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 Inc. Common stock 2025Q3 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To withdraw your question, simply press 1 again. 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, 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 J. 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. For additional details about the call, please see the earnings press release and shareholder letter, both of which are posted on our Investor Relations website. We are pleased to report our 2025Q3 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 partnership with Disney to develop an all-new digital comic platform. This new platform, which WEBTOON Entertainment Inc. Common stock will build and operate, will feature more than 35,000 comics from across Disney's portfolio, including Marvel, Star Wars, Disney, Pixar, and Twentieth Century Studios, available in a single digital comics service with one convenient subscription. Alongside the strategic commercial collaboration, we entered into a nonbinding agreement for Disney to acquire a 2% equity interest in WEBTOON Entertainment Inc. Common stock. We have already made progress; as of today, we have launched all five titles from our initial announcement in August, including Amazing Spider-Man, Star Wars, Alien, Avengers, and Disney's Frozen: Breaking Boundaries, as well as another new format title, Predator. Additionally, at New York Comic Con last month, we announced another five 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 Peach and the Samurai's 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 video episodes on our English-language platform in August. Video episodes reimagine the experience of enjoying webcomics by adding motion, sound effects, background music, and human voice acting to the original webcomics, all in a five-minute video. We believe this feature will deepen engagement with existing users, reach new users, and deliver a new medium for amazing storytelling. In Korea, we launched 'The Cut' in September, another short-form video innovation. This feature allows creators and fans to create, upload, and enjoy short-form animated videos under two minutes in length. Within just a month since we launched 'The Cut,' we have already hosted over 1,000 creators, with some videos already surpassing 1 million views. Finishing up with IP adaptation, today we announced plans to develop a slate of animated projects with Warner Bros. Animation. We intend to enter into an agreement to co-produce ten animated series for global distribution. Our creators are building franchises that Gen Z audiences 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 guest speaker and streaming releases, including 'My Daughter is a Zombie,' 'Your Letter,' and 'Shikimaki.' We believe that IP adaptations are an important part of our flywheel as we work to attract more users to our platform, and we are confident in our strong pipeline of adaptations over the long term. As we close out an exciting quarter marked by meaningful progress made towards our strategic priorities, I am 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, Junkoo, and thank you, everyone, for joining us today. I will be discussing the details on 2025Q3 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 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 two 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, with 0.8% revenue growth on a constant currency basis year over year, driven by strength in Japan and the rest of the world, offset by a decline in Korea. ARPU grew 3% on a constant currency basis in the quarter, with increases in all three regions. We see continued ARPU growth as an indicator of the health of the business, with additional opportunity for further monetization ahead. There is still 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 the rest of the 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 the rest of the 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 the rest of the 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 in the 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 the 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, offset by a double-digit constant currency revenue decline in IP adaptations. As mentioned in our shareholder letter, Line Manga was the number one 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 the 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. The rest of the world saw our revenue decline of 0.7% year over year on a constant currency basis, driven by a double-digit decline in advertising, offset by single-digit growth in paid content and double-digit growth in IP adaptations. While the rest of the world MAU declined 11.6% year over year, driven primarily by Wattpad, MPU increased 0.8% year over year, and the 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 are 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, free point expenses were moved from marketing to cost of revenue. We invested in labor to make further improvements 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 $600,000 in the quarter compared to an 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 2025Q4, 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 are close to finishing our infrastructure updates in Q4, but there may be a few items that linger in 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 non-cash 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 are 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.

Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Thank you. Your first question comes from the line of Benjamin Black with Deutsche Bank. Please go ahead.

Good evening. Thank you for taking the questions. Maybe first, can you elaborate on the long-term vision of the Disney partnership? You know, 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 know, you launched video episodes. You know, what early engagement or monetization metrics are you seeing relative to sort of static webcomics? Thank you.

Thanks, Benjamin. Let's start with your first question. I wanted to remind you, as Junkoo mentioned, that there were two particular parts to the Disney announcement. In early August, we talked about these wonderful 100 reformatted adaptations 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 great progress with the five to seven titles that we mentioned, and these are great stories, Star Wars, Alien, Avengers. You saw the list. But seven 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 US, a very large portion of our users are Gen Z. We're proud of that. This for us represents demographic gold because we know from other markets they can grow old with us. So while this is very early, think of video episodes and separately, work in Korea on 'The Cut,' 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 have 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.

Very helpful. Thank you very much.

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

Hi, everybody. Thanks for taking the questions. 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 the 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? You know, or is that a number that could continue to decline? Is it something that is of any concern or just, you know, kind of a natural variation of the business if it does? Thank you.

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 two things. Similar to the work we've announced with other partners, 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 to your several questions in the web novel ones, 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 in 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, 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, MPU, is because those are the metrics I would have 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've talked about how advertising saw a decline partially related in the rest of the world to the MAU declines in Wattpad. Having said that, when we look at Wattpad, we talked about three 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 two countries. Let's call it instead of three, the drivers let's call them two. The second driver is we were banned in a country along with great other companies like Roblox and Discord. And as we lap those two, 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, 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.

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

Okay. And the next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead.

Thanks so much for taking the question. 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 adaptations and some of the lumpiness there, but also trying to understand how much is tied to the Korea advertiser advertising from the e-commerce partner that declined in 3Q and what kind of visibility you have there? And then just putting that altogether, like, how you're positioned into 2026. Thanks.

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 ways 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 2024, a year ago relative to guidance, we had major breakouts. We had the success of 'A Star Is Born.' We had 'Trauma Code.' We haven't even in North America the impact of 'Sideline the Quarterback in Me.' So when we think about the guide, I would characterize it as primarily on revenue being driven by the timing across 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 non-cash set of costs that include, amongst other things, the actuarial adjustment for the pension expense for some of our Asian-based employees and the non-cash write-down of minimum guarantee held on balance 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 the 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'd 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.

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