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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Total Revenue $378 million, up 8.7% (9.1% on a constant currency basis) year-over-year. Growth driven by paid content and IP adaptations, partially offset by a decline in advertising.
Net Loss $11.1 million compared to a net income of $20.0 million in the prior year. Change due to lower other income and higher income tax expense.
Adjusted EBITDA $5.1 million compared to $28.9 million in the prior year. Decline attributed to increased costs and lower other income.
Adjusted Earnings Per Share $0.04 compared to $0.22 in the prior year. Decline due to lower adjusted EBITDA and higher income tax expense.
Advertising Revenue Decreased 8.9% year-over-year on a constant currency basis. Decline in Korea and Rest of World, partially offset by growth in Japan.
IP Adaptations Revenue Increased 171.8% year-over-year on a constant currency basis. Growth driven by theatrical release of 'My Daughter is a Zombie' in Korea and other adaptations.
Gross Profit $82.8 million, down 9.4% year-over-year. Gross margin declined to 21.9% from 26.3% due to reclassification of expenses and increased labor costs.
Global Monthly Active Users (MAU) Declined 8.5% year-over-year, primarily due to Wattpad being impacted by a government ban in two countries.
Korea Revenue Grew 22.2% year-over-year on a constant currency basis. Growth driven by triple-digit growth in IP adaptations, offset by declines in advertising and paid content.
Japan Revenue Grew 2% year-over-year on a constant currency basis. Growth in paid content and advertising, offset by a decline in IP adaptations.
Rest of World Revenue Declined 0.7% year-over-year on a constant currency basis. Decline in advertising offset by growth in paid content and IP adaptations.
Digital Comics Platform with Disney: WEBTOON Entertainment announced a nonbinding term sheet with Disney to develop a new digital comics platform featuring over 35,000 comics from Disney's portfolio, including Marvel, Star Wars, Pixar, and more.
Short-form Video Innovations: Launched 'Video Episode' on the English platform and 'Cuts' in Korea, enhancing user engagement with motion, sound effects, and short-form animated videos.
IP Adaptations: Announced plans to co-produce 10 WEBTOON series with Warner Bros. Animation for global distribution and highlighted successful theatrical and streaming releases of titles like 'My Daughter is a Zombie' and 'Chicken Nugget.'
English-speaking Market Growth: WebComic app MAU in English-speaking markets grew by 12% year-over-year, driven by reformat title launches and product changes.
Japan Market Expansion: LINE Manga maintained its position as the #1 app for revenue in Japan for the third consecutive quarter, with MAU increasing by 12.6% year-over-year.
Revenue Growth: Total revenue increased by 8.7% year-over-year to $378 million, with growth in paid content and IP adaptations offset by a decline in advertising.
ARPU Growth: ARPU grew by 3% on a constant currency basis, with increases across all regions.
Wattpad Stability: Resolved search engine indexing issues, leading to sequential stability in Wattpad MAU despite prior government bans in two countries.
Collaboration with Disney: Entered into a nonbinding term sheet for Disney to acquire a 2% equity interest in WEBTOON Entertainment, strengthening their partnership.
Cross-border Content Distribution: Invested in labor and infrastructure to improve platform capabilities, aiming for long-term gross margin improvement.
Net Loss and Decline in Profitability: The company reported a net loss of $11.1 million compared to a net income of $20 million in the prior year. This was attributed to lower other income and higher income tax expenses. Adjusted EBITDA also declined significantly from $28.9 million to $5.1 million.
Decline in Advertising Revenue: Advertising revenue decreased by 8.9% year-over-year on a constant currency basis, with declines in Korea and Rest of World. This was partially due to a decline from a major e-commerce advertising partner in Korea.
Global MAU Decline: Global Monthly Active Users (MAU) declined by 8.5%, primarily driven by the impact of a government ban in two countries affecting Wattpad. This decline in MAU could impact user engagement and revenue generation.
Wattpad Challenges: Wattpad continues to face challenges, including a government ban in two countries and earlier search engine indexing issues. While the indexing issue has been resolved, Wattpad's MAU remains a concern.
Pressure on IP Adaptations Revenue: While IP adaptations saw growth in some regions, there was a decline in Japan. Additionally, the company anticipates pressure on IP adaptations revenue in Q4 due to the timing of milestones.
Gross Margin Decline: Gross margin declined from 26.3% to 21.9% year-over-year, impacted by increased labor costs and reclassification of Freepoint expenses from marketing to cost of revenue.
Revenue Decline Forecast for Q4 2025: The company expects a revenue decline of 5.1% to 2.3% on a constant currency basis for Q4 2025, with anticipated revenue in the range of $330 million to $340 million. This includes pressure from IP adaptations and infrastructure updates.
Decline in Korea Paid Content Revenue: Korea experienced a single-digit constant currency decline in paid content revenue, which could impact overall revenue growth.
Rest of World Advertising Decline: Advertising revenue in the Rest of World region saw a double-digit decline, further impacting the company's overall advertising revenue.
Increased Costs and Expenses: The company reported higher costs in areas such as labor and marketing, which contributed to the decline in gross margin and profitability.
Revenue Guidance for Q4 2025: Expected revenue decline in the range of 5.1% to 2.3% on a constant currency basis, representing anticipated revenue in the range of $330 million to $340 million.
Adjusted EBITDA Guidance for Q4 2025: Anticipated adjusted EBITDA loss in the range of $6.5 million to $1.5 million, representing an adjusted EBITDA margin in the range of negative 2% to negative 0.4%.
Future Product Flow: Infrastructure updates are expected to be completed in Q4 2025, with improved product flow anticipated starting in early 2026.
Marketing Investments: The company plans to maintain its investment in marketing to drive future growth.
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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