[News Space=Reporter seungwon lee] Hyundai Motor Group's software affiliate, FortyTwoDot (CEO Park Min-woo), posted 27.707 billion won in revenue in 2025 but incurred 377.497 billion won in operating expenses, resulting in an operating loss of 349.79 billion won. While revenue increased by 10.93%, the operating loss widened by 98.68% and the net loss by 107.52%, respectively, and the operating loss ratio deteriorated to -1,262.44%.

 

Ending cash and cash equivalents increased to 338.851 billion won, but this was the result of 500.317 billion won flowing in from a paid-in capital increase in the same year, while 251.127 billion won flowed out from operations. A more striking figure than the increase in cash holdings is that 75.21% of revenue comes from related-party transactions and large-scale capital raising supports the loss-investment structure.

 

FortyTwoDot's 2025 consolidated audit report shows that cost consumption outpaced growth. While consolidated operating revenue increased by 10.93% from 24.977 billion won in 2024 to 27.707 billion won in 2025, operating expenses surged by 87.78% from 201.028 billion won to 377.497 billion won.

 

As a result, operating losses increased by 98.68% from 176.051 billion won to 349.79 billion won, and net losses also expanded by 107.52% from 175.356 billion won to 363.899 billion won. Accumulated deficits rose by 65.09% from the end of the previous year to 922.903 billion won.

 

FortyTwoDot Dominance: Hyundai Motor & Kia 96.17%... Lotte Rental Preferred Stock 1.64%

 

FortyTwoDot, an autonomous driving and mobility software company, is a core affiliate of Hyundai Motor Group, in which Hyundai Motor and Kia hold more than 96% of the shares. Hyundai Motor, the largest shareholder, holds 7,635,247 common shares of FortyTwoDot, representing a 57.70% stake, while Kia is the second largest shareholder, holding 5,090,162 common shares, representing a 38.47% stake.

 

The combined shareholding of the two companies amounts to 96.17%. While Hyundai Motor holds a majority stake and thus possesses legal and managerial control, the Hyundai Motor Group, including Kia, holds a virtually overwhelming stake. This governance structure ensures that FortyTwoDot's mid-to-long-term management direction and strategies regarding autonomous driving, software-centric vehicles (SDV), and mobility platforms are inevitably closely aligned with the Hyundai Motor Group's overall technology and business roadmap.

 

Lotte Rental holds 217,391 preferred shares, representing a 1.64% stake, while other shareholders hold 289,216 common shares, or 2.19%. The total number of shares is 13,232,016, comprising 13,014,625 common shares and 217,391 preferred shares.

 

When sales increase by 1 won, the cost structure expands more rapidly

 

The direct cause of the loss is the simultaneous increase in costs related to personnel, outsourcing, commissions, and leases. In the detailed breakdown of operating expenses, salaries rose by 46.35% to 89.116 billion won, and bonuses increased by 127.46% to 47.225 billion won. Commission fees increased by 89.32% to 60.665 billion won, and outsourcing service fees rose by 158.79% to 47.037 billion won. Depreciation expenses for right-of-use assets also surged by 272.75% from the previous year to 42.87 billion won.

 

Generally, payment fees refer to the costs of services outsourced to external experts or organizations, such as public relations and marketing agency fees, legal advisory and accounting audit fees, and external service and consulting expenses. The surge in payment fees indicates that significant assistance is being relied upon from external expert groups, including PR and advertising agencies, law firms, and consulting firms for related parties. 

 

A corporate financial analysis expert pointed out, “It is difficult to justify the fact that a company with annual sales of 27.7 billion won invested operating expenses in the 370 billion won range—more than 13 times its sales—and that bonuses, commissions, and outsourcing costs ballooned from double to triple digits in the process, simply because it is a company in the investment stage.” The expert added, “While securing technical personnel and R&D are necessary, if the rate of cost increase is faster than the rate of loss expansion and the visibility of revenue conversion is low, management must prove ‘what products, contracts, and sales the money spent returned’ rather than ‘how much was spent.’”

 

"Furthermore, if it cannot be clearly proven that the increase in bonuses and external fees has a causal relationship with actual technology development achievements, commercialization revenue, and the expansion of the customer base, this could be interpreted as a signal of cracks in cost efficiency and internal controls rather than a growth investment," they pointed out. "Hyundai Motor Group, as the major shareholder, must transparently explain to the board of directors and shareholders not only the scale of investment but also whether personnel compensation, the use of outsourcing, and transactions with affiliates have led to concrete business results."

 

The flip side of '338.9 billion won in cash'... Operating cash outflow and a 500.3 billion won capital increase

 

Cash and cash equivalents at the end of the period amounted to 338.851 billion won, an increase of 225.88% from 103.979 billion won at the end of the previous year. The current ratio was calculated at 268.75% and the debt ratio at 54.62%, while short-term borrowings remained unchanged from the previous year at 3.3 billion won, indicating that the short-term solvency at the end of 2025 is relatively high.

 

However, it is difficult to interpret the increase in cash as an improvement in operational capability. Cash flow from operating activities recorded a net outflow of 251.127 billion won, expanding by 63.94% from the previous year, while the inflow from the paid-in capital increase on the cash flow statement was 500.317 billion won. This corresponds to 18.06 times the annual operating revenue. Although cash reserves have become sufficient, the fact that this buffer is based on large-scale capital raising rather than recurring operating cash generation is the first point to consider when assessing the speed of future monetization.

 

The burden of fixed liabilities has also increased due to the expansion of server infrastructure. The ending book value of server right-of-use assets surged to 129.14 billion won from 1.571 billion won in the previous year, and discounted lease liabilities rose 351.31% from 29.9 billion won to 134.944 billion won. Of this, current lease liabilities due for repayment within one year amount to 78.318 billion won. The key to reducing losses lies in how quickly upfront investments in technology infrastructure are converted into revenue and cash flow.

 

Dependence on the group for both revenue and funding… Concentration of related-party transactions

 

The audit report classified Hyundai Motor Company as the controlling entity of FortyTwoDot and Kia as a company over which it exercises significant influence. In 2025, sales to related parties, etc. amounted to 20.841 billion won, accounting for 75.21% of total operating revenue. Of this, sales to Hyundai Motor Company, etc. amounted to 19.732 billion won, representing 71.22% of total operating revenue. Accounts receivable from Hyundai Motor Company at the end of the period was 13.48 billion won, accounting for 89.20% of total accounts receivable of 15.111 billion won.

 

Operating expenses related to related parties amounted to 21.715 billion won, a 166.22% increase from 8.157 billion won in the previous year. Operating expenses related to Hyundai Motor Company totaled 16.163 billion won, while those related to Hyundai AutoEver amounted to 3.527 billion won. What can be confirmed is that both revenue and expenses are heavily weighted towards internal group transactions, highlighting the significant challenge of proving independent profitability in external markets.

 

Funding also relied on capital contributions from related parties. According to the notes, the total capital contribution to related parties for 2025 amounts to 500.301 billion won, comprising 293.929 billion won from Hyundai Motor, 195.952 billion won from Kia, and 10.419 billion won from key executive Song Chang-hyun. This represents an 87.19% increase from 267.254 billion won in the previous year. This amount was disclosed as a capital contribution rather than a dividend payment, and regarding compensation for key executives, 8.061 billion won in short-term employee benefits and 1.220 billion won in retirement benefits were disclosed on an overall basis rather than on an individual basis.

 

Signals of restructuring and planned capital reduction… A test of execution capabilities 'after the capital injection'

 

Events after the reporting period also contained signals of financial and business restructuring. On December 19, 2025, FortyTwoDot merged its subsidiaries, UmosOne and Mobia, for the purpose of "improving the financial structure and enhancing management efficiency." Subsequently, in January 2026, the Board of Directors decided to lend 7.024 billion won to UmosOne to support operating funds. At the General Meeting of Shareholders in February 2026, a resolution was passed to reduce capital for the purpose of optimizing the capital size and enhancing shareholder value; the report stated that the financial impact of the capital reduction and cash outflow would be determined after the date of the audit report, depending on shareholder participation.

 

The capital increase of 500.3 billion won in 2025 itself, along with the purpose of investing in SDV, Agentic AI, GPU infrastructure, and key talent, are already known matters. What is more noteworthy in this audit report is the performance following the capital increase. The combination of revenue of 27.707 billion won, an operating loss of 349.79 billion won, and cash outflows from operating activities of 251.127 billion won suggests that, regardless of the justification for the investment plan, the speed at which capital input is converted into revenue and cash must be rigorously verified.

 

A corporate financial analysis expert pointed out, “FortyTwoDot’s most painful figure is not the size of the deficit itself, but the cost structure in which 377.5 billion won in operating expenses was invested against 27.7 billion won in revenue,” adding, “Although cash was replenished through a capital increase of 500.3 billion won, 251.1 billion won flowed out from operating activities, so the next target for verification is not the ability to raise funds, but the ability to monetize.”

 

He also emphasized, "In a structure where 75% of revenue comes from related parties, if reproducible revenue based on external customers cannot be demonstrated, doubts about reliance on group support will inevitably persist," adding, "As server infrastructure and lease liabilities have grown, the priority is to transparently present performance indicators for investment execution and the scale of cash outflow following the capital reduction."

 

Meanwhile, FortyTwoDot did not provide an official response to News Space's requests for coverage and inquiries.

 

◆ Below is the full text of the questionnaire sent by Newsspace to FortyTwoDot

 

Question 1. We request the company's explanation regarding the criticism that "sales increased, but the deficit doubled."

In 2025, sales reached 27.707 billion KRW, a 10.93% increase from the previous year, but operating losses widened by 98.68% to 349.79 billion KRW. Readers are inevitably left asking, “What did FortyTwoDot actually produce in 2025, and why did those results not translate into sales and profit?” Please explain the company’s key performance indicators for 2025 and the necessity of the business initiatives pursued despite the increased losses, in a manner that general readers can understand. Furthermore, please identify the specific milestones regarding products, services, mass production implementation, and customer contracts that will allow for the verification of performance in 2026.

 

Question 2. Where was the 500.3 billion won capital increase ultimately used, and what has changed since then?

The 2025 cash flow statement shows an inflow of 500.317 billion KRW through a paid-in capital increase. This amount represents approximately 18 times the revenue for the same year. Beyond the broad directions announced by the company—SDV, AI, GPU infrastructure, and talent acquisition—please explain how these funds were utilized for personnel, servers, software, outsourced development, and service commercialization in a manner tangible to the reader, as well as the results confirmed to date. In particular, please disclose the remaining funds, future investment plans, and measures to adjust priorities should investment performance fall short of expectations.

 

Question 3. Is FortyTwoDot an 'internal development organization' of Hyundai Motor Group, or an independent business operator capable of succeeding in external markets?

In 2025, sales to related parties amounted to 20.841 billion KRW, accounting for 75.21% of total sales, while sales to Hyundai Motor alone totaled 19.732 billion KRW, representing 71.22% of total sales. Although it is clear that the company serves as Hyundai Motor Group's strategic software organization, this structure could lead to questions regarding competitiveness against external customers and business independence. Please explain whether you can disclose revenue generated from non-related party customers, the actual number of customers, or the status of paid contracts, and clarify your plans for how and by what time you intend to expand specific businesses in the external market beyond internal group volume.

 

Question 4. Although cash increased, 251.1 billion won flowed out of operations. How long can you sustain this structure?

Although ending cash and cash equivalents increased to 338.851 billion KRW, cash flow from operating activities in 2025 recorded a net outflow of 251.127 billion KRW. Readers are curious about "how long the structure of covering losses with new investment funds can be sustained." Please explain the company's internally assessed rate of cash depletion, the target timeline for improving operating cash flow, and the conditions under which additional financing is required. We would also appreciate it if you could disclose the indicators—such as sales, orders received, service usage, and development costs—that the company prioritizes most when determining whether the break-even point has been achieved.

 

Question 5. Is the large-scale upfront investment in server infrastructure leading to actual business results?

Server right-of-use assets are projected to reach 129.14 billion KRW by the end of 2025, a significant increase from 1.571 billion KRW at the end of the previous year, while lease liabilities rose to 134.944 billion KRW. Notably, lease liabilities due within one year amount to 78.318 billion KRW. Please explain which services, developments, or customer projects currently require a server infrastructure of this scale, and by what criteria you assess actual uptime or utilization levels. Given that readers may view this as "infrastructure costs growing ahead of revenue," please specify when and in what way this investment will translate into revenue or product competitiveness.

 

Question 6. What is the reason for the sharp increase in labor and outsourcing costs, and who is responsible for the performance?

In 2025, salaries amounted to 89.116 billion KRW, bonuses to 47.225 billion KRW, and outsourcing costs to 47.037 billion KRW, all of which increased compared to the previous year. While rising costs may be inevitable during the growth of a technology company, given that operating losses have expanded to 349.79 billion KRW, calls regarding development performance and accountability are likely to intensify. Please explain in which areas personnel and outsourcing inputs have increased, and how these inputs are linked to product launches, mass production applications, and customer acquisition. Furthermore, please clarify how often management reviews the performance of these cost expenditures and what adjustments are made when targets are not met.

 

Question 7. Should the replacement of management and organizational restructuring following a large-scale investment be viewed as a modification of the business direction?

The audit report includes the merger of subsidiaries Umos One and Mobia in December 2025, and the decision to lend 7.024 billion won in operating funds to Umos One in January 2026. Along with this, the changes in FortyTwoDot's management and organizational restructuring may lead to interpretations that the company is readjusting its business pace or strategy following a large-scale investment. We request that the company clearly explain whether the merger, the loan, and the changes in organizational operations were carried out under a single business restructuring plan, and what changes and what remain in the existing autonomous driving and SDV strategies. Please also disclose the key goals for the next one to two years that the current management team can responsibly present.

 

Question 8. In a structure where Hyundai Motor and Kia invest and generate revenue, to what extent is FortyTwoDot's decision-making independent?

The audit report classifies Hyundai Motor Company as the controlling entity and Kia as the entity exercising significant influence. In the same year, capital contributions by related parties, including Hyundai Motor, Kia, and key management, amounted to 500.301 billion won. Please explain who actually makes decisions regarding the company's strategy, large-scale investments, and related-party transactions, and through what procedures, as well as whether the structure allows the FortyTwoDot Board of Directors or audit body to independently exercise oversight. In particular, please clarify, in a way that readers can understand, the principles by which conclusions are reached when the strategic needs of the Hyundai Motor Group conflict with FortyTwoDot's own assessment of business viability.

 

Question 9. What is the actual purpose of the capital reduction resolution, the cash outflow, and the impact on each stakeholder?

The Company resolved to reduce its capital at the General Meeting of Shareholders in February 2026, and the audit report explained that future cash outflows and financial impacts will be determined based on shareholder participation. Given the accumulated deficit of 922.903 billion KRW, the market and readers may be curious as to whether this capital reduction is merely a simple restructuring of capital or if it is linked to the divestment of specific shareholders' equity or the recovery of cash. Please provide a detailed explanation, to the extent possible for public disclosure, regarding the method of the capital reduction, the confirmed and projected scale of cash outflows, the impact on the equity of major shareholders, key management, and executives and employees, and the Company's financial capacity following the reduction.

 

Question 10. What internal controls and accountability mechanisms are in place for the management team responsible for large-scale capital and related-party transactions?

The audit report does not separately disclose individual facts regarding abuse of power, embezzlement or breach of trust, unfair internal transactions, other misconduct, or administrative sanctions related to the CEO, key executives, or controlling shareholders. However, given that massive capital increases, transactions with related parties, and the execution of outsourcing and infrastructure costs were carried out in parallel, readers are likely to inquire about the transparency of fund execution and the accountability structure of management. Please explain how the company operates a system to prevent, receive, and investigate ethical and compliance issues—such as conflicts of interest involving the CEO and key executives, inappropriate expense execution, and workplace harassment—and to receive reports. Furthermore, please disclose whether there were any significant internal control or ethical issues addressed by the Board of Directors or the audit body during the past three fiscal years, and if so, the corrective measures taken by the company without identifying specific individuals.