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 fourth quarter
and fiscal year ended December 31, 2018.
Fourth Quarter 2018
Highlights
- Total revenues were RMB7.0 billion (US$1.0 billion1),
representing a 55%2 increase from the same period in 2017.
- Operating loss was RMB3.3 billion (US$483.5 million) and
operating loss margin was 47%, compared to operating loss of
RMB856.1 million and operating loss margin of 19% in the same
period in 2017.
- Net loss attributable to iQIYI was RMB3.5 billion (US$505.7
million), compared to net loss attributable to iQIYI of RMB612.4
million in the same period in 2017. Diluted net loss attributable
to iQIYI per ADS was RMB4.83 (US$0.70).
- The number of total subscribing members was 87.4 million as of
December 31, 2018, 98.5% of whom were paying subscribing members.
This compares to 50.8 million of total subscribing members as of
December 31, 2017, up 72% year over year.
Fiscal Year 2018
Highlights
- Total revenues were RMB25.0 billion (US$3.6 billion),
representing a 52% increase from 2017.
- Operating loss was RMB8.3 billion (US$1.2 billion) and
operating loss margin was 33%, compared to operating loss of RMB4.0
billion and operating loss margin of 24% in 2017.
- Net loss attributable to iQIYI was RMB9.1 billion (US$1.3
billion), compared to net loss attributable to iQIYI of RMB3.7
billion in 2017. Diluted net loss attributable to iQIYI per ADS was
RMB17.01 (US$2.45).
“We delivered another quarter of solid growth
and closed out the year on a strong footing with over 87 million
total subscribing members,” commented Dr. Yu Gong, Founder,
Director and Chief Executive Officer of iQIYI. “As we enter 2019,
we are confident in generating growth across the board, led by
membership services which has demonstrated continued momentum. We
maintain our strategic focus on producing original premium content,
and will continue to advance our technology innovation and nurture
our ecosystem to fully leverage the tremendous IP value in our
content. With an exciting new year ahead, we look forward to
further strengthening our platform and continuing our journey to
become a technology-based entertainment giant. ”
“We are pleased to report strong top-line growth
for fiscal year 2018 with total revenues increasing 52%
year-over-year to RMB25 billion,” commented Mr. Xiaodong Wang,
Chief Financial Officer of iQIYI. “Membership business continued to
be the main engine driving our growth, while we further broadened
and diversified other revenue streams. 2018 was also a transition
year for us, as we devoted more resources towards producing
original content which added pressure to our margins. We believe
our investment in premium content will prove to be very rewarding
and help better position the Company for long-term growth.”
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
RMB6.8755 to US$1.00, the effective noon buying rate as of December
31, 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.
Fourth quarter 2018 Financial
Results
Total revenues reached RMB7.0 billion (US$1.0
billion), representing a 55% increase from the same period in
2017.
Membership services revenue was RMB3.2 billion
(US$465.6 million), representing a 76% increase from the same
period in 2017. The increase resulted from the strong growth in the
number of subscribing members, driven by our premium content as
well as various operational initiatives during the quarter.
Online advertising services revenue was RMB2.2
billion (US$320.5 million), representing a 9% increase from the
same period in 2017. The increase was primarily attributable to the
growth of brand advertising business, driven by our innovative
advertising solutions associated with expanding library of
self-produced content.
Content distribution revenue was RMB522.0
million (US$75.9 million), representing a 137% 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 RMB1.1 billion (US$160.1
million), representing a 129% increase from the same period in
2017. The increase was driven by strong performance across various
vertical business lines as well as the consolidation of
Skymoons.
Cost of revenues was RMB8.5 billion (US$1.2
billion), representing a 100% increase from RMB4.3 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 higher
content costs as we continue to invest in building our
comprehensive and diversified content library. Content costs as a
component of cost of revenues were RMB6.5 billion (US$943.4
million), representing a 97% increase from the same period in
2017.
Selling, general and administrative expenses
were RMB1.2 billion (US$177.7 million), representing a 58% 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.
Research and development expenses were RMB607.5
million (US$88.4 million), representing a 67% increase from the
same period in 2017, primarily due to the increase of
personnel-related compensation expenses.
Operating loss was RMB3.3 billion (US$483.5
million), compared to operating loss of RMB856.1 million in the
same period in 2017. Operating loss margin was 47%, compared to
operating loss margin of 19% in the same period in 2017.
Total other expense was RMB34.8 million (US$5.1
million), compared to total other income of RMB233.8 million during
the same period of 2017. In the fourth quarter of 2018, we
recognized RMB73.8 million (US$10.7 million) of foreign exchange
loss arising from the depreciation of the Renminbi against the U.S.
dollar.
Loss before income taxes was RMB3.4 billion
(US$488.6 million), compared to loss before income taxes of
RMB622.3 million in the same period in 2017.
Income tax expense was RMB79.5
million (US$11.6 million), compared to income tax benefit of
RMB9.9 million in the same period in 2017.
Net loss attributable to iQIYI was RMB3.5
billion (US$505.7 million), compared to net loss attributable to
iQIYI of RMB612.4 million in the same period in 2017. Diluted net
loss attributable to iQIYI per ADS was RMB4.83 (US$0.70) for the
fourth quarter of 2018.
As of December 31, 2018, the Company had cash,
cash equivalents, restricted cash and short-term investments of
RMB12.8 billion (US$1.9 billion). In December 2018, we closed the
offering of US$750 million in aggregate principal amount of
convertible senior notes, and received aggregate net proceeds of
approximately US$736.2 million after deducting discounts and
commissions and offering expenses from the offering.
Fiscal Year 2018 Financial
Results
Total revenues reached RMB25.0 billion (US$3.6
billion), representing a 52% increase from 2017.
Membership services revenue was RMB10.6 billion
(US$1.5 billion), representing a 72% increase from 2017. The
increase was primarily attributable to the robust growth in the
number of subscribing members, driven by our premium content,
especially our original blockbuster titles, as well as various
operational initiatives during the year.
Online advertising services revenue was RMB9.3
billion (US$1.4 billion), representing a 21% increase from 2017.
The increase was primarily due to the improved efficiency in the
monetization of advertising business, driven by our high-quality
content offerings, especially original content, as well as our
growing user base and engagement level.
Content distribution revenue was RMB2.2 billion
(US$314.5 million), representing a 92% increase from 2017. The
growth was driven by both quantity and quality of the premium
content titles that we distributed during the year.
Other revenues were RMB2.9 billion (US$418.2
million), representing a 105% increase from 2017. The increase was
driven by strong performance across various vertical business
lines, as well as the consolidation of Skymoons.
Cost of revenues was RMB27.1 billion (US$3.9
billion), representing a 65% increase from RMB16.4 billion, which
was the cost of revenues after deducting the value added tax in
2017. The increase was primarily driven by higher content costs as
we continue to invest in building our comprehensive and diversified
content library. Content costs as a component of cost of revenues
were RMB21.1 billion (US$3.1 billion), representing a 67% increase
from 2017.
Selling, general and administrative expenses
were RMB4.2 billion (US$606.2 million), representing a 56% increase
from 2017. This was primarily due to increased marketing spending
in channel coverage and content related promotion, as well as
higher share-based compensation expenses.
Research and development expenses were RMB2.0
billion (US$290.1 million), representing a 57% increase from 2017,
primarily due to the increase of personnel-related compensation
expenses.
Operating loss was RMB8.3 billion (US$1.2
billion), compared to operating loss of RMB4.0 billion in 2017.
Operating loss margin was 33%, compared to operating loss margin of
24% in 2017.
Total other expense was RMB676.2 million
(US$98.3 million), compared to total other income of RMB208.5
million during 2017. The majority of the year-over-year variance
came from foreign exchange loss and gain we recognized in 2018 and
2017 respectively, due to the fluctuation of exchange rate between
Renminbi and the U.S. dollar. The remaining variance was
attributable to lower interest expense and higher interest income
as a result of our IPO and other financing activities in 2018, as
well as the recognition of fair value gain arising from our private
company equity investments in accordance with the new financial
instruments accounting standard adopted on January 1, 2018.
Loss before income taxes was RMB9.0 billion
(US$1.3 billion), compared to loss before income taxes of RMB3.7
billion in 2017.
Income tax expense was RMB78.8
million (US$11.5 million), compared to income tax benefit of
RMB7.6 million in 2017.
Net loss attributable to iQIYI was RMB9.1
billion (US$1.3 billion), compared to net loss attributable to
iQIYI of RMB3.7 billion in 2017. Diluted net loss attributable to
iQIYI per ADS was RMB17.01 (US$2.45) for 2018.
Financial Guidance
For the first quarter of 2019, iQIYI expects
total net revenues to be between RMB6.80 billion (US$989.6 million)
and RMB7.10 billion (US$1.0 billion), representing a 40% to 46%
increase from the same period in 2018. 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 7:00 PM on February 21, 2019, U.S. Eastern Time
(8:00 AM on February 22, 2019, 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: |
|
8777925 |
A telephone replay of the call will be available
two hours after the conclusion of the conference call through March
1, 2019.
Dial-in numbers for the replay are as
follows:
International Dial-in |
|
+61 2 8199 0299 |
Passcode: |
|
8777925 |
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 |
|
Year Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2017 |
|
2018 |
|
2018 |
|
2017 |
|
2018 |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
Membership services |
|
1,929,825 |
|
2,852,329 |
|
3,200,981 |
|
6,536,028 |
|
10,622,769 |
Online advertising services |
|
2,142,839 |
|
2,396,247 |
|
2,203,637 |
|
8,158,924 |
|
9,328,061 |
Content distribution |
|
233,485 |
|
834,576 |
|
522,038 |
|
1,191,816 |
|
2,162,643 |
Others |
|
511,265 |
|
831,106 |
|
1,100,666 |
|
1,491,582 |
|
2,875,643 |
Total
revenues |
|
4,817,414 |
|
6,914,258 |
|
7,027,322 |
|
17,378,350 |
|
24,989,116 |
|
|
|
|
|
|
|
|
|
|
|
Operating
costs and expenses: |
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
(4,535,111) |
|
(7,655,102) |
|
(8,522,761) |
|
(17,386,563 |
) |
(27,132,811) |
Selling, general and
administrative |
|
(774,184) |
|
(1,292,037) |
|
(1,221,681) |
|
(2,674,990 |
) |
(4,167,889) |
Research and development |
|
(364,227) |
|
(558,373) |
|
(607,468) |
|
(1,269,806 |
) |
(1,994,652) |
Total
operating costs and expenses |
|
(5,673,522) |
|
(9,505,512) |
|
(10,351,910) |
|
(21,331,359 |
) |
(33,295,352) |
Operating
loss |
|
(856,108) |
|
(2,591,254) |
|
(3,324,588) |
|
(3,953,009 |
) |
(8,306,236) |
|
|
|
|
|
|
|
|
|
|
|
Other
expense |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
38,185 |
|
65,603 |
|
118,025 |
|
83,127 |
|
213,969 |
Interest expenses |
|
(43,581) |
|
(15,586) |
|
(61,238) |
|
(277,577 |
) |
(94,711) |
Foreign exchange gain/(loss),
net |
|
222,986 |
|
(593,147) |
|
(73,836) |
|
400,737 |
|
(970,796) |
(Loss)/income from equity method
investments |
|
(160) |
|
46 |
|
(16,016) |
|
(263 |
) |
(16,965) |
Other income/(expense), net |
|
16,402 |
|
3,683 |
|
(1,686) |
|
2,488 |
|
192,309 |
Total
other income /(expense), net |
|
233,832 |
|
(539,401) |
|
(34,751) |
|
208,512 |
|
(676,194) |
|
|
|
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
(622,276) |
|
(3,130,655) |
|
(3,359,339) |
|
(3,744,497 |
) |
(8,982,430) |
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit/(expense) |
|
9,896 |
|
6,058 |
|
(79,492) |
|
7,565 |
|
(78,801) |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
(612,380) |
|
(3,124,597) |
|
(3,438,831) |
|
(3,736,932 |
) |
(9,061,231) |
Less: Net income attributable to
noncontrolling interests |
|
- |
|
15,836 |
|
37,888 |
|
- |
|
48,545 |
Net loss
attributable to iQIYI, Inc. |
|
(612,380) |
|
(3,140,433) |
|
(3,476,719) |
|
(3,736,932 |
) |
(9,109,776) |
Accretion of redeemable convertible
preferred shares |
|
17,166,808 |
|
- |
|
- |
|
5,073,140 |
|
(298,990) |
Extinguishment and reissuance of Series B preferred shares |
|
(363,279) |
|
- |
|
- |
|
(363,279 |
) |
- |
Net
income (loss) attributable to ordinary shareholders |
|
16,191,149 |
|
(3,140,433) |
|
(3,476,719) |
|
972,929 |
|
(9,408,766) |
|
|
|
|
|
|
|
|
|
|
|
Net
earnings/(loss) per ordinary share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
4.27 |
|
|
|
|
|
0.30 |
|
|
Diluted |
|
(0.16) |
|
|
|
|
|
(1.15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
Class A and Class B ordinary share: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
(0.62) |
|
(0.69) |
|
|
|
(2.43) |
Diluted |
|
|
|
(0.62) |
|
(0.69) |
|
|
|
(2.43) |
|
|
|
|
|
|
|
|
|
|
|
Net loss
per ADS (1 ADS equals 7 Class A ordinary shares): |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
(4.34) |
|
(4.83) |
|
|
|
(17.01) |
Diluted |
|
|
|
(4.34) |
|
(4.83) |
|
|
|
(17.01) |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of Shares used in net earnings/(loss) per ordinary
share computation: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
342,548,237 |
|
|
|
|
|
342,548,237 |
|
|
Diluted |
|
3,795,709,775 |
|
|
|
|
|
3,243,147,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of Class A and Class B ordinary shares used in net
loss per share computation: |
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
5,058,650,574 |
|
5,069,616,758 |
|
|
|
3,867,931,786 |
Diluted |
|
|
|
5,058,650,574 |
|
5,069,616,758 |
|
|
|
3,867,931,786 |
|
|
|
|
|
|
|
|
|
|
|
iQIYI, INC.
Condensed Consolidated Balance
Sheets
(In RMB thousands, except for number of
shares and per share data)
|
|
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2018 |
|
|
RMB |
|
RMB |
|
|
(Audited) |
|
(Unaudited) |
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
733,010 |
|
4,586,405 |
Restricted cash |
|
- |
|
2,174,042 |
Short-term investments |
|
779,916 |
|
6,061,832 |
Accounts receivable |
|
2,235,384 |
|
2,889,234 |
Prepayments and other assets |
|
1,123,372 |
|
2,696,381 |
Amounts due from related
parties |
|
9,979 |
|
281,710 |
Licensed copyrights, net |
|
818,867 |
|
1,163,839 |
Total current
assets |
|
5,700,528 |
|
19,853,443 |
|
|
|
|
|
Non-current
assets: |
|
|
|
|
Fixed assets, net |
|
1,248,968 |
|
1,618,147 |
Long-term investments |
|
567,887 |
|
2,572,040 |
Deferred tax assets, net |
|
11,380 |
|
23,873 |
Licensed copyrights, net |
|
4,558,083 |
|
6,640,910 |
Intangible assets, net |
|
428,005 |
|
1,678,193 |
Produced content, net |
|
1,564,279 |
|
3,736,063 |
Prepayments and other
assets |
|
2,845,662 |
|
4,695,883 |
Goodwill |
|
3,276,107 |
|
3,888,346 |
Amounts due from related
parties |
|
- |
|
52,800 |
Total non-current
assets |
|
14,500,371 |
|
24,906,255 |
|
|
|
|
|
Total
assets |
|
20,200,899 |
|
44,759,698 |
|
|
|
|
|
LIABILITIES,
MEZZANINE EQUITY AND SHAREHOLDERS’ DEFICIT |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
7,041,304 |
|
10,162,366 |
Amounts due to related parties |
|
130,099 |
|
692,390 |
Customer advances and deferred
revenue |
|
1,633,649 |
|
2,195,283 |
Short-term loans |
|
299,374 |
|
3,046,449 |
Long-term loans, current
portion |
|
10,000 |
|
83,720 |
Accrued expenses and other
liabilities |
|
2,511,186 |
|
3,632,148 |
Total current
liabilities |
|
11,625,612 |
|
19,812,356 |
Non-current
liabilities: |
|
|
|
|
Long-term loans |
|
284,000 |
|
644,169 |
Convertible senior notes |
|
- |
|
4,712,284 |
Deferred tax liabilities |
|
2,255 |
|
96,405 |
Amounts due to related parties |
|
- |
|
1,281,370 |
Other non-current liabilities |
|
6,432 |
|
57,551 |
Total non-current
liabilities |
|
292,687 |
|
6,791,779 |
|
|
|
|
|
Total
liabilities |
|
11,918,299 |
|
26,604,135 |
|
|
|
|
|
Mezzanine equity: |
|
|
|
|
Redeemable convertible preferred
shares |
|
22,601,664 |
|
- |
|
|
|
|
|
Shareholders’
(deficit)/equity: |
|
|
|
|
|
|
|
|
|
Ordinary shares |
|
23 |
|
- |
Class A ordinary
shares |
|
- |
|
138 |
Class B ordinary
shares |
|
- |
|
183 |
Additional paid-in
capital |
|
600,834 |
|
39,666,150 |
Accumulated
deficit |
|
(15,016,867) |
|
(23,509,486) |
Accumulated other
comprehensive income |
|
93,126 |
|
1,879,946 |
Non-controlling interests |
|
3,820 |
|
118,632 |
Total iQIYI, Inc. shareholders’
(deficit)/equity |
|
(14,319,064) |
|
18,155,563 |
|
|
|
|
|
Total liabilities, mezzanine equity and
shareholders’ (deficit)/equity |
|
20,200,899 |
|
44,759,698 |
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