NAVER Corporation (A035420) Earnings Call Transcript & Summary

[Interpreted] Good morning. I'm Kim Min, NAVER's IR Director. Thank you for joining NAVER's Q4 2021 Earnings Presentation. Joining our call today, we have CEO, Han Seong-Sook; and CFO, Park Sang-Jin. The earnings results are K-IFRS based provided for the purpose of timely communications and are yet to be audited by an independent outside auditor and hence are subject to change after the review. I will now turn it over to our CEO, Han, to present on the business highlights.

[Interpreted] Good morning. I am Han Seong-Sook. Thank you for joining our earnings call today. With the setup of current management system in 2017, NAVER, as a tech platform, announced its commitment towards building an inclusive ecosystem to grow together with our users, creators, SMEs, brands and partners and its vision under which we crystallized our strategies in 2019 for expanding into commerce, fintech, content and B2B, underpinned by the company's search capabilities. Guided by this philosophy and vision and with balanced approach to tech investment, mutual win-wins and profitability, we were successful in making NAVER's own business models through which we grew together with our partners, including SMEs. We not only expanded synergies across businesses following the natural flow of usage from search, commerce, payments and fintech, but also solidify the system where each of our businesses could grow and expand independently. With the introduction of the entrepreneur leadership-driven CIC system, we were able to accelerate development of each stand-alone businesses, and based on the business performances, also strengthened compensation scheme in line with the shareholders' interest as well. We were, hence, able to build Korea's biggest commerce platform, growing together with 490,000 SMEs and brands, named the basis for a greater expansion led by efficient marketing solutions of the search platform and NAVER Financial's online optimized fintech services. Also supported by business integration of Z Holdings online, we will be able to take tested and proven commerce ecosystem of Korea to Japan. There were also many achievements from global challenges, which we've launched on our own. Webtoon has #1 global storytelling platform with 170 million loyal monthly active users driven by Wattpad acquisition, collaborations with Marvel, DC Comics, BTS and original IPs and expansion into other content shown through Canvas as it continues to post growth. ZEPETO, which pioneered the metaverse market, since its launch in 2018, continues to expand its circular ecosystem of creation and consumption of items by building on its 260 million subscribers and more than 2 million creators. When NAVER committed to global expansion and placed full momentum behind new business investments, there were concerns as much as positive expectations from the market. But I believe challenge and investments were necessary in developing our business portfolio for today and for future and for domestic and global, laying the optimal framework for sustainable growth. I would like to take this opportunity to express my gratitude to shareholders, employees, users and partners for placing your unwavering trust on us, helping us overcome many difficult hurdles and bring great outcome. Underpinned by the directions just mentioned, we brought meaningful results in 2021, in line with the development stages of each businesses. And I will now elaborate on the business performance highlights. Search platform is seeing growth in users and range of search words used on the back of new attempts that use AI technology, including AI search and smart block. While we terminated real-time-based ranking of keywords early last year, business query count volume has been up trending for 3 consecutive quarters, underpinned by AI-supported recommendations and matching technologies used for shopping and local services. Also, amount of content production and total revenues for influencers posted more than twofold growth versus 2019, activating the UGC ecosystem, with generation Zs now accounting for 70% of total bloggers. Product lineup was also bolstered to respond to diversified needs of advertisers. And for 2 million local SMEs already registered with NAVER, we made extensive revamp of the Smart Place platform to integrate local solutions. As a result, weekly number of visits by vendors were up 6x year-to-date, and placed ads is growing fast as new advertisers voluntarily come onboard. Smart Place also offers free solutions to off-line businesses with expected savings of KRW 12.9 trillion in cost. We will continue to meet digital transformation needs of 4.8 million local SMEs and will also go global in the future. In Q4, we launched a new premium video ad for big brands and plan on releasing dynamic ad product, which is based on the use of commerce data and AI tech, reflecting an individual's interest and intent to purchase. There will be a formal launch of full paid ads this year, which will enhance marketing efficiency and brand recognition in collaboration with Shopping LIVE! as we expand on the product lineup in line with the new media trends. Despite subdued growth from online domestic commerce market, Q4 commerce revenue continued to outperform market growth with the increase in contributions from Brand Store, Shopping LIVE! and membership. Brand Store and Shopping LIVE! in just 1.5 years since their launch reported 10% higher GMV versus the total Smart Store. Brand Store was up 110% on year, reporting cumulative GMV of KRW 1.9 trillion while Shopping LIVE! saw 39% Q-on-Q rise in number of live sessions, grossing more than KRW 100 million in GMV on the back of active participation of brands and SMEs, making contribution to monetization. [ Short ] Shopping is a short form original content released this month, which was a big success case, bringing in more than KRW 15 million of sales in just a short span of 10 minutes, which was 57% of the total sales generated from the 60-minute full session. Gift GMV was also up 150% year-over-year, showing that despite slowing market growth, we continue to see growth from different verticals of the commerce segment. In the meantime, Merchant Solution Center, which will support SME's digital transition and growth successfully completed the test phase, and yesterday, there was an advanced opening. Marketing message solution, whose beta test began in Q4, received positive feedback for providing additional marketing opportunities for the businesses. And the data shows that when AI recommendation feature is used, rate of actual opening of the messages increases by twofold. Subscription solution in just 6 months after its launch saw 4x rise in number of sellers and sixfold increase in cumulative users supporting the businesses of SMEs and enhancing shoppers' convenience. With the use of AI and data, we will strengthen personalized subscription recommendations and rapidly -- we plan to rapidly propagate these services. We will continue to differentiate lineup of solutions and expand our advertisement and commissions-driven revenue model to one that is also solution driven in the mid to long term. For NAVER Pay, we are seeing a more diversified point of payments with noncaptive payments reporting a growth of 68%, while Q4 total GMV was up 36% on-year to KRW 10.9 trillion. Its monthly active users was up 9% on-year, nearing $16 million. And the use of Pay Point top-up was up by 102% on-year, growing the loyal user base. We added new large global merchants, such as AliExpress and Google App Store, and with our off-line merchants increasing to 230,000, closely connecting the online, offline, domestic and global point of payment for our 30 million-plus NAVER Pay members. In Q4, quick settlement service further reduced 1 day in the payment cycle, keeping to its global top-tier standard. And in just 1 year since its release, reported cumulative settlement volume of KRW 8 trillion and 90% of participating sellers provided positive feedback. Total business loans to smart store operators amounted to KRW 130 billion, sourced from both Tier 1 and Tier 2 financial sector in its first year of service offering. And by using the alternative credit scoring system, lending terms and approval conversion all improved, helping out the online SMEs. We also finalized complete API system transition for My Asset services and will expand [ My Data ] lineup, which will form the basis of diverse range of fintech services in the future. NAVER Webtoon surpassed 1 trillion global annual GMV in the fourth quarter and is growing fast. Full momentum was placed on collaboration with partners who have global IPs as Marvel's internal's webtoon was exclusively featured just ahead of the film release. An original webtoon based on BTS IP amassed 15 million cumulative views in just 2 days after its global release. Also, a joint production with Studio N, the drama, Our Beloved Summer, became the first success case of making both the original drama and the webtoon IP concurrently, attesting to NAVER's content production capabilities and potential for further expansion of the IP business beyond just using Webtoon IPs for dramas and movies. This year, we plan to focus on growing GMV based on a wider range of new revenue models and expand the economic size of the global storytelling platform, including ad and IP. ZEPETO with its 260 million subscribers, mainly Generation Z saw its MAU of 57% on-year and revenue up by 318% year-over-year, growing into Asia's #1 metaverse ecosystem. Its potential was well proven by the fact that it raised sizable investment from global partners, including SoftBank as ZEPETO focuses on strengthening global ecosystem and acquiring talent for service expansions underpinned by U.S. and Hong Kong as its core foothold. CREAM, which started as a retail platform for sneakers, saw its December GMV up by threefold year-over-year, breaking through KRW 100 billion and is fast emerging as C2C market leader as it enters other categories such as luxury goods. It is targeting to become Korea's #1 vertical-specific commerce app and will continue to prove its potential as SNOW's company builder together with ZEPETO. During CREAM's biggest developer conference, DEVIEW event, NAVER LABS showcased Arcverse, which is a metaverse and ecosystem of technological convergence. By replicating real world in the digital space and through connectivity, services such as service robots, autonomous mobility, AR/VR and smart city will be offered, which will first be applied to NAVER's second headquarter building in Gak, which is a data center under construction in the Sejong City. In the upcoming future, smart buildings and robots will become common around the world, and you will have a peak at the state-of-the-art leading technologies, both in the digital space of NAVER Cloud and at NAVER's new headquarter in the real world. NAVER is supported by Korea's best researchers and strong cloud business under which NAVER technology is used for launching standardized products based on which we are gaining corporate customers. In particular, this year, we were focused on commercializing AI HyperCLOVA for corporate clients, which was launched last year. We will further elevate NAVER's service level with AI and prove that AI in itself has a strong business case for creating value. Lastly on ESG management, which will continue to be an important theme. Let me first share with you our current status and future plans. To implement carbon-negative 2040 target, we are planning to migrate to renewable energy sources at NAVER headquarters. And by closely monitoring the supply stats, we will expand to second headquarter building and to our data centers. We've also begun to identify emission sources from the greater ecosystem of NAVER partners, considering various solutions so that we may crystallize our plan to phase out coal usage. Also, in line with calls for transformation and organizational culture and working environment, we're closely communicating with our people so that we may build a healthier culture and bring fundamental changes in the rebounding of the business. Underpinning these changes are NAVER's governance structure with a strong focus on independence and transparency as we continue to endeavor to establish leading governance system with a clear priority on corporate value enhancement. NAVER's goal stands for seeking growth opportunities through a conglomeration of global challenges driving unceasing stream of best-in-class services. Through continuous growth of current businesses and new growth engines acquired through successful streak of M&As, we will continue to show the NAVER's inherent competitiveness can bring success not only in Korea but also in the global market. I ask for your support and encouragement to NAVER's new leadership who will be at the helm of NAVER's continuing journey. I would like to now invite CFO Park for financial highlights.

Good morning. I'm Park Sang-Jin. NAVER's fourth quarter consolidated operating revenue was up 27.4% year-over-year and 11.6% Q-on-Q, reporting a record high of KRW 1,927.7 billion. Consolidated operating profit was up 8.5% on year and 0.4% on quarter to KRW 351.2 billion with adjusted EBITDA up 15.3% on year and down 5.2% on quarter, reporting KRW 483.5 billion. Consolidated net profit was down 38.6% on-year and 27% on quarter to KRW 235.7 billion, driven by year-end corporate tax adjustments and valuation loss from certain financial assets. Financial year 2021 operating revenue was up 28.5% on year to KRW 6,817.6 billion. Operating profit was up 9.1% year-over-year, reporting KRW 1,325.5 billion. Adjusted EBITDA came in at KRW 1,914.6 billion, up 22.2% on year. Net profit saw a large increase to KRW 16,413.5 billion on the back of KRW 15 trillion disposition gains from line affiliates booked at the closing of integration with Z Holdings in Q1. Setting aside the one-off accounting gains, in 2021, there were more than KRW 100 billion of nonoperating profit every quarter, which is the outcome of many years of investments and seeking for synergies from business cooperation. Looking at the revenue breakdown for Q4, search platform was up 15.2% on year and 7.5% on quarter to KRW 886.9 billion on the back of improvements in search quality and intense analytics and revamping of Smart Place. Display revenue within the search platform was up 26.1% on-year, sustaining an elevated level of growth. Commerce revenue was up 27.9% on year and 6.6% on quarter to KRW 405.2 billion, with Shopping LIVE! and Brand Store GMV growth contributing to the top line growth. There was a change in the accounting of Point linked to Plus membership, which led to KRW 18 billion of temporary revenue deduction. But excluding this impact, there was 33.6% year-over-year and 11.3% Q-on-Q rise in revenue. With the onboarding of global merchants, non-captive payment volume increased 60% year-over-year as fintech revenue reported KRW 295.2 billion, up 46.8% year-over-year and 22.1% Q-o-Q. On the back of accounting changes for Plus Membership, there was a temporary upward impact of KRW 14 billion on the fintech revenue. And excluding this impact, that was 39.8% and 16.3% increase year-over-year and Q-on-Q, respectively. Driven by meaningful expansion of global Webtoon, annual content GMV broke 1 trillion mark. And with sustained top line growth of SNOW camera and ZEPETO, total revenue was up 67.8% year-on-year and 26.7% Q-on-Q to KRW 233.3 billion. Cloud revenue was up 25.2% on year and 11.4% on quarter to KRW 107.2 billion and sustained growth in winning new customers. Next on the expense items. Development and operational expense was up 49.2% on year and 19.8% on quarter to KRW 466.2 billion on temporary rise in year-end labor costs including bonus for new recruits in 2021 and severance pay. On the back of rise in revenue-linked expenses, including payment in sales commissions and NAVER Pay's basic points, partner expense was up 33.6% on year and 17.4% on quarter to KRW 714.5 billion. Infrastructure expense was up 15.8% on year and 2.6% on quarter, marking KRW 182.9 billion. Lastly, marketing expense was up 15.9% on year and 5.7% on the quarter to KRW 212.9 billion, driven by point-related expenses rising in -- which rises in proportion to Plus membership subscribers. Next is on shareholder return policies for 2021. Since 2019, we announced a new shareholder policy saying that it will last for 3 years, and this year is the last year of that period. We will be using 30% of consolidated free cash flow of previous 2 years, which amounts to KRW 162.1 billion as the resources to pay out KRW 74.8 billion, which is 5% of stand-alone net profit, after which there will be a share buyback within the limit of KRW 87.3 billion of remaining resources, which will then be immediately canceled. However, as per the November modifications to the previous disclosure made due to the Capital Markets Act that restrict disposition for 9 months following treasury share buyback, we're closely considering the timing for distribution of stock grants for employees, which started last year and the acquisition timing for share buyback. So we yet again ask you for your indulgence as we have set end of 2022 as the time line for the delayed buyback for year 2020 portion and buyback using remaining resources post this year's dividend payout. This ends our Q4 financial highlights, we will now entertain your questions.

[Interpreted] [Operator Instructions] The first question will be provided by Kim Sung Eun from Macquarie Securities.

[Interpreted] I would like to pose 2 questions. Our first question, I am over -- in 2021, there was a quite steep growth for your display ad. I would like to understand what your strategies are in 2022, what your growth strategies are and what your are expecting in terms of the performance of display ads in 2022. Second question, your content revenue outperformed our overall expectations. Could you explain as to what the driver was behind that and what your strategy will be going forward?

[Interpreted] Responding to your first question about our search platform business, specifically the display ad business. In Q4, there was a year-end seasonality impact. And also we've seen a quite solid expansion of our performance ad. There was also a new product launch, and we increased the amount of inventory. And driven by all of these factors, we were able to bring year-over-year growth of 26.1%. We've been continuously expanding on our performance ad and also through a more fine targeting of the advertisement and the continuous improvement in quality. This would -- this led to a higher level of demand coming from the advertisers. So despite the fact that there was a base effect with respect to the smart channel, we are seeing more advertisers really experiencing the efficiency -- high efficiency level of such advertisement product. And thanks to that, we were able to bring in a quite solid growth in Q4. Regarding the part of this year's forecast because of last year's high base effect, we think that the growth for this year will naturally be slightly lower. Up until last year, the growth was mostly driven -- centered around the performance ad. But this year, we wish to expand the coverage to include commerce and local advertisers as well. And by introducing various different types of product lineups that could better meet the evolving needs of the advertisers, we wish to bring about both a qualitative and quantitative growth. There will be an internal leadership change within the company. So currently, there's -- our business plan is being developed. And once that is finalized, we will be able to share with you more specific data or guidance. Moving on to your next question. Yes, in Q4, there was a quite steep growth in terms of our content revenue, and we are very much encouraged from this performance. Basically, in Q4, the Q4 amount is commensurate to the annual revenue that we have been seeing over the years. And if you look at content revenue, it breaks down into Webtoon, SNOW, V LIVE, Music and others. For V LIVE, Music and others segment, year-over-year growth was more or less flat. We've seen a quite significant growth from Webtoon and SNOW. Especially if you look at our Webtoon, our quarterly growth has been quite robust. And on an annual basis, we've been posting above 60% growth. And we expect this growth trend to continue as we enter into 2022 as well. For SNOW, we successfully monetized on SNOW camera, and the revenue from ZEPETO also showed steep growth. So both on a Q4 basis, on a per annum basis, we have posted above 130% growth. And we believe such positive performance to continue as we go forward.

[Interpreted] The following question will be presented by Yu Incheol from Citi Securities.

[Interpreted] I'd like to ask you 2 questions. First, I would like to understand what your outlook is for your commerce business in year 2022. In Q4, Smart Store GMV in terms of Q4 Smart Store GMV as well as growth of Smart Store, and you've introduced -- you've newly introduced merchant solutions and also due to the COVID-base effect, I would like to understand what the impact will look like. And what do you think is going to be the contribution made from this newly introduced merchant solutions? And to the new entrance into the Japanese market, what impact would that have? Second question relates to Plus Membership. The Plus Membership point-related marketing expense burden that the company must be feeling, what in terms of margin impact would that have? And could you also provide us with what your forecast for margin is?

[Interpreted] Now you -- responding to your first question on our Q4 GMV growth as well as guidance for 2022 for our commerce revenue. Looking at our Smart Store, despite the fact that Korea's online commerce market somewhat slowed due to the base effect, the contribution made from our Brand Store Shopping LIVE! and Membership has increased compared to the past. And we've seen some meaningful performances compared to the market average growth. So on a year-over-year basis, our Smart Store has posted 25% growth as of Q4 and per annum 35% growth. Also compared to Smart Store, we see that Brand Store and Shopping LIVE!, which were launched less than 1 year ago show a great potential. And we believe that there is quite a bit of potential for its bottom line generation. And so going forward with also the realignment and revamping of our overall shopping business, we can expect positive performances. To be a little bit more specific, Brand Store compared to Q4 had posted a growth of -- well, in Q4 posted an year-over-year growth of 110%, reaching a cumulative GMV of KRW 1.9 trillion this year. And for Shopping LIVE!, there are a lot of brands in SMEs that quite actively participated and capitalized on this method. And so on a Q-on-Q basis, GMV -- a number of live sessions basically that were bringing in more than KRW 100 million of quarterly GMV actually grew by 48%. And Shopping LIVE! -- our Shopping LIVE! has been firmly placed and being -- is being positioned as an unrivaled #1 provider. So for this year, we plan to further expand on the product categories for Shopping LIVE!, introduce a stand-alone application also launch short-form original content so that we may further widen the gap that we have with other live platforms.

[Interpreted] So this year, in terms of the mid- to long-term growth outlook, as we announced back in March, from a midterm perspective, our market share outlook is to reach about 30%. And in 2022, there will continue to be some external variables and factors such as COVID-19 pandemic, so it is not going to be all that easy for us to provide you with a exact forecast. Having said that, we will continue to make sure that our GMV growth has a meaningful -- shows a meaningful outperformance, vis-a-vis the market growth, thereby making contributions to NAVER's business as well as to our partners' businesses. Responding to your second question about our entrance into the Japanese market. In terms of the global Smart Store, we have -- we haven't -- we have done an advanced opening as of October 20. So we've taken my Smart Store to Japan. And basically, this is a -- and through this advanced opening, we were able to gain positive feedback from the Japanese users. They were most -- they were satisfied with the level of the commissions that they had to pay and also the high level of functionality that the platform provided. And also all of the paid features under Shopify had been provided free of charge to these users. And also with the interconnectivity with the LINE accounts, there is closer communication is possible. So these are some of the positive feedback that we are gaining from the advanced opening and the users of these services. We will continuously and consecutively strengthen the linkages with other local solutions and platforms so that we may continue on with the service enhancement. So my Smart Store with -- together with the LINE messenger initially, will continuously expand on its cooperation in collaboration with Yahoo! Japan as well as Z Holdings. And based off of our experience that we have gained from NAVER Smart Store, we will be able to also make a very robust ecosystem in Japan where we coexist and co-prosper with other partners and SMEs in this e-commerce ecosystem. But we have just begun this journey in Japan. This is year 1 of this initiative. So it will take some time for us to further improve and enhance on the capabilities and features that we provide.

[Interpreted] Responding to your first membership-related question, in regards to the revenue that's generated in line with this membership, actually, there are 3 aspects. One, there is a subscription fee that people pay as well as the commissions that we take off of the net addition of the GMVs being incurred as well as advertisement-related revenue. So in light of the fact that there are multiple revenue streams for this product, as of today, we do not believe that the losses that are being incurred from membership on its own -- on itself is not that significant. However, from a short-term perspective, as the number of subscribers actually increase, there is a potential that the additional pay point expense could actually rise. But in light of the fact that we are in a very cultural competitive commerce landscape in Korea, this actually is a tool for us to better solidify NAVER Shopping's positioning in the market. So we view this product from a more positive light in the fact that it can grow the number of pay subscribers and increase the number of purchases and increase GMV as well. Regarding the commerce margin, first of all, if you look at the breakdown of our commerce revenue, it's broken down into advertisement revenue and other alliances or affinity related with the outside parties and membership revenue. And in 2021, basically, the portion that membership revenue accounts for is relatively low, so the impact that it has on the margin or on the bottom line aspect is not that big.

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

[Interpreted] I would like to first preface by saying and thanking the management, CEO Han and CFO Park for your hard work in leading the company over the past 5 years. Moving on to question. Your top line revenue growth is quite encouraging, but your operating profit margin has fallen down to the teens -- early teens level. I would like to understand what's your view as to the most optimal level of OP margin? And what's your guidance on this? And for the past couple of years, the company has engaged in a lot of strategic relationships with companies like CJ, Shinsegae, Emart and others, what do you assess as the outcome of all of these endeavors? What has been some of the difficulties or shortcomings? And what would be your focus in year 2022? And what is the percentage of your LIVE Commerce and brand MOU against your shopping GMV?

[Interpreted] Well, first of all, thank you very much for that warm words. In '20 -- regarding the 2022 guidance, I've been asked this question quite frequently in Q3 as well and perhaps previously shared our views on this. From a short-term perspective, year '20 and '21 on the back of the COVID pandemic, there was a quite high growth in terms of the top line revenue. And that high base, of course, is going to work as somewhat of a burden to other companies as well, global internet platform companies, commerce and content companies alike. Under this backdrop, NAVER will continuously focused on growing its top line and review and consider aggressive investment and also think of cost efficiencies, and we'll try to bring out timely performances from areas where we are focusing our investments. And at the appropriate timing, we will be communicating with the market accordingly. Regarding the margin on the mid- to long-term and this year, if you look at 2021, out of that KRW 6.8 trillion of revenue, operating revenue, 60% to 65% were from advertisement-related revenue, which in the past for NAVER took up the lion's portion of the revenue the company was making. And these advertisement-based revenues, they entail a higher level of margin. On the other hand, the growing businesses such as fintech, content and cloud, these are areas where we continuously need to invest. So relative -- on a relative basis, they yield a lower margin. That is why in recent quarters, we've seen a bit of a margin dip. However, I believe that the timing for us to reap the rewards from such investment is upcoming. I cannot put my foot down and say when that specific timing is, but I can tell you that time is -- timing is coming. And once it does, we will be able to see improvement in the margin profile.

[Interpreted] Now moving on to our strategic relationship. First, on the logistics side, we are collaborating with CJ Logistics. And thanks to that, we were able to further enhance our logistical framework and systems and also cooperate in terms of providing quick delivery to the customers. There were also collaborations on the content side, but let me first provide some more color on the logistics aspect. Now currently, about 100 or so brand companies are making use of CJ's fulfillment services. We have been cooperating with CJ Logistics on one hand as well as the brand companies. And the fact that these 2 entities had collaborate amongst themselves also took some time, where we think that, that focus is going to accelerate as we go forward. Also in terms of quick delivery, basically in introducing the services, we were talking a lot with the brand. And as we engaged in discussions with the brands, we came to understand what their marketing solution needs were. And through the collaboration, we were able to package all of the different types of services and products, including advertisements, live shopping, et cetera, and patch them into a total solution and provide that to the -- to our -- use our customers. So that is a positive outcome that we were able to gain from such a collaborative effort. So in terms of the logistics system and the cooperation that we had with the brand companies, I can cite these are some of the key achievements that we've made. On the content side, the companies CJ and NAVER cooperated and collaborated in capitalizing on the IPs that they had, using that IP to produce and make new content and provide more support to the creators. Also through the investment into TVING, we were able to capitalize on the original IPs of NAVER web toon and web novels and develop that into a original and unique content. Another aspect that I can mention is the collaboration between NAVER membership and TVING, which drove the growth of subscriber base for NAVER membership and also enhance satisfaction of the subscribers. In terms of our work together with SSG and Emart, on the -- within the Emart -- with Emart, we started the grocery service, grocery shopping service with inside the Emart platform and traders came on board in December. And starting Q1, we started the early morning delivery with SSG. Also, there is a global collaboration with SoftBank. We -- this year, we'll go more actively at collaborating on different segments, including commerce, search, cloud and B2B. And with HYBE on the entertainment side, we will further strengthen on the K-pop platform together with growth of HYBE. I guess some of the areas that could have been better had to do with the fact that it actually took quite a bit of time for us to reach a best approach together with these partners. Because individual companies would have different corporate culture and also it took some time for us to identify the strength that each company could offer. But based on this learning, we believe that starting this year, we will be able to see much faster duration until the time that we reach and gain that achievement. And this year, for the global cooperation under the leadership of the new management, we look forward to collaborating with more number of global partners.

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

[Interpreted] My first question also relates to margin. The concern that the investors have is the fact that competition is becoming more fierce and you're starting off from a high base. And given the fact that the growth rate is going to slow, what impact would we see that play through in your margin? Last year, your top line performance was good, but your margin still dipped. This year, we're expecting a top line slowdown. So how further of a margin decline are you expecting? Or do you think margin is going to stabilize? And also, if on the -- in the e-commerce side, if competition becomes much more fierce, especially on the fulfillment side, what's the position of the management? Are you going to continuously focus on your top line? Or would you be answering to that fiercer competition? And if margin erosion is somewhat unavoidable, what will be some of your cost-cutting strategies to offset that impact? Second question, regarding the M&A. I would think that this maybe have to be answered by the incoming management later. But if you look at last year, all the M&As that you've conducted did not really have any impact or any contributions to revenue or profitability. So for this year onwards, would you be more focused on inorganic growth, so -- and doing M&As that will bring you some top line and bottom line improvement? Or would still go at that M&A opportunity because it's going to give you a strategic position despite the fact that it would provide you with any top line or bottom line impact? And what is the amount of M&A possible and resources that you could use for M&A?

[Interpreted] Well, thank you for that question. We are fully aware of that concern regarding the margin prospects as well as the revenue growth going forward. Our management is clearly aware of that and we consider all of those factors to be extremely critical. Having said that, all the businesses, the challenges, the endeavors and the new business model at NAVER has so far adopted, we are still in the development phase. And as our CEO, Han mentioned, there are multiple projects that we are currently pursuing in order to challenge ourselves and make inroads into the global market. . And so we believe that such efforts behind development and investment and the fruition of all of these endeavors will come and will become visible. We are at this point in, however, a transitional period towards reaping that benefit. If we need to defend our margin, we will do so. And if there's an opportunity for us to bring top line improvement, then we will focus on top line. But once again, we will not be doing this on our own. We will grow together with the partners. We will have our allies around us and surround us, and we would grow together. And there will be a balance between the top line opportunities as well and investments. So maybe not immediately, but we could also think of the cost savings element in managing the margin level. Operating expense items are broken down into development, partner, infrastructure and marketing. And partner and marketing-related expenses are the ones that will probably feed through in terms of increasing or impacting the investment size. Once our top line stabilizes, that will then entail our fixed cost elements to be more or less stabilized. And those aspects will be considered as we go forward in making decisions on cost savings and efficiency and bringing efficiency. In terms of infrastructure-related expenses, basically, as we increased the cloud business and traffic and data increases and -- naturally, the infrastructure-related cost is also going to go up. And these traffic is actually the foundation behind -- the driving force behind our revenue generation. So with the further growth in top line revenue, inevitably, there will be more investments that's required in the infrastructure side as well. And on the development and operations side, there is new headcount hiring and development investment that is required. And this is something that we need to very nimbly utilize in order to respond to a highly competitive market situation. So there will be appropriate or according -- there will be investments made accordingly, and all of these investments and development efforts are being made to prepare against the future. So from a long-term perspective, once these elements become much more stabilized, we will be able to see a stable level of cost management as well. Lastly, your question regarding M&As. I'm sure that once the new leadership comes in, they will be able to provide you with more color on this topic. But even if you look at our M&As that we've done in the past, these were not into areas that were irrelevant to the business that NAVER was engaged in. It actually had positive impact on NAVER's business and its performance. For instance, in 2021, we acquired Wattpad and at the end of the year, we eBOOK Japan, and these were all revenue-generating entities. And with the onboarding of these companies, we were able to bring more synergies in our Webtoon business. And also, we will continue to engage in partnering up with other entities, either through share swaps or other arrangements and engage in joint businesses. And we think that these will be shown in the performances that we report. The resources for M&As, one aspect will, of course, be the cash flow that we make and that we have on our books and also sizable treasury share-related resources, dollars if need be, we will actually go out to the market and fund the necessary resources if need be. In 2021, there were quite significant investments that were made. So compared to '20, the investment size was 2x higher. In 2022, we plan to continuously engage in strategic alliances and conduct investments.

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

[Interpreted] I have 2 questions, one in Webtoon and one on commerce. First, looking at your Webtoon business, your GMV even reached KRW 1 trillion. So now that the scale has gotten really big, in order to drive growth, user acquisition was going to be very important. What's your strategy on that? And also, in Wattpad, it seems like advertisement is the only business model that you are capitalizing on. But what about other monetization strategies? I guess what people are most interested in is what your IP monetization strategy is. Second is on commerce. Aside from LIVE Shopping and Brand Store, which you explained previously, it seems that these 2 types of services have quite a relatively higher take rate. Do you think that the take rates going forward against the GMV could actually go up? And also, can you provide us whether you have a target mix?

[Interpreted] Responding to your Webtoon question, yes, we have [ 170 ] million users, and we are truly a global #1 storytelling platform. After we acquired Wattpad, we've seen an even growth in the user base across the globe and we have been able to achieve the GMV of more than KRW 1 trillion. And once we finalized on the eBOOK Japan and Munpia acquisition process, we believe that we will be able to become #1 player in Japan as well. But of course, there is fierce competition and we have our peer or competitor entering into that market, so we need to be mindful of that. But the fact that we have now multiple number of platforms, I think, is a plus for us in terms of subscriber acquisition. With our Webtoon and Webnovel platform, basically, we're using our IPs to develop new dramas and as well as movies, for instance. And so our webtoon readers can become the viewers and vice versa. People who view either the drama or movie would look for the original webtoon content. So there are multiple synergies that we can envision within the ecosystem that we have created based on which we believe our user base would grow further. Also in Q4, together with Studio N, we produced a Studio N first original TV series that summer year, and that became -- ranked #1 in Korea's Netflix was well received by the viewers. So this was a good attempt or early successful attempt at us actually making the original drama and webtoon and producing them concurrently. And we're able to really see that there were new opportunities and new potentials in capitalizing on the IPs that we have. So for the domestic market, we will continue to work with Studio N overseas through Wattpad WEBTOON Studios to really explore and identify killer IPs, based on which we will engage in publishing as well as filming and making dramas and expand our IP business. We are also thinking of using that IP to actually develop games, audios, dramas and merchandising and exhibition. And through collaboration with the ZEPETO, we're also thinking of expanding into the metaverse side.

[Interpreted] In terms of commerce, in 2021, we really focused on launching specific verticals, such as Brand Store, Shopping LIVE! as well as other types of verticals. We've tested these new products and new approaches, and we tested many different types of revenue models and business models. Based on that learning, we've started to make improvements on our overall shopping portfolio. And once that improvement takes effect, we believe that there is a possibility of a higher take rate that we could enjoy. Added on top of that, we've developed the merchant solutions, which actually expanded the new sources of revenue from the new commerce services. And that will have a positive impact -- that had a positive impact on our overall profit structure, helping us to outperform the market growth. And also, we tried new things on our LIVE Commerce format, which used to be 60-minute basis. We've made a 10-minute short form-based live commerce sessions and have seen a very positive outcome from these attempts. And we will be further expanding and testing various different approaches. So based on which we will make better products and which will help us further boost our bottom line.

[Interpreted] Due to the time limit, we would like to now close the Q&A session. If you have any follow-up questions, please contact the IR team. So in closing, I would like to ask our CEO, Han; and CFO, Park, to share with us the last reporting messages.

[Interpreted] Over the past 5 years as the CEO, I think I participated in 20 or so earnings release calls and other follow-up and wrap up meetings. And it really provided me with a valuable opportunity for me to revisit the business performances, the directions and any of the shortcomings that we've experienced. So I would like to take this opportunity to thank all of you for always asking us your heartfelt one questions and polling in questions. And over -- and serving as the CEO for the past 5 years, I really focused on making NAVER an technology-focused platform and also growing together with our partners, the other businesses and creators. In making NAVER into a tech platform and in that process, we've worked together, and we've grown together with other producers and creators and businesses. And by providing the tools and data that these other sellers required, we were able to help them provide their products and services to their own customers. And in this process, these partners' growth led to NAVER's growth as well, all feeding into a more -- making of a more healthier ecosystem. The NAVER staff, businesses and creators all cooperated with a shared intent and brought meaningful results in the midst of fierce competition at both home and abroad, honoring the commitments we've made to our shareholders. . NAVER has built and developed its business in Korea, a country of fast-paced changes, making business models that have unique competitiveness never witnessed in any other global markets. Past 5 years as a CEO, my role was to make a solid business and technology foundation for a global expansion. And now supported by such know-how, I look forward to bigger growth from global challenges under the leadership of the new incoming management team. I ask for your support and encouragement for NAVER's story of growth on the global stage. Thank you.

[Interpreted] This is Park Sang-Jin here. For the past 6 years, as NAVER's CFO, I have supported CEO Han in making NAVER's business robust, growing together with other businesses and creators and helping to establish new global businesses as I try to strike a fine balance between investments and management. There are rapid changes in the global economy and competitive landscape of the Internet and platform businesses, and I expect there to be greater interest placed on sustainable growth road map and long-term profit of the company. These are difficult times, and I ask you, our shareholders and investors, to extend your unwavering support to our new incoming CEO and CFO, so they may steer this big company to a better direction. I've been meeting you every quarter during these earnings release calls for the past 6 years, but there were much to be desired in retrospect. Personally, it was a valuable time for me to closely review and monitor our strategies and their implementation. I would really like to thank the analysts and investors for always joining us early in the morning and posing such important questions. Well, this brings us to the end of our last earnings presentation made by CEO Han and myself. Most grateful to all of you. Thank you. . [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]