SM Entertainment Stock Jumps As Execs Reveal Solid Q1 Earnings and Plans for a Major North American Acquisition

  • Save

  • Save
SM’s EXO-M. Photo Credit: Luhan Please

Having put a much-publicized ownership battle with Hybe (mostly) in the rearview, K-pop agency SM Entertainment has revealed that it achieved a double-digit year-over-year (YoY) revenue improvement during 2023’s opening quarter.

Seoul-headquartered SM Entertainment, the professional home of acts such as Aespa, Super Junior’s Sungmin, and Exo’s Kai, just recently posted its Q1 2023 financials. The performance analysis is the first that the business has released since it (and Kakao, which now owns a substantial portion of SM) fended off a high-stakes takeover attempt from Hybe.

Despite pulling out all the stops at the height of the showdown, SM and Hybe have publicly signaled that they’ve moved past the dispute, with the former’s artists poised to join the latter’s WeVerse fan-interaction platform. Hybe, for its part, previously indicated that it would sell the entirety of the SM ownership stake it’d obtained.

Back to SM Entertainment’s Q1 2023 earnings, however, the Dream Maker Entertainment and ScreaM Records parent disclosed that it had generated ₩203.9 billion ($151.98 million at the present exchange rate) on the quarter – up about 20.3% YoY but down roughly 21.2% quarter over quarter (QoQ).

Behind the sum, SM acknowledged YoY dips in “standalone” albums and digital revenue (₩59.6 billion/$44.40 million, down 6.1% YoY and 22.7% quarterly) and in the “others” category (₩2.0 billion/$1.49 million, down 88.6% YoY). (Q1 2022 had delivered a ₩15 billion/$11.17 million “one time” windfall to others, and Q1 2023 brought album sales of 3.48 million units, including 2.15 million units for new releases, per CEO Jang Cheol-hyuk.)

But licensing income is said to have improved by 67.4% YoY to ₩29.3 billion/$21.83 million notwithstanding a 28.8% QoQ decline, compared to 16.1% YoY growth for appearance revenue (₩18 billion/$13.41 million).

SM’s biggest win on the standalone side – that is, in key categories but excluding some of the revenue from its various subsidiaries and holdings – came from concerts, which according to the document raked in ₩19.2 billion/$14.30 million during January, February and March. The sum, representing a noteworthy 155.9% quarterly improvement and a significant 2,642.9% YoY spike, derived from a total of 55 concerts, per higher-ups.

Rounding out its standalone operations, SM identified ₩30.1 billion/$22.42 million in selling and administrative expenses (up 4.4% YoY but down 5.8% QoQ owing to “one-off costs related to handling disputes over management rights”) and ₩18.7 billion/$13.93 million in net income (down 9.7% YoY but up 134.3% QoQ).

Interestingly, Jang Cheol-hyuk (who was promoted from CFO to CEO earlier in 2023) didn’t hesitate to confirm that his company and Kakao have set their sights on breaking into North America, where Hybe in February purchased Quality Control, with a potential acquisition.

“We are discussing strategies for entering North America with Kakao Entertainment,” the exec spelled out when asked about his expansion objectives, according to a translation of his Korean-language remarks. “We are considering an acquisition, although it is difficult to disclose details yet.”

Shifting to the showing of its foremost subsidiaries, SM pinpointed ₩26.7 billion/$19.88 million from SMC, ₩22.3 billion/$16.61 million from the aforementioned Dream Maker, ₩21.4 billion/$15.94 million from Culture & Contents, ₩21.1 billion/$15.71 million from others, ₩19.3 billion/$14.37 million from KeyEast, and ₩5.3 billion/$3.95 million from Tokyo-based SMEJ Plus. In total, these holdings are said to have brought SM ₩3.8 billion/$2.83 million in Q1 2023 net income.

(“You can feel the huge popularity in Japan,” Jang Cheol-hyuk said during his company’s Q1 earnings call, pointing to concert attendance in the nation of about 126 million residents and interest in Aespa’s upcoming Tokyo Dome performances.)

Elsewhere in the brief English-language earnings breakdown, SM highlighted its artists’ many forthcoming tours and releases, besides its slate of television and film projects. When the market closed today, the business’s stock (KOSDAQ: 041510) was worth ₩109,200/$81.33 per share, up 6.54% from Monday and 45.21% since 2023’s beginning.