WBTN.US

We need more time to get our financial results done

- Webtoon Entertainment's (Naver Webtoon) 2Q24 revenue and operating profit fell sharply to $321.0 million (+0.1% YoY, -1.8% QoQ) and -79.1 million (Reduced YoY/QoQ), respectively. Friday's closing price closed -38.2% lower ($12.75 vs. offering price $21)

- The sluggish performance in the second quarter was largely due to the weak won/yen. Sales growth in dollar terms was somewhat shockingly sluggish, but maintained growth in fixed exchange rates (hereinafter referred to as YoY)

1) Paid Content (+1.3% based on fixed exchange rate +11.5%): Japan and other regional indicators slightly improved. Japan MAU +1.0%; Payment Ratio +1.3%p (10.2%), ARPPU +7.4%. Korea continues to be relatively sluggish. MAU -7.3%; Payment Ratio -0.1%p (16.1%), ARPPU -2.5%

2) Advertising (-3.6% based on fixed exchange rate +2.3%): Japan/Other countries, excluding Korea with base effect, maintain double-digit and triple-digit growth, respectively

3) IP business (-3.9%; +24.9% based on fixed exchange rate)

- Operating profit excluding IPO-related expenses and stock compensation expenses is estimated to be surplus. Excluding related expenses (approximately $90 million in total), general management expenses and marketing expenses decreased compared to the previous year

▶️ Short-term stock price shortage, mid- to long-term growth capacity is not ideal

- Friday's decline was excessive, but short-term stock prices are expected to suffer a deficit in the third quarter. After all, the company needs to 1) show sustainable profit growth (structural growth in areas where advertising growth or webtoon penetration is low), and 2) produce box office IP (original webtoon or original webtoon video) to boost comfortable stock prices

- Q3 guidance: +12.5% to 14.5% sales growth based on fixed exchange rates, adjusted EBITDA Margin -2.8-2.1% (reduction QoQ). Major regional marketing (such as Japan) plans to increase AI investment in earnest