Business Context and Reporting Period
This Form 6-K filing by GRAVITY Co., Ltd. (Nasdaq: GRVY) is dated July 28, 2005. The company is a Korean-based developer and distributor of online games, with its principal product, Ragnarok Online, offered in 20 markets including Taiwan, Thailand, and Korea.
Key Financial Metrics and Targets
The filing does not provide actual revenue, profit, cash flow, or debt figures for the period. Instead, it addresses previously announced targets that the company now expects to miss:
- FY 2005 Revenue Target: US$75.1 million
- FY 2005 Pre-tax Income Target: US$33.2 million
The filing explicitly states that the company does not expect to achieve earnings targets for the second quarter of 2005 or the full fiscal year 2005.
Material Changes and Reasons for Missed Targets
Management identified three primary reasons for the inability to meet financial targets:
- Increased competition in key markets for Ragnarok Online.
- Lower than expected results from Ragnarok Online updates in Korea.
- Delayed commercialization and unfavorable market conditions for the new title, R.O.S.E. Online.
Guidance, Outlook, and Risks
Outlook: The company has withdrawn its previous guidance, stating it will not meet the US$75.1 million revenue or US$33.2 million pre-tax income targets for FY 2005.
Risks and Contingencies: The filing highlights several risks affecting future performance, including:
- Ability to diversify revenue streams.
- Timely collection of license fees and royalty payments from overseas licensees.
- Success in acquiring, developing, and launching new commercially successful games.
- Competition from companies with greater financial resources.
- Global economic and political conditions.
Investor Verification Checklist
- Verify the specific impact of the delayed R.O.S.E. Online commercialization on Q3 and Q4 revenue projections.
- Assess the current market share of Ragnarok Online in Korea and key international markets relative to new competitors.
- Review the status of royalty collections from overseas licensees to evaluate cash flow risks.
- Confirm if the company has revised its full-year guidance beyond the statement that targets will be missed.