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.(WBTN) - 2025 Q1 - Earnings Call Transcript