Webtoon Entertainment Q3 2026 Earnings Call Transcript

Webtoon Entertainment (NASDAQ:WBTN) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Webtoon Entertainment reported Q3 2026 revenue of $362.8 million, within guidance, and adjusted EBITDA of $2.2 million.

The company highlighted strong performance in Korea with revenue growth and advertising up 30%, but faced challenges in Japan with revenue declining by 18% year-over-year.

Strategic initiatives include AI-powered innovations like Auto Translation and Short Animation, as part of a broader push to enhance global user engagement and expand content reach.

Future guidance suggests a return to double-digit revenue growth by Q4 2026, driven by strong core business performance and strategic investments in AI and content.

Management expressed confidence in long-term growth, emphasizing the potential of Japan’s market and the success of the company’s content flywheel strategy involving multiple media formats.

Full Transcript

OPERATOR

Thank you for standing by. My name is John and I will be your conference operator for today for Webtoon Entertainment’s third quarter 2026 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. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad, and if you would like to withdraw your question, simply press the Star button again.

I would now like to turn the call over to Michael Pak, Senior Vice President of Strategic Finance. Mr. Pak, please go ahead.

Michael Pak (Senior Vice President of Strategic Finance)

Thank you. Good afternoon everyone and welcome to Webtoon Entertainment’s third quarter 2026 earnings call. With me today are Jungkook Kim, our Founder and Chief Executive Officer, Yong Soo Kim, our President, and David Lee, our Chief Financial Officer. Following their prepared remarks, we will open the line for questions. Our earnings press release and shareholder letter were issued after market close and are available on our investor relations website where this call is also being webcast live and will be available for replay.

Before we begin, please note that some of the statements we make today are forward-looking. These include statements about our guidance for the fourth quarter, our strategy and growth opportunities, user engagement and monetization trends, and our competitive position. These statements are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the risk factors in our most recent Forms 10-K and 10-Q filed with the SEC.

These statements speak only as of today and we undertake no obligation to update them. In addition, we will discuss both GAAP and non-GAAP financial measures, including adjusted EBITDA and revenue on a constant currency basis. Reconciliations to the most directly comparable GAAP measures are included in our press release. Non-GAAP measures should be considered in addition to, and not as a substitute for, GAAP results. With that, I will turn the call over to our Founder and CEO, Jun Gu Kim.

Jun Gu Kim (Founder and Chief Executive Officer)

Thank you everyone for joining us today. I will begin with a brief overview of the quarter and then discuss our growth strategy and why I believe the best is still ahead. Yongsu will then cover the progress we have made on and off platform and David will walk through our financial results and outlook in more detail. As always, I encourage you to read our shareholder letter which is available on our investor relations website. This quarter we delivered revenue of 362.8 million, within our guidance range of 358 to 368 million, and adjusted EBITDA of 2.2 million, also within our guidance range. We continued executing on the strategy we outlined last quarter, innovating our on-platform flywheel through AI-powered innovation while also taking a larger, more direct stake in the IP it creates, always with the goal of reaching more users across the globe. Korea and Japan are especially showing the strength and opportunity of our flywheel at two different stages.

In Korea, our market of origin, we continue to see success as our content spans a wide range of genres and creators continue to add new stories supported by our recommendation system and deepened fan engagement. In Japan, we continue to focus on developing and enriching local original content, one of the key priorities we outlined last quarter. Original content naturally carries a longer development cycle, but with new research and operational fine-tuning in place, we are executing with the goal of capturing a greater share of the large market opportunity ahead.

Yungs and David will walk you through the details later. Meanwhile, our on-platform and open platform initiatives are progressing as planned and the foundation we are building is solid. Let me share why I’m confident in the direction we have set forth. From the beginning of our journey, the vision has always been to be the world’s retail tech platform, empowering creation by anyone for everyone. Technology has set us apart from day one. Today AI is unlocking an entirely new chapter of innovation, breaking down language barriers, helping stories reach audiences around the world, and creating new ways for fans to connect with the characters and worlds they love.

At the same time, fans are experiencing their favorite stories across more formats than ever. This is how our flywheel works. Stories begin on platform where readers build fandom around their favorite stories. Then off platform, those stories transition into animation, live action, and games, reaching more audiences, and those audiences return to Webtoon to discover the next great story, which helps the next story gain traction faster and build an even bigger audience.

The Remarried Empress is an example of our flywheel in action: what began as a web novel became a beloved webcomic, recently launched worldwide as a live action series on Disney plus, and is now being developed into an animation with Hayate and Crunch—one story, four formats—and fans who keep coming back to where it all started. As we begin to wrap 2026 and look ahead into 2027, I have never been more confident in our direction. We continue to expect to return to double-digit revenue growth at the midpoint of guidance by the end of the year, primarily driven by strength of our core business. Over time we expect the initiatives we are building today to become a main part of our growth story, where they transcend the line between on and off platform, strengthen both sides of our business, and make our flywheel even more robust.

But what excites me most is the road beyond the next few quarters. The way the world creates, discovers, and experiences stories is being rebuilt and we intend to be the platform where that story is told. With that I will turn it over to Yongsu. Yongsu, please go ahead.

David Lee (Chief Financial Officer)

Thank you, Yongsoo, and thank you everyone for joining us. I’ll be discussing the details of our third quarter 2026 results compared to the comparable quarter in the prior year unless otherwise noted. For the third quarter we reported revenue of 362.8 million within our guidance range of 358 to 368 million. Revenue declined 4.0% as reported, reflecting currency headwinds, and grew 0.2% on a constant currency basis. Let me start with what is giving us confidence as we look ahead. Our core business, paid content and advertising together, grew 4.5% in constant currency and declined 0.3% as reported. Advertising globally grew 30.1% in constant currency, or 26.2% as reported. IP adaptations revenue, however, was impacted by the timing of certain revenue shifting from the third quarter into the fourth. We continue to experience softness in paid content in other regions including Japan, which I will address in a moment.

Profitability was a highlight this quarter. Gross profit grew 9.8 million year over year to 92.6 million, and gross margin expanded 3.6 percentage points to 25.5%, primarily driven by a reduction in third-party transaction fees and growth in higher-margin businesses like advertising. We remain focused on expanding profitability further over time and believe our cross-border content distribution as well as growth in higher-margin businesses will continue to support this.

Operating loss narrowed to 9.2 million, an improvement of 5.7 million year over year, driven by higher gross profit partially offset by increased marketing investment. G&A was flat year over year as we continue to drive further operational efficiency across all regions. Net loss was 7.5 million compared to 11.1 million in the year-ago quarter. We reported adjusted EBITDA of 2.2 million near the midpoint of our guidance range of 0 to 5 million, and I’ll walk through the drivers shortly.

Turning to operational health, Global MAU grew 2.7% year over year to 159.6 million. App MAU declined 8.2% and webcomic app MAU declined 0.9% year over year. Our focus remains on driving users to our app and converting them to paying users. Global NPU declined 3.1% to 7.5 million. Korea NPU grew 5.2%, but this was more than offset by declines in Japan and Rest of World. Korea shows a strong impact on growth when we keep developing compelling local content, and we are applying that approach in Japan and beyond.

Global paying ratio of 4.7% decreased 28 basis points year over year, and global ARPU of $12.30 was down 0.8% year over year as reported, but up 4.2% on a constant currency basis to $13. Now I’d like to provide an update on our revenue streams at a consolidated level, starting with paid content. Paid content revenue was 275.5 million, down 3.9% on a reported basis and up 1.0% to 289.6 million in constant currency, driven by strong performance in Korea, partially offset by declines in Japan and Rest of World. Advertising was a clear highlight. Revenue grew 26.2% year over year to 49.7 million, or 30.1% in constant currency to 51.2 million, with strength in Korea and Rest of World offset by a decline in Japan.

The growth in Korea and Rest of World was primarily driven by strength in both direct and programmatic sales, with contributions from both English-speaking and Asia Pacific regions. Finally, IP adaptations revenue declined 27.5% year over year to 37.6 million and 27% in constant currency to 37.8 million, though it grew 37.1% sequentially from the second quarter. The decline reflects a tough comparison against last year’s box office success of one of our originals adapted into a movie and the timing of revenue recognition for certain projects, a portion of which moved into the fourth quarter.

Now I’d like to look at our results in the context of core geographies. In Korea, we had another strong quarter. Revenue grew 10.8% year over year to 169.3 million and 13.5% on a constant currency basis to 173.4 million, driven by growth in paid content and advertising. These increases were offset by a decrease in IP adaptations during the third quarter. Korea’s MAU of 25.6 million increased 3.9% year over year, with NPU of 3.9 million representing 5.2% growth year over year.

Paying ratio of 15.1% increased 19 basis points year over year, and Korea ARPU of $9.40 was up 17.6% year over year, or $9.70, up 21.1% on a constant currency basis. Moving to Japan, revenue declined 18% year over year to 147.3 million, or an 11.4% decrease on a constant currency basis to 159.1 million, primarily attributed to the decrease in paid content and advertising revenue as well as a decline in IP adaptations. Japan’s MAU of 22.3 million declined 12.1% year over year, but increased 2% on a sequential basis. NPU of 2 million declined 12.9% year over year, paying ratio of 9.1% was down 8 basis points year over year, and Japan ARPU of $22.3 declined 5.8% year over year on a reported basis and was up 1.8% on a constant currency basis to $24.

In Japan, our primary focus remains on developing and enriching local original content with a stronger emphasis on serialized titles. Original content naturally carries a longer development cycle, and we’re taking steps to accelerate it. As Yongsoo mentioned earlier, we’re making thoughtful changes to rejuvenate our growth engines, including the leadership of Hiroshi Mori, who has led our Japan business since September 1, and our aggressive plan to invest 10 billion yen in Japanese content over the next three years.

We’re also proactively adopting the playbook that has driven growth in Korea and Japan, including stronger content recommendations, a better web-to-app experience, and new brand partnerships. Let me reiterate what JK has said earlier. Our opportunity in Japan is significant, and we’re laser focused on executing all of the initiatives that will not only turn the corner, but act as a long-term growth engine in the country. In Rest of World, revenue grew 1.3% year over year to 46.2 million on both a reported and constant currency basis, driven by an increase in advertising offset by a decline in paid content and IP adaptations. Rest of World MAU of 111.7 million increased 5.9% year over year, driven by growth in Wattpad. NPU declined 8% to 1.6 million in Rest of World. Our first priority is growing our user base, with monetization to follow as our audience scales. Paying ratio of 1.4% was down 21 basis points year over year, and Rest of World ARPU of $6.8 declined 0.2% year over year on both a reported and a constant currency basis.

Turning to profitability, gross profit for the quarter grew 11.8% year over year to 92.6 million. This resulted in a gross margin of 25.5%, which expanded 3.6 percentage points compared to the prior year, driven by a reduction in third-party transaction fees and growth in higher-margin businesses like advertising. Adjusted EBITDA for the quarter was 2.2 million compared to 5.1 million in the year-ago quarter. The decline was driven primarily by an increase in foreign exchange losses as the Korean won strengthened against the US dollar at the end of the quarter.

This resulted in an adjusted EBITDA margin of 0.6%, which compares to 1.4% in the prior year. On the cost side, total expenses for the quarter were 62.7 million, reflecting continued discipline on operating leverage. Marketing expenses were 39.1 million as we continue to invest in user acquisition. Q3 GAAP loss per share was $0.06 compared to a loss per share of $0.09 in the prior year period. Adjusted EPS was $0.02 in the quarter compared to an adjusted EPS of $0.04 in the prior year period.

Our balance sheet remains strong, with a cash balance of 548.4 million and another 13.3 million of short-term deposits included in prepaid expenses and 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 fourth quarter outlook for the fourth quarter of 2026. We expect to deliver revenue growth in the range of 9.0 to 12.0% on a constant currency basis. This represents revenue in the range of 371 to 381 million. Based on current FX rates, we expect fourth quarter adjusted EBITDA in the range of 0 to 5 million, representing an adjusted EBITDA margin in the range of 0 to 1.3%.

As we close, I want to reinforce why we are confident in our trajectory. First, our core business is demonstrating strength in Korea. Our playbook is working. Both paid content and advertising grew double digits, and NPU grew 5.2%. That advertising momentum is now scaling globally, up 26% as reported. Second, we are making meaningful progress on profitability. Gross margin expanded 3.6 percentage points year over year, and we narrowed our operating loss.

Third, we have a clear roadmap for accelerating growth. We know where we must improve, particularly in Japan and in paid content in Rest of World, and we remain focused on execution. At the same time, we are investing in the next phase of Webtoon Entertainment’s growth. We believe continuing to lean into AI-powered initiatives on-platform and investing to scale our off-platform IP adaptations business will strengthen our offering and improve engagement over the long term.

We remain confident in our expectation to return to double-digit revenue growth by the end of the year while continuing to build Webtoon Entertainment into the world’s leading storytelling technology platform. With that, I’d like to turn it back to our operator to begin the Q&A session.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question-and-answer session, and 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. If you would like to withdraw your question, press the star button again. We also ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. Our first question comes from the line of Mark Mahaney with Evercore ISI.

Please go ahead.

Mark Mahaney (Analyst)

Okay, thank you. I’d like to ask two questions, please. When you laid out the factors that would get you to this double-digit percent revenue growth exiting the year, which of those now do you have the most visibility in and most confidence in? And which of those factors are still sort of the most speculative? And then on the margin side, on the gross margin side, this expansion—can you just talk about the sustainability of that for the foreseeable future?

You know, next year or two, should we be able to expect gross margins to kind of continue to rise at that clip? What would be the major factors that would cause gross margins to continue to rise from here? Thank you very much.

Yongsoo Kim (See Remarks)

Thanks, Mark. Yeah, this is Yongsoo Kim. Let me start with the first question, and then David can add more details and cover the second margin question. Our platform business, which includes paid content and advertising, continued to grow at around 5% year on year on a constant currency basis in Q3, consistent with the growth we saw in Q2. In Q4 we expect Japanese paid content to begin recovering with a narrower year-over-year decline, along with continued strength in advertising and Korean paid content.

Together with the revenue we expect from IP adaptations in this quarter, we expect these drivers to bring us back to double-digit growth. To be clear, this expected double-digit growth excludes the gaming revenue from Ally Games Holdings, which we will begin consolidating in Q4 following the acquisitions.

David Lee (Chief Financial Officer)

Yeah, Yongsoo said it well. Let me just highlight a few things. First, Mark, as you saw, the guide for Q4 goes beyond what I said last quarter. What I said last quarter—you asked the question, double-digit growth. You said for the quarter or exiting the year? And I said exiting the year. The guide of 10.5% is for the entire quarter, as Yongsoo noted. The second is, as he noted, it’s primarily driven by organic performance. So with regard to your question of line of sight, I feel very good about the line of sight on gross profit margin. Gross profit margin is up 3.6%, and as you note, the question you ask is how sustainable is it? I believe the growth of our advertising business at plus 30% is an example of its future sustainability because the mix benefit as we grow our advertising business as well as paid content outside Korea benefits us.

Having said that, we will invest back, as you saw we did in marketing in important markets like Japan and the rest of the world, because we believe that the most important shareholder value-creating lever is sustainable, profitable growth. And that’s our area of focus.

Mark Mahaney (Analyst)

Okay, thank you very much.

OPERATOR

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

Eric Sheridan (Analyst)

Thanks for taking the question. I want to know if we go a little bit deeper into the Marvel announcement and how should we be thinking about elements of the launch on November 16 and how the unit economics of that might flow back into the company, both from a subscriber standpoint as well as a contribution to the P&L standpoint. And maybe I’ve got a quick follow-up.

Yongsoo Kim (See Remarks)

Thanks, Eric. The Marvel Comics app launches next Monday, November 16th. Preorders have been open since we demoed the product at the New York Comic Con in October. We have enhanced the user experience, particularly around content discovery. The Ultimate tier also shortened the wait for new issues from 3 months to 1 month after print release. These improvements have generated excitement among comic fans. Through the end of the year, our focus will be on migrating existing Marvel Unlimited subscribers to the new app, and next year we will shift our focus toward expanding the subscriber base.

Eric Sheridan (Analyst)

Great. And if I could just build on Mark’s question with respect to revenue out to Q4. I know it’s early to talk about 2027, but what should we be keeping in mind directionally that you see as various elements of headwinds or tailwinds as you factor in the exit velocity in the Q4 guide towards what that sets you up for one year out. Thank you so much.

David Lee (Chief Financial Officer)

That’s a great question. Let me be clear. The fundamental business that we started Webtoon Entertainment with—paid content and advertising—continues to be, as you see in the quarter, strong. And we believe we’re setting up that business to continue to be strong in the future. That’s the heart of the business. Having said that, for 2027 and beyond, Yongsoo and JK have been clear about a number of initiatives. The AI initiatives that we already have—early indicators like bias with 28 million cumulative chats so early in its development, the auto translation expansion—I think you heard Yongsoo say non-English readers up 40%. While these are early indicators, these are upside to the business that we are continuing to deliver growth on, which is in paid content and advertising.

And now, to be clear, within paid content, we’ve been honest about the fact that Japan will return and has not yet returned to its potential growth. But Korea is operating in a very strong way, and now you’re seeing advertising up 30%. So we feel very good about the business we’re setting up not just for the quarter but for 2027.

OPERATOR

Our next question comes from the line of Dale at J.P. Morgan. Please go ahead.

Dale (Analyst)

Great. Thanks for taking the questions. I have two follow-ups on the answers that you just gave, David. So in those two regions you talked about—Japan still not turning the corner—just curious, what do you need to see or what do you need to do to get that market to turn the corner and return to growth? And then in Korea, the growth in 3Q was very strong even against the tougher comp. So I was curious if you can give us more details on what leading indicators you saw in Korea that guided you to, or that drove, that strong performance in 3Q.

And is this something that you feel like you can replicate in regions like Japan and the rest of the world? Thank you.

Yongsoo Kim (See Remarks)

Thanks, Dale. Let me cover Japan and Korea. For Japan, while growth in Japan’s digital comics market has slowed somewhat recently, Japan remains one of our most important markets in terms of both scale and growth potential. Our market share is still below 20% in the world’s largest comics market. We believe we can deliver meaningful growth by executing the competitive strategy we outlined last quarter centered on scaling up and accelerating the development of local original content.

To strengthen and accelerate that execution, Hiroshi Mori has taken on the role of Chief Business Officer for Japan and is directly leading our content-driven growth strategy. We also recently announced a 10 billion Japanese yen content investment plan in Japan. Through our Japan-to-Global strategy, we are expanding our collaboration with local creators to bring their stories to audiences both in Japan and around the world through Webtoon Entertainment’s global platforms. As the only digital comics platform with a truly global distribution network, we offer a unique advantage for creators in Japan and across our markets. In the near term, to attract more new and returning users, we are strengthening local marketing partnerships like Lawson and McDonald’s and improving how we bring users from the web into our apps.

We also expect product improvements, including better recommendations, to help retain users and encourage more reading. In addition, our lineup of new original titles and returning series in Q4 is expected to further drive user acquisition and engagement. Regarding Korea, we are very proud of the turnaround and growth that our Korea platform business has delivered in 2026 after the challenging period in 2024 and 2025. What makes this particularly meaningful is that our double-digit revenue growth has been supported by improvement across every stage of our user funnel. Over the past one to two years, we have made a deliberate effort to restore greater diversity to our content library, including increasing the share of titles from individual creators.

At the same time, we have continuously improved content discovery to help those stories reach the right readers. Integrated online and offline marketing campaigns around key IP have also generated more buzz and brought in more new and returning users. We see this growth as the result of stronger business fundamentals rather than a temporary boost from a single event or one to two hit titles. That gives us a solid foundation to continue delivering meaningful growth in 2027.

We also plan to apply the lessons from Korea’s turnaround to other markets, including Japan.

OPERATOR

Our next question comes from the line of Kunal Madhukar. Please go ahead.

Kunal Madhukar (Analyst)

Hi, thank you for squeezing me in. A couple if I could. One, in terms of the growth in the fourth quarter, how much of that is IP adaptations revenue that is shifted from 3Q to 4Q and then how much is the M&A-related or the investment-related from RI Games? And then can you talk about the contributions that you expect from Japan and Korea that will constitute the fourth quarter revenue? Then I have a follow-up.

David Lee (Chief Financial Officer)

Great, thanks for your question. With regard to the composition of the 10.5% midpoint revenue growth guidance for Q4, I want to reiterate what Yongsoo said, which is that it’s primarily driven by our organic business. So a part of your question was how much was RI Games? And I would argue it is de minimis. A very small portion was included but, frankly, not the driver of double-digit growth. Part of this is because some of us have lived with running public company gaming folks, and we would never count in the first quarter of a game’s launch a significant portion.

It really is driven by the actual business, meaning the strength that we just covered in Korea, the strength in advertising, and as we mentioned, there is an in-quarter benefit from some timing shift associated with our IP business, but overall I think it’s a very solid indicator of business health and one that I believe we’re looking to replicate in future years. There will always be quarterly variance in 2027 and beyond, but I feel good about this guide as being, you know, a good indication of the business we will have in the future.

Did you have a follow—

Yongsoo Kim (See Remarks)

Let me add some color about our IP adaptation business. Today, the largest share of our IP adaptation revenues comes from the co-production business of Studio N, our Korean production subsidiary specializing in live-action adaptations of Webtoon IP and the studio behind The Remarried Empress, one of the hottest series globally this November. Revenue recognition is affected by production and release schedules, so some quarter-to-quarter volatility is inherent in the business.

As we outlined last quarter, we are expanding our IP adaptations portfolio into areas such as gaming and animation through both organic growth and acquisitions. Over time this expansion will meaningfully reshape the profile of our IP business, with a broader mix of formats and revenue sources helping to reduce volatility, improve revenue productivity, and create opportunities for margin expansion.

Kunal Madhukar (Analyst)

Got it, thanks. And the follow-up: in terms of the leadership change in Japan, it was fairly recently that you had appointed another person as the Chief Business Officer and now again we have a new one. What exactly are you seeing in Japan that’s making you change the leadership so quickly?

David Lee (Chief Financial Officer)

Thanks. Great question. Just to clarify, Hiroshi Mori, which we talked about as being our Chief Business Officer, along with Yongsoo, our President, are taking this hands-on role in Japan. But Hiroshi is no newcomer to the business. He had been with the business previously. So really this is a return to strong local Japanese leadership that understands how to cultivate local original content—the first plank in our three-part plan. I think it’s a great achievement to be able to recruit him back and to have a strong local leader, in partnership with Yongsoo, to bring back that local original content which we saw so successful in 2025.

And we know that it will come back. So we feel very good about that change.

Yongsoo Kim (See Remarks)

Including Hiroshi Mori, we have brought in senior leaders with deep content and business expertise in our local market. At the same time, we have strengthened our global operating structure and the way our teams work together so that local expertise and global capabilities reinforce each other. I believe these leadership changes are strengthening our ability to execute on key initiatives.

OPERATOR

Thank you. And that concludes our Q&A session and today’s conference call. We would like to thank everyone for their participation. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.