Webtoon Entertainment Inc.(WBTN) - 2025 Q2 - Quarterly Report

PART I-FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for WEBTOON Entertainment Inc. Item 1. Unaudited Financial Statements This section presents the unaudited condensed consolidated financial statements for WEBTOON Entertainment Inc. as of June 30, 2025, including balance sheets, statements of operations, statements of stockholders' equity, and statements of cash flows. Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $2.01 billion, total liabilities grew to $411.8 million, and total equity rose to $1.56 billion. Condensed Consolidated Balance Sheet Highlights (As of June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (in thousands USD) | December 31, 2024 (in thousands USD) | | :--- | :--- | :--- | | Total Assets | $2,009,759 | $1,935,334 | | Total current assets | $862,018 | $836,372 | | Goodwill, net | $685,690 | $665,275 | | Total Liabilities | $411,802 | $378,873 | | Total current liabilities | $339,848 | $313,224 | | Total Equity | $1,560,280 | $1,519,881 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q2 2025, revenue grew to $348.3 million, and net loss significantly reduced to $3.9 million from $76.6 million in Q2 2024, primarily due to decreased general and administrative expenses. Statement of Operations Summary (Three Months Ended June 30) | Metric | 2025 (in thousands USD) | 2024 (in thousands USD) | | :--- | :--- | :--- | | Revenue | $348,271 | $320,972 | | Cost of revenue | $(260,992) | $(237,915) | | General and administrative expenses | $(64,972) | $(138,705) | | Operating income (loss) | $(8,763) | $(79,096) | | Net income (loss) | $(3,883) | $(76,568) | | Basic & Diluted EPS | $(0.03) | $(0.70) | Statement of Operations Summary (Six Months Ended June 30) | Metric | 2025 (in thousands USD) | 2024 (in thousands USD) | | :--- | :--- | :--- | | Revenue | $673,978 | $647,716 | | Cost of revenue | $(515,088) | $(482,300) | | General and administrative expenses | $(131,674) | $(187,398) | | Operating income (loss) | $(35,397) | $(64,908) | | Net income (loss) | $(25,852) | $(70,335) | | Basic & Diluted EPS | $(0.21) | $(0.64) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased from $1.52 billion at the start of 2025 to $1.56 billion by June 30, driven by foreign currency adjustments and equity-based compensation. - Total equity attributable to WEBTOON Entertainment Inc. increased from $1.47 billion on January 1, 2025, to $1.51 billion on June 30, 2025[27] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $13.0 million, with cash and cash equivalents increasing by $9.1 million to $581.5 million. Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 (in thousands USD) | 2024 (in thousands USD) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(12,951) | $22,394 | | Net cash provided by (used in) investing activities | $5,711 | $(7,306) | | Net cash provided by (used in) financing activities | $229 | $336,053 | | Net increase (decrease) in cash | $9,144 | $340,560 | | Cash and cash equivalents at end of period | $581,546 | $572,305 | Notes to the Condensed Consolidated Financial Statements Detailed notes cover revenue disaggregation, geographical markets, legal proceedings, and stock-based compensation, with Paid Content and Japan as key revenue drivers. Revenue by Stream (Three Months Ended June 30) | Revenue Stream | 2025 (in thousands USD) | 2024 (in thousands USD) | | :--- | :--- | :--- | | Paid Content | $274,913 | $260,709 | | Advertising | $45,220 | $40,419 | | IP Adaptations | $28,138 | $19,844 | | Total | $348,271 | $320,972 | Revenue by Geography (Three Months Ended June 30) | Geography | 2025 (in thousands USD) | 2024 (in thousands USD) | | :--- | :--- | :--- | | Korea | $125,746 | $118,067 | | Japan | $177,881 | $156,221 | | Rest of World | $44,644 | $46,684 | | Total | $348,271 | $320,972 | - The company is facing a putative class action lawsuit filed on September 5, 2024, alleging that the IPO Registration Statement was materially false and misleading, and the company intends to defend the case vigorously[63] - Total stock-based compensation expense was $25.5 million for the six months ended June 30, 2025, a significant decrease from $57.7 million in the same period of 2024[67] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses key business metrics, financial results, and liquidity, highlighting a decrease in global MAU but growth in ARPPU and significant reduction in net loss for Q2 2025. Key Business Metrics Global MAU decreased by 7.6% to 156.1 million in Q2 2025, while Global MPU remained stable, and Paid Content ARPPU grew 11.1% to $12.4. Key Operating Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Global MAU | 156.1 million | ~168.9 million | -7.6% | | - Korea MAU | 23.0 million | 25.8 million | -10.9% | | - Japan MAU | 22.6 million | 22.0 million | +2.7% | | - ROW MAU | 110.5 million | 121.1 million | -8.8% | | Global MPU | 7.4 million | ~7.7 million | -3.9% | | Paying Ratio | 4.7% | 4.6% | +0.1 ppt | | Global ARPPU | $12.4 | ~$11.16 | +11.1% | Results of Operations Q2 2025 revenue increased 8.5% to $348.3 million, and operating loss significantly narrowed to $8.8 million due to a 53.2% decrease in G&A expenses. Comparison of Operations (Three Months Ended June 30) | Metric (in thousands USD) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $348,271 | $320,972 | 8.5% | | Operating income (loss) | $(8,763) | $(79,096) | (88.9%) | | Net income (loss) | $(3,883) | $(76,568) | (94.9%) | - The decrease in G&A expenses for Q2 2025 was largely driven by a $43.2 million decrease in stock compensation expense and the non-recurrence of a $30.0 million one-time CEO bonus related to the successful IPO in 2024[154] Non-GAAP Financial Measures Adjusted EBITDA for Q2 2025 was $9.7 million, with a 2.8% margin, while constant currency revenue grew 5.5% year-over-year. Reconciliation of Net Loss to Adjusted EBITDA (Three Months Ended June 30) | Metric (in thousands USD) | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $(3,883) | $(76,568) | | EBITDA | $(1,216) | $(67,778) | | Adjusted EBITDA | $9,662 | $20,351 | | Adjusted EBITDA Margin | 2.8% | 6.3% | - On a constant currency basis, total revenue for the three months ended June 30, 2025, was $338.7 million, representing a 5.5% increase over the prior year period[184] Liquidity and Capital Resources The company held $581.5 million in cash and cash equivalents as of June 30, 2025, supported by IPO proceeds, and believes it has sufficient liquidity for the next 12 months. - The company completed its IPO on June 28, 2024, receiving net proceeds of approximately $281.7 million, and an additional $50 million from a concurrent private placement[185][186] - As of June 30, 2025, the company had $581.5 million in cash and cash equivalents[188] Cash Flow Summary (Six Months Ended June 30) | Activity (in thousands USD) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(12,951) | $22,394 | | Net cash provided by (used in) investing activities | $5,711 | $(7,306) | | Net cash provided by (used in) financing activities | $229 | $336,053 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's Annual Report for a detailed discussion of its market risks, indicating no material changes since that filing. - The company's disclosures about market risk are referenced from its Annual Report on Form 10-K[196] Item 4. Controls and Procedures Management concluded that disclosure controls were ineffective as of June 30, 2025, due to material weaknesses in accounting resources and period-end financial reporting processes, with remediation ongoing. - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[197] - Identified material weaknesses include: * Lacking a sufficient complement of resources with appropriate accounting knowledge and experience[198] * Ineffective design and maintenance of controls related to the period-end financial reporting and disclosure process[199] - Remediation efforts are ongoing, including onboarding U.S. GAAP and SEC reporting specialists and strengthening financial closing and reporting controls[201] PART II-OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits. Item 1. Legal Proceedings The company is involved in class action and shareholder derivative lawsuits alleging misleading IPO statements, which it intends to vigorously defend. - A putative class action lawsuit was filed on September 5, 2024, against the company, its directors, and IPO underwriters, alleging violations of the Securities Act of 1933 related to the IPO Registration Statement[206] - A shareholder derivative lawsuit was filed on November 15, 2024, against the company's directors based on similar allegations as the class action, which has been stayed pending the motion to dismiss in the class action case[207] Item 1A. Risk Factors There have been no material changes to the company's risk factors since the filing of its Annual Report on Form 10-K. - No material changes to the risk factors previously disclosed in the Annual Report have occurred[208] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period. - None[209] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the period. - None[209] Item 4. Mine Safety Disclosures This item is not applicable to the company. - Not Applicable[209] Item 5. Other Information There is no other information to report for the period. - None[210] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications. - Exhibits filed include: * Amended and Restated Certificate of Incorporation and By-Laws[211] * Certifications by the Principal Executive Officer and Principal Financial Officer[211] * Interactive Data Files (Inline XBRL)[211]