Happiness anytime, anywhere Forgame Holdings Limited Management Presentation November 2013
Business Overview Unique Model Integrating Development and Publishing Attractive Financial Performance Development: No.1 Webgame Developer in China - 24% Market Share (1) - 24MM Monthly Active Users ( MAUs ) (2) Publishing: Top 10 Webgame Publisher in China - 179MM Registered Players (3) - 79 Self-developed and Licensed Games (3) Proven Track Record and Robust Pipeline Strong Revenue Momentum RMB MM ~8x Growth 384 777 30% 574 34% 34% 70% 95 66% 66% 48% 52% 2010 2011 2012 1H'13 Game Development Game Publishing 37 Self-developed Webgames and 4 Mobile Games Launched as of September 30, 2013-1 st Mobile Game, The Era of Storms, Exceeded RMB 14MM of Gross Billings in August 2013 - Launched Charmed Westward Journey mobile version in October 2013 32 Games in the Pipeline as of September 30, 2013 (4) 2 Healthy Profit Generation RMB MM -40 115 240 154 2010 2011 2012 1H'13 Adjusted Net Profit / (Loss) (5) Notes 1. Market share in 2012 in terms of net revenue, according to iresearch 2. In the month of June 2013 3. As of June 30, 2013 4. Includes 15 webgames and 17 mobile games to be beta tested in Q4 13 and 2014 5. Adjusted net profit / (loss) excludes share-based compensation, fair value change of preferred shares and finance cost relating to issuance of preferred shares
Evolution of the Industry Cloud-based Games (1) 2016E Market Size: RMB 35Bn 2012 2016E CAGR: 38% Client-based Games 2016E Market Size: RMB 80Bn 2012 2016E CAGR: 13% Console Games Product Software Internet Service Note 1. Cloud computing technologies-enabled games, including both webgames and smartphone mobile games 3
Clear Opportunities for Cloud-based Games Client-based Games Cloud-based Games Hardware Requirements High Low and flexible Engagement Home / Internet cafe Anywhere Time Commitment High Low and flexible Development Cycle 24 36 months 6 12 months Upfront Development Costs Update Frequency High Low Low High Source: iresearch Cloud-based Games Present A Large Market Opportunity with Lower Risks 4
Investment Highlights 1 Differentiated Model Integrating Development and Publishing at Scale 2 Proven Ability to Consistently Replicate Success 3 Scientific Approach to Game Development 4 High Level of Diversification 5 Visionary Management and High Retention Rate of Talent 5
1 Differentiated Model Integrating Development and Publishing at Scale 3 rd Party Publishing Partners Games Development Studios In-game Data Games Data + Beta Testing Self-owned Publishing Platform Player - Acquisition Related Data Games 3 rd Party Developers Live Service Players Games Are Continually Optimized Based on Comprehensive Data and Feedback 6
1 Empowered by A Leading Publishing Platform Rapidly Expanding User Base MAUs (MM) 20 Selfdeveloped Games 2.7 3.6 5.2 7.5 59 Licensed Games 2010 2011 2012 1H'13 and Higher Conversion MPUs (000s) 115 71 30 40 Accumulated 179MM Registered Players 2010 2011 2012 1H'13 Note: 1. Number of games and registered players on 91wan as of June 30, 2013 7
2 Proven Ability to Consistently Replicate Success Undisputed Leadership (1) 2012 Q4 13 2014 15 new Webgames 17 new Mobile Games Others #1 Market Share of 24% 1H 13 Q3 13 Source: iresearch 2012 3 New Games 34 Existing Games 2011 12 New Games 22 Existing Games 2010 2009 8 New Games 5 Existing Games 12 New Games 12 Existing Games 4 New Games 2 New Games 2 Existing Games Webgames Mobile Games Close to 1,500 R&D Professionals Dedicated to Game Development (2) Notes 1. In terms of net revenue received by webgame developers in China 2. As of June 30, 2013 8
3 Data-driven User Engagement and Monetization Official Website Registration Select Server Choose Character s Name Welcome Page Complete 1 st Task 60 Seconds of Game Play Live Data Feed to the Game Analytics Engine Detailed Analysis from Different Angles Ongoing Data Analysis Identify Potential Solutions Ongoing Game Optimization Key Focus: Retention, Paying User Conversion and ARPPU 9
4 High Level of Diversification Limited Platform Concentration 1H 13 Game Development Revenue Limited Title Concentration Total Revenue Games in Operation 6 13 24 34 100 #1 3 rd Party Publishing Partner 80 21% 34% 48% 48% ~20% 60 Others 40 20 79% 66% 52% 52% 0 2010 2011 2012 1H'13 Top 5 Games Others Low Platform Dependence - Delivering through 350+ Platforms Continued Launch of Successful Games 10
5 Visionary Management and High Retention Rate of Talent Kevin Wang Founder, Chairman & CEO Over 12 years of experience in the Internet industry Former CEO of ZCOM, an e-journal platform in China Dong Liao Co-founder Executive Director Responsible for publishing and marketing Founder of Jiyichang Network 8 years of entrepreneurial experience Kai Huang Co-founder Executive Director Responsible for research and development Over 7 years of experience in the Internet industry Jieguang Zhuang Co-founder Executive Director Responsible for research and development Seasoned entrepreneur in the Internet industry Tao Yang Co-Founder Chief Product Officer Responsible for research and development of webgame products Led the development of the Soul Guardian franchise Gary Ngan CFO Former Head, Hong Kong and China Internet Research, UBS AG Yiwei Cheng President of International Business Responsible for overseas expansion of Forgame 11
Our Growth Strategies 1 Further Expand into the Mobile Game Market 2 Broaden Reach into International Markets 3 Pursue Strategic Acquisitions and Partnerships 6 Extend Game Life Cycle and Enhance Monetization Capabilities 5 Launch New Games at A Faster Pace 4 Expand Our Leading Publishing Platform 12
Significant Mobile Game Market Opportunities Leverage Established Webgame Franchise Diversify into the Casual Game Market Soul Guardian Mobile Version Charmed Westward Journey Mobile Version Build Up Mobile Game Publishing Platform Strategic Investment Self-developed Games Licensed Games Forgame Publishing Platform Existing Webgame Players Published Over 350 Games (1) Acquired Games New Players Over 170MM Global Download (1) Note: 1. As of July 2013 13
Broaden Reach into International Markets Product Strategy - Adaption of existing hit titles into international version - Change graphic design and storyline to fit in international market Talent Strategy - Build up talent pool including programming, graphic design, game development, marketing and operating, and international business development Marketing Strategy - Market segmentation: Europe and US, Japan, Brazil, Russia, Middle East, South East Asia - Market expansion by phases 14
Financial Overview
Attractive Revenue Momentum Total Net Revenue RMB MM 777 30% 574 ~8x Growth 384 347 34% 34% 70% 33% 66% 95 66% 67% 48% 52% 2010 2011 2012 1H'12 1H'13 Game Development Game Publishing 16
Strong Underlying Drivers for Both Game Development and Publishing Game Development Average MPUs (1) 000s ARPPU (2)(3) RMB 758 88 87 83 ~11x Growth 240 518 60 69 2010 2011 2012 1H'13 2010 2011 2012 1H'13 Game Publishing Registered Players Average MPUs (1) ARPPU (2) MM ~4x Growth 47 88 141 179 000s ~4x Growth 30 40 71 115 RMB 125 274 278 282 2010 2011 2012 1H'13 2010 2011 2012 1H'13 2010 2011 2012 1H'13 Notes: 1. Monthly paying users 2. Average revenue per monthly paying user 3. Based on net revenue after revenue sharing with publishing partners 17
Healthy Gross Margin Gross Profit RMB MM 82% 90% 91% 698 89% 42% 315 72% 316 510 66% 66% 69% 40 89% 11% 34% 28% 31% 34% 2010 2011 2012 1H'12 1H'13 Game Development Game Publishing Gross Margin 18
Strategic Spending Targets for Long-term Positioning Number of New Games Operating Expenses (1) RMB MM, as % of Revenue 4 8 12 4 12 Adjusted Net Profit / (Loss) RMB MM 416 5% 347 8% 275 23% 33% 28% 166 4% 81 15% 26% 23% 8% 28% 25% 23% 21% 49% 2010 2011 2012 1H'12 1H'13 R&D S&M 31% 36% 30% 240 27% 154 115 126 (42%) -40 2010 2011 2012 1H'12 1H'13 Adjusted Net Profit / (Loss) (2) Margin Administrative Notes: 1. Does not include other income (losses) 2. Adjusted net profit / (loss) excludes share-based compensation, fair value change of preferred shares and finance cost relating to issuance of preferred shares 19
Adjusted Net Margin Analysis % 40 36 (2) 30 (3) 5 1 27 (5) 20 (4) 10 0 Adjusted Net Margin (1H'12) Increase in Cost of Revenue as % of Revenue Increase in R&D Expenses as % of Revenue Increase in S&M Expenses as % of Revenue Increase in G&A Expenses as % of Revenue Adjustment for Increase in SBC as % of Revenue Others Adjusted Net Margin (1H'13) (1) (1) Note 1. Adjusted net profit excludes share-based compensation, fair value change of preferred shares and finance cost relating to issuance of preferred shares 20
Appendix A: Additional Company Information
Income Statement Summary RMB MM 2010 2011 2012 1H 12 1H 13 Revenue 95 384 777 347 574 % YoY Growth N.A. 304% 102% N.A. 65% Game Development 50 252 541 232 379 % of Revenue 52% 66% 70% 67% 66% Game Publishing 45 132 236 116 194 % of Revenue 48% 34% 30% 33% 34% Gross Profit 40 315 698 316 510 % Gross Margin 42% 82% 90% 91% 89% Adjusted EBITDA (1) (39) 144 297 156 202 % EBITDA Margin (41%) 37% 38% 45% 35% Operating Profit (40) 41 284 152 164 % Margin (43%) 11% 37% 44% 29% Adjusted Net Profit (2) (40) 115 240 126 154 % Adjusted Net Margin (42%) 30% 31% 36% 27% Net Profit (40) 18 218 122 (243) % Net Margin (42%) 5% 28% 35% (42%) Notes: 1. Adjusted EBITDA excludes share-based compensation 2. Adjusted net profit excludes share-based compensation, fair value change of preferred shares and finance cost relating to issuance of preferred shares 22
Selected Balance Sheet Items RMB MM 2010 2011 2012 1H 13 Cash and Cash Equivalents (1) 13 86 313 398 Trade Receivable 20 46 84 91 Other Assets 74 123 125 179 Total Assets 108 255 522 668 Trade Payable 14 12 10 20 Deferred Revenue (2) 91 112 135 107 Other Payables and Accruals 10 19 42 58 Convertible Redeemable Preferred Shares 0 0 451 810 Other Liabilities 13 17 21 16 Total Liabilities 128 159 659 1,010 Total (Deficit) / Equity (20) 95 (137) (342) Total Equity and Liabilities 108 255 522 668 Receivable Days 79 44 40 29 Payable Days 92 62 47 57 Notes: 1. Including short-term investment 2. Including both current and non-current deferred revenue 23
Post-IPO Corporate Structure Post-Greenshoe (1) Kevin Wang Kai Huang Dong Liao Tao Yang Jieguang Zhuang TA Associates (Cayman) Qiming (Cayman) Ignition (Delaware U.S.) Public Investors 16.65% 7.17% 11.12% 0.80% 15.82% 10.47% 3.01% 0.92% 34.04% Forgame Holdings Limited (Cayman) 100.00% Foga Tech Limited (HK) 100.00% Offshore Ledong Technology Limited (HK) 100.00% PRC Guangzhou Feidong Software Technology Co., Ltd Contractual Arrangements PRC Operational Entities Reputable Private Equity / Venture Capital Shareholders Notes 1. Assuming pre-ipo options are not exercised 24
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