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 third quarter ended September 30, 2020. The filing was submitted on November 13, 2020. The company's principal product is the Ragnarok Online franchise, which operates in 93 markets.
Key Financial Metrics
| Metric | Q3 2020 (KRW) | Q3 2020 (USD) | Q2 2020 (KRW) | Q3 2019 (KRW) |
|---|---|---|---|---|
| Total Revenue | 131,795 million | 113,034 thousand | 88,458 million | 77,566 million |
| Operating Profit | 34,356 million | 29,465 thousand | 16,313 million | 10,226 million |
| Profit Before Tax | 33,675 million | 28,881 thousand | 16,335 million | 11,213 million |
| Net Profit (Parent) | 25,281 million | 21,682 thousand | 13,095 million | 8,952 million |
| Cash & Short-term Instruments | 171,800 million | 147,345 thousand | N/A | N/A |
Revenue Breakdown (Q3 2020):
- Mobile Games: KRW 95,531 million (72.5% of total revenue)
- Subscription (Online Games): KRW 29,159 million
- Royalty and License Fees: KRW 2,674 million
- Other Revenue: KRW 4,431 million
Costs and Expenses:
- Cost of Revenue: KRW 74,107 million
- Operating Expenses: KRW 23,332 million
Material Changes vs. Prior Periods
Quarter-over-Quarter (QoQ) Growth:
- Total revenue increased 49.0% driven primarily by the July 7, 2020 launch of Ragnarok Origin in Korea and growth in Ragnarok M: Eternal Love in Southeast Asia.
- Operating profit surged 110.6% due to revenue growth outpacing increased operating expenses.
- Net profit attributable to the parent company rose 93.1%.
Year-over-Year (YoY) Growth:
- Total revenue increased 69.9%.
- Operating profit increased 236.0%.
- Net profit attributable to the parent company increased 182.4%.
- Subscription revenue saw a 176.0% YoY increase, largely due to Ragnarok Online performance in Thailand and the United States.
Declines:
- Royalty and license fee revenues decreased 40.0% QoQ, attributed to the absence of a temporary collaboration event with Garena's Free Fire that occurred in the prior quarter.
Guidance, Outlook, and Business Updates
Upcoming Launches and Expansions:
- Ragnarok Origin: Prepared for launch in Japan in the first half of 2021.
- Ragnarok X: Next Generation: Launched in Taiwan, Hong Kong, and Macau (Oct 15, 2020); Southeast Asia launch expected in H1 2021.
- The Labyrinth of Ragnarok: Launched in Philippines, Singapore, and Malaysia (Oct 14, 2020); Thailand and Indonesia launch expected in December 2020.
- Tactical Warfare (FPS): Pre-registration started; launch expected in the Americas in Q4 2020.
- Tera Classic: Pre-registration started; launch expected in Japan in January 2021.
- The Lost Memories: a Song of Valkyrie and Action RO2: Spear of Odin: Expected launches in H1 2021 in various Asian markets.
Risks and Contingencies:
The filing includes standard forward-looking statements regarding future launches and financial performance. The company notes that actual results may differ due to risks inherent in the gaming industry, including market acceptance of new titles and regulatory changes. No specific unusual items or litigation contingencies were detailed in the text provided.
Investor Verification Checklist
- Verify the sustainability of the 76.1% QoQ mobile revenue growth following the launch of Ragnarok Origin.
- Monitor the performance of Ragnarok X: Next Generation in its initial markets (Taiwan, HK, Macau) ahead of the Southeast Asia expansion.
- Assess the impact of the 40.0% QoQ decline in royalty revenues and whether future collaboration events will stabilize this stream.
- Review the company's cash position (KRW 171.8 billion) relative to upcoming development and marketing costs for 2021 launches.
- Confirm the timeline for the Tactical Warfare launch in the Americas in Q4 2020.