Summary of WEBTOON Entertainment (WBTN) FY Conference Call Company Overview - WEBTOON Entertainment operates as a global storytelling hub with a significant user base of 153 million active users, primarily outside Asia, despite its origins in South Korea [5][6][12] - The company has a diverse set of brands, including Line Manga, and has achieved significant market penetration in Japan, where it is the number one consumer app [10][11] Financial Performance - In 2024, WEBTOON reported GAAP revenue of $1.35 billion, with a 13% growth in constant currency [8][9] - The company achieved a 4.2% growth in total company MAU and a 19% growth in web comic app MAU in North America [9][10] - The average revenue per user (ARPU) is approximately $14 in South Korea, $23 in Japan, and around $6 to $8 in the rest of the world [34][40] User Engagement and Content Creation - Users spend an average of 30 to 60 minutes daily on the platform, exploring user-generated content from over 24 million creators [6][7] - The platform has successfully transformed amateur creators into professionals, with average earnings of nearly $50,000 per year, and top creators earning up to $1 million annually [7][8] - The company has a unique revenue-sharing model, having distributed $2.8 billion to creators, which fosters a strong creator ecosystem [15][27] Business Model and Monetization - WEBTOON's monetization strategy includes microtransactions for content access, with prices ranging from $0.15 to $0.70 per episode [17][41] - The company has a dual revenue model, with approximately 12% of revenue coming from advertising and 8% from crossover IP [43] - The ad model is still in its early stages outside Korea, with plans for significant growth in North America as the company builds its ad capabilities [46][47] Market Expansion and Growth Strategy - The company is focused on geographic expansion, particularly in North America and Japan, where it has seen rapid growth [16][36] - WEBTOON aims to leverage its unique content and creator ecosystem to capture a larger share of the global market, with a specific focus on the 18 to 25 demographic [32][38] - The addressable market is substantial, with plans to increase penetration in the rest of the world, which currently stands at less than 5% [35][28] Competitive Landscape - WEBTOON positions itself as a unique player in the market, claiming no direct competition due to its extensive creator ecosystem and global reach [66][72] - The company differentiates itself from competitors like Kakao and Pikuma by allowing creators to publish globally and providing a supportive revenue-sharing model [68][70] IPO and Future Outlook - The recent IPO was motivated by the desire to transition from a subsidiary of a South Korean tech company to a globally recognized entity, enhancing its operational capabilities and market presence [58][59] - The management expresses confidence in the company's long-term growth potential, emphasizing the importance of patience and strategic execution in building the business [60][65] Key Takeaways - WEBTOON is a rapidly growing global storytelling platform with a strong user base and creator ecosystem - The company has demonstrated solid financial performance and user engagement metrics - Future growth will be driven by geographic expansion, enhanced monetization strategies, and leveraging its unique content offerings

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Summary of WEBTOON Entertainment (WBTN) FY Conference Call Company Overview - **Company**: WEBTOON Entertainment (WBTN) - **Industry**: Digital storytelling and web comics - **Key Metrics**: Approximately 24 million creators and 170 million monthly active users across over 150 countries [1][2] Core Business Model - **Unique Offering**: WEBTOON provides a platform for creators to publish serialized web comics and novels, allowing for global storytelling [2][8] - **Revenue Sharing**: The company has shared $2.8 billion in revenue with creators, which is a significant draw for new talent [13] - **User Engagement**: Users spend an average of 30 to 60 minutes daily on the platform, indicating high engagement levels [8][17] Market Positioning - **Target Demographic**: Primarily Gen Z consumers aged 18 to 25, with a growing audience among older demographics [25][26] - **Geographic Reach**: Major markets include Korea (24 million MAUs), Japan (22 million MAUs), and the rest of the world (over 100 million MAUs) [29][30] Content Strategy - **Original Content**: Emphasis on unique stories that cannot be found elsewhere, which attracts both creators and consumers [18][20] - **IP Adaptations**: Approximately 7% of revenue comes from adaptations of webtoons into films and series on platforms like Netflix and Amazon [52][56] - **Diverse Genres**: The platform hosts a variety of genres, appealing to a wide range of consumer interests [50] Financial Performance - **Revenue Composition**: Paid content accounts for about 80% of total revenue, with an average payment of $0.15 to $0.70 per episode [36][38] - **Advertising Revenue**: Currently makes up 12% to 13% of total revenue, with significant growth potential in North America [46][49] - **ARPU Growth**: Average revenue per user is increasing, particularly in markets like Japan where it is $22 compared to the company average of $12 [42][43] Growth Drivers - **User Acquisition**: Focus on increasing web comic app MAUs, particularly in North America where growth was 19% year-on-year [34][63] - **Market Penetration**: The company aims to increase penetration in less mature markets like Japan and North America [40][44] - **Advertising and Content Monetization**: Plans to enhance advertising strategies and explore new monetization models [39][46] Future Outlook - **Macro Environment Resilience**: The company is well-positioned to thrive in a potentially weaker macroeconomic environment due to its low-cost content offerings [60][62] - **Long-term Margin Potential**: Expected growth in gross profit margins as the company expands its advertising and paid content segments [66][68] Technology and Innovation - **AI Utilization**: WEBTOON employs AI to enhance creator tools, fight piracy, and improve user experience by helping consumers find stories [72][73] Conclusion - WEBTOON Entertainment is positioned as a leader in the digital storytelling space, with a strong focus on creator empowerment, user engagement, and innovative content strategies. The company is set to capitalize on growth opportunities in various markets while maintaining a robust revenue model through paid content and advertising.

User Metrics - As of March 31, 2025, the global Monthly Active Users (MAU) decreased by approximately 10.5% year-over-year to around 153 million, primarily due to declines in Korea and the Rest of World[117]. - In Korea, MAU was approximately 24.2 million, down from 27.0 million in the same quarter of 2024, while Japan's MAU increased to 21.9 million from 21.1 million[118][119]. - The Rest of World MAU declined to 107.3 million from 123.2 million, attributed to a government ban on Wattpad and a temporary dip in search traffic due to a security upgrade[120]. Paying Users - The global Monthly Paying Users (MPU) reached 7.4 million with a paying ratio of 4.8%, an increase of 0.3% compared to the previous year[122]. - In Korea, MPU decreased to around 3.4 million with a constant paying ratio of 14.2%, while Japan's MPU increased to 2.2 million with a paying ratio of 10.3%[123]. Revenue Metrics - Revenue is derived from three streams: Paid Content, Advertising, and IP Adaptations, with Paid Content being the primary source[129][130]. - Revenue for the three months ended March 31, 2025, was $325,707 thousand, a slight decrease of 0.3% compared to $326,744 thousand in the same period of 2024[141]. - Paid content revenue decreased by 2.5% to $260,226 thousand from $266,855 thousand year-over-year[142]. - Advertising revenue increased by 7.8% to $39.90 million, and IP Adaptations revenue rose by 11.8% to $25.58 million[166]. - Total revenue for the same period was $325.71 million, a slight decrease of 0.3% from $326.74 million in 2024, while revenue on a constant currency basis increased by 5.3% to $343.84 million[166]. Expenses - Marketing expenses include user acquisition costs and loyalty campaigns, which are essential for brand promotion[132]. - General and administrative expenses encompass all operating costs excluding cost of revenue and marketing, including platform maintenance and stock-based compensation[133]. - Marketing expenses increased significantly by $12,065 thousand, or 61.9%, reaching $31,543 thousand for the three months ended March 31, 2025[145]. - General and administrative expenses rose by $18,009 thousand, or 37.0%, totaling $66,702 thousand, driven by increased stock compensation and headcount costs[146]. Profitability - Net loss attributable to WEBTOON Entertainment Inc. was $22,389 thousand for the three months ended March 31, 2025, compared to a net income of $6,192 thousand in the same period of 2024, representing a decline of 461.6%[141]. - For the three months ended March 31, 2025, the company reported a net loss of $21.97 million compared to a net income of $6.23 million in the same period of 2024[158]. - Adjusted EBITDA for Q1 2025 was $4.08 million, down from $22.16 million in Q1 2024, resulting in an adjusted EBITDA margin of 1.3% compared to 6.8% in the prior year[158]. Cash and Financing - As of March 31, 2025, the company had cash and cash equivalents of $550.1 million, which are primarily invested in short-term, highly liquid investments[170]. - The company completed its IPO on June 28, 2024, raising approximately $281.7 million in net proceeds from the sale of 15 million shares at $21.00 per share[167]. - Net cash used in operating activities for Q1 2025 was $18.65 million, compared to net cash provided of $23.86 million in Q1 2024[173]. - The company plans to use its capital for debt repayment, working capital, capital expenditures, and geographic expansion[171]. - The company may seek additional financing for future acquisitions or investments, which could be affected by current market conditions[172]. Other Financial Metrics - Interest income surged by $3,878 thousand, or 314.0%, to $5,113 thousand, primarily due to interest earned on IPO proceeds[147]. - Interest expense was minimal at $2 thousand for the three months ended March 31, 2025, a decrease of 93.9% from $33 thousand in the same period of 2024[148]. - Loss on equity method investments decreased by $483 thousand, or 45.9%, to $569 thousand compared to $1,052 thousand in the prior year[149]. - Other income increased by $4,107 thousand, or 285.8%, to $2,670 thousand, attributed to gains from foreign currency transactions[151]. - Income tax expense decreased by $4,121 thousand, or 61.8%, to $2,547 thousand, reflecting a shift from income to loss before income tax[152]. - The company reported a significant increase in foreign currency effects, contributing $18.13 million to revenue adjustments in Q1 2025[166].

Core Insights - Webtoon Entertainment (WBTN) reported quarterly earnings of $0.03 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, but down from $1.73 per share a year ago [1] - The earnings surprise was 50%, and the company has surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter were $325.71 million, slightly above the Zacks Consensus Estimate by 0.53%, but down from $326.74 million year-over-year [3] Financial Performance - The company has consistently outperformed consensus revenue estimates three times in the last four quarters [3] - The current consensus EPS estimate for the upcoming quarter is $0.06, with expected revenues of $337.87 million, and for the current fiscal year, the EPS estimate is $0.31 on revenues of $1.43 billion [8] Market Position - Webtoon shares have declined approximately 29.7% since the beginning of the year, contrasting with the S&P 500's decline of 0.6% [4] - The Zacks Industry Rank places the Internet - Software sector in the top 36% of over 250 Zacks industries, indicating a favorable position compared to the bottom 50% [9] Future Outlook - The estimate revisions trend for Webtoon is currently mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market [7] - The upcoming earnings call will be crucial for understanding management's commentary and future earnings expectations [4]

Financial Data and Key Metrics Changes - The company reported a net loss of $22 million in the quarter compared to a net income of $6.2 million in the prior year, driven by higher general and administrative expenses and marketing costs [13] - Adjusted EBITDA was $4.1 million in the quarter, down from $22.2 million in the same quarter of the previous year [26] - Revenue grew 5.3% on a constant currency basis, but reported revenue was roughly flat year over year [12] Business Line Data and Key Metrics Changes - Paid content revenue grew 2.8% on a constant currency basis year over year, driven by strength in Japan, offset by declines in Korea and the rest of the world [17] - Advertising revenue increased by 13.6% on a constant currency basis, with strong performance in Korea and Japan, but a decline in the rest of the world [18] - IP Adaptation revenue saw a 20.7% increase year over year on a constant currency basis, with significant growth in Japan [19] Market Data and Key Metrics Changes - In Korea, revenue grew 3.6% year over year on a constant currency basis, primarily driven by advertising and IP adaptations [20] - Japan posted revenue growth of 9.4% on a constant currency basis, with all revenue streams contributing positively [22] - The rest of the world experienced a revenue decline of 4% year over year on a constant currency basis [24] Company Strategy and Development Direction - The company is focused on building a local creator ecosystem in Japan and expanding its cross-border strategy by taking Japanese content to other markets [6] - Investments are being made in the English language platform to enhance user experience and engagement [7][10] - The company aims to leverage its flywheel of creators, content, and users to generate profitable growth over the long term [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business model despite potential market downturns, citing a low average revenue per paying user [10] - The company anticipates revenue growth in the range of 2.2% to 5.2% for the second quarter of 2025 [29] - Management is closely monitoring market health and believes in the long-term growth potential of newer markets [35] Other Important Information - The company faced challenges with a security upgrade affecting search engine indexing, which contributed to a decline in web MAU [14] - The gross profit for the quarter was $71.6 million, resulting in a gross margin of 22%, down from 25.2% in the prior year [25] - The company is making significant changes to its English language web comic app to improve user engagement [60] Q&A Session Summary Question: User growth initiatives and investment cadence - Management highlighted strong long-term growth signs in newer markets, particularly a 19% increase in English-speaking platform MAU [35] Question: Importance of local content in local markets - Management emphasized the significance of local creator IP and partnerships to enhance global reach and engagement [39] Question: MAU decline in Korea and future growth potential - Management noted that while Korea has high penetration, constant currency revenue growth of 3.6% indicates potential for future growth [46] Question: Update on advertising revenue in North America - Management stated that North America advertising is still in early stages, with a focus on building foundational products for future growth [49] Question: Impact of global franchises on monetization - Management clarified that global franchises have historically contributed positively to the core paid content margin structure [53] Question: Security update on Wattpad and user impact - Management confirmed that Wattpad's issues significantly impacted total MAU declines, but it is not a major contributor to paid content revenue [66] Question: Engagement levels of licensed IP in the U.S. - Management indicated that engagement levels depend on the specific IP, but there is potential for licensed IP to drive user engagement [85]

Financial Data and Key Metrics Changes - The company reported a net loss of $22 million in Q1 2025 compared to a net income of $6.2 million in the prior year, primarily due to higher general and administrative expenses and increased marketing costs [13] - Adjusted EBITDA decreased to $4.1 million from $22.2 million year-over-year, with adjusted earnings per share dropping to $0.03 from $0.20 [26][27] - Revenue growth was 5.3% on a constant currency basis, but reported revenue was roughly flat year-over-year due to tough comparisons from Q1 2024 [12] Business Line Data and Key Metrics Changes - Paid content revenue grew by 2.8% on a constant currency basis, driven by strength in Japan, but was offset by declines in Korea and the rest of the world [16] - Advertising revenue increased by 13.6% on a constant currency basis, with strong performance in Korea and Japan, while the rest of the world saw a decline [17] - IP Adaptation revenue surged by 20.7% year-over-year on a constant currency basis, with significant growth in Japan [18] Market Data and Key Metrics Changes - In Japan, revenue grew by 9.4% on a constant currency basis, with all revenue streams contributing positively [22] - Korea experienced a revenue growth of 3.6% on a constant currency basis, driven by advertising and IP adaptations, despite a decline in paid content [20] - The rest of the world saw a revenue decline of 4% year-over-year, with significant drops in paid content and advertising [23] Company Strategy and Development Direction - The company is focused on expanding its presence in Japan and leveraging local content to drive growth in other markets [6] - Investments are being made in the English language platform to enhance user experience and engagement, with a focus on onboarding and content discovery [7][11] - The company aims to maintain a resilient business model that can withstand potential market downturns, emphasizing the value of microtransactions and free content [9][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate current macroeconomic uncertainties and highlighted the importance of ongoing investments in marketing and infrastructure [30] - The company anticipates revenue growth in Q2 2025 in the range of 2.2% to 5.2% on a constant currency basis, with adjusted EBITDA expected between $500,000 and $5.5 million [27][29] - Management remains optimistic about long-term growth prospects, particularly in newer markets and through product innovations [36] Other Important Information - The company is addressing a security issue that affected Wattpad, which contributed to a decline in MAU in the rest of the world [14][63] - A change in methodology by Nabor for measuring MAU in Korea has impacted reported metrics, but the company believes this will not affect long-term growth potential [21][44] Q&A Session Summary Question: User growth initiatives and investment cadence - Management highlighted strong long-term growth signs in newer markets, particularly a 19% increase in English-speaking platform MAU, driven by content flow and product innovation [35] Question: Importance of local content in local markets - Management emphasized the significance of local creator IP and the ability to publish globally, showcasing successful adaptations and partnerships [39] Question: MAU decline in Korea and future growth potential - Management noted that while Korea has high penetration, the focus should be on constant currency revenue growth, which was positive despite MAU fluctuations [44] Question: Update on advertising revenue in North America - Management indicated that North America remains a significant opportunity, with ongoing investments in product and selling organization to drive future growth [47] Question: Impact of global franchises on monetization - Management stated that global franchises enhance the core paid content margin structure and attract a larger audience [52] Question: Changes to the English app and product rollout - Management confirmed extensive product innovations based on global learnings, with promising results from AB testing indicating significant potential for user engagement [56][72] Question: Security update on Wattpad and user impact - Management clarified that Wattpad's issues primarily affected MAU but did not significantly impact paid content revenue, and they are working to resolve these issues [63] Question: Engagement of licensed IP in the U.S. market - Management noted that engagement levels depend on the specific IP, but there is potential for licensed IP to drive user engagement and attract new users [81]

Financial Performance - Total revenue for Q1 2025 was $325.7 million, a decline of 0.3% year-over-year, with a constant currency growth of 5.3% to $343.8 million[6] - Net loss for Q1 2025 was $22.0 million, compared to a net income of $6.2 million in the prior year, attributed to higher general and administrative expenses and increased marketing costs[6] - Adjusted EBITDA for Q1 2025 was $4.1 million, down from $22.2 million in the prior year, resulting in an adjusted EBITDA margin of 1.3% compared to 6.8%[6] - The company reported a diluted loss per share of $0.17, compared to diluted earnings per share of $0.06 in the prior year[6] - Operating loss for the same period was $26,634 thousand, compared to an operating income of $14,188 thousand in the prior year[24] - Net loss attributable to WEBTOON Entertainment Inc. was $22,389 thousand for Q1 2025, compared to a net income of $6,192 thousand in Q1 2024[24] - Total comprehensive loss for Q1 2025 was $15,540 thousand, compared to a total comprehensive loss of $22,465 thousand in Q1 2024[24] - Net income for Q1 2025 was a loss of $21,969,000 compared to a profit of $6,233,000 in Q1 2024[34] - Net income margin decreased to (6.7)% in Q1 2025 from 1.9% in Q1 2024[34] - Adjusted EBITDA margin fell to 1.3% in Q1 2025 compared to 6.8% in Q1 2024[34] Cash and Debt Position - Cash and cash equivalents stood at approximately $550.1 million, with no debt reported[6] - Cash and cash equivalents at the end of Q1 2025 were $550,136 thousand, down from $572,402 thousand at the beginning of the year[29] Revenue Breakdown - Paid content revenue decreased by 2.5% to $260,226 thousand in Q1 2025 from $266,855 thousand in Q1 2024[33] - Advertising revenue increased by 7.8% to $39,898 thousand in Q1 2025, compared to $36,996 thousand in Q1 2024[33] Future Guidance - The company expects revenue growth on a constant currency basis in the range of 2.2%-5.2%, translating to revenue between $335 million and $345 million for Q2 2025[7] - Adjusted EBITDA guidance for Q2 2025 is projected to be between $0.5 million and $5.5 million, indicating an adjusted EBITDA margin of 0.1%-1.6%[7] User Engagement and Content Expansion - WEBTOON Entertainment has approximately 150 million monthly active users, indicating a strong user engagement within its ecosystem[10] - Major global franchises such as 'Godzilla' and 'Sonic the Hedgehog' have been added to the platform, expanding the content library[3] Marketing and Expenses - The company incurred marketing expenses of $31,543 thousand in Q1 2025, significantly higher than $19,478 thousand in Q1 2024[24] - Stock-based compensation expense increased significantly to $17,035,000 in Q1 2025 from $2,226,000 in Q1 2024[34] Other Financial Metrics - The average revenue per paying user (ARPPU) in Korea decreased by 5.3% to $7.5 in Q1 2025 from $7.9 in Q1 2024[33] - Interest income for Q1 2025 was $(5,113,000), compared to $(1,235,000) in Q1 2024, indicating a worsening in interest income[34] - Depreciation and amortization expenses were $8,437,000 in Q1 2025, slightly down from $9,035,000 in Q1 2024[34] - Weighted average shares outstanding increased to 129,598,942 in Q1 2025 from 109,505,160 in Q1 2024[34]

Core Insights - WEBTOON Entertainment reported first quarter results for 2025, with total revenue of $325.7 million, a slight decline of 0.3% year-over-year, but a growth of 5.3% on a constant currency basis [1][6][3] - The company experienced a net loss of $22.0 million, compared to a net income of $6.2 million in the previous year, attributed to increased general and administrative expenses and higher marketing costs [1][6][3] - Adjusted EBITDA was $4.1 million, down from $22.2 million in the prior year, with an adjusted EBITDA margin of 1.3% compared to 6.8% in the previous year [1][6][3] Financial Performance - Total revenue of $325.7 million showed a decline of 0.3%, driven by a decrease in Paid Content revenue, partially offset by growth in Advertising and IP Adaptations [6][3] - Revenue on a constant currency basis was $343.8 million, reflecting a growth of 5.3%, supported by all three revenue streams: Paid Content, Advertising, and IP Adaptations [6][3] - The company reported a diluted loss per share of $0.17, compared to diluted earnings per share of $0.06 in the prior year [6][3] Operational Highlights - The CEO highlighted the implementation of product enhancements on the English-language platform, including AI-powered discovery features, aimed at improving user experience [3] - Major global franchises such as 'Godzilla' and 'Sonic the Hedgehog' were introduced to the platform, indicating a strategy to expand the content library [3] - The company maintains a strong balance sheet with cash and cash equivalents of approximately $550.1 million and no debt [1][6] Future Outlook - For the second quarter of 2025, the company expects revenue growth on a constant currency basis in the range of 2.2%-5.2%, translating to revenue between $335 million and $345 million [7] - Adjusted EBITDA is projected to be in the range of $0.5 million to $5.5 million, representing an adjusted EBITDA margin of 0.1%-1.6% [7]

Core Viewpoint - WEBTOON Entertainment Inc. plans to report its first quarter 2025 financial results on May 13, 2025, after market close, followed by a conference call to discuss the results [1]. Company Overview - WEBTOON Entertainment is a leading global entertainment company known for its storytelling platforms and is a pioneer in the mobile webcomic format [3]. - The company has transformed comics and visual storytelling, catering to both fans and creators [3]. User Engagement and Content Ecosystem - WEBTOON Entertainment boasts approximately 160 million monthly active users, indicating a strong user engagement [5]. - The company's IP & Creator Ecosystem includes various aligned brands and platforms such as WEBTOON, Wattpad, and several studios, enhancing its content offerings [5]. Partnerships and Adaptations - WEBTOON adaptations are available on major streaming platforms like Netflix, Prime Video, and Crunchyroll, showcasing the company's reach in the entertainment industry [4]. - The company collaborates with notable content partners, including Discord, HYBE, and DC Comics, to expand its influence and content diversity [4].