iQIYI, Inc. Price & Performance (IQ)

Jun Wang, our CFO Mr. Xiaogui Wang, our CCO, Chief Content Officer Mr.

Yu Chao Zhuang, Senior Vice President of our Membership Business and Mr. Seung Hwa Yang, Senior Vice President of Movies and Overseas Business. Mr. Dong will give a brief overview of the company's business operations and followed by June. Will go through the financials. After the prepared remarks, the management team will participate in the Q and A session. Before we proceed, please note that the discussion today will contain forward looking statements made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements are subject and uncertainties that may cause actual results to differ materially from our current [indiscernible] and uncertainties include but are now limited to, those outlined in our public filings with the SEC. ITE does not undertake any obligation to update any forward looking statement except as required under applicable law. I will now pass on to Mr. Hello, everyone, and thank you for joining us today. Starting from late November, we have a served a significant rebound in business across multiple metrics. Including net additions of subscribing numbers and user time spent.

Along with reinforced leading position in the total drama, we will shape market share. According to enlightened data, This by the robust comeback of our top tier content. In just three months, two of our highly popular popular dramas. We are criminal police for Xunjiao. And drifting away [indiscernible] 10,000 the ITE popularity index and further solid state [indiscernible] And rival leadership in the suspense [indiscernible] [indiscernible] our supply of premium female oriented content which is also one of our key content categories, with more [indiscernible] [indiscernible] 9,000 in iQI popularity index Alongside the strong return of our premium long term video content, we have made brief soon in the mini driver space [indiscernible] Autofuelo carries a selection of over 10,000 titles We have also revamped our products to improve user experiences. On top of that, we have upgraded [indiscernible] add placement system to more [indiscernible] [indiscernible] the growing traffic of mini dramas All these efforts have led to swift growth in our user base and look forward to what the future holds. In addition to operational improvements, we are encouraged by the healthy recovery in consumer sentiment towards quality long form videos as advertising by historical high theoretical movie box office performance.

During the Chinese New Year. This trend reinforced our in the quality and long form video content and we are optimistic for a long form video industry in the coming year. As we step into 2025, we aim to boost membership revenue by at least the quality and the share of gaming content. We also aim to expand advertising revenue by enlarging our ad even direct. Which will benefit from the growth of mini driver business These two elements will serve as the go engines driving our revenue growth. Now let's move on to the details of our core business segments. Starting with long form videos, which is the cornerstone of our content ecosystem. We have sustained our leadership in the core genre category, capturing the highest total viewership market share in Q4. And for the full year. [indiscernible] [indiscernible] This was underpinned the effectional performance of our highly acclaimed titles across multiple In Q4, our dominance in the [indiscernible] Of suspense drivers remain unchallenged. [indiscernible] We are a criminal place. Become the fifteenth drummer to break the HeiQi popularity index score of 10,000. And the company [indiscernible] the highest score of our platform in 2024. Additionally, new releases [indiscernible] [indiscernible] [indiscernible] garnered high acclaim from viewers.

Our exciting slate of proffering goes beyond Q4. Notably [indiscernible] from our flagship light on seltzer brand surpassed a popularity index score of 10,000 weekly concerts of its release It was also the first drama with a fewer episodes to reach such acclaim. Hi. In Q4, for our premium female oriented content, we made great progress [indiscernible] Our content release [indiscernible] [indiscernible] captivating [indiscernible] Note Notable among these [indiscernible] [indiscernible] [indiscernible] [indiscernible] successfully [indiscernible] new members signed up In addition, [indiscernible] lost some in winter was praised was priced for its innovative [indiscernible] Of suspense and romance beating our peak IT popularity in dense core of over 9,000 Looking ahead, we are committed to further refining production lineup and this release timing for both Asian customer [indiscernible] and the modern tales [indiscernible] [indiscernible] Turning to movies. In Q4, we have maintained our leader leading position in viewership [indiscernible] According to enlightened data, the performance was high highlighted by our operational production of frozen fruit which was best performing comedy movie on our platform this quarter. [indiscernible] upstream also secured top positions [indiscernible] For animations in Q4, our production For Chinese animation to continue to improve the legend of Sky Loss [indiscernible] remains its popularity among audiences.

We also further boosted our offerings [indiscernible] Includes new IPs such as [indiscernible] On the [indiscernible] [indiscernible] Japanese animations, Dragon Ball [indiscernible] on our platform receiving positive feedback Looking forward to 2020 they are dedicated to enhancing the production and the management of our long form videos. Our primary goal is creating [indiscernible] elevating its commercial potential while optimizing the production and the distribution process for increased efficiency For dramas, we will focus on improving the pipeline [indiscernible] and the share of our top tier premium content we aim to strengthen our leadership in real life while enhancing our premium content appeals to female audiences which have shown strong momentum. [indiscernible] such as 15 away we are also going to release titles from that on Shelter including breaking the shadow a live for a life [indiscernible] [indiscernible] also features highly anticipated female oriented dramas. [indiscernible] [indiscernible] divide tree [indiscernible] been released and have gained strong traction among female audiences while more compelling [indiscernible] [indiscernible] For a very short, our strategy is centered on [indiscernible] We are committed to maximizing the commercial value of our classic IPs while exploring innovative new shows. For flagship multi season IPs, our strong lineup includes [indiscernible] [indiscernible] [indiscernible] season five.

The Grand of China 2025 and The King of China Up [indiscernible] We are also introducing several fresh new IP including [indiscernible] And the greatest showman [indiscernible] was released in January and quickly received a peak ITE 8,000 while topping the enlightened [indiscernible] For the upcoming adjustment, Jaro building up the success of [indiscernible] Last year. Launched a spin off show [indiscernible] during the Chinese New Year holiday. Further strengthening the IPs improve For movies, premium content is our top focus especially Orange [indiscernible] January, the top up box office revenue. In 2025, our original movie Winter to Summer Yellow Topima and Momo.

Audiences can also enjoy theatrical hits on our movie [indiscernible] Burning Stars, [indiscernible] Yifu Zhang and Octopus we have broken We also plan to increase our production capabilities for online films. In the field of animation, we are trying to broaden our collection of [indiscernible] [indiscernible] [indiscernible] to a high quality Chinese animation. Our objective is to risk both quality and financial [indiscernible] Major petals to be launched includes [indiscernible] [indiscernible] [indiscernible] [indiscernible] Magical Princess and sequels to beloved children's animation including the routers and The Princess Storyme season four. Moving on to Mini Drama. We achieved exciting milestones in just three months. Firstly, we have successfully [indiscernible] [indiscernible] now the iQIYI drama in the IT main app primarily on subscription based model. [indiscernible] acquired all [indiscernible] Secondly, we have actually completed the construction of back end systems especially for content recommendations and advertising capabilities. [indiscernible] [indiscernible] [indiscernible] viewing experience, but also unlocks fresh monetization opportunities Furthermore, our Mini Driver portfolio quickly expanded to over 10,000 titles now. Capturing 95% of the leading MINI driver content providers in the market. This expensive ad diversified content portfolio has for our next stage of development. The resident program has likely increased our use [indiscernible] [indiscernible] in the fourth quarter this positive class, is expected to continue.

Notably, in December, our plan for Its first mini drama generating monthly [indiscernible] exceeding RMB1 million In As we enter the next phase, we are aiming to refine our products and service offerings with personalized recommendations fine tune our advertising system to appeal a broader base of new advertisers broaden our content catalog with fresh and library titles. And the KOSYBIT achieved original mini driver ecosystem to provide a steady stream of high quality content. Moving on to membership services. Membership revenue in the first quarter was RMB4.1 billion down annually under sequential primarily due to lighter content slated to Germany's first two months of the quarter. However, starting from late November, we have observed a strong comeback in premium content offerings as previously discussed. Driving a significant turnaround in our membership business. [indiscernible] [indiscernible] we have improved our run from video content [indiscernible] Aiming to improve member retention and attracting new subscribers. Additionally, we have maintained [indiscernible] supply of premium content and [indiscernible] our promotional [indiscernible] as Internet new releases thereby driving their 12. Beyond content enhancement, we classified our membership offering into two primary categories: One category tailored for individuals the other for Both categories include and supported basic service service tier.

As well as our center service tier. Moreover, the family category also features our premium service which is an outstanding [indiscernible] This plane grants additional privileges including unlimited access to express package that provides early access to finals of our premium content. Content the ability to up to eight supported [indiscernible] And opportunities to participate in major offline events. [indiscernible] classification benefits of membership business in multi base [indiscernible] The structure of our membership plan making their positioning clear. Two, it captures broader user needs and user growth. From value seeking individuals to those desiring more premium eight, effectively address it addresses the issue of [indiscernible] In the first quarter, to offer an improved solution to [indiscernible] the extra member feature Additionally, all our supported basic plan has seen consistent consistent in subscriptions especially among users in low tier cities as and within the [indiscernible] [indiscernible] [indiscernible] In a move to further elevate the value we offer. We also [indiscernible] joint membership [indiscernible] Gained traction with our members. Looking into 2025, our strategy focuses on building our membership business that better hit us to mass audiences they also intend to optimize member [indiscernible] Streamlined operations and improved distribution channels Moreover, we aim to elevate the iQI member brand [indiscernible] [indiscernible] boosting the value experience by our members.

Moving on to the advertising business. Revenue during the quarter came in at RMB1.2 billion, following 7% sequentially and showing a reduced rate of annual decline when compared to the prior period, [indiscernible] double digit sequential, [indiscernible] This was primarily driven by the double digit brand ad revenue growth. Generated by our premium drummer. In 2025, we aim to both [indiscernible] our brand advertising business by diversifying our revenue streams and explore new innovative advertising opportunities we plan to refine client service which will help return all current hardware sensors and attract new commerce from sectors like food and beverage [indiscernible] cosmetics [indiscernible] And communications We will also keep an eye on emerging factors such as healthcare, home furnishing, and the tourism Additionally, we aim to increase the arc of top and advertise their customized Sure. Performance at continue to grow both annually and sequentially. This was largely driven by operational improvements and the major e commerce [indiscernible] [indiscernible] robust stories provided to clients from Internet services sector.

Notably, revenue contribution from the e commerce sector during the W11 shopping festival increased. By over 40% annually and the revenue from the Internet services during the quarter increased by over 30% year over year. To attend this moment. Momentum going forward. We are enhancing our technical and platform capabilities to secure a large a larger share of budgets from healthcare clients. In sectors such as The e commerce, Internet services and video game sectors We will continue leveraging AI for video and the production and expand our clients to improve monetization efficiency. We are also excited about the incremental and inventory that Mini Driver could bring in 2025. Moving on to technology and products. We continue to advance [indiscernible] Industrialization of the video business thereby improving our operational efficiency. Our intelligent production management system has become essential for crews managing various tasks on-site. Providing them with advanced production tools and management capabilities. In the first quarter, we further enhanced the system to incorporate highly efficient production supply. Management coverability. With regard to virtual we have embraced the technology to push the boundary of content creation we are prompt that our projects [indiscernible] [indiscernible] [indiscernible] won multiple prestige industry awards.

For their excellent use of virtual production [indiscernible] Meanwhile, we have made impressive progress with our digital asset collection. Throughout the year, we have assembled in [indiscernible] [indiscernible] asset library from hundreds of drivers variety shows, movies and animation. It is recognized as one of the leading collections in China. We are now leveraging their assets in new video products and expanding into offline experiences. Looking forward we are setting [indiscernible] on wider applications including content creation, IP value added services, and Immersive virtual reality experiences. Moreover, we have been expanding AI applications across content production and operations AS inference has been notably in refining our product assessment process, providing valuable insights a pretty significantly 5,000 screenplays and novels Additionally, AI [indiscernible] in character design and custom selection as a project approval stage based on the character description from screenplays that's streamlining creative process [indiscernible] For our business performance in regions outside of Mainland China, were maintained solid performance in the first quarter with both total revenues and membership services revenue. Gained annual and sequential growth notably membership revenue from Hong Kong U. K, Thailand, and Australia grew by over 30% year over year. [indiscernible] number of subscribing numbers also increased both annually and sequentially.

With Hong Kong and Thailand growing over 40% year over year. Plus 50% year over year. The popularity of our original content continues to funds of fortune was a best performing C China drama. On our overseas platform in 2024.

With a high adopt version topping the viewership ratings in Thailand Additionally, our first original overseas variety show Starlight White. Extended its success beyond our platform achieving top position in local Google rankings for our [indiscernible] Furthermore, Thai dramas have emerged as a popular content [indiscernible] international platform.

Ranking second on A2C dramas.

Encouraged by this trend, we are planning to increase our investments in operational [indiscernible] We have been focusing on expanding our international brand [indiscernible] [indiscernible] Last quarter, we launched our first ever [indiscernible] which set a new benchmark as the most comprehensive and best attempt press conference [indiscernible] Posted by our Chinese video platform in Thailand exceptional artist participation As we said our ads on 2025, our main focus abroad will be to drive revenue with [indiscernible] and improve the monetization ability of region content having [indiscernible] [indiscernible] Southeast Asia We are set to expand our footprint into Middle East Latin America and Brazil. All approach includes reinforcing health with telecom partners seeking innovative [indiscernible] wrapping up marketing initiatives to boost our brand and content impact. In summary, we closed the year by [indiscernible] reinventions And [indiscernible] that successfully propelled our business forward. Setting a strong path to 2025. We are confident that the strong comeback of premium long form videos coupled with our continuous innovation in iQIYI dramas would serve as fuel engines sustained growth for 2025. Now let me pass it on to Chunen who will go through our financial performance. Thanks, Mr. Gorong, and hello, everyone. As Mr.

Vuong mentioned earlier, driven by the premium content we have experienced a significant rebound in main operating performance In comparison to November 2024, Now let's take a look at Q4 key numbers In Q4, the total revenues were RMB6.6 billion down 14% annually Membership services revenue reached RMB4.1 billion down 15% annually primarily due to a lighter content slate However, as Mr. Gunkis mentioned, premium content had a strong rebound from late November twenty twenty four to now. For online advertising, revenue decreased by 13% year over year to RMB1.4 billion. This was primarily due to the decrease in brand advertisement business partially offset by the growth in performance ad business Content distribution revenue reached RMB RMB406.6 million down 20% annually primarily due to a lower revenue from distribution of theatrical movies invested by iQIYI and a decrease in other transactions partially offset by increased revenue from cash transactions Other revenues decreased by 10% annually to RMB 670,200,000.0 Moving on to cost. And expenses. Common costs was RMB3.4 billion, down 9% annually primarily driven by our improvement in the current strategy as well as a lighter common slate [indiscernible] Total operating expenses were RMB1.3 billion down 5% annually primarily due to disciplined marketing spending.

Turning to profits and cash flows. Non GAAP operating income was RMB405.9 million and its corresponding margin was 6%. Navicast provided by offering activity totaled RMB $519,000,000 positive for eleven consecutive quarters As of the end of Q4, we had cash cash equivalents, short term investments and long term restricted cash included in the prepayments and other assets of RMB4.5 billion. For detailed financial data please refer to our press release on our IR website. Now, I will open the floor Thank you.

Your first question comes from Suking Zhang with CICC.

Thanks management for taking my question. We have noted since the beginning of this year. Looking ahead to 2025, what's your content pipeline or what type about the quality of these titles? How many of them have the potential to become blockbusters? Thank you. Thank you, Xuqing. We will invite our Chief Content Officer, Mr. Xiaobei Wang to answer this question.

Go ahead. We had a good start of the year for 2025.

With the new season of the light on theater drama, Justing Away, launched in January. Reaching ITE popularity index of over 10,000 in just six days. It is a milestone for us because it is not only the first drama of the year to break the 10,000 in popularity, but it also is [indiscernible] and our first drama with limited number of episodes to achieve this milestone. Our main goal for this year 2025 is to intend both the quality and the share of our premium top long form video content also ensuring greater stability and a continued strong start [indiscernible] In most the most critical areas such as the drama genre, The number of premium top tier dramas planned for release this year were significantly increased compared to last year. We will also focus on creating a greater narrative pace that better aligns aligns with the current social sentiment and the users [indiscernible] [indiscernible] And then for suspense and crime dramas and female oriented content that are our two main programming pillars. For this year, we will continue to maintain our absolute leading advantage the sustained and prime genre, And for this year, the light on theater have several works in addition to the already launched Drifting Away, there will be more releases such as creaking shadows, Justifiable Descent, [indiscernible] [indiscernible] dead end and beneath the undertone. [indiscernible] In terms of the premium oriented content and market season titles, will further strengthen our offering [indiscernible] With fans to launch titles such as The Best Thing, [indiscernible] [indiscernible] [indiscernible] a drink within a drink and The Strange Tale of Tong Dynasty.

Season three. [indiscernible] Additionally, we will continue to maintain our advantage in the realm of realistic genre The pipeline includes 8,000 miles or [indiscernible] [indiscernible] [indiscernible] Thank you. The next question comes from Li Zeng with Bank of America Securities.

Please go ahead. Thanks management for taking my question. Want to know further updates on your short mini drama area and do we have any strategic plan on minigram I in 2025? Thank you. Our CEO is actually taking this question. He first of all would like to clear the definition of mini dramas that we've been talking about in his opening remarks. So for mini dramas, Are we identified them as the vertical format, one to three minutes long. And then this is the main area that we're focusing on.

For the horizontal minisramas, which is Quite similar to the long form video content that we've been have the add on. So this is something different. So we decided to invest in the mini drama business about one quarter ago.

The reasons are two aspects. First of all, right now because the users are more to the fast paced content and they have a shorter attention span and then they also enjoy content a more fragmented time as well. That's the first reason. And also from the industry perspective and the market perspective, for 2020 market size for many dramas, although there are different data sets estimated by third parties, but we believe each should be greater than the Chinese office 20 For 2025, we are glad to see a strong rebound of the theatrical offers during the Chinese New Year. However, that we still think the media drama market should still over exceed [indiscernible] 2025. [indiscernible] completed the key path that we set.

The first bank.

Achieving significant results three areas for user product transformation, content portfolio and also building of excellence. Currently, actually, our mini drama content library has over 10,000 titles and that it has reached a scale that's comparable to the leading mini drama platform in the industry.

For Yomna, There are two reasons how we achieved such significant improvement. A very short amount of time. First of all, for our team, actually, we have a very mature whether it's IT team technology team, product team and also the operational team, all these have us over ten years Although mini drama is a new genre, but there are a lot of the know how that we can replicate from the long term video experience. That's the first reason. The second reason is we have a very deep connection with the industry. Also the industry resources. Specifically content providers for the industry, most of them we have We have actually collaborated with them in the past or we have existing collaborations. So the above three reasons can help us to achieve such progress in short amount of time.

I came to ASP for our main ID still focusing on the long form video content and then focusing on the based on revenue models [indiscernible] app and then now it [indiscernible] three minigramas. And then a supported asset model. In terms of the user trend spend for the May ID app, the mini drama time share now is actually close to the scale of animation cartoon and also variety. For IT Light, the mini drama timeshare is [indiscernible] content genre only second behind [indiscernible] I'll quickly introduce the next stage of key tasks. The first one is we'll focus on introducing the leading drama titles and then for Try to Eat. Second is to build IT original mini drama ecosystem. The Chinese New Year period actually we have already launched. [indiscernible] And next [indiscernible] are focusing on to hopefully we can increase the inventory of media drama advertising also to enhance the monetization capabilities of [indiscernible] We would like to actually explore more advertising budget and also the new formats of advertising budget from this app space. Last but not least, we will try to increase more investment in terms of bring them to ITE to watch many dramas.

Your next question comes from Lincoln Kong with Goldman Sachs.

Please go ahead.

So thank you management for taking my questions. My question is about the membership business. So regarding the recent content performance and how is the impact from those measures like a semi card or Star Diamond member, extra content gifts on those the impact on the membership business as well as the strategy for full year 2025? Thank you.

Thank you, Linda. I will invite Mr. Liu Xiaozuan, the Senior Vice President of Membership Systems to take this question. Go ahead. [indiscernible] Since late November twenty twenty four, the continuous programming of premium titles dramas have actually driven the membership business to a turning point resulting in a significant increase in subscription subscribing members. We actually rolled out several key initiatives since 2014, We have reclassified our membership offering into two primary categories. For individuals and for families. For individuals, there are actually two plants with no large screen access. And for families, there are three plants with large spring access. The membership rights and benefits are divided [indiscernible] [indiscernible] standard and premium. The new reclassified membership system actually allows users seeking either high cost effectiveness or premium benefits to find products that suit their needs. [indiscernible] Second, we strengthened the crackdown on passport sharing introducing the extra account service as an authorized sharing solution effectively expanding the membership base and improving member retention.

The third point that we did was we enhanced the benefits for premium members The newly added benefit was [indiscernible] the limited complimentary early access that provide early access to finales of our premium content increased value and perception of premium membership. After the launch of new benefits, the number of installment members have largely increased with most of the new members attracted by Big [indiscernible] And the existing assignment members have also been noted for more active We have a few areas that we're focusing on for 2025. First, we'll continuously enhance the stability and continuity of our health care premium content programming and strengthening the pre release promotion for upcoming content established mindshare among users to improve their loyalty to ITE.

Second, we'll build focusing on building a mass market membership service to increase membership scale and revenue. While focusing on contracting new members will [indiscernible] [indiscernible] improving member retention and user engagement. And also will increase the revenue scale and revenue share from external channels. Third, we will systematically continue to optimize the membership product and operations include, including further refining the membership product system pricing strategy. Also enriching membership including the member user experience and also crafting a membership model tailored for Mini Draw. [indiscernible] we will strengthen the quality of membership services and ITE enhance the perception of membership benefits and privileges and also improve the overall net promoter score [indiscernible] [indiscernible] Your next question comes from Maggie Yee with CLSA.

Just now we heard about some encouraging performance in overseas markets in terms of both membership revenue and subscribing members, Could you please provide an update on the core strategy for our overseas business? In 2025.

Thank you, Maggie. I will invite Mr. The Senior Vice President of our overseas business to take this question. Go ahead.

The overall strategy for business outside of Mainland China in 2025 is [indiscernible] while retaining profitability In the past few years, we we have focused on several markets, including Southeast Asia, Hong Kong, Macau and North America. And as have achieved satisfactory development for 2025, we have set different strategies for different markets.

So the markets where we entered since the early days, such as Thailand, Malaysia and North America. Our goal is to achieve both profit and revenue growth.

For the new core markets such as Indonesia and South Korea, the focus is on revenue growth for 2025. At the same time, we're also planning preparing for the long term growth of our business, I hope you break into new markets in 2025 such as The Middle East, the Spanish speaking Latin American region and also Brazil. For content wise, we'll strengthen the programming first three dramas in 2025 and the content slate is actually more suitable for the preferences of our overseas viewers in 2025 compared to this console we launched in In terms of local drama, local content, after years of efforts, we have actually assimilated some we'll continue to invest in market such as Thailand and Malaysia, which will serve an important support for our user growth in the [indiscernible] For content promotion, advertising placement and also the collaboration with telecom carriers and other channels, our core methods of at least the Continental. So in 2025, we will increase our investment in these areas in order. [indiscernible] So overall speaking for 2024 or over this business in terms of the membership growth and also revenue also maintained relatively high speed of growth. And since December 2024, with the ongoing launch of high quality content, the overall growth rate of our business has been even faster than 2024, so which gives us more confidence in the revenue growth for 2025.

Thank you.

That concludes our question and answer session. I'll now hand back to management for closing remarks.

Thank you everyone for don't hesitate to contact us. Thank you and see you next quarter.

It does conclude our conference for today.

Thank you