SOURCE: Gmarket Inc.

March 08, 2007 16:00 ET

Gmarket Reports Fourth Quarter and Full Year 2006 Financial Results

-- Fourth Quarter 2006 Revenues Increased 67 Percent to $51.6 Million Year Over Year and Diluted EPS Increased to $0.13 From $0.09 in Fourth Quarter 2005

-- Full Year 2006 Revenues Increased 119 Percent to $166.6 Million and Diluted EPS Increased to $0.37 From $0.12 in 2005

SEOUL, SOUTH KOREA -- (MARKET WIRE) -- March 8, 2007 -- Gmarket Inc. (NASDAQ: GMKT) ("Gmarket") announced today its financial and operating results for the fourth quarter and full year ended December 31, 2006.

Gmarket reported total revenues of $51.6 million (Won 47.7 billion) for the fourth quarter of 2006, representing a 67% increase from total revenues of $30.9 million (Won 28.6 billion) for the fourth quarter of 2005.

The Company's gross merchandise value ("GMV"), which represents the total value of all items sold on Gmarket's website, increased by 53% to $737.4 million (Won 682.4 billion) for the fourth quarter of 2006 compared to $480.8 million (Won 445.0 billion) for the same period in 2005. Transaction fee revenues for the fourth quarter of 2006 were $31.5 million (Won 29.1 billion), representing a 30% increase from $24.2 million (Won 22.4 billion) for the fourth quarter in 2005. Advertising and other non-transaction revenues for the fourth quarter of 2006 were $20.1 million (Won 18.6 billion), representing a 200% increase from $6.7 million (Won 6.2 billion) for the same period in 2005.

Operating income for the fourth quarter of 2006 was $6.6 million (Won 6.1 billion), representing a 120% increase from $3.0 million (Won 2.8 billion) for the same period in 2005.

Net income for the fourth quarter of 2006 was $6.8 million (Won 6.3 billion), representing a 78% increase from $3.8 million (Won 3.5 billion) for the same period in 2005. Earnings per diluted share for the fourth quarter of 2006 increased to $0.13 (Won 124), up from $0.09 (Won 79) for the same period in 2005.

For the year ended December 31, 2006, Gmarket's GMV increased by 110% to $2,451.1 million (Won 2,268.2 billion), compared to total GMV of $1,168.0 million (Won 1,080.9 billion) in 2005. The Company reported total revenues of $166.6 million (Won 154.1 billion), representing a 119% increase from total revenues of $76.0 million (Won 70.3 billion) in 2005. Operating income was $15.3 million (Won 14.2 billion), representing a 298% increase from $3.8 million (Won 3.6 billion) in 2005. Net income was $17.6 million (Won 16.3 billion) or $0.37 diluted earnings per share, representing a 220% increase from $5.5 million (Won 5.1 billion) or $0.12 per share in 2005.

"2006 was a remarkable year for Gmarket, as we secured the leading market position in Korea, bolstered our global brand with a listing on the NASDAQ, continued to provide the most dynamic e-commerce platform and ended the year with strong momentum heading into 2007," said Young Bae Ku, Chief Executive Officer of Gmarket. "We are grateful to everyone who contributed to our achievements in 2006 and are striving to make 2007 even more successful."

During the fourth quarter of 2006, the Company's registered user base grew to approximately 11.0 million, a 9% increase from 10.1 million registered users at the end of the third quarter of 2006. In addition, the Company averaged 17.1 million monthly unique visitors in the fourth quarter of 2006, a 22% increase from 14.0 million unique visitors during the fourth quarter of 2005.

The Company reported $22.7 million (Won 21.0 billion) of cash provided by operating activities for the fourth quarter of 2006, and finished the year with $183 million (Won 169 billion) in cash, cash equivalents and short-term deposits and no debt.

Gmarket expects GMV for full year 2007 to range from $3.3 billion (Won 3.1 trillion) to $3.8 billion (Won 3.5 trillion). For the first quarter of 2007, Gmarket expects GMV to range from $767 million (Won 710 billion) to $811 million (Won 750 billion).

Investor Conference Call / Webcast Details

The Company's management will review detailed fourth quarter and full year 2006 results on Thursday, March 8, 2007 at 6:00 p.m. U.S. Eastern Time (8:00 a.m., March 9, 2007 in Seoul, 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: +1 617 786 2904
     Hong Kong: +852 3002 1672
     Singapore: +65 6823 2164
     U.K.: +44 (0) 207 365 8426
     Korea: +82 00 308 13 1153

     Password for all regions: Gmarket
A replay of the call will be available on March 8, 2007 at 9:00 p.m. U.S. Eastern Time (11:00 a.m., March 9, 2007 in Seoul, Korea) through midnight on March 15, 2007 U.S. Eastern Time (1:00 p.m., March 16, 2007 in Seoul, Korea) at www.gmarket.co.kr/IR/ and by telephone at +1 617 801 6888, with passcode 35114009.

Notes: (1) The Dollar amounts provided in this release are based on an exchange rate of Won 925.40 to US$1.00, which is the noon buying rate in effect on January 2, 2007 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 to Gmarket.

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 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," 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 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 Form 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, December 31, December 31,
                                         2005         2006         2006
                                     -----------  ------------ ------------
                                      (Audited)
Assets
Current assets:
   Cash and cash equivalents             W36,898       W34,930 $     37,746
   Cash on deposit                        45,300       134,398      145,233
   Restricted cash                         2,100         6,400        6,916
   Accounts receivable, net               16,244        33,827       36,554
   Current held-to-maturity
    securities                                 -         4,000        4,322
   Other current assets                    2,517         5,119        5,531
                                     -----------  ------------ ------------
      Total current assets               103,059       218,674      236,302
Long-term financial instruments            5,260         5,000        5,403
Held-to-maturity securities                4,000             -            -
Property and equipment, net                8,188        19,582       21,161
Other assets                                 551         4,846        5,236
                                     -----------  ------------ ------------
Total assets                            W121,058      W248,102 $    268,102
                                     -----------  ------------ ------------

Liabilities and Shareholders' Equity
Current liabilities:
   Amounts payable to sellers            W93,458      W103,599 $    111,951
   Accounts payable                       10,859        19,242       20,793
   Deferred revenue                        2,180         3,532        3,817
   Other current liabilities               4,428        13,462       14,547
                                     -----------  ------------ ------------
      Total current liabilities          110,925       139,835      151,108
Accrued severance benefits                   428         1,397        1,509
                                     -----------  ------------ ------------
Total liabilities                        111,353       141,232      152,617
                                     -----------  ------------ ------------
Preferred shares, convertible              7,339             -            -
                                     -----------  ------------ ------------
Shareholders' equity:
   Common shares                           3,040         4,951        5,350
   Additional paid-in capital                518        86,445       93,414
   Loan to employees for stock
    purchase                                (389)            -            -
   Retained earnings (Accumulated
    deficit)                                (803)       15,474       16,721
                                     -----------  ------------ ------------
      Total shareholders' equity           2,366       106,870      115,485
                                     -----------  ------------ ------------
Total liabilities and shareholders'
 equity                                 W121,058      W248,102 $    268,102
                                     -----------  ------------ ------------




                                GMARKET INC.
                      UNAUDITED STATEMENTS OF INCOME


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

                                         Three Months Ended December 31,
                                       ----------------------------------
                                          2005        2006        2006
                                       ----------  ----------  ----------
Revenues:
   Transaction fees                       W22,389     W29,130  $   31,478
   Advertising and others                   6,195      18,599      20,099
                                       ----------  ----------  ----------
   Total revenues                          28,584      47,729      51,577
Costs and expenses:
   Cost of revenues                        13,797      25,619      27,685
   Sales and marketing                      9,739      11,861      12,817
   General and administrative               2,268       4,123       4,455
                                       ----------  ----------  ----------
      Total costs and expenses             25,804      41,603      44,957
                                       ----------  ----------  ----------
Operating Income                            2,780       6,126       6,620
Other income (expense):
   Interest income                            630       1,943       2,100
   Others, net                                (26)       (252)       (273)
                                       ----------  ----------  ----------
Income before income tax expenses           3,384       7,817       8,447
Income tax benefits (expenses)                133      (1,566)     (1,692)
                                       ----------  ----------  ----------
Net income                                 W3,517      W6,251  $    6,755
Accretion to preferred shares to
 redemption price                             (42)          -           -
Amount allocated to participating
 preferred shareholders                    (1,017)          -           -
                                       ----------  ----------  ----------
Net income applicable to common
 shareholders                              W2,458      W6,251  $    6,755

Earning per share - basic                     W81        W126  $     0.14
Earning per share - diluted                    79         124        0.13
Weighted average number of shares -
 basic                                 30,400,000  49,506,210  49,506,210
Weighted average number of shares -
 diluted                               31,143,363  50,495,363  50,495,363



                                              Year Ended December 31,
                                        ----------------------------------
                                           2005        2006        2006
                                        ----------  ----------  ----------
Revenues:
   Transaction fees                        W56,779     W99,252  $  107,253
   Advertising and others                   13,556      54,881      59,305
                                        ----------  ----------  ----------
   Total revenues                           70,335     154,133     166,558
Costs and expenses:
   Cost of revenues                         36,686      78,954      85,319
   Sales and marketing                      24,803      46,427      50,169
   General and administrative                5,286      14,577      15,752
                                        ----------  ----------  ----------
      Total costs and expenses              66,775     139,958     151,240
                                        ----------  ----------  ----------
Operating Income                             3,560      14,175      15,318
Other income (expense):
   Interest income                           1,393       5,189       5,607
   Others, net                                   -         202         218
                                        ----------  ----------  ----------
Income before income tax expenses            4,953      19,566      21,143
Income tax benefits (expenses)                 133      (3,289)     (3,554)
                                        ----------  ----------  ----------
Net income                                  W5,086     W16,277  $   17,589
Accretion to preferred shares to
 redemption price                             (165)          -           -
Amount allocated to participating
 preferred shareholders                     (1,565)     (1,260)     (1,361)
                                        ----------  ----------  ----------
Net income applicable to common
 shareholders                               W3,356     W15,017  $   16,228

Earning per share - basic                     W124        W371  $     0.40
Earning per share - diluted                    108         345        0.37
Weighted average number of shares -
 basic                                  26,963,014  40,468,471  40,468,471
Weighted average number of shares -
 diluted                                30,939,377  47,177,311  47,177,311




                                GMARKET INC.
                    UNAUDITED STATEMENTS OF CASH FLOWS


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

                                           Three Months Ended December 31,
                                           -------------------------------
                                             2005       2006       2006
                                           ---------  ---------  ---------
Cash flows from operating activities:
      Net income                              W3,517     W6,251  $   6,755
      Adjustments
   Depreciation and amortization                 470      1,165      1,259
   Stock-based compensation expense               41        242        261
   Provision for bad debt                        (58)       220        238
   Provision for severance benefits              139        261        282
   Cumulative effect of changes in
    accounting principle                           -          -          -
   Deferred tax assets                          (254)      (364)      (393)
   Provision for loyalty program reserve         812      2,023      2,186
   Others, net                                     2        134        145
   Changes in operating assets and
    liabilities
      Accounts receivable                     (5,261)    (6,567)    (7,096)
      Amounts payable to sellers              32,603     11,340     12,254
      Accounts payable                         4,562      5,867      6,340
      Deferred revenue and advances              579        184        200
      Other current assets                      (788)    (1,070)    (1,156)
      Other assets                               (76)       (25)       (27)
      Other current liabilities                  847      1,389      1,499
      Payment of accrued severance benefits       (8)       (22)       (24)
                                           ---------  ---------  ---------
Net cash provided by operating activities     37,127     21,028     22,723
                                           ---------  ---------  ---------
Cash flows from investing activities:
      Increase in cash on deposit, net       (13,500)   (12,527)   (13,537)
      Decrease (increase) in restricted
       cash, net                                 600       (600)      (648)
      Increase in long-term financial
       instruments, net                       (5,030)       (30)       (32)
      Acquisition of held-to-maturity
       securities                                  -          -          -
      Purchase of property and equipment      (3,713)    (9,195)    (9,937)
      Decrease (increase) in other current
       assets                                    (10)         -          -
      Increase in other assets, net                -     (3,190)    (3,446)
                                           ---------  ---------  ---------
Net cash used in investing activities        (21,653)   (25,542)   (27,600)
                                           ---------  ---------  ---------
Cash flows from financing activities:
      Issuance of common shares, net               -          -          -
      Decrease (increase) in loan to
       employees for stock purchase                -          -          -
                                           ---------  ---------  ---------
Net cash provided by financing activities          -          -          -
                                           ---------  ---------  ---------
Net increase (decrease) in cash and cash
 equivalents                                  15,474     (4,514)    (4,877)
                                           ---------  ---------  ---------
Cash and cash equivalents
Beginning of year                             21,424     39,444     42,623
                                           ---------  ---------  ---------
End of period                                W36,898    W34,930  $  37,746
                                           ---------  ---------  ---------



                                              Year Ended December 31,
                                            ----------------------------
                                              2005      2006      2006
                                            --------  --------  --------
Cash flows from operating activities:
      Net income                              W5,086   W16,277  $ 17,589
      Adjustments
   Depreciation and amortization               1,196     3,347     3,616
   Stock-based compensation expense              122       850       918
   Provision for bad debt                        (35)      283       306
   Provision for severance benefits              522     1,039     1,123
   Cumulative effect of changes in
    accounting principle                           -       (19)      (21)
   Deferred tax assets                          (254)     (767)     (829)
   Provision for loyalty program reserve       2,114     6,400     6,916
   Others, net                                     2       134       145
   Changes in operating assets and
    liabilities
      Accounts receivable                    (12,189)  (17,792)  (19,226)
      Amounts payable to sellers              69,307    10,141    10,958
      Accounts payable                         8,174     8,383     9,059
      Deferred revenue and advances            1,505     1,352     1,461
      Other current assets                    (2,096)   (2,328)   (2,515)
      Other assets                               (76)       21        22
      Other current liabilities                1,196     2,635     2,848
      Payment of accrued severance benefits     (559)      (71)      (76)
                                            --------  --------  --------
Net cash provided by operating activities     74,015    29,885    32,294
                                            --------  --------  --------
Cash flows from investing activities:
      Increase in cash on deposit, net       (39,200)  (88,827)  (95,988)
      Decrease (increase) in restricted
       cash, net                                (600)   (4,300)   (4,647)
      Increase in long-term financial
       instruments, net                       (5,120)     (120)     (130)
      Acquisition of held-to-maturity
       securities                             (4,000)        -         -
      Purchase of property and equipment      (7,309)  (14,749)  (15,938)
      Decrease (increase) in other current
       assets                                    (15)       47        51
      Increase in other assets, net             (418)   (3,960)   (4,278)
                                            --------  --------  --------
Net cash used in investing activities        (56,662) (111,909) (120,930)
                                            --------  --------  --------
Cash flows from financing activities:
      Issuance of common shares, net             695    79,668    86,090
      Decrease (increase) in loan to
       employees for stock purchase             (247)      388       420
                                            --------  --------  --------
Net cash provided by financing activities        448    80,056    86,510
                                            --------  --------  --------
Net increase (decrease) in cash and cash
 equivalents                                  17,801    (1,968)   (2,126)
                                            --------  --------  --------
Cash and cash equivalents
Beginning of year                             19,097    36,898    39,872
                                            --------  --------  --------
End of period                                W36,898   W34,930  $ 37,746
                                            --------  --------  --------




                                GMARKET INC.
                  UNAUDITED SUPPLEMENTAL OPERATING DATA


                                 1Q 2005    2Q 2005    3Q 2005    4Q 2005
                                ========== ========== ========== ==========
GMV
(in billions)(1)                   W146.58    W206.63    W282.68    W444.96
                                ---------- ---------- ---------- ----------
Registered Users(2)              3,473,605  4,468,150  5,632,350  7,191,356
                                ---------- ---------- ---------- ----------
Average Monthly Unique
 Visitors(3)                    11,240,000 11,493,000 12,716,000 14,024,000
                                ---------- ---------- ---------- ----------



                                 1Q 2006    2Q 2006    3Q 2006    4Q 2006
                                ========== ========== ========== ==========
GMV
(in billions)(1)                   W469.15    W543.75    W572.95    W682.35
                                ---------- ---------- ---------- ----------
Registered Users(2)              8,310,737  9,238,701 10,110,874 10,967,445
                                ---------- ---------- ---------- ----------
Average Monthly Unique
 Visitors(3)                    15,179,000 16,543,000 17,051,000 17,130,000
                                ---------- ---------- ---------- ----------


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.

Contact Information

  • Contacts:

    Paul J. Lee
    Gmarket Inc.
    +82-2-3016-4372
    Email Contact

    In the U.S.

    David Pasquale
    The Ruth Group
    +1-646-536-7006
    Email Contact