Good morning and good evening. Thank you all for joining the conference call for the HYBE earnings results. This conference will start with a presentation, followed by a Q&A session. If you have a question, please press STAR and one on your phone during the Q&A. Now we will begin the presentation on HYBE's second quarter of fiscal year 2025 earnings results.
[Foreign language].
Greetings. Thank you for joining us for HYBE's 2025 second quarter earnings call. This is Jinho Kim, Head of Financial Strategy. I'll be moderating today's conference, which will proceed to consecutive interpretation. Today, CEO Lee Jae Sang will present Q2 business highlights and future plans, and CFO Lee Kyung Joon will present the earnings highlights, followed by a Q&A session. Please note that today's earnings call is based on preliminary consolidated estimates under KIFRS and subject to terminal audit.
[Foreign language].
Good afternoon, this is Lee Jae Sang, CEO of HYBE. Thank you for joining today's earnings call. Last year in August we announced the HYBE 2.0 strategy in our letter to shareholders to present our new vision for growth. One year has passed since then and we're making meaningful change under the three pillars of music, platform, and technology-based growth business. First, in the music domain, we've been accelerating the global strategy while remaining focused on the fundamentals of content quality and fan experience enhancement. Along with the return of all BTS members, HYBE Music Group artists such as SEVENTEEN, TOMORROW X TOGETHER, and ENHYPEN are active in the global market with album releases and tours. At the same time, CATFI's success in the U.S. demonstrates that the K-pop production methodology is applicable to other genres.
In Latin America, we are employing the HYBE approach through the Pase a la Fama project and the Santos Bravos project. Thanks to these achievements, HYBE posted the highest second quarter revenue. In the platform domain, Weverse is strengthening competitiveness as a global superfan platform by onboarding Japanese top-tier artists and expanding membership-based services. For technology-based business, we are exploring how to innovate fan experience using technologies such as voice AI and gaming and conducting R&D to realize futuristic entertainment. HYBE will continue to lead the paradigm of the global music industry and innovate the way fans and artists are connected on their HYBE 2.0 vision.
[Foreign language].
Our strategic approach is well reflected in our quarterly performance based on the global strategy. HYBE produced strong results in the music market, and various activities by HYBE artists drove revenue growth. Let me first present album-related results. BTS Jin came out with his second mini album, Echo, entering the Billboard 200 at the career high No. 3, proving his growth as a solo artist. SEVENTEEN came back with their third regular album, Happy Birthday, which became the best-selling album in Korea in the first half of the year and ranked second on the Billboard 200, showing their global popularity. The album also topped the Oricon Weekly Total Album chart, achieving the 14th number one status, the most by affiliated artists, as well as topping the Weekly Digital Album chart and Weekly Album chart, which means that SEVENTEEN ranked first on all three Oricon weekly charts.
TOMORROW X TOGETHER's fourth regular album, The Star Chapter: Together, sold 1.76 million copies during the first week, surpassing the first week sales results of their previous album, making it the sixth consecutive album to sell more than a million copies during the first week. In Japan, with more than 300,000 copies sold, it achieved the highest result on the Oricon Weekly Album chart, making them the first foreign artist with 12 consecutive albums topping the chart. ENHYPEN came back with the sixth mini album, Desire: Unleash, after seven months, achieved a first week double million seller, which landed on the third place on the Billboard 200 and stayed on the chart for six weeks in a row. The group solidified their influence in the global music market with the entry into four Billboard charts and number one in six category sales Oricon charts.
LE SSERAFIM's Japanese single, Different, topped the Oricon Daily chart and ranked second on the weekly chart with more than 130,000 copies sold. The album was also gold certified by the Recording Industry Association of Japan. Going into their third year into career, BoyNextDoor achieved the highest first week sales with their fourth mini album, No Genre, maintaining a strong growth trend in the global market with high rankings on the Billboard.
[Foreign language].
Moving on to streaming, the share of streaming in the recorded music revenue in the second quarter is around 32%, suggesting that music by HYBE artists continue to be streamed globally. In particular, J-Hope, who just completed the Solar Worlds tour with an encore show in June, and Jin, who is currently on a tour with global fan concerts, have their new songs enter the Billboard Hot 100. These results demonstrate that fans from around the world are highly excited and looking forward to the comeback of BTS as a whole since debut in Japan in July. TWICE's debut single "Nice to See You Again" ranked first on two Oricon weekly charts and topped the Billboard Japan Hot 100.
[Foreign language].
In the U.S., Big Machine Label Group artists achieved solid results centered on streaming, making meaningful contributions to HYBE's earnings. Thomas Rhett's song Die a Happy Man has been certified diamond by the RIAA, signifying 10 million units sold including physical album copies, digital downloads, and streams. This is the highest certification in the U.S. music industry, showing the popularity and influence of Thomas Rhett. In addition, Get Me Some of That is quadruple platinum certified, and Something About a Woman is gold certified, further solidifying the artist's position in the U.S. country music market. Riley Green also did well with his song Worst Way topping the U.S. country radio airplay chart. His catalog received a Pandora Billionaire Award with more than 1 billion streams on Pandora, one of the most influential streaming platforms.
Demonstrating his strong performance in the local streaming market, HYBE will continue to optimize its portfolio of domestic and global artists to strengthen its position in the global streaming markets and sustain long-term growth.
[Foreign language].
HYBE artists conducted world tours and fan meetings in the second quarter to reach out to their global fans. In particular, J-Hope performed 33 shows in 15 cities from February till June to entertain half a million fans. Showcasing his stage power and musical talent as a solo artist, he also performed as the headliner on the main stage of Lollapalooza Berlin for about 60,000 people in the audience. Jin kicked off his tour in Korea in June and is on a fan concert tour in nine cities in Japan, the U.S., and Europe. Hoshi and Woozi of SEVENTEEN successfully completed their unit concert, demonstrating the possibility of a unit concert as a new concert format. SEVENTEEN will embark on a world tour in September.
LE SSERAFIM sold out their first Asia tour and confirmed an encore concert at Tokyo Dome in November, which is expected to serve as an important momentum to expand the fandom and solidify their position in the Japanese market. Following the Japanese stadium tour, NewJeans is preparing for a tour in 10 cities in the U.S. and Europe and they also performed at Coachella. After a successful first solo tour, BoyNextDoor participated in Lollapalooza Chicago to expand their global influence as well. In addition, TOMORROW X TOGETHER, ILLIT, and TWS continued their concerts and fan meetings from around the world to grow their fandom. As a result, in the first half of 2024, HYBE Music Group artists held a total of 140 concert shows and fan meetings, up 56% year-over-year.
With large tours scheduled for the second half of the year, we expect the concert business to continue to grow.
[Foreign language].
Moving on to our U.S. business, HYBE has recently adjusted strategic directions of HYBE America and implemented organizational restructuring. It is not a short-term change but a strategic decision to add more clarity to the direction of our U.S. business based on the experience and insight that we have gained from diverse business activities in North America for the past four years. In short, it is about shifting our business focus to label business. Given that earnings from management business tend to fluctuate depending on the level of activities by artists, we would like to strengthen the label business to generate stable earnings based on streaming, thereby improving profitability and business fundamentals. Considering that HYBE's multi-home, multi-genre strategy is producing meaningful results in North America, we believe that this shift makes sense strategically.
Furthermore, the restructuring is not just about changing the organizational structure, but it is about creating synergies between regions by integrating the operations of HYBE America and HYBE Latin America going forward. Based on Los Angeles and Mexico City, HYBE plans to create a structure where IP and solution businesses in North America and Latin America are organically connected to further strengthen and broaden our global business. At the center of this change is Isaac Lee, a new Chairman who has extensive experience in the global content industry with an in-depth understanding of the music and content markets in North and Latin Americas and has strong execution power. Chairman Lee is expected to accelerate the implementation of HYBE's global IP expansion strategy. Meanwhile, former CEO Scooter Braun, who led U.S. business growth, will continue to provide strategic advice as a board member and non-standing advisor for HYBE America.
[Foreign language].
The most iconic example that shows that HYBE's global strategy is working is Catseye. During the first year since debut, this rookie girl group has produced impressive results not just in North America but around the world. Their EP Beautiful Chaos, released in the second quarter, was on the Billboard 200 for three weeks in a row and Gabriela and Narlie both entered the Hot 100, clearly indicating their popularity in the mainstream pop market. The two tracks also entered the official chart in the U.K. and ranked high on the Spotify global chart, enjoying much popularity in Latin America and Europe as well. Building on this momentum, Catseye announced their first tour scheduled to be held in 13 cities in North America and all the shows were sold out. Thanks to this exclusive response they added additional shows, but tickets were also sold out quickly.
The popularity of the tour demonstrates Catseye's exclusive tandem growth and strong market position. These achievements represent not just the success of a single group, but an illustrative example that HYBE's production system and approaches are applicable to other languages, cultures, and genres. Based on this success, HYBE will apply its K-pop production methodology in other regions and genres as well.
[Foreign language].
HYBE's production capabilities are being applied in Latin America as well. HYBE Latin America is making new attempts in combining originality of Latin music and K-pop production methodology to accelerate strategic expansion in the global music industry. First, Pase a la Fama, a reality series produced in partnership with Telemundo, premiered in prime time in June and received much attention from local viewers, being the top-rated Spanish language program in its time slot. In addition, HYBE is taking steps to launch a new project titled Santos Bravos to produce a next generation Latin boy group. This reality show features talents from eight Latin American countries. It is a new initiative to apply K-pop training and production systems to Latin talent.
The program is taking a different audition format by focusing on illustrating the emotions and stories of individual hopefuls to show that the production know-how of HYBE can work across linguistic and cultural boundaries. This new group to be formed through Santos Bravos is going to be another expansion model of K-pop production. Given that Latin music is the fastest growing genre in the world, what we achieve in this market will serve as an important milestone in HYBE's global strategy.
[Foreign language].
In addition to these production projects, HYBE Latin America is quickly broadening the foundation for label and management business by attracting local Latin artists. Recently, HYBE Latin America signed deals with several artists including Morat, a Latin pop band, and Daddy Yankee, who became globally popular with a song titled Despacito, which shows that HYBE is becoming a preferred partner for Latin musicians who wish to expand their global horizon. It means that they choose to work with HYBE as a strategic partner for global expansion because of HYBE's capabilities and global networks. As more and more foreign artists are taking interest in the Asian market, we're recognized as an ideal partner that has content planning, power, platform operational expertise, and well-established global label business.
It is a strong signal that HYBE is more than just a production company, but a significant player in the global music industry that can continue to expand their business.
[Foreign language].
Finally, let me report on Weverse, the global superfan platform. In the second quarter, Weverse continued to strengthen its platform competitiveness by attracting global artists and enhancing fan experience in Japan. Several top tier artists have joined Weverse and utilized the platform, producing visible results. Weverse was joined by Mrs. GREEN APPLE, a popular band, in February. Actor and singer Katori Shingo, a former member of SMAP, in May, and four groups of Kawaii Lab, a next generation project of Asobi System, in July. Also, many Japanese artists are utilizing diverse Weverse services for their business. For example, Katori Shingo was the first foreign artist to collaborate with Weverse Album for his first global album launch. Meaningful synergy was created as Weverse's global logistics infrastructure supported the artist's desire to share his music with fans from around the world.
In addition, after opening, Weverse's DM Fruit Zipper of Kawaii Lab is using Weverse's global membership service for advanced ticket sales for the group's first concert in Korea. Weverse will continue to offer a new experience to connect artists and their fans and strengthen its leadership as a global superfan platform. Now, CFO Lee Kyung Joon will report on the financial highlights.
[Foreign language].
Good afternoon, this is Lee Kyung Joon. Let me report on HYBE's consolidated financial results for the second quarter. The consolidated revenue posted KRW 705.6 billion, up 10% year on year. Revenue with direct artist involvement including recorded music sales, concerts, advertisements, and appearances was KRW 447.9 billion, accounting for 63% of the total revenue, while revenue with indirect artist involvement including merchandise, licensing, content, and fanclub sales recorded KRW 257.8 billion, taking up the remaining 37%. This is thanks to the world tours by major artists such as J-Hope, TOMORROW X TOGETHER, and ENHYPEN. In the second quarter, we offered much entertainment to fans with comebacks, concerts, and fan meetings by many artists.
[Foreign language].
Let me give you more details by revenue category. In the second quarter, revenue with direct artist involvement grew further from the second quarter of last year when we recorded the highest quarterly result in this revenue category.
Recorded music sales were down 8% year-over-year to KRW 228.6 billion, and concert sales were up 31% year-over-year to KRW 188.7 billion. HYBE was able to maintain year-over-year trend of recorded music sales while the overall sales of K-pop albums were sluggish across the industry. This is mainly thanks to the growth of HYBE Music Group artists and very good streaming performance by global artists. The concert sales also maintained a strong growth trend on the back of large-scale tours including J-Hope's global solo tour and world tours by TOMORROW X TOGETHER and LE SSERAFIM, which were enjoyed by approximately 1.8 million fans from around the world. In total,
[Foreign language].
Revenue with indirect artist involvement posted KRW 257.8 billion, up 19% year-over-year.
Merchandise and licensing revenue recorded KRW 152.9 billion, up 40% year-over-year, while content sales were KRW 70.2 billion, down 16% year-over-year. Merch sales were driven by tour merch and lightsticks associated with tours and IP-based character products. Content sales include Nana BND with SEVENTEEN, a reality comedy show, as well as the group's DVD and video products.
[Foreign language].
In Q2, operating profit posted KRW 65.9 billion with the operating margin of 9.3%. While the margin improved QoQ and YoY, we did not achieve a double-digit margin due to the investments in major markets to expand our IP portfolio in the process of executing the multi-home, multi-genre strategy. First, the debut album by I’LL-IT, a new band that debuted in Japan in the second quarter, produced meaningful results and topped the Oricon Daily chart, but their short-term profitability was affected by initial marketing and activity-related expenses. It takes time for a new group to grow their fandom, so we believe that their profitability will improve gradually as this rookie group continues their career. Also, the production cost of Pase a la Fama in Latin America had an impact on the Q2 margin. The show premiered in June, and the production costs were partially recognized in Q2.
This project represents a first strategic step in applying the K-pop production methodology to Latin music production for global business expansion. We believe that profitability will continue to improve after the team's debut through concerts, merchandise, content, and other revenue streams. The cost structure of Q2 does not represent short-term performance but reflects our effort to solidify a foundation for long-term growth and HYBE 2.0 strategy implementation, and when these investments lead to visible results, you will be able to see that our business competitiveness and growth potential has been strengthened.
[Foreign language].
Moving on to KPIs of Weverse, the platform maintained a solid growth trend with the average monthly active users of approximately 10.9 million in the second quarter thanks to the comeback of BTS members after military service and by diverse global activities by artists on the platform.
In June, when all the BTS members returned, we hit the highest monthly active users mark of 12 million. Weverse has been strengthening its platform capacity and features while maintaining a solid monthly active users trend of around 10 million. On the back of the stable traffic flow, the return of BTS added a strong growth momentum to the platform to achieve the highest monthly active users level. Also, Q2 total transaction volumes on the platform grew 41%. QoQ consumption grew thanks to album releases by major artists as well as tours and fan events, resulting in an increase in the monthly average monthly revenue per paying user.
[Foreign language].
The first half of 2025 was a turning point in transforming HYBE's multi-label strategy into the multi-home multi-genre strategy. Going beyond K-pop, the success of Catfy in the global pop market is a prime example that HYBE's production methodology can work across different languages and cultures. Based on this success, we are moving ahead with new projects in Latin America and preparing for new market entries, including India. To further expand our global influence, HYBE will continue to offer entertainment to fans from around the world in the second half of the year. Focused on innovating how artists and fans are connected, we ask for your continued interest and support for our journey towards sustainable growth.
[Foreign language].
This is the end of the presentation now. We would like to take questions now.
[Foreign language].
Q&A session will begin. Please press Star one, that is Star and one if you have any questions. Questions will be taken according to the order. You have pressed the number Star one. For cancellation, please press Star two, that is Star and two on your phone.
[Foreign language].
The first question will be provided by Joon Lee from Daiwa Securities Capital Markets Korea. Please go ahead with your question.
[Foreign language].
Thank you for this opportunity. I'd like to ask two questions related to your business in North America and Latin America. In the case of K-pop training and production systems in Korea, contract periods tend to be longer so that expenses and costs related to production and training can be recouped later during the period of the contract. I'd like to understand the differences in contracting practices in Korea versus Latin America and the U.S. and how you're planning to overcome any limitations that come from different contract structures. The second question is that you mentioned that the business focus of HYBE America will shift more from management to label business. What is the differentiated competitiveness of HYBE America compared to the existing labels in the U.S. market? What kinds of investments are you planning to do to become a competitive label in that market? Thank you.
[Foreign language].
Thank you for your question. I'm CEO. Let me answer your first question. You basically like to understand the differences between K-pop business models and those in the U.S. and Latin America and how we're going to respond to them. I'd like to give you explanations in terms of differences in production methodologies, differences in contract structures, and also differences in business practices. First, about production methodologies in the K-pop and J-pop industries. It is common that you acquire talent and train them so that they can continue to generate profit. You may think that this is not prevalent in the U.S. or Latin America. When you think about it, such a model was quite popular in these markets as well. About 20, 30 years ago we had Backstreet Boys, Westlife, and NSYNC and other groups.
However, because of several financial crises, there was reluctance in these markets for massive investment to make and develop talented musicians because many financial and strategic investors were hesitant to make large investment because of the low possibility for returns on their investments due to financial situations. Such a model became almost disappeared in these markets. Now we're going to reapply this type of methodology in these major music markets. I'd like to say that the environment in the U.S. is quite favorable for our approach where we identify and discover good talent and train them and develop their skill sets. We are applying a similar audition and similar training methodology that we've been using in Korea and Japan to the U.S. and Latin American market.
Of course, music genres are different, but we're basically exporting our production methodology and we have a global pool of trainers who will train and develop these talent. Secondly, regarding contractual differences, in Korea and also in Japan, many major management companies sign comprehensive contracts including management agency, merchandise, label, recording deal as well as distribution and publication. Such comprehensive contract practices are common in the U.S., in Korea, as well as in Japan. However, in the U.S., Europe, and Latin America, these types of contracts are rather broken into separate contracts. For instance, recording deals and distribution deals for label businesses. There are promotion companies for tour-related work. There are also agencies for business connections. Merch is another type of contract. This is because the European and North American, Latin American markets are very big in size and they have a longer history.
Within such contract practices, we've been thinking about the kind of structure that we will pursue. It's not going to be exactly the same as what we have in Korea and Japan, but we're applying a similar economics because we have four to five years of experience in conducting business in the U.S. and also in Latin America. It may not be as comprehensive as what we have in our local markets, but we are recouping similar business. As you know, the U.S. market is very big as well as Japan. Even if we may not have a comprehensive nature in our contract because of the big size of the market itself, we are having a great impact. The U.S. is not only big in size, but also has a huge impact on Europe as well. It's like having Japan following Korea and also U.S. and the U.K.
These may not be comprehensive contracts, but the size of the contract is very big and we see huge potential.
[Foreign language].
I am the CFO. Let me respond to your second question. When you look at typical label businesses in the U.S., they focus on catalog business and distribution. When we considered which labels to acquire, we focus on the aspect of whether these labels are capable of producing superstars. BMLG, as you know, was successful in discovering Taylor Swift and QC also for Lil Baby and Lil Yachty. Exact Photos is hitting the big Billboard Hot 100 and another Team Boykins is doing really well. A key consideration for us in acquiring labels in the U.S. were whether they were able to produce superstars. We're in the process of integrating our label services, including HYBE artists. We have this very fundamental business capabilities that we have in Korea, and we're applying them to the U.S.
market so that we can continue to produce superstars and create fandom so that we can monetize from these artists. That is what we're doing and that's our strength. In terms of investments, we're making investments typical needed to enhance efficiency and integration of operations. Thank you.
[Foreign language].
As CEO, I'd like to add some comments because this is an important question. As you may know, HYBE is already having distribution contracts with Universal Music Group. HYBE is the largest label group in the world. Universal Music Group has very excellent marketing promotion team or MMPK capabilities, not only in the U.S. market, but also in Europe and Latin America. This is a big advantage for our operations in these markets. You asked where in what areas we're making investments. CFO mentioned that we're making investments for enhancement of label services.
While UMG has great MMP capabilities, I believe that our labels have a better understanding and enhanced understanding of our own artists. We have been investing in producing a larger pool of talented people who are able to do so. When we combine the marketing promotion capabilities of UMG with HYBE stand on business core competencies, I believe this is where our competitiveness sh
[Foreign language].
Due to time constraints. Please limit the number of questions per person to one. Thank you.
[Foreign language].
The following question will be presented by Diane Kang from Goldman Sachs. Please go ahead with your question.
[Foreign language].
I'm Diane Kang from Goldman Sachs. I'd like to ask a question on your new team launch plans for the second half of the year, not only for Korea, but also in Latin America. You mentioned the Santos Bravos project and I'd like to know if this is going to be a similar format as Dream Academy of Cat 's Eye.
[Foreign language].
I'm CEO. Let me answer your question. First of all, a new boy group from Big Hit Music, which is a label for BTS and TOMORROW X TOGETHER, will debut very soon and the date has already been announced as August 18th. We are expecting that this group will bring in a huge fresh air to the music industry in terms of their production method, their life stories, and their music philosophies, and the way they will be rebuilt will also be a very novel way.
Big Hit Music has been known as a label with innovative ideas and it has been representing the voices of the time and dreams and hopes of fans of the era. That has been the key DNA of this label. In terms of how this group will debut and the showcase as well as the first meeting with fans, it will be quite different. We ask for your support.
[Foreign language].
Your question was also whether our approach in Latin America for new debut groups will be similar to what Cat's Eye has been doing. Once again, our basic approach is multi-home, multi-genre, and so depending on the market, the way these teams debut and the way they will be promoted will be quite different. For instance, after Cat's Eye's debut, they took steps that are quite common in the pop market in the U.S., including performing on stages and festivals to reach out to fans, including the Lollapalooza stage. For Latin America, in the case of Pase a la Fama, this is a band audition program, and throughout the audition show, their recognition and their reputation will continue.
Of course, they will start producing music, but they will be able to quickly meet with fans after this band is decided through promotions and other activities given the characteristics of the local market. On the other hand, Santos Bravos is a project to develop and debut a boy group, and Latin music is not just popular in where we are operating, Mexico City, but also in Miami, which is another big hub for Latin music in the U.S. based on the Spanish-speaking population. For Mexico City, the West Coast, and Miami, we need to cater to these different markets and apply different marketing promotions that are prevalent and popular in the U.S.
Therefore, once again, for Pase a la Fama, this is a local band that will be able to appeal to local audiences, while Santos Bravos is about forming a new boy band for the Latin and Spanish-speaking population. What they have in common is that the multi-home, multi-genre approach will be applied, so in Korea, Japan, the U.S., and Latin America, these can be multi-homes, and we deal with different genres including K-pop, J-pop, and Latin music. The foundation is similar because we are focusing on the fandom-based mechanism in our business operation, and they will utilize Weverse DNA and Weverse as a platform to reach out and connect with fans, and they will continue to communicate with their fans. We have multiple homes in multiple genres, but the same methodology.
[Foreign language].
With this time constraint, we would like to conclude the second quarter conference call for HYBE.
If you have additional questions, please contact the IR team. Thank you for your understanding.