Q1 2025 Webtoon Entertainment Inc Earnings Call
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John: 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 Western Entertainment first quarter 2005 earnings call. All license in place had 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.
Speaker Change: But the number one on your telephone keypad to withdraw your question simply press Star One again I would now like to turn the call over to Sue and Kim Vice President of Investor Relations. Mr. Kim. Please go ahead.
Kim: Good afternoon, and thank you for joining us on our remarks today will include forward looking statements regarding our future plans objectives expected performance in particular, our guidance for the next quarter actual results may vary materially from today's statements information concerning risks uncertainties. Other factors that could cause results to differ is included in our SEC filings, including those who started in the risk factors section of our annual report on Form 10-K. These.
Kim: 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'll discuss they will include both GAAP and non-GAAP financial measures reconciliations of any non-GAAP financial measures to most directly comparable GAAP measures are set forth in our earnings press release non-GAAP financial measures should be considered in addition to not as a substitute for GAAP.
Kim: GAAP measures.
Speaker Change: Joining me today on the call our June <unk>, founder and CEO, David Lee CFO, and COO and young Soo, Kim Chief strategy Officer with that I will now turn the call over to our founder and CEO of <unk>.
Thank you everyone for joining us today.
<unk>.
David: You briefly comment on our first quarter performance and then David will provide more detail on our leaders in hone <unk>.
David: Hi, Bruce thoughts on the first quarter and our path forward. Please refer to the shareholders.
David: Posted on our Investor Relations website.
David: We drove growth to quarter, Richard with revenue and adjusted EBITDA, both coming in at the top end of our guidance range.
David: As our flywheel over creators compounds and users continued to drive significant value.
David: Now I'd like to share of few highlights from the first quarter.
David: We have grown our presence in Japan, which represented over 50% of our revenue in Q1, Japan.
David: Japan grew all three businesses in this corridor paid content advertising and other patients.
David: We are pleased to maintain our top position in Japan with align monitor ranking number one in overall.
David: Chart, four revenue, including mobile games, according to <unk> power.
David: We took.
Our last third quarter of our how we initially opioid Korean contains to Japan to get therapy, but have believed our railcar fleet our equities team in their market.
David: We are now taking our cross border threats easy one step further by.
David: By taking Japan is content to other markets.
David: We launched shaved overthrown onto overpowered and over in the U S and France linking in the top 10 of the <unk> for each respective country for the months ending March 31st.
David: So beyond the income to turn through 10 months was another Japanese tidy that <unk> on our English language platform linking secondly in launch date GMB.
David: Leveraging our learning from core market in Korea, and Japan, we are making key investments in our English language platform.
David: We have a number of initiatives drove more new user onboarding experience to our lead and lead them all to their home search and new and Hot taps, we performed a thorough core content discovery experience.
David: Even though is in the early days, we are pleased to see users in our test group Shaw of nine <unk> increase in a number of <unk> compared to the control group.
David: We look forward to bringing leaf format kind of like unique heavy haul and met her too.
David: Through our platform this quarter, which we believe will help us expand our user base.
David: Finishing up with the IV or the patients our other patients over what pages key piloted viola influenza the centrally launching on Netflix.
David: As we discussed in our shareholder letter we are pleased to continue building on our pass through Spanish language success.
David: We believe we have a compelling contents that these units.
David: The audience around the Grover and debt IPO depletion, we have continued to drive new users to our platform.
David: Before I turn the call over to David I want to <unk> and <unk>.
David: <unk> in the market.
David: While we are monitoring the market has all of our users grocery.
David: We believe we have a legit <unk> day that can we extend <unk>.
David: Tissue downturn.
David: Our <unk> is our island 12, <unk> per month, which is not a large amount of especially for the entertainment value that we provide.
David: <unk> fingers subscription price, but never made of both.
David: Many micro transaction.
David: It depends on the geographic market of first type recruited close to 15 to 17 cents per episode wide at the early past cost 30% to 40 per episode.
David: We also provide a large amount of free content and offer our users the option over leading episode for free by watching Advertiser demand.
David: As a result, we believe we can continue to deliver great value to our users regardless of the environment.
David: I am pleased and rebuild majority we delivered this quarter and look forward to making continued strategic progress as we move through the balance of the year.
David: With that I will now turn the call over to David.
David: David Please go ahead.
David: Thank you J J and thank you everyone for joining us.
David: I'm going to focus my commentary on our first quarter 2025 results compared to the comparable quarter in the prior year unless otherwise noted.
David: During the first quarter, we grew revenue five 3% on a constant currency basis with growth across all revenue streams.
David: Our reported revenue was roughly flat year over year.
David: We faced a tough comparison from Q1 last year as there was an extra day in February as well as increased traffic from a successful IP adaptation of Mary My husband on Amazon Prime.
David: Net loss was $22 million in the quarter compared to net income of $6 2 million in the year prior driven by higher general and administrative expenses due to public company costs and higher marketing expense.
David: Adjusted EBITDA was $4 1 million in the quarter compared to $22 2 million in the same quarter of 2024.
David: As a result, our adjusted earnings per share for the quarter was three <unk> compared to adjusted earnings per share of <unk> 20 in the prior year.
David: Turning to operational health.
David: Total company <unk> was down 10, 5% in the quarter driven almost entirely by rest of world.
David: As a reminder, what pad remains the largest contributor to rest of world Mou.
David: A what pads security upgrade in January temporarily affected search engine indexing, causing a dip in search traffic and contributing to a drop in web miu in February.
David: While we properly address these settings, we expect to see the impact for another quarter.
David: As we've discussed for the past two quarters <unk> pad also continues to be impacted by a government ban in one country and we are actively working to address concerns expressed by the government.
David: While web novels may generate lower revenue and profitability they serve as a valuable source of content as we convert popular titles like Mary My husband to Web Comics.
David: Web novels also have lower barriers of entry, allowing more creators to showcase their stories on our platform.
David: Millions of creators come to our platform to share their love of Friday, and storytelling with the world.
David: <unk> remains the leading global platform for web novels, and we are focused on driving growth over time.
David: We continue to be focused on driving web comic app users, who are more engaged and present better monetization opportunities.
David: While <unk> decreased by three 2% overall, we saw a four 2% increase in web comic App Mou when we remove the impact of web novel users.
David: This growth was led by increases across important English speaking markets as well as other key countries like France and Thailand.
David: We are particularly pleased to see 19% growth in English platform Web comic App Miu ahead of product changes we are introducing in may.
David: We believe these product changes will also drive better user engagement as we make it easier for users to find new titles and read more episodes.
David: Now I'd like to provide an update on our revenue streams at a consolidated level.
David: Starting with paid content.
In the quarter, we posted two 8% revenue growth on a constant currency basis year over year.
David: This was driven by our ongoing strength in Japan, offset by declines in Korea, and the rest of world.
David: Additionally, <unk> growth on a constant currency basis was eight 4% in the quarter with an increase in all three regions.
David: There is still a great deal of free content available before users get to the paywall and we believe our <unk> still represents tremendous entertainment value for our users.
David: Advertising posted 13, 6% revenue growth in the first quarter on a constant currency basis year over year.
David: This strong performance was driven by double digit constant currency revenue growth in Korea and Japan.
David: Offset by a decline in rest of world revenue.
David: In Korea. This growth was the result of increased AD sales from Naver, while AD sales from other partners were relatively consistent.
David: Japan's growth was driven by achievement based ads and pre Rollouts.
David: And in rest of World. The decline was primarily driven by a decline in what pad revenue.
David: Finally, our IP adaptation business saw revenue increase 27% year over year on a constant currency basis in Q1.
Driven by double digit revenue growth on a constant currency basis in Korea, and triple digit revenue growth on a constant currency basis in Japan.
David: Offset by a double digit revenue decline on a constant currency basis and rest of world.
David: Now I'd like to look at our results in the context of core geographies.
David: In Korea during the first quarter, our revenue grew three 6% year over year on a constant currency basis, primarily driven by double digit constant currency revenue growth in advertising and IP adaptations offset by a single digit constant currency decline in paid content.
David: Korea faced tough comps from last year as the Marion My husband IP adaptation released on Amazon Prime drove increased traffic to our original web comic.
David: During the first quarter <unk> was $24 2 million decreased 10, 3% <unk>.
David: <unk> of $3 4 million declined 10, 6%.
David: That said, we saw healthy six 7% growth in the first quarter <unk> on a constant currency basis.
David: Our paying ratio of 14, 2% was consistent with the prior year.
David: Starting January one 2025 neighbor adjusted their methodology for measuring <unk> in Korea.
David: Korea is the only region, where neighbors serves as a source of data.
David: Navy recently adjusted their methodology for identifying and counting web users for all of their services.
David: This change is only related to web Mou in Korea.
David: There is no change in the App and the new numbers and then <unk> and <unk> are also unaffected.
David: All the other regions are reporting new metrics in the same way as previous quarters.
David: Please see the table in our shareholder letter for a reconciliation with previously reported MAA.
David: Moving to Japan.
David: For the quarter, Japan posted revenue growth on a constant currency basis of nine 4%.
David: This was driven by all three revenue streams as we saw single digit constant currency revenue growth and paid content <unk>.
David: <unk> digit constant currency revenue growth in advertising.
David: And triple digit constant currency revenue growth in IP adaptations.
David: As J J mentioned, we are pleased to be number one on Japan's overall app ranking charts for revenue, including mobile games.
David: Compared to Q1 2020 for Japan's Miu was $21 9 million increased three 7%.
David: And to you $2 2 million grew five 2% and paying ratio of 10, 3% was up 14 basis points year over year.
David: Engagement with paid users remained strong with first quarter, our pool of $23 growing three 5% year over year on a constant currency basis.
David: And the rest of World, we saw revenue declined 4% year over year on a constant currency basis in the quarter driven by declines in paint content advertising and IP adaptation.
David: While first quarter, Mou and MCU declined 12, 9% and five 9% year over year, respectively.
David: <unk> ratio of one 6% was up 12 basis points year over year.
David: <unk> of $6 50 grew three 5% year over year on a constant currency basis.
David: We're making significant changes to our English language web comic App and while it's early we believe these changes have been well received by our users.
David: Turning to profitability.
David: Gross profit for the quarter was $71 6 million compared to $82 4 million in the prior year.
David: This resulted in a gross margin of 22% compared to 25, 2% in the prior year.
David: There were onetime impacts from our larger SBC expense recognized in cost of revenue.
David: As well as a true up accrual for Japan creator revenue share from the prior year and.
David: In addition, free coin marketing expenses in Korea removed from marketing to cost of revenue starting in Q1.
David: While these discreet items temporarily affect our reported progress on gross margin expansion.
David: We believe our gross margin can improve over time as we execute on our cross border content distribution strategies.
David: Adjusted EBITDA for the quarter was $4 1 million compared to $22 2 million in the prior year, driven by higher general and administrative expenses due to public company costs and higher marketing expense.
David: On the cost side total G&A expenses for the quarter were $66 7 million as compared to $48 7 million in the prior year quarter, primarily as a result of public company costs.
David: Interest income in the first quarter was $5 1 million compared to $1 2 million in the prior year and other income was $2 7 million compared to $1 4 million in the prior year period.
David: Income tax expense of $2 5 million in the quarter compared to $6 7 million in the prior year.
David: Depreciation and amortization was $8 4 million compared to $9 million in the prior year.
David: Net loss of $22 million was primarily driven by higher general and administrative expenses due to public company costs and higher marketing expense.
David: As a result, GAAP loss per share was <unk> 17, compared to earnings per share of <unk> in the prior year period.
David: Adjusted earnings per share was <unk> <unk> in the quarter compared to adjusted earnings per share of <unk> 20 in the prior year period.
David: Before I wrap up I'd like to spend a few moments discussing our second quarter outlook.
David: For the second quarter of 2025, we expect to deliver revenue growth in the range of two to five 2% on a constant currency basis.
David: This represents anticipated revenue in the range of $335 million to $345 million.
David: This guidance is based on current FX rates.
David: As we've discussed previously we expect we will face FX headwinds in the first half of this year as rates were more favorable in the first half of 2024.
David: Our infrastructure investments are proceeding on schedule as we prepare for anticipated product improvements in the back half of 2025.
David: We anticipate second quarter adjusted EBITDA in the range of <unk>, 5% to $5 5 million, representing an adjusted EBITDA margin in the range of 0.1 to one 6%.
David: We expect to maintain our investment in marketing to drive future growth. We also have additional public company expenses. This quarter that we did not have in the year ago quarter as a private company.
David: J P noted this earlier, but I would like to reiterate that we are monitoring the market health of our users closely and believe in the resilience of our business model, regardless of the current macroeconomic uncertainty.
David: In addition to the three content our users can already enjoy.
David: With or without ads, we believe we deliver a tremendous amount of entertainment value.
David: Flexible price points made up of many micro transactions.
David: In closing.
David: We believe we are off to a great start to the year.
David: While there remains a lot of work ahead of us the first quarter laid a strong foundation to the year and.
David: And we have many anticipated developments, we're encouraged about in 2025.
David: We remain focused on executing our strategy underpinned by our powerful flywheel of creators content and users, which we believe will generate profitable growth over the long term.
With that I'd like to turn it back to our operator to begin the Q&A session.
Speaker Change: Thank you, ladies and gentlemen, who will now begin the question and answer session. Once again, if you have dialed in we would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question I think the breadth of our win again as a reminder, we will ask everyone to stick to one question and one follow up so we can take as many questions.
Speaker Change: As possible. Thank you also if you are called upon to ask your question and our leasing would be allowed speaker on your device. Please speak up your handset and ensured that your phone is not on mute when asking your question.
Speaker Change: Your first question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.
Eric Sheridan: Thank you so much for taking the questions two if I could.
Speaker Change: In terms of the user growth initiatives you have planned for the remainder of this year can you talk through a little bit of what your key priorities are and how we should be thinking about that as an investment cadence.
Speaker Change: The pressure on margin for the remainder of this year and how to think about it as an output for user growth exiting the year and then maybe I'll have a quick follow up.
Speaker Change: Thanks, Eric It's a good question.
Speaker Change: First it's important to note that we have strong signs of great long term growth in newer markets. So I think you probably noticed that for the first time, we are very happy to disclose that are English speaking platform. Our web comic App Mou is up 19% as a function of our continued flow of content.
Speaker Change: Product innovation, along with marketing those three elements will continue to persist and we think it's a good investment for the long term as we're seeing great signs of habituation in the form of average revenue per purchaser <unk> because this <unk> represent some <unk>, particularly in interim.
Speaker Change: <unk> markets that we've highlighted in the script such as English speaking markets, but we also noted France is an important market for us as well along with our Spanish adaptations.
Speaker Change: With regard to guidance and the impact on the P&L, you've seen that we only guide to Q2, but importantly, even as we persist and investments in infrastructure and marketing in the guided Q2 quarter, We still guide to a positive consistent 0.5 to five five positive adjusted EBITDA, we believe that.
Speaker Change: We can grow profitably and that these investments will actually pay off in the mid to long term at a faster rate than what we would see in a given quarter. The underlying business. We see we're increasingly more bullish on and that is why we're making the investments with the strong product cadence in the back half.
Speaker Change: And then maybe just a follow up to go a little bit deeper how important you think local content gains in local markets I think in the prepared remarks, you gave that comment around Japan.
Speaker Change: Thank you do a little bit about followers to advance to a cadence of investments against the potential embarked in a market like that specifically I will thank you so much.
Speaker Change: It's a great question, let me first answer your question on Japan, but I would love to highlight some of the Spanish IP adaptations as well as the announcement of great content with partners, which is a relatively new disclosure for our English speaking platform first in Japan, Japan is early days, we're very excited about the long term growth prospect for us.
Speaker Change: Remember we are now the number one consumer app inclusive of mobile games. So we have a strong competitive position, we mentioned that key IP local creator IP that rebuilding is enhanced by the fact that these creators can publish globally. So the example of over some into overpowered and over it which actually debuts.
Speaker Change: <unk> in the U S and in France from a local Japanese creator, we highlight that because it shows that we're the only platform in the world that JK created that can give local Japanese creators the ability to be strong in Japan, given our number one status, but also globally.
Speaker Change: We also talked about how beyond Japan, there were a number of IP adaptations and you know as we disclosed in Q1 of 2020 for Maryann My husband was a sensation globally. It was Amazon Prime's hit even in North America, which we lapped this quarter while the examples that we highlighted intentionally we are not in the English language there to <unk>.
Speaker Change: So that we're strong in Spanish as well, so JK mentioned Mala influenza and <unk> <unk> on Amazon Prime model influenza on what Pat This represents how even our web novelists creators local to one market can publish globally.
Speaker Change: And then finally I think if you look to the content, we're offering on our platform in the English language. This is the first time, we spend a bit of our airtime to talk about our partnership with ITW publishing where sonic the Hedgehog and Godzilla great franchises. Starting April 25th are now able to be offered here on our platform and inger.
Speaker Change: So for us this.
Speaker Change: <unk> founded this company built on creators creators, who could publish locally and globally.
Speaker Change: And with our large consumer base. So it's critical for the economic growth of the business, but also the core strategic proposition of what he created.
Speaker Change: Your next question comes from blood of Mark Mahaney with Evercore. Please go ahead.
Mark Mahaney: Okay two questions on the Korea.
Mark Mahaney: <unk> declined year over year I understand that there was a change in methodology by neighbor do you have a separate opinion as to what.
Mark Mahaney: Whats happening to you may use in that country or maybe maybe better.
Mark Mahaney: Be realistic expectations do you think you can continue to grow MA used in Korea are you kind of add mature levels and then just give us an update please.
Mark Mahaney: Advertising revenue in North America. Thank you very much.
Speaker Change: Thanks, Mark first on Korea, I need to make sure. We all remember that Korea has such high penetration of its population.
Mark Mahaney: You will see movement in a given quarter on total Mou.
What's the most important metrics for me for Korea, our most mature market is a three 6% constant currency revenue growth, we saw and that was not accidental. If you think about why that was the case was driven by our intent to grow constant currency <unk>, which at $8 40 was up six 7% we talked about the AI.
Mark Mahaney: Personalization engine, we talked about improved product, we talked about continuing our strong flow of content. These.
Mark Mahaney: These three areas of focus are showing up there showing up in constant currency revenue now as for your question on what is the MAA Mou growth potential one of the reasons why we're so focused on describing web comic App, which you saw on a global basis grew four 2% is even encourage.
Mark Mahaney: We think that our improvement in the product on the App will actually be a better predictor of long term pay content revenue growth.
Mark Mahaney: It's also important that independent of the Mou you saw good performance across the board across the company with regards to our advertising, which was your other question advertising on a constant currency basis was up 13, 6% and a part of that was from Korea as we mentioned in our script.
Mark Mahaney: Now with regard to the question on North America advertising.
I believe it continues to be early days North America advertising since our large largest advertising market potential, but we're still putting in place fundamental products the backbone of it and the selling organization to benefit us in 2026 and beyond.
Mark Mahaney: We're going to continue to deliver on strong growth in profit in the form of paid content and advertising, but I think North America is a proposition that's more mid to long term consistent with what we said to you during the IPO process that being said, we're not in any way taking our foot off the gas. We think it is a great opportunity and we hope to be able to give you a more tangible.
Mark Mahaney: Examples of our progress in North America overtime.
David: Thank you David.
Mark Mahaney: Okay.
Mark Mahaney: The next question comes from the line of Doug Anmuth with Jpmorgan. Please go ahead.
Speaker Change: Alright. Thanks.
Speaker Change: Thanks for taking our questions.
Speaker Change: I wanted to follow up on the global franchises.
Speaker Change: All of our volunteers.
Speaker Change: I believe that the factor.
Speaker Change: Monetization coast.
Speaker Change: Now pay components monetize on unlocking new episodes. So wondering of the global franchises every format launches have that step up.
Speaker Change: Monetization capability built into it as well and does that affect how your gross margins could look like over time, you've got royalties.
Speaker Change: Franchise, we have a platform.
Speaker Change: Okay.
Thanks for your question Firstly I wanted to note that global franchises are actually not a new phenomenon for this platform.
Speaker Change: So when we look back when we look back even at cross collaborations for example in 2021 with Bts or.
Speaker Change: The crossover IP is a form Mary my husband, when it crossed over to Amazon Prime in some ways is a form of IP outside of the core of our platform benefiting the core and.
Speaker Change: And we made note of it that we lapped a pretty significant impact of that crossover IP. As an example, so when we talk about ITW, we talk about Godzilla in the past we had been call labs with for example, the Batman franchise. This is not a new phenomenon for us and we believe that this the fresh addition of content continues to.
Speaker Change: Power the core pay content margin structure and business, meaning if we can create more and more content. Even if it originates outside of our existing set of creators. It gives our creators a bigger audience as we attract more consumers.
Speaker Change: And so the one thing I would also say is that there is a difference between us discovering an amateur creator on the canvas.
Speaker Change: And turning it into a web two <unk>, which is clearly an important profit margins for us versus when we collaborate with an existing franchise.
Speaker Change: Want to make you believe that there is not a difference but being competitive in new markets like the one that we're building here in the U S means we need to be open to both higher margin U S. Original as we create and really popular franchises that don't have access to our audience. Because we have this great Gen Z audience for them as well I think both are very important for our structure of <unk>.
Speaker Change: <unk>.
Got it and then following up on the U S market.
Speaker Change: You did talk about significant changes to the English. So curious what the changes are in this test Tomorrow Boe.
Speaker Change: And you're up to the U S market or English speaking markets, thus far about bringing the learnings that you have from Korea, and Japan Japanese market to the English market. Thank you.
Speaker Change: We believe that we have the benefit of both advantages are global lessons learned but tested to the local English speaking audience is whats required for us to rollout product innovation.
Speaker Change: I'm going to describe some of it it's quite extensive it's probably the most extensive product rollout that I've been a part of since I joined less than two years ago. So for example in our AAV testing.
We saw very promising results to our local English audience, we saw a b testing results of up to 9% increase on episodes read.
Speaker Change: Now with regard to the origin of these product innovations I wanted to go through each of them because they are significant and they have benefited from lessons learned from our global product organization across the world. We installed in Q2 of 2020 for a new leader, our Chief strategy Officer Young Soo Kim benefiting from the lessons outside of just the U S.
Speaker Change: Apply to the U S took onto a global leadership role of leading our global web two business. So these four areas of new product innovation reflect that global kind of ability to find great product, but the ability to test it locally before we roll it out it's everything from Onboarding to the home tab to the search tab, even a recurring new.
Speaker Change: And hot feature that could benefit from us seeing different types of trailers style format. So it's quite extensive.
Speaker Change: As exciting, but you may not see even though it's begun to hit the U S. Based platform you may not see it at full scale in towards the back end of this fiscal year, but it's extensive and again, it's the benefit of our global product organization, but carefully tested for our local consumers.
Speaker Change: Okay.
Speaker Change: Got it.
Speaker Change: The next question comes from the line of Matthew cost with Morgan Stanley. Please go ahead.
Speaker Change: Hi, everybody. Thanks for taking the question maybe I'll start just with the security update to what pad that caused the search indexing issue I guess could you just give a little more update a little more detail on what specifically was changed.
Speaker Change: That's having.
Speaker Change: The amount of user impact had on rest of world for this quarter, and then kind of where you are in the process of resolving it. Thank you.
Speaker Change: Thanks, Matt for the question first I want to be clear what pad is a very contained source of the majority the vast majority of our rest of world total MAA declines.
Speaker Change: Yet <unk> pad is not a significant contributor to the pay content engine. So one of the reasons I just want to make sure. We understand this it's important from a source of IP standpoint, it's important from a potential of advertising business, but the reason why I can begin to describe these two key issues, which were significant for the what pad business and have it not be a significant paid content issue.
Speaker Change: <unk> is because the role of that business today is really to source IP and to provide advertising revenue.
Speaker Change: With regard to your question. However, both the band from one country as well as that security issue that we disclosed.
Speaker Change: Accounting for the majority of all of the what pad disruption we saw in the quarter and remember what pad was the primary contributor to total rest of world Mou decline. So they were significant.
Speaker Change: Internally, we've talked about having remedying or we're seeking to remedy these.
Speaker Change: <unk>, we don't have an update on the country band, but we believe that we have begun to address the security issue and while they'll have persistent impact through the Q2 period and possibly a portion of Q3.
Speaker Change: We believe that we've identified the issues and are already at work to remedy them, but I wanted to be clear what pad in and of itself to total company performance was the most significant contributor to total Mou loss, particularly in rest of world and the two issues that we've identified we believe we are on the mend dawn, but they were very significant in terms of total Mou.
Speaker Change: Packed.
Speaker Change: Great. Thank you and then just following up on a couple of the prior questions you talked a lot about the early success you're seeing with.
Speaker Change: The new Onboarding here can discovery, new and hot which is great to hear.
Speaker Change: Sounds like most of those things won't be fully rolled out until the back half I think you mentioned in the prepared remarks, something about some product changes coming in May is that just further rollout and more expanded testing of those same features or are there other things on the roadmap that we should be aware of thank you.
Speaker Change: Well first I want to be clear that we're really only offering you financial guidance for the Q2 period.
Speaker Change: We want to be very transparent about how excited we are about the product rollout not because it's the only items that we're working on the company is constantly working on our portfolio of global product innovation. The ones. We've highlighted are the ones that we know are rolling out.
Speaker Change: In the back half of this year.
Speaker Change: But there is it's not the total limit of what our global product organization continues to test and workouts.
Speaker Change: Okay.
Speaker Change: The next question comes from the line of Andrew <unk> with Raymond James. Please go ahead.
Andrew: Hi, Thanks for taking my questions maybe.
Speaker Change: Spending on that last question that was just asked on the on boarding process. It sounds like you've made some good progress so far but it sounds again like an ongoing sort of iterative.
Speaker Change: Piece of product. So I guess, one would you categorize maybe the heaviest lift is being done and maybe what you are looking forward as more incremental or do you think that there is still some kind of fundamental improvements that can be made along the way then I have a follow up thank you.
Speaker Change: Well first you did not hear us disclose significant impact from the product innovation rollout, we specifically talked J <unk> and our script talked about how it would benefit later fiscal periods at the back half of the year. So I don't know that you would should infer that the major impact of these product innovations are already.
Speaker Change: And the results we've disclosed today.
Speaker Change: The second is <unk>.
Speaker Change: <unk> has said and I believe that these product innovations are significant.
Speaker Change: Incremental.
Speaker Change: And in terms of level of completeness.
Speaker Change: The ones that we've talked about the significant have been fully tested in fact.
Speaker Change: When we say in the script that we saw in certain AB testing, a 9% increase in episodes read that as a very significant finding in an AB test I think it reflects the level of significance of the product update that we've talked through and when we talk about rolling it out.
Speaker Change: And we specify may it means that we're not disclosing work yet to be done or that this is incremental this is a major product rollout that we are going forward with based on strong results. That's how I think we characterized it.
Speaker Change: Other thing to point out is parts of it have been already begun to roll out when we talk about may we're talking about a nearly set rollout right because we've been hard at work today. So.
Speaker Change: I don't want to lead you to believe that the results for the impact of the products.
Speaker Change: Already in our numbers.
Speaker Change: But the strong results that we saw in March that 9% increase in episodes read as well as the fact that we're going to see even more features in the pipeline, possibly impacting the back half of 2025 means that we believe that we're at the beginning of a process not at yet and that is significant.
Speaker Change: Understood. Thank you for the detail and then maybe one more if I could we heard.
Speaker Change: Some rumblings from the U S presidential administration earlier in the week or maybe last week about potential tariffs on foreign.
Speaker Change: <unk> produced films I guess is that having any impact to date or do you see that as having any impact on maybe the visibility you're planning for your for your IP adaptations business. Thank you.
Speaker Change: It's a good question, let me echo with JK and I. Both said first we're very clear eyed about closely monitoring the health in particular of our consumers and creators through changes announced not just by the U S Presidential administration, but globally that said, we do not see any impact by any announcements, particularly tariffs.
Speaker Change: On our core business with the exception of swings in reported FX rates on our results, but not on the core health of our business in fact.
Speaker Change: When I recall, my time, and other consumer tech businesses like mobile gaming I'm really grateful that JK created a business model that appears to me to be very resilient for the consumer and the creator there is so much free evergreen new fresh content by design of the flywheel that arrives today, which does not demanded subscription.
Speaker Change: The vast majority almost all of the 80% of pay content is from micro payments one fresh episode at a time that is highly differentiated from almost any consumer platform I've seen so not only do we not.
Speaker Change: Haven't seen any specific impact I actually think we could be quite resilient compared to others. Our focus is just keep our heads down and provide more and more great access to consumers for creators and great stories for consumers and weather the storm, but we don't see an impact other than reported FX rates today.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Speaker Change: The next question comes from the line of Jeff <unk> with Deutsche Bank. Please go ahead.
Jeff: Hi, Thank you for taking my question.
Speaker Change: Are you guys.
Speaker Change: Are you seeing a difference in the monetization levels and the App versus web platform in the U S for for Web Comics.
Speaker Change: Thanks for your question one of the reasons why we're so clear about the difference in disclosing that 19% increase in our English speaking web comic App Mou is we monetize on the App, we do not monetize pay content on the web periods.
Speaker Change: And so it's a really important distinguish so when we talk about overall rest of world <unk> declining driven by a web novel business, It's an important disclosure.
Speaker Change: It is not one that materially as an indication of our future performance on paid content. The App is also where our new product features are really focused so it's not only where we monetize in a big market like English speaking North America. It's also the beneficiary of this product rollout that we're discussing and Thats why I really want investors to.
Speaker Change: To focus on where they see growth in our future revenue and paid content, which to me is about the web comic App business, which is why we're focused on disclosing that part of the business today.
Speaker Change: Got it got it and then maybe you could talk a little bit about the engagement of.
Speaker Change: The comments around your license IP in the U S compared to sort of the other content on the platform are you seeing a benefit where license IP is driving new users to the platform or is it more driving engagement of existing users.
Speaker Change: Well first I think it clearly depends upon the actual platform.
Speaker Change: We have historically experienced with great platforms that have potential to drive user engagement that increases, but part of I think the attraction and our partners is that we have the strong penetration among Gen Z.
Speaker Change: And they're spending 30 to 60 minutes per day on average as users.
Speaker Change: So I don't know if I can categorically answering your question because I do think it depends on the IP that we're talking about but we see great potential to be additive to our platform and to our partners.
Speaker Change: Which is why we picked it.
Speaker Change: E. W. For example, and others that we will announce later to come.
Speaker Change: Great. Thank you.
Speaker Change: And it seems that we have no further questions for today that.
Speaker Change: That concludes the question and answer session and today's conference call. We thank you for your participation. You may now disconnect your lines have a pleasant day everyone.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.