Form 6-K

 

 

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 August 2016

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  x 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 SECOND QUARTER OF 2016 RESULTS

Seoul, South Korea – August 24, 2016 – GRAVITY Co., Ltd. (NasdaqCM: 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 second quarter ended June 30, 2016, prepared in accordance with generally accepted accounting principles in the United States.

FINAICIAL RESULTS FOR THE SECOND QUARTER OF 2016

Revenues for the second quarter ended June 30, 2016 was KRW 9,057 million (US$ 7,848 thousand), representing a 0.4% decrease from KRW 9,094 million for the first quarter ended March 31, 2016 (“QoQ”) and a 1.7% decrease from KRW 9,217 million for the second quarter ended June 30, 2015 (“YoY”).

Review of Financial Results

Revenues

Royalty and license fee revenues for the second quarter of 2016 were KRW 2,738 million (US$ 2,372 thousand), representing a 18.7% decrease QoQ from KRW 3,368 million and a 1.4% decrease YoY from KRW 2,777 million. The decrease QoQ was primarily due to i) decreased revenue from Ragnarok Online in Taiwan resulting from a service suspension on May 31, 2016, as the Company terminated a distribution agreement with a local licensee for its direct service of Ragnarok Online in such market and ii) decreased revenue from Ragnarok Online in Japan. The decrease YoY was resulted mainly from decreased revenue from Ragnarok Online II in Thailand, which was partially offset by increased revenues from Ragnarok Online in Japan and the strengthening of the Japanese Yen against the Korean Won.

Mobile game and application revenues were KRW 2,495 million (US$ 2,162 thousand) for the second quarter of 2016, representing a 4.6% decrease QoQ from KRW 2,616 million and a 32.6% decrease YoY from KRW 3,703 million. The decrease QoQ and YoY was resulted primarily from decreased revenues from mobile applications for a 3rd party and Ragnarok: Path of Heroes.

Subscription revenues for the second quarter of 2016 were KRW 2,323 million (US$ 2,013 thousand), representing a 8.7% increase QoQ from KRW 2,137 million and a 20.9% increase YoY from KRW 1,922 million. The increase QoQ and YoY was mainly attributable to revenues from Ragnarok Online in Taiwan. The Company has commenced its direct service for Ragnarok Online in such market since June 15, 2016.

Character merchandising and other revenues were KRW 1,501 million (US$ 1,301 thousand) for the second quarter of 2016, representing a 54.3% increase QoQ from KRW 973 million and a 84.2% increase YoY from KRW 815 million. The increase QoQ and YoY was mainly due to recognition of deferred revenues occurred from a game development and publishing agreement with a third party, which was executed on March 25, 2016.


Cost of Revenue and Operating Expenses

Cost of revenue was KRW 6,846 million (US$ 5,932 thousand) for the second quarter of 2016, representing a 3.4% increase QoQ from KRW 6,619 million but a 7.5% decrease YoY from KRW 7,401 million. The increase QoQ was mostly from an increase in commission paid. The decrease YoY was mostly from decreased amortization of capitalized research and development cost of Ragnarok Online II, which had been amortized and fully impaired in December 2015.

Operating expenses were KRW 3,717 million (US$ 3,221 thousand) for the second quarter of 2016, representing a 22.4% increase QoQ from KRW 3,036 million but a 17.0% decrease YoY from KRW 4,481 million. The increase QoQ was mainly due to an increase in advertising expenses in Taiwan and commission paid. The decrease YoY was mostly resulted from a decrease in research and development expenses.

Loss before income tax expenses and others was KRW 1,212 million (US$ 1,050 thousand) for the second quarter of 2016 compared with loss before income tax expenses and others of KRW 1,287 million for the first quarter of 2016 and loss before income tax expenses and others of KRW 2,434 million for the second quarter of 2015.

As a result of the foregoing factors, Gravity recorded a net loss attributable to parent company of KRW 1,605 million (US$ 1,390 thousand) for the second quarter of 2016 compared with a net loss attributable to parent company of KRW 1,701 million for the first quarter of 2016 and a net loss attributable to parent company of KRW 2,763 million for the second quarter of 2015.

The balance of cash and cash equivalents and short-term financial instruments was KRW 37,445 million (US$ 32,443 thousand) as of June 30, 2016.

Note: For convenience purposes only, the KRW amounts have been expressed in U.S. dollars at the exchange rate of KRW 1,154.15 to US$ 1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.

About GRAVITY Co., Ltd.

Based in Korea, 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 80 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, 2015 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. Ji Hee Kim

IR Manager

Gravity Co., Ltd.

Email: ircommunication@gravity.co.kr

Telephone: +82-2-2132-7800

#            #             #


GRAVITY CO., LTD.

Consolidated Balance Sheet

(In millions of KRW and in thousands of US$)

 

     As of  
     31-Dec-15     30-Jun-16  
     KRW
(audited)
    US$
(unaudited)
    KRW
(unaudited)
    US$
(unaudited)
 

Assets

        

Current assets:

        

Cash and cash equivalents

     24,909        21,582        13,945        12,082   

Short-term financial instruments

     11,500        9,964        23,500        20,361   

Accounts receivable, net

     5,289        4,583        4,631        4,012   

Other current assets

     1,978        1,714        2,706        2,345   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     43,676        37,843        44,782        38,800   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Property and equipment, net

     882        764        673        583   

Leasehold and other deposits

     954        827        953        826   

Intangible assets

     132        114        112        97   

Other non-current assets

     85        74        366        317   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     45,729        39,622        46,886        40,623   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Liabilities and Equity

        

Current liabilities:

        

Accounts payable

     2,971        2,574        7,072        6,127   

Deferred revenue

     4,997        4,330        7,493        6,492   

Other current liabilities

     836        724        590        511   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     8,804        7,628        15,155        13,130   
  

 

 

   

 

 

   

 

 

   

 

 

 

Long-term deferred revenue

     6,600        5,718        4,654        4,032   

Accrued severance benefits

     123        107        130        113   

Other non-current liabilities

     210        182        209        181   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     15,737        13,635        20,148        17,456   
  

 

 

   

 

 

   

 

 

   

 

 

 

Common shares

     3,474        3,010        3,474        3,010   

Additional paid-in capital

     75,076        65,049        75,076        65,049   

Accumulated deficit

     (48,761     (42,248     (52,067     (45,113

Accumulated other comprehensive income

     694        601        782        678   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total parent company shareholders’ equity

     30,483        26,412        27,265        23,624   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-controlling interest

     (491     (425     (527     (457
  

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     29,992        25,987        26,738        23,167   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     45,729        39,622        46,886        40,623   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.15 to US$1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.


GRAVITY CO., LTD.

Consolidated Statements of Operations

(In millions of KRW and in thousands of US$, except for shares and ADS data)

 

     Three months ended     Six months ended  
     31-Mar-16     30-Jun-15     30-Jun-16     30-Jun-15     30-Jun-16  
     (KRW)     (KRW)     (KRW)     (US$)     (KRW)     (KRW)     (US$)  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Revenues:

              

Online games-subscription revenue

     2,137        1,922        2,323        2,013        3,620        4,460        3,864   

Online games-royalties and license fees

     3,368        2,777        2,738        2,372        5,289        6,106        5,290   

Mobile games and applications

     2,616        3,703        2,495        2,162        7,906        5,111        4,428   

Character merchandising and other revenue

     973        815        1,501        1,301        1,471        2,474        2,144   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenue

     9,094        9,217        9,057        7,848        18,286        18,151        15,726   
              

Cost of revenue

     6,619        7,401        6,846        5,932        15,077        13,465        11,667   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
              

Gross profit

     2,475        1,816        2,211        1,916        3,209        4,686        4,059   
              

Operating expenses:

              

Selling, general and administrative

     2,688        3,014        3,205        2,777        5,508        5,893        5,106   

Research and development

     343        1,465        512        444        2,923        855        741   

Impairment losses on intangible assets

     5        2                      2        5        4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     3,036        4,481        3,717        3,221        8,433        6,753        5,851   
              

Operating loss

     (561     (2,665     (1,506     (1,305     (5,224     (2,067     (1,792
              

Other income (expenses):

              

Interest income

     132        181        131        114        383        263        228   

Interest expense

            (1                   (3              

Foreign currency income (loss), net

     (858     51        163        141        55        (695     (602

Others, net

                                                 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
              

Loss before income tax expenses and equity loss on investments

     (1,287     (2,434     (1,212     (1,050     (4,789     (2,499     (2,166
              

Income tax expenses

     433        351        410        355        638        843        730   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (1,720     (2,785     (1,622     (1,405     (5,427     (3,342     (2,896

Net income (loss) attributable to:

              

Non-controlling interest

     (19     (22     (17     (15     (36     (36     (31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Parent company

     (1,701     (2,763     (1,605     (1,390     (5,391     (3,306     (2,865
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss per share

              

- Basic and diluted

     (245     (398     (231     (0.20     (776     (476     (0.41
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss per ADS(1)

              

- Basic and diluted

     (490     (795     (462     (0.40     (1,552     (952     (0.82
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

* For convenience, the KRW amounts are expressed in U.S. dollars at the rate of KRW 1,154.15 to US$1.00, the noon buying rate in effect on June 30, 2016 as quoted by the Federal Reserve Bank of New York.

(1) Each ADS represents two common shares.


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: August 24, 2016