AfreecaTV Co Ltd

KOSDAQ:067160

Q2-2025 Earnings Call

[Unknown Attendee]

Welcome to the live conference of Soop's Q1 2025 Earnings Report. It's my delight to join this conference. My name is Streamer, [indiscernible]. Very nice to meet you all. Thank you, everybody, for having me here. And I would like to say also that we are joined by our panel who will answer all your questions. We're going to answer some of the questions that we get from the chatbot. This live conference is joined by CEO, Daniel Choi; Ellen Kim, Head of IR; and [ Islan Jun ], the team leader. Can you say hi to those who joined this morning.

[Young Woo Choi, executive]

I'm, Young Woo Choi. This is my third time joining the conference. I go to awards and everything. I thought that I'll get more relaxed this time, but I'm quite nervous once again. And [indiscernible] , you just entered yourself as you're the up and rising MC, and it's my honor to have you here.

[Unknown Attendee]

Thank you so much. That's very kind of you to say that. Now Ellen, could you say hi?

[Kim Jiyeon, executive]

Hi. I'm Ellen, Head of IR. I look forward to a very constructive conversation in this hot weather and this hotness will be translated to the studio when we have the conversation. How about you Isla?

[Kyunghee Jun, executive]

Thank you, everybody, for joining. And I would love to be able to answer all your questions and hope you find the conference helpful and informative.

[Unknown Attendee]

Well, I've seen previous conferences, and I was so surprised. I was like -- I mean, is it okay if I join you? You know what I mean? And thankfully, I was invited. I don't know if I'll be a good suit here, but thanks to your encouragement and just watching you preparing for this conference, I can say that I'm in good hands. You say you're nervous. I don't understand. You've already done the conference before, and you could speak for yourself I am sure. What makes you nervous?

[Young Woo Choi, executive]

Well, thank you for your kind words, but I'm not a celebrity at all. I try to have my own streaming a little bit not to -- not showing my face, but just gaming. But I think as a creator, there's a rough road ahead of me. So I know that you are a great MC and you're going to do a good job.

[Unknown Attendee]

Thank you for your warm words. We're all complementing each other. This is great. So it's such an honor, and I look forward to good time today. So just to break the ice, I know we kind of discuss that, oh, we're going to start off kind of fun. Yes, we said that. But I've been doing this for many years, but there was no one time that I was not nervous. So I always think that the streamers are just amazing to be able to pull up that. Everything you say and how you behave are broadcast everywhere. So that's kind of nerve-recking. But I just think that we're all in one boat. So it's going to be great.

And Isla I thought that you are going to be very energetic, but you look nervous too.

[Kyunghee Jun, executive]

I'm always nervous. You won't believe me. I always think that whenever they take up the questions, I feel relieved.

[Unknown Attendee]

But you're going to be the one who presents us with the results. So let us start on that. And I hope that those who join us for the conference will listen to you and also ask us a lot of questions. So Isla will first present our Q2 2025 business performance and the financial results, followed by a Q&A where Daniel and Ellen will also answer some of the questions. Okay. Then without further ado, let's start.

[Kyunghee Jun, executive]

Let me present the business performance and financial results for Q2 2025. In Q2, Soop focused on expanding its ecosystem by enhancing its business model through proactive streamer support, AI development and subscription-based platform upgrades. Brand marketing efforts further boosted Soop's visibility, while content-based B2B partnerships supported the global rollout.

Soop AI project is progressing steadily. SOOPi, the AI video assistant that knows you best is now modeled after 45 streamers and serves around 41,500 diehard viewers and subscribers. It's continuously evolving to recommend both live and VOD content from streamers while also answering questions about the platform and cultural content.

In addition, SARSA, the AI manager for streamers, launched Open Beta 1.0 with its third update. Beyond stream summarization, it now offers chat management, real-time viewer sentiment analysis and new feature recommendation. Savic, our video AI, is being tested as a tool for ad content creation beyond its current use in video balloons.

On the brand side, the Soop Adventure campaign launched on April 30 introduced the brand to the public. While the launch of the user participatory Soop Adventure Season 2 on June 20 strengthened our user engagement. We saw strong results in global content partnerships. The exclusive Chinese broadcast of LCK Road to MSI, which was held from June 13 to June 15, along with expanded game and sports content like the KBO League and Three-Cushion World Cup helped drive global traffic. Sponsorships and donations are gradually gaining traction around co-streamed broadcasts and simulcasts which is promising trend.

Lastly, in the advertising business, we conducted a company-wide structural review and reorganized following the PlayD acquisition. We are now building an integrated strategy to maximize synergy across Soop,, PlayD, CTTD and FreeBR. That wraps up our key business highlights, and let us move on to the earnings.

Q2 revenue was KRW 116.9 billion, up 9% Q-o-Q and 15% Y-o-Y. Platform revenue reached KRW 84.5 billion, down 0.4% Q-o-Q, but up 2% Y-o-Y. This was largely driven by the popularity of categories like sports and gaming, which generate high traffic but relatively low gifting revenue. Q2's advertising revenue totaled KRW 30.8 billion, driven by solid performance in branded content ads and the continued top line growth supported by the consolidation of PlayD, and this represents a 41% increase Q-o-Q and 76% increase Y-o-Y.

Breaking it down further, platform ads revenue decreased 6% Q-o-Q, but recorded a 2% increase Y-o-Y. Branded content ads grew significantly, up 21% Q-o-Q and 45% Y-o-Y. In the other advertising category, revenue showed a sharp increase of 95% Q-o-Q and 182% Y-o-Y, driven by the full quarter recognition of PlayD's performance. Let me now walk you through the operating expenses. Q2's operating expenses came in at KRW 86.9 billion, up 16% Q-o-Q and 27% Y-o-Y. Key drivers of this increase includes higher employment costs due to the consolidation of PlayD, increased variable costs associated with advertising revenue growth and additional costs related to branding campaigns.

Breaking down further by cost type, paying charges, which is a variable cost, amounted to 14.6%, up 3% Q-o-Q and 6% Y-o-Y. Advertising commissions totaled KRW 9.5 billion, increasing 57% Q-o-Q and 38% Y-o-Y. Content production costs dropped 42% Q-o-Q due to fewer large-scale league productions, but rose 40% Y-o-Y, reaching KRW 2.3 billion. Among fixed costs now, employment costs totaled KRW 30.5 billion, up 22% Q-o-Q and 33% Y-o-Y. Commissions for copyrights reached KRW 9 billion, up 11% Q-o-Q and 51% Y-o-Y. Streamer support payments were KRW 2.3 billion, up 5% Q-o-Q, but down by 2% Y-o-Y. Internet circuit usage fees amounted to KRW 5.7 billion, up 15% Q-o-Q and 39% Y-o-Y.

Depreciation and amortization expenses, including server acquisitions and amortization of PlayD's goodwill recognized through PPA totaled KRW 6.1 billion, up 11% Q-o-Q and 14% Y-o-Y. Other expenses, reflecting branding marketing activities reached KRW 6.4 billion, rising 42% Q-o-Q and 45% Y-o-Y.

Now on to the operating profit. The Q2's operating profit reached KRW 30 billion, down 8% Q-o-Q and 10% Y-o-Y. So the total operating profit margin stood at 25.7%. Q2's net income stood at KRW 22.5 billion, down 7% (sic) [ 16.9% ] Q-o-Q and 19% Y-o-Y, primarily due to an increase in other losses categories stemming from foreign exchange fluctuations.

Lastly, please refer to the full year financial statements for your further details.

[Unknown Attendee]

Thank you. Thank you very much for your brief on the financial statements of the second Q, and thank you for being very concise and also very readably and easily understood.

[Unknown Attendee]

Now we're going to now open the questions to the participants to this call. Any questions are welcome, and we are able to check your questions real time, and we'll be able to answer as much as possible. Now we'll be waiting for your questions. Any questions are welcome. Anything about the performance numbers or business strategies, anything is welcome. So please feel free to ask any questions. But before we start with any questions, actually, maybe we can share some of the questions submitted from the streamers.

So personally, I'm a streamer myself. So I'm very keen on certain things. And one of that is there are many platforms for the streamers. And there's no one that actually uses AI in full swing, but Soop is different. You have AI reactions and you also have a video generation. So it's very specific services are already provided using the AI power. So these kind of services driven by AI compared to others, especially on the platforms, you have a very standout features or standout road maps that you might want to share with us at this opportunity?

[Young Woo Choi, executive]

Sure. So for us, we do have AI services. And I do believe that it's a very practical and useful tools in real life, actually, number one out of two is that for our streamers, I mean, you usually say big companies or conglomerates, usually the big name streamers. They have their own staff, they hire, and they get a lot of support in various ways. They're in the position to do that or enjoy this kind of benefits. But there are many other streamers who do not have this kind of capabilities. And for these people, we want to make sure that they can use this platform easily with some of the support features, and that is why we wanted to start this AI features as soon as possible. Especially when it comes to new technologies like AI, you do need certain investment early on, and that's a true something that we cannot overlook.

So for streamers to monetize and to create business models, we need to make sure that we support them in this regard and also make sure that this also helps our businesses to grow. So that is our main priority and focus. When it comes to AI-powered services, maybe to give you a peek of some of them, SOOPi is one. I'm sure some of them that already use them know this we have some of the test beds for the advertising businesses. Of course, I mean, these kind of initiatives are not going to bring immediate results right away visibly, but I know that this can be a long-term strategy that can bring us benefits in the longer-term perspectives, I believe.

[Unknown Attendee]

Okay. Great. Thank you very much. Now to the next question. Okay. I see some questions coming up. There is a question from Daiwa Securities.

Mr. [indiscernible] says, competition is becoming fierce for event broadcasting rights like EWC. What's your investment strategy to secure such broadcasting rights? So who can answer the question?

[Young Woo Choi, executive]

I can do that. Yes. So in terms of the broadcasting rights, yes, of course, that's very important. It plays a crucial role to Soop as a media content provider. And as you said, large-sized sports broadcasting rights and securing such rights is becoming more competitive. So we know and we recognize the importance of that, but we're not going to go on with the chicken game. So whatever contents -- the reason why those contents exist and the reason why the Soop exists is because such content has to be used as a source for the growth of the streamers.

So esports content can play a crucial role in terms of gathering the community and fostering a community. It has to be the foundation for such community. But then that doesn't mean that we go along with such heated competition, and we have to be cold headed in terms of making decision.

[Unknown Attendee]

Next question, let me read this out. So this comes from Mr. Cha Miuh from Goldman Sachs. So rebranding domestically and overseas business are the 2 most critical pillars, which one is considered more important to you at this point? And please give us some updates on both of the businesses.

[Young Woo Choi, executive]

All right. Thank you very much for the question. Internally, and this is something we've already shared in the previous ones already. We don't call it rebranding. We'd like to see it as relaunching. What that suggests is -- I mean, we changed our name last year, and we changed our brand for the platform, a lot of improvements and tweaks were made. And we think of it as starting basically from the scratch, and that is why we call it rebranching -- I mean relaunching, not just rebranding. And this comes from not just internally, but to the streamers and total community actually.

And in the second quarter, for example, we had this branding campaign. And this campaign included the streamers and the professional, which [indiscernible] Faker. He's the name -- that's the name of the player. That's why we had this campaign. And I would say the business in Korea versus global business, you asked which one we weigh more. I get that that's a very challenging question to answer. Both are very, very equally important, of course. But what I can tell you is that if you look at the local business here in Korea, there are big, I guess, missions that we need to tackle on right now.

For example, a lot of businesses in Korea are very critical at this point, of course, and they are of the highest importance, I would say. And so we put all our efforts in branding domestically, especially again for branding campaigns. It's not just a one-off event. Soop Adventure is a new channel, the whole thing. And we're also devising our own strategies for the second half of the year for this very, very important campaign.

Now on to the global business. So this is a new growth engine and the direction for the bigger and more distant future. And of course, with AI and global business, these are the 2 important things for the future business, I would say. So global business is equally important, but which one do we focus more?

Well, we need to be very, very balanced between the two. I know it's not the answer you might be -- it's not the answer you might be asking for, but that is the only thing I can say at this point.

Now on the updates of what's happening in both pillars. Domestically, in the -- there's a very, very high and fierce competition in the platform industry in Korea, as you know. And you can see them in some of the statistics and the numbers of our businesses this quarter and the previous, but we need to make sure that we don't lag behind and lead this very fiercely competitive market. So we are working all out for this.

Now on to the global business. For the second quarter, I think we're seeing improvements, some progresses because we launched a new platform, global platform last year, and there were some business and technical challenges, but we faced them on -- head on and then improved from there. Based upon these learnings last year, as somebody already mentioned, LCK, the exclusive Chinese coverage and also other great new contracts, new business opportunities are really being seen to us.

[Unknown Attendee]

So that's great. Thank you very much for answering Next, there is another question from Mr. Li Hyok Joong. Do you see that recent noises on VTubers are impacting to Soops' virtual streamers in any way? Can you answer that question?

[Young Woo Choi, executive]

That is a very difficult question to answer. I have from the perspective of a platform, I would say, yes, of course, there has been some noises on that front. But we tried not to be swayed by any of those. To do that, we focused on what we can offer and what we do best.

Within the virtual streaming ecosystem, I mean, essentially, it's the same. So within the content category, there's a new category that is most innovative and up and coming. That is the virtual streamer category. So now it's too early to tell whether or not it's being impacted. But we look at it -- we look at the statistics and data in the long term and the number of the streamers and the number -- the amount of contents that they create, they are definitely on the rise in terms of growth.

[Unknown Attendee]

Well, thank you for answering that question. Next question from again Cha Minuh of Goldman Sachs. And the question is, compared to your initial expectation at the beginning of the year, would you say the overseas business is currently on track or not? And could you also share your internal assessment and the reasonings behind it, if you could? So let's try to answer that question. Who would like to take this question?

[Young Woo Choi, executive]

Me? So I think when it comes to platform, there are 3 perspectives to evaluate. Number one is the streamers influx or attracting streamers. Number two is, of course, the users. Number three is the content, of course. So these are the 3 pillars. And of course, it will be ideal to have all 3 on track or even overperform. And I think when it comes to this, I mean, in the initial period of the year, B2B and partnerships were mentioned a lot in the first quarter's call. And we need to set this very solid base, and that's what we are doing precisely. And you can see that in our business, we have a very large scale, especially exclusive LCK, Chinese broadcasting rights, that was one great progress that we made.

And the other is the FC Mobile tournaments that we held and the other that we've been doing overall for a very long time. That's Valorant Global League. Again, that's an exclusivity there. So when these come together and accumulate over time, that drives our growth and further empowers us. And I think that's why we continue to drive this kind of growth. But on top of that as well, we keep on discussing other areas, which is acquiring more streamers.

Looking again at the Korean streamers, there are many streamers who simulcast overseas, and we need to acquire them. We're growing on that as well continuously and sustained manner. And not only that as we speak right now, our campaign is allowing us to really empower us and acquire more for the simulcast and overseas casting -- broadcasting actually. And for the streamers on other countries, you saw them probably on the news articles, Thailand, we have some MCN contracts in Taiwan. We're not doing only SK, but we also have the MCS of local -- local MCS and we have more interactions and relationship with them. And you'll see the results coming out of it very soon.

So this kind of progresses are being made and will continue to be made. But I always like to highlight that when we started the global business, it's been a long-term projects the whole time. That is why we need to be patient and see where that takes us to.

[Unknown Attendee]

All right. Thank you. As a streamer myself, I've tried the overseas simulcast myself and there was the automatic translation services, many other great supportive and features, and that was extremely engaging and being able to communicate with the foreign [indiscernible] was great for myself as well. So thank you for that.

Now Mr. Dong Hwan Oh from Samsung Securities. Platform revenue growth is slowing down, which is a concern for investors. Do you have anything in plan that will boost platform revenue growth in 2026?

[Young Woo Choi, executive]

Before I answer that question, let me go back to your experience of simulcast. And if you do that, please let me know in advance because you do the gaming and visible radio and you're definitely expanding your foundation as a streamer. So if there's anything you need from us to support you in terms of content creation, and we have tools for you. So let us know.

Okay, to answer that question. Platform revenue growth is slowing down. Well, it's been about 3 months -- less than 3 months since I became the CEO of Soop. And so in the -- during the Q2, we poured our internal efforts into things like reviewing our long-term vision and long-term plan. And what I focused on was that -- making sure that everyone is online in that vision. So I was very active in engaging with them in terms of having a dialogue with them and listening to those voices, and I got some great feedback from our employees. So not just in 2026, but in the next 3 years, we have a plan, and this year will be the beginning of that long-term plan. And we did have that time of planning altogether.

Now to address the platform revenue slowdown, I think this question is essentially about the market itself. It's not just about onetime slowdown or if it's a slow growth of the market itself, it will be ideal if we can have exponential growth every time. That would be great, but that's not possible. But what we have to do is growing steadily, but focusing on what we can offer and here it's too early to tell all the [indiscernible] details on what kind of plans we have. But I can say that we had an in-depth review on our future plan. And at some point in time in the future, we'll be able to announce those good news.

[Unknown Attendee]

Thank you very much. Let's move on to the next question. [ Mr. Chun Soo ] from DS Investment Securities. According to third-party data platforms, the traffic gap between, [ Chzzk ] and Soop appears to be widening in favor of Chzzk. Could you share recent trends in Soop's traffic and PU, paying users? So that was the question for Mr. Choi on traffic and the paying users, answer please.

[Young Woo Choi, executive]

Sure. First of all, the third-party data or statistics you mentioned is not 100% reliable. I think we should say that first. Of course, it shows a bigger trend and overall trend, but we have our own internal data, and that allows us to see that we are growing. Overall, though, the pie for this industry is growing, and I think that's encouraging already.

Now we have some internal metrics, and that is how many streamers are active on our platform. And on a day-to-day basis, how many users are spending long enough time with the streamers of their choice. And the other metrics that we look at is how many new streamers are and how many new users are coming into our platform and enjoy our ecosystem. As for the revenues and the operating profit, they are important, of course, but there are many other indexes and metrics that we also care very much about.

One thing, though, that I must say at this point is that there are many loyal users to our platform. They're spending more time here and streamers, end users on both cases -- on both sides are strengthening our platform. And like I mentioned already, it's not just attracting more of those people, but we will continue to inform more audiences, wider audiences of our rebranded Soop. So thank you. Thank you very much.

[Unknown Attendee]

Okay. Moving on to the next question. Do you think the branded content is structured in a way that it can grow continuously beyond its capacity? If yes, then what do you think will drive its growth? Now who can answer the question, please?

[Young Woo Choi, executive]

Should I?

[Unknown Attendee]

Yes, go ahead.

[Young Woo Choi, executive]

As you know, branded contents are widely used in gaming industry, and it's influenced heavily by seasons. The gaming industry is growing more and more, and our partnership is getting stronger and stronger. So recently, for example, within the recent trend, it's kind of difficult to define what branded content is because there are so many new attempts being made within this context. So for example, recently, there was a partnership with [ Riot ] Games for Fortnite. And so there was definitely a starting point in that partnership. And with the DevSisters, our partnership is expanding. And Netmarble and other gaming publishers who are our partners, all these are growing steadily.

[Kim Jiyeon, executive]

In terms of how many large-sized gaming projects are there and how many new projects coming up, these are the elements that can influence this. In terms of the branded contents, always peaked in the latter half of this year. Y-o-Y, 45% growth was marked in the first half. And of course, the game League and game-related branded contents are included here. But this year, the gaming companies' branded contents have increased, and this is a sign of good -- this is a positive sign.

And also in terms of AI, of course, it's kind of early to tell, but branded content using AI technology that is being developed right now. And in fact, a couple of companies actually tested the solution. So I believe this is quite meaningful point. And as Daniel said, going abroad, the esports league that we produce and/or game companies with good IPs and producing league with them because of that our branded content is going to grow continuously.

[Unknown Attendee]

Next question from CLSA, Kim Dohyoung shared this question. To what extent do you expect the government issued consumption coupons distributed in Q3 to influence your results? And that is the question regarding that consumption coupons. Anyone would like to take this?

[Kim Jiyeon, executive]

Well, this is the first time ever that government issues [indiscernible] coupon. So we don't really have a grip of what it will do to us. So probably better to look at it for another month and see how that impacts our businesses and overall. Okay.

[Unknown Attendee]

Moving to the next question right away. [ Eun Jung Shin ] from DB Securities. Please share with us the POR of Q2 costs related to the relaunch PlayD PPA. So that's the first question.

[Kim Jiyeon, executive]

So let us answer the first question first. The Q2 of POR, paying user -- in terms of the paying user number, Q-o-Q, 2% decline was recognized and the ARPU increase compensated for that. And the costs related to the relaunch, KRW 1.6 billion has been executed and some of them was put into advertising and also sponsorship. PlayD PPA [ 200 million ] was expended for that.

[Unknown Attendee]

Okay. Following question, and that was, are there any specific areas where synergies with PlayD are already being realized? Additionally, could you share your plans on how to intend to further unlock value from this partnership going forward?

[Young Woo Choi, executive]

I think I'll take this question. As for PlayD, it has joined Soop. And this acquisition happened only this quarter. So I think it's too early to say anything has really materialized or realized. But what I can tell you at this point is that in the second quarter, this quarter, basically, there have been many programs and activities that we focused on and PlayD was definitely a part of that overall efforts.

PlayD and Soop has this interaction and relationship. But not only that, there are many other related businesses. There are brothers and sisters, companies. So synergies with all of them in a bigger picture is very critical. So creating synergy is very important, and we've had the revamping of business and also the staff restructuring. And we will, of course align our business plans according to that in the second half of the year. So get excited and stay tuned for that.

[Unknown Attendee]

All right. Thank you very much for that answers. I think that is it for all the questions that have been posted up, and we will be more than happy to answer questions if there are any more coming from the participants. If not, I can maybe ask another question regarding streamers.

[Young Woo Choi, executive]

Your questions are quite sharp. It hurt. No, no, no, I'm just joking. This is great, great opportunity to listen to the voices of our streamers. I love it.

[Unknown Attendee]

Thank you for your thorough answers. The one-person media is now experiencing the growth of commerce. As a streamer myself, this year, I would say I streamed 3 times on the topic of commerce. Now do you have any strategies on commerce or plans to boost commerce? Could you answer the question, please?

[Young Woo Choi, executive]

So for example, [ Soop Tool ] that's an internal tool that we have to boost, collaborate with our partners, and we do the live commerce with our streamers, and we also have our own sales. And this is being discussed as a part of creating synergy with PlayD. So of course, the content that's going to be created and also the streamers business, these are all part of the strategy. So of course, we will be able to propose something very amazing and exciting coming up very soon.

[Unknown Attendee]

We answered many questions, and we talked about some business highlights in Q2. Now it looks like it's time that we wrap. And I believe we have answered all the questions thoroughly. So let's maybe just share the last words before we officially wrap up. Daniel first?

[Young Woo Choi, executive]

Sure. Well, like I said, I'm not used to appearing on live shows like this. So I have been very nervous the whole time. And when the questions are posed, of course, I tried to have a [indiscernible] for these answers. But again, I'm not a professional here in this kind of industry. And if I wasn't, therefore, enough or sufficiently answered your question, you can contact us in other communication channels, anything that you prefer, and I'll try to answer as many questions as possible. And again, it's a scorching heat in Korea, but stay healthy and stay hydrated. Thank you. Now to you.

[Kim Jiyeon, executive]

Well, thank you very much for all these great questions today, as always. We did the new branding or the launching last year, and there are many structural business changes as well internally. So that means we really are just making a new step forward. This entire company is making this whole change. And I think it comes with some sort of pain, of course. And I would like to have all of you stay tuned for this growth that we will be manifesting very soon. Okay. Now Isla.

[Kyunghee Jun, executive]

All right. As the 2 of them already mentioned, the first half of the year, we really focused on internally solidifying ourselves and hope to be able to come back to you in the second half of the year with more great results. So thank you all very much for your time.

[Unknown Attendee]

Thank you. Thank you very much. And I think this has been a very meaningful and great discussions together, and it's been an honor to be part of this. Now this wraps up the second quarter's earnings call. Thank you all very much for your time out of your busy schedule, and we will come back to you with even greater results. Thank you all very much. Have a great day. Thank you.

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