Good morning to those virtually piping in and those physically in the room. I'm Mark Mahaney with Evercore ISI. This is our annual tech conference in the wonderful city of San Francisco. I gave a commencement address this weekend and I made the mistake of mentioning AI. For the rest of my speech, I had to shout over the hecklers and the protesters. Okay. I lost my voice. We're here, and we're thrilled to kick it off with David Lee, who's the CFO of WEBTOON. WEBTOON is a company that we've covered since its IPO. It's a unique asset, with a dramatically large presence in markets like Korea and Japan, growing presence in North America and in Europe and in the rest of the world. A digital entertainment, digital comics company, it's kind of a N of one. There are some competitors, they're very few. The question really all along has been how big is the TAM? How well can they diversify their revenue streams? How well can they execute? They've had some very notable corporate developments along the way, including a fascinating deal with Disney, we're going to talk about that a little bit. That's kind of the setup on WEBTOON. It's only a company that's been around for the IPO was about a year ago. Yeah, about two years ago, actually. Two years ago. Wow. David, thanks a ton for joining us today, and so I'm going to ask you to start us off at the high level. For those investors who are less familiar with WEBTOON, give us the quick overview better than I did of the company. Talk through what I think is a little bit of a flywheel in terms of getting more creators, more users, more content, monetization, and how that builds a moat around the business. That's great. First, thanks for having us, and you're right, WEBTOON is kind of an N of one. Let me see if I can do it justice. First of all, for those in the room who aren't our targeted Gen Z audience, it may be that you've never heard of the company, or the brands that are associated with WEBTOON or Wattpad and digital novel business. I bet your friends and colleagues who are 18 to 25 have. Let me explain it. It is a digital storytelling hub where you have, on the one hand, 27 million creators, the vast majority of whom are not professional creators. They have daytime jobs like many in the room here, but they have a story in their head that they want to tell. Oftentimes, these creators, they don't come to us because they're diehard fans of comics, despite our name. They're diehard fans of telling a story. CANVAS is what our English-facing supply chain for story app is. It uses AI, auto translation, and a lot of other great tech to enable anyone with a story to tell to have a chance to tell it to the other side of the marketplace. 145 million monthly active users who spend, on average, 30- 60 minutes per day on our platform, on our app, on their phones. If you look at this country or this region, North America, the least developed but largest TAM, where we saw double-digit growth in top-of-funnel metrics last year in MAU, and now we're seeing solid MPU growth. It's predominantly Gen Z. This generation wants to discover, publish on their own, and create a social followership around stories, and they want to find them from unexpected places. We do about $1.4 billion in revenue, primarily from a paid content business. We've yet to meaningfully diversify our business into advertising, which is a frontier ahead of us. We have about 900 examples where our stories not just do well on our platform, they become hits outside of our platform. 100 rich film adaptations, we'll talk about a few of them today. Stuff on Amazon Prime, and on Netflix, and on Tubi, which benefits us and our creators because we pay them on a rev share basis. Their future success is our future success. That's a little bit about the company, and we can get into more details in a bit. Let's break it apart geographically to start with. Home country, Korea. Talk about your positioning in the Korean market and just remind us of some of the basic data points. What percentage of the Korean population is on WEBTOON? Then talk about the diversification that you're attempting. I think this is one of the first markets where you're really trying to break out into advertising revenue. Yep. Korea, our country of origin, the place where our founder and CEO, Junkoo Kim, started the company, we have 50% market penetration. We're an everyday household name. Correspondingly, if you look at the major hits in Korea, from, say, Netflix, some journalists have written that nearly half of the big K-drama hits in Korea started as stories in what we call Naver WEBTOON, which is our brand name in Korea. When you look at this market, it's every genre. Some people think, well, is this for diehard manga fans, Korean creators for Korean consumption? That's not the case. If you look at major hits globally, we're seeing K-pop, "Demon Hunters," which was not ours, but examples of every genre. Romantic comedies targeting young adults. It's every kind of story you want in Korea, and we're like the Kleenex of digital entertainment there. When you look at that business, it's a great origin story market for us, but it's not our biggest market. It's about 40% of our total revenue. We're going to cover Japan in a second. Japan is actually a much larger part of the business, and North America and the rest of world is coming on strong. For our most mature market, I'm pleased to see that we're using AI personalization engines. We powered in the last reported quarter, 13.9% constant currency revenue growth in Korea from the traditional paid content model. There, in Korea, we have actually diversified our business model outside of paid content. Let me explain paid content for a second. That term can mean many different things. When I was in mobile gaming, turning around Zynga or in e-commerce, paid content meant something different. Here, it's not a subscription. It is literally on average a $0.15-$0.70 micro purchase for a consumer to see the next weekly episode that drops. It tends to be a weekly rhythm or cadence for that business. Our advertising business in Korea is much more mature with many diversified products, but we really meaningfully have not deployed that business model extensively outside of Korea. Just starting in Japan and even more nascent in North America. We can talk about Japan next. Yes. Just might as well go in sequence. Yeah. We'll cover rest of world last. Japan's a great story for us because it's 48% of our revenue. It's our largest geographical region. We see, by the way, the company's average monthly ARPU is $12. In Japan, it's $22.50. That market, which is three times larger than Korea, has a cultural history of purchasing great digital content. What's been great for us is it was a demonstration that we could enter a brand-new region in a brand-new language in a highly competitive market and rise to become the dominant leader in our category and format. In Japan, because we saw it in 2024 grow double digits, it was our largest rocket ship growth at the company, we took the last several quarters to pause on growth and focus on what's called infrastructure. What that meant is for the last three or four quarters, it has been painful for me as a board member and the CFO to have to tell investors, "Hey, Japan growth is coming back, but we got to set it up for persistent high growth given how large it is." We completed that infrastructure project at the end of Q1, and a lot of what you saw us already deploy in a proven way in Korea and rest of the world, like video episodes, AI developments and AI personalization, anti-piracy, these things are now going to flow to Japan because we've completed the shore up of infrastructure, and we're excited to return it to that same rate of growth that we saw in 2024. There, if you think about Korea at 50% penetration of the market, there we're at around sub-20, but growing fast. If you looked at that business when we IPO'd, it was maybe half the penetration. That is a future rocket ship. If I could, I might as well cover rest of world. I was going to ask you a question, but go ahead. No, no. Ask a question. I'd rather you ask a question. What I find interesting in the setup on the stock is when we look at this paying ratio, the percentage of users that are paying. In Korea, it's kind of a decent benchmark. You have to ask yourself how good of a proxy is this for the rest of the world? In the rest of the world, the paying ratio is very low single digits, whereas it's mid-teens in Korea. That's a great unlock if it exists. Yeah. Talk about the potential there and how you unlock that. How do you get that paying ratio to rise up to Korean levels? Yes. Great question. Paying ratio is literally the metric. I just want to define it. It's the percent of monthly active users that actually pay. First, on paying ratio broadly, in all markets, we're seeing this crazy phenomenon, which is not common, where when someone starts to pay, when they make that first $0.15 - $0.70, I want to see that next weekly episode drop. Without heavy marketing investment, we tend to see over a three-year cohort period, people organically want to pay more because they have more confidence they're going to find a new story. Remember, we have 120,000 new stories we reported in recent quarters arrive every day. Unlike my former days in mobile gaming or in commerce, I'm not squeezing fixed IP. I have new IP showing up from 27 million creators every day. To answer your question, in what we call ROW, North America, everything outside of Japan and Korea, the paying ratio is 1.5% as reported. If you look at Korea, for example, you're right, it's in the teens. Well, first There's a definitional structure part. In ROW, in North America, we include a business called Wattpad. Wattpad is very small in terms of our reliance on revenue, but is very large in allowing creators globally to write new stories in the form of a web novel. Web novels are easier to write. It's intentionally designed to be a larger pool with a lower barrier of entry to write. Because we don't choose to monetize our Wattpad audience in ROW, and we really rely upon paid content revenue from our web comic format, it lowers the number. If I were to exclude Wattpad, and remember, Wattpad's purpose is to generate IP, is to generate more and more creators who want to contribute to writing. If I were to exclude Wattpad, you would see that paying ratio be closer to mid-single digits. That is in low teens. If you look at Japan and other markets, as habituation grows, as the top of the funnel grows, you see MPU grow. Then you see ARPU grow. Then you see paying ratio grow. It's what we've seen in Japan. I think we're potentially beginning to see that in the rest of world in paid content. Great. I want to ask you about Disney, the Wattpad turnaround, which you're responsible for, and then this goal of re-accelerating to double-digit constant currency growth by the end of this year. What we've put in our research is that if you can hit that goal, I think there's an opportunity for a dramatic re-rating in the stock. People aren't going to give it to you until you prove it. First, let's talk about the Disney platform. Just bring us up to speed. The stock popped last year when you announced that a series of Disney content, Star Wars, Marvel, would be on the platform. People were looking for how are you going to unlock this paying ratio in the rest of the world, and boom, you got Disney. Talk about how that builds, and then what specifically will be launching later this year. Yeah, that's great. First, we're very privileged and lucky to have a collaboration with Disney. Let me talk about the role of Disney and other external partners, and then I'll be specific about Disney. If we didn't do a deal with Disney, or if we didn't do the deal we announced with Warner Bros., or if you didn't see us on Crunchyroll powering their manga, we would still grow, but we would be a very steady Eddie growth story in North America. We would grow. The consumer has spoken. The consumer wants this. I did a study of 3,000 North American consumers, and they say they can't find these stories anywhere else, including on Netflix or TikTok or Roblox, because we have the 27 million creator ecosystem. Just 20+ years. Absent a partnership externally, I believe product market fit is demonstrable, but the growth would be slower. Doing this partnership with Disney has been wonderful because it has three components. First, we have the ability to tell stories on our platform in our format as a web comic. Even since Q4, our previous posted quarter, there are five more that you can find. I think a total of 12, although I'll have to check if it's more already. Things like Star Wars, and other great franchises they own. The second part is even more interesting. We have the ability to work with them and create brand new to the world, what we call original stories based on their universe of franchises. Imagine a bat character and pick your favorite Disney, Pixar, 20th Century storyline. Maybe it's Tony Stark's, I don't know, fill-in-the-blank bat character. Wonder if 27 million creators could be leveraged to tell a brand new to the world story featured in one of their universes on our platform. We call it an Originals, we've done it before. We've done it with DC Comics, with Batman. Those original stories, as I mentioned, is what Gen Z is looking for. They're looking for something new. We're really excited about the second part. We've talked about launching a second Original by the end of this year. Then there's the third part of the deal, which is we are going to create and run a new to the world direct-to-consumer platform leveraging all of Disney's access to stories. You may know that they have something called Marvel Unlimited. It has a fantastic followership amongst those who are fans of Marvel. We'd like to think we can bring to the partnership the ability to leverage our strong Gen Z female-oriented brand followerships along with our male and older generation followership. We hope to make it a win-win. That is due to launch, we said, on time by the end of the year. By the way, Disney took a 2% stake in the company at a little bit over $12 per share. We really have mutual alignment on our growth. I view it as a wonderful opportunity to speed up our adoption in rest of world and to do it starting in 2027 and beyond. That's Disney. Great. Wattpad. Wattpad. Wattpad. There is a need for a turnaround. You had a couple of unusual circumstances in a couple of markets where markets that don't like freedom of expression- Right. Is my understanding. You were shut down in those countries to be unnamed. There's also other things I think you're taking over. You're trying to turn it around. Talk with us about the turnaround strategy. Sure. Well, now speaking as the newly installed president of Wattpad, I have spent the last four to six weeks independently looking at it as the one who needs to turn it around and run the business. I can be a little more specific, I think, today in that role than in my ongoing role as CFO. To cover the history, we are in good company in that there are a couple of countries not to be named who have actually publicly been noted to have blocked great other companies. Companies like Roblox, for example, and others, many others, Discord. I would think of that as an unfortunate headline for us in the 2024- 2025 period. This impacts the stock because while I don't count on Wattpad MAU for revenue, paid content revenue, it shows up in my $145 million number. As investors are trying to get to know us and they're like, "Well, David, your total MAU declined, but your revenue's going up. In Korea, paid content's up 13.9%. I don't get it." Part of it is because we include Wattpad in our MAU that we primarily use Wattpad for IP generation and creator content. Here's what I can say about Wattpad. I believe we have to go back to basics and actually fix the fundamental proposition from a product standpoint. The 20th anniversary for Wattpad is in Q4 of this year in 2026. I intend by that anniversary to be able to demonstrate and show you a revamped experience for the readers and the writers because the fandom, like the inherent core reason why Wattpad has reached its large scale exists. In fact, fan fiction has become so mainstream in media entertainment, and we are an epicenter of it, that if I can create a trusted environment with improved products, leveraging tech, by the way, from not just within Wattpad, but for example, the AI tech that I've mentioned we're deploying to Japan, having proven it out in other markets. I think we're going to have a great anniversary, and I think you're going to see that business not just be a passive source of creators and a passive source of MAU, but I think you're going to see it revamped to have a chance of monetizing in its own right. It's also core to the advertising story. I want to be clear, before I monetize Wattpad for ads, I want to bring it back to basics and target that 20th anniversary in Q4 so that we can really set it up for long-term success. All right, this gets back to, I think you've said this goal twice now on your last two earnings calls about exiting 2026 with double-digit percent constant currency growth. Yeah. You've laid out a couple of the levers to get there, Wattpad, Disney, closing this ROW paying ratio gap. How do we gain confidence that you can get to that double-digit percent exit revenue growth rate? Well, first, double-digit constant currency growth exiting this year is not a gimmick. It won't come from just lapping a poor prior year comp, though there are some of that if you look at the previous year periods. It's got to come from the business itself. We talked about the paid content engine in Japan being 48% of our revenue. We talked about what we're already seeing, double-digit growth, 13.9% constant currency growth in Korea. That's got to continue. For investors, I think you can look at Korea, which is 40% of our revenue, and say, "I'm seeing 13.9% constant currency growth in the paid content part of the business last quarter." They noted that advertising was highly dependent, was a little over-concentrated in the hands of a couple advertisers, which they're working through. There, there's more proof evident, I think, in the last quarter. Remember, we spent a year deploying improved product through Yuki Chae. By the way, Yuki ran Korea, turned it around. That's why we're seeing such great results there. He's now our global chief product officer, and he's turning attention now to deploying some of the same relevant improvements to Japan under the leadership of Yongsoo, who we promoted to president. I think you're seeing it already in Korea. I think in Japan, you have to believe that the double-digit growth we saw in 2024, before we paused and worked on infrastructure, that some portion of that, not all of it, but just because you can do the maths, just some portion of that begins to recover by the end of the year. With regard to Wattpad is actually not a driver of revenue. All the stuff I described for Wattpad was to preserve the call option on a very large ad business in 2027 beyond. It's to set it up for a growth in rest of world for the mid to long term. You don't have to believe much in Wattpad, though I hope you believe me that by the 20th anniversary, we will have a revamped Wattpad. You have to believe in what you're seeing in webcomic paid content in rest of world. Last year, we had top-of-funnel double-digit growth in places like what we call English webcomic MAU. You're now seeing MPU grow, right? You know how the pattern works. People start to use the app, then they start to pay to use the app, and then the two accelerate each other. I think having partners like Disney, having the animation partnership with Warner Bros., seeing "Love Me Love Me" become a hit on Prime Video. These off-platform initiatives are the cheapest way for customer acquisition costs to be deployed. When a North American, when you see a hit on Netflix or Amazon Prime or Tubi, it's a natural, cost-effective way for you to ask, "Who wrote that? What else did they write? What was the source of it?" We are. That will accelerate to deliver that double-digit growth. It sounds like there are five drivers to get back to this double digit, and I'm oversimplifying it, correct me. You got some easing comps, continuation of the success you've had in getting Korea paid content growth back up to that kind of low mid-teens, Japan infrastructure turnaround, Wattpad, and then closing the- Yeah. The rest of world. The webcomic growth in our English app- Yeah Is the other part of it. Okay. Let's talk about AI translation or the use of AI, and how that affects your cost structure. I think you're pretty aggressively leaning on AI in terms of helping translate a lot of that content to globalize the content. Just talk about that. First, I want to be clear, maybe reprising your opening comments regarding the graduation ceremony speech that you recently gave. We are all for human creators. Our whole business model is around human creators. The good news for us is human creators are the best storytellers, period. We have great AI that we pioneered over many years. We also know the best AI from everybody, and for people who want to spend an average of 30-60 minutes or more per day reading a story of any format, human storytellers are the best. Having said that, we are super aggressive at using AI to empower our human creators and to protect our business. First, it's a wonderful example. For 27 million creators, some of whom are creating in English, to go to CANVAS, which we just revamped, we just rolled out. To have the ability to opt in, to have an auto-translation in seven languages. People think it's like a cost play only. It is beneficial to cost structure to have AI auto-translate. It's a huge game changer, potentially, for creators to have access to markets among Gen Z who really want to see a story from a different part of the world. We think it actually improves the viability of what we've already proven, that hardworking, full-time employee creators have a chance to be full-time creators on our platform itself because we create global access to markets. Our work in using technology to fight piracy, there has been notable progress to do that, and a lot of companies don't like to talk about it. We think we have a competitive advantage here from our technology. The use of our AI to create deeper engagement. You saw us partner, actually, acknowledge that we don't have to do it all. We partnered with Genies, I think we've discussed this, to be able to have great AI-powered digital characters. Imagine, I think about my former days at Zynga. At Zynga, people were playing Words With Friends, where people at the same time were engaged in the same game. How much we would leverage that relationship with each other, the rich profiles, and how much it monetized for us as a mobile gaming company, but also it deepened the engagement amongst our players. All of that we've yet to do. Like we know people who are reading the same story at the same time. Enabling deeper engagement in social and communities with things like digital characters that could interact in new ways down the road. There's so much going on that we don't talk about because we don't want the misperception to get out that we are seeking to harm in any way our human storytellers. They are the best in the world. We're cutting hours out of their day by helping them draw faster. We're recommending more stories to people in Korea. It shows up as ARPU. AI is a big part of the business at WEBTOON. Okay. Go on a little bit of a tangent. Korean culture has always sort of punched above its weight in terms of global influence. You think about some of the most popular, at least film, video, whatever, a surprising percentage, given the size of the country, has come from Korea. I would assume the same thing should be the case with web comics. Why do you think that is? Well, first, this is obviously not WEBTOON's point of view, this is just my point of view. I think there are three components. There are terms that have been used in the past on this phenomenon. First, globally, Gen Z, the digital consumer of entertainment and food, by the way, are open and desire something new, and are open to looking at any part of the world for it. This is not just about Korea. The part that is remarkable is Korea has demonstrated the ability to tell, at least in entertainment, really compelling stories that North America audiences want. Marry My Husband was a great example. It was a web novel on our platform. We turned it into a global, translated multiple languages, a global web comic on our platform. Then it debuted on Amazon Prime, and it was global number one because increasingly, as I mentioned in the first part, consumers just want a great story, and they're willing to go anywhere for it. I think the second is that we have developed an evergreen storytelling engine. Like having 27 million creators using technology be able to see if they can quit their full-time job to be a full-time storyteller is unique. I think the industry has not had a global evergreen source of stories in this format. Web novels at Wattpad, right? It's the easiest way to tell a story. You literally do it in text, and yet it is, if you look at web novels and audiobooks and other forms of it's a double-digit global industry. I think the first part is that consumers now want it, the second part is technology has enabled an evergreen source of it. I think the third part of it is you saw the industry recognize this in particular, for content and sources of pop culture influence from Korea, and rally around it. I think we're going to do the same. By the way, I'm as big a believer in the nascent English local creator pool that we're creating on CANVAS exporting in a very traditional way to Asia and to Europe. Our flywheel is not dependent on Asian to non-Asian exports only. Our flywheel is built for every source of creator storytelling to export to every source of MAU consumption. We definitely have benefited from the popularity of content from Korea. You had some recent management changes, or you elevated a new executive to be president, and he's talked about these focus areas, operational goals, specifically in the North American market. Talk us through that management shuffle? Yeah. What investors should expect to come out of it. Well, there are now three members of management on our board. First, our founder, CEO, JK, Junkoo Kim, is incredibly active and totally engaged. He has now the ability to focus on some of these really interesting game-changing growth initiatives beyond the day-to-day business. Yongsoo Kim is the gentleman that we elevated to President and joined the board, and he is running the day-to-day business. As the CFO, I'm more focused on the corporate things, but I'm also focused on Wattpad, in that it's an important business for us where I'm President. The initiatives that you'll see Yongsoo lead are all around what he's already proven. He ran the North America and global WEBTOON business. You saw video episodes arrive on the platform. You saw a revamp globally of CANVAS, the supply side for amateur storytelling with AI-powered auto-translation. I think you're going to see much more contributions from Yongsoo globalizing the operation, leveraging AI, and setting us up as a public company to operate on an ongoing basis with more maturity. You will continue to see JK lead on the most important strategic initiatives, and I intend to celebrate the 20th anniversary of Wattpad with a turnaround there and to be back speaking with you on an ongoing basis, too. I feel like the division of labor, from my perspective, it was an important necessary step and a good one. Hopefully bears fruit in that double-digit growth that we're committed to by the end of the year. All right. Last two questions. The brand collaboration playbook, can you just talk through that a little bit? Yeah. Well, first, you're going to see a lot more of what we've successfully announced in the past. What have we done in the past? I think if you look at in North America. What we did with Duolingo was such a wonderful way to say, "Hey, we both have strong demographics," right? Super attractive Gen Z demographics. We both have strong engagement. Why not have Duolingo partner with us, Duo, the iconic owl from Duolingo, create original stories on our platform? They were hits. People really wanted to see these new stories from Duo. You saw us do that in the past. That was a huge success we talked about in previous Q calls. You're going to see us do similar types of initiatives because it's the most unique form of customer acquisition at the lowest expense. People want unique content, and when we can partner with great partners, have a similar engagement and demographics, it's much more effective than just trying to buy top-of-funnel growth, which we tend not to do. Our previous work with Discord is a great example of something similar, and I would also say beyond what we've done with great partners in content, including Disney and others off-platform. We talked about 20 animation projects coming out of Japan. That takes longer to come to fruition, but that is on track. I was on stage recently with Warner Bros. Animation at the Web Summit in Vancouver, and I'm similarly on stage with Prime Video, where these off-platform deals that we've announced and having them come to fruition off-platform, I think they're wonderful awareness-building ways. Let me give you one quick example. Kissing Is the Easy Part, okay, a Wattpad story. You could see us develop that into a web comic story and leverage its success on Tubi. Sidelined: The Quarterback and Me, which is a huge success on Tubi, and its sequel was a huge success. Those things give us opportunity to leverage and partner with others in a way that can grow top of funnel in a much more effective way. All of that, more to come. I think I can point to those examples as what we know works, and we'll see more of it in the future. Okay. Last question, getting specific about Disney here. There's 12 reformatted Disney titles that are already live. What can you tell us about what that's done to engagement, new users, reviving old users? Yeah. First, I believe that the work that we're doing with Disney is early in its development, but I do think it has an impact that's positive, for example, to the WEBTOON business we have. Those stories, those 12 reformats were in our English WEBTOON platform, and you're seeing strength in our English WEBTOON platform. How much causality you associate with that will be unsaid. I think its impact will be much greater in the future as we deploy these other aspects to the partnerships, like the original stories, as well as this brand new to the world consumer platform. I think that while we really believe that Disney is a game-changing partnership for us, it's a partnership that was built for the mid to long term. It was never designed to juice a quarter or two out. You'll see us stay on track, which we are, hit our deadlines, build that momentum, that flywheel, if you will. I think it'll be meaningful, but I think it's down the road. Okay. I'm going to bring this to a close. To me, the big takeaway is we go and look at a business that's been a little bit erratic, and we've had some management changes, too. There's a very clear goal out there, this double-digit constant currency revenue growth. If we re-accelerate, if the company can re-accelerate to that level and set that up as a base for next year, I think that would give a lot of investors a lot of conviction. In the meantime, you've been able to kind of maintain that modest profitability. The business can generate cash. If you put those things together, I think that's the interesting setup. It sounds like to you that we should just be just as confident in that today as we were when we heard you pitch it on the last two earnings calls. With that, David Lee, thank you very much.