GRAVITY Co., Ltd. Form 6-K Summary
Business Context and Reporting Period
GRAVITY Co., Ltd. (NasdaqGM: GRVY), a South Korean developer and publisher of online and mobile games, reported unaudited financial results for the second quarter ended June 30, 2020. The filing was submitted on August 7, 2020, in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics
| Metric | Q2 2020 (KRW) | Q2 2020 (US$) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenues | 88,458 million | 73,684 thousand | +20.7% | +13.2% |
| Operating Profit | 16,313 million | 13,588 thousand | +57.5% | +25.5% |
| Profit Before Tax | 16,335 million | 13,606 thousand | +45.2% | +16.4% |
| Net Profit (Parent) | 13,095 million | 10,907 thousand | +41.4% | +20.6% |
| Cash & Equivalents | 131,566 million | 109,593 thousand | N/A | N/A |
Revenue Breakdown: Subscription revenues surged 147.1% QoQ to KRW 24,448 million, driven by Ragnarok Online in Thailand and Ragnarok H5 in Indonesia. Mobile game revenues declined 3.1% QoQ to KRW 54,249 million due to decreases in Taiwan and Japan, partially offset by growth in Southeast Asia. Royalty and license fees increased 25.9% QoQ.
Costs and Expenses: Cost of revenue rose 4.6% QoQ to KRW 51,098 million. Operating expenses increased significantly by 50.0% QoQ to KRW 21,047 million, primarily due to advertising for new titles and payment gateway fees.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue grew 13.2% year-over-year, reversing the previous trend of mobile game revenue decline in certain regions through successful re-launches and new market entries.
- Profitability Expansion: Operating profit margins improved significantly, with operating profit growing 57.5% quarter-over-quarter despite a 50% increase in operating expenses.
- Liquidity Position: Cash and cash equivalents plus short-term financial instruments totaled KRW 131,566 million as of June 30, 2020, up from KRW 118,928 million at year-end 2019.
Outlook, Management Commentary, and Risks
Business Updates:
- Ragnarok Origin: Launched in Korea (July 2020), ranking 4th in top-grossing charts; Japan launch prepared via GungHo Online Entertainment.
- Ragnarok X: Next Generation: Joint publishing deal signed with ByteDance for Taiwan, Hong Kong, Macau, and Southeast Asia; expected launch in H2 2020.
- Ragnarok Tactics: Global launch completed on June 18, 2020.
- Action RO2: Spear of Odin: Expected launch in Southeast Asia and Oceania in 2020.
- Tactical Warfare: FPS game pre-registration started; expected launch in the Americas in Q3 2020.
Risks and Contingencies: The filing includes standard forward-looking statements regarding future launches and financial performance. Investors are cautioned that actual results may differ due to market conditions, regulatory changes, and the competitive nature of the gaming industry. No specific litigation or unusual items were detailed in the text provided.
Investor Verification Checklist
- Verify the sustainability of the 147.1% QoQ growth in subscription revenues following the Ragnarok Online Thailand re-launch.
- Monitor the performance of newly launched titles (Ragnarok Origin, Ragnarok Tactics) against the decline in legacy mobile titles in Taiwan and Japan.
- Confirm the timeline and market reception for the ByteDance partnership on Ragnarok X: Next Generation.
- Review the impact of the 50% QoQ increase in operating expenses on future profit margins.
- Check the exchange rate sensitivity, as US$ figures are converted at KRW 1,200.50 to US$ 1.00.