Good morning, and welcome to all our valued shareholders and investors. My name is Jae Ha Shin, Vice President of APR Corporation. First of all, I would like to thank everyone for joining APR's Earnings Presentation for the Second Quarter of 2025. We truly appreciate your continued interest and support. Today's session will proceed in the following order: I will begin with a summary of our second quarter's results in Korean, followed by a full explanation in English. After the presentation, we will move on to a Q&A session, so we kindly ask for your attention to the flow of the proceedings.
Please note that the financial results we are presenting today are based on internal data and have been prepared for investors' reference. As our external auditor's review is still in progress, the numbers may be subject to change once the audit is finalized. Also, any forward-looking statements made during today's presentation are based on current expectations and may change depending on future market conditions or adjustment to our strategic direction.
With that, I will now begin APR's second quarter 2025 earnings presentation in Korean.
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Thank you for your attention. That concludes the Korean presentation of APR's earnings presentation for the second quarter of 2025. I will now proceed with the English presentation. Please note that the Q&A session will take place after the English presentation, so we kindly ask for your patience until then. Thank you.
Now, let me provide an overview of our financial performance for the second quarter of 2025. Please turn to page three of the presentation material titled Overall Sales Trend. In second quarter 2025, our consolidated sales reached KRW 328 billion, surpassing KRW 300 billion in quarterly sales for the first time since our founding. This follows the milestone we achieved in fourth quarter 2024, when we first surpassed KRW 200 billion, with each quarter setting a new record. We are continuing to demonstrate strong and consistent growth momentum. What's particularly notable is that this performance was delivered during the second quarter, which is typically a seasonally slower period for the cosmetic industry and did not include any major promotional events. Nonetheless, we achieved record high sales driven by exceptional quality of our products and the resulting rise in brand recognition, especially in global markets where demand continues to accelerate.
Please turn to page four, titled Second Quarter Results. In the second quarter, we delivered record high quarterly sales, operating profit and operating margin, successfully achieving both strong top-line growth and improved profitability. Consolidated sales came in at KRW 328 billion, representing a 111% increase year on year. Operating profit reached KRW 85 billion, which is more than triple the figure from the same period last year and marks an all-time high. Lastly, our operating profit margin improved significantly to 26%. Please refer to page five, first half 2025 results. In the first half of 2025, consolidated sales reached KRW 594 billion, nearly double that of the same period last year. Operating profit for the first half recorded KRW 139 billion, showing explosive growth. Importantly, we have already surpassed our full year 2024 operating profit of KRW 123 billion in just the first six months of this year.
Please refer to page six, titled Second Quarter 2025 Results by Division. In the second quarter, our Cosmetic and Beauty division recorded the sales of KRW 227 billion, representing a remarkable 217% year on year growth. This not only builds on the 152% growth achieved in the previous quarter, but also reflects a further acceleration in the momentum of our cosmetic business. One of the key highlights this quarter was Medicube's flagship skincare product, the Zero Pore Pad, surpassing 10 million units in cumulative global sales. This milestone further solidifying its position as a long-standing best seller. The continued growth in sales of the Zero Pore Pad, along with other core products, underscore strong and sustained global demand for our brand, reinforcing the long-term growth potential of our cosmetic portfolio.
Our Beauty Device division generated KRW 90 billion in sales, up 32% year on year. We continue to see steady demand from core markets like Japan, as well as from newly entered regions. During the quarter, cumulative global sales of our beauty devices surpassed 4 million units. Lastly, sales from the others division, primarily attributable to our apparel businesses, declined 32% year on year to KRW 11 billion, reflecting a deliberate downsizing of this segment.
Please refer to page six, titled Second Quarter Results by Region. Our overseas sales have continued to grow rapidly each quarter. In the second quarter, overseas sales reached KRW 255 billion, marking a 230% increase year on year. The proportion of overseas sales also expanded significantly, from 50% in second quarter 2024 to 78% in second quarter 2025. This strong growth was primarily driven by strong performance in the United States, which not only surpassed Korea, but also largest sales-generating region. As a result, the U.S. possesses 29% of total sales for this quarter, and it marks the largest share among all regions. Additionally, brand awareness and product popularity have been rising steadily across various global markets, leading to strong growth in other overseas regions as well. We will provide a more detailed regional breakdown on the following page.
Please refer to page eight. In the second quarter, we achieved strong growth across both developed and emerging beauty markets worldwide. Let me now walk you through our performance by region. In Korea, sales amounted to KRW 73 billion, representing a 6.5% decline year on year. While the beauty division maintained stable performance, overall sales declined due to a contraction in our fashion businesses. In the United States, sales reached KRW 96 billion, up 286% year on year, once again setting a new quarterly record. This was driven by continued growth in brand awareness, which is fueling strong consumer demand. Notably, we have secured a placement at Ulta Beauty, one of the largest beauty retailers in the U.S., marking a strategic expansion from online to offline channels. This official Ulta launch is scheduled for August.
In Japan, sales rose to KRW 44 billion, a 366% increase year on year. Strong virality on digital platforms has enhanced brand credibility, leading to sustained growth in online sales. This growing awareness is also accelerating our expansion into offline channels, resulting in robust growth across both online and offline channels. In Greater China, sales recorded at KRW 35 billion, up 34% year on year. The region continues to show steady growth supported by stable demand. Our recent pop-up store in Hong Kong, held in June, also delivered encouraging results. Others region recorded KRW 80 billion in sales, reflecting nearly 5x growth compared to the same period last year. This strong performance was driven by expanding global demand, successful entry into new markets, and increased order volumes.
Please refer to page nine, titled "Shareholder Return Policy." In July 2024, we announced a three-year shareholder return policy, under which we committed to returning at least 25% of consolidated net profit annually from 2024 through 2026. Since the announcement, we have actively executed on this commitment, delivering a cumulative return of approximately KRW 220 billion over the past year through a combination of share repurchases, share retirements, and cash dividends. In 2024, we repurchased KRW 60 billion worth of treasury shares, and the entire repurchased amount, 884,335 shares, or approximately 2.3% of total shares outstanding, was fully retired in January 2025. Additionally, we completed another KRW 300 billion buyback in 2025, and the entire amount, 613,400 shares, or roughly 1.6%, is scheduled to be retired within this month.
Furthermore, at the Extraordinary General Meeting held on July 28th, we approved the transfer of capital reserves to retained earnings, securing approximately KRW 134 billion in non-taxable dividend resources. A cash dividend has been declared and will be distributed shortly. Going forward, we remain committed to enhancing shareholder value through continued execution of our return policy while pursuing sustainable growth based on profitability and financial soundness. Lastly, please refer to page 10 for our summarized consolidated financial statement. This financial summary is provided for reference purposes only. Thank you for your attention. This concludes the English presentation of APR's earnings presentation for the second quarter of 2025.
We will now open the floor for the Q&A session. Thank you. [Non-English content] We may now start the Q&A session.
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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.
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The first question will be provided by Heejin Lim from Citi Securities. Please go ahead with your question.
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I have four questions starting with the cosmetic segment. First, aside from the Zero Pore Pad, are there any additional SKUs currently in the pipeline or any new hero product you are planning to focus on next? Secondly, how are your cosmetic sales performing in Europe? Third, what is the current proportion of B2B sales within the cosmetics business? Lastly, what are your sales targets for Ulta Beauty in 2025 and 2026?
For the first question about the bestseller items that can be leading to following by the Zero Pore Pad. Currently, we have a number of best-selling items that are currently getting a lot of attention, especially in global markets, such as t he PDRN ampoules or the Collagen Wrapping Mask, et cetera. And these product sales are continuously climbing the sales ranking, especially in Amazon or other online platforms. Currently, we have a number of the product SKUs that are settled within the product portfolios. We'll be continuously broadening the coming of SKUs for the cosmetics as well. Through this, we are quite optimistic to expand and increase the top-line sales for our cosmetic segments as well.
For the second question about the sales size for the Europe, for now, we don't have the exact data for our sales data for the Europe, but as far as I know, within the second quarter, our exports to the Europe was roughly around KRW 25 billion, and most of them were through the B2B sales. Our internal target is that within the Europe, we will be establishing directly for our subsidiaries in European regions. Through that, we will be implementing the success formulas that we have implemented in the U.S., same formula to Europe as well. Firstly, we will be penetrating through online in Europe, and afterwards we'll be penetrating more to the offline channels as well.
Lastly, we'll be focusing on Europe more in large scale, starting from the end of this year going forward. For the sales target for Ulta Beauty for this year 2025 and 2026, for now, we don't have any official targeted sales for Ulta Beauty. For now, as far as I know, Ulta Beauty sales, the expectation will be roughly around 25%- 30% relative to the online sales that we are generating. Additionally, not only for Ulta Beauty, but we have more room and also the potential to expand to any other offline channels as well. Not only the channel perspective, but if we look over to the product category perspective, we also have more room and potential to expand through the U.S. offline markets as well.
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Moving on to the device segment, the QoQ revenue decline, was this primarily driven by a decrease in ASP or by the shift in sales mix toward the Booster Pro Mini? Also, could you share more about the coming product pipeline for beauty devices?
For the last questions about the beauty device sales and about the ASP, regarding that question, first of all, it actually differs by the method of collecting the unit sales for the devices. Currently, the sales volume for beauty devices within this first half was roughly around 1.4 million units, which is almost equivalent to the total sales volume that we have sold for last entire year. Even though there are some dilutions in our ASP for beauty devices, and also there's another factor that there are some sales increments for the Booster Pro Mini, and for these reasons, it is true that there are some dilutions for the ASP as well.
Additionally, there are some sales increments through the B2B channel as well. This is also another factor that affected our dilution in ASP as well. However, the margins for the devices are continuously improving and increasing. Last year we've been communicating with the market that the margin for the devices was roughly around 20%, but as of second quarter this year, our margin for devices has been increased to 25%. Next question, please. [Non-English content]
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The following question will be presented by Youjung Han from Hanwha Investment & Securities. Please go ahead with your question.
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I have three questions. Firstly, were there any one-off expenses in the second quarter? Secondly, what was the impact of tariffs in Q2, and what's your approach to dealing with them? Thirdly, assuming the scale of losses in the other segment, could you explain us the Q2 loss and what drove the improvement in profitability? And lastly, could you share your outlook for the third quarter and let us know if there have been any updates to your guidance?
For the first question about whether there were any one-time expenses or profits, there were no specific one-time expenses or profits that occurred within the second quarter, but the operating profit actually came out much better than what we originally anticipated. The major reason for that is because normally the second quarter is considered to be the seasonally slower period. For this reason, we have spent relatively low logistics and marketing expenses. However, the growth rate for the sales outpaced our actual spending on the expense. For this reason, there were some deliberate effect on our fixed cost, and our operating profit has been recorded high.
For the second question about the tariff-related impact and how APR is going to react with that tariff: we've been paying the tariff-related costs starting from the second quarter, but before the tariff was implemented globally, there were enough stock that we originally shipped to the U.S. warehouses before the second quarter. For this reason, tariff-related costs are not that notably significant within the second quarter. Starting from the third quarter, there will be some recognition for the tariff-related costs. Our internal expectation for the tariff impact on our margin will be roughly, at most, a 1% point impact on the company-wide operating margin.
For how we are going to deal with the tariff, we are not currently considering any increments about the product due to the increase in the expenses, because we are already in a good situation in terms of our businesses, and we are quite open to accept this tariff-related impact for our U.S. businesses. We will maintain this business strategy for the coming quarters and coming year as well.
For the third question about the operating loss that we have undergone for the others division: the others division is mainly generating from the fashion and apparel businesses, NERDY, and the inner beauty brand, GLAM.D Bio . We've been continuously downsizing the sales side for our fashion and apparel businesses, NERDY, along with GLAM.D Bio . These two business segments are not the major business segments that we are operating at the moment.
For the NERDY case, we generated about KRW 5 billion loss within the first half of this year. The first quarter was roughly KRW 3 billion, and the second quarter was roughly KRW 2 billion. When we consider that the operating loss for NERDY in a full year last year was about KRW 16 billion, the size of the operating loss and the sales are decreasing together. In terms of the improvement on the profitability, there are a mixture of a few factors. First is surely the increments in the sales, and secondly, there are some reduction in the expenses for the second quarter. Lastly, because of the increments in the top-line sales, we've been experiencing the leverage effect on the fixed cost, and because of that, it helped us to record the higher operating margins for the second quarter.
For the last question about whether there will be any adjustment for the guidance for this year: we haven't adjusted any official guidance that we originally shared in the beginning of this year, which is KRW 1.31 trillion in sales with an OP margin of 17%- 18%. As CFO of APR, I personally think that we will be overachieving the original guidance that we shared earlier in the year. Our third quarter this year, the sales trends are still performing very well, so we are also expecting some additional sales growth for this quarter as well. There are some big promotional events that are packed in the fourth quarter, so it requires some pre-execution of expenses related to logistics and marketing, along with the tariff. For this reason, there are some negative impacts on our operating margins.
When we consider all these factors, I personally anticipate that the full-year guidance for this year will be around KRW 1.3 trillion won for sales. For the remaining quarters, third and fourth quarter, our operating profit margin to be at least maintaining about 20%, and we think this target is not a challenging target for us.
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The following question will be presented by Jong Hyun Park from Daol Investment & Securities. Please go ahead with your question.
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I have three quick questions. First, if the margin improvements in Q2 was primarily due to operating leverage and seasonal marketing, then how do you expect margin trends in Q3 and Q4? Secondly, while your sales rankings and performance on Amazon are strong, how are you monitoring your resellers and inventory levels? Also, how are you addressing the issue of counterfeit K-beauty products? And lastly, from a longer-term perspective, what is your outlook for the medical devices? Could you share your thoughts on potential opportunities, including in skincare or color cosmetics?
Regarding the first question about any impact on the gross margins for the coming quarter, third and fourth quarter, for that, we are expecting that there will be no noticeable changes or the impact on the gross margin and also the COGS. Surely, there will be some pricing discounts that will be prepared in the coming promotional events. But normally, these impacts are not that noticeably high. For this reason, we are expecting that the third quarter's data will be going quite similarly as our last third quarter's data. For example, like the Amazon Prime Day back in 2024, the third quarter of the events. For this reason, even if there are some impacts on the gross margin, the impact would be roughly around 1%- 2% point.
Also, in terms of the marketing perspective, we must observe our marketing investment in a more longer-term view. For example, normally the third and fourth quarters, the marketing expenses increase, but these increments are more like the investment view. Through this investment, we normally benefit in terms of sales on the coming first and second quarters. If I move on to the second question about the resellers, how we are going to deal with these resellers and inventory levels, especially in the Amazon channel. We are closely monitoring these issues. One of the methods that we are currently utilizing is that we are putting some genuine marks on our product, and through that, we are trying to offer the customers to distinguish between the real and the fake product through the Amazon channels.
Secondly, we are cooperating with the local legal entities to catch up with some of the fake products as well. Lastly, we are also actively utilizing the media press to let the customers know there are many fake products that are selling in the online marketplaces. For now, it's manageable. We are constantly managing these matters successfully, and we are not having much concern relating to this. For the last questions about the progress for the medical device businesses, and about the M&A plan, as of now, we don't have any specific plan relating to the M&A. For the progress of our medical device businesses, I have to split into two sectors. One would be the EBD, energy-based devices, and the skin booster.
Firstly, for the energy-based devices, we are currently getting the approvals and the certifications for our energy-based devices. The timeline target would be the second half of next year, 2026. For the skin booster segment, we need to acquire the second-class medical device. To get up to the fourth-class approvals, it may take some more longer time than we have originally anticipated. At most next year or beyond. For the business strategies for the second half this year and next year, it's quite similar as what you have just mentioned.
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The following question will be presented by Eun-jung Park from Hana Securities. Please go ahead with your question.
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I have four questions. In the U.S., demand for Medicube has been exceptionally strong. Looking ahead to the second half and beyond, what are your key strategic priorities in that market? Secondly, you've delivered strong results in both U.S. and Japan. As you're still in the early phase of offline expansion, how much did offline sales contribute in these markets? Third, what are your key expectations for the second half of the year, and how are you managing potential risks? Lastly, when do you plan to start breaking out sales figures for the European market separately?
For the first question, it is true that our actual performance during the Amazon Prime Day back in June was very good, actually. We internally thought that we have prepared enough inventories for the preparation of the Amazon Prime Day, but in fact, it turns out to be the shortages in the last day of the promotion event. For our major strategies for the coming second half would be similar as what we have continuously been speaking in the market. We will be continuously expanding our new categories. We'll be also launching new promotions, the collaborations through the online platforms such as Instagram. Through this, we will be continuously making new virality through the online.
We are currently preparing the numerous and various events along with the Black Friday on Amazon. For our second brand other than the Medicube, it's improving, and it's making the better performances, but relatively, it's not as satisfactory as the Medicube, surely. Starting from the second half this year and next year, we are currently preparing the new strategies for our second brand, especially through the U.S. market as well. For the third question, within the second quarter for the U.S. sales, we have recognized about KRW 3 billion, the size of the sell-in basis sales from the Ulta Beauty. But when we consider the absolute size of the U.S. sales, it's not that noticeably big enough as of now.
For Japan, the contribution for the offline channel for the second quarter, the performance was roughly around 20%. When we consider this number, it's not high enough when we consider the competitors' companies. The target to enter for the offline channels in Japan is maintaining about 2,500 stores to 3,000 stores by the end of this year. The fourth question is about how we are going to manage the risks for the coming half, especially for the tariff perspective. The tariff uncertainties have been already solved since the tariff rate has been fixed to 15%. This rate, internally, we think that it is manageable, and what we are anticipating is that through the foundation that we have made during the first half of this year, we are very confident to create the better performances for the coming second half, especially through the major marketplaces such as U.S., Japan, and Europe.
For the last question about the performances, especially for Europe, whether we can provide more detailed information for Europe — we currently do not have the sufficient information to answer that in detail because we are currently receiving the sell-out data from our B2B partners. For this region, we will follow up if and when we are able to share more in detail.
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Once again, I would like to express my sincere gratitude to all shareholders and investors for joining us today for APR's earnings presentation. Everyone at APR remains fully committed to driving sustainable growth through ongoing dedication and continuous effort. We kindly ask for your continued interest, encouragement, and support as we move forward. Thank you for your attention. This concludes our earnings presentation for the second quarter of 2025. Thank you.