iQIYI Announces Fourth Quarter and Fiscal Year 2020 Financial Results

Author: iQIYI, Inc. / 2023-07-23 22:33 / Source: iQIYI, Inc.

iQIYI Announces Fourth Quarter and Fiscal Year 2020 Financial Results

BEIJING,Feb. 18,2021 --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 31,2020.

Fourth Quarter 2020 Highlights

Total revenues were RMB7.5 billion (US$1.1 billion1),representing a 1% decrease from the same period in 2019.

Operating loss was RMB1.3 billion (US$200.4 million) and operating loss margin was 18%,compared to operating loss of RMB2.5 billion and operating loss margin of 34% in the same period in 2019.

Net loss attributable to iQIYI was RMB1.5 billion (US$237.2 million),compared to net loss attributable to iQIYI of RMB2.5 billion in the same period in 2019. Diluted net loss attributable to iQIYI per ADS was RMB2.10 (US$0.32),compared to diluted net loss attributable to iQIYI per ADS of RMB3.43 in the same period of 2019.

The number of total subscribing members was 101.7 million as of December 31,2020 and 100.7 million excluding individuals with trial memberships. This compares to 106.9 million of total subscribing members and 105.7 million excluding individuals with trial memberships as of December 31,2019.

Fiscal Year 2020 Highlights

Total revenues were RMB29.7 billion (US$4.6 billion),representing a 2% increase from 2019.

Operating loss was RMB6.0 billion (US$925.7 million) and operating loss margin was 20%,compared to operating loss of RMB9.3 billion and operating loss margin of 32% in 2019.

Net loss attributable to iQIYI was RMB7.0 billion (US$1.1 billion),compared to net loss attributable to iQIYI of RMB10.3 billion in 2019. Diluted net loss attributable to iQIYI per ADS was RMB9.52 (US$1.47),compared to diluted net loss attributable to iQIYI per ADS of RMB14.14 in 2019.

"Our fourth quarter result was in-line with our overall expectation," commented Dr. Yu Gong,Founder,Director,and Chief Executive Officer of iQIYI. "We maintained our leading position in our key content offerings,including dramas and variety shows,based on third-party data. Meanwhile,we made breakthroughs in certain areas,such as original films,intelligent screens and Virtual Reality (VR). In 2021,we will continue to provide a more diversified portfolio of high-quality content to our users and enhance the perceived value of our paying subscribers. This,in our view,should help to revive the growth of our subscribers and revenue amid the recovering macro environment."

"Our operating loss margin significantly narrowed for three consecutive quarters on a year-over-year basis" commented Mr. Xiaodong Wang,Chief Financial Officer of iQIYI. "We continued to explore the content strategy with better return-on-investment (ROI) and implement disciplined cost control amid the challenging macro environment. In December 2020,we completed our largest financing since our IPO,which enables us to further enhance our content offering and strengthen our technology."

Footnotes:

[1]Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB6.5250 to US$1.00,the exchange rate in effect as of December 31,2020 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.

Fourth Quarter 2020 Financial Results

Total revenues reached RMB7.5 billion (US$1.1 billion),representing a 1% decrease from the same period in 2019.

Membership services revenue was RMB3.8 billion (US$587.8 million),representing a 1% decrease from the same period in 2019. The decrease was primarily due to the decline of our subscribing members from 106.9 million a year ago to 101.7 million as of December 31,2020.

Online advertising services revenue was RMB1.9 billion (US$284.9 million),representing a 1% decrease from the same period in 2019.

Content distribution revenue was RMB804.3 million (US$123.3 million),representing an 8% decrease from the same period in 2019. The decrease was primarily driven by less cash transaction partially offset by the increase of barter transaction.

Other revenues were RMB959.6 million (US$147.1 million),representing a 10% increase from the same period in 2019,primarily due to the growth of certain business lines.

Cost of revenues was RMB6.8 billion (US$1.0 billion),representing a 14% decrease from the same period in 2019. The decrease in cost of revenues was primarily due to less content costs during the quarter. Content costs as a component of cost of revenues were RMB5.1 billion (US$786.1 million),representing a 10% decrease from the same period in 2019. The decrease was primarily attributable to less recorded expenses of produced content,more shorter- length contentto satisfy the diversified users' demand,as well as update of accounting estimates of future viewership consumption patterns and useful lives of content assets to better reflect the expected usage of these content assets.

Selling,general and administrative expenses were RMB1.3 billion (US$201.9 million),representing a 6% decrease from the same period in 2019. This was primarily attribute to less marketing spend.

Research and development expenses were RMB663.4 million (US$101.7 million),representing a 7% decrease from the same period in 2019,primarily due to the decrease of personnel-related compensation expenses.

Operating loss was RMB1.3 billion (US$200.4 million),compared to operating loss of RMB2.5 billion in the same period in 2019. Operating loss margin was 18%,compared to operating loss margin of 34% in the same period in 2019.

Total other expense was RMB241.0 million (US$36.9 million),compared to total other income of RMB75.3 million during the same period of 2019. The year-over-year variance was mainly due to less foreign exchange gain.

Loss before income taxes was RMB1.5 billion (US$237.3 million),compared to loss before income taxes of RMB2.5 billion in the same period in 2019.

Income tax benefit was RMB16.3 million(US$2.5 million),compared to income tax expense of RMB22.6 million in the same period in 2019.

Net loss attributable to iQIYI was RMB1.5 billion (US$237.2 million),compared to net loss attributable to iQIYI of RMB2.5 billion in the same period in 2019. Diluted net loss attributable to iQIYI per ADS was RMB2.10 (US$0.32) for the fourth quarter of 2020,compared to diluted net loss attributable to iQIYI per ADS of RMB3.43 in the same period of 2019.

As of December 31,2020,the Company had cash,cash equivalents,restricted cash and short-term investments of RMB14.3 billion (US$2.2 billion).

Fiscal Year 2020 Financial Results

Total revenues reached RMB29.7 billion (US$4.6 billion),representing a 2% increase from 2019.

Membership services revenue was RMB16.5 billion (US$2.5 billion),representing a 14% increase from 2019. The increase was primarily attributable to the increasing subscribing members pull-forwarded by Covid-19 in the first half of 2020,as well as our exclusive content launch and various operational initiatives during the year.

Online advertising services revenue was RMB6.8 billion (US$1.0 billion),representing a 18% decrease from 2019. The decrease was primarily due to the challenging macroeconomic environment in China.

Content distribution revenue was RMB2.7 billion (US$407.7 million),representing a 5% increase from 2019.

Other revenues were RMB3.7 billion (US$572.3 million),remaining flat from 2019.

Cost of revenues was RMB27.9 billion (US$4.3 billion),representing an 8% decrease from 2019. The decrease was primarily attributable to less content costs and other cost items. Content costs as a component of cost of revenues were RMB20.9 billion (US$3.2 billion),representing a 6% decrease from 2019. The decrease was a combined effect of less recorded expenses of produced content,more shorter-length content to satisfy the diversified users' demand,general and administrative expenses were RMB5.2 billion (US$795.1 million),representing a 1% decrease from 2019. This was primarily due to less marketing spend.

Research and development expenses were RMB2.7 billion (US$410.0 million),remainingflat from 2019,primarily due to the decreased personnel compensation offset by the increase of share-based compensation expenses.

Operating loss was RMB6.0 billion (US$925.7 million),compared to operating loss of RMB9.3 billion in 2019. Operating loss margin was 20%,compared to operating loss margin of 32% in 2019.

Total other expense was RMB943.4 million (US$144.6 million),compared to total other expense of RMB967.1 million during 2019.

Loss before income taxes was RMB7.0 billion (US$1.1 billion),compared to loss before income taxes of RMB10.2 billion in 2019.

Income tax expense was RMB23.3 million (US$3.6 million),compared to income tax expense of RMB51.9 million in 2019.

Net loss attributable to iQIYI was RMB7.0 billion (US$1.1 billion),compared to net loss attributable to iQIYI of RMB10.3 billion in 2019. Diluted net loss attributable to iQIYI per ADS was RMB9.52 (US$1.47) for 2020,compared to diluted net loss attributable to iQIYI per ADS of RMB14.14 in 2019.

Financial Guidance

For the first quarter of 2021,iQIYI expects total net revenues to be between RMB7.07 billion (US$1.08 billion) and RMB7.53 billion (US$1.15 billion),representing an 8% to a 2% decrease year over year. This forecast reflects iQIYI's current and preliminary view,which may be subject to change.

Update on the 2026 Notes and follow-on public offering of ADSs

The Company closed (i) the public offering of US$800 million in aggregate principal amount of 4.00% convertible senior notes due 2026 (the "2026 Notes"),and (ii) the public offering by the Company of an aggregate of 40,000,000 ADSs at an offering price of US$17.50 per ADS on December 21,2020. The underwriters exercised their option in full to purchase an additional US$100 million aggregate principal amount of the 2026 Notes (the "Option Notes") and their option in part to purchase 4,594,756 additional ADSs (the "Option ADSs"),which closed on January 8,2021. The Company received aggregate proceeds of approximately US$884.3 million after deducting underwriting discounts and commissions from the 2026 Notes offering,which included the exercise by the underwriters of the option to purchase the Option Notes,and aggregate proceeds of approximately US$758.9 million after deducting underwriting discounts and commissions from the ADS offering,which included the exercise by the underwriters of the option to purchase the Option ADSs.

Conference Call Information

iQIYI's management will hold an earnings conference call at 7:00 PM on February 17,2021,U.S. Eastern Time (8:00 AM on February 18,Beijing Time).

Please register in advance of the conference using the link provided below. Upon registering,you will be provided with participant dial-in numbers,Direct Event passcode and unique registrant ID by email.

Participant Online Registration: http://apac.directeventreg.com/registration/event/2171098

It will automatically direct you to the registration page of " iQIYI Fourth Quarter and Fiscal Year 2020 Earnings Conference Call",where you may fill in your details for RSVP. If it requires you to enter a participant conference ID,please enter "2171098".

In the 10 minutes prior to the call start time,you may use the conference access information (including dial-in number(s),Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

A telephone replay of the call will be available after the conclusion of the conference call through February 25,2021.

Dial-in numbers for the replay are as follows:

International Dial-in: +61 2 8199 0299

Passcode: 2171098

A live and archived webcast of the 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,professional user 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,talent agency,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.

Non-GAAPFinancial Measures

To supplement iQIYI's consolidated financial results presented in accordance with GAAP,iQIYI uses free cash flow as non-GAAP financial measure. The presentation of the non-GAAP financial measure is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

iQIYI believes that the non-GAAP financial measure provides meaningful supplemental information regarding its liquidity by excluding certain items that may not be indicative of its recurring liquidity position,such as operating cash flows adjusted by capital expenditures. The Company believes that both management and investors benefit from referring to the non-GAAP financial measure in assessing its liquidation and when planning and forecasting future periods. The non-GAAP financial measure also facilitates management's internal comparisons to iQIYI's historical liquidity. The Company believes the non-GAAP financial measure is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using the non-GAAP financial measure is that the non-GAAP measure exclude certain items that have been and will continue to be for the foreseeable future a significant component in the Company's results of operations. The non-GAAP financial measure presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently,limiting their usefulness as comparative measures to the Company's data.

Free cash flow represents net cash provided by operating activities less capital expenditures. Starting from January 1,iQIYI adopted ASU 2019-02,Improvements to Accounting for Costs of Films and License Agreements for Program Materials,which reclassifies cash outflows for costs incurred to acquire licensed contents from investing activities to operating activities. To increase comparability,2019 free cash flow has been adjusted to include cash outflows of acquisition of licensed copyrights,which is presented on the same basis as 2020 and going forward.

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

Year Ended

December 31,

September 30,

December 31,

2019

2020

2019

2020

RMB

(Unaudited)

Revenues:

Membership services

3,861,058

3,975,514

3,835,201

14,435,611

16,491,030

Online advertising services

1,883,100

1,840,231

1,859,031

8,270,600

6,822,115

Content distribution

878,044

392,338

804,335

2,544,221

2,660,074

Others

874,422

979,609

959,613

3,743,226

3,733,996

Total revenues

7,496,624

7,187,692

7,458,180

28,993,658

29,707,215

Operating costs and expenses:

Cost of revenues

(7,914,438)

(6,363,784,507)

(30,348,342)

(27,884,395)

Selling,general and administrative

(1,399,529)

(1,935)

(1,317,665)

(5,236,007)

(5,835)

Research and development

(711,262)

(669,933)

(663,381)

(2,667,146)

(2,675,494)

Total operating costs and expenses

(10,025,229)

(8,397,306)

(8,765,553)

(38,251,495)

(35,747,724)

Operating loss

(2,528,605)

(1,209,614)

(1,307,373)

(9,257,837)

(6,040,509)

Other income/(expense):

Interest income

89,833

34,049

22,409

402,145

157,477

Interest expenses

(276,927)

(269,311)

(269,323)

(914,371)

(1,066,320)

Foreign exchange gain/(loss),net

443,977

265,572

28,925

(190,210)

43,274

Loss from equity method investments

(49,213)

(24,749)

(40,697)

(155,073)

(224,489)

Other (expense)/income,net

(132,388)

61,461

17,651

(109,541)

146,690

Total other income/(expense),net

75,282

67,022

(241,035)

(967,050)

(943,368)

Loss before income taxes

(2,453,323)

(1,142,592)

(1,548,408)

(10,224,887)

(6,983,877)

Income tax (expense)/benefit

(22,586)

(18,846)

16,337

(51,852)

(23,276)

Net loss

(2,475,909)

(1,161,438)

(1,532,071)

(10,276,739)

(7,007,153)

Less: Net income attributable to noncontrolling interests

17,876

12,850

15,543

46,590

31,208

Net loss attributable to iQIYI,Inc.

(2,493,785)

(1,174,288)

(1,547,614)

(10,323,329)

(7,038,361)

Accretion of redeemable noncontrolling interests

(1,542)

(1,796)

(1,827)

(1,542)

(7,087)

Net loss attributable to ordinary shareholders

(2,495,327)

(1,176,084)

(1,549,441)

(10,324,871)

(7,045,448)

Net loss per share for Class A and Class B ordinary shares:

Basic

(0.49)

(0.23)

(0.30)

(2.02)

(1.36)

Diluted

(0.49)

(0.23)

(0.30)

(2.02)

(1.36)

Net loss per ADS (1 ADS equals 7 Class A ordinary shares):

Basic

(3.43)

(1.61)

(2.10)

(14.14)

(9.52)

Diluted

(3.43)

(1.61)

(2.10)

(14.14)

(9.52)

Weighted average number of Class A and Class B

ordinary shares used in net loss per share computation:

Basic

5,123,416,747

5,182,686,302

5,232,415,954

5,104,882,400

5,180,057

Diluted

5,057

iQIYI,INC.

Condensed Consolidated Balance Sheets

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

December 31,

2019

2020

RMB

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

5,934,742

10,915,282

Restricted cash

974,932

25,230

Short-term investments

4,579,313

3,358,174

Accounts receivable,net

3,627,749

3,344,433

Prepayments and other assets

3,719,228

3,515,855

Amounts due from related parties

211,993

96,111

Licensed copyrights,net

1,881

1,035,339

Total current assets

20,272,838

22,290,424

Non-current assets:

Fixed assets,754,367

1,393,467

Long-term investments

2,982,154

3,202,828

Deferred tax assets,net

34,916

51,347

Licensed copyrights,net

6,287,330

6,055

Intangible assets,net

813,960

627,198

Produced content,net

4,355,221

6,556,084

Prepayments and other assets

3,508,476

2,699,423

Operating lease assets

722,742

1,001,857

Goodwill

3,888,346

3,346

Amounts due from related parties

172,200

39,400

Total non-current assets

24,519,712

25,895,005

Total assets

44,792,550

48,185,429

LIABILITIES,REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS'

EQUITY

Current liabilities:

Accounts and notes payable

8,212,449

7,561,532

Amounts due to related parties

1,604,258

1,778,783

Customer advances and deferred revenue

3,081,407

3,444,917

Convertible senior notes,current portion

4,752,061

Short-term loans

2,618,170

2,965,957

Long-term loans,current portion

736,814

909,034

Operating lease liabilities,current portion

125,412

201,307

Accrued expenses and other liabilities

3,794,656

3,240,987

Total current liabilities

20,173,166

24,854,578

Non-current liabilities:

Long-term loans

880,278

Convertible senior notes

12,296,868

11,926,715

Deferred tax liabilities

30,136

4,588

Amounts due to related parties

1,061,883

977,407

Operating lease liabilities

402,732

767,676

Other non-current liabilities

232,555

210,167

Total non-current liabilities

14,904,452

13,886,553

Total liabilities

35,077,618

38,741,131

Redeemable noncontrolling interests

101,542

108,629

Shareholders' equity:

Class A ordinary shares

142

165

Class B ordinary shares

183

Additional paid-in capital

41,298,328

47,687,483

Accumulated deficit

(33,834,357)

(40,973,853)

Accumulated other comprehensive income

2,106,718

2,542,680

Non-controlling interests

42,376

79,011

Total shareholders' equity

9,613,390

9,335,669

Total liabilities,redeemable noncontrolling interests and shareholders' equity

44,429

iQIYI,INC.

Condensed Consolidated Statements of CashFlows

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

Three Months Ended

Year Ended

December 31,

December 31,

2019

2020

2019

2020

RMB

(Unaudited)

Net cash provided by/(used for) operating activities(1)

2,342,583

(1,929,077)

(1,447)

3,906,227

(5,411,071)

Net cash (used for)/provided by investing activities (1、2)

(2,088,910)

342,847

281,471

(11,749,571)

159,296

Net cash (used for)/provided by financing activities

(259,249)

238,109

8,392,477

7,880,306

9,373,906

Effect of exchange rate changes on cash,cash equivalents

and restricted cash

(177,873)

(113,074)

(32,770)

112,265

(91,293)

Net (decrease)/increase in cash,cash equivalents and

restricted cash

(183,449)

(1,461,195)

7,121,731

149,227

4,030,838

Cash,cash equivalents and restricted cash

At beginning of period

7,093,123

5,279,976

3,818,781

6,760,447

6,909,674

At end of period

6,674

3,781

10,940,512

6,674

10,512

Net cash provided by/(used for) operating activities

2,583

(1,077)

(1,447)

3,227

(5,071)

Less: Capital expenditures (3)

(232,225)

(89,938)

(26,523)

(740,163)

(240,750)

Less: Acquisition of licensed copyrights (1)

(3,656,339)

(11,957,549)

Free cash flow

(1,545,981)

(2,019,015)

(1,970)

(8,791,485)

(5,651,821)

(1) Starting from January 1,2019 non-GAAP measure of free cash flow has been adjusted to include cash outflows of acquisition of licensed copyrights,which is presented on the same basis as 2020 and going forward.

(2) Starting from January 1,net cash used in or provided by investing activities primarily consists of net cash flows from investing in debt securities,purchase of long term investments and capital expenditures.

(3) Capital expenditures are incurred primarily in connection with leasehold improvements,computers and servers.