GRAVITY Co., Ltd. Form 6-K Summary
Business Context and Reporting Period
GRAVITY Co., Ltd. (NasdaqCM: GRVY), a South Korean developer and publisher of online and mobile games, reported unaudited financial results for the second quarter ended June 30, 2018. The filing was submitted on July 27, 2018, in accordance with International Financial Reporting Standards (IFRS).
Key Financial Metrics
| Metric | Q2 2018 (KRW) | Q2 2018 (US$) | QoQ Change | YoY Change |
|---|---|---|---|---|
| Total Revenues | 63,026 million | 56,688 thousand | -5.0% | +133.2% |
| Operating Profit | 8,323 million | 7,486 thousand | +72.7% | +90.3% |
| Profit Before Tax | 8,642 million | 7,773 thousand | +68.9% | +89.5% |
| Net Profit (Parent) | 6,615 million | 5,949 thousand | +86.4% | +86.1% |
| Cash & Equivalents | 67,906 million | 61,078 thousand | N/A | N/A |
Revenue Breakdown: Mobile game revenues dominated at KRW 51,789 million (+323.1% YoY), driven by "Ragnarok M." Subscription revenues declined 31.3% QoQ and 37.5% YoY. Royalty and license fees decreased 30.5% QoQ and 9.5% YoY.
Liquidity: As of June 30, 2018, cash and cash equivalents plus short-term financial instruments totaled KRW 67,906 million. Total assets were KRW 108,198 million, with total liabilities at KRW 54,119 million.
Material Changes vs. Prior Period
- Revenue Mix Shift: While total revenue decreased slightly QoQ (-5.0%), the YoY surge (+133.2%) was almost entirely driven by mobile gaming. Traditional subscription and royalty models continued to contract.
- Profitability Expansion: Operating profit margins improved significantly due to a 26.4% QoQ decrease in operating expenses, primarily from reduced advertising spend for "Ragnarok M" and "RO: Idle Poring" in Korea.
- Cost Structure: Cost of revenue decreased 5.8% QoQ due to lower commission fees, offset slightly by increased outsourcing and salaries. YoY cost increases were driven by mobile game commissions.
Guidance, Outlook, and Corporate Actions
- Product Launches: "Ragnarok M" is scheduled for a global launch (excluding Taiwan, HK, Macau, Korea, Japan, China) in October 2018, with a Japan launch to follow. "Ragnarok R" is expected in Indonesia in 2018. "Spear of Odin" is targeting Southeast Asian markets in 2018.
- Market Expansion: Plans to re-launch "Ragnarok Online" in Russia and CIS countries in 2018, with a closed beta test concluding August 7, 2018. "Ragnarok Zero" is scheduled for Vietnam.
- Corporate Actions: The Board approved a 2-for-1 American Depository Share (ADS) split, effective August 27, 2018. The company also announced a transfer of its listing from the NASDAQ Capital Market to the NASDAQ Global Market, effective August 27, 2018.
- Risks: Forward-looking statements regarding launch schedules and market performance are subject to risks. The filing notes that the company assumes no duty to update these statements.
Investor Verification Checklist
- Verify the timing and market reception of the October 2018 global launch of "Ragnarok M."
- Monitor the performance of the Russia/CIS re-launch of "Ragnarok Online" post-beta.
- Confirm the impact of the ADS split and market transfer on trading liquidity and share price.
- Track the continued decline in subscription and royalty revenue streams versus mobile growth.
- Review the full investor presentation available on the company website for detailed business plans.