Good morning and good evening. First of all, thank you all for joining this conference call. Now we'll begin the conference of the fiscal year 2025 second 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 one on your phone during the Q&A. Now we shall commence the presentation on the fiscal year 2025 second quarter earnings results by CJ ENM.
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Good afternoon. This is Won-sung Woo from CJ ENM IR. I thank the shareholders and analysts for taking time out of your busy schedules to attend today's earnings release session.
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Now we will begin the earnings release session for CJ ENM Q2 2025. 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 are heads of different business units and CFO Deuk-soo Hwang. From Media, we have Sang-h yuk Park. From Music, Yong-ju Ok. From Films, Hyun-joo Jung. From Global, Chunjoo Kim. From Content Business, we have Jang-h o Seo. And from Global, we have Chunjoo Kim. From Commerce, Jin-uk Seo. Studio Dragon, Seong-h o Jang. And we have TVING CEO Joo -hee Choi with us.
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First, CFO Deuk-soo Hwang will brief us on major results and business strategies.
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Good afternoon. This is CFO Deuk-s oo Hwang. Profit in Q2 decreased on a YoY level, but seeing much improvement compared to Q1, confirming improvement. We believe that the foundation for an earnest improvement in the second half of the year has been laid with many tangible results in the first half and our strategic pursuit.
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There were many meaningful results that are aligned with our 2025 core strategy that was announced at the earlier part of the year. First, on strengthening Well Made Content production competitiveness, Resident Playbook has ranked number one on drama viewership, TVING, and Netflix. Fifth Season's IP delivery has seen an increase by 11 compared to last year and seen a turnaround. Severance has been nominated in 27 categories for the Emmy Awards, bringing the total nomination for Fifth Season to 36.
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As for acceleration of globalization, focus was on various activities, including album release of JO1 and INI concert. LAPONE's half-year revenue increased by 80% compared to last year, setting a new record. KCON Japan 2025 was also a hit with over 110,000 attendees. Korea, Japan joint planning and production dramas also saw growth with titles such as Marry My Husband Japan.
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As for digital transformation fortification, subscriber decrease as the termination of NAVER membership in Q1 is fast recovering in Q2. New subscriber number is increasing through bundling with Wavve and increased alliance with Apple . Content cooperation synergy such as cross-programming is seeing an increase. TVING's average AVOD subscriber ratio is at 46.3%, which is an increase by 21 percentage points compared to last year end. Through human IP and video content investment enhancement, Mnet has seen its global accumulated subscriber numbers go beyond 30 million and is establishing a profit model, including an advertisement based on it.
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According to the two-track content strategies, celebrities and influencers, commerce continues to grow with 47% growth in first half in MLC transaction amount. The business is also enhancing its differentiation and competitiveness with new premium brands and strengthening exclusive products.
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CJ ENM will continue to accelerate the implementation of business divisional core strategies, and through that will improve each business's profitability and focus on strengthening fundamental business competitiveness. I thank the shareholders and analysts for being with us. This concludes my presentation. Thank you.
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Next is results presentation. CJ ENM's results presentation is based on consolidated K-IFRS numbers and operating profit has not been eliminated of internal transactions.
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Good afternoon. This is Kim Jin-young from Finance. The revenue for the second quarter of 2025 was KRW 1.3129 trillion, a 13% increase compared to the same period last year, while operating profit was KRW 28.6 billion, a decrease of 19%. I will go over the changes in operating profits by business segment before the adjustment in the consolidated financial statements. The entertainment sector saw an increase in profit compared to last year due to the positive performance of LAPONE and the turnaround of Fifth Season. Although profits in commerce decreased due to an expansion of strategic investments such as new IP planning for the enhancement of the on-site brand and online-offline marketing activities, revenue growth continues thanks to the ongoing successful mobile live commerce.
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From page five, I will discuss the performance of each business segment and the outlook for the second half of the year. The media platform has continued to experience poor profitability due to a downturn in the broadcasting advertising market. From Q2, the viewer ratings for major anchor dramas have improved, and in the second half of the year, the company hopes to improve profit by scheduling high-profile premium content.
TVING has seen a recovery in the number of subscribers thanks to the expansion of platform synergy through bundling since June, and advertising revenue has increased due to the expansion of AVOD subscribers and KBO's popularity. In the second half of the year, we will enhance popular original content such as "Exchange" and "The Great Escape," and sports event-related content such as KBO, while focusing on achieving a turnaround through sustained subscriber growth through bundling and partnership services. We will also work to secure our global foundation centered in Japan and Southeast Asia.
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As for movies and dramas, Fifth Season has seen a turnaround with expansion of deliveries, including "Nine Perfect Strangers" Season 2 and "Strike" Season 2, and is aiming for solid delivery, including "His & Hers" for Netflix in the second half of the year. The overseas distribution of domestic content is expanding its global influence through premium K-content production and distribution capabilities based on comprehensive partnership with global platforms such as Netflix and Amazon. In the second half of the year, anchor content such as "Bon Appetit, Your Majesty" and "Tycoon Trading Company" is scheduled for airing on global OTTs, as well as the release of director Park Chan-wook's "No Other Choice.
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Music has grown, breaking quarterly sales records with album sales and concert performances of LAPONE's artists. Plans for the second half include securing local Japanese artists such as Hip-Hop Princess and business expansion, while focusing on strengthening the global MCS business model centered around Voice to Planet in the Greater China region.
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In the commerce sector, strategic marketing investment costs increased due to the strengthening of content and expansion of customer touch points, such as offline pop-ups. However, MLC transaction amount has grown and sustained growth in revenue was supported by the strong performance of the health supplement and beauty categories with the wellness trend. In the second half, the business will strengthen the growth momentum of e-commerce with influencer collaboration and SNS and expansion of marketing channels, including TVING. For more details, please refer to the material. Thank you.
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Now, Studio Dragon will present their results.
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Good afternoon. This is Jang Seong-ho from Studio Dragon Finance. I will brief you on the management performance for Q2 2025. The total number of episodes aired in Q2 was 41, the lowest level ever recorded. The number of TV program episodes decreased by seven YoY at 2027, which led to a decline in programming and licensing revenue. The profitability worsened with remaining amortization costs from the previous quarter's major productions. With that, the second quarter revenue stood at KRW 114.5 billion, with an operating loss of KRW 2.9 billion.
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However, there were positive results in terms of content viewership performance. "Our Unwritten Seoul" achieved a peak rating of 9.4% on tvN, and "Marry My Husband," Japanese version, a remake of our mega-hit IP, ranked first for five consecutive weeks shortly after its launch on Amazon Prime Video Japan, proving our content competitiveness and growth potential in the global market.
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In the second half of the year, we aim to recover our lineup and maximize the performance of each project, such as Head Over Heels, Bon Appetit, Your Majesty and The Manipulated, while strengthening our approach to the global market. Furthermore, we will solidify our mid to long term growth foundation by diversifying our business model to go beyond the current drama business, including launch of new actor partnerships and expanding ancillary businesses. Thank you.
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Now we will entertain your questions. Given the time restrictions, please limit your questions to three each and centering on core issues.
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Now Q&A session will begin. Please press asterisk one, asterisk and one if you have any question. For cancellation, please press asterisk two, that is asterisk and two on your phone.
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The first question will be given by Kim Hoi-jae from Daishin Securities. Please go ahead.
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I have two questions. First is on your K-Culture Valley project. I have noted that there was liquidated delay damage amounting to some KRW 310 billion. Has any of this amount been previously reflected in your book numbers? If so, I would like to know the amount and what would be your response to this damage compensation going forward. My second question is on local production. I have noted that Marry My Husband, the Japanese version, has done quite well in the Japanese market. I would like to see an update on your future local production plans.
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Yes, this is Kim Jin-young from Finance. I will be addressing your first question on the liquidated delay damage imposed by Songdo Promise. As we have disclosed in July this year, the claim from Songdo Promise stood at KRW 346.4 billion. But as to how they came to a conclusion of this number, we have yet to find out their formula or the legal foundation for imposing this damage amount. We believe that they have claimed this damage amount, but not based only on the basic contract that we had in place, but also for the period that continued after the termination of the contract.
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We have received advice from our legal advisors and have built a reserve which is founded on a very rational calculation, and it has been audited by our independent auditors.
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As was disclosed, we have objected to this number and currently readying ourselves for a damage suit.
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Now on local production.
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Yes, this is Studio Dragon. Answering to your second question, as you have noted that "Marry My Husband", the Japanese version, has done quite well after its release. It has been ranked number one for five consecutive weeks on Amazon Prime Video Japan. In the second half, we hope to continue this momentum with two new titles. TBS, "Hatsukoi DOGs", and our subsidiary have participated in a title called "Soulmate." These are the two titles that are scheduled to release in the Japanese market. Next question, please.
Next question, please.
[Non-English content] The following question is by Shin Eun-jung from DB Securities. Please go ahead.
I have three questions. One for CJ ENM and two for Studio Dragon. The first question goes to CJ ENM. Could I know the revenue and operating numbers for TVING and Fifth Season? And if you could you elaborate on your forecast for the second half of the year? My first question for Studio Dragon, in your IR documentation pack, I see that you have plans to release 14 titles in the second half of this year. Are these titles confirmed?
Yes, I will give you the breakdown. We did mention to you 14 titles to be released in the second half. As to the increase by two to three titles in the first half of 2026 compared to the second half of 2025, there has been no confirmation yet, no concrete plans as of today. So I cannot give you further color on our plans. As for your China question, we do expect a visit from President Xi of China in October to Korea. And if things go well, we would see an easing of the ban on Korean content in the larger Chinese market. So sales of our old titles to the Chinese market, which would in turn give us additional revenue. We are also discussing potentials of co-airing with the Chinese platforms and also co-productions with the Chinese makers.
First, I will talk about the performance of TVING and Fifth Season that you asked about. TVING's Q2 revenue was KRW 99.5 billion, and its operating loss was KRW 24 billion. In the second half, we expect an increase in subscribers through Wavve synergy expansion, launch with SK Telecom, and restrictions on account sharing.
In addition, we expect operating profit to increase through the popularity of original content. In the second half, we will also strengthen our alliance with SK Telecom, and with them on cap sharing, we do hope to see the numbers improve.
Next question, please.
Currently, there are no participants with questions. Please press asterisk one, asterisk one to give your question. The following question is by Choi Yong-hyun from KB Securities. Please go ahead.
I have three questions. First is related to your advertising business. I see that you have seen a decrease in YoY when it comes to your TV ad revenue also. What's your expectation for ad revenue in the second half? Is it decoupled from the economic mood? From the respondents of how the economic cycle moves, do you expect to see a continued decline in TV advertising revenue? This is my first question. My second question is for the TVING business. I see that YoY top line has seen a decline.
I think it's because of our [inaudible]. In consideration of the marketing activity in the second half, assuming that you see a similar level of [inaudible] in the second half, will you be working on your numbers through increase of subscriber basis? Will you be working on your numbers through increasing your subscribers? My third question is for your commerce business. I see that MLC has done quite well. It has reported a black ink number. However, when it comes to operating profit of your own commerce division, I see that the growth here is negative. Could I interpret this as your MLC business having a lower OP margin?
Because of the given political and social environment, we found it difficult to turn the situation around with our given capabilities. In the second half, we think the environment will somewhat change with improvement in consumer sentiment and also more investment by the government. We do hope to see the environment change for the better. In the second half of the year, we also have-- With that, we will be doing our best when it comes to our ad sales activities. We are also doing the context targeting, and we would also present to the ad buyers a TV [inaudible] solution.
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This is Joo -hee Choi from TVING, answering your question. You've asked whether our decrease in number was due to the influence from our lower RPU. Not necessarily. It's mainly due to two events. First is termination of our agreement with NAVER, which led to a decrease of our subscription income. Second was due to sluggish international sales.
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We do expect to see things to change for the better in the second half. We've already seen much evidence to that end. We've seen our subscriber bases improve in June with our collaboration with Baemin and also with bundling with Wavve. In July, we will have put a ban on account sharing and we have strengthened our alliance with SKT. With that, we saw our subscriber bases improve.
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We have our growth expectation for the second half because we have worked closely with our TVING international partners and we on a YoY basis have seen our ad revenue a twofold increase. With the KBO peak season, we hope to see this momentum continue. With that, on a YoY basis, we will see an improvement on our revenue numbers.
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This is Seo from Commerce Division addressing your question. Your question was related to the increase in our MLC number, but stunted OPI numbers. As for our mobile live commerce business, we are currently seeing a transition from TV home shopping to a more mobile-based shopping experience. Rather than focusing on immediate profit, we are working to increase the size of this business and also to enhance our market presence. We are in the midst of investing for our IP and also engaging diverse marketing activities when it comes to commerce MLC activities. As for our MLC business, we are seeing profit, but it's a little bit above our break-even point, not much of a contribution. Going forward in the second half and also going into year 2026 with a larger sized business, we hope to see much greater contribution from MLC as well.
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Next question, please.
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The following question is by Lee Ki-hoon from Hana Securities. Please go ahead.
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I have three questions. First is with Boys Planet. You did mention in your previous answer the expectation for the ban on Korean content and with Boys Planet and the winners of the competition, the beneficiary of the ban on Korean content. So what's your expectation for that? My second question is for Apple TV+'s K-Pop Idols. How does this program come to be? And if this program proves to be a success, how will the results be reflected in your numbers? My third question is on your finance income. Was it due to the strengthening of won? Did you enjoy a foreign currency exchange gain?
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Currently, episode three has been aired for the Boys Planet program. Compared to season one, Boys Planet this season is much more popular. It has gained more anticipation from the general crowd. As of today, we do not know how many Chinese members with Chinese votes will be included in the final debut group. Regardless of whether the ban on Korean content will be lifted in the second half or not, we are making our own preparations. In China, in order to boost their internal economy, we do see a lot of concerts are growing in China.
Even if there are few Chinese votes in the debut group, we could think about creating a unit group with the other Chinese participants and having them perform concerts and other opportunities. We are currently in discussion with our Chinese partner. Nothing's been confirmed yet, but before the whole program is over, we hope to come up with the details.
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Regarding your K-pop related question, the whole project , the initiation of the project was about three years ago. Lionel Richie, the U.S. singer, gave us this idea. It was through a discussion with that singer that we came to see the birth of this program. Initially, it was intended as an R&B music entertainment format, but later it evolved to be a K-pop format. During the discussion, of course, Lee Byung-kyu gave us a lot of ideas, a lot of input, and we are the main participants in the program. It's not a contract with Apple Korea, but Apple itself. Should this attempt prove to be a success, there could be added seasons going forward.
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K-pop, the program will be aired on Apple TV+ in Korea, plus TVING. With K-pop, we hope to see an increase in the expansion of our subscriber bases, too.
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Apple TV+ will be airing K-pop. Currently, at Apple TV, we have a TVING brand, which is below Apple TV. Apple TV has this huge need for Korean content. It will not only be music format, but also drama and other entertainment formats that are aired through the Apple TV platform. Likewise, we have this ongoing tight collaborative relationship with global OTT.
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That's your last question on our financial gains. Yes, we did benefit from currency exchange rate changes, but the major influence was with PRS derivatives with Netmarble. When we sold our shares with Netmarble in July 2024, we've gained a PRS derivative product gain. In the first quarter, the share prices of Netmarble stood only at KRW 39,000. In the end of second quarter, that has skyrocketed to KRW 62,000, giving us a derivative gain.
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Next question, please.
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The following question is by Lee Hyun-ji from Eugene Investment & Securities. Please go ahead.
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I have two questions. One for CJ ENM and one for Studio Dragon. The first question for CJ ENM is related to your Fifth Season business. I see that drama delivery was quite good in the results. Is it because you delivered more titles or is it because the delivered titles were larger projects? And will this involvement be sustainable going into the future? This is my first CJ ENM related question. My second question is to Studio Dragon. I see in the presentation deck you have plans for two titles in the second half, which will be bound to the US market. Have you already received the series order? Or is it going to be booked? I would like to know more details about the two titles that are bound for the U.S. market in the second half.
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This is Kim from Global Business addressing your question. If you see the delivery schedule for this year, it's quite even throughout all the quarters. In the second quarter, we were able to deliver without major glitches, and we do hope to see such trend continue in the second half. With that, we will be achieving what we have set out to achieve.
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This is Studio Dragon answering your question to the two series order that is on the presentation deck. Typically, production time takes longer in the U.S. market. The two series orders that you see in the presentation deck, the results of those projects will be reflected after next year. We have plans for over 20 titles in the U.S. territory. We have plans for planning and also development of them. We have already a set up structure for four. That is our plan for the U.S. market.
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We will have to end our Q&A session now. This concludes the Q&A session for CJ ENM.
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This concludes the fiscal year 2025 second quarter earning results by CJ ENM. Thank you for your participation.