WEBTOON Entertainment Q1 Earnings Call Highlights

Key Points

• Profitability improved despite softer revenue: Q1 2026 revenue fell 1.5% year over year to $320.9 million, but gross margin expanded to 25.9% and adjusted EBITDA jumped 132% to $9.5 million, well above guidance. The company also narrowed its net loss to $8.8 million.
• Paying users rose even as monthly active users declined: Global MAU fell 5.9%, partly due to WEBTOON changing how it excludes automated traffic in non-core markets. Still, monthly paying users increased 2.2%, supported by improved content recommendations and stronger engagement on the English platform.
• Management is betting on creator tools, Japan recovery, and new IP growth: WEBTOON is rolling out a unified Canvas platform, opt-in AI translation, and expanded Disney collaboration while aiming to return to double-digit revenue growth by year-end. The company also expects Japan and advertising trends to improve and sees further upside from IP adaptations and new product features.

WEBTOON Entertainment NASDAQ: WBTN reported first-quarter 2026 revenue that declined slightly from a year earlier, while profitability improved as the digital comics and storytelling platform cited stronger gross margins, cost discipline and growth in paying users.

Founder and CEO Junkoo Kim said the company is investing in tools for creators, expanding its Disney collaboration and continuing to pursue intellectual property adaptations across film, television and webcomics. CFO David Lee said the company remains focused on returning to double-digit revenue growth by the end of the year, while investing in creators, content and users.

Revenue Slips, But Margins Improve

WEBTOON reported first-quarter revenue of $320.9 million, down 1.5% from the year-ago period, but up 0.2% on a constant currency basis. Lee said the result was within the company’s prior guidance range and reflected growth in paid content and advertising, offset by a decline in IP adaptations.

Gross profit rose 16% year over year to $83 million, while gross margin expanded 390 basis points to 25.9%. Lee said WEBTOON believes it can expand gross margin over time as it executes cross-border content distribution strategies and grows higher-margin businesses such as advertising.

The company narrowed its net loss to $8.8 million, compared with a net loss of $22.0 million in the prior-year quarter. Adjusted EBITDA increased 132% to $9.5 million, compared with $4.1 million a year earlier, and exceeded the high end of guidance. Adjusted EPS was $0.07, compared with $0.03 in the first quarter of 2025.

Lee said the improved Adjusted EBITDA reflected cost discipline and leverage in general and administrative and marketing expenses. Total G&A expenses were $60.6 million, down from $66.7 million in the year-ago period.

Paid Users Grow Despite Lower MAU

Global monthly active users declined 5.9% in the quarter. Lee said the company saw a spike in automated web traffic in certain non-core markets in March and began excluding such users from its MAU calculation starting with the quarter ended March 31, 2026, to improve accuracy and consistency.

While app MAU and web comic app MAU declined 6.7% and 3.0%, respectively, year over year, monthly paying users grew 2.2%. Lee attributed the increase to initiatives focused on recommending more relevant content to users. He said the English platform web comic app MAU rose 3.1% year over year.

Lee highlighted two English-platform title launches during the quarter: Ties That Bind Us, a Wattpad web novel adapted into a webcomic in March 2026 that has generated more than 5 million views, and Shifting Tails, which launched in February and has consistently ranked in the top 20 among English platform titles.

• Paid content: Revenue grew 2.3% on a constant currency basis.
• Advertising: Revenue grew 0.8% on a constant currency basis, with a decline in Korea from Naver offset by growth from other partners.
• IP adaptations: Revenue declined 22.2% on a constant currency basis, with Lee noting that revenue recognition can vary by quarter based on milestone timing.

Korea Leads Growth, Japan Remains a Focus

In Korea, first-quarter revenue grew 3.2% year over year on a constant currency basis, driven by double-digit growth in paid content, offset by double-digit declines in IP adaptations and a single-digit decline in advertising. Korea MAU declined 4.3% to 23.1 million, while monthly paying users rose 8.5% to 3.7 million. The paying ratio increased 189 basis points to 16.1%, and ARPU rose 5.1% on a constant currency basis.

Japan revenue declined 3.4% on a constant currency basis. Lee said Japan saw a single-digit decline in paid content, offset by single-digit advertising growth and triple-digit IP adaptations growth. Japan MAU declined 3.6% to 21.1 million, while monthly paying users fell 8.3% to 2.1 million. ARPU in Japan rose 3.7% on a constant currency basis to $23.20.

Lee said WEBTOON completed infrastructure projects in Japan by the end of the first quarter and redeployed resources toward improving the user experience. He said Yuki Chae, recently elevated to chief product officer, is expected to spend significant time focusing on the Japan business after previously helping drive monthly paying user growth in Korea.

In the rest of world segment, revenue rose 5.6% on a constant currency basis, driven by single-digit growth in paid content and advertising, offset by a single-digit decline in IP adaptations. MAU declined 6.7%, but monthly paying users increased 3.3%, the paying ratio rose 17 basis points to 1.7% and ARPU increased 4.4% to $6.80.

Canvas, AI Translation and Disney Collaboration in Focus

Junkoo Kim said WEBTOON is introducing major changes to Canvas, its amateur creator platform, including a unified international platform intended to support distribution across languages such as English, Spanish and French. The company is also introducing an opt-in AI-powered translation program that will allow creators to translate and distribute their series in other languages.

Kim said WEBTOON will expand ad revenue sharing to all supported Canvas languages and remains focused on helping creators monetize their content. He said the company paid $2.7 billion to creators from 2021 to 2025 and wants to grow that amount over time.

During the Q&A session, Lee said WEBTOON does not believe it needs to increase revenue sharing to stay competitive for creators, saying the company is focused on increasing the value it provides through tools such as AI-powered translation and expanded distribution. President Yongsoo Kim said the global Canvas platform is intended to attract more creators, help them reach larger audiences and strengthen the pipeline for WEBTOON Originals and IP adaptations.

Junkoo Kim also updated investors on WEBTOON’s Disney collaboration, saying the company has launched five additional titles since the end of the fourth quarter, including Star Wars: Darth Maul, Star Wars: Darth Vader - Black, White, & Red, Star Wars: The High Republic, Daredevil, Wings of Starlight and Mickey x F1: Racing to the Top!. Lee said the new Disney consumer app platform remains on track for a 2026 launch.

Second-Quarter Outlook and Growth Plans

For the second quarter of 2026, WEBTOON expects revenue growth of 1.7% to 4.6% on a constant currency basis, representing revenue of $332 million to $342 million based on current foreign exchange rates. The company expects Adjusted EBITDA of $0 million to $5 million, or an Adjusted EBITDA margin of 0.0% to 1.5%.

Lee said WEBTOON expects Japan and advertising trends to improve as the year progresses and reiterated that the company expects to return to double-digit revenue growth by the end of the year. He said the drivers include paid content growth, product investments, personalization, Japan improvement, advertising recovery and continued IP adaptation opportunities.

Yongsoo Kim said the management team is focused on initiatives to accelerate growth, including expanding video formats on the platform, strengthening digital character interaction and community features, and building “mega IP franchises” that can expand the IP business and support platform growth.

Lee said WEBTOON ended the quarter with $595 million in cash and $11 million of short-term deposits included in other current assets. He said the company has a capital-efficient business model and believes it has the financial strength to invest for the long term.

About WEBTOON Entertainment NASDAQ: WBTN

Webtoon Entertainment Inc operates WEBTOON, a leading digital comics platform offering a diverse library of user-generated and professionally produced webcomics. The company enables creators around the world to publish serialized content in a vertical-scrolling format optimized for mobile and web consumption. Through its platform, readers can access thousands of titles across genres such as romance, fantasy, drama, and action, with both free-to-read episodes and advanced access options supported by microtransactions and advertising.

Founded as part of Naver Corporation and launched internationally in 2014, Webtoon Entertainment has grown rapidly by fostering a direct connection between comic creators and global audiences.

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