Investor Relations 2019

Shinhan Investment US NDR, August 2019 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 2Q 2019 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 2019 TABLE OF CONTENTS

I Studio Dragon at a Glance

II 2Q 2019 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) DOMESTIC M/S REVENUE GROWTH INTL. REVENUE CREATORS

27% 32% 29% 183People

+4Titles +64.1% +16.0% +11.9% +1.6%p

110.2 26 51.8 40.1 5.0 35.9 44.7 22 67.2 3.4

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Production Trend International Revenue Domestic VOD Payment to Creators Viewer Rating (3) (Titles) (Wbn) (Wbn) (Wbn) (%)

Note (1) As of 2018, (2) As of 2Q 2019, (3) Refers to household average viewer ratings; Excludes Olive’s series

5 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.2 Comprehensive Studio

6 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.3 Studio Dragon at a Glance

26 4,178 22 18 16

995 343 464

Studio Dragon 2015 2016 2017 2018

Note (1) Each companies’ audit report (consolidated basis) 7 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.4 Studio Centered Industry Change

8 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ① Production Capability (1)

9 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ① Production Capability (2)

10 | Investor Relations 2019 – I. Studio Dragon at a Glance We Create New Culture I.5 No. 1 Studio in Korea ② Business Capability

11 | Investor Relations 2019 – 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

26 379.6 22

286.8 18 16 195.5

97.4

86.1% 93.5% 83.6% 85.4%

2015 2016 2017 2018 2015 2016 2017 2018

Note Companies’ homepage and other sources

12 | Investor Relations 2019 – I. Studio Dragon at a Glance II 2Q 2019 Earnings Release

1. Operating Performance 2. Programing 3. Distribution 4. Cost We Create New Culture 1 1 2Q 2019 Operating Performance

International Domestic (1) Production Distribution Distribution Revenue Trend Revenue Revenue

W128.2bn w42.2bn w18.1bn 11titles (YoY +72.6%) (YoY +156.3%) (YoY +46.5%) (YoY +3 titles)

Note (1) Each quarter includes all titles in progress

14 | Investor Relations 2019 – lI. 2Q 2019 Earnings Release We Create New Culture 1 2Q 2019 Operating Performance

Summary

 2Q19 Strengthened overall production excelled programming and distribution revenue amid BEP of  Strong top-line and profit growth  2H19 Expand influence via launching a big-budget title , , etc. and diversifying platforms ( - SBS, - Netflix original, etc.)

Revenue Operating Profit Net Profit

Unit: Wbn Unit: Wbn Unit: Wbn

17.4% 14.0% 128.2 12.0% 123.7 9.9% 9.9% 9.8 8.4% 8.2% 11.4 111.8 101.7 5.7% 11.5 9.5 60.3 74.3 63.4 11.4 37.8 56.2 0.4% 1.7% 21.5 17.3 28.8

54.4 58.1 11.0 10.8 8.9 9.2 48.9 44.1 7.3 34.1 7.3 0.4 1.7 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19

Programing Distribution Others Operating Income OP Margin Net Income NP Margin

15 | Investor Relations 2019 – lI. 2Q 2019 Earnings Release We Create New Culture 2 2Q 2019 Operating Performance

Programming

 2Q19 Programming revenue hit a record high, up by 70.5% YoY, driven by expanded OCN lineups and MBC

 2H19 Diversify story items and enhance audience concentration through lineups including , , , etc.

Programming Revenue Production Trend Note (1)

Unit: Wbn Unit: Titles

100.0% 100.0% 100.0% 100.0% 58.1 90.9% 54.4 3.7 48.9 0.6 0.2 44.1 0.2 34.1 1.0 53.8 54.4 12 48.7 11 11 43.9 33.1 8 8

2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19

Captive Non-captive Current Titles % of Captive Titles Note (1) Each quarter includes all titles in progress 16 | Investor Relations 2019 – lI. 2Q 2019 Earnings Release We Create New Culture 3 2Q 2019 Operating Performance

Distribution

 2Q19 Distribution revenue grew 109.2% YoY, attributable to expanded global OTT sales of titles including , , , etc. and domestic VOD sales  2H19 Increase bargaining power through diversifying sales regions and supplying new original contents, based on content differentiation and brand recognition

Distribution Revenue No. of Library Sales

Unit: Wbn Unit: Titles

※ Note(1) 0.29bn 0.61bn 0.35bn 0.45bn 0.44bn 136 63.4 126 60.3 14 56.2 5 108 101 104 37.8 46.2 42.2 12 17 25 28.8 42.6 121 122 24.8 16.5 89 87 83 17.2 18.1 12.3 13.0 13.6

2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19

Domestic International Old Titles New Titles Note (1) Average distribution revenue per title (distribution revenue / number of library sales) 17 | Investor Relations 2019 – lI. 2Q 2019 Earnings Release We Create New Culture 4 2Q 2019 Operating Performance

Cost

 2Q19 OPEX W117.4bn (+75.4% YoY) : COGS Ratio 88.0% (+2.3%p YoY), SG&A Ratio 3.6% (-0.8%p YoY), managing cost efficiency

 2H19 Aim to reinforce and manage drama production process in order to stabilize COGS ratio

COGS and SG&A Ratio OPEX

Unit : % Unit: Wbn

2Q18 3Q18 4Q18 1Q19 2Q19 93.6 88.0 85.7 86.6 COGS 63.7 98.9 95.2 96.8 112.8

79.9 Labor Costs 1.6 1.8 2.8 1.9 2.4

Dep. & Amort. 0.1 0.1 0.1 0.3 0.3

Commissions 0.5 0.5 0.7 0.9 0.8 5.9 4.4 Marketing 0.2 0.1 0.0 0.0 0.2 3.6 3.6 2.7 Others 0.9 0.8 2.5 0.9 0.9

2Q18 3Q18 4Q18 1Q19 2Q19 OPEX 67.0 102.2 101.3 100.8 117.4

COGS Ratio SG&A Ratio

18 | Investor Relations 2019 – lI. 2Q 2019 Earnings Release III Growth Strategy

1. Media Industry 2. Studio Dragon 2.0 3. Global Roadmap 4. Outlook We Create New Culture II.1 Growth Strategy - Media Industry

Global OTT BIGBANG Maintain competitiveness Expand Presence

20 | Investor Relations 2019 – lII. Growth Strategy We Create New Culture

2 Growth Strategy - Studio Dragon 2.0 ① Production Capability

2.0

Discover new writers Promote Producer·Director ↑

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 2019 – lII. Growth Strategy We Create New Culture

2 Growth Strategy - Studio Dragon 2.0 ② Business Capability

Movie Game Performance

OIMU Bad Guys: < > (One IP Multi Use) Vile City

Remake MD

Asia Memories of What’s Wrong with VR < > < > Secretary Kim the Alhambra

Memories of Emergency < > < > the Alhambra Couple 22 | Investor Relations 2019 – lII. Growth Strategy We Create New Culture II.3 Growth Strategy - Global Roadmap

Distribution

Overseas Domestic Overseas Domestic Domestic Overseas

23 | Investor Relations 2019 – lII. Growth Strategy We Create New Culture 3 Growth Strategy - Global Roadmap (Cont’d)

Step 1 Step 2 Step 3 (~2018) (~2021) (2021~) “International revenue “International revenue proportion 30%” proportion 70%”

Step 2

International Revenue Trend  Increase in  Expanded  Enhanced (Unit: Wbn) selling price countries localization 35.3 29.0 22.6 23.4

110.2 84.8 67.2 44.2

 1H19 48.2%↑  1H19 100 countries↑  1H19 6 countries↑ 2016 2017 2018 1H19 (YoY, Avg. selling price) (Excludes sales overlaps (Co-production, excludes and OTTs) OTT originals) International Revenue International Revenue to Total Revenue

24 | Investor Relations 2019 – lII. Growth Strategy We Create New Culture II.4 2019 Outlook

PRODUCTION INTL. PRODUCTION INTL. GROWTH RATE

31Titles 5 Titles 30%↑

In-house Producers Production Subsidiaries

6

26 110.2 25

2018 2019E 2018 2019E Captive Non-Captive Production Trend International Revenue (Titles) (Wbn)

25 | Investor Relations 2019 – lII. Growth Strategy Investor Relations 2019 APPENDIX

1 Corporate Overview

2 Vision

3 Business Model

4 Financial Statements Summary 1. Financial Position 2. Income Statement

5 3Q 2019 Lineups We Create New Culture I.1 Corporate Overview

Group Structure Shareholder Structure

* Listed companies As of end-2018 * Foreign CJ Corp. ESOP 0.22% Investors 2.85%

39.36% Institutional Investors CJ ENM * 13.19%

71.30% Retail Investors * 9.38% Related Parties 100% 100% 100% 100% 3.06% CJ ENM 71.30%

Share Price Trend

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

Studio Dragon KOSPI KOSDAQ

27 | Investor Relations 2019 – Appendix We Create New Culture I.2 Vision

28 | Investor Relations 2019 – Appendix We Create New Culture I.3 Business Model

29 | Investor Relations 2019 – Appendix We Create New Culture I.4 Financial Statements - Financial Position

(Unit: Wbn) 2Q18 1Q19 2Q19 % QoQ % YoY Total Assets 476.0 514.1 567.8 10.5 19.3 Current Assets 289.1 229.9 247.2 7.5 (14.5) Cash and Cash Equivalents 185.2 131.8 119.8 (9.1) (35.3) Others 103.9 98.1 127.4 29.9 22.7 Non-Current Assets 186.9 284.2 320.6 12.8 71.5 Tangible Assets 1.1 1.3 1.4 8.8 32.3 Intangible Assets 138.4 200.1 235.3 17.6 70.0 Others 47.4 82.8 83.9 1.4 76.9 Total Liabilities 90.5 103.6 150.0 44.8 65.7 Current Liabilities 89.7 99.2 143.8 44.9 60.2 Non-Current Liabilities 0.8 4.4 6.2 42.0 711.2 Shareholders’ Equity 385.5 410.5 417.8 1.8 8.4 Equity Capital 333.6 334.1 334.1 0.0 0.2 Retained Earnings 48.8 76.9 84.2 9.5 72.6 Other Components of Equity 3.1 (0.5) (0.5) 0.0 TTR

Key Financial Ratios Current Ratio (%) 322.2 231.7 171.9 (59.8)%p (150.2)%p

Net Debt (Net Cash) to Equity (%) (48.1) (32.1) (28.7) 3.4%p 19.4%p Cash Ratio (%) 206.4 132.8 83.3 (49.5)%p (123.1)%p

Note (1) K-IFRS consolidated basis (2) Current Ratio = Current Assets / Current Liabilities, Net Debt (Net Cash) to Equity = Net Debt (Net Cash) / Shareholders’ Equity, Cash Ratio = Cash and Cash Equivalents / Current Liabilities (3) TTR (Turn To Red), TTB (Turn To Black), CR (Continue Red), n/a (not available)

30 | Investor Relations 2019 – Appendix We Create New Culture I.4 Financial Statements - Income Statement

(Unit: Wbn) 2Q18 3Q18 4Q18 1Q19 2Q19 % QoQ % YoY 2017 2018 % YoY

Sales Revenue 74.3 123.7 101.7 111.8 128.2 14.7 72.6 286.8 379.6 32.4

Programming 34.1 48.9 54.4 44.1 58.1 31.6 70.5 131.2 178.1 35.7

Distribution 28.8 63.4 37.8 56.2 60.3 7.4 109.2 111.9 162.1 44.9

Others 11.4 11.4 9.5 11.5 9.8 (14.6) (13.6) 43.7 39.4 (9.7)

OPEX 67.0 102.2 101.3 100.8 117.4 16.5 75.4 253.8 339.7 33.8

Cost of Goods Sold 63.7 98.9 95.2 96.8 112.8 16.5 77.2 239.7 324.0 35.2

SG&A 3.3 3.3 6.1 4.0 4.6 16.6 40.2 14.1 15.7 10.7

Operating Profit 7.3 21.5 0.4 11.0 10.8 (2.2) 47.3 33.0 39.9 21.0

Margin (%) 9.9 17.4 0.4 9.9 8.4 (1.5)%p (1.5)%p 11.5 10.5 (1.0)%p

Non-operating Profit 3.7 0.6 1.3 2.2 1.1 (49.6) (70.2) (2.7) 5.7 TTB

Non-operating Income 3.5 0.9 1.6 3.4 3.6 5.5 2.2 1.4 7.0 392.9

Non-Operating Expenses (0.2) 0.3 0.3 1.2 2.5 109.9 expense 4.1 1.3 (68.9)

Pre-tax Profit 11.0 22.1 1.7 13.2 11.9 (10.1) 7.7 30.3 45.6 50.8

Income Taxes 2.1 4.8 (0.0) 4.0 4.6 13.4 110.8 6.4 9.8 52.7

Net Profit 8.9 17.3 1.7 9.2 7.3 (20.4) (17.4) 23.8 35.8 50.3

Margin (%) 12.0 14.0 1.7 8.2 5.7 (2.5)%p (6.2)%p 8.3 9.4 1.1%p

Note (1) K-IFRS consolidated basis (2) TTR (Turn To Red), TTB (Turn To Black), CR (Continue Red), n/a (not available)

31 | Investor Relations 2019 – Appendix We Create New Culture 5 3Q 2019 Lineups

<60 Days, Designated Survivor>

Distributor ∙ tvN ∙ tvN ∙ tvN ∙ tvN ∙ Date (#. of episodes) ∙ Jul. 1~Aug. 20 (16) ∙ Jul. 13~Sept. 01 (16) ∙ Aug. 26~Oct. 15 (16) Jun. 1~Jul. 7, Sept. 7~Sept. 22 (18) ∙ ∙ ∙ ∙ Kim Young-Hyun, Park Sang-Yeon / Writer / Director Kim Tae-Hee / Yoo Jong-Seon Hong Jung-Eun, Hong Mi-Ran / Seol Jun-Suk / Shin Yong-Hwi ∙ ∙ Kim Won-Seok Main Cast Ji Jin-Hee, Heo Joon-Ho, Oh Choong-Hwan Song Seung-Heon, Lee Sun-Bin Kim Gyu-Ri ∙ Lee Ji-Eun, Yeo Jin-Goo ∙ Song Joong-Ki, Jang Dong-Gun, Kim Ji-Won

Distributor ∙ tvN ∙ tvN ∙ SBS ∙ Netflix Original Date (#. of episodes) ∙ Jul. 17~Sept. 5 (16) ∙ Jul. 6~Aug. 25 (16) ∙ Jul. 19~Sept. 7 (16) ∙ Aug. 22 (8) Writer / Director ∙ Jang Hong-Chul / Sung Yong-Il ∙ Han Sang-Wun / Ahn Gil-Ho ∙ Kim Ji-Woon / Jo Soo-Won ∙ Lee Ah-Yeon, Seo Bo-Ra / Main Cast ∙ Yoon Kyun-Sang, Keum Sae-Rok ∙ Han Suk-Kyu, Kim Hyun-Joo, ∙ Ji Sung / Lee Se-Young Lee Na Jeong Seo Kang-Jun ∙ Kim So-Hyun / Jung Ga-Ram

32 | Investor Relations 2019 – Appendix Thank You

Studio Dragon Investor Relations | [email protected] | www.studiodragon.net 이 종목의 더 많은 IR정보 확인하기

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