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United States securities and exchange commission logo
January 11, 2024
Junkoo Kim
Chief Executive Officer
WEBTOON Entertainment Inc.
5700 Wilshire Blvd., Suite 220
Los Angeles, CA 90036
Re: WEBTOON
Entertainment Inc.
Draft Registration
Statement on Form S-1
Submitted December
15, 2023
CIK No. 0001997859
Dear Junkoo Kim:
We have reviewed your
draft registration statement and have the following comments.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe a comment applies to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to this
letter and your amended
draft registration statement or filed registration statement, we may
have additional comments.
Draft Registration Statement on Form S-1
Glossary, page iii
1. Please revise to define
"consumer product units."
Prospectus Summary, page 1
2. Please balance your
disclosure of your strengths with a discussion of your principal
challenges, limitations
or weaknesses in the prospectus summary.
3. Please provide an
organizational chart outlining your corporate structure post-offering.
Clarify which entities
are organized in which countries and your shareholders' ownership
interests.
Junkoo Kim
FirstName LastNameJunkoo Kim
WEBTOON Entertainment Inc.
Comapany
January 11,NameWEBTOON
2024 Entertainment Inc.
January
Page 2 11, 2024 Page 2
FirstName LastName
Overview, page 1
4. We note you quantify and disclose the number of creators throughout
the filing. Please tell
us the extent to which the number of creators and the number of
professional creators
differ and explain your consideration to also disclosing the number of
professional
creators when you disclose the number of creators.
5. We note you quantify and disclose the number of monthly active users
throughout the
filing. Given the significance of paid content revenue to revenue and
the material
differences between the numbers of monthly active users and monthly
paying users, as
disclosed in MD&A, please explain your consideration to also
disclosing the number of
monthly paying users when you disclose the number of monthly active
users.
Summary Combined Financial and Other Data
Non-GAAP Financial Measures, page 19
6. We note you present a non-GAAP financial measure you identify as
EBITDA margin
without presenting the most directly comparable GAAP measure, Combined
Net Loss
Margin. When you present a non-GAAP financial measure, please present
the most
directly comparable GAAP measure with equal or greater prominence,
including here and
on pages 2, 76, 85, and 98, as required by Item 10(e)(1)(i)(A) of
Regulation S-K.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metrics, page 78
7. We note your disclosure that you regularly review metrics, such as
MAUs, MPUs, Paid
Content ARPPU and Advertising ARPMAU, to evaluate growth trends,
measure
performance and make strategic decisions. Please address the
following:
Provide a cross-reference to the definitions of the metrics which
disclose how they
are calculated;
More fully disclose and describe why each metric provides useful
information to
investors;
Disclose any key estimates, assumptions, and limitations specific
to each metric; and
Confirm you intend to provide metrics for Paid Content ARPPU and
Advertising
ARPMAU in an amendment.
Liquidity and Capital Resources, page 88
8. We note your disclosure that rising inflation and interest rates may
reduce your ability to
access capital. If material, please revise your disclosure if recent
inflationary pressures
have impacted your operations. In this regard, identify the types of
inflationary pressures
you are facing, how your business has been affected and identify
actions planned or taken,
if any, to mitigate inflationary pressures.
Executive Compensation, page 147
Junkoo Kim
WEBTOON Entertainment Inc.
January 11, 2024
Page 3
9. Please update your compensation disclosure to reflect the fiscal year
ended December 31,
2023.
Principal and Selling Stockholders, page 157
10. Please revise this section to provide the information required by Item
507 of Regulation S-
K.
Combined Financial Statements
Note 1. Description of Business and Summary of Significant Accounting Policies
Organization and Description of Business, page F-7
11. We note that Webtoon Entertainment Inc., together with its
subsidiaries, and Wattpad
Corporation and its respective subsidiaries are majority-owned
subsidiaries of Naver
Corporation. Please confirm that the historical combined financial
statement include all
costs of doing business. In this regard, we note disclosures
throughout the filing, for
example on page 30, that indicate you rely on Naver Corporation to
provide certain
functions. Please also explain to us where and how you complied with
all the disclosure
requirements of SAB Topic 1:B or explain how you determined each
disclosure is not
required or not applicable.
Revenue Recognition, page F-8
12. We note your disclosures regarding revenue recognition policies for
Paid Content
Revenue and Advertising Revenue. Please provide us your analysis of
the principal versus
agent considerations you considered in your determinations to record
revenue on a gross
basis. Please specifically address your disclosures in the filing that
indicate titles you host
are owned by the creator or publisher. Refer to ASC 606-10-55-36
through 55-40.
13. In regard to Paid Content Revenue, we note your disclosures that
customers purchase
access to content by first purchasing a virtual currency then redeeming
such virtual
currency for access to particular content and the period of time the
user can view the
content varies depending on the offering and the terms of the
arrangement with the user.
Please address the following:
More fully explain when and how you determine the estimated service
period,
including if and how your determination differs for a Fast Pass and
a Daily Pass and
quantify the estimated service period;
FirstName
LastNameJunkoo
More fully explainKim
how you determine "the last day the user views
the content"; and
Comapany NameWEBTOON
More fully explain Entertainment Inc. of virtual currency is
determined and how it is
how the unit price
used in recognizing
January 11, 2024 Page 3 revenue in relation to a Fast Pass and a Daily
Pass.
FirstName LastName
Junkoo Kim
FirstName LastNameJunkoo Kim
WEBTOON Entertainment Inc.
Comapany
January 11,NameWEBTOON
2024 Entertainment Inc.
January
Page 4 11, 2024 Page 4
FirstName LastName
Goodwill and Indefinite-Lived Intangible Assets, page F-16
14. We note your disclosure regarding the evaluation of goodwill for
impairment on page F-
16. We also note you added $405.7 million of goodwill through
acquisitions and did not
recognize any impairment of goodwill during the year ended December
31, 2022. Please
expand your discussion regarding goodwill impairment testing to
include any material
judgments, methodologies, critical estimates, and significant
assumptions you used,
including the degree of uncertainty associated with such estimates and
assumptions.
Please also disclose how you identify reporting unit(s) and, if
applicable, how you allocate
goodwill to reporting units.
Note 2. Revenue, page F-18
15. We note your disclosure of disaggregated revenue by geography for the
year ended
December 31, 2022. Please disclose your basis for attributing revenue
from external
customers to individual countries as required by ASC 280-10-50-41.
16. We note your disclosures of disaggregated revenue by revenue stream
and by geography.
Please tell us your consideration to providing disaggregated revenue
disclosures for
revenue recognized at a point in time and revenue recognized over time
and for revenue
recognized on a gross basis and revenue recognized on a net basis.
Note 17. Business Combinations, page F-40
17. In regard to your disclosures related to the acquisition of Munpia,
please address the
following:
Clarify how you obtained and what you paid for the 20.2% interest
you acquired in
October 2021;
More fully explain the facts and circumstances surrounding the
outstanding loan with
Premier of $91.3 million, including when and how it arose; and
More fully explain how you determined the fair value of the
outstanding loan with
Premier that represents the purchase consideration for the
additional shares you
acquired on February 9, 2022 that increased your interest to
56.3%.
18. In regard to your disclosures related to the acquisition of eBIJ,
please address the
following:
More fully explain where/how the cash and non-cash consideration
transferred as a
result of the acquisition are recorded in the statement of cash
flows;
More fully explain how you determined the $70.9 million fair value
of the common
stock you issued to acquire the additional shares of eBIJ that
increased your interest
to 100.0%; and
More fully explain the facts and circumstances related to the
contingent consideration
liabilities, including how you determined fair value.
Junkoo Kim
FirstName LastNameJunkoo Kim
WEBTOON Entertainment Inc.
Comapany
January 11,NameWEBTOON
2024 Entertainment Inc.
January
Page 5 11, 2024 Page 5
FirstName LastName
19. We note your disclosures that on March 31, 2022 you acquired 53.6% of
LOCUS Inc. and
its subsidiaries and the fair value of the purchase consideration was
$23.2 million paid in
cash at closing. Please more fully explain where/how the cash
consideration transferred as
a result of the acquisition is recorded in the statement of cash
flows.
20. We note your disclosure that on August 22, 2022, Munpia, a partially
owned subsidiary,
acquired a controlling financial interest in Studio JHS Inc. in
exchange for the issuance of
1,263,119 shares of Munpia to the shareholders of JHS. Please more
fully explain how
you determined the fair value of the newly issued shares.
Exhibits
21. Please file any material agreements, including, but not limited to:
service or other
agreements with NAVER or LINE, lease agreements, debt agreements and
employment
agreements, or tell us why you are not required to do so.
General
22. If any data in the registration statements relates to publications,
surveys or reports that
were commissioned by you for use in connection with the registration
statement, please
file consents of such third parties pursuant to Rule 436 of the
Securities Act as exhibits to
your registration statement or tell us why you believe you are not
required to do so.
23. Please provide us with supplemental copies of all written
communications, as defined in
Rule 405 of the Securities Act, that you, or anyone authorized to do
so on your behalf,
have presented or expect to present to potential investors in reliance
on Section 5(d) of the
Securities Act, whether or not you retained, or intend to retain,
copies of those
communications. Please contact the legal staff associated with the
review of this filing to
discuss how to submit the materials, if any, to us for our review.
Please contact Stephany Yang at 202-551-3167 or Anne McConnell at
202-551-3709 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Erin Donahue at 202-551-6063 or Evan Ewing at 202-551-5920 with any
other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Manufacturing