NAVER Corporation (A035420) Earnings Call Transcript & Summary

[Interpreted] Good morning. I am Kim Min, Director of IR. Thank you for joining NAVER's First Quarter 2020 [indiscernible]. With us today are CEO Han Seong-Sook; COO Choi In-Hyuk; and CFO Park Sang-Jin. The earnings results are K-IFRS based, provided with the purpose of timely communications and are yet to be audited by an independent auditor and, therefore, are subject to change after the review. With that, CEO Han will present on the business highlights.

[Interpreted] Good morning. I am Han Seong-Sook. Thank you for joining our call today. This quarter, the impact of COVID-19 was felt all over the world as social distancing and telecommuting became a norm, changing people's daily lives. These changes are leading to economic depressions at home and globally, and NAVER is not exempt from such impact. We are seeing slowing demand for online marketing around certain sectors hit by the economic depression, and we expect repercussions to continue until we can curb COVID-19's spread. However, as seen from the past experiences, we expect businesses to quickly return to normal once COVID-19 dissipates. So in the meanwhile, we will endeavor to create new growth opportunities in the noncontact service market, which is recently getting the spotlight by leveraging diverse array of technologies and service capabilities. In light of the fact that COVID-19 was elevated to a state of emergency at the end of February, we believe the impact on the business will be greater in the second quarter than the first quarter. Since one cannot predict the extent of the impact and the timing of the end of the pandemic, we are not letting lose the level of heightened vigilance in running our business. For advertisement, we are carrying out extensive product reorganizations to deal with not only the COVID-19 pandemic impact but also changes in the online marketing landscape. Already, starting last year, we were able to see the potential for performance ads by running a pilot on certain segments, and we plan to bring this to the mobile main screen and launch the beta version of Smart Channel in May. The size of the Smart Channel will be identical to special DA in the main home screen and will be located at the very top, where you see news, sports, entertainment apps. It would be eye-catching and an effective way to communicate premium brand image. And there is also flexibility in the execution of marketing as advertisers can choose between impression- or performance-based ads that best fit their budget and schedule. With the launch of Smart Channel, NAVER will be able to offer value as an integrated marketing platform to many more advertisers, where ads, search and shopping fulfills and matches users' journey from awareness, interest and purchase, while allowing advertisers to better use NAVER's products, service suite and tools that best fit their marketing objectives. And by delivering interest-based ad impressions to users, we plan to further enhance ad efficiency and utility and develop Smart Channel as an upgraded next-generation product. With Smart Channel as the beginning, we are committed to developing products that meet market expectations and that keeps with the changing environment and technology. COVID-19 pandemic is a crisis in terms of decline in marketing demand but also brought with it opportunities in online or non-face-to-face services. Impact of social distancing curbed off-line activities but increased online shopping needs, with Smart Store GMV posting a growth of 56% year-on-year. The number of people making purchases in the Smart Store was 8 million in January, sustaining a slight uptrend, but increased to 9 million in February and 10 million in March. There was a clear increase in first-time buyers in the 20s and above-40 age group. Also in March, number of Smart Stores that newly opened in March was record high at 37,000 stores, which shows the growth of shopping start-ups on the back of the spread of the unprecedented, untapped culture. Also in Q1, 30 stores came on board, brand store, which is an initiative to expand NAVER's merchant base from SMEs to branded companies. This year, we are targeting to open 200 stores. LG Household & Health Care, who recently opened a branded store, partnered up with CJ Logistics to enable speedy and convenient delivery of household necessities, starting 24-hour delivery service for products ordered before 11:30 p.m. This is the first case of collaboration in logistics based off of the brand store, so we will closely monitor its performance and identify possible improvements so NAVER can answer to different delivery related needs from product categories like household goods, fashion, consumer electronics, furniture, et cetera. And we'll seek cooperation with different brands as well as logistics companies. We also started to -- we also started offering LIVE Commerce tool from end of March which the sellers can use to showcase their products through live video, giving them a tool to actively adopt to a contact-constrained world. LIVE Commerce tool was used as a pilot, and My Little Tiger managed to sell all of its sets in just 1 hour after airing of the live, grossing in KRW 260 million in sales revenue. Designer Choi Bumsuk's General Idea live also received 650,000 cumulative likes. Also, live airing by daigous, or the personal shoppers, in local markets of London and Paris recorded KRW 40 million of sales respectively, and off-line sellers feeling the difficulty of COVID-19 outbreak positively responded to the use of such tool. We are moving to expand this tool for 320,000 Smart Store sellers within the first half of the year and will increase opportunities for the sellers to be featured via the live content. Driven by rapid growth on -- of online shopping, NAVER Pay GMV was up 46% year-on-year, surpassing KRW 5 trillion quarterly mark for the first time. In Q1, we focused on merchant acquisition from outside, and we plan to broaden around different verticals and the off-line space as we go forward. Monthly payment users increased 23% year-on-year, reaching 12,500,000 users, as user base broadened with 53% growth seen from age group above 50 years of age. Also Point top-up, which is a proxy for user loyalty, also increased eightfold year-on-year, which will be a fertile base for Naver Financial in expanding into tech fin business. Untapped culture is also spreading around communities and in UGCs. As it has become difficult for people to engage in off-line activities in schools, private academies and church, we saw greater need for online communication, which led to growth in BAND users. Especially, number of live sessions increased 40x in Korea compared to before the COVID-19 outbreak and 20x in the U.S. We also see DAUs for teens increase from 130,000 last year to 660,000 according to most recent figure, attesting to diversification of domestic user base. In the U.S., where COVID-19 are breaking later than Korea, monthly users moved from 1.3 million last year to 2.5 million as of March, with new subscribers growing. We are also quickly developing plans to expand our target group from after-school activities to include schools and church. We will utilize this opportunity to lock in newly onboarded target users and use this opportunity to further spread our services. Also, Knowledge iN experts, where advice of experts are offered for a fee, since the launch of its legal services last March, immediately reported 1,000 daily average consultations, grossing KRW 20 million in revenue and is getting positive feedback from users. With COVID-19 outbreak, for the time being, we expect demand for non-face-to-face consultations to rise continuously. So we will launch official on [ April 8 ], which is an official counseling channel for local government offices and brands, and will further expand the scope to home training, lessons and other verticals. As this pandemic prolongs, changes are happening in the way we work and study, and we are actively responding to such changes via a suite of B2B solutions, including NAVER Cloud, Clova and LINE Works. With growing needs around remote work, online education, interest is growing around cloud services. NAVER Cloud platform is helping universities and education institutes to build out online video lecturing systems, and we are offering services supporting connections to existing learning management systems and are also providing consulting as well. Also, in time for opening of schools online, we've provided services to EDUNET of KERIS, which is Korea Education and Research Info Services (sic) [ Korea Education and Research Information Service ], which is used by 5.5 million students nationwide, securing attractive opportunities in the educational market. Also, by building remote working environment via the use of the cloud for call centers, NAVER is developing next-generation business model while also preventing the spread of the disease. We have validated the effectiveness of at-home call centers by testing it inside NAVER's customer center, and we'll start to pitch cloud-based call center solutions to financial institutions and public organization. Starting second half of the year, we plan to also use Clova's voice recognition technology and bring AI solutions that can handle simple inquiries, bookings and work processes over the phone so that we can grasp market opportunities that will emerge post COVID-19. As remote working prolongs, there is growing interest on collaboration tools optimized for the mobile platform. LINE Works offers mobile business collaboration tools, and to support and collaborate with SMEs and small merchants, we are providing Lite package free of charge until end of June via various different NAVER channels and, as a result, saw domestic customer number increased more than 20x year-on-year. In Japan, where the speed of outbreak was relatively slow, number of new users with free IDs increased 2x year-to-date in March, and we have successfully diversified the client base by entering into contracts with multiple number of midsized companies. We believe COVID-19 outbreak can be an opportunity for NAVER's B2B solutions to really showcase its value and will work to broaden the service quite naturally through appropriate marketing and needed support. Last but not least, as we respond to this difficult time and new opportunities, to help overcome the pains felt by users, small businesses and creators, we have devised multifaceted support measures that leverage our service, infrastructure and technology. This quarter, we donated KRW 2 billion to help those in need and suffering to allow for a speedy relief. Happybean, which is an online charity platform, is matching the donation made by the users to help the vulnerable population. We also provided masks to small merchants and subcontractors of NAVER's inclusive growth program. We also started providing stock status of publicly distributed masks per pharmacy [ on a real time ] basis. We are also offering cloud services so that anyone can use government's data on masks. We have also provided free vouchers to people experiencing depression from COVID-19 so that they can receive counseling through Knowledge iN expert. We also gave exemptions on commission payments to small operators that provide lessons and to sellers of plane tickets on a temporary basis as they experience difficulties in attracting customers. We provided 50% cloud server cost for small merchants, offered LINE Works Lite and cloud WORKPLACE products free of charge to share the pain with our partners. We truly hope these efforts could help alleviate economic and psychological pain and help all to return to their daily lives. And in the meantime, we will do our utmost to join in on the national and social efforts to overcome this hardship. NAVER is poised to respond effectively to COVID-19 and build on the emerging opportunities. So when the pandemic ends, we will not only quickly normalize our business, but we'd be ready to gain a foothold for additional growth. We look forward to your continued interest and support. I will now turn it over to our CFO, Park Sang-Jin.

[Interpreted] Good morning. I am Park Sang-Jin, the CFO. Although Q1 consolidated operating revenue was up 14.6% year-on-year, there was 3.1% Q-on-Q decline, with the figure coming in on KRW 1.7321 trillion. Consolidated operating profit was up 7.4% year-on-year and 27.7% Q-on-Q to KRW 221.5 billion, with operating profit margin reporting 12.8%. NAVER's core business OP margin was 28% and operating profit reported KRW 307.4 billion. Q1 net profit was up 54% year-on-year, recording KRW 134.9 billion, with net profit margin of 7.8%. In terms of the operating revenue breakdown, despite overall cut in advertisers' budget, on growth in online shopping demand and solid shopping revenue growth, Business Platform revenue was up 12% year-on-year and 0.4% Q-on-Q to KRW 749.7 billion. Driven by higher pay GMV growth on the rise of the online shopping, IT Platform revenue was up 49.4% year-on-year and 8.9% Q-on-Q, reporting KRW 148.2 billion. For Ads, as large advertisers slashed marketing budget due to COVID-19, year-on-year revenue growth was limited to 1.2%, and compared to previous quarter, which was a high season, there was 16.2% decline as revenue reported KRW 144 billion. Underpinned by more than twofold top line growth in webtoons, Content Service revenue was up 58% year-on-year to KRW 55.4 billion. But a decline in other content revenue, including V LIVE, which rose significantly the prior quarter, there was 20.8% (sic) [ 20.8% decline ] for Q-on-Q. Next on expense items. On new hires and stock-based compensation, platform development operations expense was up 18.7% year-on-year and 2.8% Q-on-Q to KRW 259.4 billion. As revenue-linked expenses account for a larger portion, agency and partner expense went up 15.7% year-on-year but was down 5.6% Q-on-Q, recording KRW 320.5 billion. With the absence of NBP's year-end one-off expense, infrastructure expense was up 17.7% year-on-year and down 5.9% Q-on-Q to KRW 89.2 billion. An increase in NAVER Pay points and TV advertisement, marketing expense was up 83.4% year-on-year but fell 1.9% Q-on-Q, reporting KRW 120.7 billion. LINE and other platform expense was up 8% year-on-year on lower marketing expense for LINE and was down 10.4% Q-on-Q, recording KRW 720.7 billion. I'm sure the biggest question and concern held by the investors will be around how COVID-19 and ensuing crises and social changes impact corporate earnings. For NAVER, since mid-February, we've been feeling the decline in revenue compared to our original projections driven by the demand contraction. And we know it's too early to say we have gone past the peak in demand decline as of April. Having said that, what we can say for certain is that NAVER has sound financials to ride out this critical crisis and that we are determined to make investments for growth based on our deep understanding and review of business opportunities and risks. Simply put, we will spend only when it is necessary for growth and for the purpose of fully living up to NAVER's social responsibilities. We will closely monitor any developments, both internal and external, so as to minimize risk and not miss out on new and emerging opportunities. That ends Q1 financial highlights. We will be happy to take your questions.

[Foreign Language] The first question will be presented by Sung Eun Kim from Macquarie.

[Interpreted] I would like to pose 2 questions. With the outbreak of COVID-19, we have seen a significant surge in the purchase of household necessities online. I would like to understand what NAVER's strategy is to keep to its competitive edge or to maintain its market position and its competitiveness in this market. So could you paint a picture as to what your overall NAVER Shopping strategy is? Second question is, you have shared with us that the GMV growth for Smart Store was more than 50%. Can you also share with us the total growth rate of -- in the entire NAVER Shopping? And do you expect such growth to continue in the second quarter? Basically, what is your outlook?

[Interpreted] Responding to your first question, yes, there has been a significant surge in the amount of online purchases, household necessities, and that actually is true for NAVER as well. Thankfully, we've actually been developing plans and making preparations starting last year regarding brand stores or discount price warehouses or Live Commerce. So with the outbreak of COVID-19, we were able to very swiftly respond to the changing environment. Going forward, we will continue to partner up with different players in this ecosystem, and we will also accelerate partnerships as well as investment. And also, on the logistics side, we will also partner up with multiple number of logistical companies as well. Your second question regarding the growth of Smart Store GMV and NAVER Shopping as well, yes, NAVER Shopping GMV also has posted a growth. And in terms of the outlook, we see that in the second quarter that such [ growth ].

[Foreign Language] The next question will be presented by Jae-min Ahn from NH Investment.

[Interpreted] I would also like to ask questions about the COVID impact. It seems like, even on the search side, the growth was quite robust, which I believe was driven by shopping. But could you give us the breakdown between search as opposed to shopping? And give us also the outlook for the second quarter as we go forward? And I expect COVID-19 would have also impacted the display ad business as well. What is your outlook for DA in Q2? And also for the entire year, what is your projection for ad revenue?

[Interpreted] Regarding your question about the COVID-19 and its impact, since the outbreak of COVID-19, online shopping has reported a growth. And including shopping, search, ad, some of the shopping-related keyword revenue, yes, did go up. However, because of the overall contraction in consumption as well as economic depression in many of the segments, the number of clicks by the users as well as the budget by the advertisers have all gone down. And so we have seen a declining trend around the Power Link since March. In order to respond to such declining trend, we have optimized our Power Link advertisement and also tried to expand on the coverage of shopping search ad. And thanks to those efforts, in Q1, the revenue had actually gone up 12% on a year-over-year basis. Now moving on to the outlook for the second quarter. As we see this COVID-19 issue actually prolonging, we believe that for the online shopping sales revenue, it will be quite solid. However, on the off-line side, the advertisers, the search ad advertisers are slashing their advertisement budget. And also, we, therefore, expect slowness in terms of the -- just the general search-related activity. Therefore in Q2, we believe that double-digit growth is not going to be -- is going to be quite difficult. And hence, right now, although it's -- since it's only just 1 month since we started the second quarter of the year, it will be difficult for us to provide you with the exact specifics. But we will continuously take ample time and closely monitor any developments but make sure that we really respond and really endeavor to respond to any revenue-related developments. Responding to your second question on display ads. On most -- if you look at most of the top advertisers, they have actually cut their marketing budget. And we see that lowering of advertising budgets from key sectors like movies, logistics distribution and finance. Because these impacts have started to really emerge in the March numbers, and as you can see, basically, our ads revenue for Q1, therefore, posted a growth of 1.2% year-on-year. Moving on to the outlook for the second quarter. Most of the DAs are prebooked about a month or 2 before the actual running of the display ads. And at this point, we see that in the market there is low demand for display ads due to the COVID-19 situation. And hence, the outlook for second quarter is also not very, very favorable. If COVID continues, then we expect that the number that we will see for the second quarter is not going to be all that favorable due to the lowering in demand. It could actually be more serious. So we are, at this point, responding with different approaches by selling more performance-based ads as opposed to impression-based.

[Foreign Language] The next question will be presented by Eric Cha from Goldman Sachs.

[Interpreted] I would like to pose 2 questions at the call. The first question relates to your new product, the Smart Channel. It seems like this product has a performance element embedded to it. I would like to understand what data or information you would be using to actually do targeting. Second, because up until now NAVER had not that -- had not been all that proactive in using targeting strategy for your digital advertisement, have you decided to change gear? Second question also relates to the impact from COVID-19 on your advertisement and business platform. Can you give us the top line trend from January to April, give some more color with regards to the breakdown?

[Interpreted] Regarding our targeting for advertisement, we have continuously upgraded our performance-based advertisement platform. We've conducted multiple number of tests on our mobile main, Subs, Cafés and BAND based off of the auction-based performance ads auction process and also embedding a performance element to it. We wanted to make sure that we didn't create any inconvenience to the users but at the same time, provide advertisement that really is aligned with the interest of the user and information that can provide value to the users. That was the basis on which we conducted this performance ad test. We upgraded, and also we believe that this does have benefits. This does provide benefit to the users, and that's why we decided to expand and increase this product lineup. We want to make sure that we do not undermine privacy of the users. We will continuously test our targeting methods and upgrade them, and we are using customers or the users of interest-related information in conducting these tests.

[Interpreted] I'm Sang-Jin. Responding to your second question on the overall revenue trend for advertisement and business platform, I think for the business platform, the important watershed is February 20. We can look at the trend before and after that of the business platform. As you could imagine, food and beverages, household goods, other lifestyle products and health and cosmetics, these keyword-related sales have actually gone up, whereas we've seen underperformance in keywords such as travel, transportation, financial as well as comprehensive shopping mall GMV. And I think that the key defining factor was the fact that we've started in earnest to do social distancing from end of February. Same impact was felt in advertisement as well. Typically, you will see our Q1 advertisement revenue lower compared to the Q4 of the previous year. So if you were to compare last year, the Q1 versus the previous year's Q4 figure, there was 6% decline, but for this year, we have seen about 12% decline. So I can tell you that there was a bigger impact on Q1 of this year. This is typically because of the fact that the larger advertisers actually plan their marketing budget at the beginning of the year and start spending out of that budget from month of March, and that really -- that is supposed to actually drive up the display ad-related revenue. But this year, actually, the COVID impact has played in. As today is April 23, we're going to very closely monitor the development in April and May. If you look at our domestic revenue due to social distancing and also in accordance with the trend of the confirmed positive cases in Korea, that really does impact the larger advertisers and off-line advertisers that depend on the use of the keyword. And so that is an aspect that we can negatively impacted. But on the online side, the performance is relatively favorable. So we have to think about the mix of these 2 elements, and that basically -- it could offset one another. But of course, if the pandemic and outbreak actually aggravates, then that could have a further negative impact.

[Foreign Language] The next question will be presented by Seungjoo Ro from CLSA.

[Interpreted] My first question relates to e-commerce. I understand that you have partnered up with certain providers to expedite the sales of household goods and also is collaborating on the delivery side as well. I would like to understand, is this a one-off business arrangement. Or do you see possible joint investment or setting up of a new company that can actually handle this? Because Coupang, for instance, is really posting a quite significant growth based off of its extensive user experience, which may have some negative impact on NAVER Shopping. So that's the basis of my question. Second question is on Smart Channel. Is it correct to understand that the banner advertisement is going to be displayed on the mobile main at the top section, the top tabs, in each of the top tabs? If this type of advertisement is placed, I think that the impact is going to be quite positive. But due to the COVID situation, our larger advertisers have slashed their budget, so I would like to understand where you see the source of revenue for this new product.

[Interpreted] Responding to your first question, NAVER Shopping, its mode of operation is different from other operators. Basically, we provide a platform called Smart Store, and individual merchants or operators come to that platform and they run their own business. What we do is we provide tools and support and help so that they can swiftly run their business. So rather than having a unified system of delivery, we believe that depending on the type of product assortment, the type -- the size of these business merchants and their preferences, the type of delivery that will be preferred will be quite different. Also, same applies to the users as well. There will be some users who would want a very fast delivery, but some others would want more premium and more personalized delivery. So it is from that sense that we're seeking out different modes of cooperation with different partners. Smart Store, when it comes to the current delivery system as to how the products are delivered or what the process is, across this entire cycle, we're very much interested in the data we can gain. So at this point, we are seeking cooperation with a view to acquiring these data, and accordingly, we're making preparation.

[Interpreted] Now on your second question about the Smart Channel, basically, it's going to be located at the very top of each of the mobile section. We will first start with the news tab, and we will gradually expand to other tabs like sports and entertainment. We will closely monitor how we are selling these spaces. And if we sell out on one tab, obviously, we will move to the other. But even if we don't move to other tabs, that's not going to have any significant impact on us on a business -- from a business perspective. At this point, we're selling more of an impression-based ads, but we want to gradually expand into performance ad as well. For Smart Channel, basically for larger corporations, they can make use of the impression-based ads, but for smaller enterprises in Smart Channel, they also have -- they could also -- we expect that they will be quite active in utilizing the performance-based ads. I believe that carrying out a balanced mix between performance and impression-based ads is a quite critical point, and it's something that NAVER can really leverage to its benefit. Because performance ads by itself cannot fully satisfy the needs and the requirements that exist in the market, we will continuously upgrade this product and really use it as part of our integrated marketing tool and also connect that to our other businesses such as search, et cetera. We think that, at the end of the day, this is going to have a positive impact on our top line, but we have not yet launched the service yet. So it's too early to say the extent of that impact, but we're quite sure that this -- that will be positive.

[Foreign Language] The next question will be presented by Stanley Yang from JPMorgan.

[Interpreted] My first question relates to NAVER Pay and your outlook for top line and the GMV going forward. And take -- aside from the transactional fees, what is your fee income production for -- from the financial product? When do you think that you will start to see the financial product-related fee income? And what would be the extent of its contribution to your top line? And also for NAVER points, how many percent has actually been paid out? I would like to understand whether the trend is flat or an uptrend? Second question on Smart Channel. This is going to be located at the very top of the mobile page, on top of the SA. And you've mentioned that this is not really going to impact user experience. So are there any other locations or inventory slots that you're currently considering? And even if you increase the inventory, if the advertisers' demand is limited or if their budget is limited, there is not going to be any growth that follow. So what -- how do you foresee this going forward?

[Interpreted] Yes. Your question on NAVER Pay revenue and GMV outlook, for Naver Financial, this year, we are planning to achieve more than 40% growth, and looking at the trend in the beginning of the year, we believe that we will be able to achieve that objective. In terms of the GMV as well, in light of the recent trend, we also believe we can meet the originally set GMV target. In terms of the financial product-related fee income, NAVER Pay is going to launch NAVER Pay bank book end of May, and also in the second half of the year, there are a number of financial products that has been scheduled to be launched. And yes, if we make fee income, that would be growth under our top line revenue. But for NAVER Pay, the payment-related revenue element is actually what takes up the lion's portion. The financial-products-related fee income in an absolute term is going to be small. However, it's going -- although it is profitable. This year, all the sales revenue that we get from the sales of financial products is going to be used for marketing purposes and will be used to better user experience. So regarding your question about NAVER Pay points, maybe the intent of your question is to understand its impact on our P&L. When it comes to NAVER Pay points, we give out 1% when people shop on NAVER Shopping and also if they write reviews, there's additional point that is given. So the actual point -- percentage of point that is paid out is going to be slightly above 1%. And also from the off-line merchants, also, there are some points that gets accumulated. Basically, the purpose of having this point mileage system is to increase people's loyalty level and also to expand on the merchant base. So we will be continuing to pay out certain percentage of points going forward as well. But there will be some areas where point is -- brings good performance and in others where it's not as effective, so we will continuously test on the effectiveness of the performance of the usage of such points. These mileage points, yes, they do use up the resources that we have, but the purpose of having these types of mileage point system is to, at the end of the day, increase the overall GMV for our services. So in terms of the Smart Channel and the correlation between the increase in the inventory and the increase in the sales, yes, we have added to the Smart Channel and added additional advertisement inventory. There will be additional inventories that will be added to upcoming new services as well. There is definitely an advertisement market out there, and if we increase the inventory slot, I think it would give us more competitive edge in attracting the advertisers. But just simply increasing the inventory is not going to be sufficient. One has to really match the needs of the advertisers with the appropriate users. So we would do our best to satisfy the needs that the advertisers have, and also, we will continuously think hard as to how we can bring this advertisement piece and really use that to our benefit in further growing NAVER Shopping as well as our NAVER ecosystem.

[Foreign Language] The next question will be presented by Shin Soyun from Crédit Suisse.

[Interpreted] I would like to ask 2 questions. First, you've mentioned that you will increase the number of branded stores to 200 by the end of the year. Which segment do you think will be mostly attracting customers? And from a long-term perspective, is this business model different from the business model that you are taking under Smart Store? Meaning is there a different approach that you will be taking in terms of advertisement products? And second question is with COVID situation, a lot of people are staying home. Would like to understand if that had impacted the traffic or ARPU of your Webtoon services.

[Interpreted] In terms of the brand store and the types of companies that are coming onboard, it's not restricted to one single category or a small number of categories. Basically, these are large branded companies and consumer electronics, fashion, electronics as well as furniture. So we're, at this point, talking to them very closely as to ways how we could really maximize the impact from this approach. And so the priority is to really think about how we can boost the performance. And we are not, at this point, envisioning this as a separate and additional sources of revenue. But going forward, we will be looking at different ways to leverage advertisement or other types of cooperation and possibly making use of this as a promotional platform.

[Interpreted] On the impact of COVID on our webtoon traffic, as was the case last quarter, we've seen user growth of continuously going up in not just domestic but in North America, in other overseas markets, and the whole monetization process is happening quite well. In terms of the GMV on a year-over-year basis, there was more than 60% growth. And what's also very encouraging is that the portion of overseas is now about 20%. So if you look at North America, number of people actually -- number of paying users or people making purchases has grown by threefold and per subscriber average amount, that is per -- amount used, has increased by twofold. We think this trend will continue into the second quarter as well, and so on a year-over-year basis, Q1 sales, as previously mentioned, was doublefold -- twofold. Year-on-year, we think this trend will continue. Relating to the traffic and our user trend, I mean there has been a significant rise in both the domestic and overseas MAU, and we also track DAU as well. And one thing to note is that we've seen significant uptick in growth in North America and Lat Am are -- Lat Am region.

[Foreign Language] The next question will be presented by Jingu Kim from KTB Investment & Securities.

[Interpreted] My first question relates to your mid- to long-term plan on NAVER Shopping. What are your strategy to give NAVER Shopping a further boost up? And what is the investment direction? And also, can you share with us any update on your business plan that will help you bring about synergies with Naver Financial? Second question, you previously communicated that on your advertisement business, your annual revenue growth target is in the early 10%. In light of the current situation, do you have plans to change this guidance?

[Interpreted] In terms of the future outlook for NAVER Shopping, as we see, this non-face-to-face, noncontact market emerge, we believe that, at this point, we are very much focused on providing and developing tools such as LIVE Commerce for the benefit of both the users and the operators. LIVE Commerce basically is a tool that is given to the business operators of the Smart Store, which they can use in order to lock in their customers and also to create their frequent customers. And also, they could use different services and tools that NAVER provides like NAVER alert to really gain business opportunity. From the users' perspective, we're also looking at different approaches, for instance, creating a program whereby users would make repeat purchases or different types of purchases on a monthly basis or scheduled basis. So we believe that all of this will work to link back to the Naver Financial's NAVER Pay and NAVER point system as well. So this is a very important element to note as we believe that our finance -- Naver Financial business also is very closely underpinned by the whole commerce transaction. And from a mid- to long-term perspective, the Smart Store merchants, we have many businesses on Smart Store. And in order to help and provide them with the support, we gave them connection to the use of the LINE Works. So we've tried different things. We've allowed them to use LINE Works and also the cloud tools that NAVER provide. And we've seen meaningful outcomes from such attempts, and we will try to incorporate that into our mid- to long-term planning.

[Interpreted] Second question, the COVID-19 did have some positive impact [indiscernible] revenue. Clearly, there were negative impacts that existed as well. So we believe that the second quarter -- in the second quarter, if things go as has been going over the past couple of months, there will be such impact. And if March, April situation actually continues on into the second quarter, then the growth rate that we had originally projected could slow. Since we're only 1 month into second quarter, it's very hard to make any clear projections. But once again, if the current difficulties and hardships continues on, then the double-digit growth, combining both of those elements, will -- there's a possibility that double-digit growth could actually be impacted.

[Foreign Language] The next question will be presented by Taewon Kim from UBS.

[Interpreted] I see some good indicators from your overseas business in terms of user number and the monetization of the Webtoon. Can you provide some more color on what your targets and objectives are for your overseas business in SNOW, BAND and Webtoon and what your investment plan is?

[Interpreted] On Webtoon and as well as in BAND and SNOW, our overseas performance is quite positive. We will, therefore, continue to focus on growing the user base and monetization in different geographies, including North America, Europe, Japan and Asia. For this year, in particular, we were focused on North America, Europe and Japan. And for the Webtoons, we've already made equity investments in the beginning of the year, and we will be using that resources for marketing and for business operation. For BAND, we've seen a significant Q-on-Q user base growth from COVID-19, and also for the domestic business, we're going to continue to upgrade its quality. And we will also target the North American market. Last year, MAUs surpassed more than 2 million. So this year, we think that we will be able to further give it a boost, and this will be an important year for us to really well position BAND in the North American market. So aside from any seasonal marketing activities, we don't foresee any extraordinary or significant investment for BAND for the time being. For SNOW, under SNOW, there were many various different services that were launched, and the camera business, the ZEPETO, we will be, as of Monday, be spinning off that business. And there are new services that's been launched like Cake and CREAM, which was quite well received by the users. In terms of investment to SNOW, we're currently running well within the budget that we have set at the beginning of the year and in line with our business objectives. Starting with the spinoff of ZEPETO, if need be, other types of services, if we see fit, could be additionally spun off and also -- could be additionally spun off.

[Interpreted] Thank you. This ends the earnings call for NAVER's Q1 2020. We look forward to your support. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]