Core Viewpoint - Grabar Law Office is investigating claims against WEBTOON Entertainment Inc. regarding potential breaches of fiduciary duties by certain officers and directors, linked to misleading statements made during the company's IPO [2][3]. Group 1: Allegations of Misleading Information - WEBTOON allegedly misrepresented the health of its business at the time of its IPO by claiming that Monthly Active Users (MAU) were stable and rebounding, despite internal data indicating a sharp decline in MAUs in Korea and globally [3][4]. - The complaint asserts that WEBTOON failed to disclose a delay in an AI recommendation tool that contributed to weakening user engagement, which was critical for the company's performance [3][4]. - The court found that WEBTOON's statements created a misleading impression of stability and growth, while the company was aware of deteriorating MAU levels [4][7]. Group 2: Court Rulings and Legal Proceedings - On November 14, 2025, the U.S. District Court for the Central District of California denied the defendants' motion to dismiss the securities fraud class action, allowing the case to proceed [4][6]. - The court determined that the plaintiff adequately alleged that WEBTOON's risk disclosures were misleading, as the company only warned that MAU declines and foreign currency fluctuations "could" occur, despite these risks already materializing [5][7]. - The court allowed claims related to misleading risk disclosures and the failure to disclose known adverse information to proceed under securities laws [5][7].

User Metrics - As of September 30, 2025, global Monthly Active Users (MAU) decreased by approximately 8.5% year-over-year to 155.4 million, with notable declines in Korea and Rest of World[126] - In Korea, MAU was approximately 24.6 million, down from 28.1 million in the same quarter of 2024, reflecting a significant decline[126] - Japan's MAU increased to 25.3 million, up from 22.5 million year-over-year, driven by growth in eBookJapan and increased marketing investments[127] - Rest of World MAU decreased to 105.5 million from 119.3 million, primarily due to government bans on Wattpad and a security upgrade affecting search traffic[128] Revenue and Financial Performance - Revenue for the three months ended September 30, 2025, increased by 8.7% to $378,041,000 compared to $347,915,000 in the same period of 2024[150] - Revenue for the nine months ended September 30, 2025, increased by 5.7% to $1,052,019,000 compared to $995,631,000 in the same period of 2024[160] - Total revenue for Q3 2025 was $378.0 million, an increase of 8.7% compared to $347.9 million in Q3 2024[181] - Paid content revenue reached $286.8 million in Q3 2025, a slight increase of 0.6% from $285.2 million in Q3 2024[181] - Advertising revenue decreased by 9.3% to $39.4 million in Q3 2025, down from $43.4 million in Q3 2024[181] - IP adaptations revenue surged by 168.7% to $51.9 million in Q3 2025, compared to $19.3 million in Q3 2024[181] User Monetization - Global Monthly Paying Users (MPU) reached 7.7 million with a paying ratio of 5.0%, an increase of 0.3% compared to the previous year[131] - In Korea, MPU decreased to around 3.7 million, but the paying ratio increased to 14.9%, up from 13.8% year-over-year[132] - Average Revenue per Paying User (ARPPU) increased to $12.4, reflecting a 2.8% growth compared to the same quarter of 2024, driven by a strategic shift from web to app[135] - ARPPU in Japan reached $23.6, a 2.4% increase year-over-year, indicating strong monetization in that market[136] Expenses and Losses - Cost of revenue rose by 15.1% to $295,267,000 for the three months ended September 30, 2025, up from $256,534,000 in 2024[152] - Marketing expenses increased by 7.5% to $35,166,000 for the three months ended September 30, 2025, compared to $32,719,000 in 2024[153] - General and administrative expenses decreased by 6.4% to $62,486,000 for the three months ended September 30, 2025, down from $66,747,000 in 2024[154] - Net loss for the three months ended September 30, 2025, was $11,050,000, a decrease of 155.3% compared to a net income of $19,986,000 in 2024[150] - The company reported a net loss of $36.9 million for the nine months ended September 30, 2025, adjusted for non-cash items totaling $60.3 million[188] Cash Flow and Investments - Net cash provided by operating activities for the nine months ended September 30, 2025, was $3.6 million, down from $26.5 million in the same period of 2024[187] - As of September 30, 2025, the company had $584.6 million in cash and cash equivalents, primarily invested in short-term, highly liquid investments[185] - For the nine months ended September 30, 2025, net cash used in investing activities was $5.0 million, with significant payments for intangible assets and property[189] Future Outlook - The company anticipates future capital requirements will depend on growth rate and sales activities, with potential needs for additional financing[186] - The company believes that non-GAAP measures like Adjusted EBITDA and revenue on a constant currency basis provide useful insights into performance by excluding foreign currency volatility[179] - The company emphasizes that non-GAAP measures should not be considered in isolation from GAAP measures, as they have limitations[171]

Group 1: Market Overview - Major U.S. equities indexes experienced a decline, with technology shares significantly impacting the Nasdaq, which fell nearly 2% [1] - The S&P 500 and Dow Jones Industrial Average also reported lower performance following the end of the longest federal shutdown in U.S. history [1] Group 2: Company Performance - Cisco Systems (CSCO) saw its stock surge over 4% after the company raised its full-year profit outlook [3] - The Walt Disney Co. (DIS) shares dropped 9% due to weaker-than-expected revenue, particularly in its linear TV networks business [2] - Flutter Entertainment (FLUT) stock fell 11% after the company revised its full-year revenue and adjusted EBITDA forecasts downward [2] - WEBTOON Entertainment (WBTN) shares plummeted 25% after projecting a decline in fourth-quarter revenue [2] - Sealed Air (SEE) shares soared 19% following reports of potential talks with private-equity firm Clayton Dubilier & Rice for a private acquisition [3] - Firefly Aerospace (FLY) shares jumped 17% after posting better-than-expected results and a positive full-year revenue projection [3] Group 3: Commodity and Currency Movements - Oil futures rose nearly 1%, trading just above $59 per barrel [3] - Gold futures remained relatively unchanged at around $4,200 per ounce [3] - The yield on the 10-year Treasury note increased to 4.10% [3] - The U.S. dollar weakened against the euro, pound, and yen [3] - Cryptocurrency prices were mixed, with Bitcoin trading under $101,000 [3]

Core Insights - WEBTOON Entertainment Inc. (Nasdaq: WBTN) is a digital entertainment company specializing in web-based comics and storytelling, facing financial challenges despite its innovative platform [1] Financial Performance - For Q3 2025, WBTN reported an earnings per share (EPS) of -$0.09, missing the estimated EPS of -$0.04, indicating negative earnings with a price-to-earnings (P/E) ratio of approximately -21.86 [2][6] - The actual revenue for the third quarter was approximately $378 million, below the estimated $384.7 million, but the company achieved a revenue growth of 8.7%, with a constant currency revenue increase of 9.1%, primarily driven by Paid Content and IP Adaptations, despite a decline in Advertising revenue [3][6] - WBTN reported a net loss of $11.1 million but delivered an adjusted EBITDA of $5.1 million, surpassing the midpoint of its guidance range, indicating some ability to generate positive earnings before interest, taxes, depreciation, and amortization [4][6] Balance Sheet Strength - The company maintains a strong balance sheet with cash and cash equivalents totaling approximately $584.6 million and no debt, reflected in a low debt-to-equity ratio of about 0.018 and a current ratio of approximately 2.54, suggesting a strong ability to cover short-term liabilities [5]

Core Insights - Webtoon Entertainment (WBTN) reported revenue of $378.04 million for the quarter ended September 2025, reflecting an 8.7% increase year-over-year, but fell short of the Zacks Consensus Estimate by -1.35% [1] - The company's EPS was $0.04, a decrease from $0.22 in the same quarter last year, aligning with the consensus estimate [1] Financial Performance - Webtoon’s revenue breakdown includes: - Paid Content Revenue: $286.81 million, below the average estimate of $306.04 million [4] - IP Adaptations Revenue: $51.86 million, exceeding the average estimate of $26.31 million [4] - Advertising Revenue: $39.37 million, also below the average estimate of $51.09 million [4] - Monthly Active Users (MAU) totaled 155.4 million, lower than the estimated 164.82 million [4] - Monthly Paying Users (MPU) were reported as follows: - Korea: 3.7 million, slightly above the estimate of 3.69 million [4] - Japan: 2.3 million, below the estimate of 2.51 million [4] - Total MPU: 7.7 million, below the average estimate of 7.93 million [4] - Paying Ratios: - Korea: 14.9%, above the estimate of 14.1% [4] - Japan: 9.1%, below the estimate of 10.6% [4] - Rest of World: 1.6%, slightly above the estimate of 1.5% [4] Market Performance - Webtoon shares have returned -5.3% over the past month, contrasting with the Zacks S&P 500 composite's +4.6% change [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), suggesting potential for outperformance in the near term [3]

Core Viewpoint - Webtoon Entertainment reported quarterly earnings of $0.04 per share, matching the Zacks Consensus Estimate, but down from $0.22 per share a year ago [1] - The company posted revenues of $378.04 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 1.35% [2] Financial Performance - Webtoon surpassed consensus EPS estimates three times over the last four quarters [2] - The company has also topped consensus revenue estimates three times in the same period [2] - Year-over-year revenue growth was observed, increasing from $347.92 million [2] Stock Performance - Webtoon shares have increased approximately 21.4% since the beginning of the year, outperforming the S&P 500's gain of 16.4% [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating expectations for outperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.09, with projected revenues of $392.11 million, and for the current fiscal year, the EPS estimate is $0.24 on revenues of $1.45 billion [7] - The estimate revisions trend for Webtoon was favorable ahead of the earnings release, suggesting potential positive movements in stock performance [6] Industry Context - The Internet - Content industry, to which Webtoon belongs, is currently ranked in the bottom 16% of over 250 Zacks industries, which may impact stock performance [8]

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2025 was $5.1 million, down from $28.9 million in the same quarter of 2024 [10][18] - Total revenue reached $378 million, an increase of 8.7% year-over-year, or 9.1% on a constant currency basis [4][10] - Net loss for the quarter was $11.1 million compared to a net income of $20 million in the prior year [10][19] - Adjusted earnings per share was $0.04, down from $0.22 in the prior year [20] Business Line Data and Key Metrics Changes - Revenue from paid content grew by 0.8% on a constant currency basis, driven by strength in Japan and the rest of the world, but offset by a decline in Korea [12] - Advertising revenue decreased by 8.9% on a constant currency basis, with declines in Korea and the rest of the world [13] - IP adaptations revenue increased by 171.8% year-on-year on a constant currency basis, driven by theatrical releases in Korea [14] Market Data and Key Metrics Changes - In Korea, revenue grew by 22.2% year-over-year on a constant currency basis, despite a decline in advertising [15] - Japan's revenue growth was 2% year-over-year, with MAU increasing by 12.6% [16] - The rest of the world saw a revenue decline of 0.7% year-over-year, primarily due to advertising declines [17] Company Strategy and Development Direction - The company is focusing on expanding its partnership with Disney to develop a new digital comics platform featuring over 35,000 comics [5][6] - The launch of video episodes aims to enhance user engagement and attract new users [6][7] - The company plans to co-produce 10 fan-favorite WEBTOON series with Warner Bros. Animation for global distribution [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver growth despite challenges, citing strong partnerships and product innovations [21] - The guidance for Q4 2025 anticipates a revenue decline of 5.1% to 2.3% on a constant currency basis, with expected revenue between $330 million and $340 million [20] - Management highlighted the importance of IP adaptations for user engagement and revenue growth [9][38] Other Important Information - The company is experiencing a decline in overall MAU by 8.5%, primarily due to issues with Wattpad [11][31] - Gross profit for the quarter declined by 9.4%, resulting in a gross margin of 21.9% compared to 26.3% in the prior year [18] Q&A Session Summary Question: Can you elaborate on the long-term vision of the Disney partnership? - Management indicated that the collaboration with Disney is still in early stages and aims to create original stories while maintaining the fundamental margin structure of the business [24][25] Question: What early engagement or monetization metrics are you seeing with video episodes? - Management noted that it is too early to provide specific metrics but expressed optimism about the potential of video episodes to enhance user engagement [26][27] Question: Any updates on the Warner partnership and its economic terms? - Management stated that while they are excited about the partnership with Warner Bros. Animation, they are not ready to disclose specific economic terms yet [28][30] Question: How should we think about web novel users going forward? - Management acknowledged that Wattpad is a significant driver of MAU declines but emphasized its importance as a source of IP [31][33] Question: Can you discuss the drivers of the Q4 guidance? - Management explained that the anticipated revenue decline is primarily due to the timing of IP adaptations and not a fundamental business health issue [36][38]

Financial Performance - Total revenue for Q3 2025 was $378.0 million, an increase of 8.7% year-over-year, with a constant currency growth of 9.1%[6] - Net loss for the quarter was $11.1 million, compared to a net income of $20.0 million in Q3 2024[6] - Adjusted EBITDA was $5.1 million, down from $28.9 million in the prior year, resulting in an Adjusted EBITDA Margin of 1.4%[6] - Adjusted Earnings Per Share for Q3 2025 was $0.04, down from $0.22 in the prior year[6] - For Q4 2025, the company expects revenue to decline in the range of $330-$340 million, with an Adjusted EBITDA loss projected between $6.5 million and $1.5 million[7] - The company reported a basic loss per share of $0.09 for Q3 2025, compared to earnings of $0.15 per share in Q3 2024[39] - The net income margin for Q3 2025 was (2.9)%, a decline from 5.7% in Q3 2024, indicating a significant drop in profitability[39] - For the nine months ended September 30, 2025, the net loss was $36,902,000, an improvement from a loss of $50,349,000 in the same period of 2024[39] Cash and Assets - The company has approximately $584.6 million in cash and cash equivalents, with no debt[1] - Cash and cash equivalents increased to $584,575 as of September 30, 2025, compared to $572,402 as of December 31, 2024[26] - Total assets as of September 30, 2025, were $1,977,871, an increase from $1,935,334 as of December 31, 2024[27] - Total current liabilities increased to $334,260 as of September 30, 2025, from $313,224 as of December 31, 2024, reflecting a rise of 6.6%[27] Revenue Breakdown - Total revenue for the nine months ended September 30, 2025, increased by 5.7% to $1,052,019 thousand compared to $995,631 thousand in 2024[37] - Revenue on a Constant Currency Basis for the nine months ended September 30, 2025, was $1,076,043 thousand, reflecting an 8.1% increase from $995,486 thousand in 2024[37] - Paid Content Revenue for the nine months ended September 30, 2025, was $821,953 thousand, a 1.1% increase from $812,791 thousand in 2024[37] - IP Adaptations Revenue surged by 70.2% to $105,581 thousand for the nine months ended September 30, 2025, compared to $62,040 thousand in 2024[37] Operating Activities - Net cash provided by operating activities for the nine months ended September 30, 2025, was $3,578 thousand, down from $26,539 thousand in 2024[32] - Net cash used in investing activities for the nine months ended September 30, 2025, was $(5,029) thousand, compared to $(11,230) thousand in 2024[33] - Net cash provided by financing activities for the nine months ended September 30, 2025, was $1,407 thousand, significantly lower than $353,668 thousand in 2024[33] Marketing and Expenses - Marketing expenses for the three months ended September 30, 2025, were $35,166, an increase from $32,719 in the same period of 2024[29] - The company incurred stock-based compensation expenses of $9,625,000 in Q3 2025, down from $12,262,000 in Q3 2024[39] User Engagement - The company has approximately 155 million monthly active users, indicating a strong user base for its platforms[12] Strategic Partnerships - WEBTOON Entertainment is expanding its relationship with Disney, including a non-binding agreement for Disney to acquire a 2% equity interest[3] - The company plans to co-produce 10 animated projects with Warner Bros. Animation for global distribution[5] Foreign Currency and Interest - The company reported a foreign currency translation adjustment loss of $21,116 for the three months ended September 30, 2025[29] - Interest income for the three months ended September 30, 2025, was $4,638, a decrease from $6,512 in the same period in 2024[29] - Total interest income decreased to $(4,638,000) in Q3 2025 from $(6,512,000) in Q3 2024, while interest expense remained minimal at $2,000[39]

Core Insights - WEBTOON Entertainment reported a third quarter revenue growth of 8.7%, with a constant currency growth of 9.1%, driven by Paid Content and IP Adaptations [1][6][3] - The company experienced a net loss of $11.1 million, a significant decline from a net income of $20.0 million in the prior year, attributed to lower other income and higher income tax expenses [6][3] - Adjusted EBITDA was $5.1 million, down from $28.9 million in the previous year, resulting in an Adjusted EBITDA Margin of 1.4% compared to 8.3% [6][3] Financial Performance - Total revenue for the third quarter was $378.0 million, with Paid Content and IP Adaptations contributing to the growth, while Advertising revenue declined [6][3] - The diluted loss per share was $0.09, compared to diluted earnings per share of $0.15 in the prior year [6][3] - Cash and cash equivalents stood at approximately $584.6 million, with no debt reported [1][6] Strategic Developments - The company is expanding its relationship with Disney, including a non-binding agreement for Disney to acquire a 2% equity interest in WEBTOON Entertainment [3] - WEBTOON announced plans to co-produce 10 animated projects with Warner Bros. Animation for global distribution [8] Future Outlook - For the fourth quarter of 2025, the company expects Adjusted EBITDA guidance to include $16.5 million in non-cash expenses [4]

Core Insights - Webtoon Entertainment (WBTN) is a significant player in the digital storytelling space, focusing on comics and cartoons, and is preparing to announce its quarterly earnings on November 12, 2025, with an estimated EPS of approximately -$0.04 and projected revenue of around $384.7 million [1] Stock Performance - WBTN's stock has experienced a decline of 9.4% over the past two weeks, but a hammer chart pattern has emerged, indicating a potential trend reversal and suggesting that the stock may have found support [2] - The technical signal from the hammer pattern often points to a bottoming out of the stock, with a likely reduction in selling pressure [2] Analyst Sentiment - Wall Street analysts are optimistic about WBTN's future, with a strong consensus on raising earnings estimates, supporting the possibility of a trend reversal for the stock in the near term [3] - Despite a negative P/E ratio of -21.42, the price-to-sales ratio of 1.57 indicates that investors are willing to pay $1.57 for every dollar of sales [3] Financial Ratios - WBTN's enterprise value to sales ratio is approximately 1.16, reflecting the company's valuation relative to its sales [4] - The enterprise value to operating cash flow ratio is around -91.53, highlighting significant negative cash flow from operations, while the earnings yield is approximately -4.67%, indicating negative earnings [4] - The company maintains a low debt-to-equity ratio of about 0.018, suggesting a low level of debt relative to equity [4] Liquidity Position - WBTN's current ratio is approximately 2.54, indicating a strong liquidity position to cover its short-term liabilities, which may provide the company with the flexibility to navigate current challenges and capitalize on potential growth opportunities in the digital content market [5]