iQIYI, Inc. (NASDAQ: IQ) ("iQIYI" or the "Company"), an innovative
market-leading online entertainment service in China, today
announced its unaudited financial results for the second quarter
ended June 30, 2018.
Second Quarter 2018
Highlights
- Total revenues were RMB6.2 billion (US$932.5 million1),
representing a 51%2 increase from the same period in 2017.
- Operating loss was RMB1.3 billion (US$200.7 million) and
operating loss margin was 22%, compared to operating loss of
RMB990.7 million and operating loss margin of 24% in the same
period in 2017.
- Net loss attributable to iQIYI was RMB2.1 billion (US$316.9
million), compared to RMB953.2 million in the same period in 2017.
Diluted net loss attributable to iQIYI per ADS was RMB3.01
(US$0.45).
- The number of total subscribing members were 67.1 million as of
June 30, 2018, representing a 75% increase from 38.3 million as of
June 30, 2017. The number of paying subscribing members were 66.2
million as of June 30, 2018.
“We are pleased to deliver another strong
quarter of financial and operational results,” commented Dr. Yu
Gong, Founder, Director and Chief Executive Officer of iQIYI.
“Supported by our vast library of premium content, and the premiere
of a series of highly popular self-produced content, our membership
and advertising businesses both generated robust growth during the
quarter, with the total number of subscribing members reaching a
new record high. Looking ahead, we will continue to invest in
advanced technology, expand the breadth and depth of our content
offerings and nurture our entertainment ecosystem, as we pursue our
innovative and diversified monetization model that fully leverages
our premium content and IP value.”
“Our second quarter top-line growth came in
above our expectations with total revenues increasing 51%
year-over-year,” commented Xiaodong Wang, Chief Financial Officer
of iQIYI. “We are encouraged to see monetization efficiency
continuing to improve across our various business lines, driven
primarily by the strength of our self-produced content and a number
of operational efficiency enhancing initiatives we rolled out
during the quarter. We believe we are well on track to execute on
our corporate strategy and generate long-term sustainable value to
our shareholders.”
______________________________________________
Footnotes:[1] This announcement contains translations of certain
RMB amounts into U.S. dollars at specified rates solely for the
convenience of the reader. Unless otherwise noted, all translations
from RMB to U.S. dollars are made at a rate of RMB6.6171 to
US$1.00, the effective noon buying rate as of June 29, 2018, in The
City of New York for cable transfers of RMB as certified for
customs purposes by the Federal Reserve Bank of New York.
[2] Starting from January 1, 2018, iQIYI adopted
the new revenue accounting standard (ASC 606), which reclassifies
value added tax from cost of revenues to net against revenues. To
increase comparability of operating results and help investors
better understand our business performance and operating trends,
2017 net revenues have been used to calculate all percentage
changes in revenues and operating loss margins. 2017 net revenues
are defined as gross revenues under legacy GAAP after the deduction
of value added-taxes, which is presented on the same basis as 2018
and going forward.
Second Quarter 2018 Financial
Results
Total revenues reached RMB6.2 billion (US$932.5
million), representing a 51% increase from the same period in
2017.
Membership services revenue was RMB2.5 billion
(US$374.0 million), representing a 66% increase from the same
period in 2017. The increase was primarily attributable to the
growth in subscribing members, driven by our premium content as
well as various operational initiatives during the quarter.
Online advertising services revenue was RMB2.6
billion (US$395.6 million), representing a 45% increase from the
same period in 2017. The increase was primarily due to improved
efficiency in the monetization of brand advertising business,
driven by our strong and expanding library of self-produced
content, especially our self-produced variety shows during the
quarter, as well as the strong momentum of our in-feed advertising
business.
Content distribution revenue was RMB539.4
million (US$81.5 million), representing an 18% increase from the
same period in 2017. The increase was primarily due to several
major film titles that we sub-licensed to external partners in the
quarter.
Other revenues were RMB538.9 million (US$81.4
million), representing a 62% increase from the same period in 2017.
The increase was primarily driven by strong performance across
various vertical business lines.
Cost of revenues was RMB6.1 billion (US$922.9
million), representing a 47% increase from RMB4.2 billion, after
deducting the value added tax in the same period in 2017. The
increase was primarily driven by content costs due to higher
amortization of self-produced content and licensed copyrights as we
continue to invest in building our comprehensive and diversified
content library. Content costs as a component of cost of revenues
were RMB4.7 billion (US$709.0 million), representing a 47% increase
from the same period in 2017.
Selling, general and administrative expenses
were RMB949.9 million (US$143.6 million), representing a 51%
increase from the same period in 2017. The increase was primarily
due to increased channel marketing expenses as well as content
related promotion and branding expenses.
Research and development expenses were RMB441.5
million (US$66.7 million), representing a 50% increase from the
same period in 2017, primarily due to increased headcount in
research and development.
Operating loss was RMB1.3 billion (US$200.7
million), compared to operating loss of RMB990.7 million in the
same period in 2017. Operating loss margin was 22%, compared to
operating loss margin of 24% in the same period in 2017.
Total other expenses was RMB768.3 million
(US$116.1 million), compared to total other income of RMB38.2
million during the same period of 2017. In the second quarter of
2018, we recognized RMB778.0 million (US$117.6 million) of foreign
exchange loss arising from the depreciation of the Renminbi against
the U.S. dollar.
Loss before income taxes was RMB2.1 billion
(US$316.8 million), compared to RMB952.5 million in the same period
in 2017.
Income tax expenses were RMB4.9
million (US$0.7 million), compared to income tax expense of
RMB0.7 million in the same period in 2017.
Net loss attributable to iQIYI was RMB2.1
billion (US$316.9 million), compared to RMB953.2 million in the
same period in 2017. Diluted net loss attributable to iQIYI per ADS
was RMB3.01 (US$0.45) for the second quarter of 2018.
As of June 30, 2018, the Company had cash, cash
equivalents and short-term investments of RMB13.0 billion (US$2.0
billion).
Financial Guidance
For the third quarter of 2018, iQIYI expects
total net revenues to be between RMB6.70 billion (US$985.3
million3) and RMB6.98 billion (US$1.03 billion), representing a 43%
to 49% increase from the same period in 2017. This forecast
reflects iQIYI's current and preliminary view, which is subject to
substantial uncertainty.
____________________________________________________
Footnote:[3] The translations from RMB to U.S. dollars for the
expected revenues in the third quarter of 2018 are made at a rate
of RMB6.80 to US$1.0, the rounded noon buying rate as of July 20,
2018, in The City of New York for cable transfers of RMB as
certified for customs purposes by the Federal Reserve Bank of New
York.
Conference Call Information
iQIYI's management will hold an earnings
conference call at 8:00 PM on July 31, 2018, U.S. Eastern Time
(8:00 AM on August 1, 2018, Beijing/Hong Kong Time). Dial-in
details for the earnings conference call are as follows:
International |
|
|
+65 67135090 |
China |
|
|
4006 208038 |
US |
|
|
+1 845 675 0437 |
UK |
|
|
+44 2036 214779 |
Hong Kong |
|
|
+852 3018 6771 |
Passcode: 3476315 |
|
|
|
A telephone replay of the call will be available
two hours after the conclusion of the conference call through
August 8, 2018.
Dial-in
numbers for the replay are as follows: |
|
|
|
|
International
Dial-in |
|
|
+61 2 8199 0299 |
Passcode: |
|
|
3476315 |
A live and archived webcast of this conference
call will be available at http://ir.iqiyi.com.
About iQIYI,
Inc.
iQIYI, Inc. is an innovative market-leading
online entertainment service in China. Its corporate DNA combines
creative talent with technology, fostering an environment for
continuous innovation and the production of blockbuster content.
iQIYI’s platform features highly popular original content, as well
as a comprehensive library of other professionally-produced
content, partner-generated content and user-generated content. The
Company distinguishes itself in the online entertainment industry
by its leading technology platform powered by advanced AI, big data
analytics and other core proprietary technologies. iQIYI attracts a
massive user base with tremendous user engagement, and has
developed a diversified monetization model including membership
services, online advertising services, content distribution, live
broadcasting, online games, IP licensing, online literature and
e-commerce etc.
Safe Harbor Statement
This announcement contains forward-looking
statements. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of
1995. These forward-looking statements can be identified by
terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates," "confident" and
similar statements. Among other things, the Financial Guidance and
quotations from management in this announcement, as well as iQIYI's
strategic and operational plans, contain forward-looking
statements. iQIYI may also make written or oral forward-looking
statements in its periodic reports to the U.S. Securities and
Exchange Commission, in its annual report to shareholders, in press
releases and other written materials and in oral statements made by
its officers, directors or employees to third parties. Statements
that are not historical facts, including but not limited to
statements about iQIYI's beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward-looking statement, including but not limited to the
following: iQIYI's strategies; iQIYI's future business development,
financial condition and results of operations; iQIYI's ability to
retain and increase the number of users, members and advertising
customers, and expand its service offerings; competition in the
online entertainment industry; changes in iQIYI's revenues, costs
or expenditures; Chinese governmental policies and regulations
relating to the online entertainment industry, general economic and
business conditions globally and in China and assumptions
underlying or related to any of the foregoing. Further information
regarding these and other risks is included in the Company’s
filings with the Securities and Exchange Commission. All
information provided in this press release and in the attachments
is as of the date of the press release, and iQIYI undertakes no
duty to update such information, except as required under
applicable law.
For more information, please contact:
Investor RelationsiQIYI, Inc.+ 86 10 8264 6585
ir@qiyi.com
|
iQIYI, INC. |
|
Condensed Consolidated Statements
of Income |
|
(In RMB thousands, except
for number of shares and per share data) |
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
June 30, |
|
|
March 31, |
|
|
June 30, |
|
|
|
|
|
2017 |
|
|
2018 |
|
|
2018 |
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Membership services |
|
|
|
1,579,530 |
|
|
2,094,985 |
|
|
2,474,474 |
|
Online advertising services |
|
|
|
1,908,453 |
|
|
2,110,670 |
|
|
2,617,507 |
|
Content distribution |
|
|
|
486,263 |
|
|
266,670 |
|
|
539,359 |
|
Others |
|
|
|
352,073 |
|
|
404,980 |
|
|
538,891 |
|
Total revenues |
|
|
|
4,326,319 |
|
|
4,877,305 |
|
|
6,170,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
(4,394,981 |
) |
|
(4,848,219 |
) |
|
(6,106,729 |
) |
Selling, general and administrative |
|
|
|
(627,623 |
) |
|
(704,237 |
) |
|
(949,934 |
) |
Research and development |
|
|
|
(294,371 |
) |
|
(387,329 |
) |
|
(441,482 |
) |
Total operating costs and expenses |
|
|
|
(5,316,975 |
) |
|
(5,939,785 |
) |
|
(7,498,145 |
) |
Operating loss |
|
|
|
( 990,656 |
) |
|
(1,062,480 |
) |
|
(1,327,914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
16,390 |
|
|
4,726 |
|
|
25,615 |
|
Interest expenses |
|
|
|
(82,386 |
) |
|
(8,325 |
) |
|
(9,562 |
) |
Foreign exchange gain/(loss), net |
|
|
|
84,828 |
|
|
474,155 |
|
|
(777,968 |
) |
Gain/(loss) from equity method investments |
|
|
|
5 |
|
|
(99 |
) |
|
(896 |
) |
Other income/(expense), net |
|
|
|
19,354 |
|
|
195,780 |
|
|
(5,468 |
) |
Total other income /(expense), net |
|
|
|
38,191 |
|
|
666,237 |
|
|
(768,279 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
|
(952,465 |
) |
|
(396,243 |
) |
|
(2,096,193 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
(705 |
) |
|
(509 |
) |
|
(4,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
(953,170 |
) |
|
(396,752 |
) |
|
(2,101,051 |
) |
Net
loss attributable to noncontrolling interests |
|
|
|
- |
|
|
(1,059 |
) |
|
(4,120 |
) |
Net loss attributable to iQIYI, Inc. |
|
|
|
(953,170 |
) |
|
(395,693 |
) |
|
(2,096,931 |
) |
Accretion of redeemable convertible preferred shares |
|
|
|
(720,980 |
) |
|
(289,363 |
) |
|
(9,627 |
) |
Net loss attributable to ordinary
shareholders |
|
|
|
(1,674,150 |
) |
|
(685,056 |
) |
|
(2,106,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share for Class A and Class B ordinary
shares: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
(4.89 |
) |
|
(1.97 |
) |
|
(0.43 |
) |
Diluted |
|
|
|
(4.89 |
) |
|
(1.97 |
) |
|
(0.43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per ADS (1 ADS equals 7 Class A ordinary
shares): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
- |
|
|
- |
|
|
(3.01 |
) |
Diluted |
|
|
|
- |
|
|
- |
|
|
(3.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and Class B ordinary
shares used in net loss per share computation: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
342,548,237 |
|
|
347,381,732 |
|
|
4,931,100,562 |
|
Diluted |
|
|
|
342,548,237 |
|
|
347,381,732 |
|
|
4,931,100,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iQIYI, INC. |
|
Condensed Consolidated Balance
Sheets |
|
(In RMB thousands, except for
number of shares and per share data) |
|
|
|
December 31, |
|
|
June 30, |
|
|
2017 |
|
|
2018 |
|
|
RMB |
|
|
RMB |
|
|
(Audited) |
|
|
(Unaudited) |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
733,010 |
|
|
8,281,338 |
Short-term investments |
|
779,916 |
|
|
4,752,114 |
Accounts receivable |
|
2,235,384 |
|
|
2,423,492 |
Prepayments and other assets |
|
1,123,372 |
|
|
2,699,214 |
Amounts due from related parties |
|
9,979 |
|
|
78,645 |
Licensed copyrights, net |
|
818,867 |
|
|
1,163,963 |
Total current assets |
|
5,700,528 |
|
|
19,398,766 |
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
|
Fixed assets, net |
|
1,248,968 |
|
|
1,404,619 |
Long-term investments |
|
567,887 |
|
|
1,242,548 |
Deferred tax assets, net |
|
11,380 |
|
|
11,380 |
Licensed copyrights, net |
|
4,558,083 |
|
|
5,776,928 |
Intangible assets, net |
|
428,005 |
|
|
1,000,951 |
Produced content, net |
|
1,564,279 |
|
|
3,222,020 |
Prepayments and other assets |
|
2,845,662 |
|
|
3,778,867 |
Goodwill |
|
3,276,107 |
|
|
3,276,107 |
Total non-current assets |
|
14,500,371 |
|
|
19,713,420 |
|
|
|
|
|
|
Total assets |
|
20,200,899 |
|
|
39,112,186 |
|
|
|
|
|
|
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’
(DEFICIT)/EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
|
7,041,304 |
|
|
9,067,544 |
Amounts due to related parties |
|
130,099 |
|
|
238,715 |
Customer advances and deferred revenue |
|
1,633,649 |
|
|
1,853,312 |
Short-term loans |
|
299,374 |
|
|
632,619 |
Long-term loans, current portion |
|
10,000 |
|
|
10,000 |
Accrued expenses and other liabilities |
|
2,511,186 |
|
|
2,982,311 |
Total current liabilities |
|
11,625,612 |
|
|
14,784,501 |
Non-current liabilities: |
|
|
|
|
|
Long-term loans |
|
284,000 |
|
|
279,000 |
Deferred tax liabilities |
|
2,255 |
|
|
2,229 |
Amounts due to related parties |
|
- |
|
|
650,000 |
Other non-current liabilities |
|
6,432 |
|
|
40,982 |
Total non-current liabilities |
|
292,687 |
|
|
972,211 |
|
|
|
|
|
|
Total liabilities |
|
11,918,299 |
|
|
15,756,712 |
|
|
|
|
|
|
Mezzanine equity: |
|
22,601,664 |
|
|
- |
Shareholders’ (deficit)/equity: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares |
|
23 |
|
|
- |
Class A
Ordinary shares |
|
- |
|
|
137 |
Class B
Ordinary shares |
|
- |
|
|
183 |
Additional
paid-in capital |
|
600,834 |
|
|
39,204,839 |
Accumulated
deficit |
|
(15,016,867 |
) |
|
(16,841,429) |
Accumulated
other comprehensive income |
|
93,126 |
|
|
989,592 |
Non-controlling interests |
|
3,820 |
|
|
2,152 |
Total iQIYI, Inc. shareholders’
(deficit)/equity |
|
(14,319,064 |
) |
|
23,355,474 |
|
|
|
|
|
|
Total liabilities, mezzanine equity and shareholders’
(deficit)/equity |
|
20,200,899 |
|
|
39,112,186 |
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