Webtoon Entertainment, the U.S. headquarters of Naver Webtoon, said on Aug. 10 (local time) it posted second-quarter revenue of $338.47 million (about 507.9 billion won). That was down 2.8 percent from a year earlier.

On a constant-currency basis that removes the impact of a weaker won and yen, revenue was $366.39 million, up 5.2 percent year on year. The gap between reported revenue and constant-currency revenue was due to currency weakness in South Korea and Japan, its main markets. On a constant-currency basis, revenue rose in all three segments: paid content, advertising and IP business.

By segment, paid content revenue was $263.94 million, down 4.0 percent, and IP business revenue also fell 2.6 percent to $27.4 million. Advertising revenue rose 4.2 percent to $47.12 million, helping narrow the overall revenue decline. On a constant-currency basis, paid content rose 4.3 percent, advertising increased 11.5 percent and the IP business gained 4.2 percent.

By region, South Korea and Japan showed contrasting trends. South Korea revenue rose 10.1 percent (20.0 percent on a constant-currency basis). Monthly active users increased 5.9 percent to 24.3 million and monthly paying users rose 10.4 percent to 3.8 million. The company said advances in AI-based recommendations and customer relationship management, and the introduction of fan-tier badges, led to more paying users. South Korea paid content revenue rose 16.0 percent on the back of that.

In Japan, MAU and MPU fell 3.3 percent and 9.5 percent, respectively. Japan revenue fell 15.4 percent (6.7 percent on a constant-currency basis) to $150.4 million, with paid content revenue down 15.6 percent.

Profitability was affected by increased marketing investment. Net loss widened to $14.58 million (about 21.9 billion won) from $3.88 million (about 5.8 billion won) a year earlier, and adjusted EBITDA fell to $5.48 million (about 8.2 billion won) from $9.66 million (about 14.5 billion won). Adjusted EBITDA, however, exceeded the upper end of the company’s earlier forecast. The company said it had $583.1 million in cash and cash equivalents and no standalone borrowings.

Webtoon Entertainment also disclosed separately on the day that it signed a definitive agreement for a strategic investment in Arigames Holdings. The move is aimed at securing a game development pipeline based on popular webtoons and expanding IP into additional content formats such as games. It also plans to set up a $100 million IP adaptation fund jointly with Naver to move away from a licensing model and pursue direct investment in IP and expanded ownership.

Junkoo Kim (김준구), Webtoon Entertainment’s founder and chief executive officer, said at the earnings announcement, "Through innovations such as Storychat 'Bias' and AI auto-translation, we expanded user engagement on the platform." He added, "We are advancing our IP strategy to secure more of the long-term value created by the ecosystem by increasing direct investment in IP."

Webtoon Entertainment projected third-quarter revenue growth of 0.7 to 3.3 percent on a constant-currency basis. That implies revenue of $358 million to $368 million.