GRAVITY Co., Ltd. Form 6-K Summary
Business Context and Reporting Period
GRAVITY Co., Ltd. (Nasdaq: GRVY), a South Korean developer and publisher of online and mobile games, reported unaudited financial results for the first quarter ended March 31, 2019. The filing was submitted on May 13, 2019. The company's principal product is the Ragnarok Online franchise, which operates in 83 markets.
Key Financial Metrics
| Metric | Q1 2019 (KRW) | Q1 2019 (US$) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenues | 133,623 million | 117,595 thousand | +18.0% | +101.5% |
| Operating Profit | 23,640 million | 20,804 thousand | +79.9% | +390.5% |
| Profit Before Tax | 24,389 million | 21,463 thousand | +82.7% | +376.6% |
| Net Profit (Parent) | 19,760 million | 17,390 thousand | +32.0% | +456.8% |
| Cost of Revenue | 101,237 million | 89,094 thousand | +10.9% | +121.1% |
| Operating Expenses | 8,746 million | 7,697 thousand | -0.5% | -44.3% |
| Cash & Equivalents | 127,330 million | 112,057 thousand | N/A | N/A |
Note: US$ amounts converted at KRW 1,136.30 to US$ 1.00.
Material Changes vs. Prior Period
- Revenue Growth: Total revenue more than doubled year-over-year, driven primarily by a 135.7% increase in mobile game revenues. This was largely due to the expansion of Ragnarok M: Eternal Love into Southeast Asia, North America, South America, and Oceania.
- Profitability Surge: Operating profit increased 390.5% YoY. This was achieved through significant revenue growth coupled with a 44.3% reduction in operating expenses, specifically lower advertising costs for Ragnarok M: Eternal Love and RO: Idle Poring in Korea.
- Subscription Decline: Subscription revenues decreased 29.7% YoY due to lower performance from Ragnarok Online and Ragnarok Prequel in key markets like Korea and Taiwan.
- Cost Structure: Cost of revenue rose 121.1% YoY, primarily attributed to increased commission payments for mobile game services in new international markets.
Outlook, Risks, and Business Updates
- Upcoming Launches:
- Ragnarok M: Eternal Love is scheduled for launch in Japan in 2019, published by GungHo Online Entertainment.
- Ragnarok Web MMORPG (3D version) is set to launch in Taiwan, Hong Kong, and Macau in Q2 2019.
- RO X Dawn Break launched in Indonesia on May 14, 2019.
- Ragnarok Spear of Odin is expected to launch in Taiwan, Hong Kong, and Macau in 2019.
- Strategic Initiatives: The company is collaborating with KT Corporation for 5G game co-marketing and plans a global launch for RO Click H5.
- Risks: The filing includes standard forward-looking statement disclaimers regarding uncertainties in game launches, market reception, and regulatory environments. No specific new material risks were detailed beyond standard operational dependencies on key titles.
Investor Verification Checklist
- Verify the sustainability of the 135.7% YoY mobile revenue growth as Ragnarok M: Eternal Love matures in new regions.
- Monitor the performance of the Japan launch for Ragnarok M: Eternal Love given the historical decline in Japanese royalty revenues.
- Assess the impact of the 29.7% YoY decline in subscription revenues on long-term recurring revenue stability.
- Review the Q2 2019 launch timeline for Ragnarok Web MMORPG to ensure it meets the stated schedule.
- Confirm the exchange rate sensitivity, as financial results are reported in KRW but converted to USD for US investors.