iQIYI, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Content Success: The Thriving Land was a major hit, exceeding popularity indices and boosting tourism. Other content like Coroner's Dilemma and science fiction series also performed well. Movies like The Shadow Edge grossed over RMB 1.2 billion. Variety shows like The King of Stand-Up Comedy Season 2 were successful.
• Membership Growth: Driven by high-quality content, enhanced member services, and optimized marketing. Bundled memberships and targeted promotions contributed.
• Advertising: Focus on premium content and AI-driven innovation. Performance ads had a balanced advertiser portfolio.
• Technology and Products: Leveraging AI for content creation, production efficiency, and user experience. Partnerships with Peter Pau and AI-powered tools like iQuickReal and Touhou AI.
• Overseas Expansion: Strong growth in membership revenue, with C-dramas and local content gaining popularity globally.
• Experience Business: IP-based consumer products and offline experiences, with iQIYI Labs in development.

Segment Performance

• Total Revenue: RMB 6.7 billion, up 1% sequentially. Membership services revenue reached RMB 4.2 billion, up 3% sequentially. Online advertising revenue was RMB 1.2 billion, down 2% sequentially. Distribution revenue was RMB 644.5 million, up 48% sequentially. Other revenues were RMB 585 million, down 29% sequentially. Content cost was RMB 4 billion, up 7% sequentially.
• Membership Services: Driven by original hit dramas like The Thriving Land and The Coroner's Dilemma, membership revenue saw sequential growth.
• Advertising: Brand ads recorded double-digit annual growth, with content-related ad solutions contributing over 60% of brand ad revenue.
• Regions Outside Mainland China: Membership revenue increased by over 40% annually, with markets like Brazil, Spanish-speaking regions, etc., seeing more than double-digit year-over-year growth.

Guidance

• Membership Business: Confident in sustainable growth with high-quality content and enhanced member benefits.
• Overseas Expansion: Continue delivering high-quality content and leverage AI for production and promotion.
• AI Adoption: Focus on opening up intelligent production systems, promoting AI in the market, and exploring large-scale AIGC applications in various content areas.

Risks

• Potential risks and uncertainties outlined in public filings with the SEC, including those that may cause actual results to differ from current expectations.

Question and Answer

Q: It has been three months since the new regulations were issued. Can management provide an update on the progress?

A: The new policies promote healthy development of the long-form video industry. Progress includes concurrent review of key dramas and exploration of new content format reviews. Some projects have benefited from policy support.

Q: Will management share some color about your outlook on the membership business?

A: Membership business has growth momentum from high-quality content, enhanced services, and optimized marketing. Titles like The Silent Honor and Strange Tale of the Tang Dynasty Three to Chang'an contributed. Enhanced member benefits and services will drive growth.

Q: We noticed that Chinese culture industries have made good progress in the overseas markets lately. Can management share more progress on your overseas expansion and strategy?

A: Overseas business has strong performance with Q3 revenue growth. Chinese content is a cornerstone, and local content in Thailand, etc., is successful. Leverage AI for content production and promotion.

Q: The application of AI in the global film and television industry has been advancing in increasing depth. Can management share strategy insights and future plans pertaining to AI adoption in content production and business layout?

A: AI boosts operational efficiency, monetization, content production, and user features. Future plans include opening up intelligent production systems, promoting AI in the market, and exploring AIGC in various content areas.