SM Entertainment posts disappointing Q1 operating profit at $11.4 million

SM Entertainment headquarters in Seongdong District, eastern Seoul [NEWS1]

SM Entertainment logged a lower-than-expected operating profit of 15.5 billion won ($11.4 million) for the first quarter of the year on the back of initial operating costs of newly formed subsidiaries under the multi-production system introduced last year, the K-pop agency said on Wednesday.

The figure fell 14.9 percent compared to the previous year to come in well below the market consensus of 25.1 billion won compiled by market tracker FnGuide.

Quarterly revenue rose 7.9 percent on year to 220.1 billion won, in line with the analysts' forecast.

Net profit plummeted 45.9 percent to log 12.4 billion won, missing the market expectation of 24 billion won.

The uptick in revenue is due to the reflection of sales from large-scale concerts, artist-related merchandise and licensing fees from last year. Artists such as NCT 127, SHINee and TVXQ! were the largest contributors.

New album sales for the January-March period grew 28.37 percent to 2.76 million units. NCT Dream was by far the largest contributor for album sales, with 2.46 million units sold globally.

The label's artists will kick off tours in the upcoming months, with NCT Dream’s third world tour scheduled between May and June, while aespa will embark on a world tour to 14 locations from the end of June. Rookie boy band RIIZE is also expected to embark on its first global tour in four regions — the Philippines, Singapore, Thailand and Indonesia — in the third quarter.

In new album releases, aespa will release its first full-length album at the end of May. EXO’s Suho will release his third EP, and RIIZE’s first EP will be released in June. Red Velvet and WayV will also release new EPs in the second quarter.

Japanese singles from NCT Dream and NCT Wish are scheduled for release in the second quarter as well.

In the third quarter, artists NCT 127, Taeyeon, Key, Chanyeol, Irene, Jaehyun and NCT Wish will either release full-length albums or EPs. WayV, Key, aespa and RIIZE will release Japanese singles, while NCT Dream will release a single in the U.S.

Furthermore, the agency plans to debut its first virtual artist, nævis, in the third quarter, while a rookie boy group produced in collaboration with British entertainment company MOON&BACK is scheduled to debut in the fourth quarter.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]