NCsoft Earnings Release Q3, 2007 November 7, 2007
NCsoft CORPORATION OK-san Bldg 157-33, Samsung-dong, Kangnam-gu, Seoul 135-090, KOREA | Tel: +82-2-2186-3300 Fax : +82-2-2186-3550 Copyright ⓒ NCsoft Corporation. All Rights Reserved WWW.NCSOFT.COM Global Online Game Publisher NCsoft
Table of Contents
01.01 Disclaimer
02.02 Consolidated Company
03.03 Earnings Highlights | 01
04.04 User Statistics | 10
05.05 Appendix – Parent Earnings | 13 Global Online Game Publisher NCsoft Disclaimer
Disclaimer
The financial results for 3Q 2007 have been prepared on an un-audited basis, and may be subject to change during independent auditing process.
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. Global Online Game Publisher NCsoft Consolidated Company
The consolidated company
NCsoftNCsoft (Controlling(Controlling Company)Company)
ConsolidatedConsolidated SubsidiariesSubsidiaries EquityEquity MethodMethod AffiliatesAffiliates
NCNC InteractiveInteractive (100%)(100%) OrionOrion SoftSoft (100%)(100%)
ArenaNetArenaNet (100%) (100%) JJ InteractiveInteractive (100%)(100%)
NCNC EuropeEurope (100%)(100%) NCRCNCRC (100%)(100%)
NCNC JapanJapan (60%)(60%) NCsoftNCsoft JapanJapan (100%)(100%)
NCNC TaiwanTaiwan (85%)(85%) NCNC ChinaChina (100%)(100%)
NCNC True(49%)True(49%) Global Online Game Publisher NCsoft Earnings Highlights
Consolidated Sales & Profit
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Net Sales 80,050 75,882 5% 84,981 -6%
- Online Game Sales 75,548 72,076 5% 79,589 -5%
- Royalties 4,502 3,806 18% 5,392 -17%
Expenses 70,315 65,279 8% 67,486 4%
Operating Profit 9,735 10,603 -8% 17,495 -44%
(%) 12% 14% 21%
Pre-tax Profit 13,702 14,571 -6% 18,257 -25%
(%) 17% 0% 0% Net Income 10,075 10,562 -5% 12,801 -21% (%) 13% 14% 15%
1) NC Taiwan has been consolidated beginning 1Q07. Royalties in 3Q06 include royalties from NC Taiwan(1.5 billion Won).
1/18 Global Online Game Publisher NCsoft Earnings Highlights
Net Sales Mix by Geography
QoQ 3Q 07 2Q 07
Taiwan Taiwan Japan Japan 3% 3% 10% 10% Europe Europe 6% (Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%) 10% Korea North 55% America Korea North 59% Korea 47,760 48,502 -2% 53,940 -11% America 17% 17%Royalties Royalties 5% 5% - Game Sales 43,403 44,863 -3% 48,632 -11%
- Royalties1) 4,357 3,639 20% 5,308 -18% YoY North America 13,662 12,884 6% 15,791 -13%
3Q 07 3Q 06 Europe 8,181 4,525 81% 6,115 34%
Taiwan Japan Japan 7,798 7,669 2% 9,135 -15% Japan 3% 11% 10% Europe Europe 7% Taiwan 2,649 2,302 15% - New 10% Korea North Korea 55% America North 57% Total 80,050 75,882 5% 84,981 -6% America 19% 17%Royalties Royalties 5% 6% * NC Taiwan has been consolidated beginning 1Q07. 1) Royalties in 3Q06 include royalties from NC Taiwan(1.5 billion Won).
2/18 Global Online Game Publisher NCsoft Earnings Highlights
Online Game Sales Mix by Games
QoQ
3Q 07 2Q 07
Other Guild Guild 0% Wars Wars 17% Lineage (Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%) COH/V11% 31% Lineage 9% COH/V 35% Lineage 23,651 25,503 -7% 29,504 -20% 8% Lineage Lineage II II Lineage II 32,424 32,080 1% 31,135 4% 43% 45%
CoH / CoV 5,721 6,370 -10% 7,429 -23%
Guild Wars 13,012 8,264 57% 11,264 16% YoY Other 740 -141 NM 257 188% 3Q 07 3Q 06
Total 75,548 72,076 5% 79,589 -5% Guild GuildOther Wars Wars 0% 17% Lineage 14% 31% COH/V Lineage COH/V 9% 37% 8% Lineage II Lineage 43% II 40%
3/18 Global Online Game Publisher NCsoft Earnings Highlights
Royalties Breakdown
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Lineage 3,900 3,168 23% 3,329 17%
Taiwan 3,758 3,022 24% 3,214 17%
China 127 130 -2% 94 35%
H.K 15 16 -6% 21 -29%
Lineage II 448 460 -3% 1,935 -77%
Taiwan - - NM 1,446 NM
China 158 166 -5% 175 -10%
Thailand 290 294 -1% 314 -8%
Guild Wars - - NM 33 NM
Taiwan - - NM 33 NM
Others 154 178 -13% 95 62%
Royalty Total 4,502 3,806 18% 5,392 -17%
※ Other royalties consist of non-game royalties, such as royalties for character and goods guidebooks, from Korea and Japan.
4/18 Global Online Game Publisher NCsoft Earnings Highlights
Consolidated Cost Structure (COGS + SG&A)
% of total % of total (Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YOY(%) sales cost
Payroll 33,822 34,058 -1% 42% 48% 29,829 13%
Sales Variable Costs 7,566 7,301 4% 9% 11% 11,498 -34%
- Royalties 930 967 -4% 1% 1% 1,093 -15%
- Payment processing fees 3,750 2,496 50% 5% 5% 2,390 57%
- Sales commissions 1,344 1,251 7% 2% 2% 2,141 -37%
- Box production costs 323 1,716 -81% 0% 0% 3,401 -91%
- Other sales variables 1,219 870 40% 2% 2% 2,473 -51%
Advertising 6,532 2,623 149% 8% 9% 3,402 92%
Depreciation & Amortization 4,917 4,751 3% 6% 7% 5,992 -18%
Others 17,478 16,546 6% 22% 25% 16,765 4%
Total : 70,315 65,279 8% 88% 100% 67,486 4%
5/18 Global Online Game Publisher NCsoft Earnings Highlights
Quarterly Sales by Equity-Method Affiliates
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
NC China 1,430 926 54% 728 96%
(RMB Mn 11.7) (RMB Mn 7.7) (RMB Mn 6.1)
NC True 458 447 2% 507 -10%
(Baht Mn 15.5) (Baht Mn 15.7) (Baht Mn 20.3)
Total 1,888 1,373 38% 1,235 53%
6/18 Global Online Game Publisher NCsoft Earnings Highlights
Equity Method Gain or Loss Breakdown
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Korea (273) (206) Loss continued (83) Loss continued
Orion Soft (13) (69) Loss continued (16) Loss continued J Interactive (263) (137) Loss continued (67) Loss continued
Next Play 3 New New Overseas 22 (279) Turn to black (1,257) Turn to black
NC Taiwan - - - (18) - NC China (16) (226) Loss continued (597) Loss continued
NC True (3) (85) Loss continued (246) Loss continued
NCRC (5) 71 Turn to red (45) Loss continued
NCsoft Japan 46 (39) Turn to black (351) Turn to black
Total (251) (485) Loss continued (1,340) Loss continued
* NC Taiwan has been consolidated beginning 1Q07.
7/18 Global Online Game Publisher NCsoft Game Launch Schedule
Game launch Schedule
2nd Half, 2007 1st Half, 2008
Aion – 10/27 Closed beta test Aion – Commercialization
한국 Atrix – Commercialization Punch Monster –beta test
Action a side-scrolling RPG
Point Blank –beta test Dragonica –beta test
FPS a side-scrolling RPG
Richard Garriott’s Tabula Rasa – 11/2
북미 / 유럽 Guild Wars : Eye of the North -8/31
Exteel (In-game item sales)
8/18 Global Online Game Publisher NCsoft Earnings Highlights
Consolidated Balance Sheet
(Unit : W Mn) 3Q 07 2Q 07 Change
Asset 544,898 527,069 17,829
Current Asset 380,670 382,753 -2,083 (Cash & cash equivalents) 51,803 55,259 -3,456 (Short term investments) 241,626 248,490 -6,864 (Accounts Receivables) 41,037 36,196 4,841 Fixed Asset 164,228 144,316 19,912 (Investment) 10,539 8,422 2,117 (PPE) 122,406 102,235 20,171
Liability 93,260 83,243 10,017
Current Liability 85,988 76,707 9,281 Fixed Liability 7,272 6,536 736 (Debt) - - -
451,638 443,825 7,813 Shareholder's Equity (Paid in Capital) 10,235 10,202 33
9/18 Global Online Game Publisher NCsoft User Statistics
Operating Metrics (Lineage)
Korea As of September 2007 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 43 43 43 43 43 45 45 45 45 Highest concurrent users 150,863 187,786 161,038 144,109 138,733 144,430 149,034 120,012 134,596 Monthly access 1,220,491 1,627,159 788,180 746,291 716,772 775,579 733,593 583,426 590,542 Personal accounts 256,758 309,452 299,313 262,019 266,564 302,469 287,058 224,664 218,650
Taiwan Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 36 38 39 40 40 40 40 40 40 Highest concurrent users 135,731 134,462 157,365 159,309 168,218 177,571 193,119 192,546 158,386 Monthly access 428,152 472,156 470,855 434,623 445,636 423,212 428,845 417,365 386,601
Japan Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 666666666 Highest concurrent users 12,550 14,534 12,448 12,836 12,643 10,599 12,016 10,339 9,322 Monthly access 69,538 74,671 76,027 69,641 76,191 80,019 79,252 48,083 56,430
China Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 10 10 10 11 11 11 11 11 11 Highest concurrent users 14,586 14,149 18,376 20,399 17,246 19,551 20,705 25,354 18,414 Monthly access 140,422 110,182 152,466 139,669 107,644 117,407 126,479 132,758 103,127
U.S Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 33333 3 3 3 3 Highest concurrent users 1,844 2,200 2,224 2,311 2,780 3,732 3,205 3,077 2,299 Monthly access 6,760 9,059 9,759 9,685 9,727 11,953 9,202 9,093 6,999
* Highest concurrent users: Number of users that play simultaneously at one point in time (highest record of the given month) * Monthly access: Number of unique users that log on at least once in the given month * Personal accounts: Number of users that pay flat monthly fees
10/18 Global Online Game Publisher NCsoft User Statistics
Operating Metrics (Lineage II)
Korea As of September 2007 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 33 33 33 33 33 33 33 31 32 Highest concurrent users 109,814 119,345 116,897 110,183 97,558 113,369 123,332 124,566 136,017 Monthly access 944,372 730,837 531,701 508,041 499,894 482,173 460,974 440,509 478,555 Personal account 165,239 174,170 179,298 174,582 165,558 187,005 192,165 187,570 201,142 Taiwan Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 22 22 22 22 22 22 22 22 20 Highest concurrent users 68,617 71,301 78,550 72,713 66,497 55,571 46,768 50,950 47,063 Monthly access 238,620 198,795 205,661 171,408 160,316 123,006 112,244 111,263 110,261 Japan Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 10 10 11 11 12 12 12 12 12 Highest concurrent users 35,381 40,088 44,631 48,843 50,188 52,684 49,268 49,693 48,736 Monthly access 102,774 105,097 111,046 111,569 112,670 113,774 116,239 109,249 109,242 China Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 21 22 23 15 17 15 15 12 13 Highest concurrent users 54,353 43,026 37,806 18,438 18,085 16,888 15,238 16,594 15,946 Monthly access 358,305 354,395 299,675 212,173 204,269 180,584 183,049 126,878 128,248 U.S & Europe Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 9 9 9 9 10 10 10 10 10 Highest concurrent users 23,923 28,309 32,767 32,099 42,287 32,732 32,767 31,465 30,867 Monthly access 66,975 76,435 89,337 83,221 94,000 105,039 87,652 84,720 78,953 Thailand Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 108 4 555566 Highest concurrent users 13,567 10,202 11,000 7,941 7,616 6,596 5,903 7,232 6,259 Monthly access 75,545 59,938 64,920 52,516 45,778 31,727 30,416 31,637 26,004
11/18 Global Online Game Publisher NCsoft User Statistics
Operating Metrics (City of Heroes/Villains)
U.S & Europe As of September 2007 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 Servers 15 15 15 15 15 15 15 15 15 Highest concurrent users 22,340 23,730 23,699 22,274 21,500 17,728 14,767 26,669 15,910 Monthly access 150,068 194,000 171,951 171,000 172,420 154,953 143,127 153,331 139,313
Operating Metrics (Guild Wars)
US & Europe As of September 2007 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Sep. 2007 # of Accounts activated to date 1,000,000 1,270,000 1,490,000 2,080,000 2,447,000 3,122,000 3,555,000 3,917,000 4,500,000
12/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Sales & Profit
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Sales 51,474 52,155 -1% 56,878 -10%
- Korea 43,403 44,863 -3% 48,632 -11%
- Royalty 8,071 7,292 11% 8,246 -2%
Expenses 43,329 42,017 3% 42,523 2%
Operating Profit 8,146 10,139 -20% 14,356 -43%
(%) 16% 20% 28%
Pre-tax Profit 12,220 13,377 -9% 16,411 -26%
(%) 24% 26% 32%
Net Income 10,075 10,562 -5% 12,801 -21%
(%) 20% 21% 25%
13/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Sales Breakdown - Korea
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Lineage 22,254 23,776 -6% 27,480 -19%
PC Café 4,182 4,045 3% 5,735 -27%
Personal 18,072 19,731 -8% 21,745 -17%
Lineage II 20,984 20,954 0% 21,077 0%
PC Café 5,359 5,254 2% 6,550 -18%
Personal 15,625 15,700 0% 14,527 8%
Others 165 133 24% 75 120%
Total 43,403 44,863 -3% 48,632 -11%
14/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Royalties Breakdown
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Lineage 4,258 3,534 20% 3,772 13%
Taiwan 3,758 3,022 24% 3,214 17%
Japan 279 267 4% 350 -20%
China 127 130 -2% 94 35%
U.S 79 99 -20% 93 -15%
H.K 15 16 -6% 21 -29%
Lineage II 3,699 3,645 1% 4,333 -15% Taiwan 1,077 971 11% 1,446 -26% Japan 1,532 1,447 6% 1,603 -4%
China 158 166 -5% 175 -10% U.S / Europe 642 767 -16% 795 -19%
Thailand 290 294 -1% 314 -8%
Guild Wars 105 102 3% 130 -19% Taiwan 36 40 -10% 33 9%
Japan 69 62 11% 97 -29%
Others 9 11 -18% 11 -18%
Royalty Total 8,071 7,292 11% 8,246 -2%
15/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Cost Structure (COGS + SG&A)
% of total % of total (Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YOY(%) sales cost
Payroll 24,613 24,950 -1% 47% 57% 21,860 13%
Sales Variable Costs 3,369 3,528 -5% 6% 8% 5,868 -43%
- Royalties 42 37 14% 0% 0% 98 -57%
- Payment processing fees 1,599 1,599 0% 3% 4% 1,541 4%
- Sales commissions 1,344 1,251 7% 3% 3% 2,141 -37%
- Other sales variables 384 641 -40% 1% 1% 2,088 -82%
Advertising 3,190 1,741 83% 6% 7% 1,928 65%
Depreciation & Amortization 2,346 2,157 9% 4% 5% 3,053 -23%
Others (*) 9,811 9,641 2% 19% 23% 9,814 0%
Total : 43,329 42,017 3% 83% 100% 42,523 2%
16/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Quarterly Sales by Subs. & JVs
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
NC Interactive 13,746 13,214 4% 16,038 -14% ($Mn 14.8) ($Mn 14.3) ($Mn 16.8)
ArenaNet 3,232 2,298 41% 3,903 -17% ($Mn 3.5) ($Mn 2.5) ($Mn 4.1) NC Japan 7,798 7,668 2% 9,135 -15%
(JPY Mn 990) (JPY Mn 996) (JPY Mn 1,109.9) NC Taiwan 2,664 2,302 16% 3,582 -26%
(TW Mn 93.9) (TW Mn 82.1) (TW Mn 120.7) NC Europe 8,181 4,525 81% 6,115 34%
(₤ Mn 4.4) (₤ Mn 2.4) (₤ Mn 3.4) NC China 1,430 926 54% 728 96% (RMB Mn 11.7) (RMB Mn 7.7) (RMB Mn 6.1)
NC True 458 447 2% 507 -10% (Baht Mn 15.5) (Baht Mn 15.7) (Baht Mn 20.3)
Total 37,509 31,380 20% 40,008 -6%
17/18 Global Online Game Publisher NCsoft Appendix – Parent Earnings
Equity Method Gain or Loss Breakdown
(Unit : W Mn) 3Q 07 2Q 07 QoQ(%) 3Q 06 YoY(%)
Korea (273) (206) Loss continued (83) Loss continued
Orion Soft (13) (69) Loss continued (16) Loss continued
J Interactive (263) (137) Loss continued (67) Loss continued
Next Play 3 New New
Overseas 696 (716) Turn to black (756) Turn to black
NC Interactive 735 3,030 -76% 2,785 -74%
NC Japan 730 475 54% 573 27%
ArenaNet (1,459) (2,638) Loss continued (1,078) Loss continued
NC China (16) (226) Loss continued (597) Loss continued
NC Taiwan 88 (562) Turn to black (18) Turn to black
NC Europe 580 (742) Turn to black (1,779) Turn to black
NC True (3) (85) Loss continued (246) Loss continued
NCRC (5) 71 Loss continued (45) Loss continued
NCsoft Japan 46 (39) Turn to black (351) Turn to black
Total 423 (922) Turn to black (839) Turn to black
18/18