4月24日，2025爱奇艺世界·大会分论坛共创电影内容高峰论坛在北京举办。爱奇艺发布了2025年平台电影发展策略，称将搭建自制电影"三级火箭"，聚焦打 造头部院线大片、先锋创新作品和精品网络电影，并公布"燎原计划""爆前计划"合作细则，持续支持青年电影人创作好内容。同时，39部爱奇艺出品电影最 新片单亮相，主创阵容强大，题材丰富类型多元，更有行业大咖齐聚共探当前中国电影市场的机遇与挑战。 爱奇艺电影及海外业务群总裁杨向华表示，在观众审美升级与跨媒介消费抢夺用户时长的行业变局下，电影产业唯有通过内容创新、制作升级，才能在多维 竞争格局中实现破局突围。基于此，爱奇艺今年正式推出"自制电影三级火箭计划"，通过"大片计划""爆前计划""燎原计划"三大战略模块，系统性布局电影 制作，期待与每位有才华的电影人合作。 "燎原""爆前"两大计划 全力支持青年影人、寻找先锋力量 过去一年，电影市场院线票房及线上消费的档期效应与头部效应愈发突出，行业整体面临内容单一化、创新乏力、过度依赖头部创作者、单个项目投资风险 增大等挑战。杨向华表示，爱奇艺作为国内最大电影制播平台，将搭建自制电影"三级火箭"，通过"大片计划"持续合作顶尖电 ...

Investment Rating - The report assigns a "Buy" rating for iQIYI (IQ US) with a target price of $2.40, indicating a potential upside of 28.3% from the current price of $1.87 [1][18]. Core Insights - The report emphasizes the improvement in long series and the effectiveness of investments in micro-short dramas. iQIYI is focusing on high-quality content while adapting to changing viewer attention spans by increasing micro-short drama investments and reducing the number of long series [2][6]. - The company is exploring content e-commerce based on its content ecosystem and user base, currently in a trial operation phase [6]. - The report anticipates a decline in brand advertising revenue due to market pressures, projecting a decrease of 11% year-on-year and 8% quarter-on-quarter to approximately 1.3 billion RMB [6]. Financial Overview - Revenue projections for iQIYI are as follows: - 2023: 31,873 million RMB - 2024: 29,225 million RMB (down 8.3% YoY) - 2025E: 29,118 million RMB (down 0.4% YoY) - 2026E: 31,063 million RMB (up 6.7% YoY) - 2027E: 32,583 million RMB (up 4.9% YoY) [3][19] - Net profit estimates are: - 2023: 2,838 million RMB - 2024: 1,512 million RMB (down 46.5% YoY) - 2025E: 1,643 million RMB (up 9.5% YoY) - 2026E: 2,158 million RMB (up 31.3% YoY) - 2027E: 2,719 million RMB (up 25.9% YoY) [3][19]. - The report notes a projected adjusted net profit of 3.0 billion RMB for Q1 2025, reflecting a decrease due to increased micro-drama investments [6]. Market Position and Performance - iQIYI's market share in the top 20 series and online variety shows is highlighted, with a 38% share in series and a 14% share in online variety shows for Q1 2025, showing a 14% increase and a 5% decrease respectively compared to the previous year [6][10]. - The company is expected to maintain its revenue expectations for 2025, although adjusted net profit expectations have been lowered by 11% to 1.6 billion RMB due to increased content and promotional investments [6]. Upcoming Content - iQIYI has announced over 400 upcoming long and short series, focusing on high-quality content and leveraging popular IPs for commercial value [6][7]. - The report lists several anticipated series and variety shows set to launch in 2025, indicating a robust content pipeline aimed at attracting viewers [7][8].

Investment Rating - The report maintains a "Buy" rating for the company [7] Core Insights - The company is focusing on a dual strategy of long-form and short-form content to enhance its content ecosystem and commercial capabilities, with plans to optimize its advertising system and launch content e-commerce initiatives [1][2] - The management shared future plans at the iQIYI World Conference, emphasizing the importance of AI technology for content creation and user experience enhancement [2] - The company aims to diversify its revenue streams by entering the content e-commerce market, targeting its membership base for potential sales [2] Financial Forecasts - For Q1 2025, the company is expected to generate total revenue of 7.09 billion RMB, a year-on-year decrease of 10.5% but a quarter-on-quarter increase of 7.3% [3] - The non-GAAP net profit for Q1 2025 is projected at 290 million RMB, reflecting a non-GAAP net profit margin of 4.1%, down 6.6 percentage points year-on-year [3] - The company has adjusted its non-GAAP net profit forecasts for 2025, 2026, and 2027 downwards by 7.7%, 6.5%, and 9.2% respectively, due to revised revenue growth expectations [4][12] Valuation Metrics - The target price for the company is set at $2.71, based on a 12.0x non-GAAP PE for 2025, which reflects a discount compared to the comparable average of 22.6x [4][12] - The company’s projected revenue for 2025 is 29.417 billion RMB, with a slight year-on-year growth of 0.66% [6][12] - The adjusted net profit for 2025 is forecasted at 1.582 billion RMB, with a non-GAAP net profit margin of 5.4% [12][22]

Group 1: Technology Developments - OpenAI has launched a new image model, gpt-image-1, which is now available via API and has been adopted by major creative platforms like Adobe and Figma. The model features higher precision, diverse visual styles, and advanced image editing capabilities [2] - Tencent has released version 2.5 of its mixed reality 3D generation model, significantly enhancing modeling precision and increasing effective polygon count by over ten times [4] - Intel has announced a new generation of AI-enhanced software-defined vehicle system-on-chip (SDV SoC) at the Shanghai Auto Show, claiming up to a 10x performance improvement over the previous generation [8] Group 2: Corporate Actions and Financials - Apple and Meta have been fined a total of €700 million (approximately ¥58 billion) by the EU for violating the Digital Markets Act [2] - Neuralink, led by Elon Musk, is planning to raise $500 million with a pre-money valuation of $8.5 billion [10] - Jingfeng Mingyuan intends to acquire 100% of Sichuan Yichong Technology for ¥3.283 billion as part of a major asset restructuring [11] Group 3: Automotive Industry Updates - Huawei's first car under the "Shangjie" brand, developed in collaboration with SAIC, is expected to achieve significant sales upon its launch in Q3 2023 [3] - NIO's chairman Li Bin highlighted the importance of three core technologies—intelligent driving chips, universal operating systems, and smart chassis—in enhancing the experience and safety of smart vehicles [5] - GAC Aion and Didi Autonomous Driving have introduced the world's first mass-produced L4 autonomous vehicle, set for mass production by the end of the year [6] Group 4: Market Trends and Consumer Behavior - iQIYI is entering the live-streaming e-commerce space, leveraging its IP content and celebrity resources to tap into its membership base as a potential e-commerce user group [3] - Alibaba's international site has topped the U.S. App Store shopping charts, indicating a significant rise in its download rankings [4] - The establishment of the Greater Bay Area (Dongguan) Artificial Intelligence Alliance aims to enhance AI capabilities and attract over 300 AI-focused enterprises by 2027 [7]

Core Viewpoint - iQIYI, Inc. will report its financial results for the first quarter of 2025 on May 21, 2025, before the U.S. market opens, with a conference call scheduled for the same day [1]. Company Overview - iQIYI, Inc. is a leading provider of online entertainment video services in China, known for combining creative talent with technology to foster innovation and produce blockbuster content [5]. - The company produces, aggregates, and distributes a wide variety of professionally produced content and other video formats, distinguishing itself through its advanced technology platform powered by AI and big data analytics [5]. - iQIYI has developed a massive user base and a diversified monetization model that includes membership services, online advertising, content distribution, online games, IP licensing, talent agency, and online literature [5].

Core Insights - iQIYI has announced the groundbreaking of its second comprehensive theme park, iQIYI LAND, in Kaifeng, Henan Province, following plans for its first park in Yangzhou, Jiangsu Province, as part of its strategy to extend premium IP into offline experiences [1][2] - The new park will feature seven core entertainment sectors, including immersive theater and mixed reality experiences, aimed at enhancing audience engagement and interaction [2][3] - iQIYI is adopting a technology-driven model that reduces the need for heavy upfront investments and long return cycles, utilizing proprietary game engines, VR, and AI for frequent content updates [3][4] Industry Context - The theme park sector in China reached RMB 60 billion (USD 8.2 billion) in 2023 and is projected to exceed RMB 110 billion (USD 15 billion) by 2028, indicating strong growth potential [5] - iQIYI is focusing on culturally rich cities with strong market potential, with Kaifeng being strategically chosen for its historical significance and excellent transportation connectivity [6] - The immersive theater experiences have been successfully rolled out in over 20 cities and 40 locations nationwide, positioning them as a core attraction for iQIYI LAND [5]

Core Insights - The stock market is currently experiencing significant turmoil due to tariff-induced crashes, marking an unprecedented situation for investors [1]. Group 1: Market Analysis - The recent market crash has left investors confused, indicating a volatile environment that may affect investment strategies [1]. Group 2: Analyst Background - Muslim Farooque is a recognized financial journalist and market analyst with over five years of experience in stock and cryptocurrency markets, contributing to various platforms and reaching over 200,000 readers monthly [1]. - He is a Chartered Certified Accountant (ACCA) and holds a Bachelor of Science in Applied Accounting and Finance from Oxford Brookes University, UK [1].

各位童鞋搭嘎猴啊，上周 "APP流量洞察报"看的怎么样？有童鞋在后台留言："本来还在愤 怒冷一天热一天，突然，缅甸来了个大地震，顿时无颜抱怨了……"今年一个季度没过完，大 事已经接连不断，虽然经历了过去几年的不断突变，大家都有点不安了，还是愿平安、都保 重…… 言归正传，今天就给大家分享一下营销市场洞察报告。Qu e s tMobi l e数据显示，在消费品国 补、以旧换新等政策刺激下，2024年国内消费韧劲十足。具体来说，一方面，刚需品类理性 增长，另一方面，家电、汽车等耐用消费品出现阶段性爆发。此外，体验式消费更是成为了 消费风向标。 由此带来了三大营销市场变化：营销触点多元分化；IP及热点营销持续抢占用户流量；唯有 体验消费能打破营销"圈层板块"。 营销触点方面，内容消费场景 APP 持续血海厮杀，抢夺用户零碎的注意力；消费类APP使 用量增长，意味着用户倾向多平台比价达到最优决策。两大要素交织，导致"易走难 留"、"一去不回"，成了营销通病。 同时，IP化和热点事件营销挟裹着平台头部达人流量，让营销陷入"圈层化"的尴尬境地：流 量和曝光增加反而进一步强化了低价和比价的死亡螺旋。 唯一的突破出现在体验消 ...

[Key Information](index=6&type=section&id=ITEM%203.%20KEY%20INFORMATION) [Holding Company Structure and VIEs](index=6&type=section&id=Our%20Holding%20Company%20Structure%20and%20Contractual%20Arrangements%20with%20the%20Variable%20Interest%20Entities) iQIYI, a Cayman Islands holding company, operates in China via VIEs due to foreign ownership restrictions, a structure critical to revenue but with legal uncertainties - iQIYI, Inc. is a Cayman Islands holding company that does not directly operate in China, conducting business through PRC subsidiaries and Variable Interest Entities (VIEs) via contractual arrangements[28](index=28&type=chunk) - Revenues from VIEs accounted for **92%**, **92%**, and **93%** of total revenues for fiscal years 2022, 2023, and 2024, respectively, underscoring the structure's critical importance[30](index=30&type=chunk) - The VIE structure is necessary due to PRC restrictions on foreign investment in key sectors like value-added telecommunication services and internet audio-video program services[30](index=30&type=chunk) - The enforceability of VIE contractual arrangements has not been tested in a PRC court and faces legal uncertainties, particularly under the PRC Foreign Investment Law, potentially impacting control[36](index=36&type=chunk)[40](index=40&type=chunk) [Cash Flows and Dividend Policy](index=14&type=section&id=Cash%20Flows%20through%20Our%20Organization) Dividend payments depend on PRC subsidiary distributions, subject to regulations and currency controls, with the company prioritizing earnings retention for business expansion - The ability to pay dividends to shareholders depends on payments from PRC subsidiaries, which are restricted by PRC regulations requiring statutory reserves of at least **10%** of after-tax profits until the reserve reaches **50%** of registered capital[44](index=44&type=chunk)[255](index=255&type=chunk) - Cash transfers from PRC entities are subject to government controls on currency conversion, potentially limiting funds available for operations or other uses outside of China[46](index=46&type=chunk)[48](index=48&type=chunk)[262](index=262&type=chunk) Cash Flow Summary (RMB millions) | Flow Direction | 2022 (RMB millions) | 2023 (RMB millions) | 2024 (RMB millions) | | :--- | :--- | :--- | :--- | | Capital Contributions to Subsidiaries | 2,314.5 | 235.0 | 0 | | Loans from Holding Co. to Subsidiaries | 3,577.6 | 4,955.8 | 17,406.6 | | Repayments from Subsidiaries to Holding Co. | 3,398.5 | 5,428.8 | 20,791.1 | | Dividends from Subsidiaries to Holding Co. | 0 | 0 | 186.2 | - The company intends to retain most, if not all, available funds and future earnings to operate and expand the business, with no current plans for paying cash dividends[45](index=45&type=chunk)[758](index=758&type=chunk) [PRC Regulatory Permissions](index=18&type=section&id=Permissions%20Required%20from%20the%20PRC%20Authorities%20for%20Our%20Operations) The company holds necessary PRC operating permissions, but future overseas offerings require CSRC filing, with potential uncertainties regarding CAC cybersecurity reviews - The company has obtained all requisite permissions for its current business operations in mainland China, such as the Value-added Telecommunications Business Operation License (VATS License) and the Permit for Internet Audio-video Program Service[49](index=49&type=chunk) - Future overseas securities offerings and listings will require filing with the China Securities Regulatory Commission (CSRC) under the Overseas Listing Measures, effective March 31, 2023[53](index=53&type=chunk) - The company is not currently required to obtain permission from the CSRC or undergo a cybersecurity review by the Cyberspace Administration of China (CAC) for its past securities issuances to foreign investors[54](index=54&type=chunk) [Selected Financial Data](index=20&type=section&id=Selected%20Consolidated%20Financial%20Data) Financial performance shifted to net income in 2023-2024, though 2024 saw decreased total revenues and operating income, with positive but reduced operating cash flow Consolidated Statements of Operations Data (RMB thousands) | Metric (RMB thousands) | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Total Revenues | 28,997,548 | 31,872,651 | 29,225,238 | | Operating Income | 1,312,421 | 2,989,479 | 1,811,203 | | Net (Loss)/Income | (117,776) | 1,952,554 | 790,589 | | Net Cash from Operating Activities | (70,569) | 3,351,600 | 2,110,057 | Consolidated Balance Sheet Data (RMB thousands) | Metric (RMB thousands) | 2023 | 2024 | | :--- | :--- | :--- | | Total Assets | 44,594,374 | 45,760,525 | | Total Liabilities | 32,409,459 | 32,386,761 | | Total Shareholders' Equity | 12,184,915 | 13,373,764 | - Revenues from VIEs and their subsidiaries accounted for **92.4%**, **92.3%**, and **93.1%** of total consolidated revenues in 2022, 2023, and 2024, respectively[610](index=610&type=chunk) [Risk Factors](index=27&type=section&id=D.%20RISK%20FACTORS) The company faces extensive risks, including business competition, VIE structure legal uncertainties, Baidu relationship conflicts, PRC regulatory challenges, and ADS price volatility [Risks Related to Business and Industry](index=30&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Key business risks include potential future losses, high content costs, intense competition, substantial debt, evolving cybersecurity laws, and volatile advertising revenue - The company incurred net losses from its inception until 2022 and may incur losses again due to high content costs and other factors, with cost of revenues at **RMB 22.0 billion** (US$3.0 billion) in 2024[83](index=83&type=chunk)[86](index=86&type=chunk) - The business is highly dependent on retaining and attracting members and advertising customers, with online advertising revenue decreasing by **8.2%** in 2024 after a **16.7%** increase in 2023[90](index=90&type=chunk)[92](index=92&type=chunk) - The company has substantial indebtedness, totaling **RMB 13.6 billion** (US$1.9 billion) as of December 31, 2024, including several series of convertible senior notes with various maturity and repurchase dates[108](index=108&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - The business is subject to complex and evolving PRC and international laws on cybersecurity and data protection, with non-compliance potentially resulting in significant penalties, including fines or operational suspension[95](index=95&type=chunk)[97](index=97&type=chunk)[99](index=99&type=chunk) [Risks Related to Corporate Structure (VIE)](index=77&type=section&id=Risks%20Related%20to%20Our%20Corporate%20Structure) The VIE structure carries risks of PRC non-compliance, leading to severe penalties, and may offer less effective operational control than direct ownership - The VIE structure is used to comply with PRC restrictions on foreign ownership in sectors like internet video services; if deemed non-compliant by the PRC government, it could lead to severe penalties, including forced relinquishment of interests[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) - Contractual arrangements may not be as effective as direct ownership for operational control, and their enforcement relies on the PRC legal system, which has significant uncertainties[229](index=229&type=chunk)[230](index=230&type=chunk) - Shareholders of the VIEs, some of whom are not company directors or executive officers, may have potential conflicts of interest that could adversely affect the business[233](index=233&type=chunk) [Risks Related to Relationship with Baidu](index=73&type=section&id=Risks%20Related%20to%20Our%20Relationship%20with%20Baidu) As a Baidu-controlled company, iQIYI faces potential conflicts of interest, with Baidu's majority voting power influencing strategic decisions and limiting iQIYI's competitive scope - Baidu is the controlling shareholder, holding approximately **45.2%** of ordinary shares and **89.2%** of total voting power as of February 28, 2025, giving it decisive influence over corporate matters[215](index=215&type=chunk) - Potential conflicts of interest exist, as Baidu's strategic decisions may not always align with the interests of iQIYI's other shareholders, and the master business cooperation agreement limits iQIYI from competing with Baidu's core businesses[211](index=211&type=chunk)[213](index=213&type=chunk) - iQIYI is a "controlled company" under Nasdaq rules, allowing it to rely on exemptions from certain corporate governance requirements, such as having a majority-independent board of directors[218](index=218&type=chunk) [Risks Related to Doing Business in China](index=84&type=section&id=Risks%20Related%20to%20Doing%20Business%20in%20Mainland%20China) Operating in China poses significant risks, including potential ADS delisting under HFCAA, PRC legal system uncertainties, and extensive government oversight on capital and operations - ADSs may be prohibited from trading in the U.S. under the HFCAA if the PCAOB is unable to inspect the company's auditor for two consecutive years; while the PCAOB vacated its previous negative determination in December 2022, future access is not guaranteed[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Future offshore listings and capital raising activities may require approval or filing with the CSRC and other PRC authorities, with non-compliance potentially resulting in sanctions, including fines and operational restrictions[244](index=244&type=chunk)[246](index=246&type=chunk) - The PRC government has significant oversight over the business, and changes in economic, political, or social conditions, as well as enhanced enforcement of anti-monopoly laws, could materially affect operations[249](index=249&type=chunk)[253](index=253&type=chunk)[283](index=283&type=chunk) - PRC regulations restrict the ability of mainland subsidiaries to transfer funds and pay dividends to the offshore holding company, and cash may not be freely available for use outside of China[255](index=255&type=chunk)[260](index=260&type=chunk)[262](index=262&type=chunk) [Risks Related to ADSs](index=103&type=section&id=Risks%20Related%20to%20Our%20ADSs) ADS holders face stock price volatility, no expected dividends, limited voting rights, and differing shareholder protections due to Cayman Islands incorporation and dual-class structure - The trading price of our ADSs has been and is likely to continue to be volatile[292](index=292&type=chunk) - The company does not expect to pay dividends in the foreseeable future, so returns for investors will likely depend entirely on any future price appreciation of the ADSs[301](index=301&type=chunk) - The dual-class voting structure (Class A: **1 vote**, Class B: **10 votes**) gives Baidu decisive control, limiting the ability of ADS holders to influence corporate matters[313](index=313&type=chunk)[314](index=314&type=chunk) - As a Cayman Islands company and a foreign private issuer, shareholder protections and disclosure requirements may be less stringent than for U.S. domestic companies[307](index=307&type=chunk)[316](index=316&type=chunk) [Company Information](index=115&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) [Business Overview](index=117&type=section&id=B.%20BUSINESS%20OVERVIEW) iQIYI is a leading Chinese online entertainment video service, offering extensive original and licensed content, diversified monetization, and expanding overseas with AI integration - The platform features a comprehensive content library with over **40,000** professionally produced long-form titles and approximately **10,000** mini-dramas as of December 31, 2024[333](index=333&type=chunk) - Original drama series are a key driver of premium content, accounting for **90%** of newly released dramas with an iQIYI popularity index score over **9,000** in 2024[333](index=333&type=chunk) - The company's diversified monetization model includes membership services, online advertising (both brand and performance-based), content distribution, online games, and IP licensing[334](index=334&type=chunk)[353](index=353&type=chunk)[356](index=356&type=chunk) - The company is expanding its overseas business through its multilingual iQIYI app, aiming to become a home for popular Asian content, and is enhancing its content offerings by strategically integrating mini and short dramas[350](index=350&type=chunk)[343](index=343&type=chunk) [Organizational Structure](index=166&type=section&id=C.%20ORGANIZATIONAL%20STRUCTURE) The corporate structure involves a Cayman holding company, PRC subsidiaries, and VIEs, controlled through contractual arrangements for financial consolidation and PRC compliance - The corporate structure consists of the Cayman holding company (iQIYI, Inc.), its wholly-owned PRC subsidiaries (WFOEs like Beijing QIYI Century), and the VIEs (like Beijing iQIYI and Shanghai Zhong Yuan)[499](index=499&type=chunk)[503](index=503&type=chunk) - A series of contractual arrangements, including loan agreements, share pledge agreements, exclusive purchase options, and voting rights trust agreements, are used to provide the company with effective control over the VIEs[503](index=503&type=chunk)[504](index=504&type=chunk) - In October 2024, a third-party invested in Beijing iQIYI for a **1%** stake; this third party is not part of the contractual arrangements, but the company believes it still maintains primary beneficiary status for accounting purposes[505](index=505&type=chunk) [Property, Plants and Equipment](index=173&type=section&id=D.%20PROPERTY%2C%20PLANTS%20AND%20EQUIPMENT) The company's physical assets include leased Beijing offices, owned Shanghai offices, land in Zhejiang, and reliance on leased IDCs and mixed CDNs for IT infrastructure - The company leases its principal executive offices in Beijing (**29,803** square meters) and owns office space in Shanghai (**19,458** square meters)[526](index=526&type=chunk) - IT infrastructure relies on leased Internet Data Centers (IDCs) from major providers like China Telecom, China Unicom, and China Mobile, and a mix of self-built and commercial Content Delivery Networks (CDNs)[528](index=528&type=chunk) [Operating and Financial Review and Prospects](index=175&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) [Operating Results](index=175&type=section&id=A.%20OPERATING%20RESULTS) In 2024, total revenues decreased by 8.3% to RMB 29.2 billion, driven by declines in membership and brand advertising, resulting in lower but still positive net income Revenue Stream (RMB thousands) | Revenue Stream (RMB thousands) | 2023 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Membership services | 20,314,216 | 17,762,814 | -12.6% | | Online advertising services | 6,223,903 | 5,714,243 | -8.2% | | Content distribution | 2,458,610 | 2,846,854 | +15.8% | | Others | 2,875,922 | 2,901,327 | +0.9% | | **Total revenues** | **31,872,651** | **29,225,238** | **-8.3%** | - The decrease in membership revenue in 2024 was primarily due to a lighter content slate[555](index=555&type=chunk) - The decrease in online advertising revenue in 2024 was due to a decline in the brand advertising business, partially offset by growth in performance-based advertising[556](index=556&type=chunk) - Cost of revenues decreased by **5.0%** in 2024 to **RMB 22.0 billion**, mainly due to a **4.8%** decrease in content cost, also attributed to a lighter content slate[558](index=558&type=chunk) - Net income for 2024 was **RMB 790.6 million**, a decrease from the **RMB 1,952.6 million** net income recorded in 2023[565](index=565&type=chunk) [Liquidity and Capital Resources](index=181&type=section&id=B.%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of Dec 31, 2024, the company had RMB 3.5 billion in cash and a RMB 12.0 billion working capital deficit, relying on financing activities despite positive operating cash flow - As of December 31, 2024, the company had **RMB 3.53 billion** in cash and cash equivalents, **RMB 0.94 billion** in short-term investments, and a working capital deficit of **RMB 12.0 billion**[568](index=568&type=chunk) - The company generated net cash from operating activities of **RMB 2.11 billion** in 2024, compared to **RMB 3.35 billion** in 2023 and a net cash usage of **RMB 70.6 million** in 2022[586](index=586&type=chunk)[587](index=587&type=chunk)[588](index=588&type=chunk) - The company has conducted significant financing activities, including issuing US$550 million in PAG Notes (2022-23), a US$500 million follow-on offering (2023), US$600 million in 2028 Notes (2023), and US$350 million in 2030 Notes (2025)[575](index=575&type=chunk)[573](index=573&type=chunk) - **69.4%** of cash, cash equivalents, and short-term investments were held in mainland China as of December 31, 2024, with transfers subject to PRC regulations[577](index=577&type=chunk) [Critical Accounting Policies and Estimates](index=195&type=section&id=E.%20CRITICAL%20ACCOUNTING%20ESTIMATES) Financial statements rely on critical estimates for content asset amortization and impairment, VIE consolidation, and revenue recognition, involving subjective judgments - Amortization of content assets is a critical estimate, using an accelerated method based on historical and estimated future viewership patterns over the shorter of the contractual period or useful life (up to **10 years**)[622](index=622&type=chunk)[643](index=643&type=chunk) - Impairment of content assets is assessed when events indicate that the fair value may be less than the unamortized cost, with fair value determined using a discounted cash flow approach involving significant unobservable inputs (Level 3)[644](index=644&type=chunk)[646](index=646&type=chunk) - The consolidation of VIEs is a critical judgment based on contractual arrangements that give the company effective control and economic benefits, despite lacking equity ownership[624](index=624&type=chunk)[625](index=625&type=chunk) - Revenue recognition requires judgment, particularly in allocating transaction prices to multiple performance obligations in bundled advertising or membership contracts and determining the fair value of non-monetary content exchanges[629](index=629&type=chunk)[633](index=633&type=chunk) [Directors, Senior Management and Employees](index=203&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) [Directors and Senior Management](index=203&type=section&id=A.%20DIRECTORS%20AND%20SENIOR%20MANAGEMENT) The section lists key directors and senior management, including Chairman Junjie He and CEO Dr. Yu Gong, noting several directors' affiliations with controlling shareholder Baidu - The board is led by Chairman Junjie He, who is also the Interim CFO of Baidu[648](index=648&type=chunk) - Dr. Yu Gong is the founder, CEO, and a director of the company, overseeing overall strategy and operations[649](index=649&type=chunk) - Several directors, including Junjie He, Dr. Dou Shen, Fei Qi, and Shanshan Cui, are also employees or executives of the controlling shareholder, Baidu[648](index=648&type=chunk)[650](index=650&type=chunk)[651](index=651&type=chunk)[652](index=652&type=chunk) [Compensation](index=207&type=section&id=B.%20COMPENSATION) In FY2024, aggregate cash compensation for executives and directors was RMB 28.4 million, supplemented by multiple share incentive plans to align interests with shareholders - Aggregate cash compensation for directors and executive officers was **RMB 28.4 million** (US$3.9 million) for FY2024[660](index=660&type=chunk) - The company has multiple share incentive plans; as of February 28, 2025, **326.6 million** options were outstanding under the 2010 Plan and **248.2 million** options were outstanding under the 2021 Plan, with a new 2024 Plan adopted with a pool of **350 million** shares[666](index=666&type=chunk)[677](index=677&type=chunk)[684](index=684&type=chunk) [Board Practices](index=213&type=section&id=C.%20BOARD%20PRACTICES) The eight-director board, as a Baidu-controlled foreign private issuer, utilizes Nasdaq exemptions, operating with an audit and compensation committee that may not be fully independent - The board has **eight** directors; Baidu has the right to appoint a majority of directors as long as it holds over **50%** of the voting power[693](index=693&type=chunk) - The company has an audit committee and a compensation committee, relying on foreign private issuer and controlled company exemptions, so not all committee members are independent[694](index=694&type=chunk)[695](index=695&type=chunk)[696](index=696&type=chunk) - Directors are not subject to a term of office and hold their positions until removed by shareholders or the board[699](index=699&type=chunk) [Employees](index=215&type=section&id=D.%20EMPLOYEES) As of December 31, 2024, iQIYI had 4,673 employees, a slight decrease from 2023, with the largest segments in R&D and content production, and participates in required social benefit plans Number of Employees by Function (as of Dec 31, 2024) | Function | Number of Employees (as of Dec 31, 2024) | | :--- | :--- | | Research and development | 1,836 | | Content production and operation | 1,747 | | Sales and marketing | 705 | | General and administrative | 385 | | **Total** | **4,673** | - Total employee count decreased from **4,788** at the end of 2023 to **4,673** at the end of 2024[701](index=701&type=chunk) [Major Shareholders and Related Party Transactions](index=220&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) [Major Shareholders](index=215&type=section&id=A.%20MAJOR%20SHAREHOLDERS) As of February 28, 2025, Baidu held 89.2% of total voting power through Class B shares, with PAG as another major Class A shareholder, concentrating control with Baidu Shareholder Ownership (as of Feb 28, 2025) | Shareholder | Class A Shares (%) | Class B Shares (%) | Total Voting Power (%) | | :--- | :--- | :--- | :--- | | Baidu | * | 100.0 | 89.2 | | PAG | 18.1 | — | 2.3 | | Dr. Yu Gong (CEO) | 3.9 | — | * | *Less than 1% - The calculations are based on **6,740,711,936** ordinary shares outstanding as of February 28, 2025[705](index=705&type=chunk) [Related Party Transactions](index=220&type=section&id=B.%20RELATED%20PARTY%20TRANSACTIONS) The company conducts significant transactions with Baidu under a master cooperation agreement, including technology and cloud services, and has complex financing with PAG - A master business cooperation agreement with Baidu, effective until January 2026, covers AI technology, cloud services, advertising, and traffic[724](index=724&type=chunk)[726](index=726&type=chunk)[729](index=729&type=chunk) Transactions with Baidu (RMB millions) | Transaction with Baidu (RMB millions) | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Bandwidth and cloud services cost | 653.0 | 550.7 | 575.3 | | Advertising services cost | 47.6 | 116.1 | 112.7 | - The company has complex financing arrangements with PAG, including convertible notes and loan facilities; as of December 31, 2024, the amount due from PAG was **RMB 3.85 billion**[737](index=737&type=chunk)[738](index=738&type=chunk)[739](index=739&type=chunk)[740](index=740&type=chunk) - In 2024, the company purchased content from its equity investees for **RMB 1.75 billion** and generated content distribution revenue of **RMB 231.8 million** from them[741](index=741&type=chunk) [Financial Information](index=226&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) [Legal Proceedings](index=226&type=section&id=Legal%20Proceedings) A significant securities class action lawsuit filed against the company in 2020 was dismissed with prejudice in September 2024; as of December 31, 2024, the company was involved in 103 pending lawsuits in China, primarily for alleged copyright infringement, with aggregate damages sought of RMB 223.9 million - A securities class action lawsuit initiated in 2020 was dismissed with prejudice on September 30, 2024[753](index=753&type=chunk) - As of December 31, 2024, **103** cases were pending against the company in China, with damages sought totaling **RMB 223.9 million** (US$30.7 million), mostly related to copyright infringement[755](index=755&type=chunk) - The company has also brought **615** cases against others for copyright infringement and other disputes, seeking damages of approximately **RMB 688.3 million** (US$94.3 million)[756](index=756&type=chunk) [Dividend Policy](index=228&type=section&id=Dividend%20Policy) The company has no current plans to pay cash dividends, intending to retain all future earnings for business growth, with any future payments at the board's discretion and subject to PRC regulations - The company does not have any present plan to pay cash dividends and intends to retain earnings for business growth[758](index=758&type=chunk) - The ability to pay dividends is also restricted by PRC regulations on the company's mainland China subsidiaries[759](index=759&type=chunk) [Additional Information](index=229&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) [Memorandum and Articles of Association](index=229&type=section&id=B.%20MEMORANDUM%20AND%20ARTICLES%20OF%20ASSOCIATION) This section outlines the company's Cayman Islands governance, including its dual-class share structure, dividend rights, and differences in shareholder protections compared to U.S. law - The company has a dual-class share structure: Class A shares have **one vote** per share, while Class B shares have **ten votes** per share and are convertible into Class A shares[775](index=775&type=chunk)[777](index=777&type=chunk) - As a Cayman Islands exempted company, it is not obligated by law to hold annual general meetings, and shareholder rights to inspect records or requisition meetings are more limited than under U.S. standards[786](index=786&type=chunk)[790](index=790&type=chunk)[791](index=791&type=chunk) - The board of directors has the power to issue preferred shares without shareholder approval, which could be used as an anti-takeover measure[315](index=315&type=chunk)[807](index=807&type=chunk) [Taxation](index=245&type=section&id=E.%20TAXATION) Tax considerations include no corporate tax in the Cayman Islands, a 25% PRC EIT (with some 15% preferential rates), and the potential for adverse U.S. PFIC tax consequences for U.S. holders - The company is not subject to profit tax in its jurisdiction of incorporation, the Cayman Islands[832](index=832&type=chunk) - In China, the standard EIT rate is **25%**, but certain entities qualify for a preferential **15%** rate for being a High and New Technology Enterprise (HNTE)[1197](index=1197&type=chunk)[1198](index=1198&type=chunk) - The company believes it was not a Passive Foreign Investment Company (PFIC) for the 2024 taxable year, but its status is a factual determination made annually and is subject to change based on income, assets, and market price[320](index=320&type=chunk)[851](index=851&type=chunk) - If the company were treated as a PFIC, U.S. holders would face adverse tax consequences on "excess distributions" and gains from share sales, which would be taxed at higher ordinary income rates plus an interest charge[853](index=853&type=chunk) [Market Risk Disclosures](index=254&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces significant foreign exchange risk from US dollar-denominated debt against RMB revenues, with a 10% USD/RMB increase impacting debt by RMB 859.3 million, and no material hedging - The company faces significant foreign exchange risk due to its substantial U.S. dollar-denominated convertible senior notes versus its primarily Renminbi-denominated revenues[868](index=868&type=chunk) - As of December 31, 2024, a hypothetical **10%** increase in the USD/RMB exchange rate would have resulted in an increase of **RMB 859.3 million** in the value of its U.S. dollar-denominated convertible senior notes[868](index=868&type=chunk) - The company has not entered into any material hedging transactions to mitigate foreign currency exchange risk[871](index=871&type=chunk) [Controls and Procedures](index=258&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) [Internal Control over Financial Reporting](index=258&type=section&id=Management%27s%20Annual%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management and the independent auditor concluded that the company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective[887](index=887&type=chunk) - Based on the criteria in the "Internal Control-Integrated Framework (2013)" by COSO, management concluded that the company's internal control over financial reporting was effective as of December 31, 2024[891](index=891&type=chunk) - The independent registered public accounting firm, Ernst & Young Hua Ming LLP, provided an unqualified attestation report on the effectiveness of the company's internal control over financial reporting[892](index=892&type=chunk) [Cybersecurity](index=262&type=section&id=ITEM%2016K.%20CYBERSECURITY) iQIYI employs a multi-layered cybersecurity defense, integrating it into enterprise risk management with board oversight and a dedicated committee, reporting no material incidents to date - The company has implemented a multi-layered cybersecurity defense system and integrated cybersecurity risk management into its overall enterprise risk management system[910](index=910&type=chunk)[911](index=911&type=chunk) - Governance includes board-level oversight and a management-level cybersecurity committee responsible for risk assessment and incident response[914](index=914&type=chunk)[915](index=915&type=chunk) - As of the report date, no material cybersecurity incidents have been identified that have affected or are reasonably likely to materially affect the company[913](index=913&type=chunk) [Financial Statements and Notes](index=276&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) [Report of Independent Registered Public Accounting Firm](index=277&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young Hua Ming LLP issued an unqualified opinion on the financial statements and internal controls, identifying content asset amortization as a critical audit matter - The auditor, Ernst & Young Hua Ming LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2024[937](index=937&type=chunk)[938](index=938&type=chunk)[947](index=947&type=chunk) - The amortization of content assets was identified as a Critical Audit Matter due to the complex and subjective management judgment required to estimate future viewership consumption patterns for different content categories[941](index=941&type=chunk)[943](index=943&type=chunk)[944](index=944&type=chunk) [Consolidated Financial Statements](index=281&type=section&id=Consolidated%20Financial%20Statements) The statements present the company's financial position and results for the three years ended December 31, 2024, showing total assets of RMB 45.8 billion and net income of RMB 790.6 million in 2024 Consolidated Balance Sheet (RMB thousands) | Item (RMB thousands) | As of Dec 31, 2023 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | 12,635,229 | 9,527,236 | | Total Assets | 44,594,374 | 45,760,525 | | Total Current Liabilities | 22,341,534 | 21,477,333 | | Total Liabilities | 32,409,459 | 32,386,761 | | Total Shareholders' Equity | 12,184,915 | 13,373,764 | Consolidated Statements of Operations (RMB thousands) | Item (RMB thousands) | FY 2022 | FY 2023 | FY 2024 | | :--- | :--- | :--- | :--- | | Total Revenues | 28,997,548 | 31,872,651 | 29,225,238 | | Operating Income | 1,312,421 | 2,989,479 | 1,811,203 | | Net (Loss)/Income | (117,776) | 1,952,554 | 790,589 | [Notes to Consolidated Financial Statements](index=288&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes provide detailed disclosures on the VIE structure, accounting policies, content assets, various convertible notes, and related party transactions with Baidu and PAG - Note 1 details the VIE structure and the contractual arrangements that allow iQIYI to consolidate the VIEs, which are crucial for its PRC operations due to foreign ownership restrictions[978](index=978&type=chunk)[982](index=982&type=chunk) - Note 2 outlines significant accounting policies, including revenue recognition methods for membership, advertising, and content distribution, as well as policies for content asset amortization and impairment testing, which involve significant management estimates[1021](index=1021&type=chunk)[1024](index=1024&type=chunk) - Note 14 provides extensive details on the various series of convertible senior notes (2025, 2026, PAG, 2028), including their terms, conversion features, and repurchase obligations[1168](index=1168&type=chunk)[1172](index=1172&type=chunk)[1177](index=1177&type=chunk)[1180](index=1180&type=chunk) - Note 22 details transactions with related parties, primarily controlling shareholder Baidu and significant investor PAG, highlighting significant costs for services from Baidu and complex financing arrangements with PAG[1244](index=1244&type=chunk)[1245](index=1245&type=chunk)

Core Insights - iQIYI is transitioning the mini and short drama industry from quantity-driven output to premium content creation, as endorsed by industry leaders at the Glittering Night ceremony [1][2][5] Company Strategy - iQIYI's strategy includes enhancing the aesthetics and value of mini and short drama content by utilizing artificial intelligence and virtual production technology [3] - The company has structured its mini/short drama ecosystem into two standardized formats: the vertical-screen "Mini-Drama Theater" (1-5 minutes/episode) and the horizontal "Short-Drama Theater" (5-20 minutes/episode) [4] - iQIYI aims to establish an open content ecosystem to encourage collaboration among creators, refining user segmentation through its main app and iQIYI Lite app [6] Production Pipeline - The forum launched 47 new titles across various genres, including fantasy, costume, and comedy, with a focus on youthful, internet culture-infused content [7] - iQIYI introduced the "Hundred Hong Kong Mini-Dramas Initiative" to solicit IP adaptations and productions from upstream partners, aiming to recreate the popularity of classic Hong Kong films [8] Marketing and Commercialization - The rollout of high-quality content is expected to boost traffic for premium mini and short dramas, enhancing commercialization opportunities and improving advertising monetization [9] Awards and Recognition - At the Glittering Night 2025 ceremony, 30 short dramas and 42 actors received 16 honors, with notable awards going to "First Marriage," "Blind Woman," and "The Great Nobody" [10] - In the mini drama category, 12 dramas and 47 actors received 18 honors, with "Deng Feng Tai" and "Palace of Schemes" recognized as outstanding mini dramas [11]