Investor Relations 2019

Daiwa Investment Conference Hong Kong, November 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 3Q 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 3Q 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% 185People

+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 3Q 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 4,306 22 18 16

1,167 325 464

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 3Q 2019 Earnings Release

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

(1) Programming Distribution Production Revenue Revenue Revenue Trend

W131.2bn w60.8bn w60.0bn 13titles (YoY +6.0%) (YoY +24.4%) (YoY -5.4%) (YoY +5 titles)

Note (1) Each quarter includes all titles in progress 14 | Investor Relations 2019 – lI. 3Q 2019 Earnings Release We Create New Culture 1 1 3Q 2019 Operating Performance

Summary

 3Q19 Revenue (+6.0% YoY) – Hit a record high, driven by diversified business, premium IP, and expanded lineups OP (-49.2% YoY) – Maintained stable fundamentals amid last year’s high-base and BEP of  4Q19 Aim to reinforce influence via titles incl. , , secure a foothold for global businesses

Revenue Operating Profit Net Profit

Unit: Wbn Unit: Wbn Unit: Wbn

17.4% 14.0% 128.2 131.2 123.7 9.8 10.4 9.9% 8.2% 8.8% 11.4 111.8 8.4% 8.3% 101.7 5.7% 11.5 9.5 60.3 60.0 63.4 37.8 56.2 1.7% 0.4% 21.5 17.3 11.5 54.4 58.1 60.8 11.0 10.8 10.9 9.2 48.9 44.1 7.3 0.4 1.7 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19

Programing Distribution Others Operating Income OP Margin Net Income NP Margin

15 | Investor Relations 2019 – lI. 3Q 2019 Earnings Release We Create New Culture 2 3Q 2019 Operating Performance

Programming

 3Q19 Hit a record high (+24.4% YoY) for two consecutive quarters, due to diversified platforms incl. , and expanded lineups  4Q19 Focus on enhancing audience concentration via a tentpole and diversified genres, despite temporary decrease in number of lineups under OCN’s channel strategy

Programming Revenue Production Trend Note (1)

Unit: Wbn Unit: Titles

100.0% 100.0% 100.0% 60.8 58.1 90.9% 54.4 3.7 10.4 76.9% 48.9 0.6 0.2 44.1 0.2

53.8 54.4 48.7 50.4 43.9 13 11 12 11 8

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

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

Distribution

 3Q19 Posted solid revenue, driven by continued market influence through large-scaled IPs incl. , and the first Netflix original drama  4Q19 Enlarge competitive edge via diversified regional sales and enhanced sales efficiency based on strong brand recognition

Distribution Revenue No. of Library Sales

Unit: Wbn Unit: Titles

※ Note(1) 0.61bn 0.35bn 0.45bn 0.44bn 0.41bn 148 136 22 63.4 126 60.3 60.0 14 56.2 5 108 104

37.8 17 25 46.2 42.2 43.9 42.6 121 122 126 24.8 87 83 18.1 17.2 13.0 13.6 16.1

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

Domestic International Old Titles New Titles Note (1) Average distribution revenue per title (distribution revenue / number of library sales) 17 | Investor Relations 2019 – lI. 3Q 2019 Earnings Release We Create New Culture 4 3Q 2019 Operating Performance

Cost

 3Q19 OPEX W120.3bn (+17.6% YoY) : COGS Ratio 88.3% (+8.4%p YoY), SG&A Ratio 3.3% (+0.6%p YoY)

 4Q19 Continue pre-emptive investment to strengthen drama quality, aim to stabilize cost efficiency

COGS and SG&A Ratio OPEX

Unit : % Unit: Wbn

93.6 3Q18 4Q18 1Q19 2Q19 3Q19 88.0 88.3 86.6 COGS 98.9 95.2 96.8 112.8 115.9

79.9 Labor Costs 1.8 2.8 1.9 2.4 2.3

Dep. & Amort. 0.1 0.1 0.3 0.3 0.4 5.9 Commissions 0.5 0.7 0.9 0.8 0.8

3.6 3.6 3.3 Marketing 0.1 0.0 0.0 0.2 0.0 2.7 Others 0.8 2.5 0.9 0.9 0.8

3Q18 4Q18 1Q19 2Q19 3Q19 OPEX 102.2 101.3 100.8 117.4 120.3

COGS Ratio SG&A Ratio

18 | Investor Relations 2019 – lI. 3Q 2019 Earnings Release III Growth Strategy

1. Media Industry 2. Production & Business Capability 3. Global 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 - ① Production Capability

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 - 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 - G.L.O.B.A.L

Growth drivers – “G.L.O.B.A.L”, Sizable top-line and profit expansion G L O B A L Growth Localization Original Build Accelerate Long-tail

overseas U.S./Asia original core OTT competition revenue co-planning Dragon U.S. drama capabilities digital expansion proportion co-production

50% + new + 2020 Memories of < > new the Alhambra

23 | Investor Relations 2019 – lII. Growth Strategy We Create New Culture II.3 Growth Strategy - Global Roadmap

Distribution

Overseas Domestic Overseas Domestic Domestic Overseas

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 4Q 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 19.9 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) 3Q18 2Q19 3Q19 % QoQ % YoY Total Assets 491.2 567.8 585.4 3.1 19.2 Current Assets 256.9 247.2 259.0 4.8 0.8 Cash and Cash Equivalents 162.8 119.8 103.5 (13.6) (36.4) Others 94.0 127.5 155.5 22.0 65.4 Non-Current Assets 234.3 320.6 326.4 1.8 39.3 Tangible Assets 1.1 1.4 1.3 (5.2) 24.9 Intangible Assets 171.9 235.3 230.0 (2.2) 33.8 Others 61.3 83.9 95.1 13.3 55.0 Total Liabilities 91.0 150.0 154.8 3.3 70.2 Current Liabilities 84.7 143.8 146.3 1.8 72.8 Non-Current Liabilities 6.3 6.2 8.5 38.0 35.7 Shareholders’ Equity 400.2 417.8 430.6 3.0 7.6 Equity Capital 333.6 334.1 335.7 0.5 0.6 Retained Earnings 66.1 84.2 95.7 13.7 44.8 Other Components of Equity 0.5 (0.5) (0.8) CR TTR

Key Financial Ratios Current Ratio (%) 303.3 171.9 177.0 5.1%p (126.3)%p

Net Debt (Net Cash) to Equity (%) (40.7) (28.7) (24.0) 4.7%p 16.7%p Cash Ratio (%) 192.3 83.3 70.7 (12.6)%p (121.6)%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) 3Q18 4Q18 1Q19 2Q19 3Q19 % QoQ % YoY 2017 2018 % YoY

Sales Revenue 123.7 101.7 111.8 128.2 131.2 2.3 6.0 286.8 379.6 32.4

Programming 48.9 54.4 44.1 58.1 60.8 4.7 24.4 131.2 178.1 35.7

Distribution 63.4 37.8 56.2 60.3 60.0 (0.6) (5.4) 111.9 162.1 44.9

Others 11.4 9.5 11.5 9.8 10.4 5.3 (9.5) 43.7 39.4 (9.7)

OPEX 102.2 101.3 100.8 117.4 120.3 2.4 17.6 253.8 339.7 33.8

Cost of Goods Sold 98.9 95.2 96.8 112.8 115.9 2.7 17.1 239.7 324.0 35.2

SG&A 3.3 6.1 4.0 4.6 4.4 (5.6) 31.0 14.1 15.7 10.7

Operating Profit 21.5 0.4 11.0 10.8 10.9 1.2 (49.2) 33.0 39.9 21.0

Margin (%) 17.4 0.4 9.9 8.4 8.3 (0.1)%p (9.1)%p 11.5 10.5 (1.0)%p

Non-operating Profit 0.6 1.3 2.2 1.1 2.2 96.6 281.9 (2.7) 5.7 TTB

Non-operating Income 0.9 1.6 3.4 3.6 4.8 34.7 434.0 1.4 7.0 392.9

Non-Operating Expenses 0.3 0.3 1.2 2.5 2.6 6.5 701.9 4.1 1.3 (68.9)

Pre-tax Profit 22.1 1.7 13.2 11.9 13.1 10.1 (40.6) 30.3 45.6 50.8

Income Taxes 4.8 (0.0) 4.0 4.6 1.6 (65.7) (66.7) 6.4 9.8 52.7

Net Profit 17.3 1.7 9.2 7.3 11.5 57.1 (33.5) 23.8 35.8 50.3

Margin (%) 14.0 1.7 8.2 5.7 8.8 3.1%p (5.2)%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 4Q 2019 Lineups

Distributor ∙ tvN ∙ tvN ∙ tvN ∙ tvN ∙ Date (#. of episodes) ∙ Sept. 25~Nov. 14 (16) ∙ Sept. 28~Nov. 17 (16) ∙ Oct. 21~Dec. 10 (16) Nov. 20~Jan. 9 (16) ∙ ∙ ∙ ∙ Ryu Yong-Jae / Lee Jong-Jae Writer / Director Park Jung-Hwa, Kim Myo-Jin / Baek Mi-Kyung / Shin Woo-Chul So Won, Lee Young-Joo / ∙ ∙ Yoon Shi-Yoon / Jung In-Sun Main Cast Han Dong-Hwa Jee Chang-Uk, Won Jin-Ah Shin Yoon-Sub ∙ Lee Hye-Ri, Kim Sang-Kyung ∙ Moon Geun-Young, Kim Sun-Ho

<2019 Drama Stage>

Distributor ∙ tvN ∙ OCN ∙ OCN ∙ tvN Date (#. of episodes) ∙ Dec. ~ (16) ∙ Sept. 18~Nov. 7 (16) ∙ Oct. 12~Dec. 1 (16) ∙ Dec. 1~ Feb. 2 (10) Writer / Director ∙ Jang Hong-Chul / Sung Yong-Il ∙ Baek Jung-Chul / Kim Yong-Soo ∙ Jun Young-Shin, Won You-Jung / ∙ O’PEN-winning dramas Main Cast ∙ Yoon Kyun-Sang, Keum Sae-Rok ∙ Lee Yo-Won, Choi Gwi-Hwa Lee Yoon-Jung ∙ program.tving.com/tvn/dramastage2019 ∙ Lee Min-Ki, Lee You-Young

32 | Investor Relations 2019 – Appendix Thank You

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