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Studio Dragon at a Glance II 3Q 2020 Earnings Release Investor Relations 2020 November 2020 Disclaimer This financial information in this document are consolidated earnings results based on K-IFRS. This document is provided for the convenience of investors only, before the external audit on our 3Q 2020 financial results is completed. The audit outcomes may cause some parts of this document to change. In addition, this document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, “forward-looking statements” often address our expected future business and financial performance, and often contain words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks” or “will”. Our actual results to be materially different from those expressed in this document due to uncertainties. Investor Relations 2020 TABLE OF CONTENTS I Studio Dragon at a Glance II 3Q 2020 Earnings Release III Growth Strategy Appendix I Studio Dragon at a Glance 1. Highlights 2. Comprehensive Studio 3. Studio Dragon at a Glance 4. Studio Centered Industry Change 5. No.1 Studio in Korea We Create New Culture 1 Highlights (1) (1) (1) (2) PRODUCTION REVENUE GROWTH OVERSEAS REVENUE CREATORS 28titles 23% 34% 230People +4.1%P +45.5% +51.4% +72People +42Titles 46.8 230 166 160.4 14.4 42.7 124 110.2 158 9.5 2018 2019 2018 2019 2018 2019 2018 3Q20 2018 3Q20 Sales Proportion Overseas Revenue Non-captive Revenue No. of Creators Library Sales (%) (Wbn) (Wbn) (people) (titles) Note (1) As of 2019, (2) As of 3Q 2020 5 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.2 Comprehensive Studio 6 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.3 Studio Dragon at a Glance 4,616 28 25 22 18 16 1,097 339 470 Studio Dragon 2015 2016 2017 2018 2019 Note (1) Each companies’ audit report (consolidated basis) 7 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.4 Studio Centered Industry Change 8 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ① Production Capability (1) 9 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ① Production Capability (2) 10 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ② Business Capability 11 | Investor Relations 2020 – I. Studio Dragon at a Glance We Create New Culture II.5 No. 1 Studio in Korea ③ Stable Profit Structure Annual Production Trend Production Cost to Revenue Revenue to Cost of Sales Unit: titles Unit: Wbn 468.7 28 379.6 25 22 286.8 18 16 195.5 97.4 89.8% 86.1% 85.4% 93.5% 83.6% 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Note Companies’ homepage and other sources 12 | Investor Relations 2020 – I. Studio Dragon at a Glance II 3Q 2020 Earnings Release 1. 3Q 2020 Earnings Release 2. Programming 3. Distribution 4. Cost We Create New Culture 1 1 3Q 2020 Highlights It’s Okay to Missing: < > <The Flower of Evil> <Stranger 2> <Record of Youth> <Train> < > <Once Again> Not Be Okay The Other Side Revenue Operating COGS Creators Profit w106.3bn w16.0bn w85.0bn 230creators (YoY -19.0%) (YoY +46.8%) (YoY -26.6%) (YoY +45 creators) 14 | Investor Relations 2020 – lI. 3Q 2020 Earnings Release We Create New Culture 1 1 3Q 2020 Operating Performance Summary 3Q20 Revenue W106.3bn (-19.0% YoY): Fewer titles (-4 titles YoY) affected by COVID-19, high-base in 3Q19(1) → sluggish revenue OP W16.0bn (+46.8% YoY): Expanded library value, China-bound sales, cost efficiency → steep margin improvement 4Q20 Increase hit-ratio via new lineups(2) that diversifies genres and visualizes webtoon IPs Revenue Operating Profit Net Profit Unit: Wbn Unit: Wbn Unit: Wbn 15.1% 8.8% 10.0% 10.4% 7.1% 8.3% 161.4 8.3% 9.7% 20.3 131.2 120.3 10.4 -1.7% 8.2 106.3 97.4 75.7 9.7 16.9 16.0 13.4 60.0 8.9 -4.1% 11.5 10.9 11.6 10.6 66.9 8.5 42.8 50.9 60.8 65.4 -1.6 45.7 45.2 45.7 -4.0 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Programming Distribution Others Operating Profit OP Margin Net Profit NP Margin Note (1) Big-budget titles including <Arthdal Chronicles>, <Hotel Del Luna>, (2) <Wonderful Rumor>, <True Beauty>, <Sweet Home> 15 | Investor Relations 2020 – lI. 3Q 2020 Earnings Release We Create New Culture 2 3Q 2020 Operating Performance Programming 3Q20 Reduced from fewer lineups and absence of big-budget dramas (vs. high-base in 3Q19 <Arthdal Chronicles>, <Hotel Del Luna>) 4Q20 Focus on genre diversification and target influence via titles incl. <Tale of the Nine Tailed>, <Start-Up>, <True Beauty> Programming Revenue Production Trend (1) Unit: Wbn Unit: Titles 100.0% 65.4 88.9% 60.8 83.3% 81.8% 76.9% 10.4 45.7 45.2 27.6 45.7 0.8 7.4 50.4 13 45.7 44.4 12 11 37.8 38.3 9 9 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Captive Non-captive Current Titles % of Captive Titles Note (1) Each quarter includes all titles in progress 16 | Investor Relations 2020 – lI. 3Q 2020 Earnings Release We Create New Culture 3 3Q 2020 Operating Performance Distribution 3Q20 Recorded solid overseas distribution mainly attributable to expanded library value (China-bound sales, increased ASP) 4Q20 Aim to enhance distribution efficiency by promoting library sales and upscaling size of Netflix original <Sweet Home> Distribution Revenue No. of Library Sales Unit: Wbn Unit: Titles (1) 0.41bn 0.29bn 0.42bn 0.47bn 0.31bn 166 160 161 75.7 148 149 10 14 19 66.9 60.0 23 26 50.9 42.8 59.4 52.8 150 43.9 147 147 42.1 125 123 31.7 16.1 14.1 16.3 11.1 8.8 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 Domestic International Old Titles New Titles Note (1) Average distribution revenue per title (distribution revenue / number of library sales) 17 | Investor Relations 2020 – lI. 3Q 2020 Earnings Release We Create New Culture 4 3Q 2020 Operating Performance Cost 3Q20 OPEX W90.3bn (-24.9% YoY): COGS Ratio 80.0% (-8.3%p YoY), SG&A Ratio 4.9% (+1.6%p YoY) 4Q20 Continue to implement reasonable cost policy such as monitoring production-budget control process, etc. COGS and SG&A Ratio OPEX Breakdown (1) Unit : % Unit: Wbn 3Q19 4Q19 1Q20 2Q20 3Q20 97.8 Production COGS 70.8 48.6 61.9 75.0 46.8 88.3 86.2 86.5 Labor Costs 5.5 6.4 5.4 5.4 7.8 80.0 Depreciation 0.5 0.5 0.6 0.6 0.8 6.4 Amortization 28.4 27.7 25.6 44.7 18.9 4.9 4.2 Commissions 11.1 12.6 11.3 13.9 11.2 3.3 3.1 Others 4.0 5.6 3.9 4.9 4.8 3Q19 4Q19 1Q20 2Q20 3Q20 OPEX 120.3 101.4 108.7 144.5 90.3 COGS Ratio SG&A Ratio Note (1) COGS + SG&A Cost 18 | Investor Relations 2020 – lI. 3Q 2020 Earnings Release III Growth Strategy 1. Media Industry 2. Production & Business Capability 3. Short to Mid-term Strategy We Create New Culture II.1 Growth Strategy - Media Industry Global OTT BIGBANG Maintain competitiveness Expand Presence 20 | Investor Relations 2020 – lII. Growth Strategy We Create New Culture 2 Growth Strategy - ① Production Capability Discover new writers Promote Producer·Director ↑ <The Crowned Clown> <Love Alarm> <Search: WWW> <Navillera> <Mr. Temporary> <Black Dog> Shin Ha-Eun Lee Ah-Yeon Kwon Do-Eun Lee Eun-Mi Sung Yong-Il Hwang Jun-Hyuk Writer Writer Writer Writer Director Director Create ↑ Hit Ratio Internalize Profits Virtuous Cycle 21 | Investor Relations 2020 – lII. Growth Strategy We Create New Culture 2 Growth Strategy - ② Business Capability Movie Game Performance OIMU Bad Guys: <Arthdal Chronicles> <Oh My Ghost> < > <Hotel Del Luna> <Another Miss Oh> <Movie Rock> (One IP Multi Use) Vile City Remake MD Asia Exhibition Crash Landing It’s Okay to <Hotel Del Luna> < > < > <Voice> <Signal> <Oh My Ghost> on You Not Be Okay Memories of <Hotel Del Luna> < > <Memory> <Design Goods> <Candle, Diffuser> <“Mangtae” > the Alhambra <Signal> <My Mister> <Hotel Del Luna> 22 | Investor Relations 2020 – lII. Growth Strategy We Create New Culture II.3 Growth Strategy - ST/MT Strategy Distribution Overseas Domestic Overseas Domestic Domestic Overseas 23 | Investor Relations 2020 – lII. Growth Strategy We Create New Culture II.3 Growth Strategy - ST/MT Strategy Increased ASP and Global Performance ASP Growth WORLDWIDE 25% #6 #4 2017 2018 2019 2020(E) It’s Okay to <Record of Youth> <New IPs, 2019 vs.2020 YTD> < Not Be Okay > Expand Partnership with New Players Region Players 2017 2018 2019 2020(E) 2017 2018 2019 2020(E) Note : Asia region excludes Japan 2017 2018 2019 2020(E) 24 | Investor Relations 2020 – lII. Growth Strategy Investor Relations 2020 APPENDIX 1 Corporate Overview 2 Vision 3 Business Model 4 Financial Statements Summary 1. Financial Position 2. Income Statement 5 4Q 2020 Lineups We Create New Culture I.1 Corporate Overview Group Structure Shareholder Structure Reflects rights offering Reflects rights offering * CJ Corp. * Listed companies (NAVER-SD equity swap) 39.36% Others * CJ ENM 32.12% 54.48% CJ ENM * 54.48% 100% 100% 100% 100% 100% NETFLIX CJ ENM 20% 19% 4.68% 66.08% NAVER 6.26% Related Parties Share Price Trend 2.46% 2017.11.24=100 17.11 18.1 18.3 18.5 18.7 18.9 18.11 19.1 19.3 19.5 19.7 19.9 19.11 20.1 20.3 20.5 20.7 20.9 Studio Dragon KOSPI KOSDAQ 26 | Investor Relations 2020 – Appendix We Create New Culture I.2 Vision 27 | Investor Relations 2020 – Appendix We Create New Culture I.3 Business Model 28 | Investor Relations 2020 – Appendix We Create New Culture I.4 Financial Statements - Financial Position (Unit: Wbn) 3Q19 2Q20 3Q20 % QoQ % YoY Total Assets 585.4 635.0 637.1 0.3 8.8 Current Assets 259.0 269.4 266.2 (1.2) 2.8 Cash and Cash Equivalents 103.5 79.0 68.9 (12.7) (33.4) Others 155.5 190.4 197.3 3.6 26.9 Non-Current Assets
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