iQIYI Q4 2024 Earnings Results & Report

iQIYI EPS Results

• Actual EPS: -$0.03
• Consensus EPS: -$0.04
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A
• EPS Beat Rate: 3 of last 8 quarters

iQIYI Revenue Results

• Actual Revenue: $919.56 million
• Expected Revenue: $6.62 billion
• Beat/Miss: Missed by -$5.70 billion
• YoY Revenue Growth: N/A

iQIYI (NASDAQ:IQ), Inc. is a Chinese online entertainment company that operates the iQIYI streaming platform. The company provides internet video services, including professionally produced television dramas, films, variety shows, documentaries, anime and other entertainment programming. Its content is available through websites and mobile applications, with offerings supported by subscription memberships, advertising and other content-related services.

iQIYI develops and licenses content, including original productions created through its in-house studios and programming obtained from external producers and rights holders. The company also provides services related to content distribution and has expanded into areas such as interactive entertainment and online games. Its platform serves viewers primarily in China, while selected content and services are also offered to international audiences through iQIYI’s overseas products.

The company traces its origins to the launch of the iQIYI video service by Baidu in 2010 and later became a separately operated business. iQIYI completed its initial public offering on the Nasdaq Stock Market in 2018. Gong Yu, a co-founder of iQIYI, serves as the company’s chief executive officer.

iQIYI Q4 2024 Earnings Call Transcript

Key Takeaways

• In late November 2024, ITE saw a significant rebound in net subscriber additions, user time spent and reclaimed its leading drama viewership market share with top-tier content comebacks.
• Long-form dramas like We Are Criminal Police and Drifting Away surpassed a 10,000 IQ popularity score, while premium female-oriented titles also hit high popularity indices, bolstering content engagement.
• The mini-drama segment expanded rapidly with over 10,000 titles, upgraded ad placement systems and the first program generating monthly revenue over RMB 1 million, unlocking new monetization channels.
• For Q4, total revenues fell 14% year-over-year to RMB 6.6 billion, with membership services down 15% and online advertising off 13%, despite cost cuts delivering a 6% non-GAAP operating margin.
• Overseas markets outperformed, with membership revenue in Hong Kong, the UK, Thailand and Australia each rising over 30% year-over-year, and plans underway to expand into the Middle East, Latin America and Brazil.

Presentation

[Operator]

Thank you for standing by, and welcome to the iQIYI Q4 and Fiscal Year 2024 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Chang Yu, IR Director of the company. Please go ahead.

[Chang Yu, Director of Investor Relations at iQIYI]

Thank you, Operator. Hello everyone, and thank you for joining iQIYI's Q4 and Fiscal Year 2024 Earnings Conference Call. The company's results were released earlier today and available on the company's investor relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director, and CEO, Mr. Jun Wang, our CFO, Mr. Xiaohui Wang, our CCO, Chief Content Officer, Mr. Yuqiao Duan, Senior Vice President of our Membership Business, and Mr. Xianghua Yang, Senior Vice President of Movies and Overseas Business.

[Chang Yu, Director of Investor Relations at iQIYI]

Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session. Before we proceed, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.

[Chang Yu, Director of Investor Relations at iQIYI]

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statement except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Hello everyone, and thank you for joining us today. Starting from late November, we have observed a significant rebound in business performance across multiple metrics, including net additions of subscribing members and user time spent, along with a reinforced leading position in the total drama viewership market share according to Enlightent data. This was boosted by the robust comeback of our top-tier content. In just three months, two of our highly popular dramas (We Are Criminal Police and Drifting Away, Piao Bai) surpassed 10,000 in the iQIYI popularity index, further solidifying iQIYI's unrivaled leadership in the suspense genre.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We also enhanced our supply of premium female-oriented content, which is also one of our key content categories, with Moonlight Mystique, Bai Yue Fan Xing exceeding 9,500, and Winter Solstice, Dong Zhi exceeding 9,000 in iQIYI popularity index. Alongside the strong return of our premium long-form video content, we have made big swings in the mini-drama space. Now our portfolio carries a selection of over 10,000 titles. We have also revamped our products to improve user experiences. On top of that, we have upgraded our ad placement system to more effectively monetize the growing traffic of mini-dramas.

[Yu Gong, Founder, Director, and CEO at iQIYI]

All these efforts have led to swift growth in our user base and look forward to what the future holds. In addition to operational improvements, we are encouraged by the healthy recovery in consumer sentiment towards quality long-form videos as evidenced by historical high theatrical movie box office performance during the Chinese New Year. This trend reinforces our confidence in the quality long-form video content, and we are optimistic for the long-form video industry in the coming year. As we step into 2025, we aim to boost membership revenue by raising the quality and the share of streaming content.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We also aim to expand the advertising revenue by enlarging our ad inventory, which will benefit from the growth of mini-drama business. Together, these two elements will serve as the dual engines driving our revenue growth. Now, let's move on to the details of our core business segments, starting with long-form videos, which is the cornerstone of our content ecosystem. We have sustained our leadership in the core drama category, capturing the highest total viewership market share in Q4 and for the full year 2024, according to Enlighten data. This was underpinned by the exceptional performance of our highly acclaimed titles across multiple genres.

[Yu Gong, Founder, Director, and CEO at iQIYI]

In Q4, our dominance in the reality and suspense genres remained unchallenged. Notably, We Are Criminal Police became the 15th drama to break the iQIYI popularity index score of 10,000 and recorded the highest score of our platform in 2024. Additionally, new releases like [Foreign Language] Light On Theater brand and Under the Skin Season 2 (Liè Zuì Tú Jiàn) gathered high acclaim from viewers. Our exciting slate of offerings goes beyond Q4. Notably, Drifting Away from our flagship Light On Theater brand surpassed our popularity index score of 10,000 within just six days of its release. It was also the first drama with fewer episodes to reach such highs.

[Yu Gong, Founder, Director, and CEO at iQIYI]

In Q4, for premium female-oriented content, we made great progress in stabilizing our content release schedule and captivating audiences with love stories from our Sweet On Theater. Notable among these is the Asian custom drama Fangs of Fortune (Dà Mèng Guī Lí), which successfully attracted new members signed up. In addition, modern drama Winter Solstice was praised for its innovative blend of suspense and romance, hitting a peak iQIYI popularity index score of over 9,000. Looking ahead, we are committed to further refining our production lineup and release timing for both Asian custome dramas and modern tales that resonate with our female audiences.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Turning to movies in Q4, we have maintained our leading position in viewership for self-produced contents. According to Enlighten data, the performance was highlighted by our original production of Frozen Ridge, which was the best-performing comedy movie on our platform this quarter. Theatrical releases like Upstream (Nìxíng Rénshēng) and The Volunteers: The Battle of Life and Death, Zhi Yuanjun, Cun Wang Zhi Zhan, also secured top positions on the iQIYI popularity chart during Q4. For animations in Q4, our production capabilities for Chinese animations continue to improve.

[Yu Gong, Founder, Director, and CEO at iQIYI]

The Legend of Sky Lord (Shén Wǔ Tiān Zūn), retains its popularity among audiences. We also further boosted our offerings with exclusive new IPs such as Urban Miracle Doctor, (Dūshì Gǔxiān Yī) and Limited Life: Bridgesong Wǒ néng wúxiàn dùnwù. For Japanese animations, we exclusively released Dragon Ball Daima: Long Zhu Da Mo on our platform, receiving positive feedback. Looking forward to 2025, we are dedicated to enhancing the production and management of our long-form videos.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Our primary goal is creating exceptional content, elevating its commercial potential while optimizing the production and distribution process for increased efficiency. For dramas, we will focus on improving the pipeline stability and the share of our top-tier premium content. We aim to strengthen our leadership in realistic and suspenseful themes while enhancing our premium content that appeals to female audiences, which has shown strong momentum. Other than the titles we have already discussed, such as Drifting Away, we are also going to release titles from Light On Theater, including Breaking the Shadows, Wu Yun Zhi Shang, Justifiable Defense (Zhèng Dàng Fáng Wèi), Alive for a Life (jiè mìng ér shēng) and Low IQ Crime, Di Zhi Shang Fan Zui.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Our strong lineup also features highly anticipated female-oriented dramas. Moonlight Mystique, Bai Yue Fan Xing, The Fearless Season 2, Wu Suo Wei Ju, and Love of the Divine Tree (Xian Tai You Shu) have already been released and have gained strong traction among female audiences, while more compelling releases are to come. For various shows, our strategy is centered on our suitability. We are committed to maximizing the commercial value of our classic IPs while exploring innovative new shows.

[Yu Gong, Founder, Director, and CEO at iQIYI]

For flagship multi-season IPs, our strong lineup includes Become a Farmer (Zhòngdì ba), Five HA Season 5, The Rap of China 2025, and The King of Stand-Up Comedy 2, Xi Ju Zhi Wang Dan Kou Ji. We are also introducing several fresh new IPs, including The Blooming Journey, Yi Lu Fan Hua, Xing Shi, Xia Zhou Xing Sheng, and The Greatest Showman, Da Jia Da Yu Le Jia. Notably, The Blooming Journey was released in January and quickly received a peak iQIYI popularity index score of above 8,000, while topping the Enlighten rankings.

[Yu Gong, Founder, Director, and CEO at iQIYI]

For the comedy genre, building up the success of The King of Stand-Up Comedy last year, we launched its spin-off show, Happy Off Work, during the Chinese New Year holiday, further strengthening the IP's influence. For movies, premium content is our top focus, especially original theatrical releases that can generate top-box office revenue. In 2025, our original movie, Winter to Summer, Yi Lu Ping An and Moonlight Mystique, Bai Yue Fan Xing, will hit the theaters. Audiences can also enjoy theatrical hits from our movie channel, including Her Story, Hao Dong Xi, Burning Stars (Gū Xīng Jìhuà), Hot Pot Artist, Huo Guo Yi Shu Jia, and Octopus with Broken Arm (Wùshā).

[Yu Gong, Founder, Director, and CEO at iQIYI]

We also plan to increase our production capability for online films. In the field of animation, we are set to broaden our collection of enduring serials and devoted resources, specifically to a high-quality Chinese animation. Our objective is to raise both the quality and the financial performance of our original work. Major titles to be launched include Super Cube (Chāonéng Lìfāng), Over the Divine Realms, Shenguo Zhi Shang, The Fated Magical Princess, Mo Fa Gong Zhu De Fan Xiao Fannao, and sequels to beloved children's animations, including The Roofus, Rui Fu Xuerui, and The Princess Doremi Season 4, Yin Yue Gong Zhu Ai Mei Li.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Moving on to mini-dramas, we achieved exciting milestones in just three months. Firstly, we have successfully revamped our apps. Now, the mini-drama in the iQIYI main app focuses primarily on the subscription-based model, while the iQIYI Lite app prioritizes free mini-drama supported by the advertising model. Secondly, we have largely completed the construction of the back-end system, especially for content recommendations and advertising capabilities. This not only elevates the viewing experience but also unlocks fresh monetization opportunities.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Furthermore, our mini-drama portfolio has quickly expanded to over 10,000 titles now, capturing 95% of the leading mini-drama content providers in the market. This expansive and diversified content portfolio has paved the way for our next stage of development. The recent program has likely increased our user base and the viewing time spent on mini-dramas in the Q4, with these positive trends expected to continue. Notably, in December, our platform's first mini-drama generating monthly revenue sharing in Hong Kong, exceeding CNY 1 million.

[Yu Gong, Founder, Director, and CEO at iQIYI]

As we enter the next phase, we are aiming to refine our products and service offerings with personalized recommendations, fine-tune our advertising system to appeal to a broader base of new advertisers, broaden our content catalog with fresh and elaborate titles, and cultivate iQIYI's original mini-drama ecosystem to provide a steady stream of high-quality content. Moving on to membership services, membership revenue in the Q4 was RMB 4.1 billion annually and sequentially, primarily due to a lighter content slate during the first two months of the quarter.

[Yu Gong, Founder, Director, and CEO at iQIYI]

However, starting from late November, we have observed a strong comeback in premium content offerings, as previously discussed, driving a significant turnaround in our membership business. To be specific, we have improved our long-form video content and introduced exclusive mini-drama for members, aiming to improve member retention and attract new subscribers. Additionally, we have maintained a tighter supply of premium content and stepped up our promotional efforts so subscribers can eagerly anticipate new releases, thereby driving their loyalty to our platform.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Beyond content enhancement, we have reclassified our membership offerings into two primary categories: one category tailored for individuals, the other for families. Both categories include an ad-supported basic service tier as well as a standard service tier. Moreover, the family category also features a premium service level, which is the Star Diamond plan. This plan grants additional privileges, including unlimited access to express packages that provide early access to finales of our premium content, the ability to log in on up to eight supported devices, and opportunities to participate in major offline events.

[Yu Gong, Founder, Director, and CEO at iQIYI]

This reclassification benefits our membership business in multiple ways. One, it simplifies the structure of our membership plan, making their positioning clear. Two, it captures broader user needs and user groups, from value-seeking individuals to those desiring more premium perks. Three, it effectively addresses the issue of unauthorized password sharing. In the Q4, to offer an improved solution to account sharing, we introduced the extra member feature. Additionally, our ad-supported basic plan has seen a consistent uptick in subscriptions, especially among users in low-tier cities and within the young demographic throughout the quarter.

[Yu Gong, Founder, Director, and CEO at iQIYI]

In a move to further elevate the value we offer, we also introduced more joint membership options, which gained traction with our members. Looking into 2025, our strategy focuses on building a membership business that better caters to mass audiences. We also intend to optimize member offerings, streamline operations, and improve distribution channels. Moreover, we aim to elevate the iQIYI member brand and service standards, ultimately boosting the value experience by our members.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Moving on to the advertising business, revenue during the quarter came in at CNY 1.4 billion, growing 7% sequentially and showing a reduced rate of annual decline when compared to the prior period. For brand ads, revenue showed double-digit sequential growth. This was primarily driven by the double-digit brand ad revenue growth generated by our premium dramas. In 2025, we aim to evolve our brand advertising business by diversifying our revenue streams and exploring new innovative advertising opportunities.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We plan to refine client service, which will help retain our current advertisers and attract newcomers from sectors like food and beverage, cosmetics, toiletries, and communications. We will also keep an eye on emerging sectors such as healthcare, home furnishing, and tourism. Additionally, we aim to increase the share of top-tier clients and explore alternatives in mini-dramas and advertiser-customized shows. Performance ads continue to grow both annually and sequentially. This was largely driven by operational improvements and major e-commerce companies, and the robust service provided to clients from the internet services sector.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Notably, revenue contribution from the e-commerce sector during the Double 11 Shopping Festival increased by over 40% annually, and the revenue from the internet services during the quarter increased by over 30% year over year. To sustain this momentum going forward, we are enhancing our technical and platform capabilities to secure a larger share of budgets from top-tier clients in sectors such as the e-commerce, internet services, and video game sectors. We will continue leveraging AI for video and production and expand our client base to improve monetization efficiency.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We are also excited about the incremental ad inventory that mini-dramas could bring in 2025. Moving on to technology and products, we continue to advance the industrialization of the video business, thereby improving our operational efficiency. Our intelligent production management system has become essential for production crews managing various tasks on site, providing them with advanced production tools and management capabilities. In the Q4, we further enhanced the system to incorporate highly efficient production supplies management capability.

[Yu Gong, Founder, Director, and CEO at iQIYI]

With regard to virtual production, we have embraced the technology to push the boundary of content creation. We are proud that our project, Fangs of Fortune and My Journey to You, Yun Zhi Yu, have both won multiple prestigious industry awards for their excellent use of virtual production. Meanwhile, we have made impressive progress with our digital asset collection. Throughout the year, we have assembled an immense digital asset library from hundreds of dramas, variety shows, movies, and animations. Today, it is recognized as one of the leading collections in China. We are now leveraging their assets in new video projects and expanding into offline experiences.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Looking forward, we are setting our sights on wider applications, including content creation, IP value-added services, and immersive virtual reality experiences. Moreover, we have been expanding AI applications across content production and operations. AI's influence has been transformative, notably in refining our project assessment process, providing valuable insights for a preliminary 5,000 screenplays and novels. Additionally, AI aids in character design and custom selection at the project approval stage based on the character description from screenplays that streamlines the creative process.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Lastly, for our business performance in regions outside of mainland China, we maintained solid performance in the Q4, with both total revenues and membership services revenue gained annual and sequentially growth. Notably, membership revenue from Hong Kong, UK, Thailand, and Australia grew by over 30% year over year. The average daily number of subscribing members also increased both annually and sequentially, with Hong Kong and Thailand growing over 40% year over year, 50% year over year. The popularity of our original content continued to strengthen.

[Yu Gong, Founder, Director, and CEO at iQIYI]

of Fortune was the best-performing C-drama on our overseas platform in 2024, with the highest version topping the viewership rankings in Thailand. Additionally, our first original overseas variety show, Starlight Boys, extended its success beyond our platform, achieving top position in local Google rankings for variety shows across numerous Southeast Asian countries. Furthermore, Thai dramas have emerged as a popular content category on our international platform, ranking second only to C-dramas. Encouraged by this trend, we are planning to increase our investments in original Thai productions.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We have been focusing on expanding our international brand recognition through region-specific events. Last quarter, we launched our first-ever iQIYI conference overseas, which set a new benchmark as the most comprehensive and best-attended press conference ever hosted by our Chinese video platform in Thailand, with exceptional artist participation. As we set our sights on 2025, our main focus abroad will be to drive revenue expansion. We plan to enhance our C-drama offerings and improve the monetization ability of regional content.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Having established our strong presence in Asia, especially Southeast Asia, we are set to expand our footprint into Middle East, Latin America, and Brazil. Our approach includes reinforcing ties with telecom partners, seeking innovative collaborative opportunities, and wrapping up marketing initiatives to boost our brand and content impact. In summary, we closed the year by embracing a series of reinventions and innovations that successfully propelled our business forward, setting a strong start to 2025.

[Yu Gong, Founder, Director, and CEO at iQIYI]

We are confident that the strong comeback of premium long-form videos, coupled with our continuous innovation in mini-dramas, will serve as fuel engines during sustained growth for 2025. Now, let me pass it on to Jun Wang to go through our financial performance.

[Jun Wang, CFO at iQIYI]

Thanks, Mr. Gong, and hello everyone. As Mr. Gong mentioned earlier, driven by the premium content, we have experienced a significant rebound in main operating performance in comparison to November 2024. Now, let's take a look at Q4 key numbers. In Q4, the total revenues were CNY 6.6 billion, down 14% annually. Membership services revenue reached CNY 4.1 billion, down 15% annually, primarily due to a lighter content slate. However, as Mr. Gong just mentioned, premium content had a strong rebound from late November 2024 to now. For online advertising, revenue decreased by 13% year over year to CNY 1.4 billion.

[Jun Wang, CFO at iQIYI]

This was primarily due to the decrease in brand advertisement business, partially offset by the growth in performance ad business. Content distribution revenue reached CNY 406.6 million, down 20% annually, primarily due to a lower revenue from the distribution of theatrical movies invested by iQIYI, and a decrease in barter transactions, partially offset by increased revenue from cash transactions. Other revenues decreased by 10% annually to CNY 670.2 million. Moving on to costs and expenses. Content costs were CNY 3.4 billion, down 9% annually, primarily driven by our improvement in the content strategy, as well as a lighter content slate in the quarter.

[Jun Wang, CFO at iQIYI]

Total operating expenses were CNY 1.3 billion, down 5% annually, primarily due to disciplined market expanding. Turning to profits and cash flows, non-GAAP operating income was CNY 405.9 million, and its corresponding margin was 6%. Net cash provided by operating activities totaled CNY 519 million, positive for 11 consecutive quarters. As of the end of Q4, we had cash equivalents, short-term investments, and long-term restricted cash included in the prepayments and other assets of RMB 4.5 billion. For detailed financial data, please refer to our press release on our IR website. Now, I will open the floor for Q&A.

[Operator]

Thank you. If you wish to ask a question, please press Star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press Star 2. If you're on a speakerphone, please pick up the handset to ask your question. Please ask questions in Chinese first and then translate the questions into English. Please also limit yourself to one question at a time. If you wish to ask further questions, please rejoin the queue. Your first question comes from Xueqing Zhang with CICC. Please go ahead.

[Xueqing Zhang, Analyst at CICC]

[Foreign language] Thanks management for taking my question. We have noticed that iQIYI had launched many hit drama series since the beginning of this year. Looking ahead to 2025, what's your content pipeline? What about the quality of these titles? And how many of them have the potential to become blockbusters? Thank you.

[Xiaohui Wang, CCO at iQIYI]

Thank you, Xueqing. We will invite our Chief Content Officer, Xiaohui Wang, to answer this question. Go ahead. [Foreign language] We had a good start of the year for 2025, with the new season of the Light On Theater drama Drifting Away launched in January, reaching iQIYI popularity index of over 10,000 in just six days. It is a milestone for us because it is not only the first drama of the year to break the 10,000 in popularity, but it also is iQIYI's Light On Theater and our first drama with a limited number of episodes to achieve this milestone.

[Xiaohui Wang, CCO at iQIYI]

Our main goal for this year 2025 is to enhance both the quality and the share of our premium top long-form video content, also ensuring greater stability and a continued strong start to the year. [Foreign language] In the most critical areas, such as the drama genre, the number of premium top-tier dramas planned for release this year will significantly increase compared to last year. We will also focus on creating a tighter narrative pace that better aligns with the current social sentiment and user aesthetic changes.

[Xiaohui Wang, CCO at iQIYI]

[Foreign language] And then for suspense and crime dramas, and female-oriented content that are our two main programming pillars, for this year, we will continue to maintain our absolute leading advantage in the suspense and crime drama. And for this year, the Light On Theater has several works planned. In addition to the already launched Drifting Away, there will be more releases, such as The Shadow of the Trees, Justifiable Defense, Alive for a Life, Low IQ Crime, Dead End, Beneath the Undertow.

[Xiaohui Wang, CCO at iQIYI]

[Foreign language] In terms of the female-oriented content and multi-season titles, we will further strengthen our offerings and continuous programming, with plans to launch titles such as The Best Thing, Fox Spirit Matchmaker: Love in Pavilion, Fox Spirit Matchmaker: Sword and Beloved, A Dream Within a Dream, Feud, and The Strange Tales of Tang Dynasty Season 3. [Foreign language] Additionally, we will continue to maintain our advantage in the realm of realistic genres. The pipeline includes Northward, What a Wonderful World, Vitality, 8,000 Miles of Cloud and Moon, Xiaoxing, Lonely Old Town.

[Xueqing Zhang, Analyst at CICC]

[Foreign language] Thank you.

[Operator]

Your next question comes from Lei Zhang with Bank of America Securities. Please go ahead.

[Lei Zhang, Analyst at Bank of America Securities]

[Foreign language] Thanks management for taking my question. Want to know further updates on your short mini-drama area, and do we have any strategic plan on mini-drama in 2025? Thank you.

[Yu Gong, Founder, Director, and CEO at iQIYI]

[Foreign language] Our CEO is actually taking this question. He, first of all, would like to clear the definition of mini-dramas that we've been talking about in his opening remarks. So for mini-dramas, we identify them as the vertical format, one to three minutes long, and then this is the main area that we're focusing on. For the horizontal mini-dramas, which is quite similar to the long-form video content that we have the edge on, so this is something different.

[Yu Gong, Founder, Director, and CEO at iQIYI]

[Foreign language] So we decided to invest in the mini-drama business about one quarter ago. The reason there are two aspects. First of all, right now, because the users are more prone to the fast-paced content, and they have a shorter attention span, and then they also enjoy content in a more fragmented time as well. So that's the first reason. And also from the industry perspective and the market perspective, for 2024, the market size for mini-dramas, although there are different data that's estimated by third parties, but we believe it should be greater than the Chinese box office for 2024.

[Yu Gong, Founder, Director, and CEO at iQIYI]

For 2025, we are glad to see a strong rebound of the theatrical box office during the Chinese New Year. However, we still think the mini-drama market should still exceed the Chinese box office in 2025 as well. [Foreign language] Our mini-drama business actually has successfully completed the key tasks that we set for the first phase, achieving significant results in three areas: for user product transformation, content portfolio, and also building a better system development. Currently, actually, our mini-drama content library has over 10,000 titles, and it has reached a scale that's comparable to the leading mini-drama platforms in the industry.

[Yu Gong, Founder, Director, and CEO at iQIYI]

[Foreign language] There are two reasons how we achieved such a significant improvement in a very short amount of time. First of all, for our team, actually, we have a very mature whether it's IT team, technology team, product team, also the operational team. All these have over 10 years of experiences. Although mini-drama is a new genre, there are a lot of know-how that we can replicate from the long-form video experience. That's the first reason. The second reason is we have a very deep connection with the industry and also the industry resources, specifically for content providers for the industry.

[Yu Gong, Founder, Director, and CEO at iQIYI]

Most of them, we have actually collaborated with them in the past, or we have existing collaborations. So the above two reasons help us to achieve such progress in a short amount of time. [Foreign language] For our main app, the position is still focusing on the long-form video content and then focusing on the subscriber-based revenue model. [Foreign language] For iQIYI Lite, we have quickly revamped this app, and then now it is prioritized in free mini-dramas, and then supported by the advertising model.

[Yu Gong, Founder, Director, and CEO at iQIYI]

[Foreign language] In terms of the user time span for the main iQIYI app, the mini-drama time share now is actually close to the scale of animation, cartoon, and also variety shows. [Foreign language] For iQIYI Lite, the mini-drama time share is the second largest content genre, only second behind long-form video content.[Foreign language] I'll quickly introduce the next stage of key tasks. The first one is we'll focus on introducing the leading mini-drama titles for iQIYI. Second is to build the iQIYI original mini-drama ecosystem. For the Chinese New Year period, actually, we have already launched quite a few titles.

[Yu Gong, Founder, Director, and CEO at iQIYI]

[Foreign language] The next two tasks are focusing on hopefully we can increase the inventory of mini-drama advertisement, also to enhance the monetization capabilities of mini-dramas. We would like to actually explore more advertising budget and also the new formats of advertising budget from this ad space. Last but not least, we will try to increase more investment in terms of user growth. Hopefully, we can attract more users to bring them to iQIYI to watch mini-dramas. [Foreign language] thank you. And that's it.

[Lei Zhang, Analyst at Bank of America Securities]

Thank you.

[Operator]

Your next question comes from Lincoln Kong with Goldman Sachs. Please go ahead.

[Lincoln Kong, Stock Analyst at Goldman Sachs]

[Foreign language] So thank you, Management, for taking my questions. My question is about the membership business. So regarding the recent content performance and how is the impact from those measures like Family Card or Star Diamond member extra content gifts on the impact on the membership business, as well as the strategy for full year 2025. Thank you.

[Yuqiao Duan, SVP of Membership Business at iQIYI]

Thank you, Lincoln. We'll invite Mr. Yuqiao Duan, the Senior Vice President of Membership Business, to take this question. Go ahead. [Foreign language] Since late October 2024, the continuous programming of premium titles or dramas has actually driven the membership business to a turning point, resulting in a significant increase in subscribing members. We actually rolled out several key initiatives since 2024. [Foreign language] We have reclassified our membership offerings into two primary categories: one for individuals and for families.

[Yuqiao Duan, SVP of Membership Business at iQIYI]

For individuals, there are actually two plans with no large-screen access, and for families, there are three plans with large-screen access. The membership rights and benefits are divided into three tiers: basic, standard, and premium. The new reclassified membership system actually allows users seeking either high cost-effectiveness or premium benefits experience to find products that suit their needs. [Foreign language] Second, we strengthened the crackdown on password sharing while introducing the Family Card service as an authorized sharing solution, effectively expanding the membership base and improving member retention.

[Yuqiao Duan, SVP of Membership Business at iQIYI]

[Foreign language] The third point that we did was we enhanced the benefits for premium members.The newly added benefits for S Diamond members, the limited complimentary early access to the express packages that provide early access to finales of our premium content, increased the value and perception of premium membership. After the launch of the new benefits, the number of S Diamond members has largely increased, with most of the new members attracted by the express package benefits. The existing S Diamond members have also been more active on the platform.

[Yuqiao Duan, SVP of Membership Business at iQIYI]

[Foreign language] We have a series of areas that we're focusing on for 2025. First, we'll continuously enhance the stability and continuity of our top-tier premium content programming and strengthen the pre-release promotion for upcoming content, establish mind share among users to improve their loyalty to iQIYI. [Foreign language] Second, we'll focus on building a mass-market membership service to increase membership scale and revenue.While focusing on attracting new members, we'll prioritize improving member retention and user engagement. And also, we'll increase the revenue scale and revenue share from external channels.

[Yuqiao Duan, SVP of Membership Business at iQIYI]

[Foreign language] Third, we will systematically continue to optimize the membership product and operations, including further refining the membership product system and pricing strategy, also enriching membership benefits and perks, improving the member user experience, and also crafting a membership model tailored for mini-dramas. [Foreign language] Fourth, we will strengthen the quality of membership services and iQIYI brand, enhance the perception of membership benefits and privileges, and also improve the overall net promoter score for iQIYI members. [Foreign language] Thank you.

[Operator]

Your next question comes from Maggie Yee with CLSA. Please go ahead.

[Maggie Yee, CFA at CLSA]

[Foreign language] Just now we heard about some encouraging performance in overseas markets in terms of both membership revenue and subscribing members. Could you please provide an update on the core strategy for our overseas business in 2025? Thank you.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

Thank you, Maggie. We'll invite Mr. Xianghua Yang, the Senior Vice President of our overseas business, to take this question. Go ahead. [Foreign language] The overall strategy for business outside of mainland China in 2025 is to pursue rapid revenue growth while maintaining profitability.[Foreign language] In the past few years, we have focused on several markets, including Southeast Asia, Hong Kong, Macau, and North America, and have achieved satisfactory development. For 2025, we have set different strategies for different markets.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

[Foreign language] For the markets where we entered since the early days, such as Thailand, Malaysia, and North America, our goal is to achieve both profit and revenue growth. [Foreign language] For the new export markets, such as Indonesia and South Korea, the focus is on revenue growth for 2025. [Foreign language] At the same time, we're also planning and preparing for the long-term growth of our overseas business, hoping to break into new markets this year, such as the Middle East, the Spanish-speaking Latin American region, and also the Portuguese-speaking market in Brazil.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

[Foreign language] For content-wise, we see that the programming for the C-dramas in 2025 will be much better than in 2024, and the content types are actually more suitable for the preferences of our overseas viewers compared to the content we launched last year. [Foreign language] In terms of local dramas, local content, after years of effort, we have accumulated some experience, and we'll continue to invest in markets such as Thailand and Malaysia, which will serve as an important support for our user growth in the future.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

[Foreign language] For content promotion, advertising placement, and also the collaboration with telecom carriers and other channels, these are the most important ways to unleash the content value and acquire more members. In 2025 we will increase investment in these aspects in more markets. So in 2025, we will increase our investment in these areas in more markets.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

[Foreign language] Overall speaking, for 2024, overseas business in terms of the membership growth and also revenue also maintained a relatively high speed of growth. Since December 2024, with the ongoing launch of high-quality content, the overall growth rate of our business has been even faster than 2024, which gives us more confidence in the revenue growth for 2025.[Foreign language] Thank you.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

That concludes our question and answer session. I'll now hand back to management for closing remarks.

[Xianghua Yang, SVP of Overseas Business at iQIYI]

Thank you, everyone, for participating in the call today. If you have any questions, don't hesitate to contact us. Thank you, and see you next quarter. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Participants

Executives

• Xiaohui Wang, CCO
• Jun Wang, CFO
• Yu Gong, Founder, Director, and CEO
• Chang Yu, Director of Investor Relations
• Xianghua Yang, SVP of Overseas Business
• Yuqiao Duan, SVP of Membership Business

Analysts

• Company Representative
• Xueqing Zhang, Analyst at CICC
• Maggie Yee, CFA at CLSA
• Lincoln Kong, Stock Analyst at Goldman Sachs
• Lei Zhang, Analyst at Bank of America Securities