APR Co Ltd

KRX:278470

[Foreign Language]

[Interpreted] Greetings, and welcome to all our valued shareholders and investors.

First of all, I would like to express my sincere appreciation to all our valued shareholders and investors for joining us today for APR's earnings presentation for the first quarter of 2025. Today's earnings presentation will proceed as follows. I will first provide an overview of our first quarter results in Korean, followed by full explanations in English. A Q&A session is also prepared after the English presentation. So we kindly ask our investors to take note of the order of proceedings.

Lastly, please note that the financial results presented today have been prepared for the convenience of investors and are based on our internal data. As our external auditors review has not yet been completed, these figures are subject to change once and after the external audit. Additionally, any forward-looking statements made during this presentation may change due to the changes in the market conditions and modifications of our strategic directions.

Now I will begin with APR's earnings presentation for the first quarter of 2025 in Korea.

Thank you for listening. This concludes with the earnings presentation of APR's first quarter 2025 in Korean. Next, I will proceed with English. Please note that the Q&A session will be held after English presentation, and we kindly ask for your patience until then. Thank you.

Now let me begin with the review of our first quarter results for 2025. Please refer to Page 3, overall sales trend.

In the first quarter of 2025, APR recorded a consolidated revenue of KRW 266 billion, setting a new record for the highest quarterly sales in our business history. Notably, we achieved this performance by surpassing the traditionally strong fourth quarter results, continuing our solid growth momentum. This outstanding performance was driven by the enhanced brand recognition and strong growth in global markets, underpinned by the excellent quality and competitiveness of our products.

Please refer to Page 4, first quarter results. In the first quarter of 2025, APR recorded a consolidated revenue of KRW 266 billion, representing a 79% Y-o-Y growth. Operating profit reached approximately KRW 55 billion, a 97% growth from the same period last year. We recorded a record high quarterly revenue and also doubled our quarterly operating profit compared to the previous year, demonstrating both strong growth and improved profitability.

Please refer to Page 5, first quarter results by division. In the first quarter, the Cosmetics division recorded a revenue of KRW 165 billion, delivering a robust 152% Y-o-Y growth. Following the previous quarter, we continued to maintain triple-digit growth. In particular, our flagship brand, Medicube achieved exclusive growth with cosmetic sales expanding by 203% Y-o-Y, resulting by increasing demand in global regions.

Also, the Beauty Device division continued to grow across global markets, recording approximately KRW 91 billion in revenue, marking a 36% Y-o-Y growth. Meanwhile, others divisions recorded a revenue of KRW 10 billion, a 40% decline to the same period last year and mainly due to the strategic downsizing of our fashion brand, NERDY.

Please turn to Page 6, first quarter results by regions. Following the strong growth observed in the fourth quarter last year 2024, overseas business regions continued to drive our performance in the first quarter as well. Overseas sales reached KRW 190 billion, representing a remarkable 186% Y-o-Y growth. As a result, the proportion of overseas sales has risen significantly from 44% in the first quarter of 2024 to 71% for this first quarter 2025. And we will provide further regional details on the following page.

Please refer to Page 7, first quarter results by region. We witnessed strong demand across all overseas markets, leading to rapid sales growth. We strengthened our global competitiveness through simultaneous expansions in both developed and emerging beauty markets. Breaking it down by region, Korea recorded sales of approximately KRW 77 billion, representing a 7% Y-o-Y decline. While the Beauty division maintained stable sales, Fashion division has undergone a decline, resulting in overall negative growth.

The United States achieved record-breaking quarterly sales of approximately KRW 71 billion, a 187% Y-o-Y increase. Since entering the U.S. market, consistent customer reviews and proven product efficacy has fueled organic consumer-driven viral marketing, leading to further growth in brand awareness and sales.

Japan recorded sales of KRW 29 billion, representing a 198% Y-o-Y growth. During the Qoo10 MegaWari event held in March, we achieved a record high sales. Furthermore, we expanded our sales channels to offline across the country, securing new growth drivers.

The Greater China regions, including China, Hong Kong and Taiwan, recorded sales of KRW 28 billion, a 39% Y-o-Y growth, driven by the steady market expansion. Others regions continued their rapid growth, achieving sales of approximately KRW 61 billion, an explosive 442% growth compared to the previous year, driven by the expanding global demand.

Please refer to Page 8, strengthened global brand presence. With increasing customer purchases fueled by outstanding product quality, we have significantly enhanced our brand presence across both online and offline channels globally. An increasing number of our products are ranking highly on key e-commerce platforms such as Amazon in the United States and Qoo10 in Japan. Moreover, through our public stores and offline retail partnerships, we have strengthened our customer relations and observed a strong customer presence for our products in offline environment as well.

Lastly, please refer to Page 9 for our summarized consolidated financial statement. This financial summary is provided for your reference. And thank you for listening, and this is the end of English interpretation of APR's earnings presentation for the first quarter of 2025.

Now we may begin the Q&A session. Thank you.

[Foreign Language] [Operator Instructions] The first question will be provided by [ Yong Jin Park ] from Hana Securities.

[Foreign Language]

[Interpreted] I have 4 questions. First, I'd like to know about the loss from the Fashion business. Second, I'm curious about the profitability of its Beauty Device product. And third, how were marketing and logistics expenses executed? Also, how was the marketing budget allocated between the U.S. and Japan? Fourth, within the others category, is it possible to distinguish between Europe and B2B?

[Interpreted] Regarding your first question about the operating loss on the fashion and apparel division, NERDY, the first quarter's operating loss for NERDY is around the mid KRW 3 billion. But starting from this year, actually, we've been ordering minimal volume for our -- coming up the SKUs. And also, we are also shrinking the number -- the absolute number of the SKUs for our fashion and apparel businesses. And for that reason, we are expecting that the actual -- the revenue for our fashion and apparel business will shrink. And along with that, our operating loss will also get smaller as well.

And for the second question about our the operating profit margins for our cosmetics and the devices. As of now, for today's presentation, we did not prepare for that data. So we will not be able to deliver as of now. But we will be able to deliver it maybe after the disclosures for the first quarter of 2025.

And for the third question regarding the expense structures for -- especially for our marketing expenses and the transportation expenses for this quarter, we spent about 18% for the marketing expense and 9% for transportation expense. If we look over to the marketing expense compared to the previous year 2024, our marketing expense has been reduced about 2% points and the transportation expense remained similar level.

And regarding the marketing -- the transportation expense by the region, especially for U.S. and Japan, we will not be able to deliver for that detailed information as of now.

And for the last question regarding our -- the B2B sales, especially in the Europe regions, about the major -- the sales for our others regions are originated -- generated by the B2B sales over 90%. And starting from February, actually, we've been -- we've started to generating sales from the European regions. And we are expecting that the actual -- the sales volume for our EU will get bigger as time goes by.

[Foreign Language] [Interpreted] The following question will be presented by Heejin Lim from Citi.

[Interpreted] I have a few questions. First, regarding U.S. sales, which months showed the strongest performance for cosmetic devices in Q1? Would there have been any impact from tariffs in this regard?

Second, for Japan, by the end of Q1, how much progress has been made towards the goal of opening 3,000 stores within the year? And third, regarding B2B, is there any data on B2B sell-through? And lastly, was there any impact from accelerating shipments ahead of tariff implementation? And has there been any fundamental improvement in logistics costs?

[Interpreted] Regarding the first question about our expert data towards the United States. As of now, it's quite hard to deliver on our like monthly expert data towards the U.S. But in terms of sales trends in U.S., actually by month by month, our sales trend in U.S. are getting better. And also, there has been Amazon promotions back in March this year -- during the first quarter. And for the reasons, along the first 3 months, January, February and March, actually, the sales for March recorded the highest sales amongst the 3 months.

And I don't think that there has been some big bulk of purchase to prepare any the tariff issues. But because we are seeing that there has been some strong sales trends that are continuing to the current -- the second quarters.

And for the second question about the number of the offline stores that APR has been expanded in Japan. As of now, we are seeing that we've been entered under 1,000 offline stores as of now. And also, this number is increasing as of now as well. Well, we've been experiencing some big increments in our -- the demand for our products globally. So we are having some difficulties to meet up like a minimum number of SKUs to be entered in offline stores. But once this can be settled down, then we will be able to accelerate our expansion through the offline stores.

For the third question about the sell-through data for B2B. As of now, we will not be able to deliver our sell-through data. But in terms of sales trend for the B2B sales, actually, we've been increasing our sales trend globally, and these sales trends are strong at the moment as well.

And for the fourth quarter, regarding the transportation expenses and the logistics fee, because there has been some -- the percentage reduction compared to the previous year, we are seeing that -- well, one of the key factors that we -- one of the key factor is that there has been some reduction, especially on our logistics using the airplane, air cargo, but we don't think that, that's one of the major factor. But the major factor would be that we've made a big shipment in prior back in the fourth quarter last year to mitigate any of the tariff issues that can be imposed in this year, and that will be more the significant driver.

[Foreign Language] [Interpreted] The following question will be presented by Hyunjin Park from Shinhan Investment & Securities.

[Interpreted] I have 3 questions. First of all, B2B sales have been increasing significantly. So I'm wondering if they're directly related to the lower proportion of marketing expenses. And also, how do you plan to allocate marketing spend in Q2?

Secondly, could you briefly share B2B sales trends in April and May so far? Additionally, I'd like to understand the proportion of sales in U.S. dollars and the impact of FX. Is the recent increase in financial income due to the strong dollar?

Lastly, regarding your annual guidance of 17% to 18%, do you have any plans to revise it upwards?

[Interpreted] Regarding the first question is about any direct relationship between the increment in the B2B sales with the improvements in the marketing expenses. I believe that there are not much direct relationship between the 2. But rather than that, I believe that there has been some leverage effect that directly affects the reductions in our expenses. And the reason is that because we are still -- we are not executing our marketing expenses on the specific marketing campaigns or specific details or specialized marketing campaigns.

But rather than that, we are executing the marketing campaigns to increase our global brand awareness. And the focus is to increase our brand awareness as well. And for that reason, I don't think there has been some direct relationship between -- I mean the direct -- the relationship between the B2B sales increments and the marketing expenses.

And the second question is about our strategies to improve our marketing expenses. Regarding the questions, as I mentioned in the previous earnings presentation, we are preparing to execute, the similar marketing expense level -- expense rate compared to our previous year 2024, which is roughly around 20% from the sales.

For the third question about the sales proportion for B2B in April and May, the sales portion within our total sales are increasing by month by month.

And for the fourth question, about our -- the exposures to the U.S. dollars. Most of our -- the generated sales from U.S. dollar will be generated from the U.S. regions. And as you can see from our IR materials, as of first quarter, from our total sales, U.S. takes about 27% from our total sales, which is roughly around KRW 71 billion. And these sales will be purely from the U.S. dollars. But other than that, our sales in terms of currencies are very well diversified by regions, for example, like Japan, China or other countries.

And for the fifth question, whether there has been some -- any positive effects from the exchange rate. We don't think that we will be experiencing some sales reductions because of the decline in the U.S. dollar exchange rate because as I mentioned previously that most -- our sales currencies are well diversified by many different countries and U.S. takes about 27%, but the rest portion is well diversified by other countries, for example, like Korea, Japan, China and et cetera. So the impact will be very minimal.

And for the sixth questions about our increasing the financial income for the first quarter, whether this increment was actually derived from the increments in the exchange rate. Other than that, actually, our -- the financial income was actually generated from the increments in the interest rate. So as of first quarter, we've earned about KRW 4 billion financial income.

And for the last question regarding whether there will be some modifications, the upward modifications on our -- the current guidance. Well, given the external uncertainties such as U.S. tariff policies, we currently have no plans to revise our guidance upwards. And our strong first quarter performance was very encouraging. And based on this momentum, we are confident in achieving our initial guidance.

[Foreign Language] [Interpreted] The last question will be presented by Yong Jin Park from Hana Securities.

[Interpreted] I have a few questions. Firstly, could you share the Q1 device sales in the U.S., Japan and Korea? Secondly, what's your outlook for device sales from Q2? Also, could you briefly share recent sales trend in the U.S. and Japan and your Q2 outlook? Additionally, the sales of Greater China region, has there been any changes in consumer trends or strategy?

[Interpreted] Regarding the first question about the sales volume for our home beauty devices. For the first quarter, we sold about 590,000 units sold. And in terms of the regional breakdown, it's difficult to deliver such detailed information.

And for the second question is about the outlook, our overview about the second quarter, both on cosmetics and the home use beauty devices, as you said, cosmetics, the sales trends on both cosmetics and devices are strong at the moment. But at the same time, relatively during the first quarter, the sales trend for devices seems to be weakened relatively compared to the cosmetics. But I still believe that there has been some strong and positive synergies between the 2. So we are quite optimistic about the strong growth that can be sustained in the coming time as well.

And also for the overall outlook on our second quarter, the sales, as of now, our sales trends are very good. And even though the second quarters are considered to be the off-season, but still our monthly sales are improving. So personally, I am expecting that we will be able to achieve the optimistic sales for the second quarter as well.

And the last question is about our -- the Greater China regions. Greater China region is not our -- the first priority regions in terms of business strategies and directions. But it is true that the sales trends are getting improving followed by the first quarter and also the second quarter.

Once again, I would like to express my profound gratitude to all shareholders and investors for joining our earnings presentations. Every one of us in APR will continue to strive for sustained growth through constant and endless efforts. We kindly ask for your continued interest, encouragement and support.

Thank you for listening, and this is the end of the earnings presentation for the first quarter of 2025. Thank you.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]