Webtoon Entertainment Inc Aktie

Okay, I think with that, and in the interest of time, we're going to start our last session of the day, fireside chat with WEBTOON. It's great to have them back at the conference as a return participant, and David, thanks so much for making yourself available. You and I've known each other a long time, but it's always great to get an opportunity to sit down and talk with you.

But it's so much more fun to do it on WEBTOON versus other places.

Here you go,. Okay. So look, I always do like to start with the opportunity of giving you the open mic for those who are less familiar, maybe take a little bit of an introductory answer here to sort of set the framework of the company's priorities, what you're trying to build and scale against, and just level set there. And then, as you're probably aware, I'm going to go a little bit deeper in all aspects of it.

Understood. Well, it's a pleasure to be with you as well, and for everyone listening in. WEBTOON is, simply put, a global storytelling platform driven by technology and AI. On the one hand, we enable 27 million creators, most of whom are individual creators, most of whom are not professional creators. They have full-time jobs, and they aspire 1 day to tell a story that maybe somebody else might like in the world. And on the other hand, we have 155 million monthly active users who spend an average of 30 to 60 minutes per day, whether they are part of our most mature market in Korea, where we have half the population on our platform, or in a nascent market like North America, where we're sub-5%.

Because in between all of that, there's WEBTOON, where we create an ability to give access to indie creators to tell a story that might make them a franchise star, that might allow them to tell stories not just on our platform. Franchise stars can make over $1 million a year on our platform, but also increasingly become stars off our platform in the form of a great hit movie on Amazon Prime or Tubi or Netflix, or with the recent announcement we've made as a hit mobile game or AAA game.

So we're a storytelling company that aspires to give access to any creator in the world to tell a story to any consumer, any reader in the world on and off our platform.

Okay, that's very well stated. So now we've got our benchmark to talk a little bit deeper about. One of the things that was interesting on the last earnings call was you introduced sort of a double-digit growth target after a lot of back and forth in terms of some of the growth rates in the business. Talk a little bit about the confidence interval in progressing towards that target and help us better understand some of the building blocks to get to that target.

Sure. So just as a reminder to folks, as context, the thing about this business is doing approximately for an annual period, $1.4 billion in U.S. GAAP revenue. 79% is in the form of paid content, our bread and butter. Paid content is not subscription. Paid content is Gen Z and the largest consumer base in rest of the world is Gen Z and young millennials, spending on average $0.15 to $0.70 to see the next episode of a breaking story that's created by one of these 27 million creators.

I want that to sink in. Probably, a very different business model than a lot of the companies that many of you invest in or cover. And that 79%, of course, we have this emerging growth in roughly 11%, which is advertising, which should be a lot larger, and it would be very accretive once it is. And then we have crossover IP for the other remaining call it 8% or 9%. So I just want you to understand that's the revenue of the business. And by the way, the revenue of the business has so much room to run in paid content geographically, because while we started in Korea, and we have 50% household penetration, in Japan we're sub-20%. In rest of the world we're sub-5%.

So, to answer your question, what we actually did is we reaffirmed double-digit growth exiting this year, 2026. We reaffirmed it based on confidence first in our paid content part, that 79% I mentioned. Look at Korea. Korea is where we've been the longest. It's our most mature market. And yet Korea grew, in the most recent quarter, 20% on a constant currency basis. It not only grew 20% constant currency, but it grew all important metrics significantly. Paying ratio remained 15.5%. You saw an increase in top of funnel MAU in Korea. You saw an increase in MPU. Korea is firing on its cylinders. And even though it may be the most developed market, it's doing quite well.

If you look at rest of the world, our largest addressable market opportunity, it grew over 11%. If you look at advertising, which is that it created a business model that needs to be more than, say, 11% or 12% of total revenue, that grew double digits as well. And it grew over 20% in rest of the world in the most recent quarter. So why do we have confidence that we're going to exit the year? I think it's because we believe Korea will continue to perform as we've already proven it can this year, that we also believe that advertising as well as crossover IP.

Crossover IP is when almost through osmosis today, one of our hit stories becomes a hit, not just on our platform, but on Amazon Prime or Netflix or outside our platform. We don't risk much capital to make that happen because we see a natural benefit in fandom when somebody sees on Amazon Prime or Netflix or outside our platform a major story, they want to know where it came from. But the timing of that 9% in a given quarter can fluctuate. And that's why even as I guided to 2% constant currency growth in Q3, I wanted to be clear. This is a healthy business that will go double digits exiting this year.

A big part of the swing, if you know our business, is Japan. We proved in 2025 after the IPO that Japan was a rocket ship. It may be sub-20%, but we became, in that period, the #1 consumer app, including mobile games. We knew how to do it. It's local content, a great product, and our tech services. But recently, we had to focus on making sure, I call it the launch pad, the infrastructure for Japan could support its rocket growth. And that meant until Q1 of this year, we focused on infrastructure. That's why you're seeing Japan in the recent quarter not perform the way it will. But we believe we know how to return it to growth. And that's part of our belief and our confidence that we're going to see double-digit growth ending this year as well.

The last bit is all of the goodness that we announced around AI and auto translation and short dramas about a big deal with RI Games Holdings that allows us to get upside, the IP Adaptation Fund that allows us to get more upside in IP, that is all upside to the Q4 exiting call of a double digit growth because we didn't want to include it in what we provided as confidence in the core platform and the core platform health.

Okay. Building on that answer, probably one of the most often questions we get is if you take the way you report the business geographically, how do you think about the current competitive landscape and potential scope for user growth as an algorithm in Korea, Japan, and rest of the world?

Okay, so let's take these in turn, because they are quite different. In the foundation origin country of Korea, where we've been for 20 years, as I mentioned, we're 50% household penetration. We do not need to grow Korea's constant currency revenue based on top-of-funnel MAU growth. We happened to see 3% to 5% constant currency -- I'm sorry, top-of-funnel growth in Korea. But what you saw in Korea was a strong habit formation that was already in place where people trust and know Naver WEBTOON to provide hit stories to them and eventually turn them into, for example, hit movies on Netflix.

And that was reflected in the 20% constant currency growth, the higher MPU, the higher ARPU. We worked hard to deliver that. That wasn't an accident. If you recall a year ago when we spoke, I was telling you about improvement on the Korea business driven by product, by better identification of what consumers want to read, this personalization engine or CRM product. We were talking about improved local content flow. And all of those things have come to pass. In fact, the leader of our Korea business, Yuki Chae, was in this last spring recently promoted to be the Chief Product Officer because we know that his proven success in Korea can translate to other platforms like Japan and to the global WEBTOON business.

So Korea is a mature business. Consumers are already on the platform. We just need to execute as we have been to continue to see that growth. There really is not meaningful competition for the 30 to 60 minutes spent every single day from our consumers in Korea. We are dominant, and we need to continue to be dominant. Later, I'll come back to examples that leverage AI, like this interactive chat feature called By Us, B-Y U-S, By Us, that I think is an example of leading tech that allows us to grow in our mature market in Korea.

Talk about Japan. Japan's 45% of our revenue. It's actually larger in paid content revenue today than Korea. It wasn't always the case. It was a rocket ship in 2024. Japan, we have sub-20% penetration. Japan, as you know, is 3x the population of Korea. And it is a very mature creator market. People are very used to creating in the Japanese language, but they're primarily used to creating in just a few genres, like manga and anime, with just a few publishing houses, with maybe perhaps not access to the ability to be a global hit in multiple languages.

In Japan, as I mentioned, we completed our infrastructure work at the end of Q1, and we've begun to return it back to its path to growth. We also made leadership changes. We've installed a new Chief Business Officer in partnership with our President, Yongsoo Kim. And we've gone back to the basics of putting in place on top of the infrastructure, local content, product best practices that we know work quite well from our work in Korea as well as partnership with strong local entities.

So, for example, we partnered with McDonald's on September 1st. They have a little under, I think, 10 million MAU that skews quite younger in Japan versus some of their other demographics. We think that's a strong partnership. Or the 15,000 locations, community store locations of Lawson, we think that's quite strong. And as we return to our sources of local content, we believe that that market will continue to grow. By the way, ARPU in Japan, significantly higher than Korea, something like $22. This is ARPU on a monthly basis versus what we see for Korea around $7.80 or $8. Because that customer base, those readers are used to buying digital entertainment.

And so there in that market, we will make it a rocket ship again, but we have to execute against what's already a habit in Japan, which is to see great stories. For the creators, the local Japanese creators have the ability to not just publish 1 or 2 genres in 1 language, they have the ability to be a hit globally. We enable that. We also enable them to be a hit outside of our platform, like on Fuji TV, we have many examples. We've announced a slate, by the way, of 30 animation projects, and we have a real slate over the next 3 years that are going to launch. I think there are 9 projects we're excited to launch. So there's momentum in Japan, but we were sidetracked by a need to shore up the rocket pad, the infrastructure, and we're returning that to growth.

Rest of world. What's interesting about rest of the world, our most nascent markets of 5% penetration is, if you look at consumers, they're young, by the way, they're Gen Z and young millennials. They act a lot like our consumers on our most mature market in Korea. It turns out Gen Z and young millennials in the U.S. really are looking for a story they can't find anywhere else. They want to find one from Korea or Japan or Europe or Southeast Asia. And with up to 120,000 stories arriving every day from our 27 million creators, our growth there is driven by content.

One great example is we recently had this hit called Fog Land by this creator called POGO. Something like 28 million views since its global launch in September of 2025. Another example is we've partnered with Duolingo again and we launched Duo Leveling, over 4.5 million views. So, your investors may not realize that content can drive top-of-funnel and as well real revenue growth in a nascent market for our business.

In fact, in the most recent quarter, Webcomic app MAU in English grew 3% plus -- more than 3% between 3% to 4%. And we also are seeing that rest of the world constant currency revenue growth of 11%. So there, it's about pacing the pace of awareness and adoption, and it's leveraging partners like Duolingo, as well as hit content like Fog Land, and as well the best practices around retention that we have learned from our markets outside of the U.S., outside of the rest of the world. So I think that unlike a lot of other companies, we have the biggest TAMs yet available. A lot of folks that penetrated the U.S. and seek to penetrate markets outside the U.S. have the reverse. Here, I think we have product market fit. We just need to execute against it. And that's part of the geographic story of expansion for the company.

Okay, that was very detailed. I really appreciate that. Maybe now turning to some of the incremental growth drivers and partnerships that you've established for the business. You announced a partnership with Disney. I think we continue to get questions about what milestones and launch time line and unit economics and all the things that can build out of that relationship that investors should expect. How do you think about the go forward with the Disney partnership from here?

I think the Disney collaboration is super exciting and still on track. Remember, it really had 3 different components when we announced it. The first component was to leverage great stories from their universe adapted to our platform. You can now find over 20 stories that originated from their world as adapted titles on ours, which we're excited about. I think I mentioned when we last talked, I was even more excited about new-to-the-world original stories that take from a Disney storyline and create something brand new that people can't get anywhere else. And I think we have now a few examples of that. X-Men Korea is an example. From the Tony Stark universe, Tony's Girl is an example. I can't go through the title of the third one because it's excessively long by definition, but you can look it up. So now we have original stories. And by the way, we did a study, and something like 77% of our North America consumers, these Gen Z, young millennials, they like us because they, "can't get stories" they find on our platform anywhere else. So these originals are a core part of the adoption curve for rest of world.

And then the third part is we had always said it would take us through this year that we would launch this year a brand new consumer platform, a webcomic platform, in partnership with Disney that we would run, and we are on track. You will see that launch this year. So there's still a little bit of time that needs to come before investors can see that in market. But I think the Disney collaboration is on track, and we're very excited about it.

Okay, understood. You recently announced $100 million adaptation fund in partnership with Naver. I think we've gotten a lot of questions about how to think about the strategic rationale of that, what that might mean for where the adaptation business goes medium to long term and what signal you saw in terms of wanting to maybe take more ownership of how adaptation played out from the content that was being created on the platform.

Yes, first, I want to make sure that the audience has context on what we call our adaptation business, which, as I mentioned, is roughly 9% of our total annual revenue. We have a long history of seeing very successful rich film adaptations on Netflix, on Amazon, on Tubi. And we love that because when our creators have a hit story, Sidelined: The Quarterback and Me is a good one for the U.S. that started on Wattpad. When that turns into a rich film adaptation, new fans see that and ask, where did that come from? They get drawn back to the platform, and obviously it's great for our creators.

And we have largely not yet to receive the benefit of the fact that we have data, signal and a track record of knowing in a webcomic or a webnovel what will likely be a very successful film, animation release, maybe even a video game because we've been quite conservative. And we have always had the positive externality of when somebody else is paying largely for their production, we still get a little bit of benefit from consumer acquisition and creator love.

But what a missed opportunity for investors for us not to act in a very modest way on the fact that we do have data and signal and proven IP, but maybe very few other media entertainment companies have, to have a very de-risked way to know what's going to be a hit movie well in advance. We have examples of webnovels years ago that became hit webcomics on our platform. Marry My Husband is a great example. That became Amazon Prime #1.

I think of this IP adaptation fund, which is a USD 100 million fund of which we contribute 40%, as an extremely smart de-risked way to leverage our data and market signal very selectively to receive greater upside for our investors when we know that a story is going to be a hit outside our platform. We welcome other capital. We are grateful to have Naver contribute 60%. And I think it just creates opportunity for us to play off the core strategic advantage we have to grow that 9% into something that's more accretive and larger.

We are not making a headlong move against our business model. This is a product of the long history of us knowing what could be a great crossover IP hit. And I think we're being prudent, but I think it's the right time for us to stop ignoring the competitive advantage we have on knowing what's going to be a big hit outside our platform.

Okay, understood. The other thing was you recently entered in an agreement to acquire a 60% stake in a gaming company.

RI Games Holdings.

Yes, RI Games. Talk a little bit about the genesis of what you saw in the gaming landscape that interested you in making that type of investment, how we think about that from evolving against the broader strategy over the medium to long term.

Well, first, to call upon our history, when I was last speaking with you at a public company, it may have been when I was the CFO of Zynga. So I certainly know well personally, the hit-driven problems that could come from entering the gaming world and I have been scarred. So you would imagine that I would want to make sure that if we were to leverage our strong IP in gaming that we would de-risk as much as possible. Before we talk about the de-risk in the structure, let's talk about the context as well.

Similar to what we've seen with rich film adaptations and in animation, the company has had a long history of having hit stories on our platform, Tower of God is one of them, that have turned into great games. And we have very much cheered on when that's happened without accruing any benefit to ourselves. And we probably have the same market signal and data-driven advantage that I mentioned when things become a hit as a rich film adaptation, for example. But we recognize that we are not a gaming company. We do not make the presupposition that we know how to develop games. And we don't like hit-driven businesses where we randomly see people spend against the hope that something can turn into a hit game.

But rather, we would like to take our hit stories, we would like to back a proven external capability in our partner, our counterparty, who has, by the way, created some of the most successful webcomic stories of all time, Solo Leveling, Omniscient Reader as 2 examples. And I think that proven capability in a very smart structure where we will partner with Kevin Han, who is the owner of the counterparty, which is the Redice Studio, who's now part of the RI Games Holdings. We will partner with proven IP, not a bet on hope, with a proven game developer on a slate of games that we think can be transformative to our benefit and the benefit of our counterparty.

We structure the investment, if you read the filing, quite carefully. One, there are 2 closes, one of which has just been complete. We will end up with a 60% ownership stake, the first 20% is complete, but we will only invest the next 40% upon the successful launch of the first game in their slate, which by the way already has a distribution partner that we're very excited about. And so this may happen sooner rather than later. And after we see performance of the 3 games that we've initially identified together, if we don't like that performance, we have a put option to reduce our stake.

So this is, I think, a very carefully constructed way for the company's proven, data-driven proven, market-tested proven IP to turn into an off-platform set of games across all modalities, by the way, not just casual games, all forms of gaming, where we receive upside in partnership with a proven partner. It's arguably one of our first uses of our balance sheet since our IPO. We've been very careful over the last 2-plus years to carefully consider when it was the right time, and we think this is a good bet for shareholders.

Okay, understood. You introduced the concept earlier about the way in which you're using AI in the business. You're in a unique perspective or position because you have creators on one side of your marketplace that could be given more creative tools that are driven by AI. And then obviously AI can also impact discovery on the market platform and the products and impact the way in which the users consume content across your properties. Talk to us a little bit about what you're building and scaling to from an AI perspective for the company.

Sure. First, to be clear, we believe in human creativity, and we may be the only company that truly is aligned to our human creators, right? $2.8 billion shared in revenue with our now 27 million creators, we are aligned. Their success is our success, and that, I don't think, will ever change. Having said that, we are aggressively using AI to create success for ourselves, our investors, and our creators in the form of identifying the right content that people want to read through AI-driven personalization engines, which we've talked about on previous quarters, by giving access to our creators to new formats beyond the one that they own and pioneered as a webnovel or a webcomic.

Increasingly being able to have -- let me explain what By Us is, which launched pretty recently back, I think, in June of 2026 in Korea. A super fan of a character can go and have an interactive chat with that character powered by AI, can receive prompts as to what they're lost, as to what to say, what the dialogue could be, could create brand new alternative plots, new content, and new stories. It can be not just a form of engagement with a fan and their favorite character. It can be an act of creation for a fan to become a creator, leveraging the initial fandom powered by AI to create new stories and engagement.

We think opportunities like interactive chat, the ability for us to increasingly create new formats that create access for our human creators to receive revenue beyond the revenue on our webcomic platform and our webnovel platform to be very positive. And so we are very aggressively using AI. I think auto translation is a great example too. Being able to allow a creator to see across multiple languages is their active creation in CANVAS, giving readers the ability to read something in a foreign language. Being able to launch in the future simultaneously in multiple languages at the same time a hit story, I think, helps the business and helps our creators.

But I think it would be a failure for all of us to ignore the fact that if you can be an AI beneficiary as a public company, you owe it to your investors and your creators to give them access and to do it in the right way. And so you will hear us be increasingly more vocal about the fact that we think we can do it in an advantaged way. That's true to our business model, which will always be to promote access for our human creators.

Okay. Speaking of monetization, maybe just to close out the revenue picture over the long term, I think you've talked about having an opportunity on the advertising side of the equation. Talk a little bit about building to scale in advertising and what that could open up as another leg of revenue potential for the company long-term.

The heart of the company, the heart of this flywheel, was to create a self-perpetuating story creation engine. And that meant that before we pursued advertising, we were going to pursue an ecosystem that serviced 27 million creators and that we had enough global signal around our 155 million monthly active users and 80% of our business is paid content in micropayment, not in subscription, because we have 120,000 stories arriving every day up to that amount.

But if, let's call her Maddie, if -- Maddie's our typical Gen Z young millennial in the U.S., if Maddie is reading True Beauty, a romantic story about an ugly duckling protagonist, and we know that she can see a beauty ad that's contextually really relevant for what she's spending 30 to 60 minutes every day reading, giving her an alternative way to see the next episode, it does wonderful things for Maddie. Maddie doesn't have to pay the $0.15 to $0.70, but we know Maddie, even if she doesn't, will be happily looking for the next series because she's creating habit formation and she's deepening from our cohort data the fact that she's going to access more and more series or more and more stories.

That's a very high CPI, potentially direct ad sold business, that is very profitable for the company, that leverages the engagement, the content, that already pre-exists. And we have only just started to do that. We intended it to do it faster a couple years ago, and I think we decided to focus on the strength and growth of the flywheel more. So I do recognize that we are in need to go and catch up. But the 11% growth in constant currency advertising revenue in the most recent quarter, 20% growth in rest of the world, it's a good start. We just don't want to do it to compromise the fundamental flywheel.

And to do it is not rocket science. It's execution. It's a direct ad sales team in North America that understands the market. It's being on the right tech stack. But we have taken more time than we anticipated to do it the right way. That, I believe, mid to long term is still an immense upside volume to upside value creating move for our shareholders. But we have taken more time than we anticipated to get there.

Okay, with all that we've spoken about today, there's a geographic dynamic to this business. There's a CANVAS and product side to this business. When you think about the mix of the business you have today and the mix of where we're going over the medium to long term, are there any messages you want to leave investors with about how gross margins or operating margins might evolve for the company?

Structurally, our gross margin, which was 26% in the posted quarter, up about 1 percentage point. Our gross profit margin grows when we grow geographically. So every piece of paid content that is consumed outside Korea has a higher margin than the original paid content in Korea. Every great Korean language story that is consumed in English or another language has a much better variable profitability rate. So if we can grow, as I believe we should, outside of our original country, you will see accretion to the gross profit line. That's one.

The second way is business model. So as I mentioned, I wish we had gone faster in advertising, but I appreciate that we're going at a pace not to jeopardize our paid content. Advertising represents a very accretive form of growth to the P&L. And given our engagement and our demographics with Gen Z and young millennial, I think it's a meaningfully large amount, not just on a percent gross profit margin basis, but in absolute dollars.

And then let's go below gross profit. We don't need to spend, I think we spent $38.5 million in marketing this last quarter, we don't need to spend a lot on below the line marketing to grow. When you have Fog Land hit or when someone's sees Sidelined on a major release or hopefully when we come to see the releases with other partners like Warner Bros. or Disney, that's a really low customer acquisition cost if you can tie it back to the fandom on the platform.

So I think that the question for investors on can we be more profitable at bottom line is the same question as can we grow geographically and grow our business models outside of just paid content. They're very tied. There may be what I used to call kind of productivity initiatives. We've launched an AI-driven DX initiative, but that would be upside to, I think, this fundamental structural improvement in bottom line as we grow.

Okay. Last one before I lose you. You've obviously made some decisions to invest in some outside businesses and some of the things we talked about today. Any updates to how you broadly think about allocating capital behind growth investments, outside investments and/or capital return to shareholders to update folks so they have the latest on sort of your framework or your philosophy around that.

Always, every quarter, every time we talk, the objective function is to increase shareholder value and to do it in the right long-term way for the business. But we are not ideological about the method to do so, which means that we have to look during every financial period at all the different ways to do so. What you've seen us do in this last quarter is to bet on balance sheet cash flow deployed for, I think, to be the right value-creating investments in growth crossover IP and extension into gaming. And I think in a de-risk way. And that clearly was our decision reflected in the last quarter. But we look at this decision anew almost on a weekly basis. I think that the business has a lot of room to run from where we are, and use of balance sheet cash is just one lever for us to consider.

Okay. Always appreciate the opportunity to talk. Thank you, David. Please join me in thanking WEBTOON for being part of the conference.

Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Webtoon Entertainment second quarter 2026 earnings call. [Operator Instructions] I would now like to turn the call over to Suwon Kim, Vice President of Investor Relations. Mr. Kim, please go ahead.

Good afternoon and thank you for joining us. As a reminder, our remarks today will include forward-looking statements, including those regarding our future plans, objectives, expected performance, and our guidance for the next quarter. Actual results may vary materially from today's statements. Information concerning risks, uncertainty, and other factors that could cause these results differs, including our SEC filings, including those in the risk factors section with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements.

Additionally, the matters we'll discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures. Joining me today on the call are Junkoo Kim, Founder and CEO; Yongsoo Kim, President; and David Lee, CFO. With that, I will now turn the call over to our Founder and CEO, Junkoo Kim.

Thank you everyone for joining us today. I will begin by providing a brief overview of the quarter and Yongsoo will share more detail on a few strategic investments we announced today. David will then walk through our financial results in more detail. As always, I encourage you to read our shareholder letter, which is available on our Investor Relations website. We delivered another solid quarter with revenue of $338.5 million and adjusted EBITDA of $5.5 million, reflecting continued execution across the business, and I am proud of the progress we are making.

This quarter, we are introducing a new strategic direction that we believe will power our flywheels into the future. This includes further investment in AI-powered initiatives that strengthen and expand our core on-platform business, which I will share in more detail. We are also scaling our off-platform IP adaptation business to create greater franchise value and bring more fans back to our global platform. Yongsoo will share more on this in a moment.

Turning to AI, this quarter we took meaningful steps to further integrate AI across our platform with features designed to strengthen our flywheel by expanding audience reach, deepening engagement, and creating new opportunities for creators. Fandoms are built on connection and shared passion, and our AI initiatives are designed to further strengthen this sense of community. A great example is our AI-powered author translation program. By making it easier for creators to reach readers across languages, we can help creators expand their global audience and give users access to more content in their native languages.

We ran a beta program in May for eligible English language Canvas creators and the early response from both users and creators has been encouraging. We look forward to expanding the program later this year to a broader group of Canvas creators has the potential to become an important driver of growth. We are also going beyond simple character chat with BIOS, an AI interactive story chat service that we introduced this quarter in Korea, where fans hold conversations with characters and build stories of their own. BIOS brings to life the characters fans already love, built in an official world with the approval of the creators who made them.

Initiatives like this move webcomics from a 1-way experience to a deeply engaging and interactive one, and the early result has been positive. We are planning to expand the service to Japan later this year. We also continue our video innovation in Korea. We recently launched Cuts Make, a new AI-powered short-form animation tool that lets fans create and participate in their favorite story using official IP. In its first week, new content rose 136% and the number of creators making content grew 188% over the week prior.

Video initiatives overall remain an important focus area for us, and we are continuing to explore short animation as a way to extend how users experience our IP. Our ambition to be the world's storytelling technology platform is also being supported by exciting collaborations like the one we have with Disney. A quick update on our Disney collaboration. We are excited to introduce an original series later this year and remain well positioned to launch the new digital comics platform before the end of this year.

Before I turn it over to Yongsoo, I want to reiterate my belief in our strategy. We are launching new initiatives to accelerate our growth and receiving great feedback from the fans and creators who make Webtoon the destination of storytelling. We continue to expect to return to double-digit growth by the end of the year and look forward to the road ahead. With that, Yongsoo will provide an update on our off-platform initiatives. Yongsoo, please go ahead.

Thank you, JK, and thank you to everyone joining us. I'm excited to share more details on the next phase of growth for our off-platform IP adaptation business. IP adaptations are a critical element of our flywheel, creating greater franchise value and bringing more fans back to our global platform. With a massive catalog of popular content and database of user engagement, we have a unique opportunity to identify high-potential franchises and participate in their growth. The strong performance of multiple Webtoon adaptations this quarter, including 3 series reaching Netflix's global top 10, re-emphasizes our confidence in this strategy.

To support this evolution, we made 2 strategic investments during the third quarter. The first is an investment in RI Games Holdings, which will enable us to turn proven IP into immersive gaming experiences. Games are one of the most engaged forms of fandom, drawing fans deep into a story universe. Unlike many others in this space, we are starting with a strong pipeline from day 1. Together, Webtoon and RI Games Holdings plan to develop and launch multiple games over the next 4 years based on proven IP.

The formula underpinning our strategy does not stop at games. With RI Games Holdings, we are building an adaptation pipeline that can extend a single IP across multiple formats, creating a repeatable success formula of adaptations that flow from webcomics on our platform to animation and games. In particular, we hope to match game launches with animation releases to maximize their impact. Today, we also announced a dedicated IP Adaptation Fund.

Together with NAVER, we entered into a limited partnership agreement in July and established a $100 million fund to invest in IP adaptations. This fund will help us capture more value from massive global hits, evolve beyond licensing to secure strong IP rights, and gain more control over our growing adaptation slate. Our investments reflect our conviction in the long-term value of these projects and align our capital with our strongest IP. I'm excited about these investments we have made to accelerate our business and would like to thank our team, our creators, our users, and our partners. With that, I will now turn the call over to David. David, please go ahead.

Thank you, Yongsoo, and thank you, everyone, for joining us. I'll be discussing the details of our second quarter 2026 results compared to the comparable quarter in the prior year, unless otherwise noted. For the second quarter, we reported revenue of $338.5 million that declined 2.8%, but grew 5.2% on a constant currency basis. This growth was driven by increases across all 3 revenue streams: paid content, advertising, and IP adaptations.

We expanded gross margin by almost 100 basis points to 26% in the second quarter. We remain focused on expanding profitability further over time and believe our cross-border content distribution, as well as growth in higher-margin businesses like advertising, will continue to support this. We posted a net loss of $14.6 million in the quarter compared to a net loss of $3.9 million the year prior, driven by higher income tax expense, and marketing investment.

We reported adjusted EBITDA of $5.5 million, exceeding the high end of guidance. This compares to an adjusted EBITDA of $9.7 million in the same quarter of 2025 as we increased our marketing investments. As a result, our adjusted EPS for the quarter was $0.04 compared to an adjusted EPS of $0.07 in the prior year. Turning to operational health, global MAU increased 0.5% in the quarter. We continue to focus on driving users to our app, as well as converting them to paying users.

While App MAU and Webcomic App MAU declined 8.0% and 1.5% respectively year-over-year, we are pleased to have posted MPU growth of 1.8%, driven by growth in Korea, partially offset by decreases in both Japan and rest of the world. We believe we can continue to drive MPU growth by further advancing our AI capabilities initiatives. Importantly, our English platform webcomic app MAU increased by 3.7% year-over-year. Titles that supported this growth included Situationship, an English-language original, as well as [ Starting Over as a Treat ] and The Devil Never Cries.

Now, I'd like to provide an update on our revenue streams at a consolidated level, starting with paid content. In the quarter, we posted 4.3% revenue growth on a constant currency basis. As I just mentioned, we're pleased to post another solid quarter of MPU growth up 1.8% in Q2. We believe we can continue to drive MPU growth as we lean further into our AI capabilities, including the initiatives that JK mentioned earlier. ARPU also increased 2.5% in the quarter on a constant currency basis.

Advertising revenue grew 11.5% in the second quarter on a constant currency basis. This was driven primarily by growth in Korea and the rest of the world, offset by a decline in Japan. Korea in particular saw an increase in ad revenue from both NAVER and other partners. Finally, our IP adaptation business revenue grew 4.2% year-over-year on a constant currency basis in Q2. As we have noted previously, revenue recognition for IP adaptations can vary quarterly based on the achievement of certain milestones.

Now I'd like to look at our results in the context of core geographies. In Korea, during the second quarter, our revenue grew an impressive 20% year-over-year on a constant currency basis, driven by double-digit growth in paid content and advertising, offset by a single-digit decline in IP adaptations. During the second quarter, MAU of 24.3 million increased 5.9% year-over-year, with MPU of 3.8 million, representing 10.4% growth year-over-year. Our paying ratio of 15.5% increased 64 basis points year-over-year, and Korea ARPU was up 14.8% year-over-year on a constant currency basis.

Moving to Japan. For the quarter, Japan revenue declined 6.7% year-over-year on a constant currency basis. While we saw triple-digit growth in IP adaptations in Japan, it was more than offset by single-digit declines in both paid content and advertising, all on a constant currency basis. Japan's MAU of 21.8 million declined 3.3% year-over-year, but increased on a sequential basis. MPU of 2.1 million remained steady from the first quarter but declined 9.5% year-over-year, and paying ratio of 9.4% was down 65 basis points year-over-year. Second quarter Japan ARPU of $24.40 grew 2.9% year-over-year on a constant currency basis.

In the rest of the world, we saw revenue growth of 11.1% year-over-year on a constant currency basis in the quarter, driven by single-digit growth in paid contents and double-digit growth in advertising and IP adaptations. Second quarter, rest of world MAU of 110.7 million increased 0.2% year-over-year. While paying ratio of 1.5% was relatively flat year-over-year, MPU declined 0.6% to 1.7 million. However, we're pleased that rest of world ARPU of $6.90 increased 4.4% year-over-year on a reported and constant currency basis.

Turning to profitability. Gross profit for the quarter grew 1% year-over-year to $88.1 million. This resulted in a gross margin of 26%, which expanded almost a full percentage point compared to the prior year. Adjusted EBITDA for the quarter was $5.5 million compared to $9.7 million in the prior year quarter primarily due to increased marketing investment. This resulted in an adjusted EBITDA margin of 1.6%, which compares to 2.8% in the prior year.

On the cost side, total G&A expenses for the quarter were $65.4 million, roughly in line with the prior year quarter. Interest income in the second quarter was $4.5 million compared to $4.9 million in the prior year, and other income was $2.5 million compared to other loss of $1.4 million in the prior year period. We had an income tax expense of $6.9 million in the quarter compared to a benefit of $0.8 million in the prior year. Depreciation and amortization was $7.3 million in the second quarter, compared to $8.4 million in the prior year.

We posted a net loss of $14.6 million driven by higher income tax expense and marketing investment. This compares to a net loss of $3.9 million in the prior year quarter. As a result, Q2 GAAP loss per share was $0.11 compared to a loss per share of $0.03 in the prior year period. Adjusted EPS was $0.04 in the quarter compared to an adjusted EPS of $0.07 in the prior year period. Our balance sheet remains strong with a cash balance of $583 million and another $11 million of short-term deposits included in other current assets. We have a capital-efficient business model, and we believe we have the financial strength and flexibility to invest for the long term.

Before I wrap up, I'd like to spend a few moments discussing our third quarter outlook. For the third quarter of 2026, we expect to deliver revenue growth in the range of 0.7% to 3.3% on a constant currency basis. This represents revenue in the range of $358 million to $368 million based on current FX rates. We anticipate third quarter adjusted EBITDA in the range of $0 to $5 million, representing an adjusted EBITDA margin in the range of 0% to 1.4%.

We are excited about the new strategic direction for our company. We believe leaning further into AI-powered initiatives on-platform and investing to scale our off-platform IP adaptations business will continue to strengthen our offering and improve engagement for the long term. We continue to build on Webtoon's position as the destination for storytelling, and we continue to expect we will return to double-digit revenue growth by the end of the year. With that, I'd like to turn it back to our operator to begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Kunal Madhukar with Deutsche Bank. Please go ahead.

One on engagement and another one on the financial. On the engagement side, can you talk about how many minutes per day do your users actually use the platform? And can you talk about how many minutes the pay...

Thank you, Kunal. Great questions. So first, with regard to engagement, what is remarkable about this business is even as you look at the Gen Z users, for example, in North America. For the users in our original market here in Korea, you're seeing a very consistent consumer behavior on webcomics and webnovels. We say typically that it averages approximately 30 minutes per day. But the reality is, for those who have habituated, we know that that number can be larger for the heavier users.

What's interesting though is even for users that are new to this idea of a webcomic, when you think about North America users, they're not traditional paper-based comic fans. They're fans of digital-first entertainment and for them to flick a finger on their mobile device allows them instant gratification and yet they still spend that 30-minute average we've seen. With regard to our paid users, we haven't released a separate engagement number for our paid users. But we know that the amount of time they spend and the access because of our micropayment structure to multiple episodes is the driver of our paid content engine.

So this is why we tend to report ARPU. Because, for example, when you see in Korea, where we've been for nearly 20 years and we have 50% market penetration, it's remarkable that you're seeing constant currency revenue growth of 20%, growth in MPU and MAU being a growth driver, and ARPU, which is up 5%. That's why we tend to focus more on ARPU as the measure of deep engagement because we see habit formation.

...in markets that we've been in for some time. That's a great segue to the second question that I had, and which was on the marketing side. So the marketing expense delivered during the quarter, and you had delivered 3 quarters of like leverage on this line, small leverage, but leverage. Where are you spending this money on? Is that in Korea, Japan, and you know what kind of LTV to CAC are you targeting on this marketing spend? Thank you.

Another great question, Kunal, thank you. So just as we think about marketing, as you know, we spent $38 million in the quarter, approximately up 11%. So the question is, where do we spend and where do we leverage? We have a very diversified portfolio regionally. So when you think about the business I just mentioned in Korea, right? Our country of origin where we have the largest market penetration that's driving 20% growth. There is, I would call it a relatively efficient steady state of marketing because we already have strong penetration and we have a flow of great content consistently arriving in the market.

But when you look at hyper growth, with markets as we see Japan will become again, you know, we are sub-20% penetration in Japan and we're sub-10% penetration in rest of world. You see that we deliberately chose to invest with a longer LTV timeframe, particularly in rest of world. And we're seeing it pay off. While we don't disclose these numbers, we have in the past noted that this north of 3% growth in English webcomic MAU is also paired with significant growth in English webcomic increase in actually paid users as well. We manage a diversified portfolio where we have efficient spend in mature markets like Korea, but we intentionally are investing on the forward curve because we think adoption will grow in places like North America.

Thank you. Our next question comes from the line of Mark Mahaney with Evercore. Please go ahead.

I want to ask 2 questions please. Just spend a little bit more time on Japan and what specifically you need to do to return Japan to growth. And then I'm sorry if you had mentioned this earlier or not, should we still count for, lean on, and exit a double-digit revenue growth in the fourth quarter? Thank you.

Thanks, Mark. First, to cover your second question, we absolutely are strongly committed to the double-digit growth and believe we've delivered in the most important ways on-platform by the end of Q4. And to cover that, there are 2 components of that that you see evident in the quarter. Korea, our most mature market growing 20% on a constant currency basis, and then double-digit growth in advertising globally, I think it's up 11% on a constant currency basis. And importantly within advertising, we typically don't disclose this, but I have to tell you, rest of world advertising on a constant currency basis up north of 20%.

Now the question relates to your first piece, which is Japan. There are 3 key priorities that we've been working on since the completion of our infrastructure project by the end of Q1. One is returning Japan's growth through stronger local content, greater engagements, and distribution partnerships. And I think the evidence in the posted quarter in these areas would include things like our partnership with Studio N, which we think is significant on content, getting agreement with Kadokawa, and featuring the spinoff of Ryo Mizuno's fantasy series Record of Lodoss War is an example of the type of local content initiatives you're going to see much more of.

Our partnerships, for example, with Lawson, which we talked about in our materials, is an example of what's more to come. And you'll remember we elevated [ Yugi Che ], our Chief Product Officer, to implement the proven track record of growth established in Korea and Japan. And that includes things like CRM and deeper engagement with our customers there. So we feel very good about our Q4 commitment, and we think Japan is a proven growth market that we are now taking the time to deliver and stabilize through the course of this year.

Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs.

I want to go a little bit deeper in the pivot around IP commercialization. Can you talk a little bit about what you saw in the market from your IP adaptation strategy going backwards that made you want to take maybe a more proactive approach and make the type of investments you're making today? And on the go-forward over the next few years, what have you seen in the market? Next 2 to 3 years, how should we think about the capital or OpEx intensity of standing up IP commercialization and how much of it either up front will be borne through investment and whether you'll earn more of the return profile on larger hits on the outside of the investment cycle as some of these properties move forward?

Thank you, Eric. It's a great question. First, I want to distinguish between the generation of new IP on our platform. And I think as you heard from JK, there's significant innovation, for example, in Korea where I mentioned this 20% growth on allowing users through what we called Cuts and Cuts Make to generate new storylines to continually grow on-platform. BIOS is yet another AI-powered initiative where I want to distinguish between what we have on-platform, which has a strong growth story still, but candidly, you're right. You're seeing a much more deliberate, aggressive change for the IP that's not just on our platform.

With regards to the announcement of RI Games as an example, and the IP Adaptation Fund. First, the most important point here is that we start with a proven pipeline from day 1. Unlike former days that you and I had spent at Zynga and other places, we don't have to worry about what will generate the next hit, because we are the source of the next hit. In the case of our RI Games, you're seeing us deliberately partner with an icon in this world. Remember that this RI Games investment allows us to have, after 2 closings, significant majority control, but we want that organization to run independently.

Founded by Kevin Hahn, who had created, through REDICE Studio, things like Solo Leveling and Omniscient Reader, our proven IP is now being applied to a proven game maker because we think our creators deserve to have a format that's outside our platform. But as a shareholder, we know there's a whole world of deep engagement on gaming that we can enter with this significant strategic investment. The IP Adaptation Fund is a clever way to address your second question, because while we leverage partnership with another, in this case, NAVER for capital, we don't have to consolidate for the vagaries of quarter-to-quarter episodic changes in revenue, as we aggressively bet on commercializing our proven IP.

And then the last is, I'm not going to cover it, look at our earnings material. I mean across every region you're seeing pretty significant increases in IP in both partnership. We're very proud to have announced with Marvel, [ Tony's Girl ], an original, That Time Deadpool Fell Into Webtoon and Found the Longest Title of All Time, which is hard to say, and X-Men Korea. So across the board, we feel that we are going to be a very efficient provider to IP, not just on-platform, but in partnership in formats off our platform.

Our IP adaptations have consistently demonstrated the strengths of Webtoon's proven IP and built-in fandom, particularly in areas like film, television, and animation. However, historically, our adaptation business has been based on a licensing model, which means that the success of those adaptations has not always translated directly into meaningful economics for Webtoon. That is something we are looking to strengthen.

Through strategic investments and partnerships, we are gradually expanding our ability to participate more directly in the commercialization and economic upside of our IP. The game pipeline currently under development at RI Games Holdings is a great example of that strategy. These games are based on some of the biggest hit titles on Webtoon, and importantly, those being adapted into anime. So we see a very compelling opportunity to build a repeatable flywheel from a successful webcomic to animation to game, leveraging proven IP and establishing...

Eric, 1 last comment. What Yongsoo mentioned at the end I think is quite significant. We're not just able to provide games on hit Webtoon IP. We're also in a multimedia way able to launch animation concurrently and in support of the games as well as our own platform IP. I think we are equally in a position to do this, which you'll see us begin to do with this partnership and investment.

Thank you. Our next question comes from the line of Matthew Cost with Morgan Stanley. Please go ahead.

Maybe I can just follow up on what was just discussed. So if we look at the mobile game industry, in addition to low hit rates and licensed IP not necessarily being a guarantee of success, a lot of the companies that are IP holders really have exited the business of making games themselves over the years. So I'm wondering if you could reflect on sort of the synergies, the opportunities available by becoming the majority shareholder of RI, and the advantages that you see in combining the actual process of making the games with this sort of obviously proven and very successful IP engine on the Webtoon side. Thanks.

Thank you, Matt, for your question. You know, I've lived firsthand the question you've asked in my former days as CFO of Zynga. I think this is significantly advantaged. Let me explain why. First, I think it's important to understand that Zynga is a very, very good tool for... First, we are leveraging a very strong partner. We are not seeking to build ground-up capability in gaming. That would take us a long effort. And a lot of the partners that, a lot of the companies that you mentioned may have taken the approach of trying to build that capability.

We recognize what we're good at. We have 120,000 stories arriving every day from 27 million creators, and we know from data what can be a hit, not just on our platform, but off it. I think the second piece is by creating RI Games Holdings, we're leveraging a partner that has extremely deep expertise geographically first, Korea. I want to be clear this is a global opportunity. We are not limiting ourselves to Korea but the proven track record in creating adoption on hits here in Korea that we know have global appeal we believe de-risks this investment.

And then later Matt in our follow-up we can go through the detail of the Q. Only certain terms were redacted but there's a very clever way that we've managed to the mutual benefit of both this partnership with Kevin as well as for ourselves, a structure that de-risks those hits. Even though we feel that they're proven IP, we recognize that there is an uncertainty as to the size of the hits, and we can cover that financial risk management for both parties, but I think it's quite clever. And it includes forced puts on both sides that incents both of us to grow together, but also manages downside risk, which we can talk about in our follow-up.

Thank you. Our next question comes from the line of Dae Lee with JPMorgan. Please go ahead.

I have 2 follow-ups as well. First on the IP adaptation strategy development. If I'm understanding this correctly, it sounds like the direct ownership model is for more of the newer IP adaptations like video games and AI-driven products. Is that right or are you guys looking to do more owned content on the video adaptation as well?

Thank you, Dae. Let me just make sure I understand the question. The question is whether we seek to have only a primarily owned model for IP that we provide that's proven in the form of off-platform video games, etc.? I think that was your question. And whether or not we're also pursuing alternative models. Is that right?

Yes, that and if the ownership model is going to apply to video adaptations like live-action video or comics.

Ah, okay. We have the benefit of both models. So you're clearly seeing in the case of our strategic investment in RI Games, obviously related to games, that this is, as you see, a 60% ownership stake across 2 closes, where we have ownership of the venture, but we also leverage their independent capability to run as well, because we acknowledge their specialized capability we lack. On the other hand, when you look at what we've done with Disney, when you look at what we've done with Warner Bros. Animation, which we've discussed in the past, that's a different approach, for example, for IP, where we're providing our creators an opportunity to have success outside but we don't primarily own the distribution or the production engine associated with that IP. I think it's very capital efficient, but limits our upside.

And then if you look at our work in Studio N, we have this Emmy-nominated internal studio with great IP like Chicken Nugget and Bloodhounds Season 2 and [ Club of Test ] Season 2. So we are also very carefully looking at opportunities where in a de-risked way, we are taking more of the ownership on IP in the case of here, feature-length film opportunities, either in theaters or on streamers, but we're very selective there as we don't want to risk our balance sheet without understanding what could be ahead. And we have a pretty good track record in that limited area with Studio N.

A follow-up, if I can. On your double-digit growth expectation for Q4, could you remind us if that was for the full quarter or a run rate within the quarter? And could you talk about the cadence of how you expect to get there given the Q3 guide in the single-digit percent range?

Good question, Dae. The double-digit growth was really about exiting Q4 to set up, we hope, for persistent growth on a go-forward basis, going forward into '27 and beyond. It was not a guidance for the full quarter. With regard to how we get there, I think you start with what you can see in the current posted quarter results, this strong growth from Korea. I don't know how many quarters have gone by where I've been able to say that Korea drove our total MAU growth. And by the way, total MAU of 156 million MAU flat a year ago is also a nice thing to say, but it was driven by our most mature market.

And that 20% constant currency growth was very healthily reflected across not just their MAU growth, but also the MPU and the ARPU. So for me, Korea is clear. Advertising, as I mentioned, is also clear. 11% growth on a constant currency basis driven by both Korea, and I mentioned for the first time, over 20%, rest of world constant currency advertising growth in the quarter. I think you can model and extend.

Japan is the piece that we've already discussed that I believe is what's going to provide us that on-platform growth and the timing of crossover IP. Remember, IP can be great as it was in Q3 of last year, when you see my Q3 guidance, it doesn't particularly help me on the optics. That said, while there are quarterly variances, I feel really good about the fundamental growth platform we have exiting this calendar year.

Thank you. And at this time we have no further questions. That concludes our Q&A session and today's conference call. We would like to thank you for your participation. You may now disconnect.

All right. Great. Good morning, everybody. We'll get started. I'm Dae Lee, JPMorgan's Internet analyst, and we're pleased to have with us WEBTOON'S CFO and COO, David Lee. So WEBTOON is a leading global storytelling company that connects 27 million creators, 245 million monthly active users. And WEBTOON pioneered a new form of digital storytelling with long stories that are serialized into short form, vertically scrolling image-based webcomics. WEBTOON'S mission is to be the world's storytelling technology platform empowering creation by anyone, for everyone. And David joined WEBTOON in 2023. Prior to WEBTOON, David held leadership roles at various consumer and tech companies, including as Founder and CEO of Inevitable Tech, the COO and CFO of Impossible Foods and CFO at Zynga. So welcome, David.

Great. Nice to be here.

All right. So David, for investors less familiar with WEBTOON, can you walk us through the flywheel, the creators, users, content monetization and what makes this platform's competitive moat so difficult to replicate?

Yes. Well, first, I think you did a pretty good job, Dae. So I appreciate that you know the company well. But let me back up. Many who may be listening in may not fully appreciate who we are, but if they have any Gen Z friends, I bet their friends are actually already on the platform, Wattpad or WEBTOON. So what we really are is we're a storytelling engine. On the one hand, over the last 20 years, our founder, Junkoo Kim, started with a mission to cultivate creators. And we have 27 million creators, the vast majority of whom are amateurs. They have day jobs. Later, I'll give this example in greater detail, but one that I'll mention, it was a great creator in New Zealand as an example, named Rachel Smythe. And so for those 27 million creators, we have all of this technology. Right now, we recently announced an upgrade to our CANVAS platform.

So if you got a story in your head and you got a full-time job in the case of Rachel Smythe, full-time graphic designer in New Zealand with a story that she didn't know anyone would want to hear or understand. Frankly, I would never have guessed her story called Lore Olympus would resonate. But she created a story on CANVAS, like many of our 27 million creators. And then we can see because we have 145 million monthly active users who spend an average of 30 to 60 minutes per day looking for the next hit story, we can see who in the world loves it. And these monthly active users are the majority of whom are not in our country of origin, Korea or in Asia.

And then in between all of it is this flywheel where we can use our tech to personalize recommendations for that -- those readers. We can create tools that allow our creators to be successful. And once they are, they become franchise stars. Their lives are changing. Rachel Smythe became one of them. These franchise stars have the ability to have a global voice. And oftentimes, they live outside our platform. In the case of Rachel Smythe, Lore Olympus became a New York Times best-selling book in print. She was just recently announced as being a featured animation release on Amazon Prime. And she's just one example of that flywheel that I mentioned.

Let me briefly just also cover that flywheel is now large enough to be self-subsidizing and sufficient. So last year, we did about $1.4 billion in GAAP revenue. In the last 3 years, we've had positive operating cash flow. There'll be a quarter or 2 when there's some fluctuation. And we're excited to be publicly listed because it gives us global governance, and it shows that where we are just starting to get going, the largest TAM, what we call rest of world, places like North America, we're just getting traction, and we're getting traction with Gen Z, the most desirable consumers who want to find a story from an unexpected source out in the world. So let me pause there just as a quick intro before we continue on.

No, that's great. And not quite Gen Z or probably not in your main demographic, but I can attest to spending more than 30 minutes a day, consuming interesting stories on your platform. So you guys should all try it out. Okay. That's great. So when you look across your business, you operate across Korea, Japan and Rest of the World. And we talked about 145 million monthly active users. So like when you look across your geos, like where do you think -- or where do you see the biggest opportunity from where you are today?

Well, it's great to have a global portfolio. Let me kind of cover what we describe as Korea, Japan and then this very big geo rest of world. As I mentioned, Junkoo Kim, our CEO, founder, started this thing initially out of Korea 20 years ago. And so if you look at Korea, it plays a really great role. It's a foundation for the company. We have nearly 50% market penetration. We -- if you're in Korea, we are arguably in everyday part of your lives in digital entertainment. We're like, I don't know, the Kleenex of storytelling if you're in Korea. Articles have been written that not only are we that penetrated on NAVER WEBTOON and our platform there, but some have said that we create more than half of the major hit K dramas on streamers like Netflix. They start as stories on our platform.

So there, in Korea, where you have so much market penetration, it's critical to create a healthy ongoing source of growth. I'm proud that Korea, as for example, in the last quarter, first quarter, grew 13.9% on a constant currency basis in paid content. It grew it through strong MPU growth. I'm pleased with the health of the app MAU. Sometimes total MAU doesn't reflect the actual business health of the business. We look at things on an app basis and on a webcomic basis. And it's a great source of motivating content and creators that can be exported to all other parts of the world because people no longer think about origin as a liability. Actually, we've said nearly 120,000 stories arrive every day to our platform. And our Gen Z consumers in the U.S., for example, are looking for the next hit story even if it comes from a foreign language or a foreign part of the world. So that's Korea.

If you look at Japan, Japan is where we essentially around the time of our IPO in mid-June said, let's show that we are relevant beyond our country of origin. And Japan, which has 3x the population of Korea, we're now -- we've grown to be a little less than 20% of the market penetration. As you saw, if you knew us back in the 2024 time period, it was a rocket engine growing double digits. For the last 3 quarters, we said, okay, we got to keep this rocket engine growing into perpetuity because we think that it's a big market for us. And so as a result, we took a few quarters to invest in what we call infrastructure. It meant that we couldn't invest our people and time and growth, and it meant that we -- you see a pause in Japan's growth.

We thankfully have announced that infrastructure is complete, that project as of the end of the last quarter, Q1. And so we're excited to show that we can deliver what we already have in a really interesting market. What's great about Japan, just to cover it, is if you think about like consumer dynamics reflected in ARPU, you know that where we've been for 20 years, people spend about $7.80. This is the ARPU in Korea on a monthly basis. But in Japan, it's $22.50. Japan grew so fast as our second demonstration geo that it is now 48% of the total company revenue. It's contributing on a constant currency basis, $121.6 million out of the $326.4 million in Korea, sorry, but Japan is $158.6 million. So Japan is bigger than Korea.

And what we're seeing in the Rest of World, which is everywhere else, is that our total MAU is about 100 million in Q1 of our MAU out of the 145 million in Rest of World. A lot of that we don't choose to monetize. It's from parts of the world where we love that people are writing stories that can turn into hit movies. But if you focus on our English platform, where we really care people writing in English consuming, for example, in North America, we have set that up for growth, too, because we're seeing English webcomic app MAU (sic) [ MPU ] grow 3%. And we don't disclose the English webcomic app -- sorry, that's MPU. MPU grew 3%. We don't disclose the MAU. It's great to see first the MAU grow for our English platform and then the MPU grow for that same part of the world so that eventually, it turns into a very large business that we're sub-5% penetrated in rest of world. And so unlike a lot of other businesses, I think we have a lot of upside geographically as we know the consumer in the U.S. really wants the stories we create from anywhere in the world.

Okay. That's great. I guess with that said, when you look at the platform from an engagement perspective on the consumer side, how do you feel about the health of the platform, meaning you said you've done some, I guess, plumbing work in Japan to make sure that platform is better suited in Korea, there's -- it's a stable market. Rest of the World, you're still growing. So like are there other work that needs to be done to see, I would say, a more stable engagement growth from an MAU perspective? And then following up on that, like how do you feel about the MAU potential of those -- or MPU potential of those MAUs?

Yes. Good question. Let's talk about Paid Content for a second. I'm going to put Advertising to the side. We'll come back to that. We have largely completed, I believe, the foundational work to see the bread and butter, Paid Content, 80% of our revenue of our Paid Content business continue to grow geographically. And let me explain why. First, we talked about Korea being the most robust flywheel, that 13.9% constant currency Paid Content growth. You've heard about Japan. We announced for Rest of World an overhaul to our creator-facing tech stack. We call it CANVAS. So this is a pretty big rollout for everywhere other than Japan and Korea, where we've improved the ability for creators to be able to write stories that can turn into hits. This is really important for scaling paid content globally because it's the heart of the reason why we have unique content. Those 120,000 stories arrive every day. They come from these 27 million creators who oftentimes are amateur on CANVAS.

Having that complete and it rolled out in May is a critical infrastructure piece that we need to speed growth in Rest of World. And when you think about things like external deals that we're now ready to support with this proven product market fit, we'll probably come to it later but the deal we announced with Disney. Disney took a 2% stake at $12.29, and we're on track to announce the launch of a brand new to the world consumer platform that leverages all of their content, their amazing content later this year. But we've already been hard at work, creating new vertically scrolling, we call them reformatted webcomics from Disney on our U.S. platform.

I think in the last quarter, we can point to a few examples, a couple from Star Wars, one from Daredevil, an original that featured Mickey and the F1 series. So you only get to partner with world-class folks like Disney when you have the readiness and infrastructure product market fit to take that next step of growth. So we're excited. Now we recognize I'm not guiding to that growth in Q2 because it's out ahead of us. So from a source of content from these indie creators on CANVAS, and then kind of an indication of readiness on our platform with partnerships like the folks at Disney. And then I was recently just in Vancouver with Warner Bros. Animation.

Another example is we're making progress off our platform. So in Japan, we announced a slate of 20 anime that is on track for development in 2025. We announced a deal with Warner Bros. Animation, as I just mentioned, with a slate of 3. And now recently, we broke news with another slate of 4 great projects. These 4 projects are not traditional sourced from Asia projects, but great animation projects from our world in partnership with them that are focused on young adults and oftentimes have genre focus that may surprise you. So when you have external deals set up, you have internal infrastructure that's ready and you have product market fit. You have MPU growing and a true desire by Gen Z, for example, in North America to find their next hit story, I think we're setting up the flywheel for growth.

Okay. I guess at a higher level, do you think there's more opportunity on the MAU side, meaning could you get more consumers to read your content? Or is it more about monetizing those users better?

Well, again, I think the answer depends upon geography. I think Korea will continue to be a source of health and growth. But it does not require going higher than the 50% market penetration in MAU. I think there's so much that we can do as a strong player there in terms of the 3 areas that Junkoo mentioned in his most recent shareholder letter, focusing on digital characters that can interact more and create engagement between readers and between readers and creators. This idea of focusing on the social community part, which is yet to really be developed, has great upside in my mind as well as another kind of important area of future growth. And then this example of how our stories can be off-platform in the form of animation and anime, which then can drive strength back to our flywheel. I think you're going to see those drivers across all regions, but particularly start where we're really strong, which is in Korea.

In Japan, I suspect you will see both app MAU and MPU and revenue all grow because we're very competitive there. It's the consumer there is well accustomed to digital content consumption. And I think we've proven actually in the '24 period that we know what it takes to have double-digit growth. And then Rest of World, it's all of the above. The TAM is so large, but we are so underpenetrated. We're -- if we're 50% market penetration in Korea, sub-20% in Japan, we're sub-5%, maybe even sub-3, however you define rest of world. So there, I think you're going to see us grow. And you're going to see consumers be introduced to our stories on Amazon Prime and Netflix or in partnership with Warner Bros. or Disney and then come to the platform as much as you're going to see organic growth from our platform in places like Rest of World.

Okay. All right. That's great on the consumer and engagement side. And you touched on the creator side a little bit or I guess, the bigger creator in Disney. But when we look at the creator ecosystem more broadly across all of your creators, you paid out, I think last quarter, you said $2.7 billion to creators over 5 years, and you're investing roughly $50 million this year in creator support. So like can you like walk us through those numbers a little bit, like what they mean and how the rev share works with the creators? And why do creators choose you guys over other platforms?

Yes, that's a great question. So first, we are very different than a lot of people talk about creator economy and creator rev share. We benefit from the vision of our Founder and CEO, Junkoo Kim, where he said, we will fair share revenue on future success we can't yet estimate. So creators really feel aligned to us, whether they're amateurs on CANVAS where they have no idea if anyone would like their story and graduate to become franchise stars or not, it allows us, by the way, to embrace new technology together, too. I think a lot of other companies don't have that alignment on the IP, the source of the IP. We like to give our creators fair share upside in a rev share, which shows up in our variable cost, our cost of revenue shows up in our gross profit margin. And we're going to come back to the numbers. But that's where that $2.7 billion number of creator rev share comes. It's because we're growing incremental growth for the company and sharing a portion of it.

Now on the one hand, you say that is incredibly generous, and I think it's critical, and it is generous. It's why we continue to be the destination of choice. That's why creators choose us. No other ecosystem has that level of commitment and no other ecosystem has proven track record. So we've had 900 adaptations of stories that start on our platform. They become hits in multiple languages on our platform and then they become movies or games. I think 100 of those 900 are rich film adaptations. I think 2 of Netflix's all-time top projects ever came from us, one in the Spanish language and the other in Korean. So a creator can look at us and say, "My gosh, they're going to empower me." They're going to use their tech. They're going to set me up for success because they're aligned and they have a proven track record of allowing me to be successful in this emerging format called a webcomic or webnovel, but also anyway a story can be told.

Now let's get to the numbers. I think what people don't understand from the release, and I want to clarify this, is the $50 million that we talked about is already fully funded and invested in our existing cost structure. There's no incremental investment. Inherent in the financials of the company for years now has been that enduring commitment. We're just highlighting what it's already fully funded. And in fact, if you look at gross profit in the most recent quarter, this 25% gross profit margin improved by 390 basis points year-on-year in part because as we grow a business for a creator, let's say they start in Korea and they're not sure if their story is resonance and they discover through us, it does, and we help them take it globally. Well, we benefit disproportionately more financially because we do more of the heavy lifting. So as paid content grows everywhere outside of Korea, my gross profit margin should improve from a mix standpoint.

And so as a result, when I think about the total company financials, I don't feel like we have to overburden the P&L. I think we love the fact that we have cash and marketable securities, short-term marketable securities of about $600 million and operating cash flow has grown for the last few years. But that still includes investing the accretion that naturally occurs to the P&L as we grow outside of Korea. And our Advertising business, if you think about the cost structure is paid for. So we can share the revenue upside with our creators and still improve the profitability for WEBTOON because the engagement, the eyeballs, the engine of new content, that is already paid for, so to speak. So I think there's natural accretion for the company despite a very deep preexisting commitment to share with creators that future upside.

Okay. That's great. Kind of beat me to my next questions, which were about the numbers, revenue growth and profitability. But I mean, before that, we covered, I think, in good detail of your flywheel on the creator side and the consumer side. So let's dive into the numbers a little bit further. So looking a bit more near term, you talked about growing double digits by 4Q. You guys are in the low single-digit percent range right now. So could you like bridge what you're growing at right now to that double digit? And what are, I guess, like 2 or 3 biggest swing factors in that aspiration?

Yes, that's right. I think, first of all, this double-digit growth by the end of calendar 2026 is the reference from the Q call. And as I mentioned, I think of growth as having 2 different dimensions. One is the heart of the company is Paid Content. And we've already described and you now know how big Japan and Korea are. And I think my confidence, one, you see Korea already operating at 13.9% Paid Content constant currency growth in the past quarter. Japan admittedly has been focused more on setting up for future growth in infrastructure. But I have confidence in the return to the growth in Japan because we've demonstrated it before. It's a pretty strong market for us, and there's a lot more room to run. And I don't know that I need to have a huge sudden increase in growth in Japan despite its size because when you think about Advertising and the impact of crossover IP, while they may be only roughly 20% or so, give or take, in 1/4 of our total revenue, we are lapping periods in the back half of the year that allow me to feel very confident about that commitment.

But beyond just a set of numbers for a given quarter, even if it's towards the end of the year, I think what it reflects is a belief that we're setting this business up for growth beyond in '27 and '28. We talk about the investment in CANVAS, the deals yet to be launched like the collaboration with Disney, the anime and the animation where slates have been picked and are being developed. We're trying to run the business for long-term shareholder value, which I believe does test the patience for many of our investors. But I think this commitment to double-digit growth isn't just about Q4. It's about realizing the upside for investors longer term as well.

Okay. And is it fair to think that all 3 segments of your business, so Paid Content, Advertising and IP Adaptation all kind of have equal contribution to that double digit? Or is there an area where you feel particularly more confident about?

Well, I don't -- I haven't given disclosure in depth but I would say I would advise that investors look at the composition of the revenue today. 80% is Paid Content and 20% is Advertising and crossover IP. And in previous quarters, crossover IP, even though we have a great slate, I'm very excited about our slate. There's variance in that number quarter-to-quarter. You saw even last year, we had huge hits in Korea, for example, but those arrive in a quarter versus another. I think I would look at the composition overall because Advertising, for example, is the part of the business in the Rest of the World that we are taking more time to deliver because we really want to pay off more creators and more consumers, for example, in North America in the paid content flywheel first, but that's 80% of our business. So I think if you look at our composition today, it will give you an indication of the composition of growth down the road.

Okay. That's fair. And then just quickly on the IP Adaptation side. It's historically been pretty lumpy. So how -- I guess, one, like what kind of visibility do you have in the IP Adaptation's pipeline? And is there a way to think about like what a potentially normalized growth rate of that business could be given the lumpiness?

Well, I think there's no getting around the fact that launching hit feature films is lumpy. The ability for anyone to call whether it's in 1 month or another is hard to reduce fundamentally in the nature of the business. For us, having it be roughly 7%, 8% of the revenue base has meant that it's more the lowest form of customer acquisition cost than it is an area of focus for accretive revenue in the sense that when someone sees a hit story, like maybe it's Sidelined, the [ QB Bad Boy and Me, ] which came out as a hit in the U.S. on Tubi that was originally a Wattpad story or a sequel, we think it's a healthy way to increase attractiveness for the creator and a really low-cost way to create awareness for the platforms in new markets. So that's why we're committed to it.

I think our line of sight to the impact on our revenue from these projects is getting better. But I don't want to discount the fact that, that is a fundamentally lumpy business. We're committed to it because we think it has so much upside for our creators and our consumers and for us financially. But with the cost of that is you are going to see some quarterly change in volatility.

Okay. All right. That's helpful. Let's talk about profitability next. So you already talked about gross margins, but that line has been somewhat volatile as well. In 1Q, like you said, you guys expanded that by almost 400 basis points. Where do you -- like where does gross margin go from that level? Is this kind of like a stable base from which you'll continue to expand given your cross-border content translation and all of that? Or like I guess, give us a way to think about your gross margin going forward.

Yes. It's a fair question. It's a little bit challenging because I don't have long-term guidance out, but let me see if I can answer it in the context of the quarter. So let's talk about quarter 1 gross profit margin. That 390 bps improvement year-on-year in the script, we kind of talked about having 3 pieces, 2 of which I think investors should consider to be ongoing and estimate on their own how much it will grow or not. We talked about a $3 million improvement, specifically in Japan associated with the Smartphone Act that was passed by their government in December 2025. It's just lower app store fees, not just for us. By the way, it's a wonderful thing for me to see a tailwind like that emerge without having any pressure or negotiating leverage exerted by me. This is just a wonderful tailwind that we will benefit from.

I want to be clear, the gross profit margin accretion that I mentioned here, we will likely want to reinvest back for accretive growth in Japan because I'm very bullish there. But if you look at the numbers, that was a portion of that 390 bps. But more importantly, think about the business model, we talked about a second portion, which is what we call mix, but it's -- as our revenue mix grows in Paid Content outside Korea and eventually, while delayed, our Advertising will grow in rest of world, they're highly accretive to the model.

And so part of the answer to your question is folks have to estimate how fast will we grow outside of Korea. I believe it's an enormous part of the long-term investor story, which is why I believe that as we grow in the U.S., as we materially deliver on this 3% MPU growth in webcomic English our platform here, for example, you will see improvement to gross profit margin. And if you think below the line, we're not a heavy CapEx PPE company. I'm not building cloud infrastructure personally. So -- and we're already heavily investing in marketing.

So I think a lot of that question on profitability is, do you think we can grow outside Korea? And if you do, I believe that means it drops to the full bottom line, starting with gross profit margin. Some of it will reinvest. You already saw us invest time and effort in infrastructure. But from a financial standpoint, this is not a heavy spend to grow below the GP line. So the 2 questions are tied.

Okay. And like I said, I'm not asking you for a long-term guidance. But when we look at the 2Q adjusted EBITDA guide, it does imply reinvestment back towards a breakeven level relative to your 1Q results. So like given what you just said, like how should we think about the near-term context or drivers of margins? And like what that means? I mean, I guess you already talked about margin expansion down the line, but like what does that look like in the near term as you go towards that double-digit?

Again, you always ask good questions. But before I give you the specific answer on Q2, let's take a step back. I think in disclosure, it's important to recall that we talk about double-digit growth by the end of the year in revenue but we talk about some clear things that we're cycling through, finishing the infrastructure project in Q1 in Japan so that we can turn to growth, completing and launching the relaunch of CANVAS, setting up the infrastructure for more creator content for rest of world, seeing the turnaround in Korea already emerged with 13.9% constant currency growth in Korea. But yet we're not saying all of that happens in Q2 because the revenue guide, as you know, is within this range of 332% to 342% (sic) [ $332 million to $342 million ] or roughly a midpoint of 3.1%. So I believe we're managing for the right long-term growth of the company, but long term is not our Q2 guide.

And then on the bottom line, if you think about -- let's look at Q1 for a second. In Q1, we had guided to kind of flat revenue. And on a constant currency basis, we were actually flat year-on-year revenue, minus 1.5% on a reported basis due to FX. We had previously guided Q1 to $0 to $5 million positive adjusted EBITDA and delivered $9.5 million. And I said on the call, gosh, I wish I had invested some of that overdelivery back into long-term growth and that I would do it in Q2. So once again, we're guiding to $0 to $5 million adjusted EBITDA in Q2, I mean. And I think that reflects a commitment to grow this thing for the long term. That said, it's not negative adjusted EBITDA, and I do enjoy having posted positive operating cash flow in the last 3 years. And I do think this is -- this will grow on its own steam in a financially prudent way. But I don't think the investor will be rewarded by dropping short-term adjusted EBITDA, even though we will find accretion as we grow outside of Korea.

Okay. That's great. We have about 2 minutes remaining but I do want to touch on 2 exciting initiatives or changes. So let's talk about Disney first. There's 2 components of that partnership. One is content on your platform and then the new app or new platform that you're launching with them in 2026. So like when we look at those 2 pieces, like how does Disney contribute to your overall P&L?

Yes. Again, let me reiterate, I think we're extremely grateful to be able to partner with someone like Disney. And I think it reflects the fact that we are ready to really grow globally because they would not have picked a partner like us without that belief. There are really -- I think of 3 components with Disney, and let me go through them. One is bringing the vertical scroll format we have innovated and pioneered the webcomic format for great stories they have on our platform. And we've already begun and are well down the path. In fact, as you know, like since our last release, having 2 Star Wars stories in that bucket along with Wings of Starlight and Daredevil and an original Mickey Mouse and F1 collaboration is just we will continue to do that. And I think that's great.

But the second component is we're really excited about doing what we call an original story with Disney. I'm not committing to the story. This will require mutual agreement by both sides. But pick your favorite back story from your favorite Disney, Pixar, Star Wars 20th Century universe. Maybe it's someone in the Tony Stark circle that becomes from being a backstory to being a protagonist. Having an original story like that, I think, has a significant strategic and financial upside beyond just that first bucket of reformatted titles.

And then the third is having a new consumer-facing platform that has the leverage of all of their content. That will not happen until we launch it within we said this calendar year. So like I said with the long term, I think Disney will be a game changer, but I don't think it is a short-term game changer. I think it's something that's going to accelerate for the long term.

Okay. That's great. And we only have 20 seconds. And this question is not going to be -- it's going to be too big to answer that 20 seconds, but I want to ask it anyways. AI, like what does AI mean for you guys?

We may be the greatest AI story not told. We believe human creators are the best storytellers, but we are using AI for personalization recommendation engines showing up in real results in Korea to protect creators to improve their productivity. We'll talk about it more and more, but we are an AI beneficiary. And I think we're set up with our rev share to have a unique ability to partner really quickly with creators to their benefit.

Okay. Great. That's it. Thanks, David.

Thanks.

Thank you for standing by. My name is Jericho, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEBTOON Entertainment First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Soohwan Kim, Vice President of Investor Relations. Mr. Kim, please go ahead.

Good afternoon, and thank you for joining us. As a reminder, our remarks today will include forward-looking statements, including those regarding our future plans, objectives, expected performance and our guidance for the next quarter. Actual results may vary materially from today's statements. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings, including those stated in the Risk Factors section of our filings with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements.

Additionally, the matters we'll discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures.

Joining me today on the call are Junkoo Kim, Founder and CEO; David Lee, CFO; and Yongsoo Kim, President.

With that, I'll now turn the call over to our Founder and CEO, Junkoo Kim.

Thank you, everyone, for joining us today. I will begin by providing a brief overview of our performance, and I encourage you to read the shareholder letter available on our Investor Relations website for a more detailed discussion on the quarter. Then David will go over the financials.

I would like to begin by talking about a few areas we are investing in to support creators who are an important part of our global flywheel. Our mature creators make up a large proportion of our creators and contribute the vast majority of content on our platform. We have listened carefully to our amateur creators over the last years, and we are excited to introduce major changes to our CANVAS platform. We are introducing a unified international platform to support global distribution across several languages, including English, Spanish and French, which we believe will make it easier than ever for creators to share their story all over the world.

We are also introducing an opt-in AI-powered translation program where creators have a choice to translate and distribute their series in other languages. As part of this update, we also expand our ad revenue share to our supported CANVAS languages. Helping creators monetize their content on our platform remains an important part of our strategy, and we have a strong track record of driving this from 2021 to 2025. We paid out an impressive $2.7 billion to our creators. Looking ahead, we want to grow that some even more, and we will continue to invest to make our creator ecosystem more robust.

Moving on to a quick update on our Disney collaboration. Since the end of the fourth quarter, we have launched another 5 titles, including Star Wars: Darth Maul, Black, White, & Red, Star Wars: The High Republic, Daredevil, Wings of Starlight, and Mickey x F1: Racing to the Top!. We look forward to introducing another original series later this year and remain well positioned to launch the new digital comic platform before the end of this year.

Moving on to IP adaptations. I just want to highlight a couple of recent successes. We celebrated Valentine's Day this year with the release of 2 of our Wattpad web novels as film adaptations. Love Me Love Me was released on Prime Video, where it reached global #1 during its launch week, while Kissing is the Easy Part was released on Tubi. We are also excited to release a webcomic adaptation of Kissing is the Easy Part on WEBTOON in the next few months, moving the titles through our global ecosystem to unlock value for this fan-favorite webinar.

Our Korean content continues to demonstrate its universal appeal beyond just our country of origin. In March, we co-hosted the world premiere of The Legend of Kitchen Soldier at Series Mania, Europe's biggest TV festival. The series is scheduled to premiere in Korea in May 2026, with concurrent global streaming on Disney+ and HBO Max in select regions.

Before I conclude, I want to share our leadership update. As we announced in March, we have elevated Yongsoo Kim to President to lead our global operations. He has been a key member of our management team over the last few years with a demonstrated track record of driving innovation through disciplined leadership, and I believe Yongsoo will play a key role in accelerating the execution of our global business. We believe we are off to a solid start this year and look forward to driving further innovation throughout the rest of this year.

With that, I will now turn the call over to David. David, please go ahead.

Thank you, JK, and thank you, everyone, for joining us. I'll be discussing the details of first quarter 2026 results compared to the comparable quarter in the prior year, unless otherwise noted. For the first quarter, we reported revenue of $320.9 million that declined 1.5%, but grew 0.2% on a constant currency basis within our prior guidance range. This growth was driven by growth in paid content and advertising, offset by a decline in IP adaptations.

We expanded gross margin by 390 basis points to 25.9% in the first quarter. We believe we can expand gross margin over time as we execute on our cross-border content distribution strategies and grow higher-margin businesses such as advertising. We narrowed our net loss to $8.8 million in the quarter compared to a loss of $22.0 million in the year prior, driven primarily by improved gross profit. We reported adjusted EBITDA of $9.5 million, well above the high end of guidance as we exercised cost discipline, leveraging our G&A and marketing expenses to deliver adjusted EBITDA growth of 132% in the quarter. This compares to an adjusted EBITDA of $4.1 million in the same quarter of 2025. As a result, our adjusted EPS for the quarter was $0.07 compared to an adjusted EPS of $0.03 in the prior year.

Turning to operational health. Global MAU declined 5.9% in the quarter. In March 2026, we saw a spike in automated web traffic in certain noncore markets. We strive to detect and minimize unauthorized access to our platform, fake user accounts and fraudulent accounts created by bots that inflate user activity. And starting from the quarter ended March 31, 2026, we decided to exclude such users from our MAU calculation to ensure accuracy and consistency of our MAU reporting. We continue to focus on driving users to our app as well as converting them to paying users. While app MAU and webconic app MAU declined 6.7% and 3.0%, respectively, year-over-year, we're pleased to have driven MPU growth of 2.2% as our initiatives focused on recommending more relevant content to our users have been performing well. Importantly, our English platform webcomic app MAU increased by 3.1% year-over-year.

I'd like to highlight a couple of successful new title launches in the first quarter that contributed to this growth. Ties That Bind Us, a hit Wattpad web novel was adapted into a webcomic in March 2026 and has already garnered over 5 million views. Another strong performer, Shifting Sails, launched in February and has consistently ranked in the top 20 amongst English platform titles.

Now I'd like to provide an update on our revenue streams at a consolidated level, starting with paid content. In the quarter, we posted 2.3% revenue growth on a constant currency basis. We are pleased to report another quarter of solid MPU growth of 2.2% in Q1. We believe we can continue to drive MPU growth as we refine our AI-driven personalized recommendation model. ARPU also increased 0.1% in the quarter on a constant currency basis. Advertising grew 0.8% in the first quarter on a constant currency basis year-over-year. In Korea, we experienced a decline in ad revenue from Naver, offset by an increase from other partners. Finally, our IP adaptations business saw revenue decline 22.2% year-over-year on a constant currency basis in Q1. As we've noted previously, revenue recognition for IP adaptations can vary quarterly based on the achievement of certain milestones.

Now I'd like to look at our results in the context of core geographies. In Korea, during the first quarter, our revenue grew 3.2% year-over-year on a constant currency basis, driven by double-digit growth in paid content, offset by double-digit decline in IP adaptations and single-digit decline in advertising. During the first quarter, while MAU of $23.1 million decreased 4.3%, we were pleased to see MPU of $3.7 million grow 8.5% and a paying ratio of 16.1%, increasing 189 basis points compared to the first quarter of 2025. Korea ARPU on a constant currency basis was up 5.1% compared to the first quarter of 2025.

Moving to Japan. For the quarter, Japan revenue declined 3.4% on a constant currency basis. Japan saw a single-digit decline in paid content, offset by a single-digit growth in advertising and triple-digit growth in IP adaptations, all on a constant currency basis. Japan's MAU of $21.1 million declined 3.6%. MPU of $2.1 million declined 8.3% and paying ratio of 9.8% was down 50 basis points year-over-year. First quarter Japan ARPU of $23.20 grew 3.7% year-over-year on a constant currency basis. We completed our infrastructure projects by the end of Q1, and we've redeployed resources to improve user experience on our platform. Yuki Chae, who was recently elevated to Chief Product Officer, successfully drove growth in MPU in Korea in his former role as Head of Korean Content Services, and we expect Yuki to spend a substantial amount of time focusing on our Japan business.

In Rest of World, we saw revenue growth of 5.6% year-over-year on a constant currency basis in the quarter, driven by single-digit growth in paid content and advertising, offset by a single-digit decline in IP adaptations. First quarter Rest of World MAU declined 6.7% year-over-year, while paying ratio of 1.7% increased 17 basis points compared to the first quarter of last year, we are pleased to see MPU growth of 3.3%. Rest of World ARPU of $6.80 also increased 4.4% year-over-year on a reported and constant currency basis.

Turning to profitability. Gross profit for the quarter grew 16% year-over-year to $83 million. This resulted in a gross margin of 25.9%, which expanded 390 basis points compared to the prior year. Adjusted EBITDA for the quarter increased 132% to $9.5 million. This resulted in an adjusted EBITDA margin of 3.0%, which expanded 170 basis points compared to the prior year. On the cost side, total G&A expenses for the quarter were $60.6 million compared to $66.7 million in the prior year quarter as we exercised cost discipline. Interest income in the first quarter was $4.4 million compared to $5.1 million in the prior year, and other loss was $2.0 million compared to other income of $2.7 million in the prior year period. We had an income tax expense of $2.7 million in the quarter compared to $2.5 million in the prior year.

Depreciation and amortization was $8.0 million in the first quarter compared to $8.4 million in the prior year. Net loss was $8.8 million, driven primarily by higher gross profit. This compares to a net loss of $22 million in the prior year quarter. As a result, Q1 GAAP loss per share was $0.07 compared to a loss per share of $0.17 in the prior year period. Adjusted EPS was $0.07 in the quarter compared to an adjusted EPS of $0.03 in the prior year period. Our balance sheet remains strong with a cash balance of $595 million and another $11 million of short-term deposits included in other current assets. We have a capital-efficient business model, and we believe we have the financial strength and flexibility to invest for the long term.

Before I wrap up, I'd like to spend a few moments discussing our second quarter outlook. For the second quarter of 2026, we expect to deliver revenue growth in the range of 1.7% to 4.6% on a constant currency basis. This represents revenue in the range of $332 million to $342 million based on current FX rates. We anticipate second quarter adjusted EBITDA in the range of $0 million to $5 million, representing an adjusted EBITDA margin in the range of 0.0% to 1.5%.

The fundamentals of our business are strong, and we expect to see an improvement in Japan and advertising trends as we move through the course of the year. Additionally, we are continuing to make investments throughout the year in our creators, content and users in order to drive our near- and long-term success. We continue to expect these drivers will support a return to double-digit revenue growth by the end of the year.

With that, I'd like to turn it back to the operator to begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Mark Mahaney with Evercore ISI.

I'd like to ask 2 questions, please. Gross margins, you've got some nice trends working. Talk about where gross margins can go in kind of the medium term, not next quarter, but in the next year or 2? And what are the key drivers? Is it primarily this mix shift towards advertising? What else would be in there?

And then secondly, could you talk a little bit about your financial philosophies as you hopefully reaccelerate revenue growth per your guidance through by the end of the year, are there enough investment opportunities out there that you want to keep that kind of very low single-digit positive EBITDA? Is that how you're thinking about running the business at 0 to 5 single-digit millions in positive EBITDA generating each year and any revenue upside, just let it flow down to investments as opposed to just dropping to the bottom line? That's sort of the philosophical question.

Thanks, Mark. It's David Lee, and then others will join after I go through your 2 questions. They're interrelated. Let me answer the sources before we talk about, so to speak, the uses on your philosophy question.

Regarding gross profit margin, as we noted in the quarter, the 390 bps increase to 25.9% really had 2 major drivers. The one that I think persists is the benefit of mix shift as we grow more of our paid content outside of our original market of Korea, which, as we've discussed in the past, has an improved gross profit margin, along with our future growth in our advertising business. That certainly wasn't a major factor in this quarter, but it is broadly still a factor.

Crossover IP, I believe, still represents the lowest form of customer acquisition investment, but it does have a lower gross profit margin. So when we see these hit crossover IPs hit a quarter or 2, it will swing things. Broadly speaking, within Q1, you'll note in 2024, we -- and in 2025, we did have some cleanup in attribution between marketing to COR, particularly in Japan and Korea. Going forward, I think we're relatively clean. And I think the mix benefit I just described is likely to persist. But within the quarter, in addition to mix, there was an isolated improvement in our Japan business' gross profit margin associated with the Japan Smartphone Act. We do not intend to drop this benefit approximately $3 million to the bottom line. We continue to want to invest it in our guidance frame for additional growth, but that is a noteworthy improvement in the cost profile, not just for us, but many businesses in Consumer Tech in Japan.

Let me start with the answer to your philosophy question and then turn to Yongsoo or JK if they would like to comment. We're very bullish on the persistent long-term growth of this business. That's why we talk about double-digit growth by Q4. But we are intentional about investing, which you see in our Q2 guidance, behind the growth that we're excited about. Investments in CANVAS that you saw us made a major improvement on, investments in our core marketing in high-growth areas, the transition you're seeing in rest of world, we're seeing real MPU growth, 3% growth in what we call Rest of World and even higher, if I were to break out the English-speaking portion of that. And so there are really strong reasons to invest for shareholder value.

Long term, I don't think we're limited to, as you mentioned, single-digit adjusted EBITDA dollars or margin range. I think this flywheel will continue to improve its growth prospects along with its profit margin. But I want to recognize we're still getting through our Q1 noise. We finished our infrastructure project in Japan, and we're reinvesting back into growth in Japan. That will take a few quarters, which is why we recognize that it's the right thing to do in the short term. Long term, however, we're very bullish on both the top line growth and the long-term potential for profit.

Yes. The management team is focused on initiatives aimed at accelerating growth, including both organic and inorganic opportunities. This includes expanding video format on the platform, strengthening interaction and community features and building mega IP franchises that can both extend the IP business and further drive platform growth. We look forward to sharing progress updates on these initiatives in future course.

Our next question comes from Kunal Madhukar with Deutsche Bank.

Two, if I could. One is, can you give us an update on the status of the Disney Digital Comics platform? And then I have a follow-up.

Sure. And welcome to the coverage, Kunal. I look forward to meeting you in person and talking with you in greater depth. With regard to Disney, as JK mentioned, we are very excited about this collaboration, and we are on track. And specifically, we reiterated targeting a 2026 launch for the new consumer app platform, but we're not sitting on our heels.

Since our last Q call, this may be new news for you as you begin coverage, but having 5 titles launched on our platform since our last call, 2 Star Wars titles, Wings of Starlight, Daredevil and actually an original around the Mickey and Formula One racing storyline continues to exhibit the progress that we intend to continue to make. We also mentioned an additional original series coming out later this year. So I would characterize our collaboration with Disney to be on track, very exciting, but much more to come down the road.

Got it. And then a quick follow-up on the revenue side. So you mentioned getting back to double-digit growth by 4Q of '26. Can you talk about, one, what are the different elements that go into that growth acceleration? And then how much does Japan play into it?

Yes. We're excited to drive to double-digit growth by the end of this year. Let me go through the components. As you get to know our business, paid content is our quote, "Bread and Butter," and our country of origin was Korea. So noting within the quarter, a 13.9% constant currency growth in paid content in Korea reflects the fact that we're very confident in the health of our flywheel, our oldest flywheel, one that benefited from continued investment in products, AI personalization engine, a very exciting new development in character chat that was launched in June of 2024, which, by the way, is following on in Japan shortly later -- actually, it launched in Japan in February of 2026.

And just to continue the thought, we're very excited about the work that we're partnering with Genies on, that Yongsoo can talk about with regard to having AI-powered character avatars in the U.S. launching later this year. So continued investment in the product and the features that our readers, our consumers want, but then also continued investment in the supply chain of great stories. We talked about CANVAS, our amateur platform in English, for example, having launched a new homepage and then just in May recently, a new app. This is showing up in things like Korea paid content increasing 13.9%. In Japan in paid content, we just completed in Q1 a pretty important infrastructure investment. This was us shoring up the infrastructure to drive growth in the latter part of this year by Q4.

But we'll also note that our advertising business will lag a challenging quarter -- a year ago period by Q4. We talked about one large e-commerce player hurting the growth a year ago in Korea and how we are relatively early in Rest of World, which we hope to begin to drive to growth by the end of this year. And then finally, there's crossover IP. More and more of these great examples of consumers discovering our stories, not just on our platform, but on the big screen and the small screens, there is an ebb and flow and a quarter or 2 can make a difference. We're very excited about the slate. That's why Junkoo mentioned and wrote in his shareholder letter about the strength of the examples. I think all 3 of these components are the areas we're investing in to drive to that double-digit growth number by the end of the year.

Across the WEBTOON platform, we are continuing to see decent growth in Korea as well as in the U.S. and the broader ROW market. Once Japan returns to growth, we believe the platform can return to a more meaningful overall growth trajectory. Key drivers behind these efforts. Turning around the active users and paying user growth in Japan remains our top priority. These are 2 growth key drivers behind these efforts. First, as David mentioned, we see significant opportunity through product innovation. At the same time, we are accelerating the development of local original content in Japan. We plan to further strengthen our investment in local content and creators and more concrete plans are currently being developed.

Our next question comes from Eric Sheridan with Goldman Sachs.

Maybe 2-parter building on some of the themes we've talked about so far. In terms of changing the way in which you compensate or monetize creators on the platform, can you talk a little bit how that might change your competitive positioning for creators across some of your key markets, not just maybe the growth markets for creators as well? That would be number one.

And then I understood on the easier comp as you get into the back part of the year with respect to advertising. But can you update us on some of the building blocks you're putting in place with respect to the advertising business that would sustain growth beyond 2026? And how should we be thinking about those investments sort of turning into yield or output?

Thanks, Eric. Good questions. Let's cover the first and then the second. With regard to our competitive position, as the dominant leader in this format, we feel we are extremely competitive with regard to the aligned revenue share model that we continue to support. I don't think you can find another platform where any creator, even an amateur creator can sit side-by-side with the platform and see mutual benefit, and that is not going to change. We have not talked about or forecasted any need to invest more to be competitive. In fact, I think that we're increasingly providing great tools, tools like what you find in CANVAS. So there is an example where we're creating value.

So having a beta where an AI-powered translation tool can take an original English amateur story into the other 7 languages, sharing our advertising revenue with amateur is a low cost but a very aligned way to demonstrate to even those who have not had success as a creator that if they have a hit, we will power their growth beyond and very consistent with even what you see as a success in things like Lore Olympus and Amazon Prime or one of the many Wattpad examples. So this is a core strength of the business. We will increasingly provide more and more value to creators, and we will maintain that alignment with no change in my view from a CFO standpoint in needing to increase the rev share. It's rather we're increasing the value that we give to creators in our existing model.

I'll also note that this model allows for us all to benefit because as a creator exports more stories beyond their country of origination, we see more opportunity in our company's gross profit margin as described in the previous answer to the question posed.

With regard to Q4 ads, in the quarter, we talked about Korea, our most mature market for advertising, having been impacted in this quarter by a lower level of advertising from our former parent neighbor, but an increased level of support in diversifying our customers in advertising in Korea. That will continue. And we will see the benefit of that in future periods. Japan, we did not break out the growth in Japan, but we're pleased with our advertising growth in Japan. But in Rest of World, we're much more clear eyed. Part of the leadership change with Yongsoo leading the business as our Global President and having him asked me to lead Wattpad directly as its President is to put in place the fundamentals for the bigger game. That means that we're not driving to a short-term bump in Rest of World or North America-based advertising. We're much more focused on the bigger prize in 2027 and beyond. And those pieces, we will update you on as we can in terms of the building blocks.

Creators are at the very core of WEBTOON. One of our most important priority is making WEBTOON the go-to platform for more creators around the world. And the key to that is helping them share their stories and reach more users globally. The evolution of CANVAS, our amateur creator platform will further support this vision. With the launch of Global CANVAS, creators from any region around the world will be able to unload their work and with their content, have it automatically translated through our AI-powered translation engine.

In other words, creator will be able to reach a much broader global audience while users will gain access to a wider variety of content. We believe this creates meaningful benefits for both creators and users, further strengthening the flywheel of the platform.

Our next question comes from Dae Lee with JPMorgan.

I have two. So the first one, when you guys talk about leadership changes that you guys have made recently, the piece about shifting from regional structures to integrated global leadership kind of stood out and your unification of the CANVAS program also stood out as like a way to bring down geographical walls. So when you guys talk about like globalization of your platform, is this more of you guys doing great like better work in Rest of World regions? Or does that involve Korea and Japan as well and thinking about the 3 distinct regions as a global platform overall? And I have a follow-up.

Thanks, Dae. It's a great question. Let me start by offering this point of view. Globalization is about a few things. Principally for us, it's about applying best-in-class business practices to the benefit of more than one region. It is not about just Rest of World. Let me give you an example.

We're very proud of the work we've done in Korea, our original market in the last year, showing that 13.9% constant currency growth, showing the increase in experimentation and AI personalization. You see the ARPU growth. You see the ability to own titles, not just "rent and lease them."

The phenomenal work in product and on business model in Korea has great relevance across the world. And as an example, we talk about a leadership change such as Yuki Chae, who led that work in Korea, now leading globally as Chief Product Officer and spending a lot of time in the investment in Japan with Yongsoo's help as just one example. But CANVAS is another great example where having a unified tech platform, being able to provide 7 languages, not just , that doesn't eventually just benefit Rest of World. That benefits the entire global platform.

From a finance standpoint, it's about allocation of capital and talent to the maximum impact. And I think it's a big lever for us, not just in Rest of World, but as a global public company across all regions.

One of the biggest changes under our globally integrated organization structure is on the product side. Today, WEBTOON operates different platform across Korea, Japan and Rest of the World markets. And we see a significant opportunity to raise the overall platform standard by more quickly and efficiently scaling successful feature across the regions. This includes areas such as content discovery engines, character interactive features and video-related features. By accelerating the sharing and adoption of successful product innovations across markets, we believe we can improve the user experience globally and drive stronger platform growth over time.

At the same time, leadership changes across both the tech side and AI organization will help accelerate AI transformation across the product and the company as a whole. we expect to move faster in integrating AI-driven innovation into both the user experience and internal operations going forward.

Got it. And as a follow-up, on the creator side, when you guys unify CANVAS, is there a reason why, I guess, like Korea and Japan might be missing there? And then when you talk about investing $50 million in creator support, like could you give us examples of like what kind of support, I guess, was lacking on your platform that necessitated this type of investment in 2026?

Let me start with your second question first. Candidly, I don't think we were lacking any investment in our creators. It has been a 20-year passion for our founder, JK, and we've continuously invested in our creators. In fact, I think we just updated a number. I want to make sure IR correct me if it's wrong. I think it's a $2.8 billion creator rev share number from $2.7 billion, sorry, creator investment that we've made from the periods of a 5-year period of, I think, 2011 -- sorry, 2021 to 2026. We'll update you if I'm off by a decimal or 2. This is not going to change.

And then on your first question, let's have Yongsoo, our President, answer it directly.

Korean and Japanese are at different stages within the WEBTOON ecosystem. And each market also has somewhat different creator system and operating structure. As a result, Korea and Japan were not included in the initial rollout. However, we are actively considering a phased approach for applying this initiative to Korea and Japan over time.

Our next question comes from Matthew Cost with Morgan Stanley.

I just want to follow up on the CANVAS platform. Obviously, it's been talked a lot about a good bit on the call so far. And in the shareholder letter, you made a comment about increasing the number of crossovers from CANVAS to originals. And I guess, is that hopefully going to be a function of just by exposing CANVAS content to 7 languages instead of one that you'll have a better level of visibility into what content would succeed in the originals program? I guess help us understand what the new CANVAS program will do kind of at a more granular level to help increase the conversion to the original side?

Thanks. I'll start, and then I think Yongsoo will jump in. First, we have always seen great originals emerge from our amateur platform, even on the CANVAS of yesterday. And we've given you these examples, but having folks emerge who never had a voice before like Rachel Smythe and many, many others, even on the Wattpad side, is a core part of our business model. It is the lowest cost way for us to empower creators to write a story that we may not have suspected would be the global hit that they eventually become. That is unchanged. CANVAS is critically important for us in that way.

And it is -- while the purpose is unchanged, I think you'll find the specificity of the shareholder letter reflecting the fact that there's a massive upgrade in its capability. It starts with this new board, which we launched on April 21. The whole app was refreshed on May 6. We've highlighted these 7 languages where you have AI-powered translation, but there have always been and there continue to be even more compelling tools for the amateur creator on CANVAS to have a chance to graduate to being a hit maker and eventually a professional creator. I would think of this as a wholesale improvement soup to nuts rather than a bet on any small part of it.

But Yongsoo you can jump in as well.

What we expect from a globally integrated CANVAS platform is the ability to attract more creators, help them reach larger audiences and ultimately generate bigger breakout titles. Naturally, this will strengthen our WEBTOON original content, PGC platforms by creating more ticket series while also expanding the pool of content that can evolve into IP adaptations. In other words, as CANVAS becomes stronger as a starting point for discovering new content and creators, our overall original content development pipeline also becomes significantly stronger.

There are no further questions at this time, and this concludes today's call. Thank you for attending. You may now disconnect.

All right. Good morning, everyone. Welcome to the final day of the Morgan Stanley TMT Conference. My name is Matt Cost from the Morgan Stanley U.S. Internet Research team. Very happy this morning to be joined by David Lee, CFO of WEBTOON. Thank you for being here.

Sure. Absolutely.

So quickly going to go through the disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your MS sales representative.

All right. So maybe, David, let's start with the platform overview here. Maybe for people who are newer to the WEBTOON story and in the audience, tell us about your platform, tell us about your user base, what brings people to WEBTOON and what keeps them there?

Yes. Thank you. Well, WEBTOON is a global storytelling company. On the one hand, we have over 24 million creators, many of whom are amateurs. They have full-time jobs like you and me, but they feel like they have a passion and a story that they want to tell. We made it super easy as a technology platform, we call it CANVAS in English to let these over 24 million creators have a chance to tell their story. And oftentimes, you see lives change. We recently saw the success of Lore Olympus, which is being greenlit by Amazon Prime to be a featured animation series.

As an example, Rachel Smythe was a graphic designer in New Zealand that had a story in her mind called Lore Olympus, and we allowed that story to live globally on our platform, but also to be a great story outside our platform. And on the other side, we have 163 million monthly active users. These monthly active users spend a considerable amount of high engagement time on our platform, finding new stories, 30 to 60 minutes on average per day. And they're paying to do so. Our average monthly ARPU is around $12, still a small amount for the amount of, I think, value we offer, but an indication that more and more parts of the world are realizing to find original new stories, there aren't so many destinations. In terms of the scope of the business, we're in over 150 countries. We just had recently -- as we were talking about our release for Q4 and for fiscal 2025. So it's about a $1.4 billion revenue business. And it's generating in the most recent quarter, positive operating cash flow.

So you have a business that I think is set for continued growth. In terms of growth, we're really dominant in our countries of origin like Korea, but you're seeing us -- we're the #1 app in Japan now for several quarters running called LINE MANGA based on data.ai per revenue. And that includes mobile games. And we're seeing really interesting growth here in the U.S. And so we're really excited to continue that growth.

Let's stay on that theme about user engagement. You mentioned how you've been the strongest in Korea for a very long time. Japan has been a recent major success story. What has driven the strength in those regions? And what is the road map to replicate that depth of engagement in other countries, but especially in the U.S.?

Well, I think the starting point actually is fortuitous for our business outside of it, meaning the consumer. So it turns out that younger generations of consumers, what we call Gen Z, 18- to 25-year olds, but even some Gen Alpha, they're desperately looking to discover and be able to share in their community stories. They pull from the digital universe really interesting ideas, whether it's a TikTok reel or in our case, a great story on Wattpad or WEBTOON. That fundamental tailwind of the next generation of digital app-first consumers looking not for a retread of the same story before, but something brand new that they feel they can discover is a benefit to the company.

And then if you look, for example, how we started in Korea, how we've become the #1 consumer app in Japan, how we're growing in the U.S., those consumers don't want just great stories. We're really excited about our partnerships with IDW. It's great to have Godzilla and Sonic the Hedgehog and Teenage Mutant Ninja Turtles on our platform, but they want original stories. So here's where those 24-plus million creators come in. No one else can power a story from some creator in some part of the world with a passion. And then our technology, our AI makes it super easy for anyone with a story in their head to turn it into this unique format of either a digital novel or what we call a WEBTOON, which is a combination of just enough visuals, a very quick self-gratifying way to see where a story is going, but then also to see consumers engage for 30 to 60 minutes.

So that combination, original stories, a creator flywheel, a consumer that's already looking for the next story, I think, is the core from a fundamental standpoint. From a business standpoint, it's a lot of time and effort by our founder over the last 20-plus years in order to fulfill a product format that one we have. Like we're very privileged to be partnering with Disney. I want to live up to the promise that we are one of the best operators digitally of global storytelling formats for webcomics. And I think that's a key to our success, too. And that is replicatable from one market to another.

In fact, just to mention new breaking news as a part of that, to speed that up, we've announced the promotion of one of our own, Yongsoo Kim is now our President, he's going to help run across the business units. JK is obviously our Founder and CEO, and I'm running the COO, CFO stuff, but it's great to have someone to be able to take what works in one region like the AI personalization engine that we've seen success in, for example, in Korea and quickly expand that product and digital offering across the rest of the world. So I think that's what the future will bring too.

A lot of exciting stuff in there, but maybe just lingering for a moment on Japan and Korea. What are the levers for growth in those markets where you've already achieved so much success? How long is the runway? And is there room for user growth? Where is the play in those markets that remains?

Yes, it's really interesting. Korea, as an example, we have, what, 50% penetration, arguably, we're an everyday household name. Some journalists have written articles in the past that say that the major hits that Korean consumers see on the big screen actually originate as stories on what we call NAVER WEBTOON, our platform offering. So then you would think that, wow, will Korea grow? And I believe absolutely yes. If you look at the most recent quarter, for example, we saw the MAU of Korea grow 3-plus percent.

And there's a benefit to having that much habit formation already in a market when consumers know and trust that they can go in Korea on NAVER WEBTOON and find a story that they have never seen before. Because remember, we have a content generation engine that nobody else has and know that they might even discover it somewhere on the big screen or the small screen through a streamer, Netflix, Amazon Prime, et cetera. That has a lot of power to grow. We're just getting going in Korea. It's funny, my former days included mobile gaming and e-commerce, where so much was around community.

When 2 people are playing the same game for my former life, they can share stories. They can exchange chats. They can send each other's gifts. They have virtual profiles. This is a well-known phenomenon. We're just scratching the surface. We're just beginning to consider doing some of what is clearly available to us in markets like Korea and Japan around community. And I think that's a growth lever in the future. And you've seen historically Korea have fluctuations in MAU because we are 50% penetrated in that market. But you see from an MPU and ARPU and a revenue standpoint, I think there's room to run. In contrast to Korea, Japan is a relatively recent phenomenon.

We had purchased a business, I call it the launchpad business of eBookJapan. This is a great major distributor of stories. In Japan, you have -- well, first, if you just look at our ARPU, right, it's multiples of -- you have a clear consumer. And by the way, the number of consumers in Japan, they're not just spending a lot more from an ARPU standpoint, but there are a lot more of them, right? They have a history of wanting to seek out digital content. It's not just Manga, by the way. It's every genre on LINE MANGA. And so there, the key for success is to enable that creator ecosystem in Japan to have a chance to publish in any language and be able to go to a great creator in Japan and say, you may have been relegated to a few publishers of a particular type of content in one language in Japanese.

Welcome to a global franchise that can publish you and make you a global hit in English, in the U.S., in French, in Korean. And with a history of 100 rich film adaptations, we are enabling many of them to break out off our platform as well. I don't think anybody else has that. And so I think our growth -- I think we're #1 as rated by data.ai in revenue, including mobile games in Japan. I want to say for at least 3-plus quarters, I'll have to check with my team. But there, we're only sub-20% penetration of the market, a market that is really very much accustomed to purchasing digital story.

So I think Japan will be an enormous growth engine for us. I want to note, Japan already is something like 40% to 50%. It might be around 45% in the last quarter of the company's total revenue. So it already is an important business, but it's quite early. I think both those businesses have room to run.

Great. Maybe moving on to partnerships, which is a really exciting series of announcements in 2025, especially with Disney, but I think also with Warner. Can you talk about the strategic rationale behind the partnerships, how you're leveraging external IP to expand content breadth and how that's strengthening the platform?

Yes. So when you think about what we call the platform of the flywheel, I think these partnerships strengthen all 3 components. So let's kind of go through them. There's the appeal for creators to pick us. And we have never had any challenge in keeping our 24 million and growing. I think our K is out later today after the close, and you may see a more specific growth number there. But creators continue to pick us because we're the only example where they may never have been able to see their story published on our platform.

And there's a wonderful way for them. Our top creators on our platform can make over USD 1 million per year on our platform. But then to see -- I think of Netflix's top 10 projects of all time, I think 2 of them have come from our platform. So to be able to have these relationships with folks who can take a creator's dream and make them a huge success on WEBTOON, but then also see them transcend culture and language and barriers to be on the big screen, the small screen or video game. Lore Olympus is a New York Times bestselling book in print as an example, all formats is, I think, really compelling. So that's why we love our partnerships with everyone in the ecosystem.

The work emerging from Disney is exciting, 12 stories already being told originally from their universe on our platform. We call them reformatted titles and stories that I grew up loving like Star Wars and Spider-Man, et cetera. But as well a new consumer app that we're launching in partnership with Disney. We committed to announcing in the last quarter, we're doing it by the end of the year. That's just another way for the nascent U.S. consumer to get these great stories from their universe, 35,000-plus stories from their universe. But then even pre-existing Disney, we have a long history, I mentioned IDW, there are others, where we love presenting original stories for our creators, but for the second part of the flywheel, for our consumers, why not be a destination for not just our original stories, but any great story.

A lot of consumers across time may not have seen like Gen Z may not have seen Star Wars as a webcomic or realize just how interesting that storyline is. And there's something to this format, I think, for the users. That's why it's appealing to the younger generation. And then if you think kind of beyond the consumer and as well the creator, there's the role we play from a technology standpoint. We're a tech company by birth out of NAVER, now a self-standing publicly listed company. But leveraging AI to fight piracy, to personalize recommendations for the consumer, to identify the hits that could become a hit on Amazon Prime or Netflix, like that's -- all 3 of those things work together when Disney picks us to partner or we announced the Warner Bros. deal.

We're really excited about our work with these partners outside our platform, too. So we talked about in Japan, having 20 anime projects, and we're on track with that. I'm super excited to later tell you when and how they're going to be released. So consumers are going to see us not just on our app, they're going to see us everywhere they see a story. And these partnerships speed that up and help us on our platform as well.

Maybe following up just on something you touched on there, which is the user response to this content. I guess, how is this part of your strategy to expand into English-speaking markets? Is this content a means of attracting people to WEBTOON? How does it play in?

Yes. So first, the dynamic of the business, let's talk about the business here in the U.S. We have a really large portion of our business in the U.S., which is this attractive Gen Z consumer. And the Gen Z consumer and the Gen Alpha consumer is different than the days of yore when I was a consumer of stories. They want to discover and pull on their own stories. And they're increasingly -- like I think we haven't talked about this recently, but we did this big consumer study for the U.S. And the consumer said, hey, we think your experience is more fun than really great consumer apps that I admire, folks like, well, I don't want to name them. And we ask them why? Like why do you love WEBTOON here in the U.S.?

And it's because they can't find the stories they find on our platform anywhere else. It is as simple as we have original stories and oftentimes, you can't find that anywhere else. So because of that, when you think about what is the role for partnerships, how do we grow the U.S., think about the last year since going public. You saw us make investments. We said we really believe we have product market fit in the U.S. Let's grow webcomic app MAU on our English platform. And you saw quarters of double-digit growth. And in this most recent quarter, you saw me announce it was very notable that we have MPU growth now.

So as the consumers for free, it's usually 4 or 5, like, for example, if you were interested in Star Wars or Spider-Man, you can, for free, see a lot of episodes. But when you get hooked on something you feel like you've discovered or rediscovered, it's only $0.15 to [ $0.17 ] for you to see that next late-breaking episode. And that is a natural human behavior we find for the U.S. consumer. What we find is when they voluntarily cross the threshold and become MPU that we don't have to spend money to convince them because they have confidence they're going to find another story.

So I think the role of partnerships is in all 3 areas, right? It's to introduce stories that perhaps have never been seen in our format before in our platform, like what we've done with those 12 reformatted titles. It's to introduce brand-new stories that you can't get anywhere else through our originals. But then it's also to use our technology to help them find in a personalized way, the way we use AI to help them find the next story. I've never been part of a consumer business where I'm not squeezing static content for the last legs of its viable monetization.

There's 120,000 stories arriving on our platform on some days every day. So because of that evergreen source, we have the privilege of being very patient. We're not in a rush. The work we're doing with Disney and IDW in the past and others, they're really important partnerships. And so we will take our time to make sure the quality is there.

Great. I guess shifting over from the user experience to the creator ecosystem. When I go on the WEBTOON app, one thing I can't see is the amount of work that goes into curating and nurturing that creator ecosystem. So what does it take to keep that healthy?

Well, it does take some real technology. But I would tell you, our business benefits from a lot of the efficiencies that you get at scale. So we recently -- we call it CANVAS, for example. CANVAS is our user-generated amateur creator platform that makes it really straightforward for anyone with a story in their head to become a professional storyteller. We have recently talked about our heavy continued investment in upgrading and improving CANVAS. We will do that. That's part of the cost structure of the business. It's already embedded in it.

That's real technology, and it leverages learning globally. We can learn from our LINE MANGA business, our Korea business because our creators are global, right? The 24 million plus because the 10-K will be released later, you'll get the next number, but it's obviously higher. Those creators have given a signal on how they want to be able to create. So there's a fair amount of work there. But then we have such a body -- I mean, I mentioned 120,000 potential new stories arriving every day. There's a huge amount of technology and work we have underway to make sure we discover the right content for the right consumer.

So this AI personalization engine, which has been core to the success of reigniting growth in Korea recently, what we intend to do and talked about doing in Japan next and potentially here in the U.S., that's a big part as well. So again, we're an interesting blend of being a tech company at heart, but a huge at-scale content machine with 24-plus million creators and a product format that appeals to Gen Z and the next generation of digital consumers. That's kind of the way we think about the company.

Got it. And I guess from a financial perspective, obviously, a huge part of the ability to create content at a professional level on WEBTOON is what the money that you make from it. And you mentioned some of your top creators are making $1 million a year. So I guess how should investors think about balancing compensating creators for the work that they're doing versus the margin and profitability goals of WEBTOON?

Yes. I think it's important to look at the last quarter because we benefited from the last many years of achieving the scale on the financial standpoint. So in Q4, I think we delivered roughly around $330 million of revenue, but the gross profit margin of 24.3% grew 100 bps year-on-year. Why? Why is your margin increasing even as you're talking about making these investments for growth? We are positive cash flow from operations. I think it was about $11.7 million or so. So we are self-funding organic growth.

Part of the reason is that our business benefits from a profitability standpoint, the more we grow outside of our country of origin. So every -- think about how much we contribute to, say, a creator in Korea has a great story. They have a full-time job. They go through the process with us, and we say, congratulations, you can become a professional creator, and it starts in their original language of Korean. But we have this technology, this global reach, this product format that transports across language well, we can enable that creator to be a hit off platform on Netflix or Amazon Prime in Korea, but then across regions to be a global hit in multiple countries, and we have lots of examples of this.

There's so much value we create with the creator, but we're very generous. We haven't needed to reduce, we probably could, our commitment to creators, and it's on a rev share model. So unlike a lot of businesses, I don't have to make a human judgment bet on what's going to be a next hit story. My platform tells us, and we can, in good faith, go to our creators and say, we are totally aligned, like wherever your story goes, we will enable it and empower it because we fair share it. Now maybe 20 years ago, when Junkoo Kim, our CEO and Founder, began this dream, it would have been an investment to create both sides of the market.

But we're now at a point where we're generating positive operating cash flow, we're growing. We're becoming #1 in new countries like Japan, and we can self-fund. One of the great criticisms of the company from investors is, David, you haven't used your nearly $600 million in cash you got from the IPO. And it's not because I don't intend to create shareholder value, but I do see a natural self-funding mechanism now within the company that doesn't obligate me to use it. And so -- and we talked about double-digit growth by the end of Q4.

And we talked about how our 1 quarter out guidance for Q1 may be misunderstood because it includes timing stuff from the crossover IP part of the business. 8% of our revenue, of our $1.4 billion annual revenue comes from movies and stuff outside of our platform. But sometimes in a given quarter, 8% of $1.4 billion can swing a quarter. So -- and as you look at the course of 2026, double-digit revenue growth by the end of 2026 also means accretion to variable profitability if we execute well. And so that's why we're so focused on growth because the bottom line takes care of itself in this business model.

You made an interesting comment in there. I want to revisit just for one second about, well, if JK were trying to do this today, it would -- there'd be all these barriers, whereas 20 years ago, he started building it and you've come to the position that you're in by building it incrementally over time. How do you view the barriers to entry in businesses like yours now just because you introduced that idea. If I were to go on [ Claude Code ] tomorrow and say, I'm going to build a WEBTOON, what would be the roadblock in my way to prevent me from scaling that business?

Yes. So what's interesting is when you think about the WEBTOON business, we actually don't see, and this is despite many large players trying over the last 20 years, any real competition we feel threatened by. And let me explain why because that's a bold statement. So first, we think human storytellers are the best storytellers right now. We argue that we have some of the best AI, and we have -- unlike a lot of pure AI model-based companies, we have a lot of data that we have access to. We have proven hits and a library for over many, many years. So we have a lot of information about what AI should do and can do.

But we think human storytellers are really, really good at telling stories if you have a global pipeline to all of them, which we have. And that's taken a fair amount of time. So having the credibility to say, hey, we have a rev share model with 24-plus million global creators and a proven track record of helping them transform their lives on our platform, but become hits off our platform is really hard to replicate. And we're fascinated with AI. We use it extensively in the company. And in no way am I -- I'm in no way making a comment on its future growth.

But I think we're in the best position as a company to leverage any new technology to help creators and tell the best stories. I really believe that. I think the other piece is it's very hard to build a global destination for Gen Z that's durable that having demographic goal, but also 30 to 60 minutes on average engagement every day and having a next set of stories every day is really hard. I've been a part of a lot of other companies in the mobile gaming space, in the consumer space. And there's always been this dynamic of having to go to the same sources for a supposed proven hit because they had created one before. And it was never really a data-driven choice.

And part of the reasons why I came out of public company retirement to join Junkoo and WEBTOON is I think what's unique about our business is we have an evergreen source of stories. And that started with his vision very early on 20 years ago of being in the same place as creators trying to create a great legacy for them and for us, this rev share model. I don't think anyone else has that. And then the consumer dynamic is important, too. The accumulation of so many hits and so much data, knowing what consumers love, we are a data-driven tech company.

We have more data than most by frame of a WEBTOON on who's loving it and why and also webnovels with our Wattpad business. And I think that's an advantage that accrues. Because of our tech and our data and our market position, I think it's increasingly hard for anyone. That said, every great success in genres competition, we welcome it. We want the consumer and the creator to win. We just think we have a very big advantage in this area.

So I have to cancel my plans to launch [indiscernible] then.

So question is, what AI will you be?

That is the debate. So on the advertising side, so obviously, another exciting and important opportunity for the business. How have users responded to ads on the platform as you work to grow that business? And how are you thinking about the opportunity now compared to where you were when you first took the company out in terms of the ad opportunity?

Well, I think we're really nascent on, in general, our ad business. If Paid Content is roughly 80%, and I mentioned crossover IP is roughly 8% in the last quarter. That 12% of advertising theoretically should be much larger. And here's why. It's not just that I'm greedy as the CFO. From a consumer standpoint, when -- we call her Maddie, our Gen Z typical consumer, say, here in the U.S.

When Maddie discovers the [ romantic ] comedy or whatever story she's discovered and she wants to pay that $0.15 to [ $0.17 ], and she's hooked, like she wants to see the next episode, being able to offer her a highly relevant video ad and maybe it's affiliated to her own interest because we have a lot of contextual data one day. Maybe it's a beauty ad. Being able to have her see that in lieu of making that $0.15 to [ $0.17 ] doesn't really cost the company anything because even if she chooses to watch an ad here and there, we know she's going to continue to want to see where the story goes.

She'll still be a great paid consumer. And it helps a generation of Maddies have just different ways to get habit formation on stories that they can discover. It's very different than in other businesses where to introduce an ad model, you're fundamentally cannibalizing the user experience away from the Paid Content model. That's not the case to the same degree here. All our consumer research says the same thing that if we do this well, and it's taking us time to do it well, we actually can create more habit formation on Paid Content even as we monetize highly relevant high CPI interactive ads. Korea is the best example where because we have 50% penetration, we have a really strong advertising business and team.

But I think we're really early on other markets like in Japan, where it has been a great growth story for the company. But the U.S., we've really held back on pushing for short-term growth because we want to put in place the fundamentals to do this well. We don't see the need to grow an ad business. There's plenty of growth in Paid Content, but we see it accelerating Paid Content growth if we do it well. And arguably, we're taking our time. The Wattpad business, an important business, one that I just took direct control of operationally. It's such a great UGC platform that I don't want us to make quick moves in advertising at the expense of the user experience. And I don't think we need to, to achieve the results that we're talking about delivering this year. So we are being patient, but we think it's a big opportunity in the long term.

Got it. I guess one on AI content creation. I get the sense in a lot of creative industries, certainly including webcomics and webnovels, but really across entertainment that how creators are using AI is sort of a contentious subject. How are WEBTOON creators using AI to generate comments, to generate stories? What's your posture towards that? And what does it mean for the platform?

Yes. Well, we're pretty clear about being all for our human storytellers, our creators. We use our technology to protect them, to help consumers find their stories. That's core to the philosophy of the business. But we also are a tech company, and we have a lot of technology, and we have a lot of AI. We've been using AI, for example, to fight piracy, to personalize recommendations, to help creators produce more productivity with less labor and effort. And we think that's aligned to the human storytellers' interest. And so there's that.

That said, we are a platform that enables a creator to use whatever technology they want to be able to tell their story. We don't need to place bets on which AI will win. We want human creators to have all the advantages of whatever is accelerating in the technology space. And it's because we have a rev share model, frankly, where their benefit and our benefit are mutually aligned. I think what we're seeing is that -- let me give you an example. And this is work that's not powered by AI, but it's important work. You've seen us introduce Video Episodes, right, where in the U.S., for example, you can read a webcomic, a lot of people do, but you can also choose to watch a video.

It almost looks like a near form of animation that's -- because what is a webcomic? It's a series of really engaging frames of visuals, motion and just enough text. And if you string together a set of webcomic frames, you can imagine it can make a great video episode. And so we'll go where the creator and the consumer wants to go. And if Video Episodes becomes a hit, we are well positioned to do it. You're also seeing us experiment. In Korea, we introduced something we talked about called Cuts. This is much more of a very short, quick format for our -- we have a lot of creators in Korea, and they may want to be able to play with the idea of telling a short video story.

So having an ultra short-form video product offering keeps us relevant with our consumers. Now we don't need to talk about using AI for any of that, like we're really for the creator, and we will go where the consumer wants to see the story. And we'll use the technology that pleases both ecosystems. And because we're so early, and I think our growth in our Paid Content business, I don't need to artificially force the implementation of tech, I think, to grow the model. I do need to accelerate the growth. I recognize that for our investors clearly. But right now, I think we're in a good position to protect the human storytelling.

Got it. Maybe quickly in the last few minutes, we can touch on the IP business. How should investors think about the role of the IP Adaptations business inside the WEBTOON platform? How should we frame the economic and financial opportunity when we see projects or IPs that are converted over into kind of that linear entertainment format? And what does that mean for WEBTOON?

Well, I think for the business, -- when you see a major hit outside our platform, it's one of the best ways to stay relevant to creators, if you don't want to put in financial terms, to potentially reduce the burden on the company to attract great creators continuously. It's also one of the lowest forms of customer acquisition costs. So in this last quarter, in English, like you saw us talk about numerous greenlit projects that are super exciting. We talked about Lore Olympus, Chasing Red is another one, even from this last year, Sidelined 2: The Quarterback Back and Me with Sidelined 1 that came after Thanksgiving.

When consumers in the U.S., for example, where we're nascent, get to see on Amazon Prime, like Marry My Husband or on Netflix, one of the many Crunchyroll collaborations or on Tubi, a great story. The fandom interest means they want to know, well, what else did this creator create? Are there other stories? Where can I go to learn more about something that I'm enjoying on the big screen? And that draws interest back to our platform. It's also a wonderful way to have us to kind of fight for the success of our creators that start on our platform in one part of the world. So I think it's an enormously important strategic part. Now financially, I've talked about it only being 8% of our revenue base and it being lower gross profit margin as a stand-alone business compared to Paid Content, which is all true.

But it's one of the most effective, most efficient financial means to speed up adoption, in my view, to stay relevant with creators, to have people choose to pay on our platform in emerging markets like the U.S. without having to invest as much in marketing. So I think it's going to play an increasingly important role. We're really excited about it. Live action releases are happening across all of the regions we participate in, notably Japan, Korea and the U.S. But other formats like the announced deal with Warner Bros. from an animation standpoint, anime as a separate category, all these things you're going to continue to see us focus on.

Great. If I could squeeze in the last few seconds, just a big picture question on AI. In your conversations with investors, obviously, you just reported earnings this week, so starting to ramp up those conversations again. What would you highlight to the market as what you feel is the most underappreciated opportunity driven by AI for WEBTOON and maybe an underappreciated challenge that you're executing through?

Well, first, I don't think investors give us any credit for the amount of technology we have. And that is an indictment on me and management, not a criticism of our investors. I think we are really well positioned to leverage technology to protect creators as well as through the areas we talked about, but also to promote discovery of stories by the consumer fundamentally. And I think we are uniquely in a position to leverage a huge amount of data and a distribution platform for the benefit of that tech that others are struggling with.

Others are tech-only looking for the data or they have some of either, but they don't have a business model that shows up in revenue every single day. I think we have the ecosystem to be able to do all of it. But I think we have to demonstrate that to the investors, and that will take time.

David, thanks for being here.

All right. Thank you.

Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEBTOON Entertainment Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Soohwan Kim, Vice President of Investor Relations. Mr. Kim, please go ahead.

Good afternoon, and thank you for joining us. As a reminder, our remarks today will include forward-looking statements, including those regarding our future plans, objectives and expected performance and our guidance for the next quarter. Actual results may vary materially from today's statements. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings, including those stated in the Risk Factors section of our filings with the SEC. These forward-looking statements represent our outlook only as of date of this call. We undertake no obligation to revise or update any forward-looking statements.

Additionally, the matters we discuss today include both GAAP and non-GAAP financial measures. Reconciliation of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to and not a substitute for GAAP measures.

Joining me today on the call are Junkoo Kim, Founder and CEO; David Lee, CFO and COO; and Yongsoo Kim, Chief Strategy Officer.

With that, I will now turn the call over to our Founder and CEO, Junkoo Kim.

Thank you, everyone, for joining us today. I will make a few brief comments on our performance, and then David will provide more details on our results and outlook. For my first thought on the year, please refer to the shareholder letter posted on our Investor Relations website.

We reported solid year 2025 results with revenue growth of 3.9% on a constant currency basis and adjusted EBITDA of over $19 million. We are pleased to see MPU growth turn positive in the first quarter, driven by growth in Korea and in Rest of World. We made significant progress advancing our personalization tools throughout the year. As we have become more proficient with AI, we are now making increasingly personalized content recommendations that are unique to our users.

In Korea, where we have seen the most progress, we also increased the content diversity at the same time. We are seeing MPU growth as users need more titles and episodes as they get more relevant recommendations. We believe that we can take the learning from Korea and apply them to other regions. We are excited that following the end of Q4 on January 8, 2026, the Walt Disney Company and WEBTOON Entertainment announced that we have completed the previous announced strategic agreement, including both the development of an all new digital comics platform as well as Disney's approximately 2% equity investment in WEBTOON Entertainment. We are targeting a 2026 launch for this new platform.

We have already launched a total of 12 format titles on WEBTOON's Mobile vertical-scroll format following the initial collaboration announcement with Disney in August 2025. These have included stories from Amazing Spider-Man, Star Wars and Avengers, and we look forward to introducing an original series later this year. This is a powerful next step for our growing global business and a strong foundation for even greater collaboration with Disney in the year ahead.

Finally, we continue to advance our flywheel with IP adaptations, which further keep users engaged with our platform. And I would like to highlight just a few examples here. Animation continues to be a major initiative for us, and we are excited to announce that Amazon MGM Studio greenlit Lore Olympus to be developed into a new animated series from WEBTOON Productions and The Jim Henson company.

In Japan, anime is a particular focus, and I'm happy to announce that we reached our target of 20 new anime projects in 2025. We are excited to have launched another anime series on Crunchyroll with DARK MOON: The BLOOD ALTAR this January. We are also seeing success with live action as Netflix announced that viral hit will be adapted into a Japanese live action series following the success of our anime adaptation in 2024.

Overall, we believe these financial and operational results demonstrate that our flywheel and strategy are working. Our ecosystem of content, creators and users continues to drive the success of our business. That said, we acknowledge that we have an opportunity to accelerate our flywheel and realize our growth potential faster. We remain laser-focused on deepening engagement across our platform to foster a stronger, more vibrant fandom and look forward to sharing more about our plans in the quarters ahead.

With that, I will now turn the call over to David. David, please go ahead.

Thank you, JK, and thank you, everyone, for joining us. For the fourth quarter, we reported revenue of $330.7 million, in line with our expectations. Our reported revenue was down 4.1% on a constant currency basis and 6.3% on a reported basis as paid content growth was more than offset by declines in advertising and IP adaptations.

For the full year 2025, we reported revenue of $1.4 billion. Our reported revenue grew 3.9% on a constant currency basis, driven by constant currency growth in all revenue streams and grew 2.5% on a reported basis. We expanded gross margin by 100 basis points to 24.3% in the fourth quarter as we lapped a number of discrete items that were recategorized from marketing to cost of revenue during the year. We believe we can expand gross margin over time as we execute on our cross-border content distribution strategies and grow higher-margin businesses like advertising.

Net loss was $336.5 million in the quarter compared to a loss of $102.6 million in the year prior, driven primarily by goodwill impairments. Net loss for the full year was $373.4 million compared to a loss of $152.9 million in the year prior. We exercised cost discipline through the quarter, leveraging our G&A and marketing expenses to deliver adjusted EBITDA growth.

Adjusted EBITDA was $0.6 million in the quarter, exceeding the high end of guidance. This compares to a negative adjusted EBITDA of $3.5 million in the same quarter of 2024. For the full year, adjusted EBITDA was $19.4 million compared to an adjusted EBITDA of $68 million in the year prior. As a result, our adjusted EPS for the quarter was $0.00 compared to a negative adjusted EPS of $0.03 in the prior year and $0.15 for the full year compared to $0.57 in the prior year.

Turning to operational health. We continue to focus on driving users to our app as well as converting them to paying users. While fourth quarter app MAU and webcomic app MAU declined 6.5% and 2.6%, respectively, year-over-year, we were pleased to have driven MPU growth of 0.7%, evidence that our personalized content recommendations are working. Importantly, our English platform webcomic app MAU was up 2.2% year-over-year.

For the full year, MAU of 7.5 million declined 2.9% year-over-year. While app MAU declined 4.3%, webcomic app MAU grew 1.9% and English platform webcomic app MAU was up 12.8% for the full year. Global MAU declined 1.7% in the quarter. We estimate that global MAU benefited from roughly a 10 percentage point increase in Wattpad activity resulting from automated web traffic in certain noncore markets. While we saw a small increase starting in late Q3 2025, the web traffic peaked in Q4 2025, and we are seeing reduced impact in Q1 2026. Notably, this had no impact on app MAU and is not expected to have a material impact on our business. For the full year, total MAU of $157 million declined 7.1%.

Now I'd like to provide an update on our revenue streams at a consolidated level. Starting with paid content. In the quarter, we posted 0.4% revenue growth on a constant currency basis. For the full year, we posted 1.5% revenue growth on a constant currency basis. While ARPU declined 0.3% in the quarter on a constant currency basis, we were pleased to see 4.6% growth for the full year. We believe we can continue to drive MPU growth as we refine our AI-driven personalized recommendation model.

Advertising posted a decline of 10.3% in the fourth quarter on a constant currency basis year-over-year. In Korea, we saw similar declines from the same e-commerce advertising partners last quarter, but we experienced growth from other partners. Ad revenue from NAVER was relatively consistent with the fourth quarter of the prior year. For the full year, we posted 0.4% advertising growth on a constant currency basis.

Finally, our IP adaptation business saw revenue decline 29.7% year-over-year on a constant currency basis in Q4. As we've shared previously, revenue recognition for IP adaptations can be volatile from quarter-to-quarter, depending on the timing of key milestones for various projects. For the full year, IP adaptation revenue was up 35.5% on a constant currency basis. We had a strong year of IP adaptations in Korea, particularly driven by the theatrical success of My Daughter Is a Zombie and The Trauma Code on Netflix.

Now I'd like to look at our results in the context of core geographies. In Korea, during the fourth quarter, our revenue declined 9.1% year-over-year on a constant currency basis as growth in paid content was more than offset by a decline in advertising and IP out of patients. For the full year, we posted revenue growth of 5.9% on a constant currency basis. During the fourth quarter, while MAU of $24.3 million decreased 10.8%, we were pleased to see MPU of 3.7 million grow 3.3% and a paying ratio of 15.1%, reflecting an increase of 207 basis points compared to the fourth quarter of 2024.

Korea ARPU on a constant currency basis was up 0.9% compared to the fourth quarter of 2024. For the full year, Korea MAU was $24 million, decreasing 11.1% year-over-year, while Korea MPU was $3.6 million, declining 5.3% year-over-year. Full year paying ratio was 14.8%, up 91 basis points year-over-year. Full year Korea ARPU grew 4.7% to $8.2 million on a constant currency basis.

Moving to Japan. For the quarter, Japan revenue declined 1.0% on a constant currency basis. Japan saw a single-digit decline in paid content, offset by a single-digit growth in advertising and IP adaptations, all on a constant currency basis. For the full year, we posted 3.9% revenue growth on a constant currency basis. LINE Manga continued to be the #1 overall app for revenue, including mobile games for the quarter as well as the full year according to data.ai. Compared to Q4 2024, Japan's MAU of 22.2 million increased 0.5%. MPU of $2.1 million declined 6.9% and paying ratio of 9.5% was down 76 basis points year-over-year.

Fourth quarter Japan ARPU of $23.30 grew 5.7% year-over-year on a constant currency basis. For the full year, Japan MAU increased 4.9% year-over-year to $23 million, while Japan MPU of 2.2 million declined 0.1% year-over-year. Full year paying ratio of 9.7% was down 49 basis points year-over-year and ARPU grew 3.4% on a constant currency basis. We expect to complete our infrastructure investments by the end of Q1 and redeploy engineering resources to support improvement across our personalized recommendation tools. We believe more personalized AI recommendations may drive MPU growth in Japan as we've done in Korea.

In Rest of World, we saw revenue growth of 0.8% year-over-year on a constant currency basis in the quarter, driven by single-digit growth in paid content and triple-digit growth in IP adaptations, partially offset by a double-digit decline in advertising. For the full year, we posted a 2.1% revenue decline on a constant currency basis. Fourth quarter MAU was flat year-over-year after including the 10% growth impact in Wattpad activity resulting from automated web traffic. MPU grew 5.7% and paying ratio of 1.5% increased 8 basis points compared to the fourth quarter of last year.

Fourth quarter Rest of World ARPU of $6.50 declined 5.1% year-over-year on a reported and a constant currency basis. For the full year, Rest of World MAU of $110 million decreased 8.4% year-over-year, while MPU of $1.7 million declined 1.5% year-over-year. Full year paying ratio of 1.6% was up 11 basis points year-over-year. Full year Rest of World ARPU increased 0.5% to $6.60 on a reported and constant currency basis.

Turning to profitability. Gross profit for the quarter was $80.5 million compared to $82.3 million in the prior year. This resulted in a gross margin of 24.3%, which expanded 100 basis points compared to the prior year. Full year gross profit was $322.2 million compared to $339.1 million in the prior year, translating to a gross margin of 23.3%, which decreased 180 basis points compared to the prior year.

Adjusted EBITDA for the quarter was $0.6 million compared to a loss of $3.5 million in the prior year, and full year adjusted EBITDA was $19.4 million compared to an adjusted EBITDA of $68 million in the prior year. On the cost side, Total G&A expenses for the quarter were $65.4 million compared to $77.8 million in the prior year quarter as we exercised cost discipline. Total general and administrative expenses for the full year were $259.5 million compared to $332 million in the year prior.

Interest income in the quarter was $4.5 million compared to $6.0 million in the prior year, and other loss was $9.2 million compared to $6.2 million in the prior year period. For the full year, interest income was $19.2 million compared to $15.8 million in the prior year, and other loss was $9.8 million compared to other income of $6.5 million in the prior year. We had an income tax benefit of $18.4 million in the quarter compared to an income tax expense of $4.9 million in the prior year. Income tax benefit for the full year was $16 million compared to tax expense of $3.6 million in the prior year.

Depreciation and amortization was $10.6 million in the fourth quarter compared to $12.1 million in the prior year. Depreciation and amortization for the full year was $35.4 million compared to $40.1 million in the prior year.

Net loss of $336.5 million was driven by impairment losses on goodwill, the majority of which was attributable to Wattpad. This compares to a net loss of $102.6 million in the prior year quarter. Net loss for the full year was $373.4 million compared to net loss of $152.9 million last year. As a result, fourth quarter GAAP loss per share was $2.36 compared to a loss per share of $0.72 in the prior year period, and full year loss per share was $2.66 compared to a loss per share of $1.21 in the prior year.

Adjusted EPS was $0.00 in the quarter compared to a negative adjusted EPS of $0.03 in the prior year period, and full year adjusted EPS was $0.15 compared to $0.57 in the year prior. Our balance sheet remains strong with a cash balance of $582 million and another $11 million of short-term deposits included in other current assets at year-end. We generated $11.2 million in cash flow from operations during the year. We have a capital-efficient business model, and we believe we have the financial strength and flexibility to invest for the long term.

Before I wrap up, I'd like to spend a few moments discussing our first quarter outlook. For the first quarter of 2026, we expect to deliver revenue growth in the range of negative 1.5% to positive 1.5% on a constant currency basis. This represents revenue in the range of $317 million to $327 million based on current FX rates. We anticipate first quarter adjusted EBITDA in the range of $0 million to $5 million, representing an adjusted EBITDA margin in the range of 0% to 1.5%.

We continue to believe in the fundamental health of our long-term strategy, underpinned by our powerful flywheel of creators, content and users. As we've shared today, we're making numerous investments across all 3 of these areas that we believe will support a return to double-digit year-over-year growth by the end of the year.

In closing, I'm pleased with the progress we made in 2025. We're encouraged by the positive signs we see in key metrics like MPU, and we look forward to executing our strategy in 2026.

With that, I'd like to turn it back to our operator to begin the Q&A session.

[Operator Instructions] Our first question comes from the line of Mark Mahaney with Evercore.

Okay. Could I ask 2 questions, please? First, any more details on this launch coming up, the 2026 launch with Disney, the all-new digital comics platform? Just talk about what needs to be done in order to put that together, marketing plans, product plans? How far along is this platform to being launched?

And then secondly, David, on this return to double-digit year-over-year growth by the end of the year. If that happens, could you just maybe give a little bit more color on that, either by region or by revenue segment? Like what are the factors most likely? Is it recovery in the rest of world market? Is it Japan or Korea? Or is it paid content? What are the factors most likely to get to that return to double-digit year-over-year growth by the end of the year?

Thanks, Mark. This is David Lee, and those are 2 good questions. Let me take them in turn. First, with regard to Disney, it has been some time since we last spoke to you. So I wanted to be complete. Since we last spoke, first, remember that Disney closed their investment in us on January 8 of this year, purchasing 2.7 million shares for approximately a purchase price of $32.8 million. It's also important that we've been hard at work with them.

You'll note that we have launched already with their collaboration 12 reformatted titles, including 7 since the end of Q3. And while I don't think I need to list them all as you'll find them in the materials that we provided, I'm particularly impressed by the strength of those stories, stories that include Predator and Star Wars and even The Unbeatable Squirrel Girl, et cetera.

But to your broader question, we've always talked about 2 elements: one, the ability to tell original stories that we have demonstrated success with in the past, new to the world stories. And in our disclosure, we noted we are committed to doing so at least one this 2026 period. I think that's important because I think new-to-the-world originals has powered a lot of the creator success as well as the consumer delight on our platform.

The second is we've committed to launching the new consumer platform. Remember, we intend to build and operate completely this new platform in collaboration with Disney. We committed to launching that by the end of the year. You'll note that while I mentioned double-digit growth in revenue by the end of the year, I did not note any disclosed additional investment or burden on the company to achieve these outcomes with Disney.

Let me turn to your second question because I think it's important. We recognize that in the guidance we provided, which is flat growth for Q1, that there may be a misconception. We're very confident in our platform. Our flywheel is healthy. We really will deliver double-digit growth by the end of the year, and it comes in 3 parts.

First, you will see a return to the strong growth we have demonstrated in paid content, the core of our business. You'll note that we mentioned that in Japan, which has become a very large business for us, where we're still #1 in revenue when you include all consumer apps, including mobile games for 3 quarters running, that we had to take time to invest in infrastructure. While we complete that, we noted by the end of this quarter, Q1. And as a result, you could expect that will drive paid content growth towards the end of the year as one example.

The other is advertising. Korea is our most mature business in advertising, and we've been clear now in the last 2 quarterly releases on the impact of a single discrete advertiser and e-commerce provider. We also talk about the health broadly in our ability to grow our legacy businesses and advertising in Korea and the upside future opportunity in Rest of World. This will also contribute to double-digit growth.

And then finally, crossover IP, JK was very clear about some very compelling examples. There will be more to come. While this is only 8% of our total revenue in the reported quarter of Q4, the ability strategically for next-generation consumers, for example, in the U.S., where Yongsoo Kim has led growth in English web comic MAU and now you're seeing in MPU for them to see on the big screen or on the small screen, stories that they can discover not just on our platform. And I'll let the results come through the course of the year, but I think this is an important component of our growth by Q4 of 2026 as well.

Mark, this is Yong Kim, the CSO of WEBTOON. Regarding the Disney app launch within this year, the most critical and time-intensive component is the development of the new product. Disney's best content library is already in place. The key is building a new app that delivers the best possible user experience around discovery and recommendation so that this library can be presented to the user in the most compelling way.

Our next question comes from the line of Eric Sheridan with Goldman Sachs.

This is [ Julie ] on for Eric. Two, if I could. You talked a little bit about the progress made to your recommendation algorithm in Korea as being a driver toward improved user engagement. Could you talk and expand a little bit around the key learnings within that market and how we should be thinking about the application of various recommendation algorithms to other users or within other markets more broadly? And then on the creator side, you talked a little bit about content diversification coming from the rest of the world. Any updates on how we should be thinking about competitive dynamics for attracting and retaining creators, specifically within the English language markets?

Thanks, Julie. Good questions. Let me address the first. We are a tech company at heart. And with regard to our business in Korea, we're very pleased to see that in our original business, you're still seeing strong performance. There, metrics like MPU are very important, where we have approximately 50% household penetration in a market where we're an everyday household name, being able to see, as you saw, the total company delivered 0.7% increase in paying users, but Korea specifically in the breakout you saw delivered plus 3%. Because we have very strong awareness in Korea, product innovation and content presentation is an ongoing constant endeavor for us as a tech company.

And this AI-driven and machine learning-driven personalization engine is particularly relevant for our most mature market because there's habit formation already in place. So we're pleased with that. And frankly, I think you're going to see more of it outside of just our original foundation market. In fact, we even disclosed that as we've completed our infrastructure project in Japan, we specifically tried to be clear in our script that you will see machine learning-based recommendation engines and CRM that we think will help drive and return the Japan business to the historic growth that you've seen in the past. You'll hear more about our intent to drive global innovation from one market across all markets, but AI is a proven tactic for us, and you'll see more of it as we roll out more results this year.

Your second question was with regard to creator content diversification. And I think your question was particularly focused on the market here in the U.S. or what we call the English-speaking markets. So first, I just want to draw attention to the fact that we've intentionally kept our investments in marketing and in product innovation in what we call Rest of World, our English webcomic app MAU growth, which grew 2.2% and prior grew double digits, is now being accompanied with NPU growth. We didn't break it out for you at that level of disclosure, but I wanted to call it out qualitatively as I think it's a meaningful milestone for the company.

In order to create a healthy opportunity for creators, it starts with creating a growing and healthy base of paying users, which I think you're seeing today. And then I'd point you to the ongoing comments by JK in his script, but also the shareholder letter, a number of the exciting crossover IP projects that we've talked about. We talked about Chasing Red, starring Riverdale star Madalaine Petsch. We talked about Lore Olympus being greenlit by Amazon. These represent not just great opportunities for us and shareholders, but this represent proof points for that creator who is an amateur, of the 24 million, who wants to be published globally and have a voice.

I think there'll be more to come on this, but I think both the platform as well as the off-platform opportunities we'll pursue are reasons why our creator ecosystem remains strong. We are not seeing any pressure with regard to the strength of that part of our flywheel. We think it continues to be foundational and a point of leverage for us.

Regarding the second question, in the U.S., we continue to focus on strengthening our English original content development, not only by bringing proven hits from Korea and Japan, but also developing strong original title locally. Following the success of Lore Olympus, we have seen promising momentum from titles such as Starfish late last year, Chip King earlier this year. Across all markets, including English market, we will continue to carefully manage the balance between globally successful IP and locally developed content.

Our next question comes from the line of Benjamin Black with Deutsche Bank.

First, a follow-up on the Disney platform. Can you maybe just dig in a little bit to the economics a little bit? How should we be thinking about the margin profile of the new joint platform compared to the core WEBTOON app? And then secondly, maybe a bigger picture question. If we sort of zoom out and look at the broader advertising opportunity for your platform, maybe speak to us a little bit about the investments that are still required to really sort of address that potential opportunity going forward.

Great. This is David, and I'll start, but Yongsoo will jump in shortly. With regard to what we've disclosed in the past, and here, I'm not going to speak on behalf of Disney. I'm going to focus more on our experience at WEBTOON. Remember, Benjamin, we have partnered with great companies in the past. And we've talked about the economics, the unit economics of when we have our own original, as Yongsoo just mentioned, or when we have a wonderful what we call reformatted title from somebody else's universal platform.

When you take out the cost to produce great hits, the ongoing cost structure and margin from a great piece of content, whether they are created by us as an original or by our creators or from outside our platform, we've never disclosed a meaningful margin drainage or impact. And I think from that, you can infer that we're very excited about collaborating not just with Disney, but with anyone who can see us as the destination for this growth we're seeing amongst Gen Z and Gen Alpha here in the U.S.

I don't want to go more into detail on Disney. Yongsoo can provide some color on the strength of that relationship. Let me briefly cover ads. When you look at our ads business, we are very careful to maintain the long-term proposition for Rest of World as we're quite early. And that includes actions we've taken to recently focus, for example, the Wattpad effort separate from our broader WEBTOON opportunity in the U.S. This is invest in the fundamental stage for Wattpad.

And so I would love to be able to give you more milestones of progress, but we're just not yet there. We're much more focused on growing the paid content business in the U.S. with Global WEBTOON and putting in place the framework for advertising growth second. Let me turn to Yongsoo for any comments you may have.

Yes. Regarding the new platform, as the operator of the new platform, WEBTOON will recognize all revenue and cost. With respect to the content and brand licensing fee, the structure has been determined in a manner that is totally consistent with our existing business.

Our next question comes from the line of Doug Anmuth with JPMorgan.

This is Dae on for Doug. I have 2 as well. First one on your expectations to exit the year growing double digit. I appreciate the comment you gave on paid content versus advertising and by regions. But could you break that down a little bit more? And tell us if the excitement is more around what you're seeing on the MPU side? Or is it more on the monetization side? Because in 2025, the content growth appears to have been driven by ARPU growth. So just curious like how you guys are thinking about the drivers of the double-digit percent growth across those 2?

And then secondly, I appreciate the IP adaptation revenue is milestone driven and lumpy quarter-over-quarter. But curious if you can share like how your 2026 pipeline look compared to 2025? And like how much of that or how much contribution from IP addition is baked into your double-digit percent growth exiting the year?

Good question, Dave. Thanks for them. First, with regard to the double-digit growth we expect by the end of 2026, I think I was careful to make sure that you understood that, that would be driven by both paid content and an improvement in our advertising business trends as well. When one looks at paid content, as you know, the different flywheels we have in Korea, Japan and rest of world are in different states.

So let me have you recall what we've described in the past as I think they're important. In Korea, where we have a strong penetration and awareness, MPU and ARPU is critically important as product innovation that we just discussed, including innovations in AI as well as the rollout of content keep that market strong, and we're pleased with the strength of that market.

In Japan, when one excludes the recent effort to create the infrastructure to persist in the growth we saw in the first half of 2025, that is a market where LINE Manga is the #1 app. And as you know, we've historically seen not just increase in ARPU, but also a fundamental increase in actual top-of-funnel metrics. So there, we're very early with arguably less than 20% household penetration in a market that is very accustomed to purchasing our digital format. So I would expect that in the mid- to long term, you should see Japan return to healthy growth, not just in ARPU, but also in more mid- and top-of-funnel metrics.

And then in Rest of World, we are very early. It's our largest addressable market. We're pleased to have noted the MCU year-on-year growth disclosed in the quarter and the previously disclosed for the last 2 quarters growth in top-of-funnel web comic app MAU in English, but we have not yet committed to significant at-scale revenue growth as we are preparing that market given its potential size for mid- to long-term opportunity in revenue. With regard to advertising, as I mentioned, Korea represents one of our larger opportunities in advertising and a discrete reliance on one e-commerce provider accounted for some of the noise in the numbers in Q4 as disclosed.

We believe we have a healthy business and a strong team in more mature markets, and we believe it's very early days for the growth in Rest of World. Japan, as we've described in advertising, has consistently been an area of strength for us, particularly in rewarded video, and I would expect us to return to that strength by the end of this year as well. With regard to the IP pipeline. First, despite the quarterly shifts that you hear us discussing, I want to review the fact that IP adaptation revenue for all of fiscal 2025 grew a whopping 35.5%.

So this is a very healthy business, not measured in the swing between one quarter or the next, but zooming out more broadly as a lever point for us to create faster adoption. Qualitatively, I would say we are very pleased with our pipeline in 2026, but we are cautious about promising a specific quarterly impact from that pipeline as we all know that 1 quarter can shift when you are producing great IP hits. And turning it over to Yongsoo now for a comment.

Regarding the end of year growth, the growth of our weapon platform business typically follows a pattern where MAU increased first, followed by MPU growth, which then drives revenue expansion. Last year, we shared updates on MAU growth for our English WEBTOON platform, and we are now seeing that momentum translate into MPU growth in the region with the MPU growth having resumed.

In Japan, revenue growth was strong over the past 2 years, but MAU growth was somewhat stagnant. We believe we are now seeing the impact of that dynamic. In response, we are preparing initiatives aimed not only at driving revenue growth in Japan, but also at expanding the overall user base. We expect these efforts to begin delivering meaningful results in the second half of this year in Japan.

Our next question comes from the line of Matthew Cost with Morgan Stanley.

I guess on the 12 reformat titles of Disney content that are on the WEBTOON app, how is engagement with those titles going? Is it attracting new people? Is it driving new forms of engagement? I guess when you think about the goal of bringing the Disney content on to WEBTOON, what are your early learnings in terms of moving towards that goal from those titles that you put on the app?

Thank you, Matt. I appreciate the question. First, it is quite early going, candidly, in our collaboration with Disney. I think the pace that we're demonstrating is a reflection of just how large scale the opportunity set is for us in this area, this area, call it reformatted stories on our platform. So we're pleased to present the 12, including the 7 that we have recently announced since the end of Q3, but it's far too early for you to really have a meaningful sense on specific metrics.

For us, I think this opportunity won't be measured in a quarter's performance. The collaboration with Disney was always intended for the long-term success of both enterprises, and we're very excited about that. So as Yongsoo mentioned, having an original this year and not just that, but being able to really build this consumer platform he mentioned right and launch it before the end of the year, these are the areas we're focused on versus on probably too early to give results on these important reformatted titles.

Our next question comes from the line of Andrew Marok with Raymond James.

Maybe one on advertising, if I could. As we're seeing kind of the broader advertising ecosystem take a shift toward more performance-oriented outcomes over brand-focused outcomes, I guess, how is that informing your investment road map, your product focus as you're building out your ad ecosystem?

Well, it's interesting. When you look at the business with regard to Korea, we have a long history of great products built by our team that are absolutely anticipating future trends around performance. And I'm not going to go through all of them, Andrew. We can do it in a follow-up meeting. But if you look at that business, we've set the pace in many ways for products that are very much tied to the publisher or the advertiser success on platform. I think rewarded video, but not just that. We talked to you about our off-platform deals with large e-commerce creators, one of which we just mentioned.

When you look at our business in Japan and Rest of World, we're really just at the beginning stages of rolling out the infrastructure. You should anticipate in the Rest of World business here in the U.S. for us to have long-term success, but it will take us time to establish the direct ad sales force and to build for the North American market specifically, product offerings and advertising that are not just exported from our success in Japan and Korea. That's why we are very cautious about providing any short-term expectations for the business as we recognize we have to build for the market, and that will take us time.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.

All right. Great. I think we're on. We're going to go ahead and get started. Stephen Ju with the U.S. Internet team. To my right is David Lee, who serves dual roles, Chief Financial Officer and Chief Operating Officer. So welcome back to the conference, David, and -- welcome and looking forward to chatting. So thanks for having us. You are a real gut for punishment because you seem to have dual roles at the company, right? So you are probably uniquely equipped to talk about what WEBTOON does.

Well, we'll see -- we'll see about that.

I have the utmost confidence in you.

I do enjoy -- my passion has always been to join founder-led companies that I thought had something that could change the world, and it usually is as a Board member in multiple roles. So here we are.

Yes. Yes. So what is WEBTOON? Like what's the vision of the founder and CEO? What is he looking at? What problem is he trying to solve? What's he looking to accomplish?

So WEBTOON is really different. It's a global storytelling hub. We have, on the one hand, 24 million creators around the world that create 120,000 stories every day. And oftentimes, when I've come across great user-generated platforms, quality has been the issue. But what sets WEBTOON apart is that we have so much market signal. We have 155 million monthly active users. By the way, the majority of which are not in our geographic area of origin in Asia. They're here in the U.S., they're in what we call rest of world.

And we have this technology as we were started as a tech company that leverages AI and other tech to ensure that we have regularly big hits. So we did about $1.35 billion in revenue in 2024, primarily from paid content with this great source of exclusive proprietary storytelling that serves our platform well, but as we'll discuss, actually ends up being movies that you may have seen.

Just this last Thanksgiving, Sidelined 2 came out, sequel after it came out of Sideline 1 a year ago, we've powered 100 examples of rich film adaptations. It's rumored that 2 of Netflix's all-time top projects ever came from our platform. So while you may not have heard about us or know about us very well, I bet your Gen Z consumers on our platform. And many of your friends have seen us even older as Netflix, Amazon Prime and other rich film adaptations.

Okay. But it can't be just Gen Z, right? Who are the consumers of the content -- who are your customers?

So it's interesting. Of our 155 million monthly active users here in the U.S., we're growing double digits for the last 2 quarters in webcomic app MAU in English-speaking countries like the U.S. The vast majority are Gen Z. They're the coveted 18- to 25-year-olds who are looking for a story they can't find anywhere else. And if you don't know us, in the palm of their hands, these app native consumers, they flip their finger and with instant gratification, they can see where a WEBTOON or webcomic story is going.

There's just enough imagery, a few words, a notion of instant gratification. Yet on average, they spend 30 to 60 minutes every day on us. And it's the same behavior, to your point, in a more developed country like Korea, where we have 50% market penetration, we've been for 20 years, and yet the consumer behavior is the same. It's 30 to 60 minutes on average every day. The ARPU in Korea is $8. This is monthly ARPU. It's $6 already in rest of world.

And in Japan, which in the last year has become a juggernaut, we are the #1 consumer app measured by revenue per sensor tower of all consumer apps in Japan, inclusive of mobile games. We've been that for the last 3 quarters. And in each region, the longer we've been in the region, we may have started as Gen Z, but in Korea, we're in everyday part of people's lives, even people as old as me in their 50s. In Japan, we have a wide spectrum, but we're more nascent. And here in the U.S., where we're below 5% penetration and growing fast, we start young, but frankly, we call her Maddie. When Maddie, who's Gen Z, 18 to 25, finds a story she loves, finishes it, unlike my days turning around Zynga or other places, I'm happy to have her fully consume a piece of IP because I got 120,000 stories coming every day for Maddie.

So when she's in her 30s, and she doesn't like, I don't know, True Beauty, which, by the way, if you fly United to this conference, you can see True Beauty 1 and 2 as feature-linked films that started as stories on our platform. If Maddie outgrows what she loves as a 25-year-old, as a 35-, 45-year-old, we have every genre and it's habit forming. So it varies by region, but the coveted next generation of digital consumers is where we're super excited to grow here in the U.S.

Yes. You mentioned your prior place of employment, which ran a different revenue model. So that was more of a freemium model. And over here, this is a subscription-led model, right? How does that work?

Well, actually, how does that work? Yes. Let me explain this. And first, please don't look at where I've been in the past. The only common denominator is that there are companies in transformation driven by tech. So turning around Zynga or Best Buy with [indiscernible] or even Del Monte, I'm attracted to things that are in massive transformation. Our model is different. Maddie gets to surf for as long as she wants. She gets to see these great amateur creators tell stories from all parts of the world for free.

And it's only when Maddie picks a story, she discovers it, this behavior is important for this generation. When she pulls from our digital universe story where she wants to see the next episode just as it comes out, and they tend to come out on a weekly basis. We don't ask Maddie to do a subscription. We've been very patient. She pays an average of $0.15 to $0.70 to see the next breaking weekly episode. What we find is the Maddies of the world, when you are patient, when you let it be their choice, when they discover it, they pick it and they commit to it in a micro payment, we actually find over cohort analysis from our longest running customers that over 3 years, they pay to read voluntarily 2 to 3x more on their own.

So you don't see us buying top-of-funnel MAU. You don't see us spending a lot of marketing because when Maddie chooses, she builds in her own loyalty. And I got more stories coming every day to create that habit formation that we mentioned. And I'm really grateful to our founder, JK Kim, because he was so patient over 20 years, he built this model, vetted the format, and he patiently built a global infrastructure that's now -- has enough escape velocity to power growth.

Okay. So let's talk about Maddie for a second. So she's found a piece of content that she is fully invested in, waits 1 week for the content drop to show...

For 4 months or however long it is.

But it's always -- you have her for that one piece of content, but you grow when you get them for the other content, the other content, the other content, and the next thing, right? So...

Well, think of it as Maddie looks around at this unusual source of new stories from creators all over the world. By the way, the vast majority of our 24 million creators are amateurs. Their motivation isn't to make a quick buck. Their motivation is to tell a story in their head that somebody just might like. And so -- and that appeals to this generation of consumers as part of this creator economy.

By the way, when Maddie discovers, say, that first story she loves and buys that first episode for $0.15 to $0.70, she can choose to continue to read that episode or she could read 5 different ones. When Maddie gets more confidence that there's an unexpected surprise story on a single source like Wattpad or WEBTOON, we see habit formation occur to increase market basket. It's a very different business model than a lot of the ones that I've been around. And that's why we have a lot of work to do to explain how this works as a relatively young public company with frankly some misunderstood notions in the marketplace, which we own fixing. So that's why I'm excited to talk to you about it.

Okay. So for an average user like a Maddie, like when they first hop on board, like they're consuming that one thing. But over the course of time, you're not doing your job if you're not giving her the next thing and the next thing. So as that cohort of users continue to age, right, how much time do they spend with you -- I mean, I assume that the time spent with you 30 to 60 minutes is probably an average number. There has to be people who are on your 24/7. There has to be people who are...

What's really interesting about this -- so one of the things before I joined WEBTOON just before we went public was I told my family, I would not work for another public hit-driven company again. No offense to my great former colleagues at Zynga. I'm proud of the work we did there. What's really unusual about this platform, to your question, is I don't have significant whales on either side. I don't rely upon like a hit that then I have to squeeze to monetize because I don't have another one coming.

Every quarter, every month, there's a new flow of stories at sufficient scale, and we use AI to personalize recommendation to our consumers because we have so many stories that the marketplace provides a decent enough of recurring hits on that side. And then with regard to the Maddies of the world, we find that she comes -- she -- we skew female here in the U.S. in Gen Z. She's happy to read 1 story, 2 stories. It's a very flexible format. So you'd be surprised how persistent that average, that 30- to 60-minute average is -- and I don't see whales.

I don't see people -- there are times in other businesses I got concerned that some consumers would spend every waking hour of their day on our platform. I don't have that concern here. Part of it is the asynchronous unique notion of a WEBTOON is you can be waiting in line for a cup of coffee and a fraction of a second see where a story is going, put it down, come back to it and sit down and religiously read it for 30 to 60 minutes. It's the most flexible -- you don't have to be in the moment to see a real like on TikTok or on my former days in mobile gaming. It is an extremely flexible format. So we're not seeing whales on either side of the equation.

Okay. So we talked about Maddie. Let's go to the other side of the equation. So who are these content creators? Amateurs, as you say, but it sounds like a lot of them have a great story to tell.

Yes. I think, first, the 24 million creators, the vast majority are amateurs. They're kindergarten teachers, they're graphic designers. Let me give you an example. Rachel Smythe, several years ago, hard-working graphic designer out in New Zealand, full-time job, graphic designer, has a story in her head. I didn't know who -- we didn't know who Rachel was, as wasn't in the company, but I wouldn't have even if I had been at the company. And no one really knew if Rachel's story would have resonance. She didn't either.

She wrote -- she went to Canvas. We worked very hard in multiple languages to let anyone tell their stories amateurs for free. They can monetize a little bit on ads. But when we saw that Rachel, she told a story called Lore Olympus, which clearly was going to be a hit, and we have all the data and the tech to know with proven validation, not a human guessing the way I used to. We used to have humans who would tell us, well, this is going to be the next genre. This is going to be the next hit. Let's go to that proven hit maker that's going to cost us a lot of money only to find out that we had purchased a story from a one-hit wonder that cost the company a lot of money.

I don't have that problem because in the case of Rachel, she's created a monster hit. No one would have guessed a Greek pathology romantic comedy set in kind of Olympic God's time would be published in multiple languages on our platform. By the way, franchise stars make up to $1 million per year on our platform. The average is well enough to change people's lives because they come from all parts of the world. She went on to be a New York Times best-selling author. I mean in print, and she's recently been affirmed in the last month as still being that. And she's rumored with our help to be -- soon to be featured as an animation release on one of the major streamers.

We have so many examples of Rachel, like that is our business model. Now to be clear, while the majority of our well-monetizing stories here in the U.S., we call them originals come from the Rachels of the world, the amateurs that turn into surprise hits. We also are happy to let incredible well-established players like Disney or Warner Bros or many others, tell their stories with us. So in the case of Disney, there was a collaboration that was announced in August and September where 100 of their great stories are going to be put on our platform in our unique format, 6 of which have already been deployed.

So you can read Predator and Alien and Star Wars and Spider-Man. And I'm super excited about the fact that it was also announced that we're going to tell original stories in the same theme of their franchises. Imagine a back story of your favorite Disney storyline that becomes the main character created by one of our creators as what we call an original of what if ending. For us, this is a way to creep the creator ecosystem healthy. And the other thing is we have the unique rev share model, another form of patients by our founder.

We shared $2.8 billion with our creators between -- I think this is a 2017 to 2022 figure. On an ongoing basis, when we go to Rachel or we go to any one of our amateurs and say, you're going to be a star, we have all these tools to take you global and we have 100 examples where some of you have turned into great movie makers, great releasers of animation, great merchandisers of T-shirts, great sources of inspiration for short-form video or mobile games. When she agrees or the creator agrees, we empower them, we agree to a fair share agreement.

And this agreement means our incentives are totally aligned. It by the way, also means that when we employ technology, for example, when we use AI to help our creators to be more productive, we've kind of established a business model that reduces conflict and a form of revenue that's already embedded in our system. I founded an AI company, got it funded and left it for WEBTOON because I thought we had a major head start in solving the business issues around AI. We have the AI tech, of course, we have 20 years of data, but we have the commercial engine and some of the IP rights already negotiated with the creator in our core flywheel.

On the creator side, which has always been the focus of our founder, it's about creating a global marketplace and opportunity that goes beyond just our platform. That's what keeps them very interested. And that's been a key to our success in every market, particularly in Japan, one of the most competitive markets for creators, it's been really gratifying in just 1 year to become the leader there because creators get to publish in every language in multiple genres, get to release animation in the U.S., not just in Japan. So for us, this is a big part of our story.

There's a lot to unpack there. So for Rachel, the content creator, what other options does she have if it's not going to be WEBTOONs to get her stuff published. And by the way, when you mentioned AI, like what pops in my head is if Rachel or somebody else at the up-and-coming Rachel doesn't know how to draw as well, yes, you should be there with...

Yes. Well, Rachel thankfully knows how to draw well, but I will cover your question. This is the beauty of WEBTOON. We can democratize access for creators like Rachel, and we can truly be on their side, and we can route for them wherever she goes. Because what we can do is create an option for creators to be a winning creator on our platform, but to have the benefit of our history and relationships to help them be a powerhouse on any platform.

And maybe 15 years ago, we wouldn't have had the escape velocity, the scope, the scale, the fact that we haven't used any of our balance sheet cash and we grew 9% constant currency, maybe we wouldn't have had that, but we have that now, and we can afford creators the ability to really root for them because we have a rev share model. On the question of drawing, it's interesting. There have been other companies that focus on what we call web novels. Web novels are, as you can imagine, novels, meaning no actual drawings. We have a very different model.

We have 55 million web novels. We use them as a pool to do 2 things: one, to become great movies. Sideline 2, I just mentioned, Mary My Husband, a great example, started as a web novel. But then we are able to take that pool and turn those web novels with our help into web comics. So Marry My Husband went from being a web novel to a global hit as a web comic within the dream with our help that then was released in, I think, January of 2024 and was, I think, Amazon Prime's global #1, including in the U.S.

So we have this pretty well thought through design of enabling one type of format, our global web novel format to turn into really strong monetizing web comics, but also to still have the ability to become hit films. What -- think about what -- the term web comic I oftentimes take because it implies for this generation of consumers that they've ever seen a paper-based comic, which they haven't. I like the term WEBTOON, but whatever you call it, it's a set of digital storyboards.

We just released video episodes. How hard is it to help a creator with technology, take a set of digital storyboards that pays for itself and helps the creator recognize their own revenue on our platform and turn it into animation or anime. And if you believe that we are the tech company, I claim, we may have tools that enable great novelists to draw in the character of their own story to turn into web comics, which are digital stills or storyboards that can turn into great animation, rich film video, mobile games.

This is why I'm so excited to have joined this company because I think we have the most pure format of story that people are willing to pay for increasingly, but has option value to power what the industry -- the entertainment industry needs, which is fresh, evergreen stories that have proven data behind who loves them globally.

Yes. You mentioned Disney earlier. This is the company that owns Marvel, which have their own graphic novels, whatever you want to call it. They coming to you, right, for, I guess, incremental content creation. I assume some distribution as well. So how does this relationship work? I guess, to them, you could be somebody who feeds them new fresh content that's found on your platform. But it sounds like there's also a symbiotic relationship there where you get to serve as a distribution outlet for them to, I suppose?

Well, first, I want to be clear. I mean, Disney is a great company. We're proud to collaborate with them, and they should speak on their own behalf. I can tell you what was super interesting for us and part of that interest is in our ability and desire to create mutual value for everyone that we work with. First, what was announced. First of all, it was an MOU, not a definitive agreement. I think it's interesting that both companies were interested in releasing information about an MOU.

I would note that we already are well underway on the first part of the agreement with, as I mentioned, Marvel actually, Star Wars, Spider-Man, Predator and Alien are already out of the 100 -- I'll call them adapted stories of WEBTOON. But the second part of the agreement as announced by Disney was our ability to create and run a new digital platform that has access to 35,000 of these great stories across Disney, but also Pixar and 20th Century and you name it.

Why we're excited about it is we know -- if you look at our last 2 quarters as reported, webcomic app MAU in English, that means U.S., Canada, Australia, U.K., et cetera, is growing double digits. And in the last quarter, I had the privilege of saying that MPU, those who are willing to pay for it is really beginning to grow, too. And you already heard me say the majority of, for example, our U.S. consumers are Gen Z, that coveted 18 to 25. So we're growing with arguably one of the most attractive demographics in the largest TAMs.

We only are getting going in the largest TAMs, and we're growing double digits in the case of English webcomic app MAU. While the majority of our well monetizing stories we call originals come from our own ecosystem, that Canvas, the Rachel is a great example. Why not give these growing amount of fans, young fans access to all these stories in a format that they already love, which is in the palm of their hand.

We think we're pretty good at running global consumer apps that Gen Z loves. We think we're pretty good at delivering great value to those who partner with us. By the way, this isn't new for us. We did a deal with IDW, Godzilla is on our platform. Years ago, we did a deal with DC Comic, Wayne Family Adventures is a playoff of the Batman series. So we've worked really hard to establish the core competence of partnering well, living up to great companies like Disney in a way that could speed up our adoption in what we call rest of world.

We're 50% market penetration in Korea, sub below 20% in Japan, the #1 in Japan and Korea. And we're sub -- we're below 5% in the largest markets that we're growing double digits in. I'm really interested in paying off these great stories from Disney, but also growing faster in the largest TAM available to the company. That's my interest.

50% market share, like if I were...

I would say that 50% -- like how many people you think can create like we're 50% -- like we're in every day -- there have been some articles written that I can't validate that say that half of the hits on great distributors of film like Netflix could start stories in the Korean language on our platform. We're 50% of the market. So -- and I think that's a good example. People love great stories no matter what language they originate in. And I think that the rest of world market can easily approach the same level of penetration that we've seen in others.

And I think, by the way, people sometimes mistake like, of course, U.S. consumers love great content from Korea. This wasn't ours, but KPop Demon Hunters obviously was a huge success for Netflix. But we create our own ecosystem of English-speaking creators as well. We love to bring over our content that's beloved from Central America, Europe or Asia to U.S. consumers, but we really love empowering the next generation of creators in the U.S., which is, I think, what differentiates.

So the optimist in me should believe that the market share and the -- I guess, the market presence that you have in Korea should be the norm as opposed to that being the exception as you think about what the rates could be?

I think the optimist in you should believe that the penetration of a population of great storytelling could be as high as where we've empirically proved at like 50%. But candidly, when I think of the room to run even where we are 50% like Korea, I think there's a lot of room to run. In former places, we know what half the market, in some cases, are choosing to read at the same time in the same genre, like the commonality of interest in community between Maddie and, I don't know, somebody else who she's never met. Every other consumer industry, mobile gaming, social media, you name it, enable community and connection, consumer to consumer.

We've been so busy just growing our creators and our consumer flywheel, we haven't gotten to it yet. That's an enormous growth opportunity for the company that we haven't even begun yet. So I would say it is geographic penetration, but it is -- it's also deepening the community amongst consumers who have cross affinity in the same story that they're reading or multiple stories that they're reading. And then as well as the upside around being the source of stories outside our platform. We haven't gotten advertising yet, but that's the last one.

Okay. So let's talk about a situation in which a creator's content blows up, then you want to talk -- take it to other forms of media. How does that actually work? Do all of the creators who sign up now like you're thinking, okay, this could, over the next couple of years, blow up into a real property...

We've generally been very procreator and conservative. So, for example, if we had a first right of refusal, we generally just wanted creators to be as successful off our platform as possible. And here's the economic reason. When you see -- when you're watching a film and you see a story you love, you ask oftentimes if you're in the U.S., where did it come from? What other stories did that creator write? And it draws you to our platform, which is still nascent, WEBTOON and Wattpad, our 2 platforms.

That is the lowest cost customer acquisition that I didn't have to buy, right? So there's a genuine value to the ecosystem, but there's just the philosophy to give every creator the ability to be successful anywhere. So when someone blows up, it's not that we control them. We advocate on their behalf often amongst partners that we have a long history with and an established track record to ensure that they're as successful as possible. In some rare cases, because we have a balance sheet now and we don't apparently use it yet, we have the ability to place a few bets.

But we see so much growth in just growing storytelling for creators and consumers that it hasn't been an aggressive form of investment. It's upside value and option value because I think over time, as we grow, we have more leverage to do that. But to be clear, it's not something that we've acted on for the most part.

We have a very successful studio in Asia, where you'll see us selectively make some of those bets -- My Daughter is a Zombie came out, I know it's a movie you probably haven't seen here in the U.S., but it was very successful in Korea last quarter. And you'll see more of those, but they're the exception. It is very -- a very small percent of the crossover IP successes from the company that we choose to act on.

Okay. Touched on advertising. How does that work on your platform?

So Korea is the most robust because when you have half of -- we have great products that leverage the strong engagement where they're rewarded video. In Japan, we've had success there as well, a pretty nascent market. We talked about it last quarter. But we really are just in the beginning phases in what we call rest of the world. Even though we have a very attractive demographic and strong engagement, frankly, our priority is much more to grow the flywheel around consumers and paid content first.

But it is upside as well. I think you'll see over time us achieve what we've already proven in markets like Korea, in newer markets like Japan and the U.S. But admittedly and intentionally, we are going slow in the U.S. because we think there's a lot of upside in having a great consumer experience with more penetration on paid content.

Got you. We have about a minute or so left. So let's fast forward 1 year, December 2026.

Am I here again?

Yes. Of course, you're here, right?

Good.

Yes. And what do you think we're going to be talking about as we reflect on the trailing 12 months in terms of what WEBTOONs has been able to accomplish?

Well, I hope in a year, we're talking about how much proof is evident that what I believe has already happened in markets like the U.S. and rest of the world that there's already a large adoption of our content by the most attractive young consumers. I'd love to be able to talk to you about a movie you just saw or something that was released as a mobile game that started as a web novel or a web comic.

And I hope and think that we'll be having a different conversation then about where the midterm, long-term guidance. Remember, we are less than 2 years old as a public company, and we've had growing pains. So I would love to be able to not have to close misunderstandings that we may have created with our investors, but be talking about the future with a great common view of what the company is. That would be my hope in a year.

David, this has been awesome. Thank you for joining us again.

Thanks for having us.

Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEBTOON Entertainment Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Soohwan Kim, Vice President of Investor Relations. Mr. Kim, please go ahead.

Good afternoon, and thank you for joining us. As a reminder, our remarks today will include forward-looking statements, including those regarding our future plans, objectives, expected performance and our guidance for the next quarter. Actual results may vary materially from today's statements. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings, including those stated in the Risk Factors section of our filings with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements.

Additionally, the matters we'll discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures. Joining me today on the call are Junkoo Kim, Founder and CEO; David Lee, CFO and COO; and Yongsoo Kim, Chief Strategy Officer. With that, I will now turn the call over to our Founder and CEO, Junkoo Kim.

Thank you, everyone, for joining the call today. I will briefly discuss a few highlights from the third quarter before turning the call over to David to provide our results and outlook. For additional details about the quarter, please see the earnings press release and shareholder letter, both of which are posted on our Investor Relations website. We are pleased to report solid third quarter results that demonstrate the underlying strength of our model with adjusted EBITDA of $5.1 million, coming in above the midpoint of our guidance range.

Total revenue of $378 million was up 8.7% or 9.1% on a constant currency basis compared to the same quarter in 2024. This was an exciting quarter as we broadened our relationship with Disney. On September 15, 2025, we announced a nonbinding term sheet with Disney to develop an all new digital comics platform. This new platform, which WEBTOON Entertainment will build and operate will feature more than 35,000 comics from across Disney's portfolio, including Marvel, Star Wars, Disney, Pixar and 20th Century Studios, all available in a single digital service with one convenient subscription.

Alongside the commercial collaboration, we entered into a nonbinding term sheet for Disney to acquire a 2% equity interest in Western Entertainment. And we have already made progress. As of today, we have launched our 5 titles from our initial announcement in August, including Amazing Spiderman, Star Wars, Alien, Avengers and Disney as old as time: A twisted tale as well as another reformatted title, Predator. Additionally, and [near] Comic-Con last month, we announced another 5 new titles coming to WEBTOON, including Astonishing X-men, Star Wars Lost Stars, Star Wars: Darth Vader - Black, White and Red, The Unbeatable Squirrel Girl and Stitch and the Samurai

– The Complete Collection.

Disney's extraordinary storytelling legacy is second to none, and we are honored to work with them to build the future of digital comics. This is a powerful next step for our growing global business and a strong foundation for even greater collaboration with Disney in the years ahead. Moving on to our innovation in short-form video. We launched this video episode on our English language platform in August. Video episode reimagine the experience of enjoying web coming by adding motion, sound effect, background music and human voice adding to the original web commit all in a 5-minute video.

We believe this feature will deep engagement with existing users, reach new users and deliver on new medium for amazing stories. In Korea, we launched Cuts in September, another short-form video innovation. This feature allows creators and fans to create, unload and enjoy short-form animated video on the 2 minutes in name. Within just a month since we launched Cuts, we have already hosted over 1,000 creators with some videos already surpassing 1 million views. Finishing up with IP application, today, we announced the plan to develop a slate of animated projects with Warner Bros animation. We intend to enter into an agreement to coproduce 10-fan favorite WEBTOON series for global distribution.

Our creators are building franchise that Gen Z audience love and working with Warner Bros. Animation gives us an incredible opportunity to test those stories further alongside one of the most respected names in animation. As outlined in the shareholder letter, we also continue to see success with our theatrical and streaming release, including my daughter is a zombie, Your Letter and Chicken Nugget. We believe that IP adaptations are an important part of our [indiscernible] as we work to attract more users to our platform, and we are confident in our strong pipeline of application over the long term.

As we close out an exciting quarter marked by progress made toward our strategic priorities, I'm confident in our ability to deliver further growth in upcoming quarters. We would like to thank our users, creators and employees for their continued support. With that, I will now turn the call over to David.

Thank you, JK, and thank you, everyone, for joining us today. I'll be discussing the details on third quarter 2025 results compared to the comparable quarter in the prior year, unless otherwise noted. During the third quarter, reported revenue was up 8.7%, and we grew revenue 9.1% on a constant currency basis, with growth in paid content and IP adaptations, partially offset by a decline in advertising. Net loss was $11.1 million compared to a net income of $20.0 million in the prior year, primarily due to lower other income as well as a higher income tax expense. Adjusted EBITDA was $5.1 million compared to $28.9 million in the same quarter of 2024.

As a result, our adjusted earnings per share for the quarter was $0.04 compared to adjusted earnings per share of $0.22 in the prior year. Turning to operational health. We delivered another successful quarter of Webcomic app user growth, attracting a highly engaged audience with better monetization opportunities. While app MAU declined 4.2% overall, webcomic app MAU, which excludes the impact of web novel users, increased 1.5%. This growth was led by increases across important English-speaking markets. Our English platform WebComic app MAU was up 12% year-over-year, demonstrating continued momentum in this important region. We believe recently introduced reformat title launches and product changes will continue to drive increased user activity over time.

Global MAU declined 8.5% in the quarter, primarily driven by Wattpad, which continues to be impacted by a government ban in the 2 countries we discussed last quarter. Encouragingly, we fully resolved the search engine indexing issue we discussed earlier this year and saw sequential stability in Wattpad MAU in the second half of this quarter as a result. While Wattpad is not a significant revenue driver, it is an important source of IP. We recently received a green light on a new film project that began as a web novel on Wattpad, turned into a webcomic on WEBTOON and now will become a feature film. We're excited to share more about this title soon.

Now I'd like to provide an update on our different revenue streams at a consolidated level. Starting with paid content. In the quarter, we posted 0.8% revenue growth on a constant currency basis year-over-year, driven by strength in Japan and Rest of World, offset by a decline in Korea. ARPU grew 3% on a constant currency basis in the quarter with increases in all 3 regions. We see continued ARPU growth as an indicator of the health of the business with additional opportunity for further monetization ahead. There still is a large variety of free content for our users to enjoy before they hit the paywall, and we believe our ARPU is still relatively low for our offering.

Through our product initiatives, partnerships and new content, we believe that we will continue to drive engagement and monetization over the long term. Advertising revenue decreased 8.9% in the third quarter on a constant currency basis year-over-year as growth in Japan was more than offset by constant currency declines in Korea and Rest of World. In Korea, we saw a decline from a major e-commerce advertising partner, partially offset by an increase from other partners. Ad sales from NAVER were relatively consistent with the prior year quarter. In Rest of World, the decline was primarily driven by Wattpad impacts.

Japan's growth was the result of continued growth in pre-roll ads. Finally, our IP adaptations business saw revenue increase 171.8% year-on-year on a constant currency basis in Q3, driven by revenue growth on a constant currency basis in Korea and Rest of World, offset by a decline on a constant currency basis in Japan. Korea benefited from the theatrical release of my daughter is a zombie. In Japan, we are still early days with our IP adaptation business with a small revenue base that fluctuates based on milestones. But we're pleased with the pipeline of upwards of 20 anime projects for the year.

Now let's look at our results in the context of our core geographies. In Korea, during the third quarter, our revenue grew 22.2% year-over-year on a constant currency basis, driven by triple-digit constant currency growth in IP adaptations, offset by a double-digit constant currency decline in advertising and a single-digit constant currency decline in paid content. During the quarter, Korea MAU was $24.6 million, decreasing 12.3% year-over-year. MPU was 3.7 million, declining 4.9%. We saw growth of 4% for ARPU on a constant currency basis and paying ratio was 14.9%, up 116 basis points year-over-year.

Moving to Japan. Revenue growth on a constant currency basis was 2% year-over-year. This was driven by single-digit constant currency revenue growth in paid content and advertising and offset by a double-digit constant currency revenue decline in IP adaptations. As mentioned in our shareholder letter, LINE Manga was the #1 overall app for revenue, including mobile games for the third consecutive quarter according to Sensor Tower. Japan's MAU increased 12.6% year-over-year to $25.3 million, driven by strong growth in eBook Japan.

We've expanded eBook Japan's marketing budget and established strong partnerships. While it may take time for new users to start spending, we expect their ARPU to increase over time as their engagement grows. MPU grew 0.2% year-over-year to 2.3 million and paying ratio was 9.1%, down 112 basis points year-over-year. Our paid users remained strong with ARPU of $23.60, growing 1.3% year-over-year on a constant currency basis. Rest of World saw a revenue decline of 0.7% year-over-year on a constant currency basis, driven by a double-digit decline in advertising, offset by a single-digit growth in paid content and double-digit growth in IP adaptations.

While Rest of World MAU declined 11.6% year-over-year, driven primarily by WattPad, MPU increased 0.8% year-over-year and paying ratio of 1.6% was up 20 basis points year-over-year. ARPU of $6.80 grew 1.4% year-over-year on a reported and constant currency basis. Our English platform WebComic app MAU was up 12% year-over-year, reflecting all the investments we're making in this region. After several quarters of healthy MAU growth, we're pleased to see an increasing number of English WebComic users converting to paid users. Turning now to profitability. Gross profit for the quarter declined 9.4% to $82.8 million. This resulted in a gross margin of 21.9% compared to 26.3% in the prior year.

There were a number of items that contributed to this change. As previously disclosed, Freepoint expenses were moved from marketing to cost of revenue. We invested in labor to make further improvement to our platform. While these discrete items temporarily affected our results, we believe our gross margin can improve over time as we execute on our cross-border content distribution strategies. Adjusted EBITDA for the quarter was $5.1 million compared to $28.9 million in the prior year. Total G&A expenses for the quarter were $62.5 million compared to $66.7 million in the prior year.

Interest income for the quarter was $4.6 million compared to $6.5 million in the prior year, and other loss for the quarter was $1.9 million compared to other income of $11.8 million in the prior year period. Income tax expense was $0.6 million in the quarter compared to income tax benefit of $9.9 million in the prior year. Depreciation and amortization for the quarter was $7.9 million compared to $10 million in the prior year. Net loss for the third quarter was $11.1 million compared to a net income of $20 million in the prior year quarter due to lower other income as well as higher income tax expense.

As a result, GAAP loss per share was $0.09 compared to earnings per share of $0.15 in the prior year period. Adjusted earnings per share was $0.04 in the quarter compared to adjusted earnings per share of $0.22 in the year prior. Moving to our business outlook for the fourth quarter. For fourth quarter 2025, we expect revenue decline in the range of 5.1% to 2.3% on a constant currency basis. This represents anticipated revenue in the range of $330 million to $340 million. This guidance is based on current FX rates. We expect pressure from IP adaptations related to the timing of milestones.

We're close to finishing our infrastructure updates in Q4, but there may be a few items that linger into early 2026. We expect to see improved product flow starting next year. We anticipate fourth quarter 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%. Adjusted EBITDA guidance includes $16.5 million noncash expenses, of which actuarial losses on retiree benefits and minimum guarantee write-downs are the largest contributors. We expect to maintain our investment in marketing to drive future growth. We're pleased with the performance this quarter, underpinned by a number of exciting partnerships and collaborations as well as the introduction of new product features.

As we head into the fourth quarter, we remain confident in our ability to drive further progress, positioning us well to continue growing our content, platform and brand long term. With that, I'd like to turn it back to our operator to begin the Q&A session.

[Operator Instructions] Your first question comes from the line of Benjamin Black with Deutsche Bank.

Maybe first, can you elaborate on the long-term vision of the Disney partnership Beyond the initial slate of titles, how should we be thinking about maybe the revenue potential and the margin profile of the new joint platform compared to some of the core WEBTOON app? And then secondly, you launched video episodes. What early engagement or monetization metrics are you seeing relative to sort of static webcomic.

Thanks, Benjamin. This is David Lee. Let's start with your first question. I wanted to remind you, as JK mentioned, that there were 2 particular parts to the Disney announcement. In early August, we talked about these wonderful 100 reformatted adaptions that would be on our platform. And then separately, in September, we discussed the opportunity to have access to these 35,000 stories. And I would say, I would remind us just how early we are. We have a great progress with the 5 to 7 titles that we mentioned, and these are great stories, Star Wars, Alien, Avengers, you saw the list. But 7 out of 100 is quite early.

And another opportunity, which we discussed in the last call and you and I discussed, is we love the opportunity to create original stories in collaboration with Disney that can be new but carry on the history and the origin of the franchises that we're talking about. These have yet to come. You'll note we did not provide disclosure that in Q3, there was any material impact from this great collaboration with Disney nor did we highlight it for the Q4 guide. And I think that reflects how early we are. Having said that, as we said before, we are building this collaboration for the long term because we think it's a game changer.

And in terms of your question on economics, as you heard, we believe as a category leader that we can partner with a great company like Disney in a way that doesn't materially change or hurt the fundamental margin structure of the business. That's why we didn't preannounce or disclose any financial impacts other than the wonderful collaboration opportunity and their interest, which is yet to be consummated in a final agreement on a 2% equity stake in the company. At this point, however, it's too early for us to provide any more additional color beyond what we've said.

With regard to the second question, I think it's important that we recognize that we believe our existing WEBTOON webcomic format is working extraordinarily well. And when we talk about video episodes, which we launched the first batch of 14 English originals just last quarter. This is also very, very early and represents a way for us to ensure we maintain our dominant leadership. Remember, in the U.S., a very large portion of our users are Gen Z. We're proud of that. This, for us, represents demographic goal because we know from other markets they can grow hold with us.

So while this is very early, think of video episodes and separately our work in Korea on Cuts as the active experimentation we will persist with to ensure we maintain the leadership role we already have with our webcomic format amongst what we think to be the most interesting demographic, which is this 18- to 25-year-old demographic. And candidly, the 12% webcomic English app MAU growth and now seeing them turn into paid users, which I think is very promising, is a product of everything, this overall product update that Yongsoo and his team has led, but as well, I think the very early steps we've taken on new formats like video episodes. That said, I think that upside is down the road, and it's not one that we would promise. It's too early at this stage.

Your next question comes from the line of Matthew Cost with Morgan Stanley.

Two, if I could. I guess just starting with the new Warner partnership, anything you can share about the timing of when that rolls out and anything that you're able to share in terms of the economic terms of it from a revenue or margin perspective? And then secondarily, just on the user figures. So you provided a very helpful context about kind of Wattpad and the web novel MAU growth versus the webcomic MAU growth. I guess, are you considering in the future kind of breaking those out as part of your regular disclosure? And if not, how should we think about the web novel users going forward? Is that a number that could continue to decline? Is it something that is of any concern or just kind of a natural variation in the business if it does?

Thanks, Matt. This is David Lee, and I can start. First, all very good questions. Let's start with your first one. With regard to Warner Bros., we're very proud of the announcement we've made with them. We think it suggests 2 things, similar to the work we've announced with other partners that as a category leader, we can be the source of stories in any format. Being able to partner with a high-quality organization for the announced 10 potential projects outside of our platform, but bringing them to life in the form of anime and animation I think it is a major step forward. And you'll see in the press release that there are specific examples, a handful, less than a handful, but that is not necessarily the full slate, as we've mentioned, 10.

At this point, while we want to be very transparent and announce these major partnerships, we again are not really in a position to offer more specifics. But I think that says something. We're not talking about a change to our financial business model. We're talking about a continued catalyst for our growth, particularly in markets globally. At this point, we're not ready to provide any more specifics, but I'm very encouraged by it. I think it's the opportunity to partner with well-established, high-quality companies to be their source of stories in new formats and has the potential, I think, to continue the growth that we have outside of our core legacy markets.

With regards -- you had several questions nested in the web novel ones. So let me back up and start with MAU because it's interrelated into how we think about Wattpad. First, with regard to MAU, you've heard me say this before, while total MAU is an important metric, and we know that it is down 8.5%, the best predictor of our paid content, which remains 80% of our revenue is really the new innovation and products that we are bringing to our app. And webcomics, in particular, is the format that we leverage. So the reason why we keep on talking about the 1.5% global webcomic app MAU growth in the quarter. And I think more importantly, in the largest addressable market, the newest largest addressable market, what we call English webcomic app MAU, we focus on that 12% number, noting that it's turning into higher monthly paid users, PU, is because those are the metrics I would have the Street focus on with regard to the majority of our future revenue growth.

Now I want to be clear, Wattpad itself is the single largest driver of the total MAU declines. And I do think we need to be clear on what drives them so that you can model persistence. Wattpad is an important business. It's a great source of IP. We talked about in my script, Sidelined, the sequel coming out in thanksgiving. We're very excited about the crossover IP, and we're very excited about its advertising potential. We talked about how advertising saw a decline partially related in Rest of World to the MAU declines in Wattpad. Having said that, when we look at Wattpad, we talked about 3 drivers. We talked in the previous quarter about a search engine indexing issue that we described as fully resolving, which is good news. But we also talked about 2 countries, let's call them instead of 3 drivers, let's call them 2.

The second driver is we were banned in a country along with great other companies like Roblox and Discord. And as we lap those 2, we will eventually in 2026, begin to see more of the sequential stabilization that we mentioned in my script. But at this point, it's very hard for us to call the ball on when some of these country issues resolve. What we can control, the search engine issue, we've made progress on. But I think you'll have to hear more in coming quarters for us to provide definitive guidance on the total MAU associated with the company driven by Wattpad.

Your next question...

Hold on, one moment, John. Yongsoo, our Chief Strategy Officer and Lead of our global business is going to offer a comment.

Another important aspect of our partnership with Warner is that it includes not only Korean [original] titles, but also a significant number of English original titles. We believe the impact on the Wattpad brand and English platform will be especially meaningful once these English original titles are developed through a major U.S. animation studio like Warner and reach the market.

And the next question comes from the line of Doug Anmuth with JPMorgan.

David, can you just talk a little bit more about the drivers of the 4Q guide, the slower revenue growth? Just trying to understand -- I know you mentioned IP adaptation, some of the lumpiness there, but also trying to understand how much is tied to the Korea advertiser advertising from the e-com partner that declined in 3Q and what kind of visibility you have there? And then just putting that all together, like how you're positioned into '26.

Great. Thanks for the question. First, let me start with the last part of your question. We feel very good about the fundamental business health and growth opportunity mid- to long term for this business. In particular, in paid content to see the emerging signals of continued webcomic English app MAU growth and now paid user signs of future monetization, we feel very good. And frankly, the announcements that we've made with great partners like Warner Bros and Disney make me feel even stronger about the future of this company for '26 and beyond. Having said that, Q4 does represent a quandary for us to explain.

Let me try. First, while we do not usually disclose great detail, I wanted to mention that within the 2.3% to 5.1% revenue decline as forecasted, this $330 million to $340 million range with the $335 million midpoint. Within that range at current FX rates, paid content is up, reflecting what we believe to be the strength in paid content. The primary driver, frankly, year-on-year is not a function of paid content. It's a function of the timing of IP adaptations. I want you to remember that IP adaptations play a really important role for us with regard to having some of the lowest cost way to create awareness for our creators and for our own content on our platforms.

And in Korea, where we've talked about a 50% market penetration, that is a great strength. However, when you have that much market penetration, the flow of when crossover IP hits a quarter can really change the optics of the total revenue. Recall in Q4 of 2024, a year ago relative to guidance, we had major breakouts. We had the success of the Stars Borne. We had Trauma Code. We haven't even in North America, the impact of Sidelined: the QB and Me. So when we think about the guide, I would characterize it as primarily on revenue being driven by the timing of crossover IP. And I'll note that despite the fact that we're guiding to a decline in total revenue, we're still guiding to the same adjusted EBITDA, the same definition and the same number of roughly minus $4 million, and that reflects how strong we're managing G&A, and it also reflects the fact that we're managing our mix and our gross profit.

In fact, we added another disclosure, which I think is important on the bottom line, which is within the guide, there is inclusive in it a $16.5 million noncash set of costs that include, amongst other things, the actuarial adjustment for the pension expense for some of our Asian-based employees and the noncash write-down of minimum guarantee held on balance sheet, independent of what we actually pay in terms of liquidity. And the reason why we did so is to really note that we feel that the quarter guide, while appropriate, reflects the strength we think that we are building for the long term. I know that's hard perhaps on the surface to see. Now with regard to your question in advertising, we are so early in the rest of world that you should think of advertising as disclosed as primarily being driven by Korea.

And it goes to the same market penetration point. When you have 50% market penetration, we described a movement in one large e-commerce customer affecting the quarter. You'll note we also disclosed the strength of our relationships with other advertising partners in Korea, inclusive of NAVER. And we did not talk about this issue as being a persistent one in our business model beyond the quarters that we have described. So you have to read into that as you will. But again, we're not talking about a fundamental business health issue anywhere, particularly amongst where we are strong in Korea, including our advertising business in the mid- to long term.

Next question comes from the line of Andrew Marok with Raymond James.

Two, if I could. So maybe first, just if you could elaborate a little bit on the engagement that you've seen with some of the Disney content to date. I mean, obviously, you've mentioned that there's a lag between the content coming on to the platform, the monetization because of the free episodes. But just how that engagement curve is progressing relative to expectations? And then maybe one more on advertising. If you could just maybe talk a bit about advertiser appetite for new platforms and new channels to devote spend to and kind of what we're hearing is maybe a little bit of a mixed or an uncertain environment into Q4.

Sure. On your first question, unfortunately, Andrew, while everything that we've seen is positive, it's too early for me to give you specific quantified metrics. I will tell you that we've talked about in the past how the timing of this engagement with Disney is a great time because the leadership and the team have already rolled out fundamental improvements in product. We call it Global Web 2.0. And we've also talked in the last quarter, previously, we talked about a 9% increase. And things like when we look at engagement from new products, we look at not just the webcomic English app MAU growth or the MPU growth that we mentioned, that's great.

But we look at episodes of red. We look at quality metrics. Too early for me to disclose them quantifiably. But I would tell you, we're very encouraged by the progress we're making. And it's the largest upside market for us because we've only started. So I can't give you more that I can't disclose in the short term on Disney, but I can tell you we're very bullish about our business in Rest of World, particularly in North America.

Great. And then maybe on the advertising point for advertisers looking to invest through the appetite for incremental platforms or channels.

There is definitely strong interest. I would point you to in Japan, the continued success of pre-roll video, which we think is a wonderful way to deepen engagement even in paid content, right? This is the opportunity. And I think as we get better and better at targeting, the opportunity for people to see pre-roll video that has better and better affinity to the paid content they're already engaged with. We talked about that being a strength in Japan. We did talk about the dislocation from one customer in Korea. But in terms of rest of world, we are early. And while we're building for the long term, we're not yet realizing, I think, the very large offerings that I believe customers want. So at this point, I can't give you specifics.

I will tell you, it was a wonderful opportunity to engage with advertisers publicly, we were at New York Ad Week. We had a very large presence along with our New York Comic-Con presence. I'm really encouraged personally by the interest in the differentiated products that we can offer. But I also need to be candid that we're still fundamentally building out the infrastructure in places like North America to begin to realize them down the road.

And it seems that we have no further questions at this time. This concludes the Q&A session and today's conference call. We would like to thank you all for your participation. You may now disconnect your lines. Have a pleasant day, everyone.

All right. I think with that, we're going to move on to our next session. It's my pleasure to have the team from WEBTOON Entertainment here, David Lee, CFO; and the IR team. David, thanks so much for being part of the conference for the second year in a row because you were here last year.

I'm very happy to be here.

So I'm going to read the safe harbor to kick this off. Our remarks today will include forward-looking statements, and actual results may differ materially as a result of various factors. So please refer to the company's SEC filings, including the Risk Factors section of the company's most recent report -- annual report on Form 10-K. David, so the company has been on quite a journey since going public. For those who don't know the story as well, why don't you talk a little bit about the market opportunity that WEBTOON is going after and how you're thinking about building out this platform for the longer term?

Great. Well, thanks for having us here. I'm not surprised if a lot of you've never heard of WEBTOON. I mean if you happen to be in the coveted Gen Z demographic, I'm sure you have. But in essence, WEBTOON is the only global storytelling hub that has 24 million creators all around the world telling interesting, unexpected stories in a format called a webcomic to over 155 million monthly active users.

This format is the purest form of a story invented by our founder, JK Kim. That's why there are 100 examples where you may actually know of us through a movie on Netflix or a hit on Amazon Prime or even in the Box Office, which I can talk to you about. So in terms of the market opportunity, the biggest opportunity for us is right here in the United States. We're in everyday part of people's lives in places like Korea, where we have 50% market penetration. We are now the #1 app in Japan including mobile games for the first 6 months in this year, so we are growing fast there. But we are just getting going in our largest opportunity here in the U.S. The good news is Gen Z consumers here already love our product, the bad news is most of you I can tell in the room have never heard of the company. So we have an awareness gap which is part of our role at this conference to try to fix.

Great. And against that backdrop, maybe build on that and talk about what are the key pillars of your growth story -- growth narrative and how to think about some of the initiatives you are putting in place to execute against it?

I think one of the most important parts of our growth story is something I don't think anybody else has, which I remember doing turnarounds in mobile gaming and in consumer tech, where I was really tired of buying the next future hit because they had, had a hit before. We have an evergreen storytelling hub. This 24 million group of creators enabled through AI and technology. We produce 120,000 stories per day fresh and new.

And because of that, our consumers here in the U.S. tell us that, 77% of them tell us that we have a more fun experience than many experiences that they could be on other great apps. And the reason is they simply can't get the stories they see on our platform anywhere else. We take that great evergreen source of stories. We pair it in a format that is data-driven to tell us what could be a great movie, what could be a great mobile game, what could be a great piece of merchandise.

And with all that information, we like to think we de-risk the ability for amateur storytellers to become great professional storytellers on our platform. So it's taken us over 20 years. Our founder started this business over 20 years ago, a labor of love. But now we have escape velocity. We have enough creators. We have enough consumers. to be delivering last year $1.35 billion in net revenue and at a positive operating profit. So that's -- those are the keys to our business.

Great. And you referenced earlier a little bit about how to think about current market share penetration across Korea, Japan and then obviously, there's Rest of World, which is inclusive of North America. When you look at the North America opportunity, which is the one as you articulated, where there's the potential for the largest growth in users, talk a little bit about what you need to get right in this market, either on the content side or the user acquisition side to capitalize on that opportunity.

I think what spans across all of our regions, thankfully, is that Gen Z wants a good story. And increasingly, they don't care what language it originated in. They're looking to discover on their own using technology, something they consider to be a story that they found. The way this works for us in North America, the reason why we showed 19% webcomic app MAU growth here in the U.S. and other English-speaking countries is we call her Maddie.

Maddie, our typical consumer, she gets to surf this immense digital universe of stories, 120,000 stories coming every single day. We've used AI to be able to tell her which story she might like. And only when she wants with no pressure, she gets to see the next episode that breaks for $0.15 to $0.70 on average. No heavy subscription, no push for merchandise. When she wants to see the next story she pays. That patient business model allows Maddie to pick stories on her own terms. And we find that as a result, she in other countries, we know will tend to read and pay to read 3x more over a period of a few years. That patient approach allows us to be confident when Maddie completely finishes the story. By the way, these story arcs sometimes span 10, 15 years, but she finishes the story. I'm not worried because I got 120,000 more coming.

And even as her tastes change, she'll have more confidence finding the next story she wants. I think that process of meeting the Gen Z consumer where they want to be met. The other piece is each of our regions, Korea, Japan and what we call Rest of World, they don't create stories to be published within their region. They create stories and publish across all regions. So each of these epicenters have creators that now have the ability to publish in all the languages we have as a global company. And that is a proposition that many creators don't have with other companies and other formats. Being able to have that signal, I think, is important for both the creators and the consumers.

Got it. Maybe turning back to your more mature markets compared to the Rest of World. How does that algorithm or how does that paradigm look when you think about driving user acquisition and user engagement trends in a market like Korea or Japan, where the format and your platform are further along that journey?

Yes, it's a great point. Each market is different. Interestingly, in Korea, where we have 50% of the market penetration, we're an everyday household name. So there, when you saw in the last quarter, we posted 9% constant currency revenue growth. Well, how did we do that to your question? Well, a large amount of it is that we're rumored to be powering most of the great K dramas that get released on Netflix and other off-platform sources for great movies. In fact, there's a block -- a box office busting record hit called My Daughter Is a Zombie that is rumored to be coming from us.

So having the ability when you're in 50% of the market to spawn not just great stories on your platform but also to spawn great stories in the format of a Box Office movie or something you see on Netflix or even a mobile game, allows us to leverage the trust we've been given in Korea and demonstrate that 9% growth. Now MAU when you are that big in the market will fluctuate and vary.

We also like to look at ARPU in mature markets because if you can create better products, we just released by the way in I think the last week a new short-form video product in Korea called Cuts, which allows any user, any UGC, any consumer, any creator to create a short 2-minute short-form video as another form of storytelling. That product relevance, the ability to tell stories not just on our platform, to be able to advertise in ways that feel authentic to what they're interested in reading, that's all part of having a strong market presence like Korea for that 9% growth.

Japan, very different story. A couple of years ago, we were not the market leader. We became the market leader really in the last 12 months. And we did it because creators in Japan have the ability to publish in any language and in any genre. They don't have to be stuck just publishing in Japanese in manga. With us, a creator can choose to go global across the world with us, but also cross-over into TV and film. That's allowed us to grow all metrics, right, ARPU, top of funnel MAU as well as strong revenue growth.

That's why we're still #1 in revenue, even including mobile games. Here in the U.S., by the way, in Japan, we're sub-20% market penetration, growing fast. Here in the U.S., we're sub-5%, and so while I know that consumers are already enjoying our story, we need more of them, which is why part of our formula is to not just let them see our stuff on big streamers like Netflix and Amazon Prime, but it's also to do great collaborations with partners like Disney or IDW, which we recently announced.

Yes. And I want to build on that because I think that was obviously the big news behind the last earnings release was the parallel announcement of the partnership with Disney on the content side. Maybe bring us in a little bit to the details of that collaboration. What is the content offering exactly going to look like? And how would we expect it to drive users on the platform going forward?

I mean the first point that I'd make is, we feel very grateful to have someone to collaborate like Disney. They have the opportunity to partner with anyone. And we think it's a testament that we're choosing to work together. Having the ability -- we just released Star Wars on our platform, I think Saturday. A couple of weeks ago, we launched The Amazing Spider-Man. For the Gen Z population, that we're the leader of here and globally, these stories actually are fresh.

They're new and different. And I hope that over time for our partners, and it hasn't just been Disney. We've long partnered IDW. We have great stories around Godzilla and Sonic the Hedgehog and the Teenage Mutant Ninja Turtles. For us, these are ways to hasten the pace for our Gen Z new consumers here in the U.S. to discover stories they couldn't find anywhere else. Because we already have our own exclusive source of original stories from our own creator platform, we have the ability to partner with great firms to tell their stories, too. And in the case of Disney, what's even maybe more exciting for us is we have the ability to tell original new stories in the theme of their franchises, which are quite extensive. And so for us, this is just a way to continue that 90% webcomic app MAU growth here and to deepen the relationship with Gen Z as we expand.

Okay, understood. But building on that, I think, one of the questions we've gotten coming out of the Disney partnership from investors has been the mix of content on the platform. Because I think initially when you IPO'd, a lot of people viewed you as an output of the creator [ economy. ] You were enabling some sort of mix of amateur and rising professional creators to build their brand and build content. Now there is licensed content as well. How do you think about striking the right balance so that you create an array of supply that continues to drive or fuel engagement on the platform?

I think for us making sure that our consumers and our creators have the best opportunities to grow, is the bright shining light that our founder, JK set. So specifically on Disney, a 100 great reformatted stories on our platform gives our consumers the ability to see as a webcomic a story they didn't know. Gen Z may be relatively new to some of these stories. For our creators, the ability to tell original new stories themed from a great story that originated within the Disney company is a new avenue.

And I think it gives both sides of our marketplace, the consumer and the creator more opportunity for the company and for shareholders, it allows us to speed up what I think is inevitable, which is we are becoming mainstream in the U.S. We are -- I think of deals like the ones we did with IDW and our collaboration with Disney are perhaps statements that we are becoming mainstream faster. And I think that's good for the entire ecosystem and our investor base.

Okay. Understood. I do want to stick with this theme of content though and maybe pivot towards the IP adaptation business you have. So I think one of the areas that I think is still relatively underappreciated, you alluded to it a little bit as you being the source material for a number of hits on the platforms. Talk about how content can get generated, built and scale on your platform, but then can possibly have a life off of your platform and how that informs scaling and building the IP adaptation business over the long term.

Well, first, I'd like to think we have the lowest cost, most de-risked way to generate future movie hits that I've ever seen. And let me explain why. We have 24 million creators, the vast majority of which have full-time jobs. They're graphic designers. They're kindergarten teachers. A great example is Rachel Smythe, right, a New Zealander, graphic designer tells her story on our platform called [ CANVAS ] called Lore Olympus.

I never would have commissioned or thought that her incredible story would be something that I would have proactively purchased. I don't think anyone knew how many people would resonate with her as a creator, enabling her to go global on our platform, enabling her to receive a living as a creator on our platform, but then leveraging her success on our platform to see her rise as a New York Times best-selling author in print. Rumored to be soon announced as a great featured animation release on one of the major streamers.

This example is not uncommon, we have 900 examples of crossover IP. We have 100 examples of rich film adaptations and series that originated as stories on our platform. We have data that tell us when Marry My Husband became a hit an Amazon Prime in 2024, 4 years prior we knew it was going to be success as a web novel that we then turned into a global webcomic, so this ability gives us a way to democratize storytelling to give anyone the ability with data and success to go far beyond our own platform.

And it's because we fair share of the revenue. $2.8 billion shared with creators from 2017 to 2022 is inherent in the business model and the proposition to creators. I think that was the genius of our Founder, JK, our CEO. He built something 20 years ago that would reach a level of scale where we could enable a story to live outside our platform well and would be perhaps one of the lowest customer acquisition cost vehicles. When someone sees a hit on Amazon Prime and they want to know where it came from, they come back to WEBTOON. It's a beautiful way for us to pay off that LTV for that customer acquisition cost.

Understood. Sticking with monetization and the business model before we move to other aspects of the business, advertising. So you're in a process of trying to build and scale an advertising business, especially in maybe this part of the world. Think about what advertising presents rather than commerce presents as an opportunity for monetization over the long run for the platform.

Well, first, unlike a lot of businesses that I have come across, this is the only one where I see advertising actually possibly enhancing the consumer experience around paid content. When Maddie is reading a great series around a romantic comedy, let's call it True Beauty, which is one of the hits on our platform, being able to show her a sponsored alternative ending from a Major Beauty brand feels really consistent with her experience.

And at the same time for the advertiser, giving the opportunity to have a high CPM, very targeted fit with a Gen Z consumer that is voluntarily choosing to spend 30 to 60 minutes reading content they can't get anywhere else is a differentiating offering, I think, for the North America advertising market. So I think for us, the consumer experience -- and then financially, I will tell you, I feel the company has worked hard to already pay for the evergreen storytelling content engine.

We already have the right consumer spending 30 to 60 minutes. If we were to achieve the nascent opportunity here in North America for advertising, a lot of it drops to the bottom line. So for me, North America advertising is more than just another revenue channel. It's a great revenue channel, it will drive a lot of profit, but it could actually speed content consumption and adoption by this new emerging group of consumers here in the U.S. We're very early. We have great experience in Korea. We're growing fast in Japan. We're just putting in the places -- the pieces in place here in the United States. But it could be a step change function once those pieces are in place for the business.

Okay. Obviously, the theme of the conference has been a lot around AI. You have a lot of different places in your ecosystem where you can apply AI content creation, content distribution, the way the consumer interacts with your platform. Talk about some of the initiatives inside the company that are both external facing and internal facing that are currently being driven by AI.

Well, from the very beginning, when our Founder and CEO, JK started the company, he started from within a great tech company called NAVER in South Korea. So our heritage was always built on tech. And in fact, I'd like to think we have 100 of the best AI technologists who have been fully dedicated to us for some years. So this is not a new concept to us. I also think from an asset standpoint, we have a business model where we can protect the human creator because we share in their upside with the rev share model we have.

And I want to be clear that we use technology to protect the human creator and protect the consumer. So right now, we use a lot of our technology to fight piracy. We make our content more discoverable in a personalized way for the consumer. We have tools to reduce the burden of having to produce the images and the storytelling components for a successful global webcomic. But I also think that we have the potential to do even faster and better what you're seeing the consumer ask for. Cuts, we just launched video episodes in the U.S. being able to not just read but for Gen Z to watch video.

I mean what is animation or video? It could be viewed as a series of static panels, which we have in a webcomic put together with sound in motion. So I'm really excited about us being one of the very few AI and tech companies that will defend, promote and enhance human productivity and have a business model that allows for it to be shared with the creator and create financial results. That's the idea of why we use the tech we have in the business model.

Maybe just one follow-up, and it came up in some conversations I've had with other companies like yourself that are in and around the broader media ecosystem. It's really about how to strike the right balance with AI because you want to make creators more efficient, but you don't want to disintermediate creators. You want to create efficiency for yourself as a company and scale content. But again, you want to keep an ecosystem that's highly incented in continuing to be a thriving creator economy company. How do you strike that right balance?

Well, I think it's easier for us because I believe human storytellers are still the best storytellers. When it comes to how quickly can we create support images to allow a human storyteller to maximize the impact of their story, we are aligned with the human creator and our tech. And for us, because we are one of the few business models that shares the upside with our creators, there is less debate at the outset about what's inbound and out of bound.

That doesn't mean it's not difficult. I think we are very sensitive to the idea that we always protect the human creator and enhance their productivity versus threaten them. For us, that's good business. So it's a lot easier, I think, for us because we have a lot of creators, we have a lot of consumers and we have a lot of data. I think for start-ups or others who are talking about a future use of disruptive GenAI, that's a different conversation and one that I don't have to have. Right now, I can defend our human creators and give them more productivity and deliver great results to investors.

Okay. Understood. Pivoting to that theme, though, obviously, you've got growth investments you want to make, you're trying to scale products and platforms in the years ahead. How do you think about striking the right balance of making sure these investments had -- and you're still in the mode of sort of continuing to prove out some of the profitability dynamics to investors as well. How do you think about striking that right balance without forestalling some of the growth initiatives, but then also delivering what folks in the audience want from an investment community standpoint?

One of the things we talk about a lot internally at the company and that we're beginning to share with investors is that as we grow outside of our origin, as our paid content picks up more scale here in the U.S., as our advertising business scales outside of our origin in Korea, we actually have a higher rate of variable profitability. So by just growing in one of the most attractive markets, obviously, here, what we call Rest of World as well, we actually deliver improved profitability in our view.

Now that requires a ruthless management of overall G&A, which we like to think we do. And it requires deliberately investing when we think we have data suggests we have a winner. One example is we are deliberately investing in the United States in marketing. It's driving the 19% webcomic app MAU growth in English that we've seen for the last 2 quarters. And with the announcement of great partnerships with IDW in collaboration with Disney, we think it's a good bet.

And yet you're not seeing us use any of our balance sheet cash that we are self-generating enough within the company to deploy very considerable investments for future growth without depleting the balance sheet. We don't intend to hoard cash. Our view is that we need to maximize shareholder value, but we are very, very careful to self-fund as many of the important bets. And we're lucky because as I execute better and better outside of our origin, I improve the company's profitability as a function structurally of the way our cost system works.

Okay. Understood. I wanted to turn next -- well, maybe ask in a different way because we have gotten this question a lot from investors. When you think about some of the content deals you've structured, is there any help you can give investors to think about what impact that might have on gross margins over the shorter period of time? We're getting that question a fair bit.

First, I think I can rely upon what we've already discussed. I think the collaborations and the partnerships are great ways that fit into our existing business model. We haven't disclosed any upfront payments or onerous terms. We haven't talked about a change in our fundamental structural profitability. I'm still happy to talk about how growth here in the U.S. can improve the company's overall profitability.

All of that is unchanged even with great disclosures and announcements around IDW and our recent collaboration with Disney. I think that's all I can say to help the investor at this point. But I feel very fortunate to be able to keep the original business model that JK envisioned and have confidence that as we execute against it, we will drop improvement to the bottom line.

Okay. Building on the growth investment discussion, how should investors think about capital allocation? What are the priorities for the capital you have on your balance sheet, which you are a well-capitalized company relative to like what future capital being generated by the business might be aimed at as priorities?

We think about the capital we have on our balance sheet, but we also think about how much excess cash flow we generate every period and how we use it. And the three areas of priority have always been around core technology that enables more engagement by consumers with our creators. AI would fit into that. The second is expansion where we see proven product market fit. I think we've talked about what we're seeing here in the U.S. and how excited we are to expand in this webcomic app MAU growth here in the U.S.

And the third is to ensure that we are setting ourselves up with infrastructure that allows us to grow for multiple years. We talked this year about how we saw explosive growth in Japan in 2024 and how we were taking 2025 to set up that business to be a rocket ship for '26 and beyond. I think those are the ways that we've talked about using the self-generated cash flow that we have to continue to deliver shareholder value.

We look at every period at stock buybacks. We are very active in understanding what we could buy from an M&A standpoint. We have no ideology around keeping a large cash balance. But right now, we believe the best thing for shareholders is to manage the cash we have as I described.

Okay. We only have a few minutes left, but I want to turn the floor over to you on sort of a bigger picture question. Obviously, we've talked about a lot of themes on stage so far. But when you think about the three or four biggest themes that you're levered to as a company and how you're aligning your strategic priorities to sort of align with where those growth drivers are in the broader industry? How would you frame that narrative for investors as a sum up point?

I think the first theme is around our origin as a technology company to reduce the risk in generating an ongoing set of storytelling hits, both for consumption on our platform as well as for consumption outside our platform with all of our partners. I think the second is that at our core, we are about enabling creators to tell great stories to consumers, that we will always protect both sides of the flywheel for the long term.

And I think the third is that we recognize to many investors that we are poorly understood by you. And that's our burden, not your lack of understanding. I hope over time that the results we post as a new public company demonstrate that we are different from most and that you may have to look a little bit further into us before you understand our core. Those are the three things that we're talking about these days.

Okay. Well, David, always appreciate the opportunity to talk to you. Thank you for being part of the conference again. Please join me in thanking WEBTOON for being part of the conference.

Thank you.