Good morning and good evening. First of all, thank you for joining this conference call. Now we will begin the conference of the fiscal year 2025 first quarter earnings result by CJ ENM. This conference will start with a presentation followed by a divisional Q&A session. If you have a question, please press star and one, that is star one, on your phone during the Q&A. Now we shall commence the presentation on the fiscal year 2025 first quarter earnings results by CJ ENM.
[Foreign language] CJ ENM IR [Foreign language] .
Good afternoon, this is Kaye Choi from CJ ENM's IR. I thank the shareholders and analysts for their attendance despite their busy schedules.
[Foreign language] 2025 [Foreign language] CJ ENM [Foreign language] .
We will now begin the earnings release session for Q1. Please note that the financial and management results presented today have yet to undergo an independent auditor's review and could be subject to changes upon such review.
[Foreign language] CEO [Foreign language], CJ ENM [Foreign language] CEO [Foreign language] .
Today we have with us CFO Deuk-su Hwang and heads of different business divisions. From Media, Ki-s ung Hong; Music, Kyung-joon Oh; Film, Kyoung-bum Ko; and Global Jun-hyun Kim. From Commerce, we have Jin -woong Seo; and from Studio Dragon, we have Gwang -seok Oh. We have TVING CEO Joo-hee Choi, as well as CJ ENM Studios CEO Young -soo Ha with us.
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First, CFO Hwang will remark on major results and business strategies.
[Foreign language] .
Good afternoon, this is CFO Deuk-su Hwang. With weaker viewership in Q1, the company was inevitably influenced by market conditions. However, CJ ENM continues to plan and produce well-made content and is strengthening creator and artist-centered human IP. With that, we expect a full-fledged profitability recovery from the second half on.
[Foreign language] 35.5% [Foreign language] .
Music business showed good results from album sales and concerts of artists, and label sales continued its strong growth with human IP results. Overseas growth stood out with label sales growing 35.5% YoY in Q1. The business aims to improve profitability by increasing live concerts and album releases.
[Foreign language] AVOD [Foreign language] .
TVING focused on traffic and ad coverage to see earnest generation of revenue. AVOD subscriber ratio increased to 39.2% in Q1, and user and content activation metrics continued to be steady. From Q2, strengthened sports and short-form content and existing package products will lead TVING's ad revenue.
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Live commerce continued its strong growth base starring product analysis and stronger content planning. Mobile live commerce transaction amount increased 92.4% YoY in Q1. Profit contribution increased too. The business will continue to grow in Q2 with a differentiated portfolio with expanded exclusive offerings and stronger content planning with cooperations with influencers and celebrities.
[Foreign language] . CJ ENM [Foreign language] .
CJ ENM will focus more intensely on profit-oriented management, and based on added efficiency of all business segments, will continue to improve cash flow. I thank the shareholders and analysts for your support. Thank you.
[Foreign language] . CJ ENM [Foreign language] K-IFRS [Foreign language] .
Next is the results presentation. Our quarterly and yearly results are on a consolidated K-IFRS basis, and the divisional operating results have not carved out internal transactions. Now the Q1 results presentation of the company.
[Foreign language] .
Good afternoon, this is Jin Young Kim from Finance. The company recorded a revenue of KOR 1.1383 trillion in Q1 2025, with KOR 700 million operating profit reaching BEP. I will go over the results of different businesses and Q2 outlook starting from page 5.
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With lower viewership, accompanying more interesting news coupled with a low season led to a sluggish broadcasting ad market. TV ad in Q1 was slow but is quickly bouncing back with improved viewership and buzz in Q2. TVING continues to grow with steady traffic improvements. The business will improve profitability in Q2 with original content, stronger sports traffic, and expanded integrated ad solution execution.
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As for film and drama, this season has completed delivery of Chief of War and began delivering Nine Perfect Strangers season 2. The business will expand delivery focusing on global platforms with premium series lineup enhancement in Q2. Korean content distribution overseas is showing results in new markets such as Brazil and Mexico. The business will continue new market expansion in Q2, including India and the Middle East.
[Foreign language].
As for music, sub-label revenue continued to grow, but with weaker Mnet content and added marketing costs for new artists, profitability softened. Music business aims to expand revenue and profitability in Q2 with live concerts and expanded album activities. Channel profitability will also see improvement with airing of World of Street Woman Fighter.
커머스 부문은 프리미엄 뷰티, 패션, 리빙 카테고리 기획을 강화하며 고마진 상품 포트폴리오 중심으로 수익성을 개선하고 있습니다. 2분기 역시 다양한 콘텐츠 IP를 확대하고 맞춤형 큐레이션을 강화해 수익성을 높이겠습니다.
Premium beauty, fashion, and living categories were enhanced in commerce, and profitability continues to improve, centering on high-margin portfolios. Content IP will see diversification, and profitability will continue improving through tailored curation in Q2.
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Operating cash flow turned positive in 2024 with improved working capital management and interest cost cut through strengthened transaction structure and processes. This positive flow continues in 2025 as well. By securitizing non-business assets, our net borrowing has decreased to KOR 1.5 trillion in Q2 2025. By fortifying the virtuous cycle of positive cash flow, the company will add to operating cash flow numbers and will continue to ease financial burden with additional asset securitization. Please refer to the document for further details. Thank you.
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Now we will hear the results presentation of Studio Dragon.
[Foreign language] OTT [Foreign language] .
Good afternoon, this is Gwang-seok Oh from Studio Dragon. I will brief you on management results of Q1 2025. 59 episodes were aired in Q1, which is a decrease of 12 episodes year-over-year. With the exception of When the Stars Gossip, there were no global OTT bound pre-sales. With reduced overseas sales with underperforming new titles, our profitability weakened. The company witnessed negative growth in Q1 with revenue of KOR 133.8 billion, with KOR 4.3 billion operating profit.
[Foreign language] TV [Foreign language] .
Studio Dragon will minimize influence of TV lineup decrease with supply of original content in Q2. With launch of hit IP, restart of Wednesday and Thursday lineup, and Japanese local titles, the company will aim for results improvement and build growth momentum.
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Studio Dragon has undertaken M&A and stake investment to expedite our growth. Through the acquisition of domestic production companies such as Next Scene, we have created a Studio Dragon universe. With that, the company will intensify its quality content production basis. Added stake holding in Skydance, we will further cement business cooperation and see earnest expansion in Hollywood. Added IP business cooperation with Japanese partners will solidify our Asian presence and establish us as a global studio. Thank you.
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Now we will entertain your questions. In consideration of time, please limit your questions to three each, centering on core issues.
[Foreign language . Now Q&A session will begin. Please press star one, star and one if you have any questions. For cancellation, please press star two, that is star and two on your phone. [Foreign language] . The first question will be given by Ms. Shin Eun-jung from DB Securities. Please go ahead, ma'am.
[Foreign language] .
Yes, I have three questions. First is on your films and drama. I see that the loss numbers are quite significant. Could you please give us the details on those numbers? My second question, as always, is related to Fifth S eason and TV. Could you provide us with the revenue numbers and operating profit numbers for each business? My third question is on music. It seems that your revenue number on a YoY basis had remained quite steady, but the profitability has seen some deterioration. So could you provide us with more color?
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Let me take the second question first. For TVING, the sales or revenue number was still at KOR 88.9 billion with an operating loss of KOR 25.7 billion. For Fifth S eason, the revenue number was at KOR 146 billion with an operating loss of KOR 17.3 billion.
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Yes, let me take the music question first. As you've rightly noted, we have seen a slight increase in our revenue numbers for Q1, but our profitability did not really match the revenue increase. It's because of our offering mix. The music business has IP business, concert business, and distribution business, and many other sub-branches of our businesses, which are all associated with different levels of profitability. Japan's Lapone, they have given us different results, and there was YoY tour and ZEROBASEONE album sales and ATEEZ concert. Album sales are typically associated with better profitability, and as for larger concerts, they gave us a big revenue number, but the profitability is a bit lacking compared to the album sales activities. But going forward in the second quarter, Japan's Lapone, their IP will be releasing new albums. Almost all of them will be releasing new albums, which will give us a better profitability number as well as an expected tour of INI. With that, we would see a rebound of our profitability level.
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Yes, let me talk first about movies and dramas. There were no film lineup this year, so we did not gain any profit from our films business, and much of our revenue had to do with, of course, Fifth Season. If you see the loss numbers, it's pretty similar on a YoY level, but in consideration of the revenue decrease that you have witnessed in Q1, you will realize that our profitability improvement efforts had paid off. On a QoQ basis, there was some seasonality, but from the second quarter onward, we would be delivering a good line of titles. So perhaps from the second quarter or perhaps from the second half, you'll be seeing some results.
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From the global distribution, if I may give you more color on the Fifth S eason business, well, we've delivered five episodes in Q1, and in the second quarter, we have plans to deliver 19. That is a big increase. The episodes are for Nine Perfect Stranger, Strife, and The Savant. And with that, you'll be seeing some results improvement. And we believe that we will be on schedule when it comes to our delivery for the second half.
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Next question, please.
[Foreign language] . Currently, there is no participant waiting with questions. Please press star one, star and one to give your question. [Foreign language] . The following question is by Mr. Lee Ki-hoon of Hana Securities. Please go ahead, sir.
[Foreign language] .
Yes, my first question is on your ad revenue. I see the numbers that you have given us for Q1, and it's almost half what we saw three years ago. I know it's very difficult to forecast any concrete numbers, but if possible, could you give us your yearly outlook for your ad revenue? My second question is for Boys II Planet production costs. I believe that they will start their activity coming July, and what is the contract structure like for their activities in China? What is the Chinese activity management contract like? I know this is first of its kind, but could we please get some color on the structure? My third question is related to Studio Dragon's information on page nine. I see that you have illustrated here a 75% improvement and 93% improvement when it comes to production costs. Could you please give us more information on the number here?
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On the first question, Mr. Ki-sung Hong from media would provide you with an answer.
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Yes, if I may talk about the ad market in the first quarter, the market itself was quite down, and our results were rather lackluster too. It's really difficult to give you a yearly outlook for our ad income, but the second quarter I believe will be better compared to what we have seen in the first quarter. Please understand that it's quite difficult to give you a yearly outlook. We will do our best in the given circumstances. We will work with virtual PPL, and we'll try to link content and in-between program ads and so on, in order to gain what market share we can.
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Now on the music production cost-related question, I'm afraid I cannot give you any information on how much it costs to reach a production stage. For the project that you've mentioned, it would be requiring a bigger amount of investment than on the general programs. I really wish that I had some information or inkling on what other companies are spending on their production, but it's quite confidential. So please understand I cannot give you or disclose any numbers related. The airing is scheduled for July, and with that programming, we will be seeing an input and use or execution of our production costs. As for our activities in China, you had the example of ZEROBASEONE , and now it's Boys II Planet. It's a new structure now. It's a five-year contract, which will deliver a longer-term profit, and the structure is geared towards that longer-term horizon. As for their activity in China, nobody knows how the ban on Korean content will unfold. We are discussing with diverse partners locally, and according to how the discussion on ban on Korean content unfolds, we will be working with them. We will see some more visibility with the APEC meeting that is scheduled in October, but we will begin and commence our work far before that. So we will be working on several scenarios before the actual production presentation, and depending on how the talks unfold with the ban on Korean content, we will make our choice as to what scenario to go with. We believe we could make that announcement somewhere in mid-June.
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Now, Studio Dragon will provide you with their answer.
[Foreign language] .
Yes, the 75% and 93% numbers that you're seeing are actual cost settlement. The 75% number may seem low for the earlier half of this year because the number includes some of the titles that we have begun working on last year. The number will improve to 93% in the second half, and our internal goal is to go for 100% cost settlement going forward.
[Foreign language] .
[Foreign language] . The next question is from Mr. Choi Yong-hyun of KB Securities. Please go ahead, sir.
[Foreign language] .
Yes, I have a follow-up question for Studio Dragon. You talked about 93% actual cost settlement, and you talked about your aim to go for 100% next year. How will this change influence your profit and loss numbers going forward? My second question is related to an article or report that I've read in regards to TVING and the Baemin partnership. What kinds of results or effect do you expect out of this potential partnership? My third question is related to your global activities, perhaps your partnership with Amazon Prime. What's the contract with Amazon Prime like? Is it a simple distribution contract?
[Foreign language] .
This is the answer from Studio Dragon. As you've mentioned, we hope to settle the actual cost. With that practice in place, we believe that we will be seeing a saving by 10% when it comes to our production cost. We will be receiving actual cost data, and we will be providing this cost-related information to our outsourcing partners. I do not expect to see a 10% cut across all our projects, but our goal or our target is to see a 10% cost cut when it comes to production. When this becomes actual cost settlement, actually becomes a practice, we believe that we will actually see a 10% cost cut result.
[Foreign language] .
This is the Choi Yong-hyun from TVING, and we're addressing your question. We are currently in discussion with various potential partners, including Baemin. With all these discussions in place, I believe that we could see a result of AVOD partnership within the year, which is quite sizable. And with these diverse partnerships in place, we believe that we could reach demographic groups that are quite difficult for us to reach on a D2C basis, including the elders and people in rural areas. With all these partnerships in place, we believe we could see an uplift of our subscriber basis by perhaps 20% - 30%.
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As for your Amazon Prime-related question, please understand that I'm not limited to disclose any structure. When it comes to content distribution, too much reliance on a single big platform could be a business risk because it's associated with a longer license out period. If we depend too much on a single platform, of course, that would translate into a bigger business risk. Our basic direction is to go for non-exclusivity in diverse regions across diverse platforms.
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Yes, and as was mentioned in the presentation and as is illustrated on the presentation deck, we have begun distributing our content in Latin America, South American nations, and regions in Q1. This activity will expand in the second quarter, and we did talk about our new market initiatives in India and Middle East. We will be seeing more releases and more contracts in place. In the first quarter, we saw our content revenue somewhat sluggish, but that was mainly due to seasonality and because of the content itself too. But as was mentioned in the presentation, we will be seeing some more new releases in the second quarter, which in turn will push up our revenue.
[Foreign language] .
Next question, please.