Hey, thank you all for joining the company's first quarter 2024 earnings conference call.
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I will begin with the key metrics for the first quarter, starting with TPV, Consolidated Revenue and Expense, P&L, followed by performance highlights of Q1 2024. First, on performance metrics for the first quarter of 2024.
[Foreign language] , EBITDA [Foreign language] BEP [Foreign language] .
First quarter TPV for 2024 broke the ₩40 trillion mark for the first time, reaching ₩40.9 trillion, which is up 26% year over year. Revenue TPV increased 31% year on year to ₩11.9 trillion, coming close to the ₩12 trillion level. Full year revenue was ₩176.3 billion, which is up 25% YOY. Q1 net profit reported ₩200 million, with EBITDA at -₩1.3 billion. ₩15.8 billion of financial income drove net profit turnaround, reaching close to the breakeven point.
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Next is on business metrics. KakaoPay's MAU count as of end of first quarter 2024 stood at 23,620,000, with number of transactions per user at 103. We saw a robust MAU growth across core businesses of money transfer, payment, and asset services. Upon our strategic decision to replace or fade out services like the receipt and focus more on other areas, there was short-term downward impact constraining MAU and monthly active user count to levels similar to that of last year. Domestic on- and offline merchant count reached above 1 million, recording 1.03 million merchants. KakaoPay services is now linked up to 3 million Samsung Pay and 1.1 million ZeroPay payment locations, so out of all of the easy pay providers, we now have the most comprehensive offline point of acceptance. As we have built an environment where KakaoPay can be used without any constraint of payment method or devices, we expect an uptrend in business metrics and that it will continue in 2024. Next, I will invite CFO Aiden, who will run through the details of Q1 TPV.
[Foreign language] . Revenue TPV [Foreign language] 29% [Foreign language] 25% [Foreign language] YOY [Foreign language] TPV [Foreign language] YOY 61% [Foreign language] 24% [Foreign language] .
Hello. This is Aiden. First quarter TPV was ₩40.9 trillion, up by 26% year over year. Revenue TPV increased 31% year over year, with its share at 29% of total TPV. Compared to last year, digital payment grew by 25%, and cross-border and offline TPV sustained a steep year-over-year growth, whilst the inclusion of payment in our consolidated statements drove growth in offline payment TPV. For digital finance, rollover and mortgage loan demand drove loan TPV growth of 61% year over year, while other services including money transfer posted 24% growth. All in all, total first quarter TPV is well within the annual guidance and plan.
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Q1 revenue reported ₩176.3 billion, up 24.7% year over year and 6.1% quarter over quarter, on the back of balanced growth across the business domains. Driven by cross-border and offline payment growth, digital payment was up 14.5% year over year, reporting ₩120 billion in revenue. Digital finance saw more than double-digit revenue growth year over year across loan, investment, and insurance, with its quarterly revenue nearing ₩50 billion for the first time. Other services revenue, however, was flat quarter over quarter due to the base effect from advertisement revenue last quarter. We expect to quickly regain the uptrend as we will be further expanding ad business category before the end of the year.
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Q1 operating expense increased 20.4% year over year, reporting ₩186.1 billion. Due to increasing commissions paid to card companies following higher card payment revenue and shared costs from MyData, there was also 13.2% year over year increase in labor costs on headcount increase from KakaoPay Insurance, as well as expansion of our financial services business. Other expense, which was up 152.2% year over year, was driven by higher revenue from KakaoPay Securities and KakaoPay Insurance. KakaoPay Securities revenue increased 52% year over year, accompanying an increase in commissions and interest expense on the back of increases in deposit balance and overseas stock trading volume. KakaoPay Insurance also saw its year-over-year revenue growth by around 19-fold, which led to an increase in service-related expense. Operating expense was down 0.8% quarter on quarter. Due to the base effect of booking bonus and employee sabbatical leave expenses in Q4, labor cost in the first quarter was down 12.6% quarter over quarter. Share of marketing expense as of the first quarter against the revenue was 7.6%, keeping in line with our stance and efficient cost controls. Operating expense is being spent under strategic judgment of the company, and any sort of investments, including the likes of marketing spend, will be made strategically depending on business needs, such as for creating momentum for offline as we move into the second and the third quarter.
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Consolidated operating loss for Q1 was ₩9.7 billion, while EBITDA was -₩1.3 billion and net profit at ₩0.2 billion. Q1 consolidated net profit turned positive, reaching a breakeven. We're strategically executing spending, fully considering the speed of growth of each of our businesses, and we plan to continue to gradually improve their profit structure.
[Foreign language] 14.8% [Foreign language] 1,478 [Foreign language] . 1 [Foreign language] 118 [Foreign language] 212 [Foreign language] 8%, [Foreign language] 14.4% [Foreign language] 240 [Foreign language] .
First quarter standalone revenue reported ₩147.8 billion, up 14.8% year over year. Q1 standalone operating profit was ₩11.8 billion, net profit ₩21.2 billion, with OP margin at 8% and net profit margin at 14.4%. As of end of March 2024, separate bases accumulated deficit narrowed to ₩24 billion. At the end of '21, immediately after the IPO, accumulated deficit was well above ₩200 billion. After that, we've seen the deficit come down quickly on sustained level of net profit, and we expect to report a surplus before the end of the year. We will continue to manage the company based on a discipline of reasonable spending from the perspective of profit expansion. Next, Jason, in charge of business division, will present key performance highlights from the first quarter.
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Hello. This is Jason, heading the business division. I will first talk about digital payment. In April, KakaoPay expanded its merchant coverage nationwide by supporting the payments of Samsung Pay and Zero Pay. For the ultimate payment convenience, we refreshed the payment screen so that users can use KakaoPay intuitively and easily, whichever payment method they choose, across all offline payment locations. Starting June, we will roll out a benefit program where up to 3% of pay point is given so that we can give back more benefits when people choose KakaoPay to make their payments. We can also now offer partner's promo events right inside the payment tab, which will create a virtuous feedback loop between payment and advertising revenue. We will also make sure such innovation and change translate into a definite growth in terms of payment TPV and our top-line revenue. Next, I will turn it over to Jeff, head of services, to give an update on key highlights from KakaoPay Securities and KakaoPay Insurance for the first quarter.
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Hello. I'm Jeff, heading the service division. I will start with key highlights of KakaoPay Securities. The company's quarterly growth trajectory continues, underpinned by growth from MTS and funds under KakaoPay Securities account. Assets under KakaoPay Securities account, including funds, stocks, and deposit, increased 80% year over year, recording ₩2.7 trillion. Outstanding stock balance increased 2.5 times versus last year, reaching ₩1.4 trillion, and funds under KakaoPay Securities account increased by 1.7 times, surpassing ₩800 billion. TPV in Q1 for stock trading was at ₩11.8 trillion, up 154% year over year and 23% quarter over quarter. We see that number of transactions is higher for overseas stock trading versus domestic, which is a key contributing factor to fee income growth.
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KakaoPay Securities opened and is currently servicing day market service, extending the trading time to 21.5 hours for US stock investment. With better investment convenience, we made it easier for people trading US stocks to better and nimbly respond to changes that are happening in the market. Collecting stocks, which was introduced last October, very quickly attracted more than 300,000 subscribers, gaining positive responses from its user base. This collection service allows recurring investment, investing automatically, at minimum, ₩1,000 in stocks that one prefers at a predetermined investment cycle. As a result, we see more users transitioning from casual investment experience to becoming more active investors, which is gradually fueling the growth of our MTS service.
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Next, just to give you a brief update on KakaoPay Insurance, whose growth trajectory continues powered by its innovative, unique selling point. In just 10 months since the rollout of traveler's insurance , cumulative subscriber count went above 1 million. We are broadening the service scope, adding new lineup of products such as mobile insurance and driver's insurance. We also released a long-term insurance product with monthly premium, which we expect will drive steep top-line growth, underpinned by a basis for stable generation of earnings. Next, I will invite back Alan, and he will run through the ESG plan before we close today's earnings presentation.
[Foreign language] RE100 [Foreign language] 2024 [Foreign language] RE100 [Foreign language] .
Hi. This is Alan. KakaoPay will actively join in on Kakao's Active Green Initiative and is getting ready to implement RE100, converting the use of electricity to 100% renewable sources and achieve net zero, which means zero carbon emissions by 2040. Starting the second half of 2024, our plan is to transition to 100% renewable energy for Kakao's Pangyo Agit and have set RE100 as the target to use renewable energy sources for all of the 100% of annual electricity used at the office starting 2025. Through such efforts, we seek to join in on carbon mitigation efforts. There is also a project we're running this year to improve accessibility for everyone to enjoy the benefits of financial services by incorporating an enhanced user interface design for the visually impaired. We are also improving digital access through IT and financial education programs for the vulnerable segment of the population, i.e., the seniors, the disabled, and those hospitalized over an extended period of time. KakaoPay's dedication, as such, in making a better society, doing what it does best, continues as we speak.
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Well, that brings me to the end of the Q1 highlights for 2024. We are looking forward to turning earnings surplus on a standalone basis before the end of the year. And this quarter, we were able to ascertain a quick-paced top-line growth coming from our consolidated financial subsidiaries. In terms of business performance, we expanded offline network of acceptance points. KakaoPay Securities continued on with quarterly growth trajectory, while KakaoPay Insurance, fueled by its innovative insurance services, drove fast-paced revenue growth. All of the crew at KakaoPay will do its utmost to make a leap forward and sustain the growth every quarter to be the nation's number one daily financial platform. Thank you. [Foreign language] .
[Foreign language] . Now, Q&A session will begin. Please press star 1. That is, star and 1 if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2. That is, star and 2 on the phone. 다음으로 질문해 주실 분은 골드만삭스의 삭스증권의 박신영 님입니다. The first question will be provided by Shinyoung Park from Goldman Sachs. Please go ahead with your question.
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Thank you. This is Shinyoung Park from Goldman Sachs Securities. I have two questions. First one relates to your digital payment business. We've also seen your peer in the industry post quite steep growth through partnerships and alliances. I would like to understand what are your differentiating points if you look at these partnerships that you've entered into in April. Also, up to how high do you think you will be able to increase the share of your offline payment from a mid to longer-term perspective, and what impact would that have on your margin? My second question relates to your digital finance services. In the previous earnings presentation, you've mentioned that the growth from financial services will be driven by your KakaoPay Securities and insurance subsidiaries. I would like to know what specific segments under KakaoPay Securities you are currently thinking of that you think is going to fuel growth as we go forward. Also, from a longer-term perspective, could you provide us with what the revenue breakdown is going to look like under your digital finance?
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Hello. This is Jason in charge of the overall business at KakaoPay. I will respond to your first question. Now, KakaoPay has secured the widest reach in terms of our offline acceptance points out of all of the Korean payment companies through its partnerships with Samsung Pay and ZeroPay. In addition to KakaoPay's own 1 million merchant base, we expanded payment coverage to 3 million Samsung Pay merchants and 1.1 million small vendor merchants of ZeroPay. And now people can choose KakaoPay as a payment method at any store nationwide.
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The reason why such a business alliance was possible this year is because we were well prepared to provide optimal user experience and benefits when people chose to use KakaoPay. At the same time, we built a clear revenue model from KakaoPay's business point of view, which required a more careful and thorough process of negotiations and discussions than a simple payment alliance.
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To explain the uniqueness of KakaoPay, we came up with a structure that allows customers to use various payment methods such as Samsung Pay and others. Through this, they can make use of KakaoPay Money, KakaoPay Points, and KakaoPay Gift Certificate in addition to the card payments, thus expanding the customer's choice. We were able to create a substantial revenue base for KakaoPay with this approach. In Q3, we will expand the entry points to access these payment methods such as Samsung Pay even through KakaoTalk.
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iPhone users can also pay with KakaoPay at 1.1 million [Foreign language] merchants. Small businesses can now accept payments with KakaoPay using 제로페이 QR without the need to install a separate KakaoPay barcode scanner. We've also expanded user benefits by offering up to 2% in points when KakaoPay Money is used. Also, in major traditional outdoor markets where [Foreign language] is available, we're actively promoting KakaoPay usage in such traditional markets by talking to merchant associations and informing and exposing KakaoPay to the sellers.
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There were also big functional changes as well. The onboarding process, for instance, for both 삼성페이 and 제로페이 has been greatly simplified to lower the entry barrier by allowing users to use the two payment methods immediately without additional sign-up or verification process or card registration. We also revamped the payment window to make the experience simple and pleasant, which could have been cluttered when we added these additional payment methods.
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Although our online share is still high in absolute terms, we have been continuously building up offline payment merchants. We expect 삼성페이 and 제로페이 partnership to be an important juncture for us. Therefore, we expect the share of offline payments to gradually increase in the future, and we are targeting an online-offline mix of 7:1 in the short term and 50:50 in the mid to longer term.
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Hello. This is Eddie responding to your second question, particularly about our KakaoPay Securities business. As we mentioned in our last earnings call, we do expect a significant contribution from financial services behind KakaoPay's revenue growth in 2024. In particular, top-line growth from KakaoPay Securities and KakaoPay Insurance will be quite distinguished.
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KakaoPay Securities is a digital securities company started by a tech company. In the four years since its launch in 2020, it very quickly attracted and activated its user base, laying the foundation for KakaoPay's next growth engine. It has the largest number of securities accounts in Korea, at 6.5 million, and it also ranks first among securities companies, having more than 2 million fund accounts. The domestic and international stock trading service started a little later than its competitors and in a less favorable market environment, but it too has been rapidly expanding its user base and gaining market share.
2024 [Foreign language] .
In 2024, we aim to build on KakaoPay's huge user base and wealth management customers to attract, retain, and activate those who are willing to trade stocks by providing right offerings at the right time for them to experience optimal services. By doing so, we aim to strengthen our presence in the securities services market and are looking forward to high revenue growth backed by brokerage fee income.
[Foreign language], 2024 [Foreign language] 2024 [Foreign language] .
As of end of Q1 '24, KakaoPay Money balance was approximately ₩1.4 trillion, of which KakaoPay Securities account deposits exceeded ₩800 billion, which is a 45% YOY increase. We expect total pop-up balance to continue to grow in 2024 as KakaoPay Money continues to improve its usability. In addition, interest income from credit transactions continues to grow in line with the increase in stock trading, so we expect interest income to grow strongly as well.
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As for the revenue breakdown of financial business, we expect loan brokerage, securities, and insurance to grow rapidly over the medium to longer term. We expect securities and insurance to grow faster and account for a larger proportion of revenue within the financial services business.
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Thank you. We'll take the next question.
[Foreign language] . The following questions will be presented by Dongwoo Kim from Kyobo Securities. Please go ahead with your question.
[Foreign language] . 2024 [Foreign language] .
Thank you for taking my question. I am Dongwoo Kim from Kyobo. My question relates to your personalization initiatives. If you provide better digital access to the senior citizens, I believe that will have a positive contribution to your payment as well as your financial services business. Can you provide some color as to how you're going to attract these specific user segments? Also, aside from the personalization aspect, I see that there's been quite a bit of change in revamping of the Samsung Pay and ZeroPay screens, the payment screens. If you could share some, if you could talk about going forward within 2024, if there are any additional plans for you to refresh the overall services framework.
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Hello. I'm Jeff, Head of Services. I will respond to both of your questions. We are at this point working on lowering the barrier to accessibility, both from an emotional and physical perspective, for senior users. To do so, we're focusing on safety. We will be running security campaigns that emphasize peace of mind and improve access to security features. To lower the physical hurdle, we'll simplify screen configurations, implement large print, and simplify authentication process as well, including the use of one-factor authentication.
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Now, on the service reorganization plan, this year, KakaoPay will accelerate our service reorganization across our offline payment, pay app, and financial platform. For offline payment, we quickly expanded our payment coverage with the launch of Samsung Pay and ZeroPay Alliance in April, and we will continue to improve their usability and expand on always-on benefits. To achieve our goal of doubling traffic year over year, we have started to reorganize virtually all areas of the pay app, including the payments tab, the benefits tab, home tab, and the more tab. You can see the first round of changes in the first half of this year. This will take the usability of pay app to the next level and accelerate growth of traffic.
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For the financial platform, we will launch an intelligent push service utilizing MyData and pay data in the first half of the year and strengthen financial discovery and conversion rate on the home tab in the remainder of the year. This will make it easier for users who are not financially literate or engaged to discover, use, and sign up for loans, insurance, savings, and stock trading through KakaoPay.
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Next question, please.
[Foreign language] CT [Foreign language] . The following question will be presented by Incheol Yoo from Citi Securities. Please go ahead with your question.
[Foreign language] , MTS [Foreign language] .
Hello. I'm Yoo Incheol from City. I would like to, before I ask the question, first congratulate you, Alan, for your second term as the CEO. You're virtually opening up a second chapter under your management. Would like to understand as to where will be your key focus going forward. I believe that the company now has a good set of product and service portfolio within KakaoPay. I think what's left for you is to further increase its penetration. So I would like to understand as to where your focus will be in terms of your marketing efforts.
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Yes. Hello, and thank you very much for that kind word. This is Alan responding to your question. For the past two years, we have been, you're right, focused on stabilizing the organization, responding to both internal and certain external issues, and bolstering the lineup of financial and payment products inside the company. This year, our focus will be placed on delivering results through synergies between and across payments, wealth management, and financial intermediation.
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First, KakaoPay can now be used across other payment infrastructures such as Samsung MST and ZeroPay. We've also strengthened offering of benefits by giving up to 3% in reward points. We are also improving the CRM functions and features and giving more benefits through an application that has been specifically developed for use by business operators so that we may further drive digital payment performance.
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Through these payment service enhancements, we will cater to various different needs people have in wanting more benefits and in wanting to learn about how to go about small spending, then naturally tie this off with KakaoPay's wealth management services and thus expand our reach into financial services. We will also provide 15 million and growing MyData users with appropriate payment benefits and provide them with the analysis of their spending behavior and connect them to financial intermediary services based upon updated financial status, which the users will update on an ongoing basis. For your information, based on what we've communicated in previous earnings calls, data-driven scale-up of business at this point is well underway as planned, and we will be able to share with you more details come next quarter.
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KakaoPay's financial services will continue to improve its usability and better translate needs into results. KakaoPay Securities is offering functionality such as daytime trading, stock collection, and other features, and has upgraded its community feature as well. For loan brokerage, we will continue to provide technical support to minimize churn-out in the loan origination process happening at our partners. Insurance will continue to be a driver of financial performance by eliminating unnecessary coverage through KakaoPay Insurance and continuously launch new insurance products in the life, digital, leisure, and embedded sectors that are tailored to users' needs.
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We've spent about one hour so far, and due to the time constraints, we will now take the final question.
[Foreign language] . The last question will be presented by Heeyeon Lim from Shinhan Financial Investment. Please go ahead with your question.
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Thank you for good results this quarter. I see that the numbers are speaking for themselves, so I just have two very short questions. First is, in Q1, you turned to positive on a consolidated basis, and on a separate basis, you've also been able to achieve profit. I see that your accumulated deficit has gone down to $25 billion. Would like to know, when would you be able to turn earnings surplus? If you could share that with us, that would be helpful. Second question is, in your KakaoPay Insurance business, there's been quite significant growth in terms of QoQ and YoY, top-line growth in Q1. I believe that this has been contributed or driven by your new businesses coming in for the new products like the Travelers, the Handset Damage, and Drivers insurance. Would like to know as to what your plan is in terms of their breakdown going forward or their share out of your total new business premium. After Q2, what will be your new product lineup plan?
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Hi. This is CFO Aidan responding to your question. Thank you for your question, by the way. As you mentioned, consolidated net profit for the first quarter was about ₩200 million, and accumulated deficit on a separate basis was reduced to minus ₩24.3 billion. Three years ago, at the end of 2021, size of deficit was over ₩200 billion, but since the first quarter of 2022, accumulated deficit was cut to around ₩25 billion level as the company was able to consistently post net income every quarter.
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Although still in deficit in terms of consolidated operating income due to subsidiary losses, consolidated pretax income and net income turned around in Q1 with pretax income of ₩3.5 billion and net income of ₩200 million respectively, driven by financial income of ₩15 billion generated on a quarterly basis. Standalone pretax profit for Q1 reached a record high of ₩24.5 billion, and separate basis net profit reached ₩21.2 billion, the highest excluding Q4 of 2022 when there was a tax effect.
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As we've mentioned before, from a short term, there will be a short-term impact from increased marketing expenses regarding Samsung Pay and ZeroPay-related promotions. But if financial income continues on the current trend, then we believe that after Q2 and Q3, it is structurally possible for us to turn to surplus on a standalone basis before the end of Q4.
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Hi. This is Eddie again. I will respond to your question about our insurance business. If you look at our first quarter, KakaoPay Insurance, there was a revenue increase driven by rapid growth of our insurance product sales, leading to increases in the overall gross premium written. Overseas travel insurance accounted for approximately 70% of the total premium written in Q1, while new product lines such as mobile phone damage insurance and driver insurance accounted for the remaining 30%. For your reference, the share of overseas travel insurance out of the total gross premium in Q4 2023 was around 80%, and this figure has fallen to 60% level on a monthly basis due to the growth in sales of mobile phone insurance and diversification of the product lineup, including the launch of driver's license.
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Now, going forward, we aim to accelerate sales growth by launching new products, including some long-term insurance in the life segment, along with solid growth from overseas travel insurance, drivers insurance, and mobile phone insurance in the digital segment. In the first half of the year, we will launch protection products to provide coverage for risks depending on where the customer is at in his or her life cycle. In the second half, we will launch products bringing KakaoPay Insurance's unique features in its digital and leisure categories.
KakaoPay [Foreign language] .
KakaoPay Insurance is focused on providing distinctive customer value by offering insurance products and services that take care of consumers in their everyday lives. It goes beyond just small amounts or short-term mini insurances. Our aim is to provide optimal insurance coverage at a reasonable price, being true to the core of insurance by offering daily risk coverage rather than cannibalizing the existing markets as we target the millennials and Gen Zs.
[Foreign language].
Thank you, everyone, for joining us. This brings us to the end of the Q1 2024 earnings presentation by KakaoPay. If you have any unanswered questions, please do not hesitate to contact us at the IR team. Once again, thank you very much.