GlobeNewswire Inc | Aug 13, 2021 06:20AM EDT

August 13, 2021

Seoul, South Korea, Aug. 13, 2021 (GLOBE NEWSWIRE) -- GRAVITY Co., Ltd. (NasdaqGM: GRVY) (Gravity or Company), a developer and publisher of online and mobile games based in South Korea, today announced its unaudited financial results for the second quarter ended June 30, 2021, prepared in accordance with international Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECONDQUARTER 2021 HIGHLIGHTS

-- Total revenues were KRW 83,611 million (US$ 73,965 thousand), representing a 20.4% decrease from the first quarter ended March 31, 2021 (QoQ) and a 5.5% decrease from the second quarter ended June 30, 2020 (YoY). -- Operating profit was KRW 19,157 million (US$ 16,947 thousand), representing a 31.5% decrease QoQ and a 17.4% increase YoY. -- Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand), representing a 32.3% decrease QoQ and a 18.7% increase YoY. -- Net profit attributable to parent company was KRW 14,766 million (US$ 13,062 thousand), representing a 37.3% decrease QoQ and a 12.8% increase YoY.

REVIEW OF SECOND QUARTER 2021 FINANCIAL RESULTS

Revenues

Online game revenues for the second quarter of 2021 were KRW 22,380 million (US$ 19,798 thousand), representing a 15.0% increase QoQ from KRW 19,458 million and a 22.6% decrease YoY from KRW 28,907 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand. The decrease YoY was largely due to decreased revenues from Ragnarok Online in Thailand and revenues from collaboration event with Garenas Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 55,140 million (US$ 48,778 thousand) for the second quarter of 2021, representing a 33.1% decrease QoQ from KRW 82,438 million and a 1.6% increase YoY from KRW 54,249 million. The decrease QoQ resulted primarily from decreased revenues from RagnarokX: Next Generation in Taiwan, Hong Kong and Macau, Ragnarok Origin in Korea and Ragnarok M: Eternal Love in Southeast Asia. Such decrease was partially offset by increased revenues from Ragnarok X: Next Generation in Southeast Asia that was launched on June 18, 2021. The increase YoY was primarily due to revenues from Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau and Southeast Asia and RagnarokOrigin in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love and Ragnarok Tactics.

Other revenues were KRW 6,091 million (US$ 5,389 thousand) for the second quarter of 2021, representing 92.6% increase QoQ from KRW 3,163 million and a 14.9% increase YoY from KRW 5,302 million.

Cost of Revenue

Cost of revenue was KRW 45,842 million (US$ 40,554 thousand) for the second quarter of 2021, representing a 20.3% decrease QoQ from KRW 57,553 million and a 10.3% decrease YoY from KRW 51,098 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal Love, Ragnarok Origin in Korea and Ragnarok X: Next Generation in Taiwan, Hong Kong and Macau. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal Love and Ragnarok Tactics.

Operating Expenses

Operating expenses were KRW 18,612 million (US$ 16,464 thousand) for the second quarter of 2021, representing a 4.8% decrease QoQ from KRW 19,553 million and a 11.6% decrease YoY from KRW 21,047 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Tera Classic in Japan, The Lord in Thailand and The Labyrinth of Ragnarok in global. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Sacred Blade in Japan, Ragnarok Online in Thailand and Ragnarok H5 in Indonesia.

Profit before income tax expenses

Profit before income tax expenses was KRW 19,387 million (US$ 17,150 thousand) for the second quarter of 2021 compared with profit before income tax expense of KRW 28,620 million for the first quarter of 2021 and profit before income tax expenses of KRW 16,335 million for the second quarter of 2020.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 14,766 million (US$ 13,062 thousand) for the second quarter of 2021 compared with net profit attributable to parent company of KRW 23,565 million for the first quarter of 2021 and a net profit attributable to parent company of KRW 13,095 million for the second quarter of 2020.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 202,631 million (US$ 179,253 thousand) as of June 30, 2021.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online

Gravity opened Ragnarok Online in Vietnam on July 8, 2021 with VTC Technology and Digital Content Company as a joint publisher.

Ragnarok Online IP-based Games

-- Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in Japan on June 28, 2021 and ranked as the first in free download of Google Play games and Apples App Store games after its launching. The game is scheduled to be launched in the United States and Canada in October 2021 and in Taiwan, Hong Kong and Macau in the first half of 2022.

-- Ragnarok X: Next Generation, a MMORPG mobile game

Ragnarok X: Next Generation was launched in Southeast Asia on June 18, 2021 and ranked as the first in top grossing of Apple App Store in Thailand, Indonesia and the Philippines. The game is being prepared for launch in Vietnam in September 2021 and in Korea in the first half of 2022.

-- Other Ragnarok Online IP-based games

Ragnarok Project S (Tentative title), a MMORPG mobile game, is scheduled to be launched in Oceania in the fourth quarter of 2021 and has been developed by Gravity NeoCyon, Inc., our subsidiary in Korea.

Ragnarok The Lost Memories, a Cinematic Newtro Story RPG mobile game, is expected to be launched in Thailand inthe third quarter of 2021 and in North America in the fourth quarter of 2021. Gravity NeoCyon, Inc., our subsidiary in Korea, has developed the game.

RagnarokBegins, a MMORPG PC game, is expected to start the first closed beta test(CBT) in September 2021 and the launching schedule will be disclosed in G-STAR 2021. The game has been developed by Gravity.

Other IP games

NBA RISE TO STARDOM, a Sports mobile game, is scheduled to run the CBT in September 2021 and is expected to be launched in Japan in the fourth quarter of 2021. Both mobile platforms, iOS and Android, will be available for the game.

Sadako M, an Adventure mobile game, is expected to be launched in Japan in September 2021.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Companys recent business updates, results of the second quarter in 2021 and Gravitys business plan. The presentation can be found on the Companys website under the IR Archives section at http://www.gravity.co.kr/en/ir/pds/list.asp. Korean and Japanese versions of the presentation are also provided on the website.

About GRAVITY Co., Ltd. ----------------------------------

Gravity is a developer and publisher of online and mobile games. Gravity's principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 91 markets and countries. For more information about Gravity, please visit http://www.gravity.co.kr.

Forward-Looking Statements:

Certain statements in this press release 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 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 contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the SEC), including our annual report for the fiscal year ended December 31, 2020 on Form 20-F, together with such other documents that we may submit to or file with the SEC from time to time, 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.

Contact:

Mr.Heung Gon KimChief Financial OfficerGravity Co., Ltd.Email: kheung@gravity.co.kr

Ms.Jin LeeMs. Hye Ji An IR UnitGravity Co., Ltd.Email: ir@gravity.co.krTelephone: +82-2-2132-7800

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GRAVITY Co., Ltd.Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

As of 31-Dec-20 30-June-21 KRW US$ KRW US$ (audited) (unaudited) (unaudited) (unaudited) Assets Current assets: Cash and cash 110,632 97,868 101,631 89,906 equivalentsShort-termfinancial 71,000 62,809 101,000 89,347 instrumentsAccounts 59,761 52,866 58,874 52,082 receivable, netOtherreceivables, 8 7 60 53 netPrepaid 2,238 1,980 1,946 1,721 expensesOther current 2,946 2,606 2,301 2,035 assetsTotal current 246,585 218,136 265,812 235,144 assetsProperty and 7,695 6,807 9,459 8,368 equipment, netIntangible 3,363 2,975 3,788 3,351 assets, netDeferred tax 3,590 3,176 3,072 2,718 assetsOthernon-current 1,324 1,171 2,071 1,832 financialassetsOthernon-current 2,815 2,490 1,844 1,631 assetsTotal assets 265,372 234,755 286,046 253,044 Liabilities and EquityCurrent liabilities:Accounts 52,688 46,609 40,271 35,625 payableDeferred 13,692 12,112 12,030 10,642 revenueWithholdings 2,851 2,522 2,680 2,371 Accrued expense 1,365 1,208 1,219 1,078 Income tax 9,470 8,377 4,273 3,780 payableOther current 2,654 2,348 2,567 2,271 liabilitiesTotal current 82,720 73,176 63,040 55,767 liabilitiesLong-termdeferred 101 89 98 87 revenueOthernon-current 5,203 4,604 5,782 5,114 liabilitiesTotal 88,024 77,869 68,920 60,968 liabilitiesShare capital 3,474 3,073 3,474 3,073 Capital surplus 27,110 23,982 27,110 23,982 Othercomponents of (1,045 ) (924 ) 11 10 equityRetained 147,371 130,368 185,702 164,277 earningsEquityattributable to owners of the 176,910 156,499 216,297 191,342Parent CompanyNon-controlling 438 387 829 734 interestTotal equity 177,348 156,886 217,126 192,076 Totalliabilities and 265,372 234,755 286,046 253,044 equity

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$ 1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.

GRAVITY Co., Ltd.Consolidated Statements of Comprehensive Income

(In millions of KRW and thousands of US$ except for share and ADS data)

Three months ended Six months ended 31-Mar-21 30-Jun-20 30-Jun-21 30-Jun-20 30-Jun-21 (KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Online 19,458 28,907 22,380 19,798 42,343 41,838 37,011 games Mobile 82,438 54,249 55,140 48,778 110,231 137,578 121,705 games Other 3,163 5,302 6,091 5,389 9,144 9,254 8,187 revenue Total 105,059 88,458 83,611 73,965 161,718 188,670 166,903 net revenueCost of revenue 57,553 51,098 45,842 40,554 99,972 103,395 91,467 Gross profit 47,506 37,360 37,769 33,411 61,746 85,275 75,436 Operating expenses: Selling,general and 15,508 17,643 14,014 12,397 28,650 29,522 26,116 administrativeexpenses Research 4,009 3,254 4,147 3,669 6,126 8,156 7,215 and development Others, net 36 150 451 398 301 487 430 Total 19,553 21,047 18,612 16,464 35,077 38,165 33,761 operating expensesOperating profit 27,953 16,313 19,157 16,947 26,669 47,110 41,675 Finance income (costs): Finance 1,600 627 597 528 2,178 2,197 1,943 income Finance (933 ) (605 ) (367 ) (325 ) (1,262 ) (1,300 ) (1,150 ) costsProfit before 28,620 16,335 19,387 17,150 27,585 48,007 42,468 income taxIncome tax expense 5,059 3,293 4,569 4,042 5,297 9,628 8,517 Profit for 23,561 13,042 14,818 13,108 22,288 38,379 33,951 the yearProfit attributable to:

Non-controlling (4 ) (53 ) 52 46 (70 ) 48 42 interest Owners of 23,565 13,095 14,766 13,062 22,358 38,331 33,909 Parent companyEarning per share - 3,391 1,884 2,125 1.88 3,217 5,516 4.88 Basic and dilutedWeighted averagenumber of shares outstanding - 6,498,000 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 Basic and dilutedEarning per ADS(1) - Basic and 3,391 1,884 2,125 1.88 3,217 5,516 4.88 diluted

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,130.42 to US$1.00, the noon buying rate in effect on June 30, 2021 as quoted by the Federal Reserve Bank of New York.(1) Each ADS represents one common share.