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Disclaimer
1IGG INC
Agenda
• Company Overview
• 2014 Interim Financial Results
• Business Review and Prospects
As at 30 June 2014, the player community of the Group consisted of over 160 million player accounts from over 180 countries and regions, including a total MAU of approximately16.7 million;
3IGG INC
Company Profile
IGG went public on 18 Oct., 2013. Stock code: 8002.HK.
A fast-growing global mobile games developer and operator, founded in 2006, with headquarters in Singapore and regional offices in the US, China, Canada and Philippines;
As at end of June 2014, IGG has been operating about 40 games, among which 80% were developed in-house;
As of 30 June 2014, according to Distimo.com, the Group ranked among top five in 22 countries and top ten in 46 countries in terms of quarterly gross sales generated via Google Play;
4IGG INC
Launching of Major Self-developed Games
2006 2007 2008 2009 2010 2011 2012 2013
Browser Games
Mobile Games
Client-based Game
5IGG INC
Core Competencies
High quality & Marketproven games could be launched worldwide
Keeping us aligned with trends in the online gaming industry
Cooperating with leading internet platforms to target potential clients
Large and multifarious player base decreases the risk associated with operating in a single market
Experienced localization team and
international operating team
Globalized organizational
structure, equal and vibrant
corporate culture
Agenda
• Company Overview
• 2014 Interim Financial Results
• Business Review and Prospects
13H1 14H1 Change 13H2 14H1 Change
Revenue USD million 28.8 91.9 219% 59.2 91.9 55%
Gross profit USD million 21.9 66.6 204% 43.8 66.6 52%
Gross profit margin 76% 73% -3ppt 74% 73% -1ppt
Adjusted net income* USD million 7.2 33.7 368% 15.0 33.7 125%
Adjusted net incomemargin
% 25% 37% +12ppt 25% 37% +12ppt
Profit/loss attributed to owners of the parents
USD million -7.2 32.9 - 14.1 32.9 133%
Weighted averagenumber of ordinary shares
Shares million 6.36 13.59 - 11.61 13.59 -
Basic earnings/loss pershare for the year
USD cents -1.12 2.42 - 1.21 2.42 100%
14H1 Financial Highlights (unaudited)
* Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares.
7IGG INC
14H1 Revenue Growth
28.8
91.9
13H1 14H1
219%
The increase was primarily due to:
•An increase in the overseas revenue generated from
the hit title “Castle Clash” launched in July 2013;
•An increase in revenue generated from “Clash of
Lords II”, especially for the English version launched
in March 2014;
•The revenue contribution from the simplified
Chinese version of Castle Clash, which was launched
on Tencent’s social mobile platforms in May 2014;
In addition, the Group’s other income and gains for
the period was about US$1.4 million, primarily due
to an investment income from a South Korea listed
online gaming company.
(USD million)
8IGG INC
Quarterly Revenue Growth
(USD million)
0
10
20
30
40
50
60
13 Q3 13 Q4 14 Q1 14 Q2
$ 22.5
$ 44.1
$ 47.8
$ 36.7
14Q2 V.S. 14Q1
The revenue increased
8.4%
14Q2 V.S. 14Q1
The growth rate for mobile game segment achieved
14.1%
9IGG INC
14H1 Adjusted Net Income* Growth
7.2
33.7
13H1 14H1
368%
* Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares.
The growth rate of adjusted net profit
surpassed that of revenue was primarily
due to:
•The fixed cost percentages of revenue
such as admin. exp. and R&D costs both
witnessed a decrease due to the synergy
coming from the considerable revenue
growth;
•The revenue percentage of selling &
distribution expense was relatively low in
14H1 since major new games will be
launched in second half of this year.
(USD million)
10IGG INC
0
5
10
15
20
25
13 Q3 13 Q4 14 Q1 14 Q2
Quarterly Net Profit Growth
$ 4.5m
$ 9.6m
$ 13.6m
$ 19.3m
(USD million)
14Q2 V.S. 14Q1
The net profit increased
41.9%
from 13Q3 to 14Q2
The compound growth rateof net profit achieved
62.5%
11IGG INC
14Q2 Revenue Breakdown by Segment
Joint operation
6%
By segment*
Games operated by us
94%
Games operated by us: • 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.
Joint operation:• refers to the games we jointly operated
with third-party operators (like Tencent);• we are responsible of 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 revenue-sharing agreement.
* Revenue generated from the licensing segment, namely the games licensed to and operated by the third-party licensees, accounted for less than 1% of total revenue in 14Q2.
12IGG INC
14Q2 Revenue Breakdown by Game
Mobile game title% of
total revenue
Castle Clash 62%
Clash of Lords (I&II) 11%
Texas Poker Deluxe 5%
Slot Machines 3%
Browser game title% of
total revenue
Galaxy Online II 5%
Wings of Destiny 4%
Texas Poker Deluxe 2%
Godswar 1%
Browser games
15%
Mobile games
83%
By game type
Client-based games 2%
13IGG INC
Bycountry/region
% oftotal revenue
Mainland China 5%
Taiwan 3%
Singapore 2%
Bycountry
% oftotal revenue
Australia 3%
14Q2 Revenue Breakdown by Region
• The Group’s revenue comes from over 180 countries and regions, except for the U.S., revenue from other countries/regions is relatively even.
Bycountry
% oftotal revenue
Germany 7%
Russia 6%
France 5%
Great Britain 4%
14IGG INC
Asia28%
Europe26%
Others6%
North America40%
By country% of
total revenue
U.S. 36%
Canada 4%
Expenses Breakdown and Profitability
13FY 14Q1 14Q2
Revenue (USD million) 88.0 44.1 47.8
Gross profit margin 75% 73% 72%
Selling & distribution exp./ Revenue 26% 25% 17%
Administrativeexp./ Revenue 12% 7% 7%
R&D costs/Revenue 11% 8% 8%
Adjusted net incomemargin *
25% 31% 41%
* Adjusted net income represented profit excluding share-based compensation, and the fair value loss of the redeemable convertible Preferred Shares.
• The decline of gross profit margin was mainly due to the increase of higher payment costs incurred in relating to mobile games as compared to other non-mobile channels;
• The decline of the selling and distribution exp. percentage of revenue was primarily because that major new games will be launched in second half of this year.
15IGG INC
Tax Rate
•More than 95% of our total revenue was booked through IGG Singapore in 14H1, 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.
17%5%
The Preferential corporate tax rate
The prevailingcorporate tax rate
IGG Singapore
16IGG INC
Dividend
Dividend type Payment DateTotal
amount(USD million)
Sharenumbers*(million)
Dividendper share
(HK cents)
2013 final dividend
May 29, 2014 2.88 13.59 1.6
2014interim dividend
Sep. 5, 2014 9.84 13.61 5.6
* The outstanding ordinary share numbers as at the end of the corresponding report period.
• The total amount of 2013 final dividend accounted for 30% of the Group’s 13Q4 net profit;
• The total amount of 2014 interim dividend accounted for 30% of the Group’s 14H1 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.
17IGG INC
Agenda
• Company Overview
• 2014 Interim Financial Results
• Business Review and Prospects
Mobile Games
55%
72%
79%
83%
0% 50% 100%
13Q3
13Q4
14Q1
14Q2
Quarterly percentage change ofmobile games revenue/total revenue
from 13Q3 to 14Q2
Browser & client-based
Mobile
• More than 90% R&D force has been shifted to mobile games development;
• The revenue percentage of mobile games is expected to further increase along with the launching of more new mobile games in second half of this year;
• Strategically, the original browser and client-based game business will be maintained without expansion.
19IGG INC
Castle Clash (CC)
Grossing rank
Language versions
Player accounts
Platform cooperation
As shown in the Google Play top grossing list of AppAnnie on 30 June 2014, CC ranked top ten in 33 countries and top five in 17.
As at the end of June, 2014, CC has been launched worldwide in 13 languages across Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively 76%, 21% and 3%.
As at the end of June 2014, the registered account number of CC achieved 55 million, including a total MAU of around 9 million.
CC was formally launched on Tencent’s social mobile platforms on May 5th, 2014. As at the end of July 2014, total registered accounts were over 9 million, the average DAU since launching were around 1 million.
20IGG INC
The Revenue Recognition of CC Tencent
Note
Gross billings × (1-VAT rate) = AThe prevailing VAT rate for R&D and tech. service industry is 6% in mainland China
A ×(1-channel cost
rate)= B
For instance, the prevailing channel cost rate of Apple App Store is 30% worldwide
B ×Revenue share
percentage= C C is the Group’s gross revenue
C ×(1-withholding
tax rate)=
IGG’s net revenue
The prevailing withholding tax rate between Singapore and Chinese government is 10%
•Since CC’s launching on Tencent platforms on May 5, its net revenue contribution to IGG has achieved about 2 million US dollars as at the end of June 2014.
21IGG INC
Human Resources
Finance&Admin.
6%
R&D46%
Global support
22%
China81%
US3%
Singapore6%
Philippines8%
Canada 2%
Breakdown by function
Operation & Customer service 17%
IT support7%
Management3%
Breakdown by location
•As at 30 June 2014, the Group had 754 employees, the turnover rate of 14H1
was around 15% ;
•The employee growth rate will be around 20% for the second half of this year.
22IGG INC
Global Games Market
Mobile games market
•The revenue of global
games market and mobile
games market will be USD
102.9 bn. and USD 35.4 bn.
respectively;
•Market share of mobile
games will increase to 34%.
The compound revenue growth rate
of global games market will be 8.1%
from 2014 to 2017, the number for
mobile games market will be 17.5%;
45% of the 2014 global games
revenue will come from Asia Pacific
region, 27% from North America and
24% from Europe, Middle East and
Africa;
Tencent will account for 10% of the
global games market in 2015;
Global game players will increase to
2.0 bn. in 2016 from 1.7bn. in 2014.
*Data source: Newzoo report
•The revenue of global
games market is expected
to be USD 81.4 bn.;
•Mobile games revenue will
arrive at USD 21.8 bn.,
namely 27% of total games
market.
2014
2017
23IGG INC
14H2 Prospect-Major New Games
A self-developed combat strategy game set in the underworld. Players can direct their gang members to perform various tasks, strategically expand and defend their own territory.
A strategy game set in space, Galaxy Online3 is a sequel to the Group’s popular browser game, Galaxy Online II. The game offers “player-vs-everything” style combat. Game play mechanics has also been changed to better suit mobile devices.
A card-based strategy game with a Western mythology theme, Deck Heroes boasts arevolutionary game design with intuitive game play mechanics that support a varietyof game play modes.
A self-developed mobile game set in the seafaring age of exploration, Blood andBlade is a horizontal side-scrolling action MMORPG.
Brave Trials (English version) , which was licensed from Taomee, is a role-playing game in “Japanese anime” style featuring a virtual joypad to control the player-character.
24IGG INC
14H2 Prospect-Link Messenger
Link Messenger is a location-based instant messaging and social networking mobile application. The global promotion is expected to start in 14Q3;
The launching of Link is to facilitate interaction and communication among the Group’s 160 million registered users, and to foster a strong sense of community among them;
The Group will not try to monetize the Link Messenger platform until it has achieved a critical mass of users worldwide. The existing 160 million game players the Group has will be the initial marketing target of Link Messenger.
25IGG INC