Core Viewpoint - iQIYI, Inc. shares are rated as a Hold, with Q2 2024 results aligning with market expectations, and no significant surprises anticipated for Q3 2024 [2][5][6] Q2 Performance Summary - iQIYI's Q2 2024 revenue was RMB 7,438.8 million, slightly above the consensus estimate of RMB 7,415.9 million, reflecting a YoY decline of -4.7% [4] - Non-GAAP adjusted EPS for Q2 2024 was RMB 0.25, consistent with prior predictions [4] - Operating margin for Q2 2024 was 4.6%, down from 11.9% in Q1 2024 and 7.8% in Q2 2023 [4] - Operating expenses decreased by -1.3% YoY to RMB 7,096.7 million, helping to mitigate the decline in operating profit [4] Competitive Landscape - iQIYI faces ongoing competitive pressures from both short-form video platforms and within the long-form video sector, impacting revenue performance [4][6] - The company acknowledged fluctuations in drama market share and membership numbers, which are influenced by new content [6] Q3 Outlook - Q3 2024 results are expected to show a more severe top-line contraction of -9.0% YoY, with no positive surprises anticipated [6] - The company plans to focus on expanding membership rather than immediate profitability, which may involve discounting subscription prices [6] Valuation and Future Prospects - iQIYI shares are considered reasonably valued, with a forward P/E of 9.6 times and a projected normalized EPS CAGR of +7.4% from FY 2023-2026 [7] - The outlook for Q3 2024 indicates a lack of meaningful turnaround in financial performance [7]

Investment Rating - The investment rating for the company is "Buy" with a target price of $3.80, indicating a potential upside of 46.2% from the current price of $2.60 [1][17]. Core Insights - The company's membership revenue is under short-term pressure, leading to a downward adjustment of the full-year revenue and profit expectations [1]. - The second quarter performance met expectations, with total revenue of 7.4 billion RMB, a decrease of 5% year-on-year and 6% quarter-on-quarter, primarily due to a high base from the previous year and weaker performance in key content [2][3]. - Adjusted net profit for the second quarter was 250 million RMB, consistent with expectations, resulting in an adjusted net profit margin of 3% [1][2]. Financial Overview - Total revenue for 2022 was 28,998 million RMB, increasing to 31,873 million RMB in 2023, with a projected revenue of 30,319 million RMB for 2024, reflecting a year-on-year decline of 4.9% [3]. - The adjusted net profit for 2024 is expected to be 1,617 million RMB, with a significant decrease from the previous year [3]. - The company’s earnings per share (EPS) for 2024 is projected at 1.65 RMB, down from 2.91 RMB in 2023 [3]. Membership and Advertising Revenue - Membership revenue in the second quarter decreased by 9% year-on-year to 4.5 billion RMB, while the average revenue per member (ARM) continued to show a growth trend [2][3]. - Advertising revenue for the second quarter was 1.5 billion RMB, a slight decline of 2% year-on-year, but performance in effect advertising remained positive [2][3]. Future Outlook - For the third quarter, despite improvements in key drama viewership data, membership revenue is expected to decline by 13% year-on-year, with a potential recovery in the fourth quarter as new content is released [2][3]. - The company has adjusted its revenue expectations for 2024 and 2025, reflecting ongoing uncertainties in content strategy execution and short-term performance adjustments [2][3].

Investment Rating - The report maintains a BUY rating for iQIYI, with a target price of US$5.00, reflecting a potential upside of 92.3% from the current price of US$2.60 [4][9]. Core Insights - iQIYI's total revenue for 2Q24 decreased by 5% YoY to RMB7.4 billion, with non-GAAP operating income down by 36% YoY to RMB501 million, attributed to intense competition in the long-form video sector [2][12]. - For 3Q24E, total revenue is expected to decline by 9% YoY to RMB7.3 billion, with non-GAAP operating profit forecasted to drop by 63% YoY to RMB335 million [2][8]. - The forecast for FY24-26E non-GAAP net income has been lowered to RMB1.7 billion, RMB2.5 billion, and RMB2.9 billion respectively, down from previous estimates of RMB2.8 billion, RMB3.3 billion, and RMB4.0 billion [2][8]. Revenue and Profitability - Membership services revenue fell by 9% YoY to RMB4.5 billion in 2Q24, primarily due to underperformance of certain drama series and competition [2][12]. - Online advertising revenue decreased by 2% YoY in 2Q24, with fewer variety shows impacting brand ad revenue, although performance-based ad revenue showed YoY growth [2][12]. - Gross margin dropped by 2.3 percentage points YoY to 23.7% in 2Q24, while non-GAAP operating margin declined by 3.4 percentage points YoY to 6.7% [2][12]. Future Outlook - iQIYI anticipates continued short-term headwinds in 3Q24E, with membership services and online ad service revenue expected to decline by 13% and 17% YoY respectively [2][8]. - The company plans to enhance content targeting the female audience, with upcoming titles expected to improve market share and revenue in the long term [2][8]. - The gross profit margin and non-GAAP operating margin are projected to decline further in 3Q24E to 21.7% and 4.6% respectively [2][8].

Expanding Successful VR Adaptations of iQIYI's Popular IP from 'Love Between Fairy and Devil'BEIJING, Aug. 26, 2024 /PRNewswire/ -- On August 23, iQIYI, China's leading online entertainment service, announced that its latest VR immersive theater at Galaxy Macau received positive customer feedback following its debut earlier this month, further enriching its portfolio of location-based entertainment experiences. Adapted from the popular fantasy series Love Between Fairy and Devil, this project showcases the ...

Investment Rating - The report assigns a cautious recommendation rating for the company, indicating a potential upside of 5% to 15% relative to the benchmark index over the next 12 months [4]. Core Insights - The company reported a year-over-year revenue growth of 4.6% in Q2 2024, with total revenue reaching 7.439 billion yuan. The net profit attributable to shareholders was 0.69 billion yuan, reflecting a non-GAAP net profit margin of 3.3% [2][3]. - Membership growth is highlighted as a key focus area, with expectations that Q3 may represent a temporary low point for profitability. The company aims to maximize membership revenue through enhanced content offerings [2][3]. - The report notes that advertising revenue has declined, primarily due to a decrease in brand advertising performance, although this was partially offset by an increase in performance-based advertising revenue [2]. Summary by Sections Financial Performance - In Q2 2024, the company achieved a total revenue of 7.439 billion yuan, with a year-over-year growth of 4.6%. The operating profit was 0.9 billion yuan, resulting in an operating profit margin of 6.7% [2]. - Membership revenue grew by 2% year-over-year, while advertising revenue saw a decline of 2.3% year-over-year and 1.4% quarter-over-quarter [2]. Content Strategy - The company plans to enhance its content strategy by focusing on female-friendly genres, with several new series in the pipeline, including "Four Corners" and "Dream of the Great Return" [2]. - The report emphasizes the importance of content quality and its impact on membership growth, suggesting that improved content offerings could lead to better financial performance in the future [2]. Market Outlook - The company is expected to face short-term challenges in its membership business, particularly in Q3, but there is optimism regarding the recovery of operational metrics as new content is released [2][3]. - Analysts suggest that the company should be closely monitored for the performance of upcoming content releases, which could significantly influence future revenue and profitability [2].

iQIYI Announces First Quarter 2024 Financial Results BEIJING, CHINA, May 16, 2024 – iQIYI, Inc. (Nasdaq: IQ) ("iQIYI" or the "Company"), a leading provider of online entertainment video services in China, today announced its unaudited financial results for the first quarter ended March 31, 2024. First Quarter 2024 Highlights • Total revenues were RMB7.9 billion (US$1.1 billion1), decreasing 5% year over year. • Operating income was RMB944.8 million (US$130.8 million) and operating income margin was 12%, com ...

Financial Data and Key Metrics Changes - Total revenues for Q2 2024 were RMB7.4 billion, down 5% year-over-year [32] - Membership services revenue reached RMB4.5 billion, down 9% annually, primarily due to fluctuations in content performance [32][33] - Online advertising revenues decreased by 2% year-over-year to RMB1.5 billion, mainly due to a decrease in brand ad businesses [33] - Content distribution revenue grew 2% annually to RMB698 million [33] - Non-GAAP operating income was RMB501 million, with a corresponding margin of 7% [34] Business Line Data and Key Metrics Changes - Membership services faced a decline in revenue due to content performance fluctuations, but the attrition was partially offset by a steady growth in the high-tier membership segment [8][9] - The advertising business saw a healthy growth in performance apps, with e-commerce revenue from the June 18 shopping festival growing 80% annually [24][25] - Content costs were RMB4.1 billion, down 2% annually, while total operating expenses remained flat at RMB1.4 billion [33] Market Data and Key Metrics Changes - The company regained market leadership in the drama category in July, with notable titles achieving high popularity index scores [6][18] - Membership revenue from overseas markets continued to grow, with a 30% annual increase attributed to top C-dramas [29] - The influence of Chinese dramas on overseas platforms has strengthened, with over half of the 20 most popular shows being Chinese dramas [49] Company Strategy and Development Direction - The company aims to enhance content quality and diversify its offerings, particularly targeting female audiences and mainstream preferences [5][12] - Investment in AI technology is prioritized to improve content creation and operational efficiency [7][26] - The company plans to explore revenue opportunities beyond membership and advertising, including IP divestment and offline experiences [7][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledged intense competition in the long-form video sector but emphasized the importance of high-quality content supply [4][36] - The company is optimistic about the long-term outlook for its membership business, supported by a solid foundation of loyal members [9][42] - Future strategies include optimizing content scheduling and enhancing IP serialization development [41][50] Other Important Information - The company organized 17 offline events in Q2, receiving positive feedback from members [11] - The annual iQIYI Member Festival generated significant engagement, with over 30 million views during the live streaming event [11] - The company has successfully launched various innovative content formats, including VR experiences and theme parks [56][59] Q&A Session Summary Question: Competition landscape and market share fluctuations - Management acknowledged the intense competition and emphasized the need for high-quality content to maintain market leadership [35][36] Question: Membership growth prospects and ARPU - Management indicated that the average revenue per member (ARPU) has shown solid year-over-year growth, with plans to expand membership while maximizing revenue [42][43] Question: Strategy for overseas business - Management highlighted the success of overseas operations reaching breakeven and plans to increase revenue growth while enhancing content offerings [44][49] Question: Unlocking IP potential beyond membership and advertising - Management discussed the importance of monetizing content IP through various channels, including offline experiences and derivative products [53][54]

iQIYI Announces Second Quarter 2024 Financial Results BEIJING, CHINA, August 22, 2024 – 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 second quarter ended June 30, 2024. Second Quarter 2024 Highlights ● Total revenues were RMB7.4 billion (US$1.0 billion1), decreasing 5% year over year. ● Operating income was RMB342.1 million (US$47.1 million) and operating income margin was 5%, ...

Core Viewpoint - iQIYI, Inc. reported a decline in total revenues and net income for the second quarter of 2024, highlighting challenges in the competitive online entertainment market in China while emphasizing a commitment to delivering premium content and managing financial resources effectively [2][3][5]. Financial Performance - Total revenues for Q2 2024 were RMB 7.4 billion (US$1.0 billion), a decrease of 5% year over year [2][5]. - Operating income was RMB 342.1 million (US$47.1 million), with an operating income margin of 5%, down from 8% in Q2 2023 [2][7]. - Non-GAAP operating income was RMB 501.4 million (US$69.0 million), representing a 36% decrease year over year, with a non-GAAP operating income margin of 7% [2][7]. - Net income attributable to iQIYI was RMB 68.7 million (US$9.5 million), a significant decline of 81% compared to RMB 365.2 million in Q2 2023 [2][8]. - Non-GAAP net income attributable to iQIYI was RMB 246.9 million (US$34.0 million), down 58% year over year [2][8]. Revenue Breakdown - Membership services revenue was RMB 4.5 billion (US$618.6 million), decreasing by 9% year over year [6]. - Online advertising services revenue was RMB 1.5 billion (US$201.1 million), a decrease of 2% year over year [6]. - Content distribution revenue increased by 2% year over year to RMB 698.2 million (US$96.1 million) [6]. - Other revenues grew by 16% year over year to RMB 783.9 million (US$107.9 million), driven by talent agency services and third-party cooperation [6]. Cost Management - Cost of revenues was RMB 5.7 billion (US$781.4 million), a decrease of 2% year over year [6]. - Selling, general and administrative expenses were RMB 969.7 million (US$133.4 million), down 1% year over year [7]. - Research and development expenses increased by 2% year over year to RMB 448.7 million (US$61.7 million) [7]. Cash Flow and Financial Position - Operating cash flow for Q2 2024 was RMB 410.8 million (US$56.5 million), down from RMB 885.6 million in Q2 2023 [9]. - Free cash flow was RMB 382.5 million (US$52.6 million), compared to RMB 872.3 million in the same period last year [9]. - As of June 30, 2024, the company had cash, cash equivalents, and short-term investments totaling RMB 8.6 billion (US$1.2 billion) [9]. Strategic Initiatives - The company completed the repurchase of US$395.5 million of its 4% convertible senior notes due 2026, reducing outstanding notes to less than US$0.2 million [10]. - iQIYI entered into facility agreements with PAG, providing loan facilities totaling up to US$522.5 million, aimed at optimizing financial leverage [11][12].

Core Insights - iQIYI premiered its latest drama series, "For The Young Ones," which explores societal issues related to minors and features juvenile prosecutors as main characters [1][2] - The series aims to highlight the role of juvenile prosecutors in shaping youth lives and raising awareness among adults regarding incidents involving minors [2] - This drama continues iQIYI's commitment to impactful content that addresses social issues, following the success of the film "Trending Topic" which focused on cyberbullying [3] Group 1 - The series "For The Young Ones" premiered globally on August 14, 2024, and is the first Chinese drama to feature juvenile prosecutors prominently [1] - The narrative follows a team of juvenile prosecutors tackling complex cases while addressing broader societal issues such as school bullying and parental neglect [1] - The show aims to provide a holistic view of legal responsibilities, emphasizing collaboration with families, schools, and communities to support minors [1] Group 2 - The anticipation for the series was heightened by its cast, including Yi ZHANG and Lan QIN, who are known for their compelling performances [2] - Zhiqi JIA, head of iQIYI Qixi Studio, expressed the intention to raise awareness about the responsibilities of juvenile prosecutors and the importance of adult involvement in youth welfare [2] - iQIYI's strategy includes creating content that sparks conversations about social issues, reinforcing its role in promoting positive social change [3]