Disclaimer This presentation and the accompanying slides (the Presentation ) which have been prepared by IGG INC (the Company ) do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or be relied on in connection with any contract or binding commitment whatsoever. This Presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied, whatsoever, on the truth, accuracy, completeness, fairness and reasonableness of the contents of this Presentation. This Presentation may not be all-inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of or any omission from this Presentation is expressly excluded. Certain matters discussed in this presentation may contain statements regarding the Company s market opportunity and business prospects that are individually and collectively forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and assumptions that are difficult to predict. The Company s actual results, levels of activity, performance or achievements could differ materially and adversely from results expressed in or implied by this Presentation, including, amongst others: whether the Company can successfully penetrate new markets and the degree to which the Company gains traction in these new markets; the sustainability of recent growth rates; the anticipation of the growth of certain market segments; the positioning of the Company s products and services in those segments; the competitive environment; and general market conditions. The Company is not responsible for any forward-looking statements and projections made by third parties included in this Presentation. 1
Agenda Company Overview 2014 Annual Financial Results Business Review and Prospects 2
Company Profile IGG Group, global leading mobile gaming developer and operator 2014 As of year-end, the Group has been operating about 20 games, 75% of which were developed in-house; Revenue from mobile games accounted for 90% of the total revenue in Q4; The user community of the Group consisted of over 210m user accounts from more than 200 countries and regions, including a total MAU of over 20m; 2013 IGG went public on 18 Oct., 2013. Stock code: 8002.HK. 10-12 Completed two successful transitions from client-based game to browser game and from browser game to mobile game. 2008 Received VC funding from IDG, Vertex and Hearst 2006 The group was founded 3
Global Branches Well-organized corporate structure and explicit functional division enables the Group to carrying out its global strategy from a macro perspective. Singapore Group headquarters; Self-owned ad. platform; Localized R&D and operation USA Marketing and operation China R&D; Management New Canada Localized R&D New Japan Localized R&D and operation New Thailand Localized operation New Korea Localized R&D and operation Philippines Customer service center 4
Global Ranking As a game developer as well as a publisher, IGG is able to combine game features with market characteristics and therefore to successfully grab market shares in different regions around the world. Ranked top 3 in 17 countries and regions No. 17 14Q3 No. 9 14Q4 Ranked top 5 in 34 countries and regions 48 個國家排名前 10 Ranked top 10 in 48 countries and regions IGG ranked nine among global publishers, and was among the top three in 17 countries and regions including the United States and Russia, in terms of 14Q4 gross billing; Data from Distimo.com, via Google Play. 5
Major Self-developed and Licensed Games The Group has diversified mobile game genres, including strategy, card, RPG, casino etc., most of which are mid-core. 1.8 Hard-core 1.6 1.4 1.2 1 Mid-core 0.8 0.6 0.4 0.2 Casual 0 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 Dec. 2011 June 2013 Dec. 2013 June 2014 Dec. 2014 4 6
Agenda Company Overview 2014 Annual Financial Results Business Review and Prospects 7
2014 Financial Highlights 2013 2014 Change 13Q4 14Q4 Change Revenue USD million 88.0 204.6 133% 36.7 60.5 65% Gross profit USD million 65.7 145.8 122% 27.0 42.3 57% Gross profit margin % 75% 71% -4ppt 74% 70% -4ppt Adjusted net income* USD million 22.1 68.6 210% 9.7 15.9 64% Adjusted net income margin* Profit attributed to owners of the parent Profit Margin for the period Weighted average number of ordinary shares Basic earnings per share for the year % 25% 34% +9ppt 26% 26% - USD million 7.0 66.4 849% 9.6 15.3 59% % 8% 32% +24ppt 26% 25% -1ppt Shares million 896 1360-1332 1364 - USD cents 0.78 4.88-0.72 1.12 - * Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares. 8
2014 Revenue Growth (USD million) 133% 204.6 The increase was primarily due to: The continued steady growth of our hit title Castle Clash launched in July 2013; the 14Q4 gross billing of CC was about USD36 million worldwide; 88.0 2013 2014 An increase in revenue generated from the mobile game series Clash of Lords, gross billing from this game series (I & II) was over US$10.0 million in 14Q4. 9
2014 Quarterly Revenue Growth 70 60 (USD million) $ 60.5 50 40 30 20 10 $ 44.1 $ 47.8 from 14Q1 to 14Q4 The compound growth rate of total revenue achieved 11.1% $ 52.2 14Q4 vs. 14Q3 Quarterly revenue growth 16.0% 0 14 Q1 14 Q2 14 Q3 14 Q4 10
2014 Revenue Breakdown by Segment In light of the rich R&D resources and operating experiences the Group has, self-operating business will go on to contribute significantly to the Group s revenue while collaborating and co-operating with certain superior third-party platforms is a good supplementary. Others* 1% Joint operation 4% Self-operated games: refers to the games, both in-house developed and licensed from third parties, solely operated by the Group; the revenue recognized from this segment is approximately equal to the game players payment. Self-operated games 95% Joint operation: refers to the games we jointly operated with thirdparty operators (such as Tencent); we are responsible for providing technical support, game update etc. and has been given access to the joint operators platform to monitor sales activities; the revenue is recognized on a net basis, namely the portion we are entitled of according to the revenuesharing agreement. * Others refers to the revenue from the Group s Advertising and Marketing center. 11
2014 Revenue Breakdown by Game The Group s R&D resources has been allocated to mobile games and mobile related software; Strategically, the original browser and client-based game business will be maintained without expansion. Client-based Games 2% Browser Games 12% 14FY Others* 1% Client-based Games 2% Browser Games 7% 14Q4 Others* 1% Mobile Games 85% Mobile Games 90% * Others refers to the revenue from the Group s Advertising and Marketing center. 12
2014 Revenue Breakdown by Game Title The revenue percentage of the top 6 games declines while the total revenue is growing, which implies a more diversified revenue stream of the Group 14FY 14Q4 Game title % of total revenue Game title % of total revenue Castle Clash* 62% Castle Clash* 58% Clash of Lords(I&II) 12% Clash of Lords(I&II) 17% Texas Poker Deluxe* 5% Texas Poker Deluxe* 4% Galaxy Online II* 5% Brave Trials (licensed) 3% Wings of Destiny 4% Wings of Destiny 2% Slot Machine* 3% Galaxy Online II* 2% Total 91% Total 86% *Including the revenue from its mobile and browser versions. 13
2014 Revenue Breakdown by Region The Group s revenue comes from over 200 countries and regions, which dilutes the impact from the revenue and exchange rate fluctuation of certain regions. by country % of total revenue by country % of total revenue Germany 8% Russia 7% France 5% Great Britain 4% Europe 28% Australia 3% Other 5% Asia 29% by country/region % of total revenue Taiwan 3% Singapore 2% Koera 2% by country % of total revenue U.S. 33% North America 38% Canada 4% 14
2014 Expenses Breakdown-14FY vs 13FY 13FY 14FY Gross profit margin 75% 71% Selling & distribution exp./ Revenue 26% 21% Administrative exp./ Revenue 12% 8% R&D costs/revenue 11% 8% Adjusted net income margin * 25% 34% Channel cost is the major constituent of cost of sales, the channel cost of our mobile game business (i.e. on Google Play and Apple Store) is approximately 30%, which is higher than that of browser and client-based games; The revenue percentage of mobile games increased to 85% in 2014 from 50% in 2013. Impacted by launching of new games and other related reasons, selling & distribution exp. is subject to fluctuation in the short run; In the mid-to-long run, the selling & distribution exp. percentage of revenue is expected to be less than 25%. With the total revenue doubled YoY, the admin. and R&D exp. percentage of revenue both declined significantly. * Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares. 15
2014 Expenses Breakdown-14H2 vs 14H1 14H1 14H2 Gross profit margin 72% 70% Selling & distribution exp./ Revenue 21% 21% Other than channel cost, server related exp. and labor cost of direct operating staff are also recognized in cost of sales; The revenue percentage of mobile game further increased in 14H2 and reached 90% in 14Q4; The slightly increase in both R&D cost and admin. expense percentages of revenue was mainly due to (1) staff expansion in North America; (2) increase of R&D outsourcing in Asia, (3) increased bonus for employees. Administrative exp./ Revenue R&D costs/revenue Adjusted net income margin * 7% 9% 7% 9% 37% 31% There exists about one month time-lag between the paying of players (in local currencies) and the revenue recognition of the Group with the platform (in USD). The substantial depreciation of Rouble in 14Q4 negatively impacted the Group s revenue generated from Russian area; Despite that the resulting currency exchange lose is not recognized in the income statement, the decrease of total revenue adversely impacted the Group s profit margin when cost remain unchanged. * Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares. 16
Net Cash and Capex USD million Cash & cash equivalents 127 Time deposit over three months 54 - Short-term borrowings 0 USD million PP&E such as servers and computer equipment + Intangible assets such as software and trademark 2.33 1.47 Net cash USD181 m Capex USD3.80 m Healthy cash position and low capex business nature set the stage for potential M&As over the next few years 17
Tax Rate IGG Singapore 17% The prevailing corporate tax rate The Preferential corporate tax rate 5% More than 99% of our total revenue was recognized through IGG Singapore in 2014, and this percentage is expected to be stable in the foreseeable future; From 2010-2016, IGG Singapore is entitled to a preferential tax rate of 5%, subject to meeting certain conditions. 18
Dividend Dividend Type Payment Date Total amount Share numbers* Dividend per share (USD million) (million) (HK cents) 2014 interim dividend (the second) April 15, 2015 10.0 1370 5.7 2014 special dividend April 15, 2015 20.0 1370 11.3 The outstanding ordinary share numbers as at the end of the corresponding report period. The total amount of 2014 interim dividend (the second) accounted for about 30% of the Group s 14H2 net profit; Given the past excellent results and affluent cash reserve, the management is highly confident about the future profitability of the Group. In return for the support of the shareholders, in addition to the interim dividend (the second), the Board declared a special dividend of US$20 million, accounted for about 60% of the Group s 14H2 net profit; The future dividend payout ratio will be formulated in consideration of the Group s profitability, funding need for M&A and the industry benchmark. 19
Agenda Company Overview 2014 Financial Results Business Review and Prospects 20
Human Resource As at Dec. 31 2014, the Group had 796 employees, with 145 newly recruited over the past year; The number of R&D employees increased by 85 to 405; in addition, as at the end of Feb. 2015, the Group hired an exclusive outsourcing R&D team of about 100 team members. by function by location Operation & Customer service 30% Management 3% Finance & admin. 8% Canada 3% Singapore 7% Philippines 9% US 4% R&D 51% China 77% IT support 8% 21
Mobile Game Business Mobile game business revenue achieved 16% quarterly compound growth rate in 2014, 14Q4 revenue increased 20% from 14Q3; The revenue percentage of mobile games increased to 90% in Q4 from 79% in Q1. 60 (US million) Mobile Client-based and browser 50 $ 54.4 14Q4 90% 40 30 $ 34.9 $ 39.9 $ 45.4 14Q3 14Q2 14Q1 87% 83% 79% 20 14 Q1 14 Q2 14 Q3 14 Q4 0% 50% 100% 22
Operational Data Excerpts of Major Games CC (Castle Clash) COL II (Clash of Lords II) Launched in July 2013 Dec. 2013 Numbers of language versions (as at the end of Dec. 2014) Registered users (as at the end of Dec. 2014) Monthly active users (Dec. 2014) Revenue from Android platform (Dec. 2014) Listed in the top ten grossing list of how many countries (Dec. 31 2014, Google Play) 13 7 81.0 million 26.0 million 9.3 million 3.1 million 75% 78% 33 2 23
Macroeconomic Change and Its Impact The development and reforming of global mobile game market The number of mobile game players surpassed 1.5b in 2014, among whom 32% are paying users; revenue of global mobile games was about $25b in 2014, representing 29% of total revenue of the gaming industry, and this percentage is (1) expected to increase to 37% in 2017; The transaction value of global games M&A achieved record $15B in 2014 as mobile dominates; (2) With the fast development and maturity of the mobile gaming market, game developers and publishers were inevitably confronted with market restructure; as a result, a number of small or weak players have been flushed out due to the increasingly fierce competition. The growing potential of Asian gaming market Asian game market maintained the highest growth rate in 2014, accounting for 45% of global gaming revenue; (1) Due to the burgeoning economy and the prevalence of internet and Smartphone, the growth market (represented by Asian market) is expected to achieve $59b in 2017, representing 57% of total gaming market. (1) In early 2015, the Group set up regional offices in Japan, Korea and Thailand and recruited game development and operation talents from the local markets, in order to penetrate the market segments and grasp the growing opportunity. (1)Data derived from Newzoo report;(2)data derived from Digi-Capital report. 24
Prospect R&D To further enhance the mobile game development ability through recruiting local talents in each regional offices and strengthening the internal competition; Encouraging face-to-face communication among staffs from each branches; To supplement the Group's existing R&D force by outsourcing certain mobile game products, in order to inspire creativity and bring in fresh design concepts; More than 30 new mobile games are planed to be launched in 2015. Looking for opportunities of setting up new offices in other market segments to fully exploit the Group's global operating ability and to improve the gaming experience of players; To improve Link's functionalities in interest group creating, information sharing and private chatting to strengthen the connections among users; To allocate more resources to the Group's self-owned advertising platform to facilitate its monetization ability. Operation M&A The Group has made several equity investments in North American and Asian market in 2014, and is expecting to benefit from the synergy coming from industry chain integration and R&D ability enhancement; The Group will keep an eye on potential M&A opportunities around the world in the future. 25
Thank you! IR Contact yolanda.gao@igg.com 26