GlobeNewswire Inc | Aug 7, 2020 06:35AM EDT

August 07, 2020

Seoul, Aug. 07, 2020 (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, 2020, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2020 HIGHLIGHTS

-- Total revenues were KRW 88,458 million (US$ 73,684 thousand), representing a 20.7% increase from the first quarter ended March 31, 2020 (QoQ) and a 13.2% increase from the second quarter ended June 30, 2019 (YoY). -- Operating profit was KRW 16,313 million (US$ 13,588 thousand), representing a 57.5% increase QoQ and a 25.5% increase YoY. -- Profit before income tax expenses was KRW 16,335million (US$ 13,606 thousand), representing a 45.2% increase QoQ and a 16.4% increase YoY. -- Net profit attributable to parent company was KRW 13,095 million (US$ 10,907 thousand), representing a 41.4% increase QoQ and a 20.6% increase YoY.

REVIEW OF SECOND QUARTER 2020 FINANCIAL RESULTS

Revenues

Subscription revenues for the second quarter of 2020 were KRW 24,448 million (US$ 20,365 thousand), representing a 147.1% increase QoQ from KRW 9,893 million and a 262.4% increase YoY from KRW 6,746 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Thailand that was re-launched on May 28, 2020 and Ragnarok H5 in Indonesia that was launched on March 31, 2020. The increase YoY was largely due to increased revenues from Ragnarok Online in Thailand and Taiwan and Ragnarok H5 in Indonesia.

Royalty and license fee revenues for the second quarter of 2020 were KRW 4,459 million (US$ 3,714 thousand), representing 25.9% increase QoQ from KRW 3,543 million and a 57.5% increase YoY from KRW 2,832 million. The increase QoQ was primarily due to increased revenue from collaboration event with Garenas Free Fire items based on Ragnarok Online IP. Such increase was partially offset by decreased revenue from Ragnarok Online in Japan. The increase YoY resulted mainly from increased revenue from collaboration event with Garenas Free Fire items based on Ragnarok Online IP.

Mobile game revenues were KRW 54,249 million (US$ 45,189 thousand) for the second quarter of 2020, representing a 3.1% decrease QoQ from KRW 55,982 million and a 16.6% decrease YoY from KRW 65,013 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Taiwan and Japan, and Ragnarok Tactics in Taiwan. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Southeast Asia, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. The decrease YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America and Oceania. This decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Taiwan and Europe, Ragnarok Tactics in Korea and Taiwan, and Ragnarok H5 in Indonesia.

Other revenues were KRW 5,302 million (US$ 4,416 thousand) for the second quarter of 2020, representing 38.0% increase QoQ from KRW 3,842 million and a 49.9% increase YoY from KRW 3,536 million

Cost of Revenues

Cost of revenue was KRW 51,098 million (US$ 42,564 thousand) for the second quarter of 2020, representing a 4.6% increase QoQ from KRW 48,874 million and a 10.1% decrease YoY from KRW 56,858 million. The increase QoQ was mainly due to increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania, Ragnarok H5 in Indonesia, and Ragnarok Tactics in Korea. The decrease YoY was mostly from decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania.

Operating Expenses

Operating expenses were KRW 21,047 million (US$ 17,532 thousand) for the second quarter of 2020, representing a 50.0% increase QoQ from KRW 14,030 million and a 154.5% increase YoY from KRW 8,271 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok Origin in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, and commission paid for payment gate way fees related to Ragnarok Online in Thailand. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok Origin and Ragnarok Tactics in Korea, Ragnarok Online in Thailand, Sacred Blade in Japan, Ragnarok H5 in Indonesia, commission paid for payment gate way fees related to Ragnarok Online in Thailand, salaries and research and development expenses.

Profit before income tax expenses

Profit before income tax expenses was KRW 16,335 million (US$ 13,606 thousand) for the second quarter of 2020 compared with profit before income tax expense of KRW 11,250 million for the first quarter of 2020 and profit before income tax expenses of KRW 14,037 million for the second quarter of 2019.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 13,095 million (US$ 10,907 thousand) for the second quarter of 2020 compared with net profit attributable to parent company of KRW 9,263 million for the first quarter of 2020 and a net profit attributable to parent company of KRW 10,861 million for the second quarter of 2019.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 131,566 million (US$ 109,593 thousand) as of June 30, 2020.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

-- Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin was launched in Korea on July 7, 2020 and ranked as the fourth in top grossing of Google Play games and the fourth in top grossing of Apples App Store games after its launching. Gravity signed a publishing contract with GungHo Online Entertainment, Inc. for Japan service. The game is being prepared to launch in Japan.

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

Gravity signed a joint publishing contract with ByteDance Ltd., a multinational content platform company, for Ragnarok X: Next Generation in Taiwan, Hong Kong, Macau, and Southeast Asia. The game is expected to be launched in Taiwan, Hong Kong and Macau in the second half of 2020.

-- Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics was launched in global market on June 18, 2020.

-- Other Ragnarok Online IP-based games

Action RO2: Spear of Odin, a 3D Action MORPG mobile game, is expected to be launched in Indonesia, Malaysia, Philippines, Singapore and Oceania in 2020. The game was developed by NeoCyon, Inc., our subsidiary in Korea.

Other IP games

Tactical Warfare, a First-Person Shooter (FPS) game, has started pre-registration and will be launched in North, Central and South America in the third quarter of 2020. The game is published by Gravity Interactive, Inc., a subsidiary in the United States.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Companys recent business updates, results of second quarter in 2020 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. ----------------------------------

Based in Korea, Gravity is a developer and publisher of online and mobile games. Gravitys principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 93 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, 2019 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 Kim Chief Financial Officer Gravity Co., Ltd. Email: kheung@gravity.co.kr

Ms.Jin LeeMs. Minji Oh IR Unit Gravity Co., Ltd. Email: ir@gravity.co.kr Telephone: +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-19 30-Jun-20 KRW US$ KRW US$ (audited) (unaudited) (unaudited) (unaudited) Assets Current assets: Cash and cash 79,428 66,162 94,066 78,356 equivalentsShort-termfinancial 39,500 32,903 37,500 31,237 instrumentsAccounts 32,253 26,866 48,910 40,741 receivable, netOtherreceivables, 56 47 265 221 netPrepaid 1,962 1,634 2,892 2,409 expensesOther current 2,664 2,219 2,558 2,131 assetsTotal current 155,863 129,831 186,191 155,095 assetsProperty and 6,663 5,550 7,893 6,575 equipment, netIntangible 1,717 1,430 1,899 1,582 assetsDeferred tax 7,667 6,387 10,246 8,535 assetsOthernon-current 1,770 1,474 1,785 1,487 financialassetsOthernon-current 1,745 1,454 2,050 1,707 assetsTotal assets 175,425 146,126 210,064 174,981 Liabilities and EquityCurrent liabilities:Accounts 37,496 31,234 43,914 36,580 payableDeferred 10,748 8,953 12,834 10,691 revenueWithholdings 1,764 1,469 2,366 1,971 Accrued expense 1,175 979 1,185 987 Income tax 2,618 2,181 2,577 2,147 payableOther current 1,986 1,654 2,788 2,322 liabilitiesTotal current 55,787 46,470 65,664 54,698 liabilitiesLong-termdeferred 98 82 343 286 revenueOthernon-current 3,774 3,143 4,058 3,380 liabilitiesTotal 59,659 49,695 70,065 58,364 liabilitiesShare capital 3,474 2,894 3,474 2,894 Capital surplus 27,128 22,597 27,110 22,582 Othercomponents of 274 228 1,875 1,562 equityRetained 84,668 70,527 107,026 89,151 earningsEquityattributable to 115,544 96,246 139,485 116,189 owners of theParent CompanyNon-controlling 222 185 514 428 interestTotal equity 115,766 96,431 139,999 116,617 Totalliabilities and 175,425 146,126 210,064 174,981 equity

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$ 1.00, the noon buying rate in effect on June 30, 2020 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-20 30-Jun-19 30-Jun-20 30-Jun-19 30-Jun-20 (KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Onlinegames-subscription 9,893 6,746 24,448 20,365 13,002 34,341 28,606 revenueOnline games-royalties 3,543 2,832 4,459 3,714 6,552 8,002 6,666 and license feesMobile games 55,982 65,013 54,249 45,189 185,103 110,231 91,821 Other revenue 3,842 3,536 5,302 4,416 7,093 9,144 7,616 Total net revenue 73,260 78,127 88,458 73,684 211,750 161,718 134,709 Cost of revenues 48,874 56,858 51,098 42,564 158,095 99,972 83,275 Gross profit 24,386 21,269 37,360 31,120 53,655 61,746 51,434 Operating expenses: Selling, general and 11,007 5,733 17,643 14,696 12,398 28,650 23,865 administrative expensesResearch and 2,872 2,432 3,254 2,711 4,309 6,126 5,103 developmentOthers, net 151 106 150 125 310 301 251 Total operating 14,030 8,271 21,047 17,532 17,017 35,077 29,219 expensesOperating profit 10,356 12,998 16,313 13,588 36,638 26,669 22,215 Finance income(costs): Finance income 1,551 1,141 627 522 2,203 2,178 1,814 Finance costs (657 ) (102 ) (605 ) (504 ) (415 ) (1,262 ) (1,051 )Profit before income 11,250 14,037 16,335 13,606 38,426 27,585 22,978 taxIncome tax expenses 2,004 3,208 3,293 2,743 7,835 5,297 4,412 Profit for the year 9,246 10,829 13,042 10,863 30,591 22,288 18,566 Profit attributable to: Non-controlling (17 ) (32 ) (53 ) (44 ) (30 ) (70 ) (58 )interestOwners of Parent 9,263 10,861 13,095 10,907 30,621 22,358 18,624 companyEarning per share - Basic and diluted 1,333 1,563 1,884 1.6 4,407 3,217 2.7 Weighted average number of shares outstanding- Basic and diluted 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 Earning per ADS^(1) - Basic and diluted 1,333 1,563 1,884 1.6 4,407 3,217 2.7

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,200.50 to US$1.00, the noon buying rate in effect on June 30, 2020 as quoted by the Federal Reserve Bank of New York.(1) Each ADS represents one common share.