With Continuing Growing on Q2, iQiyi plan to activated a ‘calming’ growth on its Q3

With Continuing Growing on Q2, iQiyi plan to activated a ®calming growth on its Q3

On August 30, iQiyi (NASDAQ:IQ) released its unaudited financial report for the second quarter ended June 30.

According to the report, the total revenue of iQiyi on second quarter is 6.7 billion RMB, including membership service revenue 4.3 billion RMB, increasing 7%(YoY) Operating profit based on non-GAAP financial measures was RMB344 million, an increase of 5% quarter-on-quarter and the second consecutive quarter of operating profit.

“Though the process was challenging, the results were exciting. The performance in the second quarter shows that the ship of iQiyi has completed its optimization and upgrading and successfully sailed out of the eye of the storm.” said by Gong Yu, the founder and CEO of iQiyi. What¡¯s more, he status that iQiyi has faith in continuing its ®calming rgrowth on the third quarter.

This strategy will help iQiyi balance the benefit of its user, clients and shareholders, which leads the further improvement on its business model in a healthy way, also drive further profit growth and revenue growth.

“We are committed to building a healthy and sustainable business and creating long-term value,” said Wang Jun, CFO of iQiyi.

Member Increasing 7% (YoY %)

On second quarter, improvement in content quality and revenue has a goal to iQiyi. This quarter, the cost is 5.2 billion which decreasing 24% (YoY%), total operation fees is 1.3 billion which decreasing 31%(YoY%). The non-GAAP operation profit is 344 million on the second quarter, 5%(ring growth) increasing than the first quarter 327 million. This the second time that iQiyi continuing achieve its operation profit growth after the first quarter.

As the most important business segment of iQiyi, the membership service maintained solid growth in the quarter, providing strong support for iQiyi to achieve sustained profitability.This season, the revenue in membership service is 4.3 billion, increasing 8%(YoY%). Up to the second quarter in 2022, iQiyi’s monthly ARM has recorded six consecutive quarters of healthy year-on-year growth of 8% or more.Average daily subscription members reached 98.3 million in the second quarter.

The continued growth of membership service revenue is due to IQiyi’s active expansion of new members on the TV side, continuous provision of diversified high-quality content, and implementation of refined member operation strategy to enhance the value of members. By enhancing the value and experience in the TV side user through the new releasing platinum member, the monthly activated members on iQiyi TV side has grow 15%(YoY%).

Furthermore, iQiyi’s refined operation based on users’ preferences for watching movies and paying habits improves membership retention, recruitment and turnover recall. In the second quarter, diversified high-quality content met the differentiated needs of iQiyi members from different category. For the exclusive broadcast content, IQiyi adopts the mode of “members first”, for example the show <Rap of China:All Star Season> was launched in this mode, attracting more than 1.3 million members on the first day of broadcast.

Excellent Content is Always the Key

In the second quarter, iQiyi’s various businesses performed well. A large number of high-quality content has been recognized by the market, and a number of key operating indicators have been kept ahead of the industry. New increments have been released in overseas market and iQiyi overseas version.

TV series like <Ordinary Greatness> which received a high score on Douban 8.6/10 as the Top 1 TV series in the first half of 2022, as well as its membership income for iQiyi.Content of the second quarter continue fulfill the different needs for the users, such as <The Lords of the Losers>, with its interactive method created by iQiyi team has greatly improve user¡¯s engagement.iQiyi’s original film <Man On the Edge> grossed more than 160 million RMB and was one of the major contributors to the box office of domestic films in the second quarter.

In addition, IQiyi adheres to the strategy of IP seasonal broadcast of variety shows, and has launched four popular original variety shows, such as <Rap of China:All Star Season> and <The Detective’s Adventures 2>  which have attracted many audiences. Among them, many songs of <Rap of China:All Star Season> dominated the list of major music platforms.  <The Detective’s Adventures 2> is number one on several third-party data platforms.

According to Quest Mobile, iQiyi ranks first in the industry in terms of monthly active users (MAUs). Third-party data show that iQiyi’s effective broadcast market share of drama and animation (including children’s animation) ranks first in the industry.

“While the cost ratio of key content categories continues to improve, we provide a wealth of quality content to increase user activity. It is worth mentioning that IQiyi’s return on investment (ROI) of drama, variety show, animation and children’s channels all improved in the second quarter compared with the previous quarter.” said by Gong Yu, the founder and CEO of iQiyi.

In terms of overseas market, the significant growth of paying users led to a significant year-over-year increase in member service revenue. Among them, IQiyi’s hit shows <Kinn Porsche Story> and <Seven Days in Love with Me 3> launched overseas in the second quarter have attracted a large number of users and advertisers, especially in

Thailand and Malaysia.

In the second quarter, the daily active users (DAU) of iQiyi Ultra Edition exceeded 5 million, and its membership revenue and advertising revenue grew rapidly year-on-year. Meanwhile, the convergence of user groups between iQiyi Speed Edition and the main website App remained at a very low level in the second quarter, with a DAU convergence of less than 4% in June.

New Growth Strategy for Q3

Looking ahead, iQiyi has well-prepared for third quarter and entire year. During the summertime holiday, iQiyi launched a series of hit drama like <The Heart of Genius>, <Love Between Fairy and Devil> and <Twenty Your Life On 2>

Among them, <Love Between Fairy and Devil> on ¡°SweetOn¡± Channel breaks the hit index 10,500 also proving the strength of iQiyi in original creation and channel operation, The synchronized online animation version <Love Between Fairy and Devil> also achieved a good revenue performance,verifying the great potential of animation and drama series to drive each other. As a follow-up, a new season of ¡°LightOn¡± Channel will return in the fourth quarter.

For variety show, more upcoming original shows will be broadcast during the next half year, including shows like <Super Sketch Show 2>, <Mr. Housework 4 >.

In July, iQiyi and Douyin reached a content licensing cooperation. For the long video content authorized by iQiyi, users of Douyin platform can create interesting short videos for the second time.

This cooperation not only reflects that iQiyi’s value of continuously creating high-quality long video content and adhering to the long-term has been recognized by the market and users, but also will unlock new opportunities for iQiyi, expand its user base, optimize the ecology of the online video industry, and broaden its cash ability.

Gong Yu said that ¡°iQiyi upgraded its strategy from the third quarter and entered a new channel of “calm growth”.

“In the third quarter, iQiyi entered into partnerships with key partners such as Douyin Group and Pacific Alliance Investment Group (PAG), and with the strong momentum of a series of blockbuster content, we are confident of continued profit growth in the future.”

He explained that compared with the previous growth model, “calm growth” does not consume a lot of cash flow, and more resources are invested in the company’s main business and high ROI projects with higher certainty. Seek both revenue and profit growth, profit growth is higher than revenue growth, at the same time, operating expenses will remain stable, compact organizational structure configuration, operation efficiency is higher; Base all financial returns on creating greater value for users and customers.

He said the “calm growth” strategy will help IQiyi further improve the health of its business and drive future profit and revenue growth.