We'll now begin APR's third quarter 2026 earnings presentation. Good morning, everyone. Thank you for joining us today. I am Jaeha Shin, Executive Vice President of APR, and I'd like to welcome you to our third quarter 2026 earnings call. Today, I'll review our third quarter performance, followed by a Q&A session. Before we begin, please note that the financial results discussed today are preliminary and may change as we complete the external review process. Our discussion may also include forward-looking statements based on current expectations. These statements involve risks and uncertainties, and actual results may differ materially. I'll now begin with an overview of our third quarter results. Moving on to page three, let me start with our quarterly revenue trend. In Q3 2026, our consolidated revenue reached KRW 773 billion , setting another quarterly record.
After surpassing KRW 700 billion for the first time in Q2, we continued to grow quarter-on-quarter in Q3. Notably, we achieved this growth despite the absence of major promotions and the sharp appreciation of the Korean won during the quarter. The stronger won reduced our overseas revenue when translated into Korean won, creating a challenging FX environment. Even so, we delivered sequential revenue growth, highlighting the strength of our expanded revenue base and continued growth momentum. Turning to page four, let's look at our financial results for the third quarter of 2026. In Q3, we achieved another record high in quarterly revenue, with sales nearly doubling year-on-year. Our consolidated revenue reached KRW 773 billion , up 100% year-on-year, while operating profit rose 69% to KRW 161 billion . Our operating profit margin was 20.8%. We only adopted IFRS 18 in Q1 this year.
In Q3, the sharp appreciation of the Korean won led to FX-related losses, including losses from the reevaluation of foreign currency receivables. Under IFRS 18, these losses were included in operating profit. Excluding this accounting impact, operating profit under the previous basis would have been KRW 177 billion , with a margin of 22.9%. While the stronger won weighed on profitability, we continued to deliver solid revenue growth, supported by the expansion of our global business. Next, on page five, let's take a closer look at our revenue by business segment for the third quarter of 2026. Starting with cosmetics and beauty, revenue reached KRW 682 billion , up 151% year-on-year. This was our seventh consecutive quarter of triple-digit growth since Q1 2025, setting another quarterly revenue record. Our core products continued to sell well, while new bestsellers also contributed to growth.
By expanding into more markets and sales channels and broadening our product portfolio, we are building a more diversified revenue base with less reliance on any single product or market. Turning to beauty devices, revenue reached KRW 85 billion , down 18% year-on-year. Beauty devices are relatively high-priced, so we tend to see stronger sales during the major promotions. As there were no major global promotions in Q3, revenue declined from a year ago. However, demand remains steady across our key global markets. Notably, the cumulative global sales of our beauty devices recently surpassed 8 million units. This reflects the strength of our product and our broad customer base worldwide. Going forward, we will keep improving our products and expanding global sales channels to support sustainable growth.
Lastly, the others recorded KRW 6 billion in revenue, down 42% year-on-year, mainly due to the continued reduction of non-core businesses. Moving on to page six, let's look at our regional revenue breakdown for the third quarter of 2026. In Q3, we continued to deliver strong growth across our key markets, especially North America and Europe. Despite the absence of major promotions, steady consumer demand and broader sales channels supported our global performance. Overseas revenue reached KRW 723 billion, up 135% year-on-year, setting another quarterly record. Having surpassed KRW 700 billion for the first time in Q2, we continued to grow in Q3. In particular, supported by steady growth in North America and rapid expansion in Europe, the combined revenue share of these two regions increased from 47% to 69% year-on-year, up 22 percentage points.
Both regions have become key drivers of our global growth. We see this shift in our revenue mix towards North America and Europe, two major markets in the global skincare industry, as a very positive development. Starting with North America, our offline business continued to show positive results by expanding our retail network, and we are reaching more consumers across the region. At the same time, the steady demand across our online channels continues to support our strong brand presence. Turning to Europe, the sales continued to grow rapidly across major online platforms. Going forward, we plan to strengthen our presence in existing markets while expanding our offline retail channels to capture further growth opportunities. Moving on to Korea, the revenue declined this quarter as we focus more of our resources on our key global markets.
However, given the much larger market opportunities globally, we see this as a natural adjustment as we expand our international business. Meanwhile, in the rest of Asia, we continue to see steady demand across our key markets, supporting solid sales performance. Lastly, in others region, medicube's growing global brand awareness continues to drive demand across a wider range of markets, supporting strong revenue growth. Turning to page seven, I will explain how foreign exchange movements affected our profitability in the third quarter. During the quarter, the Korean won strengthened sharply against major currencies. This led to FX losses on foreign currency receivables and reduced the won value of our overseas revenue, putting pressure on profitability. As shown in the chart on the left, the U.S. dollar and euro have remained strong against the won for about a year.
This trend reversed in Q3, with both exchange rates falling by around 13% during the quarter. To understand the impact on our margins, it's helpful to break the FX effect into two parts. First, FX losses from the revaluation of foreign currency receivables. Given our high share of overseas sales, we hold a significant amount of foreign currency receivables. When the won strengthens, their value in won fell, resulting in revaluation losses. Under IFRS 18, which we adopted only in Q1, these losses were reflected in operating profit, reducing our operating margin by 1.9 percentage points. Second, the lower overseas revenue when translated into Korean won. While we generate most of our revenue overseas, a significant portion of our cost is in won. Even with the same amount of sales in foreign currencies, a stronger won leads to lower reported revenue without an equivalent reduction in cost.
This reduced our operating margin by another 1.7 percentage points. In total, these FX-related factors had a negative impact of KRW 28 billion on operating profit and 3.6 percentage points on our operating margin in Q3. Despite these FX headwinds, we continue to deliver solid revenue growth across our key overseas markets. Please refer to page eight for our summarized consolidated financial statements. This financial summary is provided for reference purposes only. Lastly, I would like to share a brief update on our businesses in the fourth quarter. While it is still early to discuss specific financial results, we have seen increasing results from major global promotions in October. During Amazon Prime Big Deal Days on October 6 and 7, we achieved record high daily sales in the U.S. and several major European markets.
What stood out was that more medicube products ranked among the top sellers, while our existing bestsellers continued to perform well. In the U.S., 13 medicube products ranked in Amazon's Beauty Top 100, once again demonstrating strong product competitiveness. We also delivered positive results across five major European markets. In Q2, an average of seven medicube products per country ranked in Amazon's Beauty Top 100. But during the October promotions, this rose to 17, more than double the Q2 average. In Italy, eight of the top 11 products in Amazon's beauty category were medicube products, highlighting our strong brand presence. These results show that our core products remain competitive, while a broader range of product is gaining traction with consumers.
On the product side, our existing bestsellers, including Zero Pore Pad, continued to perform well, and we also saw positive results from newer product lines, including serums and multi balms. In particular, the products launched this year, such as multi balms, mud masks, and body care products, have become bestsellers in key markets. This shows that our growth is supported by an expanding product portfolio rather than just a few established bestsellers. Overall, October's promotion results once again confirmed strong consumer demand and brand competitiveness across our key global markets. Looking ahead to the year-end shopping season, we will continue to strengthen our core products while expanding our product portfolio and sales channels to capture further growth opportunities. This concludes APR's earnings call for the third quarter of 2026, and the Q&A session will begin shortly.
We would like to begin the Q&A session. If you have a question, please press star and one on your phone. If you would like to cancel, please press star and two on your phone. The question is from Han Yu-jeong from Hanwha Investment & Securities. Please go ahead.
Thank you for taking my questions. I have three questions. First, at the end of Q3, what was our overall expenses, as well as any pre-executed expenses in the early Q4, and also EBD update? Finally, I understand that there is some burden on your logistics and freight costs. Are there any measures you are taking to improve the situation?
Thank you for the question. I would like to check back on the inventory situation and report to you later. Moving on to your second question on the EBD update. I would like to talk about our EBD products.
We have already finished preparations for business. We have been consulting with medical professionals to check on the competitiveness of our products. We have been receiving positive feedback. As early as the end of this year, we will be able to launch this product line. Initially, we are going to focus on key doctors and major medical clinics in Korea to accumulate product usage references. Later, we are going to expand our sales base. By the end of this year, HIFU technology-based EBD product will be launched. For your information, in addition to this, we are going through the medical certification process. We are planning to launch the high-frequency EBD product that is expected to be launched in the mid or later half of next year. With these products, we are going to kick in our EBD business in full swing.
We have two products based on PN. This is an injectable type. We have started to supply this to Latin America. There will be official launch in Chile in November. Full production has started in the manufacturing Campus 3 in July. We are targeting Japan and the Middle East to expand our sales. As for our domestic market, we are currently going through the medical certification process. We believe that the official launch will be in early 2028. Moving on to your question on our transportation costs. The transportation cost towards the Western markets is coming from two sources. First of all, there is an increasing burden of air freight costs. Secondly, there are fulfillment costs for last-mile coverage. This tends to be higher in Western markets compared to Asia.
We are collaborating closely with our partners to discuss optimization of the fulfillment costs. In the short term, we will be able to reduce burden on air freight. In Q3, air freight cost did not go down significantly. However, we continue to build our inventory. Focusing on Europe and the U.S., our safety stock is continuing to build up. On top of that, starting from early next year, we believe that the overall logistics volume will stabilize, thereby reducing our reliance on air freight going forward.
As of the end of Q3, the inventory value is about KRW 500 billion. To increase sales in the fourth quarter, we need to continue to build our inventory and to secure safety stock in the Western markets. We are taking measures to do so. Currently, our sales are increasing. As a result, our inventory cost is increasing accordingly. We would like to take the next question.
The next question is from Morgan Stanley Securities, [Kim Haeun]. Please proceed with your question.
Thank you very much for the opportunity. I have a total of three questions. We can see that for division, the beauty is doing very well, and in the case of device, we're seeing some underperformance. Especially if you think about the European and the U.S. markets, if you think about the cosmetics and beauty market and the device market, it's probably providing us with a different landscape. Could you provide us with some more color by division? In the U.S. and Europe, whether it be offline or B2B, I do know that you're engaging in expansion efforts. In the third quarter, which areas would be the focus? The second question, you did mention about the FX situation. Thank you very much for the details.
At any rate, there are some cost-related burden under this foreign currency situation. I would like to understand, what is the company trying to do? Maybe adjusting the prices, or are you looking into changing or adjusting the pricing of new SKUs? What kind of pricing do you have amongst the FX fluctuations? Especially in terms of the translation issues, I think that that can be overcome. However, at the end of the day, there is a margin impact coming from the costs, so I would like to understand the situation. My third question, regarding marketing costs. In the third quarter versus revenue, what is the budget set forth? How was it executed? In the fourth quarter, there are many promotional events. As you enter into the high season, I would like to understand how you foresee the situation in terms of marketing.
Regarding the device business, the device business, if you think about Korea and Asia, it still accounts for 50%+ of revenue. Once again, to reiterate, regarding the device business, depending on whether we do have a promotional event or not, there are different leverages that we can actually take advantage of in revenue. In the case of device, it's like a consumer good. Well, rather, it's not a consumer good. It's not used on an everyday basis. It's true that if you think about Europe and North America, it's not like they would need it right away. They will wait until they can see some better promotional events or price discounts. As you know, there were some promotions last quarter, but not this quarter, and that has impacted the revenue.
Regarding the revenue per region, it's very difficult to go into specifics right now, but if you think about the North American and European region, it's in the early range of the 30% level. If you include cosmetics, it's true that it goes beyond 70%. However, if we think about cosmetics, but in the case of the beauty device business in North America and Europe, it's true that the progress that we're making in the markets is not as much as we see in cosmetics. Also, in terms of internal resources, I think that this has also had an impact, because in the case of the cosmetics business, there are a lot of collaborations with influencers, and as we deploy our products in the market, we have been seeing accelerating speed, and we've been also seeing fruition.
Our internal marketing personnel are, of course, more so focused in the cosmetics channel. However, I would like to emphasize that going forward, our medical business, in the mid-to-long run, we believe that this is going to create a huge synergy with the beauty business. In the fourth quarter, the Black Friday and Cyber Monday season is upcoming, and we believe that we will be performing quite well. Regarding the device performance and revenue, I would like to ask you to stay tuned. We will be seeing better performance. Regarding price adjustments, there is nothing that is decided from within on our price strategy. Therefore, I cannot go into specifics right now at this moment in time.
However, we believe that the FX will have an impact on our profitability until the run-up to early next year, so we want to be very cautious and prudent on the impact. Because if you look at most of the companies, for us, we do not recognize the revenue by monthly or quarterly FX. It is based on an average annual value. Therefore, it is not about an exacerbation of quarterly revenue, but rather, we have to look into the overall annual figures in order to understand the actual negative impact from FX. To go into more specifics, this is irrespective of IFRS 18 adoption. Let us say that if we actually utilize the average FX rates within the quarter, or if we take an annual average FX rate, there is a difference in terms of the operating profit that is acknowledged.
First, second quarter, the higher, let us say, profits, and the third quarter, due to FX rates, some, we would be seeing a retrospective recognition of profit. It is a bit difficult to go into detail, but once again, what I would like to say is that in terms of profitability, in the fourth quarter and the first and second quarter of next year, we will be able to understand the mid-to-long-term impact of FX rates, and then can we fully understand the margin structure that comes from this impact.
Therefore, we are not just approaching this with a profitability lens. It is about strengthening our consumer reach, and it is also about making sure that we perform in our global markets and staying profitable. So, we are going to take a very prudent approach, and we will be reviewing the situation. Last but not least, on the marketing cost, it is around 20%.
Compared to the first and second quarter, it is true that it is around average of what we spent in the previous quarters. Therefore, regarding marketing costs, we have not been seeing any huge uptick in the cost. In the fourth quarter, there are many events. However, typically, there is that revenue leverage effect and impact that we can take advantage of. Overall, it is true that we do see better performance. However, in the case of fourth quarter, compared to the annual average FX rate of third quarter right now, it is actually lower than what we have been with. It is to be lower than the third quarter, so there is going to be a netting effect. In the fourth quarter, in order to provide better performance, we are putting in our best efforts. That is all. Let us now receive the next question.
There is no question in line. If you would like to ask a question, please press star and one on your phone. The next question is from [Imogen] from Citigroup. Please go ahead.
Thank you for taking my questions. I have actually one question. Regarding FX impact on an annual basis in Q4, we are expecting further downward pressure. Let us say that we, considering this FX impact, do you think that there is a likelihood for you to underperform the annual guidance? Also, the margin outlook, do you think that you will be able to meet this outlook, meet the operating margin target or not? What is your overall guidance for next year? If there is any color, we would appreciate it.
Thank you for the question. As for FX pressure, yes, we still do have FX pressure, but given our revenue trend, we are overcoming it, and the sales is quite solid. In my view, I believe that we will be able to overachieve more than KRW 3 trillion. Our sales revenue guidance of KRW 3 trillion is what we would like to maintain. As for the margin, there was about 24%-25% OP margin target, but if you translate that with KRW 3 trillion, then it will be about KRW 730 billion-KRW 750 billion of operating profit. The sales trend is really good. There is quite a lot of FX pressure on our operating margin, but we do not have any plan to adjust our guidance.
The fourth quarter is ongoing, and there are some headwinds regarding FX situations, but we are working really hard to overachieve on our guidance so that we can produce satisfactory results for the fourth quarter. Moving on to our business plan for 2027, we are now working on our annual business plan, and our plan is to announce and share with you our 2027 guidance when we announce our fourth quarter earnings result. What I can say is that we are rather aggressive on our business plans for 2027.
We do see that there is much growth potential given our sales trend and our sales potential. We see that there is quite a lot of upside potential given the increasing demand and brand awareness and appetite for our products. We have some positive outlook on 2027. When it comes to revenue and operating profit, we are expecting high growth rates. Thank you. We will take the next question.
The next question is from Morgan Stanley Securities, [Kim Haeun]. Please go ahead with your question.
Yes, thank you very much for the second opportunity. Regarding the cosmetics division, what I did ask was in the U.S. and Europe, especially I would like to understand your channel expansion strategies or plans. In the third quarter, anything that was underway, and in the fourth quarter, what are the plans when it comes to new channels, especially the offline channels? Can you provide us with more color on that? Thank you.
In the U.S. and Europe, if I may go into each market. First, the North American market, as was indicated in the number of press releases, we have Target, Ulta Beauty, Walmart, Costco, CVS Pharmacy.
These are our major channels where we already have our products, and sell-in and sell-out are all showing some desirable flow. The reorder cycle is also quite frequent, and the sales cycle is also quite desirable, so we're also looking and seeing expedited orders as well. There are many channels, especially in the U.S., where if you look at the SKUs, the assortment, the number is to increase going forward. Therefore, in the offline market, we are foreseeing additional growth. Europe is also quite similar. However, in the case of Europe, we have just started discussions on going into major retail channels. For instance, in the case of offline, we have Boots.
We have our products already in Boots, this retailer, and within the retailer category, we're looking into increasing the SKUs and also increasing the number of stores that carry our products, and we are going to use this to increase our revenue. There are new retailers where we're undergoing discussions to engage in expansion. In the fourth quarter, in terms of the number of channels, there are so many channels, and it's getting more diverse. In the case of the major channels in Europe, most of the targeted channels, we already have our products being sold there. In the case of U.S., excluding Sephora channel, all of the targeted channels, we already have our products being carried in these channels.
Within these channels, it's about the retailer's performance, sell-out data, and participation in promotional events, and also our positions on shelf space, the expansion of SKU assortments. These are some of the areas where we plan to see better performance. We will now receive the next question.
The next question is from [Choi Jin-young] from Macquarie Securities. Please go ahead.
I am [Choi Jin-young] from Macquarie Securities. I would like to ask you two questions. First of all is about sales SG&A. You talked about marketing against revenue, but as for transportation costs and sales commissions, what were their shares against the revenue, and what was the trend compared to the first half of the year? Second question is about the U.S. In Q3, Amazon Prime Day revenue absence was compensated mainly by offline or TikTok. I would like to understand what was the main driver behind revenue contribution.
I am [Cha Tae-young] from the Communications Division. Regarding our sales commissions and transportation costs, as of the third quarter, the sales SG&A is 17% and transportation costs is about 9%. Compared to previous quarters, there is no significant growth.
As for sales commission in the fourth quarter and the second quarter, it was around 17%-18%. This year, for Q3, because there were no major promotions, the sales commissions have been going down slightly, and because of the increase in transportation costs, there was some additional burden. As you can see here, transportation cost does not represent the entire lost logistics cost because, as you may know, much of the portion of air freight costs are first recognized as inventories, and when they are sold, they will be recognized as part of COGS. In the third quarter, offline, whether it was offline or TikTok that contributed to the absence of Amazon Prime Day, in our understanding, let me check on the materials and get back to you.
In North America, offline sales increased dramatically on a quarter-over-quarter basis, and the sales from Europe also increased significantly. Both in online and offline channels, Europe's revenue went up, and North America offline sales went up significantly, which was able to make up for the absence of Amazon Prime Day event. We would like to now take the next question.
The next question is Park Jong-hyun from DAOL Securities. Please go ahead with your question.
I am Park Jong-hyun. Thank you very much for the opportunity. We have North America and Europe, and can you share with us the split between offline and online? In the offline business, our channels that did very well, if we compare the sell-in and sell-through, this is some data that we need to look into. If this was driven by sell-in, then I think that in terms of future growth, there may be an inflection point, or do you believe that it will continue on a sustained through sell-through that will lead to the continued sales? You talked about the SKUs and the stores that carry the products, but in the case of the major retail channels, I want to understand our positioning.
For instance, we have Ulta and Target. In these channels, compared to other brands, are we top-selling brands? Maybe are we within the top five? Could you give us some quantifiable indicators to make reference of? Thank you.
Yes, I'm [Cha Tae-young] from the Communications Office. The channels in North America and Europe, for North America, we have offline three and online seven. You can see that the offline business is increasing. In the case of Europe, online six, offline four. For Europe, offline is growing. However, in terms of the proportion, online is actually growing at a faster pace. Your additional question has to do with a sell-in and sell-through, a comparison between the through. Sell-through is actually going on and showing an upward trending. As you're very well aware, in the case of North America, it's been a couple of quarters since we entered into the offline market. However, you can see that with the increase in sell-through, we had orders leading to further sell-in.
Any concerns that you believe that with increased sell-in that we may see this plummet going forward, that's not the case. This is something that we're overcoming right now, and we're seeing stabilized sell-through. It's very robust, so that's the situation. The positioning in the major channels, the rankings. In the case of Ulta and Target, we are definitely within the top five. Walmart and Costco, we just recently entered into this channel, and therefore, we will follow up on that and provide you with an update. I will now receive the next question.
The next question is from Kwon Woo-jung from Kyobo Securities. Please go ahead.
Thank you for taking my questions. Regarding retail, you mentioned that you are one of the top five at Ulta, for instance. Is it based on beauty or is it all based on skincare? Can you specify on that? Secondly, about tariff refunds, I understand that there were some refunds. What was the size of the refund that you recognized? On top of that, when it comes to profitability, I can see that there is a significant impact on your profit from FX. I would like to know what you are planning to do when it comes to hedging measures as well as price adjustments. What is the company going to do to respond to this?
Regarding the categories, our ranking is based on the skincare category. To respond to your second question, let me check back. In Q3, there was about KRW 10 billion of tariff refunds recognized. In addition, we still have some tariff refund to be recognized going forward, so maybe next quarter or the quarter after. Regarding FX hedging, it is not easy to do FX hedging because it is mainly about B2C sales rather than B2B sales. For all these B2C transactions and sales, we cannot really hedge against FX risks. We did consider the option of FX hedging, but in our view, we may shorten the time of collecting the receivables to reduce the impact of FX movements.
Regarding top five ranking at Ulta, whether it is beauty or skincare categories, as far as I know, within Ulta, there is a sector called Prestige, and our medicube brand is included in the Prestige section, and our ranking is number two or number three. When I said number five or top five, we have lower-priced lineup products as well. At Ulta, what is our overall ranking at Ulta? They do not provide such data to us, so we use third-party routes to estimate our ranking and how high we are ranked in different categories and sections. What I can say is that we have high ranking within Ulta in the relevant categories, and our rankings are pretty high in other channels as well. Thank you. We would like to take the next question.
There are no questions in the queue. If you do have any questions, please press star and number one. The next question is [ Lee Jae Sung] from Shinyoung Securities. Please go ahead with your question.
Thank you for this opportunity. I have one question. In the case of Europe, officially through a press release, I do know that there was information on the offline channels, which was Sephora, and I know that you are trying to increasing the number of channels. Per channel, if we go into the online, we have Nocibé of France and other online channels, and I know that there are products being carried in these channels, and I am not exactly sure whether it is also in the relevant offline channels. I would like to understand, is this a direct supply? Is it via a vendor? Is there a high likelihood that we will be directly managing these products going forward, is my question.
As you are very well aware, in the case of Europe, there are various channels amongst various countries. There are some we manage, but we cannot provide the full coverage of all of the individual channels. In such cases, we utilize dealers and distributors to enter into such channels. Let me now receive the next question.
The next question is from [Choi Ja Yeon] from HSBC. Please go ahead.
Thank you for taking my question. I have one question related to what Executive Vice President mentioned earlier. So, KRW 3 trillion of revenue, annual revenue, and the OP margin of 24%-25%. You mentioned that you would like to maintain your annual guidance targets. So, 24%-25% OP margin, is it on an annual basis in consideration of the FX situations, or are you planning to target 25% OP margin for Q4 only? Regarding tariff refunds, how much of the remaining amount of tariff refunds you are anticipating, whether it is some tens of hundreds of billion KRW. What is the range of the amount?
Regarding the guidance, our annual guidance, let me elaborate more on that.
When we talk about the OP margin guidance, it is not necessarily on an annual basis, but rather our absolute operating profit target of KRW 730 billion-KRW 750 billion. To achieve this operating profit margin, we would like to boost our sales revenue. We do have the headwinds regarding FX situations. There is no guarantee, and there is a lot of uncertainty as to whether we can maintain this OP margin target in Q4. It is not easy to make any specific predictions. What I mentioned, when we say that we will maintain the guidance, is because our revenue trend is really good. It is not so much focusing on the OP margin itself, but rather producing the operating profit of KRW 750 billion. As for tariff refund, situations have changed slightly. An additional tariff refund amount remaining is about KRW 10 billion or lower than that.
As we continue to sell our products, there may be some additional tariff refunds following our sales. So, we will continue to track this trend. Thank you. We will take the next question.
The next question is from Park Jongdae of Hana Securities. Please go ahead.
I have three questions. Regarding the sales commission, versus revenue, could you once again reiterate the percentage? I missed it. In the case of other revenue, I can see that that proportion is increasing. I would like to understand, what is that in the mid to long run? Versus, QoQ and year-over-year, I would like to understand. In 2027, the Latin American business, the plan that you have, could you provide us with some more information on that? The third question, regarding our cosmetics revenue per product or per lineup, the Zero Pore Pad is number one and the Pink Peptide, I am sure that there is a ranking depending on the lineup.
I would like to, could you provide us with a top five list of the products or by lineup?
Sales commission versus revenue for the third quarter is 17%. Latin American revenue, we do not have a clear categorization of that to share right now. In the case of the other regions, Latin America does take on the lion's share. Year-over-year, it is increasing by three digits, and it is vastly increasing. That is a trend that we do see. In the case of 2027, the Latin American plan, we will double-check on that one and then provide you an update on a later note. By product and lineup for the cosmetics business, by revenue, we still, in the top 10 SKU, the top 10 SKU accounts for 40% of the total revenue, so it is well-diversified.
The biggest-selling product, the pad, especially the Zero Pore Pad, is less than 10%. PDRN Peptide lineup, it is sustaining its revenue. It is quite solid and robust. In the case of the Zero Pore Pad and PDRN Multi Balm, PDRN Ampoule, and Gel Mask, I think that this is basically the order in terms of revenue. New SKUs are not in the top 10, and decorating the top 10. We have steady sellers, and we also have new SKUs well-balanced in our overall lineup based on revenue figures. Once again, there is no clear concentration of a particular product in terms of revenue. As mentioned in the first and second quarter, we are seeing similar comparable trending. Thank you. Next question, please.
There are no questions in the queue. If you would like to ask a question, please press star and one on your telephone pad. With no further questions, I do see that there is someone who has a question. The next question is from Park Shin-ae from Meritz Securities. Please go ahead.
Hello. I would like to ask some specific questions about SG&A. Compared to the revenue, your ad spend, that is about 20% of the revenue. This may be variable, but going forward, at what point in time will you be able to have a better structure in your costs so that ad spend can go down? Also, sales commissions in Europe are higher than the U.S.
With revenue growing rapidly in Europe, there is an increase in sales commissions as well. The percentage of sales commissions in Europe, I wonder if it is going to go down through negotiations or adjustments. Also, regarding transportation costs, your QoQ revenue growth is quite rapid. In consideration of this rapid trend, you may be able to ship your products in advance in anticipation of increasing revenue because of the increase in your revenue trend. I wonder what you can do to reduce the transportation cost overall.
Right now, on average, last year, the ad spend was about 18% of the total revenue, and this year, on average, the rate is about 20%. There was an increase in ad and marketing spend this year. We are maintaining this 20% range, and compared to the previous quarter, the percentage of ad spend has gone down. Overall, the share of ad spend is not going to increase dramatically.
As we continue rapid growth, there are ways to reduce fixed expenses. In our view, we believe that this 20% share of ad spend is rather appropriate given our business plans for next year as well. About sales commissions, depending on sales mix, sales commissions may vary, and there is increase in sales commissions for TikTok and online channels, and there are frequent promotions and fulfillments. Some of them are included in the sales commissions as well. But the percentage of sales commissions is not increasing significantly. When you look at the overall proportion, it rather remains the same. For the sales commissions, there are certain fixed elements and fixed structures. Sales commissions may not change dramatically, but it very much depends on the sales mix. You mentioned about the possibility of sending inventory early.
This is something we can do, of course, to a certain extent. But other than that, when there is increase in demand for new SKUs, we have to respond to that increasing demand as well. We do have early shipments in anticipation of sales, but we also need to consider the production lead time. There is increasing demand for new SKUs as well, which is leading to a delay in or extension of the lead time for the production. Therefore, in the short term, it is not easy to anticipate any inventory level changes or demand changes so that we could do this in one or two months. It is not easy because these are very long-distance markets that are far away from Korea. But in Q2 and Q3, we continue to work on improving our overall logistics structure.
In the first quarter and the second quarter next year, including Q4, we believe that safety stock in Europe will continue to increase. With the buildup of safety stock, we hope that we will be able to save some costs on the transportation side. Thank you.
It is time to conclude today's earnings call. Thank you again for taking the time to join us today. Everyone at APR remains fully committed to delivering sustainable growth through continued innovation and disciplined execution. We sincerely appreciate your continued interest and support. This concludes APR's third quarter 2026 earnings call. Thank you.