Gravity Co. 20-F — FY2009 (June 2010)

Gravity Co., Ltd. filed its FY2009 Form 20‑F to disclose a turnaround in profitability driven almost entirely by the flagship MMORPG Ragnarok Online. Total revenue rose to KRW 57,403 million (US$50.7 m) in 2009 from KRW 53,170 million the prior year, with the game contributing 73.7 % of sales and accounting for a 13 % increase in royalties. Operating income swung from a KRW 236 million loss to a KRW 10,854 million profit, reflecting tighter cost control and higher gross margins of 63.1 %. Net income remained negative due to a large equity loss in the Revolution Fund, but cash flows from operations improved markedly.

The company’s geographic focus is global, with the largest revenue share in Japan (55.7 % of sales) and Korea (20.1 %). Licensing arrangements with GungHo, the largest shareholder at 59 %, dominate distribution; other titles such as Requiem Online and Emil Chronicle Online contribute modestly. Revenue diversification is limited, exposing Gravity to concentration risk and regulatory uncertainty across multiple jurisdictions—including Korea’s tightening café regulations, China’s anti‑addiction laws, and U.S. privacy statutes.

Operational risks include senior‑management turnover, difficulty attracting developers, technical security threats, and intellectual‑property disputes. Financially, the firm relies on short‑term financing, has no long‑term debt, and maintains significant cash reserves but faces foreign‑currency exposure (36 % in yen, 16 % in dollars). Internal control weaknesses identified in 2008 were remediated by year‑end, and the audit committee retained an independent financial expert. Overall, Gravity’s FY2009 performance demonstrates a modest recovery but underscores the need for portfolio diversification and robust risk management to sustain growth.