WEBTOON Entertainment (NASDAQ:WBTN) reported a 4% decline in third-quarter revenue as currency headwinds and weaker results in Japan offset growth in advertising and its Korean business. The company forecast a return to double-digit revenue growth on a constant-currency basis in the fourth quarter.
Revenue was $362.8 million, within management’s guidance range of $358 million to $368 million, and rose 0.2% excluding currency movements. Net loss narrowed to $7.5 million, or $0.06 per share, from $11.1 million, or $0.09 per share, a year earlier.
Adjusted EBITDA fell to $2.2 million from $5.1 million, which Chief Financial Officer David Lee attributed primarily to higher foreign exchange losses. Gross margin expanded to 25.5% from 21.9%, helped by lower third-party transaction fees and growth in higher-margin advertising.
Fourth-Quarter Outlook
WEBTOON expects fourth-quarter revenue of $371 million to $381 million, representing constant-currency growth of 9% to 12%. It forecast adjusted EBITDA of $0 million to $5 million.
President Yongsoo Kim said the outlook reflects expected continued strength in Korean paid content and advertising, a narrower year-over-year decline in Japanese paid content, and revenue from IP adaptations, including some shifted from the third quarter.
Kim said the anticipated double-digit growth excludes gaming revenue from RI Games Holdings, which WEBTOON will begin consolidating in the fourth quarter following its acquisition. Lee later said a “very small portion” of RI Games revenue was included in guidance, but that it was not driving the projected growth.
Lee said advertising growth and a greater mix of paid content outside Korea could support gross margin over time, while the company continues to invest in marketing in Japan and other markets.
Advertising Gains Contrast With Japan Weakness
Paid content revenue fell 3.9% to $275.5 million, though it rose 1% in constant currency. Advertising revenue increased 26.2% to $49.7 million, or 30.1% excluding currency effects, as growth in Korea and the rest of the world offset a decline in Japan.
IP adaptations revenue fell 27.5% to $37.6 million. Lee cited a difficult comparison with a prior-year movie success and the shift of some project revenue into the fourth quarter.
Korea revenue rose 10.8% to $169.3 million, supported by paid content and advertising. Monthly paying users in the market increased 5.2% to 3.9 million. Yongsoo Kim said a more diverse content library, improved discovery and marketing around key properties contributed to the growth.
Japan revenue declined 18% to $147.3 million, or 11.4% in constant currency, as paid content, advertising and IP adaptations all decreased. Monthly active users fell 12.1% year over year to 22.3 million, although they rose 2% from the second quarter.
To improve performance in Japan, WEBTOON plans to invest 10 billion Japanese yen, or approximately $63 million, in local content over three years. Hiroshi Mori, who previously worked for the business, became Japan chief business officer and co-representative director of LINE Digital Frontier on Sept. 1. Management also plans to improve recommendations, move more web users to its apps and expand local marketing partnerships.
Globally, monthly active users increased 2.7% to 159.6 million, while monthly paying users declined 3.1% to 7.5 million. WEBTOON’s cash balance was $548.4 million at quarter-end, with another $13.3 million in short-term deposits.
AI and Adaptations Drive Expansion Plans
Yongsoo Kim said WEBTOON is expanding access to its auto-translation beta for English-language CANVAS creators. In the eight weeks ended in August, average weekly CANVAS episode reads by non-English readers rose almost 40% from the eight weeks before the beta launch, he said.
The company’s AI interactive story chat service, byUs, exceeded 28 million cumulative conversations in 17 weeks after its June launch in Korea, Kim said. WEBTOON launched a Japanese version on LINE MANGA in October and expects to share its first AI-assisted short animation titles next year.
Outside its platform, WEBTOON announced an anime co-production partnership with HAYATE and Crunchyroll to develop about 15 titles, including The Remarried Empress. Its live-action adaptation recently launched on Disney+ and Hulu, while The Mafia Nanny entered development at Hulu in September.
WEBTOON also developed a new Marvel Comics app with Disney, scheduled to launch Nov. 16. Yongsoo Kim said the immediate focus will be migrating existing Marvel Unlimited subscribers, with subscriber expansion targeted next year.
About WEBTOON Entertainment (NASDAQ:WBTN)
WEBTOON Entertainment Inc (NASDAQ: WBTN) is a global entertainment company that operates digital storytelling platforms for webcomics and web novels. Its flagship WEBTOON platform allows creators to publish serialized comics and enables readers to access content through mobile and online services. The company generates revenue through paid content, advertising and other creator- and consumer-focused offerings.
The company’s portfolio includes WEBTOON, Wattpad and Wattpad WEBTOON Studios, which develop and distribute original stories across digital publishing and entertainment formats.
