WEBTOON Entertainment Inc. Common Stock 2026 Q2 Earnings Call

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 these results to differ is included in our SEC filings, including those 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 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. Joining me today on the call are Junkoo Kim, founder and CEO, Yongsoo Kim, president, and David 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 Yongsoo will share more detail on a few strategic investments we announced today. David will then walk 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 $338.5 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. Yongsoo will share more on this in a moment. Turning to AI. This quarter, 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 readers 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 character chat with Bios, an AI interactive storychat service that we introduced this quarter in Korea, where fans hold conversations with characters and build stories of their own. Bios brings to life the characters fans already love, built on official world with the approval of the creators who made them. Initiatives like this move webcomics from a one-way reading experience to a deeply engaging and interactive one, and the early result has been positive. We are planning to expand this service to Japan later this year.

We also continue our video innovation in Korea. We recently launched Cuts Make, 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 content 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 collaborations like the one 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 storytelling.

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, Yong Kim will provide an update on our off-platform initiatives. Yong Kim, please go ahead.

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 a massive catalog of popular content and database of our 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 three series reaching Netflix global top 10, reinforces our confidence in this strategy. To support this evolution, we made two strategic investments during the third quarter. The first is an investment in RI Games Holdings, which will enable us to turn proven IP into immersive gaming experiences.

Games are one 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 one. Together, WEBTOON and RI Games Holdings plan to develop and launch multiple games over the next four years based on proven IP. The formula underpinning our strategy does not stop at games. With RI Games Holdings, we are building an adaptation pipeline that can extend a single IP across multiple formats, creating a repeatable success formula of adaptations that flow from webcomics 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 a $100 million fund to invest in IP adaptations.

This fund will help us capture more value from massive global hits, evolve 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 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. Thank you, Yongsoo, and thank you everyone for joining us.

I will be discussing the details of our second quarter 2026 results compared to the comparable quarter in the prior year, unless otherwise noted. For the second quarter, we reported revenue of $338.5 million that declined 2.8%, but grew 5.2% on a constant currency basis. This growth was driven by increases across all three 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 the year prior, driven by higher income tax expense and marketing investment.