2008 San Francisco Money Show August 7-10, GRAVITY Co., Ltd. (NASDAQ: GRVY)

Transcription

1 2008 San Francisco Money Show August 7-10, 2008 GRAVITY Co., Ltd. (NASDAQ: GRVY)

2 Disclaimer These materials have been prepared by GRAVITY Co., Ltd. ( Gravity or the Company ), solely for use at the Company s presentation at the Bank of New York Mellon s 2008 Money Show in San Francisco, California from August 7-10, 2008 and have not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or contained in these materials. Neither the Company nor any of its affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in these materials. The information presented or contained in these materials is subject to change without notice and its accuracy is not guaranteed. The presentations do not constitute an offer or invitation to purchase or subscribe for any shares or other securities of the Company and neither any part of the materials nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Certain statements or other disclosure content in these presentation materials may include, in addition to historical information, forward-looking statements within the meaning of the safe-harbor provisions of the U.S. Private Securities Litigation Reform Act of Forward-looking statements can generally be identified by the use of forward-looking terminology, such as may, will, expect, intend, estimate, anticipate, believe, project, or continue or the negative thereof or other similar words, although not all forward-looking statements will contain these words. These forward-looking statements are based on our current assumptions, expectations and projections about future events. All forward-looking statements involve risks and uncertainties that may cause our actual performance, financial condition or results of operations to be materially different from those suggested by the forward-looking statements, including, but not limited to, our ability to diversify revenue; our ability to collect, and in a timely manner, license fees and royalty payments from overseas licensees; our ability to acquire, develop, license, launch, market or operate commercially successful online games; our ability to compete effectively in a highly competitive industry; our ability to anticipate and access technological developments in our industry; our ability to recruit and retain quality employees as we grow; our ability to implement our growth strategies; and economic and political conditions globally. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the SEC ), including our registration statement on Form F- 1, as amended, and our annual reports on Form 20-F, together with such other documents and we may submit to or file with the SEC from time to time, including on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.

3 INDEX 1. Company Overview 2. Industry Overview 3. Current Business 4. Game Line-up 5. Future Strategy 6. Financial Performance 7. Attractive Valuation

4 1. Company Overview GRAVITY SUMMARY Gravity was founded in April 2000 when the Korean online game industry was still in its infancy. Gravity has now grown into a global online game company, and is the first Korean company directly listed on the NASDAQ Global Market (ticker GRVY ). Gravity develops and distributes Ragnarok Online TM, a massively multiplayer online role playing game (MMORPG) which is currently serviced in 23 countries. The company is well positioned to publish other MMORPG and casual game titles by leveraging its global network as a distribution platform. Company name: Gravity Co., Ltd. Chairman and CEO: Yoon Seok Kang Main business: Online game development and publishing, mobile game development, animation and character merchandising Flagship Title: Ragnarok Online TM, MMORPG: Ragnarok Online TM, Requiem Online, Ragnarok Online 2 TM, Emil Chronicle Online and Time N Tales Casual Online Games: Pucca Racing Other Products: Ragnarok toys, animation, comic books and collectable items Gravity Mobile: Wireless convergence technology of games including Ragnarok Online TM and Time N Tales

5 1. Company Overview Gravity is a Korea-based developer and publisher of online games, with newly built positions in the mobile game and online casual game segments. Fast growing global online PC games market Large global game distribution network 4 wholly owned subsidiaries in the U.S., France, Russia and Dubai and 15 global licensees distributing to 36 countries Leading online game in multiple markets Gravity s principal product, Ragnarok Online TM, is an MMORPG which has had the highest global user penetration in Japan, Taiwan, Thailand, the Philippines, Brazil, Indonesia, Malaysia and Singapore. Robust online game lineup Among other new MMORPG and casual games, the highly anticipated Ragnarok Online 2 TM sequel is slated for commercialization in the fourth quarter of GRAVITY has online game coverage across 36 countries Operations by Geographic area Headquarters Subsidiaries BRAZIL RUSSIA & CIS EUROPE Gravity CIS Co, Ltd. U.S.A/CANADA Gravity EU SASU CHINA KOREA JAPAN Gravity Interactive, Inc. MIDDLE EAST THAILAND Gravity Middle East & TAIWAN HONG KONG Africa FZ LLC SINGAPORE MALAYSIA INDONESIA THE PHILIPPINES AUSTRALIA NEW ZEALAND (as of December 2007) Source: the Company

6 2. Industry Overview Online gaming is one of the fastest growing segments of interactive entertainment Dramatic improvements in the quality of online platform technologies has made online gaming a far more rewarding experience for users Networked consoles and broadband adoption (through online gaming) continues to drive the market Games continue to garner a larger portion of the consumers time at the expense of traditional media Micro-payments and sales of premium services have demonstrated the most effectiveness in monetizing the consumer base Many of the traditional software publishers are exploring the online gaming sector, either through investment or acquisitions (i.e. Electronic Arts investment in Neowiz) Worldwide Online Gamers Global Online Gaming Revenues In Millions of Users In Millions of $ Source: DFC Intelligence, 2006 Source: DFC Intelligence, 2006

7 2. Industry Overview The MMOG market opportunity and growth prospect is huge MMOG market is currently dominated by Asia, but the US, European and CIS markets are rapidly growing DFC estimates that the global MMOG market size is presently US$ 2.66 Billion and is growing at a CAGR ( ) of 33.7% Broadband will be one of the primary drivers for mass market penetration Network effect: the game experience will become richer as increasingly more players build relationships and property in the game world Electronic distribution will present minimal threat to intellectual property Worldwide MMOG Market Forecast In Millions of $ Source: DFC Intelligence, CAGR = 33.7%

8 2. Industry Overview The casual games market outlook presents enormous opportunity if the content can be monetized effectively Casual games are experiencing a rapidly growing, mass-market user base: the increasing popularity of downloadable casual games will continue to drive the market DFC estimates there currently over 160 million casual game players globally, growing at a CAGR ( ) of 14.8% Online casual games are taking market share from traditional PC software product The increased broadband penetration and online distribution technologies make it easier to purchase and play casual games online Casual games have a tendency to appeal to a broader mass-market audience Compelling online casual games have also been licensed to mobile distributors Worldwide Online Casual Gamers Forecast Worldwide Casual Gaming Market Forecast In Millions of Users CAGR = 14.8% In Millions of $ CAGR = 31.9% Source: DFC Intelligence, Source: DFC Intelligence, 2006

9 3. Current Business: Online Game Development Online Game Development Gravity s core business has been the successfully development and distribution of Ragnarok Online TM, one of the world s leading MMORPGs. Gravity s next focus is to develop the sequel Ragnarok Online 2 TM, Requiem and other outstanding games which will continue the success story of the Ragnarok franchise.

10 3. Current Business: Game Publishing Game Publishing Gravity s publishing business explores and invests in high quality games developed in Korea and globally to provide its users with a continual pipeline of innovative games.

11 3. Current Business: Mobile Games Mobile Games Gravity has developed a range of new technologies and services to penetrate the rapidly growing mobile communications industry.

12 3. Current Business: Merchandising and Animation Charter Merchandising Business Animation Business Gravity produces high quality animations and exports the broadcasting rights internationally.

13 4. Game Line-up: Ragnarok Online TM Promotes a healthy gaming environment with no violence, adult themes or explicit graphics An internationally renowned MMORPG running in 23 countries Achieved status of #1 online game in Japan, Taiwan, Thailand, Malaysia and Singapore Suitable for most cultures throughout the world Serviced in 23 countries in over 8 languages

14 4. Game Line-up: Ragnarok Online II TM The sequel to Ragnarok Online, which is slated for commercial release at the end of 2008 Dynamic action and tactical combat system Enhanced new game system which supports both on and off line user communities Vivid, high quality 3D graphics

15 4. Game Line-up: Requiem MMORPG depicting the alliances and conflicts arising from 4 different races A life-like cyber society unseen in other online games Realistic graphic quality equivalent to console games Dynamic vivid battle scenes, combat systems and graphics Interactive game system which reacts to the user s preference and play styles

16 4. Game Line-up: Emil Chronicle Online 3D cartoon rendering graphic based animation style game with fairy tale characters A fairy tale game providing a total of 25 levels to enjoy

17 4. Game Line-up: Pucca Racing An enjoyable casual bike racing game, highlighting the well-known Pucca character Supports a variety of characters and items Unique facial expressions and character movements Varying and challenging levels

18 5. Future Strategy 1. Retain, Build and Leverage Strengths Strengthen pipeline of new games to maintain a competitive position in the marketplace Enhance in-house development capabilities and upgrade game content quality Secure high quality game titles in Korea and other countries Continue building global networks Reinforce relationships with local partners in existing markets Penetrate new, higher growth markets to diversify revenues geographically Continue strengthening alternate revenue sources such as convergence areas and the mobile game business 2. Remedy Weaknesses and Pursue New Opportunities Restructuring and other internal cost cutting measures to reduce overhead expenses and development costs Diversify and stabilize revenues through new businesses and potential acquisitions Explore related Internet, media and entertainment content businesses having stable, growth revenues and sharing synergies with Gravity s existing online game business Improve relationship with investors to increase share price and share liquidity

19 6. Financial Performance Income Statement Summary (in millions of KRW) Q1 Revenue 53,384 40,963 40,229 12,529 (Subscription) 11,249 8,420 9,405 2,860 (Royalties & License Fees) 37,375 26,123 24,698 6,897 (Mobile) 1,664 3,840 4,063 1,421 (Others) 3,096 2,580 2,063 1,351 Cost of Revenue 16,038 17,746 19,479 7,504 Gross Profit 37,346 23,217 20,750 5,025 SG&A 30,795 27,555 29,030 5,928 R&D 9,219 9,239 5, Impairment losses on investments - - 8,619 - Operating loss (2,668) (12,197) (22,660) (1,686) Other income (expense), net (787) 2,265 3,441 1,408 Pre-tax Profit (loss) (3,455) (9,932) (19,219) (278) Income tax expenses (benefit) (817) 12,069 2, Net Income (loss) (3,030) (22,265) (23,201) (1,370) Source: the Company

20 6. Financial Performance Breakdown of Operating Expenses from Q1 (in millions of KRW) Q1 Payroll 5,694 8,054 7,782 1,771 Retirement expenses Fringe benefit 853 1,441 1, Travel expenses Taxes 1, Depreciation & Amortization 1,138 1,468 1, Commission & Service charge 9,570 5,229 4, Advertisement 6,273 3,744 6, Research & Development 9,219 9,239 5, Rent fee 778 2,461 2,837 1,035 Stock option expenses Impairment loss 1,568 1,913 10,490 0 Loss on disposal of assets Penalties Others 1,170 (5,359) 1, Total 40,014 30,766 43,411 6,711 Source: the Company

21 6. Financial Performance Balance Statement Summary (in millions of KRW) Q1 Asset 144, ,561 96,927 95,067 Current Asset 109,428 88,203 72,667 66,641 (Cash & cash equivalents) 25,874 35,314 53,588 50,800 (Short term investments) 59,900 45,835 8,715 5,616 (Accounts Receivables) 4,784 2,163 4,820 4,772 Non-current asset 35,429 34,358 24,260 28,426 (Intangible assets) 12,750 10,393 11,686 11,457 (PPE) 11,863 8,472 7,195 7,877 Liability 24,073 24,419 21,383 19,801 Current Liability 19,448 16,192 10,112 8,539 Non-current liability 4,625 8,227 11,271 11,262 Shareholder's Equity 120,762 98,113 75,476 75,176 Common Shares Additional paid-in capital Liability & Shareholder's Equity Source: the Company 3,474 74,902 3,474 3,474 3,474 74,694 75,126 75, , ,561 96,927 95,067

22 7. Attractive Valuation As of July 25, 2008, Gravity s share price was trading at $0.97 near its 52-week low of $0.90. The company has no debt, a book value of $2.69/share and a cash value of $2.02/share. Share Price ($) Book Value (per share, $) Cash Value (per share, $) Gravity Co., Ltd. $0.97 $2.69 $2.02 Peer NASDAQ/NYSE Companies GIANT Interactive Group, Inc. $10.21 $0.45 $0.53 Netease.com Inc. $22.87 $4.37 $5.42 Perfect World Co., Ltd. $26.65 $3.95 $4.10 Shanda Interactive Entertainment Ltd. The9 Limited $24.59 $23.20 Source: The Company, NASDAQ website and publicly available data as of July 25, $7.90 $6.59 $14.54 $11.21

23 Thank You