APR Co., Ltd. (262260.KQ) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome, everyone. This is Jaeha Shin, Executive Vice President of APR. Thank you for joining our fourth quarter 2025 earnings call. We sincerely appreciate the continued interest and support from our shareholders and the investors. Today, we will start with a performance review followed by a Q&A session. Please note that our results are preliminary and subject to change during the audit process. Furthermore, any forward-looking statement reflects our current outlook and may be impacted by market volatility. With that, let's review our results for the fourth quarter of 2025. Please turn to Page 3, overall revenue trend. In Q4 2025, consolidated revenue reached KRW 548 billion, marking another historic milestone. Notably, just 1 year after reaching KRW 200 billion in late 2024, we have now surpassed the KRW 500 billion mark for the first time. This growth was driven by strong Black Friday performance and successful SKU expansion. Furthermore, our rapid penetration in the U.S., Japan and Europe is creating a powerful spillover effect, driving record demand across our entire global footprint. Please turn to Page 4. For our fourth quarter results, in Q4 2025, we once again achieved all-time highs for both revenue and operating profit. Consolidated revenue surged 124% year-over-year to KRW 548 billion, while operating profit grew 228% to KRW 130 billion. This resulted in an operating margin of 23.8%, representing a significant 7.5 percentage point expansion compared to the same period last year. Next, please turn to Page 5, overall annual revenue trend. 2025 was a record year for APR with annual revenue more than doubling to KRW 1.5 trillion, driven by our unrivaled product competitiveness and aggressive global expansion. We are proud to mark our 11th consecutive year of growth. Please turn to Page 6, 2025 annual results. 2025 was a defining year as we achieved exceptional top line expansion while significantly enhancing profitability. Annual revenue more than doubled year-over-year to KRW 1.5 trillion, while operating profit nearly tripled to KRW 365 billion, both record-breaking figures. This resulted in a robust annual operating margin of 24%, a 6.9 percentage point increase from the previous year. Next, our fourth quarter results by division. Our cosmetic and beauty division surged 255% year-over-year to KRW 413 billion. Since Q2, we have maintained 200% range growth, and this marks the first time cosmetic revenue has surpassed the KRW 400 billion milestone. Importantly, we are successfully mitigating revenue concentration. Instead of relying on a single hero product, a broader lineup of core product ensures balanced performance, building a more resilient and sustainable business model. Moving to home beauty devices. Revenue grew 19% to KRW 123 billion. We maintained stable demand in core regions while capturing new markets. In Q4, we also introduced new products with enhanced functionalities, leveraging our in-house R&D and manufacturing capabilities. Finally, others revenue decreased 51% to KRW 12 billion. This reflects our strategic decision to downsize noncore businesses and sharpen our focus on our primary growth drivers. Please turn to Page 8 for annual results by division. Our cosmetics division reached KRW 1.1 trillion, establishing a self-sustaining cycle where rising brand awareness drives continuous demand. Meanwhile, our home beauty devices division grew 30% to KRW 407 billion, reflecting steady global momentum. And notably, as of January 2026, we surpassed the 6 million unit milestone in cumulative sales volume. Next is our fourth quarter sales by regions. Q4 overseas revenue surged 203% year-over-year to KRW 475 billion. Following our KRW 300 billion milestone in Q3, we maintained incredible momentum to break the KRW 450 billion mark this quarter. The global portion of our total revenue mix has shifted dramatically, jumping from 58% to 87% this year. The U.S. market continues to lead this expansion, now accounting for 47% of total revenue, while other regions have grown to 22% as our brand scales globally. I will provide more specific details on each region in the following page. Now please refer to Page 10 for a detailed regional breakdown. Q4 was characterized by robust growth across nearly all global markets. In Korea, revenue was KRW 73 billion, reflecting a year-over-year decline due to our strategic downsizing of noncore business. In the U.S., we achieved a record-breaking KRW 255 billion, a 270% increase year-over-year. This is the first time a single country has surpassed the KRW 250 billion threshold in a single quarter. We have maintained consistent quarter-over-quarter growth for 7 consecutive quarters since Q2 2024. During Black Friday, a wide range of products, not just our best sellers, saw exceptional demand across both online and offline channels. In Japan, revenue grew 289% to KRW 69 billion, driven by the synergy between our online and offline presence. Greater China reached KRW 32 billion, up 11%. Finally, our others region delivered a breakout performance, surging 192% to KRW 119 billion. This is the first time quarterly revenue from emerging markets has topped KRW 100 billion, driven by rapid penetration and increasing demand in new regions. Please turn to Page 11, annual sales breakdown by regions. In 2025, overseas revenue surged 207% to KRW 1.2 trillion. Our overseas sales contribution jumped sharply from 55% to 80%, driven by explosive U.S. momentum spreading globally. This record performance cements our KRW 1.2 trillion milestone in the global market. Also, there is one more achievement from 2025 I'd like to mention, something you won't find in the presentation material, and that is the incredible growth of our Medicube brand. In 2025 alone, Medicube's revenue hit KRW 1.4 trillion. That is a massive 145% jump from the previous years of KRW 578 billion. We are still waiting for final industry data to come out. But based on what we are seeing, we believe Medicube's KRW 1.4 trillion performance makes it the #1 beauty brand in Korea for 2025. It's a huge milestone that really proves our brand power. Please refer to Page 12 for our summarized consolidated financial statement. This financial summary is provided for reference purposes only. And next, I would like to discuss our business outlook for 2026. For the full year, we project revenue of KRW 2.1 trillion, a 40% year-over-year increase with a 25% range of operating margin. Medicube's global momentum remains strong, and we are confident these targets are well within reach, especially when considering our strategic initiatives and recent sales performance. Geographically, we anticipate robust growth in the U.S., Japan and Europe as we expand our channel presence. In Europe specifically, we are scaling our online presence while expanding offline through B2B distribution. And this dual approach will establish a strategic foothold for long-term growth in the region. And this is the end of our fourth quarter earnings call, and we will wait for a while until our Korean earnings call end.

[Interpreted] [Operator Instructions] The first question will be presented by [ Hinijin ] of [ Citi Investment & Securities ].

[Interpreted] Congratulations on your good performance. I have 2 questions. For the '26 guidance, U.S., Europe, Japan will be your primary market. What is the respective ratio by each country, online and offline? And for the fourth quarter, not only the U.S. and you had strong growth in Europe. And can you share your growth in Europe?

[Interpreted] For the financial year 2026 guidance, so we don't have a specific number for this conference call for U.S., Europe and Japan, we're going to have higher guidance, but we don't have any regional guidances. However, if we can mention online and offline by region, U.S., the offline revenue will increase compared to this year. As you can see from the news, we have good results from Ulta Beauty. And from the end of the first half, we're going to enter big retailers. In the next conference call or for -- with other calls, once we confirm our entrance into other retailers, we are going to share the results with you. And for Japan, new device and Japan-specific distribution and EBD will have a better result in Japan. So the Japanese revenue last year was about KRW 180 billion. And I think we will see an increase of KRW 100 billion. And in case of Europe, I couldn't specify the Europe number because we have a lot of sales from cross-border revenues, and we have diversified channels for the sales. We haven't fully initiated our operation in Europe. We've started setting up the subsidiary and opening the malls, but we don't have enough inventories. And it takes about 2 to 3 months to send the inventories to Europe. So I think we can start the operation in a full-fledged manner from March. We started our operation in the U.K. and the reaction is really good. So if we include other regions in Europe, I think we can -- if we start the marketing in a full-fledged manner, then we can increase the offline sales, and that will increase the online sales as well. We'll take the next question.

[Interpreted] Next question is from Samsung Securities, Lee, Ka-young.

[Interpreted] Congratulations on your good performance. And I have 2 questions. First, across all regions you recorded significant growth. And first, I'd like to mention about the U.S. and in Amazon and I've read various articles, you made significant growth from Ulta and TikTok as well. And throughout various channels, you may have different performances. So can you give me some detailed data? And second, in Europe, you mentioned that you already entered the U.K. market and the growth is being materialized. And what kind of products are being popular in the U.K.? And in Q3, what regions are the target in the whole entire European region? And also in Japan, you have been focusing on online growth. And I think the amount of vendor and deals for offline channel is increasing and the growth is being materialized in the offline channel as well. So can you give me the percentage of the growth in offline channel in Japan also?

[Interpreted] This is from [ Taka Yong ] from APR Communication. I would like to double check your question. So are you talking about channels in the U.K. or growth?

[Interpreted] So I'm asking about portion. And also, I would like to know about the shares of sales from cosmetic products and device segment as well.

[Interpreted] Let me check this part and give you an answer. So let me answer your question first in on and offline. In the U.S., online market is very strong, but -- and also offline market only remained one digit number in terms of growth rate. However, both channels are growing really fast. And about the U.K. market, the growth is on the rise and best-selling products are very similar to that -- to those in the U.S. market. And also the best-selling items in the U.S. can spread across the global market and also can be selling very well in the U.K. So that's our logic. And I mean, the products are selling very well similarly in the U.K. and also in the European region. We cannot enter all regions at the same time. So starting from the U.K., we're targeting, France and Germany, and we're started -- and we'll be starting with online markets. And it's pretty much similar in Japan as well. In Q3, 80% of the revenue was coming from online and the rest was coming from offline. And not only one channel was very significant. So across all regions, on and offline channels showed a significant growth. Next question, please.

[Interpreted] The next question is provided by Han, Yu-jung from Hanwha Investment & Securities.

[Interpreted] Congratulations on your good performance. I have some questions. First is the color about the quarter 1 revenue and operating profit and the revenue growth for the device has reduced a little bit. Can you provide the logic for that? And for the -- is there any data we can think about the inventory?

[Interpreted] For the quarter 1 colors, I think we can get the exact figures if we look at the numbers by March. Now the season promotion for the quarter 1 has ended and -- for the quarter 4 has ended. And compared to quarter 4 of 2025, we have reduced effect from the marketing for Q1 and the revenue is consistent. However, as of now, we cannot specifically say expected color for the quarter 1. Internally, we are seeing that there will be a further step up. We're expecting the revenue of KRW 500 billion for the operating profit. It is hard for us to estimate the number. And for the device -- reduced growth for the device quarter-on-quarter. If you look at the sales number only, we have sold KRW 290 million. So it's twice the number. And our priority region was Europe and U.S. for the Q4. However, the sales of device in that region is not high yet. So that's why we see the higher growth in beauty. And from quarter 1, our second generation lineup will be detailed. So Booster Pro, the new device for that will be released, and we are going to promote globally, and the effect from the promotion can take effect. And Korea and Japan, we started with beauty product and followed by the popularity in device. And same for U.S. and Europe, the device growth, the sales in beauty can lead up to device growth. And for the inventory, once we finalize our audit, we can provide the results. And we have a high stock of inventory because we have a supply management issue. So we have to provide the inventory in a timely manner. So if you look at the inventory provision status compared to revenue, we have low stock of inventory. We are working with the partners to make the inventory more sufficient. We'll take the next question.

[Interpreted] Next question is from Goldman Sachs, Dayun Kang.

[Interpreted] Congratulations. First off, my question is about on off-line portions. And if you say there are no significant changes, then I expect that there are promotional events in Q4, and there might be a lot of marketing expenses, but then your earnings recorded very well. So what was the driver? And in 2026, there will be changes in top 5 or top 10 selling products. And also, I would like to get more details about your item categories in different events. And SKUs as well.

[Interpreted] The reason that gross profit increased is that, I mean, there are similar reasons for that. The portion in offline channel remained solid. And also when it comes to discounts, we didn't offer big discounts during promotional events and top 5, top 10 products, it has been a month past. We still have to look at the trend. And in Q4, top 10 Medicube products account for more than half and our diversified hero products, which are driving the growth. Next question, please.

[Interpreted] The next question will be provided by Jung, Jiyoon of NH Investment & Securities.

[Interpreted] I have 2 questions. First, in terms of SG&A, how much marketing expense did you spend? And how did you allocate by country? And the second question is U.S. revenue is better than our expectation. And what's the portion of Amazon and TikTok?

[Interpreted] For the 4Q, the marketing was 18.3%. It's a bit of an increase compared to the last quarter because of the promotion and because we were focusing on the U.S., that's why we have increased the marketing expense of 1 percentage point. However, we cannot share the numbers for each region. And overall, our SG&A, it's about 400 to 500 [indiscernible]. And in case of U.S. sales, if we divide by Amazon and TikTok, we should say that we have higher contribution from Amazon. It's almost the twice of the TikTok. We are seeing the increase in TikTok sales. However, this is -- TikTok is used as a sales channel as well as the promotional sales. We have a higher sales proportion from Amazon. We'll take the next question.

[Interpreted] Next question is from Shinhan Investments, Hwang, Seong-hwan.

[Interpreted] And I think this is pretty much similar question, but I want detailed information. You mentioned that SG&A expense as 18.3%, which was slightly increased Q-o-Q. And your OP is very significant. So aside from marketing, you may have commissions as well. Is there any items that recorded cost effectiveness in your expense? And also, you have great OP growth. You may have a lot of cash reserves. So how many -- how are you going to use this cash reserve in the future?

[Interpreted] In Q4 alone, advertisement and sales commission didn't have a lot of savings effect because those expenses are pretty much similar or edged up and stable sales or operating income are the good reason for the cost effectiveness. And we have really great growth momentum. And also we have good fixed cost leverage effect. That's the reason. And since we have good growth momentum, we have a lot of PS and PI for our employees. And according to our accounting policy, we prerecognize this PS and PI in our balance sheet. So there is no substantial increase in our balance sheet. And we have improvement in sales mix in our revenue, and we didn't offer big discounts, and we're trying to improve COGS continuously. So those are the reasons. And when it comes to sales mix, revenue or sales from fashion segment reduced because it was eroding the overall revenue as well. So reduced fashion segment improved COGS and overall revenue. And fixed cost leverage effect is being materialized because we only maintained 6% of fixed cost. So rather than variable cost, this leverages our cost effectiveness. And of that cash reserve, we're maintaining our shareholder return policy, and we're preparing for cash dividends for our shareholders. And we're thinking about twice a year. So regular and interim cash dividend will be planned. And in March this year, since we provide a big amount of cash dividend last year, so there will be no big amount of cash dividend this year. And about the exact amount, there will be public announcement. And since we're expanding globally, we still need working capital. And for stable sales in the global market, we need enough inventory and warehouse. So for that reason, we still need working capital. And even so, we still expect improved cash flow. And after shareholder return policy and consuming working capital, if there is any synergy area for our business, then we will think about reinvestment. However, aggressive investment or M&A are not in our plan currently. Thank you. Next question, please.

[Interpreted] The next question will be provided by Son, Minyoung from KB Securities and Investment.

[Interpreted] The first question is, in the U.S. what's the revenue from the Ulta sales? And last quarter, you have provided a guidance on Ulta for the sales, KRW 300 billion. Did you revise this? And secondly, for the EBD device, what's the progress for the, reaching the performance? And when can we see the actual profit from EBD devices?

[Interpreted] So in Q4, the sell-in B2B recognition sales was KRW 16 billion. And for the guidance for Ulta, KRW 100 billion, I think we can maintain that guidance because we might see the increase in Ulta sales. But if we combine all the sales, I think the sales can be distributed to Ulta. So the off-line sales overall for the U.S., we are seeing them positively. However, we are not going to revise the guidance for KRW 100 billion for Ulta. And for the EBD sales progress, we have -- we are progressing with getting the certificate for 2 devices for EBD. If it's fast, then in the latter half of this year, we are going to release 2 products. So as we make sales that we can recognize as sales. However, we can invest some amount for the promotion. So the reflection of that sales will happen after the sales occur. However, if we want to see the meaningful reflection, I think it will be next year. And the reason why we are doing the EBD division is because we are seeing the long term -- we're expecting the long-term effects and the anti-aging advancing into the market early is very important. And we are doing the home beauty device for our portfolio. And beauty, I think the EBD division will have a positive effect for both divisions. We'll take the next question.

[Interpreted] [Operator Instructions] Next question from Kyobo Securities, Kwon, Woojeong.

[Interpreted] So about Ulta, in Q4 you recorded KRW 16 billion. And I think the number is better right now. So I wonder the current status quo. And even across Ulta, there are various major brands. So Medicube's SKU, sales progress and your scalability plan are my questions. And also, you mentioned about inventory earlier. So is there any possibility for inventory shortage or bottleneck? And do you have any plan for that?

[Interpreted] About market share in Ulta, I don't really know specifically right now. We don't have any data. And it vary by category. And we have Prestige skin care. That's how we are recognized in Ulta Beauty. And I think we are ranked 2, rank #2 in Q4. And about display, and we're working very well with Ulta right now. And although we're expanding, but when it comes to trend and ranks, we have different timing and there are competitors and other brands, but our shelf is a little bit smaller than our competitors. And currently, we are expanding our products on the shelf. And when it comes to SKU, and we have about 10 off-line SKUs, and it will be increased to 20 approximately. And in the future, we will have substantial expansion in Ulta Beauty malls as well. When it comes to inventory, we have promotional events in Q4, and we -- in order to have enough volume in inventory, we prepared a lot in Q3, and that worked very well in Q4. And after selling products, we experienced some inventory shortage. And the trend remained solid, and they didn't have enough stocks in inventory. So sales were not recorded at the right time. So right now we're working with OEM and ODM in order to increase the [ capa ]. And in the first half of this year, in order to achieve our business targets and increase capacity, we already are planning for supply, and I think we can meet the demand. And we cannot handle supply shortage with maritime transportation. So we were going to use airplane transportation as well. So that will also be included in our SG&A expense, although the amount will not be big, but that will be included in our SG&A expense. Next question, please.

[Interpreted] The next question will be provided by [ Kim Myung ] of Morgan Stanley.

[Interpreted] I have a question regarding EBD. So you said you are going to release new products by the end of this year. And in your third quarter earnings call you said 1 for EBD and 1 for PDRN. And if you are talking about PDRN, it's going to be injectables. So are you releasing injectables products or EBD product? And in the third quarter, you said you are adding your resources. And I think 50 people will be enough for the sales force. What do you think?

[Interpreted] So I said we are going to release about 2 products, and that's all EBD products. And for the PDR and injectables, we are not able to release that. We already have the factory and we are getting the certificate. And we have to get the fourth rating certificate. So it will take some time for the injectables. So we'll take -- I think we are going to release them by end '27 or early '28 because we are getting a new certificate. So it will take some time until we release the injectable. For the sales team, we are increasing the resources. We have hired some experienced sales personnel. And the number of people for the sales, we haven't got the finalized number, but it's going to be lesser than 50 people. Next question, please.

[Interpreted] Next question is from Samsung Securities, Lee, Ka-young.

[Interpreted] I still have 2 questions. First, you mentioned about maritime transportation. And with this channel alone, you are thinking about airline transportation. So how much do you expect in terms of the share of airline in the transportation? And when it comes to Ulta Beauty, you're going to enter into the European market with major retailers in Europe. So do you have any specific malls? So can you share detail, for example, in the U.K. market?

[Interpreted] Airline transportation, I can give you in terms of volume or in terms of amount. So in terms of volume, it might be around 10%, but the amount of money is substantial. So I believe that the amount of payment for airline transportation is substantial amount. So I will double check in and give you detail. And about deals with retailers in Europe, is still underway. Boots or Superdrug already rolled out our brands, but the number of SKUs is not very big and the number of locations is not very big, and we're going to expand in terms of the number of locations and in terms of the number of SKUs. Next question, please.

[Interpreted] The next question will be provided by [ Kim Myung ] by Morgan Stanley.

[Interpreted] So regarding the PDR and injectables, are you thinking about -- how are you going to secure salmon because securing the salmon will be the bottleneck.

[Interpreted] We have already secured some locations for the salmon, and we have secured some partners for the long-term contract. It's usually from overseas. We have a lot of locations that we partnered with in Europe, United States and Canada. We don't think securing the raw material will be difficult. We have talked with a lot of providers, and high-quality raw material can be secured. And recently, Canada and Alaska U.S. is the place that we are securing our raw materials from. However, because we have some time until we release PDR and injectables, we are creating samples after we get the certificate, the amount is not too much. We are not selling them. So securing the raw material will start from the end of next year, where we are going to secure the certificate. So we'll take the next question. Next question is from Kyobo Securities, Kwon, Woojeong.

[Interpreted] I'm back again. You told about Prestige cosmetic line in the U.S. and you mentioned 10 offline SKUs. And when you mentioned about #1, what was the comparison? And you also mentioned that the number of SKUs will be increased to 20. And you told me it will be within 2026. And can you also increase the number within Q1 or Q2 in 2026?

[Interpreted] I double-checked it. And major brands, SKUs are more, they have more than 50 and some have 60 to 80 SKUs in the store. However, our brand has about 15 SKUs and Medicube will have 20-plus SKUs in the future. And for online channel, we already have 47 SKUs, and there is still potential for further scalability. Next question, please.

[Interpreted] We don't have any questions. [Operator Instructions]. Because of the time limit, we will take one question. If you don't have any questions, we will conclude the session. Thank you for participating in our earnings call.

[Interpreted] We're going to put our effort for the further growth. Please continue to send your support for this year, and we will conclude the Q4 earnings call. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]