UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of November 2019

Commission File Number 000-51138

 

GRAVITY CO., LTD.

(Translation of registrant’s name into English)

 

15F, 396 World Cup buk-ro, Mapo-gu, Seoul 121-795, Korea

 

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.  Form 20-F  Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): 



GRAVITY REPORTS THIRD QUARTER OF 2019 RESULTS AND BUSINESS UPDATES

 

Seoul, South Korea – November 14, 2019 – GRAVITY Co., Ltd. (NasdaqGM: GRVY) (“Gravity” or “Company”), a developer and publisher of online and mobile games based in South Korea, today announced its unaudited financial results for the third quarter ended September 30, 2019, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and business updates.

 

THIRD QUARTER 2019 HIGHLIGHTS

 

Total revenues were KRW 77,566 million (US$ 64,863 thousand), representing a 0.7% decrease from the second quarter ended June 30, 2019 (“QoQ”) and a 75.5% increase from the third quarter ended September 30, 2018 (“YoY”).

 

Operating profit was KRW 10,226 million (US$ 8,551 thousand), representing a 21.3% decrease QoQ and a 44.4% increase YoY.

 

Profit before income tax expenses was KRW 11,213 million (US$ 9,376 thousand), representing a 20.1% decrease QoQ and a 53.0% increase YoY.

 

Net profit attributable to parent company was KRW 8,952 million (US$ 7,485 thousand), representing a 17.6% decrease QoQ and a 41.8% increase YoY.

 

REVIEW OF THIRD QUARTER 2019 FINANCIAL RESULTS

 

Revenues

 

Subscription revenues for the third quarter of 2019 were KRW 10,564 million (US$ 8,834 thousand), representing a 56.6 % increase QoQ from KRW 6,746 million and a 75.9% increase YoY from KRW 6,005 million. The increase QoQ was mainly attributable to increased revenues from Ragnarok Online in Taiwan, Brazil, and Ragnarok Prequel 2 in Taiwan. The increase YoY was largely due to increased revenues from Ragnarok Online in Taiwan, Brazil and Ragnarok Prequel 2 in Taiwan. Such increase was partially offset by decreased revenue from Ragnarok Prequel in Taiwan.

 

Royalty and license fee revenues for the third quarter of 2019 were KRW 2,583 million (US$ 2,160 thousand), representing an 8.8% decrease QoQ from KRW 2,832 million and a 12.8% decrease YoY from KRW 2,961 million. The decrease QoQ was primarily due to decreased revenue from Ragnarok Online in Japan. The decrease YoY resulted mainly from decreased revenues from Ragnarok Online in Brazil and Thailand.

 

Mobile game and application revenues were KRW 61,238 million (US$ 51,209 thousand) for the third quarter of 2019, representing a 7.9% decrease QoQ from KRW 66,463 million and a 83.4% increase YoY from KRW 33,387 million. The decrease QoQ resulted primarily from decreased revenues from Ragnarok M: Eternal Love in Southeast Asia, North America, South America, Oceania, and Taiwan. Such decrease was partially offset by increased revenues from Ragnarok M: Eternal Love in Japan, Korea and Ragnarok H5 that has launched on September 19, 2019 in Korea. The increase YoY was primarily due to revenues from


Ragnarok M: Eternal Love in Southeast Asia, Japan, North America, South America, Oceania, and Ragnarok H5 launched in September in Korea. This increase was partially offset by decreased revenues from Ragnarok M: Eternal Love in Taiwan and Korea.

 

Character merchandising and other revenues were KRW 3,181 million (US$ 2,660 thousand) for the third quarter of 2019, representing 52.5% increase QoQ from KRW 2,086 million and a 72.1% increase YoY from KRW 1,848 million.

 

Cost of Revenue

Cost of revenue was KRW 56,058 million (US$ 46,877 thousand) for the third quarter of 2019, representing a 1.4% decrease QoQ from KRW 56,858 million and a 88.1% increase YoY from KRW 29,806 million. The decrease QoQ was mainly due to decreased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America, and Oceania. The increase YoY was mostly from increased commission paid for mobile game services related to Ragnarok M: Eternal love in Southeast Asia, North America, South America, Oceania, and Japan.

 

Operating Expenses

Operating expenses were KRW 11,282 million (US$ 9,435 thousand) for the third quarter of 2019, representing a 36.4% increase QoQ from KRW 8,271 million and a 54.3% increase YoY from KRW 7,311 million. The increase QoQ was mainly attributable to increased advertising expenses for Ragnarok M: Eternal Love in Korea, Ragnarok H5 launched in September in Korea, and re-launched Ragnarok Online in Indonesia. The increase YoY was mostly resulted from increased advertising expenses for Ragnarok M: Eternal Love in Korea, Ragnarok H5 launched in September in Korea, re-launched Ragnarok Online in Indonesia, research and development expenses and salaries.

 

Profit before income tax expenses

Profit before income tax expenses was KRW 11,213 million (US$ 9,376 thousand) for the third quarter of 2019 compared with profit before income tax expense of KRW 14,037 million for the second quarter of 2019 and profit before income tax expenses of KRW 7,329 million for the third quarter of 2018.

 

Net Profit

As a result of the foregoing factors, Gravity recorded a net profit attributable to parent company of KRW 8,952 million (US$ 7,485 thousand) for the third quarter of 2019 compared with net profit attributable to parent company of KRW 10,861 million for the second quarter of 2019 and a net profit attributable to parent company of KRW 6,312 million for the third quarter of 2018.

 

Liquidity

The balance of cash and cash equivalents and short-term financial instruments was KRW 120,259 million (US$ 100,564 thousand) as of September 30, 2019.


Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,195.85 to US$ 1.00, the noon buying rate in effect on September 30, 2019 as quoted by the Federal Reserve Bank of New York.

 

GRAVITY BUSINESS UPDATE

 

Ragnarok Online IP-based Games

 

Ragnarok Origin, a MMORPG mobile game

Ragnarok Origin is scheduled to be launched in Korea in 2020. The game embodies Ragnarok’s game elements to the highest level of graphics on the mobile device.

Ragnarok M: Eternal Love, a MMORPG mobile game

Ragnarok M: Eternal Love has launched in Europe (except for some regions) and Russia on October 16, 2019.

Ragnarok Tactics, a SRPG mobile game

Ragnarok Tactics has launched in Thailand on November 8, 2019. On the launching day, the game ranked as the first in free download rankings and the second in gross rankings of Apple App Store. The game is scheduled to be launched in Korea in the first half of 2020.

Other Ragnarok Online IP-based games

Gravity has launched Ragnarok Click H5, a Click Action RPG game, globally on November 13, 2019.

 

The company has been preparing to launch Ragnarok H5, an idle RPG game, in Indonesia in the first quarter of 2020.

 

Other IP games

The Color of Dream Fantasy Latele, a MMORPG mobile game, has launched in Japan on October 16, 2019.

 

Investor Presentation

 

Gravity issued an investor presentation. The presentation contains the Company’s recent business updates, results of the third quarter in 2019 and Gravity’s business plan. The presentation can be found on the Company’s website under the IR Archives section at http://www.gravity.co.kr/en/ir/pds/list.asp. Korean and Japanese versions of the presentation are also provided on the website.


About GRAVITY Co., Ltd. ---------------------------------------------------

Gravity is a developer and publisher of online and mobile games. Gravity's principal product, Ragnarok Online, is a popular online game in many markets, including Japan and Taiwan, and is currently commercially offered in 83 markets and countries. For more information about Gravity, please visit http://www.gravity.co.kr.

Forward-Looking Statements:

Certain statements in this press release may include, in addition to historical information, “forward-looking statements” within the meaning of the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act 1995. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe”, “project,” or “continue” or the negative thereof or other similar words, although not all forward-looking statements contain these words. Investors should consider the information contained in our submissions and filings with the United States Securities and Exchange Commission (the “SEC”), including our annual report for the fiscal year ended December 31, 2019 on Form 20-F, together with such other documents that we may submit to or file with the SEC from time to time, on Form 6-K. The forward-looking statements speak only as of this press release and we assume no duty to update them to reflect new, changing or unanticipated events or circumstances.

Contact:

Mr. Heung Gon Kim
Chief Financial Officer
Gravity Co., Ltd.
Email: kheung@gravity.co.kr

 

Ms. Jin Lee

Ms. Minji Oh
IR Unit
Gravity Co., Ltd.
Email: ir@gravity.co.kr
Telephone: +82-2-2132-7800

#     #     #


GRAVITY Co., Ltd.

Consolidated Statements of Financial Position

(In millions of KRW and thousands of US$)

 

 

As of

 

 

 

31-Dec-18

 

 

30-Sep-19

 

 

 

KRW

 

 

US$

 

 

KRW

 

 

US$

 

 

 

(audited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

86,051

 

 

 

71,958

 

 

 

88,759

 

 

 

74,223

 

Short-term financial instruments

 

 

9,500

 

 

 

7,944

 

 

 

31,500

 

 

 

26,341

 

Accounts receivable, net

 

 

60,664

 

 

 

50,729

 

 

 

39,409

 

 

 

32,955

 

Other receivables, net

 

 

255

 

 

 

213

 

 

 

199

 

 

 

166

 

Prepaid expenses

 

 

2,516

 

 

 

2,104

 

 

 

1,929

 

 

 

1,613

 

Other current assets

 

 

1,182

 

 

 

988

 

 

 

3,749

 

 

 

3,135

 

Total current assets

 

 

160,168

 

 

 

133,936

 

 

 

165,545

 

 

 

138,433

 

Property and equipment, net

 

 

1,498

 

 

 

1,253

 

 

 

6,833

 

 

 

5,714

 

Intangible assets

 

 

1,163

 

 

 

973

 

 

 

1,568

 

 

 

1,311

 

Deferred tax assets

 

 

7,413

 

 

 

6,199

 

 

 

8,866

 

 

 

7,414

 

Other non-current financial assets

 

 

1,494

 

 

 

1,249

 

 

 

1,662

 

 

 

1,390

 

Other non-current assets

 

 

1,438

 

 

 

1,202

 

 

 

1,727

 

 

 

1,444

 

Total assets

 

 

173,174

 

 

 

144,812

 

 

 

186,201

 

 

 

155,706

 

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

71,928

 

 

 

60,148

 

 

 

44,258

 

 

 

37,010

 

Deferred revenue

 

 

16,476

 

 

 

13,778

 

 

 

12,795

 

 

 

10,700

 

Withholdings

 

 

2,019

 

 

 

1,688

 

 

 

2,119

 

 

 

1,772

 

Accrued expense

 

 

1,031

 

 

 

862

 

 

 

1,049

 

 

 

878

 

Income tax payable

 

 

1,944

 

 

 

1,626

 

 

 

3,204

 

 

 

2,679

 

Other current liabilities

 

 

123

 

 

 

102

 

 

 

1,889

 

 

 

1,580

 

Total current liabilities

 

 

93,521

 

 

 

78,204

 

 

 

65,314

 

 

 

54,619

 

Long-term deferred revenue

 

 

3,598

 

 

 

3,009

 

 

 

1,294

 

 

 

1,082

 

Other non-current liabilities

 

 

503

 

 

 

421

 

 

 

3,564

 

 

 

2,980

 

Total liabilities

 

 

97,622

 

 

 

81,634

 

 

 

70,172

 

 

 

58,681

 

Share capital

 

 

3,474

 

 

 

2,905

 

 

 

3,474

 

 

 

2,905

 

Capital surplus

 

 

27,141

 

 

 

22,695

 

 

 

27,128

 

 

 

22,685

 

Other components of equity

 

 

138

 

 

 

115

 

 

 

814

 

 

 

680

 

Retained earnings (Accumulated deficit)

 

 

45,405

 

 

 

37,970

 

 

 

84,978

 

 

 

71,061

 

Equity attributable to owners of the Parent Company

 

 

76,158

 

 

 

63,685

 

 

 

116,394

 

 

 

97,331

 

Non-controlling interest

 

 

(606

)

 

 

(507

)

 

 

(365

)

 

 

(306

)

Total equity

 

 

75,552

 

 

 

63,178

 

 

 

116,029

 

 

 

97,025

 

Total liabilities and equity

 

 

173,174

 

 

 

144,812

 

 

 

186,201

 

 

 

155,706

 

 

* For convenience purposes only, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,195.85 to US$ 1.00, the noon buying rate in effect on September 30, 2019 as quoted by the Federal Reserve Bank of New York.

 


GRAVITY Co., Ltd.

Consolidated Statements of Comprehensive Income

(In millions of KRW and thousands of US$ except for share and ADS data)

 

 

Three months ended

 

 

Nine months ended

 

 

 

30-Jun-19

 

 

30-Sep-18

 

 

30-Sep-19

 

 

30-Sep-18

 

 

30-Sep-19

 

 

 

(KRW)

 

 

(KRW)

 

 

(KRW)

 

 

(US$)

 

 

(KRW)

 

 

(KRW)

 

 

(US$)

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Online games-subscription revenue

 

 

6,746

 

 

 

6,005

 

 

 

10,564

 

 

 

8,834

 

 

 

21,017

 

 

 

23,566

 

 

 

19,706

 

Online games-royalties and license fees

 

 

2,832

 

 

 

2,961

 

 

 

2,583

 

 

 

2,160

 

 

 

10,788

 

 

 

9,135

 

 

 

7,639

 

Mobile games and applications

 

 

66,463

 

 

 

33,387

 

 

 

61,238

 

 

 

51,209

 

 

 

136,573

 

 

 

248,848

 

 

 

208,093

 

Character merchandising and other revenue

 

 

2,086

 

 

 

1,848

 

 

 

3,181

 

 

 

2,660

 

 

 

5,160

 

 

 

7,767

 

 

 

6,495

 

Total net revenue

 

 

78,127

 

 

 

44,201

 

 

 

77,566

 

 

 

64,863

 

 

 

173,538

 

 

 

289,316

 

 

 

241,933

 

Cost of revenue

 

 

56,858

 

 

 

29,806

 

 

 

56,058

 

 

 

46,877

 

 

 

118,740

 

 

 

214,153

 

 

 

179,080

 

Gross profit

 

 

21,269

 

 

 

14,395

 

 

 

21,508

 

 

 

17,986

 

 

 

54,798

 

 

 

75,163

 

 

 

62,853

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

5,733

 

 

 

5,602

 

 

 

8,984

 

 

 

7,513

 

 

 

28,899

 

 

 

21,382

 

 

 

17,880

 

Research and development

 

 

2,432

 

 

 

1,760

 

 

 

2,349

 

 

 

1,965

 

 

 

5,376

 

 

 

6,658

 

 

 

5,568

 

Others, net

 

 

106

 

 

 

(51

)

 

 

(51

)

 

 

(43

)

 

 

296

 

 

 

259

 

 

 

217

 

Total operating expenses

 

 

8,271

 

 

 

7,311

 

 

 

11,282

 

 

 

9,435

 

 

 

34,571

 

 

 

28,299

 

 

 

23,665

 

Operating profit

 

 

12,998

 

 

 

7,084

 

 

 

10,226

 

 

 

8,551

 

 

 

20,227

 

 

 

46,864

 

 

 

39,188

 

Finance income(costs):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Finance income

 

 

1,141

 

 

 

58

 

 

 

1,353

 

 

 

1,131

 

 

 

1,540

 

 

 

3,556

 

 

 

2,974

 

Finance costs

 

 

(102

)

 

 

187

 

 

 

(366

)

 

 

(306

)

 

 

(679

)

 

 

(781

)

 

 

(653

)

Profit before income tax

 

 

14,037

 

 

 

7,329

 

 

 

11,213

 

 

 

9,376

 

 

 

21,088

 

 

 

49,639

 

 

 

41,509

 

Income tax expenses(profits)

 

 

3,208

 

 

 

1,024

 

 

 

2,357

 

 

 

1,971

 

 

 

4,659

 

 

 

10,192

 

 

 

8,523

 

Profit for the period

 

 

10,829

 

 

 

6,305

 

 

 

8,856

 

 

 

7,405

 

 

 

16,429

 

 

 

39,447

 

 

 

32,986

 

Profit attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

(32

)

 

 

(7

)

 

 

(96

)

 

 

(80

)

 

 

(47

)

 

 

(126

)

 

 

(105

)

Owners of Parent company

 

 

10,861

 

 

 

6,312

 

 

 

8,952

 

 

 

7,485

 

 

 

16,476

 

 

 

39,573

 

 

 

33,091

 

Earning per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic and diluted

 

 

1,563

 

 

 

908

 

 

 

1,288

 

 

 

1.08

 

 

 

2,371

 

 

 

5,695

 

 

 

4.76

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic and diluted

 

 

6,948,900

 

 

 

6,948,900

 

 

 

6,948,900

 

 

 

6,948,900

 

 

 

6,948,900

 

 

 

6,948,900

 

 

 

6,948,900

 

Earning per ADS(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- Basic and diluted

 

 

1,563

 

 

 

908

 

 

 

1,288

 

 

 

1.08

 

 

 

2,371

 

 

 

5,695

 

 

 

4.76

 

 

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,195.85 to US$1.00, the noon buying rate in effect on September 30, 2019 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents one common share.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

GRAVITY CO., LTD.

 

 

By:

/s/ Heung Gon Kim

Name:

Heung Gon Kim

Title:

Chief Financial Officer

 

 

Date: November 14, 2019