NQ Mobile Inc. (NYSE: NQ) Investor Presentation May 2013
Management Dr. Henry Lin Co-Founder, Chairman and Co-CEO Omar Khan Co-CEO Dr. Vincent Shi Co-Founder and COO Suhai Ji CFO 12 years of experience in mobile industry Ph.D. degree in communication and information systems from Beijing University of Posts and Telecommunications 15 years of experience in mobile technology related industry Previously Global Head of the Mobile Center of Excellence at Citigroup and CTO/CPO and Chief Strategy Officer at Samsung Mobile 12 years of experience in mobile industry Ph.D. degree in geographic information system from Peking University 11 years of experience in financial related industry Previously director in the NYSE Beijing Representative Office and an investment banker with Deutsche Bank AG, Hong Kong 2
NQ Mobile Today Leading Global Provider of Mobile Internet Services Consumer Mobile Services Mobile Security and Privacy Mobile Games & Advertising ~404M registered user accounts ~125M active user accounts ~53M new user accounts added in Q1 2013 ~#1 mobile game publisher on ios platform in China and #3 on all smartphone platforms in China (Sino MR, 1Q 2013) Enterprise Mobility Managed Mobility Services ~1,250 enterprise customers ~ Over 80 of fortune 500 companies as customers 3
Investment Highlights 6 Global management team with a proven track record 1 Enormous market opportunity encompassing consumers and enterprises 2 2 Proven ability to acquire, engage and monetize users 5 Consistent execution and financial outperformance 4 Complementary and synergistic businesses 3 Advanced proprietary technology and operation system 4
Consumer Mobile Security and Privacy 5
Proliferation of Mobile Technology Rapid Adoption of Smart Phones Worldwide smartphone shipment (MM) 1,405 Increasing Functionalities Application download (MM) CAGR: 18.3% CAGR: 61.4% 62.9% 309,606 Surging Mobile Data Traffic Mobile data traffic / month (Exabyte) 7.4 718 CAGR: 69.3% 41.3% 45,617 0.9 2012 2016 2012 2016 2012 2016 Smartphone Penetration Rate (3) Source: IDC (December 2012) Source: Gartner (August 2012) Source: Cisco (February 2013) An average U.S. household will have 9 connected devices by 2015 (1) Sales of mobile devices to business worldwide are expected to reach 272MM units by 2016 (2) 1 Based on IDC estimates as of May 2012 2 Based on Gartner estimate as of February 2013 3 Smartphone shipments as % of total mobile phone shipments 6
Rapid Increase of Android Phones and Malware on Android Android Taking Over Global Market Share Mobile Platform Market Share Rise of Mobile Malware Number of Threats 65,227 2009 2012 CAGR: 241% 24,794 1,649 6,760 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2009 2010 2011 2012 Android Linux ios Symbian BlackBerry OS Others Windows Phone / Mobile Source: IDC Source: Company Data Android phones are more vulnerable to malware due to: Significant portions of the platform are built on open-source technologies like Linux and WebKit Open source code for all Android app developers Open market and open distribution channels for all Android apps 7
NQ Mobile Threat Report 2012 Malware Explosion 8
NQ Mobile Maintains Broad Leadership on Mobile Full Suite of Products to Protect Mobile Users R&D and Product Leadership 8 proprietary core technologies and mobile security patents registered and over 70 patent application filed 309 professionals of our employees engaged in R&D activities NQ Mobile Security NQ Mobile Vault NQ Family Guardian With our strong R&D capabilities, our security response team can usually provide a solution to a security threat in 6 to 12 hours after identifying the threat Dominant Market Share in China (1) Platform Agnostic 44% Others 56% Source: SinoMR 1 The market share measured by the number of registered user accounts as of Dec. 31, 2012 9
Leading Proprietary IP and Technology CLOUD Crawler Scanning Engine Collect data across various mobile networks Open Platform / Open APIs Interaction with different OSs Risk rank algorithm Large repository Quick response Black list/grey list/white list Security Knowledge Repository Largest malware/virus database globally PARTNERS CLIENT Mobile malware scanning engine Fast scanning High accuracy Intelligent anti-spam filtering engine Intelligent filter 99%+ accuracy Productivity Device agnostic Platform agnostic Cross-OS support carriers app stores web sites ( Open APIs / SDKs ) Technology Know-how + Cloud-Client Interaction The most comprehensive and accurate service with an outstanding user experience 10
BOSS Business and Operation Support Systems: We Own Our Customers User Life Cycle and Channel Management Customer Service Integration User acquisition channel Payment channel User activity User profile Call Fax IM User queries User queries Online forum Email User queries SMS BOSS Customer service center + Webpage support 1 3 Direct access to user base to better understand user behavior 2 Analyze user profiles with consent Adjust pricing strategies based on user data analysis 24/7 global customer service center 60 customer service hotlines Manage user acquisition and payment channel in real time 11
Wide Range of Collaborations with Key Ecosystem Participants Chipset Retailers Smartphone OS 3 rd Party Developers Handsets App Store Wireless Carriers 12
Diversified User Acquisition and Payment Channels User Acquisition Channels Viral marketing Customers Payment Channels Wireless carriers and mobile payment service providers Pre-installation Third party payment processors Online download Pre-paid cards 13
Discovery to Monetization to Discovery New Service Discovery Customer Activation User Engagement Service Monetization Customer Retention Service Discovery 14
Offer Wall Monetization of Active Users 15
NQ @ America Móvil América Móvil and NQ Mobile Collaborate to offer Mobile Subscribers Security, Privacy and Family Protection across Mexico, and Latin America Google Play promotion Online promotion 16
NQ @ US Cellular NQ Mobile Announces that U.S. Cellular Will Begin Offering Family Guardian Product Under the Name U.S. Cellular Family Protector, winning out over Location Labs. uscellular.com promotion In-store promotion Online tutorial 17
NQ @ Retail - ~3000 US Retail locations this summer From warehouse to point-of-sale Semi-permanent fixtures highlight product offerings, with the opportunity to flex-in new product or promotional literature quickly. Web-based activation tools help sales agents get customers up and running, so they can walk out working. Retail material ready-to-ship Point-of-sale presence Product overview and takeaway material Promotional material In-store, on-device activation 18
Mobile Games and Advertising 19
Large and Growing China Mobile Games and Mobile Advertising Market China Mobile Games Market Size (RMB Bn) (%) China Mobile Advertising Market Size (US$MM) (%) 1,687.5 25.0 2009 2015 CAGR:43% 19.1 2009 2015 CAGR: 69% 1,125.1 1,400.0 13.5 825.0 6.2 8.8 474.7 2.9 4.2 72.6 214.4 2009 2010 2011 2012E 2013E 2014E 2015E 2009 2010 2011 2012E 2013E 2014E 2015E Source iresearch (June 2012) Source IDC (January 2013) 20
Mobile Games and Advertising Platform Feiliu Mobile Games and Advertising Platform Founded in 2009, Feiliu is a leading mobile interest based social platform in China Engages user in real-time online group activities, built upon unique interest communities including mobile technology, automobile, health care, games, etc. NQ Mobile invested in Feiliu in Feb. 2010 and entered definitive agreement with Feiliu to acquire the remaining stake in Nov. 2012 Mobile Interest-based Social Platform 77M+ registered users 14M+ monthly active users Distribute 400K+ apps/games #1 mobile game publisher on ios platform in China and #3 on all smartphone platforms in China (Sino MR, 1Q 2013) 21
Products and Services Interest based social graph Sponsored download Gaming monetization platform Developers Mobile Interest Based Community Users Content sharing and download Interest based communities Virtual goods Merchants goods recommendation Promotion Rewards Advertisers Feiliu AD inventory Sponsored recommendation Merchant inventory 22
Synergistic Businesses Engage Trusted Platform 111MM Active Users Protect Secure Prevent Users Actively Data Analyze Optimize Customize Interest-based Community 14MM Active Users Socialize Share Play Monetize 1 All user data as of December 2012 23
Feiliu s Top Games 24
Enterprise Mobility and Security 25
Managed Mobility Services Outlook Forecast of Managed Mobility Services Market, Worldwide, 2011 2016 (MM) 3,480 2011 2016 CAGR: 54% 2,450 400 750 1,100 1,400 2011 2012 2013 2014 2015 2016 Source : Gartner 26
Enterprise Mobility: NationSky Founded in 2005 by Charlie Hou N ation NQ Mobile acquired majority stake (55%) in May 2012 Leader in China enterprise mobility services Over 1,250 large and medium enterprise customers Strong industry alliance and partnerships Partners include Apple, RIM, China Mobile, Mobile Iron, GEMA etc. Cross platform proprietary expertise and IP in mobile enterprise services and software Solutions for ios, Android, BlackBerry Mobile device/application Management Enterprise app/content distribution 27
Products and Services Manageability Services Security Industry Solutions Platform Integration Services Mobile data strategy consulting Architecture design and deployment Asset management Training Mobile device management Mobile content management Mobile application management Insurance solution Banking solution Public service solution Logistic solution Enterprise app store Enterprise content distribution Push integration Cross platform middleware Devices Mobility Application Enablement and Deployment N ation Consulting and Management Services Legacy Enterprise IT Integration Framework Mobility Security Framework N ation Mobility Infrastructure N ation N ation 28
NationSky Customer Engagement Model Helpdesk and Support E Learning and Training Provisioning and Operation Support Training and Support Consulting Mobility Blue Print Adoption Methodology Mobility as a Service Software as a Service Mobile Device Management Mobile Content Management Mobile App Management Management Infrastructure as a Service Architecture Architecture Design Integration Framework Design Deployment Devices/Servers Procurement Mobile Application Deployments Appstore/Content Distribution Deployment Industry Solutions 29
Selected Customers of NationSky Banking Brokerage Insurance Pharmaceutical Manufacturing Energy 30
Financial Highlights 31
Strong Underlying Operating Metrics Registered User Accounts (1) (MM) Registered User Account Additions (1) (MM) 350.8 403.5 76.9 136.7 67.4 2009 2012 CAGR (2) : China: 57% Overseas: 92% Total: 68% 119.4 140.2 75.0 72.4 146.7 55.1 71.7 186.4 164.0 35.6 23.2 91.6 8.7 48.5 26.9 2009 2010 2011 2012 1Q13 China Overseas Feiliu 31.9 52.7 9.5 36.1 64.3 20.8 20.5 14.4 43.1 6.0 14.5 21.6 22.4 2009 2010 2011 2012 1Q13 1 The registered user accounts are as of year / quarter end 2 Excluding Feiliu 32
Strong Underlying Operating Metrics (cont d) Active User Accounts (1) (MM) Paying User Accounts (1) (MM) 124.8 110.1 13.7 8.9 9.2 2009-2012 CAGR (2) : China: 58% Overseas: 94% Total: 69% 12.5 40.7 48.6 2009-2012 CAGR: China: 56% Overseas: 134% Total: 69% 5.6 3.0 3.2 52.4 19.4 25.4 56.9 62.5 12.0 8.0 32.9 2.9 17.4 9.1 4Q 2009 4Q 2010 4Q 2011 4Q 2012 1Q 2013 China Overseas Feiliu 1.6 3.2 0.7 5.9 6.0 4.0 1.1 0.1 2.5 1.0 4Q 2009 4Q 2010 4Q 2011 4Q 2012 1Q 2013 1 The active user accounts and paying user accounts are average monthly numbers for the specified quarter 2 Excluding Feiliu 33
Rapidly Growing Revenues Revenue (1) ($MM) 91.1 0.7 12.6 10.6 2009 2012 CAGR: 104% 40.7 4.5 11% 108% 33.2 2.9 17.7 44% 6.1 17.7 3.3 16.0 2.4 14% 32.2 2.1 13% 11.6 3% 6.2 35% 5.3 18.5 7.1 0.2 45% 44% 21% 1.1 9.0 51% 4.0 6.8 43% 9.3 76% 2009 2010 2011 2012 1Q 2012 1Q 2013 35.7 10% 18% 10% 35% 28% China Consumer Overseas Consumer Other Enterprise Feiliu 1 2012 revenues include full year results for Enterprise (Nationsky) and Feiliu even though they were acquired in 2Q and 4Q, respectively 34
Rapidly Growing Revenues (cont d) Quarterly Revenue ($MM) 7.6 1.1 3.0 8.9 14% 1.2 39% 3.8 13% 43% 3.6 3.9 47% 44% 11.3 1.0 5.1 9% 45% 12.8 1.2 5.8 10% 45% 16.0 2.1 7.1 13% 44% 20.0 1.4 7% 2.5 12% 8.2 41% 25.8 5.2 5.8 6.8 7.8 8.4 9.1 9.3 43% 39% 33% 30% 46% 45% 4.5 3.0 9.9 17% 12% 38% 30.0 0.7 6.7 3.1 10.5 2% 22% 10% 35% 33.2 2.9 6.1 3.3 11.6 10% 18% 10% 35% 28% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 China Consumer Overseas Consumer Other Enterprise Feiliu 35
Healthy Gross and Operating Margins Total Gross Profit (1) ($ 000) (%) 80.3% 79.6% 80.7% 80.1% 78.6% 12,555 9,162 10,270 6,118 7,062 76.5% 15,268 69.2% 67.8% 17,848 20,358 68.5% 22,775 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 NQ ex. NationSky Gross Profit (1) Enterprise (NationSky) Gross Profit (1) ($ 000) (%) ($ 000) (%) 80.4% 79.8% 81.2% 80.5% 78.9% 80.8% 78.5% 79.5% 6,125 7,079 9,215 10,324 12,607 14,988 16,749 18,572 76.3% 20,703 19.9% 280 24.6% 1,099 26.8% 1,785 33.9% 2,072 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q12 3Q12 4Q12 1Q13 1 GAAP figures, which include share based compensation 36
Healthy Gross and Operating Margins (cont d) Total Operating Profit (1) ($MM) 39.1% 41.6% 41.6% 37.5% 35.0% 32.8% 26.4% 26.2% 29.9% (%) 9,952 2,982 3,689 4,722 4,817 5,597 6,548 6,817 7,855 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 NQ ex. NationSky Operating Profit (1) Enterprise (NationSky) Operating Profit (1) ($ 000) (%) ($ 000) (%) 39.1% 41.6% 41.6% 37.5% 35.0% 34.5% 29.8% 30.7% 33.4% 10.5% 10.3% 10.3% 14.8% 9,048 7,166 6,401 6,354 5,597 4,722 4,817 2,982 3,689 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 904 689 463 147 2Q12 3Q12 4Q12 1Q13 1 Non-GAAP figures, which exclude share based compensation. The percentage represents the non-gaap operating margin 37
Healthy Gross and Operating Margins (cont d) Selling & Marketing Costs (1) General & Administrative Costs (1) Research & Development Costs (1) ($ 000) (%) ($ 000) (%) ($ 000) (%) 18.2% 1,385 11.9% 10.1% 899 1,347 18.7% 18.4% 17.3% 16.9% 2,403 2,764 3,375 13.9% 4,736 12.5% 4,178 4,165 17.1% 18.6% 18.6% 18.5% 18.5% 17.5% 15.7% 5,833 12.7% 11.5% 5,544 875 1,514 2,110 1,630 2,964 3,691 4,042 11.6% 11.0% 11.5% 9.1% 8.0% 8.5% 9.0% 9.4% 8.8% 2,834 2,934 2,310 1,706 1,474 1,282 976 1,037 883 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 1 Non-GAAP figures excludes share based compensation. The percentage represents the non-gaap operating expense as a percentage of total revenue 38
Healthy Profitability Non-GAAP Net Income (1) ($ 000) (%) 61.7% 12,325 48.3% 51.0% 10,476 40.7% 6,996 40.0% 6,542 6,386 35.7% 7,127 8,134 31.5% 41.0% 31.5% 4,282 3,101 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 1 Non-GAAP figures excludes share based compensation. The percentage represents the non-gaap net margin 39
High Visibility and Strong Cash Flow Deferred Revenue ($ 000) 14,439 12,234 10,861 8,660 9,473 6,024 7,090 4,595 3,389 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 40
High Visibility and Strong Cash Flow (cont d) Operating Cash Flow ($ 000) 6,779 6,934 4,191 3,938 4,426 3,038 2,633 1,978 1,862 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 41
Account Receivable Days Total Receivable Days 132 136 129 138 131 130 126 142 140* 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Jan.-Apr. 13 China Receivable Days International Receivable Days 171 176 174 194 189 193 182 209 209* 106 100 92 94 85 85 91 105 104* 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Jan.-Apr. 13 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Jan.-Apr. 13 * Based on management account 42