iQIYI(IQ) - 2024 Q1 - Quarterly Report

Management Commentary Management highlighted 2023 as the best-performing year with record revenues, operating income, net income, and cash flows, emphasizing business resilience and strengthened financial health - CEO Yu Gong stated that 2023 was the company's best-performing year, with record highs in total revenues, operating and net income, and cash flows[5] - Average Revenue per Membership (ARM) grew for five consecutive quarters, reflecting the high attractiveness of content and the growing value of membership services[5] - CFO Jun Wang highlighted that both operating and free cash flows surpassed RMB 3.3 billion in 2023, significantly strengthening the company's financial health[7] Financial & Operational Highlights This section provides a high-level overview of iQIYI's financial and operational performance for Q4 and FY2023, presenting key metrics and year-over-year comparisons Fourth Quarter 2023 Highlights In Q4 2023, total revenues grew 1% to RMB 7.7 billion, with net income attributable to iQIYI significantly increasing to RMB 466.2 million Q4 2023 Key Financial Metrics (vs. Q4 2022) | Metric | Q4 2023 (RMB) | Q4 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | 7.7 billion | 7.6 billion | +1% YoY | | Operating Income | 773.7 million | 783.6 million | -1% YoY | | Non-GAAP Operating Income | 927.8 million | 978.7 million | -5% YoY | | Net Income (attributable) | 466.2 million | 304.3 million | +53% YoY | | Non-GAAP Net Income (attributable) | 682.0 million | 856.4 million | -20% YoY | Fiscal Year 2023 Highlights For FY2023, total revenues increased 10% to RMB 31.9 billion, with operating income more than doubling to RMB 3.0 billion and net income reaching RMB 1.9 billion Fiscal Year 2023 Key Financial Metrics (vs. 2022) | Metric | FY 2023 (RMB) | FY 2022 (RMB) | Change | | :--- | :--- | :--- | :--- | | Total Revenues | 31.9 billion | 29.0 billion | +10% YoY | | Operating Income | 3.0 billion | 1.3 billion | +128% YoY | | Non-GAAP Operating Income | 3.6 billion | 2.2 billion | +68% YoY | | Net Income (attributable) | 1.9 billion | (136.2 million) | Turnaround to Profit | | Non-GAAP Net Income (attributable) | 2.8 billion | 1.3 billion | +116% YoY | Fourth Quarter 2023 Operating Highlights In Q4 2023, average daily subscribing members decreased to 100.3 million, offset by a 13% year-over-year increase in monthly ARM to RMB 15.98 - The average daily number of total subscribing members for Q4 was 100.3 million, compared to 111.6 million in Q4 2022 and 107.5 million in Q3 2023[11] - Monthly Average Revenue per Membership (ARM) for Q4 increased 13% year-over-year to RMB 15.98, up from RMB 14.17 in Q4 2022[11] Detailed Financial Results This section provides a detailed breakdown of iQIYI's Q4 and FY2023 financial performance, covering revenue streams, costs, expenses, and profitability metrics Fourth Quarter 2023 Financial Results In Q4 2023, total revenues rose 1% to RMB 7.7 billion, driven by online advertising growth, while content costs decreased, leading to a 53% increase in net income attributable to iQIYI Q4 2023 Revenue Breakdown (YoY) | Revenue Stream | Q4 2023 (RMB) | YoY Change | | :--- | :--- | :--- | | Membership Services | 4.8 billion | +1% | | Online Advertising | 1.7 billion | +6% | | Content Distribution | 506.1 million | -21% | | Other Revenues | 741.2 million | +13% | | Total Revenues | 7.7 billion | +1% | - Content costs decreased by 5% year-over-year to RMB 3.7 billion due to improved content strategy and operational efficiency[15] - Net income attributable to iQIYI increased by 53% year-over-year to RMB 466.2 million, with diluted net income per ADS at RMB 0.48[21] Fiscal Year 2023 Financial Results For FY2023, total revenues grew 10% to RMB 31.9 billion, driven by membership and advertising, with operating income surging 128% to RMB 3.0 billion and net income reaching RMB 1.9 billion Fiscal Year 2023 Revenue Breakdown (YoY) | Revenue Stream | FY 2023 (RMB) | YoY Change | | :--- | :--- | :--- | | Membership Services | 20.3 billion | +15% | | Online Advertising | 6.2 billion | +17% | | Content Distribution | 2.5 billion | -4% | | Other Revenues | 2.9 billion | -15% | | Total Revenues | 31.9 billion | +10% | - Operating income for FY2023 increased 128% year-over-year to RMB 3.0 billion, with the operating margin expanding from 5% in 2022 to 9% in 2023[28] - The company reported a net income attributable to iQIYI of RMB 1.9 billion for 2023, compared to a net loss of RMB 136.2 million in 2022[32] Financial Statements This section presents iQIYI's unaudited condensed consolidated financial statements, including the Income Statement, Balance Sheet, and Statement of Cash Flows, providing a comprehensive view of financial position and performance Condensed Consolidated Statements of Income/(Loss) The income statement for FY2023 shows total revenues of RMB 31.9 billion, operating income of RMB 3.0 billion, and a net income of RMB 1.9 billion, a significant improvement from the prior year's loss FY 2023 vs FY 2022 Income Statement Highlights (RMB in thousands) | Line Item | Year Ended Dec 31, 2023 (RMB in thousands) | Year Ended Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Total revenues | 31,872,651 | 28,997,548 | | Operating income | 2,989,479 | 1,312,421 | | Net income/(loss) attributable to iQIYI, Inc. | 1,925,469 | (136,212) | | Diluted net income/(loss) per ADS | 1.98 | (0.16) | Condensed Consolidated Balance Sheets As of December 31, 2023, iQIYI's balance sheet shows total assets of RMB 44.6 billion, total liabilities of RMB 32.4 billion, and total shareholders' equity nearly doubled to RMB 12.2 billion Balance Sheet Highlights (RMB in thousands) | Line Item | Dec 31, 2023 (RMB in thousands) | Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Total Assets | 44,594,374 | 46,048,349 | | Total Liabilities | 32,409,459 | 39,704,910 | | Total Shareholders' Equity | 12,184,915 | 6,343,439 | Condensed Consolidated Statements of Cash Flows For FY2023, iQIYI generated RMB 3.35 billion in net cash from operating activities and RMB 3.31 billion in free cash flow, a significant turnaround from the prior year Cash Flow Highlights (RMB in thousands) | Line Item | Year Ended Dec 31, 2023 (RMB in thousands) | Year Ended Dec 31, 2022 (RMB in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 3,351,600 | (70,569) | | Net cash used for investing activities | (1,739,515) | 265,980 | | Net cash used for financing activities | (4,285,072) | 4,468,863 | | Free cash flow | 3,314,629 | (244,832) | Non-GAAP Financial Measures and Reconciliation This section explains iQIYI's non-GAAP financial measures, including operating and net income, and provides a detailed reconciliation to comparable GAAP measures, clarifying adjustments - The company uses non-GAAP measures like non-GAAP operating income and non-GAAP net income to supplement GAAP results, excluding items such as share-based compensation and amortization of intangible assets from business combinations[39][41][42] FY 2023 GAAP to Non-GAAP Reconciliation Highlights (RMB in thousands) | Metric | GAAP (RMB in thousands) | Non-GAAP (RMB in thousands) | Key Adjustments | | :--- | :--- | :--- | :--- | | Operating Income | 2,989,479 | 3,643,384 | +636,732 (Share-based comp) | | Net Income (attributable) | 1,925,469 | 2,838,292 | +636,732 (Share-based comp), +336,226 (Impairment) | | Diluted Net Income per ADS | 1.98 | 2.91 | +0.93 (Non-GAAP adjustments) | Other Information This section provides supplementary information for investors, including earnings conference call details, a corporate profile, and the Safe Harbor Statement regarding forward-looking statements Conference Call Information iQIYI management will host an earnings conference call on February 28, 2024, at 6:30 AM U.S. Eastern Time, with registration and replay details provided - An earnings conference call is scheduled for 6:30 AM U.S. Eastern Time on February 28, 2024[33] - A live and archived webcast will be available on the company's investor relations website[36] About iQIYI, Inc. iQIYI is a leading online entertainment video service provider in China, leveraging AI and big data with a diversified monetization model including membership and advertising - iQIYI is a leading online entertainment video service in China, utilizing AI and big data for its technology platform[37] - The company's monetization model includes membership services, online advertising, content distribution, online games, IP licensing, and more[37] Safe Harbor Statement This statement cautions that the announcement contains forward-looking statements subject to inherent risks and uncertainties, directing readers to SEC filings for further information - The announcement includes forward-looking statements subject to risks and uncertainties as per the U.S. Private Securities Litigation Reform Act of 1995[38]