SM, aespa's Unprecedented Success... Ushering in the 'SM 3.0' Era

aespa Mini 3rd Album, All-Time Girl Group First Week Sales No.1
Five Major Measures Including Advanced Corporate Governance Proposed
"Will Lead Entertainment Development Through Synergy with Kakao"

SM Entertainment's 'SM 3.0' era, launched this year, is marking a successful beginning. The girl group 'aespa,' the first to apply the core strategy of the 'Multi Production Center,' has set a record for the highest first-week sales among girl groups. Plans to create synergy with Kakao Entertainment are also underway.

Aespa's Record-Breaking Performance, Result of the Multi Production Center

On the 26th, SM announced, "Under the ‘Multi Production Center System’ implemented as part of the SM 3.0 strategy, aespa's third mini-album ‘MY WORLD’ surpassed 1.8 million pre-orders and exceeded 2 million sales within two weeks of release," adding, "Compared to the previously released mini 1st album ‘Savage’ with 510,000 copies and mini 2nd album ‘Girls’ with 1.65 million copies, sales surged by 394% and 121% respectively, setting a new personal best." They also broke records for the highest first-week sales by a girl group (1.69 million copies) and the highest first-day sales by a girl group (1.37 million copies). The title track 'Spicy' is currently topping major domestic and international album and digital charts and has won four music program awards. Aespa recently became the first K-pop group to attend the Cannes Film Festival and plans to continue their overseas tour focusing on North America in the second half of this year.

In the disclosure released that day, SM outlined five key investment points: ▲Establishing an advanced corporate governance structure ▲Introducing the Multi Production Center system ▲Maximizing IP value through business cooperation with Kakao ▲Investing in publishing business and label acquisitions ▲Shareholder return policies based on an optimal capital structure. Regarding advanced corporate governance, the company operates compensation committees, outside director nomination committees, internal transaction committees, and governance committees centered on the board of directors. All committee chairs are outside directors. Additionally, SM is delivering results through five Multi Production Centers and pursuing maximization of IP (intellectual property) profitability. The recent aespa mini-album was also a product of the Multi Production Center. Furthermore, through collaboration with Kakao, SM plans to complement each other's strengths and weaknesses to increase business opportunities.

External Label Acquisitions... Commitment to Shareholder Value Return

SM is expanding its IP production capabilities through external label acquisitions and the establishment of a music publishing subsidiary, while managing capital structure by utilizing net debt at 0.5 to 1 times (target leverage multiple) of separate operating profit. The company follows an investment policy based on target required returns, proceeding with investments when expected shareholder returns exceed the target required return. SM also sets a target financial structure (maintaining net cash equivalent to 0.5 to 1 times separate operating profit) and plans to use surplus cash for shareholder returns. Through these five pillars of the SM 3.0 strategy, SM aims to steadily realize its vision of becoming a ‘fan- and shareholder-centered global entertainment company.’

Jang Cheol-hyuk, CEO of SM, stated, “The SM 3.0 strategy is not merely focused on expanding profitability but is an exemplary growth strategy in the entertainment industry that pursues advanced corporate governance. We will demonstrate the SM Initiative leading the development of the entertainment industry through IP x IT synergy creation with Kakao.”