NAVER Corporation (A035420) Earnings Call Transcript & Summary

[Interpreted] Good morning, ladies and gentlemen. We will now begin NAVER's 2023 Q1 Earnings Conference Call. In this conference call, we will first listen to the presentation prepared by NAVER, and then we will open the floor for Q&A. [Operator Instructions] Now without further ado, I would like to hear the presentation from NAVER.

[Interpreted] Good morning. I am [indiscernible] from NAVER Capital Markets office. Like our investors, I used to work in the market before I joined NAVER this February. I'm very excited to be in charge of communication on behalf of the company, with the investors and analysts. Thank you for joining NAVER's 2023 Q1 earnings presentation. Joining our call today, we have CEO, Soo-yeon Choi; and CFO, Nam-Sun Kim, to walk you through NAVER's business highlights and strategies, financial highlights and new shareholder return policy. After which, we will entertain your questions. Please note that the earnings results are K-IFRS-based provided for timely communications and have not yet been audited by an independent auditor and hence, are subject to change after such review. With that, I will turn it over to our CEO, to present on the business highlights.

[Interpreted] Good morning. I am Soo-yeon Choi, the CEO. In the face of strong headwinds in 2023, NAVER is making strenuous efforts to improve profitability by further monetizing businesses and reducing costs. We will mull over and implement the right strategies and initiatives so that such endeavors can bear fruit in the mid- to long term. In this context, I would like to explain where each business stands today and headed tomorrow as well as how NAVER's AI technology is married with other businesses, including search, to generate synergies. With that, let me go over the performance of each key business. First, let me discuss our search platform. In 2023, the company launched multiple projects aimed at sharpening the competitiveness of Team NAVER. Among Smart Block, which offer tailored search results for keyword searches based on user intent, UGC Block, which takes up the largest share will be further expanded. Also from Q2 onwards, we plan to launch diverse types of blocks, including multimedia block and theme-based café block. Furthermore, aside from the existing text-based UGC content, images, short forms, the usual videos will also be displayed to enhance user reliability and convenience, ultimately, creating an environment where users consume more content. In the second half of this year, search displays will be upgraded so that users can be connected to the right search results after quickly identifying their search intent. To enhance user satisfaction, we will also have AI recommendations added to the results so that users can explore more content. On the business front, despite global economic downturn and subsequent advertiser budget cuts, search ads increased around 5% Y-o-Y backed by improved ad space exposure and expandable ads. In Q2, we will work on improving and expanding the existing services while undertaking new initiatives to sustain our growth. For example, we will conduct a Smart Block beta test, where ad users might be interested in are added to the bottom of Power Link for certain traffic and integrate machine learning to optimize ad copies. Place Ads saw its sales more than double Y-o-Y as all industries enjoyed even growth with the resumption of off-line activity. As of late March, paying advertisers jumped 74% Y-o-Y to 112,000, sustaining a strong uptrend. We will further advance ad matching service for search keywords so as to improve the ad search quality and effectiveness and raise advertiser satisfaction. Display Ads, our revenue declined 13.1% Y-o-Y because of the base effect of the Olympic Games and the Presidential Election last year and economic slowdown. On micro search and performance display ads where performance is easier to measure, fixed ads for branding purposes in particular, TV ads specific to economic cycles and measures are in the works to counter this. I will elaborate more later, but NAVER has also developed a demo and is currently upgrading an innovative generative AI search service linked with its other services in line with the emerging trend of generative AI. We will expand Open Talk and Issue Talk categories to beef up NAVER's media power and also revamp NAVER app in the second half by adding short forms and home feeds to offer more interesting content in keeping with the trends. Communication ads are launched in Q1 which developed with CLOVA and it offers targeted ads by analyzing context and matching. Communication ad is now available for café services and will be rolled out to services like Open Talk, where communication takes place via in exchanging comments. From late April, we started A/B test, where various contents are shown as feeds at the bottom of NAVER at home. Going forward, we will explore new end ad inventory for the space and launch highly effective personalized ad products, unique to NAVER meeting the needs of both the users and advertisers and to bolster growth. Next, let me go over to commerce. Weak consumer sentiment and increased offline activities dampened domestic e-commerce market to record a segment or low growth, but NAVER Commerce's GMV maintained a robust growth of 19.7% Y-o-Y to post KRW 11.6 trillion in Q1. Without Poshmark annually added, the growth rate would be 13.2% Y-o-Y. Excluding affiliates, our performed product GMV was up 20.7% Y-o-Y to KRW 8 trillion backed by brand and Smartstore growth. Service GMV rose 2.2% -- rather 2.2x Y-o-Y to record KRW 1.5 trillion, bolstered by increased offline activities and platform upgrade, which drove up market share. NAVER Commerce ecosystem has evolved from mostly comprising of start-ups and small- and medium-sized sellers to onboard large established brands and became a platform where sellers of all development stages grow together. In the first half of this year, we will launch dozens of upgraded commerce solutions and features to attract new sellers and to address various issues sellers encounter to accelerate their growth and to improve profitability of shopping business. For brands, NAVER provides customized solutions, including effective branding, sales and delivery and customer management and is developing into an integrated B2C platform. In particular, its existing B2C logistics solution, NAVER Delivery Guaranteed boasts 98% delivery success rate, which together with exclusive tags help boost our purchase rate and brand reliability. It also helps brand refine their sales forecast and inventory management. In just 3 months since the launch, 20% of all brand stores adopted the Delivery Guaranteed solution. CJ ENM, LG, HMH, Samsonite and others, who leveraged the solution, saw tangible marketing benefits with their GMV soaring 1.5 to 3x Y-o-Y. Now that the benefits are evident, we will introduce a reasonable fee scheme for monetization. When it comes to commerce solution market applicable for all stores, AI targeting based recommendation to global MD combined with auto payment function was officially launched as a paid subscription service in Q1 after beta test. The service is enjoying a great number of users with high conversion rates and ROI far exceeding seller fees. B2C fashion platform, Poshmark consolidated on January 5, continued to grow, leveraging high user retention and increased its market share even when most of U.S. fashion C2C platforms backslid. Furthermore, optimized marketing and sales spending helped to quickly improve profitability to achieve 2024 target of EBITDA surplus ahead of schedule in Q1. The company will continue to drive cost efficiency and monetization going forward. A live commerce feature, Posh Shows Live was introduced in April. And as a result, the annual live GMV jumped close to KRW 1 trillion, delivering stellar initial results. Also, IP-based search ads were launched recently to further expand profit model. Search word matching accuracy also improved and drove off conversion rate. We will continue to use technologies such as NAVER Shopping Live, AI and search to create more synergies. Since it already accounts for close to 20% of NAVER Commerce revenue, we plan to focus our resources to grow the service into one of the global commerce business pillars. Finally, I'd like to note that the rise of retail media network as the third big wave of digital advertising throughout the world. NAVER Shopping has a strong foothold and huge potential with solid user base of seller ecosystem and product TV. Although global ad market is reeling from economic slowdown and sluggish demand, NAVER will leverage its unparallel product TV and advertiser base to expand into diverse platforms and seek growth drivers. For example, NAVER Shopping ran proprietary product TV ads on 20-plus other platforms, including [indiscernible] and recently added Karrot Market, the largest C2C platform in Korea to the list. In Japan, we integrated NAVER's technologies and know-how to Yahoo! Japan's shopping and local category after live verification test since last year. Going forward, we will integrate our search and ad technologies to Poshmark and Wallapop to upgrade service quality and solidify our presence not only in Korea, but also in the U.S., Europe and Japan and other overseas retail media markets. Next, let me provide updates on the Fintech business. Q1 Naver Pay TPV reached KRW 13.4 trillion, up 19.2% Y-o-Y and 1.5% Q-o-Q. Non-captive TPV, in particular, increased 32% Y-o-Y to KRW 5.4 trillion to drive a total TPV upstream led by new merchants, including TMON and Tmoney and a boom in overseas travel-related industries. Off-line TPV also jumped 68% Y-o-Y to KRW 810 billion. As we transitioned into the endemic stage and also as the number of outlets increased, including industry leaders such as CGV and Shilla Duty Free and [ BIGFILMS ]. In late March, we added Samsung Pay MST payment to Naver Pay app on-site payment service. That's ramped up the number of offline merchants to 3 million nationwide. Initial market response has been quite positive. The service is ranking #1 in Google Android app market. We believe the interlink between Naver Pay and Samsung Pay will translate into visible TPV increase from Q2 onwards. In the area of finance, we are beefing up efforts to showcase innovative services, some of which will be rolled out this year. In Q1, the proprietary and personal loan comparison service was joined by large financial institutions, increasing the number of financial partners to 60. In late May, we plan to introduce a loan conversion service and further expand lending product line up for better service. The Naver Pay Money Hana account unveiled last year also achieved 500,000 new accounts in just 5 months. With its depositor protection feature and point accumulation benefits, the product is attracting new and loyal customers. Besides such financial products, we are also preparing to launch online deposit product comparison service, which was selected as an innovative financial service late last year. We launched in Q1 this year the industry first Naver Pay insurance claims service, which allows users to submit their claims to multiple insurers simultaneously. We will partner up with more insurers to broaden the scope of applicable products and also expand other insurance-related services. Next, let me move on to Webtoon's Q1 performance. Despite cutbacks from marketing on the heels of endemic and improved profitability, operation downsizing in certain regions and increasing the number of Korean web novels on hiatus, global Webtoon total GMV recorded KRW 412.2 billion, up 2.2% Q-o-Q and 28.9% Y-o-Y buoyed by integration of eBookJapan. Increased supply of quality content, including original series in Japan as well as better usability helped us push up paying users in Japan by 16% Y-o-Y. From Q2, we expect Webtoon's both new and return upon hiatus will hit the market in Korea, Japan and the U.S. Also in the first half, we plan to improve Webtoon recommendation features on the platform to enhance user engagement and thus boost growth. Furthermore, we will focus on strengthening monetization by applying various tools, improving our Korea operations to convert users to paid users. We believe that Webtoon still has low pay content ratio and ads are also in the nascent stage, and thus has a strong monetization potential. We expect offerwall ads, which rake in over KRW 70 billion in annual ad revenue has the potential to gain traction globally. NAVER Webtoon, a global story tech platform, the most lucrative profit-sharing model for creators around the world, has made continued efforts to develop relevant technologies to protect and expand the creator ecosystem. 2,000-plus creators featuring original works on NAVER Webtoon made more than 6 figures a year on average, which is more than 20x compared to $4,000 to $5,000, Top 5 select YouTube creators make. We also opened the creators and amateur creator only system to help diversify creator income source. Webtoon authors can communicate with their readers via creators and also enjoy a better creative environment while protecting their works from malicious comments. We will add additional income monetization features within this year. Next, I would like to briefly touch upon Team NAVER's approach to build a competitive hyperscale AI ecosystem in Korea in the face of rapidly changing technology paradigms centering on generative AI. As a first step, we plan to debut this summer the next-generation hyperscale AI titled HyperCLOVA X, which will serve as the backbone of generative AI. It is the third in the world and the first and the largest in Korea in terms of the amount of Korean language learning. HyperCLOVA X will be a response to GPT-4. It will have super performance and run on only 1/4 of the cost compared to its peers. It can understand both images and voices and generate replies using diverse APIs, including Calculator and Mac. NAVER is #1 in Korea in terms of the number of AI engineers. Utilizing such resources, we will apply HyperCLOVA X to overall NAVER services, including B2B services. On the search front, we're preparing for an in-house beta test of generative AI search service, which will optimize search per user sometime in the first half. In the second half, we will be able to release an upgraded model to actual users. Lately, we see a growing number of commercial use cases of AI in the global market for tools needed for content creation and work. We believe such a paradigm shift will provide NAVER opportunities to make a leap forward in the B2C area, where it already has a leadership position in Korea. For example, the hyperscale model, which we have invested in to enhance the search service for the past several years can be applied to NAVER shopping recommendation until their tools, blocks, knowledge in service, travel and booking services to upgrade them and to enhance user experience. For B2B, we plan to offer customization and data protection services that global players cannot deliver. We can marry customer data with HyperCLOVA X to upgrade CLOVA Studio that can create generative AI services and offer them over hybrid cloud. In Japan, in particular, we plan to launch our B2B services that have HyperCLOVA X fused into productivity tools such as LINE WORKS and NAVER WORKS within this year. To that end, we have a project ongoing where NAVER's corporate softwares are extended to AI-based platforms. More updates on the project will be shared when we release HyperCLOVA X. NAVER is also committed to fulfilling its responsibilities in creating a sound AI ecosystem by working closely with the industry and academia experts to address controversial AI issues such as ethics and data protection. Next, our CFO, Nam-Sun Kim, will walk you through Q1 financial performance.

[Interpreted] Good morning. I'm the CFO. First and foremost, I will explain 3 changes that became effective from Q1. Two have to do with changes in accounting policies and one with the deal closure and subsequent consolidation. First, the depreciation and amortization period of service and other key equipment has been extended from 4 to 5 years. This is to reflect the company's average equipment lifespan of 4 -- 5.4 years and to align with the trend where most IT and tech companies both at home and abroad, expanded from late last year, the D&A period of their server, CPU and other assets from 4 to 5, even up to 6 years. Extending the D&A period is more than just an accounting measure. It represents the will to effectively utilize assets just like global tech businesses have declared so in their earnings call, starting from Q1 this year. Since the cost of AI and hyperscale model learning as well as inference are projected to rise going forward, it is essential to effectively use our resources. By doing so, we expect to save around KRW 22.5 billion in D&A costs or rather, I should say, cost deferral rather than cost reduction. Second is the gradual shift towards the gross method for revenue recognition, which we adopted from the previous quarter for Webtoon. In the past, payments to authors and app store commissions were recorded as net depending on countries and businesses. To ensure alignment with industry global practices and consistency among Webtoon subsidiaries, we are in the process of switching to the gross method. The sales and cost impact of this will be KRW 48.7 billion, respectively. There's no impact on OP and net income, but margins will decline. Third is the effect of consolidating Poshmark. Poshmark acquisition closed on January 5 and is reflected in NAVER's consolidated financial statements from Q1 this year. As our CFO -- or rather CEO mentioned earlier, Poshmark's EBITDA returned to the track 1 year ahead of our target. We were able to deliver on our promises made last October when we signed a contract to raise cost efficiency earlier than expected, thanks to the cooperation of CEO, management and the team. We reduced our public company costs as planned, and growth marketing efficiency was raised faster than anticipated. As a result, our EBITDA, which posted around minus $7 million and $4 million in Q3 and Q4 2022 recorded plus $20 million. Let me now run through Q1 earnings results. NAVER's Q1 revenue rose 23.6% Y-o-Y and 0.4% Q-o-Q to KRW 2.28 trillion. Without Poshmark consolidation effect, revenue was up 17.1% Y-o-Y. Despite external uncertainties, Commerce, Fintech, and Content business led the growth. Q1 adjusted EBITDA, excluding variables, such as stock-based compensation and asset D&A expenses recorded KRW 488.1 billion, up 16.2% Y-o-Y and 0.3% Q-o-Q. Adjusted EBITDA rate was flat Q-o-Q despite Poshmark consolidation. We will continue to work on improving profitability while optimizing controllable cost items this year. Operating profit was up by 9.5% Y-o-Y but down 1.8% Q-o-Q to KRW 330.5 billion while OP margin dropped 0.3 percentage point Q-o-Q to record 14.5%. Next, let me discuss revenue by each business area. Now if you look at Q1 revenue by business, search platform was up 0.2% Y-o-Y but down 7.1% Q-o-Q to KRW 851.8 billion. Search Ads revenue grew 5.3% in Q1 despite the advertisers' budget downsizing amid concerns over global economic slowdown and seasonality, sustaining a solid growth in Naver Search, surpassing the growth rate of major global search ad businesses. Display Ads revenue declined 13.1% Y-o-Y due to the base effect of the Olympic Games and the Presidential Election last year. To break down by segment, retail sales, including clothing and fashion increased. Following the announcement of endemic, the construction and distribution advertisers who are vulnerable to economic conditions cut back their marketing spending. Commerce revenue was KRW 605.9 billion, up 45.5% Y-o-Y and 24.5% Q-o-Q. Without Poshmark consolidation effect, revenue would be up 16.7% Y-o-Y and flat Q-o-Q. By sector, Commerce Ads was up 1.4% Y-o-Y, but down 4.4% Q-o-Q. Despite weak consumer spending over a global slowdown, the Search Ads increased Y-o-Y to maintain Commerce Ads growth. Commission and sales revenue jumped to 129% Y-o-Y and 75.2% Q-o-Q. Revenue growth exceeded that of GMV with the consolidation of Poshmark and the increase of higher commission service ratio. Without Poshmark, the revenue was up 39.7% Y-o-Y and 6.9% Q-o-Q. We will continue to grow commission and sales revenue this year by further monetization of services, including service, rather solution businesses. Subscription revenue from membership fell by 64% Y-o-Y and 3.5% Q-o-Q as the number of subscribers increased by more than 35% as compared to last year. Fintech revenue posted KRW 318.2 billion, up 15.8% Y-o-Y but slightly down Q-o-Q. Non-captive TPV led the growth with KRW 5.4 trillion and offline TPV recorded KRW 810 billion, up by 68.4% Y-o-Y backed by an increase in booking and order payments following endemic and expansion in merchants with on-site payments. Content revenue was up by 94% Y-o-Y but down 6% Q-o-Q to KRW 411.3 billion. Despite cutbacks on marketing and withdrawal from certain regions, global Webtoon GMV posted KRW 412.2 billion, up 28.9% Y-o-Y and 2.2% Q-o-Q. Webtoon revenue, which accounts for 86% of the total content sales, jumped 115.5% Y-o-Y but fell 7.8% Q-o-Q. But without the effect of accounting changes, Webtoon sales have climbed 43% Y-o-Y. Meanwhile, revenue rose 35.5% Y-o-Y and 16.7% Q-o-Q, thanks to the launch of AR avatar feature in cell camera and other monetization efforts as well as [indiscernible] sales uptick overseas. Cloud revenue came in at KRW 93.2 billion, up 1.2% Y-o-Y and down 16.1% Q-o-Q. B2B revenue was up 6.6% Y-o-Y but down 9.1% Q-o-Q as Q1 was off season for the public sector. Future Tech R&D revenue declined due to some CLOVA device sales impact. Next is on expense items. Development and operation expenses, including labor costs increased 34.6% Y-o-Y and 13.2% Q-o-Q with Poshmark consolidation and stock-based compensation following stock price increase. Without Poshmark, headcount stayed flat Q-o-Q. Partner expense dropped 7.4% Q-o-Q due to the base effect of the one-off World Cup broadcasting fees last quarter but increased 33.4% Y-o-Y due to Webtoon accounting changes after the previous quarter. Infrastructure expense remained flat Y-o-Y and decreased 14% Q-o-Q. As explained before, in line with the global trend, we extended the D&A period of server and other supplies from 4 to 5 years, reflecting the actual useful life of the assets. As a result, there was a savings of KRW 22.5 billion Q-o-Q. Other global big tech companies are working on raising CapEx efficiency, thereby extending their server lives from 4 to 6 years. Likewise, we will continue such efforts. We will maintain appropriate level of investments in AI and super-bot to lay the foundation for future business opportunities. This year, we spent KRW 130 billion increase in CapEx and depreciation booked based on useful life. But for many years, NAVER has made preemptive investments in data centers and AI technologies, so we plan to keep the structure expense to revenue ratio to the current level. Last but not least, our marketing expense was up 11.1% Y-o-Y and 8.8% Q-o-Q due to Poshmark consolidation. Without it, our marketing expense fell 6% Y-o-Y and 4% Q-o-Q due to reduced marketing in the content segment. Next, let me discuss the P&L by segment. First, combined segment margin of search platform and commerce edged up Q-o-Q. But without Poshmark, core margin improved by more than 3 percentage points Q-o-Q due to the base effect of one-off expense related to the World Cup broadcasting rights, and year-end bonuses as well as D&A period expansion of infrastructure assets and transfer of Papago and Whale to Naver Cloud. Fintech margin rose 1.2 percentage points Q-o-Q due to a lagging effect in one-off severance pay and operating expenses in the second half of 2022. Without it, regular OPM remained flat Q-o-Q. Content deficit narrowed Q-o-Q driven by FX to optimize operating expenses, including marketing expense. Among others, Webtoon posted a loss of KRW 21.3 billion, down KRW 7.9 billion Q-o-Q while maintaining global total Webtoon GMV growth. We have painstaking cost-cutting measures in place to ensure speedy and successful IPO of Webtoon, and our target is to achieve a positive EBITDA by Q4 this year. Aside from KREAM, which falls under commerce, SNOW and its affiliated services recorded the largest deficit with the Content segment -- within the Content segment with a total loss of KRW 45 billion. We will focus on enhancing overall profitability of the SNOW business through diverse strategic and business initiatives. Without the effect of increased stock-based compensation expense following higher stock price, our Q1 cloud B2B profit fell Q-o-Q due to a bearish seasonal demand from the public sector and its subsequent downward impact on NCP revenue. Consolidated net profit dropped 66.9% Q-o-Q to KRW 43.7 billion, primarily due to increased FX rates and increased FX loss on foreign currency-denominated debt and decreased equity method valuation gains. Q1 free cash flow was up KRW 1.1 billion Q-o-Q to KRW 319 billion on the back of increased adjusted EBITDA and decreased CapEx Q-o-Q. For your information, borrowings increased due to $800 million of loans taken out for Poshmark acquisition in January, but $230 million were payback in Q1 using FCF, and we plan to pay additional $200 million within the first half. Lastly, I will present on our new 3-year shareholder return policy reflective of mid- to long-term business plans. For shareholder return for each fiscal year from 2022 to 2024, we will pay out 15% to 30% of our prior 2-year average consolidated FCF as cash dividends. As usual, the plan is subject to change depending on business and market conditions. There are 2 differences to the policy compared to the past. First, whereas the size of return was fixed at 30% in the past, the new policy has a more flexible range of 15% to 30% for the next 3 years. This is to manage the debt ratio by paying back some borrowings, which soared following a sharp increase in investments for the past several -- 3 years. As a matter of fact, during the past 5 years, NAVER build the Sejong data center and a new headquarters and procured infrastructure equipment, including GPU, to sharpen AI capabilities, which led to a surge in CapEx. Also, NAVER sealed several M&A deals, which required a huge investment. Large-scale construction projects such as Sejong and HQ are complete, and we plan to hold back on making strategic investments in significant M&A for some time but infrastructure equipment investment for AI is inevitable. Even so, we will ensure efficient use of them so that total CapEx to revenue ratio stays where it is today. We have a delta payment plan aimed at keeping the debt-to-EBITDA ratio at 2 to 2.5x incorporated into the shareholder return policy. Second, whereas a portion of shareholder return was carried out via treasury stock buyback in the past, 100% of return will be done by cash dividend payout for the next 3 years. In 2020 and 2021, there were occasions where the plan to acquire shares got interrupted and could not buy back their treasury shares at all and had to pay back dividends instead. The reason was because of the stock-based compensation scheme or SBC NAVER adopted for all its employees, which is unheard of in other Korean companies. But the capital markets has reached restrictions with rather long back period before and after treasury stock buyback or disposition, posing operational challenges to the SBC scheme. With the new policy this year, the total shareholder return for 2022 is expected to be around KRW 62 billion to KRW 120 billion, which will be paid out in Q3 as interim dividend after BoD resolution. Separately, the company decided to retire 3% of the treasury shares it currently hold. NAVER's treasury shares represent around 8% of the total outstanding shares, and they were utilized as useful strategic resources to fund important deals such as M&As and strategic alliances. Given so, to minimize confusion and possibility of misperceptions towards the NAVER's use of its treasury shares, we decided to cancel around 1% of them each year for the next 3 years. They are worth more than KRW 1 trillion in total based on today's share price. NAVER still will maintain the amount of treasury shares within 5% of the total shares issued and outstanding to fund the SBC scheme for its employees in line with the company HR principles. In 2022 alone, the treasury shares NAVER used for the SBC scheme was equivalent to approximately 1% of the total shares. This ends the Q1 financial performance update. We will now take your questions.

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

[Interpreted] I would like to ask you 2 questions. First, relating to your efforts to revamp and improve your core services, including search and application revamp, as we've seen through your efforts behind Smart Block, I would like to understand as to what you consider are key aspects that will help you drive a growth and turnaround in your search platform business? And do you believe that you will be able to outperform in terms of growth vis-à-vis compared to the overall improvement in the macro backdrop? And when do you think that, that timing will be is the second portion of that question. My second question relates to your Webtoon business. I believe that in a global, against the worldwide or global backdrop, your competitors would not necessarily be other Webtoon providers, but other content platforms. And if you could just share with us as to how your time spent share is trending versus these peers? And what are your key strategies to bring about a long-term growth?

[Interpreted] Thank you for that question. As you've mentioned, within NAVER, our key business, of course, is the advertising business and our search services. And we've been bringing about and applying some upgrades to our search services and improving and revamping our app as the advertisement business makes up a very important basis, and we are putting an effort to maximize that. So search and advertisement business being our key, we've been putting efforts to further drive up the efficiency by adopting and introducing Smart Block as well. We've also been improving the main page and also increasing the services for the feed. Through these efforts, we've also been trying to personalize and provide a more customized feed to the user base. So our objective is to drive a meaningful level of growth before the end of the year. And of course, our main and brand-related advertisements are subject to market movement. But since NAVER advertisement really has or enjoys higher level of efficiency, we believe that we will be able to bring about a faster growth compared to the market.

[Interpreted] Thank you. Responding to your second question, this is the CFO. Yes, from a broader perspective, basically Webtoon do compete with TikTok on a timeshare basis. But direct competition to TikTok is more like YouTube. So I do -- we don't think that the Webtoon will be in direct competition in terms of the timeshare. Having said that, if you just look at the time share figure for Webtoon on a stand-alone basis, that time spent has been showing a sustained uptrend. And if you look at the U.S. market and the Japanese market, at the beginning of the year, actually, we've seen the time spent actually grow by about 10% compared to the beginning of the previous year. Also, in order for us to further increase the time spent, we will be adding features such as social, community and communications. And also, we will explore and develop original IPs in regards to movies or Netflix, as we develop these source content, we will try to really place an effort behind increasing the users' time spent. Last but not least, compared to our competitive Webtoon platform, the number of titles that are loaded on our payroll is much, much smaller. Going forward, hence, we will be able to further expand our opportunity to monetize from our Webtoon platform, and we will take on a little more aggressive approach towards the ad -- using our ad product, which we've been quite unaggressive up to date. And therefore, based on not just the time spend, we will try to focus on increasing the revenue from these platforms.

[Foreign Language] The next question will be presented by [indiscernible] Securities.

[Interpreted] I also have 2 questions. First relates to your advertisement business. Can you provide us with some color on the overall advertisement -- advertiser-related trend and also impact from the high seasonality? And what is your take on the current overall market backdrop in light of the economic slowdown that we've experienced? Second question is on your AI business. Compared to other global big techs, what do you consider to be your competitive edge? I see that this quarter, your infrastructure spending had been quite flat. What was the impact from AI? And also from a long-term perspective, how do you foresee your infrastructure expense to actually rise, especially in relation to your AI and also your cost efficiency measures?

[Interpreted] Responding to your first question, this is the CEO. As you've mentioned during the first quarter, the advertisement market overall has been quite slump, which was, of course, not very good. And this actually was the same market backdrop on a global basis. So we expect during the second quarter, uncertainties will persist, and so it will be quite difficult for us at this point to give you an exact forecast and projection with regards to the ad market in the first half and the possible growth in the DA, display ad. However, NAVER as a company will really endeavor to further solidify its power as a media, and we have, by introducing premium advertisement product for big brands, we are currently executing on those efforts. So we believe that in terms of the DA, our display ad, we will be able to see a solid -- a better performance compared to the first quarter. Regarding AI, we've been continuously making investments into AI and related technologies since year 2017. We are the global #3 in terms of owning an AI model, a hyperscale generative AI model that is. And we believe that it is part of our responsibility and a must for NAVER to continue to develop our capabilities, especially in terms of the Korean language-based generative AI model, I believe that we surpass our global peers.