IR PRESENTATION

NCSOFT IR PRESENTATION
March 2015
NCSOFT Corporation
12 Daewangpangyo-ro 644beon-gil, Bundang-gu, Seongnam-si, Gyeonggi-do, Korea
Tel: +82-2-2186-3300 Fax : +82-2-6201-7787
Copyright ⓒ NCSOFT Corporation. All Rights Reserved
WWW.NCSOFT.COM
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 FY2014 have been prepared on an un-audited basis,
and may be subject to change during independent auditing process.
※ Consolidated subsidiaries (K-IFRS) :
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),
Oraion Soft(100%, KR), Ntreev Soft(74%, KR)
1
Contents
I. Overview
1. Industry Overview
2. Company Overview
II. Financials
3. Financial Highlights
4. Sales Breakdown
5. Costs Breakdown
III. Investment Points
6. Opportunities
7. Strengths
Appendix
8. Summarized Financial Statements
9. Screenshots
2
1-1. Industry Overview : Global Market at a Glance
(Unit : USD BN)
Online is one of the fastest growing game platforms with CAGR 14% 2011~2016.
China is the biggest online game market with CAGR 22% 2010~2015.
Growth Projection by Platforms
160
140
120
100
113
114
7
7
28
26
117
7
125
7
24
50
45
40
20
11
14
7
24
44
18
47
21
49
22
31
140
7
23
30
26
23
25
21
24
80
60
132
Breakdown of Online by Regions
35
20
18
15
1
2
2
51
23
10
14
1
1
1
1
2
2
9
23
26
31
2011
2012
2013
2014E
2015E
2016E
2010
2011
2012E
PC Package
China
Korea
Europe
Console
Arcade
9
7
21
Mobile
2
7
18
5
3
8
5
5
3
8
35
Online
1
2
2
2
2
2
7
11
2013E
13
2014E
N. America
15
2015E
Others
(Source : Game White Paper 2014, Ministry of Culture, Korea)
3
1-2. Industry Overview : Global Market at a Glance
(Unit : USD BN)
Mobile is growing faster than Online, but Online will maintain bigger market share through 2016.
Market Share Trend
Growth Projection
40
Online
CAGR 14%
(2011~2016)
30
25
31
6%
6%
5%
5%
24%
23%
21%
19%
18%
17%
37%
37%
36%
26
23
21
18
14
11
23
22
21
18
15
10
6%
35
35
20
6%
Mobile
CAGR 17%
(2011~2016)
44%
9%
5
2011
2012
2013
Online
2014E
2015E
Mobile
2016E
39%
12%
37%
16%
17%
17%
17%
16%
19%
20%
21%
23%
25%
2011
2012
2013
2014E
2015E
2016E
PC Package
Arcade
Console
Mobile
Online
4
1-3. Industry Overview : China
(Unit : USD BN)
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 of Online games.
Growth Projection by Platforms
40
Breakdown of Online by Genre
16
14
35
14
11
30
8
25
4
15
10
5
2
1
1
7
1
2
8
5
4
9
8
6
3
3
11
14
16
9
10
7
6
20
11
12
18
8
6
5
4
7
3
3
4
2
4
5
6
6
2013E
2014E
7
-
2011
2012
2013
Online (Client Based)
2014E 2015E 2016E 2017E
Online (Web Based)
Mobile
(Source : Game White Paper 2014, Ministry of Culture, Korea)
2011
2012
MMORPG
2015E
Casual Games
(Source : GPC and IDC 2013)
5
1-4. Industry Overview : Korea
(Unit : USD BN)
Online will serve as the most dominant game platform in Korea just like China.
Online will make up roughly 70 % of Korean gaming market through 2016.
Market Share Trend
Growth Projection by Platforms
8.0
100%
90%
7.0
0.7
6.0
2.1
0.4
2.2
2.2
2.1
7%
6%
6%
11%
30% 31% 31% 29%
80%
70%
5.0
60%
0.3
50%
4.0
0.2
3.0
5.7
0.3
4.3
2.0
1.0
10%
40%
6.2
5.0
4.8
5.0
5.2
90% 93% 94% 94% 89%
70% 69% 69% 71%
30%
20%
3.4
2.4
10%
0%
2008 2009 2010 2011 2012 2013 2014E2015E2016E
Online
Mobile
Online
Mobile
(Source : Game White Paper 2014, Ministry of Culture, Korea)
6
1-5. Industry Overview : US & EU
(Unit : USD BN)
Console is still the most dominant game platform in US & EU unlike China and Korea.
35
Growth Projection by Platforms (US)
45
40
30
25
1
2
2
2
2
2
25
19
15
16
-
1
1
1
1
1
4
4
4
4
4
4
2
2
2
2
3
3
2011
2012
2013
2014E
2015E
2016E
Online
Arcade
3
3
19
18
19
20
21
22
2
3
3
3
3
3
12
11
10
10
10
10
2
2
2
2
2
2
2011
2012
2013
2014E
2015E
2016E
20
15
1
2
19
18
17
10
5
35
4
4
4
30
20
15
Growth Projection by Platforms (EU)
PC
Console
Mobile
10
5
-
Online
Arcade
PC
Console
Mobile
(Source : Game White Paper 2014, Ministry of Culture, Korea)
7
2-1. Company Overview : NCSOFT at a Glance
A leading game company boasting the finest development capabilities and global publishing network.
Products
Snapshot
□ Foundation :
□ CEO :
□ BOD :
□ Employees** :
□ Global network :
□ Ownership** :
Individual
22.5%
National
Pension
7.9%
Domestic
Institution
11.6%
March 1997
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*
3,100
Korea, North America,
Europe, Japan, Taiwan
Management
10%
Treasury Stock
9%
Nexon
15%
MMORPG
Casual Games
Mobile Games
Foreign
Institution
23.8%
* Outside Directors
** As of March 2015
8
2-2. Company Overview : Revenues Trend
(Unit : KRW BN)
Legacy products remain solid. With the case of Lineage, sales has been stronger than in the past.
New online games and mobile games will drive growth further.
WS(‘14)
900
GW2(‘12)
Others
Royalty
800
B&S(‘12)
Casual & Mobile Games
Wildstar
700
64
Guild Wars 2
25
Blade & Soul
600
49
AION
48
57
Guild Wars
500
City of Heroes/Villains
AION(‘08)
Lineage2
400
252
262
223
165
62
29
Lineage2(‘03)
9
100
7
0
1998
1999
22
15
28
21
111
119
119
131
20
10
147
123
69
141
57
35
200
Lineage(‘98)
22
32
96
Lineage
300
66
153
1
55
113
133
118
113
115
118
111
113
132
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
123
101
137
23
50
86
83
94
59
65
183
196
205
2010
2011
2012
288
263
2013
2014
9
2-3. Company Overview : EPS Trend
EPS in 2014 grew 43% versus 2013
EPS growth will continue on the back of strong legacy games and new online & mobile games
(Unit : KRW)
(Unit : KRW MN)
900,000
800,000
Revenues
Operating Profit
Net Income
EPS
12,000
838,718
756,656
753,520
10,342
10,000
700,000
608,878
600,000
8,000
7,213
6,985
500,000
6,000
400,000
5,349
278,188
300,000
205,235
200,000
135,722
117,676
4,000
227,519
158,696
151,252 153,667
2,000
100,000
-
2011
2012
2013
2014
10
2-4. Company Overview : Development & Publishing Network
Top-talented developers in Korea and US
Well-organized publishing arms in major markets such as Europe, US, Japan, and Taiwan
Europe
NC Europe (100%)
Innova System (LineageII)
Gameforge (AION)
Shanda (AION)
Tencent (B&S, Lineage, LineageII, Punch Monster )
KongZhong (Guild Wars 2)
China
Korea
NCSOFT Corporation
Japan
North America
NC Interactive (100%)
Carbine Studio (100%)
Arenanet (100%)
NC Japan (60%, JV with SoftBank)
Taiwan
NC Taiwan (85%, JV with Gamania)
Gamania (Lineage)
Development Studio
Publishing Entity
First Party Studio
License Partner
11
2-5. Company Overview : Never-Ending Innovations
Online Games
Lineage Eternal
Wildstar
Guild Wars 2
Epic scale combat
Blade and Soul
MMO + SNG
AION
MXM
Dynamic quest system
Lineage2
Differentiated actions
Lineage
HON
Shooting + RPG
PvP + RvR
Tag play
3D MMO
LE mobile
MXM mobile
Fashion street
Large community
Summoner
Pangya
H2
Lineage mobile
Fashion themed
mobile SNG
AION mobile
Board game + RPG
B&S mobile
Fantasy Golf
Real time RvR
RPG + TCG
Clan system
Strategy enriched
shooting action
Cloud based
mobile MMO
Synchronization of
Online & Mobile
Platform expansion
Baseball simulation
3D Mogul engine
Mid to hardcore
Casual
Mobile Games
12
3. Financial Highlights(Quarterly)
4Q sales recorded W235bn(YoY+12%) and operating profit W87bn (YoY+54%)
Strong 4Q results were driven by L1, L2 and B&S
-Excluding 4Q12 when GW2 was launched, 4Q14 achieved the highest revenues and OP of all time
-L1 recorded W97bn(QoQ+41%), L2 W20bn(QoQ+31%) and B&S W25bn(QoQ+24%)
250,000
Operating Profit
Sales
300,000
210,026
200,000
213,811
120,000
211,615
235,145
100,000
81,338
178,147
80,000
150,000
↑ 11% QoQ
↑ 12% YoY
100,000
50,000
60,000
87,382
64,948
56,746
44,520
↑ 7% QoQ
↑ 54% YoY
40,000
20,000
4Q 13
1Q 14
2Q 14
3Q 14
Pre-tax Income
100,000
4Q 14
93,653
86,568
0
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
Net Income
120,000
100,000
80,000
60,000
(Unit : KRW in MN)
64,353
61,248
44,436
↑ 8% QoQ
↑ 53% YoY
40,000
60,000
20,000
0
0
1Q 14
2Q 14
3Q 14
4Q 14
62,337
52,938
45,850
40,000
20,000
4Q 13
75,706
80,000
36,539
↓ 18% QoQ
↑ 36% YoY
4Q 13
1Q 14
2Q 14
3Q 14
4Q 14
13
3. Financial Highlights(Yearly)
Full-year FY 2014 revenues and operating profit recorded a historical-high of W839bn(YoY+11%) and
W278bn (YoY+36%) respectively
(Unit : KRW in MN)
- Stable performance from legacy games and an increase in overseas royalty led to improved profitability.
- OPM in 2014 was 33% (YoY+6%).
900,000
800,000
838,718
756,656
700,000
600,000
500,000
2013
400,000
↑ 11% YoY
2014
289,009
278,188
300,000
205,235
227,519
216,222
200,000
158,696
↑ 36% YoY
100,000
↑ 34% YoY
↑ 43% YoY
Revenues
Operating Income
Pre-tax Income
Net Income
14
4. Sales Breakdown(Quarterly)
(Unit : KRW in MN)
- Korea sales increased on the back of improved sales from legacy games
Overseas royalty also increased due to B&S China
- In 4Q14, L1 generated record-high quarterly revenue of W97bn
- L2 continues sales growth driven by service upgrades (growth rate 3Q 9%→ 4Q 31%)
- B&S grew 24% QoQ to W25bn due to the successful launch of B&S in Taiwan
Sales by Region
235,145
250,000
200,000
210,026
211,615
32,319
22,260
2,130
10,062
2,699
13,555
150,000
250,000
Sales by Games
(excluding royalty)
202,717
32,428
27,355
38,622
177,707
14,337
Royalty
150,000
36,471
189,355
200,000
6,519
12,031
33,555
Taiwan
17,887
Japan
100,000
124,983
138,541
156,812
100,000
21,622
15,560
US+EU
17,611
16,007
19,686
24,576
19,759
20,935
32,937
Korea
19,472
68,514
4Q 13
3Q 14
WS
GW2
AION
96,711
74,746
Others
B&S
14,841
50,000
50,000
16,261
5,491
19,272
L2
L1
-
4Q 13
3Q 14
4Q 14
L1 : Lineage 1
B&S : Blade and Soul
4Q 14
GW2 : Guild Wars 2
WS : Wildstar
15
4. Sales Breakdown(Yearly)
(Unit : KRW in MN)
-The contribution of Korea sales increased led by a rebound in legacy game earnings
-L1 and B&S generated strong and stable performance, while growth potential of L2 and AION was confirmed
Sales by Region
900,000
800,000
838,718
800,000
756,655
700,000
65,940
10,652
54,837
600,000
136,019
700,000
136,820
500,000
690,716
57,760
13,179
41,549
148,376
Sales by Games
(excluding royalty)
123,317
Taiwan
500,000
400,000
68,847
300,000
57,131
300,000
489,207
498,795
US+EU
200,000
Korea
100,000
200,000
100,000
-
85,634
Others
WS
82,701
GW2
95,773
400,000
Japan
66,965
49,547
600,000
Royalty
701,898
94,445
59,479
B&S
AION
L2
287,887
263,128
2013
2014
L1
2013
2014
L1 : Lineage 1
B&S : Blade and Soul
GW2 : Guild Wars 2
WS : Wildstar
16
5. Costs Breakdown
Full-year sales grew 11% YoY, but operating expenses increases were limited to +2% YoY
-Annual labor cost declined 1% YoY to W309bn.
-Marketing costs increased YoY, due to G-star, Wildstar’s release and B&S Taiwan launch
(Unit : KRW in MN)
In 4Q14, operating expenses rose 13% QoQ to W148bn
-Year-end adjustments to labor cost and an increase in marketing activities, such as G-Star, are the main drivers
* 4Q14 Others: Bandwidth costs(4,664), Rent(1,868), Wage for outsourced staff(6,937), Outsourced R&D(2,711) etc.
17
6-1. Opportunities : China
(Unit : USD BN)
MMO genre is the largest segment in Chinese online game market.
Leading MMOs in China are reported to generate USD 500 MN ~ 600 MN revenues per year.
Growth Projection by Platforms
40
Breakdown of Online by Genre
16
14
35
14
11
30
8
25
4
15
10
5
2
1
1
7
1
2
8
5
4
9
8
6
3
3
11
14
16
9
10
7
6
20
11
12
18
8
6
5
4
7
3
3
4
2
4
5
6
6
2013E
2014E
7
-
2011
2012
2013
Online (Client Based)
2014E 2015E 2016E 2017E
Online (Web Based)
Mobile
(Source : Game White Paper 2014, Ministry of Culture, Korea)
2011
2012
MMORPG
2015E
Casual Games
(Source : GPC and IDC 2013)
18
6-2. Opportunities : Mobile Games
Main directions for NCSOFT mobile games are to leverage our franchises, to focus on mid to hard-core
RPG genre, and to develop multiplayer game elements such as competition and cooperation.
19
6-3. Opportunities : Artificial Intelligence
AI is a catalyst for innovations in a variety of fields.
NCSOFT will capitalize on the AI technology it has been building up.
Cases of AI implementation
Games equipped with AI
Halo
Dyson vacuums
Apple Siri
Google driverless car
ANKI Drive
Amazon Echo
Netflix Cinematch
IBM Watson
Assassin’s Creed
Forza Motorsport
20
7. Strengths
 To be launched
Technology-backed innovations
World-class development capabilities and a strong pipeline
Global publishing network
17 years of operational know-hows and skills
In service 
Lineage Eternal
Wildstar
...
Guild Wars 2
 CBTs expected in 2015
Blade and Soul
 Hands-on demo at PAX
and GamesCom in 2013
 Launched in US and EU on June 3 2014
AION
 Launched in US/EU on August 28 2012
 Launched in China via KongZhong on May 15 2014
Lineage2
MXM
 Launched in Korea on June 30 2012
 PCU in Korea : 230K
(PCU: Peak Concurrent Users)
 Launched in China via Tencent Aug 8 2014
Lineage
 Launch : Nov. 2008
 Accumulated Sales:
KRW 1.1 TN (launch~2014)
 Service Country: 7 countries
(EU counted as one)
 Latest Quarterly Sales: KRW 21 BN
 Launch: Oct. 2003
 Accumulated Sales:
KRW 1.2 TN
(launch~2014)
 Service Country: 9 countries
(EU counted as one)
 Latest Quarterly Sales: KRW 19 BN
 Release expected in 2015
 Launch: Sep. 1998
 Accumulated Sales:
KRW 2.3 TN
(launch~2014)
 Service Country: 6 countries
 Latest Quarterly Sales: KRW 97 BN
21
8. Summarized B/S & P/L
(Unit : KRW MN)
B/S
P/L
22
9-1. Screenshot(MXM)
23
9-2. Screenshot(Lineage Eternal)
24
9-3. Screenshot(Project Hon)
25
9-4. Screenshot(Lineage Mobile)
26
9-5. Screenshot(AION Mobile)
27
9-6. Screenshot(B&S Mobile)
28
9-7. Screenshot(H2)
29
9-8. Screenshot(Pangya)
30