Financial Data and Key Metrics Changes - In Q4 2024, total revenues were RMB 6.6 billion, down 14% year-over-year [52] - Membership services revenue reached RMB 4.1 billion, down 15% year-over-year, primarily due to a lighter content slate [53] - Online advertising revenue decreased by 13% year-over-year to RMB 1.4 billion, mainly due to a decline in brand advertisement business [54] - Content distribution revenue was RMB 406.6 million, down 20% year-over-year [54] - Non-GAAP operating income was RMB 405.9 million, with a corresponding margin of 6% [55] - Net cash provided by operating activities totaled RMB 519 million, positive for 11 consecutive quarters [55] Business Line Data and Key Metrics Changes - Long-form video content maintained leadership in viewership, with significant performance in suspense genres [12][16] - Mini-drama portfolio expanded to over 10,000 titles, capturing 95% of leading mini-drama content providers [28] - Membership revenue showed a strong comeback starting from late November 2024, driven by improved content offerings [30] Market Data and Key Metrics Changes - Membership revenue from overseas markets, including Hong Kong, U.K., Thailand, and Australia, grew by over 30% year-over-year [46] - Average daily subscribing members increased both annually and sequentially, with Hong Kong and Thailand growing over 40% year-over-year [46] Company Strategy and Development Direction - The company aims to boost membership revenue by enhancing content quality and expanding advertising revenue through mini-drama growth [11] - Focus on refining production and management of long-form videos, with an emphasis on premium content appealing to female audiences [20][22] - Plans to expand into new markets, including the Middle East and Latin America, while enhancing local content offerings [49][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in consumer sentiment towards quality video content, supported by high box office performance during the Chinese New Year [10] - The company is confident that the strong comeback of premium long-form videos and continuous innovation in mini-dramas will drive growth in 2025 [50] Other Important Information - The company has revamped its membership offerings into two primary categories: individual and family, enhancing user experience and retention [31][88] - The advertising business showed signs of recovery, with brand ad revenue growing sequentially, driven by premium dramas [36][39] Q&A Session Summary Question: What is the content pipeline for 2025 and potential blockbuster titles? - Management highlighted a strong start to 2025 with several premium titles planned, aiming for both quality and quantity in content offerings [58][60] Question: Updates on the mini-drama area and strategic plans for 2025? - The company is focusing on mini-dramas with a dedicated app and aims to enhance monetization capabilities while increasing user growth [69][80] Question: Impact of recent membership initiatives on the membership business? - Management noted a significant increase in subscribing members due to the rollout of new membership categories and benefits, enhancing user engagement [84][90] Question: Core strategy for overseas business in 2025? - The strategy includes pursuing rapid revenue growth while maintaining profitability, with tailored approaches for different markets [93][96]

Revenue Performance - Total revenues for Q4 2024 were RMB6.61 billion (US$906.0 million), a decrease of 14% year over year[6]. - Membership services revenue was RMB4.10 billion (US$562.1 million), down 15% year over year, primarily due to a lighter content slate[11]. - Online advertising services revenue was RMB1.43 billion (US$196.4 million), decreasing 13% year over year, mainly due to a decline in brand advertising[12]. - For the fiscal year 2024, total revenues were RMB29.23 billion (US$4.00 billion), an 8% decrease from 2023[24]. - Total revenues for the three months ended December 31, 2023, were RMB 7,706,468 thousand, representing an increase from RMB 6,613,417 thousand for the same period in 2022, a growth of approximately 16.5%[49]. Profitability - Net loss attributable to iQIYI was RMB189.4 million (US$25.9 million), compared to net income of RMB466.2 million in Q4 2023[20]. - Operating income for fiscal year 2024 was RMB1.81 billion (US$248.1 million), down 39% from 2023[28]. - Non-GAAP net income for fiscal year 2024 was RMB1.51 billion (US$207.2 million), a decrease of 47% from 2023[32]. - Operating income for the year ended December 31, 2023, was RMB 2,989,479 thousand, compared to RMB 1,811,203 thousand in 2022, reflecting an increase of approximately 64.8%[49]. - Net income attributable to iQIYI, Inc. for the three months ended December 31, 2023, was RMB 466,233 thousand, a significant recovery from a net loss of RMB 189,355 thousand in the same quarter of the previous year[49]. Cash Flow and Liquidity - Cash and cash equivalents as of December 31, 2024, totaled RMB4.53 billion (US$620.9 million)[23]. - Free cash flow for fiscal year 2024 was RMB2.03 billion (US$278.2 million), down from RMB3.31 billion in 2023[33]. - Cash and cash equivalents as of December 31, 2023, were RMB 4,434,525 thousand, a decrease from RMB 3,529,679 thousand as of December 31, 2024[51]. - The company reported a free cash flow of RMB 1,000,000 thousand for the year ended December 31, 2023, indicating strong operational cash generation[49]. - Net cash provided by operating activities for the year ended December 31, 2023, was RMB 3,351,600 thousand, down from RMB 2,110,057 thousand in the previous year[53]. Shareholder Equity and Assets - Total assets increased to RMB 44,594,374 thousand as of December 31, 2023, compared to RMB 45,760,525 thousand as of December 31, 2024[51]. - Total liabilities decreased slightly to RMB 32,409,459 thousand as of December 31, 2023, from RMB 32,386,761 thousand as of December 31, 2024[51]. - iQIYI's total shareholders' equity increased to RMB 12,184,915 thousand as of December 31, 2023, compared to RMB 13,373,764 thousand as of December 31, 2024[51]. Operational Highlights - The company expanded its mini-drama portfolio to over ten thousand titles, enhancing monetization strategies[7]. - Operating income for the three months ended December 31, 2023, was RMB 773,709 thousand, a significant increase compared to RMB 238,921 thousand for the previous quarter[57]. - Free cash flow for the three months ended December 31, 2023, was RMB 614,355 thousand, compared to RMB 234,817 thousand in the previous quarter[53]. - Capital expenditures for the year ended December 31, 2023, totaled RMB 79,319 thousand, primarily related to construction in process, computers, and servers[54]. - Net cash used for investing activities for the year ended December 31, 2023, was RMB 2,444,870 thousand, compared to RMB 1,739,515 thousand in the previous year[53]. Earnings Per Share - The total number of Class A and Class B ordinary shares used in net income per share computation for the three months ended December 31, 2023, was approximately 6,713,897,712[49]. - Diluted net income per ADS for the three months ended December 31, 2023, was RMB 0.48, up from RMB 0.24 in the previous quarter[57]. - The company reported a net loss attributable to iQIYI, Inc. (non-GAAP) of RMB 58,779 thousand for the three months ended December 31, 2023, compared to a profit of RMB 479,787 thousand in the previous quarter[57].

Core Viewpoint - iQIYI, Inc. reported a decline in revenues and net income for the fourth quarter and fiscal year 2024, despite a strong performance in the drama market and growth in mini-dramas, indicating challenges in the online entertainment sector in China. Group 1: Fourth Quarter 2024 Highlights - Total revenues for Q4 2024 were RMB6.61 billion (US$906.0 million), a decrease of 14% year over year [7][10] - Membership services revenue was RMB4.10 billion (US$562.1 million), down 15% year over year, attributed to a lighter content slate [10][23] - Operating income was RMB285.4 million (US$39.1 million), with an operating income margin of 4%, compared to 10% in Q4 2023 [7][14] - Net loss attributable to iQIYI was RMB189.4 million (US$25.9 million), contrasting with a net income of RMB466.2 million in the same period of 2023 [7][18] Group 2: Fiscal Year 2024 Highlights - Total revenues for the fiscal year 2024 were RMB29.23 billion (US$4.00 billion), an 8% decrease from 2023 [7][23] - Membership services revenue for the year was RMB17.76 billion (US$2.43 billion), down 13% from 2023 [23] - Operating income for the year was RMB1.81 billion (US$248.1 million), with an operating income margin of 6%, compared to 9% in 2023 [7][26] - Net income attributable to iQIYI was RMB764.1 million (US$104.7 million), a 60% decrease from 2023 [27][28] Group 3: Strategic Developments - iQIYI launched a series of blockbusters since late November 2024, which helped to reinforce its leading position in the total drama market share in Q4 2024 [4] - The company expanded its mini-drama portfolio to over ten thousand titles and optimized its ad-placement system to enhance monetization [5] - The management emphasized a focus on discipline and efficiency, leading to sequential growth in operating profit for the fourth quarter [5]

Core Insights - iQIYI experienced a significant surge in viewership during the Chinese New Year holiday, driven by classic IPs and diverse content offerings, resulting in a 118% year-on-year increase in bullet comments and a rise in offline immersive experiences [1][10][12] Viewership Trends - The variety show channel on iQIYI had the highest viewing time, with the 2025 Spring Festival Gala achieving a 135% year-on-year increase in average viewing time per user on iQIYI International [2] - Original variety shows like "The Blooming Journey" and comedy shows such as "The King of Stand-Up Comedy" saw strong audience engagement, with "Super Sketch Show" experiencing viewing time increases of 18% and 26% for Seasons 1 and 2, respectively [3] Drama and Content Popularity - Premium dramas like "The White Olive Tree" and "Unbreakable 2" dominated viewership, with "Unbreakable 2" seeing a nearly tenfold increase in viewing time for Season 1 compared to last year's CNY holiday [5] - New suspense dramas launched under the "Light On Theater" brand contributed to a 22% increase in overall viewing time for suspense content [6] Film and Animation Engagement - The box office success of sequels, such as "Ne Zha 2," led to a 624% increase in viewing time for its predecessor [7] - The release of "Legends of the Condor Heroes: The Gallants" resulted in a 1,306% rise in viewing time for related martial arts films [8] - Animation and kids' content also saw increased viewership, with "How Dare You!?" experiencing a 27% increase in viewing time [9] Technological Engagement - 70% of iQIYI users consider bullet comments essential, contributing to a 118% year-on-year increase in such interactions [10] - AI-powered chats with fictional characters enhanced viewer engagement, bringing characters to life [11] Offline Experiences - iQIYI expanded its premium IPs through offline experiences, with the VR immersive theater "Strange Tales of Tang Dynasty 2: To the West" seeing a 206% increase in visitor numbers compared to the pre-holiday period [12]

Core Insights - iQIYI has upgraded its Diamond VIP membership, allowing members to unlock Member Express Packages without additional points or purchases, enhancing the platform's membership offerings [1][4] Membership System Optimization - iQIYI launched Member Express Packages in 2023, which allows VIP members to access exclusive content, receiving over 2 million redemptions on the launch day [3] - By 2024, over 10 million VIP members utilized Member Express Packages for popular shows, indicating its acceptance among drama lovers [3] Membership Offerings - iQIYI provides five membership packages catering to individual and family scenarios, including Basic, Golden, Basic (TV), Platinum, and Diamond VIP memberships, ensuring diverse user preferences are met [5] - The Basic VIP membership, which is ad-supported, gained popularity among new users, particularly in smaller markets and younger demographics [6] Premium Membership Benefits - The Diamond VIP membership saw an increase in device limits from 5 to 8, and exclusive high-definition streaming options expanded to over 23,000 episodes, with VIP member views nearly tripling year-over-year [7] Member Engagement and Experiences - iQIYI launched initiatives like Membership Day and 717 Member Day to enhance member interaction, offering exclusive discounts, early access to content, and IP-related events [8][9] - The platform provided over 40 IP-related events in 2024, including VIP screenings and creator meet-and-greets, enriching the member experience [8]

Core Viewpoint - iQIYI, Inc. will report its financial results for the fourth quarter and fiscal year ended December 31, 2024, before the U.S. market opens on February 18, 2025 [1] Group 1: Earnings Conference Call - iQIYI's management will hold an earnings conference call at 6:30 AM on February 18, 2025, U.S. Eastern Time [1] - Participants must register in advance to receive dial-in numbers, passcode, and unique access PIN [2][3] - A telephone replay of the call will be available until February 25, 2025, with specific dial-in numbers provided for international access [4] Group 2: Company Overview - iQIYI, Inc. is a leading provider of online entertainment video services in China, combining creative talent with technology for continuous innovation [5] - The company produces, aggregates, and distributes a wide variety of professionally produced content and other video content in various formats [5] - iQIYI distinguishes itself through its advanced technology platform powered by AI, big data analytics, and proprietary technologies, along with a diversified monetization model [5]

Core Insights - The recent stage adaptation of "Mysterious Lotus Casebook" by iQIYI has received an exceptional response during its multi-city tour, marking a significant achievement in the company's IP development strategy [1][4] - The original series, a martial arts mystery, was a major hit in 2023, achieving a content popularity index exceeding 10,000 and earning a nomination at the 29th Shanghai TV Festival's Magnolia Awards [2] Production and Audience Engagement - The stage adaptation maintains the beloved elements of the original series while offering a fresh theatrical experience, featuring a narrative about a swordsman drawn back into the martial arts world [3] - Innovative stage design combines traditional Chinese aesthetics with modern elements, enhancing audience engagement through cultural motifs [3][4] Commercial Success and IP Expansion - The production has generated significant social media buzz and positive audience reviews, prompting plans for an expanded tour in 2025 [4] - Merchandise sales related to the IP have reached RMB80 million (approximately US$11 million), with over 1,300 SKUs available [5] - The IP has also expanded its offline presence through tourism partnerships, creating immersive experiences at locations like Suyun Thirteen Gardens and Hengdian World Studios [6] Strategic Vision - iQIYI aims to strengthen its premium content offerings and maximize the long-term value of its IPs through diverse offline experiences and consumer touchpoints [7] - The company plans to launch new original IPs and expand established ones in 2025, alongside innovative merchandise and co-branded initiatives [7]

Investment Rating - The report maintains a **Buy** rating for iQIYI (IQ US) with a target price of $2.60, representing a potential upside of **39.8%** from the current closing price of $1.86 [1][3] Core Views - The target price is based on a **10x 2025 P/E ratio**, adjusted from the previous $2.90 to $2.60 due to content supply stability recovery [1] - Membership is expected to gradually bottom out and rebound in 2025, leading to marginal financial improvements [1] - The current valuation is near historical lows at **6.6x 2025 P/E**, making it an attractive investment opportunity [1] - The company's micro-drama layout is progressing steadily, with potential contributions to commercial growth [1] Financial Model Updates - Revenue forecasts for 2024E, 2025E, and 2026E are adjusted to **RMB 29,222 million**, **RMB 28,914 million**, and **RMB 31,233 million**, respectively, with minor downward revisions [2] - Gross profit margins are expected to remain stable at **25%** in 2024E and 2025E, increasing to **27%** in 2026E [2] - Adjusted operating profit for 2024E is revised upward to **RMB 2,353 million**, while 2025E and 2026E forecasts are slightly lowered [2] - Adjusted net profit for 2024E is reduced by **12%** to **RMB 1,494 million**, with further downward revisions for 2025E and 2026E [2] Performance Outlook - Q4 2024 revenue is expected to decline by **14% YoY** to **RMB 6,610 million**, with membership revenue under pressure, declining **15% YoY** [5][6] - Advertising revenue is projected to grow **7% QoQ** in Q4 2024, driven by popular dramas like *I Am a Police Officer* [5] - Adjusted operating profit for Q4 2024 is revised upward to **RMB 397 million**, despite pressure from exchange rate losses [5] Industry and Peer Comparison - iQIYI is categorized under the **entertainment content** sub-sector, alongside peers like Bilibili (BILI US) and Tencent Music (TME US) [12] - The report covers multiple companies in the internet and education sectors, with **Buy** ratings for most, including Baidu (BIDU US) and Pinduoduo (PDD US) [12] Financial Ratios and Metrics - Gross margin is expected to improve from **24.9%** in 2024E to **26.6%** in 2026E [16] - ROE is forecasted to increase from **5.5%** in 2024E to **11.8%** in 2026E, reflecting improved profitability [16] - Net debt-to-equity ratio is projected to decrease significantly from **62.2%** in 2024E to **13.7%** in 2026E [16]

17 Jan 2025 CMB 国际全球市场 | 股票研究 | 公司更新 爱奇艺 (IQ US) 会员和广告业务仍然面临压力 ； 关注短剧的发展 我们预计爱奇艺2024年第四季度总收入将同比下降14%，至66亿元人民币，这 与我们之前的预期和市场共识基本一致。收入下降主要是由于10月2024年的内 容较少以及交易抵账收入的减少（对毛利润影响较小）；总体来看，内容方面 的影响相对有限。 Wo 几部关键剧集推出后 ， 演出开始恢复 ， 如 石兴经 在11月，我们预计2024年第四季度非GAAP运营利润将环比增长7%，达到人民 币3.95亿元，超出我们之前的预期（人民币3.60亿元），这得益于严格的内容 成本控制。展望2025年，我们预计在线视频市场竞争仍将激烈，因此对未来的 收入和盈利复苏持更为谨慎的态度。我们将2025-2026财年的总收入预测下调7 %-10%，并将目标价调整至3.00美元，基于2025财年12倍市盈率（之前为基于 15倍市盈率的4.50美元）。维持买入评级。 内容性能从 11 月起开始恢复。 按板块划分：1）我们估计会员收入将在2024 年第四季度同比下降15%，环比下降6%，达到人民币41 ...

iQIYI (IQ US) Membership and ad businesses remain under pressure; eye on short-drama development We expect iQiyi's 4Q24E total revenue to decline by 14% YoY to RMB6.6bn, largely in line with our previous expectation and consensus. The decrease was primarily due to the light content slate in Oct 2024 and the decline in revenue from barter transactions (minor impact on gross profit); but overall content performance started to recover after the launch of several key dramas like Wo Shi Xing Jing in Nov. We fore ...