2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and...

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Transcript of 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and...

Page 1: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively
Page 2: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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 notform the basis for or be relied on in connection with any contract or binding commitment whatsoever. ThisPresentation has been prepared by the Company based on information and data which the Company considersreliable, 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 maynot be all-inclusive and may not contain all of the information that you may consider material. Any liability inrespect 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 marketopportunity and business prospects that are individually and collectively forward-looking statements. Suchforward-looking statements are not guarantees of future performance and are subject to known and unknownrisks, 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 thisPresentation, including, amongst others: whether the Company can successfully penetrate new markets and thedegree to which the Company gains traction in these new markets; the sustainability of recent growth rates; theanticipation of the growth of certain market segments; the positioning of the Company’s products and servicesin those segments; the competitive environment; and general market conditions. The Company is notresponsible for any forward-looking statements and projections made by third parties included in thisPresentation.

Disclaimer

1IGG INC

Page 3: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

Agenda

• Company Overview

• 2014 Interim Financial Results

• Business Review and Prospects

Page 4: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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;

Page 5: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

4IGG INC

Launching of Major Self-developed Games

2006 2007 2008 2009 2010 2011 2012 2013

Browser Games

Mobile Games

Client-based Game

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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

Page 7: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

Agenda

• Company Overview

• 2014 Interim Financial Results

• Business Review and Prospects

Page 8: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 9: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 10: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 11: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 12: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 13: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 14: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 15: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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%

Page 16: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 17: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 18: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

Dividend

Dividend type Payment DateTotal

amount(USD million)

Sharenumbers*(million)

Dividendper share

(HK cents)

2013 final dividend

May 29, 2014 2.88 1,359 1.6

2014interim dividend

Sep. 5, 2014 9.84 1,361 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

Page 19: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

Agenda

• Company Overview

• 2014 Interim Financial Results

• Business Review and Prospects

Page 20: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 21: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 22: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 23: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 24: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 25: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 26: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

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

Page 27: 2013 Annual Results - IGG Inc.img1.igg.com/9900/news/2014/08/10/445403547.pdf · Android, iOS and Amazon platforms. The revenue split of June 2014 on the three platforms was respectively

Thank you!

IR Contact

[email protected]

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