AfreecaTV Co Ltd

KOSDAQ:067160

Q3-2025 Earnings Call

[Kyunghee Jun, executive]

Welcome to the live conference of Soop's Q3 2025 Earnings Report. Joining you here is, I'm the streamer and caster, Kyunghee Jun. This live conference is open to anyone who is interested in Soop. But as this is related to earnings, only those who have registered in advance can ask questions in the chat. Today, we have CEO, Daniel Choi; and Ellen Kim, Head of IR. Will you say hi to those who joined us this morning.

[Young Woo Choi, executive]

Hello. I'm Daniel Choi.

[Kim Jiyeon, executive]

Should I add?

[Kyunghee Jun, executive]

Yes, yes, go ahead.

[Kim Jiyeon, executive]

Hello, I'm Ellen.

[Kyunghee Jun, executive]

[ Rogi ] that was here before me for the Q2. And I know that you said you got nervous, but we had a conversation in the back room. And I could really tell that I expected that you will be less nervous, but you look nervous.

[Young Woo Choi, executive]

Yes, I'm always nervous in front of the camera. Well, you have been in front of the camera for a long time, you're professional. Before we started, I thought I'll be okay, but no, not at all. How about you, Ellen?

[Kim Jiyeon, executive]

No, this is -- I'm quite nervous every time.

[Kyunghee Jun, executive]

So do you feel that nervousness as soon as you see the camera going live or even before do you get that butterfly in your stomach?

[Kim Jiyeon, executive]

Well, for me, when you start opening -- when you start your opening, then I get nervous.

[Kyunghee Jun, executive]

Well, I would love to break the ice, but well, I -- let's talk about weather. Okay. Well, it's gotten quite cold. How do you keep your health?

[Young Woo Choi, executive]

Well, I get cold quite easily. And yes, I do feel the temperature dropping like crazy. I went to Bangkok a couple of years ago -- a couple of weeks ago, and I got back a week before, and I could really feel the coldness in the air. And I heard that it's going to get even colder.

[Kyunghee Jun, executive]

I hope that you get more extra layer. How do you keep yourself healthy?

[Young Woo Choi, executive]

Yes. Yes, I'm doing my best.

[Kyunghee Jun, executive]

I know that the weather is cold, but I hope that today, it's going to be quite a hot topic today. So Ellen will present Soop's business performance and financial results for Q3 2025, and then we'll have a Q&A session with the 2. Now Ellen, take us away.

[Kim Jiyeon, executive]

Let me present the business performance and financial results for Q3 2025. Slide, please. In Q3, Soop continued to deliver meaningful growth in its advertising and global businesses, supported by solid platform performance. In the platform segment, both subscription and quick view users increased, maintaining steady momentum. In particular, virtual idol content such as HADES sustained positive traction, while the success of the GTA 5 RP server and PUBG tournaments drove growth in the gaming category. In the advertising segment, synergy from the PlayD acquisition is taking shape, a hybrid ad model combining Soop's branding strength and PlayD's performance-based solution is gradually establishing itself, already yielding visible results through joint wins on major campaigns. We plan to build an integrated value chain across Soop, PlayD, CTDD and CTTD and [ Free BR ] to maximize competitiveness.

The global business also showed progress, particularly in the Chinese-speaking market. The main growth driver was securing the exclusive Chinese broadcast rights for the LCK, which contributed throughout the third quarter. In October, we also strengthened our local fandom by successfully hosting the VCT Thailand League offline event.

Lastly, in the AI segment, we've begun commercializing our AI advertising technology. The technical maturity of key AI solutions such as Savic has improved. And in Q3, we ran AI video campaigns with several advertisers, generating our first commercial revenue.

Q3 revenue was KRW 127.4 billion, up 9% Q-o-Q and 21% Y-o-Y. Platform revenue in Q3 was KRW 84.1 billion, down 0.6% Q-o-Q, but up 2.2% Y-o-Y, mainly due to the strong performance of high-traffic categories such as gaming, which, however, showed a relatively low contribution from gifting. Q3's advertising revenue totaled KRW 40.5 billion, reflecting continued top line growth driven by solid performance in branded content ads and a seasonal rebound in platform advertising, and this represents an increase of 32% Q-o-Q and 86% Y-o-Y. Breaking it down even further, platform ads revenue declined 1% Y-o-Y, but increased 20% Q-o-Q, maintaining positive growth momentum. Branded content ads showed strong performance, rising 57% Q-o-Q and 114% Y-o-Y, marking a sharp surge in growth.

Moving on to operating expenses. Q3's operating expenses amounted to KRW 96.3 billion, up 11% Q-o-Q and 18% Y-o-Y. The main drivers of the Q-o-Q increase were higher personnel expense due to increased retirement benefit costs and higher production costs associated with the expansion of league operations. Breaking it down by the nature of costs, first for variable cost, paying charges amounted to KRW 14.5 billion, down 0.3% Q-o-Q, but up 7% Y-o-Y. Advertising commissions totaled KRW 9.2 billion, down 3% Q-o-Q, but up 18% Y-o-Y. Content production costs came KRW 9.2 billion, up 295% Q-o-Q and 186% Y-o-Y, reflecting the large-scale expansion of lead production. For fixed cost now, employment costs totaled KRW 33.8 billion, up 11% Q-o-Q and 49% Y-o-Y. Commissions for copyrights and others amounted to KRW 9.2 billion, up 3% Q-o-Q and 7% Y-o-Y.

Streamer support payments totaled KRW 2.5 billion, down 0.7% Q-o-Q and 22% Y-o-Y. Internet circuit usage fees amounted to KRW 5.8 billion, up 3% Q-o-Q and 10% Y-o-Y. Depreciation and amortization expenses, including server acquisition and amortization of PlayD goodwill under PPA totaled KRW 6 billion, down 2% Q-o-Q and up 12% Y-o-Y. Operating profit for Q3 was KRW 31.2 billion, representing 4% Q-o-Q growth and 31% Y-o-Y growth with an operating profit margin of 24.5%.

Net income for the third quarter came in at KRW 25.5 billion, up 13% Q-o-Q and 6% up Y-o-Y. Now this quarter's results include a total of KRW 6.3 billion of one-off expenses, which had a broad impact on the income statement. First, about KRW 4.8 billion was recognized as a onetime retirement benefit expense, which reduced the operating profit to KRW 31.2 billion. If we were to exclude this one-off time item, the adjusted operating profit would have been KRW 36 billion. In addition, as disclosed already, about KRW 1.5 billion related to a financial penalty imposed by the financial supervisory service was recorded under nonoperating expense, other losses. As a result, reported net income for the third quarter was KRW 25.5 billion, incorporating both operating and nonoperating one-off items. But if we exclude all these one-off costs, the adjusted net income would have been KRW 31.8 billion. Lastly, please refer to the other balance sheet for the detailed information.

[Kyunghee Jun, executive]

Thank you very much for your presentation. Now let's have a Q&A now, and please ask any questions away in the chat room, and I'll be more than happy to answer those questions with you all. And as the questions come up, I do have some questions that I might want to ask you. We talked about the broadcasting rights, and there was the -- not only just the feed broadcasting, and you mentioned you're doing the production to be added on top of what you already have. So can you elaborate on this? And where do you stand at this point?

[Young Woo Choi, executive]

Thank you. First of all, we're not going to stop at just simple streaming services. What's most important is communicating with our streamers and helping them connect with the audience. That's what we do as a platform. And of course, the content plays a very important role there. But we're not simply going to buy and purchase contents and provide. That's not going to be the only thing that we do. We want to go a step beyond because we are at the interface with the IP owners here as a platform. So production is something that we want to channel our resources into. From early this year, we talked about this, and we've been working very hard for the production side of it. And as you know, very recently in Tokyo, there was a VCT Pacific Finals, and we were the one that operated all. We were behind all this. And that really showed that Soop isn't just a local small-scale company. We're really ready and equipped to have something for global events with tens and thousands of the audience. That was really an opportunity to show what we have as capabilities.

[Kyunghee Jun, executive]

Next, please. "Some popular streamers claim that they will no longer do [ XL show ]. Is there an impact on the platform revenue and outlook? And what is your strategy to grow platform revenue?"

[Young Woo Choi, executive]

Well, how should I say? Well, we have a business model that's only for certain streamers. It's for everybody. And it's difficult to say that this will have any big impact on our overall model. And there are -- that the streamer has other contents for the show and his core fans do enjoy other contents in that show too. And it's not like the fans have left our platform. They have been involved in other shows, and they have been communicating with us. So I don't think this incident will have any fundamental impact on where we're going. But of course, we are also in talks with the streamers on the future direction. And so we're going to -- we have been doing everything that we can to prevent any impact here.

[Kim Jiyeon, executive]

Well, XL Show is where different streamers come together as a joint show. And as Daniel said, the streamers -- these streamers exist in our ecosystem. And if you look at our data, these participating streamers, the -- if we looked at their revenue and after this incident, their revenues didn't really get any impact. And of course, the fandom for each streamer is quite high. But also these fans are loyal to Soop as a whole.

[Kyunghee Jun, executive]

Next question comes from Mr. Cha, Minuh from Goldman. "Now Daniel, you led the foreign businesses. What do you think of the expansion to the global market? I feel like it's quite slow this year. And what was the difficulties on the execution side of it?"

[Young Woo Choi, executive]

Well, thank you for the great question, first of all. Yes, until last year, I was the leader in the foreign businesses, overseas businesses. And now that I am in helm of this, I mean, we don't think that we're being slow. That's not our assessment. But last year we launched the platform. And with that launch, various other events were held at the time of the launching. So you may feel that it's not as fast as you would like. However, what I can tell you is that there were a lot of trials and testings last year and in Southeast Asian countries especially, and we showed really great results already. And the visible outcomes were already shown last year, but maybe this year, we didn't. So that's maybe what you're talking about. But as Ellen already said, in Taiwan, there is an LCK, Chinese language feed broadcasting that we did. And there are many other activities that we're doing in Taiwan. And I think it's an expansion of growing of the pie. But when it comes to business side of it, as I keep on saying, when it comes to the foreign businesses of any sort, it's something that we need to look at in the long-term perspective, not short one. But in order to keep and grow this momentum, we need to make sure that we need to grow the market and the partnership with the local is something that we're working very hard on. So I hope that you would look into that aspect, not just from the business side of it. And we've had the fan meetings with the streamers already, and we will continue to do those kind of events down the road. So there will be something connecting the streamers with the local users and the collaboration and partnerships in a broader and deeper way is something that we're looking to bring into this. And I was going to actually say at the end of it, but let me go ahead and say now that the topic is already. There's a global platform and the Korean local platform and the simulcast is done by some of the streamers. And I think we've successfully expanded into the global market. But right now, we're preparing something and that has to do with the very fundamental of the streaming service, which is the communication, of course. And in the chat room, there are 2 different chats global versus local. So the streamers have difficulties doing both the chats and engaging with them in the equal level. So what we're trying to do is incorporating these chats into one, and there's a technical aspect we're working on right now.

[Kyunghee Jun, executive]

"Ad revenue grew a lot Q-o-Q, but the paying charges growth is not as big. Why? And do you think the overall advertising profitability would rise as the advertising mix changes?"

[Kim Jiyeon, executive]

I can comment on that. The variable expenses in advertising, it includes the paying charges. But on top of that, the branded content had a lot of expenses. So the weak production revenue growth was visible. So the operating expenses on production has risen alongside.

[Kyunghee Jun, executive]

Next question, [ Mr. Keysumo ] from [ DS Securities ]. "The branded content ads in the 3Q was pretty successful. Tell us more about this? And do you think this momentum will continue to the 4Q?"

[Young Woo Choi, executive]

I can take it.

[Kyunghee Jun, executive]

Sure.

[Young Woo Choi, executive]

Yes. I think when it comes to content, the ads, branded content ads, I think there's a seasonality as well. There's new titles being released. And with the game companies, we have always had the broad and deep partnership with those companies. We've always been working in that direction. And I think it really materialized this quarter. Having said that, it is influenced by the trend and the seasonality of the game market itself. And of course, I mean, we're going to try our best and increase the volume and everything and to become more efficient. However, like I said, is it going to be better even next year to that question, that has to be influenced by the market situations, and that's outside our control. But what I can tell you is that we will do our best to expand our presence and footprint there.

[Kim Jiyeon, executive]

And to add to that, for the league production cost, about the revenue, we've been growing over 7 and 8 years already. What that means is that this industry in Korea and abroad is growing overall. And when it comes to the production outside this country, we are also doing a lot of strong sales activities already there. So I think there's a great potential to grow. But like he mentioned, already when it comes to [ Star Balloons ] and the platform ads, which grows on a very steady manner, but there's a seasonality in this area for the ad.

[Young Woo Choi, executive]

So depending on the game industry itself, I think there will be big variables. And I can add on that variables or the fluctuations. We want to minimize that uncertainties and become more stable in that category. And to do that, like I mentioned already in the earlier part of this year, the partnership strategy is very critical. In the past, we had the -- I mean, of course, the Thai office and there are events in Thailand, for example, and we would have the partnerships for that particular event. Let's say, if there's an event in Korea, then we have other partnerships. But what's important though is the more global, more integrated partnerships, the Thai team and the Korean team working together could create even stronger synergies is something that I've already highlighted in the previous quarter. And to do that, we need to grow our capabilities from the Korean side and the Thai aspect also needs to grow so that they can work with us.

And recently, the global size event that we held successfully is something that shows and is a testament to our potential. And just last week in Bangkok, we had a [ iTech ] match already. It's a big size already. And after this event, many of the game companies are knocking the doors at us because they've seen that we are capable of doing this. So I think in the future we can hold even larger and global scale games in the future. Thank you.

[Kyunghee Jun, executive]

Feel free to leave question in the chat. Well, as a caster who is involved in e-sports casting, every time I go out there for the casting events, and I check on the viewership too. How I feel these days is that a lot of, the number of is being reduced and the actual -- the population itself is decreasing. But I feel that a lot of people actually come and watch the e-sports games. So do you respond to the trend?

[Young Woo Choi, executive]

Well, ultimately, where we want to be in the future is that we create a community revolving around the e-sports games. Of course, production business is an important element here in terms of business, in terms of numbers, but partnership is very important to us and also supporting the streamers so that they can thrive. That's quite important for us too. So when we carry out different businesses, we look at all different aspects also. So you're correct to say that.

[Kyunghee Jun, executive]

From DB Securities, "Talk about the synergy with the PlayD. Can you tell us more about this and how that impacts your performance? And the value chain expansion, including the CTTD, tell us more about the strategies for the advertising, please?"

[Young Woo Choi, executive]

Sure. So within Soop, we had our advertising team that was doing a great job already. And CTTD was a separate agency that helped us in that regard. But internally, there are [ Privial ] and other bodies. And I thought we had some challenges creating the challenges between all these different parts. Of course, in each of their category, they did a great job individually. However, we thought that we want to create better synergies. And PlayD is that basically a bridge linking all these different parts of it. What they did is, number one, for purely just for the advertising strategy and synergy creation strategy for mainly, it was the critical driver within us. And you will be able to hear our visions about this in more detail later on in a different occasion.

So for PlayD, again, more specifically, there's a CTTD and Privial and Soop. And surpass our sales capabilities. And we want to be basically an advertising agency of a sort. So we're working very hard, and that will be something that you'll see more detailed strategies down the road. Thank you.

[Kyunghee Jun, executive]

The platform revenue growth is slowing down quite a lot, even though the overseas business will add more steam to the growth engine. But do you think it will be difficult to achieve 2-digit growth in Korea? If then, would you consider strengthening shareholder return?

[Young Woo Choi, executive]

Yes. In terms of the revenue, we are doing everything we can to improve revenue, but this is not unrelated to the market situation. And we have been monitoring this closely. But of course, the growth engine and the new business model development have been at the core of our effort. And as I said, advertising business models are being strengthened. And in terms of partnerships in the past revolved around branded contents or advertisement in the production, but now we're going beyond that. Now we are strengthening our close relationship with them so that we can seize the opportunity in the gaming. Some companies, some of the partnerships, we have almost completed our partnership and we really wish that we'll be able to give you good news during our results show -- result broadcasting, but you're going to have to tune in. So we are definitely expanding our partnerships with various companies.

And claiming that we'll be able to achieve 2-digit growth is not easy to definitely say because that's related to the market situation. And the shareholder return, we're going to keep our previous stance.

[Kyunghee Jun, executive]

Thank you for that. So let's see if there are anything else that you would like to add or share your thoughts about any topic.

[Kim Jiyeon, executive]

Yes, about the platform. I think that revenue is a portion that you're concerned about. Yes. So I can elaborate on that. So there's an [ XL ] podcasting that was initiated by the streamers themselves. And if the streamers have any few -- I mean, any other new ideas, that will be great. I mean this can be something that leads to higher Star Balloons and higher subscriptions, virtual, XL. These are the new contents that we introduce, thanks to the streamers. And every time we move to the new horizon, the next step. And these great ideas, brilliant ideas are usually created and driven by the streamers. And we're here to help. For example, signature content is one. And so these are some of the great examples that we've worked with the streamers to bring us to the next horizon. So your ideas as the streamers and our support, when these come together, we can always create new categories.

And I mean, digital content consumption, I mean, we already know that this has been growing and will continue to do so. So when new contents are created, then I'm sure there is a room for further growth.

[Kyunghee Jun, executive]

Yes. Great. I look forward to that new ideas and further collaborations with the streamers.

Well, before we wrap up, could you say a few words?

[Young Woo Choi, executive]

Thank you so much for joining us despite your busy schedule.

[Kyunghee Jun, executive]

There is one more question. Yes, of course, we can take it. "The Soops branding and PlayD performance-based advertisement synergy was mentioned. Then does that mean the number of advertisers and the amount of advertisement, the budget have grown?"

[Young Woo Choi, executive]

The PlayD has their own performance-based advertising solution, and it's an agency. So we are discussing our future strategies together. And the effect of consolidating them into our company would have immediate impact. But now we are definitely bringing the -- we have brought them into some good orbit, and we have stabilized. And then we are going to make some good news -- give you some good news after the discussion with them.

[Kyunghee Jun, executive]

All right, then you can continue on with your closing statement.

[Young Woo Choi, executive]

Thank you so much for your great questions. This is Q3, and we're going toward the end of the year. And the AI solutions and e-sports and our Soop Global and other contents we have been talking about how we have approached this. And with AI solutions, we are going to -- after introducing AI solutions, we have tested the solutions and we also applied our AI technologies with other advertisers. Now that we have been doing lots of tests, we are going to really open this AI to streamers and the users and upgrade our functionality of the AI so that actual users can enjoy what AI has to offer. And we'll be able to make announcements on how AI have been utilized in the actual shows.

Yes, the going global, it is not easy business. But as a platform, we go out there and localization and -- localization itself is important. But more than that, we want to create synergy between local streamers and Korean streamers and really build fandom. These are actually the main driver of growth of our global platform. So we're going to improve on that chat service.

And in terms of contents, of course, supplying a variety of content is very important. And we have other efforts that we pour into this. So we look forward to giving you good news next time.

[Kyunghee Jun, executive]

Thank you. Ellen?

[Kim Jiyeon, executive]

I think Daniel already covered a lot. And I just will say goodbye, and thank you. Well, thank you once again, everybody, for the great year already and the market participants, the shareholders and the streamers to all of you in the ecosystem, I hope you have a great year, and we'll do our best to help that out as well. Thank you, two of you very much.

[Kyunghee Jun, executive]

Okay, everyone. This brings us to the end of the third Q earnings call, and I will see you in the fourth quarter's earnings call. Thank you all very much for your time. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]