WEBTOON's Q3 2025: Contradictions Emerge on Disney Partnership Revenue, Wattpad MAU Stabilization, and Security Challenges

Date of Call: None provided

Financials Results

• Revenue: $378 million, up 8.7% year-over-year (9.1% on a constant currency basis vs Q3 2024)
• EPS: GAAP loss per share of $0.09 vs. $0.15 EPS prior year; Adjusted EPS $0.04, down from $0.22 year-over-year
• Gross Margin: 21.9%, down from 26.3% in the prior year (gross profit $82.8M, down 9.4% YOY)

Guidance:

• Q4 2025 revenue expected $330M–$340M, a constant-currency decline of 5.1% to 2.3% (midpoint $335M)
• Q4 adjusted EBITDA loss expected $6.5M to $1.5M (margin -2% to -0.4%); guidance includes $16.5M noncash expenses (actuarial losses and minimum guarantee write-downs)
• Expect pressure from timing of IP-adaptation milestones; paid content expected to be up
• Infrastructure updates mostly complete in Q4 but some items may linger into early 2026; maintain marketing investments

Business Commentary:

• Revenue Growth and Disney Collaboration:
• WEBTOON reported total revenue of $378 million for Q3 2025, up 8.7% or 9.1% on a constant currency basis compared to the same quarter in 2024.

• The growth was driven by a broadened relationship with Disney, including a nonbinding term sheet for an all-new digital comics platform and a 2% equity stake acquisition by Disney.

• MAU and Engagement Trends:

• Global MAU declined by 8.5%, primarily due to a government ban impacting Wattpad in two countries.

• Despite this, the English platform WebComic app MAU grew by 12% year-over-year, reflecting increased user engagement and future monetization potential.

• Product Innovation and Partnerships:

• WEBTOON introduced video episodes and Cuts, short-form video features, which have shown promise in enhancing user engagement and creativity.

• Strategic collaborations were announced with Warner Bros. Animation for 10 fan-favorite WEBTOON series and with Disney to develop a slate of animated projects.

• Earnings and Financial Health:

• The company reported an adjusted EBITDA of $5.1 million, slightly above the midpoint of guidance.
• Despite a net loss due to lower other income and higher income tax expense, WEBTOON maintained its focus on long-term growth and investment in product development and marketing.

Sentiment Analysis:

Overall Tone: Neutral

• Management highlighted revenue growth ($378M, +8.7% YOY) and strategic partnerships (Disney, Warner) while reporting a net loss and lower gross margin (21.9% vs 26.3%). Q4 guidance forecasts revenue decline and adjusted EBITDA loss but underscores long-term confidence: “we remain confident in our ability to drive further progress.”

Q&A:

• Question from Benjamin Black (Deutsche Bank): Can you elaborate on the long-term vision of the Disney partnership beyond the initial slate of titles — revenue potential and margin profile versus the core WEBTOON app? And what early engagement or monetization metrics are you seeing from video episodes versus static webcomics?
  Response: Too early to quantify Disney's financial impact; collaboration is long-term and not expected to materially change the company's margin structure. Video episodes are an early experiment showing promise for Gen Z engagement but no measurable monetization metrics yet.

• Question from Matthew Cost (Morgan Stanley): On the Warner partnership, any timing or economic details? And regarding user figures, will you break out web novel vs webcomic MAU regularly, and should we be concerned about declines in web novel users?
  Response: Warner: announced slate (~10 projects) but no timing/economic specifics and no change to the financial model. On MAU: Wattpad drove total MAU declines (search-index fix partly resolved; bans in two countries remain); management will emphasize webcomic/English MAU as the key paid-content metric.

• Question from Douglas Anmuth (JPMorgan): Please explain drivers of the Q4 guide and how much is due to timing of IP adaptations versus the Korea e‑commerce ad partner decline; how does this position you into 2026?
  Response: Q4 guide weakness is primarily timing/lumpiness of IP-adaptation revenue; paid content is growing. Ad softness partly driven by one large Korean e‑commerce partner but not viewed as structural. Guide also includes $16.5M of noncash charges; management remains positive on '26 fundamentals.

• Question from Andrew Marok (Raymond James): How is engagement progressing with Disney content relative to expectations, and what's advertiser appetite for new platforms/channels into Q4?
  Response: Engagement with Disney content is encouraging but too early for quantified metrics; management is bullish on Rest of World. Advertiser interest is strong (pre-roll success in Japan), but North America/Rest of World monetization is early as infrastructure is being built.

Contradiction Point 1

Disney Partnership Revenue Potential and Margin Profile

It involves differing expectations regarding the financial impact of the Disney partnership on revenue and margin profiles, which are crucial for understanding the company's strategic direction and financial outlook.

What is the long-term vision for the Disney partnership beyond the initial titles? How does the revenue potential and margin profile of the new joint platform compare to the core WEBTOON app? What early engagement and monetization metrics are you seeing compared to static webcomics? - Benjamin Black (Deutsche Bank AG, Research Division)

20251113-2025 Q3: We're building this collaboration for the long term. It's too early to provide financial impacts, but we're not expecting a material change to our margin structure. - David Lee(CFO, COO & Director)

What is the long-term vision for the Disney partnership beyond the initial title slate? How does the new joint platform's revenue potential and margin profile compare to the core WEBTOON app? What early engagement and monetization metrics are you seeing compared to static webcomics? - Benjamin Black (Deutsche Bank AG, Research Division)

2025Q3: We aren't expecting a material change to our margin structure. The Disney partnership doesn't preannounce any financial impacts. - David Lee(CFO, COO & Director)

Contradiction Point 2

Wattpad MAU Stabilization and Growth

It involves differing expectations regarding the stabilization and growth of Wattpad's Monthly Active Users (MAUs), which is a key metric for user engagement and revenue projections.

Can you provide details on the timing and financial terms of the Warner partnership? Are you planning to separately disclose web novel MAU in your regular reports? How should we view the future of web novel users? - Matthew Cost (Morgan Stanley, Research Division)

20251113-2025 Q3: The Warner partnership highlights our role as a source of stories in various formats. We're not providing specific details yet. Regarding MAU, while total MAU is down, webcomic app MAU is up, especially in English-speaking markets. - David Lee(CFO, COO & Director)

What are the timing and economic terms of the Warner partnership? Are you considering breaking out web novel MAU in regular disclosures? How should we think about web novel users going forward? - Matthew Cost (Morgan Stanley, Research Division)

2025Q3: Wattpad impacts total MAU, but webcomic app MAU is a better predictor of future growth. Wattpad's issues are due to search engine indexing and government bans in two countries. We expect stabilization as these issues resolve. - David Lee(CFO, COO & Director)

Contradiction Point 3

Wattpad MAU Decline and Security Issues

It involves explanations for the decline in MAUs on the Wattpad platform, focusing on the impact of government bans and security issues, which are crucial for understanding user growth and platform health.

What are the timing and economic terms of the Warner partnership? Will Wattpad's MAU decline continue? - Matthew Cost (Morgan Stanley)

20251113-2025 Q3: The Wattpad MAU decline is mainly due to government bans, search engine issue resolved. We focus on webcomic MAU growth, especially in English markets, as key revenue drivers. - David Lee(CFO and COO)

Can you provide more details on the security update to Wattpad and its impact? - Matthew Witkos (Morgan Stanley)

2025Q1: Wattpad's issues, including a security upgrade and a government ban, significantly impacted MAU. We're addressing these problems, but impacts will persist through Q2 and possibly Q3. - David Lee(CFO and COO)

Contradiction Point 4

Disney Partnership and Revenue Potential

It involves differing statements about the financial impact and revenue potential of the Disney partnership, which could influence investor expectations.

What is the long-term vision for the Disney partnership and its revenue potential/margin profile? What early engagement and monetization metrics are you seeing from video episodes compared to static webcomics? - Benjamin Black(Deutsche Bank)

20251113-2025 Q3: The Disney collaboration is an early stage opportunity with an upcoming 35,000-story platform and potential original content. No financial impact disclosed yet. - David Lee(CFO and COO)

How does adding established IP like Disney affect user growth and monetization? Can you share unit economics for content providers on the platform? - Eric James Sheridan(Goldman Sachs Group, Inc., Research Division)

2025Q2: This partnership is significant due to Disney's vast IP portfolio, including Marvel, 20th Century Studios, and Star Wars. It aims to attract new users and create new generations of fans. The collaboration is structured for long-term value, with no immediate financial impact as of now. - David J. Lee(CFO, COO & Director)

Contradiction Point 5

Wattpad MAU and User Growth Strategy

It involves differing statements about Wattpad's MAU performance and the company's user growth strategy, which could impact market perception and strategic planning.

Can you provide details on the timing and economic terms of the Warner partnership? Will Wattpad's MAU decline continue? - Matthew Cost(Morgan Stanley)

20251113-2025 Q3: Wattpad MAU decline is mainly due to government bans, search engine issue resolved. We focus on webcomic MAU growth, especially in English markets, as key revenue drivers. - David Lee(CFO and COO)

How to evaluate user trends in the English WebComic app moving forward? - Unidentified Analyst(Deutsche Bank)

2025Q2: The English WebComic app MAU is growing, driven by new onboarding processes and product enhancements. The focus is on discoverability and habituation of users, particularly in the U.S. - David J. Lee(CFO, COO & Director)