Good morning and good evening. First of all, thank you all for joining this conference call. We will begin the conference of the Fiscal Year 2026 First Quarter Earnings Results by CJ ENM. This conference will start with a presentation, followed by a divisional Q&A session. If you have a question, please press asterisk and one. That is asterisk one on your phone during the Q&A session. After the conference call begins, to ensure smooth presentation and minimize background noise, we kindly ask all participants other than the speaker, keep surrounding noise to a minimum. We shall commence the presentation on the fiscal year 2026 first quarter earnings results by CJ ENM.
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Good afternoon. This is Won Sung Woo from CJ ENM's IR team. I thank the shareholders and analysts for their time despite your busy schedule.
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Now we will begin the 2026 Q1 Earnings Report from CJ ENM. 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.
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Today, here with us, we have CFO Lee Jong-hwa and Kim Jin-hyoung from Finance, we also have heads of various business divisions. From Media, we have Park Sang-ryul. From Media Solutions, Lee Sang-mu. We also have Miss Jung Hyun-joo from Films. From Content Distribution, we have Kim Do-yeon. From Global Business Support, we have Kim Jun-hyuk, Kim Jun-hyuk. From Music, we have Lim Ko Seol-hyun. From Commerce, Seo Jin-woo. From Studio Dragon, Lee Hye-mi. We have TVING CEO Choi Ju-hui with us too. We also have the President of CJ ENM Studios, CEO Deuk-soo Hwang or Hwang Deuk-soo.
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First, Lee Jong-hwa will go over the major results and business strategies.
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Good afternoon. This is CFO Lee Jong-hwa.
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Q1 2026 was a little wanting in terms of profit, but our mid to long term core strategies are well underway.
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TVING has continued an overall increase in subscribers with advertising revenue contributing and maintaining a high growth rate of 35% over the previous quarter.
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This suggests that the strategy the company is pursuing to become a daily platform is being well implemented, supported by the solidification of the AVOD subscriber base, as well as the effects of WBC broadcasting and exclusive IPs. In addition, overseas content sales demonstrated a 31% growth, supported by the expansion of global OTT drama lineup and the strengthening of non-scripted formats and music sales.
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New dramas and originals were supplied to global audiences through major OTT platforms such as Netflix, Amazon, and Disney+, while new non-scripted shows and music content like Show Me The Money 12 and A League of Their Own were provided to local platforms, thereby expanding the company's global presence as a leading K-content creator.
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Although we did experience short-term profitability fluctuations due to the seasonality of Japan's LAPONE, the album by ALPHA DRIVE ONE recruited through last year's Boys II Planet recorded initial sales of 1.44 million copies, debuting successfully and further strengthening human IP.
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Mnet Plus surpassed 44 million subscribers, and revenue grew by 260%. This is demonstration of TVING's growth and a smooth progression to digital platform shift.
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In the case of commerce, sales continued to grow thanks to an increase in MLC GMV through the expansion of the content commerce IP universe and the expansion of the customer base through fandom IP.
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In Q2, to respond to the decline in the advertising market, we're refocusing on recovering advertising revenue through integrated advertising products that includes the digital resources of TV and others, as well as our company and group's resources such as theaters and Olive Young DOOH, along with advanced advertising product strategies like Anchor IP Sponsorship and celebrity targeting.
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Additionally, we will restore profitability through drama and entertainment content such as Yumi's Cells 3, The Legend of Kitchen Soldier, and Unplanned Trip: Limited Edition, as well as music IP and conventions such as MODYSSEY, H//PE Princess, and KCON JAPAN 2026.
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In addition, to overcome the external environment of the continuously declining TV advertising market, the company is improving its business structure to maximize IP-based revenue generation through programming optimization, organization structure efficiency, establishment of organic ex-internal and external collaboration system, and diversification of IP revenue model. We expect visible results starting in the second half of the year.
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While developing and maturing global Mega IP, we will continue to accelerate the shift to digital platforms such as TVING and Mnet Plus, thereby improving growth potential and profitability in the medium to long term.
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Thanks to shareholders and analysts for interest in and support for CJ ENM. This concludes my presentation.
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Results presentation. CJ ENM's results presentation is based on consolidated K-IFRS and has not carved out operating profits resulting from transactions among different businesses.
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Next, I will talk about the performance delivered during 2026. Sales amounted to KRW 1.29 trillion, a 17% increase compared to the previous year. Operating profit was KRW 1.5 billion, showing slight improvement YoY. I will go over the changes in operating profit by business segment based on key consolidation adjustments. Entertainment business sales grew due to Wavve consolidation. Strong content sales from Studio Dragon and TVING, as well as increases in subscribers and advertising sales for TVING, and operating losses narrowed compared to the previous year. In commerce, sales increased due to growth in mobile live commerce, driven by the strengthening of short-form content and influencer commerce. On page 5, I will discuss the performance by business segment and outlook for the second half of the year.
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In the media platform segment, TV advertising experienced a decline due to the continued slowdown in traditional off-season periods and overall TV advertising demand. TVING's revenue showed steady year-on-year growth, driven by strong advertising revenue from net subscriber increases and the effect of WBC popularity and exclusive content acquisition. In the second quarter, we will focus on defending TV ad revenue and improving business structure through anchor IP centers, integrated solutions covering broadcast, digital, and DOOH, as well as strengthening sponsorship sales capabilities. With the KBO season and the launch of the anticipated original content, TVING is expecting to increase subscribers and traffic, leading to simultaneous high growth in advertising and subscription revenue, and is projected to achieve high gains.
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The film and drama segment experienced significant revenue growth due to Fifth Season increasing sales and profitability from supplying TV series such as American Classic, expansion of channel broadcasting lineups, and steady overseas content sales through a wider number of subscribed to global OTT platforms. In the second quarter, we concluded a new slate agreement with regional OTT platforms such as Japan's U-NEXT, North America's Viki, and Russia's IVI, while continuing to diversify local platform partnerships in new markets such as India and the Middle East. Fifth Season anticipates temporary delivery gaps in TV series, but will focus on securing revenue through diversification of business models, including distribution and planning. Additionally, we will continue to expand the foundation for overseas co-productions through measures such as establishing joint ventures with Japan's TBS and U-NEXT and Taiwan fund investments.
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Music saw strong performance, with ALD1's debut album selling 1.44 million copies. There are tour results of ZB1 and revenue growth for Mnet and Mnet Plus based on the success of [Seven for Nine's] growth led to overall expansion. Unlike the same period last year, which featured the large-scale concert LAPOSTA , activities were maintained at a sleepy pace and profitability was somewhat lackluster due to increased investment costs by Mnet Plus for growth. In the second quarter, with the expansion of activities of existing key artists such as ZB1 and JO1, with the debut of new artists like MODYSSEY and H//PE Princess, album releases and other activities, label revenue is expected to grow. Through ALD 1 Korea- Japan fan concert tour, day 1 dome tour, and hosting of KCON JAPAN 2026.
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Commerce revenue increased as the GMV of mobile live commerce continued to grow at high rates YoY, driven by the expansion of IP-based content commerce and the strengthening of SNS sales focused on short-form content. In addition, mobile competitiveness is being enhanced as key customer acquisition and engagement metrics improve, including app downloads and app MAU, thanks to increased mobile investment. In the second quarter, we plan to secure fandom customers through strengthening collaboration with mega influencers and external partners such as KBO, while actively promoting customer login through enhanced large-scale campaign promotions and expanded sourcing of high additional products. Furthermore, we will continue investing in AI content platforms to promote both competition and quality growth of short-form content and sustain the growth of MLC through the advancement of data-driven influencer commerce. This concludes my presentation, and should you require more information, please refer to the document pre-provided.
[Foreign language] May we have your attention please. Background noise is currently being detected. To ensure smooth presentation and minimize background noise, we kindly ask that all participants other than the speaker keep surrounding noise to a minimum. Thank you.
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We will continue with the presentation from Studio Dragon.
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Good afternoon. This is Hye-mi Lee , CFO of Studio Dragon. I will walk you through the business performance for Q1 2026.
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In the first quarter, we addressed concerns over content supply by expanding our lineup across TV and OTT, and continued growth in programming and sales.
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The total number of broadcast episodes was at 91, an increase of 32 episodes compared to the same quarter last year, and 33 episodes compared to the previous quarter, marking three consecutive quarters of revenue growth. However, profitability temporarily slowed due to an increase in project expense in the short term and the recognition of remaining amortization costs resulting from expanded pre-sales in previous quarters. Accordingly, revenue amounted to KRW 155.3 billion, and operating profits KRW 6.4 billion.
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External difficulties such as economic uncertainties continue. Starting from the second quarter, we plan to gradually recover performances through expanded original content supply for terrestrial and global markets. With ease cost burdens, performances of major anticipated titles such as Yumi's Cells 3 will fetch us better results.
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In addition, the company will strengthen domestic and international competitiveness and global scalability through enhanced programming strategies and diverse portfolios, while actively developing an official YouTube channel and commerce-based businesses to expand drama from a single product to an IP-based platform business. Thank you for your attention.
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We will now entertain your questions. Given the time constraints, please limit your questions to three each, depending on core issues.
[Non-English content] Now Q&A session will begin. Please press asterisk one, asterisk and one if you have any questions. For cancellation, please press asterisk two. That is asterisk and two on your phone. [Non-English content] The first question will be given by Shin Eun-jung from DB Securities. Please go ahead.
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Yes, I have three questions. First is on the revenue and operating profit or loss numbers for both TVING and Fifth Season. My second question is Studio Dragon. In presentation, you mentioned temporary expensing and this leading to a lesser than expected profit numbers. Could you please elaborate what the temporary expensing was about? My third question is also to Studio Dragon. You talked about using your IP for a variety of services. You talked about a platform, making your IP the platform. I believe that in your previous presentation, you said you will begin this endeavor with Yumi's Cells 3, but to date, I don't see any effort to do that. Has there any changes to your plan?
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Yes, I talked about TVING's revenue and operating loss numbers. Our TVING revenues stood at KRW 103 billion, with an operating loss of KRW 19.2 billion. For the operating loss numbers on a YoY basis, it's an improvement of KRW 14.5 billion.
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Now on the revenue number of Fifth Season, it stood at KRW 233.6 billion with an operating loss number of KRW 2.9 billion. Compared to the previous year, it's an improvement by KRW 14.5 billion.
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The temporarily expensing seems much to do with OTT originals and our supply to terrestrial broadcasting stations. If we air our titles on tvN, then the amortization happens over a certain period of time, whereas we supply to OTTs as originals, and if we supply to terrestrials, recognize that while the titles are being aired. In the second quarter, there has been a lot of concentration of our supplies to the OTT originals and terrestrials. Thus, the titles are temporarily increasing expenses.
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Because of the difference in this amortization practice, I know there has been some confusion caused on the part of shareholders and TV analysts. We do understand that there is this possibility, maybe the confusion. Because of that, we are thinking of reviewing some changes to our amortization practices.
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As for expanding our IP business, yes, it's true that we have began the work with Yumi's Cells 3 and Filing for Love. As to the detail, please understand that I cannot describe the details to you today. If you look at our future titles to be aired, I think you will get the system.
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[Non-English content] Currently there are no participants with questions. Please press asterisk one, asterisk and one to give your question. [Non-English content] The following question is by Choi Yong-Hyun from KB Securities. Please go ahead.
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Yes, I have some questions. The first one is for TVING. You talked about making adjustments to the useful life of copyrights in the first quarter. Could you please give more color on what you're about to do? My second question goes to Fifth Season. In the presentation you talked about some delivery voids. Is this a temporary thing or is it a trend that you will be seeing for the medium to long run? How much of an influence will it have on your final numbers? My third question is on your overall content investment for the year as our company as a whole.
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Yes, this is TVING , addressing your question. We amortize our content for their useful life. We have made some evaluation on how we should apply the useful life over the consumption of our content. Till date, we have been going by a two- year amortization.
It was because in the past, our contents were largely broadcasted over broadcast stations. Now the paradigm shift has really moved towards OTT. Therefore, we thought it was right to remake some adjustments to the useful life of our content. With that, we've changed it from two years to four years, because we've benchmarked the other global OTTs and on average, the global OTTs, they amortize their content useful life over four to seven years. We are following industry practice.
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This is Fifth Season addressing your second question. The delivery void that we witnessed in Q2 is a temporary thing. It isn't a lasting thing. It's a temporary two year 2026. We are currently in discussion with various platforms for future deliveries.
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In the near future, we want to enhance distribution sales and also increasing TV buyouts and production services to defend our profit in over the short term.
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Really, I give what you just said. I think some stagnation when it comes to the number of our new line, domestic production, but we will be working to address this situation centering around our in-house studios, including Studio Dragon. We will be keen on balancing. We will make sure to balance spend per episode.
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We will move on to the next question.
[Non-English content] The following question is given by Kim Hoi-Jae from Daishin Securities. Please go ahead.
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Yes, I have three questions. First is on your investment profit, or investment into your affiliated company. Secondly regards to Studio Dragon. You also plan to use an official YouTube channel. What kind of opportunity will this channel bring to the company? What kind of scale are you talking about here? My third question is related to your series order. How are things moving with your U.S. series order?
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As to your first question on our investment is equity method shares with our investment in affiliated companies.
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This is Studio Dragon answering your YouTube question. It will not be a money-making business model itself. It will be a YouTube channel to support our overall IP business. It will mostly be used for promotional and marketing purposes, and also it would be an excellent tool for our Studio Dragon branding.
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As for your last question on our U.S. series order, our aim is to have a series order within the year. We currently are working on three candidates. Things are really slow, but it is moving. Should we have any updates, we'll make sure to let the market know about it.
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We will take your next question, please.
[Non-English content] The following question is by Lee Hwa-jung from NH Investment & Securities. Please go ahead.
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I have one question for TVING. You talked about changing your utilize when you copyrights, and I think that translates to lesser expenses going forward. I see your number for revenue in the first quarter. It's quite good on YoY basis, but still you're in a loss- making section. I think this is largely due to the acquisition or the importance of your place, which has pushed up your SG&A expenses. When do you think you will be seeing black ink numbers?
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Yes. As you've mentioned in your question, our revenue number for Q1 was quite strong, we still saw a break-even number when it comes to our operating numbers. It wasn't very long. Well, if you look at our ad income for the first quarter is on a YoY basis that has shown steady growth of over 50%. As you may know, a first quarter is not a good quarter for ad income. It only accounts for 10% of a year's ad income. That was one of the reasons. We also had a concentration of original content supply. As was answered in a previous answer, because there was such a concentration of original content, which has a different monetization process, we saw our operating numbers in the loss-making section.
Going forward, starting from Q2, I can say with some confidence that you will be seeing a break-even point.
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Next question, please.
[Non-English content] Currently, there are no participants with questions. Please press asterisk one. Asterisk and one to give your question. [Non-English content] The following question is by Lee Ki-hoon from Hana Securities. Please go ahead.
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Yes. I have two questions. First is on your advertising revenue.
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As for expanding our IP business. Yes, it's true that we have began the work with Yumi's Cells 3 and Filing for Love. As to the detail, please understand that I cannot describe the details here today. If you look at our future titles to be aired, I think you will get the gist of it.
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[Non-English content] Currently, there are no participants with questions. Please press asterisk one. Asterisk and one to give your question. [Non-English content] The following question is by Choi Yong-hyun from KB Securities. Please go ahead.
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Yes. I have three question. The first one is for TVING. You talked about making adjustments to the useful life of copyrights in the first quarter. Could you please give more color on what you're about to do? My second question goes to Fifth Season. In the presentation, you talked about some delivery void. Is this a temporary thing, or is it a trend that you will be seeing for the medium to long run? How much of an influence will it have on your final numbers? My third question is on your overall content investment for the year as a company as a whole.
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Yes. This is Hee-jin, getting your question. Well, we amortize our content for their useful life, that we have made some evaluation on how we should apply the useful life over the consumption of our content. Till date, well, we have been going by a two-year amortization. It was because in the past, our contents were largely broadcasted over broadcast stations. Now the paradigm shift has really moved towards OTT, and therefore we thought it was right to remake some adjustments to the useful life of our content. With that, we've changed it from two years to four years, because we've benchmarked the other global OTTs, and on average, the global OTTs, they amortize their content useful life over four to seven years.
We are following industry practice.