Greetings. Thank you for joining us for HYBE's fourth quarter earnings call. This is Lee Sangwoo, head of the IR team. I'll be moderating today's call, which will proceed through consecutive interpretation. Our CEO, Park Jiwon, and CFO, Lee Kyung-jun, will first present the financial and business highlights for 2022, including Q4, business plans for the future, and the recently announced M&A, and followed by the Q&A session. Please be advised that today's earnings call is based on preliminary consolidated estimates under KIFRS and thus subject to change after the external audit. I will hand over to our CEO.
Good afternoon. This is CEO Park Jiwon. Thank you for joining our 2022 fourth quarter earnings call today. 2022 will be remembered as a very challenging year for us as we had to take on new challenges amidst numerous uncertainties.
Last year, COVID-19 related restrictions forced us to reschedule artist activities, including concerts. BTS, HYBE's representative act, announced that the members would fulfill their military duty consecutively and engage in solo projects. In addition, we debuted three new acts and started new businesses represented by the launch of an in-house developed game. Despite doubts and concerns in the market, HYBE artists and employees were able to produce high quality results and made significant achievements that innovated the entertainment industry while engaging in constant communication with our fans. We're pleased to share with investors that HYBE is continuing its growth in diverse areas and has strategic plans for further growth. In the fourth quarter, under HYBE's multi-label structure, diverse HYBE artists gave a lot of joy and excitement to fans through their unique music and performance.
BTS' Jin and RM released their solo albums and engaged in solo activities, which were loved by their fans. SEVENTEEN, Tomorrow X Together, and ENHYPEN were able to conclude their world tour successfully and met with their fans offline, which they were not really able to do during the COVID-19 pandemic. LE SSERAFIM and NewJeans had a fantastic first year and enjoyed an exclusive growth thanks to a strong comeback after a successful debut. In Japan, &TEAM's debut attracted huge attention. HYBE did a remarkable job of launching these 3 new groups successfully. HYBE artists produced overwhelming achievements, and their successes were confirmed not only in terms of indicators such as album sales, but also in numerous TV music programs and year-end award ceremonies. This year, our artists are continuing to produce great results.
First of all, NewJeans by ADOR released an album titled OMG early January, whose tracks Ditto and OMG are enjoying worldwide popularity. With the first-week sale of 700,000 copies, the album has sold more than 1 million copies so far. Given the fact that their debut album, which came out just six months ago, also sold more than 1 million copies, NewJeans became a group that has 2 million-selling albums in just half a year. In terms of chart performance, the group broke the record of being the longest number 1 on various domestic music charts while staying on the Billboard Hot 100 and ranking high on the numerous global charts, enjoying a syndrome-like popularity. In addition, the group ranked number 1 in terms of reputation for brand advertisement, signing the advertising contracts with global brands like Nike.
The members are also serving as ambassador for several luxury brands, including Chanel. NewJeans has been demonstrating an unprecedented growth and trajectory and influence, and I ask for your continued interest in what this group will achieve this year. Big Hit Music's Tomorrow X Together by Big Hit Music has positioned itself as a leading next-generation K-pop act, selling 2.18 million copies in the first week of release. The group achieved double first-week million sellers in 3 years and 11 months since debut. They are the first 4th-generation K-pop group that has more than 20 million TikTok followers, demonstrating their remarkable growth. TXT will begin the world tour from March this year at a scale much bigger than their last year's world tour. LE SSERAFIM by Source Music is getting a huge response in Japan with their Japanese debut single, Fearless.
Their first week sales is 220,000 copies, recording high for Japanese debut album sales by a K-pop girl group, topping the monthly single chart. The group will hold the first-ever fan meeting at the Olympic Hall in Seoul on March 18th and 19th, whose tickets were sold out in just 5 minutes. BSS, a unit of SEVENTEEN by Pledis, topped global charts with more than 600,000 copies of their albums sold in the first week, which shows that SEVENTEEN can continue their career and brand through diverse unit and solo activities. I would like to emphasize that our artists were able to carry out numerous activities independently in parallel, thanks to our multi-label system that started in 2019. It is clear why the labels, including ADOR, were able to achieve great success under HYBE's multi-label structure.
The success of a multi-label system does not just simply hinge on the organizational structure where labels exist independently. For example, the most important success factor for ADOR and NewJeans is, first and foremost, talented creators such as producer Min Hee-jin, who can break the mold of the existing thinking and lead the market. Their success is also thanks to the dedicated employees who share the creators' vision and pursue the vision through the independent operation system that enables completely independent creative endeavors, as well as the label's infrastructure that can support various business ideas. In short, HYBE's multi-label strategy is all about respecting each label's unique color and character and supporting their expansion. This year, several new artists will be added to the lineup.
First, a new boy group produced by Zico, a leader of KOZ Entertainment, will debut in the first half of the year. Producer Pop Time, who is known for numerous hit songs such as Tomboy, New Thing, and Any Song, has joined the project to create music and content that are intuitive and easy listening. Much time and effort has been invested to prepare for the new group comprised of members that exhibit uniqueness and originality. Pledis will present a new boy group this year as the first new act to be launched in eight years since Seventeen. The group is preparing for its debut with talented members selected through domestic and global auditions. Preparations for a girl group audition jointly pursued by HYBE and Universal Music Group in the U.S. are well underway.
Many people at HYBE are working hard together with globally renowned producers and songwriters, as well as top talents who have produced successful pop albums for many decades for this fabulous project, so that we can expand the K-pop market further. I would like to ask for your interest and encouragement. You may also want to know about future plans of BTS, a group that has made HYBE what it is today. Until they join the military, BTS members will continue to pursue solo projects and interact with their fans actively. Jimin's solo album will be released in March, Suga will start his world tour in April in the U.S., Asia, and Japan. Other members will also engage in diverse solo projects, we will make sure to share them with you as soon as detailed schedules are finalized.
As fans desire earnestly, HYBE is not only supporting their solo careers, but also working on plans for a comeback as a whole group when BTS members finish their military service. We will do our best to support this, we would like to ask you for your continued support and love for BTS. Along with the explosive growth of artists through vigorous activities, HYBE has also recently shared news and plans to maximize the global competitiveness of K-pop and become more influential in the global music market. We announced on February 9th to acquire 100% stake of QC Media Holdings, a holding company of Quality Control Music through HYBE America, which makes another step forward for HYBE to expand into the global music market together with another major global music company following the case of Ithaca Holdings. Based in Atlanta, Quality Control Music...
Quality Control Music Holdings has strong presence in North American urban music scene. Their acts include Lil Baby, who won a 1 Grammy and received 8 Grammy nominations. Migos, who played a key role in popularizing trap genre in North America, as well as Lil Yachty and City Girls. As a result, we can expect music catalog revenue and management revenue, and their revenue contribution is expected to continue to increase with new album releases by QC artists and debut of new acts. Furthermore, this deal allows HYBE to expand its genre portfolio from K-pop, pop music, country music to hip hop, urban music, thereby building a top -tier lineup in each category and solidifying the multi-label structure not only in Korea and Japan, but also in North America.
회사에 재무 성과 및 이익 분배와 관련하여 주주에게 투명성과 예측 가능성을 제공하고, 더 넓은 범위의 투자자를 유치하여 회사의 시장 가치를 높일 수 있도록 하겠습니다. 2023년에도 HYBE가 만들어 나갈 미래를 계속 응원해 주시길 부탁드리며, 계속해서 Lee Kyung-jun CFO가 재무실적에 대한 내용을 말씀드리도록 하겠습니다.
Finally, as we mentioned at the last quarter's earnings call, I would like to share with you our medium and long-term shareholder return policy to enhance shareholder value. Going forward, HYBE will pay dividend and buy treasury shares each year within the range of 30% of the consolidated controlling shareholder's net profit. As the first step, we plan to propose a resolution item on the transfer of capital reserve to retained earnings at the upcoming general shareholders meeting in order to secure stable profit available for dividend. So far, HYBE was not able to secure income available for dividend payout due to structural changes resulting from split offs and merger.
If there is enough support from shareholders on this proposal, HYBE plans to start to pay out dividend and purchase treasury stock in 2024, the earliest possible time for the implementation of the shareholder return policy. We will make sure to provide transparency and predictability to shareholders with respect to the company's finances and profit sharing, and enhance the company's valuation by attracting a larger pool of investors. We ask for your continued support and encouragement for the future that HYBE will continue to create in 2023. Now, CFO Lee Kyung-jun will report on the earnings highlights.
안녕하세요. 이경준입니다. HYBE의 연결기준 재무실적에 대해 말씀드리겠습니다. HYBE는 2022년 연결기준 연간 매출액 KRW 1,778,000,000,000으로 작년 대비 42% 성장을 기록하며 또 한 번 최고의 매출을 달성하였습니다. 영업이익 또한 KRW 237,700,000,000으로 전년 대비 25% 상승하였으며, 지난 3년 평균 27.8% 성장하였습니다. 영업이익률은 13.4%를 기록했습니다.
Good afternoon. This is CFO Lee Kyung-jun. Let me report on HYBE's consolidated financial results. The consolidated annual revenue for 2022 posted KRW 1,778 billion, another record high with a 42% growth year-over-year. Operating profit was up 25% year-over-year to KRW 237.7 billion, with an average annual growth rate of 27.8% for the past three years. OP margin recorded 13.4%.
반면, 당기순이익은 삼백삼십구억원으로 영업이익 대비 매우 낮다고 느끼실 텐데요. 이는 이타카 홀딩스 영업권에 대한 손상, 손, 손상차손과 전환사채의 평가손실 등으로 인한, 인한 영업비용 때문입니다. 세부 내용을 말씀드리면, 이타카 홀딩스는 2022년 EBITDA 육십... 육백삼십오억원으로 당초 사업 계획을 달성하는 견조한 실적을 보여주었으나, 최근 금리 상승으로, 어... 금리 상승으로 인한 할인율 상승으로 인하여 회계상 영업권 평가 과정에서 약 팔백억원의 손상차손을 인식하였습니다. 또한 2021년에 발행한 전환사채의 경우 당사 주가와 연동되어 평가됨에 따라 사백억원의 평가손실을 인식하였는데, 이는 현금 유출입과는 무관한 비용일 뿐만 아니라, 향후 전환사채를 상환하는 시점에 해당 금액만큼 이익으로 돌아올 금액입니다. 이외 기타 영업외 손익들이 일부 발생하여 당년도 당기순이익에 영향을 주었지만, 실제 현금흐름 측면에서 봤을 때는, 어... 연간 약 삼천육백억원에 영업활동으로 인한 현금흐름이 창출되었으며, 이를 통해 저희 본업을 통한 수익성은 꾸준히 성장하고 있는 것을 확인하실 수 있습니다.
Net profit posted KRW 33.9 billion, which seems quite low compared to the operating profit. This is mainly due to non-operating expenses, including impairment loss on goodwill for Ithaca Holdings and valuation loss on convertible bond. To give you more detail, Ithaca Holdings posted EBITDA of KRW 63.5 billion in 2022 with solid business performance in line with its business plan. KRW 80 billion of impairment loss was recognized in the process of goodwill valuation because of the rising discount rate on the back of the rising interest rates. Convertible bond issued in 2021 incurred KRW 40 billion of valuation loss because its valuation is linked to our stock price. This cost bears no impact on the cash flow, and the same amount will be recovered as profit at the time of bond repayment.
There were also other non-operating expense items that impacted our net profit. In terms of the actual cash flow, about KRW 360 billion of cash flow was generated annually from our business operations, which shows that our core business profitability continues to improve.
Q4 실적에 대해서 좀 더 자세히 말씀드리겠습니다. 연결기준 Q4 매출액 KRW 535.3 billion, 영업이익 KRW 51.7 billion을 달성하였습니다. Q4 매출액은 전년 동기 대비 17% 증가하였고, 직전 분기 대비해서는 20% 증가하였습니다. 엔데믹을 맞이하며 앨범과 공연, 광고, 출연과 매니지먼트와 같은 직접 참여형 매출은 KRW 289.4 billion으로 전체 매출의 54%를 차지하였으며, MD 및 Licensing, Contents, Fanclub 매출 등의 간접 참여형 매출은 KRW 245.9 billion으로 전체 매출의 46%를 차지하였습니다.
Moving on to the fourth quarter results. We recorded revenue of KRW 535.3 billion and operating profit of KRW 51.7 billion. In Q4, the revenue grew 17% year-over-year and 20% Q-on-Q. As COVID-19 became endemic, revenue with direct artist involvement, including album sales, concerts, advertisements, appearances, and management, was KRW 289.4 billion, accounting for 54% of the total revenue. While revenue with indirect artist involvement, including merchandising, licensing, content, and fan club sales, made up the remaining 46%, recording KRW 245.9 billion. Let me give you more details by revenue category.
In the fourth quarter, album sales recorded KRW 149.1 billion, up 15% Q-on-Q and 74% Y-o-Y, mainly thanks to the BTS Jin and RM solo albums and LE SSERAFIM's mini album ANTIFRAGILE. In 2022 as a whole, HYBE artists' performance on the domestic and global music charts was outstanding. First of all, in Korea's Circle Chart annual album sales chart, BTS, SEVENTEEN, Tomorrow X Together, ENHYPEN, LE SSERAFIM made top 15. In addition, in Japan, HYBE artists were the only Korean groups that made top 15 in terms of the annual album sales data from Oricon Chart. Among them, SEVENTEEN sold the most copies, and BTS and ENHYPEN were also loved by Japanese fans. In the U.S., BTS and TXT were the only K-pop artists that made top 10 on the Billboard annual album sales chart.
Considering the massive success of TXT's fifth mini album, that is not even yet included in the chart, we expect the career of TXT to soar even higher in 2023.
SEVENTEEN, Tomorrow X Together, ENHYPEN,
SEVENTEEN, Tomorrow X Together, and ENHYPEN held numerous concerts in the fourth quarter, resulting in the concert revenue of KRW 64.7 billion. SEVENTEEN sold all the tickets for 6 concerts of the Dome Tour in Japan under the theme of THE CITY Project, solidifying its overwhelming status in Japan. Tomorrow X Together and ENHYPEN also concluded their first world tour successfully. First, thanks to the strong support of their fandom, these three acts are expected to see the scale of their concerts more than double in 2023. Furthermore, LE SSERAFIM, NewJeans, and &TEAM, all debuted last year, will expand their activities, including concerts and fan meetings this year. Of the indirect involvement revenue, MD and licensing and content revenue recorded KRW 112.5 billion and KRW 115.1 billion, respectively.
The video publications including Love Yourself, Love Yourself Tour DVD, and Season's Greetings that look back on the year of each artist release at the end of each year, were loved by fans and contributed to good results. The OP margin in 2022 was down 1.8 percentage points year-over-year to 13.4%. Given the three new groups who made a debut and expenses incurred due to Weverse integration and new game release, HYBE demonstrated very strong earnings fundamentals in 2022.
계속해서 글로벌 팬 커뮤니티 플랫폼 위버스와 관련된 KPI에 대해 설명드리도록 하겠습니다. 매월 팬들의 방문 수인 MAU는 사분기 평균 전분기 대비 약 이십일 퍼센트 대폭 성장한 약 팔백오십만 명 수준을 기록했습니다. 페이 유저 한 명당 한 달에 결제하는 평균 금액인 AR, ARPPU와 결제 금액은 직전 분기와 비슷한 수준을 이어갔습니다. 이처럼 위버스는 작년 7월 V LIVE와의 성공적인 통합 이후 지속적으로 MAU와 고객 리텐션에 있어서 긍정적인 지표들을 만들어내고 있습니다.
Moving on to the KPIs of Weverse, a global fan community platform. The average MAU in the fourth quarter is around 8.5 million, up 21% Q1Q. The total user payments and ARPPU, which measures average monthly revenue per paying user, remain similar to the previous quarter. These indicators show that Weverse has been producing positive results in terms of MAU and customer retention since the successful integration with V Live in July last year.
또한 위버스는 세계 일위의 팬 아티스트 커뮤니케이션 플랫폼으로서 더 많은 아티스트들과 함께 하게 되었습니다. 이천이십일 년 말 서른여섯 개에 불과했던 아티스트 채널 수는 이천이십이 년 말, 어... 일흔여덟 개로 늘었으며, 아티스트와 팬 포스팅 수도 이와 더불어 늘었습니다.
As the world's number one fan -artist communication platform, Weverse is now joined by more artists with the number of artist channels, which was only 36 at the end of 2021, increasing to 78 at the end of 2022, along with the increase in the number of postings by artists and their fans.
올해에는 말씀드렸던 대로 위버스의 새로운 서비스들이 시작될 예정입니다. 먼저 팬이 직접 나만의 머치를 직접 디자인하고 주문할 수 있는 서비스인 바이 팬스가 올해 이 분기 중에 출시될 예정입니다. 또한 위버스 내에서 사용될 젤리를 통해 구입할 수 있는 다양한 디지털 혜택들을 준비하고 있으며, 이것들을 멤버십 구독 서비스로 묶어서 올해 삼 분기에 출시할 예정으로 이러한 서비스들을 통해 팬분들께 즐거움을 줄 수 있는 종합적이고 고도화된 플랫폼으로 발전해 나갈 계획입니다.
As we announced earlier, Weverse will offer diverse new services this year. First, we will launch a new service called By Fans in second quarter, which allows fans to design and order their own merch. Also, we're working on various digital benefits that can be purchased with Jelly on Weverse. They will be bundled as a membership subscription service and launched end of third quarter of this year. Through these services, we plan to transform Weverse into a comprehensive and sophisticated platform that can offer a lot of joy and fun for our fans.
최근 발표한 QC Media Holdings의 수익성에 대해서 궁금해하시는 투자자분들이 많으실 것으로 예상됩니다. 저희는 연평균 기준으로 EBITDA 대비 10배에서 15배 수준으로 가치를 추정하였으며, 이는 합리적인 가치 산정이라고 판단합니다. 특히 올 한 해에는 메인 아티스트인 Lil Baby가 올해 대규모 투어, 오프라인 이벤트 및 앨범 발매 등의 적극적인 활동을 함에 따라 전년 대비 실적이 크게 증가할 전망이며, HYBE와 QC는 향후 공동 사업 기회를 창출하고 운영 효율화를 이루며 확장된 인프라를 통해 시너지 극대화가 가능할 것으로 보고 있습니다.
I believe many investors want to know more about the profitability of QC Media Holdings. Our value estimation of the business was 10-15 times its annual average EBITDA, and we believe it is a fair valuation. In particular, their earnings in 2023 are expected to grow significantly year-over-year, since its main artist, Lil Baby, plans to engage in various activities including a large -scale tour, offline events, and album sales. HYBE plans to develop joint business opportunities with QC, enhance its operational efficiency, and we believe we can maximize earnings by expanding infrastructure.
2022년에는 BTS가 더욱 성숙한 아티스트로 거듭나는 다음 챕터를 위한 첫발을 떼었고, 저희가 오랜 기간 선보이지 않았던 신인들을 세상에 공개하면서 전례 없는 성공들을 보여드렸습니다. V Live와의 통합을 이뤄낸 팬덤 플랫폼 Weverse를 런칭하고 자체 개발 게임 In the SEOM으로 저희 게임 역량도 확실히 입증했습니다. 2023년은 HYBE가 이 모든 사업들을 더욱 공고히 해나가며 또 한 차례 HYBE의 DNA를 증명해 보이는 한 해가 될 것입니다. 오프라인 공연이 완벽히 가능해진 새해에 더 많은 아티스트와 레이블이 저희의 솔루션과 플랫폼 기반으로 성장한 모습을 보여드릴 예정입니다. 끊임없는 고민을 통해 발전하는 저희 HYBE의 앞으로의 행보에 지속적인 관심과 성원 부탁드립니다. 감사합니다.
In 2022, BTS took the first step for the next chapter to become more mature as artists. New acts were finally revealed after a long time of preparation, achieving unprecedented success. We launched a fandom platform, Weverse, after integration with V Live, and demonstrated our game related capability by launching an in-house developed game, In the SEOM. This year we will focus on solidifying and strengthening these businesses further and once again demonstrate HYBE's DNA. As restrictions for offline events are all lifted this year, we expect more artists and labels to grow even further on the back of HYBE solutions and platforms. We would like to ask for your continued interest and support as HYBE continues its journey through ceaseless efforts for change and growth. Thank you.
Now, Q&A session will begin. Please press star three. That is star and three if you have any questions. Questions will be taken according to the order you have pressed star and 3. For cancellation, please press star 4. That is star and 4 on your phone. The first question will be given by Park Jung-joon from JP Morgan. Please go ahead with your question.
I am Park Jung-joon from JP Morgan. Thank you for giving me the opportunity to ask you questions. My first question is about the fourth quarter results. I can see that your top line growth was pretty good, but there has been lower margin compared to expected. I wonder if this is a structural issue as you have more direct artist involvement revenue, or was it because of any one-off expense issue that incurred in the fourth quarter that had a negative impact on the margin? The second question is related to your revenue breakdown by artists. You mentioned about Tomorrow X Together and NewJeans. If you cannot provide us with a breakdown by each artist, I would appreciate it if you could rank them in terms of their revenue contribution other than BTS. Thank you.
Thank you for the questions. As for the first question, yes, you may think that the operating margin was lower in the fourth quarter than expected. It is partly because, as you mentioned, of the increase in the direct artist involvement revenue, especially the increase in the concert revenue. In addition, we gave away some incentives for the employees at the end of 2022, which were recognized in the fourth quarter. Moving on to the second question, I would say that the other artists other than BTS would take up about mid-40% of the entire revenue. When it comes to the ranking, SEVENTEEN is number one, followed by TXT and ENHYPEN, and also followed by the new groups, including NewJeans.
The following question will be provided by Lee Hwa-jeong from NH Investment & Securities. Please go ahead with your question.
Hello. I am Lee Hwa-jeong from NH Investment. I have two questions. First of all, there is a lot of talk about this situation with SM Entertainment, and I believe that there are two major points of criticism from SM Entertainment regarding HYBE's recent move. First of all, they're saying that this is a hostile M&A attempt and there was no agreement or consensus. What is your position on this? Also there are some people who say that SM Entertainment's valuation will drop after this deal. What is your take on this argument?
The second question is related to your platform plan. Phoning started in December last year, so it's been three months. I wonder how this service is doing. Also, I wonder if this is part of the subscription service that you mentioned you will be launching soon, or when do you think you will launch any paid-in services?
안녕하세요. HYBE Park Jiwon입니다. 제가 질문에 먼저 답변드리도록 하겠습니다. 이제 적대적 M&A에 대해서는 저희는 SM의 지분 인수를 적대적 M&A라고 생각하지 않습니다. 저희가 이제 최대 주주의 지분을 상호 합의해 인수했기 때문이고요. 또한 이제 소액 주주들에게도 최대 주주와 동일한 조건으로 공개 매수를 제안드렸습니다. 이제 저희는 사실 현재 SM의 경영진과도 적대 의도가 전혀 없었고요. 다만 이제 경영진들은 전체 주주의 이해를 대변해야 되고 저희도 이제 주주의 일원이므로 현 경영진이 저희를 포함한 SM 모든 주주의 이익을 보호해 주셔야 한다고 생각을 합니다. 이제 또 여러 가지로 궁금해하고 계시는 이제 Kakao의 사업적 제외에 대해서도 사실 Kakao 경영권 참여에는 관심이 없다는 전제하에서 해당 사업적 제휴 내용이 SM에 도움이 된다면 저희도 충분히 고려할 수 있습니다. 다만 아직도 이제 그 사업적 제휴 내용에 대해서 어떠한 것인지 알려주시지 않았기 때문에 해당 내용에 대해서는 아직은 언급드리기 좀 이른 점 양해 부탁드리겠습니다.
I am CEO Park Jiwon. Let me address your question related to SM Entertainment. We do not believe this SM Entertainment stake acquisition as a hostile M&A. We are not hostile to any party, and we acquired the stake based on a mutual agreement with the majority shareholder. We also offered a tender offer to the minority shareholders under the same conditions. We have no intention of being hostile to any member of the management. However, I would also like to mention that the management of the company should represent interests of all the shareholders, including HYBE, which is now a shareholder of SM Entertainment. I believe that the SM Entertainment management has to protect interests and interests of all the shareholders, including us. And also about potential business partnership with Kakao.
Based on the assumption that Kakao has no interest in participating in the business management, if there is any business proposal that will benefit SM Entertainment, we will positively consider that. However, we have not been shared with us from them any specific proposal for business cooperation, it is too early for me to mention about it.
이제 HYBE가 M&A를 하면 SM의 기업 가치가 주가가 떨어진다는 것에 대해서 저희에게는 여쭤보셨는데요. 다들 아시는 것처럼 이제 HYBE와 SM이 함께됨으로써 양사 모두에게 큰 시너지가 발생하는 거라고 생각을 하고 있습니다. 예를 들어서 이제 북미 시장에서 방탄소년단단 큰 성과나 Ithaca Holdings를 통해서 구축한 현지 네트워크와 노하우를 통해서 이제 SM 아티스트의 북미 진출을 도와드릴 수 있을 것 같고요. 이제 반대로 이제 SM의 중국을 비롯한 동남아 시장에서의 압도적인 인프라는 HYBE 아티스트들의 해당 시장에서의 활동을 크게 도울 수 있을 거로 생각을 합니다. 이제 최근에 발표를 하신 거를 저희도 봤고요. 이제 multi-label 체제 구축에 대해서는 저희가 오늘 실적 파트 중에서도 충분히 설명드린 것처럼 이제 한 3년 정도의 이제 준비 기간과 실행을 통해서 저희가 충분히 노하우와 경험을 공유하고 있기 때문에 이제 비즈니스적 성장에도 큰 기여를 할 수 있을 것이라고 생각을 합니다.
Also about some of the arguments that this deal will lower the value of SM Entertainment. I do not believe so because as pretty much everyone knows, there will be a lot of synergies created when HYBE and SM Entertainment join hands. For instance, in the North American market, BTS has made a big success, and we have the local network and know-how that has been accumulated through Ithaca Holdings, so we can support SM Entertainment artists to expand their career in the North American market. On the other hand, SM Entertainment has absolute superb infrastructure in China and also in the Southeast Asian market. This can be utilized for HYBE artists to expand into these markets. I also learned about this multi-label structure plan announced by SM Entertainment.
As I mentioned during the earnings call, HYBE has been accumulating know-how and experiences in implementing the multi-label structure for the past three years. I believe that our skills, expertise and know-how can support SM's business support and growth.
HYBE가 인수하게 될 경우에는 크게 2가지의 지배구조 관점에서 장점이 있다고 생각을 합니다. 첫 번째는 지배구조와 내부 거래의 즉각적이고 즉시적인 개선이 가능할 것이라고 생각을 하고요. 저희는 영업양수도나 합병 그리고 소송 등의 절차를 최대한 거치지 않고 지배구조 및 내부거래 이슈를 즉각적이고 즉시적으로 해결할 수 있는 권리를 가지고 있습니다. 두 번째는 잠재적인 책임 이슈와의 단절인데요. 지금 현재 구조가 주주 가치를 저해하고 또 왜곡된 내부거래 구조를 가지고 있는데, 이런 것들이 나오고 있는 배경에 대해서 조금 더 고민해 볼 필요는 있을 것 같고요. HYBE는 현재, 과거, 그리고 미래의 이런 이슈들로부터 자유롭기 때문에 이런 구조들을 개편함으로써 즉각적이고 즉시적인 주주 가치 개선을 할 수 있을 것이라고 생각을 합니다.
I believe that HYBE can offer a lot of advantages in terms of corporate governance structure of SM Entertainment. First of all, we will be able to immediately improve the situation in terms of internal transactions and governance structure because we have the right to resolve these issues without any transfer of goodwill or merger or any legal suit. Secondly, we will be able to be free from any issue of responsibility because the current governance structure may have led to some of the transactions and some of the deals that may undermine shareholder value. We are free from these kinds of issues from the past, now, and in the future. I believe that our presence in SM Entertainment will enhance shareholder value immediately.
I understand that there are some concerns about conflict of interest between HYBE and SM Entertainment. In order to prevent such conflict of interest, we will have to strengthen internal control mechanisms. HYBE already has very high level of governance structure that is actually the most advanced in the industry. We will make sure that what we can do is to link KPIs of directors to the interests of SM Entertainment and their stock price. For instance, we can also have the various sub-committees under the board, including the compensation committee and internal transaction committee and outside director nomination committees that are comprised of outside directors, so that there will be no further conflict of interest between HYBE and HYBE and SM Entertainment. Still, you may think that there may be some concerns in the market.
We understand that. We may consider additional measures to improve the corporate governance structure, including the launch of an audit committee under the board. For such ideas, we will gather opinions from the shareholders before the major shareholders meeting of SM Entertainment. We'll have an opportunity to share them with the shareholders later. We're not really able to share with you any specific indicators related to Phoning yet. So please understand. As for private chatting service, it's not going to be launched as a single or standalone service, but as per how it's going to be incorporated in the subscription plan, we're going to share with you when we have more details later.
The following question will be provided by Ahn Jin-ah from E-Best Investment & Securities. Please go ahead with your question.
I'm Ahn Jin-ah from E-Best Investment & Securities. My questions are actually follow up on the questions that were already posed. There's a lot of talk about your acquisition of SM stake, and I want to know more specifically about business synergies that you're expecting from this deal. I'm sure you have a lot of these advantages in mind as you invested more than KRW 1 trillion to acquire their stake. SM Entertainment seems to argue that there is a lot of conflict of interest in terms of business. I wonder what kinds of benefits SM Entertainment can gain from this deal from your perspective. I wonder if the current struggle between the two companies will continue for some time, or how these are going to be resolved. Secondly, I understand your point about governance structure improvement, but what about business synergy expectations?
If you are able to gain, let's say, 40% of SM Entertainment's stake as planned, what kinds of specific business synergies or opportunities are you expecting?
결론적으로 지금 질문은 HYBE와 SM의 시너지가 무엇이며, 그것이 HYBE에만 도움이 되는지 SM에도 도움이 되는지를 물어보신 것으로 이해가 됩니다. 저희가 그 보도자료를 내면서 아마 Lee Soo-man former Founder와 저희 Bang Si-hyuk Chairman께서 말씀을 나누고 K-pop의 Globalization의 뜻을 같이 해서 이 딜을 하게 됐다는 얘기가 나갔을 것 같은데요. 거기서 제일 중요한 거는 사실 K-pop의 Globalization이라는 이야기 같습니다. HYBE는 아까 말씀드린 것처럼 북미 시장에 대해 상당히 높은 수준의 인프라와 네트워크를 갖추고 있습니다. 반면에 저희가 중국 시장에서는 presence를 갖고 있지 않고요. 동남아에서도 낮은 presence를 갖고 있는데 SM은 전통적으로 아시아 시장에서 훌륭한 네트워크와 인프라를 갖고 있습니다. 양 사가 함께 하게 된다면 서로의 이런 infrastructure와 네트워크를 공유하면서 서로의 시너지를 유기적으로 상호 도움이 되게 이용할 수 있을 것이라고 저희들은 보고 있습니다. 두 번째로 SM 입장에서는 이렇게 저희의 글로벌 네트워크를 서로 공유하는 시너지가 있을 거고요.
이번에 SM 3.0 그 전략이 발표가 됐는데 전체적인 전략을 보면 Multi-label과 플랫폼 전략, 그리고 IP를 One Source Multi-Use하는 방안들에 대해서 논의를 하고 계신 것 같습니다. 이런 전략은 이미 HYBE가 오래전부터 해왔던 전략으로 이해가 되고요. 이런 전략을 함에 있어서 저희들이 갖고 있는 많은 노하우, 거기에 필요한 리소스들을 저희들이 SM에 제공해 드릴 수 있기 때문에, 이런 것들을 통해서 SM의 전략을 실행하시는데 큰 도움을 드릴 수 있을 것이라고 생각하고 있습니다.
I understand that you want to know the synergies expected between HYBE and SM Entertainment and whether such synergies will only benefit HYBE or will also benefit SM Entertainment. As was announced in the news release, Mr. Lee Soo-man and Mr. Bang Si-hyuk agreed on the need for globalization of K-pop, and that was basically the background behind this deal. The key word here is the globalization of K-pop music. As was mentioned by CEO, HYBE already has extensive infrastructure and network in the North American market. While we don't have much presence in China and has limited presence in Southeast Asia. However, traditionally SM Entertainment has been very strong in Asia and has wonderful network and infrastructure.
For these two companies to share these networks and infrastructures in the respective regions, we will be able to complement each other and expand our businesses. Secondly, from the perspective of SM Entertainment, I read about the SM Entertainment Strategy 3.0, which is basically about building a multi-label structure, expanding the platform and using various IP for one source multi-use strategy for IP utilization. These are the kinds of strategies that HYBE has been implementing for some time. We have expertise and know-how and resources in implementing these strategies. By providing what we have to SM Entertainment, we can support this company to implement these new strategies. Thank you.
시간 관계상 마지막 질문 하나만 더 받겠습니다.
마지막으로 질문해 주실 분은 HSBC의 김 Jun-hyun 님이십니다. 질문해 주십시오. The last question will be given by Kim Jun-hyun from HSBC. Please go ahead with your question.
네, 질문 기회 감사합니다. 어, 전 두 가지 질문이 있는데요. 첫 번째로는 이번에 GP 마진 올해 좀 가이던스 관련해서 올해도 저희가 신인 아티스트랑 이렇게 많은 라인업 준비하고 계신데 이거 관련해서 좀 뭐 사 분기 GPM 베이스로 볼 때 저희가 좀 상상할 수 있는, 어, 그런 좀 저희만의 좀 전략이나 좀 카탈리스트가 있으면 말씀해 주시면 감사하겠고. 네, 두 번째로는 이번에 그 인수하신 그 미국 레이블 관련해서 저희 인수 효과가 좀 이타카 홀딩스, 어, 때보다 좀 더 크게 기대할 수 있는지 좀 내부적으로 어떤 기대감이나 요런 쪽에 대해서 좀 말씀해 주시면 감사하겠습니다.
I am Kim Jun-hyun from HSBC. Thank you for this opportunity. I have 2 questions. The first question is about GPM guidance. You mentioned that there will be some new artists coming up for this year. What is your overall guidance for your business performance? The 2nd question is expected benefits that you would like to reap by acquiring Quality Control Music compared to your deal with Ithaca Holdings. How much of expectation do you have?
예, 먼저 GP 마진에 대해서 말씀을 드리면요. 저희가 사 분기 GP 마진... 저희가 사실은 GP 마진과 함께 이제, 어, OP 마진도 함께 봐야 되는데요. 어, 사 분기 정도 수준을 저희들이 어느 정도 유지하기 위해서 최선의 노력을 다할 예정입니다. 어, 그리고 두 번째, 미국의 QC 홀딩스 인수에 따른, 어, 효과들을 보면 저희가 재무적으로 봤을 때는 가장 저희가 높게 평가한 거는 QC 홀딩스는 이 Management와 Label이 섞여 있는데 Label의 그 특히 Streaming 매출이 안정적으로, 어, 발생하는, 어, 곳입니다. 그래서 저희들이 안정적인 현금 흐름 창출이 가능한 사업이다. 그리고 두 번째, 비즈니스적으로 봤을 때는 저희가 장르적 확장과 함께 미국 내에서 presence를 상당히 확장함으로 인해서, 어, 저희들이, 어, 미국 내 시장에서 상당한 협상력이라든지, 어, bargaining power를 가질 수 있을 것으로 기대하고 있습니다.
As for the guidance on GP margin and we also have to look at the OP margin. We are going to do our best to make sure that our GP margin and OP margin trend will be maintained at the level of the fourth quarter. Moving on to your second question, with our acquisition of QC Holdings, we have expectations in terms of financials and also in terms of business performance. When it comes to the financials, they have both the management business and the label business, and the label business continues to generate very stable streaming revenue, which is going to bring about stable cash flow for us.
In terms of business, it has the benefit of expanding our genre portfolio and increase our presence in the North American market so that we can strengthen our bargaining power in the U.S.
이것으로 하이브 사 분기 실적 발표를 마치겠습니다. 참여해 주셔서 감사합니다.
This is the end of the earnings call for HYBE, fourth quarter. Thank you for joining us. Thank you.