GRAVITY Co., Ltd. Q1 2022 Financial Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited financial results for GRAVITY Co., Ltd. (Nasdaq: GRVY) for the first quarter ended March 31, 2022. Gravity is a South Korea-based developer and publisher of online and mobile games, best known for the Ragnarok Online franchise. The results are prepared in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics
| Metric | Q1 2022 (KRW) | Q1 2022 (USD) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenue | 88,607 million | 73,135 thousand | -8.3% | -15.7% |
| Operating Profit | 22,316 million | 18,419 thousand | +138.2% | -20.2% |
| Profit Before Tax | 23,220 million | 19,166 thousand | +135.5% | -18.9% |
| Net Profit (Parent) | 16,431 million | 13,562 thousand | +1,198.9% | -30.3% |
| Cash & Short-term Instruments | 266,369 million | 219,858 thousand | N/A | N/A |
Revenue Breakdown: Online game revenue increased 40.7% QoQ to KRW 21,447 million. Mobile game revenue decreased 17.2% QoQ to KRW 63,241 million. Other revenue decreased 21.5% QoQ to KRW 3,919 million.
Costs and Expenses: Cost of revenue decreased 17.2% QoQ to KRW 45,254 million. Operating expenses decreased 35.5% QoQ to KRW 21,037 million, driven by reduced advertising and R&D spend.
Material Changes vs. Prior Period
- Profitability Surge: Despite a 15.7% year-over-year revenue decline, net profit attributable to the parent company increased 1,198.9% quarter-over-quarter. This was primarily due to a significant reduction in operating expenses and cost of revenue, rather than revenue growth.
- Mobile Revenue Decline: Mobile game revenue fell 23.3% year-over-year, attributed to decreased performance in key titles such as Ragnarok X: Next Generation and Ragnarok M: Eternal Love in specific regions.
- Online Revenue Growth: Online game revenue grew 10.2% year-over-year, supported by strong performance of Ragnarok Online in Taiwan, Japan, and Southeast Asia.
- Liquidity Position: Cash and cash equivalents plus short-term financial instruments totaled KRW 266,369 million as of March 31, 2022, indicating strong liquidity.
Outlook, Guidance, and Business Updates
Management highlighted several upcoming launches and milestones for the second half of 2022:
- Ragnarok Online: Celebrating its 20th anniversary in Korea.
- New Launches: Ragnarok X: Next Generation (Korea) and Ragnarok Origin (Taiwan, Hong Kong, Macau) are scheduled for the second half of 2022.
- Blockchain Initiatives: Ragnarok Labyrinth NFT was re-opened in Southeast Asia in April 2022, ranking highly in top-grossing charts. Ragnarok Poring Merge is preparing for a second-half launch.
- Other Titles: Ragnarok: The Lost Memories launched on Steam in April 2022. Ragnarok V: Returns is scheduled for Oceania in Q2 2022.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. No specific new material risks or contingencies were detailed beyond the standard market and operational risks associated with game development and regional launches.
Investor Verification Checklist
- Verify the sustainability of the 138.2% QoQ operating profit increase given the 15.7% YoY revenue decline.
- Monitor the performance of the newly launched blockchain titles (Ragnarok Labyrinth NFT, Ragnarok Poring Merge) in Southeast Asia.
- Track the success of the second-half 2022 launches for Ragnarok X: Next Generation and Ragnarok Origin in new regions.
- Review the impact of reduced advertising spend on future user acquisition and long-term revenue growth.
- Confirm the exchange rate sensitivity, as USD figures are converted at KRW 1,211.55 to US$ 1.00.