HYBE has shown weaker performance in the first half of this year compared to the previous year, with its cash flow also declining. This downturn has been influenced by costs related to global entertainment business expansion and investments in gaming and information technology (IT). Under the leadership of new CEO Lee Jae-sang, HYBE is expanding its global operations, focusing on the U.S., Japan, and Latin America.
According to HYBE's semi-annual report, the cash flow from operating activities on a consolidated basis was -42.4 billion won for the first half of the year, turning negative from 21.9 billion won during the same period last year. Cash flow from operating activities serves as an indicator of a company's business competitiveness by showing the money earned from core operations. Factors influencing this cash flow include product sales, expenses, interest income and payments, dividend income and payments, and corporate tax payments. HYBE's cash flow from operations for the first half of the year was 2.8 billion won, a 97.7% decrease compared to the same period last year.
During the same period, free cash flow (FCF) turned negative at -111.9 billion won. FCF is the cash available for use after subtracting taxes, capital expenditures (CAPEX), and dividends from operating income. It represents the cash that can be practically used after covering operating costs. This is the first time HYBE's FCF has turned negative since its listing in 2020.
(column: Sales activities, Investment activities, Finance activies)
Green: 1st half of 2023, Blue: 1st half of 2024
The decrease in cash inflow appears to be a result of worsening performance. For the first half of the year, sales and operating profit were 1.01 trillion won and 65.3 billion won, respectively, which represents a 3% and 51% decrease compared to the same period last year. HYBE's main businesses include music and album releases, content production, performances, and the fan platform Weverse. All of these are based on the intellectual property (IP) of its affiliated artists. In the first half of the year, there were relatively few high-revenue international performances and a slower resumption of activities by affiliated artists.
(Column: revenue, operating profit)
Green: 1st half of 2023, Blue: 1st half of 2024
Since August, HYBE has launched a new business strategy called "HYBE 2.0" under the leadership of this CEO. This CEO previously served as the Chief Innovation Growth Officer (CIGO) at Big Hit Entertainment, HYBE's predecessor, and later as the CEO of HYBE America. He has been leading the development of HYBE 2.0 since early this year. HYBE 2.0 focuses on three main areas: expanding business in the U.S., Japan, and Latin America; introducing a subscription-based membership service on Weverse; and exploring future growth opportunities based on information technology (IT).
As part of HYBE 2.0, this CEO is concentrating on expanding HYBE's presence in the U.S., the world's largest music market. The goal is to support comprehensive entertainment activities for local artists. Typically, Korean entertainment companies sign exclusive contracts with their artists and manage all aspects of their activities. For instance, HYBE's subsidiary Big Hit Entertainment has exclusive contracts with all BTS members, supporting their music releases, overseas performances, advertising shoots, and fan meetings. As a result, all revenue from BTS's activities is reflected in Big Hit Entertainment's earnings.
Columns: Assets convertible into cash, Net borrowings
Blue: 1st half of 2023, Purple: 1st half of 2024
Meanwhile, as HYBE implements its new business strategy, it faces the challenge of managing financial stability. As it prepares for investments in gaming and IT and expands its overseas business, its cash assets have decreased and debt has increased.
According to Korea Ratings, as of the end of June this year, HYBE's cash assets amounted to 978.9 billion won, a 30.4% decrease compared to the same period last year. The net borrowings, calculated by subtracting cash assets from total borrowings, stand at 58.9 billion won. This means that even if all available cash were used to repay debt, there would still be remaining liabilities.
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1. So they've used up all their money?
2. They're an entertainment company that uses all their money in non-entertainment related activities and on useless stuff
3. Seen like that, it's quite obvious they don't have any money anymore
4. What happened to all the money that BTS earned?
5. Seventeen were sent on a tour to make them money this year and then to a hiatus, BTS also sold a lot of goods and photobooks too, just where did all that money go? I don't get it
6. Incompetent...
7. BTS has one guy sinking their ship and Seventeen are also entering their hiatus, so what are they going to do?
8. I used to like HYBE for a little while, and right before the company started ruining their image, I left my fandom. Now they're operating just like a small company, if you watch their content, you'll get PTSD from fangirling on them... Honestly the small companies who succeed all go through similar trajectory, but of the 100 small companies that flopped, they all found a different way to screw themselves over ã…‹ã…‹ã…‹
9. They're so incompetent...
10. There's a reason why no matter how good you make your idols, if you don't know how to scale them, you'll fail
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