A Presentation for Prospective Investors & Partners. Feb 2004

Transcription

1 A Presentation for Prospective Investors & Partners Feb 2004

2 Overview Financial Highlights Services & Products Company Profile Shareholding Structure Neowiz at a Glance Management 2004 Outlook

3 Company Profile Company Profile Balance Sheet Summary of Company History Neowiz Founded by Sung-Kyun Nah Modem dial-up ISP business launched Online Community Sayclub.com launched KOSDAQ Initial Public Offering Introduced Avatar business Acquired M-cube Corp Web-board game business launched Acquired Taff Systems Corp Dedicated game publishing portal Pmang.com launched Online Music Streaming Service Jukeon.com launched 320 Employees (KRW billion) Assets Current Assets Investment Others Total Liabilities Total Shareholder s Equity Income Statements Stock Info. - Common stock of 14.8 million shares outstanding (2Q 2003) - Par value KRW 500; IPO Price KRW 12,000 (KRW billion) Sales Gross Profit Major Shareholders: Sung-Kun Nah (17..3%), Byung-Ku Chang (15.5%), Sae-Yeon Choi (10.2%) Management CEO: Jin-Hwan Park CFO: Kwan-Yong Song COO: Kwan-Ho Choi Operating Income Pretax Income Net Earnings

4 Shareholding Structure Share Holders Number of Shares % Sung-Kyun Na Byung-Kyu Chang Sae-Yeon Choi Local Institutions 1,350,000 1,137, , , % 14.89% 10.21% 1. 73% Foreign Institutions 669, % Treasury stock 18, % Others 3,554, % Total 7,640, % (December 31, 2003) Sung-Kyun Nah Others % 17.67% 14.89% 8.76% 10.21% Byung-Kyu Chang Sae-Yeon Choi Foreign Institutions

5 Neowiz at Glance Integrating Online community with game production and publishing capabilities Strategic initiative to develop into online entertainment group through focused & diverse portfolio of businesses Online Entertainment Revenue Sources Vertical Integration 11 million active online community users with highest loyalty SayClub.com Pmang.com Networked arcade games starts from 2004 Foundation for future online businesses Quality Web Board Games with NO.1 market share 2003 Revenue Streams Avatars Web board Games Advertising + Game Publishing Online Music Revenue Maximization Jukeon.com MMORPG Getting ready for the emergence of online music market 2004 upcoming Revenue Streams

6 Management Team CEO Jin-Hwan Park Seoul National Univ (BA in Management) Nexon Strategic Planning Manger CTO Seong-Kyu Oh KAIST (MS in Computer Science) Hangul & Computer Serome Technology CFO Kwan-Yong Song Seoul National Univ (MA in Management) PriceWaterhouseCoopers / CPA COO Kwan-Ho Choi Seoul National Univ (MA in Mgmt) Chaeil Communication Director Seung Hwan Park George Washington University Harvard University, MBA Midas Asset Auditor DB Interactive Director Director Gae-Hyun Cho KAIST (PhD in Management) Kino Net Managing Director Director Marvin Park KAIST (BA in Computer Science)

7 Overview Financial Highlights Services & Products Growth & Profitability Revenues & Income Sales Breakdown Cost Structure 2004 Outlook

8 Growth and Profitability Except for two quarters, the company has stayed in the black, maintaining a minimum 20% operating margin over the past five years. Profitability is improving (from 20% in 2002 to 31% in 2003) on increasing scale and a fugal management team. Revenue Trends Operating Income Trends Net Profit Trends 90 (KRW billion) (KRW billion) (KRW billion) Y2001 Y2002 Y2003 Y2001 Y2002 Y2003 Y2001 Y2002 Y2003

9 Quarterly Revenue & Income Quarterly Revenue Trends Quarterly Income Trends (KRW in billion) (KRW in billion) Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 Revenue Op Annual Total Revenue: w 31.2b / Op: w 6.8b OP Margin : 22% Revenue: w 41.5bn / w Op: 8.7b Op Margin : 21% Revenue: w 81.3b / Op: w 25.1b Op Margin : 31%

10 Sales Breakdown (KRW in billion) Quarterly Sales Breakdown other online advertising web board games avatars Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 Sayclub Game N/A N/A N/A N/A N/A N/A AD Others Total (KRW in billion)

11 Cost Structure Neowiz benefits from a high operating leverage as most of its expenses are fixed costs. Wages, depreciation should account for about 55% of its expenses. Although labor cost are rising, this is justified by strong business expansion, and impact on profitability should not be excessive. Cost Structure System Marketing etc Human Resource Y % Y2004 % 21% % 19% % 34% % Profit Sharing Commission Default System Marketing Human Resource Y2004 (Estimate) - Capex: w 21.5 bn - Depreciation: w 12.0bn - Employee: 500 Others 1.4 2% 20 2% Fixed Cost Total Commission on Sales % 10% % 9% Y2004 Profit Sharing Default Variable Cost Total Yearly Total Cost % 6% 24% % 4.0 5% % 84.0 (KRW in billion) Profit Sharing Commission Default System Marketing R&D Human Resource Y Capex: w 10.0 bn - Depreciation: w 7.4bn - Employee: 310

12 Overview Financial Highlights Services & Product 2004 Outlook Service Portfolios Game Portal Landscape Pmang Sayclub Avatar Online Music

13 Online Service Portfolios Pmang ( Game Portal with No1. Traffic Market Share in Korea Provides web-board games for adults game users more than 7miillion monthly. Starting game publishing business with 10+ titles developed by domestic game software developers. MMORPG game Luciad to be released in 2H Revenues: Game Currency Refill Game Items Monthly Subscription Fee Online Advertising SayClub ( Korea s leading chat site & online community 11million monthly visitors, regularly ranks among the top 20 in Alexa.com s top 500 global website traffic rankings The company s core platform for future business expansion Generate revenues via sales of Avatars & online advertising Revenues: Avatars Online Advertising Mobile Services Jukeon.com ( Online Music Portal Provides online music streaming services 50,000 Concurrent Users base. Music Contents download service open during 2H04 Revenues: Monthly Subscription

14 Korean Game Portal Landscape Facts More than 11 million Korean adults are estimated to visit game portals every months. More than 1.5 million people are paying fees for their web board game services every month. Pmang is the most popular game portal in terms of its traffics. More than 1.1 million people visit the site everyday. Pmang s traffic market share is reaching 28%, the company widened the gap with its competitors Pmang Hangame Netmarble 29-Nov Pmang 6-Dec Hangame 13- Dec Daily Unique Visitors Trends 20- Dec 27- Dec 3-Jan 10-Jan 17-Jan 24-Jan 31-Jan Traffic Market Share Netmarble 29-Nov 6-Dec 13- Dec 20- Dec 27- Dec 3-Jan 10-Jan 17-Jan 24-Jan 31-Jan

15 Pmang: #1 Web board games Web board games Revenues Trend (KRW in billion) Q02 4Q02 1Q Revenues are generated by: 2Q03 3Q03 4Q03 Game Avatars: Users buy game avatars priced at W950-W6,500 that grant a varying amount of virtual cash players can use for betting. Monthly Subscription: Users buy W12,000 monthly subscription package that grants bigger amount of betting cash and daily refill cash. Game Items: Users can purchase variety of special skills, a virtual training tutors to enhance their winning ratio. (Pmang s Porker Game)

16 Pmang Key Operating Index Monthly Unique Visitors and Paying Rate(%) (in million) Monthly Visitors (LHS) Paying Rate (RHS) 2.6% 4.2% % 5.1% % (%) 5.1% Pmang s web board games are attracting 5.7 million visitors every month which is #1 in the market and the figure is still growing. UV 3Q02 4Q02 1Q03 Monthly Paying customers and ARPU 300, , ,000 10,700 14,600 Monthly Paying Users (LHS) ARPU( RHS) 165,739 15, ,365 2Q03 3Q03 4Q03 15, , ,564 13, ,744 Fee paying rate is just over 5%. Relatively lower than other major game portals. Pmang.com generates the highest web board game monthly ARPU in the industry (W 13,000). 79,323-3Q02 4Q02 1Q03 2Q03 3Q03 4Q03

17 SayClub: No1. Online Community 600, , ,000 - Web Chatting with over 515,145 Concurrent Users Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q ,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000, million Online Community Unique Visitors Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 - Over 4.1 million Instant Messenger Monthly Access Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q SayClub.com Avatar Revenue Trends Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03

18 SayClub at a Glance With its massive no. of concurrent users exceeding 480,000 every day, Sayclub is the most active chatting environment in the world. Users graphic representation (Avatar). 880,000+ active communities are present in SayClub. Online Advertising SayClub s fun seeking users certainly enjoy listening music Launched in Dec 2003, Sayclub s online music streaming service shows example for others how online music service should be done The Avatar Mall is where SayClub users purchase the Avatar of their choice. For the past 3 years, more than 4 million people have purchase an Avatar from SayClub. Every one of Sayclub user has their own Avatar representation that can be viewed by other users.

19 SayClub Avatar: the concept Users saw Avatars as a way to represent their virtual personality Avatar Bulletin Board Memo Internet Broadcasting Room Messenger Buddy List Introduction in Chat Rooms

20 Global Avatar Licensing Partners Mattel: Barbie Character (Neowiz is the Only licensee of Mattel Barbie Collectibles in the world) NIKE, FILA: Sports apparels & celebrity Blizzard: Starcraft, Diablo II, War Craft III Game Characters Movie Characters: The Lord of the Rings 3/21

21 Overview Financial Highlights Services & Products 2004 Outlook Management target 2004 Sales Breakdown 2004 Cost Structure Game Business Outlook Pmang Expansion Avatar & Online Music

22 2004 Management Target (KRW in Million) 120,000 90,000 Revenue rising 47% y-y Operating Profit rising 41% y-y Net Profit rising 50% y-y 60,000 30, (e) Revenues 31,190 41,549 81, ,000 Operating Profit 6,755 8,718 25,098 36,000 OP Margin (%) Net Profit 7,311 7,656 15, Net Profit Ratio (%)

23 2004 Revenue Structure Revenue Structure (KRW in billion) (e) (KRW in billion) 120 Game Publishing Mobile Web board game Sayclub Advertising Sayclub Others Sayclub Mobile Publishing Game Yearly Total Sayclub Web board game Web board game Web board game Y2002 Y2003 Y2004 Operating Income Sales (KRW in billion) (KRW in billion) Sales Operating Income OP OP Margin 21% 31% 30% Y2002 Y2003 Y2004

24 Cost Structure Neowiz benefits from a high operating leverage as most of its expenses are fixed costs. Wages, depreciation should account for about 55% of its expenses. Although labor cost are rising, this is justified by strong business expansion, and impact on profitability should not be excessive. Cost Structure System Marketing etc Human Resource Y % Y2004 % 21% % 19% % 34% % Profit Sharing Commission Default System Marketing Human Resource Y2004 (Estimate) - Capex: 21.5 bn - Depreciation: 12.0bn - Employee: 500 Others 1.4 2% 20 2% Fixed Cost Total % % Y2004 Commission on Sales Profit Sharing Default Variable Cost Total Yearly Total Cost % 8% 6% 24% 7.5 9% % 4.0 5% % 84.0 (KRW in billion) Profit Sharing Commission Default System Marketing R&D Human Resource Y Capex: 10.0 bn - Depreciation: 7.4bn - Employee: 310

25 2004 Game Business Outlook (%) % Improving Paying Rate Mil 12 Improving Unique Visitors Market UV % 5.1% 2004 Pmang Target Paying Rate 8% m 5.7 m 7.6 m 2004 Target Monthly Unique Visitors Han game Net Marble Pmang Dec 2002 Dec 2003 Dec 2004(e) = 2004 Revenue rising 60% y-y Target Revenue: W 67.7 bn Constant rise of monthly unique visitors (KRW billion) Introduction of monthly subscription service to complement existing transaction based service Monthly Fee Paying Customer to exceed 500,000+ by the end of Y2002 Y2003 Y2004(e)

26 2004 Pmang Coverage Expansion Entering MMORPG & Online arcade games arena 3Q04 Pmang Web board games Market Size: W 230 bn Arcade Games Market Size: W 150 bn 1H04 Online Arcade Games Series of online arcade games have been published. By 1 st half of 2004, Pmang is expected to service 6 or more arcade games that will enable to bring Pmang into arcade games sector. MMORPG Game With its expected public launch of Lussiard (3D online role playing game) in summer 2004, the company enters MMORPG games arena for the first time. MMORPG Games Market Size: W 450 bn

27 SayClub: Avatars & Beyond Operation Execution 2004 Avatar buying customers to exceed 550,000 Concurrent users to grow 600,000 Acquire 1.5 million Unique Visitors Incubate Online Music Business Commercialize Mobile Services Introduction of brand new Sayclub service (2H04) ARPU W 6, ,000 Concurrent Users 20 million Registered Users Avatars Mobile Online Music New Services 600,000 Monthly Paying Customers 1.5 million Unique Visitors Revenues Avatars: w 35.4 bn Mobile: w 7.6 bn Non Paying Users Paying Customers Free Services Commercialized Services

28 Online Music Market Due to the emergence of free online music service & P2P file sharing sites, domestic music business market size has reduced almost KRW 124 billion in two years. However, the government regulatory body are clamping down the big illegal music site, soon the lost portion of the market will be regained in form of online music. Shrinking of Korean Music Industry (KRW in billion) Emergence of P2P & Free online Streaming Service 124 Billion won Online music market Neowiz is targeting at. Starting with online stream service then the music download service will be started before the end of

29 Jukeon.com: Online Music Licensing fee arrangement completed with the most of big record labels Monthly re-subscription rate 90% Preparing for the post-illegal online service O F F L I I N E Song Writhers Planning Agency Record Companies Licensing Agreements Whole Sales Retailers Customers Project Investment Obtain copyright Eins Digital O N LI LI N E Neowiz Streaming Service Music Download Service Value added online contents

30 Contact Jason Lee (Head of IR) Taeyeon Choi