NCSOFT PRESENTATION. August 2014

Size: px

Start display at page:

Download "NCSOFT PRESENTATION. August 2014"

Cecilia Scott
6 years ago
Views:

2 Disclaimer Some of the information and data in the material have been prepared based on assumptions. There can be no assurance that the assumptions used by NCSOFT are correct and even if they are, that the effect of such assumptions on NCSOFT s business and results of operations will be as projected. Therefore, NCSOFT will not be responsible for individual investment decisions based solely on this material. The financial results for Q 014 have been prepared on an un-audited basis, and may be subject to change during independent auditing process. Consolidated subsidiaries (K-IFRS based) : NC West Holdings(100%, US), NC Europe(100%, UK), NC Japan(60%, JP), NC Taiwan(85%, TW), NCSOFT Corporation(HQ, KR), NCSOFT Service(100%, KR), NC Dinos Baseball Club(100%, KR), Hotdog Studio(58%, KR), Oraion Soft(100%, KR), Ntreev Soft(76%, KR)

3 Contents I. Overview 1. Industry Overview. Company Overview II. Q 014 Earnings 3. Financial Highlights 4. Sales Breakdown 5. Costs Breakdown III. Investment Points 6. Opportunities 7. Catalysts 8. Strengths Appendix 9. Summarized Financial Statements 10. Screenshots 3

4 1-1. Industry Overview(Characteristics & Categories) General Characteristics of Online Game Industry Fast-growing industry High margin business Low cultural barriers Multi-year cycle business Categories of Online Games MMOG (Massively Multiplayer Online Games) MOG (Multiplayer Online Games) Web Board Games Definition Main User Base Product Life Cycle Business Model Development cost Thousands of players play in an evolving virtual persistent world simultaneously over the internet Hardcore users Male, young adults Relatively long (5-10 years) Mainly subscription fees, box sales in some regions High development cost over long development period (4~5 years) Online games with limited number of players in a single game world at a time Mid-core & light users Male & female, from teens to 40 s Generally shorter than MMOGs In-game items sales, optional fees for premium contents Relatively low development cost, shorter development period Easy to play browser games such as chess, poker, etc. 4

5 1-. Industry Overview(Global Market at a Glance) Online is the fastest growing game platform with CAGR 17% 010~015. China is the biggest online game market with CAGR % 010~015. Growth Projection by Platforms (Unit : USD BN) Breakdown of Online by Regions (Unit : USD BN) E 014E 015E Online Mobile Console Arcade PC Package E 013E 014E 015E China Korea Europe N. America Others (Source: DFC 013, iresearch 013, PWC 013, Jamma 007~013, informa 005~008, Enterbrain 013, Playmeter 013, JOGA 013) 5

6 1-3. Industry Overview(Global Market, Online platform) Online is one of the fastest growing game platforms. China and MMORPG genre are one of the biggest growth drivers for Online games. Growth Projection Market Share Trend 35 (Unit : USD BN) 6% 6% 6% 6% 6% 6% 30 5 Online CAGR 17% (010~015) % 5% 3% 1% 19% 17% Mobile CAGR 19% (010~015) 0 38% 37% 37% 40% 44% 47% 1% 9% 8% 15% 15% 16% 14% 16% 19% 1% % 4% E 014E 015E E 013E 014E 015E Online Mobile PC Package Arcade Console Mobile Online (Source: DFC 013, iresearch 013, PWC 013, Jamma 007~013, informa 005~008, Enterbrain 013, Playmeter 013, JOGA 013) 6

7 1-4. Industry Overview(China Market) Online will remain as the most dominant game platform in China. MMORPG will be the most popular genre in China with 50% ~ 60% market share. 18 Growth Projection by Platforms (Unit : USD BN) 16 Breakdown of Online by Genre (Unit : USD BN) E 014E 015E E 014E 015E Online Mobile Others MMORPG Casual Games Web-based Games (Source : Game White Paper 013, Ministry of Culture, Korea) (Source : GPC and IDC 013) 7

8 1-5. Industry Overview(Korea Market) In Korea, as in China, Online will serve as the most dominant game platform. Online will make up 83% of Korean gaming market through Growth Projection by Platforms (Unit : USD BN) 100% Market Share Trend % 80% 70% 60% 50% 6% 6% 11% 15% 15% 15% % 30% 0% 86% 88% 86% 83% 83% 83% 10% E 014E 015E 0% E 014E 015E Online Mobile Others Online Mobile Others (Source : Game White Paper 013, Ministry of Culture, Korea) 8

9 1-6. Industry Overview(Growth stages of Korea market) 1. Lineage (MMORPG) : pioneer of online game in Korea. Hangame and Pmang (Web board game) : diversification of online game 3. Sudden Attack and FIFA online (Casual game) : establishment of FP biz model 4. Cross Fire and D&F (Exported game) : global expansion of Korean-made online game 5. Kakao Talk game center (Mobile game) : emergence of mobile games and platforms. Market size of online and mobile game in Korea 1 (Unit : USD BN) Stage5 : Kakao Talk Stage4 : Cross Fire Stage3 : Sudden Attack Stage : Hangame Stage1 : Lineage E 014E 015E 9

10 1-7. Industry Overview(US & EU Market) While Console is shrinking, Online and Mobile are expected to grow further. MMORPG is expected to expand continuously in EU on the back of strong user base in Germany. Growth Projection by Platforms Market Share Trend in EU 70 (Unit : USD BN) 100% % 80% 70% % 50% % 30% 0% E 014E 015E 10% 0% Online Mobile Console Arcade PC Package (Source :DFC 013, PWC 013, IDC 013, Informa 009, Screendigest 013) MMORPG Casual 10

11 -1. Company Overview(NCSOFT at a Glance) A leading game company boasting the finest development capabilities and global publishing network. Snapshot Services Foundation : March, 1997 CEO : BOD : Employees** : 3,100 Kim, Taek Jin Kim, Taek Jin(CEO) Lee, Hee Sang(CCO) Bae, Jae Hyun(CPO) Jeong, Jin Soo(COO) Park, Byoung Moo Oh, Myoung * Seo, Yun Seok* Global network : Korea, North America, Europe, Japan, Taiwan Ownership** : Individual 4.3% Management 10% Treasury Stock 9% MMORPG Casual Games Mobile Games National Pension Service 9.6% Nexon 15% * Outside Directors ** As of August 014 Domestic Institution 8.6% Foreign Institution 3.7% Game Portal Game Portal 11

12 -. Company Overview(Annual Revenues Trend) Legacy products remain solid. With the case of Lineage, sales actually increased. B&S and GW will drive growth further via China launch in 014. (Unit : KRW BN) 1, Others Royalty Casual & Mobile Games Guild Wars Blade & Soul AION Guild Wars City of Heroes/Villains B&S and GW China( 14~) GW( 1) B&S( 1) Lineage Lineage AION( 08) Lineage( 03) Lineage( 98) (E) 1

13 -3. Company Overview(Growth stages) Lineage pioneered online games and still remains solid on the back of social network effect Lineage and AION expanded NCSOFT s domestic presence via product diversification B&S and GW will accelerate global expansion thanks to differentiated quality and target marketing (Unit : KRW BN) 1, Others Royalty Casual & Mobile Games Guild Wars Blade & Soul AION Guild Wars City of Heroes/Villains Stage 3 : Global Expansion B&S and GW China( 14~) GW( 1) B&S( 1) Lineage Lineage AION( 08) Lineage( 03) Stage 1 : Pioneer Lineage( 98) (E) 49 Stage : Dominance in Korea 13

14 Company Overview(Hybrid Biz Model) Global Online Game Publisher NCsoft Lineage, one of the legacy games, is now stronger than ever thanks to hybrid business model. Hybrid biz model(subscription + in-game item sales) will be expanded to other existing titles. Annual Revenue of Lineage Quarterly Revenue of Lineage 300,000 (Unit : KRW MN) 90,000 (Unit : KRW MN) 84,791 50,000 00, , ,000 50, , ,70 05,61 18,947 13, ,01 11,60 117, , ,65 11,800 11, ,050 54,605 In-game item sales 87,887 80,000 70,000 60,000 50,000 40,000 30,000 0,000 10,000-50,050 9,351 9,03 8,887 7,481 8,088 5,151 6,605 1Q 08 3Q 08 1Q 09 3Q 09 51,618 4,459 66,87 47,955 40,915 38,51 1Q 10 3Q 10 1Q 11 50,951 66,038 64,861 6,313 58,449 43,646 39,95 38,306 3Q 11 1Q 1 3Q 1 1Q 13 74,746 3Q 13 56,885 41,019 1Q 14 14

15 -5. Company Overview(Development & Publishing Network) Global Online Game Publisher NCsoft Top talented developers in Korea and U.S. Well-organized publishing arms in major markets such as Japan, Taiwan, Europe, U.S. Europe NCSOFT Europe (100%) Innova System (LineageII) Gameforge (AION) Korea NCsoft Corporation (Headquarters) China Shanda (AION) Tencent (B&S, Lineage, LineageII, Punch Monster ) KongZhong (Guild Wars ) Japan NC Japan (60%, JV with Soft Bank) North America NC Interactive (100%) Carbine Studio (100%) Arenanet (100%) Taiwan NC Taiwan (85%, JV with Gamania) Gamania (Lineage) Development Studio Publishing Entity First Party Studio License Partner 15

16 -6. Company Overview(Never-Ending Innovation) To be launched In service Wildstar Lineage Eternal... Guild Wars Blade and Soul Epic scale combats Drag skill Lineage AION Lineage Flying characters Wide range of customization The first 3D MMO in Korea Differentiated action Seamless instant dungeons Smart UI Proprietary graphic engine Personalized story line Dynamic quest system MMO + SNG Never seen before adventures Smart view Interactive object Seamless world Users get to create their own contents Large scale PvP called Gong Sung Jeon 16

17 3. Financial Highlights Revenues and profits increased thanks to new launches such as Wildstar in US/EU and Guild Wars in China. Sales Operating Profit 300,000 10,000 (Unit : KRW in MN) 50,000 00, , ,000 50,000 19, ,740 10,06 178,147 13,811 0% QoQ 11% YoY 100,000 80,000 60,000 40,000 0,000 6,48 30,730 56,746 44,50 64,948 46% QoQ 4% YoY - Q 13 3Q 13 4Q 13 1Q 14 Q 14 0 Q 13 3Q 13 4Q 13 1Q 14 Q 14 70,000 60,000 50,000 40,000 30,000 0,000 10,000 58,677 Pre-tax Income 31,06 61,48 44,436 64,353 45% QoQ 10% YoY 10, ,000 80,000 60,000 40,000 0,000 34,18 6,97 Net Income 45,850 36,539 5,938 45% QoQ 55% YoY 0 Q 13 3Q 13 4Q 13 1Q 14 Q 14 0 Q 13 3Q 13 4Q 13 1Q 14 Q 14 17

4. Sales Breakdown The contribution of overseas sales expanded thanks to Wildstar. Lineage1 recovered meaningfully on the back of solid user base.

18 4. Sales Breakdown The contribution of overseas sales expanded thanks to Wildstar. Lineage1 recovered meaningfully on the back of solid user base. Sales by Region Sales by Games (excluding royalty) (Unit : KRW in MN) 00,000 19, ,147 13, , , ,000 10, ,000 80,000 60, ,987 13,591 8,899 14,15 3,57 14,98 133,58 14,369 5,14 19,34,5 176,44 18,044 8,048,14 19,13 18,347 13,573 Others WS GW B&S AION 40,000 84,791 11,593 L 0,000 41,019 56,885 L1 - Q 13 1Q 14 Q 14 L1 : Lineage 1 B&S : Blade and Soul GW : Guild Wars WS : Wildstar 18

5. Costs Breakdown Labor costs remained flat QoQ as there was no change in headcount Variable expense went up reflecting Wildstar Marketing expense also rose due to increased marketing

19 5. Costs Breakdown Labor costs remained flat QoQ as there was no change in headcount Variable expense went up reflecting Wildstar Marketing expense also rose due to increased marketing campaigns for Wildstar No meaningful changes in D&A and Others (Unit : KRW in MN) * Q14 Others: Bandwidth costs(5,030), Rent(,046), Wage for outsourced staff(4,68), Outsourced R&D(3,04) etc. 19

20 6. Opportunity Online is the fastest growing game platform (CAGR 17%). Great potential for growth is ahead, but there are only a handful of players in the market. Game Markets by Platform Annual Revenue Trend of Blizzard 60 (Unit : USD in BN) 1,800 1,600 (Unit : USD in MN) 1, CAGR 0% ,400 1,00 1,08 1,346 1,196 1,43 1, CAGR 17% 8 CAGR -% CAGR 19% , E 014E 015E Online Mobile Console Arcade PC Package - CY004 CY005 CY006 CY007 CY008 CY009 CY010 CY011 CY01 (Source: Hudson Square Research) (Source: Game White Paper 013, Ministry of Culture, Korea) 0

21 7-1. Catalysts (China) MMO genre is the largest segment in Chinese online game market and successful MMOs in China are reported to generate USD 400 MN ~ 500 MN revenues per year. B&S and GW, the most anticipated games in China, are expected to launch in 1H Breakdown of Online by Genre (Unit : USD BN) 15 Annual revenues(fy11) of leading MMOs in China 600 (Unit : USD MN) E 014E 015E MMORPG Casual Games Web-based Games (Source : GPC and IDC 013) 0 FWJ Mir TLBB WoW Zhuxian Netease Shanda Changyou Netease Perfect World (Source : duowan.com, companies) 1

22 7-. Catalysts (Platform expansion) Not only existing games but also new titles will be ported to a variety of platforms. HQ focuses on premium mobile games, while subsidiaries * specialize in light and trendy ones * Hotdog Studio(58% ownership, KR), Ntreev Soft(76% ownership, KR)

8. Strengths World-class development capabilities and a strong pipeline Global

Wildstar To be launched Lineage Eternal.

Internal tests expected in 014 Launched in US and EU on June 3 014 Lineage

Lineage Launch: Sep. 1998 Accumulated Sales: KRW.

Launch: Oct. 003 Accumulated Sales: KRW 1.

Quarterly Sales: KRW 14 BN Launch : Nov.

23 8. Strengths World-class development capabilities and a strong pipeline Global publishing network 16 years of operational know-hows and skills In service Wildstar To be launched Lineage Eternal... Guild Wars AION Blade and Soul Hands-on demo at PAX and GamesCom in 013 Internal tests expected in 014 Launched in US and EU on June Lineage Launched in US/EU on August 8 01 Launched in China via KongZhong on May Lineage Launch: Sep Accumulated Sales: KRW.3 TN (launch~013) Service Country: 6 countries Latest Quarterly Sales: KRW 57 BN Launch: Oct. 003 Accumulated Sales: KRW 1.6 TN (launch~013) Service Country: 9 countries (EU counted as one) Latest Quarterly Sales: KRW 14 BN Launch : Nov. 008 Launched in China via Tencent Aug Accumulated Sales: KRW 1..1 TN (launch~013) Service Country: 7 countries (EU counted as one) Latest Quarterly Sales: KRW 18 BN Launched in Korea on June PCU in Korea : 30K (PCU: Peak Concurrent Users) 3

24 Appendix 9. Summarized Financial Statements 10. Screenshots 4

25 9-1. Summarized B/S Global Online Game Publisher NCsoft Consolidated (Unit : KRW in MN) 013 1H 014 Current Assets 785, ,988 Cash & cash equivalents 13, ,635 Short-term financial instruments 378, ,387 Account receivables 81,390 88,94 Others 0,07 34,673 Non-current Assets 694, ,55 Investment assets 9,078 88,577 Tangible assets 48,310 47,331 Intangible assets 11, ,63 Others 41,54 41,74 Total Assets 1,479,5 1,549,43 Current Liabilities 51,845 35,135 Borrowings 3,430 - Payables,559 5,58 Current tax liabilities 40,04 10,44 Other provisions 6 38 Others 185, ,397 Non-current Liabilities 68,913 78,541 Defined benefit obligations 45,945 48,176 Long-term employee benefits 4,873 4,319 Others 18,096 6,045 Total Liabilities 30, ,676 Capital Stock 10,957 10,965 Other Paid-up Capital 119,618 10,916 Other Components of Equity (6,1) (8,143) Retained Earnings 1,016,785 1,096,07 Non-Controlling Interests 17,54 15,758 Total Stockholders Equity 1,158,763 1,35,567 Total Liabilities and Stockholders Equity 1,479,5 1,549,43 Parent (Unit : KRW in MN) 013 1H 014 Current Assets 650,03 703,161 Cash & cash equivalents 3,984 18,330 Short-term financial instruments 36, ,179 Account receivables 58,938 69,10 Others 05,80 31,549 Non-current Assets 739, ,11 Investment assets 463, ,637 Tangible assets 30,439 6,18 Intangible assets 6,564 5,770 Others 19,836 0,497 Total Assets 1,390,188 1,433,8 Current Liabilities 165, ,09 Payables 7,740 8,896 Current tax liabilities 35,061 10,05 Others 1, ,109 Other Provisions - - Non-current Liabilities 55,386 6,908 Defined benefit obligations 39,945 4,957 Long-term employee benefits 4,650 4,104 Derivatives Liabilities Other Account Payble 10,676 15,73 Total Liabilities 0,86 198,117 Capital Stock 10,957 10,965 Other Paid-up Capital 19, ,53 Other Components of Equity 1, Retained Earnings 1,07,69 1,09,403 Total Stockholders Equity 1,169,36 1,35,165 Total Liabilities and Stockholders Equity 1,390,188 1,433,8 5

26 9-. Summarized P/L Global Online Game Publisher NCsoft Consolidated Parent (Unit : KRW in MN) 013 1H 014 Sales 756, ,958 Cost of Sales 0,45 117,790 Gross Profit 536,04 74,168 Selling & Administrative Expense 330, ,699 Operating Income 05,35 109,469 Other Income 41,417 13,49 Other Expense 30,430 14,17 Income before Income Tax Expense 16, 108,789 Income Tax Expenses 57,57 19,31 Net income 158,696 89,477 Non-Controlling Interests (60) (1,599) Equity Attributable to the owners of the Parent Company 158,756 91,076 (Unit : KRW in MN) 013 1H 014 Sales 530,440 70,130 Cost of Sales 108,916 46,703 Gross Profit 41,53 3,46 Selling & Administrative Expense 37,43 18,161 Operating Income 184,091 95,66 Other Income 3,370 11,969 Other Expense 6,983 1,84 Income before Income Tax Expense 189,478 94,951 Income Tax Expenses 46,909 17,798 Net Income 14,569 77,153 6

27 10-1. Screenshot(Blade & Soul) Global Online Game Publisher NCsoft 7

28 10-. Screenshot(Guild Wars ) Global Online Game Publisher NCsoft 8

29 10-3. Screenshot(Wildstar) Global Online Game Publisher NCsoft 9

30 10-4. Screenshot(Lineage Eternal) Global Online Game Publisher NCsoft 30

31 Thank you 31

NCSOFT PRESENTATION. June 2014

NCSOFT PRESENTATION. June 2014 NCSOFT PRESENTATION June 014 NCSOFT Corporation 1 Daewangpangyo-ro 644beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea Tel: +8--186-3300 Fax : +8--601-7787 Copyright c NCSOFT Corporation. All Rights