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 third quarter ended September 30, 2018. The company's principal product is the Ragnarok Online franchise, which operates in 81 markets globally.
Key Financial Metrics (Q3 2018)
| Metric | Amount (KRW) | Amount (US$) |
|---|---|---|
| Total Revenues | 44,201 million | 39,829 thousand |
| Operating Profit | 7,084 million | 6,383 thousand |
| Profit Before Tax | 7,329 million | 6,604 thousand |
| Net Profit (Parent) | 6,312 million | 5,687 thousand |
| Cash & Short-term Instruments | 65,779 million | 59,273 thousand |
| Total Assets | 98,756 million | 88,989 thousand |
| Total Liabilities | 38,418 million | 34,619 thousand |
Revenue Breakdown: Mobile game revenues accounted for KRW 33,387 million (75.5% of total), while subscription revenues were KRW 6,005 million and royalty/license fees were KRW 2,961 million.
Material Changes vs. Prior Periods
- Quarter-over-Quarter (QoQ): Total revenues decreased 29.9% from Q2 2018, driven primarily by a 35.5% drop in mobile game revenues due to declines in Ragnarok M (Korea/Taiwan) and RO: Idle Poring. Operating profit fell 14.9% QoQ.
- Year-over-Year (YoY): Total revenues increased 86.3% from Q3 2017. Net profit attributable to the parent company surged 134.1% YoY. Mobile game revenues grew 243.1% YoY, offsetting declines in subscription and royalty revenues.
- Cost Structure: Cost of revenue decreased 30.9% QoQ due to lower commissions and outsourcing fees. Operating expenses dropped 36.7% QoQ, largely from reduced advertising spend for Ragnarok M in Korea.
Outlook, Management Commentary, and Risks
- Business Updates: Ragnarok M launched in Southeast Asia (11 countries) on October 31, 2018, with over 2.5 million pre-registrations. Ragnarok R launched in Indonesia. Ragnarok Prequel 2 and Spear of Odin are scheduled for launch in Taiwan in the first half of 2019.
- Future Plans: Pre-registration for Ragnarok M in North/South America and Oceania is planned for late 2018, with a Q1 2019 launch. Service preparation for Japan is underway.
- Risks: The filing includes standard forward-looking statements regarding future launches and financial performance, noting that actual results may differ due to market conditions and other unanticipated events.
Investor Verification Checklist
- Verify the sustainability of mobile game revenue growth given the significant QoQ decline in key titles (Ragnarok M, RO: Idle Poring).
- Monitor the performance of the new Southeast Asia launch of Ragnarok M to assess if it can offset regional declines.
- Review the timeline and market reception for upcoming 2019 titles (Ragnarok Prequel 2, Spear of Odin).
- Confirm the exchange rate impact on USD reporting, as the filing uses a specific rate of KRW 1,109.76 to US$ 1.00.