Q1 2024 iQIYI Inc Earnings Call
Thank you for standing by and welcome to the Ikea first quarter 2024 earnings Conference call.
Operator: Thank you for standing by, and welcome to the iQIYI 1st Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode.
All participants are in a listen only mode.
There will be a presentation, followed by a 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.
I would now like to hand, the conference over to MS. Shang you IR director of the company. Please go ahead.
Unknown Executive: Thank you operator, Hello, everyone and thank you for joining Ice's first quarter 2024 earnings conference call. The company's results were released earlier today and available on the company's Investor Relations website I R. I C E Dot com on the call today are Mr. Evan Guo, our founder director and CEO Mr. <unk>.
Operator: There will be a presentation followed by a 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. I would now like to hand the conference over to Ms. Chang Yu, IR Director of the company. Please go ahead. Thank you, Operator. Hello, everyone, and thank you for joining ITE's first quarter 2020 earnings conference call.
Operator: The company's results were released earlier today and are available on the company's investor relations website at ir.ite.com. 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, Chief Technology Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business. Mr. Xianghua Yang, Senior Vice President of Movies and Overseas Business. And Mr.
Unknown Executive: Our CFO, Mr Shan Li Wang our chief.
Unknown Executive: Chief content officer, Mr with O'neil, our CTO Chief Technology Officer, Mr. He has held senior Vice President of our membership business. Mr. Sun <unk> Senior Vice President of Moody's and overseas business and Mr. Tom <unk> Senior Vice President of brand advertising business, Mr. Quinn will give.
Chang Yu: Gang Wu, Senior Vice President of Brand Advertising Business. Mr. Ong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. 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 Security Litigation Reform Act of 1995.
Speaker Change: A brief overview of the company's business operations and highlights followed by James who will go through the financials.
Speaker Change: After the prepared remarks, the management team who are participating in the Q&A session. 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.
Chang Yu: Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the FCC. ITE does not undertake any obligation to update any forward-looking statement except as required under applicable law.
Speaker Change: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations potential risks and uncertainties include but not limited to those outlined in our public filings with the SEC.
Speaker Change: <unk> does not undertake any obligations to update any forward looking statement, except as required under applicable law I will now pass the floor to Mr. Kang. Please go ahead.
Yu Gong: I will now pass the floor to Mr. Gong. Please go ahead. Hello everyone, thank you for joining us today. We kick off the year with a strong first quarter as we continue to execute our high-quality growth strategy and achieve multiple historical highs in key financial and operational results. The non-GAAP operating income and its corresponding margin both reached record highs, with income at RMB 1.1 billion and margin at 14%. The expanding margin is a natural result of high-quality growth.
Lincoln Kong: Hello, everyone. Thank you all for joining us today.
Lincoln Kong: Oh, Yeah, we have a small source so called her as we continue to build our high quality growth strategy.
Lincoln Kong: Achieved multiple is tolerable.
Lincoln Kong: Financials and operational results.
Lincoln Kong: non-GAAP operating income.
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Lincoln Kong: Income and RMB, one one feeling and matching 14th.
Lincoln Kong: 14%.
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Yu Gong: For our membership services business, the monthly ARM goes to an all-time high, which marks the sixth consecutive quarter of sequential growth. We are satisfied with the program and continue to believe that ARM remains one of the key drivers for Unleashing the Long-Term Value of Membership. In our advertising services, revenue from performance ads achieved double-digit annual growth and hit a historical high in Q1. We anticipated the momentum to continue as it directly benefited from the growing adoption of generative AI, which is expected. Jio Greater Returns on Investment for Advertisers; Content Distribution Revenue hit a historical high as well, reaching RMB 928 million and growing 27% annually.
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Lincoln Kong: Go to an all time high.
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Lincoln Kong: That is fine with the program.
Lincoln Kong: To believe that.
Lincoln Kong: One of the key drivers.
Lincoln Kong: And we see.
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Speaker Change: Historical high in Q1.
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Yu Gong: This Claire It illustrates that our growing content and production capabilities are creating more high-quality content that is recognized by television stations and other buyers. While we delivered an impressive financial performance in the quarter, we maintained our dominance in contract markets. The data from Enlightened shows that our total viewship across major content categories, such as dramas and movies, maintained the top spot in the market in Q1. Notably, in the Crucial Drama category, we held the No. 1 position for the Wheelchair Show at 9th Street Quarters.
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Yu Gong: Aside from our domestic achievements, we are also excited by the amplified reach and influence of our content and brand in the overseas market. Now, let's dive deeper into the performance of the call business. Italian, Vietnamese, Russian, Soviet, etc.
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Yu Gong: We are committed to offering our users superior content. The findings, user experience, and enhanced membership privileges and benefits, which we believe are well for the sustainable long-term growth of our membership services, of Focus extends beyond merely the quarterly subscriber numbers. As a revenue result, ultimately, reflects all the collective components contributing to that performance. With that said, we believe the way we show the development of our membership business should be aligned as well.
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Yu Gong: Starting in Q1 of this year, we will start reporting the quarterly average subscriber numbers and arm. We will provide updates on key milestones related to subscriber growth and arm as they are achieved. In the first quarter, we delivered membership revenue of RMB 4.8 billion, flat, sequentially, and down 13% from a year earlier. The year-over-year fluctuation was primarily due to the high-bill effects created last year with the release of our mega-hit, The knockout. The surge in travel and offline entertainment during the very first Chinese New Year holiday of this year, post-COVID, also partially dilutes online activities.
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Yu Gong: Currently, among the various factors contributing to revenue performance, we are intently focusing on enhancing the arm and extending the lifespan of each membership, which serves as our principal area of focus. We remain highly confident in the long-term growth potential of our membership business. Our confidence is supported by the success of our ARM strategy, which reflects six consecutive quarters of sequential growth. Nostrum performance is driven by our ongoing efforts to improve operations in which products we offer, and the In-House Membership Benefit. O.O.V. has bolstered the value proposition of all members given that all membership fees are affordable and the effective arm remains mounted.
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Yu Gong: We have the opportunity to further refine our pricing strategy, emphasizing the exceptional value of our premium content and services. We have been working on improving ARM by introducing exciting services that add substantial value. I take the express package, for example; cash purchase for the drama. A Lonely Warrior reached a new high.
Speaker Change: We have the opportunity to further refine our pricing strategy first I assume the exceptional value of our premium content.
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Yu Gong: The express package not only brought in more revenue, but it also increased the popularity of the title. In fact, just one day after we launched this package, the drama hit its peak on the IT popularity index score. We are making good progress in bringing additional value to our members while concurrently driving revenue and popularity. In summary, our strategy for our membership business involves consistently delivering premium content and streamlining operations and making efforts to attract and engage users. We also intend to adapt our membership offerings to suit diverse user preferences and bolster our loyalty program to motivate commitment to long-term premium subscriptions. Such initiatives are designed to foster loyalty and enhance customer lifetime value.
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Lawrence: Is that a total foster Lawrence here on the enhanced customer lifetime value.
Lawrence: Moving on to content maintain market leadership in key content generous.
Yu Gong: Maintain market leadership in key content genres has reinforced our reputation as a diversified and high-quality premium content powerhouse. For non-consumptive content, our drama will shape shelves, and has passed the industry. The corner's newly released title highlighted the extensive range and depth of our offering. We achieved meaningful advancements in the realistic genres, distinguishing ourselves from competitors' strong quality genres infused with varied creative elements. This strategy has successfully broadened our content creation expertise. Original programming remains the cornerstone of our content strategy. iQIYI Originals accounted for over 70% of our key new genres launched in the first quarter, covering diverse themes. In particular, one of the one of the, Cui Fengzhe, emerged as the first drummer this year and 13th in history to surpass an ITA popularity index of 10,000, setting it apart from other warm seed shows.
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Yu Gong: War of Faith, a historical period setting with financial intrigue, suspense, and other creative elements demonstrates our commitment to innovation as we continue to push general boundaries and introduce unique storytelling perspectives. The well-received drama, Always on the Move, which was released during the Chinese New Year holiday, recorded a viewshed shell of over 27% at its peak, according to Inlight. It also set a new record for drama viewership on CCTV 8, and its IT popularity index score was 9,959, just shy of 10,000 landmarks. After establishing our industrial leadership in Japan's general with light arms shelter, we have continued to thrive in the Comedy General, introducing three new titles under the Lafon Seltzer brand this quarter. This includes Parallel Universes.
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Yu Gong: Shao Yihe Wo, and the great nobody, Zhao Wang, Bie Huan Zhang, both of which are drama spin-offs of our hit variety show. Additionally, the new released soldier story, Gousheng Kuaitou, has broken ITU's guardrails for the highest popularity index score, highest revenue, and the best ROI for Lava on Shelter production. During the quarter, we also released a collection of the world's high-quality dramas, such as Burning Flames, Lie Yan, Born to Run, Ru Guo Ben Pao Shi Wo de Ren Sheng, Detective Chinatown 2, Tan Ye Tan, and so on. For the quarter, our movie sales will outperformed competitors, as reported by Enlightened. We released 24 major films across genres like crime, suspense, and action, including top-grossing theatrical releases on our movie channel.
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Yu Gong: Meanwhile, 32 movies debuted on our cloud cinema channel to positive audience reception. We also observed encouraging early responses to our new action master season,, and our film cinema,, brand release. For variety shows, we made solid progress in both new releases and established IPs. Become a Farmer, To leverage the strong facts of the first season, it achieved not only a notable boost in popularity and revenue but also spurred a resurgent Billship for the first season. In addition, five hot, has a powerful season, Wuhan, with a high level of interaction among guests. Its international index surpassed 8,408 peak.
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Speaker Change: Also observed encouraging responses.
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Yu Gong: For animation, we got better at what we do, and users responded well. Our original works, The Great Ruler, Da Zhu Zai, and Against the Gods, Ning Tian Xian Shen, achieved the best performance for domestic animation on our platform. Meanwhile, our upcoming dramas feature several old titles, such as Fourth Spirit Matchmaker.
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Yu Gong: Huyao Xiaomingyang, Follow Your Heart, Yanxing Ji, and As Husband, As Wife, Xiaofu Qi and our staff of recent releases, including and an outlet of recent releases, including In the Name of a Father, Harbin 1944, and others, have bolstered our reputation for delivering high-quality and diverse content with great audience appeal. Don't forget, CTL is CTL, which To the wonder, what other types exemplify artists as imblanding artistics?
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Yu Gong: Merit with commercial success. Adapted from literary prose and special effects, with light commentary and live comedy elements, it supports our pioneers' active standards and offers a cinematic experience that sets a new industry benchmark. [inaudible] This service is the first to utilize our in-house developed cloud-based on-site production management system, enabling instant collaboration on daily shooting footage remotely and largely boosting production efficiency. It has achieved profitability while garnering domestic and international acclaim. And the top star, greetings on Dobar this year, became the first, 8-episode miniseries to air during CCTV-1's prime Time slot and was the first Chinese drama to be selected for the prestigious, Long-form Competition at Cannes Zero.
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Speaker Change: Top star ratings on gold bar this year becomes a first.
Speaker Change: Eight episodes maintenance out of two of our earnings is ATV was prime time slot.
Speaker Change: First of all Chinese drama debuted selected Florida.
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Yu Gong: The Light on Filter is set to introduce six titles in 2022, with notable ones such as the already released Tell No One, We'll call it a day, and the upcoming Lost in the Shadow,, and Internet Theme. Sponsored ADR Class A. In addition, we are broadening our general focused selector mode with two new brands. Microcosm Delta, Wei Chen Qu Chao, which focuses on premium mini cereals that explore the nuances of everyday life. With To the Wanderer being its first title.
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Yu Gong: The Masterpiece Center The Masterpiece Center, on the other hand, offering adaptations of Extreme, literary works, we believe the delta node will further enhance content performance and commercial value. Our Q2 movie offerings include social relevance titles like Peacock Zip, Featuring Song, the Pig, the Snake, and the Pigeon, Zhou Chu, Chu Sanhan, Cloud Cinemas will showcase YOLO, He is from the Chinese New Year release window, along with renowned director Zhang Yimou, Article 20, and the Action Packet Suspect Chaoyi Shentai.
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Yu Gong: Additionally, we are eager for the May 17th shelter release of the project. Harbin Blade Pengfeng Chen, based on Keiko Higashino's, IEF and NOAA, Dongyue Guiwu. With our variety show, we have seen a strong return on our established IP, including Detective Adventure Season 4 and Wrath of China 2024.
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Yu Gong: We are also exploring new IPs in the reality show genre, with I Play Basketball in Hengdian and Wonderland. Meanwhile, our original production capabilities for animation continue to improve. We will impact the number of kids animation titles we release next quarter to increase, in addition to sequels from existing serials. We will launch new IPs such as Funtastic Around and Xiaotiao Bangbangbang. We also press forward with sequels of new animation IPs like Phoenix, the Goddess, and the Golden Corp Prison., and I'm the leader. I'm Blademaster Wu Weidong in the material arts and fantasy genre.
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Yu Gong: We recognize that the core strength of the long-form video industry lies in consistently delivering high-quality content that strikes a balance between creative value and economic success. Our position in this industry is secured by combining elite talent and industry resources, as well as rigorous content evaluation and management.
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Yu Gong: Sophisticated business intelligence and innovative technology. As we progress through 2024, our approach will focus on crafting top-tier diverse content that leverages our leadership in the genre category while exploring advancements in the genres. We will also refine our release strategy to align with the evolving tastes of our audience. Moving on to the advertising business, in the first quarter, ad revenue reached RMB1.5 billion, up 6% annually, which was driven mainly by the growth of performance ads.
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Speaker Change: Moving on to the advertising business in the first quarter.
Speaker Change: Revenue reached RMB, one 5 billion up 6% annualized which was driven mainly by the growth of procurements as.
But for them and for us.
Yu Gong: Performance As a highlight of the quarter, the record high revenue was propelled by the growing adoption of generative AI, which in turn improved ROI for advertisers. In fact, we have successfully integrated generative AI tools into iQIYI's advertising platform, allowing advertisers to promote and create advertising materials on their own. These tools have been effectively reducing production costs while improving ad quality and boosting ROI for Gaming and Short Drama Advertisers, as created with generative AI tools, have seen an increasing increase in ROI by over 40%.
Speaker Change: The highlight of the quarter.
Speaker Change: Are the highest revenue.
Per pound.
Speaker Change: Gotcha.
Speaker Change: <unk> AI, which in turn improve rois.
Speaker Change: Advertisers.
Speaker Change: In fact.
Speaker Change: We have successfully integrate its John <unk>.
Speaker Change: Bruce.
Speaker Change: Into that either.
Speaker Change: Of our testing platform alone advertisers to.
Speaker Change: For most of the increase advertising materials on their own.
Speaker Change: <unk> effectively reducing production costs, while improving quality and boosting rois.
Speaker Change: Okay on the sharp drama advertisers.
Speaker Change: As it relates to China January.
Bruce: It's Bruce.
Bruce: I've seen increasing.
Bruce: Increase in ROI by over.
Bruce: 48%.
Bruce: 50%.
Yu Gong: With the role of generative AI rapidly expanding, we are leveraging its broader potential to transform the world of advertising. On-bred ad business site, our premium content continues to attract advertisers, with over half of the revenue stemming from content-targeted ads. A great example of this trend is the drama Always on the Move.
Bruce: With a goal of trying to generate here.
Bruce: Welcome to the expansion, we are leveraging its broad potential to transform the world.
Bruce: Advertising.
Brad.
Hey, Brad.
Bruce: Inside our premium content continues to track.
Speaker Change: I'm sorry.
Speaker Change: With over a half of the revenue stemming from content targeted at a great example to date trends drama always on the move.
Yu Gong: Nanabei Wang, which achieved The Exceptional Path Itself in Performance, Additionally, the variety show Become a Farmer from Lima, which... debuted in 2023, has seen a notable 80% increase in revenue this year. By industries, the food and beverage sector stood out with solid increases in spending both annually and sequentially. The medical services and communication sectors also saw substantial growth, with Ad Revenue exceeding 20% on both.
Speaker Change: Alabama, which achieved.
Speaker Change: Exceptional pad itself.
Speaker Change: Yes.
Speaker Change: Additionally, thus far in April become a farmer from fever pitch.
Speaker Change: He built it in 2000.
Speaker Change: <unk> has seen notable eight 8% increase in revenue this year.
Speaker Change: Industrious.
Speaker Change: Nevada sector stood out with solid increases in ad.
Speaker Change: Spending both annually and sequentially the medical services and communication sectors also adjusted substantial growth.
Speaker Change: In added revenue exceeding 17% on both.
Yu Gong: Annual and Decentralized Business. Looking Ahead, we start to see a resurgence. In Brandad, spending a second quarter is a traditional, Sponsored ADR Class B Sponsored ADR Class C. We anticipate domestic brands to show faster recovery than their international peers. Moving on to Technology and Products, our dedication to advancing technological innovation remains a status quo, as it plays a crucial role in driving. The Industrialization of Content Production, Improving the User Experience, and Hosting Operationally Inpatients
Speaker Change: Annual and sequential basis.
Speaker Change: Okay.
Speaker Change: We have to see.
Speaker Change: Surgeons in brand AD spending as second quarter as our transitional.
Speaker Change: Hi, Steve.
Speaker Change: And then for Brian that business and we have a strong line up of Walmart.
Speaker Change: Although we remain cautious of.
Speaker Change: Obviously a mistake.
Speaker Change: A mistake regarding brand advertisements.
Speaker Change: Market for this year.
Speaker Change: It's paid domestic brands too.
Speaker Change: To show faster.
Speaker Change: Recovery.
Speaker Change: There are international tariffs.
Speaker Change: Moving on to technology products.
Speaker Change: <unk> dedication to advancing technology and automation remains steadfast as it plays a crucial role in driving.
Speaker Change: You can go straight lines nation of content production improving user experience.
Speaker Change: <unk>.
Speaker Change: Operational efficiency.
Yu Gong: We look forward to the abundant opportunities that AI presents across our business. We have been witnessing the revolutionary impact that the rise of AI technology is having on the entire entertainment ecosystem. Other than the performance at this conference, we also see the substantial benefits from integrating generative AI into the process of content production and operations. We are still at the initial stage of fully releasing the potential of generative AI.
Speaker Change: We look forward to the Boston.
Speaker Change: Alternative AI process across our business.
Speaker Change: With Macy's.
Speaker Change: The ocean that array in patents that the wrath of AI technology is having on in both the entertainment ecosystem.
Speaker Change: The performance additives.
Speaker Change: Earlier.
Speaker Change: Also Steve.
Speaker Change: That's fair.
Ben: Sure Ben.
Speaker Change: It's from integrating.
Speaker Change: Eight inch for the profile of production and operations.
Speaker Change: Wow.
Speaker Change: We are still at the initial.
Speaker Change: The initial stage of full land they have seen.
Speaker Change: Of gender.
Speaker Change: Hi.
Yu Gong: It has meaningfully enhanced the industrialization of content production, contributing to content quality improvements and cost savings. For example, we utilize our in-house developed data-driven platform, the iQIYI Content Production Management System. To meaningfully improve the history show while enhancing content production and operation efficiency, our latest upgrades have extended its scope from dramas to include variety shows, animations, and movies. And it is culturally and continuously refined to improve production and management capability.
Speaker Change: Mainly in Florida in past.
Speaker Change: That's true.
Speaker Change: Lesion of content protection.
Speaker Change: Built into the pumps and the quality improvements and cost saving.
Speaker Change: Well the example.
Speaker Change: We utilized.
Speaker Change: Our in house developed data driven platform.
Speaker Change: We are confident that reduction.
Speaker Change: Uh huh.
Speaker Change: To meaningfully improve our hit ratio now enhancing content adventure on the operation efficiency.
Speaker Change: Upgrades.
Speaker Change: It's called from Commerce to include a variety of shops and nation.
Speaker Change: Movies and.
Speaker Change: Culture outlets and continuously.
Speaker Change: Great fun to improve protection independent Chairman <unk>.
Yu Gong: In addition, we have incorporated a broader range of AI tools into the system, streamlining everything from content selection to promotion. Our new AI features can not only summarize novels and scripts, but they can also assist in crafting story outlines and character profiles, increasing producers' reading efficiency by several times.
Speaker Change: The issue we have in.
Speaker Change: In coverage opera browser range of AI.
Speaker Change: Davidson.
Speaker Change: Dream binding.
Speaker Change: Everything from content selection.
Speaker Change: <unk>, our new AI at future not only can summarize notable.
Speaker Change: Scripts.
Speaker Change: Also.
Speaker Change: But they can also.
Speaker Change: In <unk> stock authorized parents are profiles, increasing producers raising efficiency at <unk>.
Yu Gong: Additionally, our system skillfully handles wild restoration for actors in poster production, which has been implemented in major projects. Beyond production, our marketing and distribution efforts have been upgraded as well. We are now better equipped to produce compelling promotional materials, and our smart video search function offers more accurate content recommendations by effectively responding to plot-oriented searches and conversational comments. Continuous Commitment to Improving the User Experience, The introduction of a kids mode on a smart TV app.
Speaker Change: Additionally, all system skillfully handle wise.
Speaker Change: All of Asia.
Actors in cost of production, which has been implemented in major projects.
Speaker Change: Dr.
Speaker Change: Beyond production.
Speaker Change: Marketing and distribution.
Speaker Change: On being upgraded as well.
Speaker Change: Badger.
Speaker Change: For deals compelling promotional materials and mass.
Speaker Change: Visual search function offers more accurate content recommendations.
Speaker Change: We effectively punting to cloud oriented search.
Speaker Change: Conversational Commerce tomorrow.
Speaker Change: Months.
Speaker Change: The yields are fronts, great Prize pride in all.
Speaker Change: Our continuous commitment to improving that youll start earlier.
Speaker Change: The introduction of.
Keith mode: Keith mode.
Smart TV app.
Deepa tool.
Yu Gong: Designed to create content suitable for children has resulted in increased parental, trust, and user engagement time Love, but not live, live for our business performance in regions outside of mainland China. We achieved solid annual revenue growth in the first quarter. Membership revenue grew both annually and sequentially, with nearly an 80% annual increase in markets such as Hong Kong and the UK. We continue to amplify the reach and influence of our country and the brand in the overseas market.
Keith mode: Rich content suitable for children.
Chris: Results in Chris.
Speaker Change #100: M Tor.
Speaker Change #101: Uh huh.
Speaker Change #100: User engage.
Speaker Change #100: <unk> time.
Speaker Change #100: Not not least lately.
Speaker Change #102: For our business performance in regions outside of mainland China.
Speaker Change #102: She is solid annual revenue growth in the first quarter membership revenue growth annually and that sequential that.
Speaker Change #102: This ATM.
88%.
Speaker Change #102: Increase in markets, such as Hong Kong and the U K.
Speaker Change #102: Continuous tool.
Speaker Change #102: Rich on the inflows of all content and the brand in the overseas markets.
Speaker Change #102: This year already and those continue to again.
Speaker Change #102: Section.
Speaker Change #102: Sure.
Speaker Change #102: Attraction to gain traction among overseas audience, the overall shape of small cell.
Yu Gong: [inaudible] Attraction, to gain attraction among overseas audiences. The overall viewership of SWOT and SELF4 ranked first in all regions and categories on our overseas platform, topped popularity charts in Thailand, and Sponsored ADR Class A Original, King Taku 2 continued its success of the first season, boosted.
Speaker Change #102: Yes.
Speaker Change #103: Yeah first in alternatives.
Speaker Change #103: Chris.
Speaker Change #104: <unk> platform top tier of popularity of Charles Charles.
Speaker Change #103: Thailand.
Speaker Change #103: And in more detail the secondaries.
Speaker Change #103: No nation.
Speaker Change #103: Orange.
Speaker Change #103: One pass.
Speaker Change #103: Q2 <unk>.
Speaker Change #103: <unk> success opened up for our associates.
Speaker Change #103: Boosted.
Yu Gong: Both traffic and membership around the world on our Malaysian side. Leveraging our premium content, we developed local partnerships to boost global penetration and monetization. We have strengthened House with telecom companies and tourism in Hong Kong and Thailand, and the last one, an ITC drama. [inaudible] on selected local TV stations in Thailand.
Speaker Change #103: Traffic on the membership growth.
Speaker Change #103: And in fact.
Speaker Change #103: Leveraging our premium content.
Speaker Change #103: Developed local partnerships to boost our global penetration and.
Speaker Change #103: In addition, we have strengthened.
Speaker Change #103: Our house with telecom companies and tourism.
Speaker Change #105: All therapy.
Speaker Change #106: Oh, sorry, yes in Hong Kong, Thailand, and the launch.
Speaker Change #107: <unk> is C drama.
Speaker Change #107: Flat.
Speaker Change #107: On selected local television station in Thailand, looking at half and to provide a steady slate of premier seat pop content to key overseas market.
Yu Gong: Looking ahead, we aim to provide a steady slate of Premium CPAP Content Toolkit for the overseas market and accelerate the production of original premium content for local audiences, in our efforts to promote Z-POP and local content through partnership with Southeast Asian TV stations. As we enhance our brand presence in key markets, we are also committed to exploring a variety of IP monetization opportunities. In summary, the strong performance in the first quarter demonstrated the successful execution of our high-quality growth strategy. We recently celebrated our 14th anniversary.
Speaker Change #107: Accelerate the production of original premium content for local audiences.
Speaker Change #107: Meanwhile, we are persistent.
Speaker Change #107: In our effort to promote the path.
Speaker Change #107: <unk> content.
Speaker Change #107: So partnership with South East Asian television stations as Lee has all brands.
Speaker Change #107: Assets in key markets.
We're also committed to following of our entire of IP monetization opportunities.
Speaker Change #107: In summary.
Speaker Change #107: Strong performance in the first quarter demonstrated.
Speaker Change #107: That's exactly the picture of a high quality of growth strategy.
Speaker Change #107: Davidson.
Speaker Change #108: Not at all.
Speaker Change #109: <unk> and <unk>.
Speaker Change #109: Alright.
Jun Wang: As we step boldly into the future, we are seeing more exciting opportunities ahead, especially when we assess the power of generative AI, which could potentially transform the entire landscape of entertainment. With this in mind, we are committed to leveraging pioneering technologies to further enhance our ability to continuously provide high-quality content and Extent of Lead in the Industry. Now, let me pass the microphone to Guo Sun of Financial Performance. Thank you, Mr. Gong, and I follow everyone.
Speaker Change #110: As we step.
Speaker Change #110: Into that field trough, we are seeing more exciting opportunities ahead.
Lynn.
Speaker Change #111: SaaS the pump.
Speaker Change #112: <unk>, AI, which could have potential.
Speaker Change #112: Trans growth until Netscape.
Speaker Change #113: Got it.
Speaker Change #113: With this in mind, we are committed to leveraging the pioneering technologies to further enhance.
Speaker Change #113: Our ability to continuously provide our high quality content.
Speaker Change #113: The extent of late in the <unk>.
Speaker Change #113: In Australia.
Jun Wang: We delivered a strong Q1 result with a record high operating profit and the corresponding margin, improved cash flow, and a healthier balance sheet. We believe we can utilize more tools to enhance shareholder value over time. Now, let me walk you through the key numbers. In Q1, total revenues were RMB 7.9 billion. Membership services revenue reached RMB 4.8 billion, remained stable sequentially, and decreased 13% annually. The annual decrease, as previously explained, was primarily due to the hype-based effect from the same period last year.
Speaker Change #114: Let me pass.
Speaker Change #115: Four goals of a natural performance.
Speaker Change #114: Yes.
Speaker Change #116: Thanks, Paul and Hello, everyone.
Speaker Change #117: We delivered a strong Q1 results.
Speaker Change #117: The record high operating profit and a corresponding margins.
Speaker Change #117: The cash flow and healthy balance sheet.
Speaker Change #117: We believe we can utilize more tools to enhance shareholder value overtime.
Jun Wang: For online advertising, revenue grew by 6% annually to RMB1.5 billion. The increase was primarily driven by the growth of performance and revenue, which achieved double-digit annual growth and hit a historical high in Q1, even compared with a high base from the previous year. The Accountant Distribution Revenue also hit an all-time high, reaching RMB 928 million and growing 27% annually. Moving on to costs and expenses, the current cost was RMB4 billion, down 5% annually, driven by our improvement in our current strategy and operating efficiency. Total operating expenses were RMB 1.4 billion, down 12% annually, primarily due to our discipline in marketing spending and the reversal of the allowance for credit loss.
Speaker Change #117: Now, let me walk you through the key numbers.
Speaker Change #117: In Q1 total revenues were RMB seven 9 billion.
Speaker Change #117: Membership services revenue reached RMB four 8 billion.
Speaker Change #117: Maintenance stable sequentially and decreased 13% annually.
Speaker Change #117: The annual decrease as previously explained was primarily due to the high base effect from the same period last year.
Speaker Change #117: Online advertising revenue grew by 6% annually to RMB, one 5 billion.
Speaker Change #117: The increase was primarily driven by the relative performance as revenue, which achieved double digit annual growth and hit a historical high in Q1, even compare with a high base from last year.
Speaker Change #118: Yeah content distribution revenue also hit all time high reached RMB $928 million and grew 27% annual rate.
Speaker Change #118: Moving on to costs and.
Speaker Change #118: And then expenses.
Speaker Change #118: Content cost.
Speaker Change #119: Full opinion.
Speaker Change #119: 5% annually driven by our improvement in content strategy and operating efficiency.
Speaker Change #119: Total operating expenses was RMB, one 4 billion down 12% annually, primarily due to our discipline and the marketing spending and the reversal of allowance for credit losses.
Speaker Change #119: Turning to profits and cash flows.
Jun Wang: Our non-capital operating income was RMB 1.1 billion, and its corresponding margin was 14%, reaching historical highs. Furthermore, the operating cash flow totaled RMB 938 million, remaining positive for eight consecutive quarters, reflecting the continuous improvement of our balance sheet. At the end of Q1, we had cash, cash equivalents, short-term investments, and long-term restricted cash included in the prepayment and other assets of RMB 7.3 billion in
Speaker Change #119: Our non-GAAP operating income was RMB, one 1 billion and this corresponding margin is 14%.
Speaker Change #119: Reaching historical high.
Speaker Change #119: Furthermore, the operating cash flow totaled RMB $938 million remaining positive for calix.
Speaker Change #119: Two quarters, reflecting the continuous improvement.
Speaker Change #119: Our sheets.
Speaker Change #119: And at the end of Q1, we had cash cash equivalents short term investments and long term restricted cash included in the prepayment and other assets of <unk>.
Speaker Change #119: RMB seven 3 billion in total.
Speaker Change #119: Moving forward, we remain committed to creating long term value forward stakeholders. We aim to continue to generate sustainable profit and the cash flow and to further strengthen our balance sheet.
Jun Wang: Moving forward, we remain committed to creating long-term value for our stakeholders. We aim to continue to generate sustainable profit and cash flow and to further strengthen our value chain. For detailed financial data, please refer to our press release on our IR website.
Speaker Change #119: For Qdoba financial data, please refer to our press release.
Speaker Change #120: IR web site.
Operator: With that, I will open the floor for Q&A. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2.
With that I will now open up floor for Q&A.
Speaker Change #120: Yes.
Speaker Change #121: Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change #121: If you wish to cancel your request please press star two.
Operator: If you're on a speakerphone, please pick up the handset to ask your question. Please ask your question first in Chinese, then again in English. In the interest of time, we ask that you please ask one question at a time. You may press star 1 again to rejoin the queue if you wish to ask a follow-up question. Your first question comes from Xueqing Zhang from CICC.
Speaker Change #121: If you're on a speakerphone please pick up the handset to ask your question.
Speaker Change #122: Please ask your question first in Chinese and then again in English in the interest of time, we ask that you. Please ask one question at a time.
Speaker Change #122: Press Star one again to rejoin the queue. If you wish to ask a follow up question.
Speaker Change #123: Your first question comes from Cheng from CIC. Please go ahead.
Speaker Change #124: CBS Com Borgwarner vishal.
Speaker Change #123: Gotcha.
Speaker Change #125: EMEA has been done.
Speaker Change #125: <unk>.
Speaker Change #126: Got it.
Speaker Change #127: <unk> sure.
Speaker Change #126: Sure.
Speaker Change #128: Sanchez yard that you add.
Speaker Change #128: The leash.
Speaker Change #128: Okay.
I agree to you with a good chunk of feedback yet.
Xueqing Zhang: Please go ahead. ????????????,????????????,??????????,??????????????????????,?????????????,?????????????????????,??? ????????????,????????????,??????????,??????????????,?????????????,?????????????????????,??? The CEO, Mr. Gong, just explained why we didn't, Disclose the subnumbers and arm, because this only partially indicates the progress of our entire business. So disclosing the numbers too much in detail probably will disturb some of the development of our overall business. So for the details, we'll invite Mr. Duan, who's in charge of the membership business, to explain further. ???,??????????,??????????????ARM,??????????????????,?????????,???????????????????? After serious consideration, we decided no longer to disclose the subscriber and ARM data starting this quarter.
Speaker Change #128: Thanks.
Speaker Change #129: Thanks management for taking my question and congratulations on this genre.
Speaker Change #130: My question is about the membership business.
Anthony: Anthony did not discard stepping subscriber numbers this quarter.
Anthony: The reason for that and how shall we think about the alcohol explore that membership business in the longer term. Thank you.
Anthony: Yeah.
Speaker Change #133: Our formula for <unk> sure sure sure.
Bill: Sure Bill.
Speaker Change #134: Jinan broadband Joshua.
Speaker Change #135: Hey, godfather offer.
Speaker Change #135: Flat.
Speaker Change #135: Often the channel.
Speaker Change #136: Over to.
Speaker Change #135: <unk>.
Speaker Change #135: You do that you can function on the book yield.
Speaker Change #137: Sorry, I'm on chart <unk>.
Speaker Change #135: On the field.
Speaker Change #138: Mr. Goldman just explained why we didnt disclose some numbers in orange and because this only partially indicates the progress of our entire business. So.
Speaker Change #138: Disclosing the numbers too much in detail probably will just start with some of the development of our overall business. So.
Some details about you like Mr. Glenn with the entirety of the membership business to explain further.
Speaker Change #138: And therefore, what would hopefully that linear.
Speaker Change #139: But if you look at the <unk> decisions related to the whole portfolio do a deal or something like that and now youll highlight of alumina.
Speaker Change #140: Yes, John she help we absolutely appeal.
Xueqing Zhang: At the same time, we believe many of you have already noted that there is an overseas streaming platform which will soon cease the disclosure of these data as well. Our reasons are very similar, because different members and levels correspond to different rights and prices and, at the same time, bring different economic values. Therefore, we believe that the progress of member business and financial data only through a specific time or a certain cycle is incomplete and objective.
Speaker Change #141: After serious consideration, we decided no longer to east coast.
Speaker Change #141: The subscriber and arm data, starting this quarter and at.
Speaker Change #141: At the same time, we believe many of you have already noted that there is overseas streaming platform, which will soon cease to disclosure of this data is as well.
Speaker Change #142: Is it OK Chancellor.
The only put one of Amazon's year I wanted to try even chopped up.
Speaker Change #142: Yes.
Speaker Change #143: Do you need out there.
Jim: Jim here.
Speaker Change #145: Yes from what we told you that Andrew Lazar.
Plus how that truly that is the thing that I would really sort of one <unk>.
Youqiao Duan: Our reasoning is, in part, similar due to the different rights and pricing associated with various membership products and tiers. Each user contributes a different economic value, and therefore, to merely reflect business and financial progress through the number of subscribers at a specific point in time or over a period is actually incomplete and lacks objectivity. Since 2022, we have been emphasizing that the core goal of member business is to achieve long-term member income maximization.
Speaker Change #146: Our reasoning is in parts and similar.
Speaker Change #146: Different rate and pricing associated with various membership products and tiers.
Speaker Change #146: Each user contributes a different economic downturn, and therefore to nearly with business and financial progress. There is a number of subscribers at a specific point in time.
Speaker Change #146: Over a period is actually incomplete and lack objectivity.
Speaker Change #146: Or are they already in house.
Speaker Change #147: A woman Kaiser is a challenge.
Speaker Change #148: I didn't move Ghana, and assist with him Cheung CFO.
Youqiao Duan: At the current stage of member business development, the indicators of member business development and health are no longer limited to the performance of the number of members. The three-wheeled carriage of member businesses, including ARM, LTE, and member numbers, will ultimately be reflected in member income.
Speaker Change #148: Time will tell.
Elena: It is on the home they also find out but yeah I'm humbled as Elena.
Elena: We absolutely built yet.
Elena: With us on how much of that.
Elena: Iot and I hope, we therefore, she is actually a doughnut with debt and equity are totally novel.
Youqiao Duan: Therefore, we believe that member income as the core indicator can best help investors understand the progress of our member business. Since the beginning of 2022, we have always emphasized that the core goal of our membership business is to maximize long-term membership revenue. And at the current stage of development of our membership business, the indicators for evaluating its growth and health are now limited to the performance of subscriber count.
Michelle: Michelle here.
Michelle: Lastly, <unk> announced the bundle was ordered at retail we are yields in that.
Michelle: And just the beginning of 2022, we have always emphasized that our core goal of our membership business is to maximize long term membership revenue and in the current stage of development of our membership business. The indicators, we're evaluating its growth in health and now limited to.
Michelle: The performance of subscriber count. So therefore, the three drivers to revenue growth.
Youqiao Duan: So therefore, the three drivers to revenue growth, namely ARM, membership lifetime, and subscriber scale, will ultimately be reflected in the revenue performance. So overall, we believe using membership revenue as the core indicator is the best way to help investors understand the business progress. ???,????????,????,??????????,???????????????????,??????IT????,??????????? Sponsored ADR Class A ???,????????,????,??????????,???????????????????,??????IT????,??????????? We are confident in the long-term growth prospects of our membership business. In the future, we will continue to improve the quality and diversification of the content, improve the membership product and service system, better penetrate the user groups that are not yet fully serviced, such as the elderly and the young, and continue to maintain the long-term and healthy growth of the iQIYI membership business. We remain confident in the long-term growth prospects of our membership business.
Michelle: Namely arm membership lifetime and subscriber scale will ultimately be reflected in the revenue performance. So overall, we believe using membership revenue.
Michelle: Our indicators.
Michelle: Best way to help investors understand the business progress.
Speaker Change #151: That's only room downtown Nashville looks a little highly wildwood Yana clay bundle with whole address that <unk>, yes.
Speaker Change #152: Shall I do the hurdle.
Speaker Change #153: <unk>, Yes, we will do it.
Speaker Change #154: In terms of the talking performance aside from revenue actually there are other external there'll some indicators that can help investors understand our business performance for example in not including Ice's popularity index and third party data.
Speaker Change #155: Well I'm going to deal with it.
Speaker Change #156: Obviously, you don't know Sandy that's one of things yet.
Jonathan you can walk us on their own sort it out.
Wow.
Speaker Change #157: We are targeting a full year.
Speaker Change #158: Thats really a sudden horn mountain yet Sonya.
Speaker Change #158: That's all it first more holiday, which India.
Speaker Change #158: So as you evolve.
That answer your question.
Speaker Change #158:
We remain confident in the long term growth prospects of our membership business in the future. We will continue to drive the long term healthy growth of our membership business.
Youqiao Duan: In the future, we will continue to drive the long-term healthy growth of our membership business through measures such as improving content quality and diversity, more optimized membership products and services, and also better penetration of user groups that are not fully served, for example, the elderly and youth. Thank you. And last but not least, I wanted to remind everyone that for each company, actually, the way we track subscriber numbers or the disclosure measures is a little bit different also.
Measures, such as improving content quality and diversity more optimized membership products and services and also better penetrate.
Speaker Change #158: User groups are not fully serve for example, the elderly and is.
Speaker Change #158: Yes.
Speaker Change #159: Okay hold on what.
Speaker Change #160: As you might have to either go to option either we absolutely.
Speaker Change #161: Can we hold you will not see.
Speaker Change #162: And last but not least I wanted to remind everyone that for each.
The company actually get the language.
Speaker Change #163: Truck subscriber number.
Speaker Change #163: Org closure measures a little bit different.
Speaker Change #164: Thank you.
Speaker Change #165: Thank you. Your next question comes from Maggie from CLSA. Please go ahead.
Youqiao Duan: Thank you. Thank you. Your next question comes from Maggie Yee from CLSA. Please go ahead.
Speaker Change #164: Okay.
Speaker Change #166: This is Tom <unk>.
Maggie Yee: ,, 8.8,,,,,,,? I'll translate myself. My question is related to our recently released iQIYI original premium mini-series To the Wonder, which is very well rated on Douban currently with a point A score, and I myself am a big fan of it. So I noticed that this drama series represents outstanding artistic qualities and is very different from traditional commercial production. I'm just wondering what the investment return would look like for this type of similar project?
Speaker Change #167: Sanjay <unk> with <unk>.
Speaker Change #168: I'll, let Pat now Jacob <unk> <unk> with Alibaba in the Gulf.
Speaker Change #169: Your line from Julien Dumoulin Jacobsen the pathway.
Speaker Change #170: Hi, Michelle.
Speaker Change #171: So it sounds good.
Tom: John This is Tom will conduct towards open foundation.
Speaker Change #172: So she'll go to adult I E.
Speaker Change #173: I'm, sorry that you guys see your phone.
Speaker Change #174: I will translate myself. My question is related to our recently released <unk> original premium minions the rise to no longer which is very well rated Oh don't think currency with eight point score and myself is a big fan of it. So I noticed that this drama service represents very outstanding artistic qualities and Zara.
Maggie Yee: And is this indicative of the new direction for iQIYI's future content strategy? Thank you. Thank you, Maggie.
Speaker Change #174: Different from traditional commercial productions, and just wondering whats the imaginary turn look like for these type of similar projects.
Speaker Change #174: Is this indicative of the new direction for <unk> content strategy. Thank you.
Speaker Change #175: Thank you Maggie will invite.
Xiaohui Wang: We'll invite our CCO, Chief Content Officer, Mr. Xiaohui, to answer this question. Thank you. Next, I will answer this question. My Dalai Lama is indeed very successful. But we also think that it cannot be simply defined as a literary film and a commercial film.
<unk>, our chief content Officer, Mr Sound way to answer this question.
Speaker Change #175: Yes.
Speaker Change #176: It would have been <unk>.
Speaker Change #177: Well I'm not sure if your feet up to go well.
Speaker Change #178: EMEA was only a couple months yet.
Speaker Change #179: When you can't Lasagna Pan.
Xiaohui Wang: It still represents a direction of innovation for us, which is to fully verify our understanding of content quality and commercial profit. It was awarded the highest rating of the year, and for the first time on a Ghanaian TV show, it represented the Chinese audience to go international and opened a new health theater for AIDS. To the Wonder actually has been a very resounding success. We think it cannot be simply categorized as art drama or commercial drama; rather, it also represents a new direction of our innovation and fully affirms our belief in emphasizing both content quality and commercial success.
Speaker Change #180: Hi Tiger.
Speaker Change #180: From <unk> to <unk>.
Speaker Change #180: I'm sure that the Xiaomi <unk> yet.
Speaker Change #181: Fidelity in Dubai toolbar to tweak all the GDP.
Speaker Change #180: So that kind of is that you get all that would be a high jump.
Speaker Change #180: And keep chasing recent Utah critical hospital.
Speaker Change #180: Two the wonder actually has been a very a much resounding success.
Speaker Change #180: We've seen it cannot be simply categorized as arkoma, our commercial trauma and rather it also represents a new direction of our innovation and actually fully affirming our belief in emphasizing both content quality and commercial success.
Speaker Change #180: Indeed, he received the highest.
Speaker Change #180: <unk> <unk> this year for domestic drama series.
Xiaohui Wang: Indeed, it received the highest rating on Douban this year for domestic drama series, scoring as high as 8.8, and it also represented Chinese language series internationally for the very first time at the Cannes Film Festival, setting a very good, excellent start for ITE's new microcosm theater.
Speaker Change #180: Eight.
Speaker Change #180: Eight eight.
Speaker Change #180: And it also represented Chinese language series internationally for the very first time at <unk>.
Speaker Change #182: Setting are very good.
Speaker Change #183: Start for Ice's, new metric hasn't theater.
Speaker Change #183: Total net <unk> number.
Xiaohui Wang: Sponsored ADR Class A, In terms of content innovation, we adapted the story from a literary prose and spiced up with light comedy elements. Actually, this brings a new energy and rhythm to the drama for a relatively strong literary quality. Sponsored ADR Class A, What's more impressive, actually, is that from a commercial perspective, this drama actually achieved profitability through diverse revenue streams, proving that the high-quality content yields not only strong social influence, but also substantial commercial, ??????????,?????????????????????,??????????????????????,???????????,???????????????? Coming back to our content strategy, we will continue to balance content quality with commercial value.
Speaker Change #184: How should I use it again.
Speaker Change #184: Ruler change either way.
Speaker Change #185: We have the interesting Joe I'll, let you.
Speaker Change #186: <unk> <unk> 40.
Speaker Change #186: In terms of content and innovation, we adapted the story from the letter readily <unk> and spiked up with like comedy.
Speaker Change #186: And actually this spring, a new energy and rhythm to the drama with a.
Speaker Change #186: Relatively strong better lease up property.
Speaker Change #186: But nonetheless, it will shine.
Speaker Change #186: Okay.
Speaker Change #186: For your initial funds so again a unique.
Speaker Change #186: The needle <unk> Chanda silver.
Speaker Change #187: Yeah to your account.
Speaker Change #187: What's more impressive actually is that from.
Speaker Change #187: Commercial perspective, that's DRAM actually achieved profitability there with diverse revenue streams proving that our high quality content yields not only strong influence, but also substantial commercial potential.
Speaker Change #188: We don't really alter your shop will make drilling around the Tricia dzhambul legal turnout with Xiaomi, a suite of <unk> tissue, but it deals with Goldman.
Speaker Change #188: So culturally it's out of the needle.
Speaker Change #189: Ooh ECG.
Speaker Change #189: In that channel.
Speaker Change #190: Good luck.
Speaker Change #190: Coming back to our content strategy, we will continue to balance customer already with commercial balances.
Xiaohui Wang: Consistently producing high-quality, diverse, and commercially valuable content. We aim to solidify our core competitive advantage in the drama sector while seeking more breakthroughs in other content genres. In terms of drama content strategy, we will continue to consolidate the advantages of realism and enhance the content of high-quality costume themes.
Speaker Change #190: Consistently producing high quality diverse and commercially valuable content, we aim to.
Speaker Change #190: Solidify our competitive advantage in the pharma sector, while seeking more green juice and other content.
Speaker Change #190: To summarize.
Speaker Change #191: Should you need on California with tissue.
Speaker Change #192: You said that you wish it.
Speaker Change #192: <unk> you want to.
Speaker Change #192: <unk> hired a new.
Xiaohui Wang: We will continue to develop high-quality and diversified content in order to gain the widest acceptance of users. Thank you. Regarding our drama strategy, we will continue to consolidate our advantages in the realistic genre and strengthen our reserve of high-quality ancient costume dramas.
Speaker Change #192: Okay.
Speaker Change #192: On the needle each of three <unk>.
Speaker Change #192: Okay.
Speaker Change #193: Regarding our drama strategy will continue to consolidate our advantages in the real estate.
John and strengthening our reserves of high quality ancient Hudson Thomas we are committed to cultivating a high quality diverse content with the aim of gaining the broadest possible recognition from our audience.
Xiaohui Wang: We are committed to cultivating high-quality diverse content with the aim of gaining the broadest possible recognition from our audience.??,??,?? Our CEO, Mr. Gong, just added, actually, for the content strategy, cost control is very, very important. And just namely, To the Wonder actually had very good cost control, so that's why, in the commercial aspect, it performed very well in that.
Speaker Change #194: Or that would tweak the progression.
Speaker Change #194: Antonio.
Speaker Change #194: So the longer term less closures or equal to 830 <unk>.
Speaker Change #194: The.
Speaker Change #194: Two new Shanghai.
Speaker Change #195: Our CEO Mr. <unk> added actually content strategies, how cost control is very very important and it just namely to the wonder actually had a very good cost control so thats why commercial.
Speaker Change #196: Very well.
Speaker Change #197: Thank you.
Speaker Change #198: Thank you. Your next question comes from Thomas Chong from Jefferies. Please go ahead.
Xiaohui Wang: Thank you. Thank you. Your next question comes from Thomas Chong from Jeffreys. Please go ahead.
Thomas Chong: Good evening. Thank you for accepting my question. My question is about advertising. Can you share with us the trend of advertising revenue in 2014, especially the growth of commercial advertising?, AI, AI Thanks, management, for taking my question. My question is about online advertising.
Thomas Chong: So I'm just.
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Speaker Change #200: Good morning.
Speaker Change #200: And then we will see some growth.
Speaker Change #201: Don't just yourself.
Speaker Change #202: Uh huh.
Speaker Change #203: I was.
Speaker Change #203: I'm wondering.
Speaker Change #204: I wanted to talk to you.
Speaker Change #204: Yes.
Speaker Change #204: Yes.
Thank you management for taking my question. My question is on that advertising Coeur mining Goldman comments about the <unk>.
Thomas Chong: Can management comment on the advertising outlook in 2024, in particular performance-based advertising? On the other hand, can management comment on how AI benefits our advertising business? Thank you.
Speaker Change #204: Okay.
Speaker Change #205: Perfect for that performance.
Speaker Change #204: Rising.
Speaker Change #204: Okay.
Speaker Change #204: Comment.
Our advertising business. Thank you.
Wenfeng Liu: Thank you, Thomas. We will invite our CTO, Wenfeng, to answer this question related to a performance app. Advertisement We found that the effect and business growth of the live AI technology is more effective than the live AI of brand ads. It has a huge potential to boost the growth of iQIYI's future advertising. Indeed, performance ad has indeed achieved considerable growth in the first quarter. In fact, in the first quarter, ad revenue reached an all-time high, contributing to over 40% of the total advertising revenue.
Thomas Chong: Thank you Thomas will invite our CTO and lymphoma.
Thomas Chong: To answer questions related to our performance.
Speaker Change #206: Sheldon components tissue children are shown on the Florida <unk> syndrome, an awesome.
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Speaker Change #208: So the OEM is home infusion.
Speaker Change #209: Q1, obviously in China and tissue jump I'm sure that this one can be sorted out.
Speaker Change #210: <unk> sensors and tissue insurance, you don't Shlomo.
Sean: This is Sean can have on cost engineering to show until you begin.
Speaker Change #211: Thank you.
Speaker Change #211: You and I won't call it didn't.
Gilles G: Hi, Gilles G launching.
Speaker Change #213: Performance AD have indeed achieved considerable growth in the first quarter and actually in the first quarter revenue reached an all time high.
Speaker Change #213: Contributing to over 40% of the total advertising revenue and we expect to continue to see strong annual revenue growth in Q2, all sorts throughout this year.
Wenfeng Liu: And we expect to continue to see strong annual revenue growth in Q2 and also throughout this year. Also, we found that the application of generative AI has effectively driven the growth of our performance ad business. Compared to brand advertising, the impact of generative AI on performance ads is actually more significant and still holds tremendous potential to drive future ad revenue growth for us. And this is actually reflected in several aspects.
Speaker Change #213: Also we found that the application of generated AI has effectively exit and the growth in our performance ads business compared to brand advertising the impact of generated AI I'm fulfillment actually it's more significant.
Speaker Change #213: Still holds tremendous potential to drive future revenue growth for us and this is actually reflected in our field separately.
Speaker Change #213: So the median I should say suicide than a syntax Tony funding proposals, we will end with <unk>.
Wenfeng Liu: First of all, in terms of the production efficiency of the material, through the AI tools provided by the Advertising Team, the sponsor automatically generates very rich picture and video advertising material to improve production efficiency and reduce advertising costs. In terms of production quality of advertisements, AI has helped various industries to create high-quality advertisements so that the high-quality content of iQIYI can be more harmonized, and the advertisement can be more deepened, which can bring better projection effects.
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Speaker Change #213: Unfortunately, the toolkit should keep our close loop.
Speaker Change #214: 2000, and Xiaomi is jumping up.
Speaker Change #214: Gulf of December.
Speaker Change #214: So it hasn't had to alpha.
Speaker Change #214: And as soon as the AI to reoccur tunnels will go to Hong Kong.
Speaker Change #214: Talking to new accounts.
Speaker Change #214: Your account organization.
Speaker Change #214: And that goes from commercial exactly pumping.
Wenfeng Liu: And in terms of advertising projection, the deep optimization and deepening effect of the e-tool model add-on upgrade and projection strategy make the advertising projection more exquisite and personalized, which helps advertisers obtain the projection effect and, at the same time, improve traffic conversion efficiency.
Speaker Change #215: It won't listen John Wilson.
Speaker Change #216: Tom could you cannot send to Johansson and shown Washington, lumping that into Cushing.
Speaker Change #216: Hans over multiple quarters of colonial.
Speaker Change #217: He said, we go down the beauty channel.
Wenfeng Liu: Wenfeng actually mentioned three aspects. First, in terms of ad material production efficiency, advertisers can use this AI tool to independently and automatically generate a wide range of image and video ad materials, increasing production efficiency and lowering costs for advertisers. And second, regarding the quality of ad material production, generative AI helps industries to create high-quality materials that coincide with high-quality video content on our platform, making ads more native and resulting in better campaign performance.
Speaker Change #218: Once I actually mentioned.
Speaker Change #219: You mentioned the three aspects first in terms of AD materials production efficiencies advertisers can use this AI to it.
Speaker Change #219: Independently and automatically generate a wide range of image and video App.
Speaker Change #219: Materials, increasing production efficiency and lowering costs for advertisers and second.
Speaker Change #219: Guarding the quality of how much material production generated AI hub.
Fees to create high quality materials that coincides with a high quality video content on our platform.
Speaker Change #219: Making brent, making up more native and resulting in better campaign.
Wenfeng Liu: And third, in ad placement, by relying on upgraded model architecture and evolving ad placement strategies, we can optimize ad performance to make ad placement more precise and personalized, helping advertisers achieve better results while enhancing the monetization efficiency of user traffic. In the future, we will continue to use the capabilities of real-time AI to help advertisers attract advantageous users, achieve multi-faceted hair linkage, enhance exposure value, and improve advertising efficiency. From the industry point of view, we hope to continue to look at the development of the industry, including platform e-commerce, the e-commerce industry, the online service industry, the game industry, and the rapid growth of short films, etc., to bring more opportunities for e-commerce advertising.
Speaker Change #219: And third.
Speaker Change #219: And AD placement fight really relying on upgraded model architecture and evolving AD placement strategies, we can optimize outperformance to make placements more precise and personalized helping.
Speaker Change #219: Helping advertisers achieve better results, while enhancing the monetization efficiency of use is happening.
Speaker Change #220: Well I know it went down tissue <unk> pumps over multiple.
Speaker Change #219: Uhm.
Speaker Change #221: So autonomous Colombian channel partner portal on the Johnson <unk> Johnson.
Speaker Change #222: <unk> will then comment.
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Speaker Change #224: We're looking at in Shang Trinidad is outstanding additions from here will move from here you will see a higher.
Speaker Change #224: Price was just under <unk> <unk> to.
Speaker Change #225: The Fontana, which opened my manager can do.
Speaker Change #226: Moving forward, we will continue to leverage generated AI capabilities to help advertisers to attract high quality users.
Speaker Change #226: On the topline and delivery synergy and also reinforced the valuable exposure and enhance the advertising effectiveness and looking at the performance by industry for Q2, we are optimistic about the development of sectors, including E Commerce online services gaming industry.
Wenfeng Liu: And looking at the performance by industries for Q2, we are optimistic about the development of sectors, including e-commerce, online services, the gaming industry, and fast-growing sectors such as programming, which we believe will bring more opportunities for performance apps. Thank you. Wu Gang, can you repeat the question? We will invite Mr. Wu Gang, who is the Senior Vice President of Brand App Business, to add on the performance of the brand app. Q2 is the peak of the brand advertising industry, and iQIYI's content control has also been strengthened. It is expected that the brand advertising business will recover a little compared to the same period in Q2.
Speaker Change #226: And the fast growing sectors, such as programs, which we believe will bring more opportunities for performance. Thank you.
Speaker Change #227: Will come post retirement medical oncologists.
Speaker Change #228: Well I'll invite Mr will go to with the senior Vice President of pent up business to add onto.
Speaker Change #227: Right.
Speaker Change #229: Fan out.
Speaker Change #230: Two hours is.
Speaker Change #231: Neither wants it to sorry, I Cheetah answer they also a georgetown reshaping that familiar with would say sure too lumpy to be reshaped.
Wenfeng Liu: The whole family still maintains a cautious and optimistic attitude towards this year's brand advertising business. From an industry perspective, we are optimistic about the food and beverage industry, the medical service industry, and the communication service industry. The future growth of brand advertising is still the development of local brand customers. In this four-year outlook, we remain a cautiously optimistic attitude towards the brand advertising business for the entire year. And looking at the industry from the perspective of the advertisers, we are bullish on the food and beverage, medical services, and telecommunications industries. In general, we believe future growth in brand advertising will still rely on the development of domestic brand advertising.
Speaker Change #231: A trend that I thought the switching anything I don't know yet.
Speaker Change #231: Bulge in terms of on the table.
Speaker Change #232: Hey, Tom how are your childhood icon.
Speaker Change #233: Omidria console shipping.
Speaker Change #233: Yes.
Speaker Change #233: Yes.
Speaker Change #233: Yes.
Speaker Change #233: Pipe won't go to some chunky, yes, it will be impactful with Paypal.
Speaker Change #233: Okay.
Speaker Change #233: For Q2, Q2 actually is the peak season for brand advertising.
Speaker Change #233: And hence our supply of variety shows in the quarter, we anticipate a recovery in Brent advertising, both sequentially and annually and for this full year outlook we remain.
Speaker Change #233: Cautiously optimistic attitude towards the brand advertising business for the entire year and looking at our the answer industry's.
Speaker Change #233: This perspective, we are bullish on the food and beverage medical services and telecommunications industry.
Speaker Change #233: In general we believe the future growth in brand advertising will still rely on the development of domestic brand advertisers.
Wenfeng Liu: Sponsored ADR Class A, We think the rapid increase in smart TV penetration rates will bring more opportunities to the brand advertising business, helping advertisers to deeply engage with highly commercially valuable home scenarios. And currently, we actually have industry-leading user coverage on large screens.
Speaker Change #234: The dosage in India Assistant told you the cause was and John Johnson with <unk>.
Speaker Change #235: Completely chew it <unk>, three or <unk> dot, Sean Johnson, <unk> Johnson's hunting right.
Speaker Change #236: Jim, which and I can go on to forget.
Speaker Change #237: Forget it yourself meeting agenda.
Speaker Change #237: Okay.
Speaker Change #238: We think the rapid increase in smart TV penetration rate will bring more opportunity to the advertising brand advertising business, helping advertisers to deeply engage with the highly commercial.
Speaker Change #238: So the value of some scenarios and currently actually we have.
Speaker Change #238: Industry, leading user coverage from large screen.
Speaker Change #239: Thank you.
Speaker Change #240: Thank you. Your next question comes from Lincoln, calling from Goldman Sachs. Please go ahead.
Lincoln Kong: Thank you. Thank you. Your next question comes from Lincoln Kong from Goldman Sachs. Please go ahead.
Lincoln Kong: Thank you, Management, for accepting my question. My question is quite simple. I'd like to ask you about your future strategies and the direction you are particularly concerned about, whether it's this year or for a longer period of time. So thank you, Management, for taking my question.
Speaker Change #241: Okay great.
Speaker Change #242: So just over the Q.
Speaker Change #243: To implement.
Speaker Change #244: Got you back towards our range closer to you could still do it.
Speaker Change #245: According to the issue of hydro.
Speaker Change #246: Sure John Great question Jim.
Speaker Change #247: So thank you management for taking my question. So my question is pretty straightforward.
Yu Gong: To ask about our future strategy, especially what are the areas that Management is focusing on for this year and for the longer term. Thank you. I'm Feng Yu. I'll answer the question. In the short term, management is mainly concerned about improving the efficiency of business, the efficiency of production, the efficiency of operations, and so on.
Speaker Change #248: I spoke to our future strategy, especially.
Speaker Change #248: The areas that I mentioned are focusing on for this year and therefore longer term.
Speaker Change #249: Thank you.
Speaker Change #250: But I don't want to you Bob but hiccup.
Yu Gong: Improving efficiency and the ability of the team to do business well. Our CEO, Mr. Gong, is answering this question, so in the short term, actually, we will continue to improve our business operational efficiency to enhance team capabilities, including strengthening the business fundamentals and also from a financial perspective to improve profits and cash,??,??,?? So from the mid to long term perspective, the very first one is to consistently enhance the quality and diversity and supply of stability of our premium content.
Speaker Change #251: Got it.
Unknown Executive: Sure Sean.
Sean Johnson: Yes.
Speaker Change #253: Shelby Truvada.
Speaker Change #254: Michel you talked about <unk>.
Speaker Change #255: <unk> got a million in R&D.
Speaker Change #254: Yes.
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Speaker Change #254: Okay.
Speaker Change #256: The whole mortgage or achieve call me directly at <unk>.
Speaker Change #254: You Wanna.
Speaker Change #254: Okay.
Speaker Change #257: Our CEO Mr. Goldman answering this question.
Unknown Executive: In the short term it actually will continue to improve our business operational efficiency to enhance.
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Unknown Executive: Adding strengthening business fundamentals and also for the financial perspective to improve profits and cash flows.
Speaker Change #258: Total loyalty Sonya MTB audience eager for tissue to call golfs.
Speaker Change #258: <unk> adoption.
Speaker Change #259: Sure as you can see that Amit.
Speaker Change #259: So from the mid to long term perspective.
Speaker Change #259: First one is to consistently enhance the quality and diversity and supply stability of.
Speaker Change #259: Premium content.
Speaker Change #259: Sure.
Yu Gong: AI And second, for generative AI, we will apply it more broadly and more deeply into content creation and operations to raise our efficiency. Third, we utilize all means to fight piracy.,, The fourth one is to improve the quality of our domestic market operations, and in terms of overseas business, we will invest, I would say, carefully, and then properly invest in this market. In terms of future growth, and actually beyond our relatively mature businesses, for example, the membership business, and also the advertising business, we will utilize generative AI and virtual reality, these innovative technologies to explain new business opportunities, such as franchise staff, both online and offline.
Speaker Change #259: Some the constantly more than I'm sure I'm not sure.
Speaker Change #260: Tom go up from here or here at home Meridian.
Speaker Change #259: And second.
Speaker Change #259: For generated AI.
Speaker Change #259: And more broadly and more deeply into content creation on operations to meet our efficiency.
Speaker Change #259: Sure.
Speaker Change #261: Craig the only vessel.
Speaker Change #261: Hum.
Speaker Change #261: Third is to utilize our armies to fight piracy.
Speaker Change #261:
Speaker Change #261: Sure.
Speaker Change #261: Well I'm sure.
Speaker Change #261: Oh sure it up hopefully that's true headquarter have extra time.
Speaker Change #261: One is to improve the quality of our domestic.
Speaker Change #261: Market operation and in terms of.
Speaker Change #261: Overseas business.
Speaker Change #261: I will say carefully and then two property and in depth into that market.
Speaker Change #262: Oh, sorry tongue, Florida Simba.
Speaker Change #263: Okay, Shyam Ultra July <unk> and beyond.
Speaker Change #263: Synergies will be enforced from Contra AI.
Speaker Change #264: I assume you centered with our Q4.
Speaker Change #264: The actual yield.
Speaker Change #265: Yes, Farquhar, China, yet from yield on that.
Speaker Change #264: Okay.
Speaker Change #264: In terms of future growth and actually beyond our matured a relatively mature businesses. For example, the membership business and also the advertising business.
Speaker Change #266: <unk> utilized to generate a AI and virtual reality is innovative technology to explain to new business opportunities such as franchise, including also both online and offline.
Yu Gong: ,,, In the future, we will also better serve two demographics, for example, the elderly and the children, by adapting product design and content production to meet their needs, also to enhance their viewing experiences and very niche content preferences. For example, for the elderly to increase their accessibility to content viewing, and also for kids' content to provide them with more healthy, safe, and reliable content.
Speaker Change #267: Could you talk more on quality of its future.
Speaker Change #268: Play a cloud comes down the total buy.
Speaker Change #267: Sure.
Speaker Change #269: Old Navy.
Speaker Change #270: One is on the upstream unless useful.
Speaker Change #270: Oh sure yes sure.
Speaker Change #270: Art home, it's just shop at.
Jim: Hong Kong from Jim.
Jim: On the <unk>.
Operator: Thank you. Thank you. Thank you. There are no further questions at this time. I'll now hand back to management for closing remarks. Thank you everyone for joining the call today. And then, if you have any questions, feel free to reach out to the IR team.
Jim: And.
Jim: In the future we will also both.
<unk> better serve two demographics for example, the elderly and children.
Adapting product designs and content production to meet their needs also to enhance their viewing experiences and.
Jim: Very niche.
Jim: Content preferences for example.
Four.
Jim: Elderly to increase the accessibility to content viewing and also for kids content to provide them with healthy safe and reliable content. Thank you. Thank you.
Operator: Thank you. Thank you. Bye-bye.
Speaker Change #271: Thank you there are no further questions at this time I'll now hand back to management for closing remarks.
Speaker Change #272: Thank you everyone for joining the call today and then if you have any questions feel free to reach out to the IR team. Thank you.
Speaker Change #272: Thank you bye bye.
Speaker Change #272: Yes.
Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Speaker Change #273: Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
Operator: Sponsored ADR Class A, Sponsored ADR Class A Transcribed by https://otter.ai, Sponsored ADR Class A Thomas Chong, Lei Zhang, Dying Yu, Wenfeng Liu, Xiaohui Wang, Youqiao Duan, Diying Ji, Xianghua Yang, Yifan Ye, iQIYI, Inc. Sponsored ADR Class A: Thomas Chong, Lei Zhang, Dying Yu, Wenfeng Liu, Xianghua Yang, Yifan Ye, iQIYI, Inc. Sponsored ADR Class A: Thomas Chong, Lei Zhang, Dying Yu, Wenfeng Liu, Xianghua Yang, Yifan Ye, iQIYI, Inc. Sponsored ADR Class A: Thomas Chong, Lei Zhang, Dying Yu, Wenfeng Liu, Xianghua Yang, Yifan Ye, iQIYI, Inc.
Speaker Change #273: Okay.
Speaker Change #273: Yes.
Operator: Sponsored ADR Class A, [inaudible] Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, Sponsored ADR Class A, What is Peace? What is Peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace? What is peace?
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Speaker Change #273: Yeah.
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Speaker Change #273: Yes.
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