• iQIYI Announces First Quarter 2024 Financial Results

    Source: Nasdaq GlobeNewswire / 16 May 2024 05:00:00   America/New_York

    BEIJING, May 16, 2024 (GLOBE NEWSWIRE) -- iQIYI, Inc. (Nasdaq: IQ) ("iQIYI" or the "Company"), a leading provider of online entertainment video services in China, today announced its unaudited financial results for the first quarter ended March 31, 2024.

    First Quarter 2024 Highlights

    • Total revenues were RMB7.9 billion (US$1.1 billion1), decreasing 5% year over year.
    • Operating income was RMB944.8 million (US$130.8 million) and operating income margin was 12%, compared to operating income of RMB858.6 million and operating income margin of 10% in the same period in 2023.
    • Non-GAAP operating income2 was RMB1.1 billion (US$150.4 million) and non-GAAP operating income margin was 14%, compared to non-GAAP operating income of RMB1.0 billion and non-GAAP operating income margin of 12% in the same period in 2023.
    • Net income attributable to iQIYI was RMB655.3 million (US$90.8 million), compared to net income attributable to iQIYI of RMB618.1 million in the same period in 2023.
    • Non-GAAP net income attributable to iQIYI2 was RMB844.3 million (US$116.9 million), compared to non-GAAP net income attributable to iQIYI of RMB939.5 million in the same period in 2023.

    “Our operating profits and corresponding margins reached historical highs, thanks to our quality execution and increased operating efficiency,” commented Mr. Yu Gong, Founder, Director, and Chief Executive Officer of iQIYI. “The initial integration of generative AI into our operations is already yielding promising results. We are eager to harness the power of this innovative technology to improve our capacity for delivering top-tier content and to expand our growth possibilities.”

    “We have been generating positive operating cash flow for eight consecutive quarters, and our balance sheet continued to improve,” commented Mr. Jun Wang, Chief Financial Officer of iQIYI. “This makes our business more defensible and offers us more tools to improve shareholder value over time.”


    First Quarter 2024 Financial Highlights  
      Three Months Ended
    (Amounts in thousands of Renminbi (“RMB”), except for per ADS data, unaudited) March 31, December 31, March 31, 
      2023 2023 2024 
      RMB RMB RMB 
    Total revenues 8,348,807 7,706,468 7,927,355 
            
    Operating income 858,631 773,709 944,753 
    Operating income (non-GAAP) 1,034,296 927,818 1,085,762 
            
    Net income attributable to iQIYI, Inc. 618,109 466,233 655,317 
    Net income attributable to iQIYI, Inc. (non-GAAP) 939,533 682,026 844,325 
            
    Diluted net income per ADS 0.64 0.48 0.68 
    Diluted net income per ADS (non-GAAP)2 0.97 0.70 0.87 

    Footnotes:
    [1] Unless otherwise noted, RMB to USD was converted at an exchange rate of RMB7.2203 as of March 29, 2024, as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.

    [2] Non-GAAP measures are defined in the Non-GAAP Financial Measures section (see also “Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures” for more details).

    First Quarter 2024 Financial Results

    Total revenues reached RMB7.9 billion (US$1.1 billion), decreasing 5% year over year.

    Membership services revenue was RMB4.8 billion (US$664.6 million), decreasing 13% year over year. The decrease was primarily due to the high base effect in the same period last year.

    Online advertising services revenue was RMB1.5 billion (US$205.3 million), increasing 6% year over year. The increase was primarily driven by the growth of performance-based advertising business.

    Content distribution revenue was RMB928.0 million (US$128.5 million), increasing 27% year over year, primarily driven by the distribution of several major titles.

    Other revenues were RMB718.4 million (US$99.5 million), increasing 8% year over year, primarily driven by the increase of revenue derived from third-party cooperation.

    Cost of revenues was RMB5.6 billion (US$779.9 million), decreasing 5% year over year. Content costs as a component of cost of revenues were RMB4.0 billion (US$553.5 million), decreasing 5% year over year. The decrease in content cost was driven by our improvement in content strategy and operating efficiency.

    Selling, general and administrative expenses were RMB922.0 million (US$127.7 million), decreasing 17% year over year. The decrease was primarily due to disciplined marketing spending and reversal of allowance for credit losses.

    Research and development expenses were RMB429.3 million (US$59.5 million), flat year over year.

    Operating income was RMB944.8 million (US$130.8 million), increasing 10% year over year. Operating income margin was 12%, compared to operating income margin of 10% in the same period in 2023. Non-GAAP operating income was RMB1.1 billion (US$150.4 million), increasing 5% year over year. Non-GAAP operating income margin was 14%, compared to non-GAAP operating income margin of 12% in the same period in 2023.

    Total other expense was RMB261.3 million (US$36.2 million), increasing 25% year over year, primarily due to loss from foreign exchange, less interest income and non-operating income related to the repurchase of convertible senior notes, partially offset by less loss pick-up from equity method investments.

    Income before income taxes was RMB683.5 million (US$94.7 million), compared to income before income taxes of RMB650.4 million in the same period in 2023.

    Income tax expense was RMB17.6 million (US$2.4 million), compared to income tax expense of RMB24.6 million in the same period in 2023.

    Net income attributable to iQIYI was RMB655.3 million (US$90.8 million), increasing 6% year over year. Diluted net income attributable to iQIYI per ADS was RMB0.68 (US$0.09) for the first quarter of 2024, compared to diluted net income attributable to iQIYI per ADS of RMB0.64 in the same period of 2023. Non-GAAP net income attributable to iQIYI was RMB844.3 million (US$116.9 million), decreasing 10% year over year. Non-GAAP diluted net income attributable to iQIYI per ADS was RMB0.87 (US$0.12), compared to non-GAAP diluted net income attributable to iQIYI per ADS of RMB0.97 in the same period of 2023.

    Operating cash flow was RMB937.8 million (US$129.9 million), compared to operating cash flow of RMB1.0 billion in the same period of 2023. Free cash flow was RMB915.3 million (US$126.8 million), compared to free cash flow of RMB1.0 billion in the same period of 2023.

    As of March 31, 2024, the Company had cash, cash equivalents, short-term investments and long-term restricted cash included in prepayments and other assets of RMB7.3 billion (US$1.0 billion).

    Conference Call Information

    iQIYI's management will hold an earnings conference call at 7:00 AM on May 16, 2024, U.S. Eastern Time (7:00 PM on May 16, 2024, Beijing Time).

    Please register in advance of the conference using the link provided below. Upon registering, you will be provided with participant dial-in numbers, passcode and unique access PIN by a calendar invite.

    Participant Online Registration: https://s1.c-conf.com/diamondpass/10038227-kjuy76.html  

    It will automatically direct you to the registration page of "iQIYI First Quarter 2024 Earnings Conference Call ", where you may fill in your details for RSVP.

    In the 10 minutes prior to the call start time, you may use the conference access information (including dial-in number(s), passcode and unique access PIN) provided in the calendar invite that you have received following your pre-registration.

    A telephone replay of the call will be available after the conclusion of the conference call through May 23, 2024.

    Dial-in numbers for the replay are as follows: 
    International Dial-in +1 855 883 1031
    Passcode: 10038227

    A live and archived webcast of the conference call will be available at http://ir.iqiyi.com/.

    About iQIYI, Inc.

    iQIYI, Inc. is a leading provider of online entertainment video services in China. It combines creative talent with technology to foster an environment for continuous innovation and the production of blockbuster content. It produces, aggregates and distributes a wide variety of professionally produced content, as well as a broad spectrum of other video content in a variety of formats. iQIYI distinguishes itself in the online entertainment industry by its leading technology platform powered by advanced AI, big data analytics and other core proprietary technologies. Over time, iQIYI has built a massive user base and developed a diversified monetization model including membership services, online advertising services, content distribution, online games, IP licensing, talent agency, online literature, etc.

    Safe Harbor Statement

    This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the quotations from management in this announcement, as well as iQIYI's strategic and operational plans, contain forward-looking statements. iQIYI may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about iQIYI's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: iQIYI's strategies; iQIYI's future business development, financial condition and results of operations; iQIYI's ability to retain and increase the number of users, members and advertising customers, and expand its service offerings; competition in the online entertainment industry; changes in iQIYI's revenues, costs or expenditures; Chinese governmental policies and regulations relating to the online entertainment industry, general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company’s filings with the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release, and iQIYI undertakes no duty to update such information, except as required under applicable law.

    Non-GAAP Financial Measures

    To supplement iQIYI’s consolidated financial results presented in accordance with GAAP, iQIYI uses the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating income margin, non-GAAP net income attributable to iQIYI, non-GAAP diluted net income attributable to iQIYI per ADS and free cash flow. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

    iQIYI believes that these non-GAAP financial measures provide meaningful supplemental information regarding its operating performance by excluding certain items that may not be indicative of its business operating results, such as operating performance excluding non-cash charges or non-operating in nature. The Company believes that both management and investors benefit from referring to the non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to iQIYI’s historical operating performance. The Company believes the non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP financial measures is that the non-GAAP measures exclude certain items that have been and will continue to be for the foreseeable future a significant component in the Company’s results of operations. These non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company’s data.

    Non-GAAP operating income represents operating income excluding share-based compensation expenses, amortization of intangible assets resulting from business combinations.

    Non-GAAP net income attributable to iQIYI, Inc. represents net income attributable to iQIYI, Inc. excluding share-based compensation expenses, amortization of intangible assets resulting from business combinations, disposal gain or loss, impairment of long-term investments, fair value change of long-term investments, adjusted for related income tax effects. iQIYI’s share of equity method investments for these non-GAAP reconciling items, primarily amortization and impairment of intangible assets not on the investees’ books, accretion of their redeemable non-controlling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per share, adjusted for related income tax effects, are also excluded.

    Non-GAAP diluted net income per ADS represents diluted net income per ADS calculated by dividing non-GAAP net income attributable to iQIYI, Inc, by the weighted average number of ordinary shares expressed in ADS.

    Free cash flow represents net cash provided by operating activities less capital expenditures.

    For more information, please contact:

    Investor Relations
    iQIYI, Inc.
    ir@qiyi.com


    iQIYI, INC.

    Condensed Consolidated Statements of Income

    (In RMB thousands, except for number of shares and per share data)
      Three Months Ended 
      March 31, December 31, March 31, 
      2023  2023  2024  
      RMB RMB RMB 
      (Unaudited) (Unaudited) (Unaudited) 
    Revenues:        
    Membership services 5,547,305  4,808,727  4,798,861  
    Online advertising services 1,403,752  1,650,513  1,482,052  
    Content distribution 731,907         506,059  928,009  
    Others 665,843      741,169  718,433  
    Total revenues   8,348,807    7,706,468    7,927,355   
            
    Operating costs and expenses:        
    Cost of revenues (5,956,003) (5,533,082) (5,631,239) 
    Selling, general and administrative (1,105,855) (947,806) (922,035) 
    Research and development (428,318) (451,871) (429,328) 
    Total operating costs and expenses      (7,490,176)  (6,932,759)     (6,982,602) 
    Operating income      858,631    773,709       944,753   
            
    Other income/(expense):        
    Interest income 104,986  55,098  58,740  
    Interest expenses (285,964) (284,301) (282,135) 
    Foreign exchange gain/(loss), net 36,982  10,660  (31,551) 
    (Loss)/gain from equity method investments (85,109) (1,284) 13,514  
    Others, net 20,862  (39,972) (19,859) 
    Total other expense, net   (208,243) (259,799)  (261,291) 
            
    Income before income taxes  650,388  513,910   683,462  
    Income tax expense (24,632) (38,473) (17,633) 
            
    Net income   625,756   475,437    665,829   
    Less: Net income attributable to noncontrolling interests 7,647  9,204  10,512  
    Net income attributable to iQIYI, Inc.  618,109  466,233   655,317  
    Net income attributable to ordinary shareholders  618,109   466,233   655,317   
            
    Net income per share for Class A and Class B ordinary shares:       
    Basic 0.09  0.07  0.10  
    Diluted 0.09  0.07  0.10  
            
    Net income per ADS (1 ADS equals 7 Class A ordinary shares):       
    Basic 0.66  0.49  0.68  
    Diluted 0.64  0.48  0.68  
            
    Weighted average number of Class A and Class B ordinary shares used in net income per share computation:        
    Basic 6,569,658,687  6,713,897,712  6,717,652,924  
    Diluted 6,754,965,091  6,834,735,594  6,788,073,126  
            


    iQIYI, INC.
    Condensed Consolidated Balance Sheets

    (In RMB thousands, except for number of shares and per share data)
      December 31, March 31,
      2023  2024 
      RMB RMB
        (Unaudited)
    ASSETS    
    Current assets:    
    Cash and cash equivalents 4,434,525  5,045,322 
    Restricted cash 6,120  - 
    Short-term investments 941,738  985,970 
    Accounts receivable, net 2,169,042  2,727,305 
    Prepayments and other assets 2,794,259  2,602,327 
    Amounts due from related parties 1,707,024  1,716,816 
    Licensed copyrights, net 582,521  724,610 
    Total current assets 12,635,229  13,802,350 
         
    Non-current assets:    
    Fixed assets, net 863,813  845,380 
    Long-term investments 2,260,785  2,217,918 
    Licensed copyrights, net 6,966,508  6,920,485 
    Intangible assets, net 309,534  333,395 
    Produced content, net 13,376,985  13,613,389 
    Prepayments and other assets 3,518,210  3,845,572 
    Operating lease assets 683,897  661,171 
    Goodwill 3,820,823  3,820,823 
    Amounts due from related parties 158,590  239,328 
    Total non-current assets 31,959,145  32,497,461 
         
    Total assets 44,594,374  46,299,811 
         
    LIABILITIES AND SHAREHOLDERS’ EQUITY    
    Current liabilities:    
    Accounts and notes payable 5,671,074  5,897,266 
    Amounts due to related parties 2,953,658  2,839,277 
    Customer advances and deferred revenue 4,373,208  4,650,902 
    Convertible senior notes, current portion 2,802,442  2,854,578 
    Short-term loans 3,571,637  3,520,199 
    Long-term loans, current portion 2,000  23,000 
    Operating lease liabilities, current portion 100,883  97,214 
    Accrued expenses and other liabilities 2,866,632  3,111,662 
    Total current liabilities 22,341,534  22,994,098 
    Non-current liabilities:    
    Long-term loans 97,990  326,830 
    Convertible senior notes 8,143,994  8,357,217 
    Deferred tax liabilities 824  560 
    Amounts due to related parties 80,566  75,569 
    Operating lease liabilities 523,747  499,599 
    Other non-current liabilities 1,220,804  1,276,089 
    Total non-current liabilities 10,067,925  10,535,864 
         
    Total liabilities 32,409,459  33,529,962 
         
         
    Shareholders’ equity:    
         
    Class A ordinary shares 237  237 
    Class B ordinary shares 193  193 
    Additional paid-in capital 54,971,469  55,122,923 
    Accumulated deficit (44,573,428) (43,918,111)
    Accumulated other comprehensive income 1,688,047  1,508,392 
    Non-controlling interests 98,397  56,215 
    Total shareholders’ equity 12,184,915  12,769,849 
         
    Total liabilities and shareholders' equity 44,594,374  46,299,811 



    iQIYI, INC.

    Condensed Consolidated Statements of Cash Flows

    (In RMB thousands, except for number of shares and per share data)
     Three Months Ended 
     March 31, December 31, March 31, 
     2023  2023  2024  
     RMB RMB RMB 
     (Unaudited) (Unaudited) (Unaudited) 
           
    Net cash provided by operating activities1,001,765  633,586  937,773  
    Net cash provided by/(used for) investing activities(1,2)166,845  (1,430,634) (222,755) 
    Net cash (used for)/provided by financing activities(3,356,630) (22,484) 261,136  
    Effect of exchange rate changes on cash, cash equivalents and restricted cash(8,862) (31,445) 14,606  
    Net (decrease)/increase in cash, cash equivalents and restricted cash(2,196,882) (850,977) 990,760  
    Cash, cash equivalents and restricted cash at the beginning of the period7,861,556  6,131,585  5,280,608  
    Cash, cash equivalents and restricted cash at the end of the period5,664,674  5,280,608  6,271,368  


    Reconciliation of cash and cash equivalents and restricted cash:    		      
    Cash and cash equivalents4,529,267  4,434,525  5,045,322  
    Restricted cash6,120  6,120  -  
    Long-term restricted cash1,129,287  839,963  1,226,046  
    Total cash and cash equivalents and restricted cash shown in the statements of cash flows5,664,674  5,280,608  6,271,368  
           
    Net cash provided by operating activities1,001,765  633,586  937,773  
    Less: Capital expenditures(2)(241) (19,231) (22,429) 
    Free cash flow1,001,524  614,355  915,344  

    (1)   Net cash provided by or used for investing activities primarily consists of net cash flows from loans provided to related party, investing in debt securities, purchase of long-term investments and capital expenditures.
    (2)   Capital expenditures are incurred primarily in connection with construction in process, computers and servers.



    iQIYI, INC.

    Reconciliations of Non-GAAP Financial Measures to the Nearest Comparable GAAP Measures

    (Amounts in thousands of Renminbi (“RMB”), except for per ADS information, unaudited)
     Three Months Ended
     March 31, December 31, March 31, 
     2023  2023  2024  
     RMB RMB RMB 
           
    Operating income858,631  773,709  944,753  
    Add: Share-based compensation expenses169,046  152,576  139,476  
    Add: Amortization of intangible assets(1)6,619  1,533  1,533  
    Operating income (non-GAAP)1,034,296  927,818  1,085,762  
           
    Net income attributable to iQIYI, Inc.618,109  466,233  655,317  
    Add: Share-based compensation expenses169,046  152,576  139,476  
    Add: Amortization of intangible assets(1)6,619  1,533  1,533  
    Add: Impairment of long-term investments118,984  62,231  70,745  
    Add: Fair value loss/(gain) of long-term investments9,445  (323) (22,482) 
    Add: Reconciling items on equity method investments(2)18,351  -  -  
    Add: Tax effects on non-GAAP adjustments(3)(1,021) (224) (264) 
    Net income attributable to iQIYI, Inc. (non-GAAP)939,533  682,026  844,325  
           
    Diluted net income per ADS0.64  0.48  0.68  
    Add: Non-GAAP adjustments to earnings per ADS0.33  0.22  0.19  
    Diluted net income per ADS (non-GAAP)0.97  0.70  0.87  

    (1)    This represents amortization of intangible assets resulting from business combinations.
    (2)    This represents iQIYI’s share of equity method investments for other non-GAAP reconciling items, primarily amortization and impairment of intangible assets not on the investee’s books, accretion of their redeemable noncontrolling interests, and the gain or loss associated with the issuance of shares by the investees at a price higher or lower than the carrying value per share.
    (3)    This represents tax impact of all relevant non-GAAP adjustments.


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