Core Viewpoint - The short drama industry is experiencing a transformation, leveraging classic IPs to attract audiences and generate buzz, despite initial skepticism about the format [1][5][28] Group 1: Short Drama Development - Short dramas have evolved from being overlooked to becoming a new avenue for content consumption, driven by the redistribution of content flow [1] - The adaptation of classic IPs into short dramas has sparked mixed feelings among audiences, reflecting a broader industry change [1][8] Group 2: Popularity of "Liang Jian" - "Liang Jian" is regarded as a classic military drama, achieving significant viewership upon its release in 2005, with an average rating of 11.42% in its first week [2] - The show has maintained its popularity over the years, with a high Douban score of 9.5, and its quotes have become internet memes, enhancing its cultural relevance [2][4] Group 3: Marketing and Audience Engagement - The announcement of a short drama titled "Shan He Hui Xiang," featuring the original cast of "Liang Jian," generated substantial online interest, with 827.8 million views on Douyin [5][8] - The marketing strategy capitalizes on the nostalgia associated with the original series, creating a buzz even before the show's release [5][8] Group 4: Industry Trends and Future Outlook - The short drama market is projected to grow significantly, with an estimated market size of 504.4 billion yuan by 2024, potentially surpassing the film market [24] - The user base for micro short dramas reached 5.76 million by mid-2024, indicating a growing acceptance and demand for this format [22][24] - Major platforms are increasingly investing in classic IP adaptations, reflecting a shift towards high-quality content in the short drama sector [25][28]

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]

WEBTOON Entertainment Inc. (NASDAQ:WBTN) Q4 2024 Earnings Conference Call February 25, 2025 4:30 PM ET Company Participants Soohwan Kim - Vice President, Investor Relations Junkoo Kim - Founder & Chief Executive Officer David Lee - Chief Financial Officer and Chief Operating Officer Yongsoo Kim - Chief Strategy Officer & Head of Global WEBTOON Conference Call Participants Mark Mahaney - Evercore Eric Sheridan - Goldman Sachs Benjamin Black - Deutsche Bank Matthew Cost - Morgan Stanley Andrew Marok - Raymond ...