Weak won bites Naver-controlled Webtoon Entertainment after high-profile Nasdaq debut

Webtoon Entertainment, a Naver-controlled, Nasdaq-listed company, is grappling with pressure on earnings from a weakening won after its high-profile debut on the New York stock market last year, industry officials said Friday.

The company reports its sales in U.S. dollars as a U.S.-listed company, while around 60 percent of its shares are owned by Korean internet giant Naver and roughly 24 percent are held by LY Corp., a joint venture between Naver and the Japanese multinational investment conglomerate SoftBank.

Meanwhile, the company depends heavily on revenue from paid webtoons operated by its subsidiary Naver Webtoon, with Korea and Japan accounting for 88 percent of total sales. Under these circumstances, industry officials said sales in the fourth quarter are likely to decline from the previous quarter, as the won has weakened further against the dollar. According to the U.S. Securities and Exchange Commission, Webtoon Entertainment posted $378.04 million in third-quarter sales, calculated using an average exchange rate of 1,385.4 won per dollar.

While sales rose 8.7 percent year-on-year, it would have increased 9.1 percent to $379.45 million without the effects of the weaker won, an official said.

“In other words, currency movements reduced the company’s overall revenue growth,” he added.

Another official described the situation as “far worse in the fourth quarter,” noting that the exchange rate has remained above 1,400 won per dollar from October through December.

The rate even breached the 1,480 level, hitting 1,480.10 on Monday and 1,483.6 on Tuesday, marking the first time since 2009 — the height of the Great Recession — that the exchange rate ended two consecutive days in this range.

As for the Japanese currency, the yen-dollar exchange rate entered the 150 range in mid-October and has since climbed to about 156.

“As Webtoon Entertainment relies on Korea and Japan for its revenue, foreign exchange risks will inevitably affect its earnings when converted into dollars,” the official said.

Even excluding currency effects, the company expects fourth-quarter sales to decline, driven by a substantial level of year-end expenses. These include severance costs and minimum revenue guarantees to contracted cartoonists, totaling an estimated $16.6 million.

“The company is projected to post a year-on-year decline of 2.3 to 5.1 percent in sales even without taking exchange rates into account,” another official said.

Webtoon Entertainment became the first Korean content company to debut on the New York stock market in June 2024. The company has been working with Disney, Warner Bros. and other Hollywood studios to expand its presence in the global storytelling market.