NCSOFT PRESENTATION. June 2014

Transcription

1 NCSOFT PRESENTATION June 014 NCSOFT Corporation 1 Daewangpangyo-ro 644beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea Tel: Fax : Copyright c NCSOFT Corporation. All Rights Reserved

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 1Q 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. 1Q 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** : National Pension 10.3% 11.4% Individual 16.6% 19.5% Management 10% Treasury Stock 9% Nexon 15% MMORPG Casual Games Mobile Games * Outside Directors ** As of June 014 Domestic Institution 17.0% 17% Foreign Institution 18.3%.% 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 47,95540,915 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 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 dipped reflecting decrease in Lineage1. 300,000 50,000 00, , ,000 50, ,875 19,014 Sales 169,740 10,06 178,147 1Q 13 Q 13 3Q 13 4Q 13 1Q 14 15% QoQ 4% YoY 80,000 60,000 40,000 0,000 0 Operating Profit (Unit : KRW in MN) 55,51 6,48 56,746 44,50 30,730 % QoQ 0% YoY 1Q 13 Q 13 3Q 13 4Q 13 1Q 14 80,000 Pre-tax Income 80,000 Net Income 60,000 40,000 0,000 65,7 58,677 31,06 61,48 44,436 7% QoQ 3% YoY 60,000 40,000 0,000 5,330 34,18 6,97 45,850 36,539 0% QoQ 30% YoY 0 1Q 13 Q 13 3Q 13 4Q 13 1Q Q 13 Q 13 3Q 13 4Q 13 1Q 14 17

18 4. Sales Breakdown Royalty expanded thanks to strong B&S in China. Lineage1 temporarily dropped with in-game item sales being scaled back. Sales by Region Sales by Games (excluding royalty) (Unit : KRW in MN) 184,875 10,06 178,147 00, , , , , ,707 1,708 14,337 36,38 33, ,58 Others 10, ,000 80,000 60,000 40,000 0,000 16,504 8,84 14,18 66,038 17,887 1,6 15,560 74,746 14,369 5,14 19,34,5 11,593 41,019 GW B&S AION L L1-1Q 13 4Q 13 1Q 14 L1 : Lineage 1 L : Lineage B&S : Blade and Soul GW : Guild Wars 18

19 5. Costs Breakdown Labor cost went down 5% QoQ with year-end incentives in 4Q wearing off. Variable expense shrank staying in line with decreased sales. Marketing expense was down 37% QoQ driven by less marketing activities in 1Q. Others got stabilized as the one-off costs from NC Dinos in 4Q disappeared. (Unit : KRW in MN) 1Q 13 Q 13 3Q 13 4Q 13 1Q 14 QoQ YoY Labor Cost 76,543 76,46 75,481 8,898 78,487-5% 3% Variable expense 1,758 11,591 13,847 15,33 10,836-9% -15% - Payment processing fee 6,584 6,90 6,939 5,6 5,380-4% -18% - Royalty expense 3,46,750 5,43 4,073 3,9-4% 13% - Box production fee 580 1, , % -40% - Other variable, ,145 4,483 1,185-74% -44% Marketing expense 4,006 4,875 6,15 5,759 3,606-37% -10% D&A 8,458 8,47 9,097 9,517 9,46-3% 9% Others(*) 7,598 8,403 34,37 39,875 31,451-1% 14% Sub Total 19,363 19, , ,80 133,67-13% 3% * 1Q14 Others: Bandwidth costs(4,37), Rent(,01), Wage for outsourced staff(5,000), Outsourced R&D(,586), 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)

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 75 BN Launch: Oct. 003 Accumulated Sales: KRW 1.6 TN (launch~013) Service Country: 9 countries (EU counted as one) Latest Quarterly Sales: KRW 16 BN Launch : Nov. 008 To be launched in China via Tencent in 1H 014 Accumulated Sales: KRW 1..1 TN (launch~013) Service Country: 7 countries (EU counted as one) Latest Quarterly Sales: KRW 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 Parent (Unit : KRW in MN) 013 1Q 014 Current Assets 785, ,366 Cash & cash equivalents 13, ,403 Short-term financial instruments 378, ,057 Account receivables 81,390 10,95 Others 0,07 3,954 Non-current Assets 694, ,750 Investment assets 9,078 89,454 Tangible assets 48,310 51,941 Intangible assets 11, ,788 Others 41,54 46,567 Total Assets 1,479,5 1,53,116 Current Liabilities 51,845 7,191 Borrowings 3,430 - Payables,559 5,814 Current tax liabilities 40,04 14,064 Other provisions 6 6 Others 185,808 05,308 Non-current Liabilities 68,913 71,195 Defined benefit obligations 45,945 43,17 Long-term employee benefits 4,873 4,36 Others 18,096 3,787 Total Liabilities 30, ,387 Capital Stock 10,957 10,965 Other Paid-up Capital 119,618 10,579 Other Components of Equity (6,1) (5,030) Retained Earnings 1,016,785 1,044,544 Non-Controlling Interests 17,54 17,67 Total Stockholders Equity 1,158,763 1,188,730 Total Liabilities and Stockholders Equity 1,479,5 1,53,116 (Unit : KRW in MN) 013 1Q 014 Current Assets 650,03 695,174 Cash & cash equivalents 3,984 3,888 Short-term financial instruments 36, ,000 Account receivables 58,938 88,350 Others 05,80 16,936 Non-current Assets 739, ,06 Investment assets 463, ,866 Tangible assets 30,439 8,6 Intangible assets 6,564 5,958 Others 19,836 4,977 Total Assets 1,390,188 1,434,01 Current Liabilities 165, ,113 Payables 7,740 41,884 Current tax liabilities 35,061 1,983 Others 1, ,45 Other Provisions - - Non-current Liabilities 55,386 54,874 Defined benefit obligations 39,945 38,33 Long-term employee benefits 4,650 4,05 Derivatives Liabilities Other Account Payble 10,676 1,501 Total Liabilities 0,86 40,987 Capital Stock 10,957 10,965 Other Paid-up Capital 19, ,917 Other Components of Equity 1, Retained Earnings 1,07,69 1,050,447 Total Stockholders Equity 1,169,36 1,193,14 Total Liabilities and Stockholders Equity 1,390,188 1,434,01 5

26 9-. Summarized P/L Global Online Game Publisher NCsoft Consolidated Parent (Unit : KRW in MN) 013 1Q 014 Sales 756, ,147 Cost of Sales 0,45 54,696 Gross Profit 536,04 13,451 Selling & Administrative Expense 330,969 78,931 Operating Income 05,35 44,50 Other Income 41,417 7,191 Other Expense 30,430 7,75 Income before Income Tax Expense 16, 44,436 Income Tax Expenses 57,57 7,897 Net income 158,696 36,539 Non-Controlling Interests (60) (68) Equity Attributable to the owners of the Parent Company 158,756 36,807 (Unit : KRW in MN) 013 1Q 014 Sales 530, ,939 Cost of Sales 108,916 4,641 Gross Profit 41,53 109,98 Selling & Administrative Expense 37,43 68,67 Operating Income 184,091 41,031 Other Income 3,370 7,565 Other Expense 6,983 7,530 Income before Income Tax Expense 189,478 41,067 Income Tax Expenses 46,909 8,436 Net Income 14,569 3,631 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