• iQIYI Announces Third Quarter 2024 Financial Results

    Source: Nasdaq GlobeNewswire / 21 Nov 2024 03:00:00   America/Chicago

    BEIJING, Nov. 21, 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 third quarter ended September 30, 2024.

    Third Quarter 2024 Highlights

    • Total revenues were RMB7.2 billion (US$1.0 billion1), decreasing 10% year over year.
    • Operating income was RMB238.9 million (US$34.0 million) and operating income margin was 3%, compared to operating income of RMB746.7 million and operating income margin of 9% in the same period in 2023.
    • Non-GAAP operating income2 was RMB368.6 million (US$52.5 million) and non-GAAP operating income margin was 5%, compared to non-GAAP operating income of RMB894.9 million and non-GAAP operating income margin of 11% in the same period in 2023.
    • Net income attributable to iQIYI was RMB229.4 million (US$32.7 million), compared to net income attributable to iQIYI of RMB475.9 million in the same period in 2023.
    • Non-GAAP net income attributable to iQIYI2 was RMB479.8 million (US$68.4 million), compared to non-GAAP net income attributable to iQIYI of RMB622.1 million in the same period in 2023.

    “In the third quarter of 2024, we topped the industry in the drama series market share, according to Enlightent data,” commented Mr. Yu Gong, Founder, Director, and Chief Executive Officer of iQIYI. “We have recently elevated our entertainment offerings and services with strategic enhancements, integrating sought-after mini and short dramas to complement our extensive long-form content portfolio. We have also introduced a family account option within our membership programs. We believe these improvements will better serve users’ evolving entertainment needs.”

    “Our goal is to enhance content appeal by optimizing long-form video offerings and incorporating mini and short dramas into our content portfolio. With disciplined execution, we believe that such initiatives will lead to long-term value creation for our businesses,” commented Mr. Jun Wang, Chief Financial Officer of iQIYI.

    Third Quarter 2024 Financial Highlights
     
      Three Months Ended
    (Amounts in thousands of Renminbi (“RMB”), except for per ADS data, unaudited) September 30, June 30, September 30,
      2023 2024 2024
      RMB RMB RMB
    Total revenues 8,015,079 7,438,785 7,245,681
           
    Operating income 746,747 342,093 238,921
    Operating income (non-GAAP) 894,879 501,417 368,644
           
    Net income attributable to iQIYI, Inc. 475,920 68,685 229,412
    Net income attributable to iQIYI, Inc. (non-GAAP) 622,071 246,914 479,787
           
    Diluted net income per ADS 0.49 0.07 0.24
    Diluted net income per ADS (non-GAAP)2 0.64 0.25 0.50

    Footnotes:
    [1] Unless otherwise noted, RMB to USD was converted at an exchange rate of RMB7.0176 as of September 30, 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).

    Third Quarter 2024 Financial Results

    Total revenues reached RMB7.2 billion (US$1.0 billion), decreasing 10% year over year.

    Membership services revenue was RMB4.4 billion (US$622.1 million), decreasing 13% year over year, primarily due to a lighter content slate.

    Online advertising services revenue was RMB1.3 billion (US$190.5 million), decreasing 20% year over year, primarily due to the decrease in brand advertising business, partially offset by the growth of performance-based advertising business.

    Content distribution revenue was RMB814.0 million (US$116.0 million), increasing 52% year over year, primarily driven by the increase in the barter transactions.

    Other revenues were RMB728.8 million (US$103.8 million), decreasing 8% year over year.

    Cost of revenues was RMB5.6 billion (US$805.1 million), decreasing 3% year over year. Content costs as a component of cost of revenues were RMB4.0 billion (US$569.0 million), decreasing 5% year over year. The decrease in content cost was primarily due to lighter movie offerings in the quarter.

    Selling, general and administrative expenses were RMB907.9 million (US$129.4 million), decreasing 7% year over year. The decrease was primarily due to the decrease in the marketing spending.

    Research and development expenses were RMB449.0 million (US$64.0 million), flat year over year.

    Operating income was RMB238.9 million (US$34.0 million), decreasing 68% year over year. Operating income margin was 3%, compared to operating income margin of 9% in the same period in 2023. Non-GAAP operating income was RMB368.6 million (US$52.5 million), decreasing 59% year over year. Non-GAAP operating income margin was 5%, compared to non-GAAP operating income margin of 11% in the same period in 2023.

    Total other income was RMB8.4 million (US$1.2 million), compared to total other expense of RMB254.2 million in the same period in 2023. The year over year variance was primarily driven by gain from foreign exchange, partially offset by the increase in impairment provision.

    Income before income taxes was RMB247.3 million (US$35.2 million), compared to income before income taxes of RMB492.5 million in the same period in 2023.

    Income tax expense was RMB11.5 million (US$1.6 million), compared to income tax expense of RMB9.0 million in the same period in 2023.

    Net income attributable to iQIYI was RMB229.4 million (US$32.7 million), decreasing 52% year over year. Diluted net income attributable to iQIYI per ADS was RMB0.24 (US$0.03) for the third quarter of 2024, compared to diluted net income attributable to iQIYI per ADS of RMB0.49 in the same period of 2023. Non-GAAP net income attributable to iQIYI was RMB479.8 million (US$68.4 million), decreasing 23% year over year. Non-GAAP diluted net income attributable to iQIYI per ADS was RMB0.50 (US$0.07), compared to non-GAAP diluted net income attributable to iQIYI per ADS of RMB0.64 in the same period of 2023.

    Operating cash flow was RMB242.5 million (US$34.6 million), compared to operating cash flow of RMB830.7 million in the same period of 2023. Free cash flow was RMB234.8 million (US$33.5 million), compared to free cash flow of RMB826.5 million in the same period of 2023.

    As of September 30, 2024, the Company had cash, cash equivalents, short-term investments and long-term restricted cash included in prepayments and other assets of RMB4.7 billion (US$673.8 million). In August 2024, PAG drew down US$200.0 million under the loan facility, bringing the total draw down under the facility agreements to US$400.0 million as of September 30, 2024. As such, PAG’s repurchase right for the US$522.5 million principal of the convertible senior notes due January 2028 has been waived.

    Conference Call Information

    iQIYI's management will hold an earnings conference call at 6:30 AM on November 21, 2024, U.S. Eastern Time (7:30 PM on November 21, 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/10042987-f1zkbm.html

    It will automatically direct you to the registration page of "iQIYI Third 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 November 28, 2024.

    Dial-in numbers for the replay are as follows:
    International Dial-in +1 855 883 1031
    Passcode:  10042987
       

    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
      September 30, June 30, September 30,
      2023
    		 2024
    		 2024
      RMB RMB RMB
      (Unaudited) (Unaudited) (Unaudited)
    Revenues:      
    Membership services 5,011,617  4,495,310  4,365,955 
    Online advertising services 1,674,260  1,461,367  1,336,932 
    Content distribution 537,058  698,175  814,028 
    Others 792,144  783,933  728,766 
    Total revenues 8,015,079  7,438,785  7,245,681 
           
    Operating costs and expenses:      
    Cost of revenues (5,839,540)  (5,678,342)  (5,649,836) 
    Selling, general and administrative (981,409)  (969,673)  (907,885) 
    Research and development (447,383)  (448,677)  (449,039) 
    Total operating costs and expenses (7,268,332)  (7,096,692)  (7,006,760) 
    Operating income 746,747  342,093  238,921 
           
    Other income/(expense):      
    Interest income 45,219  68,688  69,044 
    Interest expenses (281,528)  (288,162)  (256,440) 
    Foreign exchange (loss)/gain, net (38,084)  (51,338)  296,030 
    Gain/(loss) from equity method investments 1,355  (2,100)  4,627 
    Others, net 18,802  32,476  (104,867) 
    Total other (expense)/income, net (254,236)  (240,436)  8,394 
           
    Income before income taxes 492,511  101,657  247,315 
    Income tax expense (9,012)  (25,741)  (11,483) 
           
    Net income 483,499  75,916  235,832 
    Less: Net income attributable to noncontrolling interests 7,579  7,231  6,420 
    Net income attributable to iQIYI, Inc. 475,920  68,685  229,412 
    Net income attributable to ordinary shareholders 475,920  68,685  229,412 
           
    Net income per share for Class A and Class B ordinary shares:      
    Basic 0.07  0.01  0.03 
    Diluted 0.07  0.01  0.03 
           
    Net income per ADS (1 ADS equals 7 Class A ordinary shares):      
    Basic 0.50  0.07  0.24 
    Diluted 0.49  0.07  0.24 
           
    Weighted average number of Class A and Class B ordinary shares used in net income per share computation:      
    Basic 6,712,002,812  6,725,978,497  6,737,281,504 
    Diluted 6,850,839,094  6,857,915,450  6,779,359,665 
           


    iQIYI, INC.
    Condensed Consolidated Balance Sheets
    (In RMB thousands, except for number of shares and per share data)
     
      December 31, September 30,
      2023 2024
      RMB RMB
        (Unaudited)
    ASSETS    
    Current assets:    
    Cash and cash equivalents 4,434,525  3,241,336 
    Restricted cash 6,120  - 
    Short-term investments 941,738  936,267 
    Accounts receivable, net 2,169,042  2,215,920 
    Prepayments and other assets 2,794,259  2,302,748 
    Amounts due from related parties 1,707,024  345,392 
    Licensed copyrights, net 582,521  522,495 
    Total current assets 12,635,229  9,564,158 
         
    Non-current assets:    
    Fixed assets, net 863,813  839,945 
    Long-term investments 2,260,785  2,054,565 
    Licensed copyrights, net 6,966,508  6,862,492 
    Intangible assets, net 309,534  310,006 
    Produced content, net 13,376,985  14,321,624 
    Prepayments and other assets 3,518,210  3,508,104 
    Operating lease assets 683,897  621,083 
    Goodwill 3,820,823  3,820,823 
    Amounts due from related parties 158,590  2,927,240 
    Total non-current assets 31,959,145  35,265,882 
         
    Total assets 44,594,374  44,830,040 
         
    LIABILITIES AND SHAREHOLDERS’ EQUITY    
    Current liabilities:    
    Accounts and notes payable 5,671,074  6,486,111 
    Amounts due to related parties 2,953,658  3,267,320 
    Customer advances and deferred revenue 4,373,208  4,320,866 
    Convertible senior notes, current portion 2,802,442  16,668 
    Short-term loans 3,571,637  4,347,147 
    Long-term loans, current portion 2,000  36,800 
    Operating lease liabilities, current portion 100,883  93,432 
    Accrued expenses and other liabilities 2,866,632  2,883,646 
    Total current liabilities 22,341,534  21,451,990 
    Non-current liabilities:    
    Long-term loans 97,990  496,951 
    Convertible senior notes 8,143,994  8,187,011 
    Deferred tax liabilities 824  34 
    Amounts due to related parties 80,566  64,211 
    Operating lease liabilities 523,747  464,837 
    Other non-current liabilities 1,220,804  886,346 
    Total non-current liabilities 10,067,925  10,099,390 
         
    Total liabilities 32,409,459  31,551,380 
         
         
    Shareholders’ equity:    
         
    Class A ordinary shares 237  238 
    Class B ordinary shares 193  193 
    Additional paid-in capital 54,971,469  55,439,943 
    Accumulated deficit (44,573,428)  (43,620,014) 
    Accumulated other comprehensive income 1,688,047  1,388,992 
    Non-controlling interests 98,397  69,308 
    Total shareholders’ equity 12,184,915  13,278,660 
         
    Total liabilities and shareholders' equity 44,594,374  44,830,040 


    iQIYI, INC.
    Condensed Consolidated Statements of Cash Flows
    (In RMB thousands, except for number of shares and per share data)
     
     Three Months Ended
     September 30, June 30, September 30,
     2023
    		 2024
    		 2024
     RMB RMB RMB
     (Unaudited) (Unaudited) (Unaudited)
          
    Net cash provided by operating activities830,689  410,752  242,517 
    Net cash (used for)/provided by investing activities(1,2)(55,245)  336,256  (1,662,662) 
    Net cash provided by/(used for) financing activities269,189  865,894  (2,611,570) 
    Effect of exchange rate changes on cash, cash equivalents and restricted cash4,587  23,113  (83,808) 
    Net increase/(decrease) in cash, cash equivalents and restricted cash1,049,220  1,636,015  (4,115,523) 
    Cash, cash equivalents and restricted cash at the beginning of the period5,082,365  6,271,368  7,907,383 
    Cash, cash equivalents and restricted cash at the end of the period6,131,585  7,907,383  3,791,860 


    Reconciliation of cash and cash equivalents and restricted cash:    		     
    Cash and cash equivalents4,230,587  6,301,808  3,241,336 
    Restricted cash6,120  -  - 
    Long-term restricted cash1,894,878  1,605,575  550,524 
    Total cash and cash equivalents and restricted cash shown in the statements of cash flows6,131,585  7,907,383  3,791,860 
          
    Net cash provided by operating activities830,689  410,752  242,517 
    Less: Capital expenditures(2)(4,192)  (28,299)  (7,700) 
    Free cash flow826,497  382,453  234,817 

    (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
     September 30, June 30, September 30,
     2023
    		 2024
    		 2024
     RMB RMB RMB
          
    Operating income746,747  342,093  238,921 
    Add: Share-based compensation expenses145,730  157,791  128,190 
    Add: Amortization of intangible assets(1)2,402  1,533  1,533 
    Operating income (non-GAAP)894,879  501,417  368,644 
          
    Net income attributable to iQIYI, Inc.475,920  68,685  229,412 
    Add: Share-based compensation expenses145,730  157,791  128,190 
    Add: Amortization of intangible assets(1)2,402  1,533  1,533 
    Add: Disposal loss-  -  22,265 
    Add: Impairment of long-term investments-  16,591  91,243 
    Add: Fair value (gain)/loss of long-term investments(1,756)  2,577  7,407 
    Add: Tax effects on non-GAAP adjustments(2)(225)  (263)  (263) 
    Net income attributable to iQIYI, Inc. (non-GAAP)622,071  246,914  479,787 
          
    Diluted net income per ADS0.49  0.07  0.24 
    Add: Non-GAAP adjustments to earnings per ADS0.15  0.18  0.26 
    Diluted net income per ADS (non-GAAP)0.64  0.25  0.50 

    (1)    This represents amortization of intangible assets resulting from business combinations.
    (2)    This represents tax impact of all relevant non-GAAP adjustments.


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