SOURCE: Gmarket

July 29, 2008 16:01 ET

Gmarket Reports Second Quarter 2008 Financial Results

Revenues Increased to Won 70.0 Billion ($66.9 Million), Up 26% Year-Over-Year; Operating Income Increased to Won 13.2 Billion ($12.6 Million), Up 74% Year-Over-Year; Net Income Increased to Won 16.1 Billion ($15.4 Million), Up 91% Year-Over-Year

SEOUL, SOUTH KOREA--(Marketwire - July 29, 2008) - Gmarket Inc. (NASDAQ: GMKT) ("Gmarket") announced today its financial and operating results for the second quarter ended June 30, 2008.

Gmarket reported total revenues of Won 70.0 billion ($66.9 million) for the second quarter of 2008, representing a 26% increase from total revenues of Won 55.6 billion for the second quarter of 2007.

The Company's gross merchandise value ("GMV"), which represents the total value of all items sold on Gmarket's website, increased by 25% to Won 971.1 billion ($927.7 million) for the second quarter of 2008 compared to Won 780.0 billion for the same period in 2007. Transaction fee revenues for the second quarter of 2008 were Won 37.4 billion ($35.7 million), representing a 16% increase from Won 32.1 billion for the second quarter in 2007. Advertising and other non-transaction revenues for the second quarter of 2008 were Won 32.6 billion ($31.2 million), representing a 39% increase from Won 23.4 billion for the same period in 2007.

Operating income for the second quarter of 2008 was Won 13.2 billion ($12.6 million), representing a 74% increase from Won 7.6 billion for the same period in 2007.

Net income for the second quarter of 2008 was Won 16.1 billion ($15.4 million), representing a 91% increase from Won 8.4 billion for the same period in 2007. Earnings per diluted share for the second quarter of 2008 increased to Won 317 or $0.30, up from Won 167 for the same period in 2007.

"We are pleased with our second quarter performance and the progress with our initiatives. We are continuing to strengthen our growth drivers by focusing on emerging categories including food and lifestyle products and developing categories for future opportunities," said Young Bae Ku, Chief Executive Officer of Gmarket. "Through improved operational efficiency and expanding advertising revenue streams, we are continuously increasing our profitability."

During the second quarter of 2008, the Company's registered user base grew to approximately 14.7 million from 14.3 million registered users at the end of the first quarter of 2008. In addition, the Company averaged 18.7 million monthly unique visitors in the second quarter of 2008, compared to 17.6 million unique visitors during the second quarter of 2007.

On June 27, 2008, the Company was granted renewal of its status as an eligible venture Company under the Special Tax Treatment Control Law of Korea. This renewal entitles the Company to a reduced tax rate of 13.75%, which is 50% of the statutory tax rate, for taxable income directly generated from operations, effective until 2008. This discounted tax rate was not applied in the first quarter 2008 as the Company had deemed that renewal of the 13.75% rate was not probable at that time.

Investor Conference Call / Webcast Details

The Company's management will review detailed second quarter 2008 results on Tuesday, July 29, 2008 at 6:00 p.m. U.S. Eastern Time (7:00 a.m., July 30, 2008 in Seoul, South Korea). A live webcast of the conference call will be available on Gmarket's website at www.gmarket.co.kr/IR/.

Dial-in details for the conference call are as follows:

      US: +1 800 884 5695 or +1 617 786 2960
      Hong Kong: +852 3002 1672
      Singapore: +65 6823 2164
      U.K.: +44 207 365 8426
      Korea: +82 00 308 13 1153
      Password for all regions: Gmarket

A replay of the call will be available beginning July 29 at 8:00 p.m. U.S. Eastern Time (9:00 a.m., July 30, 2008 in Seoul) at www.gmarket.co.kr/IR/ and by telephone at +1 888 286 8010 or +1 617 801 6888 with passcode 92291558 (telephone replay available through 10:59 a.m. on August 6, 2008 U.S. Eastern Time (11:59 p.m., August 6, 2008 in Seoul)).

Notes: (1) The Dollar amounts provided in this release are based on an exchange rate of Won 1,046.80 to US$1.00, which is the noon buying rate in effect on June 30, 2008 as quoted by the Federal Reserve Bank of New York. (2) GMV should not be construed as an alternative to revenues or any other measure of performance determined in accordance with U.S. GAAP. Other companies may determine GMV in a different manner than Gmarket does.

About Gmarket

Gmarket Inc. is a leading retail e-commerce marketplace in Korea, offering buyers a wide selection of products at competitive prices and sellers a comprehensive and flexible sales solution. Gmarket's e-commerce marketplace is highly scalable and facilitates the sale of products in small or large quantities to a large number of potential buyers in a convenient, cost effective and secure manner. Gmarket's e-commerce marketplace is located primarily at www.gmarket.co.kr.

Safe Harbor Under the Private Securities Litigation Reform Act of 1995

Certain statements in this filing on Form 6-K 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 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "project," "continue," "plan" or "predict" 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 the Company's current assumptions, expectations and projections about future events. All forward-looking statements involve risks and uncertainties that may cause the Company's 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, the Company's ability to diversify revenues; the Company's ability to compete effectively in a highly competitive industry; the Company's ability to anticipate and access technological developments in the Company's industry; the Company's ability to recruit and retain quality employees as the Company grows; the Company's ability to implement the Company's growth strategies; and economic and political conditions in and outside of Korea. Investors should consider the information contained in the Company's submissions and filings with the SEC, including the Company's registration statement on Form F-1, as amended, together with such other documents as the Company may submit to or file with the SEC from time to time, including on Forms 20-F and 6-K. The forward-looking statements speak only as of this filing on Form 6-K and the Company assumes no duty to update them to reflect new, changing or unanticipated events or circumstances.

                               GMARKET INC.
                         UNAUDITED BALANCE SHEETS

(in millions of Korean Won and in thousands of US dollars)

                                     December 31,   June 30,     June 30,
                                         2007         2008         2008
                                     ------------ ------------ ------------
Assets
Current assets:
    Cash and cash equivalents             W48,367      W55,051 $     52,590
    Cash on deposit                       190,000      213,275      203,740
    Restricted cash                         8,110       10,100        9,648
    Accounts receivable, net               52,565       54,659       52,215
    Other current assets                    8,120       12,956       12,377
                                     ------------ ------------ ------------
        Total current assets              307,162      346,041      330,570
Property and equipment, net                23,577       28,165       26,906
Other assets                                6,305        8,736        8,345
                                     ------------ ------------ ------------
Total assets                             W337,044     W382,942 $    365,821
                                     ------------ ------------ ------------

Liabilities and Shareholders' Equity
Current liabilities:
    Amounts payable to sellers           W147,300     W152,630 $    145,806
    Accounts payable                       22,727       28,180       26,920
    Deferred revenue and advances           5,196        6,217        5,939
    Loyalty program reserves                8,619        9,773        9,336
    Other current liabilities               8,336       10,299        9,838
                                     ------------ ------------ ------------
        Total current liabilities         192,178      207,099      197,839
Other liabilities                           3,268        4,573        4,368
                                     ------------ ------------ ------------
Total liabilities                         195,446      211,672      202,207
                                     ------------ ------------ ------------
Shareholders' equity:
    Common shares                           4,975        5,006        4,783
    Additional paid-in capital             88,080       91,302       87,221
    Accumulated other comprehensive
     income                                     -           16           15
    Retained earnings                      48,543       74,946       71,595
                                     ------------ ------------ ------------
       Total shareholders' equity         141,598      171,270      163,614
                                     ------------ ------------ ------------
Total liabilities and shareholders'
 equity                                  W337,044     W382,942 $    365,821
                                     ------------ ------------ ------------




                               GMARKET INC.
                      UNAUDITED STATEMENTS OF INCOME

(in millions of Korean Won and thousands of US dollars,
 except per share data)

                                            Three Months Ended June 30,
                                        -----------------------------------
                                           2007        2008        2008
                                        ----------- ----------- -----------
Revenues:
    Transaction fees                       W32,129      W37,392 $    35,720
    Advertising and other                   23,438       32,621      31,163
                                        ----------- ----------- -----------
    Total revenues                          55,567       70,013      66,883
Costs and expenses:
    Cost of revenues                        29,253       36,474      34,844
    Sales and marketing                     13,111       13,493      12,889
    General and administrative               5,612        6,862       6,555
                                        ----------- ----------- -----------
       Total costs and expenses             47,976       56,829      54,288
                                        ----------- ----------- -----------
Operating income                             7,591       13,184      12,595
Other income (expense):
    Interest income                          2,066        3,467       3,312
    Others, net                                (99)         149         142
                                        ----------- ----------- -----------
Income before income tax expenses            9,558       16,800      16,049
Income tax expenses (1)                      1,141          719         687
                                        ----------- ----------- -----------
Net income                                  W8,417      W16,081 $    15,362

Net income per share - basic                  W169         W321 $      0.31
Net income per share - diluted                 167          317        0.30
Weighted average number of shares -
 basic                                  49,657,529   50,046,277  50,046,277
Weighted average number of shares -
 diluted                                50,524,504   50,798,090  50,798,090


                                              Six Months Ended June 30,
                                        -----------------------------------
                                           2007        2008        2008
                                        ----------- ----------- -----------
Revenues:
    Transaction fees                       W62,366      W74,205 $    70,887
    Advertising and other                   41,252       60,457      57,754
                                        ----------- ----------- -----------
    Total revenues                         103,618      134,662     128,641
Costs and expenses:
    Cost of revenues                        54,849       70,594      67,438
    Sales and marketing                     25,358       26,417      25,236
    General and administrative              10,371       14,151      13,518
                                        ----------- ----------- -----------
       Total costs and expenses             90,578      111,162     106,192
                                        ----------- ----------- -----------
Operating income                            13,040       23,500      22,449
Other income (expense):
    Interest income                          4,119        6,611       6,315
    Others, net                                (24)         283         270
                                        ----------- ----------- -----------
Income before income tax expenses           17,135       30,394      29,034
Income tax expenses (1)                      2,039        3,991       3,812
                                        ----------- ----------- -----------
Net income                                 W15,096      W26,403 $    25,222

Net income per share - basic                  W304         W529 $      0.51
Net income per share - diluted                 299          521        0.50
Weighted average number of shares -
 basic                                  49,582,287   49,899,610  49,899,610
Weighted average number of shares -
 diluted                                50,484,722   50,692,036  50,692,036

(1) On June 27, 2008, the Company was granted renewal of its status as an
    eligible venture Company under the Special Tax Treatment Control Law 0f
    Korea.  This renewal entitles the Company to a reduced tax rate of
    13.75%, which is 50% of the statutory tax rate, for taxable income
    directly generated from operations, effective until 2008.  This
    discounted tax rate was not applied in the first quarter 2008 as the
    Company had deemed that renewal of the 13.75% rate was not probable at
    that time.  The higher tax rate had a negative impact on our first
    quarter 2008 EPS by 3 cents.



                               GMARKET INC.
                    UNAUDITED STATEMENTS OF CASH FLOWS

(in millions of Korean Won and thousands of US dollars)

                                               Three Months Ended June 30,
                                              ----------------------------
                                                2007      2008      2008
                                              --------  --------  --------
Cash flows from operating activities:
Net income                                      W8,417   W16,081  $ 15,362
Adjustments
 Depreciation and amortization                   1,534     2,179     2,082
 Stock-based compensation expense                  400       691       660
 Provision for bad debt                             95         -         -
 Provision for severance benefits                  353       627       599
 Deferred tax assets                              (573)     (598)     (571)
 Provision for loyalty program reserves          1,323     1,713     1,636
 Others, net                                       118       (49)      (47)
Changes in operating assets and liabilities
 Accounts receivable                            (5,577)   (1,489)   (1,423)
 Amounts payable to sellers                      6,881    (7,094)   (6,777)
 Accounts payable                                2,999     6,286     6,005
 Accrued income                                 (1,198)   (1,611)   (1,539)
 Other assets, net                              (1,196)   (1,833)   (1,752)
 Other current liabilities                      (1,577)      254       243
 Payment of accrued severance benefits            (136)     (150)     (143)
                                              --------  --------  --------
  Net cash provided by operating activities     11,863    15,007    14,335
                                              --------  --------  --------
Cash flows from investing activities:
(Increase) in cash on deposit, net             (17,233)  (11,522)  (11,007)
(Increase) in restricted cash, net                   -         -         -
Purchase of property and equipment              (1,260)   (6,306)   (6,024)
(Increase) in other assets, net                   (140)   (1,606)   (1,533)
                                              --------  --------  --------
  Net cash (used in) investing activities      (18,633)  (19,434)  (18,564)
                                              --------  --------  --------
Cash flows from financing activities:
Issuance of common shares, net                     130     2,071     1,978
                                              --------  --------  --------
  Net cash provided by financing activities        130     2,071     1,978
                                              --------  --------  --------
  Net increase (decrease) in cash and cash
   equivalents                                  (6,640)   (2,356)   (2,251)
                                              --------  --------  --------
Cash and cash equivalents:
Beginning of period                             37,954    57,407    54,841
                                              --------  --------  --------
End of period                                  W31,314   W55,051  $ 52,590
                                              --------  --------  --------


                                                Six Months Ended June 30,
                                              ----------------------------
                                                2007      2008      2008
                                              --------  --------  --------
Cash flows from operating activities:
Net income                                     W15,096   W26,403  $ 25,222
Adjustments
 Depreciation and amortization                   3,005     4,308     4,115
 Stock-based compensation expense                  637     1,161     1,109
 Provision for bad debt                            146       133       127
 Provision for severance benefits                  771     1,315     1,256
 Deferred tax assets                            (1,028)     (594)     (567)
 Provision for loyalty program reserves          2,167     3,096     2,957
 Others, net                                       114       (43)      (41)
Changes in operating assets and liabilities
 Accounts receivable                            (6,167)   (2,211)   (2,112)
 Amounts payable to sellers                     12,575     5,330     5,092
 Accounts payable                                  374     5,452     5,209
 Accrued income                                 (1,384)   (1,973)   (1,885)
 Other assets, net                              (1,735)   (2,404)   (2,297)
 Other current liabilities                         332     1,042       995
 Payment of accrued severance benefits            (162)     (229)     (218)
                                              --------  --------  --------
  Net cash provided by operating activities     24,741    40,786    38,962
                                              --------  --------  --------
Cash flows from investing activities:
(Increase) in cash on deposit, net             (24,653)  (23,022)  (21,993)
(Increase) in restricted cash, net                (110)   (1,990)   (1,901)
Purchase of property and equipment              (3,693)   (8,870)   (8,473)
(Increase) in other assets, net                    (31)   (2,314)   (2,210)
                                              --------  --------  --------
  Net cash (used in) investing activities      (28,487)  (36,196)  (34,577)
                                              --------  --------  --------
Cash flows from financing activities:
Issuance of common shares, net                     130     2,094     2,000
                                              --------  --------  --------
  Net cash provided by financing activities        130     2,094     2,000
                                              --------  --------  --------
  Net increase (decrease) in cash and cash
   equivalents                                  (3,616)    6,684     6,385
                                              --------  --------  --------
Cash and cash equivalents:
Beginning of period                             34,930    48,367    46,205
                                              --------  --------  --------
End of period                                  W31,314   W55,051  $ 52,590
                                              --------  --------  --------




                               GMARKET INC.
                  UNAUDITED SUPPLEMENTAL OPERATING DATA

                                             2007                 2008
                                  =========================== =============
                                    1Q     2Q     3Q     4Q     1Q     2Q
                                  ====== ====== ====== ====== ====== ======
G M V
 (in billions of Won)(1)           723.0  780.0  775.6  970.0  933.4  971.1
                                  ====== ====== ====== ====== ====== ======
Registered Users(2) (000)         11,754 12,408 12,981 13,674 14,260 14,735
                                  ====== ====== ====== ====== ====== ======
Average Monthly Unique
 Visitors(3) (000)                16,931 17,581 17,925 18,712 17,861 18,651
                                  ====== ====== ====== ====== ====== ======

(1) Represents the aggregate value of all products sold on the Company's
    website for the period.  GMV is commonly used in the e-commerce
    industry to measure a company's operating performance as transaction
    fees depend in part on GMV.  GMV should not be construed as an
    alternative to any measure of performance determined in accordance
    with U.S. GAAP.  Other companies may determine GMV in a different
    manner to Gmarket.

(2) Registered Users include both buyers and sellers who have registered
    with the Company as of the end of the period.

(3) Average monthly unique visitors represents the average number of
    monthly unique visitors to the Company's website during the period,
    measured and announced by Metrix Corporation, a Korean Internet
    research company. Other research companies' results may differ.

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