Good morning and good afternoon. My name is Jae-ha Shin , Vice President of APR Corporation. I would like to express my profound gratitude to all our shareholders for joining our earnings call. Before getting into the details about our performance, I want to inform you that starting from this session, the earnings presentations will be conducted through webcast. Since our listing on KOSPI market in February this year, APR has consistently sought to enhance communications with our shareholders and investors. Therefore, to provide transparent communications regarding our company's current status and future, we have decided to conduct our earnings presentation through webcast. Today's presentations will proceed in Korean first, and followed by English. Lastly, Q&A session will begin after English interpretation.[Non-English content]
Before getting into the presentations, the information included in this presentation material is prepared and provided for the convenience of shareholders and investors. The financial information and data have not yet been audited from the external auditors and may cause some modifications during the final audit. Once again, English interpretations will begin after Korean interpretations. Thank you for your patience.
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I may start the presentations by announcing our financial performance for the third quarter 2024. You may refer to page three. Once again, APR achieved a new highest quarterly revenue by recording sales of KRW 174 billion, surpassing the previous record achieved in the second quarter this year. As you may know, the fourth quarter has traditionally been our peak season and consistently driving the strongest annual revenue growth. Not only the fourth quarter, but other quarters are also continuously recording YoY growth. Additionally, our sustained success this quarter has been made possible by the continued efforts of all our employees. As a result, we have achieved continuous YoY growth for the 39 consecutive quarters since the establishment of the company in 2014.
The following page will provide a more detailed overview of our performance in third quarter. It's page four, third quarter results. APR recorded the sales of KRW 174 billion, resulting in YoY growth of 43%. Both beauty device and cosmetic divisions have achieved overwhelming growth, followed by the sales of KRW 75 billion and KRW 85 billion respectively, and also YoY growth of 62% and 54%, respectively. Operating profit was KRW 27 billion, a 25% growth in YoY. We have recorded 15.7% for the OP margins, which is a 2.3% point decrease relative to the third quarter 2023.
We were undergoing a temporary decrease in the OP margins due to the increase in transportation expenses to secure the optimum inventory level for the preparations of the peak season, fourth quarter. Additionally, there has been a drastic fluctuation in the exchange rate for the overseas inventories during the adjustment of the unrealized P&L. However, it's not occurred from the actual operating activities, but done based on our accounting treatment. It is anticipated that the adjustment will be executed after the fourth quarter. Now, it's page five, third quarter results by divisions. Beauty device divisions recorded the sales of KRW 75 billion, resulting in YoY growth of 62%.
I would like to highlight that the device divisions has achieved its highest quarterly sales by selling over 300,000 devices within third quarter. Especially, there has been a distinctive sales growth for the devices in all overseas regions. We offered various options for the beauty devices by introducing and launching new items such as Booster Pro, Pink Edition, and High Focus Shot for the domestic customers, and Ultra Tune for the overseas customers. Starting from Hong Kong, global launch for the RF device, Ultra Tune, will begin and expand for the additional sales growth for the coming period. Moving on to the cosmetic divisions.
The cosmetic division recorded the sales of KRW 85 billion, resulting in YoY growth of 54%. We are making distinctive and noticeable results in the cosmetic divisions, especially for the medicube brand. The rapid growth on medicube is not only limited to domestic regions, but global regions, especially in U.S. and Japan. There has been a solid growth in cosmetic sales across the best-selling items. Additionally, we have enhanced our product competitiveness by increasing the product lineup such as PDRN cosmetics. As a result, medicube recorded the sales of KRW 67 billion, a steep YoY growth of 73%.
Aprilskin is growing through Korea and US-centric strategies, resulting in YoY growth of three consecutive quarters. Glam. D Bio experienced a sales growth in Hong Kong, not only for the health supplements nor enzymes, but also for the massagers. Others divisions, including the fashion brand, NERDY, experienced a sales reduction due to the economic slowdown in China. Next is the sales by regions. Please refer to page six. The third quarter results saw rapid growth in overseas sales, recording YoY growth of 79% and surpassing over KRW 100 billion for the first time. US-centric growth led to the steep growth in overseas sales and overtaken the domestic sales. As of now, overseas sales account for about 58% of the total sales. I will move on to the next page to deliver more detailed information about regional performance.
There has been a steep growth in overseas regions, especially in U.S., Japan, and Hong Kong, which allow us to achieve another record-high quarterly sale. This performance was achieved through the transition of current K-beauty consumers to the general cosmetic consumers by executing the channel expansion strategies. Coming back to the domestic performance, we've recorded the sales of KRW 74 billion, resulting in YoY growth of 12%. Major sales upside driver was the ninth anniversary promotion and launch of new device, High Focus Shot. For U.S., we established a new quarterly sales record of KRW 40 billion, resulting in YoY growth of 123%. Continuous high growth of 94% in beauty device and 146% for cosmetics.
Along with US, Japan also established new record high for the quarterly sales by recording KRW 15 billion with YoY growth of 79%. Breaking down into beauty devices and cosmetics, they recorded a YoY growth of 68% and 136% respectively. Due to the economic slowdown in China, fashion brand NERDY undergone sales reductions of KRW 7 billion, led to the decrease in overall sales. In Hong Kong, by successfully establishing high brand awareness, we've recorded the sales of KRW 16 billion, resulting in continuous high YoY growth of 93%. Others regions recorded the sales of KRW 24 billion, along with YoY growth of 184%. Accelerations of global expansion allowed us to expand our global market to Europe, such as UK, Denmark and Romania.
Also, both channel diversification and global expansions allowed us to broaden our business capabilities to B2B channel and new markets such as Europe. As a result, both B2B and B2C channel sales are experiencing growth. Next page is prepared to explain more details about transportation expenses. With sustained global sales growth, we are seeing continuous quarterly increases in exports from our headquarters in Korea to overseas subsidiaries and B2B partners.
The export volume spike in third quarter reflected both local sales growth and early shipments to meet peak season demand. As a result, transportation expense proportion has increased from 7.4% to 9.5%, but this number is a one-time expense and projected to be normalized in fourth quarter as it is reflected in advance to the third quarters. Please refer to page nine. Now I would like to address the sales trends of our main business divisions, beauty devices and cosmetics. Despite the fact that the third quarter is an off-season period, both device and cosmetic break a new quarterly sales record.
As shown in the diagram, beauty device divisions has been growing continuously since 2021. Also, there has been a sales spike during the peak season in every fourth quarter. Considering this circumstance and recent market response, we are expecting that this trend will continue through this fourth quarter. Following this peak season, we have successfully prepared to ensure that our secured inventory stock translates into sales. In the cosmetic divisions, while our focus in 2023 was largely on the device business, we have strengthened our competitiveness in 2024 by expanding human resources and accelerating global expansions.
As shown on the right chart, the growth rate for cosmetic increased sharply, recording the sales of KRW 222 billion, exceeding the entire 2023 annual sales of KRW 214 billion by 4%, marking a significant achievement in our cosmetic businesses. Next page, financial statement summary on page 10. This is the summary of our consolidated financial statement. You may refer to this page at your convenience. Thank you for listening, and this is the end of the presentation. We may move on to the Q&A session. Thank you.
Now, Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two. That is star and two on your phone. The first question will be provided by Park Jong-hyun from Daol Investment & Securities. Please go ahead with your question.
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I have three questions. First, in third quarter shipping cost percentage of sales have increased. I'm curious if this is due to a general rise in international shipping rates or if it's because our overseas shipments volume has increased. Could you provide detailed insights on which factors are contributing to this increase?
First of all, most of the transportation expenses for this quarter, the increments, the highest portion takes from the shipment to the overseas regions and the amount is around KRW 4 billion. Regarding the transportation expenses, there are several factors that affect the increments on our transportation expense. One of the examples is that there has been some increments for the shipments relating to the increments of the payment for the tariffs. Another factor is that there has been some duties for us to meet up some the logistics of the schedules. To meet up that schedules, we had to utilize more the shipments using the airplanes. Also, there has been some increments in the other logistic related fees.
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Secondly, in the device category, I'd like to know the sales volume for Ultra Tune and the High Focus Shot, which launched in September. I feel the sales might be somewhat weaker than expected.
Regarding the sales trend for the beauty devices within the third quarter, I've mentioned that we've sold over 330,000 devices, and from that number, around 120,000 are from domestic, and the rest, 210,000, is from overseas. From that number, around 60% is from Booster Pro, and the rest, 40%, is from Ultra Tune and the High Focus Shot. Regarding the sales trend for the newly launched devices, Ultra Tune and High Focus Shot, we are seeing that the speed of the sales are going at the optimal pace.
Also, for the global launch of Ultra Tune, it's completed for the launch in Hong Kong and the U.S., and we will be able to launch Ultra Tune in Japan in a coming period. There are some reasons behind the delays of the global launch in countries like Hong Kong and the U.S., and the reasons are, it requires some additional time for us to acquire some related approvals relating to the sales in those local regions.
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Last question is for cosmetics. I'd like to know if there are any plans to enhance cosmetic segments, such as launching sunscreen product in the future.
Regarding the product launch for the new products. As you can see from the third quarter, the big promotion events such as Mega Wari and other events, you can often observe that APR is increasing its brand awareness in several cosmetic categories, such as ampoules or serums or pads. In that sense, our business strategies relating to the cosmetics will be the same as our original strategies that we've planned in the early part of this year. In that sense, we can also consider launching new product categories such as sunscreens as well.
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Next question, please.
[Non-English content] The following question will be presented by Han Yoo-jung from Hanwha Investment and Securities. Please go ahead with your question.
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First, how much of the adjustment to COGS was reflected in third quarter? And what amount is expected to be reversed in fourth quarter?
Regarding the impact on the COGS by the fluctuations of the exchange rate, normally APR makes modifications on the inventory level from the early of the month to the end of the month. During these processes, the exchange rate fluctuation often impacts on our expenses level. Because of that, there have been some modifications regarding the cost of goods sold, COGS.
It's KRW 1 billion.
The amount is KRW 1 billion.
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Secondly, what are the plans for launching new device products next year? And what are the current data on inventory turnover?
Regarding the product launch plan for the beauty devices for the coming year, we are preparing for the product launch for the coming year, but for today's earnings call, it's quite hard for us to deliver some detailed information, but we will be able to deliver more detailed information at the start of the next year, 2025. Regarding the safety inventory turnover period, the inventory level has been increasing starting from August to September, and the inventories have been delivered to the warehouses starting from October this year. In that sense, as of now, we have enough safety inventory level. One of the major reasons for that is because, at the early of this year, we had to go through some of the supply shortages on a short-term basis, and taking that as a lesson, we have prepared enough safety inventory level.
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Next question, please.
[Non-English content] The following question will be presented by Hyunjin Park from Shinhan Securities. Please go ahead with your question.
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You mentioned that the increase in shipping cost was the main reason for the operating profit margin falling below consensus. Could you explain if the opening of the new Pyeongtaek plant has significantly contributed to this, particularly in terms of increased labor costs and depreciation expense?
It is true that we've been running the two production facilities in Korea, and in that sense, the number of the labors relating to the factories are actually increasing trend. The expenses relating to the labor cost is not as high as our actual sales growth, so the impact is actually very minimal. Also, in the same concept, the depreciation cost is also not impacting as much on our operating profit.
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What is the current utilization rate of the Pyeongtaek plant?
Normally, as of now, the average monthly sales for the beauty devices is around 130,000 to 140,000 devices. But this number actually temporarily increases during the peak season, the fourth quarter, especially during the Black Friday promotion period. And as of now, the production facilities are producing our product corresponding to these kinds of promotion events. So as of now, we are planning to produce around 150,000 devices per month.
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How much capacity investment is planned for the future?
Regarding the investment plan, there will be some CAPA relating to the medical devices and also some facilities relating to our R&D center. As of now, our home-use beauty devices are produced heavily on the second production facilities located in Pyeongtaek. As of now, the utilization rate, the production rate for the second factory is ongoing trend without any difficulties or problems. As of now, at least in the short term, we don't have any plans to increase or establish additional other production facilities for the beauty devices.
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Could you provide a breakdown of the proportion of overseas sales for the cosmetic segment? If it's difficult, could you explain the operating profit margin?
The difference of the operating profit within the cosmetics and beauty devices, I think I can deliver some kind of a trend based on the trend. Normally, our beauty device divisions have slightly higher OP margins relative to the cosmetics. Also, as you know that we have several cosmetic brands within our brand universe, the OP margins differs by each brand. But within the medicube brand, still beauty device division has slightly higher OP margins than the medicube cosmetics.
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What is the proportion of overseas sales in the cosmetic segment?
The sales proportions for cosmetics, the overseas takes about 60% from the total cosmetic sales and the domestic is around 40%.
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Lastly, regarding the impact of Trump's tariff policy, what will be the impact of potential future changes?
Regarding the tariff policies that have been announced by Trump, the tariff rate for the beauty devices and cosmetics are still relatively low. It is true that we have to apply certain portions to our COGS. As of now, we are preparing to conduct some initiatives regarding the tariff policies that have been announced by Trump.
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[Non-English content] The following question will be provided by Heejin Lim from Citi. Please go ahead with your question.
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I heard there was an additional. How significant was this increase?
Originally, I mentioned that our transportation expense was around KRW 4 billion. From that number, the question was how much the air shipment portion takes. Regarding that, the air shipment took about a little over KRW 2 billion. The breakdown of these transportation expenses regarding the air shipment requires some more breakdown. We'll be able to deliver some more detailed information afterwards.
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Could you provide insight into the sales visibility of PDRN and medical device?
Regarding the PDRN business sector, we've been continuously provided that we are under construction for the third factory, which is specialized in producing and extracting the raw materials, PDRN, and also PDRN related cosmetics and beauty devices. The construction will be completed at the end of November this year. The completion of the construction includes the installation of the equipment, etc. The extraction of the raw materials, and also the production of the completed cosmetics, will start from the early of next year. About the medical devices, it normally takes at least one year since the completion of the construction of the factories. We are expecting that at least we'll be able to introduce our medical devices starting from the end of 2025 or the early of 2026. Our R&D team and also any related human resources are already fully settled within our R&D center, and the time schedules and the planned schedules — the progress is on track right now.
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There was an unrealized inventory adjustment of KRW 1 billion in COGS, and the cost ratio appears to be 24%, which is higher than usual. Is this due to the normalization process following the sales of new equipment?
Regarding these inquiries, actually excluding some of the adjustment about the unrealized P&L, I think I can conclude that there are three more reasons relating to these inquiries. First is that as you may know, the fashion apparel division, NERDY, is still recording the operating loss, and that's the first reason. The second reason is that we had to apply some additional inventory allowance for the inventories for NERDY. Thirdly, the last reason is that there has been some modifications for the COGS because of the sales mix. As you know, starting from the second half this year, we've diversified our sales channel from D2C to the other online channel, such as Amazon or TikTok shops. That's also one of the reasons as well.
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Once again, I would like to express my profound gratitude to all shareholders for joining our earnings call, and every one of us in APR will continue to strive