HYBE’s Revenues Soared in Q2, But That Doesn’t Account for BTS Break

With BTS on a break since June and its members pursuing solo projects, HYBE’s solid second-quarter earnings release was as much about what happens next than what already happened.

HYBE’s total revenue improved 83.8% to 512.2 billion KRW ($397.7 million) from April to June. Most growth came from the company’s “artist direct involvement” segment, which increased 153%. Concert revenue grew to 85 billion KRW ($66 million) from nothing in the prior-year period on the strength of BTS’s four concerts in Las Vegas and Seventeen concerts in Japan. Revenue from ads, appearances and management grew 39% to 30 billion KRW ($23.3 million)

While merchandising and licensing improved 97.2% to 98.8 billion KRW ($78.7 million), contents fell 22.6% to 70.7 billion KRW ($54.9 million), partially because online concerts were categorized under contents in the prior-year period. Fan club revenue improved 96% to 16.9 billion KRW ($13.1 million).

Adjusted earnings before interest, taxes, depreciation and amortization jumped 146% to 107.4 billion KRW ($83.4 million), although EBITDA margin (as a percent of revenue) dropped from 22.4% to 21.0%.

With BTS on tour and releasing music, the second quarter looked like any other recent quarter for HYBE. BTS’ “hiatus” announcement came on June 14 — two weeks before the end of the quarter and four days after releasing Proof, a retrospective compilation that debuted at No. 1 on the Billboard 200 with 314,000 album equivalent units, including 266,000 album sales and 52.8 million on-demand streams.

That helped HYBE’s albums revenue — basically its recorded music sales — jump 97.1% to 210.9 billion KRW ($163.7 million at the June 30, 2022, exchange rate) from the prior-year period. Any lingering effects of BTS’ hiatus won’t be evident on HYBE’s financials until the second half of the year.

BTS’s decision to take a hiatus rocked HYBE’s share price and raised questions about the company’s ability to maintain revenues with members’ solo projects and the releases and tours of other HYBE artists. Although HYBE is a larger, more diversified company following its acquisition of Ithaca Holdings in 2021, some analysts downgraded HYBE’s stock following the announcement.

HYBE’s offered little information in its earnings call that would help ease worries about the financial impact of BTS’ break, however. Little information was provided on the individual band members’ solo projects. Nothing constructive was offered about the members’ possible military service. And no specifics were offered about upcoming BTS projects that would would boost HYBE while members are otherwise on break.

CEO Park Ji-won began Wednesday’s earnings call by looking ahead towards the second half of 2022. BTS member J-Hope released a solo album, Jack in the Box, on July 15. In the U.S., Jack in the Box debuted in the top 20 of the Billboard 200 and reached No. 5 on the Top Album Sales chart with 10,000 units sold — small by BTS standards, but it was not available on CD. Other BTS members “are also working hard on their solo projects to showcase their individual perspectives on music,” Park said. He noted that BTS will hold a concert in Busan, Korea, in October to help South Korea’s bid to host the 2030 World Expo. As if to set minds at ease, Park added, “I would like to reiterate that BTS is going to carry out those team projects and solo projects in a harmonious matter.”

Otherwise, J-Hope’s much-hyped performance at Lollapalooza will make only a small contribution to HYBE’s third-quarter financials, said CFO Lee Kyung-joon. But Lee believes it’s best to take a long-term view here. J-Hope’s 70-minute performance was streamed live through HYBE’s WeVerse social media platform, racking up 14.9 million views from fans in 223 countries, according to Lee. “This was an opportunity to once again enhance and prove the status of HYBE artists and I believe that there is a lot of intangible value created,” he told investors during the call.

HYBE succeeded in highlighting the diversity of its roster, suggesting that artists such as Seventeen, Tomorrow X Together and Enhypen can do some of the heavy lifting. The first-week sales of Tomorrow X Together’s last three albums’ sales improved from 300,000 to 1,250,000 — a 103% compound growth rate. Seventeen’s last trio of albums improved from 1,360,000 to 2,070,000 in their first week of release. In fact, Seventeen’s Face the Sun, released May 27, and 4th Album Repackage: Sector 17, released July 18, made it the first HYBE band since BTS with two albums to surpass one million first-week sales, said Park. Enhypen’s last three albums improved from 380,000 to 1,240,000 — 80% compound growth rate.

These acts will also soon be touring and impacting HYBE’s concerts and merchandise revenues. Seventeen’s Be the Sun tour will hit 27 dates in 20 cities in Korea, North America, Southeast Asia and Japan. Tomorrow X Together’s first offline world tour, Act: Lovesick, has 20 concerts in 14 cities and has sold out dates in the U.S. Enhypen’s Manifesto tour — also its first offline world tour — starts in September and reaches 14 dates in 10 cities in South Korea, Japan and the U.S.

HYBE shares rose 2.9% to 175,500 in early trading Thursday (Aug. 4) morning in Seoul. Investors are more optimistic than when BTS broke the news of its break in mid-June: The share price has recovered 68.2% of its losses and is 27.6% above the 2022 low mark of 138,000 KRW.