Webtoon Entertainment Inc. ((WBTN)) has held its Q1 earnings call. Read on for the main highlights of the call.
Confident Investing Starts Here:
- Quickly and easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks straight to you inbox with TipRanks' Smart Value Newsletter
WEBTOON Entertainment’s recent earnings call for Q1 2025 revealed a mixed sentiment, with notable successes in specific markets overshadowed by broader operational challenges. While the company celebrated strong performances in Japan and growth in advertising and IP adaptation revenues, it faced setbacks with a decline in overall monthly active users (MAU), a net loss, and significant issues with the Wattpad platform. These mixed results highlight the need for strategic adjustments to address ongoing challenges.
Strong Revenue Performance in Japan
Japan emerged as a standout market for WEBTOON Entertainment, contributing over 50% of the company’s revenue in Q1 2025. All three business segments—paid content, advertising, and IP adaptations—experienced growth. Notably, LINE Manga achieved the top spot in the overall app ranking chart for revenue, including mobile games, underscoring the company’s robust presence in the Japanese market.
Successful IP Adaptations
WEBTOON Entertainment continued its success in IP adaptations with the launch of “Marla Influencia” on Netflix. This adaptation of a key Wattpad title highlights the company’s strength in Spanish-language content and its ability to leverage popular stories across different media platforms.
Innovative Product Changes
The company introduced innovative product changes on its English language platform, resulting in a 9% increase in episodes read by the test group compared to the control group. These changes included enhancements in user onboarding and content discovery, demonstrating WEBTOON’s commitment to improving user engagement and experience.
Growth in Advertising Revenue
Advertising revenue saw a significant increase, growing by 13.6% year-over-year on a constant currency basis. This growth was primarily driven by strong performances in Korea and Japan, reflecting the company’s effective strategies in these key markets.
IP Adaptation Revenue Growth
The IP adaptation business experienced a remarkable 20.7% year-over-year revenue growth on a constant currency basis. This growth was fueled by double-digit increases in Korea and triple-digit growth in Japan, showcasing the company’s successful expansion in this lucrative segment.
Net Loss and Decline in Adjusted EBITDA
Despite these successes, WEBTOON reported a net loss of $22 million, a stark contrast to the net income of $6.2 million in the previous year. This loss was attributed to higher general and administrative expenses and increased marketing costs. Adjusted EBITDA also declined to $4.1 million from $22.2 million in the same quarter of 2024.
Decline in Monthly Active Users (MAU)
The company faced a 10.5% decline in total MAU, primarily due to issues with the Wattpad platform. A security upgrade affecting search engine indexing and a government ban in one country were major contributors to this decline, highlighting significant challenges in maintaining user engagement.
Rest of World Revenue Decline
Revenue in the rest of the world declined by 4% year-over-year on a constant currency basis. This decline was impacted by decreases in paid content, advertising, and IP adaptation, indicating challenges in expanding beyond core markets.
Challenges with Wattpad Platform
Wattpad faced significant disruptions due to a security upgrade and a government ban, which were major contributors to the decline in rest of world MAU. These issues underscore the need for strategic improvements to stabilize and grow the platform.
Forward-Looking Guidance
Looking ahead, WEBTOON Entertainment anticipates second-quarter revenue growth of 2.2% to 5.2% on a constant currency basis, with expected revenue between $335 million and $345 million. The company also projects an adjusted EBITDA margin between 0.1% and 1.6%, maintaining a focus on marketing investments and infrastructure improvements. This guidance reflects cautious optimism as the company navigates its operational challenges.
In conclusion, WEBTOON Entertainment’s Q1 2025 earnings call painted a picture of both opportunities and challenges. While strong performances in Japan and growth in advertising and IP adaptation revenues are promising, the company must address issues with the Wattpad platform and declining MAU to sustain its growth trajectory. Investors will be keenly watching how WEBTOON navigates these challenges in the coming quarters.