IQ
$18.00
Iqiyi Inc ADR
$.51
2.92%
Earnings Details
3rd Quarter September 2019
Wednesday, November 6, 2019 4:30:00 PM
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Summary

Iqiyi Inc ADR Beats

Iqiyi Inc ADR (IQ) reported a 3rd Quarter September 2019 loss of $0.72 per share on revenue of $1.1 billion. The consensus estimate was a loss of $0.74 per share on revenue of $1.1 billion. The Earnings Whisper number was for a loss of $0.77 per share. Revenue grew 3.8% on a year-over-year basis.

The company said it expects fourth quarter revenue of $960.0 million to $1.02 billion. The current consensus revenue estimate is $992.7 million for the quarter ending December 31, 2019.

Results
Reported Earnings
($0.72)
Earnings Whisper
($0.77)
Consensus Estimate
($0.74)
Reported Revenue
$1.05 Bil
Revenue Estimate
$1.06 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

iQIYI Announces Third quarter 2019 Financial Results

BEIJING, Nov. 06, 2019 (GLOBE NEWSWIRE) -- 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, 2019.

Third quarter 2019 Highlights

  • Total revenues were RMB7.4 billion (US$1.0 billion1), representing a 7% increase from the same period in 2018.
  • Operating loss was RMB2.8 billion (US$396.2 million) and operating loss margin was 38%, compared to operating loss of RMB2.6 billion and operating loss margin of 37% in the same period in 2018.
  • Net loss attributable to iQIYI was RMB3.7 billion (US$516.0 million), compared to net loss attributable to iQIYI of RMB3.1 billion in the same period in 2018. Diluted net loss attributable to iQIYI per ADS was RMB5.04 (US$0.70).
  • The number of total subscribing members was 105.8 million as of September 30, 2019, 99.2% of whom were paying subscribing members. This compares to 80.7 million of total subscribing members as of September 30, 2018, up 31% year over year.

“We continued to make solid progress during the quarter as we march toward our vision of building a technology-based entertainment giant,” commented Dr. Yu Gong, Founder, Director and Chief Executive Officer of iQIYI. “Growing 30% year-over-year, our subscription business contributed more than half of our total quarterly revenues for the first time. This once again demonstrated the strength of our platform and validated our dedication to producing high quality original content.  Leveraging our cutting-edge AI technology, we are continually fine-tuning our content offerings, optimizing our monetization efficiencies, and exploring potential new runways for future growth. With the rapid development of 5G, we believe there will be astonishing new opportunities ahead, and we will continue to push forward the convergence between technology and art to create deeper value and greater prospects for the future.”

“Despite a challenging environment, we delivered another quarter of topline growth with total revenues increasing 7% year-over-year to RMB7.4 billion,” commented Mr. Xiaodong Wang, Chief Financial Officer of iQIYI.  “Subscription business continued to serve as the major driver of our revenue growth, and we further executed on our multi-dimensional IP development strategy to create new monetization opportunities and diversify our revenue streams. While we experienced some margin fluctuation due to seasonally higher content cost during the quarter, we believe we are on track to improve long-term efficiency through disciplined spending and investment. Going forward, we will continue to drive shareholder value by further enhancing monetization and transitioning toward a more balanced content structure.”

Footnote:

[1] Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.1477 to US$1.00, the exchange rate in effect as of September 30, 2019 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. Translations are provided solely for the convenience of the reader.

Third quarter 2019 Financial Results

Total revenues reached RMB7.4 billion (US$1.0 billion), representing a 7% increase from the same period in 2018.

Membership services revenue was RMB3.7 billion (US$520.0 million), representing a 30% increase from the same period in 2018. The increase resulted from the solid growth in the number of subscribing members, driven by our premium content and various operational initiatives during the quarter.

Online advertising services revenue was RMB2.1 billion (US$289.2 million), down 14% year over year, mainly due to the challenging macroeconomic environment in China, the delay of certain content launches and the intensified competition in in-feed advertising.

Content distribution revenue was RMB680.4 million (US$95.2 million), representing a 18% decrease from the same period in 2018, mainly due to the delay of certain content launches during the quarter, as well as the high base in the same period of previous year.

Other revenues were RMB932.3 million (US$130.4 million), representing an 12% increase from the same period in 2018. The increase was primarily driven by our game business following several new game launches this year by Skymoons.

Cost of revenues was RMB8.2 billion (US$1.1 billion), representing a 7% increase from the same period in 2018. The increase was primarily driven by higher content costs as well as other cost items. Content costs as a component of cost of revenues were RMB6.2 billion (US$870.5 million), representing a 3% increase from the same period in 2018.

Selling, general and administrative expenses were RMB1.3 billion (US$188.8 million), representing a 4% increase from the same period in 2018. This was primarily due to increased sales and marketing expenses of game business associated with the consolidation of Skymoons, as well as higher marketing spending for certain iQIYI apps.

Research and development expenses were RMB703.2 million (US$98.4 million), representing a 26% increase from the same period in 2018, primarily due to the increase of personnel-related compensation expenses.

Operating loss was RMB2.8 billion (US$396.2 million), compared to operating loss of RMB2.6 billion in the same period in 2018. Operating loss margin was 38%, compared to operating loss margin of 37% in the same period in 2018.

Total other expense was RMB826.8 million (US$115.7 million), compared to total other expense of RMB539.4 million during the same period of 2018. The year-over-year increase was mainly due to increased interest expenses arising from our financing activities and higher foreign exchange loss associated with the fluctuation of exchange rate between Renminbi and U.S. dollar.

Loss before income taxes was RMB3.7 billion (US$511.8 million), compared to loss before income taxes of RMB3.1 billion in the same period in 2018.

Income tax expense was RMB16.0 million (US$2.2 million), compared to income tax benefit of RMB6.1 million in the same period in 2018.

Net loss attributable to iQIYI was RMB3.7 billion (US$516.0 million), compared to net loss attributable to iQIYI of RMB3.1 billion in the same period in 2018. Diluted net loss attributable to iQIYI per ADS was RMB5.04 (US$0.70) for the third quarter of 2019.

As of September 30, 2019, the Company had cash, cash equivalents, restricted cash and short-term investments of RMB13.9 billion (US$1.9 billion).

Financial Guidance

For the fourth quarter of 2019, iQIYI expects total net revenues to be between RMB6.86 billion (US$0.96 billion) and RMB7.28 billion (US$1.02 billion), representing a -2% to 4% 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 November 6, 2019, U.S. Eastern Time (8:00 AM on November 7, 2019, Beijing Time). Dial-in details for the earnings conference call are as follows:

International 
China    
US 
UK 
Hong Kong  
Passcode:  
+65 67135090
4006 208038
+1 845 675 0437
+44 2036 214779
+852 3018 6771 
7892488

A telephone replay of the call will be available two hours after the conclusion of the conference call through November 14, 2019.

Dial-in numbers for the replay are as follows:

International Dial-in  
Passcode:  
+61 2 8199 0299
7892488

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, online games, live broadcasting, IP licensing, online literature, talent agency 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 Relations
iQIYI, Inc.
+ 86 10 8264 6585
ir@qiyi.com


iQIYI, INC.

Condensed Consolidated Statements of Loss

 (In RMB thousands, except for number of shares and per share data)

 Three Months Ended 
 September 30, June 30, September 30, 
 2018  2019  2019  
 RMB RMB RMB 
 (Unaudited) (Unaudited) (Unaudited) 
 Revenues:       
Membership services 2,852,329   3,412,349   3,716,861  
Online advertising services 2,396,247   2,200,682   2,067,385  
Content distribution 834,576   517,939   680,377  
Others 831,106   979,211   932,311  
 Total revenues  6,914,258   7,110,181  7,396,934   
          
 Operating costs and expenses:       
Cost of revenues(7,655,102) (6,980,957)  (8,175,751) 
Selling, general and administrative(1,292,037) (1,346,324)  (1,349,543) 
Research and development(558,373) (654,601)  (703,211) 
 Total operating costs and expenses (9,505,512) (8,981,882) (10,228,505 ) 
 Operating loss (2,591,254 ) (1,871,701 ) (2,831,571 ) 
          
 Other expense       
Interest income65,603  130,721   116,494  
Interest expenses(15,586) (247,762)  (254,435) 
Foreign exchange loss, net(593,147) (306,117)  (656,105) 
Gain/(Loss) from equity method investments46  (38,112) (33,213) 
Other income, net3,683  34,593  478  
 Total other expense, net (539,401 ) (426,677 ) (826,781 ) 
          
 Loss before income taxes (3,130,655) (2,298,378) (3,658,352 ) 
Income tax benefit/(expense)6,058  (5,776) (16,047) 
          
 Net loss (3,124,597) (2,304,154) (3,674,399 ) 
 Net income attributable to noncontrolling interests15,836   23,291  13,724  
Net loss attributable to iQIYI, Inc.   (3,140,433)  (2,327,445) (3,688,123) 
          
 Net loss per share for Class A and Class B ordinary shares:       
 Basic(0.62) (0.46)  (0.72) 
 Diluted(0.62) (0.46)  (0.72) 
       
 Net loss per ADS (1 ADS equals 7 Class A ordinary shares):      
 Basic(4.34) (3.22) (5.04) 
 Diluted(4.34) (3.22) (5.04) 
       
Weighted average number of Class A and Class B ordinary shares used in net loss per share computation:       
Basic 5,058,650,574  5,102,652,726  5,109,395,926  
Diluted 5,058,650,574  5,102,652,726  5,109,395,926  
       


iQIYI, INC.

Condensed Consolidated Balance Sheets

(In RMB thousands)

  
  December 31, September 30,
  2018 2019
  RMB RMB
    (Unaudited)
ASSETS    
  Current assets:    
Cash and cash equivalents  4,586,405    4,505,175 
Restricted cash 2,174,042    2,587,948 
Short-term investments 6,061,832    6,841,710 
Accounts receivable   2,889,234    2,982,334 
Prepayments and other assets   2,696,381    4,022,826 
Amounts due from related parties   281,710    312,936 
Licensed copyrights, net   1,163,839    1,323,772 
  Total current assets   19,853,443  22,576,701  
     
  Non-current assets:    
 Fixed assets, net 1,618,147    1,843,682 
 Long-term investments 2,572,040    2,907,112 
 Deferred tax assets, net 23,873    23,873 
 Licensed copyrights, net 6,640,910    6,589,081 
 Intangible assets, net 1,678,193    1,353,493 
 Produced content, net 3,736,063    4,845,923 
 Prepayments and other assets 4,695,883    3,583,698 
Operating lease assets -    525,700 
 Goodwill 3,888,346    3,888,346 
Amounts due from related parties 52,800    172,200 
  Total non-current assets   24,906,255  25,733,108  
     
Total assets 44,759,698  48,309,809  
     
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Current liabilities:    
Accounts and notes payable 10,162,366    10,089,850 
Amounts due to related parties 692,390    1,234,081 
Customer advances and deferred revenue 2,195,283    2,354,884 
Short-term loans 3,046,449    3,509,915 
Long-term loans, current portion 83,720    363,480 
Operating lease liabilities, current portion -    116,826 
Accrued expenses and other liabilities 3,632,148    3,846,605 
  Total current liabilities 19,812,356  21,515,641  
Non-current liabilities:    
Long-term loans 644,169    672,352 
Convertible senior notes 4,712,284    12,517,935 
Deferred tax liabilities 96,405    51,759 
Amounts due to related parties 1,281,370    1,091,088 
Operating lease liabilities -    218,653 
Other non-current liabilities 57,551    52,868 
  Total non-current liabilities 6,791,779  14,604,655  
     
Total liabilities 26,604,135  36,120,296  
     
Shareholders’ equity:    
     
Ordinary shares 321  324 
Additional paid-in capital 39,666,150    40,877,665 
Accumulated deficit (23,509,486)   (31,339,030)
Accumulated other comprehensive income 1,879,946    2,491,981 
Non-controlling interests 118,632    158,573 
Total shareholders’ equity 18,155,563  12,189,513  
     
Total liabilities and shareholders’ equity 44,759,698  48,309,809  

 

Source: iQIYI, Inc.