iQIYI, Inc. (NASDAQ: IQ) ("iQIYI" or the "Company"), an innovative
market-leading online entertainment service in China, today
announced its unaudited financial results for the third quarter
ended September 30, 2019.
Third quarter 2019
Highlights
- Total revenues were RMB7.4 billion (US$1.0 billion1),
representing a 7% increase from the same period in 2018.
- Operating loss was RMB2.8 billion (US$396.2 million) and
operating loss margin was 38%, compared to operating loss of RMB2.6
billion and operating loss margin of 37% in the same period in
2018.
- Net loss attributable to iQIYI was RMB3.7 billion (US$516.0
million), compared to net loss attributable to iQIYI of RMB3.1
billion in the same period in 2018. Diluted net loss attributable
to iQIYI per ADS was RMB5.04 (US$0.70).
- The number of total subscribing members was 105.8 million as of
September 30, 2019, 99.2% of whom were paying subscribing members.
This compares to 80.7 million of total subscribing members as of
September 30, 2018, up 31% year over year.
“We continued to make solid progress during the
quarter as we march toward our vision of building a
technology-based entertainment giant,” commented Dr. Yu Gong,
Founder, Director and Chief Executive Officer of iQIYI. “Growing
30% year-over-year, our subscription business contributed more than
half of our total quarterly revenues for the first time. This once
again demonstrated the strength of our platform and validated our
dedication to producing high quality original content.
Leveraging our cutting-edge AI technology, we are continually
fine-tuning our content offerings, optimizing our monetization
efficiencies, and exploring potential new runways for future
growth. With the rapid development of 5G, we believe there will be
astonishing new opportunities ahead, and we will continue to push
forward the convergence between technology and art to create deeper
value and greater prospects for the future.”
“Despite a challenging environment, we delivered
another quarter of topline growth with total revenues increasing 7%
year-over-year to RMB7.4 billion,” commented Mr. Xiaodong
Wang, Chief Financial Officer of iQIYI. “Subscription
business continued to serve as the major driver of our revenue
growth, and we further executed on our multi-dimensional IP
development strategy to create new monetization opportunities and
diversify our revenue streams. While we experienced some margin
fluctuation due to seasonally higher content cost during the
quarter, we believe we are on track to improve long-term efficiency
through disciplined spending and investment. Going forward, we will
continue to drive shareholder value by further enhancing
monetization and transitioning toward a more balanced content
structure.”
Footnote:
[1] Unless otherwise noted, all translations
from RMB to U.S. dollars are made at a rate of RMB7.1477 to
US$1.00, the exchange rate in effect as of September 30, 2019 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.
Third quarter 2019 Financial
Results
Total revenues reached RMB7.4 billion (US$1.0
billion), representing a 7% increase from the same period in
2018.
Membership services revenue was RMB3.7 billion
(US$520.0 million), representing a 30% increase from the same
period in 2018. The increase resulted from the solid growth in the
number of subscribing members, driven by our premium content and
various operational initiatives during the quarter.
Online advertising services revenue was RMB2.1
billion (US$289.2 million), down 14% year over year, mainly due to
the challenging macroeconomic environment in China, the delay of
certain content launches and the intensified competition in in-feed
advertising.
Content distribution revenue was RMB680.4
million (US$95.2 million), representing a 18% decrease from the
same period in 2018, mainly due to the delay of certain content
launches during the quarter, as well as the high base in the same
period of previous year.
Other revenues were RMB932.3 million (US$130.4
million), representing an 12% increase from the same period in
2018. The increase was primarily driven by our game business
following several new game launches this year by Skymoons.
Cost of revenues was RMB8.2 billion (US$1.1
billion), representing a 7% increase from the same period in 2018.
The increase was primarily driven by higher content costs as well
as other cost items. Content costs as a component of cost of
revenues were RMB6.2 billion (US$870.5 million), representing a 3%
increase from the same period in 2018.
Selling, general and administrative expenses
were RMB1.3 billion (US$188.8 million), representing a 4% increase
from the same period in 2018. This was primarily due to increased
sales and marketing expenses of game business associated with the
consolidation of Skymoons, as well as higher marketing spending for
certain iQIYI apps.
Research and development expenses were RMB703.2
million (US$98.4 million), representing a 26% increase from the
same period in 2018, primarily due to the increase of
personnel-related compensation expenses.
Operating loss was RMB2.8 billion (US$396.2
million), compared to operating loss of RMB2.6 billion in the same
period in 2018. Operating loss margin was 38%, compared to
operating loss margin of 37% in the same period in 2018.
Total other expense was RMB826.8 million
(US$115.7 million), compared to total other expense of RMB539.4
million during the same period of 2018. The year-over-year increase
was mainly due to increased interest expenses arising from our
financing activities and higher foreign exchange loss associated
with the fluctuation of exchange rate between Renminbi and U.S.
dollar.
Loss before income taxes was RMB3.7 billion
(US$511.8 million), compared to loss before income taxes of RMB3.1
billion in the same period in 2018.
Income tax expense was RMB16.0
million (US$2.2 million), compared to income tax benefit of
RMB6.1 million in the same period in 2018.
Net loss attributable to iQIYI was RMB3.7
billion (US$516.0 million), compared to net loss attributable to
iQIYI of RMB3.1 billion in the same period in 2018. Diluted net
loss attributable to iQIYI per ADS was RMB5.04 (US$0.70) for the
third quarter of 2019.
As of September 30, 2019, the Company had cash,
cash equivalents, restricted cash and short-term investments of
RMB13.9 billion (US$1.9 billion).
Financial Guidance
For the fourth quarter of 2019, iQIYI expects
total net revenues to be between RMB6.86 billion (US$0.96 billion)
and RMB7.28 billion (US$1.02 billion), representing a -2% to 4%
increase from the same period in 2018. This forecast reflects
iQIYI's current and preliminary view, which is subject to
substantial uncertainty.
Conference Call Information
iQIYI's management will hold an earnings
conference call at 7:00 PM on November 6, 2019, U.S. Eastern Time
(8:00 AM on November 7, 2019, Beijing Time). Dial-in details for
the earnings conference call are as follows:
International China US UK Hong Kong
Passcode: |
+65 671350904006 208038+1 845 675 0437+44 2036 214779+852 3018
6771 7892488 |
A telephone replay of the call will be available
two hours after the conclusion of the conference call through
November 14, 2019.
Dial-in numbers for the replay are as
follows:
International Dial-in Passcode: |
+61 2 8199 02997892488 |
A live and archived webcast of this conference
call will be available at http://ir.iqiyi.com.
About iQIYI,
Inc.
iQIYI, Inc. is an innovative market-leading
online entertainment service in China. Its corporate DNA combines
creative talent with technology, fostering an environment for
continuous innovation and the production of blockbuster content.
iQIYI’s platform features highly popular original content, as well
as a comprehensive library of other professionally-produced
content, partner-generated content and user-generated content. The
Company distinguishes itself in the online entertainment industry
by its leading technology platform powered by advanced AI, big data
analytics and other core proprietary technologies. iQIYI attracts a
massive user base with tremendous user engagement, and has
developed a diversified monetization model including membership
services, online advertising services, content distribution, online
games, live broadcasting, IP licensing, online literature, talent
agency and e-commerce 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 Financial Guidance and
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.
For more information, please contact:
Investor RelationsiQIYI, Inc.+ 86 10 8264 6585
ir@qiyi.com
iQIYI, INC.
Condensed Consolidated Statements of
Loss
(In RMB thousands, except for
number of shares and per share data)
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
|
|
2018 |
|
2019 |
|
2019 |
|
|
RMB |
|
RMB |
|
RMB |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
Revenues: |
|
|
|
|
|
|
Membership services |
2,852,329 |
|
|
3,412,349 |
|
|
3,716,861 |
|
|
Online advertising services |
2,396,247 |
|
|
2,200,682 |
|
|
2,067,385 |
|
|
Content distribution |
834,576 |
|
|
517,939 |
|
|
680,377 |
|
|
Others |
831,106 |
|
|
979,211 |
|
|
932,311 |
|
|
Total
revenues |
6,914,258 |
|
|
7,110,181 |
|
|
7,396,934 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs
and expenses: |
|
|
|
|
|
|
Cost of revenues |
(7,655,102 |
) |
|
(6,980,957 |
) |
|
(8,175,751 |
) |
|
Selling, general and administrative |
(1,292,037 |
) |
|
(1,346,324 |
) |
|
(1,349,543 |
) |
|
Research and development |
(558,373 |
) |
|
(654,601 |
) |
|
(703,211 |
) |
|
Total operating
costs and expenses |
(9,505,512 |
) |
|
(8,981,882 |
) |
|
(10,228,505 |
) |
|
Operating
loss |
(2,591,254 |
) |
|
(1,871,701 |
) |
|
(2,831,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other
expense |
|
|
|
|
|
|
Interest income |
65,603 |
|
|
130,721 |
|
|
116,494 |
|
|
Interest expenses |
(15,586 |
) |
|
(247,762 |
) |
|
(254,435 |
) |
|
Foreign exchange loss, net |
(593,147 |
) |
|
(306,117 |
) |
|
(656,105 |
) |
|
Gain/(Loss) from equity method investments |
46 |
|
|
(38,112 |
) |
|
(33,213 |
) |
|
Other income, net |
3,683 |
|
|
34,593 |
|
|
478 |
|
|
Total other
expense, net |
(539,401 |
) |
|
(426,677 |
) |
|
(826,781 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
(3,130,655 |
) |
|
(2,298,378 |
) |
|
(3,658,352 |
) |
|
Income tax benefit/(expense) |
6,058 |
|
|
(5,776 |
) |
|
(16,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
(3,124,597 |
) |
|
(2,304,154 |
) |
|
(3,674,399 |
) |
|
Net income attributable to noncontrolling interests |
15,836 |
|
|
23,291 |
|
|
13,724 |
|
|
Net loss attributable
to iQIYI, Inc. |
(3,140,433 |
) |
|
(2,327,445 |
) |
|
(3,688,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share for Class A and Class B ordinary shares: |
|
|
|
|
|
|
Basic |
(0.62 |
) |
|
(0.46 |
) |
|
(0.72 |
) |
|
Diluted |
(0.62 |
) |
|
(0.46 |
) |
|
(0.72 |
) |
|
|
|
|
|
|
|
|
Net loss per ADS
(1 ADS equals 7 Class A ordinary shares): |
|
|
|
|
|
|
Basic |
(4.34 |
) |
|
(3.22 |
) |
|
(5.04 |
) |
|
Diluted |
(4.34 |
) |
|
(3.22 |
) |
|
(5.04 |
) |
|
|
|
|
|
|
|
|
Weighted average
number of Class A and Class B ordinary shares used in net loss per
share computation: |
|
|
|
|
|
|
Basic |
5,058,650,574 |
|
|
5,102,652,726 |
|
|
5,109,395,926 |
|
|
Diluted |
5,058,650,574 |
|
|
5,102,652,726 |
|
|
5,109,395,926 |
|
|
|
|
|
|
|
|
|
iQIYI, INC.
Condensed Consolidated Balance
Sheets
(In RMB thousands)
|
|
|
|
December 31, |
|
September 30, |
|
|
2018 |
|
2019 |
|
|
RMB |
|
RMB |
|
|
|
|
(Unaudited) |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
4,586,405 |
|
|
4,505,175 |
|
Restricted cash |
|
2,174,042 |
|
|
2,587,948 |
|
Short-term investments |
|
6,061,832 |
|
|
6,841,710 |
|
Accounts receivable |
|
2,889,234 |
|
|
2,982,334 |
|
Prepayments and other assets |
|
2,696,381 |
|
|
4,022,826 |
|
Amounts due from related parties |
|
281,710 |
|
|
312,936 |
|
Licensed copyrights, net |
|
1,163,839 |
|
|
1,323,772 |
|
Total current
assets |
|
19,853,443 |
|
|
22,576,701 |
|
|
|
|
|
|
Non-current
assets: |
|
|
|
|
Fixed assets, net |
|
1,618,147 |
|
|
1,843,682 |
|
Long-term investments |
|
2,572,040 |
|
|
2,907,112 |
|
Deferred tax assets, net |
|
23,873 |
|
|
23,873 |
|
Licensed copyrights, net |
|
6,640,910 |
|
|
6,589,081 |
|
Intangible assets, net |
|
1,678,193 |
|
|
1,353,493 |
|
Produced content, net |
|
3,736,063 |
|
|
4,845,923 |
|
Prepayments and other assets |
|
4,695,883 |
|
|
3,583,698 |
|
Operating lease assets |
|
- |
|
|
525,700 |
|
Goodwill |
|
3,888,346 |
|
|
3,888,346 |
|
Amounts due from related parties |
|
52,800 |
|
|
172,200 |
|
Total
non-current assets |
|
24,906,255 |
|
|
25,733,108 |
|
|
|
|
|
|
Total
assets |
|
44,759,698 |
|
|
48,309,809 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts and notes payable |
|
10,162,366 |
|
|
10,089,850 |
|
Amounts due to related parties |
|
692,390 |
|
|
1,234,081 |
|
Customer advances and deferred revenue |
|
2,195,283 |
|
|
2,354,884 |
|
Short-term loans |
|
3,046,449 |
|
|
3,509,915 |
|
Long-term loans, current portion |
|
83,720 |
|
|
363,480 |
|
Operating lease liabilities, current portion |
|
- |
|
|
116,826 |
|
Accrued expenses and other liabilities |
|
3,632,148 |
|
|
3,846,605 |
|
Total current
liabilities |
|
19,812,356 |
|
|
21,515,641 |
|
Non-current liabilities: |
|
|
|
|
Long-term loans |
|
644,169 |
|
|
672,352 |
|
Convertible senior notes |
|
4,712,284 |
|
|
12,517,935 |
|
Deferred tax liabilities |
|
96,405 |
|
|
51,759 |
|
Amounts due to related parties |
|
1,281,370 |
|
|
1,091,088 |
|
Operating lease liabilities |
|
- |
|
|
218,653 |
|
Other non-current liabilities |
|
57,551 |
|
|
52,868 |
|
Total
non-current liabilities |
|
6,791,779 |
|
|
14,604,655 |
|
|
|
|
|
|
Total
liabilities |
|
26,604,135 |
|
|
36,120,296 |
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
321 |
|
|
324 |
|
Additional paid-in
capital |
|
39,666,150 |
|
|
40,877,665 |
|
Accumulated deficit |
|
(23,509,486 |
) |
|
(31,339,030 |
) |
Accumulated other
comprehensive income |
|
1,879,946 |
|
|
2,491,981 |
|
Non-controlling interests |
|
118,632 |
|
|
158,573 |
|
Total shareholders’ equity |
|
18,155,563 |
|
|
12,189,513 |
|
|
|
|
|
|
Total liabilities and shareholders’
equity |
|
44,759,698 |
|
|
48,309,809 |
|
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