iQIYI (IQ) 17 Nov 202020 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the iQIYI Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Investor Relations Director of iQIYI, Lei Zhang. Thank you. Please go ahead.

operator. you, Thank thank Earnings and joining Third iQIYI's Hello, Call. you XXXX Conference Quarter everyone, for The released results Investor company's were Relations the available website company's on at ir.iqiyi.com. earlier today and

their our today give Mr. Xiaodong call a our Mr. of brief Vice Xiaodong and Yang, prepared CFO; and Mr. company's our business the Xianghua the On and operations Membership who by will Wang, our followed financials in Yu go Gong, business. of CEO; Founder, Mr. overview guidance. are join highlights, Mr. After remarks, will Senior President Xiaodong Gong the through and Xianghua Director and session. Q&A Gong will

Before of forward-looking States the we today United discussion under XXXX. note Securities provision will the Litigation Reform of statements Private proceed, Act contain the please that made safe harbor

the outlined and that, SEC. as law. go include Forward-looking differ to Mr. does applicable risks Please from actual to are obligation to turn statements not subject under required statements any With any but that limited Gong. undertake our and may forward-looking cause expectations. will results uncertainties those call update over except our now in Potential uncertainties public current ahead. the to filings materially with I risks not iQIYI to

Good morning.

taking see of to the prepare normal. recovery and As to of both fourth to up. for this back third we know, negative catch year's of variety process abnormal the we the the half the trying behavior economy measures growth. year, are we all next of the In know gradually alleviation first year production users' content -- up with and impact COVID-XX is industry XXXX, the the as speed we quarter, this the a epidemic in Despite macro in and

through our go business segments. Now let's

about I'll First, our membership business. talk

September RMBX.XX the grew revenue ratio of year-over-year billion. XX.X%. by to X% subscribers and reached million, paying our XXX.X Membership XX, total As reached services

the business quarter, last a compared remained membership membership with revenue are still flat factors year. Although trend. this There regarding total subscribers few observed increased we

lack some affected new platform was movie accordingly that the new this cinemas our year movie there new and in fact shortage. supply. delay fewer content released The the of movies on theatrical content were to First, due release

a fewer compared year. still although as period some In movies As as launched supply we the movie sequential much result, same QX we of to year. in QX QX, new last last rebound expect not

we hit November are streaming Hundred the Specifically, The immediately. happy movies became Eight most started very this X of just and one from platform our see year, to that expected on

gradually We theatrical and coming expect more movies online more for our subscribers.

see we on are videos. the Second, users more time spending short-form

also experience. screens smart we noticed that entertainment box popular. screen TV also users for prefer large and better became as home watching such the However, more on content larger set-top More

several term. TV mid/long ability via that spend past an the surpassed tactics, more the time mobile the is large believe, platform, and driver Our develop growing can the initiatives be and operation will on we We recently, screen-related appropriate with monetization us spend for devices years, total take time Accordingly, monetization of for larger important TV on on them. business screens devices. in

We Lastly, softer slowdown to spend compared was lead time usual, on the vacation growth and last our with temporary. than summer is year shorter traffic which year. platform the this believe membership

business. in improve expected are and next to from originality the in ultimately will confidence Most the studios in-house to of our over second production and studios year. growth our drive the always These largely key diversification of As attract into we the and full platform half content on in-house our content premium is capabilities. original subscribers, both of production content membership have high go our XX continued

has and great by and need features categories. some content already Mist user initial we as in targeting Theater, dramas, diverse are suspense XX-episode members, verticals which its of launch our seen over have large iQIYI watched we of XX groups finale. Considering group by focusing the been results. diversified of content million addition, subscribers on the different a user In invested movie variety

are happy dramas series strong see new We shorter to with longer to better are that Also, and attracting monetization models. the we continue as these as subscribers even more ROI. explore

to a content We for access have few mode premium for movies. early users and provided to our video-on-demand premium extra the launched charge

plenty charges, S-diamond since by high users In was premium received addition, of privileges the of our well with membership our membership, a launch. package part and

our recent there on ahead Looking might adjustment. expect membership our to year, we some to the be pricing the uncertainties due of rest

-- launched just on As pricing as effective XX. subscription new which we you know our November you plan, may was know,

Despite advertising. the the domestic to is recovering. advertising headwinds, macro market of all over Moving recent

gradual While our in of launch quarter. the new are the third second a Band of of The we The the year, positive performance advertisers' during content, industry with half both hit and signs. remains the pressure second in Theater, quarter, ads Mist of recovery brand some XXXX, coupled all seeing rebounded Rap compared our of already the China and Big The successful X, under including series the with ads confidence

during ads was consecutive mainly attributable increase growth the the in third of advertisers. the quarter revenue for sequential number -- brand The sequential recorded Our two a to quarter quarters. increase sequential the growth was

transportation. mainly In from industry, online was food beverage, sequentially. faster consumer increase and games and terms and education Besides, recovered revenue the of electronics

campaigns During template sparked a Mist our new the the and shorter advertising ideas we innovate Theater series. quarter, provided theater. advertising has across for to with continue

also So already far, advertisers and over joined. attracted we've Yili, and Volkswagen have other XX

choices. more In advertising categories we buzz. such Theater and has plan word-of-mouth more launch Mist revenue theaters romance in As as providing comedy, a advertisers to future, in the addition to decent generated result,

the Moving content. on to

entertainment and during released with During the identified and quarter, we variety users' shows vacation and pandemic hit animations innovative demand number scheduling. for accurately our the summer a of post dramas, the

achieved phenomenal We success. and content trial our Theater self-branded are trying to first The was Mist establish vertical. our

the We other to continue to just in title. verticals than stickiness content user platform to self-branded self-branded rather our verticals can raise will We launch our coming single different content the a believe quarters.

popularity, total Kids Chinese released high-quality Sisyphus, The Busan became dramas, attention. the Bad and Long Mist high Recently, Theater win XXXX Theater a its under quality Kidnapping we drawn widespread series Bad the mentioned Best The River, Contents Asia first suspense has banner, Festival. of in second to drama The X As Crimson in global Night. Game, Kids, Because the award the the International have short Mist Film Creative namely Awards

group Sound a popularity that number launch Unicorn featured our Love Outstanding a My on Yourself, Awards. female dramas at of viewing. XXth addition, and Love cater broke also rapidly China the X, to been Television on Award Festival Besides, Sweet, on the the XXth TV original mark Meanwhile, Shanghai story, Providence drama, our of recently we and of after drama who personal the most theme contributing released to growth its Golden Reunion: the In Series index content exclusive The has are Season Eagle is our female honored of The another demand Girl, X,XXX including Magnolia platform. user Thunder, TV

THEX for Also, our Mr. and Dear for the diversified Desk China and were Summer The original well nicely athletic Shop Surf Little Season the aired shows user quarter. for X, Big quarter. to catering during parents; Season and Housework Band For Party group also as The performed as Let's varieties, girl fans people; X, such received XXXX idol Rap during of of top such

In addition, and Deer the were during and self-produced popular including among Squad You fans animation, and became our Are children. released OK, quite quarter ACG

Deer. including high-quality quarter, Season Best the Season of we dramas, X, Mount have with to many we My unprecedented, plan the a we made including and more X, Dear Story, shows, despite are of initiatives. facing, fourth release For Talk and Hahahahaha; and key conclusion, difficult Realm, Upcoming variety Missy, a In Spirit considerable Qipa The situation others Duke variety FOURTRY Friend's operational Dimension Nova. and volatile progress

success. has turn to the operational Theater over achieve growth With future, we our and business I'll innovate the continue Our will long about Mist talk to that, to develop sustainable it financials. and production over Xiaodong In to a running in our term. new strategies been

Morning, everyone.

review X% for with business highlights our Total the billion. September continued accounting Membership reached total business for XX% me up of our Let pillar, quarter. to RMBX.X largest our revenue. key revenue year-over-year, financial revenue be

a business XX% with -- rebound Our notable year on basis. recorded Q-over-Q increase advertising

the Our revenue of cost cost. SG&A year-over-year. to of were XX% content XX% expenses only decreased up X% decline year-over-year year-over-year mainly due

XX% As result, year. from a our operating margin to in narrowed XX% last the period loss same

investments the As cash of of RMBX.X equivalents, cash September had short-term and billion. XX, XXXX, restricted company cash,

please For website. refer our to our on data, detailed release press financial

change. I expect reflects for increase and between to quarter revenue now a and Q&A. the year-over-year. -- current open decrease the billion total XXXX, forecast increase For subject RMBX.XX fourth RMBX.XX view preliminary to of iQIYI's billion, to a X% we X% This floor will be

for we the floor Q&A. can Operator, I think open the

Instructions]. [Operator

Your Eddie first Bank Leung from from question comes Lynch. America of Merrill

what Gong is Dr. just question potential the about So my mentioned number uncertainty subscriber hike. in the price after about the

wondering the just after on price subscriber add hike. in seeing color if could So whether we the growth that, some you some weakness are

the and pricing per -- to to And price new balance meaning per effective RMBXX.X or RMBXX from iOS come renewals to was to Android time, was RMBXX increased that our has from on that As monthly the terminal RMBXX plan increased month. to was fee the fee terminals, subscription per auto monthly month this month. iPhone plan targeted XX, the to we November terminal, pricing Android

change But is But on see so our and negative. be that also will per say not Now experience X or days peers' come Saturday not the behavior maybe we much have we our -- there's increasing. the last from and that so whether X speaking, you. pricing that And much we Sunday subscribers, impact the single negative days to think in that X increased. plan. of analysis the course, that of positive that normal. that that term we but back it the the Friday It this experience or some Thank of on vanish new our shows X the we subscriber is the will only it's for before meaning and will the fee far, in far time the all negative launched and will we that And cannot of since the data not there -- long overall, data. quarters. But new so new long. And based user coming impact have

strong we user premium the abilities. One all based content that our -- the to subscribe point on is has that's that the production which main them know to attract added content is original exclusive motivation

if So quite forward you're our rich. is looking that our pipeline pipeline at

Thank normal. our new and of -- in the plan, our term back subscriber that our exclusive negative reach you. believe speaking, pricing long content -- of to the the will us released trends definitely that will do pipeline to we help the So mitigate self of midterm

Instructions]. [Operator

next comes Your from Yiwen Zhang question from Citi.

I on So into asking of English. behalf Alicia. I'm translate

the question hike. also regarding So is price subscription

So the notice Dr. years Gong behind set previously RMBXX.X talked price rationale the about ago. X

you the review talk then future, do And what behind about you the the of the price, So price? XX% rise new when can rationale consider? will periodical in we factors the the of

Mr. more Yang the thinks charge Gong of that membership is And the who you Thank Thank question. who it's in answer for Xianghua, will just Mr. business, for appropriate question. you. our

we for evidence this on adjustment that user new As first the Thank the and new month be of of auto this the half user on that we the collected from behavior we to in you. that pricing. renewal their user plan, we of the new executed XXXX that the and collected of the reasonable. on And to suite we would second quite from the that's the user based RMBXX the price based executed. suite days pricing Actually and also launched acceptance data the this we per the -- that content RMBXX the think

question comes from from Your Jefferies. Chong next Thomas

about about management need pay into also for outlook. any comment coming regard with to think how to My about advertising we special question events XXXX next is and attention the trend should we Can that the year?

Yes.

driver our that I significantly was our advertising think impacted our year, that by business quite this pandemic. brand main of advertisement the is for

pandemic it's that this much be the so next better the this the for year course, would control patterns year experience. really outlook is But based think, on that year, with unprecedented, can this of year's next systematic from trace we year. under largely the of like globally, than we abnormal along Of and

for time more give year. of more take prediction the next will to it us So accurate the

So a lot drive business. are factors that of we there think that our

animation is content for -- about movies movies focus the drive including original we and adult and first next the measures we and also The and for adults to to one which of that in numbers. definitely the variety that the more to is kids. budget the are not the theatrical for take animation ability development, production the production that Internet that on the drama that content future, animation, series we abilities movies, And the selection, year how show productionality And self-studio will is our the also movies going talk higher. only but increase also

improve technology the the will our content invest and technology to new with content that distribution content production. we applied on the and more And also We on secondly our also partners. cooperation will execute

members be as the Asian -- and And -- our Asian numbers for content a number. held that organic Korean and/or event a definitely that will Chinese third mid-form rapidly. that our the And further confidence content our to Asian-oriented we one up numbers. just it the that one from we invest overseas and is members on video peers content on the our more such up emphasized out that the strengthens to few community. subscription but content, community the Asian-oriented Suike, and develop build just than X% members is announced membership platform, think weeks that well as members, and before, that, to our very will was fans and content the Suike, the business we focused gather and definitely overseas including overseas the Thank the business to the Suike after overall fans creators subscriber by that sports our that, Asian for all our include we to leverage And content to intelligence of drive so is domestic and our and invest will less maybe on business definitely platform, That interest video blockchain But which released. our with the comes by we fans that that of growth will also position the membership overseas of the explore subscriber into interest we overseas the driven received Japanese it It is and the Southeast We that And improve aggressive around X-year that definitely business. our our that subscribers not we unlike extreme quite a have video customers. to not we organically distribution quite numbers -- approach artificial the our The be of a the find even on. build South based as the subscription certain does overseas Suike these creators numbers you. and business XG subscriber is mention and and fourth increase not content is members, production And and and our for is our to process. and globally. compared that to members. take include our the so technologies acquisition And it overseas that trial will video develop much

Instructions]. [Operator

question comes from Stanley. Gary next from Morgan Your Yu

translate the I me two have Let questions. well. as questions

question related first The to is competition.

should on we announcement of changes, The is acquisition So price after or market how the share increase? the recent membership domestic market our related with announcement should business? in how our expect YY we Baidu also of we other potential question And forward? at look recent going players the business to at business. competitors second iQIYI synergy And to do of look

the I earnings also fee, a industry, about on the original based the the cost subscription overview supply about have other -- of provide peers plan on price And no But content the clearly, their mentioned not -- As but years, that from we're any position as pricing our our last in China. their X whole there that's fee plans. call plans gap and between their to big after the in the peers of subscription is we don't for -- predictions for on we know, -- that pricing idea plan.

the to think So used quite be. is to that we it situation unreasonable keep as

think the second Baidu, -- different from think pricing quite that business is regarding that So overall is we business. for YY business the business its from that reasonable the quite for the adjusted that plan from our nature. the our looking question we And industry, at acquisition

significant Thank So that iQIYI. it's you. no direct on influence or

Your comes next question Crédit from Xie Suisse. Alex from

question first My was about cost. content

Theater. So the the And decreased quarter-over-quarter. question of on cost the Mist next in is content just What's about view costs quarters? content your the outlook second

So received you series feedback mentioned quite potential from good these customers.

you what's do variety subscriber dramas Theater? growth original original shows? previous Mist impact for So the ROI how and the the on compare with And the

of So the there recent or the decreasing behind are X for X reasons quarters. content cost two

The pandemic for is the definitely regulation by the that first influence, lead first delay and is audit. caused one one the content second time the release

the one half first that that and XXXX first that the XXXX released titles second is we So the from half second half at the are year. high of the this and of purchased of of even only the gradually XXXX end

released the titles So that don't XX-episode content year. But also they and sharp X -- after is speaking, on think Plus, it cost-wise. fluctuation that, may Theater our we the of for cost gradually consists long the; term Thank it Mist have decrease it you. decreased In the be the price from that short content gradually the will content cost. that drama. high series the on of the this of

The revenue their was the each because cost is XX driving the title. to series has to television by look per episodes, from increased of So it older at it period for XX the long call why by time. title advertising. have the driving experience television, meaning we the drama first, advertising average episode used that on user an be is short? to our It You it

more also their platform station trading the derive money for it's episode. And they content different to produce the So of they produce, the on will series dramas producers, the are pattern more they longer also intentionally be to quite are, the they'll money per to Internet course, money. the based earn -- is cost But longer more because us. earn. episode like more The television

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And the main so that for is driver us.

low that strategy short so with for very quite will we us. wise is more develop much with And cost total better dramas the if but ROI, is quite

produce So dramas. will you.] we short definitely more [Thank

Zhijing question from next from Liu UBS. comes Your

see for question -- that we Media we advertising attractive so see recovery is can My Focus many quarters, past advertisers? still as very very in branded is has advertising two the seen some good that

delayed, And the content. keep pandemic, -- auto considering quite it's some that and you. advertising. that also method Because Thank advertising single specific for and advertising target content that also trend we positive is release brand pandemic is is domestic content definitely, distributed. advertising. of As the Internet one for controlled as the the abundant, our our to our the of that first on the supply influenced very to advertising the were content one content and outlook the for brand brand quite after released is targeted is the the recovering is delay -- that another so But one platform,

question comes from from next Bo Pei Your Oppenheimer.

And then for I myself. translate will

is channel, us. handle movies then net impact now. a copyright I for the there And bad users short Or but paying on dramas on was short a there other net on And one basis, for do this the question promotional what we on first they video any side, is video us? platforms so platforms? how side, on good platforms, potential the they on many watching people the And the we or Because just So is noticed service model. some then attract our about on are second is question licensing actually wondering, and theater And impact short us? video deals?

does the ads in of of term, can also achieve So theater that long then will total dramas mean given we does further content can from we come our the if these decrease? lower this cost percentage number what percentage models? mean And

platform, is video video huge lot on a videos the on long-form As a has of clicks the there it short of negative impact long-form the platform.

to impact imposing overall, -- the think the is To I like very We short-form advantages yes, -- about -- that negative actions with users ones. to things legal attraction of definitely you that, impact some Yes. surpass are drama, are good there there And the the want we about the that theater. new so said. on positive -- negotiations such about and we videos. saying But short-episode that the short after talk positive form also,

title. theater users users that that or so and will also to attracted keep that and So that released paying But our the -- not accumulated address the to our the stick passion older with with will the theater audience to after the with audience, to the more theater, single go away title as and normally was fully that. on a just

they And In our course, waiting definitely dramas. another dramas and the that see to maintain to As the think dramas paying be long to will word, have of the good a in we roughly longer. of the between to future, stick time I that our speaking, that very users. may we short-episode is half half long for platform way in that will will so this us

you. of short we way the both the is recently that per the that right user platform. waiting to average approach Thank monetization those seeing and definitely to shorter are dramas. stickiness title right improve now times that But drama because our So the platform dropping down is the our on

Our from final from HSBC. Wong question comes Binnie

So I'll just translate. quickly

-- guess billion is CNY right, that in look you billion X XXX the at I Tencent X years are of has question first the XX here the So around next to step in announced in next the they that if X years, last to the versus up terms in years content content spend, going CNY spend.

Tencent, do terms how us the licensing, is content then how content on the -- like narrowed affect decline affect like their still in if -- last structure? has So quarters the our decline. down now? we right? is of down from iQIYI's X%. double And double-digit in on the in terms a in only strategy? advertising you of this in But down only And versus very of look of say, the remind how self-production, does the growth. split what to type the then then of that? several advertising, a flattish at, terms optimal a It's split just growth, mix we magnitude media Can our like do And It's we see lastly digit right, then almost

should is just better structural be able we -- advertising then matter something see for we Or I advertising in should to is should the timing just that of to understand, a reminded want of? probably be growth? So iQIYI, down business road, a our and there it

based X years, easily past that if spending, look can at that talking be the the will you the Yes. coming in calculated in it When on it the it total and our definitely years, biggest experiences. coming about spending our for content main investment

we new of is So a stories this This not not can earnings the or that is event a the It's spending. today tell the story. or new like billions call. press million

a look change. think speaking, ratio original increasing I will content. content we it definitely generally between of original spending from it the that you the about licensed versus to number the not years our the past won't at the amount a you on trend the that few And for if that think see really if So much content, big

detailed on is categories. if ratios, that content -- you about quite take you based If different talk the

drama, variety at contract to the look You variety the produce to content if the that at the producing, content. self-produced half are or at goes almost shows most our the at we shows original over are you are But operating if look And or ones. that look that you may and year, about one the you the titles look future movies, higher. cost be original the our also lead. quality release And talk to scale -- that almost for definitely the you investment if movie, theatrical the time mainstream have of is about this year, still licensed cost And or content movies and launched take movies only and this the self-produced all the license release. the we distance movies still if

business. that we has did versus the analysis bit we or passed. see that And get And that think Thank overall and industries, internal higher some or the business. advertisers So about you. we worst advertisers and research for advertiser or that year is our that this quite our And time better. definitely, think is peers' -- better analysis we of we already our think a the comparable it will to recovering tough, our

is think that us I all Operator, you. today. Thank for

our Thank Ladies you. call. the have participating. reached conference of gentlemen, for we and end Thank you

may You disconnect. all

Have good much. a very day. you Thank

Thank you.

Bye, bye.