Greetings. This is Kim Soo Gyeong, Head of the IR Team. I would first like to ask for your understanding that there was a 30-minute delay in our earnings conference call due to the technical issues on the part of IR Kudos , a webcast operator. We will make sure to have a plan B ready for any contingencies for the next earnings call. Once again, thank you very much for joining us for HYBE's fourth quarter and full-year earnings call. We would like to start the conference call from the very beginning again. Today's conference call will proceed through consecutive interpretation, and today CEO Park Ji Won will present business highlights and financial results for 2023, including the results for Q4, followed by the Q&A session where CEO Park Ji Won and CFO Lee Kyung Joon will address your questions. Please note that today's earnings call is based on preliminary consolidated estimates under K-IFRS and thus subject to change during an external audit.
[Foreign language]
Good afternoon. This is CEO Park Ji Won. Thank you for joining HYBE's earnings conference call. 2023 was a year when we proved what we have been communicating with you. On top of the outstanding achievements by BTS members, SEVENTEEN set a record album sales in history in Korea, while NewJeans' music was recognized by major global media outlets as their music was chosen as the Song of the Year and the Album of the Year, and LE SSERAFIM achieved remarkable growth in the global music market. In short, HYBE's artists made another leap forward in 2023. Furthermore, with the lifting of COVID-19-related restrictions on concerts, HYBE artists were able to meet fans around the world through 125 concerts in total. As a result, HYBE recorded the consolidated annual revenue of KRW 2.1781 trillion and the operating profit of KRW 295.8 billion, with both numbers growing more than 20% year over year. Since going public in 2020, HYBE has been delivering on investors' expectations, with the revenue growing more than 20% each year.
[Foreign language]
It is safe to say that 2023 revenue growth was mainly driven by album sales and concerts. In 2023, HYBE's artists in Korea sold 43.6 million copies of albums in total, according to the annual Circle Chart , representing 38% of the total albums that enter the chart. Album sales in 2023 nearly doubled from the previous year. By artists, SEVENTEEN sold 16 million copies, TXT 6.5 million copies, and NewJeans 4.26 million copies. In addition, through solo projects, BTS members were able to achieve high record sales of approximately 8.7 million copies at home and abroad. What we would like to note here is that streaming frequency and streaming revenue have increased along with physical album sales. HYBE's streaming revenue grew by about 79% year over year to achieve KRW 298 billion, and the streaming times of HYBE Korean artists reached 5.8 billion, which represents about 4.5% of the Spotify 200 chart on an annual basis. Furthermore, NewJeans ranked number one and number two at the same time on Korea's annual streaming chart, and Perfect Night by LE SSERAFIM topped the charts at the end of last year by regaining popularity, and Jungkook's Seven, 3D, and Standing Next to You entered Billboard Hot 100. Likewise, HYBE's artists have enjoyed popularity in the streaming market as well. Furthermore, artists of BMLG and QC under HYBE America generated solid streaming sales, thus contributing much to the album revenue. Recognizing the growing significance of streaming starting from 2024, we will call the album sales category as the category of recorded music sales. Please note that the actual revenue classification for reporting remains unchanged.
[Foreign language]
In addition to the huge growth in album and streaming sales, we would also like to direct your attention to concerts and performances. HYBE artists performed 125 concerts in total in 2023. Suga of BTS sold out all 28 concerts, which were attended by approximately 330,000 people. SEVENTEEN conducted the Follow tour where they met with more than 700,000 fans at 20 concerts held in nine cities. TOMORROW X TOGETHER held 28 concerts in 15 cities to entertain 410,000 fans, while ENHYPEN performed 15 shows in nine cities with the accumulated audience of about 240,000. In particular, TXT and ENHYPEN had their first stadium tour in North America and the first dome tour in Japan since their debut, demonstrating their elevated status on the global stage. LE SSERAFIM also conducted their first world tour with tickets sold out in Seoul, Japan, and Hong Kong, proving their global popularity. HYBE has combined their offline tours with live streaming and live viewing to engage more fans around the world.
[Foreign language]
There were many other developments in 2023 that helped bring HYBE to the next level. First of all, in March, the acquisition of QC Media expanded the genre portfolio of HYBE to include hip-hop in the U.S. In May, the debut of BOYNEXTDOOR further solidified HYBE's multi-label structure, and the combination of HYBE's technology and the artist's talent led to the debut of MIDNATT. In June, the ARMY around the world were joined together for BTS FESTA to celebrate the 10th anniversary of BTS. In September, SM artists opened fan communities on Weverse to allow more K-POP fans to utilize the platform. In October, we acquired BELIFT LAB to reinforce our label business. Like this, with an unwavering vision, HYBE is moving fast for the future.
[Foreign language]
Currently, HYBE has 12 labels in total, including six in Korea, three in the U.S., two in Japan, and one in Latin America. Each label has a lineup of artists with distinct style and color. In 2024, HYBE artists will continue to release new music, perform actively, and reach out and communicate closely with their fans. Our multi-label structure is designed to reduce dependence on any particular act or label while ensuring independent operations of the labels and promoting competition and cooperation among them. The strength of the system was already proven in 2023. This year, we look forward to the debut of [Foreign language] of BELIFT LAB , and [Foreign language] of HYBE Geffen [Foreign language] to further expand the artist portfolio.
[Foreign language]
[Foreign language]HYBE [Foreign language] management company, newly signed a contract with [Foreign language] last year. This year, in addition to the already released single by [Foreign language] , her regular album is scheduled to come out, which is expected to generate substantive revenue.
[Foreign language]
HYBE has been striving to expand the K-POP system, and one of the strategies to do so is to grow our influence in the new markets through label acquisitions. In October, we acquired Exile Music, a label under Exile Content , and established HYBE Latin America in Mexico, which allowed us to enter the Latin music market, one of the fastest growing music markets in the world. HYBE Latin America will carry out artist management business as well as activities to discover and nurture talent. In the medium to long run, we would like to apply the proven business methodology of K-POP to the Latin genre. Chairman of the board of HYBE Latin America is assumed by Isaac Lee, a guru on the Latin content market who founded Exile Content . Having worked as Chief Content Officer of TelevisaUnivision , the world's largest Spanish-speaking TV channel, Chairman Lee is going to contribute to content production targeting the Latin audience and partnerships with global media companies.
[Foreign language]
Weverse, our global superfan platform, achieved really cool growth in 2023. The number of artist communities on the platform increased from 71 at the end of 2022 to 122 at the end of last year. 51 artist groups have newly opened Weverse communities, and with not only domestic but also global artists joining the platform and opening communities, the MAU has been stable at around 10 million. Since Weverse Live was launched more than a year ago, artists and fans have been communicating on a real-time basis throughout showcases, album behinds, post-concert sessions, as well as during breaks. This has helped increase monthly average visits and time spent on the platform. In 2023, we introduced digital currency Jelly, a Weverse DM, fan letter, and a POD service called byFans so that Weverse has become the platform where fans can enjoy a diverse fan experience. Weverse is striving to offer more diverse experiences to artists and fans, and this year we will continue to work hard to become a global representative fan platform by reflecting diverse needs and preferences of artists and fans in their services. We will be able to deliver more good news within this year.
[Foreign language]
Now let me report on HYBE's consolidated financial results. The consolidated revenue for 2023 was again record high, posting KRW 2.178 trillion, up 23% year over year. Operating profit was also the highest in history to come in at KRW 295.8 billion, up 25% year over year. The average growth rate of HYBE's operating profit for the past three years was 25%. The OP margin improved 0.3 percentage points year over year to 13.6%.
[Foreign language]
Let me give you more details on Q4 results as well. On a consolidated basis, fourth quarter revenue posted KRW 608.6 billion, up 14% year over year and 13% quarter over quarter. We recorded the highest quarterly consolidated operating profit in Q4 with KRW 89.3 billion. Recorded music sales were record high in Q4 thanks to the comeback of many HYBE artists and higher album sales. Concert revenue sustained a Q3 growth trend with large-scale concerts held in Q4. In addition, content sales grew at a similar rate as the previous years thanks to artists' Season's Greetings and BTS documentary, thereby contributing to the full year earnings.
[Foreign language]
By revenue category in the fourth quarter, recorded music sales posted KRW 276.2 billion, up 5% quarter-over-quarter and 88% year-over-year, a record high level. The result is thanks to the success of SEVENTEEN's 11th mini album titled 'God of Music', Jungkook's solo album 'Golden', ENHYPEN's fifth mini album, as well as TXT's third regular album. In particular, three tracks by Jungkook, 'Seven', 'Standing Next to You', and '3D', were very successful in the global streaming market, a major driver of streaming revenue growth. Furthermore, artists of BMLG and QC generated solid revenue with good performance in the streaming market by the end of the year. In 2024, our artists will be releasing albums starting from the second quarter. We're preparing to continue our lead not only in album sales but also in the streaming market.
[Foreign language]
In Q4, concert sales were similar as the previous quarter at KRW 89.5 billion, up 38% year over year. SEVENTEEN carried out their tour titled 'Follow' with 20 concerts in nine cities including those in Japan, attracting more than 700,000 people in total. ENHYPEN started FATE tour in the third quarter and demonstrated their popularity in the U.S. with the first stadium concert in LA in October. The FATE tour concluded successfully with an encore concert in Korea last weekend. This year, HYBE artists will continue to be active on the concert scene with the size of concerts expected to be bigger than last year to meet more fans in diverse regions.
[Foreign language]
Content sales posted KRW 103.1 billion, down 10% year over year but more than doubled Q2. In the fourth quarter, Season's Greetings by various groups were welcomed by their fans and the ARMY loved a diverse range of BTS content including the documentary titled 'Monuments' in commemoration of the 10th anniversary as well as PTD concert DVD.
[Foreign language]
The OP margin in 2023 recorded 13.6%, up 0.3 percentage points year over year. The result demonstrates the power of the multi-label structure that we've been building for the past several years. Artists of each of these labels as well as individual members of BTS produced outstanding results thereby driving the margin improvement.
[Foreign language]
Today, HYBE announced its plans for cash dividends. For shareholder return, we listened to the market for more than a year and engaged in discussions through board meetings to develop a dividend policy and proceeded with capitalizing excess share issuance proceeds. As a result, for the first time since the IPO, we will pay out cash dividends worth KRW 29.2 billion with a DPS of KRW 700. Considering that the company is still in a full-fledged growth phase after going public, it may seem rather early to introduce a shareholder return program, but it reflects HYBE's philosophy of prioritizing shareholder value. Going forward, we will ensure transparency and predictability for shareholders with respect to the company's financial performance and profit sharing and further enhance shareholder value to promote the company's valuation in the market.
[Foreign language]
2023 was a year when we tried and proved many of the things that HYBE wanted to accomplish. We demonstrated the healthy fundamentals of the multi-label structure and continue to expand our business globally. In 2024, we will keep striving to achieve solid growth around HYBE's artists, labels, solutions, and platforms. We would like to ask for your continued support and encouragement. Thank you.
[Foreign language]
Today's earnings presentation was not delivered by CEO Park Ji-won himself but through TTS, an AI voice synthesis technology by SuperTone. When you input CEO's voice sample and a desired text, AI generates the speech in his voice. We thought it would be a great opportunity to showcase SuperTone's technology to the investors. We ask for your continued interest as SuperTone will demonstrate unlimited potentials around what we can do with this AI voice technology. Now, CEO Park Ji-won and CFO Lee Kyung-jun will like to address your questions in their real voice.
[Foreign language]. Now, Q&A session will begin. Please press star three, that is star and three on your phone. Questions will be taken according to the order you have pressed the number star three. For cancellation, please press star four, that is star and four on your phone. [Foreign language] . The first question will be provided by Kim Dong-jun from CLSA. Please go ahead, sir.
[Foreign language]
I am Kim Dong-jun from CLSA. Thank you for the opportunity. I would like to ask two questions. First of all, we can see that there has been a decline in the physical album sales for K-POP artists, which has actually been a driver for the growth of the K-POP industry as a whole. So in your view, can you provide us with some guidance on the overall trend and the future outlook on physical album sales? The second question has to do with your game business. I understand that 'ASTRA: Knights of Veda ' will soon be released and there was some testing period where you collected feedback. I would like to know more about the feedback that you received because personally when I tried this game I thought that there would be too much pricing. When we consider that you need to build the brand image as a game publisher because it is going to be the first game that you will release to the market as a publisher, you need to take care of this aspect because the higher pricing model may lead to more fatigue on the user side. There are some concerns related to that. About the recent IP acquisition through a partnership, I'd like to learn more about that. Can you provide us with some color and the guidance on your gaming business? I would also like to know what percentage of your employees are engaged in the gaming business. Thank you.
[Foreign language]
I am CFO Lee Kyung-jun. Let me address your first question. It is true that there has been a declining trend in the market overall for the K-POP physical album sales, mainly due to the decline in group purchases in China as well as the weakened competition among fans of different groups within Korea. However, we were able to see the strong growth for our artists going forward because we can see that the number of people buying physical albums has been growing and we believe that this trend will continue. In particular, we are seeing noticeable growth in the U.S. and Japan. As for HYBE artists, they are not only successful in terms of physical album sales but also streaming revenue has been growing. So there may be temporary decline in the physical album sales but overall the recorded music revenue for our artists is expected to grow.
[Foreign language]
I am CEO Park Ji-won. Let me address your question regarding our gaming business. Currently, 'ASTRA: Knights of Veda ' is going through a beta testing to continue to receive feedback and make improvements, especially around the dungeon play as well as increasing the quality of the initial gameplay. We're overall improving the game both in terms of the gameplay as well as the battle balance. As for the pricing model, we have been continuing to monitor the situation and making constant improvements. We recently signed a publisher contract with Action Square for 'Dungeon Stalkers' and Action Square has already released the Steam Next Fest very recently, which was chosen as the most played game. We're working hard to make sure that we publish this game towards the second half of this year. As for the headcount for gaming, it is around 10%, a little more than 200 people.
[Foreign language]
[Foreign language]. The following question will be presented by Park Seong-guk from Kyobo Securities. Please go ahead.
[Foreign language]
I am Park Seong-guk from Kyobo Securities. Thank you for good earnings results. I have three quick questions. First of all, I can see that your non-operating expenses are about KRW 260 billion. Even in consideration of the valuation losses on the part of SM equity due to the falling stock prices, I believe that this is quite a large amount. I wonder if there were any one-off issues related to loss, impairment of goodwill, or any other situations. The second question has to do with the amortization amount. I understand that there were some transactions including the acquisition of BELIFT LAB recently. I wonder the size of the amortization on a quarterly basis and when this will be fully amortized. The third question has to do with your shareholder return policy. Going forward, including a potential shareholder buyback as well as dividend payout, what is your target shareholder return percent or ratio? If you can share with us any color, we would appreciate that.
[Foreign language]
I am CFO[Foreign language] . I'd like to comment on the side of non-operating expenses, but I would like to ask you to take a look at the difference between non-operating expenses and non-operating income. The impact on the expense side is about KRW 180 billion. This is partly due to the stock price falling of SM Entertainment. For SM equity, we recognized profit in the third quarter, but we had to recognize some losses in the fourth quarter. There was some devaluation or valuation cut for some subsidiaries, especially Ithaca Holdings . In 2023, Justin Bieber and Ariana Grande were expected to resume their career. However, this was delayed and there was some loss or cut or decline in the valuation for these subsidiaries. Going forward in 2024, Ariana Grande has already started her activities and other activities are planned. This is going to normalize the operation of Ithaca Holdings .
[Foreign language]
Your second question has to do with the PPA amortization including the acquisition of Ithaca Holdings , BELIFT LAB , and [Foreign language]. On an annual basis, the amount is about KRW 60-KRW 70 billion. As for the timing or the timeline of the amortization, it varies by asset. I cannot give you any definite answer as to when they will all be fully amortized because it depends on the contract period and the timing of the acquisition. We acquired Ithaca Holdings some time ago but the other acquisitions are relatively new. We believe that these will be amortized within two to five years.
[Foreign language]
As for our shareholder return policy, you asked whether we have any plans for treasury share buyback. We may consider dividend payout or treasury share purchase on a yearly basis given in consideration of various factors. This year we do not have any plan for share buyback, but if there is a need that arises in the future, we will consider that and if we decide to do so, we will communicate it with you.
[Foreign language]
You also wanted to know the target shareholder return ratio and when we disclose our dividend payout policy, we mentioned that it can be up to 30% of the consolidated net income.
[Foreign language]
We'll take one more question.
[Foreign language]. The following question will be presented by[Foreign language] from KB Securities. Please go ahead.
[Foreign language]
I am [Foreign language] from KB Securities. I enjoyed the earnings presentation produced by AI technology and I was able to see the technology of SuperTone and what it can do. I have three quick questions. The first question is that as we see a transition from core fandoms to light fandoms and from high RPU to light RPU, I believe there may be some need for business model change. So I'd like to know what kind of strategies HYBE has in mind. The second question is that we can see the increasing significance of streaming revenue and so far only BTS and NewJeans made the entry to the Billboard Hot 100. I wonder if there are any other groups that you believe will be able to make that this year. The third question is that some of the BTS members will soon finish their military service and I wonder if there are any comeback plans for individual members. Thank you.
[Foreign language]
I am CFO [Foreign language]. You mentioned that we're going through a phase where there is a shift from core fandom to light fandom and I believe it is mainly because of the declining sales of physical albums. But in our view, the declining physical album sales is mainly due to the decline in group purchases in China as well as weakened competition among fan groups for some music groups. However, we believe that we are strongly maintaining the core fandom and their RPU is not really declining in our view. Our strategy is to continue to maintain the core fandom while expanding the light fandom. In particular, we are going to help our core fans to not only consume physical albums but to be able to enjoy content and music through concerts and other direct and indirect experiences through utilizing other business models. For light fandom, we will focus on offering them opportunities to enjoy our music in a more easy manner.
[Foreign language]
I am CEO [Foreign language]. Let me add a little bit more. We have been closely monitoring the purchase trends of our artist's albums as we sell these albums through Weverse. We have been monitoring the trend of the number of buyers who are buying physical albums and we're planning to introduce new business models to expand their experiences. Many investors wanted to know when Weverse membership service will be launched and this year we're going to offer the expanded Weverse membership service. We will continue to expand our fans and our customers' experiences going forward.
[Foreign language]
You also asked some questions as to which other groups will be able to make it to Billboard Hot 100 other than NewJeans and BTS. We would, of course, like to have all our music and albums enter the chart, but it is not easy to predict which track or which albums will make that.
[Foreign language]
As for the comeback schedule of BTS members, as you know, Jin will finish his military service in June followed by J-Hope. But as for specific schedules and plans for individual activities including album release, they have not been finalized. But once they are finalized, we will make sure to share them with the investors as well as fans.