HYBE beats the odds with surge in net profits, hints at future plans

BTS during a free concert in Busan on Oct. 15 [HYBE]

HYBE reported a consensus-beating 91 percent on-year surge in net profit during the third quarter this year due to album sales and the resumption of offline concerts.

The company’s July-to-September net came in at 94.9 billion won ($66.7 million), beating the 47.2 billion won forecast, according to FnGuide.

Revenue also jumped 31 percent compared to the same period last year, coming in at 445.5 billion won.

Of the total, albums took up 129.2 billion won and concerts 47.2 billion won. Singer J-Hope of boy band BTS and bands Seventeen, Enhypen and NewJeans all released albums during the third quarter. Some bands have also embarked on world tours for the first time in three years with the easing of pandemic regulations, such as boy bands Seventeen and Tomorrow X Together.

Sectors in which artists did not directly take part — artists’ merchandise, licenses, content and fan club membership fees — made up for 239.3 billion won. Artists’ world tours led to increased sales of merchandise around the world, the company said.

Operating profit slipped by 8 percent to 60.6 billion won due to the cost of holding audition programs, but the company “hopes it will prove as a profit with future debuts,” according to a press release.

“HYBE is looking to M&As and establishing joint ventures so that we may expand on our multi-label structure both in and outside of Korea,” the company said.

“We are looking to various labels, managements and any other companies that pursue businesses related to musical intellectual property [IP]. Tech companies are also being considered.”

The reason that operating profit fell but net rose is mainly due to the dollar income the company has earned, at a time when the won is at its weakest in over 13 years.

A regional breakdown for the third quarter was not provided. During the first half of 2022, 67 percent of its revenue was generated from outside of Korea.

The earnings come as a surprise to market watchers, who had been skeptical about HYBE without its biggest boy band, BTS. The band hinted at focusing on solo work with a temporary halt in group activities in June, crashing HYBE’s stock prices, and then made it official last month that the bandmates will begin serving their mandatory two-year military duties, starting with the oldest member, Jin.

“BTS used to take up as much as 95 percent of HYBE’s revenue until 2019, but that percentage has dropped to 70 percent in 2021 and 50 percent in 2022,” said Kim Hyun-yong, an analyst at Hyundai Motor Securities.

“That percentage is likely to drop to 30 percent in 2023 when BTS’s hiatus truly begins. In contrast, other artists such as Seventeen, Tomorrow X Together, Enhypen, Le Sserafim and NewJeans will be more active, giving the company a hopeful 1.69-trillion-won revenue next year, down 5 percent on year.”

In a letter to shareholders on Oct. 17, HYBE CEO Park Ji-won emphasized the company's ongoing efforts and future plans, saying it has new bands and non-K-pop businesses in the works.

HYBE has four new groups ready for 2023. It has acquired game and tech companies to mix K-pop content with digital services, such as the BTS Island mobile game, and is merging its Weverse fan community service with Naver’s V Live livestream.

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]