APR Co., Ltd. ($A278470)

Good morning and welcome, everyone. This is Jae-ha Shin, Executive Vice President of APR. Thank you for joining our first quarter 2026 earnings call. We sincerely appreciate the continued interest and support from our shareholders and the investors. Today, we will start with the 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 first quarter of 2026. Please turn to Page 3, quarterly revenue trends. In the first quarter of 2026, APR recorded consolidated revenue of KRW 593 billion, achieving another record high quarterly performance. While the first quarter is typically considered a seasonally slower period, we continue to see strong demand and growing brand awareness across global markets. As a result, revenue surpassed the previous quarter, reaching nearly KRW 600 billion, marking a new quarterly high. This quarter demonstrates our ability to overcome seasonality through sustained demand with growth momentum broadening across regions such as Europe, Southeast Asia and Latin America, leading to another phase of record growth. Next, please turn to Page 4 for our first quarter results. In the first quarter of 2026, APR once again delivered record high quarterly revenue and operating profit. Revenue increased 123% year-over-year to KRW 593 billion, while operating profit increased 174% to KRW 152 billion. Our operating margin reached 25.7%, up 4.8 percentage points from a year earlier. As a note, APR has only adopted IFRS 18 starting from 2026. For comparability, the prior period financial information in this presentation has been restated on the same basis. So please note that some restated figures may differ from our previously disclosed material. Next, please turn to Page 5 for our revenue breakdown by business division. Starting with the Cosmetic division, revenue reached KRW 453 billion, up 174% year-over-year. Since the first quarter of 2025, this division has delivered triple-digit growth for 5 consecutive quarters, surpassing KRW 450 billion in quarterly revenue and once again setting a new all-time high. The cosmetics division is also building a more balanced growth -- balanced structure with sales no longer concentrated in only a few products. OLIVE YOUNG products such as the Zero Pore Pad continue to perform strongly, while new products are also becoming a key growth driver, supporting broad-based growth across multiple SKUs. This trend is also reflected in our PDRN product line. As global awareness continues to expand, cumulative sales of PDRN products surpassed 50 million units in February. Moving on to the home beauty device division. Revenue reached KRW 133 billion, increased 46% year-over-year. Demand remained solid in key markets, while expanded regions and channel supported steady growth in new markets, leading to another record high quarterly results. In the first quarter, we also launched Booster Pro X2, the next-generation model of our flagship device Booster Pro. With upgraded performance and newly added modes, it further enhanced both the technology and the user experience of our device lineup. Lastly, revenue from the others division declined 20% year-over-year to KRW 8 billion, mainly due to the reduced contribution from noncore businesses. Please turn to Page 6, first quarter results by region. In the first quarter of 2026, overseas revenue reached KRW 528 billion, representing a 180% increase year-over-year. Since the second quarter of 2024, our overseas revenue has reached a new quarterly high for 7 consecutive quarters. The overseas sales mix also increased significantly, rising from 71% to 89% this quarter. The growth led by the U.S. continues to expand globally with the U.S. and others regions together accounting for 74% of total revenue. We will provide further regional details on the next page. Please turn to Page 7 for the regional revenue details in the first quarter of 2026. Despite the usual seasonal slowdown in the first quarter, APR continued to deliver strong growth as awareness of both our product and our brand expanded across global markets. At the same time, we strengthened our global competitiveness by broadening our bestseller lineup and expanding our sales channel in line with rapidly growing demand. Let me walk you through the performance by region. Starting with Korea, revenue reached KRW 65 billion. The domestic business recorded negative growth, mainly due to the reduced contribution from noncore business division. In the United States, revenue reached KRW 249 billion, representing a 251% increase from a year earlier. Our bestseller portfolio continued to expand while demand remains solid across online channels. This is also reflected in the gradual increase in Medicube's market share across key channels. On the offline side, following our entry into the Ulta Beauty in August 2025, we further accelerated expansion by launching in Target in April this year. Going forward, we plan to further strengthen our position in online channels while also increasing brand visibility and diversifying our growth base through broader online expansion. In Japan, revenue reached KRW 59 billion, up 101% year-over-year. Demand remains solid, resulting in more than a doubling of revenue from a year earlier. We also saw both online and offline channel grow together with synergies between the 2 channels continuing to expand. In Greater China, revenue reached KRW 31 billion, increased 8% year-over-year. Lastly, in others regions, revenue reached KRW 190 billion, representing 216% growth year-over-year. After surpassing KRW 100 billion in quarterly revenue for the first time in the first quarter of last year, demand continued to expand across global markets, leading to another quarter of very strong growth. Please refer to Page 8 for our summarized consolidated financial statements. This final summary is provided for the reference purposes only. This concludes the APR's earnings call for the first quarter of 2026. We will now move on to the Q&A session. Thank you.

[Interpreted] [Operator Instructions] The first question will come from Heejin Lim of Citi Securities.

[Interpreted] Congratulations on the strong results. I have two questions. The first off, the first quarter result was really good. And I wonder if you will update the guidance and the driver should be from the United States and Europe. And if you have any detailed figures, please share it with us. And second, going forward to the second quarter, you said Costco and Walmart will be -- will have your products. So what is your expectations regarding revenue by quarters and by years? And due to the geopolitical risks, there might be some increase in costs. And what -- can you please provide colors on that?

[Interpreted] Regarding guidance upward -- according to guidance, we don't really plan to provide an upward estimation in the guidance, but the first quarter surpassed our guidance. So this is my personal idea. We believe that we will reach a KRW 2 trillion in revenue, and we are very active in our businesses. And as you said, in Europe and in the United States, we have our own targets, but we cannot really reveal and disclose a specific target in revenue for those 2 regions. But maybe in a separate IR session, we can provide the numbers. And this is an official release, but according to Bloomberg, actually, we shared the information with the Bloomberg, and we plan to enter Costco and Walmart. We will. But specific schedules will be announced later. But what we can tell you at this moment is that going through second and third quarters, we will enter those 2 markets, the Walmart and Costco. And regarding the targets, yearly targets and quarterly targets by channels are not yet set. But like I said, offline sales mix in the United States have been remaining at 2% -- 20%. And regarding the impact of the Middle East issue, of course, raw material prices have been surging. And with our suppliers, we have been discussing how we can come down the impact, and we are very closely working together with our suppliers, but there should be some changes in cost, but how many percentages will be increased are not really estimated yet, but it shouldn't be that large. But the thing is -- the thing that we are concerned about is logistics because last quarter, logistics cost has increased a lot. There should be 2 factors behind the large increase in logistics. As you understand, a sea freight is not really going smoothly, especially for the long distance like to the United States and Europe, the freight cost has increased a lot, plus we -- the portion of the air freight is quite high. And coming into this year, the portion of air freight has been increasing even further. So the cost of air freight will make an impact. But to reduce air freight and to make logistics cost more efficient under the circumstance of the revenue increase, the supply chain should be stabilized. So for the product supply should be also stabilized. These issues are being resolved at the moment. But at the same time, we would like to also tell you that the demand at the global level is increasing. So supply becomes short. And this is kind of the repetitive cycle and patterns of the demand and supply from our side. But coming into the latter half of this year, we believe the supply chain, the bottleneck issues will be resolved to a large extent, we believe.

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

I'm really happy to hear all the good news. And I have questions about the European market specifically. And sales by region, you have this information. And you have KRW 70 billion increase. Is it mainly coming from the U.K.? Or I believe that your sales have been recorded since March, but I think the sales from Sephora and other retailers are seeing are very significant. So I'm curious, is that mainly coming from the U.K. And also offline market, I would like to follow up more. Since you have an expanding in the offline market as well, so the execution itself might be different from online market. So what is your offline market strategy? For example, stock management or sales or marketing management, what is your strategy? And if you are interested in increasing labor or people, then I would like to know more about this information.

[Interpreted] In other regions, including the U.K., I mean, or across all European markets, I think we still have upside potential. And according to our business strategy, I cannot give you specific information about other regions at this point of time. And I'd like to give you a color instead across all European markets, the U.K. For example, in Amazon or TikTok online marketplaces, we are having really significant growth. And we have significant growth in the first quarter in other regions such as France and Spain, Germany. We're starting to run online markets and because of supply chain issue and because we started selling our product in the U.K., I think we have some different market growth. And still, since we started selling our products in the U.K. and the U.K. market is very significant and also B2B market revenues are included in the European market and B2B revenues are also significant. And when it comes to offline market strategy, we believe that it is very important. And when it comes to priority, of course, the U.S. and Western or European market expansion will be very important in our strategy. And when demand is created, then we can expand in the offline market. And I believe that we can increase sales in offline markets over the years to come and in the local global market in order to operate our brands instead of recruiting in local labor market, we would focus more on communication and design our strategy and help the local partners and have global sales partners to execute sales brands in the local markets.

[Interpreted] The next question will come from Park Jonghyun of DAOL Investment & Securities.

I have three questions. First off, K-IFRS is applied now. So the figures have been changing a little bit. And before applying the new regulation, the OP size is KRW 145.6 billion and -- but the operating profit is quite large in others. And for the B2B portion, I'm wondering the information, the sales mix of the B2B. And looking at the decrease of SG&A and marketing and transportation costs, how much portion of the two are representing?

[Interpreted] Before applying IFRS, well, for the #18 of the regulation, that standard and the operating profits are reflected there. And to follow the global standard, we decided to apply it earlier than the regulation announced -- regulation set. And you mentioned the difference between before and after the IFRS. And well, regarding the other revenue, there is no changes. But regarding the foreign exchange -- foreign currency conversion and so on, there have been some changes. It is a little hard to disclose much details. But for more details, on May 15, we are going to provide announcement. So we are going to share more details on that day.

[Interpreted] Yes. My name is [indiscernible] from the communication team. Regarding the second number regarding in other region, you mentioned the proportions of vendors. We have many vendors. So it is really hard to break all down. But those vendors we call cross borders at the global level. And their proportion as of the first quarter is 40%, middle of 40%. And then regarding the first quarter, you also asked about cost compared to revenue, SG&A, 19%; and the commissions, 17%; and transportation, 7%. That should be the rough figures.

[Interpreted] [Operator Instructions] Next question is from Hanwha Securities, Han Yu-jung.

[Interpreted] I think your earnings in Q1 is very good, and sustainable revenue growth and guidance would be very pleased to hear. And also, I'd like to listen to the color in Q2. And also home beauty device, what is the road map? I'd like to hear an update if you have any.

[Interpreted] As for now, I think profitability in Q1 can be sustainable or not. I think it can be sustainable. I cannot give you the specific scope. However, I believe that profitability can remain. And because in Q1, we were not in the situation to optimize because of the stock shortage and logistic, price, expenditures and there were some inefficiency in operating perspective. And in marketing expenses, I believe we have spent a similar amount of money Q-o-Q. However, still profitability remains and sales increased. And still, we have really good OP margin. And in my opinion, as for now, the OP margin remains healthy and remains similar and will also remain similar. And to give you the color in Q2, I believe we will maintain healthy growth in Q2 as well because we have seasonal factors because it will be off-season or low season. Still, the demand and sales are very good regardless of the seasonality. So I believe the sales in Q2 might be similar to Q1 or -- will edge up a little bit in my opinion and perspective. And when it comes to home beauty devices, Booster Pro X2 have been launched domestically and in new countries, but still in different countries, old versions are still selling. So at the end of the first half of this year, in Europe and the U.S., this Booster Pro or new version or X2 will be launched. And recently, there was an announcement, the ultrasonic device. So in Korea and in Asian countries, this device will be launch as well. So this will be another factor to our growth. And additionally, aside from these 2 devices, there will be a couple of more devices to be newly launched in the market. So I'll answer next questions.

[Interpreted] [Operator Instructions] The next question will come from Park Hyunjin of Shinhan Investment Securities.

The revenue in Korea has been a little decreasing you said noncore business. Are you talking about NERDY or something else? And second, cosmetics is really good in revenue. And yes, I can see very clearly, very clear is going well and the categories is expanding, and also the markets are also expanding. How about APRILSKIN? For example, mask pack, [ 8 mask pack ] and sun pack. And I'm wondering about APRILSKIN performance. And also you said you are going to enter some malls in the United States, and the products sold in Amazon will be displayed in those malls.

[Interpreted] Regarding domestic businesses, yes, the impact of the fashion division is quite large still. Medicube is increasing both home and abroad, but Forment and GLAM.D and other noncore businesses have decreased albeit slightly. And there has been a change in sales mix. And rather than our own website, we are focusing on OLIVE YOUNG, and revenue recognition is different between OLIVE YOUNG and on our own website. So when those products are sold in OLIVE YOUNG, the revenue numbers might be decreased in accounting. And for Booster Pro X2, at the end of first quarter, we launched [ the Eve ] and then we also stopped selling the older version, and that's why the revenue decreased a little bit. For APRILSKIN, as you said, in Korea, Japan and the rest of the Asian region, tint, which is a lip product has been a major product that has been sold very well. But we have some concerns in APRILSKIN because there are not many Hero products. So we have to diversify our products in APRILSKIN business. And at the global level, we are expecting growth Y-o-Y. And based on this growth, maybe we can sell those products beyond Asia, expanding the business to the United States and European markets. But at the moment, we focus on Medicube for those markets as well. And SKU strategies, the Amazon and [ marts ] products are same, that's what you asked. We cannot really disclose any details. But of course, the demand is expanding from online to offline. And that's why we see an increase in revenue and offline channels as well. But of course, there are much more revenue coming from online. But top products are [ well shared ] despite of the offline market as well. But the channels, the number of channels per se are increasing, so -- but of course, we are going to differentiate the products that we sell by retailers. For example, for certain items, we are preparing Walmart or Ulta Beauty exclusive products. So to sum it up as a big picture, we share the SKUs, but by channel basis, we also provide some custom-made products.

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

[Interpreted] I have three questions. First, the U.S. offline market. In Q1, Ulta and Target sales might be recognized? And what is the size of sales from the U.S.? And my second question is about -- you talked about air freight in Q2. So I'm curious about the increased expense from air freight. And my last question is about tariffs, especially in the U.S. So I'm curious about the size of duty drawback or tariff refund. And I'm curious about the size in profit gains and loss.

[Interpreted] Let me check this part and get back to you. In Q1 off-line market sales recognition, I think the size is not very significant to give you rough information. I think it is about 10%. And from offline, the sales will gradually increase. And the second question was about air freight, right? The air freight might be different based on the standard of recognition by country or region. However, we spent a lot of money in Q4. And quarterly expense for air freight is about KRW 10 billion. And I think the cost increased in Q1 as well for air freight. And I believe that we spent about KRW 20 billion for air freight in Q1 if I'm right. And when it comes to air freight cost, I believe that the cost will remain high a little bit in Q1, but it will be a little bit smaller than Q1, and the cost will also decrease in Q3. And when we have enough safety stock through better SCM, then the air freight cost will decrease. So we're trying to solve these issues. And the impact from tariffs, I think the amount of tariff [indiscernible], as far as I know or the confirmed amount is about KRW 20 billion, and it is not coming from at once. It will be installment. So as soon as in Q2, I think the amount will be recognized from Q2 and the point of time, it's not confirmed yet and the amount is not confirmed yet either. And we're getting this refund. And starting from Q3, we're starting to recognize this amount of tariff refund. And for retrospective amount, I think maybe we should wait until at the end of this year. So I'll take that question. Thank you very much.

[Interpreted] The next question will come from Park Jonghyun of DAOL Investment & Securities.

[Interpreted] I have a question regarding Amazon in the European market. Your experiences in the U.S. market for Amazon was quite -- was very good. And concluding that, when do you expect the online channel contributions to be seen visibly in European Amazon. But in Europe markets, including the U.K., Spain and Germany, is expectedly going well. And continuing from what I said just now, can you please share with us more details regarding online sales in the European market? And lastly, the size of the market. Amazon contribution in the U.S. market is 60%, you said. And how about European Amazon market? Is it -- and that's the similar -- I mean the 60% is pretty much the target for the European Amazon market as well?

[Interpreted] For your first question, so when do we expect the online channels contribution to sales mix, right, in European market? Yes. Yes. Actually, in the Q1, we've seen the contribution, it's already started. coming up. And by quarters, over time, the contribution ratio will increase. Even on a monthly basis, we see the increase in promotional and events and influencers collaborations are strengthened. And from early this year, we set up -- we built up the team for European markets. But of course, there should be some learning curves of our teams compared to the United States, which is the existing market. But we still believe that we will see a better result in the second quarter. And after the U.K., France, Germany, Spain and Italy are the markets that we have high expectations, but it's not necessarily about the second quarter and how much we see an increase in revenue there because we don't have any data yet. But in the U.K. market, we've seen a rapid growth in -- so based on the learning curve from the U.K. experiences, maybe we can see an increase in revenue in those other markets. And not only us, but also other K-beauty brands are performing very well in the markets -- in our target markets as well. So that is a very good stimulus for us and also it is a really good benchmark as well. And in this call, we cannot really disclose the online market performance. This is our policy, confidentiality policy, but the sales mix of the online and offline, like I said, in the U.S., online marketplace ratio is higher. But in European markets, out of 28 countries, online marketplace is running in 5 only. And we started it from this year. So the sales mix of online and offline are 5 to 5 -- 50-50. So we believe that online contributions will increase over time. But at this moment, the ratio is 50:50 in online and offline sales mix.

[Interpreted] Next question is from Shinhan Security of Park Hyunjin.

[Interpreted] I think I have heard it wrong. And in Q2, the sales guidance or your target revenue might be similar to Q1 according to your early statement. Is that right? And I think we're expecting Prime Day in Q2, so it might not be similar to Q1. So can you double check it? And also in the U.S., you have started selling your products in Ulta from last year. And your sales have grown Q-o-Q. So what is the sales in Q1? So I'd like to double check.

[Interpreted] The revenues in Q2 is your question, right? So let me double check. I said the sales in Q2 might be similar to Q1 or will edge up a little bit in Q2. That's what I mentioned earlier because Q2 normally is off-season or slow season still, but our operating profit will be healthy. And Amazon Prime Day is planned for June, and I believe that it will be late June. So it will not be recognized for Q2 sales. So I did not include that promotional day in Q2. That's why I said sales in Q2 might be a little bit smaller to Q1 or adds up a little bit because I did not include that promotional event. And this is not official guidance, and this is my personal opinion or my perspective to give you a color on the guidance. But I'm still positive for Q2 sales expectation. And sales from Ulta Q-o-Q increased in Q4, and what is it in Q1? So I don't have any numbers right now. And depend -- I mean based on channel mix, it is really difficult for me to give you the breakdown by channel because I don't have an exact data right now. And let me double check it across all offline channels. And if I have any chance for IR call later, then I will give you the exact information. I think there is no additional question right now. So we will conclude this Q&A session and close our conference call for today. Thank you very much once again for joining us today out of your busy schedules. And thank you for your attention and interest. I would like to look forward to your attention and interest. And so from now on, we would like to close our conference call. Thank you very much. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]