WEBTOON Entertainment Inc. (NASDAQ: WBTN) saw its stock price plummet 6.29% in after-hours trading on Tuesday following the release of its first-quarter 2025 financial results that fell short of expectations and provided weak guidance for the second quarter.
The global entertainment company reported total revenue of $325.7 million for Q1, a slight decline of 0.3% compared to the same period last year. While this narrowly beat analysts' expectations of $324.3 million, the company's profitability took a significant hit. Adjusted earnings per share (EPS) came in at $0.03, down sharply from $0.20 in the year-ago quarter and below the $0.07 loss per share that analysts had anticipated.
The earnings miss was primarily driven by increased general and administrative expenses, which the company attributed to costs associated with being a public company, as well as higher marketing expenses. As a result, WEBTOON reported a net loss of $22.0 million for the quarter, compared to a net income of $6.2 million in the same period last year. Adjusted EBITDA also declined significantly to $4.1 million from $22.2 million a year ago.
Adding to investor concerns, WEBTOON's outlook for the second quarter was less optimistic than hoped. The company expects Q2 revenue growth on a constant currency basis to be in the range of 2.2% to 5.2%, translating to revenue between $335 million and $345 million. This guidance suggests a potential slowdown in growth, particularly when compared to the 5.3% constant currency growth achieved in Q1.
Junkoo Kim, Founder and CEO of WEBTOON Entertainment, commented on the results, stating, "We are pleased to report both revenue and Adjusted EBITDA above the midpoint of our guidance. Total revenue was up 5.3% on a constant currency basis, with all three revenue streams -- Paid Content, Advertising, and IP Adaptations -- contributing to growth." Despite the positive spin, investors appear to be focusing on the company's challenges in maintaining profitability and accelerating growth in a competitive market environment.
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