Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CJ ENM Co Ltd (XKRX:035760, Financial) reported a consolidated revenue increase of 11% year-over-year, reaching KRW1.1647 trillion in Q2 2024.
- The company's operating profit stood at KRW35.3 billion, indicating solid financial performance.
- Paying subscribers grew rapidly by 29% year-over-year, contributing to a 41% increase in subscription and application revenue.
- Music business saw a 29% year-over-year growth in international revenues, driven by new album releases and distribution artists.
- Fifth season's revenue increased by 106% year-over-year, showing strong sales in different regions with recovering content production and deliveries.
Negative Points
- Studio Dragon reported a 49.4% year-over-year decrease in revenue, recording KRW137.1 billion, which is a 16% decrease over the previous year.
- The company continues to face challenges in its pictures and drama business, with ongoing losses.
- There is a possibility of a capital increase amounting to around KRW100 million to address operational costs.
- The company has seen an increase in debt numbers, raising concerns about financial stability.
- Rising production costs and tougher competition in the K-drama industry are putting pressure on profitability.
Q & A Highlights
Highlights of CJ ENM Co Ltd (XKRX:035760) Q2 2024 Earnings Call
Q: Can you provide an update on the progress of your license project and its financial implications?
A: The license project is progressing well. We have been notified by the province of tonnage regarding the contract for our continued expansion. Our asset in construction amounts to KRW260 billion, and our payment guarantee is about KRW480 billion, spread until 2026. These figures are reflected in our financials, and we do not foresee further financial burdens from this project.
Q: With recent management changes at CJ ENM and Studio Dragon, is there a shift in your media content strategy?
A: Despite the leadership changes, our mission to become a global IT powerhouse centered on content remains unchanged. The new CEO of Studio Dragon, Mr. Chang, has a strong background in drama and content, reinforcing our focus on content competitiveness.
Q: Can you explain the non-operating gains and their sources?
A: We recorded a non-operating gain of KRW42.2 billion through our equity method investments, primarily from Netmarble holdings. This represents an improvement of KRW53.7 billion year-over-year.
Q: How do you plan to maintain the high number of paying subscribers, especially after the baseball season?
A: We have a plan to minimize subscriber attrition post-baseball season by creating valuable content that attracts baseball lovers to other sources. This includes working with PBL to create engaging content and providing off-season training videos of baseball players.
Q: What are your plans for managing debt and financial health in the second half of the year?
A: We will continue to work on reducing our debt levels to achieve healthier financial numbers. We have used proceeds from selling our Netmarble shares to service outstanding debt and will keep a keen eye on market conditions to digitize our non-US businesses.
Q: Can you provide details on the revenue and operating profit for the second quarter?
A: Consolidated revenue for Q2 2024 stood at KRW1.1647 trillion, an 11% increase year-over-year. Operating profit was KRW35.3 billion. Entertainment revenue was KRW792.8 billion with an operating profit of KRW7.8 billion, while commerce revenue was KRW371.9 billion with an operating profit of KRW27.5 billion.
Q: How do you plan to handle the challenges in the drama industry and rising production costs?
A: We aim to lead the new paradigm in the drama industry by producing quality content, securing human IP, and finding creative funding. We will focus on securing new growth engines and improving profitability through better production processes and creating new business opportunities both domestically and internationally.
Q: What are your strategies for Studio Dragon's growth and profitability?
A: Domestically, we will focus on profitability and rationalization. Internationally, we will seek growth opportunities in new markets, replicating our success in the US and Japan. We are in discussions with our new CEO to add more substance to our growth plans and will communicate further details once finalized.
Q: Can you elaborate on the increase in paying subscribers and its impact on ad revenue?
A: We have seen strong growth in paying subscribers, with a 30% year-over-year increase. The number of ad-watching viewers is growing the fastest, accounting for about 20% of our mobile subscriber base. Our ad revenue is expected to reach approximately KRW10 billion, representing around 10% of our overall revenue.
Q: What are your plans for content delivery and production in the second half of the year?
A: We expect more normalized content delivery and production in the second half. We have planned for eight major deliveries this year and aim to regain distribution rights for significant titles in the third quarter, adding more value to our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
