Q2 2026 APR Co Ltd Earnings Call

August 5, 2026

Speaker #1: Good morning. Thank you for joining APR's earnings conference call. Today, APR will review its Q2 performance, followed by a Q&A session with the participants.

Operator: Good morning. Thank you for joining APR's earnings conference call. Today, APR will review its Q2 performance, followed by a Q&A session with the participants. If you have a question, please press Star and One on your phone. Now, I'd like to invite APR for 2026 Q2 earnings presentation.

Speaker #1: If you have a question, please press star and 1 on your phone. Now, I'd like to invite APR for the 2026 Q2 earnings presentation.

Jae-ha Shin: Good morning, everyone. Thank you for joining us today. I'm Jae-ha Shin, executive vice president of APR, and I'd like to welcome you to our Q2 2026 earnings call. Today, I'll review our Q2 performance, followed by a Q&A session. Before we begin, please note that the financial results discussed today are preliminary and may change as we complete the external review process. Our discussion may also include forward-looking statements based on current expectations. These statements involve risks and uncertainties, and actual results may differ materially. I'll now begin with an overview of our Q2 results. Page three highlights our quarterly revenue trends. Q2 consolidated revenue reached a record KRW 768 billion. After approaching KRW 600 billion last quarter, we surpassed KRW 700 billion for the first time, marking another consecutive quarterly high.

Speaker #2: Good morning, everyone. Thank you for joining us today. I'm Jay Hashin, Executive Vice President of APR, and I'd like to welcome you to our second quarter 2026 earnings call.

Speaker #2: Today, I'll review our second quarter performance, followed by a Q&A session. Before we begin, please note that the financial results discussed today are preliminary and may change as we complete the external review process.

Speaker #2: Our discussion may also include forward-looking statements based on current expectations. These statements involve risks and uncertainties, and actual results may differ materially. I'll now begin with an overview of our second quarter results.

Speaker #2: Page 3 highlights our quarterly revenue trend. The current quarter consolidated revenue reached a record ₩768 billion. After approaching ₩600 billion last quarter, we surpassed ₩700 billion for the first time, marking another consecutive quarterly high.

Speaker #2: The growth was led by the strong overseas momentum in North America and Europe, supported by new SKU sales and our expansion into the U.S.

Jae-ha Shin: The growth was led by the strong overseas momentum in North America and Europe, supported by the new SKU sales and our expansion into US offline and European online channel. Page four provides an overview of our Q2 financial performance. We delivered record quarterly revenue and operating profit. Consolidated revenue increased 134% year over year to KRW 768 billion, while operating profit grew 135% to KRW 191 billion, resulting in an operating margin of 24.8%. Page five breaks down our Q2 revenue by business segment. The revenue from our cosmetic and beauty segment increased 186% year over year to KRW 648 billion. This marks the sixth consecutive quarter of triple-digit growth and another quarterly record, with revenue surpassing KRW 600 billion for the first time. The growth remained well-balanced, supported by solid demand for our core products and increasing contribution from newer categories.

Speaker #2: Offline and European online channels. Page 4 provides an overview of our second quarter financial performance. We delivered record quarterly revenue and operating profit. Consolidated revenue increased 134% year-over-year to ₩768 billion, while operating profit grew ₩191 billion.

Speaker #2: Resulting in an operating margin of 24.8%. On page 5, we break down our second quarter revenue by business segment. The revenue from our cosmetic and beauty segment increased 186% year-over-year to 648 billion won.

Speaker #2: This marks the sixth consecutive quarter of triple-digit growth and another quarterly record, with revenue surpassing 600 billion won for the first time. The growth remained well-balanced, supported by solid demand for our core products and an increasing contribution from newer categories.

Speaker #2: During Amazon Prime Day in the U.S., 11 of our products ranked among the top 100, affirming the strength of our best-selling portfolio. We also participated in Prime Day in Europe for the first time.

Jae-ha Shin: During Amazon Prime Day in the US, 11 of our products ranked among the top 100, reaffirming the strength of our best-selling portfolio. We also participated in Prime Day in Europe for the first time, with an average of more than seven products ranking the top 100 across the UK, France, Spain, Italy, and Germany. Our newer categories are also showing encouraging momentum. The Collagen Glow sunscreen, for example, surpassed 400,000 units in cumulative sales within eight months of launch, demonstrating its potential to become another key product. The revenue from our home beauty device segment increased 24% year over year to KRW 112 billion. The demand remains solid in our core markets, while geographic and channel expansion supported growth in new markets. During the quarter, we launched Booster Glow, powered by LDM ultrasound technology.

Speaker #2: With an average of more than seven products ranking in the top 100 across the U.K., France, Spain, Italy, and Germany, our newer categories are also showing encouraging momentum.

Speaker #2: The Collagen Glow sunscreen, for example, surpassed 400,000 units in cumulative sales within eight months of launch, demonstrating its potential to become another key product.

Speaker #2: The revenue from our home beauty device segment increased 24% year-over-year to 112 billion won. Demand remained solid in our core markets, while geographic and channel expansion supported growth in newer markets.

Speaker #2: During the quarter, we launched Booster Glow, powered by LDM Ultrasound Technology. By adapting technology used in professional aesthetic equipment for at-home use, we further strengthened our home beauty device portfolio.

Jae-ha Shin: By adapting technology used in professional aesthetic equipment for at-home use, we further strengthen our home beauty device portfolio. Lastly, the revenue from Other businesses declined 31% to KRW 7 billion, reflecting the continued downsizing of non-core operations. Page six provides an overview of our regional revenue. Beginning this quarter, we are reporting revenue across five regions: Korea, North America, Europe, Asia, and Other regions. This change provides greater visibility into North America and Europe, now key markets for APR. The prior year figures have been recast on the same basis for comparability. The Q2 overseas revenue increased 178% year-over-year to KRW 704 billion, surpassing KRW 700 billion for the first time and setting another quarterly record. The overseas revenue accounted for 92% of total revenue, up from 77% a year earlier. The growth was led by the continued strength in North America and exceptional momentum in Europe.

Speaker #2: Lastly, revenue from other businesses declined 31% to ₩7 billion, reflecting the continued downsizing of non-core operations. Page 6 provides an overview of our regional revenue.

Speaker #2: Beginning this quarter, we are reporting revenue across five regions: Korea, North America, Europe, Asia, and Others. This change provides greater visibility into North America and Europe, now key markets for APR.

Speaker #2: The prior year figures have been recast on the same basis for compatibility. Second quarter overseas revenue increased 178% year-over-year to 704 billion won, surpassing 700 billion won for the first time and setting another quarterly record.

Speaker #2: Overseas revenue accounted for 92% of total revenue, up from 77% a year earlier. The growth was led by continued strength in North America and exceptional momentum in Europe.

Speaker #2: Together, the two regions represented 68% of total revenue. I will discuss each region in more detail on the next page. Let me now provide more detail on our regional performance.

Jae-ha Shin: Together, the two regions represented 68% of total revenue. I will discuss each region in more detail on the next page. Let me now provide more detail on our regional performance. In Q2, we delivered strong growth in North America and Europe, while maintaining solid momentum across Asia and Other emerging markets. Starting with Korea, revenue was KRW 63 billion. The year-over-year decline mainly reflected the continued downsizing of our non-core businesses. The North America revenue increased 265% year-over-year to KRW 376 billion. The online growth remained strong, supported by an expanding portfolio of best-selling products. The Medicube brand, number one in Amazon Beauty category in both Q1 and Q2. During the Prime Day at the end of June, Medicube also became the most searched term across all categories on Amazon, reaffirming the strength of the brand in the US online market.

Speaker #2: In the second quarter, we delivered strong growth in North America and Europe, while maintaining solid momentum across Asia and other emerging markets. Starting with Korea, revenue was 63 billion won. The year-over-year decline mainly reflected the continued downsizing of our non-core businesses.

Speaker #2: North America revenue increased 265% year-over-year to ₩376 billion. Online growth remained strong, supported by an expanding portfolio of best-selling products. The Medicare ranked number one in Amazon's beauty category in both the first and second quarters.

Speaker #2: During Prime Day at the end of June, Medicare also became the most searched term across all categories on Amazon, reaffirming the strength of the brand in the U.S.

Speaker #2: online market. We also expanded our offline presence through major retailers, including Ulta Beauty, Target, and Walmart. Going forward, we will build on our strong online demand while broadening offline distribution and consumer reach.

Jae-ha Shin: We also expanded our offline presence through major retailers, including Ulta Beauty, Target, and Walmart. Going forward, we will build on our strong online demand while broadening offline distribution and consumer reach. Europe delivered another exceptional quarter, with revenue increasing 380% year-over-year to KRW 145 billion. Our entry into online channels across five major European markets has established a strong platform for expansion, with revenue reaching nearly five times the prior year level. Europe is emerging as another major driver of our global growth. We plan to strengthen brand awareness and sales in our existing markets, while entering additional countries and pursuing opportunities with major offline retailers. In Asia, the revenue increased 15% year-over-year to KRW 121 billion. Lastly, revenue from Other regions increased 325% to KRW 62 billion, supported by a growing B2B demand and expansion across the Middle East and Latin America.

Speaker #2: Europe delivered another exceptional quarter, with revenue increasing 380% year-over-year to 145 billion won. Our entry into online channels across five major European markets has established a strong platform for expansion.

Speaker #2: With revenue reaching nearly five times the prior year level, Europe is emerging as another major driver of our global growth. We plan to strengthen brand awareness and sales in our existing markets.

Speaker #2: While entering additional countries and pursuing opportunities with major offline retailers. In Asia, revenue increased 15% year-over-year to 121 billion won. Lastly, revenue from other regions increased 325% to 62 billion won.

Speaker #2: Supported by growing B2B demand and expansion across the Middle East and Latin America. Page 8 highlights the progress we made in expanding our global presence during the first half of 2026.

Jae-ha Shin: Page eight highlights the progress we made in expanding our global presence during H1 2026. Starting with North America, revenue increased 261% year-over-year to KRW 648 billion. The region has become a core market where our global growth model was first successfully proven at scale. Building on the channel expertise and brand expansion capabilities we developed in North America, we have been able to accelerate our growth in Europe. The revenue in Europe increased 363% year-over-year to KRW 229 billion. The growth playbook we established in North America and Europe is also beginning to gain traction across new markets, including Middle East and Latin America. Revenue from Other regions increased 235% year-over-year to KRW 99 billion, demonstrating encouraging early progress in this market.

Speaker #2: Starting with North America, revenue increased 261% year-over-year to 648 billion won. The region has become a core market where our global growth model was first successfully proven at scale.

Speaker #2: Building on the channel expertise and brand expansion capabilities we developed in North America, we have been able to accelerate our growth in Europe. Revenue in Europe increased 363% year-over-year to 229 billion won.

Speaker #2: The growth playbook we established in North America and Europe is also beginning to gain traction across newer markets, including the Middle East and Latin America.

Speaker #2: Revenue from other regions increased 235% year-over-year to ₩99 billion, demonstrating encouraging early progress in these markets. Going forward, we plan to replicate the experience and capabilities we have built in North America and Europe across additional regions.

Jae-ha Shin: Going forward, we plan to replicate the experience and capabilities we have built in North America and Europe across additional regions, including the Middle East and Latin America, further strengthening the foundation for our global growth. Please refer to page nine for our summarized consolidated financial statement. This summary is provided for reference purposes only. Additionally, let me briefly update you on our EBD and skin booster businesses. For EBDs, we have received Korean regulatory approval, clearing a key milestone towards a domestic launch by year-end or early next year. Feedback from leading medical professionals has been encouraging, and we are now building out our sales organization and preparing manufacturing for commercialization. For skin boosters, our PN-based product has received Class II medical device certification and also export authorization in Korea, establishing the foundation for overseas sales.

Speaker #2: Including the Middle East and Latin America, further strengthening the foundations for our global growth. Please refer to page 9 for our summarized consolidated financial statement.

Speaker #2: The summary is provided for reference purposes only. Additionally, let me briefly update you on our EBD and Skin Booster businesses. For EBDs, we have received periodic regulatory approval, clearing a key milestone towards a domestic launch by year-end or early next year.

Speaker #2: Feedback from leading medical professionals has been encouraging, and we are now building out our sales organization and preparing manufacturing for commercialization. For Skin Boosters, our PN-based product has received Class II medical device certifications and export authorizations in Korea.

Speaker #2: Establishing the foundation for overseas sales. The initial exports have begun, with a broader rollout expected from the third quarter, led by Japan and the Middle East.

Jae-ha Shin: The initial exports have begun with a broader rollout expected from the Q3, led by Japan and the Middle East. We are also preparing a Class IV approval applications for the Korean market, with more meaningful domestic revenue growth targeted for 2028 onwards. Finally, let me address our full year 2026 guidance. We began this year with a revenue target of KRW 2.1 trillion and operating margin of approximately 25%. Since then, the growth has accelerated significantly, led by the US and Europe, and also supported by strong online and offline channel expansion. Reflecting this momentum, we are raising our full year revenue guidance to approximately KRW 3 trillion, while maintaining an operating margin outlook of 24% to 26%. We remain focused on delivering strong growth with solid profitability. This concludes APR's earnings call for the Q2 of 2026.

Speaker #2: We are also preparing a Class 4 approval application for the Korean market, with more meaningful domestic revenue growth targeted for 2028 onward. Finally, let me address our full-year 2026 guidance.

Speaker #2: We began this year with a revenue target of 2.1 trillion won and an operating margin of approximately 25%. Since then, growth has accelerated significantly, led by the U.S.

Speaker #2: and Europe, and also supported by strong online and offline channel expansion. Reflecting this momentum, we are raising our full-year revenue guidance to approximately 3 trillion won, while maintaining an operating margin outlook of 24 to 26%.

Speaker #2: We remain focused on delivering strong growth with solid profitability. This concludes APR's earnings call for the second quarter of 2026. The Korean presentation is now coming to an end.

Jae-ha Shin: The Korean presentation is now coming to an end. We'll now move on to the Q&A session. Thank you.

Speaker #2: We will now move on to the planning session. Thank you.

Speaker #1: We would now like to have a Q&A session. If you have a question, please press star and 1 on your phone. If you would like to cancel your question, please press star and 2 on your phone.

Operator: We will now like to have a Q&A session. If you have a question, please press star and one on your phone. If you'd like to cancel your question, please press star and two on your phone. The first question is from Im Jin from CD Securities. Please go ahead. Thank you for this opportunity, and congratulations on the successful Q2. I have two questions. First of all, I'd like to get some color on Q3 performance. In Q2, we had the Prime Day effect from Amazon, so I'd like to understand what is your expectation for Q3 performance going forward. Secondly, the impact of tariff refunds from the US as well as the transition to IFRS 18. I believe there has been some impact on your margin. Nevertheless, at the cost side, I believe that you were able to save some. Can you provide more details?

Speaker #1: The first question is from Imogen from CD Securities. Please go ahead. Thank you for this opportunity, and congratulations on the successful Q2. I have two questions.

Heejin Lim: Thank you for this opportunity, and congratulations on the successful Q2. I have two questions. First of all, I'd like to get some color on Q3 performance. In Q2, we had the Prime Day effect from Amazon, so I'd like to understand what is your expectation for Q3 performance going forward. Secondly, the impact of tariff refunds from the US as well as the transition to IFRS 18. I believe there has been some impact on your margin. Nevertheless, at the cost side, I believe that you were able to save some. Can you provide more details? Thank you.

Speaker #1: First of all, I'd like to get some color on Q3 performance in Q2. We had the Prime Day effect from Amazon, so I'd like to understand what is your expectation for Q3 performance going forward.

Speaker #1: And secondly, the impact of tariff refunds from the U.S., as well as the transition to IFRS 18. I believe there has been some impact on your margin.

Speaker #1: Nevertheless, on the cost side, I believe that you were able to save some. So, can you provide more details? Thank you. Rather than providing color on Q3, I'd like to give you some color on the second half performance.

Jae-ha Shin: Thank you. Rather than providing color on Q3, I would like to give you some color on the H2 performance. For Q3, we don't have much visibility to Q3 performance. We will not be able to provide you with aggressive figures for Q3 because there are no special events for Q3. The Amazon Prime Day was rescheduled to Q2. The biggest event that we anticipated in the middle of the year would normally be scheduled in October, November, and December. Nevertheless, we continue to generate revenue, and we see a continued revenue growth trend over the markets. Overall, in Q3 and Q4, I believe that KRW 1.7 trillion of revenue is expected, KRW 2.7 trillion.

Jae-ha Shin: Rather than providing color on Q3, I would like to give you some color on the H2 performance. For Q3, we don't have much visibility to Q3 performance. We will not be able to provide you with aggressive figures for Q3 because there are no special events for Q3. The Amazon Prime Day was rescheduled to Q2. The biggest event that we anticipated in the middle of the year would normally be scheduled in October, November, and December. Nevertheless, we continue to generate revenue, and we see a continued revenue growth trend over the markets. Overall, in Q3 and Q4, I believe that KRW 1.7 trillion of revenue is expected, KRW 2.7 trillion.

Speaker #1: As for Q3, we don't have much visibility into Q3 performance. We will not be able to provide you with aggressive figures for Q3 because there are no special events planned for Q3.

Speaker #1: Amazon Prime Day was rescheduled to the second quarter. The biggest event that we anticipated in the middle of the year would normally be scheduled in October, November, or December.

Speaker #1: And nevertheless, we continue to generate revenue, and we see a continued revenue growth trend over the markets. So overall, in Q3 and Q4, I believe that 1.7 trillion won of revenue is expected.

Speaker #1: ₩2.7 trillion. And for the U.S. and Europe, we see a quarter-on-quarter growth in our revenue. In Europe, led by the U.K., where we see significant revenue growth, we are also working on Germany, France, Italy, and Spain.

Jae-ha Shin: For the US and Europe, we see a QoQ growth in our revenue and in Europe, led by the UK, where we see a big growth in revenue. We also work on Germany, France, Italy, and Spain. In these markets, we see our rankings continue to go up, resulting in a growth in our revenue performance. When it comes to our Q3 performance outlook, I believe that it will be similar to our performance in Q2. So far, we have had aggressive growth on a QoQ basis, but in Q3 we have some uncertainty and lack of visibility because we don't have a major event or promotional event, we will have to rely on organic growth. It is difficult to predict accurately. Our performance in Q3 is pretty good. Including Q4, in terms of our H2 performance, we expect good results.

Speaker #1: And in these markets, we see our rankings continue to go up, resulting in growth in our revenue performance. So, when it comes to our Q3 performance outlook, I believe that it will be similar to our performance in Q2.

Speaker #1: So far, we have had aggressive growth on a QOQ basis, but in Q3, we have some uncertainty and lack of visibility because we don't have a major event or promotional event.

Speaker #1: So we will have to rely on organic growth. It is difficult to predict accurately, but our performance in Q3 is pretty good. Including Q4, in terms of our second half performance, we expect good results.

Speaker #1: And moving on to the impact of tariff refunds from the U.S. Right now, about 13 billion won of tariff refunds has already been recognized. And it's not the total amount, but a partial refund has been made.

Jae-ha Shin: Moving on to the impact of tariff refunds from the US. Right now, about KRW 13 billion of tariff refunds was recognized already. It's not a total amount, but a partial refund was made. In H2, as well as early next year, we will be able to receive tariff refunds in a significant amount. As for the amount, I will not be able to give you a specific number. Nevertheless, you mentioned about IFRS 18 recognition. For Q2, there was no big impact in terms of positive impact, but we will communicate separately through an IR channel. We also saw an increase in one-off expenses, including logistics costs, it is included in COGS, so it was recognized as part of inventory expense. In terms of cost, we have air freight, and air freight rates have been going up quite significantly.

Speaker #1: In the second half of the year, as well as early next year, we will be able to receive tariff refunds in a significant amount.

Speaker #1: But as for the amount, I won't be able to give you a specific number. Nevertheless, you mentioned about IFRS 18 recognition. For the second quarter, there was no big impact on a in terms of positive impact, but we will communicate separately through an IR channel.

Speaker #1: We also saw an increase in one of the expenses, including logistics costs, and it is included in COGS. So, it was recognized as part of inventory expense.

Speaker #1: But in terms of cost, we have air freight. And air freight rates have been going up quite significantly, so we incurred some major air freight expenses in the second quarter, including 10 billion won.

Jae-ha Shin: We had incurred some major air freight expenses in Q2, including KRW 10 billion, and there are several reasons why. First of all, we have had this Amazon Prime Day, which was scheduled in June, and we had to meet the cutoff deadlines. To do so, we had to make huge shipments through air freight. There's an increase in sales in Europe, and to respond to this demand, majority of the shipments are made through air freight. The major reason is that there are disruptions in ocean freight. We are looking for alternative sea routes. Nevertheless, to provide stock to Europe, we will have to continue to utilize air freight, air freight expense is expected for Q3 as well.

Speaker #1: And there are several reasons why. First of all, we had Amazon Prime Day, which was scheduled in June, and we had to meet the cutoff deadlines.

Speaker #1: And to do so, we had to make huge shipments through air freight. There is increasing sales in Europe, and to respond to this demand, the majority of the shipments are made through air freight.

Speaker #1: The major reason is that there are disruptions in ocean freight. So, we're looking for alternative sea routes, but nevertheless, to provide stock to Europe, we will have to continue to utilize air freight.

Speaker #1: And so, air freight expense is expected for the third quarter as well. But for the U.S., we have some safety stock already in place.

Jae-ha Shin: For the US, we have some safety stock already in place. As I mentioned, there's no major promotional event scheduled for Q3, inventory stock forecast is going up. Gradually, air freight burden will decrease. In addition, Coachella festival as well as other one-off marketing expenses were made. That is why we didn't see a significant growth in operating profit margin. It is similar to the previous quarters. Thank you very much. We'll take the next question. The next question is by Kim Hyun from Morgan Stanley Securities. We cannot hear you because of the static. There are no questions waiting. For those who have questions, please press star and one on your phone. The next question will be raised by Mr. Tom June from NH Securities. Please go ahead with your question.

Speaker #1: And as I mentioned, there's no major promotional event scheduled for Q3, so the inventory stock forecast is going up. Therefore, the air freight burden will gradually decrease.

Speaker #1: In addition, Coachella Festival, as well as other one-off marketing expenses, occurred. That is why we didn't see significant growth in operating profit margin.

Speaker #1: It is similar to the previous quarters. Thank you very much. We'll take the next question. The next question is from Kim Hyun at Morgan Stanley Securities.

Operator: The next question is by Kim Hyun from Morgan Stanley Securities. We cannot hear you because of the static. There are no questions waiting. For those who have questions, please press star and one on your phone. The next question will be raised by Mr. Tom June from NH Securities. Please go ahead with your question.

Speaker #1: We cannot hear you because of the static. There are no questions. Waiting. For those who have questions, please press star and one on your phone.

Speaker #1: The next question will be raised by Mr. Jeong Jun from NH Securities. Please go ahead with your question. Yes. Do you hear me? Yes, we do.

Jae-ha Shin: Yes. Do you hear me?

Ji-yoon Jung: Yes. Do you hear me?

Jae-ha Shin: Yes, we do.

Speaker #1: Thank you very much for taking my question. I have two questions. The first is about the cost. Of course, it was explained earlier in the presentation.

Jae-ha Shin: Thank you very much for taking my question. I have two questions. First is about the cost. Of course, it was explained earlier in the presentation, in terms of the transportation cost as well as the commissions, the promotions, and the ad spend, I wonder how much they were. Those costs, will they be more stabilized in Q3? The second question is, at the revenue side, we see that in the US, the revenue was stronger than expected. What is the share between the offline and then also in terms of the other channels as well?

Ji-yoon Jung: Thank you very much for taking my question. I have two questions. First is about the cost. Of course, it was explained earlier in the presentation, in terms of the transportation cost as well as the commissions, the promotions, and the ad spend, I wonder how much they were. Those costs, will they be more stabilized in Q3? The second question is, at the revenue side, we see that in the US, the revenue was stronger than expected. What is the share between the offline and then also in terms of the other channels as well?

Speaker #1: So, in terms of the transportation cost, as well as the commissions, promotions, and the ad spend, I wonder how much they were.

Speaker #1: And also, those costs—will they be more stabilized in Q3? And the second question is: Now, on the revenue side, we see that in the U.S., the revenue was stronger than expected.

Speaker #1: What is the share between offline and, also, in terms of the other channels as well? Well, thank you very much. I will have to double-check on some of the numbers.

Jae-ha Shin: Well, thank you very much. I will have to double-check on some of the numbers. First of all, about the cost. The COGS went up by 20.8%, the sale commission went up by 18.6%, the ad spend was 22.5%, the transportation was 7.7%. The transportation cost is actually a bit higher because the COGS also includes part of the transportation. When we export to Europe and the US, they would be first recognized as inventory, when they are sold, they will be recognized as COGS. At this time, the air freight is

Speaker #1: Now, first of all, about the cost. The COGS went up by 20.8%, and then the sales commission went up by 18.6%. The ad spend was 22.5%.

Speaker #1: And then the transportation was 7.7%. But the transportation cost is actually a bit higher because the COGS also includes part of the transportation.

Speaker #1: Because when we export to Europe and the U.S., the products are first recognized as inventory, and then when they are sold, they will be recognized as COGS.

Speaker #1: And at this time, the air freight is increasing the most rapidly. And part of that is actually recognized as COGS at this time. And now we see that the ad spend has gone up a bit.

Jae-ha Shin: Increasing the most rapidly, part of that is actually recognized as COGS at this time. We see that the ad spend has gone up a bit, especially in Q2, we were more aggressive in our sales growth. We mentioned this at every call. Our biggest focus right now is on growing our sales. Of course it was a one-time cost, yes, Lisa was in Coachella, we are also the main sponsor in Coachella, the promotion event with Kim Kardashian, some other events as well. These are some of the examples of our more aggressive ad spend. Having said that, the aggressive ad spend, I do not believe that it is going to increase much higher than this, because our expectation is to be around 20%.

Jae-ha Shin: We see that the ad spend has gone up a bit, especially in Q2, we were more aggressive in our sales growth. We mentioned this at every call. Our biggest focus right now is on growing our sales. Of course it was a one-time cost, yes, Lisa was in Coachella, we are also the main sponsor in Coachella, the promotion event with Kim Kardashian, some other events as well. These are some of the examples of our more aggressive ad spend. Having said that, the aggressive ad spend, I do not believe that it is going to increase much higher than this, because our expectation is to be around 20%.

Speaker #1: And especially in Q2, we were more aggressive in our sales growth. We have mentioned this at every call. But right now, our biggest focus is on growing.

Speaker #1: Our sales—so, of course, it was a one-time cost. But then yes, Lisa was in Coachella. And we were also the main sponsor at Coachella, as well as for the promotion event with Kim Kardashian.

Speaker #1: And also some other events as well. So, because of that, these are some examples of our more aggressive ad spend. Having said that, the aggressive ad spend—I do not believe that it is going to increase much higher than this.

Speaker #1: Because our expectation is to be around 20%, and the sales commission is not much of an increase from the past. So, our biggest consideration at this time would be about the stock shortage, and that means we also need to manage the supply chain.

Jae-ha Shin: The sales commission, it is not much of an increase from the past. Our biggest consideration at this time would be about the stock shortage, that means that we also need to manage the supply chain more effectively. Out of the sales, we also need to make sure that there will be no gaps in the sales. That is why we rely on air quite heavily. In the US, there has been severe stock shortages, coming into Q3, we see that the stock shortage is considerably easing. For the US market at least, we do believe that there is now a decline in the usage of air freight.

Speaker #1: More effectively. And also, outside of the sales, we also need to make sure that there will be no gaps in the sales. So that is why we rely on AIR quite heavily.

Speaker #1: Now, in the U.S., there have been severe stock shortages, but coming into Q3, we see that the stock shortage is considerably easing.

Speaker #1: So for the U.S. market, at least, we do believe that there is now a decline in the usage of air freight. But then, in order to meet Prime Day, there have been some products where there have been stock shortages, and we are still using air freight for those.

Jae-ha Shin: In order to meet the Prime Day there have been some products where there have been stock shortages, we are still using the air freight for those. For the European market, was at the Suez Canal. Because the Suez Canal is also blocked, it is taking double the time over the ocean to reach Europe. We are also getting more revenue out of Europe. Yes, that is, of course, a good thing. In order to meet the demand, the very quickly rising demand, we are using even more air freight for Europe, more so than the US. We do believe that going into Q3 as well, we will have to still rely on the air freight for Europe.

Speaker #1: And for the European market, was it the Suez Canal? Now, because the Suez Canal is also blocked, it's taking double the time over the ocean to reach Europe.

Speaker #1: But now we are also getting more revenue out of Europe. And yes, that is, of course, a good thing. But then, in order to meet the very quickly rising demand, we are using even more air freight for Europe.

Speaker #1: More so than the U.S. And we do believe that going into Q3 as well, we will still have to rely on air freight for Europe.

Speaker #1: And then now from Q4 and on, now because there is the safety stock to be built up, we believe that is also going to ease somewhat.

Cha Tae-Young: From Q4 and on, because there is the safety stock to be built up, we believe that that is also going to ease somewhat. About the offline channel mix, allow me to respond to this question. Yes, this is Cha Tae-Young from the communications office, and let me respond to the online and offline mix in the US market. As you would know, there was some regional reclassification. Some of the cross borders, they have been also reclassified. Based on this new standard, in the North American sales, about 80% was online and 20% offline. Based on the altered criteria, in Q1 last year in the US, the offline was 18%, but this time it was 23%, so there was increase of about five percentage points.

Jae-ha Shin: From Q4 and on, because there is the safety stock to be built up, we believe that that is also going to ease somewhat. About the offline channel mix, allow me to respond to this question.

Speaker #1: And now, regarding the offline channel mix, allow me to respond to this question. Yes, this is Cha Tae Young from the Communications Office.

Tae-Young Cha: Yes, this is Cha Tae-Young from the communications office, and let me respond to the online and offline mix in the US market. As you would know, there was some regional reclassification. Some of the cross borders, they have been also reclassified. Based on this new standard, in the North American sales, about 80% was online and 20% offline. Based on the altered criteria, in Q1 last year in the US, the offline was 18%, but this time it was 23%, so there was increase of about five percentage points.

Speaker #1: And let me respond to the online and offline mix in the U.S. market. Now, as you would know, there was some regional reclassification.

Speaker #1: So some of the cross-border sales now have also been reclassified. So now, based on this new standard, in the North American sales, about 80% was online and 20% offline.

Speaker #1: And also, based on the altered criteria, in the first quarter last year in the U.S., offline was 18%, but this time it was 23%.

Speaker #1: So there was an increase by about 5 percentage points. Also, the sell-through trend is quite steady. I cannot give you the specific data at this time, but now, in the channels where we have presence, we see that it is quite steady.

Cha Tae-Young: The sell-through trend, it is quite steady, and I cannot give you the specific data at this time, but in the channels where we have presence, we see that it is quite steady, the sell-through trend is also quite healthy. We have entered Target first, the sell-through data is very quickly rising. In Ulta as well, we are not seeing any drop or decline, it is also steadily rising. In Walmart, the sell-through data, we are not getting the specific data yet, I believe they will be able to share the data with you in time. Thank you. We will take the next question. The next question is from Park Jung-Won from Tao Investment and Securities. Please go ahead.

Tae-Young Cha: The sell-through trend, it is quite steady, and I cannot give you the specific data at this time, but in the channels where we have presence, we see that it is quite steady, the sell-through trend is also quite healthy. We have entered Target first, the sell-through data is very quickly rising. In Ulta as well, we are not seeing any drop or decline, it is also steadily rising. In Walmart, the sell-through data, we are not getting the specific data yet, I believe they will be able to share the data with you in time. Thank you.

Speaker #1: And also, the sell-through trend is quite healthy. So, we have entered Target first. And yes, the sell-through data is rising very quickly. Also, in all time as well, we are not seeing any drop or decline.

Speaker #1: So, it is also steadily rising. And also, for Walmart, the sell-through data—we are not getting the specific data yet. I believe they will be able to share the data with you in time.

Speaker #1: Thank you.

Speaker #2: We'll take the next question. The next question is from Park Jong-yeon from Tao Investment & Securities. Please go ahead.

Jae-ha Shin: We will take the next question.

Operator: The next question is from Park Jung-Won from Tao Investment and Securities. Please go ahead.

Speaker #3: Hello, I am Park Jong-yeon from Tao Investment and Securities. Thank you for this opportunity. My questions are quite similar to the previous ones. Based on the answers, on a quarter-over-quarter basis, there were some changes to operating profit, and there was an increase in the share of Amazon as well as an increasing share in B2B, resulting in the improvement of OP margin.

Park Jung-won: Hello, I am Park Jung-Won from Tao Investment and Securities. Thank you for this opportunity. My questions are quite similar to the previous questions. Based on the answers on a quarter-over-quarter basis, there was some changes to operating profit, there was increase in the share of Amazon, there was an increasing share in B2B, resulting in the improvement of OP margin. Considering our air freight expenses and ad spend, I believe that there will be some recovery in OP margin in H2. Do you think that this will be mainly driven by the increase in offline sales? What do you think are going to be the major drivers behind the improvement in the OP margin? I would like to get some guidance on the overall direction. Thank you.

Jong-hyun Park: Hello, I am Park Jung-Won from Tao Investment and Securities. Thank you for this opportunity. My questions are quite similar to the previous questions. Based on the answers on a quarter-over-quarter basis, there was some changes to operating profit, there was increase in the share of Amazon, there was an increasing share in B2B, resulting in the improvement of OP margin. Considering our air freight expenses and ad spend, I believe that there will be some recovery in OP margin in H2. Do you think that this will be mainly driven by the increase in offline sales? What do you think are going to be the major drivers behind the improvement in the OP margin? I would like to get some guidance on the overall direction. Thank you.

Speaker #3: So, considering our air freight expenses and ad spend, I believe that there will be some recovery in OP margin in the second half of the year.

Speaker #3: Do you think that this will be mainly driven by the increase in offline sales? What do you think are going to be the major drivers behind the improvement in the OP margin?

Speaker #3: I'd like to get some guidance on the overall direction. Thank you. First of all, what you made is quite valid, as you mentioned. We have the online channel as well as very aggressive marketing, with an increase in virality not only in the U.S.

Jae-ha Shin: First of all, what you made is quite valid. As you mentioned, we have the online channel, as well as very aggressive marketing with increase in viral, not only in the US and Europe. There will be increase in B2B orders. B2B channel, because it has higher margin, will contribute to OP margin, which means that the marketing expenses and ad spend are more allocated to the online channel. With the B2B increase, OP margin will improve. In terms of geography in Europe

Speaker #3: and Europe. There will be an increase in B2B orders. As a result, the B2B channel, because it has a higher margin, will contribute to OP margin. This means that marketing expenses and ad spend are more allocated to the online channel, and with the B2B increase, OP margin will improve.

Speaker #3: Now, in terms of geography, in Europe, the OP margin is currently lower than the average OP margin in Europe because we are quite aggressive in increasing our top line.

Jae-ha Shin: The OP margin is currently lower than the average OP margin in Europe because we are quite aggressive in increasing our top line in Europe. Of course, we are not incurring any losses in that sense, but we are quite aggressive in conducting our marketing in Europe to expand our presence. When it comes to our cases in Japan and the US, once we have more mature presence in these markets, OP margin will naturally improve. For instance, in Japan, our revenue growth is almost three times, but OP margin continues to improve. In Europe and other channels, when we consider that they are online channels, OP margin will improve in the future as we become more mature in these markets.

Speaker #3: In Europe, of course, we are not incurring any losses on that in that sense. But we are quite aggressive in conducting our marketing in Europe to expand our presence.

Speaker #3: And when it comes to our cases in Japan and the U.S., once we have a more mature presence in these markets, OP margin will naturally improve.

Speaker #3: For instance, in Japan, our revenue growth is almost three times, but OP margin continues to improve. Therefore, in Europe and other channels, when we consider that they are online channels, OP margin will improve in the future as we become more mature in these markets.

Speaker #3: So initially, in order to increase penetration and to address market entry barriers, we tend to execute aggressive marketing. Therefore, this results in an increase in marketing and ad expenses.

Jae-ha Shin: Initially, in order to increase penetration and in order to address the market entry barriers, we tend to execute aggressive marketing, therefore resulting in an increase in marketing and ad expenses. It's not so much about efficiency improvement, but rather we try to improve our top line in these new markets, and later our margin will improve. Moving on to OP margin trend for next year, we don't have any specific sales guidance or OP margin guidance for next year because we still are working on our internal analysis. In our view, we believe that there is enough story to further drive up our OP margin. As you mentioned, we have very rapid increase in online sales, B2B demand will go up as well. These are our expectations for next year.

Speaker #3: It's not so much about efficiency improvement, but rather we try to improve our top line in these new markets, and later our margin will improve.

Speaker #3: And moving on to the OP margin trend for next year, we don't have any specific sales guidance or OP margin guidance for next year because we are still working on our internal analysis.

Speaker #3: But in our view, we believe that there is enough story to further drive up our OP margin. As you mentioned, we have a very rapid increase in online sales.

Speaker #3: And B2B demand will go up as well. So these are our expectations for next year. Nevertheless, this year, we have had to deal with many unexpected situations.

Jae-ha Shin: Nevertheless, this year we have had to deal with many unexpected situations, there are a lot of uncertainties for next year as well. When we communicate with our analysts, we try to provide some buffer in our outlook and projections. Our goal is to maintain our OP margin while trying to increase the top line further. We continue to observe our market situations, and we will make sure to communicate with you. We will take the next question. The next question will be raised by Mr. Resembling from CLSA Securities. Please go ahead with your question.

Speaker #3: So, there are a lot of uncertainties for next year as well. So, when we communicate with our analysts, we try to provide some buffer in our outlook and projections.

Speaker #3: So, our goal is to maintain our OP margin while trying to increase the top line further. We continue to observe market conditions and will make sure to communicate with you.

Speaker #3: We will take the next question.

Speaker #2: The next question will be raised by Mr. Izumo from CLS Securities. Please go ahead with your question.

Operator: The next question will be raised by Mr. Resembling from CLSA Securities. Please go ahead with your question.

Speaker #3: Yes, good morning. Thank you very much for taking my questions. Now, it was actually mentioned earlier, so this question—a couple of questions—as an extension to that.

Jae-ha Shin: Yes. Good morning. Thank you very much for taking my questions. It was actually mentioned earlier, a couple of questions as an extension to that. The first is, as was mentioned, yes, I see that the revenue guidance has gone up from KRW 2.1 trillion to KRW 3 trillion, even accounting for the geopolitics. I would say that that would also include the uncertainties about the air freight. The cost is going to be higher. Going into next year then, assuming that KRW 3 trillion is going to be the baseline, I believe that the air freight by that time could go down. Today then, what is the percentage of the air freight out of the revenue, or what would be the percentage in each quarter?

[Analyst] (CLSA Securities): Yes. Good morning. Thank you very much for taking my questions. It was actually mentioned earlier, a couple of questions as an extension to that. The first is, as was mentioned, yes, I see that the revenue guidance has gone up from KRW 2.1 trillion to KRW 3 trillion, even accounting for the geopolitics. I would say that that would also include the uncertainties about the air freight. The cost is going to be higher. Going into next year then, assuming that KRW 3 trillion is going to be the baseline, I believe that the air freight by that time could go down. Today then, what is the percentage of the air freight out of the revenue, or what would be the percentage in each quarter?

Speaker #3: Now, the first is, as was mentioned, yes, I see that the revenue guidance has gone up from $2.1 trillion to $3 trillion, even accounting for the geopolitics.

Speaker #3: And I would say that that would also include the uncertainties about air freight. So, the cost is going to be higher. Then, going into next year, assuming that 3 trillion is going to be the baseline, I believe that the air freight by that time could go down.

Speaker #3: So today, then what is the percentage of the air freight out of the revenue or what would be the percentage in each quarter? And then now for next year, if it is going to be about 3 trillion won in revenue, then again, I wonder whether there is a chance that the air freight is going to drop considerably next year.

Jae-ha Shin: For next year, if it is going to be about KRW 3 trillion in revenue, again, I wonder whether there is a chance that the air freight is going to drop considerably next year. I hope for some guidance on this one. The second question is, in H2 of this year, the revenue growth is very hard to predict and of course the same for next year as well. Still the growth is very high, so I wonder whether the high growth is going to continue into next year given the high base. Perhaps for next year, even if you cannot share the specific revenue target or guidance, can you at least give us some insight into the potential drivers of the revenue going to next year as well?

[Analyst] (CLSA Securities): For next year, if it is going to be about KRW 3 trillion in revenue, again, I wonder whether there is a chance that the air freight is going to drop considerably next year. I hope for some guidance on this one. The second question is, in H2 of this year, the revenue growth is very hard to predict and of course the same for next year as well. Still the growth is very high, so I wonder whether the high growth is going to continue into next year given the high base. Perhaps for next year, even if you cannot share the specific revenue target or guidance, can you at least give us some insight into the potential drivers of the revenue going to next year as well?

Speaker #3: So, I hope for some guidance on this one. Now, the second question is: in the second half of this year, the revenue growth is very hard to predict.

Speaker #3: And of course, then the same for next year as well. But even so, the growth is very high. So I wonder whether this high growth is going to continue into next year, given the high base.

Speaker #3: So then perhaps for next year, then even if you cannot share the specific revenue target or guidance, then can you at least give us some insight into the drivers, the potential drivers of the revenue going to next year as well?

Speaker #3: Thank you. First of all, about the air freight—compared to last year, we would say that it is about 10 times higher this year.

Jae-ha Shin: Thank you. First of all, about the air freight, yes, compared to last year, we would say that it is about 10 times higher this year. This time it is not the cost recognition, but just in terms of the Q2 air freight actual, it is close to KRW 30 billion, which is highly abnormal, and that is why we call this one-time cost or a one-off cost. In terms of the share out of the revenue, in terms of the air freight, it is 10 times higher than the ocean freight. One thing that we could not expect was the long-distance markets, like for example in the EU and the US and the revenue growth there.

Speaker #3: Then this time, it's not the cost recognition, but now, just in terms of the Q2 air freight actual, it is close to 30 billion, which is highly abnormal.

Speaker #3: And that is why we call this a one-time cost, or one-off cost. Now, in terms of the share out of the revenue—now, in terms of air freight—right now it is 10 times higher than ocean freight.

Speaker #3: And now, one thing that we could not expect was the long-distance markets—for example, in the EU and the U.S.—and the revenue growth there.

Speaker #3: And also, we have all these SKUs that are existing, and then some of the newly launched SKUs, and they are also growing very rapidly.

Jae-ha Shin: We have all these SKUs that are existing, also some of the newly launched SKUs, they are also growing very rapidly. If there are some stock shortages, they tend to drop dramatically in the Amazon ranking. We also wanted to keep them up in the ranking, and that is why we had to rely on air freight quite a lot. Again, the long-distance market, for example in the US and Europe, because inventory was not enough, there also was quite a lot of expense in terms of the air freight. More recently, we are seeing that there is some stabilization of the inventory in the EU and the US. We believe that in H2 the inventory is going to stabilize.

Speaker #3: And if there are some stocks that were reduced, then they tend to drop dramatically in the Amazon ranking. So we also wanted to keep them up in the ranking.

Speaker #3: And that is why we had to rely on air freight quite a lot. But again, the long-distance markets, for example, in the U.S. and Europe—now, because the inventory was not enough—there also was quite a lot of expense in terms of the air freight.

Speaker #3: But now, more recently, we are seeing that there is some stabilization of the inventory in the EU and the U.S. So we believe that in the second half, the inventory is going to stabilize.

Speaker #3: So, we believe that in the second half, the inventory is going to be built up to the extent that it will also reduce the air freight considerably.

Jae-ha Shin: We believe that in H2 the inventory is going to be built up to the extent that it will also

Jae-ha Shin: We believe that in H2 the inventory is going to be built up to the extent that it will also reduce the air freight considerably. Because we had been relying on online and D2C, we were having very lean operations. The K-beauty trend these days, not just for the company, but also for others as well, we do believe that the demand is going to steadily and consistently rise. Meaning that, I believe that now we also have the fundamentals to have healthy inventory turnover, and that is why the inventory is being built up, and we believe that that is also going to drive down the air freight in the H2. About the growth drivers. In the US, the US revenue is growing much faster than we had expected in the early part of the year.

Jae-ha Shin: Reduce the air freight considerably. Because we had been relying on online and D2C, we were having very lean operations. The K-beauty trend these days, not just for the company, but also for others as well, we do believe that the demand is going to steadily and consistently rise. Meaning that, I believe that now we also have the fundamentals to have healthy inventory turnover, and that is why the inventory is being built up, and we believe that that is also going to drive down the air freight in the H2. About the growth drivers. In the US, the US revenue is growing much faster than we had expected in the early part of the year.

Speaker #3: And also because we had been relying on online and D2C, so we were having very lean operations. But then now the K-beauty trend these days, so not just for the company, but also for others as well, we do believe that the demand is going to steadily and consistently rise.

Speaker #3: Meaning that I believe that now we also have the fundamentals to have healthy inventory turnover. That is why the inventory is being built up, and we believe that this is also going to drive down air freight in the second half.

Speaker #3: Now, about the growth drivers. In the U.S., the U.S. revenue is growing much faster than we had expected in the early part of the year.

Speaker #3: Despite that, the offline now is still about 8 to 2, meaning that offline sales growth was not as fast as we had expected.

Jae-ha Shin: Despite that, the offline now it's still about 8 to 2, meaning that offline, the sales growth was not as fast as we had expected. Rather than that, I would put it this way, the online growth is growing more rapidly. In terms of the offline, of course, it takes time for us to enter into these brick-and-mortar shops. We do believe that, yes, there will be growth in both online and offline as well. For the offline, we are also looking forward to the growth in the new categories. We did not mention this earlier in the briefing, in the hair and body categories, we see that some of the K-beauty companies are also thriving there, and the same for us. In the hair and body categories, we are also seeing growth.

Speaker #3: Well, rather than that, I would put it this way. So the online growth is growing more rapidly. And in terms of the offline, of course, it takes time for us to enter into this big and mortar shops.

Speaker #3: So, we do believe that, yes, there will be growth in both online and offline as well. And also, for the offline segment, we are looking forward to growth in the new categories.

Speaker #3: We did not mention this earlier in the briefing, but now, in the hair and body category, we see that some of the K-beauty companies are also thriving there.

Speaker #3: And that's the same for us. So, in the hair and body categories, we are also seeing growth. We intend to be even more aggressive in the U.S.

Jae-ha Shin: We intend to be even more aggressive in the US market, and that is where we are looking forward to in terms of the stronger growth. Let me summarize now for the US online, the existing products expansion, and also the new categories. Through these moves, we continue to broaden our growth base. For the offline market, we believe that the revenue will continue to grow as well. Looking to the European market, we see this still as a new market for us. We believe that the US leading the way, Europe will also follow suit. We will also continue to be aggressive in the European sales as well.

Speaker #3: market. And that is where we are looking forward to in terms of the stronger growth. So then let me summarize. Now for the U.S.

Speaker #3: Online, then the existing products' expansion, and also the new categories. So, through these moves, we continue to broaden our growth base. And then, for the offline market, we believe that the revenue will continue to grow as well.

Speaker #3: And then, looking to the European market, we see this as still a new market for us. So, we believe that the U.S. is leading the way and that Europe will also follow suit.

Speaker #3: So, we will also continue to be aggressive in European sales as well. Now, in the early part of the year, for the European market, we would say that this is our year one, and we are looking at about 300 billion won in revenue.

Jae-ha Shin: In the early part of the year, for the European market, we would say that this is our year one, and we are looking to about KRW 300 billion in revenue. In the H1, we have already achieved over KRW 220 billion. Based on this trend, we believe that for the full year, we will be able to more than fulfill KRW 500 billion in Europe. For your information, in the US, it was KRW 500 billion. If we achieve KRW 500 billion in Europe this year, that means that we will match number coming from the US last year, meaning that Europe has a very strong growth potential for us. In Europe now we are focusing on the online channels in the top five countries.

Speaker #3: But now, in the first half, we have already achieved over 220 billion. So, based on this trend, we believe that for the full year, we will be able to more than fulfill 500 billion in Europe.

Speaker #3: Now, for your information, in the U.S., it was $500 billion. Now, if we achieve $500 billion in Europe this year, then that means it will match the number coming from the U.S.

Speaker #3: last year. This means that Europe has very strong growth potential for us. Not only that, but in Europe, we are now focusing on online channels in the top five countries.

Speaker #3: But then again, in Europe, there are some other new countries for us as well. So we can continue to broaden our presence and our base there, meaning that there can be more growth to come.

Jae-ha Shin: Again, in Europe, there are some other new countries for us as well. We can continue to broaden our presence and our base there, meaning that there can be more growth to come. Not only that, but also the EBD medical devices and also the skin boosters, as well as the home beauty devices, which are our focus these days. They are also high drivers for us today, but also will continue to be so into the future, especially for the home beauty devices in Q2. There was a transition from the existing product to a new product, and because of that, as the main SKU transitioned, perhaps the growth was not as high as we have seen in the previous quarter. Now going into the second half, we will have stronger promotions for the new products and as a result, the ASP.

Speaker #3: Not only that, but also the EBD medical devices, and also the skin boosters, as well as the home beauty devices, which are our focus these days.

Speaker #3: Now, they are also high drivers for us today, and will continue to be so into the future, especially for the home beauty devices in Q2.

Speaker #3: Now, there was a transition from the existing product to a new product. And because of that, as the main SKU transitioned, perhaps the growth was not as high as we have seen in the previous quarter.

Speaker #3: But then now going into the second half, it will have stronger promotions for the new products. And as a result, the ASP so we will also match the ASP from of the where this is a product as well.

Jae-ha Shin: We will also match the ASP of the predecessor product as well. We cannot specify how much it is going to be. The skin booster and the EBD, we do believe that they will also be able to drive quite a strong sales next year as well. Thank you, and we will take the next question. The next question is from Kim Yun from Morgan Stanley. Please go ahead. I am really sorry, but there is a lot of static, so it is hard to understand. Please send me a text message, and we will respond to your question later. Thank you. The next question is from Che Jin Yung from Meritz Securities. Please go ahead.

Speaker #3: So, we cannot specify how much it is going to be, but the skin booster and the EBD—we do believe that they will also be able to drive quite strong sales next year as well.

Speaker #3: Thank you. And we'll take the next question. The next question is from Kimion at Morgan Stanley. Please go ahead. There is quite a lot of static, so I'm really sorry.

Operator: The next question is from Kim Yun from Morgan Stanley. Please go ahead.

Jae-ha Shin: I am really sorry, but there is a lot of static, so it is hard to understand. Please send me a text message, and we will respond to your question later. Thank you.

Speaker #3: But there is a lot of static, so it is hard to understand. So please send me a text message, and we will respond to your question later.

Speaker #3: Thank you. The next question is from Chae Jin-young at Mercury Securities. Please go ahead. Hello? Can you hear me? Yes, we can hear you well.

Operator: The next question is from Che Jin Yung from Meritz Securities. Please go ahead.

Che Jin Yung: Hello, can you hear me?

[Analyst] (Macquarie Securities): Hello, can you hear me?

Jae-ha Shin: Yes, we can hear you well.

Speaker #3: Thank you for the opportunity. I have two questions. First of all, about marketing expenses: about 20% of revenue is used for marketing, according to your explanation.

Che Jin Yung: Thank you for the opportunity. I have two questions. First of all, about marketing expenses. About 20% of revenue is used for marketing, according to your explanation. In anticipation for major events in Q4 I'd like to know whether you're going to spend marketing expenses preemptively in Q3 as well. My second question is about B2B revenue. What is the percentage of B2B sales in Q2 out of the total revenue? Also in Latin America and Middle East, if you have any go-to market strategies for these markets, please share them with us. Thank you for your questions. Typically, before any major event, we are likely to spend marketing expenses 1 month prior to that major event. As for Q3, in my view, rather than preemptive marketing expenses, Q3 is expected to see an early recognition of air freight in Q3 instead of Q4.

[Analyst] (Macquarie Securities): Thank you for the opportunity. I have two questions. First of all, about marketing expenses. About 20% of revenue is used for marketing, according to your explanation. In anticipation for major events in Q4 I'd like to know whether you're going to spend marketing expenses preemptively in Q3 as well. My second question is about B2B revenue. What is the percentage of B2B sales in Q2 out of the total revenue? Also in Latin America and Middle East, if you have any go-to market strategies for these markets, please share them with us.

Speaker #3: So, in anticipation of major events in Q4, I'd like to know whether you are going to spend marketing expenses preemptively in Q3 as well.

Speaker #3: And my second question is about B2B revenue. What was the percentage of B2B sales in Q2 out of the total revenue? Also, regarding Latin America and the Middle East, if you have any go-to-market strategies for these markets, please share them with us.

Speaker #3: Thank you for your questions. Typically, before any major event, we are likely to spend marketing expenses one month prior to that major event. But as for Q3, in my view, rather than preemptive marketing expenses, Q3 is expected to see an early recognition of air freight in Q3 instead of Q4.

Jae-ha Shin: Thank you for your questions. Typically, before any major event, we are likely to spend marketing expenses 1 month prior to that major event. As for Q3, in my view, rather than preemptive marketing expenses, Q3 is expected to see an early recognition of air freight in Q3 instead of Q4. We have cut-off deadlines that we need to meet, and cut-off deadlines are usually 2 to 3 months prior to a major event. For that, we would have to stock up faster than usual. In order to address inventory shortage, we're utilizing air freight, and some of these air freight expenses are likely to be recognized in Q3.

Speaker #3: We have cut-off deadlines that we need to meet, and cut-off deadlines are usually two to three months prior to a major event. For that, we would have to stock up faster than usual.

Jae-ha Shin: We have cut-off deadlines that we need to meet, and cut-off deadlines are usually 2 to 3 months prior to a major event. For that, we would have to stock up faster than usual. In order to address inventory shortage, we're utilizing air freight, and some of these air freight expenses are likely to be recognized in Q3. As for commissions and marketing expenses, the Prime Day is from November, some of them may be recognized in October, but these may not be recognized in Q3 to a large extent. For the percentage of B2B sales, we are not able to provide you with a specific breakdown, but it's roughly speaking 30%. Moving on to our Middle East and Latin American market, for your information, last week, we accompanied the president's visit to Latin America and we visited Brazil.

Speaker #3: And in order to address inventory shortages, we're utilizing air freight, and some of these air freight expenses are likely to be recognized in Q3.

Speaker #3: But as for commissions and marketing expenses, the prime day is in November. So some of them may be recognized in October, but these may not be recognized in Q3.

Jae-ha Shin: As for commissions and marketing expenses, the Prime Day is from November, some of them may be recognized in October, but these may not be recognized in Q3 to a large extent. For the percentage of B2B sales, we are not able to provide you with a specific breakdown, but it's roughly speaking 30%. Moving on to our Middle East and Latin American market, for your information, last week, we accompanied the president's visit to Latin America and we visited Brazil.

Speaker #3: To a large extent. And for the percentage of B2B sales, we are not able to provide you with a specific breakdown, but, roughly speaking, it's 30%.

Speaker #3: Moving on to our Middle East and Latin American market. For your information, last week we accompanied the president's visit to Latin America, and we visited. Latin America was, in our view, a market with great potential.

Operator: Latin America was, in our view, a market with great potential, and we were able to see that in person. Our Latin American sales is not very significant, and this was not our major market. It was mainly B2B channels, mainly focusing on B2B distributors rather than large retail chains. The volume was not very big. When we actually visited the market there, we were able to see that there was a high brand awareness and awareness of K-beauty. When we meet with people who are not in the beauty business, they were even aware of Medicube and our brand. So far, we focused on Europe, North America and Asia.

Jae-ha Shin: Latin America was, in our view, a market with great potential, and we were able to see that in person. Our Latin American sales is not very significant, and this was not our major market. It was mainly B2B channels, mainly focusing on B2B distributors rather than large retail chains. The volume was not very big. When we actually visited the market there, we were able to see that there was a high brand awareness and awareness of K-beauty. When we meet with people who are not in the beauty business, they were even aware of Medicube and our brand. So far, we focused on Europe, North America and Asia.

Speaker #3: And we were able to see that in person. Our Latin American sales are not very significant, and this was not our major market. It was mainly B2B channels.

Speaker #3: We were mainly focusing on B2B distributors rather than large retail chains, so the volume was not very big. But when we actually visited the market there, we were able to see that there was high brand awareness and awareness of K-beauty.

Speaker #3: And when we met with people who are not in the beauty business, they were already aware of Medicube and our brand. So far, we have focused on Europe, North America, and Asia.

Speaker #3: But as you mentioned, Latin America and the Middle East are showing a lot of potential because we were able to see that there is high interest in K-beauty.

Operator: As you mentioned, Latin America and Middle East are boasting a lot of potential because we were able to see that there is high interest in K-beauty, and there is viral marketing such as TikTok and Instagram and social media channels, and we were able to see that there was a growing fandom for K-beauty in these markets as well. Going forward, we believe that sales can grow in these new emerging markets. However, in Q2, Latin America and Middle East figures cannot be provided, but if you want to know more details, we will communicate to you separately. There was a question from Kim on offline and B2B performance in Q2 versus outlook for the H2 of the year, and especially with respect to Europe and the US. She wants to know our plans for these major markets.

Jae-ha Shin: As you mentioned, Latin America and Middle East are boasting a lot of potential because we were able to see that there is high interest in K-beauty, and there is viral marketing such as TikTok and Instagram and social media channels, and we were able to see that there was a growing fandom for K-beauty in these markets as well. Going forward, we believe that sales can grow in these new emerging markets. However, in Q2, Latin America and Middle East figures cannot be provided, but if you want to know more details, we will communicate to you separately.

Speaker #3: And there is viral marketing, such as TikTok and Instagram and social media channels, and we were able to see that there was a growing fandom for K-beauty in these markets as well.

Speaker #3: So, going forward, we believe that sales can grow in these new emerging markets. However, in Q2, Latin America and Middle East figures cannot be provided, but if you want to know more details, we will communicate them to you separately.

Speaker #3: And there was a question from Kimion on offline and B2B performance in Q2 versus the outlook for the second half of the year, and especially with respect to Europe and the US.

Operator: There was a question from Kim on offline and B2B performance in Q2 versus outlook for the H2 of the year, and especially with respect to Europe and the US. She wants to know our plans for these major markets.

Speaker #3: She wants to know our plans for these major markets, with an online and offline breakdown. In the US and Europe—as I mentioned—it's 80% online and 20% offline in the US.

Jae-ha Shin: Online and offline breakdown in the US and Europe, as I mentioned, 80% online and 20% offline in the US. In Europe in Q2, 50% online and 50% offline. As you may know, we started online earlier this year, and there was an acceleration of growth, so more than half of growth in the online market in Europe. Moving on to our projections for Europe and the US for the H2 of the year. As you may know, in the US, we continue to offer new SKUs and best sellers as well. In the H2, in October, we have Amazon Prime Day, and also we have the Black Friday event in November. We are preparing for that.

Speaker #3: And in Europe, in Q2, 50% was online and 50% was offline. As you may know, we started online earlier this year, and there was an acceleration of growth.

Speaker #3: So, more than half of the growth in the online market is in Europe. And moving on to our projections for Europe and the US for the second half of the year.

Speaker #3: As you may know, in the US, we continue to offer new SKUs as well as best sellers. In the second half, in October, we have Amazon Prime Day, and also we have the Black Friday event in November.

Speaker #3: And so, we are preparing for that. We entered Walmart and Target in the first half of the year, but going into the second half of the year, we are planning to enter major retailers, including Costco.

Jae-ha Shin: We entered Walmart and Target in the H1 of the year, but going into the H2 of the year, we are planning to enter major retailers, including Costco. There will be a big increase in the H2 of the year for these offline channels. With initial shipments to new retailers, we will be able to see a big driver. Moving on to Europe, the UK is a leader, and Germany, France, Spain, and Italy are markets with big growth. In Amazon Top 100, there is an increasing presence of our products. If we accelerate this speed, we will be able to expand our online presence, and this will lead to a growth in offline market as well. These are going to serve as important drivers for next year. We are on track for the US market and for Europe.

Speaker #3: So, there will be a big increase in the second half of the year for these offline channels. And with initial shipments to new retailers, we'll be able to see a big driver.

Speaker #3: Moving on to Europe. The UK is a leader, and Germany, France, Spain, and Italy are markets with significant growth. In Amazon's top 100, there is an increasing presence of our products.

Speaker #3: So if we accelerate this speed, we'll be able to expand our online presence, and this will lead to growth in the offline market as well.

Speaker #3: So these are going to serve as important drivers for next year. We are on track for the US market. As for Europe, as we checked, there is a huge upside for offline sales increase.

Jae-ha Shin: As we checked, there is a huge upside for offline sales increase. Indeed, in Europe so far, we focused on marketing and Amazon Play

Jae-ha Shin: As we checked, there is a huge upside for offline sales increase. Indeed, in Europe so far, we focused on marketing and Amazon Play. For online, we didn't, but for Amazon and TikTok and online channels, we are able to increase our revenue through viral marketing on social media. There is big growth in demand for our products in Europe. I believe that sales growth in Europe will take off in earnest. We will take the next question.

Speaker #3: Indeed, in Europe so far, we focused on marketing and Amazon Play for online. We didn't. But for Amazon and TikTok and online channels, we are able to increase our revenue through viral marketing on social media.

Jae-ha Shin: For online, we didn't, but for Amazon and TikTok and online channels, we are able to increase our revenue through viral marketing on social media. There is big growth in demand for our products in Europe. I believe that sales growth in Europe will take off in earnest. We will take the next question. The next question will be raised by Mr. Kwon Eun-seong from Kyobo Securities. Please go ahead with the question.

Speaker #3: There is significant growth in demand for our products in Europe, so I believe that sales growth in Europe will take off in earnest.

Speaker #3: We will take the next question. The next question will be raised by Mr. Kwon Seong from Global Securities. Please go ahead with your question.

Operator: The next question will be raised by Mr. Kwon Eun-seong from Kyobo Securities. Please go ahead with the question.

Speaker #3: Thank you very much for taking my questions. Now, first, about the U.S. offline. So, starting this year, Target, Walmart—so, you have also entered these retailers.

Kwon Eun-seong: Thank you very much for taking my questions. First about the US offline. Starting this year, Target, Walmart, you have also entered these retailers. I believe that the channel is a bit different in characteristics from Ulta, so I wonder what the initial performance is, and also in terms of the initial operations, what has been your experience so far? The second question is, as you expand the offline presence in the US, moving from Amazon-centric to more offline, I wonder whether there are any concerns of cannibalization. Because in the offline, they say that the consumers offline are a bit different from online, so could you also share your experience so far? Last, in the US and Europe, you have also upwardly adjusted the guidance for the year.

Woojeong Kwon: Thank you very much for taking my questions. First about the US offline. Starting this year, Target, Walmart, you have also entered these retailers. I believe that the channel is a bit different in characteristics from Ulta, so I wonder what the initial performance is, and also in terms of the initial operations, what has been your experience so far?

Speaker #3: But then I believe that the channel is a bit different in characteristics from Ulta, so I wonder what the initial performance is, and also, in terms of the initial operations, what has been your experience so far?

Speaker #3: And the second question is, now as you expand the offline presence in the US, moving from Amazon-centric to more offline, I wonder whether there are any concerns about cannibalization.

Woojeong Kwon: The second question is, as you expand the offline presence in the US, moving from Amazon-centric to more offline, I wonder whether there are any concerns of cannibalization. Because in the offline, they say that the consumers offline are a bit different from online, so could you also share your experience so far? Last, in the US and Europe, you have also upwardly adjusted the guidance for the year. Out of this, what would be the share of offline?

Speaker #3: Because now, in the offline channel, they say that the consumers offline are a bit different from online. So could you also share your experience so far?

Speaker #3: And also, lastly, now in the US and Europe, you have also upwardly adjusted the guidance for the year. Out of this, what would be the share of offline?

Kwon Eun-seong: Out of this, what would be the share of offline?

Speaker #3: Thank you, first of all, for the offline revenue in the US. Now, as we diversify the channels, we do believe that there is going to be sufficient revenue upside.

Jae-ha Shin: Thank you. First of all, for the offline revenue in the US, as we diversify the channels, we do believe that there is going to be sufficient revenue upside. I did not share specific data with you earlier, in terms of the Target or Walmart, and also for the future, what we are planning for example, Costco and CVS Pharmacy, I would say that we will be able to meet the GMV that is similar to Ulta. In the US, for each of these five channels, in terms of the GMV and also the purchasing power, they are quite strong. What we have seen so far is that, in terms of the cannibalization among the offline channels, it hasn't been long enough for us to see any signs of that yet.

Speaker #3: Now, I did not share specific data with you earlier, but in terms of Target or Walmart, and also looking ahead to the future, we are planning for that.

Speaker #3: So, for example, with Costco and CVS Pharmacy, I would say that we will be able to meet a GMV that is similar to Ulta.

Speaker #3: So, in the US now, for each of these five channels, in terms of GMV and also purchasing power, they are quite strong.

Speaker #3: And also, what we have seen so far is that now, in terms of cannibalization among the offline channels, it hasn't been long enough for us to see any signs of that yet.

Speaker #3: So we can see that there is healthy growth coming from each offline channel. And then also, your question was whether there was any cannibalization between online and also offline.

Jae-ha Shin: We can see that there is healthy growth coming from each offline channel. Your question was whether there was any cannibalization between online and also offline, and we have not seen anything like that so far. It is also hard for us to figure out the reasons yet. Perhaps the offline consumers are different, and also in terms of the accessibility, it might be different by the region as well as the purchasing patterns, and the shopping patterns might also be different by the region. Yes, we are also seeing increase in offline channels, even more so, we are also seeing revenue growth in Amazon as well. So far we are seeing little to no signs of cannibalization so far. In terms of the KRW 3 trillion guidance, you also asked about the offline in the US share.

Speaker #3: And we have not seen anything like that so far. It is also hard for us to figure out the reasons yet. Perhaps the offline consumers are different.

Speaker #3: And also in terms of the accessibility, it might be different by the region as well as the purchasing patterns and the shopping patterns might also be different by the region.

Speaker #3: So yes, we are also seeing an increase in offline channels, but now, even more so, we are also seeing revenue growth in Amazon as well.

Speaker #3: So so far, we are seeing little to no signs of cannibalization so far. Now in terms of the $3 trillion one guidance, then you also asked about the offline in the US share.

Speaker #3: And for us, the guidance—now, this is actually based on the rollout plan from the first half. So, yes, there is going to be growth in the volume in the US as well. But if the offline is going to grow even more, then we actually believe that there is also some more upside potential.

Jae-ha Shin: For us, the guidance, now this is actually based on the rollout plan from the H1. Yes, there is going to be growth in the volume in the US as well. Now if the offline is going to grow even more, then we actually believe that there is also some more upside potential. Based on the guidance so far, then the share of the offline is going to be similar to where we are today, so about 20% to 25%. Thank you. We see that there are no further questions, but if there is one more, I believe that we have time to take one more question. The next question is from Han Yoo Jung, from Hana Investment & Securities. Please go ahead.

Speaker #3: And based on the guidance so far, the share of offline is going to be similar to where we are today—so about 20 to 25 percent.

Speaker #3: Thank you. So, we see that there are no further questions, but if there is one more, I believe that we have time to take one more question.

Speaker #3: The next question is from Han Yujung at Hana Investment & Securities. Please go ahead. Hello, can you hear me well? Yes, we can hear you.

Operator: The next question is from Han Yoo Jung, from Hana Investment & Securities. Please go ahead.

Han Yoo Jung: Hello, can you hear me well?

Yoo-jung Han: Hello, can you hear me well?

Jae-ha Shin: Yes, we can hear you.

Speaker #3: I have two questions. I'm not sure if this is an appropriate question, but within this month, there will be some changes to your business when it comes to lockup.

Han Yoo Jung: I have two questions. I'm not sure if this is an appropriate question. Within this month, there will be some changes to your business when it comes to lockup. The second question is that your existing products are selling well, but there is high expectation for new categories, including hair and body. If there is any number or data you can share with us, we will appreciate it.

Yoo-jung Han: I have two questions. I'm not sure if this is an appropriate question. Within this month, there will be some changes to your business when it comes to lockup. The second question is that your existing products are selling well, but there is high expectation for new categories, including hair and body. If there is any number or data you can share with us, we will appreciate it.

Speaker #3: And the second question is that your existing products are selling well, but there are high expectations for new categories, including hair and body. So if there are any numbers or data you can share with us.

Speaker #3: We will appreciate it. So, the CEO and myself, there will no longer be a lockup. For the other executives, their lockup period ended more than a year ago.

Jae-ha Shin: CEO and myself, there will be no longer lockup, the other executives, their lockup period ended more than a year earlier. As for share sales-related events, we don't have anything expecting soon. As for the remaining quarters, as I mentioned before, about a year and a half lockup period ended, a couple of times, shares were traded, but these were mainly to pay taxes for stock options. Tax payment has not been done, there will continue to be some selling of shares, there will not be any major share block deals or any major selling of our shares into the market. As for myself

Speaker #3: So, as for share sales related events, we don't have anything expected soon. But as for the remaining quarters, as I mentioned before, about a year and a half lockup period ended.

Speaker #3: And a couple of times, shares were traded, but these were mainly to pay taxes for stock options. And the tax payment has not been done.

Speaker #3: So, there will continue to be some selling of shares, but there will not be any major share block deals or any major selling of our shares into the market.

Speaker #3: As for myself, I don't have any intention to sell my shares right away. For some time, we will continue to focus on shareholder value enhancement.

Jae-ha Shin: I don't have any intention to sell my shares right away, for some time, we continue to focus on shareholder value enhancement. Going forward, if there's any plan for major share sell-off, we will make sure to communicate that with you in advance there will be no major impact on the market. What I can say right now is that there's no concrete plan for equity sell-off, our CEO is not interested in doing so any time soon. Moving on to your second question regarding our performance in the new categories. We don't have specific data to share with you at this moment. We will share them later separately, we see encouraging performance coming from the new categories. Not only the new categories, but also the mud packs and multi-balm product. We have these new SKUs.

Speaker #3: And going forward, if there's any plan for a major share sell-off, we will make sure to communicate that with you in advance so that there will be no major impact on the market.

Jae-ha Shin: Going forward, if there's any plan for major share sell-off, we will make sure to communicate that with you in advance there will be no major impact on the market. What I can say right now is that there's no concrete plan for equity sell-off, our CEO is not interested in doing so any time soon. Moving on to your second question regarding our performance in the new categories. We don't have specific data to share with you at this moment. We will share them later separately, we see encouraging performance coming from the new categories. Not only the new categories, but also the mud packs and multi-balm product. We have these new SKUs.

Speaker #3: So what I can say right now is that there's no concrete plan for an equity selloff, and our CEO is not interested in doing so anytime soon.

Speaker #3: Moving on to your second question regarding our performance in the new categories, we don't have specific data to share with you at this moment.

Speaker #3: We will share them later, separately. But we see encouraging performance coming from the new categories—not only the new categories, but also the mud pegs and multi-bomb product.

Speaker #3: We have these new SQs; their performance is really encouraging. And in the new categories—especially the hair category—is quite encouraging. On Amazon, we were ranked in the top 100, which shows that our performance is growing quite significantly.

Jae-ha Shin: Their performance is really encouraging, in the new categories, especially the hair category, is quite encouraging. In Amazon, we were ranked in the top 100, which shows that our performance is growing quite significantly. We plan to be more aggressive in the new categories, including hair and body. In addition to our existing SKU lineups, we see a huge potential for success in the new categories, including body and hair. We're planning to execute more marketing for these products as well. Thank you. It is time to conclude our earnings call.

Speaker #3: Therefore, we plan to be more aggressive in the new categories, including hair and body. In addition to our existing SKU lineups, we also see a huge potential for success in these new categories, including body and hair.

Speaker #3: So, we are planning to execute more marketing for these products as well.

Speaker #1: Thank you.

Speaker #2: And it is time to conclude our earnings call.

Speaker #3: Thank you again for taking the time to join us today. Everyone at APR remains fully committed to delivering sustainable growth through continued innovation and disciplined execution.

Jae-ha Shin: Thank you again for taking the time to join us today. Everyone at APR remains fully committed to delivering sustainable growth through continued innovation and disciplined execution. We sincerely appreciate your continued interest and support. This concludes APR Q2 2026 earnings call. Thank you.

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Q2 2026 APR Co Ltd Earnings Call

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