GRAVITY Co., Ltd. Form 6-K Summary
Business Context and Reporting Period
Company: GRAVITY Co., Ltd. (NasdaqGM: GRVY)
Reporting Period: Second Quarter ended June 30, 2019
Filing Date: August 8, 2019
Business Overview: A South Korean developer and publisher of online and mobile games, primarily known for the Ragnarok Online franchise. Financial results are prepared in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics (Q2 2019)
| Metric | KRW (Millions) | USD (Thousands) |
|---|---|---|
| Total Revenues | 78,127 | 67,667 |
| Operating Profit | 12,998 | 11,257 |
| Profit Before Tax | 14,037 | 12,158 |
| Net Profit (Parent) | 10,861 | 9,407 |
| Cash & Short-term Instruments | 111,164 | 96,281 |
| Cost of Revenue | 56,858 | 49,246 |
| Operating Expenses | 8,271 | 7,164 |
Note: USD amounts converted at KRW 1,154.58 to US$ 1.00.
Material Changes vs. Prior Periods
- Revenue: Decreased 41.5% quarter-over-quarter (QoQ) but increased 24.0% year-over-year (YoY). The QoQ decline was driven by a 45.1% drop in mobile game revenues, primarily due to lower performance of Ragnarok M: Eternal Love in key markets (Southeast Asia, Americas, Taiwan, Korea), partially offset by the June 5, 2019 launch in Japan.
- Profitability: Operating profit fell 45.0% QoQ but rose 56.2% YoY. Net profit attributable to the parent company decreased 45.0% QoQ but increased 64.2% YoY.
- Cost Structure: Cost of revenue dropped 43.8% QoQ, largely due to reduced commission payments for mobile game services. Operating expenses decreased 5.4% QoQ, mainly from reduced advertising spend in Korea.
- Liquidity: Cash and short-term financial instruments increased to KRW 111,164 million as of June 30, 2019, compared to KRW 95,551 million (Cash + Short-term instruments) at year-end 2018.
Guidance, Outlook, and Business Updates
Upcoming Launches and Expansions:
- Ragnarok M: Eternal Love: Preparing service for Europe (excluding some regions), Turkey, and Russia in Q3 2019.
- Ragnarok Web MMORPG: Launched in Taiwan, Hong Kong, and Macau on June 5, 2019.
- RO Click H5: Global launch planned for September 2019.
- Ragnarok Spear of Odin: Expected launch in Taiwan, Hong Kong, and Macau in H2 2019.
- Ragnarok Online: Scheduled re-launch in Indonesia in September 2019 via a new joint venture publisher.
- The Color of Dream Fantasy Latele: Expected launch in Japan in H2 2019.
Risks and Contingencies: The filing includes standard forward-looking statements regarding future launches and performance. No specific new material risks or contingencies were detailed beyond the standard disclosure that future results may differ from expectations.
Investor Verification Checklist
- Mobile Revenue Sustainability: Verify the trajectory of Ragnarok M: Eternal Love revenues following the significant QoQ decline and the impact of the new Japan launch.
- Japan Market Performance: Monitor the initial performance of Ragnarok M: Eternal Love in Japan (launched June 5) and the upcoming European expansion.
- Indonesia Re-launch: Confirm the execution and initial user acquisition for the September 2019 re-launch of Ragnarok Online in Indonesia.
- Cost Management: Assess whether the reduction in advertising expenses (QoQ) will impact future user growth or if it reflects a shift in marketing efficiency.
- Currency Exposure: Note the reliance on KRW reporting and the impact of exchange rate fluctuations on USD-denominated financial metrics.