Business Context and Reporting Period
Company: GRAVITY Co., Ltd. (NasdaqGM: GRVY)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: February 15, 2019
Reporting Period: Preliminary unaudited results for the fourth quarter ended December 31, 2018.
Business Overview: Gravity is a South Korean developer and publisher of online and mobile games, best known for the Ragnarok Online IP, which is commercially offered in 83 markets.
Key Financial Metrics
| Metric (KRW Billions) | 3Q 2018 | 4Q 2017 | 4Q 2018 | QoQ Change | YoY Change |
|---|---|---|---|---|---|
| Revenues | 44 | 67 | 111 | 152.3% | 65.7% |
| Operating Profit | 7 | 2.9 | 12 | 71.4% | 313.8% |
Liquidity: Cash and cash equivalents and short-term financial instruments totaled KRW 95.5 billion as of December 31, 2018.
Margins: Operating margin for 4Q 2018 was approximately 10.8% (12/111). The filing does not provide net income, cash flow from operations, or debt figures.
Material Changes vs. Prior Period
- Revenue Surge: Q4 2018 revenue of KRW 111 billion represents a 152.3% increase from Q3 2018 and a 65.7% increase from Q4 2017.
- Profitability Expansion: Operating profit jumped to KRW 12 billion, a 71.4% sequential increase and a 313.8% year-over-year increase.
- Seasonality: The significant QoQ growth suggests strong seasonality or specific product launches in the fourth quarter compared to the third quarter.
Guidance, Outlook, and Business Updates
Management Commentary & Outlook: The company highlighted the successful expansion of its flagship IP, Ragnarok Online, into new regions and formats.
- Ragnarok M: Eternal Love: Launched in North America, South America, and Oceania on January 9, 2019. It reached upper ranks in app stores in regions including Brazil, Canada, and Australia. Japan launch is planned for 2019.
- New Titles:
- Ragnarok Web MMORPG: Scheduled for Taiwan, Hong Kong, and Macau in H1 2019.
- Ragnarok Adventurer: A 3D ARPG mobile game scheduled for 2019.
- Ragnarok Spear of Odin: A 3D Action MORPG expected in Taiwan, Hong Kong, and Macau in H1 2019.
- RO Click H5: An HTML5 idle game expected to launch in Korea in March 2019 with global rollout later in 2019.
- Dawn Break X RO Collaboration: Launched in Korea on January 29, 2019.
- Strategic Expansion: Established a Joint Venture in Indonesia with Lyto and a subsidiary in Thailand to expand services in Southeast Asia.
Risks & Contingencies: The filing includes standard forward-looking statement disclaimers. The preliminary financial figures are unaudited and subject to revision. Final results will be reported in the Form 20-F for the fiscal year ended December 31, 2018.
Investor Verification Checklist
- Audit Confirmation: Verify the final audited figures in the upcoming Form 20-F, as current numbers are preliminary and unaudited.
- Revenue Drivers: Confirm the specific contribution of Ragnarok M: Eternal Love to the Q4 revenue spike and its retention rates in new international markets.
- Debt Profile: The filing does not disclose total debt or interest obligations; review the full balance sheet in the annual report to assess leverage.
- Launch Execution: Monitor the actual launch dates and performance of the H1 2019 titles (Web MMORPG, Spear of Odin) against management's schedule.
- Joint Venture Terms: Review the specific financial terms and equity stakes in the new Indonesia and Thailand entities.