Vision and Purpose of

Coway Acquisition

Oct 14, 2019

Netmarble Investment in Gaming Sector

Netmarble has pursed active investment in game companies for the last 5 years

Netmarble focused on sizable companies showing stable growth based on platforms

However, it is challenging to find attractive targets having stable revenue and

R&D capability

Netmarble’s recent investment targets

※ Netmarble has reviewed investment opportunities of more than 100 companies

Investment in Non-gaming Sectors

Entertainment

(IP)

Netmarble invested across various non-gaming sectors to find future growth engines

including entertainment, digital bank, AI, blockchain and platform

However, these are mainly minor investments in early stage companies with

limited earnings in the near future

AI/Big data

AR/VR

Digital

bankBlockchain Platform

Netmarble named as

the Preferred Bidder for Coway

Netmarble is named as the preferred bidder for acquiring 25% controlling ownership

Coway is the No.1 leader in ‘Product Subscription Economy’ with water/air purifiers

and mattresses

With Netmarble’s IT capability in AI/big data/cloud, Coway has potential to expand

its business to Smart Home market

Rental Subscription

Economy

AS-IS TO-BE

Global Major Player in Smart Home &

Subscription Economy

IntegrateAI / Big Data / Cloud

technology

100

111 130

155

180

217

269

322

100 105 106 111 114 120 125 126

100 105 106 111 108 110 117

125

2011 2012 2013 2014 2015 2016 2017 2018

Growth of Subscription Economy

Korea Consumer/Household Rental

Market Size

Global subscription economy market is forecast to grow to $ 530 BN by 2020

Korea consumer/household rental market is also forecast to grow to ₩ 10.7 TN by 2020

with 5-years CAGR of 16%

5.0 5.5

6.5

7.6

8.5

10.7

2015 2016 2017 2018 2019E 2020E

(Unit: Trillion won)

Source : Korea Development Institute

Subscription Economy Index

SEI = Total subscription business sales of companies (SaaS/IoT/Media)

Source : ZUORA

(2011 = 100)

S&P500 Revenue

CAGR 3.2%

US Consumer

Sales Index

CAGR 3.3%

SubscriptionEconomy

Index

Growth of Coway

Coway has shown steady growth with revenue of ₩ 2.7 TN and EBIT of ₩ 0.52 TN in 2018

The number of gross accounts also has shown stable growth with 7 MN (Korea 5.9 MN

and Overseas 1.1 MN) accounts in 2018

Coway is expected to show rapid growth in SEA and the US markets

Financial Performance

1.82 1.99

2.12 2.16 2.32 2.38

2.52 2.71

2.99

0.39 0.41 0.54 0.58 0.69 0.57

0.71 0.78 0.82

0.23 0.23 0.34 0.36 0.46 0.34

0.47 0.52 0.55

2011 2012 2013 2014 2015 2016 2017 2018 2019E

Revenue EBITDA EBIT

Number of Gross Accounts

(Unit: Trillion KRW)

3%5%

6% 9%12%

16%

5.6 5.9

6.1 6.2 6.5

7.0

3%

5% 4%

2%

5%

7%

2013 2014 2015 2016 2017 2018

Korea Overseas YoY Growth

(Unit: Million Accounts)

What is Subscription Economy?

Subscription and Sharing Economy has risen as new business models as a result of paradigm

shift called ‘The Age of Access’ in the 4th Industrial Revolution

People have shown increasing interests in subscription economy as it can generate

stable cash flow without conflicts with existing ecosystem

Sharing Economy Subscription Economy

‘The Age of Access’

People share products and services

The key goal is to improve efficiency of resources

People sign up membership service to use products and services

The key goal is to provide customized experience

Trendshift

‘Product Subscription Economy’ is expected to rapidly rise after ‘Contents Subscription’

While rental model was slow in innovation, it has growth potential based on integration

with IT components

Potential of Product Subscription Economy

Netflix Model Rental ModelMembership Model

Provide infinite access to contents

with monthly subscription

Deliver curated products with

monthly subscription

Provide door-to-door service

with monthly subscription

‘Product’‘Content’

Synergy between Subscription Economy and IT

Product subscription economy model was not globally adopted due to difficulty of

providing services to wide region

However, Product Subscription started to rise as mainstream with recent development of

AI/Cloud technology and logistics innovation

Coway also partnered with Amazon DRS to expand its business in the NA market

One of top sellers among Amazon’s air purifiers

Expanding product category including water purifier and bidet

Coway Air-purifier ‘Air Mega’ IoT functions of ‘Air Mega’

Filter lifetime calculation

Filter order through Amazon with alarm to a user

Filter delivery

Smart Home Market Forecast

Smart Home is intelligent service based on appliances connected to network with IoT

Global Smart Home market is forecast to witness a 6-yrs CAGR of 43% to $ 192 BN in 2023

Coway has advantages in transforming to global Smart Home business

Global Smart Home Market Size

22

51

74

120

150

172

192

2017 2018 2019E 2020E 2021E 2022E 2023E

(Unit: Billion USD)

Startups in Smart Home Market

Source : IHS Markit Source : CB INSIGHTS

Active M&A Trends

Amazon and Google have competitively acquired Smart Home companies

Google acquired NEST for $ 3 BN and Amazon acquired RING for $ 1 BN

They aim to provide the best service by collecting and analyzing data from various

IoT-based devices in households

Google acquired NEST for $ 3 BN

NEST offers customized A/C and heating system based

on machine-learning analysis of data collected from

motion, moisture, temperature sensors

Amazon acquired RING for $ 1 BN

RING helps a user to monitor a visitor through its

doorbell camera

NEST by Google RING by Amazon

Synergy with Netmarble

AI

DataAnalysis

Game Device (Netmarble) Smart Home Device (Coway)

Know-how Transfer

DataAnalysis

Cloud

The goal is to implement to all devices of Coway the know-how of user big data analysis

and operation which Netmarble has accumulated via game business

Cloud

Big Data AIBig Data

Secure a Stable Revenue Business

With the acquisition of a growing platform-based, subscription-economy company,

Netmarble’s operational stability is expected to be further strengthened

Hit-driven

game business

Platform-based

Subscription

Economy business

+

Thank you.