Ncsoft Earnings Release Q2, 2007 August 8, 2007
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NCsoft Earnings Release Q2, 2007 August 8, 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 2Q 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) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) Net Sales 75,882 84,715 -10% 85,505 -11% - Online Game Sales 72,076 80,988 -11% 79,689 -10% - Royalties 3,806 3,727 2% 5,816 -35% Expenses 65,279 67,648 -4% 83,830 -22% Operating Profit 10,603 17,067 -38% 1,675 533% (%) 14% 20% 2% Pre-tax Profit 14,571 19,773 -26% 3,993 265% (%) 19% 23% 5% Net Income 10,562 14,121 -25% -222 NM (%) 14% 17% - 1) In 2Q 2006, one-off expenses related Auto Assault (W11.3bn) were included. 2) NC Taiwan has been consolidated beginning 1Q07. Royalties in 2Q06 include royalties from NC Taiwan of 1.8 billion Won. 1/18 Global Online Game Publisher NCsoft Earnings Highlights Net Sales Mix by Geography QoQ 2Q 07 1Q 07 Taiwan Taiwan Japan Japan 3% 3% 10% 10% Europe Europe 9% (Unit : W Mn) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) 6% North Korea North Korea America 59% America 59% Korea 48,503 53,698 -10% 52,915 -8% 17% 15% Royalties Royalties 5% 4% - Game Sales 44,864 49,988 -10% 47,177 -5% - Royalties1) 3,639 3,710 -2% 5,738 -37% YoY North America 12,884 12,932 0% 15,749 -18% 2Q 07 2Q 06 Europe 4,525 7,759 -42% 9,340 -52% Japan 7,669 8,063 -5% 7,501 2% Taiwan Japan Japan 3% 9% 10% Europe Europe 11% Taiwan 2,302 2,263 2% - New 6% North Korea North Korea America 59% America 55% Total 75,883 84,715 -10% 85,505 -11% 17% 18% Royalties Royalties 5% 7% * NC Taiwan has been consolidated beginning 1Q07. 1) Royalties in 2Q06 include royalties from NC Taiwan of 1.8 billion Won. 2/18 Global Online Game Publisher NCsoft Earnings Highlights Online Game Sales Mix by Games QoQ 2Q 07 1Q 07 Guild Other Guild Wars 0% Wars 11% (Unit : W Mn) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) COH/V Lineage 14% COH/V Lineage 9% 35% 7% 38% Lineage 25,503 30,408 -16% 28,510 -11% Lineage Lineage II II Lineage II1) 32,080 32,814 -2% 28,355 13% 45% 41% CoH / CoV 6,370 5,954 7% 5,532 15% Guild Wars2) 8,264 11,542 -28% 16,389 -50% YoY -152% -116% 2Q 07 2Q 06 Other -141 270 903 Total 72,076 80,988 -11% 79,689 -10% Guild Other Wars Guild 1% 11% Wars * Other revenues in 2Q07 include the cancellation of revenues for Auto Assault (-W380 million). Lineage COH/V 21% Lineage 9% 35% 1) Lineage II sales in 2Q06 include royalties from NC Taiwan of 1.7 billion Won. COH/V 35% 7% 2) Guild Wars sales in 2Q06 include royalties from NC Taiwan of 20 million Won. Lineage Lineage II II 45% 36% 3/18 Global Online Game Publisher NCsoft Earnings Highlights Royalties Breakdown (Unit : W Mn) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) Lineage 3,168 3,276 -3% 3,393 -7% Taiwan 3,022 3,167 -5% 3,278 -8% China 130 95 37% 95 37% H.K 16 14 14% 20 -20% Lineage II 460 428 7% 2,299 -80% Taiwan - - NM 1,743 NM China 166 134 24% 230 -28% Thailand 294 294 0% 326 -10% Guild Wars - - NM 24 NM Taiwan - - NM 24 NM Others 178 23 674% 100 78% Royalty Total 3,806 3,727 2% 5,816 -35% ※ 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) 2Q 07 1Q 07 QoQ(%) 2Q 06 YOY(%) sales cost Payroll 34,058 35,377 -4% 45% 52% 30,456 12% Sales Variable Costs 7,301 8,649 -16% 10% 11% 8,104 -10% - Royalties 967 1,116 -13% 1% 1% 763 27% - Payment processing fees 2,496 2,572 -3% 3% 4% 2,026 23% - Sales commissions 1,251 1,898 -34% 2% 2% 1,946 -36% - Box production costs 1,716 2,159 -21% 2% 3% 2,257 -24% - Other sales variables 870 904 -4% 1% 1% 1,112 -22% Advertising 2,623 2,015 30% 3% 4% 8,150 -68% Depreciation & Amortization 4,751 4,593 3% 6% 7% 6,923 -31% Others (*) 16,546 17,014 -3% 22% 25% 30,197 -45% Total : 65,279 67,648 -4% 86% 100% 83,830 -22% (*) Depreciation & Amortization in 2Q06 includes Auto Assault write off expense of 1 billion Won. (*) Others in 2Q06 include Auto Assault write off expense of 10.3 billion Won. 5/18 Global Online Game Publisher NCsoft Earnings Highlights Quarterly Sales by Equity-Method Affiliates (Unit : W Mn) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) NC China 926 659 41% 965 -4% (RMB Mn 7.7) (RMB Mn 5.5) (RMB Mn 8.1) NC True 447 437 2% 612 -27% (Baht Mn 15.7) (Baht Mn 15.8) (Baht Mn 24.6) Total 1,373 1,096 25% 1,577 -13% 6/18 Global Online Game Publisher NCsoft Earnings Highlights Equity Method Gain or Loss Breakdown (Unit : W Mn) 2Q 07 1Q 07 QoQ(%) 2Q 06 YoY(%) Korea (206) (296) Loss continued (17) Loss continued Orion Soft (69) (89) Loss continued (17) Loss continued J Interactive (137) (207) Loss continued - New Overseas (279) (985) Loss continued (979) Loss continued NC Taiwan - - - 352 - NC China (226) (613) Loss continued (47) Loss continued NC True (85) (171) Loss continued (874) Loss continued NCRC 71 57 25% (410) Turn to black NCsoft Japan (39) (258) Loss continued - New Total (485) (1,281) Loss continued (996) 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 Aion – 10/31 Closed beta test Atrix –3Q Point Blank –beta test Korea Action FPS Service Platform SP JAM –3Q Project D –beta test SetSet upup Casual Game Snowboarding a side-scrolling RPG Casual Game PortfolioPortfolio Richard Garriott’s Tabula Rasa -fall U.S. Guild Wars : Eye of the North -8/31 & Europe Exteel (In-game item sales) 8/18 Global Online Game Publisher NCsoft Earnings Highlights Consolidated Balance Sheet (Unit : W Mn) 2Q 07 1Q 07 Change Asset 527,069 523,164 3,905 Current Asset 382,753 378,764 3,989 (Cash & cash equivalents) 55,259 46,371 8,888 (Short term investments) 248,490 250,000 -1,510 (Accounts Receivables) 36,196 43,088 -6,892 Fixed Asset 144,316 144,400 -84 (Investment) 8,422 10,649 -2,227 (PPE) 102,235 99,246 2,989 Liability 83,243 84,490 -1,247 Current Liability 76,707 78,331 -1,624 Fixed Liability 6,536 6,159 377 (Debt) - - - 443,825 438,674 5,151 Shareholder's Equity (Paid in Capital) 10,202 10,202 0 9/18 Global Online Game Publisher NCsoft User Statistics Operating Metrics (Lineage) Korea As of June 2007 Jun. 05 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Servers 43 43 43 43 43 43 45 45 45 Highest concurrent users 151,113 150,863 187,786 161,038 144,109 138,733 144,430 149,034 120,012 Monthly access 1,166,001 1,220,491 1,627,159 788,180 746,291 716,772 775,579 733,593 583,426 Personal accounts 257,385 256,758 309,452 299,313 262,019 266,564 302,469 287,058 224,664 Taiwan Jun. 05 Sep. 2005 Dec. 2005 Mar. 2006 Jun. 2006 Sep. 2006 Dec. 2006 Mar. 2007 Jun. 2007 Servers 36 36 38 39 40 40 40 40 40 Highest concurrent users 138,623 135,731 134,462 157,365 159,309 168,218 177,571 193,119 192,546 Monthly access 475,066 428,152 472,156 470,855 434,623 445,636 423,212 428,845 417,365 Japan Jun. 05 Sep. 2005 Dec.