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Script
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Hello, everyone, we express our sincere gratitude for your participation at SM
ENTERTAINMENT’s second quarter 2023 Earnings Conference call today. This is Jang
Jeong Min, CFO of SM ENTERTAINMENT. Pleasure to meet everyone.
Let us jump right in with an overview of our second quarter performance results.
The operating profit margin increased 4.4%p year-over-year to 15%, mainly driven
by improving operating leverage accompanied by revenue growth.
We’ll now move on to the details of SM ENTERTAINMENT’s earnings and its major
subsidiaries on an unconsolidated basis.
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During the second quarter, SM ENTERTAINMENT revenue increased 25% year-over-
year to KRW 138.9bn, thanks to increasing revenue of concert business from the
expansion of offline concert lineups and growing MD sales associated with the
concerts.
SM ENTERTAINMENT resumed offline concerts from the second half of last year,
and a total of 60 offline concerts were held in Korea and abroad in the second
quarter.
NCT DREAM held 17 concerts including North America and Europe for their second
world tour, which started in September 2022 and ended in July of this year with
completion of 41 performances in 26 cities.
We were able to observe expansions of NCT DREAM’s global fan base, which has
grown significantly since its first world tour in 2019. In particular, through this tour,
they entered Jamsil Main Stadium, the largest concert hall in Korea, and held
concerts in large venues such as Kyocera Dome Osaka in Japan and Gocheok Sky
Dome in Seoul, proving stronger presence in the K-pop industry.
Red Velvet has also held 11 concerts in Europe and Asia, and as it was the first
European tour since their debut, they received a lot of attention and favorable
reviews from local media.
TVXQ! resumed their tour in Japan after 3 years. A total of 12 concerts were held,
which was the highest number of dome performances in the history of overseas
artists with 30 Tokyo Dome performances and 89 nationwide dome performances.
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These active offline concerts and strong sales of MD, including items like fan sticks,
substantially contributed to the overall growth of revenue. In particular, revenue
from pop-up stores that were pre-promoted on time for each artist's album release
also increased significantly.
NCT DOJAEJUNG and SHINee held pop-up stores prior to their album releases, and
in the case of NCT DOJAEJUNG, a differentiated promotion including the debut
launching show and pop-up stores that applied the theme of ‘Perfume’, which was
their title song, received well in the industry.
For reference, the concert revenue that is reflected in parent based financial
statement represents the amount distributed by the concert agency according to
the contractual ratio. For those seeking information on the total concerts revenue
conducted by SM ENTERTAINMENT, please refer to the concerts revenue of
consolidated earnings provided in the fact book that was sent to you via email.
Due to the temporary increase of past album sales in the second quarter of last
year, revenue of album business decreased year-over-year.
However, sales of new albums released in the second quarter of this year were 3.56
million, far exceeding 2.07 million in the same period last year, indicating that the
album sales of artists increased significantly compared to their previous albums.
Especially, aespa became a double million seller with 2.02 million albums sales of
their third mini album ‘My World’ that was released in second quarter.
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In addition, the first mini album of NCT DOJAEJUNG was sold 0.79 million copies,
with the 0.67 million copies sold in the first week of the launch, ranking 1st among
all K-POP group units. TAEYONG’s first mini album, a first solo debut of NCT, sold
0.5 million copies, and SHINee's eighth album sold 0.24 million copies.
Operating profit grew from the strong sales of new albums, including sales of more
than 2 million copies of aespa’s, and the active global concert lineup such as NCT
DREAM world Tour.
This was due to the revenue decrease in profitable record/digital music business,
and increase in expenses of KRW 5bn that is related to the establishment of multi-
production center system, business internalization of the performance/MD business,
and one-off expenses related to record returns from changing a distribution
channel.
The figures presented in these data are on a consolidated basis for subsidiaries
with its own subsidiaries, and subsidiaries with no subsidiaries are on parent basis.
Please note that the combined performance of subsidiaries is based on simple
summation, and does not exclude internal transactions within the company.
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Based on simple summation, revenue of subsidiaries showed 54% year-over-year
increase to KRW 138.4bn, driven by the strong growth of concert-related revenue.
Thanks to the strong revenue growth, the operating profit of subsidiaries based on
simple summation turned profit in second quarter.
As the pre-production of KEYEAST drama ‘When the Stars Gossip’ was completed
in April, and they are working on a follow-up process to improve completion. Also,
‘No Secrets (tentative)’, another drama of KEYEAST, is under pre-production.
Accordingly, additional revenue is expected to be generated through content
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distribution once the broadcasting platform is confirmed.
Turning now to SM ENTERTAINMENT's major lineup of albums and concerts for the
second half of 2023.
On July 10th, EXO made a comeback with their 7th album. The sales in first week
exceeded 1.56 million, recording their highest album sales. As a result, EXO has
been listed as the 7th million seller in their career since the release of the first album
in 2013.
On July 17th, NCT DREAM's 3rd album was released. Following 4.2 million pre-orders,
it recorded 3.65 million sales in the first week and they have achieved another
career high. This is 2.6 times increase from 1.41 million sales of their second album
released in March last year, which showed that their fan base has grown over the
year.
Furthermore, two new artists will make their debuts. From July 27th, the pre-debut
reality show of NCT TOKYO (tentative), the last chapter of NCT's infinite expansion,
has been aired on Nihon TV, ENA, and TVING.
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The forward-looking statements regarding album lineups are based as of August
2nd, and are subject to changes in the future.
The offline concerts, which resumed since the third quarter of last year, will be
continued though out the year.
First, NCT DREAM successfully wrapped up their second world tour. TAEYEON and
aespa are continuing their tours globally, and CHEN and SHINee will be on a tour
in Japan. NCT will hold their first concert as a whole group in Korea and Japan, and
all of those will be held at large-sized stadiums.
The concert lineup mentioned so far is current as of 2nd August, and is subject to
potential changes in the future.
Next, CEO, Jang Cheol Hyuk, will give you the recent business updates and go over
outlook for second half of the year.
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