Good morning and good evening. First of all, thank you all for joining this conference call. Now we will begin the conference of the fiscal year 2026 first quarter earnings resulted 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. Now we shall commence the presentation on the fiscal year 2026 first quarter earnings resulted by CJ ENM.
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Good afternoon. This is Woo Won-sung 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-young 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 Ms. Jung Hyun-joo from Films. From Content Distribution, we have Kim Do-yeon. From Global Business Support, we have Kim Joon-yeop. From Music, we have Min Ko-seon. From Commerce, Seo Jin-woo. From Studio Dragon, Hyemi Lee . We have TVING CEO, Choi Ju-hui with us, too. We also have the President of CJ ENM Studios, CEO Duk-soo Hwang.
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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.
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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" 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 pop culture mix, the album by Alpha Drive One, recruited through last year's Boys 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 continue to grow thanks to an increase in MOC, 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 focusing on recovering advertising revenue through integrated advertising products that includes the digital resources of tvN networks, 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," "Legend of Kitchen Soldier," and "Youth Over Flowers: Limited Edition," as well as music IP and conventions such as MODYSSEY, Hype 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 internal and external collaboration systems, and diversification of IP revenue models. We expect visible results starting in the second half of the year.
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Furthermore, 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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Next, the 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 of each quarter of 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 year-over-year. I will go over the changes in operating profit by business segment based on two 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 five, 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 sector, 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-centered 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 this season's increase in 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. This 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 ZB1's debut album selling 1.4 million copies. There are tour results of ZB1 and revenue growth for Mnet and Mnet Plus based on the success of shows like King of Masked Singer led to overall expansion. However, unlike the same period last year, which featured the large-scale concert, LAPOSTA , activity from our famous A&R BP division 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, and with the debut of new artists like MODYSSEY and Hype Princess, album releases and other activities, label revenue is expected to grow. Additionally, through IVE's Korea-Japan fan concert tour, JO1 Dome Tour, and hosting 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 random 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 the diversification and quality growth of short-form content and sustain the growth of MNC through the advancement of data-driven influencer commerce. This concludes my presentation, and should you require more information, please refer to the document provided.
[Non-English content] 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 Hyemi 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 the previous quarter. Accordingly, revenue amounted to KRW 155.3 billion, and operating profit KRW 6.4 billion.
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External difficulties such as economic uncertainties continue, but starting from the second quarter, we plan to gradually recover performances through expanded original content supply for terrestrial and global markets. With ease cross-border, 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, focusing 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 Seezn. My second question is to Studio Dragon. In your presentation, you mentioned temporary expensing and this leading to lesser than expected profit numbers. Could you please elaborate what this temporary expensing was about? My third question is also to Studio Dragon. You talked about using your IP for various services. You talked about 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 do not see any efforts to do that. Have 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 107.3 billion, with an operating loss of KRW 19.2 billion. For the operating loss numbers on a year-over-year basis, it is an improvement of KRW 14.5 billion.
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Now on the revenue numbers to Seezn , it stood at KRW 233.6 billion, with an operating loss number of KRW 2.9. Compared to the previous year, it's an improvement by [KRW 14.5 billion].
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The temporarily expensing is 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 if 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 over supplies to the OTT originals and terrestrials. Thus, the temporary increase in expenses.
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Because of the difference in this amortization process, I know there has been some confusion caused on the part of shareholders and TV analysts. We do understand that there is this possibility of misunderstanding. 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 Fighting for Love. As to the detail, please understand that I cannot disclose 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 and 1 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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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 are about to do? My second question goes to TVING. 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 TVING addressing your question. Well, 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 that we make some adjustments to the useful life of our content. With that, we have changed it from two years to four years because we have benchmarked the other global OTTs, on average, the global OTTs, they amortize their content useful life over four to seven years. So, we are following industry practice.
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This is TVING addressing your second question. The delivery void that we witnessed in Q2 is a temporary thing. It is not a lasting thing. It is a temporary 2026. We are currently in discussion with various platforms for future deliveries.
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In the near future, we want to enhance our distribution sales and also engaging TV buyouts and production services to defend our profit in the short term.
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I agree with what you just said. I think some stagnation when it comes to the number of our new lines through 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 Hye-jin 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 talked to 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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To your first question on our investment is equity method shares with our investment with 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. Also, it would be an excellent tool for Studio Dragon branding.
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As for your last question on our YouTube 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 will 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 user right when you copyrights, and I think that translates to lesser expenses going forward. I see your number for revenue in the first quarter. It is quite good on a year-over-year basis but on a monthly basis. Still, you are in a loss-making section. I think this is largely due to the acquisition or the integration with Seezn, which has pushed up your SG&A expenses. When do you think you will be seeing black ink coming?
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Yes. As you mentioned in your question, our revenue number for Q1 was quite strong, but we still saw a breaking number when it comes to our operating numbers. It was not very strong. If you look at our ad income for the first quarter, on a year-over-year basis, it has shown steady growth of over 50%. As you may know, the 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 and 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-h oon from Hana Securities. Please go ahead.
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Yes, I have two questions. First is on your advertising revenue. While I see that your TV advertising sector is still experiencing much difficulty, and in the previous quarter, I think it might be because of the Olympics. Now we have the World Cup Games soon to be held. With that big international sporting event, how do you foresee the ad space moving? While the TV ad space is difficult, could you offset the difficulties in the TV ad space with the merger of TVING and Wavve? Do you think this platform will offset the negativity that you see in the TV market? My second question is related to your asset sales. There were some presentations on your asset sales maybe a year back, two years ago. What about your asset sales going forward, including that of your stakeholding in Netmarble?
Because I still see that your financial costs are quite high.
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Yes, this is Lee. Speaking for the TV ad question. Yes, we do expect to see some pickup in the TV ad space in the second quarter. While seeking or looking at the bigger picture, Q2 will continue to be a slow quarter for overall TV ads. As you rightly noted, there were Olympic Games in the first quarter, and we will be seeing the World Cup games being held starting June. Because of these two big mega sporting events, we will continue to see somewhat of a sluggish ad space continuing the first quarter. As you have mentioned, with the merger between TVING and Wavve, we expect to see the ad revenue being offset by this merger. As was demonstrated in our presentation, revenues with TVING have grown more than 20% on a year-over-year basis.
Our income from this space is likely to be more than to offset what we see from the decrease in TV.
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To your second question of our non-core asset sales. We are continuing with the effort, but we have been experiencing a lot of external macro volatility, including the war. We also have the new regulation in place for prior disclosure of such endeavors. We are currently looking into various possibilities as to the timing and method of how to sell our non-core assets. If we find the right fit, then we will look further into the possibility.
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Due to time constraints, we will entertain one last question.
[Non-English content] Currently there are no participants with questions. Please press asterisk one. Asterisk and one to give your question.
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There are no further questions. We will end the Q&A session here.
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I once again thank you for your attendance. This concludes the 2026 earnings release session for CJ ENM. Thank you.
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This concludes the fiscal year 2026 first quarter earnings resulted by CJ ENM. Thanks for the part