Soop Co., Ltd. (A067160) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, and good evening. Thank you all for joining the conference call for the Soop earnings results. This conference will start with a presentation followed by a Q&A session. [Operator Instructions] Now we will begin the presentation on Soop's Fourth Quarter of Fiscal Year 2025 Earnings Results.

Hello, everyone. My name is [indiscernible], and I lead the business support division here at Soop. After I provide an overview of our fourth quarter 2025 operational and financial highlights, our CEO, Young Woo Choi, and I will host a Q&A session to answer your question. Although platform revenue was relatively flat this quarter, we saw significant momentum in our advertising sector, thanks to subsidiaries synergies and active BTL engagement. Notably, our strategic focus on gaming content continues to pay off as evidenced by the steady rise in user engagement and viewing traffic across the platform. We are currently driving a company-wide integration of our global and Korea platforms. By the first quarter or the second quarter at the latest, we expect to unveil a unified Global One platform where domestic and international streamers and users can interact freely. This will serve as a pivotal momentum for our qualitative leap in platform revenue and our broader global expansion. Our fourth quarter revenue reached KRW 119.3 billion, representing a 5% decrease quarter-over-quarter but a 7% decrease year-over-year. For the full year 2025, annual revenue reached KRW 469.7 billion, a 14% increase year-over-year. Breaking this down, platform revenue totaled KRW 331 billion, up 1% year-over-year, while advertising revenue saw a significant jump to KRW 131.9 billion, marking 61% year-over-year growth. Platform revenue for the fourth quarter was KRW 775 billion, down slightly by 8% quarter-over-quarter and 6% year-over-year. This decline is primarily attributed to a shift in content consumption toward categories like gaming, which drive high traffic and engagement but currently have a relatively lower contribution to donation revenue. In the third quarter, advertising revenue reached KRW 40.2 billion, growing 3% advertising, up 3% quarter-over-quarter and a robust 45% year-over-year, fueled by strong performance in BTL advertising and our subsidiaries. To break it down further, platform advertising revenue rose 3% quarter-over-quarter but saw a 6% decline year-over-year. Meanwhile, content-based advertising decreased 4% quarter-over-quarter but maintained a steady growth of 6% on a year-over-year basis. Next, I will discuss our operating expenses. In the fourth quarter, operating expenses totaled KRW 91.5 billion, an increase of 2% quarter-over-quarter and 9% year-over-year. According to the nature of the expenses, variable costs such as payment processing fees were KRW 13.1 billion, down 10% quarter-over-quarter and 2% year-over-year. Ad-related commission fees rose 53% quarter-over-quarter but decreased 23% year-over-year to KRW 15 billion. Content production costs were KRW 200 million, representing a 98% quarter-over-quarter and 95% year-over-year decrease. Regarding fixed costs, personnel expenses were KRW 300 million, up 4% quarter-over-quarter and 27% year-over-year. Fees related to broadcasting rights and others increased significantly to KRW 11.3 billion, up 64% quarter-over-quarter and 63% year-over-year. Streamer support funds were KRW 2.8 billion, up 11% quarter-over-quarter but down 8% year-over-year. Network usage fees rose 6% quarter-over-quarter and 37% year-over-year to KRW 6.2 billion, while depreciation and amortization increased 1% quarter-over-quarter and 12% year-over-year, totaling KRW 6 billion. Operating expenses for the year were KRW 347.7 billion, up 16% from the previous year, resulting in an operating profit of KRW 122 billion, an 8% increase year-over-year. Operating profit for the fourth quarter was KRW 27.8 billion, representing a 23% decrease quarter-over-quarter and a slight 0.1% decline year-over-year. The operating margin for the period stood at 23.3%. For your reference, there was an adjustment of approximately KRW 2.9 billion during the year-end audit, resulting in a reduction in operating expenses and an upward revision of operating profit. This was the result of correcting duplicate recognized commission fees related to ad balloon revenue sharing, along with the reversal of accrued expenses for which payment obligations have expired. Any further adjustments arising from the audit will be disclosed in our annual business report. Our net profit for the fourth quarter was KRW 23.1 billion, representing a 22% decrease quarter-over-quarter and an 11% decline year-over-year. Regarding the 2025 dividend, we are planning a total payout of KRW 36 billion, which translates to KRW 3,380 per share. As our previous 3-year shareholder return policy has concluded, we're excited to announce a new 3-year framework for 2026 through 2028. To enhance transparency and predictability, we plan to shift the basis of our shareholder returns from FCF to consolidated net income with a target payout ratio of at least 25% of our annual consolidated net income. Lastly, please refer to the annual balance sheet included in our materials for more details. This concludes our formal presentation, and we will now open the floor for your questions.

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

There are 2 questions that I would like to ask. First of all, I see that the platform revenue has weakened, and I would like to know the reason behind it. And what could be the strategy to increase the momentum? And what is the trend of the January market situation like? And the second question is, when the new CEO takes the handle, I would like to know what his strategy is to increase the momentum for the overseas market? And what would be -- with making the Global One platform one of the strategies that you uphold?

I would like to address the first question first. Regarding the platform revenue, the reason why it's showing weak numbers compared to the last numbers is because our online payment result hasn't been included. In order to have the numbers reflected, it will take some time. So if those numbers are reflected, I'm pretty sure the numbers will grow. And we have seen previously some -- when we were trying to change the online payment system that it took time to reflect the numbers. So it will take some time to show on. So you should be able to see the numbers in our next report. And in order to address the second question, we are trying to operate one build platform in order to have a lot of synergy effect. First of all, we see this as a long-term project. And first of all, we've been doing a lot of work with Thailand and with Taiwan with some of the exclusive content. And in order to amplify this kind of effect, we're trying to integrate lots of functions that we only had in our domestic website. And first, for example, we would like to provide some translating service, which has been only given to the foreign users, but we're going to slowly expand this kind of function to also the Korean users. And another effect that we would like -- result we would like to see is since this is a live stream program, we need a lot of communities to communicate together and come together as a whole. So we're going to -- once we implement this one Build project, we're going to have a lot of promotions to amplify the effects and have lots of communities come together and have communications as one whole global platform.

The following question will be presented by Junhyun Kim from HSBC.

First of all, after looking into the operational revenue, I have a question about the live streaming service market. It seems like a lot of -- we have a lot of competitors in the market coming up with many different kinds of content. And I think that this also can be assumed that the market might get smaller in the future. And I would like to know what the management has to offer as a strategy in order to survive in this competitive market situation.

Internally and also there are many global insight reports, it is shown that the live streaming market isn't going down. It is actually on the rise. There are a lot of. of competitive short-form platforms that are on -- shown through social media and like TikTok. And it seems like all those talent-based creators are interested in streaming live streaming broadcasting. So we have a lot of creators in domestic market who are interested in doing live streaming shows on our platform, and we are trying to have more streamers come into our channel or our platform in order to host their live streaming shows. So I think these platforms and also our live streaming content has to coexist in the market. I don't think we are to be considered as competitors in the market.

Currently, there are no participants with questions. [Operator Instructions] The following question will be presented by Hyok Joong Lee from Daiwa Securities.

I would like to ask you regarding the platform becoming one -- the 2 platforms of domestic and global platform becoming one. And if the platform gets interconnected. I wonder if only the subtitle service alone could have everybody globally and domestically enjoy the content in the same way. Before, there was a similar scenario where they use content, but there were some restrictions with -- in regard to content to go universal. But in terms of very popular content on Soop, we wonder if those content could be delivered the same just with the providing of subtitles. So in order to go global or have more content to be globalized, I wonder if subtitle -- providing subtitle is the only strategy that you are going to have.

I think it will all depend on the content of the -- streaming content that we're going to be providing. And we are actually having global integration project, and it's on the way, and we have already opened up some service channels. And for now, we have a lot of Korean content creators to stream their shows globally at the same time to foreign viewers, and it has been receiving positive reviews. And we're going to -- we're also having some foreign streamers do the shows on our Korean platform at the moment with the subtitles provided. And right now, with only the subtitle, it seems like the viewers and the content creators are having a wholesome interactions on our channels. And of course, for now, we're not providing any objective content through our channels, such as news or documentaries. And most of our viewers are based on fans who are interested in the individual talent. So they have already a lot of interest in our talent online. So that's why we are very confident that even with just the subtitles provided, we won't be losing any viewers but we would be able to deliver enough content for them to enjoy. We have some examples here. We have -- we already have an experience of streaming live shows with the foreign channel with only the subtitles, and it is still being streamed with popularity. And also, we had the Faker show already being streamed without subtitle, but people used to enjoy it through providing their subtitles themselves. But now if they come on to our website, they'll be able to use our subtitle service, which means it would be easier for people to enjoy those kind of shows. And I think we will -- we are also planning not only to provide subtitles, but also at the same time, in several months, we'll be providing multi-translating service, which would provide simultaneous translating service on the website at the same time. So I think we would be able to reach more global viewers.

Currently, there are no participants with questions. [Operator Instructions] Thank you, everyone, for your participation. This concludes the fourth quarter 2025 earnings call for Soop. Have a wonderful day, and our CEO, Choi Young Woo, would have some words.

First of all, thank you for your time, and I would like to give you 2 messages. First of all, in 2026, we're all focusing on that One Build project for our global expansion. For now, we have a lot of Korean streamers trying to stream their content to foreign reviewers but we are actually negotiating with the foreign streamers in each country in order for them to stream live shows on our platform as well. And we are trying to have more Korean streamers to shoot videos abroad, and we're trying to take them abroad to other countries in order to communicate with the foreign viewers. So please look forward to that kind of content, and you would be able to see more of that towards the end of the transition of the first quarter. And also our -- in regards to our advertising revenue, last year, we've seen a steady growth in the advertising revenue, and we are trying to create more revenues through our commerce website and also the benefit pages. So the users of our platform could enjoy more things on our -- through our platform with those new services. So we're trying to create more content and more activities for all the users for both domestic and foreign viewers. So I hope you guys would look forward to our activities in the future. [Statements in English on this transcript were spoken by an interpreter present on the live call.]