WEBTOON (WBTN) Q2 2026 Earnings Call Transcript

DATE

Monday, Aug. 10, 2026 at 5:30 p.m. ET

CALL PARTICIPANTS

• Vice President of Investor Relations – Soohwan Kim
• Founder and Chief Executive Officer – Junkoo Kim
• President – Yongsoo Kim
• Chief Financial Officer – David J. Lee

TAKEAWAYS

• Revenue — $338.5 million, representing a 2.8% decline year over year while growing 5.2% on a constant currency basis.
• Adjusted EBITDA — $5.5 million, exceeding the high end of previous guidance and reflecting a margin of 1.6%.
• Net Loss — $14.6 million, compared to a net loss of $3.9 million in the prior year due to increased marketing investment and higher income tax expense.
• GAAP Loss Per Share — $0.11, compared to a loss of $0.03 in the second quarter of 2025.
• Adjusted EPS — $0.04, compared to $0.07 in the prior year period.
• Korea Revenue — 20% growth on a constant currency basis, driven by double-digit increases in paid content and advertising.
• Japan Revenue — 6.7% decline on a constant currency basis, as triple-digit growth in IP adaptations was offset by declines in paid content and advertising.
• Rest of World Revenue — 11.1% growth on a constant currency basis, supported by double-digit growth in advertising and IP adaptations.
• Advertising Revenue — $50.4 million on a constant currency basis, reflecting 11.5% growth led by performance in Korea and the Rest of World.
• Paid Content Revenue — $286.7 million on a constant currency basis, representing 4.3% growth year over year.
• Global MAU — 156 million, representing 0.5% growth year over year, driven by increases in Korea and North America.
• Monthly Paid Users (MPU) — 1.8% growth globally, behind a 10.4% increase in Korea to 3.8 million users.
• Korea ARPU — 14.8% growth on a constant currency basis, reflecting high market penetration and deepening engagement.
• Japan ARPU — $24.40, representing 2.9% growth on a constant currency basis despite a 9.5% decline in MPU.
• Rest of World ARPU — $6.90, reflecting 4.4% growth on both a reported and constant currency basis.
• Gross Margin — 26%, expanding nearly 100 basis points from 25% in the prior year.
• Marketing Expense — $38.3 million, an 11% increase year over year focused on user acquisition in underpenetrated markets.
• Cash and Cash Equivalents — $583.1 million, providing liquidity for strategic investments with no reported debt.
• Q3 Revenue Guidance — $358 million to $368 million, representing constant currency growth of 0.7% to 3.3%.
• Q3 Adjusted EBITDA Guidance — $0 to $5 million, reflecting an anticipated margin range of 0% to 1.4%.
• Allied Games Investment — 60% majority stake to be acquired over two closes to develop a dedicated game pipeline from webcomic IP.
• IP Adaptation Fund — $100 million partnership established with NAVER in July to invest directly in IP commercialization projects.

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RISKS

• CFO Lee stated, “Japan revenue declined 6.7% year over year on a constant currency basis,” noting that performance was affected by the completion of a major infrastructure project and the transition to new local content strategies.
• CFO Lee warned that the company reported a net loss of $14.6 million in the quarter compared to a net loss of $3.9 million a year prior, attributing the widening loss to higher income tax expenses and a deliberate 11% increase in marketing investment.

SUMMARY

WEBTOON Entertainment Inc. (NASDAQ:WBTN) reported second-quarter results that highlighted a divergence in regional performance as management initiates a strategic shift toward direct IP commercialization and AI integration. While reported revenue declined due to currency headwinds and softness in the Japanese market, the company maintained growth on a constant currency basis and exceeded its own profitability guidance for adjusted EBITDA. Management is prioritizing the transition from a licensing-heavy model to one of direct ownership and investment in adaptations through new partnerships and specialized funds. The company maintains its objective to return to double-digit revenue growth by the end of 2026, supported by stabilization in Japan and continued expansion of the advertising business in North America and Korea.

• CEO Kim noted that the new AI-powered short-form animation tool, CutCut, led to a 136% increase in new CANVAS content and a 188% rise in participating creators during its first week in Korea.
• The company announced a 60% majority stake investment in Allied Games Holdings, which CFO Lee noted will allow the company to “leverage a partner that has extremely deep expertise” in the gaming sector to build a repeatable flywheel for hit IP.
• CEO Kim stated, “Fandoms are built on connection and shared passion and our AI initiatives are designed to further strengthen this sense of community,” specifically referencing the expansion of AI auto-translation and interactive chat features.
• CFO Lee attributed sales growth in the North American English Webcomic app to titles such as Situationship and The Devil Never Cries, with English app MAU increasing by 3.7% year over year.
• Management confirmed a collaboration with Disney to launch a new digital comics platform and an original series before the end of 2026.
• President Kim noted the establishment of a $100 million IP adaptation fund with NAVER to evolve beyond licensing and “secure strong IP rights” and capture more value from global hits.
• CFO Lee indicated that while Japan MPU declined 9.5% year over year, the company is implementing Korean growth strategies, including CRM and deeper engagement tools, to stabilize the market.

INDUSTRY GLOSSARY

• ARPU: Average Revenue Per User, a metric measuring the average amount of revenue generated per user over a specific period.
• BIAS-ON (byUs): An AI-powered interactive story chat service where users can hold conversations with official IP characters.
• CANVAS: WEBTOON’s self-publishing platform that allows creators to manage and promote their own webcomics.
• Constant Currency: A financial calculation used to filter out the effects of exchange rate fluctuations when reporting financial results.
• CutCut: An AI-driven short-form animation tool that enables fans to create video content using official WEBTOON intellectual property.
• MAU: Monthly Active Users, the total number of unique users who visit the platform within a 30-day period.
• MPU: Monthly Paid Users, the average number of unique users who make at least one purchase on the platform per month.

Full Conference Call Transcript

Operator: 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 26 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. I would now like to turn the call over to Soohwan Kim, Vice President of Investor Relations. Mr. Kim, please go ahead.

David J. Lee: 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 stated statements. Information concerning risks, uncertainties, and other factors that could cause results to differ, including our SEC filings, including those given 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. Undertake no obligation to revise or update any forward-looking statements. Additionally, the matters we will 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 and not as a substitute for GAAP measures.

Junkoo Kim: Joining me today on the call are Junkoo Kim, founder and CEO Yongsoo Kim, president, and David J. 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 I will also share more detail on a few strategic investments we announced today. David will then walk us 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 $339 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 flywheel 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. We also will share more on this in a moment. Turning to AI.

This call, 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 auto translation program. By making it easier for stories to reach leaders across languages, we can help creators expand their global audience and give users access to more content in their native language. We launched the 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. And we believe it has the potential to become an important driver of growth. We are also going beyond simple predictive chats with BIAS-ON AI interactive story tech that we introduced to this call in Korea, where fans hold conversations with characters and build stories of their own. BIAS-ON brings to life characters fans already love, built on official world with the approval of the creators who made them. Initiatives like this move Webcomics from a 1-way reading experience to a deeply engaging and interactive 1, and the early results have been positive.

We are planning to expand the service to Japan later this year. We also continue to pioneer video innovation in Korea. We recently launched CutCut, 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 CANVAS 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 collaboration like the 1 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 stories. 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 initiative. Please go ahead.

Yongsoo Kim: Thank you, JK, and thank you to everyone joining us. I am 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 our 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 global top 10, reinforces our confidence in this strategy. To support this evolution, we made 2 strategic investments during the third quarter.

The first is an investment in Allied Games Holdings. Which will enable us to turn proven IP into immersive gaming experiences. Games are 1 of the most engaging form of fandom. Pulling 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 Allied 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 Allied Games Holdings, we are building a monetization pipeline that can extend a single IP across multiple formats.

Creating a repeatable success formula of adaptations that flow from web comics on our platform to animation and games. In particular, we hope to match game launches with animation release. 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. To establish $100 million fund to invest in IP adaptations. This fund will help us capture more value from our massive global hits. Evolved beyond licensing to secure strong IP rights. And gain more control over our growing adaptation slate. Our investment reflects our conviction in the long term value of these projects and aligns our capital with our strongest IP.

I am excited about these investments we have made to accelerate our business and we 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.

David J. Lee: Thank you, Yongsoo, and thank you everyone for joining us. I will be discussing the details of our second quarter 26 results compared to the comparable quarter in the prior year, unless otherwise noted. For the second quarter, we reported revenue of $339 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 a 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 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 our Webtoon App MAU declined 8.0%, 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 and initiatives. Importantly, our English platform Webtoon 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 Cheat Player, and The Devil Never Cries. Now, I would 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 are 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 Rest of World, offset by a decline in Japan. Korea, in particular, has seen 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 Adaptation can vary quarterly, based on the achievement of certain milestones. Now I would 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 Rest of 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 content, and double digit growth in advertising and IP adaptations. Second quarter rest of world MAU of 111 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 are 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 and 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 $900 thousand in the quarter, compared to a benefit of $800 thousand 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 would like to spend a few moments discussing our third quarter outlook For the third quarter of 26, 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 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 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 would like to turn it back to our operator to begin the Q&A session.

Operator: Thank you. Ladies and gentlemen, this formally begins the question and answer session. And at this time, I would like to give you a reminder, if you would like to ask a question, please press star. We would also like to ask everyone to stick to 1 question and 1 follow-up so we can take as many questions as possible. Our first question comes from the line of Kunal Madhukar with Deutsche Bank. Please go ahead.

Kunal Madhukar: 1 on engagement and another 1 on the financials. So 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 paying users use on the platform? And then I have a follow-up.

David J. Lee: 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, or the users in our original market here in Korea. You are 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 number can be larger for the heavier users. what is interesting, though, is even for users that are new to this idea of a web comic, when you think about North America users, they are not traditional paper based comic fans.

They are 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 have seen. With regard to our paid users, we have not 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 have been for nearly 20 years and we have 50% market penetration, it is remarkable that you are seeing constant currency revenue growth of 20%, growth in NPU and MAU being a growth driver, and ARPU, which is up 5%. that is why we tend to focus more on ARPU as the measure of deep engagement because we see habit formation in markets that we have been in for some time.

Kunal Madhukar: that is a that is a great segue to the question that I had, and which was on the marketing side. So the marketing expense delevered 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 is that in Korea? Is that in Japan? And, what kind of LTV-to-CAC are you are you targeting on this marketing spend? Thank you.

David J. Lee: Another great question, Kunal. Thank you. So just as we think about marketing, as you know, spent $38 million in the quarter, approximately up 11%. And so the question is, where do we spend and where do we leverage On the 1 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 is 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 hypergrowth markets, as we see Japan will become again, you know, we are sub 20% penetration in Japan. And we are sub 10% penetration in rest of the world. You see that we deliberately chose to invest with a longer LTV time particularly in rest of world. And we are seeing it pay off. And while we do not 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. So we manage a diversified portfolio where we have efficient spend to mature markets like Korea.

But we intentionally are investing on the forward curve because we think adoption will grow in places like North America.

Operator: Thank Our next question comes from the line of Mark Stephen Mahaney with Evercore.

Mark Mahaney: Okay. I want to ask 2 questions, please. The could you spend a little bit more time on Japan and what specifically you need to do to return Japan to growth? And then I am sorry if you if you had mentioned this earlier or not, Should we still count on and lean on an exit of double digit revenue growth, percent revenue growth in the fourth quarter? Thank you.

David J. Lee: Thanks, Mark. First, to cover your second question, we absolutely are strongly committed to the double digit growth and believe we will deliver it in the most important ways on platform by the end of Q4. And to cover that, there are 2, components of 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 is up 11% on a constant currency basis. And importantly, within advertising, we typically do not disclose this, but I have to tell you, rest of world advertising on a constant currency basis is up north of 20%.

Now the question relates to your first piece, which is Japan. There are 3 key priorities that we have been working on since the completion of our infrastructure project by the end of Q1. 1 is returning Japan’s growth through stronger local content. greater engagement and distribution partnerships. And I think the evidence in the post quarter in these areas would include things like our partnership with Studio White, which we think is significant on content. Getting agreement with Kadakawa and featuring spin off of Ryo Mizuno’s fantasy series Record of Lodoss War is an example of the type of local content initiatives you are going to see much more of.

Our partnerships, for example, with Lawson, which we talked about in our materials, is an example of what is more to come. And you will remember, we elevated Yuki Chae, our chief product 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, Dae.

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

Eric Sheridan: Thanks so much for taking the question. 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 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 are making today. And on the go forward over the 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 upfront will be born through investment and whether you will earn more of the return profile on larger hits, on the outside.

Of the investment cycle as some of these properties mature. Thanks so much.

David J. Lee: Thank you, Eric. it is 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 is significant innovation, for example, in Korea where I mentioned this 20% growth on allowing users through what we call CutCut make to generate new storylines to continually grow on platform. BIAS-ON is yet another AI powered initiative where I want to distinguish between what we have on which has a strong growth story still, But candidly, you are right.

You are seeing a much more deliberate aggressive bet for the IP that’s not just on our platform with regards to the announcement of Allied 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.

Yongsoo Kim: Unlike former days that you and I had spent at Zynga and other places, we do not need to worry about what will generate the next hit because we are the source of the hit. In the case of Allied Games, you are seeing us deliberately partner with an icon in this world Remember that this Allied 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 is outside our platform. But as a shareholder, we know there is 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 leveraged partnership with another, in this case, Naver for capital, we do not have to consolidate for the vagaries of quarter to quarter changes in revenue. As we aggressively bet on commercializing our proven IP.

And then the last is, I am not gonna cover it, but if you look in our earnings material, I mean, across every region, you are seeing pretty significant increases in IP in both partnership, You know, we are very proud to have announced with Marvel Toni’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 gonna 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 strength of Webtoons proven IP and built-in fandom.

Particularly in areas like film, television, and animation. However, historically, our adaptation business has been based on licensing model. Which means that the success of those adaptations is 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 Allied 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 are being adopted into anime. So we see a very compelling opportunity to build a repeatable flywheel.

From a successful web comic to animation to game. Leveraging proven IP and established fandoms. Eric, 1 last comment.

David J. Lee: What Yongsoo mentioned at the end, I think, is quite significant. We are not just able to provide games on hit WEBTOON IP. We are 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 clearly in a position to do this. Which you will see us begin to do with this partnership and investment.

Eric Sheridan: Great. Really appreciate the color from both of you. Thank you.

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

Matthew Cost: Great. Thanks for taking the question. Maybe I can just follow-up on what was just discussed. So if we look at the mobile game industry, you know, in addition to, you know, low hit rates, and, you know, 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 am wondering if you could reflect on sort of the synergies, the opportunities available by becoming the majority shareholder of Allied 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.

Operator: Thank you, Matthew, for your question.

David J. Lee: You know, I have lived firsthand the question you have asked. In my former days as CFO of Zynga. I think this is significantly advantaged. Let me explain why. 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 companies that you mentioned have taken the approach of trying to build that capability. We recognize what we are good at. We have a 120 thousand stories arriving every day. 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 Allied Games Holdings, we are leveraging a partner that has extremely deep expertise geographically first, in 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 adaptation on hits here in Korea that we know have global appeal we believe derisks this investment. And then later, Matthew, in our follow-up, we can go through the detail of the queue, only certain terms were redacted. But there is a very clever way that we have managed to the mutual benefit of both this partnership with Kevin as well as for ourselves. A structure that derisks those hits.

Even though we feel that they are 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 is 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.

Matthew Cost: Great. Thank you very much.

Operator: Our next comes from the line of Dae Lee with JPMorgan. Please go ahead.

Day Li: Great. Thanks for taking the questions. I have 2 follow ups as well. First, on the IP adaptation strategy development. If I am 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 own content on the video adaptation as well? Then I have a follow-up.

David J. Lee: 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 is proven in the form of off platform video games, etcetera? I think that was your question. And whether or not we are also pursuing alternative models. Is that right? Got that. And if the ownership model is going to apply to video adaptations like live action video or comics? Okay. We have the benefit of both models. So you are clearly seeing in the case of our strategic investment in Allied Games, 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 that business well. As we acknowledge their specialized capability we lack. On the other hand, when you look at what we have done with Disney, when you look at what we have done with Warner Brothers animation, which we have discussed in the past, that is a different approach, for example, for IP. Where we are providing our creators an opportunity to have success outside our platform but we do not primarily own the distribution or the production engine associated with that IP. I think it is very capital efficient. But limits our upside.

And then if you look at our work in Studio Ed, we have this Emmy nominated internal studio with great IP like Chicken Nugget and Bloodhound Season 2 and Gyeongseong Creature Season 2. So we are also very carefully looking at opportunities where in a derisk way, we are taking more of the ownership on IP in the case of here, future feature length film opportunities, either at theaters or at streamers. But we are very selective there. As we do not want to risk our balance sheet without understanding what could be ahead. And we have a pretty good track record in that limited or rare area with StudioN. Thank you for your question.

Day Li: Okay. A follow-up if I can, On your double digit growth expectation for 4Q, 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 3Q guide? in the single-digit percent range? Thank you.

David J. Lee: 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 2027 and beyond. It was not a guidance for the full quarter. 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 do not know how many quarters have gone by where I have been able to say that Korea drove our total MAU growth. And by the way, total MAU of 156 million flat to 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, 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 is the piece. That we have already discussed. That I believe is what is 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, But when you see my Q3 guidance, it does not 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.

Operator: And at this time, we have no further. That concludes our Q&A session in today’s conference call. We would like to thank you for your participation. You may now disconnect.

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