Soop Co., Ltd. (A067160) Earnings Call Transcript

Good morning and good evening. Thank you all for joining the conference call for the Soop earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on Soop's Third Quarter of Fiscal year 2026 Earnings Results.

Hello, this is Jiyeon Kim, Head of IR at Soop. Today's earnings call will begin with a review of our third quarter business results followed by a Q&A session. CEO Young-woo and CFO, Byung-ho will be answering your questions during Q&A. Please note that the results presented today are preliminary consolidated results prepared in accordance with K-IFRS and they are subject to change depending on the outcome of the external auditor review. Let me walk you through our third quarter results. This quarter's revenue increased quarter-on-quarter on the back of a significant rise in advertising revenues. Operating profit and net income also increased from the previous quarter, showing a recovery in profitability. However, platform revenue declined due to factors such as reduced activity in major crew broadcasts and streamer attrition. With growth in the advertising segment, partially offsetting the decline in starting revenue, total revenue increased slightly. Q3 total operating revenue was KRW 105.7 billion, an increase of approximately 1.8% from the previous quarter. Although platform revenue declined, overall revenue growth was driven by expanded advertising spend related to major game and major large-scale events occur at line and follow-on CCM ratio along increased platform advertising and by major game partnerships. Next, let me turn to revenue by major business segments. First, platform revenue came in at KRW 66.1 billion, down 10.8% Q-o-Q, showing an impact from the use activity and the quarters among key streamers. Other revenue was KRW 2.7 billion, up slightly from the previous quarter. Advertising revenue was KRW 36.8 billion, up 35.4% from the previous quarter. Branded content ad revenue increased expanded ad spend related to major gaming and large-scale events, the inflow of large corporate advertisers from nongaming sectors also made contribution to growth. In platform advertising continued spend by major game issuance on new cite lineups and large-scale products also supported revenue growth. Going forward, we will secure stable demand for branded content advertising on proven major game and large-scale events while broadening our base of platform and corporate advertising in multiple ways to sustain our growth momentum. Next, let me go over our operating expenses. Operating expenses for Q3 were KRW 91.2 billion remaining at a level similar to the previous quarter. Depreciation and amortization increased due to new capital expenditure for IDC interest fashion and data center via asset amortization. Content production expense in total with an execution of large scale at campaign. However, decrease in some line items such as greater initial costs, cash total operating expenses at a level similar to the previous quarter. We will continue investing in infrastructure to ensure total paper operations in competitiveness while improving profitability through technological efficiency and cost management. Operating profit was KRW 14.5 billion, up 16 Q-o-Q, and the operating margin improved by 1.6 percentage points on quarter to 13.7% despite higher depreciation related to IDT -- and other business rate expenses, Operating profit improved as ad revenue increased significantly and overall costs remained stable. Net income was KRW 10.6 billion, up 21% from the previous quarter. Despite changes in nonoperating income expenses such as financial income reduction and foreign currency translation losses, net income increased as corporate tax expenses decreased from the previous quarter. Please refer to the distributed material to the summary financial statements and our kay metrics at trading. This concludes our report on the third quarter business. Results before the Q&A, CEO, Young-woo will briefly share our future business direction and key initiatives.

I'm CEO of Soop. Before we move on to the Q&A, I'd like to share the key challenges we identified through third quarter results, our future business direction as well as our shareholder return plan. This competitive landscape of the platform market is changing rapidly with greater diversification and platforms of streamers, competition to secure content is intensifying which is affecting our origination economy, our core business and revenue day. Although our ad business shows growth for lead recovery in the platform revenue is taking longer than expected. Rather than resting on a temporary easing of costs, we will focus on restoring the competitiveness of our ecosystem and translating it into reserve activity and revenue growth. Next, I will share the status of our business initiatives and our shareholder return policy. First, responding to market changes and revitalizing our streamer ecosystem. In October, we introduced partners in for program to prevent streamer attrition and to help via returning streamer on. Currently, about 20 major content partners are participating and about 25% of eligible partner streamers have joined the program. Going forward, we will broaden participation and reduce our dependence spicy content laying the foundation for a more diversified streamer ecosystem and a recovery in duration-based revenues. In addition, we will unveil our platform UI/UX overhaul at the year-end streamer work and boost user engagement through phase rollout in the first half of next year. Recovery in our advertising business and integrated growth. Soop is solidifying collaborative relationships with key partners with Home and abroad in the field of branded content and. We have completed the Train bark application for Super, an integrated brand that brings together the marketing capabilities of Soop and it's sister companies and is establishing a sales and operational network in framework. We will complete the organizational set out within the year and officially launched the brand in the first quarter of the next year, accelerating the acquisition of new advertisers and expansion of that business. Lastly, [indiscernible] starting with this belief, we have begun disclosing full and movie to show fundamental changes in our platform. And in September, we completed the cancellation of 306,375 treasury shares worth approximately KRW 18.9 billion as planned. As for dividends, we will maintain our iconpolicy of paying out at least 25% of consolidated net income as cash dividends and as announced in the no disclosure today for 2026 year- dividends, we plan to implement a plan that meets the requirements to a high-dividend company. We will announce our corporate value plan, which will include our mid- to long-term capital education plan regarding remain treasury shares and dividends around our Annual Shareholders' Meeting in March 2027. Dear shareholders and investors, the softer market will continue to evolve, simply responding to each change in exchange environment. You cannot guarantee sustained growth. The matter is building the fundamental strength of the platform that can stay competitive in any environment. Starting in the fourth quarter, we will go down on executing our key initiatives in 2027, we will show you the results of these changes due to a recovery in competitiveness and improved business performance. We'll continue to communicate our progress and results transparently and well encourage you for your trust by storing our core business competitive and delivering sustained growth. Thank you very much, and we will now take your questions.

[Operator Instructions] The first question will be provided by Junhyun Kim from HSBC.

I have 2 questions. First, in this quarter, the number of users are increasing year-on-year, as was seen in July and September. Can you first share a little bit about why the number of users increased? And second part of the first question is, when you look at the entire revenue composition, share of content that has high ARPU is on the decline. And as the competition was CDKs intensifying do you have any ways to monetize on this increasing number of users? You talked about plan -- recovery plan for the platform's competitiveness. Can you share more details about the strategy. Second question is about the advertisement. The rebound Q-o-Q is quite encouraging, but Y-o-Y Y, the decline is continuing. I think 1 of the 2 strengths is production of imports lead. But I believe the growth driver on this front is diminishing. So do you have any strategy to bolster any other engine book growth.

In the third quarter, our MUV numbers increased particularly thanks to the popularity in different ports, sports and games and there is increasing go of international users, which showed Y-o-Y increase. So as you can see, the pattern of watching and payment is different from one category of content from another and gain is not closely associated with the unitization or the payment activity on the platform. The most active mentioned economy is visible in visible rating and because of the attrition, the visible radio has been impacted slightly. But however, average start to go our entry program with numerous agreements with MTN and partner streamer starting from early November, we will be able to see inflow of new streamers who will bring along with them, users and communities from outside, and we will be able to more active engagement.

For advertising business, we -- on the basis of consolidated partnership solidified partnerships with existing large game publishers and other big corporate advertisers, we are continuing to expand our business base for advertisement. And as was mentioned in the presentation, we have made preparations to launch Super as a brand. because we judged that with the previous structure, it is difficult to expand our advertising business. So we have converged capabilities of stop and our sister companies into a brand to here to secure greater and disciplined growth in advertising business. And by the year-end, we will together organization and operational framework and we officially launched super in the first quarter next year and make the brand operational. By doing so, we will invite more new advertisers and expand our business and orders from advertiser base, and we will be able to see the strength of top content and stream live with the greater performance in the advertising business.

The following question will be presented by Joshua Kim from CGSI.