Iqiyi 2022Q1 financial report： quarterly profit was achieved for the first time, with a net increase of 4.4 million members in the quarter.

On May 26th, iQiyi (NASDAQ:IQ) released its unaudited financial report for the first quarter as of March 31st, 2022. The financial report shows that iQiyi’s revenue in the first quarter was 7.3 billion yuan, of which membership service revenue was 4.5 billion yuan, a year-on-year increase of 4%. The daily average number of subscribed members was 101.4 million, a net increase of 4.4 million compared with the fourth quarter of last year. Based on non-GAAP financial indicators, the operating profit was 330 million yuan, and the profit rate was 4%, which increased for three consecutive quarters and achieved quarterly profit for the first time.

Gong Yu, founder and CEO of Aiqiyi, said at the earnings conference call that day: "We realized the non-GAAP operating profit for the first time this quarter. This proves the effectiveness and strong execution ability of the company’s new strategy. I am very happy to see that this quarter’s performance exceeded expectations. "

Earlier, when releasing the financial reports for the fourth quarter and the whole year of 2021, Gong Yu announced that this year’s goal is to achieve breakeven at the operational level of non-GAAP for the whole year, and to achieve breakeven at the operational level of non-GAAP for the quarter as soon as possible.

Gong Yu explained that iQiyi achieved positive quarterly operating profit ahead of schedule through four major measures, including: the newly launched head content in the first quarter consolidated iQiyi’s market leading position, which brought growth to the membership size and monthly average single member income (ARM); Further improve operational efficiency through refined content scheduling and content promotion; Control costs and expenses while continuing to provide users with quality services; Further improve the sales ability through various ways.

Q1 explosion drama "In the World"

Gong Yu believes that Iqiyi’s performance in the first quarter is replicable, and will continue to implement the current operation strategy in the next few quarters, and believes that it will continue to achieve ideal results. He said that he is full of confidence in the future layout in terms of high-quality content; In terms of efficiency management, we will maintain the current streamlined and efficient organizational structure and continue to focus on improving efficiency.

Double growth of membership size and revenue, positive quarterly operating profit ahead of schedule.

In the first quarter, the membership business maintained steady growth, which provided strong support for the overall performance of iQiyi to exceed expectations. In the first quarter, membership service revenue was 4.5 billion yuan, up 4% year-on-year and 9% quarter-on-quarter. This indicator has increased year-on-year for nine consecutive quarters. The average number of subscribed members in the first quarter was 101.4 million, a net increase of 4.4 million compared with the previous quarter. In the quarter, ARM was RMB 14.69, up 8% year-on-year and 4% quarter-on-quarter. As of the first quarter of 2022, ARM has achieved year-on-year growth of 8% and above for five consecutive quarters.

This quarter, iQiyi focused on attracting users through high-quality new content, retaining users through rich and varied film library content, and adopting various operational measures to improve user loyalty and brand awareness. These measures were widely recognized by users and helped to consolidate the membership base, which in turn turned into stronger liquidity.

In the same period, the operational efficiency of the platform continued to improve. The cost continued to decline, and the revenue cost in the first quarter of 2022 was 6 billion yuan, a year-on-year decrease of 16%; Expenditure on sales and management expenses was 740 million yuan, a year-on-year decrease of 38%.

Q1 Financial Report Partial Data

"In the past three quarters, our gross profit margin has continued to grow and reached a record high in the first quarter of 2022. At the same time, operating expenses continued to decline for three consecutive quarters. " Wang Jun, CFO of Aiqiyi, said, "Behind these figures are our unremitting efforts to improve operational efficiency and enhance business expansion, so as to better prepare for long-term development."

Rich in content reserves

Operational efficiency improvement

Long-term development and supply gradual system

In the first quarter of 2022, iQiyi continued to launch high-quality content.

The newly launched "The World", "A Picture Book of Hunting Crime" and "Heart Residence" have gained a good reputation, but also achieved a double harvest of social value and commercial value. In particular, "In the World" became a national explosion, loved by audiences of different ages and backgrounds, and attracted 25 advertisers to cooperate with the platform. In addition, high-quality content shows a good long tail effect, and these series continue to produce steady performance after the closing.

Iqiyi focuses on building content business from production to operation in a systematic way.

According to the financial report data, the content cost of iQiyi in this quarter was 4.4 billion yuan, both year-on-year and quarter-on-quarter. Gong Yu said: "Our goal is to obtain the most suitable content with the best ROI (return on investment) while maintaining the overall competitiveness and market leading position of iQiyi, and to maximize the realization with a reasonable amount of content."

Among them, iQiyi uses technology to further improve the production efficiency.

In the first quarter, the AI dubbing technology IQ-Dubbing developed by iQiyi was widely used in film dubbing, which effectively optimized the cost and promoted the revenue of long tail content. The IP development strategy of "one fish eats more" explores multiple opportunities for realizing high-quality content. The first work of iQiyi’s "Ancient Chinese City Universe" series-"The Wind Rises in Luoyang" IP has signed contracts to authorize more than 20 customers, and developed a variety of derivatives such as tide play, jewelry, clothing, food and beverage.

Stills of "The Wind Rises in Luoyang"

In terms of content storage, iQiyi has been committed to improving original production capacity, and has now established the largest and most professional producer team in the industry. Iqiyi expressed confidence in this year’s content reserves, especially the multi-core drama reserves. In the second quarter, "Dear Children" and "The Wind Rises in Longxi" were well received.

As for the impact of the epidemic, iQiyi said that due to a considerable amount of original content reserves and the operational experience accumulated in the past two years to deal with the epidemic, this round of epidemic rebound since March this year has limited impact on the content reserves of iQiyi’s future dramas.

Improving the overall content quality is the focus of iQiyi’s work. The platform will continue to introduce high-quality content, improve the quality of content, and use the advantages of the platform to build the content ecology of iQiyi.

Among them, we will continue to build content brands, strengthen the advantages of iQiyi in the vertical track through the serialization strategy of long dramas and the theatrical mode. Benefiting from rich content reserves, the platform launched a series of good works in the second quarter. At present, Dear Children, Greetings to the Qing Dynasty, The Wind Rises in Longxi and The Night Walker have received enthusiastic response from users, and the highly anticipated original TV series Life as First Seen and Police Honor will also be launched. In terms of theater, Xiaodiao Theater will broadcast the third work "Breaking Elite", and this year, Love Theater will also launch five new dramas. Variety, animation and children’s content will all launch new works under the strategy of seasonal broadcasting. For the upcoming summer file, the platform has prepared rich and diverse high-quality content, covering all core content types to meet the needs of users in different circles.

Publicity map of "Police Honor"

Iqiyi will continue to produce and distribute original films to enrich the content ecology. On April 15th, the film "Edge Walker" which was shown in major cinemas has exceeded 130 million yuan at the box office. On April 1st, Iqiyi upgraded the online movie cooperation mode, from the previous accounting according to the broadcast volume to the accounting according to the duration. The new accounting mode helps high-quality films to stand out and achieve a win-win situation for both the film and the platform.

Iqiyi Extreme Edition and overseas markets have become new growth points.

Iqiyi explores growth opportunities through new business models. In the first quarter of 2022, iQiyi Extreme Edition and overseas business continued to maintain a strong growth momentum.

Through continuous efforts to improve product and user experience, overseas business achieved steady growth in membership revenue and advertising revenue in the first quarter.

Iqiyi Extreme Edition, as a good supplement to the main station APP, maintained a strong performance in various operational indicators this quarter, with a monthly DAU of 5 million in the first quarter and over 5 million in April. The monetization mode of Iqiyi Extreme Edition is mainly based on effect advertisements, which is obviously different from the monetization mode of the main station APP based on membership subscription. The user portrait, monetization mode and content consumption behavior of iQiyi Extreme Edition are very different from those of the main station APP. The user overlap between iQiyi Extreme Edition and the main station APP decreased further in this quarter, and the DAU overlap was only about 4% in March. The consumption of the content in the library of iQiyi Extreme Edition is significantly higher than that of the main station APP, which greatly enhances the long tail value of the content in the library. Iqiyi believes that the Extreme Edition has great growth potential in terms of user scale and liquidity.

"The first quarter was a breakthrough for the company." Gong Yu believes that "the encouraging performance in the first quarter also shows that the long video industry can continuously generate operating profits. We are full of confidence in the long-term healthy development of the industry. "

Original title: "Iqiyi 2022Q1 Financial Report: First quarterly profit, net increase of members in the quarter of 4.4 million"

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