NCsoft Earnings Release Q4, 2007 February 13, 2008 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
Table of Contents 01. Disclaimer 02. Consolidated Company 03. Earnings Highlights 04. Game Launch Schedule 05. Guidance 06. User Statistics 07. Appendix Parent Earnings 01 08 09 11 14
Disclaimer Disclaimer The financial results for Q4 of 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.
Consolidated Company The consolidated company NCsoft (Controlling Company) Consolidated Subsidiaries Equity Method Affiliates NC Interactive (100%) Orion Soft (100%) ArenaNet (100%) J Interactive (100%) NC Europe (100%) NCRC (100%) NC Japan (60%) NCsoft Japan (100%) NC Taiwan (85%) NC China (100%) NC True(49%)
Earnings Highlights Consolidated Sales & Profit Quarterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 YoY(%) Net Sales 89,069 80,050 11% 90,221-1% 329,716 338,679-3% - Online Game Sales 85,803 75,548 14% 85,463 0% 314,415 316,923-1% - Royalties 3,266 4,502-27% 4,758-31% 15,301 21,756-30% Expenses 76,990 70,315 9% 74,806 3% 280,232 295,401-5% Operating Profit 12,078 9,735 24% 15,415-22% 49,484 43,278 14% (%) 14% 12% 17% 15% 13% Pre-tax Profit 14,057 13,702 3% 17,652-20% 62,103 50,016 24% (%) 16% 17% 20% 19% 15% Net Income 10,289 10,075 2% 18,650-45% 45,047 38,052 18% (%) 12% 13% 21% 14% 11% 1) NC Taiwan has been consolidated beginning 1Q07. Royalties in FY 06 include royalties from NC Taiwan (6.3 billion Won). 1/19
Earnings Highlights Online Game Sales Mix by Games * NC Taiwan has been consolidated beginning 1Q07. 1) Royalties in FY 06 include royalties from NC Taiwan (6.3 billion Won). Quarterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 YoY(%) Korea 55,815 47,760 17% 53,459 4% 205,775 215,161-4% - Game Sales 52,645 43,403 21% 48,826 8% 190,899 193,880-2% - Royalties 3,170 4,357-27% 4,633-32% 14,876 21,281-30% North America 15,129 13,662 11% 18,008-16% 54,606 60,869-10% Europe 7,181 8,181-12% 10,776-33% 27,647 30,065-8% Japan 8,461 7,798 9% 7,978 6% 31,990 32,584-2% Taiwan 2,483 2,649-6% - New 9,698 - New Total 89,069 80,050 11% 90,221-1% 329,716 338,679-3% 4Q 07 QoQ 3Q 07 4Q 07 YoY 4Q 06 Taiwan Japan3% 9% Europe 8% North America 17% Royalties 4% Korea 59% Japan 10% Europe 10% Taiwan 3% North America 17% Royalties 5% Korea 55% Taiwan Japan 3% 9% Europe 8% North America 17% Royalties 4% Korea 59% Japan 9% Europe 12% North America 20% Royalties 5% Korea 54% 2/19
Earnings Highlights Online Game Sales Mix by Games Quarterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 YoY(%) Lineage 31,839 23,651 35% 29,988 6% 111,401 118,049-6% Lineage II 33,836 32,424 4% 30,581 11% 131,154 119,206 10% CoH / CoV 5,401 5,721-6% 5,532-2% 23,446 25,016-6% Guild Wars 9,240 13,012-29% 18,635-50% 42,058 52,600-20% Tabula Rasa 5,019 - New - New 5,019 - New Others 468 740-37% 727-36% 1,337 2052-35% Total 85,803 75,548 14% 85,463 0% 314,415 316,923-1% QoQ YoY 4Q 07 3Q 07 4Q 07 4Q 06 Tabula Rasa Guild6% Wars Others 1% 11% Lineage COH/V 37% 6% Lineage II 39% Guild Wars 17% Other 1% COH/V 8% Lineage II 43% Lineage 31% Tabula Rasa Guild6% Wars Others 1% 11% Lineage COH/V 37% 6% Lineage II 39% Guild Wars 22% Other 1% COH/V 6% Lineage II 36% Lineage 35% 3/19
Earnings Highlights Royalties Breakdown Quaterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 YoY(%) Lineage 2,936 3,900-25% 2,922 0% 13,280 12,870 3% Taiwan 2,828 3,758-25% 2,810 1% 12,775 12,430 3% China 96 127-24% 92 4% 448 357 25% H.K 12 15-20% 20-40% 57 83-31% Lineage II 234 448-48% 1,634-86% 1,570 8,207-81% Taiwan - - - 1,170-100% - 6,123-100% China 152 158-4% 154-1% 609 806-24% Thailand 82 290-72% 310-74% 961 1,278-25% Guild Wars - - - 65-100% - 148-100% Taiwan - - - 65-100% - 148-100% Others 96 154-38% 137-30% 451 531-15% * Royalty Total 3,266 4,502-27% 4,758-31% 15,301 21,756-30% Other royalties consist of non-game royalties, such as royalties for character and goods guidebooks, from Korea and Japan. 4/19
Earnings Highlights Consolidated Cost Structure (COGS + SG&A) (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) % of total sales % of total cost FY '07 FY '06 YOY(%) Payroll 35,191 33,822 4% 40% 46% 138,448 130,854 6% Sales Variable Costs 9,708 7,566 28% 11% 13% 33,222 38,269-13% - Royalties 638 930-31% 1% 1% 3,650 4,609-21% - Payment processing fees 2,726 3,750-27% 3% 4% 11,544 9,917 16% - Sales commissions 1,402 1,344 4% 2% 2% 5,896 8,585-31% - Box production costs 3,945 323 1121% 4% 5% 8,142 9,470-14% - Other sales variables 997 1,219-18% 1% 1% 3,990 5,688-30% Advertising 5,504 6,532-16% 6% 7% 16,677 20,921-20% Depreciation & Amortization 6,290 4,917 28% 7% 8% 20,551 24,678-17% - Depreciation 4,151 3,654 14% 5% 5% 14,588 19,687-26% - Amortization 2,139 1,263 69% 2% 3% 5,963 4,991 19% Others (*) 20,297 17,478 16% 23% 26% 71,334 80,679-12% Total : 76,990 70,315 9% 86% 100% 280,232 295,401-5% (*) 4Q 07: Bandwidth cost (1,351), Rent(3,847), Wage for outsourced staff(1,774), outsourced R&D(1,014), etc. 5/19
Earnings Highlights Quarterly Sales by Equity-Method Affiliates Quaterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) FY '07 FY '06 YoY(%) NC China 915 1,430-36% 3,930 3,343 18% (RMB Mn 7.4) (RMB Mn 11.7) (RMB Mn 32.2) (RMB Mn 27.9) NC True 355 458-22% 1,698 2,203-23% (Baht Mn 11.9) (Baht Mn 15.5) (Baht Mn 58.9) (Baht Mn 87.4) Total 1,270 1,888-33% 5,628 5,546 1% 6/19
Earnings Highlights Equity Method Gain or Loss Breakdown (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) FY '07 FY '06 YoY(%) Korea (522) (273) Loss continued (1,297) (302) Loss continued Orion Soft 23 (13) Turn to black (148) (114) Loss continued J Interactive (127) (263) Loss continued (734) (188) Loss continued Next Play (418) 3 Turn to red (415) - New Overseas 254 22 1055% (987) (3,655) Loss continued NC Taiwan(*) - - - - (809) - NC China 32 (16) Turn to black (823) (1,263) Loss continued NC True 17 (3) Turn to black (241) (945) Loss continued NCRC (82) (5) Loss continued 41 (89) Turn to black NCsoft Japan 287 46 524% 36 (549) Turn to black Total (268) (251) Loss continued (2,284) (3,957) Loss continued * NC Taiwan has been consolidated beginning 1Q07. 7/19
Game Official Launch Schedule ( 08) 1st Half, 2008 2nd Half, 2008 Aion Point Blank FPS Korea Punch Monster a side-scrolling RPG Dragonica a side-scrolling RPG Love Beat Rhythm & Dance North America /Europe Guild Wars 2 -beta test Aion Japan Aion, Tabula Rasa China /Taiwan Aion 8/19
Earnings Guidance (Unit : W Mn) FY 08 Financial Forecast 2008 Estimation (I) YoY(%) 2008 Estimation (II) YoY(%) 2007 Sales 350,000 6% 380,000 15% 329,716 - Online Game Sales 335,000 7% 365,000 16% 314,415 Lineage 106,000-5% 106,000-5% 111,401 Lineage II 138,000 5% 138,000 5% 131,154 CoH / CoV 22,000-6% 22,000-6% 23,446 Guild Wars 29,000-31% 29,000-31% 42,058 Tabula Rasa 15,000 199% 15,000 199% 5,019 Others 25,000 1770% 55,000 4014% 1,337 - Royalty Sales 15,000-2% 15,000-2% 15,301 Expenses 293,000 5% 314,000 12% 280,232 Operating Profit 57,000 15% 66,000 33% 49,484 (%) 16% 17% 15% Pre-tax Profit 67,000 8% 77,000 24% 62,103 (%) 19% 20% 19% 9/19
Earnings Highlights Consolidated Balance Sheet (Unit : W Mn) 2007 2006 Change Asset 547,183 506,490 40,693 Current Asset 368,908 373,405-4,497 (Cash & cash equivalents) 51,009 49,369 1,640 (Short term investments) 240,577 250,849-10,272 (Accounts Receivables) 39,744 39,195 549 Fixed Asset 178,275 133,085 45,190 (Investment) 10,004 40,745-30,741 (PPE) 124,811 84,599 40,212 Liability 98,283 85,221 13,062 Current Liability 91,311 79,752 11,559 Fixed Liability 6,972 5,469 1,503 (Debt) - - - Shareholder's Equity 448,900 421,269 27,631 (Paid in Capital) 10,237 10,194 43 10/19
User Statistics Operating Metrics (Lineage) Korea As of December 2007 Servers 43 43 43 43 45 45 45 45 45 Highest concurrent users 187,786 161,038 144,109 138,733 144,430 149,034 120,012 134,596 138,469 Monthly access 1,627,159 788,180 746,291 716,772 775,579 733,593 583,426 590,542 619,065 Personal accounts 309,452 299,313 262,019 266,564 302,469 287,058 224,664 218,650 255,818 Taiwan Servers 38 39 40 40 40 40 40 40 42 Highest concurrent users 134,462 157,365 159,309 168,218 177,571 193,119 192,546 158,386 146,897 Monthly access 472,156 470,855 434,623 445,636 423,212 428,845 417,365 386,601 281,625 Japan Servers 6 6 6 6 6 6 6 6 6 Highest concurrent users 14,534 12,448 12,836 12,643 10,599 12,016 10,339 9,322 9,899 Monthly access 74,671 76,027 69,641 76,191 80,019 79,252 48,083 56,430 57,187 China Servers 10 10 11 11 11 11 11 11 8 Highest concurrent users 14,149 18,376 20,399 17,246 19,551 20,705 25,354 18,414 16,740 Monthly access 110,182 152,466 139,669 107,644 117,407 126,479 132,758 103,127 91,886 U.S Servers 3 3 3 3 3 3 3 3 3 Highest concurrent users 2,200 2,224 2,311 2,780 3,732 3,205 3,077 2,299 1,862 Monthly access 9,059 9,759 9,685 9,727 11,953 9,202 9,093 6,999 6,414 * 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
User Statistics Operating Metrics (Lineage II) Korea As of December 2007 Servers 33 33 33 33 33 33 31 32 33 Highest concurrent users 119,345 116,897 110,183 97,558 113,369 123,332 124,566 136,017 137,285 Monthly access 730,837 531,701 508,041 499,894 482,173 460,974 440,509 478,555 445,096 Personal account 174,170 179,298 174,582 165,558 187,005 192,165 187,570 201,142 207,334 Taiwan Servers 22 22 22 22 22 22 22 20 20 Highest concurrent users 71,301 78,550 72,713 66,497 55,571 46,768 50,950 47,063 45,906 Monthly access 198,795 205,661 171,408 160,316 123,006 112,244 111,263 110,261 116,080 Japan Servers 10 11 11 12 12 12 12 12 12 Highest concurrent users 40,088 44,631 48,843 50,188 52,684 49,268 49,693 48,736 54,475 Monthly access 105,097 111,046 111,569 112,670 113,774 116,239 109,249 109,242 123,703 China Servers 22 23 15 17 15 15 12 13 7 Highest concurrent users 43,026 37,806 18,438 18,085 16,888 15,238 16,594 15,946 19,897 Monthly access 354,395 299,675 212,173 204,269 180,584 183,049 126,878 128,248 198,662 U.S & Europe Servers 9 9 9 10 10 10 10 10 10 Highest concurrent users 28,309 32,767 32,099 42,287 32,732 32,767 31,465 30,867 29,055 Monthly access 76,435 89,337 83,221 94,000 105,039 87,652 84,720 78,953 79,986 Thailand Servers 8 4 5 5 5 5 6 6 5 Highest concurrent users 10,202 11,000 7,941 7,616 6,596 5,903 7,232 6,259 5,010 Monthly access 59,938 64,920 52,516 45,778 31,727 30,416 31,637 26,004 43,029 11/18
User Statistics Operating Metrics (City of Heroes/Villains) U.S & Europe As of December 2007 Servers 15 15 15 15 15 15 15 15 15 Highest concurrent users 23,730 23,699 22,274 21,500 17,728 14,767 26,669 15,910 17,058 Monthly access 194,000 171,951 171,000 172,420 154,953 143,127 153,331 139,313 136,250 Operating Metrics (Guild Wars) US & Europe As of December 2007 # of Accounts activated to date 1,270,000 1,490,000 2,080,000 2,447,000 3,122,000 3,555,000 3,917,000 4,500,000 4,878,000 12/18
Appendix Parent Earnings Sales & Profit Quarterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 YoY(%) Sales 61,452 51,474 19% 57,686 7% 222,556 227,456-2% - Korea 52,752 43,403 22% 48,826 8% 191,006 193,880-1% - Royalty 8,700 8,071 8% 8,860-2% 31,550 33,576-6% Expenses 46,418 43,329 7% 46,235 0% 175,674 175,610 0% Operating Profit 15,034 8,146 85% 11,451 31% 46,881 51,846-10% (%) 24% 16% 20% 21% 23% Pre-tax Profit 14,424 12,220 18% 18,969-24% 58,328 47,266 23% (%) 23% 0% 33% 26% 21% Net Income 10,289 10,075 2% 18,650-45% 45,047 38,052 18% (%) 17% 20% 32% 20% 17% 14/19
Appendix Parent Earnings Sales Breakdown - Korea Quarterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 Lineage 30,540 22,254 37% 28,128 9% 105,398 110,721 PC Café 4,175 4,182 0% 5,682-27% 18,283 22,218 Personal 26,365 18,072 46% 22,446 17% 87,115 88,503 Lineage II 21,984 20,984 5% 20,611 7% 84,969 82,558 PC Café 5,261 5,359-2% 6,179-15% 21,697 25,682 Personal 16,723 15,625 7% 14,432 16% 63,272 56,876 Others 228 165 38% 87 162% 639 601 Total 52,752 43,403 22% 48,826 8% 191,006 193,880 15/19
Appendix Parent Earnings Royalties Breakdown Quaterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) 4Q 06 YoY(%) FY '07 FY '06 Lineage 3,364 4,258-21% 3,494-4% 14,838 14,762 Taiwan 2,828 3,758-25% 2,810 1% 12,775 12,430 Japan 364 279 30% 421-14% 1,203 1,484 China 96 127-24% 92 4% 448 357 U.S 64 79-19% 151-58% 355 408 H.K 12 15-20% 20-40% 57 83 Lineage II 3,946 3,699 7% 5,197-24% 14,975 18,370 Taiwan 983 1,077-9% 1,170-16% 3,908 6,122 Japan 2,001 1,532 31% 2,497-20% 6,594 6,843 China 152 158-4% 154-1% 609 806 U.S / Europe 728 642 13% 1,066-32% 2,903 3,321 Thailand 82 290-72% 310-74% 961 1,278 Guild Wars 113 105 8% 158-28% 433 387 Taiwan 34 36-6% 65-48% 156 148 Japan 79 69 14% 93-15% 277 239 Tabula Rasa 1,276 - New - New 1,276 - Others 1 9-89% 11-91% 28 57 Royalty Total 8,700 8,071 8% 8,860-2% 31,550 33,576 16/19
Appendix Parent Earnings Cost Structure (COGS + SG&A) Quarterly (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) % of total Sales % of total Cost Annual FY '07 FY '06 YoY(%) Payroll 22,962 24,613-7% 37% 49% 98,439 95,332 3% Sales Variable Costs 4,091 3,329 23% 7% 9% 15,272 22,297-32% - Royalties 67 42 60% 0% 0% 211 234-10% - Payment processing fees 1,998 1,559 28% 3% 4% 6,930 9,917-30% - Sales commissions 1,402 1,344 4% 2% 3% 5,896 8,585-31% - Other sales variables 624 384 63% 1% 1% 2,235 3,561-37% Advertising 4,147 3,190 30% 7% 9% 10,377 12,116-14% Depreciation & Amortization 2,737 2,346 17% 4% 6% 9,264 11,920-22% - Depreciation 2,356 2,157 9% 4% 5% 8,328 11,153-25% - Amortization 381 189 102% 1% 1% 936 767 22% Others (*) 12,481 9,851 27% 20% 27% 42,322 33,945 25% Total : 46,418 43,329 7% 76% 100% 175,674 175,610 0% 17/19
Appendix Parent Earnings Quarterly Sales by Subs. & JVs Quaterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) FY '07 FY '06 YoY(%) NC Interactive 15,435 13,746 12% 55,562 62,013-10% ($Mn 16.7) ($Mn 14.8) ($Mn 59.8) ($Mn 64.9) ArenaNet 3,130 3,213-3% 12,020 12,708-5% ($Mn 3.4) ($Mn 3.5) ($Mn 12.9) ($Mn 13.3) NC Japan 8,468 7,798 9% 31,997 32,585-2% (JPY Mn 1,040) (JPY Mn 990) (JPY Mn 4,051.6) (JPY Mn 3967.5) NC Taiwan 2,521 2,649-5% 9,736 15,144-36% (TW Mn 88.8) (TW Mn 93.9) (TW Mn 344.1) (TW Mn 515.1) NC Europe 7,040 8,181-14% 27,506 30,081-9% ( Mn 3.7) ( Mn 4.4) ( Mn 14.8) ( Mn 17.1) NC China 915 1,430-36% 3,930 3,343 18% (RMB Mn 7.4) (RMB Mn 11.7) (RMB Mn 32.2) (RMB Mn 27.9) NC True 355 458-22% 1,698 2,203-23% (Baht Mn 11.9) (Baht Mn 15.5) (Baht Mn 58.9) (Baht Mn 87.4) Total 37,864 37,475 1% 142,449 158,077-10% 18/19
Appendix Parent Earnings Equity Method Gain or Loss Breakdown Quaterly Annual (Unit : W Mn) 4Q 07 3Q 07 QoQ(%) FY '07 FY '06 YoY(%) Korea (522) (273) Loss continued (1,297) (302) Loss continued Orion Soft 23 (13) Turn to black (148) (114) Loss continued J Interactive (127) (263) Loss continued (734) (188) Loss continued Next Play (418) 3 Turn to red (415) - New Overseas (1,507) 696 Turn to red (416) (15,304) Loss continued NC Interactive 1,519 735 107% 7,509 (7,525) Turn to black NC Japan (422) 730 Turn to red 1,512 1,116 35% ArenaNet (1,950) (1,459) Loss continued (6,806) (5,854) Loss continued NC China 32 (16) Turn to black (823) (1,263) Loss continued NC Taiwan (309) 88 Turn to red (1,588) (809) Loss continued NC Europe (599) 580 Turn to red (56) 614 Turn to red NC True 17 (3) Turn to black (241) (945) Loss continued NCRC (82) (5) Loss continued 41 (89) Turn to black NCsoft Japan 287 46 524% 36 (549) Turn to black Total (2,029) 423 Turn to red (1,713) (15,606) Loss continued 19/19