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Edited Transcript of 035760.KQ earnings conference call or presentation 13-Feb-20 7:00am GMT

Q4 2019 CJ ENM Co Ltd Earnings Call

SEOUL Feb 14, 2020 (Thomson StreetEvents) -- Edited Transcript of CJ ENM Co Ltd earnings conference call or presentation Thursday, February 13, 2020 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Chul-Gu Kang

CJ ENM CO., Ltd. - MD of Global Support

* Jae Min Baek

CJ ENM CO., Ltd. - CFO

* Min-hoi Heo

CJ ENM CO., Ltd. - CEO & Director

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Conference Call Participants

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* Min Jung Kim

HI Investment & Securities Co., Ltd., Research Division - Research Analyst

* Sejong Hong

Shinhan Investment Corp., Research Division - Research Analyst

* Sung-Ho Park

Yuanta Securities Korea Co., Ltd., Research Division - Analyst

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Presentation

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Operator [1]

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[Interpreted] Good morning and good evening. First of all, thank you all for joining this conference call. And now we'll begin the conference of the fiscal year 2019 fourth quarter earnings result by CJ ENM. (Operator Instructions)

Now we shall commence the presentation on the fiscal year 2019 fourth quarter earnings results by CJ ENM.

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Unidentified Company Representative, [2]

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[Interpreted] Good afternoon. This is [Kay Che] from CJ ENM's IR team. First of all, I'd like to thank all of our analysts and shareholders for taking the time out of your busy schedules to attend our earnings conference today.

We will now begin CJ ENM's 2019 fourth quarter earnings call. Please be reminded that the financial and management results we will be discussing today have yet to undergo a full independent auditor's review and, therefore, may be changed pursuant to audit findings.

Today, we are joined by our CEO, Mr. Min-hoi Heo, and other members of management representing their respective business divisions. Mr. -- we have Executive VP, Mr. Yong Soo Ha; [Mr. Lee Sung-ho], Executive VP; [Mr. Gyo Han Lee] from the Media Content segment; Mr. Seong-Hak Lee from media content solutions; [Mr. Song Yung Kang] from Commerce; [Mr. Yeong Gi Joo] from pictures; [Mr. Chu Lin Gong] from music; and lastly, [Mr. Chul-Gu Kang] from Studio Dragon.

We will now start the call with our CEO, Mr. Min-hoi Heo, who will present our business strategy and guidance for 2020.

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Chul-Gu Kang, CJ ENM CO., Ltd. - MD of Global Support [3]

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[Interpreted] Good afternoon. This is Min-hoi Heo, the CEO of CJ ENM.

Despite the difficult market environment in 2019 marked by a slowdown in the advertisement market and contraction in consumption spending, CJ ENM nevertheless delivered good performance in and outside of Korea, thanks to efforts to enhance the underlying competitiveness of our businesses, delivering solid growth across all business areas. We will continue to build on these efforts into 2020, improving the underlying fundamentals of our business, further strengthening our management focus on earnings growth, centered on improved profitability and margins, for each of our respective business segments. We intend to improve the hit ratios of our original content, further enhance the competitiveness of our commerce offerings while boosting our bottom line through better cost efficiency and increase our global presence abroad.

In the media segment, we are looking to achieve 10% or above growth in TV advertisements and 20%-plus growth in digital sales. We intend to reinforce audience ratings or viewership of our original content and broader digital distribution to boost profitability. On the commerce side, we have been strengthening the competitiveness of our in-house brands and product offerings, which we will continue, to deliver earnings growth driven by -- centered around higher-margin business portfolio. In pictures, last year's release, Extreme Job, hit an all-time box office record here in Korea while, of course, Parasite did very well, winning Oscar honors at the Academy Awards. It won both critical acclaim and commercial success, and we'll build on this momentum and continue our strategy of strengthening our in-house development and production capabilities to boost earnings for respective film titles. In the music segment, we will continue our strategy of building up a mega IP portfolio, targeting the global market. As a representative player in the music industry, we are embracing stronger accountability and public interest as we focus on creating new content, expanding our portfolio in a different way from before.

In terms of guidance, CJ ENM's 2020 target includes KRW 3.8 trillion in revenue and operating profit of KRW 310 billion. Our top line target is based on conservative growth assumptions as we plan on allocating resources in line with profitability and scale back low-margin business. Meanwhile, we're looking to achieve solid bottom line growth targets centered on profitability.

At our BoD meeting held earlier today, the Board resolved on

total cash dividend of KRW 27.5 billion or KRW 1,400 per share and a dividend payout target of 15% or above as we seek to deliver strong shareholder returns. As a representative media and commerce player growing [addressable] market, we're continuing doing our best as we represent Korea on global stage. I'd like to express my deep gratitude to our shareholders and all analysts joining us today, and that concludes our management plan for 2020. Thank you.

Next, we will move on to our financial results. All quarterly and annual financial results of CJ ENM disclosed in our earnings release are based on K-IFRS consolidated financial statements. Please be advised that 2019 full year financial statements reflect income from discontinued operations with CJ Hello pursuant to its [spin-off] with quarterly and historical comparisons based on pro forma estimates.

Now I will turn the call over to our CFO, Mr. Jae Min Baek to walk us through fourth quarter 2019 financial performance.

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Jae Min Baek, CJ ENM CO., Ltd. - CFO [4]

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[Interpreted] Good afternoon. This is Jae Min Baek, CJ ENM's CFO.

Our consolidated fourth quarter revenue recorded KRW 1,014.1 billion, a 5.7% increase Y-on-Y. Media segment revenue recorded KRW 441.1 billion, a 1.3% decline whereas commerce, pictures and music continued top line growth. In terms of operating profit, commerce continued upside growth while media saw sluggish earnings. Operating profit came in at KRW 42.7 billion, a 14.9% decrease, reflecting operating loss from pictures and music business.

Full year revenue for 2019 was KRW 3,789.7 billion, an increase of 14.5% Y-o-Y while operating profit recorded KRW 269.4 billion, an increase of 9.5% Y-o-Y. Commerce and pictures made significant contributions to our improved operating profit, thanks to better profitability and the turnaround, respectively, while media and music saw reduced profitability owing to investments in several production. In 2020, we intend to reinforce the commercial success of our content while expanding digital distribution. We also carry out company-wide cost-cutting measures and improved production efficiency to help achieve our earnings growth targets.

Moving on to Page 5 for media. Media in the fourth quarter reported revenue of KRW 445.1 billion and operating profit of KRW 4.6 billion. TV advertisement revenue decreased by 2.4% year-on-year due to a slowdown in the broadcast advertising market while digital ad revenue grew by 0.7%. Content sales revenue recorded KRW 69.6 trillion, with reduced profitability growth, owing to a slowdown in advertisement and content sales.

On a full year basis, media revenue totaled KRW 1,678.4 billion; and operating profit, KRW 70.9 billion. Driven by an increase in mid-program advertising sales, overall TV ad sales grew by 8.5% Y-o-Y and digital sales by 22%. In 2020, we intend to be more efficient in production budgeting and execution in order to boost profitability. We will expand our lineup of seasonal content and strengthen original digital content and focus on reclaiming higher margins through more impactful audience viewership.

Moving on to commerce on Page 6. Fourth quarter commerce revenue recorded KRW 409.9 billion and operating profit of KRW 41.8 billion. We strengthened in-house brands, such as A+ G and Jean Michel Basquiat and continued to record earnings growth thanks to our strategy on seasonal products and trend-leading programming. On a full year basis, commerce revenue was KRW 1,427.3 billion; and operating profit, KRW 149.2 billion.

Robust growth in GMV from PB led robust top and bottom [line growth]. We also set out to restructure certain low-margin business lines; for example, a closeout of overseas operations and discontinuation of our catalog business to better focus on growing profitability. We will carry this business strategy forward into 2020 as well, reinforcing our strategy to enhance our portfolio, centered on profitability and improving the competitiveness of our own private brands.

Page 7, on to pictures. Fourth quarter pictures revenue was KRW 93.1 billion, with an operating loss of KRW 1 billion. The Divine Move 2: The Wrathful and Ashfall grossed KRW 33.4 billion in theater revenue at the local box office while overseas revenue recorded KRW 36.9 billion. This includes overseas exports of Parasite, agency distribution in Turkey and investment in a Vietnamese production. Although overseas revenue saw strong growth, contribution to margins was minimal, resulting in a slight operating loss overall.

Full year revenue was KRW 349.3 billion; and operating profit, KRW 43.6 billion. We managed a significant turnaround by strengthening in-house development and production capabilities, focusing on the underlying profitability of respective projects. This will remain unchanged in 2020 as we look to grow the overall pictures segment, centered on our enhanced lineup strategy, anchored on our own development and production capabilities. And we'll also report the overseas business guide.

Moving on to Page 8 for music. Fourth quarter music revenue was KRW 66 billion with operating loss of KRW 2.8 billion. Record in digital sales from artists like Kim Jae Hwan and Heize recorded KRW 37.5 billion, and concert revenue for groups like Davichi and BTS recorded KRW 48.7 billion. Despite this top line growth, however, music recorded an operating loss in the fourth quarter of KRW 2.8 billion, impacted by pre-production records and programs for new artists.

Full year revenue was KRW 334.8 billion, with operating profit of KRW 5.6 billion. Although an increase in new production invariably weighed on profitability in 2019, we are looking to deliver earnings growth in 2020 as our lineup of new artists, including JO1, Belift Lab and TOO, make their debut on the global markets and as concerts, record sales, et cetera, start to ramp up into the year as they reinforce their presence.

Yes. Let me now brief you on our 2020 growth strategy for Studio Dragon. We will be focusing our business capabilities on new growth areas, namely stepping up our global business, diversifying our business portfolio and improving business efficiency. Leveraging our industry-leading capabilities in scripted drama production in Korea, we will seek more full-fledged growth on the global markets while also strengthening our top line business fundamentals and profitability through better cost efficiency gains.

First, we intend to continue our growth by further crystallizing our global collaboration. Our overseas revenue has been growing at very high levels with CAGR above 50% over the last 3 years, and we'll continue to maintain this strong momentum as we target strong double-digit growth this year as well.

Early normalization and localization of our U.S. subsidiary will be a key priority focus. We are already in talks with 20th Century, Showtime and others on remix based on our original IPs as we continue to expand our global scope. We are also partnering up with players like HBO and currently have 10 or more of these sort of global projects in discussion. And we are also working together with Skydance, in which we have made an equity investment in to speed up local networking and recruitment of creator talent as we flesh out our drama localization strategy going forward.

This will work to strengthen our portfolio further and diversify across more distribution channels to grow our influence on the market. We will optimize the mix of ENM dramas on a quarterly basis to strike an optimal balance of content in terms of different genre and production scale to enhance audience viewership. We also want to diversify across multiple channels, including terrestrial broadcasting stations and also OTT platform. We actually produced 1 original drama for OTT last year, but we intend to do 2 or more this year as we build out large-scale OTT production to come up with the next tentpole success case. And we also seek to maximize profitability and distribute risk in the interest of better risk management by diversifying our original drama content, again, across different distribution channels.

And we also seek to secure strong fundamentals for future growth through better business efficiency. Efficiency gains have already been achieved by stabilizing rising production costs and raising the bar in our negotiation terms with Netflix, which should later provide us with incremental growth. We'll also continue to chase further business efficiency improvements through our [E&P] renewal, which will enforce tighter discipline from budgeting to execution, contributing to improved profitability.

Okay. Moving on to Page 10 please for 2019 full year and fourth quarter results for Studio Dragon. In 2019, we achieved revenue of KRW 468.7 billion, which is a 23.5% increase Y-o-Y, and a 3-year CAGR of 27%, thanks to efforts to better influence on the local and global markets, including building up a mega IP portfolio, improving execution. And also, we diversified into different genre and expanded into new OTT-bound business models. Notably, we recorded KRW 160.4 billion in overseas sales, which represents 45.5% growth Y-o-Y, and a very strong 3-year CAGR of 54.5%, thanks to an increase in global sales ASP, expansion to new territories and expansion of the OTT business model. Meanwhile, fourth quarter revenue was KRW 97.4 billion, down by 4.2% year-on-year and 25.7% Q-on-Q. This was mostly due to intensifying competition, a bit of a delay in programming especially for Crash Landing on You and also slowdown in VOD or endorsement sales.

On the operating profit side, we did see strong earnings trends hold up, up to the third quarter despite multiple negative factors, such as the reverse base effect from Mr. Sunshine from last year, a poor performance from Arthdal Chronicles, which managed to just breakeven. But still, overall, we did record negative operating profit due to the temporary setback we saw in the fourth quarter. At present, all business performance measures are back at normal or above-normal levels. New content, including Crash Landing on You and Black Dog are all off to a good start, and the influence of other drama titles have been seeing a recovery. And we feel that first quarter growth will show that the fourth quarter results were, in fact, just a temporary set back after all, and we'll be able to shortly (inaudible).

Next, we will move on to our Q&A session. (Operator Instructions)

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Questions and Answers

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Operator [1]

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[Interpreted] (Operator Instructions) The first question will be given by Hong Sejong from Shinhan Financial Investment.

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Sejong Hong, Shinhan Investment Corp., Research Division - Research Analyst [2]

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[Interpreted] Yes. This is analyst Sejong Hong. Two questions. I think throughout the presentation, you did emphasize that you want to engage in business management focused on profitability. If you look at the Dragon lineup, however, you have roughly 28 to 33 titles, and assuming that per title production costs remain the same, it's likely that your production costs may increase by 20%. So given how you're forecasting revenue to stay flattish but in your guidance, you said that operating profit should go up by about KRW 40 billion or more, what is factored into your underlying assumptions for the guidance? Is there a factor including perhaps China? Or could you elaborate? Could you specify more details, please?

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Unidentified Company Representative, [3]

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[Interpreted] Yes. So for the first question, it is true that our revenue -- we're investing for 2020. We do want to decrease the portion of our lower-margin business while focusing on profitability-centered sales that will be our foremost [earning goal]. And our guidance for revenue actually was on the conservative side as we are mindful of different factors that could affect the business cycle in and outside of Korea.

However, for profitability, we intend to see or enforce more cost-cutting measures to be more disciplined about more cost discipline and efficiency. For example, we are going to adopt more seasonal programming, and we'll be able to manage our planning or preproduction costs more efficiently. And we'll illuminate cross-channel, overlapping costs as well for better efficiency. So overall, that will be the stance for us over 2020 as we manage, again, centered on profitability. If there are any plans to [change] this type of business management plan, we will be sure to communicate it with you.

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Unidentified Company Representative, [4]

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[Interpreted] Yes. This is Studio Dragon. Well, regarding HBO, it so happens that HBO Asia was looking for a potential studio to partner off with for collaboration, and it has been working on the script called [Alone]. And it actually came to Korea to find a potential partner, and that's how we came to work with HBO as they found us to have the necessary global production capabilities and also the capability to pull off this type of global project.

We do have a contract in place where (inaudible) lead production and necessary investments, and we're in the process of further work on the script for the piece. Ultimately, our goal would be to do coproduction and co-show running together with HBO Asia and (inaudible) and also tvN. We are still in ongoing discussions about further details, for example, about profit sharing, et cetera.

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Operator [5]

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[Interpreted] The following question is by Park Sung-Ho from Yuanta Securities.

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Sung-Ho Park, Yuanta Securities Korea Co., Ltd., Research Division - Analyst [6]

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[Interpreted] Yes. This is Sung-Ho Park from Yuanta Securities. I think I will ask one question each regarding broadcasting, music and pictures. First, for broadcasting or media, I believe that your production budget for last year was a total of KRW 600 billion. So is that full amount completely expended at the moment? And can you provide guidance on production budget for 2020? And I understand that there was -- there are some concerns regarding the advertising market in the first quarter due to the corona outbreak. So what is the situation at CJ ENM?

Second question has to do with music. Regarding last year's scandal over Produce 101, I imagine that you had to do something, perhaps satisfy some additional provisioning or whatnot. So could you elaborate on what actually had to be done? And even assuming that IZ*ONE starts to perform again and become active, is it fair to say that further profits on your side from Produce 101 will be still 0? And third, regarding some -- regarding Parasite. I understand that overseas exports for Parasite were all booked in the fourth quarter. Are there any additional RS provisions that still remain in place? And there was some press suggesting that you provided support towards marketing and promotion. So could you clarify?

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Unidentified Company Representative, [7]

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[Interpreted] Yes. Let me cover the first question. So as you said, it is true that last year, production budget was stated at KRW 600 billion per our guidance. Actual expended amount in terms of content production last year was KRW 610 billion, so there was a slight overrun compared to the stated guidance. But we previously mentioned how we want to enforce better cost efficiency, especially in terms of production costs. So in 2020, we want to manage production costs so that it's only slightly higher compared to 2019 levels.

And regarding the advertisement, especially the broadcasting advertisement market, there are concerns that due to the economic slowdown, growth will continue at the low single-digit range or so. However, we actually think that we can deliver better efficiency, especially in terms of our digital advertising and sales. That's why we have set our revenue target for TV advertisement 10% or more year-on-year; for digital advertisement, 20% year-on-year or more.

Yes. So as you said, the corona viral outbreak is having a significant negative impact on the advertisement market, especially travel industry, cosmetics industry. And also, the auto industry is suffering a negative impact primarily because of a setback in parts foreseen. However -- those types of industries are seeing the biggest impact in terms of advertisement. So this impact is continuing into January and February. However, in March, we have in the pipeline the Hospital Playlist, which is already validated, proven seasonal title. We have our strong portfolio of in-house content and also TV/digital hybrid content that will help us broaden into or actually advance into a wider pool of new advertisers. We also want to diversify our product offering, offering TV/digital integrated tech package products, maximize ROI as advertisers. We also want to broaden variety, for example, increased sports broadcasting and other documentary, real-life type of genre as well to diversify our anchor IP, maximize the high season effect as much as possible to grow both top line and also bottom line. Yes.

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Unidentified Company Representative, [8]

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Yes. So let me cover the second question on music. You did ask about Produce 101. And again, I'd like to take this opportunity to express my regret of the incident. So at the end of last year, as our CEO sat for an interview, he apologized for the situation. There was mention how we wanted to set up specific funds, if you will, so that we could contribute to the local industry and also to the globalization of K-Pop. So as you may have already read through the press, already as of the month of January, the fund has been established with total value of KRW 25.3 billion. So this is not intended to be just a one-off spending exercise, but it will be full of resources that will continue to be used to fund growth in the industry. And we are in further talks about possibly contributing an additional KRW 3 billion to KRW 5 billion, but this is not reflected in fourth quarter financials.

Yes. So regarding IZ*ONE, actually they're full album, the next album is planned for release later this month; in fact, February 17. And that's when they will start their local activities here in Korea, and they also continue to be active elsewhere, including Japan, as before. So we believe that this will be a turning point for IZ*ONE, but nonetheless, they will be back up and performing. Unfortunately, the group X1 will be disbanded, but the costs involved actually are quite minimal because we're only -- we were only at the very early stage of album production for X1, and all costs have already been fully booked as of 2019 with no outstanding amount remaining.

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Unidentified Company Representative, [9]

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Yes. I'll take the third question on Parasite and overseas exports. There's a bit of difference depending on what country you would be thinking of, the exporting destination, I mean. But for the most part, there are additional RS provisions that apply to growth in revenue after deducting certain amount of cost. So overseas exports have largely been booked into -- in the fourth quarter. We can look forward to additional upside that can be booked in this year as well.

So after winning the Academy Awards, in particular, now most theaters are showing Parasite in France, U.K., U.S., Japan and elsewhere. For example, in the U.S., as of this weekend, Parasite has come to 2,000 theaters nationwide. In Japan, 170-or-so theaters has been increased to 274. So I think we should watch and see until it's the end of February to get a better idea of how much upside or further add-on to our financials we can expect from Parasite. Now regarding the Academy campaign, you mentioned some concerns about P&A cost. But this is all done within the scope of U.S. growth in revenue and G&A, so there is no additional burden involved

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Operator [10]

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[Interpreted] The following question is by (inaudible) from (inaudible) Capital.

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Unidentified Analyst, [11]

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[Interpreted] Yes, this is (inaudible) from (inaudible) Capital. Do you have any plans to (inaudible) this year or issue any mezzanine bonds this year?

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Min-hoi Heo, CJ ENM CO., Ltd. - CEO & Director [12]

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[Interpreted] So regarding your question, we do see some long-term borrowings that will mature this year. So there may be some need to raise some funding in order to pay down some of those borrowings. Regarding mezzanine bonds, I don't know if you have a particular issuance in mind. But at the moment, there is nothing detailed or nothing planned in detail. But we would be open to the possibility, depending on the market situation we could look at.

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Operator [13]

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[Interpreted] The following question is by [Riki Hun] from Hana Financial Investment.

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Unidentified Analyst, [14]

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[Interpreted] This is (inaudible) from Hana Financial Investment. So I have some questions about media. You said that titles produced by Dragon will increase by 5. And then you mentioned how you had negotiated some better terms with Netflix -- I mean Dragon and Netflix that's (inaudible) and that's going to give a better production [firm]. So it seems that the production cost guidance provided by CJ ENM are not as high as I'd imagine. So per title, does that mean that the amount of production support that ENM has to provide to them may actually be lower than expected as far as titles that Dragon will tie to Netflix are concerned? Is that the case? And the second question has to do with the debut of the Japanese JO1, I believe you said. Japan, I think these (inaudible) based on monthly salary base. That is the scheme. So is it true that if we are able to start here first and get them to be popular and perform onstage on concerts first, then does that mean -- does that scheme mean that they may actually do higher-than-expected return for the company? And the third question has to do with the Dragon since you recorded your first operating loss. Does it have to do with any particular reason in particular, for example, amortization of IP rights, for example, for -- like ENM, are there any non-operating expense costs that were part of the problem?

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Unidentified Company Representative, [15]

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[Interpreted] So let me explain first about the (inaudible) and then we'll move onto the questions and answers from Dragon side. First, regarding production between Dragon and ENM are concerned. Actually, we do amortization on a straight-line basis over 1.5 years. That's the amortization period. And so the idea is that also the number of production titles increases, that does not necessarily mean heavy production costs. For example, Mr. Sunshine. Well, we finished all amortization of the copyright or IP on the content as of the fourth quarter of 2019. Yes, so let me take your question about Dragon. So the number -- you said that Dragon titles increased by a total of 5. Well, that's actually the total add-on for Dragon overall, but if you look just at how many more titles will be produced and given from Dragon to ENB, actually, that's only 2 out of the 5. And in terms of what led to the poor performance in the fourth quarter of 2019. As we explained earlier during the presentation, it was not necessarily because of any one-off cost items, but due mostly to the overall instability of our overall lineup. For example, there was a programming delay we saw in Crash Landing on You, for example, and other factors, for example, we were only able to reflect the results to the sixth episode only for that title in the fourth quarter. And also overall viewership and performance of the other titles tended to be (inaudible) so local VOD sales suffered, overseas sales were sluggish and endorsement or sponsorship sales also were down. So combined the endorsement sales and also internal sales from CJ ENM dropped by KRW 4 billion, which is the reason that we recorded an operating loss in Q4. And also there was a reduction or scale down in the OCN lineup as well, which led to further decrease in internal sales for CJ ENM. However, going forward, because we have already made (inaudible) plans regarding 2020 lineup already as of the fourth quarter last year, so we are set to execute on the plan. I think it's an improved situation. Let me take your question on JO1. So JO1 is an idol group who were actually selected from Produce 101 Japan, which aired in Japan earlier. So it was one of our globally bound projects. So after their album is released, they will be set for -- to make an official debut in March, and then they will be active on broadcasting stations, they will be putting on concerts and e-events as well. So they are set up to start their activities in Japan. So JO1 was actually the first type of this -- it was actually the first of this type of project, idol group to be produced out of Japan. But actually, the reception, the response from the market has been very heated. If you look at the response online and their fan base, actually they are very enthusiastic over this group. And so they're actually making the headlines across many different media, entertainment related magazines, other publications as well. So I think we can look forward to profitable growth from JO1.

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Operator [16]

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[Interpreted] (Operator Instructions) The following question is from Min Jung Kim from HI Investment & Securities.

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Min Jung Kim, HI Investment & Securities Co., Ltd., Research Division - Research Analyst [17]

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[Interpreted] I will be asking 2 questions as well. So regarding this (inaudible) revenue guidance of (inaudible), could you break it down into business segment, different business-specific guidance? And second, regarding last year's TV advertisement growth target, well, you did happen to miss last year's guidance. So I'd like to hear more on the reasons why. And the TV advertisement growth target of 10% that you mentioned for 2020, what are the assumptions underlying that target?

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Min-hoi Heo, CJ ENM CO., Ltd. - CEO & Director [18]

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[Interpreted] So regarding your first question on a breakdown of the revenue guidance by different business segment. I do seek your understanding as we currently do not provide that level of guidance. And the second question was on why we missed last year's target in terms of TV advertising growth. Well, something completely unexpected occurred last year, which is mainly the [export] contribution that Japan placed on Korean exports. So this was the biggest factor where, in fact, most Japanese brands actually discontinued their advertisement campaigns as a result. And then why despite the slow advertisement market development in 2020, why do we think that we can achieve 10% growth. Well, if you look at the recent content consumption trends, I think these trends are largely led by digital and OTT consumption, and we actually have developed a very sophisticated lineup of that kind of TV plus digital advertisement products that is well aligned to those trends. Again, we have already launched and made available TV digital hybrid-type offerings as well, which give us reasons to believe we can achieve that 10% goal.

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Operator [19]

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[Interpreted] The following question is by Sung-Ho Park from Yuanta securities.

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Sung-Ho Park, Yuanta Securities Korea Co., Ltd., Research Division - Analyst [20]

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[Interpreted] Yes, I have a question on something that seems a bit strange to me on one of your IR fact sheets. It seems that for advertisement and promotion costs, for -- those costs actually increased significantly in the fourth quarter, a total amount was KRW 146.4 billion, which is about a KRW 40 billion increase just from the previous quarter. But then it seems that in terms of other cost items, there was some reversal of about KRW 49.5 billion. So I don't know, something about this is in strange to me. So could you explain?

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Min-hoi Heo, CJ ENM CO., Ltd. - CEO & Director [21]

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[Interpreted] So for commerce, you may understand that the platform commissions actually are booked (inaudible) for there to be (inaudible). And regarding other expenses where you say some of the number may appear wrong, well, we will make the necessary correction and if (inaudible). Thank you very much. It seems that there are no further questions. This brings us to conclude the fourth quarter 2019 earnings call by CJ ENM. Thank you very much.

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Operator [22]

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[Interpreted] This concludes the Fiscal Year 2019 Fourth Quarter Earnings Results by CJ ENM. Thank you for your participation.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]