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01/11 11:28
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several positive aspects: strong IP adaptations revenue growth, reduced G&A expenses, and a promising collaboration with Disney. Despite some declines in margins and regional revenue, the overall sentiment is optimistic due to strategic initiatives like market expansion, cross-border strategies, and user engagement improvements. The Q&A session further supports positive sentiment with expected long-term benefits from the Disney partnership and strong advertising outlook. The positive guidance and strategic focus on growth suggest a stock price increase in the short term, hence a positive rating.
Revenue Revenue grew 5.5% on a constant currency basis year-over-year, with reported revenue up 8.5%. This growth was driven by increases across all revenue streams.
Net Loss Net loss was $3.9 million compared to a net loss of $76.6 million in the prior year. This improvement was driven by lower G&A expenses associated with the IPO in the prior year quarter.
Adjusted EBITDA Adjusted EBITDA was $9.7 million compared to $20.4 million in the same quarter of 2024. The decline was not explicitly explained in the transcript.
Adjusted Earnings Per Share Adjusted earnings per share for the quarter was $0.07 compared to $0.18 in the prior year. The decline was not explicitly explained in the transcript.
App MAU App MAU declined 3.4% overall, but WebComic app MAU increased 4.8%, excluding the impact of web novel users. This growth was led by increases in English-speaking markets and most non-English markets.
Global MAU Global MAU was down 7.6%, primarily driven by declines in Korea and Rest of World, including Wattpad’s impact due to a government ban in one country and a new ban in another.
Paid Content Revenue Paid content revenue grew 2.0% on a constant currency basis year-over-year, driven by strength in Japan but offset by declines in Korea and Rest of World.
Advertising Revenue Advertising revenue posted 10.2% growth on a constant currency basis year-over-year, driven by growth in Korea and Japan, offset by a decline in Rest of World.
IP Adaptations Revenue IP adaptations revenue increased 42.6% year-over-year on a constant currency basis, driven by growth in Korea and Rest of World, offset by a decline in Japan.
Gross Profit Gross profit increased 5.1% to $87.3 million, benefiting from higher cross-border paid content growth in Japan and better advertising in Japan. Gross margin was 25.1%, down from 25.9% in the prior year.
G&A Expenses Total G&A expenses for the quarter were $65 million compared to $138.7 million in the prior year. The prior year included several one-time expenses related to the IPO.
Interest Income Interest income for the quarter was $4.9 million compared to $2 million in the prior year, reflecting an increase in interest earnings.
Depreciation and Amortization Depreciation and amortization for the quarter was $8.4 million compared to $8.9 million in the prior year, showing a slight decrease.
English-language WebComic app updates: Implemented significant product updates in May and June to enhance user experience, resulting in increased user activity.
New content launches: Launched popular Japanese manga titles like Fullmetal Alchemist and From Old Country Bumpkin to Master Swordsman, attracting millions of views.
Partnership with Disney: Teamed up with Disney to bring 100 blockbuster comics, including Amazing Spider-Man, Avengers, and Star Wars, to the platform. New original WEBTOON series are also in development.
English-speaking markets: English platform WebComic app MAU increased by 19% for the second consecutive quarter, showing strong growth.
Japan market: LINE manga was the #1 overall app for revenue, including mobile games, for the second consecutive quarter.
Revenue growth: Revenue grew 5.5% on a constant currency basis, with growth across all revenue streams.
Profitability: Gross profit increased by 5.1% to $87.3 million, with gross margin improving sequentially to 25.1%.
Advertising revenue: Posted 10.2% revenue growth year-over-year, driven by growth in Korea and Japan.
IP adaptations: Revenue increased 42.6% year-over-year, with a strong pipeline of 20 anime projects in Japan.
Wattpad challenges: Wattpad faced user declines due to government bans and search engine indexing issues, but remains a critical source of IP.
Global MAU Decline: Global Monthly Active Users (MAU) declined by 7.6% in the quarter, primarily driven by decreases in Korea and Rest of World regions. This decline could impact user engagement and revenue potential.
Wattpad Platform Challenges: Wattpad faced a government ban in one country and a new ban in another smaller market, leading to reduced MAU. Additionally, a security upgrade affected search engine indexing, causing lingering effects on user activity.
Revenue Decline in Rest of World: Rest of World revenue declined by 4.4% year-over-year on a constant currency basis, driven by decreases in paid content and advertising.
Korea MAU and MPU Decline: Korea's MAU decreased by 11.1% year-over-year, and Monthly Paying Users (MPU) declined by 8.5%, which could affect revenue growth in this key market.
Profitability Pressure: Adjusted EBITDA for the quarter was $9.7 million, a significant drop from $20.4 million in the prior year, indicating profitability challenges.
Dependence on Wattpad for IP: Wattpad, while not a significant revenue driver, is a critical source of intellectual property (IP). Challenges with Wattpad could impact the broader ecosystem and IP generation.
ARPU Growth Constraints: While ARPU grew in some regions, the relatively low ARPU for the amount of entertainment delivered indicates limited monetization efficiency.
IP Adaptation Revenue Fluctuations: Revenue from IP adaptations is dependent on achieving certain milestones, leading to variability and unpredictability in this revenue stream.
Revenue Growth: For Q3 2025, the company expects revenue growth in the range of 9.4% to 12.2% on a constant currency basis, representing anticipated revenue between $380 million and $390 million.
Adjusted EBITDA: Anticipated adjusted EBITDA for Q3 2025 is projected to be between $2 million and $7 million, with an adjusted EBITDA margin ranging from 0.5% to 1.8%.
Product Improvements: Infrastructure updates are expected to show improvement in product performance towards the end of the year.
Marketing Investments: The company plans to maintain its investment in marketing to drive future growth.
Content Expansion: The company is optimistic about the impact of greater diversity in content and product improvements on future performance.
The selected topic was not discussed during the call.
The earnings call summary shows mixed results: a strong increase in IP Adaptations revenue but declines in advertising revenue, gross profit, and MAUs. The Q&A revealed uncertainty and lack of details on key partnerships with Disney and Warner, and management's evasive responses likely raise concerns. Although the Disney partnership holds long-term potential, its immediate impact is unclear, and weak guidance for Q4 further dampens sentiment. Overall, these factors suggest a negative market reaction.
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