GRAVITY : REPORTS SECOND QUARTER OF 2021 RESULTS AND BUSINESS UPDATES (Form 6-K)

GRAVITY REPORTS SECOND QUARTER OF 2021 RESULTS AND BUSINESS UPDATES

Seoul, South Korea - August 13, 2021 - 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.

SECOND QUARTER 2021 HIGHLIGHTS

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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').

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Operating profit was KRW 19,157 million (US$ 16,947 thousand), representing a 31.5% decrease QoQ and a 17.4% increase YoY.

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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.

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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 Garena's 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 Ragnarok X: 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 Ragnarok Origin 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

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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 Apple's 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.

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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.

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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 in the 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.

Ragnarok Begins, 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 Company's recent business updates, results of second quarter in 2021 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 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 Kim
Chief Financial Officer
Gravity Co., Ltd.
Email: [e-mail]

Ms. Jin Lee

Ms. Hyeji An
IR Unit
Gravity Co., Ltd.
Email: [e-mail]
Telephone: [phone]

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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-Jun-21
		KRW			US$			KRW			US$
		(audited)			(unaudited)			(unaudited)			(unaudited)
Assets
Current assets:
Cash and cash equivalents			110,632				97,868				101,631				89,906
Short-term financial instruments			71,000				62,809				101,000				89,347
Accounts receivable, net			59,761				52,866				58,874				52,082
Other receivables, net			8				7				60				53
Prepaid expenses			2,238				1,980				1,946				1,721
Other current assets			2,946				2,606				2,301				2,035
Total current assets			246,585				218,136				265,812				235,144
Property and equipment, net			7,695				6,807				9,459				8,368
Intangible assets, net			3,363				2,975				3,788				3,351
Deferred tax assets			3,590				3,176				3,072				2,718
Other non-current financial assets			1,324				1,171				2,071				1,832
Other non-current assets			2,815				2,490				1,844				1,631
Total assets			265,372				234,755				286,046				253,044
Liabilities and Equity
Current liabilities:
Accounts payable			52,688				46,609				40,271				35,625
Deferred revenue			13,692				12,112				12,030				10,642
Withholdings			2,851				2,522				2,680				2,371
Accrued expense			1,365				1,208				1,219				1,078
Income tax payable			9,470				8,377				4,273				3,780
Other current liabilities			2,654				2,348				2,567				2,271
Total current liabilities			82,720				73,176				63,040				55,767
Long-term deferred revenue			101				89				98				87
Other non-current liabilities			5,203				4,604				5,782				5,114
Total liabilities			88,024				77,869				68,920				60,968
Share capital			3,474				3,073				3,474				3,073
Capital surplus			27,110				23,982				27,110				23,982
Other components of equity			(1,045	)			(924	)			11				10
Retained earnings			147,371				130,368				185,702				164,277
Equity attributable to owners of the Parent Company			176,910				156,499				216,297				191,342
Non-controlling interest			438				387				829				734
Total equity			177,348				156,886				217,126				192,076
Total liabilities and equity			265,372				234,755				286,046				253,044

* 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 games			19,458				28,907				22,380				19,798				42,343				41,838				37,011
Mobile games			82,438				54,249				55,140				48,778				110,231				137,578				121,705
Other revenue			3,163				5,302				6,091				5,389				9,144				9,254				8,187
Total net revenue			105,059				88,458				83,611				73,965				161,718				188,670				166,903
Cost of revenues			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 administrative expenses			15,508				17,643				14,014				12,397				28,650				29,522				26,116
Research and development			4,009				3,254				4,147				3,669				6,126				8,156				7,215
Others, net			36				150				451				398				301				487				430
Total operating expenses			19,553				21,047				18,612				16,464				35,077				38,165				33,761
Operating profit			27,953				16,313				19,157				16,947				26,669				47,110				41,675
Finance income(costs):
Finance income			1,600				627				597				528				2,178				2,197				1,943
Finance costs			(933	)			(605	)			(367	)			(325	)			(1,262	)			(1,300	)			(1,150	)
Profit before income tax			28,620				16,335				19,387				17,150				27,585				48,007				42,468
Income tax expenses			5,059				3,293				4,569				4,042				5,297				9,628				8,517
Profit for the year			23,561				13,042				14,818				13,108				22,288				38,379				33,951
Profit attributable to:
Non-controlling interest			(4	)			(53	)			52				46				(70	)			48				42
Owners of Parent company			23,565				13,095				14,766				13,062				22,358				38,331				33,909
Earning per share
- Basic and diluted			3,391				1,884				2,125				1.88				3,217				5,516				4.88
Weighted average number of shares outstanding
- Basic and diluted			6,498,000				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			3,391				1,884				2,125				1.88				3,217				5,516				4.88

* 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 shares.