GRAVITY Co., Ltd. Q3 2022 Financial Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited financial results for GRAVITY Co., Ltd. (Nasdaq: GRVY), a South Korean developer and publisher of online and mobile games, for the third quarter ended September 30, 2022. The results are prepared in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics
| Metric | Q3 2022 (KRW) | Q3 2022 (USD) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenue | 102,377 million | 71,509 thousand | +6.1% | -20.4% |
| Operating Profit | 21,271 million | 14,857 thousand | -3.8% | -47.1% |
| Profit Before Tax | 24,410 million | 17,050 thousand | +2.2% | -41.1% |
| Net Profit (Parent) | 16,076 million | 11,229 thousand | -8.0% | -39.0% |
| Cash & Short-term Instruments | 293,684 million | 205,134 thousand | N/A | N/A |
Revenue Breakdown: Mobile game revenues were KRW 79,443 million (77.6% of total), while online game revenues were KRW 19,271 million (18.8% of total). Cost of revenue increased 18.3% QoQ to KRW 59,829 million, primarily due to commissions for new mobile launches.
Material Changes vs. Prior Period
- Revenue Decline YoY: Total revenue decreased 20.4% year-over-year, driven by a 25.2% drop in mobile game revenue. This was largely due to declining performance of Ragnarok X: Next Generation in Southeast Asia and Ragnarok Origin in Japan and Korea.
- Mobile Growth QoQ: Mobile revenue increased 16.8% quarter-over-quarter, fueled by the September 15, 2022 launch of Ragnarok Origin in Taiwan, Hong Kong, and Macau.
- Online Game Performance: Online game revenue fell 22.4% QoQ due to declines in Taiwan and Thailand, though it rose 5.3% YoY thanks to growth in Thailand and Korea.
- Expense Management: Operating expenses decreased 10.7% QoQ and 4.5% YoY, attributed to reduced advertising spend for Ragnarok Labyrinth NFT and lower salaries for Ragnarok: The Lost Memories.
Outlook, Management Commentary, and Risks
Business Updates and Pipeline:
- Ragnarok Origin is scheduled for launch in Southeast Asia in H1 2023.
- Ragnarok X: Next Generation began pre-registration in Korea in November 2022, with a planned Q1 2023 launch.
- Ragnarok Begins is scheduled for launch in North America on November 15, 2022.
- Gravity signed a partnership with Me2On to launch a blockchain NFT game in H1 2023.
Risks and Contingencies: The filing includes standard forward-looking statements regarding future game launches and market performance. The company notes that forward-looking statements are subject to risks and uncertainties, and they assume no duty to update them. No specific material legal contingencies or unusual items were detailed in the text provided.
Investor Verification Checklist
- Verify the sustainability of the QoQ mobile revenue growth following the Ragnarok Origin launch in new regions.
- Monitor the performance of Ragnarok X: Next Generation upon its Q1 2023 Korea launch to assess if it can reverse the YoY revenue decline.
- Review the impact of rising commission costs on gross margins as new mobile titles launch.
- Confirm the timeline and market reception for the North American launch of Ragnarok Begins in November 2022.
- Assess the liquidity position relative to upcoming development and marketing expenditures for the 2023 pipeline.