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]

Financial Data and Key Metrics Changes - The total revenues for Q1 2024 were RMB7.9 billion, with membership services revenue at RMB4.8 billion, remaining stable sequentially but down 13% year-over-year due to high base effects from the previous year [28][29] - Non-GAAP operating income reached a record high of RMB1.1 billion, with a corresponding margin of 14% [5][30] - Operating cash flow totaled RMB938 million, remaining positive for eight consecutive quarters, indicating continuous improvement in the balance sheet [30] Business Line Data and Key Metrics Changes - Membership services revenue was flat sequentially but down 13% year-over-year, attributed to the high base effect from the previous year and increased offline entertainment during the Chinese New Year [9][28] - Advertising revenue grew by 6% annually to RMB1.5 billion, driven mainly by performance ads, which achieved double-digit annual growth [20][29] - Content distribution revenue reached RMB928 million, growing 27% annually, reflecting enhanced content production capabilities [6][29] Market Data and Key Metrics Changes - The company maintained its top position in viewership across major content categories, holding the number one position for viewership in the general category for nine consecutive quarters [7][11] - Membership revenue in overseas markets, such as Hong Kong and the UK, grew nearly 80% annually [25][26] Company Strategy and Development Direction - The company is focused on high-quality growth, emphasizing premium content and operational efficiency to enhance long-term membership revenue [5][11] - Generative AI is being integrated into advertising and content production to improve efficiency and ROI for advertisers [20][23] - The company aims to expand its content offerings to cater to diverse demographics, including the elderly and children, enhancing their viewing experiences [50][51] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of the membership business, focusing on improving content quality and diversity [35] - The outlook for advertising is cautiously optimistic, with expectations for a resurgence in brand ad spending in Q2, driven by a strong lineup of content [22][45] - The company plans to leverage generative AI and virtual reality technologies to explore new business opportunities [50] Other Important Information - The company will no longer disclose subscriber numbers and average revenue per member (ARM) to provide a more comprehensive view of business performance [32][34] - The success of the drama "To the Wonder" highlights the company's commitment to balancing content quality with commercial success [39][40] Q&A Session Summary Question: Why did the company not disclose subscriber numbers this quarter? - Management explained that subscriber numbers only partially indicate business progress and could disturb overall business development [32][34] Question: What is the investment return for the drama "To the Wonder"? - Management indicated that the drama achieved profitability through diverse revenue streams, affirming the potential for high-quality content to yield substantial commercial success [39][40] Question: What is the outlook for online advertising in 2024? - Management expects continued strong growth in performance-based advertising, driven by the application of generative AI [41][43] Question: What are the company's long-term strategic focuses? - The company aims to enhance content quality and diversity, leverage generative AI, combat piracy, and improve domestic market operations while cautiously investing in overseas markets [50][51]

PART I [ITEM 3. KEY INFORMATION](index=7&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section outlines iQIYI's VIE-based corporate structure, key financial data, and significant operational and regulatory risks - iQIYI, Inc. is a Cayman Islands holding company, not a Chinese operating company. It conducts its operations in mainland China through subsidiaries and Variable Interest Entities (VIEs) via contractual arrangements. Investors purchase equity in the Cayman holding company, not the Chinese operating entities[30](index=30&type=chunk) - Revenues from the VIEs accounted for **94%**, **92%**, and **92%** of total revenues for the fiscal years 2021, 2022, and 2023, respectively, highlighting the company's heavy reliance on this structure[30](index=30&type=chunk) - The company faces risks related to PRC government oversight, including potential challenges to the legality of its VIE structure, cybersecurity reviews, and requirements for CSRC approval for offshore listings, which could materially impact operations and stock value[41](index=41&type=chunk)[43](index=43&type=chunk) - Cash transfers from mainland China entities to offshore entities are subject to PRC government controls on currency conversion and restrictions on dividend payments, which may limit the holding company's ability to fund operations or distribute dividends to shareholders[44](index=44&type=chunk)[47](index=47&type=chunk) [Selected Consolidated Financial Data](index=17&type=section&id=Selected%20Consolidated%20Financial%20Data) Selected Consolidated Statements of Comprehensive (Loss)/Income Data (2021-2023) | | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | **Total revenues** | **RMB 30.55 billion** | **RMB 29.00 billion** | **RMB 31.87 billion** | | Operating (loss)/income | (RMB 4.48 billion) | RMB 1.31 billion | RMB 2.99 billion | | Net (loss)/income | (RMB 6.11 billion) | (RMB 117.8 million) | RMB 1.95 billion | | Net (loss)/income attributable to ordinary shareholders | (RMB 6.19 billion) | (RMB 136.2 million) | RMB 1.93 billion | | Diluted Net (loss)/income per ADS | (RMB 7.77) | (RMB 0.16) | RMB 1.98 | Selected Consolidated Balance Sheet Data (as of Dec 31, 2022 & 2023) | | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | | **Total assets** | **RMB 46.05 billion** | **RMB 44.59 billion** | | Total liabilities | RMB 39.70 billion | RMB 32.41 billion | | Total shareholders' equity | RMB 6.34 billion | RMB 12.18 billion | Selected Consolidated Cash Flows Data (2021-2023) | | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | :--- | | **Net cash (used for)/provided by operating activities** | **(RMB 5.95 billion)** | **(RMB 70.6 million)** | **RMB 3.35 billion** | | Net cash provided by/(used for) investing activities | RMB 1.26 billion | RMB 266.0 million | (RMB 1.74 billion) | | Net cash (used for)/provided by financing activities | (RMB 2.96 billion) | RMB 4.47 billion | (RMB 4.29 billion) | [Risk Factors](index=24&type=section&id=D.%20RISK%20FACTORS) - The company identifies several major risk categories: business and industry risks (e.g., content costs, competition), corporate structure risks (reliance on VIEs), relationship with controlling shareholder Baidu (e.g., conflicts of interest), risks of doing business in China (e.g., regulatory oversight, HFCAA), and risks related to its ADSs (e.g., price volatility)[75](index=75&type=chunk)[76](index=76&type=chunk)[78](index=78&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=76&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details iQIYI's business history, content strategy, diversified monetization, technology use, and the complex Chinese regulatory environment [History and Development of the Company](index=82&type=section&id=A.%20HISTORY%20AND%20DEVELOPMENT%20OF%20THE%20COMPANY) - iQIYI launched its internet video streaming service in April 2010. The holding company was incorporated in the Cayman Islands in November 2009[302](index=302&type=chunk) - The company operates its core business in mainland China through Variable Interest Entities (VIEs) like Beijing iQIYI and Shanghai Zhong Yuan to comply with PRC regulations[303](index=303&type=chunk) - The company's American Depositary Shares (ADSs) began trading on the Nasdaq Global Select Market under the symbol "IQ" on March 29, 2018[305](index=305&type=chunk) [Business Overview](index=83&type=section&id=B.%20BUSINESS%20OVERVIEW) - iQIYI is a leading online entertainment video service provider in mainland China, focusing on premium content, particularly original dramas and variety shows. In 2023, original drama series accounted for **75%** of newly released dramas with a popularity index score over **9,000**[309](index=309&type=chunk)[310](index=310&type=chunk) Key Membership Metrics (2023) | Metric | Value | | :--- | :--- | | Average Daily Total Subscribing Members | **111.9 million** | | Monthly Average Revenue per Membership (ARM) | **RMB 15.13** | | YoY Growth in Monthly ARM | **5.7%** | - The company has a diversified monetization model including membership services, online advertising (brand and performance-based), content distribution, online games, IP licensing, and talent agency services[311](index=311&type=chunk)[329](index=329&type=chunk) - iQIYI is expanding its overseas business through its multilingual app, featuring popular Chinese content (C-pop) and local content to cater to a global audience, aiming to become a home for beloved Asian content[326](index=326&type=chunk) [Organizational Structure](index=112&type=section&id=C.%20ORGANIZATIONAL%20STRUCTURE) - To comply with PRC laws restricting foreign ownership in telecommunications and internet audio-video services, iQIYI conducts its business in mainland China through VIEs based on a series of contractual arrangements[471](index=471&type=chunk) - The contractual arrangements enable iQIYI, Inc. to direct the activities of the VIEs, receive their economic benefits, and hold an exclusive option to purchase their equity and assets, making it the primary beneficiary for accounting consolidation purposes[472](index=472&type=chunk) - Key agreements in the VIE structure include Loan Agreements, Share Pledge Agreements, Exclusive Purchase Option Agreements, Shareholder Voting Rights Trust Agreements, and Exclusive Technology Consulting and Services Agreements, which collectively give the company effective control over the VIEs[473](index=473&type=chunk)[474](index=474&type=chunk)[475](index=475&type=chunk) [Property, Plants and Equipment](index=119&type=section&id=D.%20PROPERTY%2C%20PLANTS%20AND%20EQUIPMENT) - The company's principal executive offices are leased in Beijing, covering approximately **30,074 square meters**. It also owns office premises in Shanghai (**17,570 sq. meters**) and land in Zhejiang Province (**101,722 sq. meters**)[494](index=494&type=chunk) - iQIYI's main IT infrastructure includes internet data centers (IDCs) and content delivery networks (CDNs). It leases IDC facilities from major state-owned operators like China Telecom, China Unicom, and China Mobile[494](index=494&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=112&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes iQIYI's financial performance, highlighting 2023 profitability, revenue growth, improved efficiency, liquidity, and R&D investment [Operating Results](index=119&type=section&id=A.%20OPERATING%20RESULTS) Revenue Breakdown (2021-2023) | Revenue Source | 2021 (RMB) | 2022 (RMB) | 2023 (RMB) | 2023 (% of Total) | | :--- | :--- | :--- | :--- | :--- | | Membership services | RMB 16.71 billion | RMB 17.71 billion | RMB 20.31 billion | 63.7% | | Online advertising services | RMB 7.07 billion | RMB 5.33 billion | RMB 6.22 billion | 19.5% | | Content distribution | RMB 3.01 billion | RMB 2.56 billion | RMB 2.46 billion | 7.7% | | Others | RMB 3.77 billion | RMB 3.39 billion | RMB 2.88 billion | 9.1% | | **Total revenues** | **RMB 30.55 billion** | **RMB 29.00 billion** | **RMB 31.87 billion** | **100.0%** | - In 2023, the company achieved a net income of **RMB 1.95 billion**, a significant turnaround from net losses in 2021 and 2022. This was driven by a 9.9% increase in total revenues and improved operating efficiency[499](index=499&type=chunk)[521](index=521&type=chunk) - Membership services revenue grew **14.7%** in 2023, driven by a **5.7%** increase in monthly ARM to **RMB 15.13** and a rise in the average daily number of total subscribing members to **111.9 million**[522](index=522&type=chunk) - Online advertising revenue increased by **16.7%** in 2023, primarily due to growth in the performance-based advertising business. Average brand advertising revenue per advertiser also rose by **13.7%**[523](index=523&type=chunk) - Gross profit increased by **31.3%** to **RMB 8.77 billion** in 2023, with the gross profit margin improving from **23.0%** in 2022 to **27.5%** in 2023[527](index=527&type=chunk) [Liquidity and Capital Resources](index=125&type=section&id=B.%20LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - As of December 31, 2023, the company had **RMB 4.43 billion** in cash and cash equivalents and **RMB 0.94 billion** in short-term investments. However, it reported a working capital deficit of **RMB 9.7 billion**[535](index=535&type=chunk) - The company generated positive net cash from operating activities of **RMB 3.35 billion** in 2023, a significant improvement from a net cash usage of **RMB 70.6 million** in 2022[551](index=551&type=chunk)[552](index=552&type=chunk) - In 2022 and 2023, the company conducted several financing activities, including a private placement raising **US$285 million**, issuance of **US$550 million** in PAG Notes, a follow-on public offering raising **US$500 million**, and an offering of **US$600 million** in convertible senior notes due 2028[540](index=540&type=chunk) - The company believes its current cash, available credit lines, and anticipated cash flows from operations will be sufficient to meet its working capital and capital expenditure needs for at least the next 12 months[539](index=539&type=chunk) [Research and Development, Patents and Licenses, etc.](index=132&type=section&id=C.%20RESEARCH%20AND%20DEVELOPMENT%2C%20PATENTS%20AND%20LICENSES%2C%20ETC.) - The company utilizes AI technology across its entire business, including content creation, production, distribution, and monetization, to improve efficiency and user experience[576](index=576&type=chunk) R&D Expenditures (2021-2023) | Year | R&D Expenditure (RMB) | % of Total Revenues | | :--- | :--- | :--- | | 2021 | **RMB 2.79 billion** | **9.1%** | | 2022 | **RMB 1.90 billion** | **6.5%** | | 2023 | **RMB 1.77 billion** | **5.5%** | - Advanced technologies are employed to enhance user experience, offering features like 4K/8K high-definition video, Dolby Atmos® audio, and AI-powered search functions like AI Radar[582](index=582&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=131&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, executive and director compensation, share incentive plans, board practices, and employee count - The board of directors consists of eight members, chaired by Junjie He. Dr. Yu Gong is the founder, CEO, and a director[612](index=612&type=chunk)[613](index=613&type=chunk)[614](index=614&type=chunk) - For the fiscal year 2023, the aggregate cash compensation paid to executive officers and directors was **RMB 35.5 million** (**US$5.0 million**)[627](index=627&type=chunk) - The company has three share incentive plans: the 2010 Plan, the 2017 Plan (no outstanding awards), and the 2021 Plan, used to grant options and restricted share units to employees, directors, and consultants[632](index=632&type=chunk)[641](index=641&type=chunk)[643](index=643&type=chunk) - As of December 31, 2023, the company had **4,788** employees, a decrease from 4,981 in 2022 and 5,856 in 2021, reflecting an efficiency enhancement initiative[661](index=661&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=143&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details iQIYI's ownership structure, including Baidu's controlling stake, and key related party transactions and cooperation agreements - As of February 29, 2024, Baidu is the controlling shareholder, holding **45.4%** of total ordinary shares and **89.2%** of the total voting power[200](index=200&type=chunk)[667](index=667&type=chunk) - PAG is a principal shareholder, beneficially owning **17.8%** of Class A ordinary shares as of February 29, 2024[667](index=667&type=chunk) - The company has a master business cooperation agreement with Baidu for collaboration in AI technology, cloud services, online advertising, and internet traffic. Baidu agrees not to compete in long-form video, and iQIYI agrees not to compete in Baidu's core businesses[685](index=685&type=chunk)[688](index=688&type=chunk) Key Transactions with Baidu (FY 2023) | Transaction Type | Amount (RMB) | | :--- | :--- | | Bandwidth and cloud services fees paid to Baidu | **RMB 550.7 million** | | Advertising services provided by Baidu | **RMB 116.1 million** | | Membership services revenue from Baidu | **RMB 92.9 million** | [ITEM 8. FINANCIAL INFORMATION](index=147&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section covers key financial disclosures, including ongoing securities class-action lawsuits, copyright infringement cases, and the company's dividend policy - Following a short-seller report in April 2020, the company is a defendant in several putative securities class-action lawsuits and has been requested by the SEC to produce documents. The outcome of these matters is uncertain[710](index=710&type=chunk)[711](index=711&type=chunk) - As of December 31, 2023, iQIYI was a defendant in **168** pending cases in mainland China, primarily for alleged copyright infringement, with aggregate damages sought of approximately **RMB 416.1 million** (**US$58.6 million**)[713](index=713&type=chunk) - The company has no current plans to pay cash dividends and intends to retain future earnings to operate and expand its business[716](index=716&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=148&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section details the company's corporate governance, dual-class share structure, differences in corporate law, and tax considerations including PFIC status - The company has a dual-class share structure: Class A ordinary shares have one vote per share, while Class B ordinary shares have ten votes per share. Class B shares are convertible into Class A shares, but not vice-versa[730](index=730&type=chunk)[732](index=732&type=chunk) - As a Cayman Islands exempted company, iQIYI is not obligated by law to hold annual general meetings, and shareholder rights to inspect corporate records are more limited compared to U.S. corporations[742](index=742&type=chunk)[746](index=746&type=chunk) - The company believes it was not a Passive Foreign Investment Company (PFIC) for the 2023 taxable year but notes that PFIC status is a fact-intensive determination made annually and cannot be guaranteed for future years[296](index=296&type=chunk)[801](index=801&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=163&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the company's exposure to market risks, primarily foreign exchange risk from USD-denominated notes and interest rate risk - The company's primary market risk is foreign exchange risk, as its revenues are mainly in RMB while it has significant U.S. dollar-denominated convertible senior notes outstanding (**US$1.54 billion** as of Dec 31, 2023)[818](index=818&type=chunk) - A hypothetical **10%** appreciation of the U.S. dollar against the RMB would have increased the value of the company's U.S. dollar-denominated convertible senior notes by **RMB 1.095 billion** as of December 31, 2023[818](index=818&type=chunk) - The company has not entered into any material hedging transactions to mitigate its foreign currency exchange risk[821](index=821&type=chunk) PART II [ITEM 15. CONTROLS AND PROCEDURES](index=167&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting, as concluded by management and the independent auditor - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[838](index=838&type=chunk) - Based on the criteria in the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[843](index=843&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 as of December 31, 2023[844](index=844&type=chunk) [ITEM 16. CORPORATE GOVERNANCE AND OTHER DISCLOSURES](index=168&type=section&id=ITEM%2016.%20CORPORATE%20GOVERNANCE%20AND%20OTHER%20DISCLOSURES) This section covers corporate governance, including the code of ethics, auditor fees, Nasdaq exemptions, and cybersecurity risk management - The board has adopted a code of ethics applicable to all directors, officers, and employees[847](index=847&type=chunk) Principal Accountant Fees (2022-2023) | Fee Type | 2022 (RMB) | 2023 (RMB) | | :--- | :--- | :--- | | Audit fees | **RMB 16.07 million** | **RMB 17.16 million** | | Audit-related fees | **RMB 6.14 million** | **RMB 3.63 million** | - As a foreign private issuer and a "controlled company" (controlled by Baidu), iQIYI follows certain home country practices and is exempt from some Nasdaq corporate governance requirements, such as having a majority-independent board and holding an annual shareholder meeting (none was held in 2023)[855](index=855&type=chunk)[856](index=856&type=chunk)[857](index=857&type=chunk) - The company has established a cybersecurity risk management framework overseen by the board of directors and a management-level cybersecurity committee. As of the report date, no material cybersecurity incidents have been identified[861](index=861&type=chunk)[864](index=864&type=chunk)[865](index=865&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=172&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the company's audited consolidated financial statements prepared under U.S. GAAP, with the independent auditor's unqualified opinion - The independent registered public accounting firm, Ernst & Young Hua Ming LLP, issued an unqualified opinion on the consolidated financial statements for the three years ended December 31, 2023[888](index=888&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023, based on the COSO 2013 framework[897](index=897&type=chunk) - A critical audit matter identified was the amortization of content assets, which required complex and subjective judgment regarding estimates of future viewership consumption patterns[892](index=892&type=chunk)[893](index=893&type=chunk) [ITEM 19. EXHIBITS](index=172&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed with the annual report, including corporate documents, securities agreements, share incentive plans, and key VIE and convertible note arrangements - The exhibits include the company's Ninth Amended and Restated Memorandum and Articles of Association[872](index=872&type=chunk) - Multiple exhibits detail the contractual arrangements with the company's VIEs, such as Share Pledge Agreements, Exclusive Purchase Option Agreements, and Shareholder Voting Rights Trust Agreements[872](index=872&type=chunk)[873](index=873&type=chunk) - Indentures for various convertible senior notes (due 2023, 2025, 2026, 2028, and PAG Notes) are filed as exhibits[877](index=877&type=chunk)[878](index=878&type=chunk)

[Management Commentary](index=1&type=section&id=Management%20Commentary) 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](index=5&type=chunk) - Average Revenue per Membership (ARM) grew for **five consecutive quarters**, reflecting the high attractiveness of content and the growing value of membership services[5](index=5&type=chunk) - 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](index=7&type=chunk) [Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) 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](index=1&type=section&id=Fourth%20Quarter%202023%20Highlights) 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](index=1&type=section&id=Fiscal%20Year%202023%20Highlights) 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](index=2&type=section&id=Fourth%20Quarter%202023%20Operating%20Highlights) 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](index=11&type=chunk) - 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](index=11&type=chunk) [Detailed Financial Results](index=3&type=section&id=Detailed%20Financial%20Results) 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](index=3&type=section&id=Fourth%20Quarter%202023%20Financial%20Results) 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](index=15&type=chunk) - 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](index=21&type=chunk) [Fiscal Year 2023 Financial Results](index=4&type=section&id=Fiscal%20Year%202023%20Financial%20Results) 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](index=28&type=chunk) - 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](index=32&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) 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)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%2F%28Loss%29) 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](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) 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](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) 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](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliation) 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](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) 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](index=6&type=section&id=Other%20Information) 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](index=6&type=section&id=Conference%20Call%20Information) 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](index=33&type=chunk) - A live and archived webcast will be available on the company's investor relations website[36](index=36&type=chunk) [About iQIYI, Inc.](index=6&type=section&id=About%20iQIYI%2C%20Inc.) 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](index=37&type=chunk) - The company's monetization model includes membership services, online advertising, content distribution, online games, IP licensing, and more[37](index=37&type=chunk) [Safe Harbor Statement](index=7&type=section&id=Safe%20Harbor%20Statement) 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](index=38&type=chunk)

iQIYI, Inc. (NASDAQ:IQ) Q4 2023 Earnings Conference Call February 28, 2024 6:30 AM ET Company Participants Chang Yu - IR Director Tim Gong - Founder, CEO & Director Jun Wang - CFO Xiaohui Wang - Chief Content Officer Wenfeng Liu - CTO Conference Call Participants Xueqing Zhang - CICC Lincoln Kong - Goldman Sachs Group Lei Zhang - Bank of America Merrill Lynch Operator Good day and welcome to the iQIYI Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions]. I would now like to ...

Exhibit 99.1 iQIYI Announces Third Quarter 2023 Financial Results BEIJING, CHINA, November 21, 2023 – 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 third quarter ended September 30, 2023. Third Quarter 2023 Highlights "We recorded strong results in both revenues and profits. ARM increased by 12% year over year, driven by our compelling content offering and growing perceived valu ...

iQIYI, Inc. (NASDAQ:IQ) Q3 2023 Earnings Call Transcript November 21, 2023 6:30 AM ET Company Participants Chang You - Director of Investor Relations Yu Gong - Founder, Director & Chief Executive Officer Jun Wang - Chief Financial Officer Youqiao Duan - Senior Vice President, Membership Business Xiaohui Wang - Chief Content Officer Wenfeng Liu - Chief Technology Officer Conference Call Participants Xueqing Zhang - CICC Lincoln Kong - Goldman Sachs Daniel Chen - JPMorgan Thomas Chong - Jefferies Maggie Ye - ...

iQIYI, Inc. (NASDAQ:IQ) Q2 2023 Earnings Conference Call August 22, 2023 8:00 AM ET Company Participants Chang You - Director of Investor Relations Yu Gong - Founder, Director & Chief Executive Officer Jun Wang - Chief Financial Officer Xiaohui Wang - Chief Content Officer Wenfeng Liu - Chief Technology Officer Youqiao Duan - Senior Vice President, Membership Business Gang Wu - Senior Vice President of Brand Advertising Business Conference Call Participants Xueqing Zhang - CICC Lei Zhang - Bank of America S ...

Financial Performance - Total revenues for Q2 2023 reached RMB7.8 billion (US$1.1 billion), representing a 17% year-over-year increase[5] - Operating income was RMB610.4 million (US$84.2 million), with an operating income margin of 8%, compared to 2% in Q2 2022[5] - Non-GAAP operating income was RMB786.4 million (US$108.4 million), with a non-GAAP operating income margin of 10%, up from 5% in the same period last year[5] - Net income attributable to iQIYI was RMB365.2 million (US$50.4 million), a significant recovery from a net loss of RMB214.0 million in Q2 2022[5] - Total revenues for the three months ended June 30, 2023, were RMB 7,802,297, representing a 17.2% increase from RMB 6,656,549 in the same period of 2022[33] - Operating income for the three months ended June 30, 2023, was RMB 610,392, compared to RMB 125,787 for the same period in 2022, marking a significant increase of 385.5%[33] - Net income attributable to iQIYI, Inc. for the three months ended June 30, 2023, was RMB 365,207, a turnaround from a net loss of RMB 213,995 in the same period of 2022[33] - Diluted net income per ADS for the three months ended June 30, 2023, was RMB 0.37, compared to a loss of RMB 0.28 in the same period of 2022[41] - Non-GAAP net income attributable to iQIYI, Inc. for the three months ended June 30, 2023, was RMB 594,663, compared to RMB 78,253 in the same period of 2022[41] Revenue Streams - Membership services revenue increased to RMB4.9 billion (US$682.2 million), a 15% year-over-year growth driven by an increase in subscribing members[8] - The average daily number of total subscribing members rose to 111.2 million, compared to 98.3 million in Q2 2022[9] - Online advertising services revenue grew by 25% year-over-year to RMB1.5 billion (US$206.2 million), primarily due to performance-based advertising[10] - Membership services revenue for the six months ended June 30, 2023, reached RMB 10,493,872, up 19.8% from RMB 8,756,546 in the same period of 2022[33] Costs and Cash Flow - Cost of revenues was RMB5.8 billion (US$796.3 million), a 10% increase year-over-year, mainly due to higher content costs[12] - Free cash flow for the three months ended June 30, 2023, was RMB 872,253, compared to a negative free cash flow of RMB 18,646 in the same period of 2022[37] - Cash and cash equivalents at the end of June 30, 2023, were RMB 3,565,285, down from RMB 7,097,938 at the end of December 31, 2022[35] Assets and Liabilities - As of June 30, 2023, the company had cash and cash equivalents totaling RMB6.1 billion (US$840.8 million)[19] - Total assets decreased to RMB 43,088,918 as of June 30, 2023, from RMB 46,048,349 as of December 31, 2022[35] - Total liabilities decreased to RMB 32,347,631 as of June 30, 2023, from RMB 39,704,910 as of December 31, 2022[35] Future Investments - The company is investing in transformative technologies, including generative AI, to support future growth[4]