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 third quarter
ended September 30, 2018.
Third Quarter 2018
Highlights
- Total revenues were RMB6.9 billion (US$1.0 billion1),
representing a 48%2 increase from the same period in 2017.
- Operating loss was RMB2.6 billion (US$377.3 million) and
operating loss margin was 37%, compared to operating loss of RMB1.1
billion and operating loss margin of 23% in the same period in
2017.
- Net loss attributable to iQIYI was RMB3.1 billion (US$457.3
million), compared to RMB1.1 billion in the same period in 2017.
Diluted net loss attributable to iQIYI per ADS was RMB4.34
(US$0.63).
- The number of total subscribing members was 80.7 million as of
September 30, 2018, over 98% of whom were paying subscribing
members. This compares to 42.7 million of total subscribing members
as of September 30, 2017, up 89% year over year.
“We continued to deliver solid results during
the third quarter backed by a set of strong user reach and
engagement metrics that further validates our leading position in
the industry,” commented Dr. Yu Gong, Founder and Chief Executive
Officer of iQIYI. “Our library of premium content continued to
excel, driving robust growth in subscriber number and membership
revenue. Our record-breaking drama series Story of Yanxi Palace
turned out to be a mega-hit for the entire summer, demonstrating
our strong capabilities and potentials in producing high-quality
premium content. Leveraging our extensive content offerings and
expanding distribution network, we are also continuously improving
and diversifying our business monetization. We remain dedicated to
applying advanced technology to further enhance our platform and
refine our ecosystem to generate long-term growth for
shareholders.”
“We had a good quarter with total revenues
increasing 48% year-over-year to RMB6.9 billion,” commented Mr.
Xiaodong Wang, Chief Financial Officer of iQIYI. “Membership
services performed particularly well and became the biggest revenue
contributor for the Company. While we faced some margin pressure
during the quarter due to higher investment in content, we saw this
as necessary and within our expectations as we are going through a
transition period toward building an optimized and healthier
content ecosystem which will position us well for the future.”
______________________________________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 RMB6.8680 to US$1.00, the effective
noon buying rate as of September 28, 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.
Third Quarter 2018 Financial
Results
Total revenues reached RMB6.9 billion (US$1.0
billion), representing a 48% increase from the same period in
2017.
Membership services revenue was RMB2.9 billion
(US$415.3 million), representing a 78% increase from the same
period in 2017. The increase was primarily attributable to the
robust growth in the number of subscribing members, driven by our
premium content, especially our self-produced blockbuster titles,
as well as various operational initiatives during the quarter.
Online advertising services revenue was RMB2.4
billion (US$348.9 million), representing a 4% decrease from the
same period in 2017. The decrease was primarily due to the impact
of FIFA World Cup and recent regulation headwinds, which resulted
in diverted or tightened advertiser budget.
Content distribution revenue was RMB834.6
million (US$121.5 million), representing a 220% increase from the
same period in 2017. The significant increase was primarily
attributable to a number of premium content titles that we
distributed during the quarter.
Other revenues were RMB831.1 million (US$121.0
million), representing a 157% increase from the same period in
2017. The increase was driven by strong performance across various
vertical business lines, and in particular, the consolidation of
Skymoons, a mobile game company we acquired in mid-July 2018.
Cost of revenues was RMB7.7 billion (US$1.1
billion), representing a 66% increase from RMB4.6 billion, which
was the cost of revenues 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 licensed copyrights and more
self-produced content as we continue to invest in building our
comprehensive and diversified content library. Content costs as a
component of cost of revenues were RMB6.0 billion (US$875.5
million), representing a 66% increase from the same period in
2017.
Selling, general and administrative expenses
were RMB1.3 billion (US$188.1 million), representing a 66% increase
from the same period in 2017. This was primarily due to increased
marketing spending in channel coverage and content related
promotion, as well as higher share-based compensation expenses
mainly arising from the acquisition of Skymoons.
Research and development expenses were RMB558.4
million (US$81.3 million), representing a 63% increase from the
same period in 2017, primarily due to the increase of
personnel-related compensation expenses.
Operating loss was RMB2.6 billion (US$377.3
million), compared to operating loss of RMB1.1 billion in the same
period in 2017. Operating loss margin was 37%, compared to
operating loss margin of 23% in the same period in 2017.
Total other expense was RMB539.4 million
(US$78.5 million), compared to total other income of RMB15.6
million during the same period of 2017. In the third quarter of
2018, we recognized RMB593.1 million (US$86.4 million) of foreign
exchange loss arising from the depreciation of the Renminbi against
the U.S. dollar.
Loss before income taxes was RMB3.1 billion
(US$455.8 million), compared to RMB1.1 billion in the same period
in 2017.
Income tax benefit was RMB6.1
million (US$0.9 million), compared to income tax expense of
RMB0.8 million in the same period in 2017.
Net loss attributable to iQIYI was RMB3.1
billion (US$457.3 million), compared to RMB1.1 billion in the same
period in 2017. Diluted net loss attributable to iQIYI per ADS was
RMB4.34 (US$0.63) for the third quarter of 2018.
As of September 30, 2018, the Company had cash,
cash equivalents and short-term investments of RMB9.7 billion
(US$1.4 billion).
Financial Guidance
For the fourth quarter of 2018, iQIYI expects
total net revenues to be between RMB6.48 billion (US$943.5 million)
and RMB6.75 billion (US$982.8 million), 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.
Conference Call Information
iQIYI's management will hold an earnings
conference call at 8:00 PM on October 30, 2018, U.S. Eastern Time
(8:00 AM on October 31, 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: |
5687735 |
A telephone replay of the call will be available two hours after
the conclusion of the conference call through November 7, 2018.
Dial-in numbers for the replay are as
follows: |
|
International
Dial-in |
+61 2 8199
0299 |
Passcode: |
5687735 |
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 |
|
|
|
|
|
September
30, |
|
June 30, |
|
September
30, |
|
|
|
|
|
2017 |
|
2018 |
|
2018 |
|
|
|
|
|
RMB |
|
RMB |
|
RMB |
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Membership services |
|
|
|
1,696,697 |
|
|
2,474,474 |
|
|
2,852,329 |
|
|
Online advertising services |
|
|
|
2,634,187 |
|
|
2,617,507 |
|
|
2,396,247 |
|
|
Content distribution |
|
|
|
276,052 |
|
|
539,359 |
|
|
834,576 |
|
|
Others |
|
|
|
343,647 |
|
|
538,891 |
|
|
831,106 |
|
|
Total revenues |
|
|
|
4,950,583 |
|
|
6,170,231 |
|
|
6,914,258 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
(4,897,843 |
) |
|
(6,106,729 |
) |
|
(7,655,102 |
) |
|
Selling, general and administrative |
|
|
|
(777,038 |
) |
|
(949,934 |
) |
|
(1,292,037 |
) |
|
Research and development |
|
|
|
(342,328 |
) |
|
(441,482 |
) |
|
(558,373 |
) |
|
Total operating costs and
expenses |
|
|
|
(6,017,209 |
) |
|
(7,498,145 |
) |
|
(9,505,512 |
) |
|
Operating loss |
|
|
|
(1,066,626 |
) |
|
(1,327,914 |
) |
|
(2,591,254 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
21,053 |
|
|
25,615 |
|
|
65,603 |
|
|
Interest expenses |
|
|
|
(83,539 |
) |
|
(9,562 |
) |
|
(15,586 |
) |
|
Foreign exchange gain/(loss), net |
|
|
|
110,524 |
|
|
(777,968 |
) |
|
(593,147 |
) |
|
(Loss)/income from equity method investments |
|
|
|
(80 |
) |
|
(896 |
) |
|
46 |
|
|
Other income/(expense), net |
|
|
|
(32,359 |
) |
|
(5,468 |
) |
|
3,683 |
|
|
Total other income /(expense),
net |
|
|
|
15,599 |
|
|
(768,279 |
) |
|
(539,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
|
|
(1,051,027 |
) |
|
(2,096,193 |
) |
|
(3,130,655 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense)/benefit |
|
|
|
(786 |
) |
|
(4,858 |
) |
|
6,058 |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
(1,051,813 |
) |
|
(2,101,051 |
) |
|
(3,124,597 |
) |
|
Less: Net (loss)/income attributable to
noncontrolling interests |
|
|
|
- |
|
|
(4,120 |
) |
|
15,836 |
|
|
Net loss attributable to iQIYI,
Inc. |
|
|
|
(1,051,813 |
) |
|
(2,096,931 |
) |
|
(3,140,433 |
) |
|
Accretion of redeemable convertible preferred
shares |
|
|
|
(10,652,232 |
) |
|
(9,627 |
) |
|
|
|
|
Net loss attributable to ordinary
shareholders |
|
|
|
(11,704,045 |
) |
|
(2,106,558 |
) |
|
(3,140,433 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per share for Class A and
Class B ordinary shares: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
(34.17 |
) |
|
(0.43 |
) |
|
(0.62 |
) |
|
Diluted |
|
|
|
(34.17 |
) |
|
(0.43 |
) |
|
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss per ADS (1 ADS equals 7
Class A ordinary shares): |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
- |
|
|
(3.01 |
) |
|
(4.34 |
) |
|
Diluted |
|
|
|
- |
|
|
(3.01 |
) |
|
(4.34 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of Class A and
Class B ordinary shares used in net loss per share
computation: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
342,548,237 |
|
|
4,931,100,562 |
|
|
5,058,650,574 |
|
|
Diluted |
|
|
|
342,548,237 |
|
|
4,931,100,562 |
|
|
5,058,650,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
iQIYI, INC.Condensed
Consolidated Balance Sheets (In RMB thousands,
except for number of shares and per share data) |
|
|
|
|
December 31, |
|
September 30, |
|
|
2017 |
|
2018 |
|
|
RMB |
|
RMB |
|
|
(Audited) |
|
(Unaudited) |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash
equivalents |
|
733,010 |
|
|
5,831,440 |
|
Short-term investments |
|
779,916 |
|
|
3,844,249 |
|
Accounts
receivable |
|
2,235,384 |
|
|
3,164,612 |
|
Prepayments and other assets |
|
1,123,372 |
|
|
3,076,183 |
|
Amounts
due from related parties |
|
9,979 |
|
|
66,131 |
|
Licensed
copyrights, net |
|
818,867 |
|
|
1,051,997 |
|
Total
current assets |
|
5,700,528 |
|
|
17,034,612 |
|
|
|
|
|
|
Non-current assets: |
|
|
|
|
Fixed assets, net |
|
1,248,968 |
|
|
1,475,642 |
|
Long-term investments |
|
567,887 |
|
|
2,306,070 |
|
Deferred tax assets, net |
|
11,380 |
|
|
11,380 |
|
Licensed copyrights, net |
|
4,558,083 |
|
|
6,715,958 |
|
Intangible assets, net |
|
428,005 |
|
|
1,651,881 |
|
Produced content, net |
|
1,564,279 |
|
|
4,070,153 |
|
Prepayments and other assets |
|
2,845,662 |
|
|
4,062,738 |
|
Goodwill |
|
3,276,107 |
|
|
3,888,346 |
|
Total
non-current assets |
|
14,500,371 |
|
|
24,182,168 |
|
|
|
|
|
|
Total
assets |
|
20,200,899 |
|
|
41,216,780 |
|
|
|
|
|
|
LIABILITIES,
MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts
payable |
|
7,041,304 |
|
|
10,422,892 |
|
Amounts
due to related parties |
|
130,099 |
|
|
492,543 |
|
Customer
advances and deferred revenue |
|
1,633,649 |
|
|
2,356,275 |
|
Short-term loans |
|
299,374 |
|
|
1,172,553 |
|
Long-term
loans, current portion |
|
10,000 |
|
|
10,000 |
|
Accrued
expenses and other liabilities |
|
2,511,186 |
|
|
3,490,059 |
|
Total
current liabilities |
|
11,625,612 |
|
|
17,944,322 |
|
Non-current liabilities: |
|
|
|
|
Long-term
loans |
|
284,000 |
|
|
274,000 |
|
Deferred
tax liabilities |
|
2,255 |
|
|
117,225 |
|
Amounts
due to related parties |
|
- |
|
|
1,316,531 |
|
Other
non-current liabilities |
|
6,432 |
|
|
66,929 |
|
Total
non-current liabilities |
|
292,687 |
|
|
1,774,685 |
|
|
|
|
|
|
Total
liabilities |
|
11,918,299 |
|
|
19,719,007 |
|
|
|
|
|
|
Mezzanine
equity: |
|
|
|
|
Redeemable convertible preferred shares |
|
22,601,664 |
|
|
- |
|
|
|
|
|
|
Shareholders’
(deficit)/equity: |
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
23 |
|
|
320 |
|
Additional paid-in
capital |
|
600,834 |
|
|
39,517,690 |
|
Accumulated
deficit |
|
(15,016,867 |
) |
|
(19,981,862 |
) |
Accumulated other
comprehensive income |
|
93,126 |
|
|
1,880,892 |
|
Non-controlling
interests |
|
3,820 |
|
|
80,733 |
|
Total iQIYI,
Inc. shareholders’ (deficit)/equity |
|
(14,319,064 |
) |
|
21,497,773 |
|
|
|
|
|
|
Total
liabilities, mezzanine equity and shareholders’
(deficit)/equity |
|
20,200,899 |
|
|
41,216,780 |
|
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