iQIYI, Inc. Q2 FY2025 earnings call

• Content: Delivered diverse content with original blockbusters like 'Field', 'Coroner's Diary' etc. Micro dramas focused on premium titles. Movies aimed to build an original production ecosystem with three key projects. Variety shows delivered top titles. Animation improved original production capabilities.
• Experience Business: Focused on IP-based consumer products (transitioning to self-operation) and offline experiences (asset-light strategy with immersive theaters and IG events).
• Overseas Business: Membership revenue and scale expanded for eight consecutive quarters. Micro dramas expanded overseas with strong momentum. Hosted offline marketing events to amplify global influence of C-pop.
• Technology and Products: Introduced AI-powered features like iJump Talkout. Harnessed AI to upgrade content production and enhance user engagement.

In the second quarter, total revenues were RMB6.6 billion. Membership services revenue reached RMB4.1 billion, down 9% annually. Online advertising revenue was $300 million, decreased by 13% annually. Accounts and distribution revenue was RMB436.6 million, down 37% annually. Other revenues increased by 6% annually to RMB829.3 million. Content-wise, drama maintained leadership in total drama viewership market share; micro dramas saw double-digit sequential growth in gross average daily viewing time and unique visitors; movies dominated viewership market share for fourteen consecutive quarters; overseas membership revenue grew by around 35% annually with strong performances in markets like Brazil, Mexico, etc.

• Content Pipeline: Upcoming fourth quarter lineup includes various anticipated titles. For micro dramas, focus on premium titles. For movies, three key projects for original production. For variety shows, enhance multiple season IPs and introduce new shows.
• Advertising: Sharpen focus on premium variety shows, dramas, etc. Capitalize on new budgets for micro and short dramas. Utilize AI to optimize advertising materials and placement strategies.
• Overseas: Ramp up original micro drama production overseas and scale offline marketing events internationally.

Forward-looking statements are subject to risks and uncertainties outlined in public filings with the SEC. Potential risks include those that may cause actual results to differ materially from current expectations.

Q: Regarding the recent change of policy in China's long-form video industry, could management share with us your thoughts on the potential impact on the company?

A: The introduction of new policies is a positive development. It shortens content production and review time, enhances content creation flexibility, strengthens synergy with traditional TV networks, and attracts talent and capital into content production.

Q: You mentioned a great number of hit dramas and variety shows during the summer seasons. Could the management provide an overview of the content performance this summer? Additionally, considering the impact of the new regulations, what's your future content strategy?

A: During summer, original drama blockbusters like 'Field', 'Coroner's Diary' achieved high popularity indices. Future strategy includes strengthening content across categories, focusing on premium productions, leveraging drama theaters, exploring innovative formats for micro dramas, and comprehensive frameworks for film projects.

Q: This year, we have seen that iQIYI is preparing for the offline theme park, at the same time selling related iQIYI products during the broadcasting of some top key dramas. Could you share about these strategies in the future? And how do you think of this market size?

A: For experience business, IP-based consumer products are transitioning to self-operation with collectible cards testing. Offline experiences use asset-light approach with immersive theaters and IG events. Market size is being explored with expansion plans.

Q: My question is about our debt management plan. Can management share more color about this?

A: Outstanding balance for 2028 convertible notes is $208 million. Domestic debt structure improved with fifty-fifty long-term and short-term loans. Company has sufficient cash to meet debt obligations and capital structure is healthy to support operations and growth.