Q3 2023 iQIYI Inc Earnings Call

Speaker 1: Thank you for standing by and welcome to the ITE third quarter 2023 earnings conference call. All participants are in a...

Thank you for standing by and welcome to the I T E third quarter 2023 earnings conference call.

All participants are in a listen only mode.

Speaker 1: There will be a presentation followed by a question and answer session.

There will be a presentation, followed by question and answer session.

If you wish to ask a question you will need to press the star key followed by the number one on your telephone keypad.

Speaker 1: If you wish to ask a question, you will need to press the star key followed by the number one on your telephone key.

Speaker 1: I would now like to hand the conference over to Xiao Yu, Investor Relations Director of ITE. Please go ahead.

I would now like to hand, the conference over to shall you Investor Relations director of ITE. Please go ahead.

Thank you operator, Hello, everyone and thank you for joining Ice's third quarter 2020 used to be earnings conference call. The company's results were released earlier today and are available on the company's Investor Relations website at IR E arc com on the call today are Mr.

Speaker 1: Thank you, Operator. Hello, everyone, and thank you for joining ITE's 3rd Quarter 2023 Earnings Conference Call. The company's results were released earlier today and are available on the company's industrial relations website at ir.ite.com.

Speaker 2: On the call today are Mr. Yu Gong, our Founder, Director and CEO , Mr. Jun Wang, our CFO , Mr. Xiaohui Wang, our CCO, Chief Content Officer, Mr. Wenfeng Liu, our CTO, Mr. Yuqiao Duan, Senior Vice President of our Membership Business and Mr. Xiang Huayang, Senior Vice President of Movies and Overseas

Founder director and CEO, Mr. Joe <unk>, our CFO, Mr Shan Li Wang our chief.

Chief content Officer, Mr. O'neill, our CTO, Mr. Your child doing senior Vice.

As president of our membership.

Mr. Shanghai Young senior Vice President of New movies and overseas business. Mr. Kang will give a brief overview of companies. This is operations and highlights followed by Jim who will go through the financial after the prepared remarks, the management team will participate in the Q&A session.

Speaker 2: Mr. Gong will give a brief overview of the company's business operations and highlights, followed by June , who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.

Speaker 2: Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.

Before we proceed. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act with 1995 forward looking statements are subject to risks and uncertainties, our actual results to differ materially from our current expectations.

Speaker 2: Potential risks and uncertainties include are now limited to those online in our public filings with yes

Potentially.

As a surgeon.

Not limited to those outlined in our public filings with the SEC.

Speaker 3: ITE does not undertake any obligation to update any forward-looking statement except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead. Hello everyone. Thank you for joining us today. I'll focus.

<unk> does not undertake any obligation to update any forward looking statement, except as required under applicable law I will now has also struggle. Please go ahead.

Hello, everyone and thank you for joining us today.

All hooker.

Okay.

Yeah.

Yeah.

Also occurs.

Uh huh.

Yeah.

Speaker 3: Our focus of the quarter remains firmly on generating high quality growth, achieving strong results in both revenue and profit.

Oh <expletive> ourselves.

And then finally on generating a high quality of growth achieving strong results in both.

Policies.

Speaker 3: Our total revenues grew 7% year-on-year, while profit performance was far more remarkable. Gross profit and non-gap operating profit had annual growth of 23% and 71% respectively.

Total revenues grew 7% year on year, while crop is performing well.

What's more remarkable.

<unk> policies on our non-GAAP operating profit.

Annual growth of <unk>.

3% and 72, 1% respectively.

Speaker 3: The impressive financial results demonstrate the strength of our robust operating leverage, anchored by our exceptional content, which serves as our core competitive advantage.

The impressive financial results demonstrates the strength of <unk>.

Robust operating leverage at inception.

Exceptional content rich so as I'll call competitive advantage.

Speaker 3: iQIYI is a signature brand for top-tier content.

Yes, so in the interim.

Our top tier content.

Speaker 3: According to enlightened data, we have been leading the industry in drama, we all shape Shell for seven consecutive quarters.

According to the license data, we have been leading the industry in drama the Ultrashape shell for seven consecutive quarters of original dramas remains key.

Speaker 3: All original dramas remained as a key driver for content supply and revenue contribution. Meanwhile, a diverse of high-quality titles emerged.

Key driver while content no supply.

Sure.

Well.

Is that worse of high quality titles.

Hey, Bob.

Speaker 3: were highly acclaimed by users. Notably, the Lotus casebook Yuan Hualong was the 10th drama in our history to break the 10,000 popularity index strong.

Our highly acclaimed buying users.

The ultimate Facebook Hello, once that test drama in all his trip to break that 10.

Popularity index.

Yes.

Speaker 3: During the quarter, membership services revenue grew by 19% annually, mainly driven by a 12% annual increase in R. Two key factors contributed.

During the membership services revenue grew by 19% annually, mainly driven by a talented person annually.

The annual increase in AR.

Two key factors contributing to that revenue growth first led in part by the high appeal.

Speaker 3: to the revenue growth, firstly in part by the high appeal of our inclusive content.

All else equal same concepts, we have reduced our debt.

Speaker 3: we have reduced the discounts provided for membership purchases well-direct on the channel sales

It's cost provided well membership or purchases well to act on that channel sale.

Speaker 3: Our content is compelling enough to drive purchasing decisions in its own.

All content is compelling enough to drive purchasing decisions.

That's enough.

Speaker 3: we have upgraded our member benefits and services.

We have upgraded our member.

And that's the way it is.

Speaker 3: resulting in increased viral perception among our members and boosted membership retention rate.

Resulting in increased Atlanta perception.

And both states membership.

Right.

Speaker 3: The enhanced member benefits encompass a wide range of upgrades.

But you have to remember benefits income pass a wider range on our progress.

Speaker 3: For example, optimizing the viewing experience from mobile devices to large screen TV.

For example, I was in my view.

The only areas mobility glasses to large screen television.

Speaker 3: Members can now enjoy content in signing 4K, 8K, and even indulge in our proprietary if

Members can now enjoy content in sandy.

Okay.

8-K.

Ebay in adoption in <unk>.

Well hi.

That's correct.

Yeah.

Exactly.

Speaker 3: ESAB E-S-A-B-E to enjoy better quality audio-visual experience. The audio experience is equally enhanced with a shift from ordinary stereo sound to the immersive and captivating experience.

Are you starting next year.

John J G impart Max total in dry sell her holiday all regional.

Well I'll do you service is equally.

Yes, Akshay Patel from older Nebraska sterile song to the immersive and.

Ill cover two P M.

Speaker 3: a private career, industry-leading, high-quality, humorous song, and our member perks don't stop there. We go beyond the online realm, extending our offering to exciting offline experiences, such as inclusive concerts.

Correct.

Yesterday, a leading high cure C marl.

And our member PRC.

Don't stop their vehicle young online.

You have pending offering.

You can see exciting offline is currently.

Cool concepts.

These upgrades.

Speaker 3: These upgrades have transformed entertainment, providing users a diversified, personalized, and immersive entertainment experience.

<unk> and their team met providing us a diverse they fly for them.

More on entertainment if currencies.

Speaker 3: We are very pleased to see users' appreciation for our content and services translate into our goals. Alongside membership services,

Eric Please.

<unk> uses our appreciation for all content unnecessarily.

Translated into euros.

Well I'll send my birthday.

Membership services.

About half the revenue was I'll say kind of girls.

Speaker 3: driving during the quarter. Our premium content and enhanced marketing capability drove up advertising revenue by 34% annually and 12% sequentially. Both brand ads and performance ads booked annually and sequentially grew.

Driving jewelry.

Hum, our premium content and enhanced marketing.

Copper pillar.

Uh huh.

Passenger revenue by.

So if you're forecasting annual at present.

Crescent sequentially.

Right.

And their performance.

Folks to annual and sequential growth.

Speaker 3: Entering into Q4, we are cautiously monitoring the microenvironment impact on the advertising market. We will upgrade our marketing capabilities to weather potential challenges as we continue to seek out new growth opportunities in the future.

Sorry into Q4, we are culturally.

The macro environment impact on either our testing market.

Well I've upgraded our marketing capabilities to gather potential challenges I see.

Continue to see calls.

Growth opportunities in the future.

Speaker 3: Now, let's dive deeper into the performance of our core business standards, starting with membership services.

No.

Let's dive deeper into the performance of our core business.

Yes.

Membership services.

Speaker 3: In the third quarter, membership services revenue exceeded RMB5 billion for the second time in our history, representing a strong annual increase of 19%, driven primarily by arm quotes.

Unless their memberships.

Membership so it's worth.

If it is RMB five purely for the second time.

That's fair.

Or is that.

Strong annual increase.

19% driven primarily by wells.

Speaker 3: they would like to reappear it.

It will last tool.

It is pure it.

Speaker 3: that the primary goal for membership services is to drive long-term and sustainable revenue growth. Membership revenue is driven by three components, namely on subscriber lifetime and subscriber base.

The primary goal for our membership services is to drive long term.

And the ball that you'll girls membership revenue is driven by three components.

Oh subscriber lifetime.

Subscriber base.

Speaker 3: and subscriber lifetime are our current key focus in driving the long-term economic value of membership services.

And subsequent to our last time.

Parrot key full curves.

And driving the long term it called the mix of membership services.

Speaker 3: In the third quarter, ARM reached RMB15.54, up 12%.

In the first half.

<unk> reached RMB, one five tons fight for talent.

Hello.

Speaker 3: percent annually and 5 percent sequentially. The average daily subscriber increased by 60 percent.

Present annually and 5% sequentially.

I haven't even still it sounds clabaugh increased up by six Chris.

Speaker 3: percent annually to 107.5 million.

Present annually tool.

Hundred understand then.

Why.

Speaker 3: The current arm level, in our views, is still very affordable compared with the price of other consumer products. We will continue to drive sustainable arm growth over the long term, backed by several factors.

The current.

Naval all deals is still there with off all the ball.

If the price of other consumer products.

Well continue to drive sustainable growth over the long term.

Backed by several factors.

Speaker 3: First, as we just mentioned, membership purchase decisions are increasingly being made based on content and member benefits rather than discounts.

First I believe jobs mattress membership purchase it's Asia.

Increasing demand.

Content on the membership on the Madden bar benefits rather than Steve Coss.

Speaker 3: Very importantly, our ability in consistently delivering high-quality premium content will be further improved.

Very important today.

Our ability.

Jason.

Liver high quality and premium content wherever you are.

With our improved second.

Speaker 3: Our member experience offers a compelling value for the many. We will continue enhancing our offering with new value-added services that increase members' value, perception, and willingness to pay, such as express package, concerts, and merchandise offers.

Oh member experience all force Com Perry.

For the money.

We are continually enhancing our offering with new ideas.

Increased membership Matto perception.

We are willing to pay such as express package concept and the merchandise offers finally.

Speaker 3: Finally, we see significant potential to further upgrade existing gold members to platinum and star diamond membership tiers, which command a higher price yet offer more privileges.

Suddenly, we see significant potential to further upgrade.

Golden members tool last year.

Scott Murphy if tariffs.

Command a higher price.

Oh for us more privilege.

I'll remember it was a privilege and the benefits roll roll it.

Speaker 3: Our member privileges and benefits have grown.

Speaker 3: a proven high attractiveness and we expect their appeal to remain strong. For example, the express package is one of the content

Our pro with Hi Tec.

Hi chip.

I'll talk to you.

Is there a PR remains well funded.

Uh huh.

Perhaps packages as well of that content.

Speaker 3: privileges we have developed for members, which enable subscribers to redeem their member points to unlock early access to finally episodes of hit drama serials. This model

We do love to phone number.

<unk> enables subscribers.

They are met for a pump points too.

Locke access to.

Cool.

Absolutely.

Drama series.

This model was.

Speaker 3: was applied to two key drivers in the third quarter, attracted over 10 million participating members, demonstrating the significant value person-to-person interaction.

Part two two he is driver for us in the so called.

It's all around 10 million.

Pay team members, demonstrating the significant than Nevada Kristen.

Speaker 3: perception attached to this benefit.

Perception.

Tuesday's benefits.

In line with.

Speaker 3: with our strategy to foster deeper connections between our loyal members and our premium content, ZoomIP, the RedWordTips.

Our strategy to foster.

A part of connections between Lora members.

And Oh premium content some IP.

Our tapes.

Speaker 3: Club concerts are another important component of membership offerings.

Oh I'm sorry.

Another important component of membership offering.

Speaker 3: we have the mysterious Lotus casebook theme concert.

We as health Istar Els Lofthouse his book concept.

Speaker 3: which created immersive excitement. Lastly, we have developed a dedicated e-commerce platform for merchandise related to our IPs. Members can use their member points to pay for these goods in full or in part.

We had great hedge immersive excitement vacillate.

Laughter dedicated ecommerce.

Merchandise relating to all IP.

First you'll see are.

A number of pumps to pay for these schools in full or in part.

[noise] as its cost.

Speaker 3: As discussed repeatedly, our primary focus is on enhancing member loyalty, retention and lifetime value through our membership privileges and benefits.

Peter.

Our primary focus is on enhancing bamboo alright.

Alright.

Yes.

<unk> saw a membership privileges.

Yes.

Speaker 3: Our loyalty program is closely tied to the duration of membership and we strive to improve the service experience and value perception, especially for our long-term members. For instance, users who opt to auto-renewal choose long-term plans.

Laura program is closely tied to the duration of membership and we strive to improve the Soviets esophagus and Atlanta perception, it's back to that for our long term members boy if you.

Youll says.

After two hours.

Youll wall.

Loss from class all become premium members.

Speaker 3: or become premium members, are granted elevated benefits, including faster RQ.

Great hands, and if they pay it benefits including faster.

Got you.

Speaker 3: accumulation of member points that can be redeemed for content-related perks and merchandise.

Accumulations of member of pumps.

For content related products and merchandise.

Speaker 3: As a result, we observed meaningful year-over-year growth in both the quantity and proportion of annual plan subscription in the third quarter.

As a result.

So mainly for Europe, or Europe rose in both the quoted here.

Propulsion of annual plan subscription in the us.

Moving onto the continent.

Speaker 3: Content is our core competitive advantage. I.T. original drivers continue to be the main driver in terms of content supply and revenue contribution, accounted for over 60% of the key drivers launched in the third quarter.

And as I'll call competitive advantage your owners all drivers continue to be as a main driver in terms of content that supply on the ground.

Contribution.

It's well over a six 8% over the two dry docks in the so called her.

Speaker 3: For this year's summer season, our drama line-up covered diverse genres such as Asian customs, reality, and suspense. The Asian customs detective drama, The Lotus Casebook, became the dark horse hit of the summer.

But this year is that.

Our drummer line, Colorado.

That worst jarrod, such as Asia and the custom.

Really.

Just past the Asia So Asia.

Detective drama Lofthouse casebook become the casket.

Speaker 3: It was our 10th drama to break our 10,000 popularity index score, and the drama's streamed concerts we have generated over 230 trending search topics and attracted over

It was all tense.

Rick I'll turn followed the popularity that school.

Genre same concert we use health.

Or.

Andre unnecessarily trending topics.

Attracted or.

Speaker 3: 320 million likes. We are happy to see.

So hamzah on the 20th Mealing Lax, we're happy to see that.

Speaker 3: the significant long-lasting impact with these areas as it continues to dominate the enlightened.

Yes.

Long lasting impact with these areas continue.

Continue to.

Dominate.

Right now at least.

Speaker 3: even after its serious finale.

Even after its cereals.

In that light.

Speaker 3: other hit dramas such as Asian custom suspense serials, my journey to you, Yun Zhiyu.

Other key drivers such as Asia, and the customer service.

Yes, My journey to you Andrew.

Inc.

Speaker 3: imperfect victim, imperfect victim,

In perfect victim, well what makes right.

Speaker 3: Serials focused on social issues and criminal suspense serials, the last 11 floors.

So full cars social it yourself I know, let me know if that's Penn sorry off the last of your Latin floor shelf luxury useful.

Speaker 3: all well-received by audiences and reflect the quality and depth of our drama line-up.

Well, Oh well received.

Oh, that's it.

If lapses I'll call it call it.

That's all drama.

Well whenever he shows say close to a classic Ips such as the Thursday.

Speaker 3: where he shows sequels to all classic IPs such as the Third Season of the Big Bang and Housework Talent.

And the whole house.

Talent.

Speaker 3: Jiawu Youdengcheng made strong comebacks. The Big Bang Theory achieved outstanding performance in both advertising and membership revenue.

Yeah, John John Reorder Trump made a strong comeback.

Suite achieved almost standing performance in both and what I see on the membership revenue.

Speaker 3: We also launched diverse, innovative new IPs, including our very first variety show and drama crossover, As You Wish, Love You Seven Times, and One Million Promises.

We also launched.

That works in a way to you.

Including all Larry first of all on his show no drama.

I still wish Lawville seven times.

<unk> She said Tcl.

Cultural or at his soul Gloria back to you.

Speaker 3: A cultural variety show, Glory is Back, Beijing, and a cruising show, Let's Barbecue, which attracts a wide variety of people.

And Craig Shull, that's Bobbie cool, which Ah trial.

Oh, Wow alright here of users.

Speaker 3: On a separate note, we are also making good progress in realizing the commercial potential of our premium IPs. Notably, sales of the Lotus casebook merchandise exceeded RMB.

Suffered its not we are also making good progress in <unk>.

Commercial potential of our premium <unk>.

Multiplex south of the love her sketchbook merchandise you can say, it's all right.

<unk>.

Speaker 3: 18 million, we have also introduced merchandise based on our original children's IPs, spanning the full range of children's products, including daily life, learning, food, and offline entertainment.

Of the 18 billion. We have also introduced merchandise based on original insurance Ips that spending now for rich opportunities products, including daily by the Army.

On the offline entertainment.

And then into Q4 and next year.

Speaker 3: Heading into Q4 next year, we are committed to deliver diversified and high-quality content on a continuous basis.

We are committed to deliver our diversified.

The quality of content on a continuous basis, we have a highly anticipated slate of drivers.

Speaker 3: We have a highly-anticipated slate of dramas, aside from the already-launched hit titles such as Romance of Fa, Kendoji, Story of Kunning Palace, Ni'an Rumo, and the Fearless Season 1.

Either from the already large stuff either titles such as long run off.

Sorry of putting you in Paris.

On the Duff fellas.

What.

Speaker 3: ???????,??????? We also propelled a stellar drama pipeline to be released. This includes major Asian customer titles, Journey to Love, ????, and Chinese Paladin 4, ???, as well as modern-day theme dramas like Detective China, Chinatown Season 2, ???,

<unk>.

Sorry, what.

We also held a stellar drama pipeline will be released.

This includes a major.

A major Asian customer titles journey to love, Yeah, one shot on that Chinese Paladin fall genius Aswell Malden.

Chalmers detective China cannot harvest season tool on yet.

A lack of flow reverses the.

Speaker 3: A lake of flowing river season, ????, and the lonely warrior, ???.

Hello on the lovely Laura.

Some of it.

Speaker 3: For Variety Shou, our pipeline covers a wide range of themes, including our first original physical competition, Shou the Shou Will Never Stop, Shoupla, and our hit show, Become a Farmer, will introduce its first spin-off show, Kai, Young Farmers.

For any Shaw of Avalon covers a wide range of Sims, including offer sorry, physical commutation shoulder, so we'd never stop sure.

Oh sure.

Some are far more.

Well introduce its first us being offshore.

Hi.

Young farmers.

Speaker 3: We also have an exciting lineup of children's cartoons and animations. For our original children's cartoon, we are going to debut the second half of Dell Squad Season 3.

They also have eye in thanking lie off of children, a cartoon animation for children at home.

We are going to be built.

Second half of the all squad Susan St.

Speaker 3: DiaoSquad Season 3 and a brand new title, Mega Miao, MiaoNeng ZhanShi, for original animation, The Great Ruler, DaZhuZan, and Against the Gods, NiTianXieShen.

So you can see on the up.

Brian your title.

Mel.

Jack.

Our original animation.

The great ruler out with that.

Against the top golfs.

Okay.

I'll still treating trendy.

Oh, well you ask you such as a SIFI Argos.

Speaker 3: well-known IPs, such as Cypher Serial, the Bithumb.

Speaker 3: the beef game Shenyuan Youxi and a comic adaption of Magic Girl 3.

Yeah.

Shame that you'll see on the upcoming adaption.

My Magic.

Alright.

Speaker 3: ??????? are set for release.

Oh, Yeah, Oh, yeah.

That flow relief.

Speaker 3: Moving on to advertising business, we are delighted to see accelerated recovery during the third quarter. Total advertising revenue reached RMB 1.7 billion, up 34% annually and 12% sequentially.

Moving on to what I see is that well the Atlanta is to see that.

It is.

Recovery of yarn.

So our total advertising revenue rich.

Uh huh.

Hey.

34% annually.

<unk> percent sequentially.

Speaker 3: Revenue from brand ads recorded double-digit growth, both annually and sequentially, driven by several factors. Notably, our premium original content, such as Big Bang Season 3 and Love You Seven Times, attracted stronger advertising demand.

Daniel from Brian as recorded double digit growth both annually and sequentially.

And then by several factors North Platte <unk>.

Premium audio content.

It actually has a big fancy Nancy Lawville seven times attracted to stronger advertising demand either one has seen budgets are located towards where they show that drop or increase to five seven.

Speaker 3: Advertising budgets are located towards where they show an increase by 67% and 28% year-on-year, respectively.

Six.

The 7% and 28% year on year, respectively.

Speaker 3: Breaking it down by sector, we saw increased ad budget from food and beverage.

Breaking it down by sector, we saw increased AD budgets from food and beverage.

Speaker 3: while sectors like Internet services, transportation, and healthcare also recover.

Well our sectors like Internet so yes this transportation.

Health care also recovered.

Speaker 3: Revenue from performance ads recorded strong annual.

Revenue from procurements as you called it a strong annual.

Revenue growth.

Speaker 3: of over 70% mainly due to two factors. First, targeted and efficient operations gain a higher budget share from sectors such as internet services, e-commerce, and games. Second, the effective use of generative AI-enhanced ad creation and ROI.

All over.

17%, mainly due to two factors first.

And the efficient operations, a higher bucket bucket the shell from sectors, such as Internet services E Commerce, and I guess second.

The effective use of that.

John there right.

In past.

And our own.

Speaker 3: Looking ahead to Q4, we are partially monitoring the overall advertising market.

Looking out of habit tool Q4.

Cautiously monitoring the overall housing market.

We.

Knowledge.

Speaker 3: that the consumption segment takes time to fully bounce back, creating a lagging effect on brand advertising business.

That the consumption sentiment.

Time to fully a bounce back.

<unk>, a lagging effect on brand advertising business.

Speaker 3: Nevertheless, based on our unparalleled content quality and extensive user profile, we are the go-to platform for advertisers seeking optimal advertising opportunities.

That we're in that's less that's all in parallel.

Content quality.

It turns out you will sell cross sell we are though.

And what has sort of seeking after more advertising opportunity.

Speaker 3: For performance ads, we are optimistic on sectors such as internet services, e-commerce, and shop drivers. And we will continue to fine-tune our algorithm and leverage generative AI to enhance ad creation and maximize efficiency.

Well performance as we.

Optimistic second.

Sectors, such as Internet services E Commerce and the.

Shelf drivers.

We will continue to fine tune all at work on.

Our net leverage generate G suite.

We have adequate Asia.

Maximize efficiency.

Moving on to Anton allergy products.

Speaker 3: Moving on to technology and the product.

Her that.

Speaker 3: Our commitment is centered around fostering technology innovation to empower the entertainment ecosystem.

Our commitment is centered around the.

False Hurney technology in Alicia tool, you can park and.

Entertainment ecosystem, creating value for our users.

Speaker 3: creating value for our users and content creators. Firstly, we harness the power of technology to elevate the entertainment experience for our users. And secondly, we empower our content creators by equipping them with the latest tools and resources to improve the quality and efficiency of their creation.

Content creators for estimate we harness the power of technology It will elevate elevators.

And their team.

Well I'll use us and that affected that way.

In par to all content, great hires by equipping them with atheists tools.

Artists to improve was I'll call it efficient sales, they're all creation.

I'll focus on lateral Ritchie.

Speaker 3: AI to enhance the user experience has yielded significant progress. Notably, we have pioneered the use of generative AI in three key research categories.

Eight tweeting has that youll sorry.

Perez has yeah.

I can give you some progress.

Notably.

We have pioneered the use of it.

John.

With him.

In sweet cheap such categories.

Speaker 3: character search, class search, and actor search.

Good luck.

Such as.

As such.

Speaker 3: by applying Advanced Accounting Analysis.

Applying the whilst accounting.

Alright.

Speaker 3: We are now capable of automatically generating video clips and drama highlights.

We are now capable of.

Automatically generating week, you cliffs and the drama highlights this.

Speaker 3: This cutting-edge technology has been implemented across hundreds of core drummers.

Cutting edge technology has been in place mandate.

Interest of cough dramas.

Speaker 3: on our platform, greatly improving such accuracy.

Alcohol gradually improving.

Oh of course.

Speaker 3: Accuracy and user engagement. Users directed to a drama through AI plot search spend an average of 40% more time viewing the content.

I'm curious.

<unk>.

Engagement yours are expected to a drama so AI apart such it's about an average of 40% more time, we are viewing.

No comment.

Speaker 3: One more exciting user experience optimization is the introduction of karaoke mode in BigBang 3. This innovative and interactive feature seamlessly integrates

One more exciting you'll say areas of amnesia.

Introduction of Karl K mode in the Big Button suite.

You can always have an interactive feature.

Lastly in Congress.

Speaker 3: some lyrics into the on-screen display during band performance sessions, allowing viewers to sing along and creating a more immersive experience.

Lyrics into the onscreen display.

During past performance Oh.

Allowing us to sing a long end up creating a walkie more safety experience.

It's meaningful.

Speaker 3: engagement and time span increased by users activating this feature.

Engagement.

Timespan increase by users activity this feature.

Speaker 3: In terms of content production and operation, we are promoting the application of generative AI in various user cases during the rapid technology development of the video industry.

In terms of content production and the operation we are promoting.

Application of January at Tampa.

Powerhouse user okay.

The rapid technology.

All of the legal industry.

Speaker 3: Now, the role of generative AI is evolving from a mail-embedded to a co-pilot.

No the goal of withdrawn their age.

It's involving from me.

Now in bad debts tool tool called pilot.

Speaker 3: made in every phase of workflow. By leveraging this transformative technology, we are empowering creators in every aspect of their work, from planning and development to production and promotion of content.

In aggregate the phrase of work for all.

Leveraging this.

Transformer test tons of LNG.

In par <unk> tires in every aspect of their work.

Planning on that.

But to a reduction in our promotion of content.

Speaker 3: This approach not only enhances efficiency but also unlocks new potentials.

This approach not only enhanced efficiency, but also unlock new potentials.

Speaker 3: We are seeing great initial results. For example, we use generative AI producing low-cost, high-quality posters and videos to showcase our content.

We are seeing great initial results for example January Tampa, AI, producing low cost high quality posters and visuals to showcase all content.

We have a part is technology in promoting all key programs such as.

Speaker 3: We have applied this technology in promoting our key programs, such as testing.

<unk>.

Speaker 3: Chengfengdu, the Big Bang Season 3, etc. In addition, we are expanding the reach and influence of us by using generative AI.

I will do the Big Bang C C.

And that's where all the Asia Pac.

Pending that reach.

Okay.

Hey, John.

Sure.

Speaker 3: Finally, for our business performance in regions outside of mainland China.

Finally on it for our business performance in regions outside of mainland China.

Speaker 3: Our premium content continues to win acclaim from overseas users and job-steady growth in overseas membership revenue. In the third quarter, membership revenue in Japan, Korea, the U.S., and Hong Kong all increased by over 50 percent annually.

Our premium content continue to be a claim.

From overseas.

That it grows.

Overseas membership revenue English so called membership revenue in Japan Korea, The U S.

In Hong Kong.

Increased over 50 50 person agile it.

Speaker 3: The solid performance was driven by the rising influence

Solid performance was driven by the rising for influence.

Speaker 3: of our high-quality C-pop, powered by a number of popular titles. The total viewing time for C-dramas on our overseas platform increased by 23% annually and 33% sequentially in the quarter.

Of all high quality C pulse powered by a number of popular titles the total.

Time for a C drummers overseas.

<unk> increased by 23% annually.

So it is 3% sequentially in the car.

Speaker 3: My Journey to You, Yun Zhiyu, achieved the highest revenue on an overseas platform during its broadcasting period. Meanwhile, the Lotus Kiss Book's popularity in the extended beyond

My journey to Hugh Indra, you achieved the highest revenue needle Oh S overseas platform during.

Broadcasting Prairial maybe.

Meanwhile, the lockers kit.

Popularity.

10 minutes.

Yeah.

Speaker 3: mainland China as a top overseas platform in both total video view and viewing time in the third quarter and ranked No. 1 in total video views in Southeast Asia, East Asia and North American market.

Matt the China at a time.

Total overseas fall in both total we we do feel we are in time in the so called her.

Number one in total we do deals in South East Asia.

Sure.

American bar market.

Speaker 3: For the fourth quarter, we will continue to drive high-quality growth, in addition to enhancing platform co-operation and channel expansion.

For the fourth quarter, we will continue to drive a high quality of growth at.

He said two enhancing francois.

Operation on the chat.

If pasha.

Speaker 3: We are dedicated to bolster our content pipeline to capitalize on the strong momentum of Chinese drama. We are introducing localized dramas in Thailand, Malaysia, and Taiwan to further expand our influence.

We are dedicated to.

<unk> bolster our content pipeline tool.

Have you.

Yes.

The strong mobile.

<unk> of Chinese drama, well, introducing local labs to drive us in Thailand.

Yeah on that Teva to further expand our influence.

Speaker 3: In summary, we have accomplished strong results in the so-called

In summary, we have accomplished our strongest thoughts in the so called <unk>.

Speaker 3: with other emphasis on delivering high-quality growth.

We used to offer emphasis there.

Delivering high qualitative squirrels.

Speaker 3: As we look ahead, our dedication to enhancing user experience, strengthening competitive edge in original content, maximizing member value, and harnessing the power of advanced AI technology remains steadfast.

As we look how has our dedication to <unk>.

<unk> will tell you, it's permanent sweating competitive edge in autozone content.

Vaccine Miocene.

Wow.

Hanmi.

Now part of advanced AI technology, we have made.

Stat fast.

But going into next year, we will harsher led culture slight increase in west, but in both of our call.

Speaker 3: Going into next year, we will cautiously increase investment in both our core and innovative business, establish a solid foundation for sustainable long-term growth.

In Norway business establish a solid foundation for.

So its terminable long term goals.

Speaker 3: Now, let me pass to Wang Jun to go through our financial performance. Thanks, Mr. Gong, and hello, everyone. We have delivered strong Q3 results, as you can see. The growth of ARM drives the growth of the membership services revenue, profits, and free cash flow, and our operating leverage led to margin expansion on year-over-year basis.

Now, let me pass to once you <unk> some of the natural from it.

Thanks, Michael and Hello, everyone.

We have delivered a strong Q3 result, as you can see the growth of our cloud drives the growth of the membership services revenue.

Fifth and the free cash flow and our operating leverage led to margin expansion on year over year basis.

Speaker 3: This demonstrates the defensibility and scalability of our business model. Now, let me walk you through.

This demonstrates that the visibility.

<unk> ability of our business model.

Now, let me walk you through the key numbers.

Speaker 4: The total revenue increased by 7% annually to RMB 8 billion, driven by growth in both membership services revenue and online advertising services revenue.

Total revenue increased by 7% annually to RMB 8 billion driven by growth in both membership services revenue and online advertising services revenue.

Speaker 4: The membership services revenue exceeded RMB 5 billion, up 19% annually, primarily driven by the increase in RMB.

Membership services revenue exceeded RMB 5 billion up 19% annually, primarily driven by the increasing arm.

Speaker 4: Online advertising revenues reached RMB 1.7 billion with annual growth rate of 34%.

Online advertising revenues reached RMB, one 7 billion with annual growth rate of 34%.

Speaker 4: This was fueled by the growth in both brand and performance ads. With performance ads showing stronger growth momentum.

This was fueled by the growth in both brand and performance ads with performance as shown stronger growth momentum.

Now moving to the cost.

Speaker 4: Our quality costs and expenses remain relatively stable year-on-year. Total cost of revenue was RMB 5.8 billion, up 2% annually.

Low quantity costs and expenses remain relatively stable.

Are those.

Total cost of revenue was RMB, five 8 billion up 2% annually.

Speaker 4: Common cost as a component of cost of revenues was RMB 4.2 billion, down 3% annually.

Content cost as a percent.

As a component of cost of revenues was RMB four 2 billion downstream percent annually.

Speaker 4: Total operating expenses will RMB 1.4 billion, down 2% annually.

Total operating expenses were RMB, one 4 billion down 2% annually.

Speaker 4: Turning to profits and cash flow, the non-GAAP operating income reached RMB895 million, up 71% annually, positive for seven consecutive quarters.

Turning to profits and cash flow and non-GAAP operating income reached RMB 895 million up 71% annually positive for seven consecutive quarters.

Speaker 4: The free cash flow reached RMB 826 million and has been positive for five consecutive quarters, representing our enhanced cash generating capability.

The free cash flow reached RMB $826 million and has been.

Oh, five consecutive quarters, representing our enhance the cash generating capability.

Speaker 4: At the end of Q3, the company had cash equivalents, restricted cash, short-term investments, and long-term restricted cash included in the prepayments and other assets, the total of RMB 7.2 billion.

Is the end of Q3, the company had a cash cash equivalents restricted cash and short term investments and long term restricted cash, including the prepayment and other assets.

Total of RMB, seven 2 billion.

Speaker 4: To conclude, our Q3 results reflected a strong execution of our strategy and steady progress in driving high-quality growth. We are dedicated to delivering long-term value to all of our stakeholders.

To conclude our Q3 results reflect a strong execution of our strategy and the steady progress in driving high quality growth.

Advocate to delivering long term value to all stakeholders.

Speaker 4: For detailed financials, please refer to our press release on our IR website.

So tito the financials, please refer to our press release on our IR website.

Now we will open up for Q&A.

Thank you if you wish to ask a question. Please press Star then one on your telephone and wait for your name to BMO.

Speaker 1: Thank you. If you wish to ask a question, please press star then 1 on your telephone and wait for your name to be announced.

If you wish to cancel your request. Please press Star then two.

Speaker 1: If you wish to cancel your request, please press star then 2.

Speaker 1: If you are on a speakerphone, please pick up the handset to ask your question.

If you are on speakerphone, please pick up the handset to ask your question.

If you wish to ask you a question in Chinese please repeat your question in English for the benefit of everyone on the call.

Speaker 1: If you wish to ask your question in Chinese, please then repeat your question in English for the benefit of everyone on the call.

Please limit yourself to one question. If you have further questions you may reenter the question queue.

Speaker 1: please limit yourself to one question. If you have further questions, you may re-enter the question queue.

Speaker 1: Your first question comes from Qiuping Zhang of CICC, please go ahead.

Your first question comes from Q Ping Zhang of B I D. C. Please go ahead.

Speaker 5: Thank you, Management, for accepting my question and congratulating me on another strong performance in the quarter. My question is about the member ARM. We see that this quarter, ARM has achieved a steady growth. I would like to ask Management, what is the outlook for the next quarter and next year's ARM? And I would also like to ask Management to expand on how we are improving the value perception and loyalty of members. Thank you. Thank you, Management, for taking my question and congratulations on another strong quarter. My question is about ARM. ARM has recorded solid growth this quarter. So, what's your outlook for ARM in the first quarter and next year? Also, could you give us more clarity on how to improve the perceived value and loyalty of membership? Thank you.

Yeah.

Sure.

Oh gosh, yeah, you could get to.

Yes.

What Barack Isa granting U.

Hum.

Similarly in the lung.

So she could talk I mean look.

We shoot for.

Yeah, Oh, Yeah sounds cool comes out that sounds that would make it look like Houston Cleveland research.

Research into it.

Our gross 19 and for taking my question and congratulations on the strong quarter.

My question is about.

Got it.

Okay.

Let's now look for Oh real quick.

Yeah and also could you please ask them okay.

Clearly a perceived value in the bike membership. Thank you.

Yes.

Thank you.

Speaker 2: Thank you. Deng Youqiao will answer this question. Yes. Hello everyone. Dr. AP of membership business Deng Youqiao will answer this question. Please go ahead.

<unk> will answer this question.

Okay.

Membership business David will answer. This question. Please go ahead.

Speaker 6: Hello, everyone. Let me answer this question. The first time Q3's ARM was over $15 was within our expectations. This is the result of our long-term supply in terms of content quality and member rights. Users are more and more willing to pay a reasonable price for high-quality content and services. The overall goal of our member business is to continuously improve the user experience and achieve long-term member income maximization. At this stage, our focus is on the lifetime LTE of ARM and its members.

Oh, well, absolutely Ivy Lynne here.

Curious on the envelope Yoplait I'll walk through Ipass, so that would be easier to Nathan just.

There's a woman and then they're also now hopefully actually I either they've gotten comment how do you believe that you will.

Oh, Yeah, you wear yoga neighborhood for that report.

Well, obviously that deal with them keep moving out due to the pool.

Yeah. So again I'm here for this year, though we absorbed without what Duncan do you have a lot in our when we're literally as hopefully on the left hand Archie.

Speaker 2: Yeah, for Q3, the ARM exceeded 15 RMBs within our expectations, and then this is because our program's in content quality and also membership privilege.

Yeah for Q3 are the arm exceeded 15 arm is within our expectation and then this is because our progress in content quality and also.

Our content quality and also membership privilege.

Speaker 2: for the long-term perspective. The result of that has been promising. And more users have been willing to pay at a reasonable price for premium content and also quality service.

For the long term perspective.

As a result of that has been promising and more users have been willing to pay are willing to pay at a reasonable price for premium content and also quality services.

Speaker 2: We expect healthy growth in arm to continue in Q4 with significant room for further improvement in the long term. Our confidence comes from four aspects.

Ah well now using <unk>.

Is your boss rigs get hung up.

Ill jump.

He hung yet well netted with fusion that we all actually cast them yet.

We expect healthy growth in arms to continue in Q4 with significant room for further improvement in the long term our confidence comes from four aspects.

Speaker 6: First of all, content is the key factor in determining the payment of members. We are constantly improving our ability to provide high-quality and diversified content.

Uh Huh neurosurgery honestly I have to say that's.

Oh usual IRA womens issue when they don't.

Okay. That's all I needed one of the only about either that will go on the junk out.

Speaker 2: Content quality remains the primary determinant for a member's purchase decision and the ability to consistently provide high quality and diversified content is strengthening continuously.

Come from quality remain the primary it for a minute for members purchase decision.

So consistent consistently provide high quality and diversified content is strengthening continuously.

Speaker 6: Second, compared to other domestic daily consumables and products of the same type abroad, the actual price of our members is relatively low.

They are not <unk>.

Okay I'll leave it at all either lasers L b.

Which I know you're honest with you so Jonathan hi, it sounds like.

Second in comparison to other domestic daily consumer goods and some other products abroad are current prices are relatively low.

Speaker 2: Second, in comparison to other domestic daily consumer goods and similar products abroad, our current prices are relatively low.

Speaker 6: Third, with the growing demand for large-screen television, more and more gold members will be upgraded to higher-end platinum and star members.

Lisa.

Yes, it was back end weighted.

Sundar.

We found it couldn't go the other ideas with you Rob.

Yep.

Speaker 2: Third, with the growing demand for watching content on large TV screens, an increasing number of GOLD members are upgrading to Platinum and Diamond membership levels.

Third with the growing demand for watching content on large television screens and increasing number of voting members are upgrading to platinum and diamond.

Membership level.

Speaker 6: Fourth, with members' points, bonus gifts, cloud performances, members' favorites, IP extensions, etc., these more member-friendly launches will also continue to enhance the attractiveness of member products and bring long-term value to members.

These sooner.

You bet jargon here yet.

Oh I don't Yeah, I don't know if they just couldn't do it if we actually I either with or without <unk>.

So hopefully I mean the hilli.

Not that large companies out here.

Speaker 2: And fourth, the introduction of more member privileges and benefits such as loyalty points, express package, cloud performances, member exclusive e-commerce items, and also IP merchandise will continuously enhance the attractiveness and the long-term value for members.

The introduction of more member diligent and benefits such as Lucky point Express package.

This member corporate E Commerce items, and also IP merchandise will continuously enhance the attractiveness and the long term value for members.

Speaker 2: All of the above four items I just mentioned gives us confidence that the arm will continue to have healthy growth in the future.

You saw this is a formula, but we're not willing to rely the omnibus sushi and hunt them down into my head here.

The above four items I, just mentioned gives us confidence that the.

Well continue to have healthy growth in the future.

Speaker 6: Also, because our price is low, the growth of AMU on the Zest platform is definitely worth it. It has a big impact on the user's perception, but not much. The most important thing for the user payment is what we said above, how good the content is, and how good the experience is.

Right.

It would be useful.

And unfortunately, it's.

John Bullock hat.

With our country.

That helped with that.

You were saying that its I E. The hassle on the Sunday NATO.

I don't think the Ta Oklahoma.

Speaker 6: Recently, with the launch of high-quality content, the size of members has been rapidly increasing. This shows that we are using good content and good experience to improve the long-term value strategy of ARM and members is correct. It can be recognized by users and the income of members can continue to grow. We will continue to push in this direction. Thank you.

Our teams yesterday reorder later on sounds yeah, absolutely honestly why not you don't have quite a few zone Joseph Romeo well the overall needle.

Shifting gears on amas, hopefully I'm, not obviously, Utah, because that's really awesome job.

Nonetheless, we know where they're going to go up.

Yeah not at all.

I still look at so you don't know Xiaomi, it's easier to digest.

Yeah.

Speaker 2: Further, due to our relatively low pricing base, the absolute impact of ARM growth on user perception is relatively small. What users care about the most is to feel the quality of content and the user experience. We have seen rapid increase in member conversions with the launch of recent premium content.

Further due to our relatively low pricing days or the absolute impact on growth on user procession is relatively small what users care about the most is the.

Still the quality of content and the user experience, we have seen rapid increase in member conversion with the launch of premium content.

Speaker 2: This indicates that our strategy of leveraging quality content and user experience to enhance ARM and long-term member value is correct and has gained user recognition.

This indicates that our strategy of leveraging quality content and user experience enhanced arm and lot of member value is correct and has gained recognition leading to sustainable growth in membership revenue will continue to pursue this direction.

Speaker 2: leading to sustainable growth in membership revenue. We will continue to pursue this direction.

Thank you.

The next question will come from Lincoln Kang of Goldman Sachs. Please go ahead.

Speaker 1: The next question will come from Lincoln Kong of Goldman Sachs. Please go ahead.

Speaker 3: Thank you for accepting my question. I would like to ask about the situation for next year. If we look forward to next year at this time, what do you think about the overall business plan and the direction of development?

Hey, how's it going into detail with you on that.

And once a week.

Oh, you mean, the sequential Shaw to listen to the city I recall, Machista, Armenia, and why he gets Michelle women's into the two year basically hot Tawang.

Danielle if I tend to function.

Speaker 7: So, thank you, Manjuan, for taking my question. So, my question is at this time juncture of the year, when we think about the next year, how is our overall business plan strategy outlook and the focus area for next year? Thank you.

So thank you management for taking my question. So my question is this Tom juncture of the year when.

When we think came out to next year, how is our overall business plan and our strategy outlook had been a focus area.

For next year. Thank you.

Oh sure yeah, well after that isn't yet a confusing answer.

Speaker 3: Thank you. I will answer this question. According to our own judgment of the macroeconomic situation and our own conditions for next year, we still focus on high-quality growth, i.e. income and profit,

When you can get a handle at <unk> with you the data.

Yes.

<unk> sure.

With that goal.

<unk> Yeah, no sure sure how do you.

Speaker 2: For next year, for 2024, based on the current macro environment and also our current performance so far, our goal for next year is still aiming for high-quality growth, high-quality growth meaning the revenue and profit will both grow and profit will go at a faster pace.

From them now urge yet even that don't have approval.

Sure.

For next year for 2024 based on the current macro environment and also our current performance. So far our growth for next year is still aiming for high quality growth a high quality well, meaning the revenue and profit were both growth and profit will grow at a faster pace.

Speaker 3: There are two aspects that I will focus on. The first aspect is the content.

Yeah, Wei Sugarloaf I'm doubtful ego home, yet my name on them yet.

Speaker 3: Because content is the main driving force of our membership business and advertising business, we will moderately increase the content content based on the market growth next year.

You're in the room sure will now clearing yields Oh, yeah.

It shouldn't be.

Now.

One more quick and you should Honda Jacob I'm not quite.

Sure border some job name.

Speaker 3: especially the input of the content to increase the number of members and the number of members and increase the advertising input.

Until their share of total neighborhoods.

Hello.

Thank you Sean.

Lifetime, Iowa, when they're fully EG from Yahoo.

Okay, Secondly, Ah.

Speaker 2: Secondly, we will cautiously and appropriately increase investment in core business to promote long-term growth. Specifically, we will reasonably allocate more investment in top premium content to enhance our core membership business performance in ARM member lifetimes and sub-base, and also will drive the performance in advertising.

We will cautiously and appropriate and increased investment in our business.

Promote long term growth specifically.

Reasonably allocate more investment.

Top premium content to enhance our membership business performing and arm member lifetime and sub base and also well.

Drive that performance in our advertising business.

Speaker 3: On the other hand, Canada is investing heavily in the application of AI in Shenzhen. There are two aspects to Shenzhen's AI application. One is what we call 2B, which focuses on smart production, improvement, and industrialization of the film industry.

Muni only insurer jobs, where we have actually I'm not sure I have it in your palm yet children's.

Yeah.

Can you.

<unk> jumped who either don't get that turned on through for you Sean Im sure Gubbio Plaza.

Honduras.

Speaker 3: On the other hand, it is mainly applied to the innovation of consumer service. We strive to use the large-scale model of AI to innovate new business. This new business can become the second and third growth area of IT in the future.

Even if home yet.

Draw unions that to ensure we grow without considering from here.

Finally, I'm with young children.

Number four shouldn't I yell at JBT.

Wait and see.

The date of the Archaeocyathid amounts each year.

Okay, and thirdly, we will continue to exploit inflammation implementation of.

Speaker 2: Okay, and thirdly, we will continue to explore the implementation of innovative technologies centered around generative AI.

They take technologies centered around generated so I'm on to site, that's kind of a benefit from this on the PCB side will increase investments in intelligent production to improve the industrialization and efficiency of the video industry and that HSC side, well explore no news.

Speaker 2: So there are two sides that's going to benefit from this. On the B2B side, we'll increase investment in intelligent production to improve the industrialization and efficiency of the video industry. And on the B2C side, we'll explore new services and even new business models to cater to the consumer needs. And hopefully, this will become the second or third growth new growth pillars going forward in the long term.

Services, and even new business models to cater to consumer needs and hopefully this will become the second okay, well a new book.

Pillars going forward in the long term.

Speaker 3: Re while I feel like I'm gun trro in Y how a Y go for you UL.

And Sheila you haven't gone to <unk> yields, which will have a yield you refer it's useful bought you.

Speaker 3: However, if there is profit, we will try to earn more income next year.

You need a few months out.

Sure.

When that comes through from John on Voyager.

Speaker 2: And for the other two, innovative and new, growing business, such as overseas business and ICE Light, if we can maintain the profitability of these two businesses, we will hopefully grow the revenue performance for these segments next year. Thank you. Thank you.

And for the other two and.

Innovative and new.

Well, we're in the business such as overseas business and you liked.

If we can maintain our profitability of these two businesses will hopefully lead to growth in revenue performance for these statement next year. Thank you. Thank you.

Hum.

The next question comes from Daniel Chen of Jpmorgan. Please go ahead.

Speaker 1: The next question comes from Daniel Chen of J.P. Morgan. Please go ahead.

Yeah.

Speaker 3: Thank you, Guan Yiteng. I want to ask a question about the content cost. I want to ask about our future content investment strategy and our investment plan. Thank you.

Oh, My God, what's not where you want to is quite easy.

Just your content cost me once again I wish I would work.

She was a wheeler you've got NATO.

The legacy <unk> Io.

Jason will then total day great.

T J.

Thanks management for giving me the opportunity to use last question. My question is R&D.

Speaker 8: content cost and also content strategy. Could management please elaborate on what's our content strategy going forward and also the content span outlook?

Content cost and also content strategy.

Could management elaborate on.

Well, what's our contact strategy going forward and also.

The content spend outlook. Thank you.

Yeah.

Speaker 6: Oh, yeah. Our chief content officer, Mr. Xiaohui, will answer this question. Please go ahead. Thank you.

Oh yeah.

Our chief content Officer yourself way well answer. This question. Please go ahead Sir.

And some of them, but I didn't understand.

Speaker 6: Overall, the goal of our overall content strategy in the future is to stabilize and continue to export high-quality and diversified content to stabilize the advantages of the core drama track and to seek more breakthroughs in other content categories.

And I kind of leave that Wilmington, and they also didn't have moved off high single when in tissues Fufu option, just led the way on the knee.

At G E.

E site of user told me of them ultra cheap hardly at all.

So the two ball.

Speaker 2: Our goal in the future remains to consistently deliver high-quality and diverse content, solidifying our core advantage in the drama genre while seeking breakthroughs in other content categories.

Our Gulf War in the future remains to consistently delivering high quality and diverse content solidifying our advantage.

While seeking breakthroughs other content categories.

Speaker 6: In terms of drama, next year, we will focus on improving the investment ratio of S and A-level projects while maintaining a stable overall number of uploads. We will continue to produce and supply dramas.

Vanilla come up she farm, yet, meaning that followed suit you sounded yes, we are.

Yeah, Doug Julien deep hole.

Thank you Thomas for the iPhone eight out of the helmet that Tobey.

So this you need a certain type of Queen culture did a needle.

Speaker 3: At the same time, in Q1 next year, we will launch a new season of My Little Pony and some of the best S-series works to strengthen our competitive advantage and create an opening season for next year.

Holden <unk>, who he'd immunogen.

Yeah.

It's looking like Yahoo woman familiar with <unk>.

We mean <unk> panel.

Speaker 6: According to iQIYI, so far this year, there have been four dramas that have reached 10,000 views. We expect to see further improvements next year.

Oh no it doesn't.

That kind of genius <unk>.

Paul and <unk>.

While the EMEA Yahoo, Virginia team with us.

For 2024, it in terms of the trauma category, while maintaining a stable overall number of releases, we will focus on increasing investment in top tier projects, which.

Speaker 2: For 2024, in terms of the drama category, while maintaining a stable overall number of releases, we will focus on increasing investment in top tier projects.

Speaker 2: which we normally called the S and the A plus grading.

We normally called the F and eight plus ratings.

Speaker 2: Continue to produce and supply high quality content is our number one goal. In Q1 of next year, we will launch a new season of NIST Theatre and a highly anticipated S-grade production.

Continue to produce and supply high quality content is our number one.

In Q1 of next year, we will launch a new season of theater and highly anticipated as great protection strengthening our competitive advantage and making a strong stuff.

Speaker 2: strengthening our competitive advantage and making a strong kickoff for the year.

Yeah.

Speaker 2: Based on the ITE's popularity index score, we have already seen four dramas this year that have exceeded a significant milestone of 10,000 score for this year. And we anticipate the performance for next year will be better this year.

Just on the Ice's popularity index score we have already seen for drama. This year that have exceeded our significant milestone of 10000 square foot this year and we anticipate them.

Performance for next year will be better than industry.

Speaker 3: In terms of variety shows, we will increase the number of programs and upgrade our production team while maintaining the basic stability of the content cost.

And ultimately you're probably in that kind of fair ball Sydney want comprehensive Melbourne solicit some documents.

He assumed deal.

Speaker 6: In addition to several Chinese-language programs that have been verified by the market, many innovative projects will be introduced one after another starting from this year's TO4.

Tony you can be sure Tom Yeah Don.

One David Jimmy Lat am blows the Clunkiness out some funky and appeals the case bullshit I've got Jim yet.

Speaker 6: For example, the upcoming self-managed variety show in the field of physical fitness is also a high-scoring variety show, and it will be released at the end of November .

Oh Gee downtown agenda 19 delayed shipping.

<unk> cut off.

Unable to eliminate the Goldman debt.

So you had a chance yet to.

Speaker 6: In the business model, we will also explore the potential of advertising, membership, and IP extensions.

We're selling them what it will mean downtime to Guam golf Cleat at <unk>, My skin him, Washington County that IV I'm, assuming to get kind of awesome. So Google the hassle.

Speaker 6: to do more research on the long-term development of IP.

Speaker 2: Regarding variety shows, while keeping content costs relatively stable, we will increase the number of programs and upgrade our production team.

Regarding variety shows while keeping content cost relatively stable well will increase the number of programs.

Our production team.

Speaker 2: In addition to the already market-proven multi-season variety shows, several innovative projects will be gradually introduced starting from Q4 this year.

In addition to the already market proven multi season variety shows several innovative projects will be gradually introduced starting from Q4. This year such as our original physical competition show, we never stop which will be launched at the end of November and we have internally high expectation for that.

Speaker 2: such as our original physical competition show, We Never Stop, which will be launched at the end of November . And we have internally high expectations for that.

Speaker 2: In terms of business models, we will explore monetization models beyond advertising, membership, and IP derivatives, as well as explore more IP development opportunities throughout its lifecycle.

In terms of business models, we will fill our monetization models beyond advertising membership and IP to residents as well as explore more IP development opportunity throughout its lifecycle.

Speaker 6: In terms of movies, we will also increase our investment in pure blind movies and head-to-head movies.

Staying bum yet.

Some godly trim model being uphold game name, but who.

Speaker 6: For online movies, movie theaters and cinemas, three different operating modes will be further optimized.

Do you, even though again you can gain a unique bundle.

In Washington, It sounds <unk>, but youll walk.

Speaker 2: For movies, we will increase investment in films made for online distribution and top-tier content feature films while further optimizing the operating models for online films, theatrical releases, and our ITE cloud cinema.

Four movies will increase investment in films made for online distribution and top tier content feature films, while further optimizing the opera operating models for online games.

<unk> releases and I eat out cinema.

Speaker 6: In terms of children's content, we will increase the investment appropriately, especially to strengthen the impact of continuous IP, increase the quality of commercial orientation, and expand the content of POGC. The first goal is to increase input, and expand the potential for more diverse input such as issuance and complete authorization.

Awesome.

Saddam absolute <unk> he sent me that.

Some gas sunny at all.

In quadrant appeal do you see the needle is something absolutely we deem will be all caught out fighting when you switch and go boy I'm, not sure which handy.

Speaker 2: For today's content, we will appropriately increase in that.

For childrens content, while you were appropriate appropriately increase investment.

Speaker 2: strengthen the influence of our multi-season IPs and increase commercially oriented original content as well as expand PUGC content. Our primary objectives will be increasing the revenue growth potential and expanding IP licensing and exploring additional revenue potential such as toy licensing and expansion.

Strengthened the influence of a multi season I E. An increase commercially oriented original content as well as expand P. UGC content, a primary objective will be increasing the revenue growth potential and expanding IP licensing and all three additional revenue potential such as toilet in it.

Et cetera.

Speaker 6: In terms of animation, we see that Q3 is the best year for our self-made animation performance so far. We are very confident that we will continue to increase the input of self-made content next year. We expect that the number of self-made animations will increase. Thank you.

And sorry for my opinion on what kind of science that Youll see logistical ma'am God yet achievable.

300 <unk>.

Yeah, we keep some got through the name of that hole.

Yeah, Julien, giving the Buda.

Is it.

Speaker 2: As for animation, Q3 was the best quarter we've had for original animation. We are confident in further increasing investment in original content next year, and expect a moderate increase in the number of original titles. Thank you.

That's for animation Q3 was the best quarter, we've had it for a revision of animation work.

Thompson and further increasing investment in original content next year and expect a moderate increase in the number of original titles. Thank you.

Okay.

Yes.

Yes.

The next question comes from Thomas Chong of Jefferies. Please go ahead.

Speaker 1: The next question comes from Thomas Chong of Jeffrey's. Please go ahead.

Somehow sits at one <unk>.

Speaker 6: Good evening. Thank you for accepting my question. My question is about overseas business. Can you share with us the latest situation and future strategies? Thanks management for taking my questions. May I ask about our overseas outlook as well as our strategies? Thank you.

So what have you and what demand piece of it.

When one each hung until you find something you travel, but it seems that you've seen that's going well.

Thanks management for taking my questions.

Ask about our overseas outlook, that's what I saw strategies. Thank you.

Speaker 2: Our Senior Vice President, Xiang Ba, will answer this question.

Our senior Vice President.

Yeah, well answered this question.

Speaker 6: Good evening, everyone. Our overseas business started in 2019. After the launch, we did encounter the pandemic. So in the past three years, we have made some adjustments and taken some slow steps. Through these three years of exploration, we have gained a lot.

But that one ha high many of which I believe you already junior.

Once you don't you're going to choose to use it.

Of course, you just send him you will meet your father.

We'll see yet an imager talented families. It's helpful. I don't want to send you the maus on only yeah Youre looking beautiful.

Speaker 2: Our overseas business started in 2019 and encountered the outbreak of COVID, which led us to adjust and slow down our progress over these three years.

Our overseas business started in 2019 and country that the outbreak of Covid, which led us to adjust and slow down our progress over that Oh visits for years.

Speaker 2: However, through these three years of exploration, we have also achieved fruitful results.

However, there is three years of exploration, we have also achieved football results.

Speaker 6: First of all, we have verified that our domestic business model is successful overseas. In 2023, although the scale of our overseas business is still relatively small, we expect to achieve profit while increasing revenue throughout the year. We have found some ways to increase and profit in the market of different levels. Next year, we can gradually copy to other markets.

Millions of them wanting to Sanya most enough unless it's from Goldman.

Oh, Sanya woman to Mohammed yes pretty.

Pretty much in the hyper Joshua.

Tenure increases so some donaldson's decision unit.

70, <unk> hundred tons shipped of holiday shifts and somebody you need a farmer minions.

Gotcha Gotcha.

Speaker 2: Firstly, we have validated our business model, although our overseas business is still small in scale. In 2023, we forecast to achieve revenue growth and profitability. We have experimented in different markets and identified methods for growth and profitability that can be gradually replicated in other markets.

Firstly, we have validated our business model, although our overseas business is still small in scale in 2023 with forecast to achieve revenue growth and profitability. We have experimented in different markets and identified mindset for growth and profitability that can be gradually replicated in other market.

Speaker 6: Second, we have verified the influence of iQIYI's content in the overseas market and established our core competitiveness. Our goal is to make overseas content a core video platform in Asia. iQIYI's content acquisition is our obvious advantage. Over the past few years, we have been in some markets.

That ships are women.

She doesn't mean under how about each of them surely lumen and believe well Linda will gossip offhand lifetime Hudson I don't know, it's only one week question does.

And Sheila this is similar to what you said.

Well Michelle.

If you can go into junior when would you say is just in time, one come out <unk>. What are you kind of see publisher chimney.

Speaker 2: And secondly, we have validated the influence of ITE's original content overseas, establishing a core competitive advantage.

And secondly, we have validated the influence of <unk> original content overseas, establishing our core competitiveness. Our goal is to it's that established our overseas platform at the home of the loved Asian content and.

Speaker 2: Our goal is to establish our overseas platform as the home of beloved Asian content. And ITE's original Chinese dramas are a most evident advantage.

Original Chinese dramas are are most evident advantage over the past years Chinese dramas have witnessed significant viewership growth in certain markets and we have seen the potential of the pump.

Speaker 2: Over the past years, Chinese dramas have witnessed significant viewership growth in certain markets, and we have seen the potential of CPOC.

Speaker 6: In the end, we also started to build our own ecosystem in some key countries, including cooperation partners with local regulatory agencies and content partners. And through cooperation, we also launched some excellent local content.

Hold on one of your cousins that you shared some important asset within each CPT.

Sometimes you don't you don't need a two months ago. This was a whole bunch done if it was a whole bunch.

It always goes on Omega threes, Felicia usual contingency methyl mercury at war and sheet or want more tend to want more junk. She thought was unusual to me, though one thing it's worsening transgenic wenzel, especially its impact.

Speaker 2: We can bring the excellent content and culture of other countries to China and even the world through ICC's global network. These progresses are going very well. Lastly, we began to build a comprehensive ecosystem in key countries, including cooperation with local regulatory agencies, content partners, and channel partners.

Hmm.

Lastly, we began to build a comprehensive ecosystem in key countries, including cooperation with local regulatory agencies content.

Hunton partners and channel partners through these collaborations we have already launched exceptional local drama content, we can bring outstanding content and culture, if Oliver O. Although the world. So I see your users in China and also around the world through our global network and these advancements have inspired us largely.

Speaker 2: Through these collaborations, we have already launched exceptional local drama content. We can bring outstanding content and culture from all over the world to IT users in China and also around the world through our global network. These advancements have inspired us largely.

Speaker 6: On the basis of these three achievements, we hope to strengthen our cooperation with partners from all over the world, and to use content as a substitute. Through our technical platform, on the one hand, we can promote cultural exchanges, and on the other hand, more importantly, we can explore new business opportunities and continue to provide rich and productive opportunities for partners in the ecosystem.

That's a sign of some wanted to fill some of them has shrunken Linda downtown who could you go to a clinical need them right.

One of these options have you found me and switching on to all of you know my comment on it's tens of them seem to find out who is the.

Swinging hard acuity is your plan b so much <expletive> on the hook local government she can influence items.

Speaker 2: Building on these three achievements, we aim to strengthen collaboration with partners around the world using content as a medium and leveraging technology platforms to facilitate cultural exchange and also explore new commercial opportunities. We will continuously empower and add value to everyone in our ecosystem.

Building on these three achievements, we aim to strengthen collaboration with partners around the world using content off the medium and leveraging technology.

Technology platforms to facilitate cultural exchange and also explore new commercial opportunities, we will continuously empowered and app that we went to every one in our ecosystem.

Thank you.

Speaker 1: The next question comes from Maggie Yee of CLSA. Please go ahead.

The next question comes from Maggie of C. L.

Please go ahead.

Speaker 5: Thank you, management, for taking my question. My question is about advancement we made in the application of generated AI technologies at iQIYI. And I'm particularly interested in understanding the results we have already achieved in terms of improvement in business efficiency.

Okay. So Glenn in terms of NMC quick Shlomo glad he's homes Zanesville Alethia is that I see you guys, Joe Johnson and.

I'm glad you know if I'm gonna things that I noticed that the Chicago and the Gulf Zain, Saudi you'll watch hoping you can go from here.

Well if you go to a town center that one thank.

Thank you management for taking my question. My question is about a bounce and then when they ask.

Dictation of generated AI technologies, I see and I'm, particularly interested in understanding the results. We have already achieved in terms of improvement in business efficiency as well as cost structure and also want to know more about management's perspective on the long term impact.

Speaker 5: as well as cost structure and also want to learn more about management's perspective on the long-term impact of these technologies. Thank you.

Technology. Thank you.

Yeah.

Sure. Thank you Maggie and then we will have learned from our CTO to answer this question.

Speaker 2: Sure, thank you, Maggie. And then we will have Wenfeng, our CTO, to answer this question.

Speaker 6: We believe that AI will have a major impact on the film and television industry in the next three to five years, including the production method, cost structure, and personnel structure, which will bring huge changes. Therefore, IT is already in the core sections of content planning, development, production, and publication, and has started to land in some applications of AI, using text, pictures, sound, video, and other four major applications to have a certain productivity, which will help creators and operators to improve quality, optimize efficiency, and reduce costs.

Element wishes AI and found that went on in San <unk>, We're doing science has consumed amnesia alcohol central function, Tim and Jim <unk> from here with <unk> <unk>.

Yeah, Thanks, Nathan so on Panther.

The share count and closing on June <unk> and GE.

<unk> <unk> <unk> and <unk> 91000.

Almost constantly eating and essentially Johan shoney's attendees from that.

Speaker 2: Okay, we believe the generative AI will have significant impact on the entire video industry in the next three to five years. Bringing significant changes in production methods, cost structure, and personnel structure. So currently, ITE has already started implementing generative AI in core areas, such as content planning, development, production.

Okay. We believed that generated a I will have significant impact on the on the entire video industry in the next three to five years, bringing significant changes in production method cost structure and personnel structure. So currently H E has already started implementing generate its AI core areas.

Such as contemplating development production and promotion, we have achieved a certain level of productivity in all major application scenarios.

Speaker 2: and promotion. We have achieved a certain level of productivity in four major application scenarios.

Speaker 2: Namely, text, image, sound, and video.

Namely.

Image <unk> and.

Videos and this has helped them theatres to improve quality optimize efficiency and reduce cost.

Speaker 2: And this has helped creators to improve quality, optimize efficiency, and reduce cost.

Speaker 4: For example, in the content planning section, we use deep AI to compress the tidying up of project evaluation information from a few hours to a few minutes. In the development section, we use deep AI to help people read.

So what does that mean.

Angio ammonium sulfate, yeah, Jonathan Wolk English usage any cautions with you to help she asked me why didn't you syndrome.

And that 1 million since Shang will function.

Speaker 6: The time of 3-4 days of manual translation was shortened to 1 hour. The accuracy of the scene and characters in the script was increased by 90%.

Jonathan knows that hinder installed.

Installed engines each year since you've been as hunting for more tankage and Julius how long about Egypt.

For example in content planning, we have used generated to compress the time required for sweat extensive evaluation feedback from project assessment process from Sarah several hours to a few minutes.

Speaker 2: For example, in content planning, we have used generative AI to compress the time required for short extensive evaluation feedback from project assessment process from several hours to a few minutes.

Speaker 2: In the development phase, the use of generative AI has assisted in reducing the time required for manual reading from three to four days to about one hour. The accuracy of seeing and character breakdown in scripts have also exceeded 90%.

In the development phase and the use of generated AI assistant.

Reducing the time required for menu BD from three to four days to about one OE the accuracy of seeing and character breakdown in script have also exceeded 90%.

Speaker 2: Try to to a you to. I want to you sentence associshe who any high shall socity, that is also your Chef here, who cent and want to to you ure HY PO hyrogen J town. On to you the and gener young the time ily med ING jment. In the production Phase, produce producers have effectively safe, undesigned production cost by using generative a? I tools to generate character sketches and conact of.

Thank you, Bob and Th opinion, it was finishing Yang <unk>.

Some challenges and shortages will feel shameful <unk> onto since we're a huge a hospital.

Sounds helpful to use a shopping center in Germany, some of the time.

Ladies and gentlemen.

In the predictions faith produce producers have effectively saved undefined and production cost of using generate it's AI tools to generate character sketches and contact posters.

Speaker 2: In the promotion phase, high-quality posters and dynamic videos generated by AI have been applied in on-platform operations and off-platform advertising for key projects, such as Destin and the Big Band.

Promotion phase I, I'll leave posters and dynamic videos generated by generating eight I have been in a form operation and off platform advertising for key projects such.

At this time and the Big Bang theory.

Speaker 6: In addition to the production of video content, we also use AIGC's creative tools to help advertisers produce advertising materials. Some industries have increased the amount of advertising materials by 200% compared to the previous use of money. The investment return rate of advertisers using AI materials has also increased by 60% compared to non-AI materials.

So they don't use with New Orleans, I shall multiple bunch on your issue.

<unk> crunchy pumps syndrome, almost once you see monkey with Xiaomi to change <unk> Anthony I'm back. She only asked was kind of a Muslim dental supermodel chunky fee as well.

The ocean.

Speaker 2: In addition to content production, we also utilize AI-generated creative tools for effective app material production for performance ads. Some industry have seen a 200% increase in app spending compared to before the use of AI. While ad campaigns using AI-generated materials have also experienced a 60% higher rate of investment compared to non-AI materials.

In addition to content production, we also utilized AI generated creative.

Creative tools for effective material protection for performance at some industry have seen 200% increase in AD spending compared to before these of AI.

Using.

Well out of campaigns using AI generated materials have also experienced at 60% higher rate of investment compared to AI materials.

Speaker 6: So in the future, we will continue to explore more business scenarios, landing opportunities and application opportunities. Fully use the capabilities of Samsung AI to play its greater value. Thank you.

So he said well I know, which is essential employee overtime and what is equally.

<unk> and comprehensive combined cash.

In the future, we will continue to explore more business scenarios and application opportunities fully.

Speaker 2: In the future, we will continue to explore more business scenarios and application opportunities, fully leveraging the capabilities of generative AI to create even greater value. Thank you.

Leveraging that capability of generating AI to create even greater value.

Thank you.

Yes.

There are no further questions at this time I'll now hand back to management for closing remarks.

Speaker 1: There are no further questions at this time. I'll now hand back to management for closing remarks.

Speaker 2: Thank you, everyone, for participating in today's call, and please do not hesitate to contact us if you have further information or questions. Thank you. Bye-bye. We'll see you next quarter.

Thank you everyone for participating in today's call and please do not hesitate to contact us if you have further information.

Question. Thank you I will see you next quarter.

Thank you.

Speaker 1: conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Okay.

Okay.

Yes.

Okay.

Yeah.

Okay.

Okay.

<unk>.