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 first quarter ended March 31, 2021. The filing was submitted on May 14, 2021. The company's principal product is the Ragnarok Online franchise, which operates in 93 markets.
Key Financial Metrics
| Metric | Q1 2021 (KRW) | Q1 2021 (US$) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenue | 105,059 million | 93,243 thousand | -6.6% | +43.4% |
| Operating Profit | 27,953 million | 24,809 thousand | +2.2% | +169.9% |
| Profit Before Tax | 28,620 million | 25,401 thousand | +7.0% | +154.4% |
| Net Profit (Parent) | 23,565 million | 20,915 thousand | +56.4% | +154.4% |
| Cash & Equivalents | 194,754 million | 172,850 thousand | N/A | N/A |
Revenue Breakdown:
- Online Games: KRW 19,458 million (+26.6% QoQ, +44.8% YoY). Growth driven by Ragnarok Online in Taiwan and Japan.
- Mobile Games: KRW 82,438 million (-10.9% QoQ, +47.3% YoY). QoQ decline due to lower revenues from Ragnarok X and Ragnarok Origin; partially offset by Tera Classic and Ragnarok M.
- Other Revenue: KRW 3,163 million (-29.8% QoQ, -17.7% YoY).
Costs and Expenses:
- Cost of Revenue: KRW 57,553 million (-11.4% QoQ, +17.8% YoY). QoQ decrease attributed to lower commissions for mobile services.
- Operating Expenses: KRW 19,553 million (-2.9% QoQ, +39.4% YoY). QoQ decrease driven by lower advertising and R&D expenses.
Material Changes vs. Prior Period
While total revenue decreased 6.6% quarter-over-quarter (QoQ), profitability improved significantly. Operating profit rose 2.2% QoQ, and net profit attributable to the parent company surged 56.4% QoQ. This divergence was primarily caused by a 11.4% reduction in the cost of revenue and a 2.9% reduction in operating expenses, which outpaced the revenue decline. Year-over-year (YoY) performance showed robust growth across all major metrics, with revenue up 43.4% and net profit up 154.4%, reflecting the successful expansion of mobile titles in new markets.
Outlook, Risks, and Business Updates
Business Updates and Pipeline:
- Ragnarok Origin: Closed beta test completed April 22, 2021; launch in Japan expected in Q2 2021.
- Ragnarok X: Next Generation: Closed beta and pre-registration started April 23, 2021; Southeast Asia launch expected in June 2021.
- The Labyrinth of Ragnarok: Launched globally (excluding specific Asian markets) on March 23, 2021.
- Ragnarok: Poring Merge: Launched globally on April 12, 2021.
- Future Launches: "The Lost Memories: a Song of Valkyrie" and "Project S" (CBT) expected in H2 2021. "The Lord" and "CPBL Pro-baseball 2021" also scheduled for H2 2021.
Risks and Contingencies:
The filing includes standard forward-looking statements regarding future game launches and financial performance. The company notes that actual results may differ due to market conditions, regulatory changes, and the competitive nature of the gaming industry. No specific unusual items or litigation contingencies were detailed in this summary.
Investor Verification Checklist
- Mobile Revenue Sustainability: Verify if the QoQ decline in mobile revenue (down 10.9%) is a temporary fluctuation or a trend, given the heavy reliance on the Ragnarok franchise.
- Upcoming Launch Execution: Monitor the actual launch dates and initial user reception for Ragnarok Origin (Japan) and Ragnarok X (Southeast Asia) scheduled for Q2 2021.
- Cost Management: Confirm if the QoQ reduction in cost of revenue and operating expenses can be maintained as new titles launch and marketing spend potentially increases.
- Currency Impact: Note that USD figures are converted at a rate of KRW 1,126.72 to US$ 1.00; fluctuations in the KRW/USD exchange rate will impact reported USD earnings.