SM Reports Slight Decrease in Q2 Revenue... In Line with Market Expectations

[Asia Economy Reporter Ji Yeon-jin] SM Entertainment announced on the 16th that its sales for the second quarter of this year recorded 184.4 billion KRW, a 1% decrease compared to the same period last year. Operating profit during this period decreased by 30% to 19.4 billion KRW, and net profit decreased by 68% to 25.4 billion KRW.

Sales exceeded market expectations, mainly due to a significant increase in revenue from concerts and MDs following the resumption of offline concerts and fan meetings. For concerts, most of the revenue reflected came from NCT127, Super Junior, Minho, BoA's offline concerts in Japan, and TVXQ's fan meetings, resulting in increased sales from SM's standalone operations and its Japanese subsidiary.

Additionally, operating profit declined due to a decrease in SM's standalone operating profit and an expansion of losses at its subsidiary Dream Maker. It is analyzed that Dream Maker's losses increased as the group's 'The Boyz' U.S. tour was canceled due to COVID-19, leading to increased related expenses.

Net profit for the period sharply decreased compared to the previous quarter due to a base effect, as the accounting audit adjusted DearU, previously a subsidiary, to an associate company in the second quarter, resulting in a significant increase in non-operating income. The reflected non-operating income includes a 66.2 billion KRW gain from stock disposals and 3.8 billion KRW in corporate taxes.

An SM representative stated, "In the third quarter, sales growth is expected thanks to new releases and concert resumptions led by key artists including aespa." They added, "In July, aespa's second mini-album and Super Junior's eleventh full-length album were released, and this month, Girls' Generation's seventh full-length album, marking their 15th anniversary comeback album, was released."

Aespa's second mini-album recorded 1.61 million pre-orders and achieved first-week sales of 1.42 million copies, marking their first initial million-seller. Super Junior's 11th full-length album ranked number one in 23 regions including Brazil, Mexico, Hong Kong, and Japan on iTunes on the release day, while Girls' Generation's 7th full-length album topped charts in 31 regions worldwide including Sweden, Brazil, New Zealand, and Australia.

Following the third quarter, concert resumptions are expected to drive related sales growth. Starting with NCT 127's Singapore concert and Onew's Japan concert in July, as well as Super Junior's domestic and Thailand concerts, SM Entertainment's global concert brand 'SMTOWN LIVE' will hold domestic and Japan concerts in August, and NCT Dream's domestic concert is planned for September.