Seoul, Korea, Aug. 08, 2019 (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, 2019, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

SECOND QUARTER 2019 HIGHLIGHTS

-- Total revenues were KRW 78,127 million (US$ 67,667 thousand), representing a 41.5% decrease from the first quarter ended March 31, 2019 (“QoQ”) and a 24.0% increase from the second quarter ended June 30, 2018 (“YoY”). -- Operating profit was KRW 12,998 million (US$ 11,257 thousand), representing a 45.0% decrease QoQ and a 56.2% increase YoY. -- Profit before income tax expenses was KRW 14,037million (US$ 12,158 thousand), representing a 42.4% decrease QoQ and a 62.4% increase YoY. -- Net profit attributable to parent company was KRW 10,861 million (US$ 9,407 thousand), representing a 45.0% decrease QoQ and a 64.2% increase YoY.

REVIEW OF SECOND QUARTER 2019 FINANCIAL RESULTS

Revenues

Subscription revenues for the second quarter of 2019 were KRW 6,746 million (US$ 5,843 thousand), representing a 7.8 % increase QoQ from KRW 6,256 million and a 10.3% increase YoY from KRW 6,116 million. The increase QoQ was mainly attributable to increased revenue from Ragnarok Online in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok online in Taiwan and Korea. Such increase was partially offset by decreased revenue from Ragnarok Prequel in Taiwan.

Royalty and license fee revenues for the second quarter of 2019 were KRW 2,832 million (US$ 2,452 thousand), representing a 23.9% decrease QoQ from KRW 3,720 million and a 11.7% decrease YoY from KRW 3,209 million. The decrease QoQ was primarily due to decreased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenues from Ragnarok Online in Thailand and Brazil.

Mobile game and application revenues were KRW 66,463 million (US$ 57,565 thousand) for the second quarter of 2019, representing a 45.1% decrease QoQ from KRW 121,147 million and a 28.3% increase YoY from KRW 51,789 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, and Oceania, Taiwan, and Korea. Such decrease was partially offset by revenue from Ragnarok M: Eternal Love in Japan, which was launched on June 5, 2019. The increase YoY was primarily due to revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, Oceania, and Japan. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Korea and Taiwan. RO: Idle Poring in global markets except for China and Japan, and Ragnarok R in Taiwan and Korea.Character merchandising and other revenues were KRW 2,086 million (US$ 1,807 thousand) for the second quarter of 2019, representing 16.6% decrease QoQ from KRW 2,500 million and a 9.1% increase YoY from KRW 1,912 million.

Cost of Revenue

Cost of revenue was KRW 56,858 million (US$ 49,246 thousand) for the second quarter of 2019, representing a 43.8% decrease QoQ from KRW 101,237 million and a 31.8% increase YoY from KRW 43,150 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania, Taiwan, and Korea. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America and Oceania and salaries.

Operating Expenses

Operating expenses were KRW 8,271 million (US$ 7,164 thousand) for the second quarter of 2019, representing a 5.4% decrease QoQ from KRW 8,746 million and a 28.4% decrease YoY from KRW 11,553 million. The decrease QoQ was mainly attributable to decreased advertising expenses for Ragnarok M: Eternal Love in Korea. Such decrease was partially offset by increased commission paid and research and development expenses. The decrease YoY was mostly resulted from decreased advertising expenses for Ragnarok M: Eternal Love in Korea. Such decrease was partially offset by increased research and development expenses and salaries.

Profit before income tax expenses

Profit before income tax expenses was KRW 14,037 million (US$ 12,158 thousand) for the second quarter of 2019 compared with profit before income tax expense of KRW 24,389 million for the first quarter of 2019 and profit before income tax expenses of KRW 8,642 million for the second quarter of 2018.

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 10,861 million (US$ 9,407 thousand) for the second quarter of 2019 compared with net profit attributable to parent company of KRW 19,760 million for the first quarter of 2019 and a net profit attributable to parent company of KRW 6,615 million for the second quarter of 2018.

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 111,164 million (US$ 96,281 thousand) as of June 30, 2019.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,154.58 to US$ 1.00, the noon buying rate in effect on June 28, 2019 as quoted by the Federal Reserve Bank of New York.

GRAVITY BUSINESS UPDATE

Ragnarok Online IP-based Games

-- Ragnarok M: Eternal Love, a MMORPG mobile game

Ragnarok M: Eternal Love (locally named Ragnarok Masters in Japan) has launched in Japan on June 5, 2019 by GungHo Online Entertainment Inc, (“GungHo”), the licensee of Ragnarok Online. Also, Gravity is preparing the service for Europe (except for some regions), Turkey and Russia in the third quarter of 2019.

-- Ragnarok Web MMORPG, a web browser-based 3D new version of game

Ragnarok web MMORPG has launched in Taiwan, Hong Kong and Macau on June 5, 2019.

-- Other Ragnarok OnlineIP-based games

Gravity is planning to launch RO Click H5, a HTML 5 version of idle game globally in September 2019.

A 3D Action MORPG mobile game, Ragnarok Spear of Odin, is expected to be launched in Taiwan, Hong Kong, and Macau in the second half of 2019. The game was developed by NeoCyon, our subsidiary in Korea.

Ragnarok Online

-- The company is scheduled to be re-launchedRagnarok Online in Indonesia in September 2019. The publisher of the game has changed from Gravindo to Gravity Game Link, a joint venture in Indonesia.

Other IP games

-- The Color of Dream Fantasy Latele, a MMORPG mobile game,is expected to be launched in Japan during the second half of 2019.

Investor Presentation

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of second quarter in 2019 and Gravity’s business plan. The presentation can be found on the Company’s 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. Gravity's principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 83 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, 2018 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: +82-2-2132-7800~1

# # #

GRAVITY Co., Ltd.Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

As of -------------------------------------------- 31-Dec-18 30-Jun-19 -------------------- -------------------- KRW US$ KRW US$ (audited) (unaudite (unaudite (unaudite d) d) d) Assets Current assets: Cash and cash equivalents 86,051 74,530 88,664 76,793 Short-term financial instruments 9,500 8,228 22,500 19,488 Accounts receivable, net 60,664 52,542 34,817 30,156 Other receivables, net 255 221 239 207 Prepaid expenses 2,516 2,179 2,096 1,815 Other current assets 1,182 1,024 2,390 2,070 ------- ------- ------- ------- Total current assets 160,168 138,724 150,706 130,529 Property and equipment, net 1,498 1,297 5,843 5,061 Intangible assets 1,163 1,007 1,687 1,461 Deferred tax assets 7,413 6,421 7,035 6,093 Other non-current financial assets 1,494 1,294 1,554 1,346 Other non-current assets 1,438 1,245 1,411 1,222 ------- ------- ------- ------- Total assets 173,174 149,988 168,236 145,712 ------- ------- ------- ------- Liabilities and Equity Current liabilities: Accounts payable 71,928 62,298 38,350 33,215 Deferred revenue 16,476 14,270 12,421 10,758 Withholdings 2,019 1,749 1,456 1,261 Accrued expense 1,031 893 1,050 909 Income tax payable 1,944 1,684 2,005 1,737 Other current liabilities 123 106 2,135 1,849 ------- ------- ------- ------- Total current liabilities 93,521 81,000 57,417 49,729 ------- ------- ------- ------- Long-term deferred revenue 3,598 3,116 1,960 1,698 Other non-current liabilities 503 436 2,401 2,080 ------- ------- ------- ------- Total liabilities 97,622 84,552 61,778 53,507 ------- ------- ------- ------- Share capital 3,474 3,009 3,474 3,009 Capital surplus 27,141 23,506 27,140 23,506 Other components of equity 138 120 277 240 Retained earnings (Accumulated deficit) 45,405 39,326 76,026 65,847 ------- ------- ------- ------- Equity attributable to owners of the Parent Company 76,158 65,961 106,917 92,602 ------- ------- ------- ------- Non-controlling interest (606 ) (525 ) (459 ) (397 ) ------- ------- ------- ------- Total equity 75,552 65,436 106,458 92,205 ------- ------- ------- ------- Total liabilities and equity 173,174 149,988 168,236 145,712 ------- ------- ------- -------

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.58 to US$ 1.00, the noon buying rate in effect on June 28, 2019 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-19 30-Jun-18 30-Jun-19 30-Jun-18 30-Jun-19 ---------- ---------- ------------------------ ---------- ------------------------ (KRW) (KRW) (KRW) (US$) (KRW) (KRW) (US$) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Online games-subscription 6,256 6,116 6,746 5,843 15,012 13,002 11,261 revenue Online games-royalties 3,720 3,209 2,832 2,452 7,828 6,552 5,675 and license fees Mobile games and 121,147 51,789 66,463 57,565 103,185 187,610 162,492 applications Character merchandising and 2,500 1,912 2,086 1,807 3,312 4,586 3,972 other revenue --------- --------- --------- --------- --------- --------- --------- Total net revenue 133,623 63,026 78,127 67,667 129,337 211,750 183,400 Cost of revenue 101,237 43,150 56,858 49,246 88,934 158,095 136,929 --------- --------- --------- --------- --------- --------- --------- Gross profit 32,386 19,876 21,269 18,421 40,403 53,655 46,471 Operating expenses: Selling, general 6,665 9,470 5,733 4,966 23,297 12,398 10,738 and administrative Research and 1,877 1,742 2,432 2,106 3,616 4,309 3,732 development Others, net 204 341 106 92 347 310 268 --------- --------- --------- --------- --------- --------- --------- Total operating 8,746 11,553 8,271 7,164 27,260 17,017 14,738 expenses Operating profit 23,640 8,323 12,998 11,257 13,143 36,638 31,733 Finance income (costs): Finance income 1,062 892 1,141 989 1,482 2,203 1,907 Finance costs (313 ) (573 ) (102 ) (88 ) (866 ) (415 ) (359 ) --------- --------- --------- --------- --------- --------- --------- Profit before 24,389 8,642 14,037 12,158 13,759 38,426 33,281 income tax Income tax 4,627 2,042 3,208 2,779 3,635 7,835 6,786 expenses(profits) --------- --------- --------- --------- --------- --------- --------- Profit for the 19,762 6,600 10,829 9,379 10,124 30,591 26,495 year Profit attributable to: Non-controlling 2 (15 ) (32 ) (28 ) (40 ) (30 ) (26 ) interest --------- --------- --------- --------- --------- --------- --------- Owners of Parent 19,760 6,615 10,861 9,407 10,164 30,621 26,521 company --------- --------- --------- --------- --------- --------- --------- Earning per share - Basic and 2,844 952 1,563 1.40 1,463 4,407 3.80 diluted --------- --------- --------- --------- --------- --------- --------- Weighted average number of shares outstanding - Basic and 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 6,948,900 diluted --------- --------- --------- --------- --------- --------- --------- Earning per ADS(1) - Basic and 2,844 952 1,563 1.40 1,463 4,407 3.80 diluted --------- --------- --------- --------- --------- --------- ---------

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.58 to US$1.00, the noon buying rate in effect on June 28, 2019 as quoted by the Federal Reserve Bank of New York.(1) Each ADS represents one common shares.

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