iQIYI Q1 2025 Earnings Report

iQIYI EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.05
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: N/A

iQIYI Revenue Results

• Actual Revenue: $988.19 million
• Expected Revenue: $7.10 billion
• Beat/Miss: Missed by -$6.11 billion
• YoY Revenue Growth: N/A

iQIYI Announcement Details

• Quarter: Q1 2025
• Date: 5/21/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 21, 2025
• Conference Call Time: 7:00AM ET

iQIYI (NASDAQ:IQ), Inc., together with its subsidiaries, provides online entertainment video services in the People's Republic of China. It offers various products and services, including online video, online games, online literature, animations, and other products. The company operates a platform that provides a collection of internet video content, such as professionally produced content licensed from professional content providers and self-produced content. It also offers membership, online advertising, content distribution, and live broadcasting services. In addition, the company operates iQIYI Show, a live broadcasting platform that enables users to follow their favorite hosts and shows in real time through live broadcasting; and iQIYI Lite that offers an easy and quick access to the personalized videos based on their user preferences. Further, it is involved in the talent agency and IP licensing activities, as well as engages in developing a video community app. The company was formerly known as Qiyi.com, Inc. and changed its name to iQIYI, Inc. in November 2017. iQIYI, Inc. was incorporated in 2009 and is headquartered in Beijing, China. iQIYI, Inc. is a subsidiary of Baidu, Inc.

iQIYI Q1 2025 Earnings Call Transcript

Key Takeaways

• Solid Q1 performance with total revenues up 9% sequentially to RMB7.2 billion and membership services revenue up 7%, driven by popular long-form dramas.
• Online advertising revenue fell 7% sequentially to RMB1.3 billion amid macroeconomic headwinds and typical Q1 seasonality pressures.
• Rapid growth in micro dramas—over 15,000 titles now available—has tripled heavy-user engagement since December and management is exploring advertising and e-commerce monetization.
• Company is optimizing content strategy by producing shorter, faster-paced premium episodes, leveraging AI features like iJump, and aiming for greater production cost efficiency.
• Overseas business grew revenue over 30% YoY with C-dramas gaining global traction, though international contribution remains a modest share of total revenues.

Presentation

[Operator]

Thank you for standing by, and welcome to the iQiyi First Quarter twenty twenty five Earnings Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. I would now like to hand the conference over to Ms. Chang Yu. Please go ahead.

[Chang Yu, IR Director at iQIYI]

Thank you, operator. Hello, everyone, and thank you for joining IT's first twenty twenty five earnings conference call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.ike.com. On the call today are Mr. Yu Zhong, our Founder, Director and CEO Mr. Jun Wang, our CFO Mr. Xiaofei Wang, our CCO, Chief Content Officer Mr. Youchaoduan, Senior Vice President of Unnecessary Business and Mr. Shang Pai Yang, Senior Vice President of Movies and Overseas Business and Mr. Gang Wu, Senior Vice President of Brand Advertising Business.

[Chang Yu, IR Director 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 and A session. Before we proceed, please note that the discussion today will contain forward looking statements made under the safe harbor provisions of The U. S.

[Chang Yu, IR Director at iQIYI]

Private Securities Litigation Reform Act of 1995. 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. ICE does not undertake any obligation to update any forward looking statements except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Hello everyone and thank you for joining us today. We delivered a solid first quarter gaining sequential growth in both total revenues and progress. This was built by a strong rebound in our long form premium content and strategic investments in vertical format macro dramas. IQIYI is rapidly cementing its position as a go to platform for users, making a seamless blend of long form and short form entertainment, creating exciting opportunities for future commercialization. And this will strengthen our confidence and commitment to drive even deeper upgrades across our business model and the content ecosystem in response to involving market and user demand.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

For the core long form video content, we are committed to delivering engaging and soft after story as we reflect in our strong lineup of top tier drama, notably drifting away Kaoban from our flagship Night On Shelter brand surpassed the 10,000 IT popularity in Dex Score, while the Demon Hunter's dramas, Will Do, and Moonlight Mystic. Alright? Baiyue Fansheng both achieved a score of over 9,600. Looking ahead, we are dedicated to focusing on premium content with a strong commercial value, while also upholding artist excellence. Additionally, we will further enhance our certain production mechanism to deliver shorter, faster paced and more habitat beating storytelling than resonates strongly with audiences. Through this user centric approach, we are confident in our ability to unleash our full creative potential and foster workforce content ecosystem. For micro dramas, we made notable progress on HD live. Micro dramas now rank second in terms of daily time spent and the first in the number of daily unique visitors.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

This clearly shows their growing appeal in captivating audiences, reinforcing our confidence in further unlocking their full potential. Moving forward, we are committed to expanding our microglomer portfolio, placing a strong emphasis on premium microgrammers by enhancing original production and acquisition capabilities. At the same time, we aim to effectively monetize their growing traffic through advertising and e commerce. Beyond our content ecosystem, we are leveraging technical innovation to improve user experience. Standout example is a launch of our AI powered iJump feature, PeelCast, which transforms how user engage with long form videos with a simple swipe up or down on their mobile screen.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Users can effortlessly escape between key highlights in each episode without missing any exciting moments, delivering a user centric, microglomerular like experience tailored to their fast paced viewing habits. Highlight points are generated by AI based videos and personalize the behaviors of each user. As all investors are aware, the market is becoming increasingly unpredictable as it continues to evolve. However, in such a volatile environment, the ability to create sustainable value is emerging as a real and valuable asset. With this in mind, we are wrapping up our investments in strategic area such as enriching our content ecosystem and enhancing the user experience.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Well, these investments may lead to short term costs that are designed to deliver long term benefits. Now, let's move on to the details of our core business segments. Starting with long form videos, which serve as the foundation of our content ecosystem. We maintain leadership in the score genre category as a current top spot in terms of total viewership market share during the quarter according to enlightened data. Our strong performance was highlighted by Brookstone in our general specific sales mode as we have now established five distinct signature brands, each featuring unique content genres.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

In the suspense genre, our light on shelter brand achieved a remarkable milestone with the release of Drifting Away. ChaoBi is first title to surpass the 10,000 IG popularity in DANI score. It also generated the third highest single episode revenue in our history, just behind Mega Heat, The Snow Cloud, Konyo and my heroic husband, Fei Xu. In the romance genre of Labour Arms Centre, Bianney and Chutong brand made notable progress in this quarter, expanding our portfolio of content for female audiences with release of four captivating titles. Notably, our in house produced fantasy drama Modern Life Mystic.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Baiyue Fengxion again, an impressive popularity in that score of over 9,600. Our modern romance drama, The Best of Scene, was not only a success in the domestic market, but also the best performing modern C drama, our overseas platform, C drama with Chinese drama. Our masterpiece theater, Danyaju Town, sports licensing, sports licensing, sports adaption and realistic stories, debuted its first title North War. This genre adapted from a modern literary track wide winning novel has further strengthened our reputation for top notch drama. Lastly, our microcosm filter, and the last arm theater, Xiaodouyu Chang, a focus on innovative drama series with few episodes and on comedy, respectively.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Building on the success of past hits such as To the Wonder, Without A Time and The Great Nomadie, I want to a follow-up, this brand are set to release an exciting lineup this year. Turning to movies. We continued to dominate the category during the quarter with the highest view shape market share according to enlightened. Creaming content drives a strong long tail effect. Example exemplified by the success of Nezha two during Chinese New Year, The firm boosted viewership of the original Nezha, making it the most watched movie on our platform this quarter.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

In addition, our original production bleed forecast logo achieved a strong brand new and viewership especially among male users drawn to action and crime genres. So when it showed during the first quarter, our flagship multi phase IP become a former season three. Zhonggui effect made a strong comeback, sustaining strong traffic and a positive word-of-mouth. Our brand new IP, The Blooming Journey, Hero Fan Fun, excels with a peak popularity index score of over 8,000 attracting audiences in lower tier cities and among older audiences beyond commercial variety show viewers. In terms of animation during the first quarter, we continue to improve our production capability.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Key titles such as Super Cube, Changli Fang and the Rufu season group, Shui Lei generated positive user feedback during the quarter. Moving on to our content strategy and the pipeline. In our core drama category, our focus is on creating a well balanced content mix that aligns commercial success with taste excellence. While committed to three key genres, realistic, suspense and female focused drama to cater to past the pace of viewing habits, we are enhancing our content creation strategies. This includes reducing the episode cost for long form dramas and increasing the number of high quality short dramas with each episode lasting five to twenty minutes.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

This change well expands the value of diversity of our offering, enrich the user experience and drive deeper audience engagement. Our drama pipeline features an exceptional lineup of top tier content. The already released the Demon Hunter's romance and loving gathering widespread acclaim. Adding to the excitement, the highly anticipated field, Ping Tian Xian, a dream with vision a dream, Shu Yuan Ying Huang will be released soon in the success general. Our renowned lifetime cell program recently debuted Breaking the Shadow and Life for Life generation that can also look forward to upcoming release including justifiable defense, Zhengdao Hanmei, and Born with Luck, Peter Shangfan Zhen, adapted from the renowned novel Low IQ Crime.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Additionally, the new science fiction suspense drama What a Wonderful World, Taipei Nguyen, will be released shortly as well. Our lineup of realistic drama includes highly anticipated titles such as Swine, Slime, Sheng Wan Wu, and Gaoxing among others. For movies, we are increasing investments in operational production focusing on geological releases with strong box office potential. Notably, our original production, Momo, has already achieved the box office revenue of over RMB540 million. We have six more titles scheduled for the article release throughout the rest of the year, including the Shadow's Edge for phone drawing.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Additionally, we are boosting support for online movies with revenue sharing model. Our diverse lineup includes eight original online movies such as ultimate mission. Covering popular genre such as martial arts, comedy and action. For licensed theatrical movies, we launched several hits, including Legends of the Condor Ferals, and detective Chinatown Nineteen Hundred both of which have successfully their actual rounds during the Chinese New Year and are now performing well on our platform. For variety shows, we will maintain our focus on producing top quality programs while introducing exciting new content.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

This includes sequels to a beloved classic like and the Land of China Twenty Twenty Five. Alongside flash IPs such as Sing Asia, Yaozhou Xin Shen, and the reality show, Smell at You. Building on the success of the bromine journey. We also plan to launch a second season later in this year. For animation, we are dedicated to increasing revenue contribution from original productions, especially high quality Chinese animation.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

We also aim to broaden our collection of enduring serials and optimize our operations to maximize IP value. Major titles to be launched include animation over the Deep Y, Real, Embers, Moreover, we are excited to announce that the highly acclaimed Japanese animation One Piece controller has resumed airing for its dedicated fun days. For children's content, we will concentrate on IP commercialization and developed a comprehensive IP ecosystem that spans the entire lifecycle, offering all edge cloud services tailored to parent child audiences. Anticipated title include Princess Doran Yi Season four, Season four, the first bullet trap. Moving on to macro dramas, which have demonstrated a promising potential within our content ecosystem harnessing this powerful momentum.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

We are poised to amplify our investments in micro drama content and strengthening user acquisition efforts. We have three key objectives starting with addressing our user base and boosting business we see it by increasing micro dramas into our content ecosystem. Secondly, we perceive micro dramas as a catalyst for attracting new users and driving membership revenue growth, especially in under test lower tier cities and among older audience. Lastly, we are actively exploring monetization opportunities for our micro drama soon initiatives such as advertising and e commerce. We have successfully achieved the first objective by revamping our apps and rapidly expanding our micro drama of fellow to over 15,000 titles now.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

We have available for free and the other half inclusive to members. We backed us proficient differently in terms of design and targeted audiences. The main IG app focuses primarily on long form videos and the main uses subscription model with micro dramas serving as complementary value add. The IGLITE app primarily focus on free micro dramas and monetize them, soon advertising and e commerce. This meaningful progress has driven impressive growth in both daily viewing time and unique basis for microdramas with substantial increases of over 300110% respectively when comparing the April to last December.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

In the future, IGE Lite will be reprised as IGE macro dramas and we are confident that this transformation will tap into its full potential. We pioneered the concept of the dedicated Chinese New Year slate for microdramas released in 28 premium titles, hits like My Sweet Home, and Please Come Into My Park, by consistently delivering premium content, we are reinforcing our position as the go to plan for micro dramas. As the micro drama industry continues to evolve, the growing user demand for premium title aligns perfectly with our core strengths With expertise in premium content, trusted brand and a lawyer user base, we are uniquely positioned to capitalize on this trend, coupled with our extensive resources, talent, teams and advanced technologies, they deliver unique value to the microglomerate industry. To that end, we are continuously enhancing our ability to produce original micro drama while exploring innovative genres to broaden our content offering. Recent initiatives include notable projects such as adapting around 100 classic Hong Kong movies and producing an extensive series of legal educational content, all to be developed as micro dramas. Additionally, we are integrating technologies like AI and water production to improve both efficiency and quality. Building on these initiatives, we are collaborating with partners to foster a thriving industry ecosystem. In March, we hosted the first microglomerate, light and thermal, bring together hundreds of foreign made actors, creators, and industry professionals. The event sparked a meaningful interest from our attendees eager for a future collaboration.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

As the first ever ceremony dedicated to the microgamma industry, it not only enhanced our profile, but also reinforced our role as a key industry player. Moving on to membership services, revenue regained growth momentum during the quarter, increasing 7% sequentially to RMB4.4 billion. This was healthy growth in subscriber base in Q1, supported by the strong performance of key titles such as Shifting Away, Moonlight, Mystic, North War. Average revenue per member remained healthy, thanks to our improved operating initiatives. Our strategy is focused on developing a membership business that caters to a broad audience, expands our subscriber base, delivers enhanced value and ultimately accelerate revenue growth.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

As the core of membership business, exceptional content. We strive to boost both member acquisition and retention by maintaining consistent to low or premium long form content and engaging micro commerce. We continue strengthening our membership plans, deliver delivering greater value to our members. We are refining product position, comparing to connect with our broader user base, The family oriented premium ad segment plan saw excellent growth after we introduced free unlimited express package generally benefits. Meanwhile, our ad supported basic membership plan designed to offer exceptional value at a lower price reached historic adoption high.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Younger generation and users from low tier cities live this third in new members with many joining as the first time subscribers. We are focused on enhancing member value through initiatives that boost loyalty and drive upgrades. Long term members now enjoy greater discounts while premium F Diamond members receive free Express package to drive conversions with expanded options like express package, contest the experience programs, who purchases gift cards and bundled membership plans with added benefits. These steps make all membership services more attractive and valuable supporting value growth and strong membership community. Moving on to advertising business.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Advertising revenue in the first quarter decreased sequentially to RMB1.3 billion other than the macro pressure Q1 is typically low season compared to Q4. For brand our top tier dramas and the variety shows remain a strong draw for advertisers. With content driven ads contributed over half of the revenue. Notably, the sequel to our classic IP become a father suite leader advertising sales, where all the new IP, a blooming journey and the fantasy drama more than mystic generated widespread positive feedback. Looking ahead, brand ads are showing encouraging signs of our potential rebound driven by premium content.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

We plan to drive ourselves by leveraging premium dramas and the generous specific sales rep brands. For YT shows, we have our focus on delivering high impact projects and expanding sequel opportunities for classic IP. Additionally, we aim to launch a mining type, mini variety shows, micro dramas, customized advertising products, providing innovative and tailored advertising solutions. On the performance ad side, we captured badges from new high potential customers in the internet services and education sectors, further diversifying our advertising time surveys. In addition, incorporating AI into advertising content creation has boosted ROI by over 20% compared to apps developed without AI.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

The future focus is on continuously enhancing our technologies and the platform capabilities to drive new revenue growth across Internet services, e commerce, gaming and education. Furthermore, we plan to seize growth opportunities in micro dramas and deepen the integration of AI maximize monetization efficiency. Our commitment to enhancing ad efficiency is further demonstrated by the recent launch of our AI driven Qiju ad placement platform by integrating resources from both our long form and micro drama ecosystem. This platform empowers both brand and performance ads with sophisticated smart marketing solutions. Moving on to technology and products, we continue to advance video production through industrialization, enhancing both efficiency and the creativity.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

For example, by scaling up the reuse of digital assets in major original dramas like Southern Artemis Dongs. We have largely reduced the production time and cost without compromising quality. Moreover, our cutting edge tech to speech TTS solving solutions designed to combine emotions of same city, has already been applied to English language for both long form and macro dramas. On the user front, we are harnessing those AI to redefine the entertainment experience. In addition to newly launched iJump feature mentioned earlier, we also introduced other AI powered products to enhance user engagement.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Our AI powered chatbot platform, PaoDongWar, launched last April, features around 1,000 AI characters from our popular IPs and have engaged with users of over 1,000,000, one hundred million times. Recently. We introduced the personal AI assistant, Touhou, within the platform. Which users can use to discover content, discuss plot, and control playback. Additionally, we launched our senior mode feature, either for motor users, complementing our earlier kid mode designed for younger audiences.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Moving on to our business performance in regions outside of Mainland China. We maintained strong growth momentum in the first quarter with total revenues increasing by over 30% year over year and the average daily number of subscribing members reaching new high. Moreover, we are thrilled to see C dramas gaining traction with our wider global audiences. According to Google Trends data, worldwide search for C drama recently reached a five year high even surpassing first for Korean drama. Our original production have planned a key role in this growing international appear With four of the top 10 overseas drama in the past six months coming from iQIYI, our modern romance drama, the best scene, best rockers on our international platform is establishing a new revenue benchmark for this genre.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Additionally, our original Chinese animation Super Clothes also achieved the highest single day revenue for Chinese animation within the first week of its overseas release. The influence of our premium content from advertising revenues by 40% year over year. Our original Thai drama, Gale Boy gained a substantial traction from brand advertisers, while our Chinese variety show, Become a Farmer also drew interest from overseas clients looking ahead. We are focused on expanding our investment in our original production to create high quality content tailored to international audiences, while integrating micro dramas into our global portfolio. At the same time, we aim to deepen collaborations with local partners and further enhance our brand influence across key markets.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Last but not least, iQIYI consistently pushed the boundaries of business innovation as evidenced by our pursuit of new opportunities and exploration of untapped horizons. We are leveraging cutting edge digital technologies to seamlessly integrate all IPs, extending their lifecycle and unlocking greater commercial potential. We recently expanded our footprint to offline Experience Park, the first IT land is set to open in Yangzhou this year, with a second new project underway in Kaifeng. In addition, our VR immersive centers are expanding rapidly, feature popular IPs such as Luoyang, Strange Tale of Tang Dynasty, and The Love Between Fell and Devoke, Tang Zuan. These VR experiences are now available in over 50 stores across nearly 30 cities.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

We believe this immersive entertainment experiences will deepen user engagement with our content and IPs. On the e commerce front, the rest of new content formats, such as micro dramas, combined with consumption scenario driven by vertical content has a significant opportunity in the sector to cultivate the capacity to capitalize on these opportunities, we have launched a trail of operations for IT e commerce by leveraging our robust IP portfolio, extensive artist resources and high quality member base. We hold distinct advantages in this space. This year, we are concentrating on building a solid foundation for content driven e commerce with a goal of driving accelerated growth and a superb up in the year ahead. In summary, as the video entertainment industry continues to evolve, we remain committed to investing in our content ecosystem and elevating the user experience.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

This strategic efforts will enable us to accelerate our content flywheel, strengthening resilience, laying a solid foundation for sustainable growth and deliver long term value to our stakeholders. Now, let me pass on to Qin to go through our financial performance.

[Jun Wang, Chief Financial Officer at iQIYI]

Thank you, Mr. Gong, and hello, everyone. Now let's take a look at the Q1 key numbers. In the first quarter, total revenues were RMB7.2 billion, up 9% sequentially. Membership services revenue reached RMB4.4 billion, up 7% sequentially.

[Jun Wang, Chief Financial Officer at iQIYI]

The increase was primarily driven by the strong performance of the long form dramas. For online advertising revenue decreased by 7% sequentially to RMB1.3 billion, primarily due to macro headwinds and seasonality. The accounting distribution revenue reached RMB628.7 million, up 55% sequentially, driven by more common titles distributed during the quarter. Other revenues increased by 24% sequentially to million, primarily driven by the growth of certain business lines. Moving on to costs and expenses.

[Jun Wang, Chief Financial Officer at iQIYI]

Content cost was RMB3.8 billion, up 10% sequentially, driven by higher number of premium dramas launched during the quarter. Total operating expenses were RMB 1,400,000,000.0, up 8% sequentially, primarily driven by higher marketing spendings. Turning to profits and cash flow. Our non GAAP operating income was RMB458.5 million, up 13% on a sequential basis. The non GAAP operating margin was 6%.

[Jun Wang, Chief Financial Officer at iQIYI]

The net cash provided by operating activities totaled RMB339 million, positive for twelve consecutive quarters. As of the end of the first quarter, we had cash, cash equivalents, restricted cash, short term investments and a long term restricted cash included in the prepayment and other assets, the total of RMB5.7 billion. In addition, the company had a loan of hundred and $22,500,000 to PHE recorded under amounts due from earlier parties. When reviewing our financial performance, the results of our efforts to optimize the capital structure are very clear. Over the past two years, we have prioritized this goal through a series of initiatives to lower our debt levels, optimize repayment schedules and make our debt restructure more manageable.

[Jun Wang, Chief Financial Officer at iQIYI]

Notably, the total the outstanding principal balance of our convertible bonds have sharply declined, dropping from billion at the end of first quarter back in 2023 to NT1.17 billion dollars this year. And under the current outstanding balance, there is million dollars as we mentioned earlier, were resolved through equivalent loan arrangements with a creditor. And we continue to optimize this debt structure, we have also achieved a substantial reduction in net interest expense, which has declined from RMB223 million to RMB155 million in the first quarter of this year, decreased by over 30% year over year. For detailed financial performance and data, please refer to our press release on our IR website. Now we will open the floor for Q and A.

[Operator]

Thank you. If you're on a speakerphone, please pick up the handset to ask your question. Please ask your question in Chinese first and then translate your questions into English. Please limit to one question at a time and rejoin the queue if you have additional questions. Your first question is from Shikun Zhang from CICC. Please go ahead.

[Xueqing Zhang, Analyst at China International Capital Corporation (CICC)]

Management for taking my question. My question about micro dramas. Gongfu mentioned some operational updates on micro dramas in the prepared remarks. Could management elaborate a little more on the latest developments of micro dramas and outline the key focus points for its future development. Thank you.

[Chang Yu, IR Director at iQIYI]

Our CEO, Mr. Gong, is answering this question. First of all, the users have gradually developed the habit of watching microdramas on ITE. We now have over 15,000 microdrama titles with free content and a member exclusive content that each accounted for about half. Our two mobile apps have also developed very distinct brand positioning.

[Chang Yu, IR Director at iQIYI]

The main IT app focuses on members watch for free model, primarily featuring paid micro dramas, while the IT Lite app primarily focuses on free micro dramas supported by advertising. This development, as I mentioned earlier, has driven rapid growth in both user time spent and user base for microdramas, while significantly enhancing the user stickiness. So when we compare the April to December of last year, the number of heavy microdramas users on IT, which are users who spend 80% of their time watching microdramas, have increased about three times. We just stepped into the micro drama field for not so long, and then just started our original production and seen some impressive progress. For example, a recently released original microdrama called In As Capable of Supporting Love ranked first in IT's micro drama Viewing Time for several consecutive weeks, and also successfully entered the ADX top 10 list, which is a well renowned list in the microdrama field.

[Chang Yu, IR Director at iQIYI]

So among the acquired top tier titles, for example, like My Sweet Home, and Please Come into My Heart each achieved revenue sharing milestone of over RMB 1,000,000 within a week. And these progress reflecting the high user recognition and appreciation of high quality microdramas. There's some background that I would like to share with everyone. For example, the content cost for each micro drama title on average cost less than RMB1 million. And the top tier titles usually will be less than RMB2 million per title.

[Chang Yu, IR Director at iQIYI]

So as such, within the week, the revenue share dollar RMB reached 1,000,000, is actually a very sizable and nice income. Going forward, there are two areas we're focusing on. First is to have more and better quality micro dramas, and second, to invest more on user acquisition, user In addition, we'll try more ways to monetize the growing traffic, for example, advertising and also e commerce.

[Operator]

The next question is from Vicky Wei from Citi.

[Vicky Wei, Vice President - Citi Internet Research team at Citi]

Thanks management for taking my question. Will management share some color about the change of long video content strategy and the rationale behind it? Thank you.

[Chang Yu, IR Director at iQIYI]

Thank you. I will invite our Chief Content Officer, Mr. Xiaopui, to answer this question. First of all, long form videos are the cornerstone of IT's content ecosystem, and our commitment to this remains unwavering. Dramas are at the core of long form videos.

[Chang Yu, IR Director at iQIYI]

So to better cater to involving user preferences, our future drama strategy will focus on two key areas. First of all, releasing high quality, shorter episodes of premium dramas, and second, producing more high quality short dramas with each episode lasting five to twenty minutes. Going forward, the total number of drama titles will increase, accompanied by enhanced content quality and greater diversity. This approach will not only improve the flexibility and stability of content scheduling, will also reduce reliance on individual titles and effective effectively mitigate risks. Thank you.

[Operator]

Thank you. The next question is from Maggie Yi from CLSA.

[Maggie Ye, Research Analyst at CLSA]

Would you please share more details on the latest of our overseas business, such as membership and content distribution as well? From financial perspective, what is current situation of the overseas business in terms of revenue and profit contribution? And how shall we expect from from the overs what shall we expect from overseas business in the next one to three years?

[Chang Yu, IR Director at iQIYI]

We started our overseas business in second half of twenty nineteen. And after that, we experienced three years of COVID. So there were some difficulties in terms of getting headcount and also travel plans to between Mainland China and overseas. So the development were actually quite lower than expectation. But after COVID, in the recent two years, the business has been going through a very rapid development phase.

[Chang Yu, IR Director at iQIYI]

But however, we do have some restrictions in terms of the financial resources. So there is some limitations to the development. In addition to what I mentioned in the opening remarks that we experienced very rapid growth in terms of the annual revenue growth and also subscriber count, etcetera, there are some very important progress we made, very importantly that we kind of figure out the right content mix for each region overseas. And also what can we do from the content mix to drive user growth and also to drive our revenue performance. And more importantly, in addition to that, we also figured out how we can really operate in each region.

[Chang Yu, IR Director at iQIYI]

For example, how we can promote content to acquire better user growth and also in terms of the user growth, how we can improve that as well. In terms of the content mix for our overseas business, Chinese content actually accounts for about half of the content and the other half are digital content. Based on the data that we collected, the Chinese video content actually, the value of that are increasing in the global market, which is very beneficial to our overseas business growth. Right now, currently, the revenue contribution from the overseas market is still at a relatively low percentage, but it also depends on the future investment into the overseas business, limited to, for example, the scale of our financial support and also the financing sources. So these are the areas where we look out for the overseas business.

[Chang Yu, IR Director at iQIYI]

The CFO just added to our CEO's comment. So what we took from the past few years are really valuable revenue growth as well as the right content mix as well as the operating takeaways from each market, and these are the key takeaways in the past few years. Of course, these are under a very disciplined investment cycle that we did in over the past few years as well. And from the management accounting perspective, the overseas business are profitable in the past couple of years. And in the future going forward, of course, maintaining our profitability is important.

[Chang Yu, IR Director at iQIYI]

However, it doesn't have to be a meaningful amount. What we want is to invest, take that profit and invest into the business. Hopefully, it will drive greater growth opportunities in the future.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Thank

[Operator]

you. There are no further questions at this time. I'll now hand back to management for closing remarks.

[Chang Yu, IR Director at iQIYI]

Thank you, everyone, for participating on the call today. And if you have any questions, don't hesitate to contact us. Thank you, and see you next quarter.

[Yu Gong, Founder, Chief Executive Officer and Director at iQIYI]

Thank you. Goodbye.

[Operator]

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

Participants

Executives

• Chang Yu, IR Director
• Yu Gong, Founder, Chief Executive Officer and Director
• Jun Wang, Chief Financial Officer

Analysts

• Xueqing Zhang, Analyst at China International Capital Corporation (CICC)
• Vicky Wei, Vice President - Citi Internet Research team at Citi
• Maggie Ye, Research Analyst at CLSA