PR Newswire | Nov 17, 2021 03:30AM EST

11/17 02:30 CST

iQIYI Announces Third Quarter 2021 Financial Results BEIJING, Nov. 17, 2021

BEIJING, Nov. 17, 2021 /PRNewswire/ -- iQIYI, Inc. (Nasdaq: IQ) ("iQIYI" or the "Company"), an innovative market-leading online entertainment service in China, today announced its unaudited financial results for the third quarter ended September 30, 2021.

Third Quarter 2021 Highlights

* Total revenues were RMB7.6 billion (US$1.2 billion1), representing a 6% increase from the same period in 2020. * Operating loss was RMB1.4 billion (US$212.3 million) and operating loss margin was 18%, compared to operating loss of RMB1.2 billion and operating loss margin of 17% in the same period in 2020. * Net loss attributable to iQIYI was RMB1.7 billion (US$268.4 million), compared to net loss attributable to iQIYI of RMB1.2 billion in the same period in 2020. Diluted net loss attributable to iQIYI per ADS was RMB2.17 (US$0.34), compared to diluted net loss attributable to iQIYI per ADS of RMB1.61 in the same period of 2020. * The number of total subscribing members was 103.6 million as of September 30, 2021, or 103.0 million excluding individuals with trial memberships.

"During the third quarter, we experienced significant uncertainty in terms of content scheduling, which resulted in softer than expected top-line performance," commented Mr. Yu Gong, Founder, Director, and Chief Executive Officer of iQIYI. "We expect the uncertainty to largely remain, so we are proactively adapting ourselves to the new market environment. We are determined to continue improving the efficiency of our operations as we execute our diversified content strategy. Meanwhile, we are seeing a promising growth trajectory for our new initiatives, such as iQIYI Lite and our overseas business. We will continue to take the lead in rolling out new intelligent production capabilities and driving the industrialization of the long-form video production process, which will help to further optimize our operating efficiency. The experiences we have accumulated from the past decade and the recent temporary challenges will enable us to be more resilient and adaptive to market changes in the long run."

"Our membership services revenue increased by 8% year-over-year as we experienced subscriber volatility during the third quarter," commented Mr. Xiaodong Wang, Chief Financial Officer of iQIYI. "This was driven by our refined membership strategy and innovative operational initiatives that focused on elevating the user experience. Furthermore, we will continue to improve the efficiency of our operations, and remain cautious with our investments in content. In the long term, we will continue to grow our portfolio with diversified content and develop innovative new products and services with better ROI."

Footnotes:

[1] Unless otherwise noted, all translations from RMB to U.S. dollars are madeat a rate of RMB6.4434 to US$1.00, the exchange rate in effect as of September30, 2021 as set forth in the H.10 statistical release of the Board of Governorsof the Federal Reserve System. Translations are provided solely for theconvenience of the reader.

Third Quarter 2021 Financial Results

Total revenues reached RMB7.6 billion (US$1.2 billion), representing a 6% increase from the same period in 2020.

Membership services revenue was RMB4.3 billion (US$665.5 million), representing an 8% increase from the same period in 2020. This was mainly attributable to our refined membership strategy that focused on content diversification and user experience, and improved monetization capabilities.

Online advertising services revenue was RMB1.7 billion (US$257.7 million), representing a 10% decrease from the same period in 2020, primarily due to less premium content launched during the quarter and challenging macroeconomic environment in China.

Content distribution revenue was RMB627.1 million (US$97.3 million), representing a 60% increase from the same period in 2020. The increase was primarily driven by more content titles distributed to other platforms during the quarter.

Other revenues were RMB1.0 billion (US$157.3 million), representing a 3% increase from the same period in 2020.

Cost of revenues was RMB7.0 billion (US$1.1 billion), representing a 10% increase from the same period in 2020. The increase in cost of revenues was primarily due to higher content costs during the quarter. Content costs as a component of cost of revenues were RMB5.3 billion (US$824.5 million), representing a 13% increase from the same period in 2020, primarily due to more investment in original content.

Selling, general and administrative expenses were RMB1.2 billion (US$193.4 million), representing a 9% decrease from the same period in 2020.

Research and development expenses were RMB683.0 million (US$106.0 million), representing a 2% increase from the same period in 2020.

Operating loss was RMB1.4 billion (US$212.3 million), compared to operating loss of RMB1.2 billion in the same period in 2020. Operating loss margin was 18%, compared to operating loss margin of 17% in the same period in 2020.

Total other expense was RMB330.5 million (US$51.3 million), compared to total other income of RMB67.0 million during the same period of 2020. The year-over-year variance was mainly due to the fluctuation of exchange rate between Renminbi and the U.S. dollar.

Loss before income taxes was RMB1.7 billion (US$263.6 million), compared to loss before income taxes of RMB1.1 billion in the same period in 2020.

Income tax expense was RMB9.0 million (US$1.4 million), compared to income tax expense of RMB18.8 million in the same period in 2020.

Net loss attributable to iQIYI was RMB1.7 billion (US$268.4 million), compared to net loss attributable to iQIYI of RMB1.2 billion in the same period in 2020. Diluted net loss attributable to iQIYI per ADS was RMB2.17(US$0.34) for the third quarter of 2021, compared to diluted net loss attributable to iQIYI per ADS of RMB1.61 in the same period of 2020.

As of September 30, 2021, the Company had cash, cash equivalents, restricted cash and short-term investments of RMB11.0 billion (US$1.7 billion).

Financial Guidance

For the fourth quarter of 2021, iQIYI expects total net revenues to be between RMB7.08 billion (US$1.10 billion) and RMB7.53 billion (US$1.17 billion), representing a 5% decrease to 1% increase year over year. This forecast reflects iQIYI's current and preliminary view, which may be subject to change.

Conference Call Information

iQIYI's management will hold an earnings conference call at 6:30 AM on November 17, 2021, U.S. Eastern Time (7:30 PM on November 17, 2021, Beijing Time).

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

Participant Online Registration: http://apac.directeventreg.com/registration/event/6981067

It will automatically direct you to the registration page of "iQIYI Third Quarter 2021 Earnings Conference Call," where you may fill in your details for RSVP. If it requires you to enter a participant conference ID, please enter "6981067".

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

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

Dial-in numbers for the replay are as follows:

International Dial-in +61 2 8199 0299

Passcode: 6981067

A live and archived webcast of the conference call will be available at http://ir.iqiyi.com/.

About iQIYI, Inc.

iQIYI, Inc. is an innovative market-leading online entertainment service in China. Its corporate DNA combines creative talent with technology, fostering an environment for continuous innovation and the production of blockbuster content. iQIYI's platform features highly popular original content, as well as a comprehensive library of other professionally-produced content, professional user generated content and user-generated content. The Company distinguishes itself in the online entertainment industry by its leading technology platform powered by advanced AI, big data analytics and other core proprietary technologies. iQIYI attracts a massive user base with tremendous user engagement, and has developed a diversified monetization model including membership services, online advertising services, content distribution, online games, live broadcasting, IP licensing, talent agency, online literature, etc.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the Financial Guidance and quotations from management in this announcement, as well as iQIYI's strategic and operational plans, contain forward-looking statements. iQIYI may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about iQIYI's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: iQIYI's strategies; iQIYI's future business development, financial condition and results of operations; iQIYI's ability to retain and increase the number of users, members and advertising customers, and expand its service offerings; competition in the online entertainment industry; changes in iQIYI's revenues, costs or expenditures; Chinese governmental policies and regulations relating to the online entertainment industry, general economic and business conditions globally and in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in the Company's filings with the Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of the press release, and iQIYI undertakes no duty to update such information, except as required under applicable law.

Non-GAAP Financial Measures

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

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

Free cash flow represents net cash provided by operating activities less capital expenditures.

For more information, please contact:

Investor RelationsiQIYI, Inc.+ 86 10 8264 6585 ir@qiyi.com

iQIYI, INC.

Condensed Consolidated Statements of Loss

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

Three Months Ended

September 30, June 30, September 30,

2020 2021 2021

RMB RMB RMB

(Unaudited) (Unaudited) (Unaudited)

Revenues:

Membership services 3,975,514 3,992,956 4,288,215

Online advertising services 1,840,231 1,825,333 1,660,332

Content distribution 392,338 687,891 627,134

Others 979,609 1,102,094 1,013,423

Total revenues 7,187,692 7,608,274 7,589,104

Operating costs and expenses:

Cost of revenues (6,363,438) (6,868,868) (7,027,681)

Selling, general and administrative (1,363,935) (1,184,736) (1,246,334)

Research and development (669,933) (676,481) (683,047)

Total operating costs and expenses (8,397,306) (8,730,085) (8,957,062)

Operating loss (1,209,614) (1,121,811) (1,367,958)

Other expense

Interest income 34,049 29,231 35,979

Interest expenses (269,311) (343,124) (351,293)

Foreign exchange gain, net 265,572 35,404 4,462

Loss from equity method investments (24,749) (64,230) (17,345)

Others, net 61,461 116,280 (2,292)

Total other income/(expense), net 67,022 (226,439) (330,489)

Loss before income taxes (1,142,592) (1,348,250) (1,698,447)

Income tax expense (18,846) (30,418) (8,978)

Net loss (1,161,438) (1,378,668) (1,707,425)

Less: Net income attributable to noncontrolling interests 12,850 18,559 22,135

Net loss attributable to iQIYI, Inc. (1,174,288) (1,397,227) (1,729,560)

Accretion of redeemable noncontrolling interests (1,796) (4,343) (4,769)

Net loss attributable to ordinary shareholders (1,176,084) (1,401,570) (1,734,329)

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

Basic (0.23) (0.25) (0.31)

Diluted (0.23) (0.25) (0.31)

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

Basic (1.61) (1.75) (2.17)

Diluted (1.61) (1.75) (2.17)

Weighted average number of Class A and Class B ordinary shares used innet loss per share computation:

Basic 5,182,686,302 5,569,531,698 5,590,418,635

Diluted 5,182,686,302 5,569,531,698 5,590,418,635

iQIYI, INC.

Condensed Consolidated Balance Sheets

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

December 31, September 30,

2020 2021

RMB RMB

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents 10,915,282 7,296,165

Restricted cash 25,230 89,667

Short-term investments 3,358,174 3,661,719

Accounts receivable, net 3,344,433 2,882,733

Prepayments and other assets 3,515,855 3,715,664

Amounts due from related parties 96,111 274,498

Licensed copyrights, net 1,035,339 1,096,941

Total current assets 22,290,424 19,017,387

Non-current assets:

Fixed assets, net 1,393,467 1,315,895

Long-term investments 3,202,828 3,435,521

Deferred tax assets, net 51,347 84,917

Licensed copyrights, net 6,435,055 7,292,712

Intangible assets, net 627,198 563,199

Produced content, net 6,556,084 9,597,884

Prepayments and other assets 2,699,423 3,079,995

Operating lease assets 1,001,857 939,934

Goodwill 3,888,346 3,888,346

Amounts due from related parties 39,400 81,000

Total non-current assets 25,895,005 30,279,403

Total assets 48,185,429 49,296,790

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTSAND SHAREHOLDERS'EQUITY

Current liabilities:

Accounts and notes payable 7,561,532 9,128,010

Amounts due to related parties 1,778,783 2,418,734

Customer advances and deferred revenue 3,444,917 3,209,078

Convertible senior notes, current portion 4,752,061 4,807,593

Short-term loans 2,965,957 3,990,459

Long-term loans, current portion 909,034 656,861

Operating lease liabilities, current portion 201,307 179,077

Accrued expenses and other liabilities 3,240,987 3,557,070

Total current liabilities 24,854,578 27,946,882

Non-current liabilities:

Convertible senior notes 11,926,715 12,671,436

Deferred tax liabilities 4,588 4,231

Amounts due to related parties 977,407 793,990

Operating lease liabilities 767,676 633,265

Other non-current liabilities 210,167 204,268

Total non-current liabilities 13,886,553 14,307,190

Total liabilities 38,741,131 42,254,072

Redeemable noncontrolling interests 108,629 374,355

Shareholders' equity:

Class A ordinary shares 165 172

Class B ordinary shares 183 183

Additional paid-in capital 47,687,483 49,365,225

Accumulated deficit (40,973,853) (45,379,956)

Accumulated other comprehensive income 2,542,680 2,601,930

Non-controlling interests 79,011 80,809

Total shareholders' equity 9,335,669 6,668,363

Total liabilities, redeemable noncontrolling 48,185,429 49,296,790interests and shareholders' equity

iQIYI, INC.

Condensed Consolidated Statements of Cash Flows

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

Three Months Ended

September 30, June 30, September 30,

2020 2021 2021

RMB RMB RMB

(Unaudited) (Unaudited) (Unaudited)

Net cash used for operating activities (1,929,077) (1,425,910) (2,080,544)

Net cash provided by investing 342,847 58,140 1,885,081activities ^(1,2)

Net cash provided by financing 238,109 801,074 867,420activities

Effect of exchange rate changes oncash, cash equivalents (113,074) (92,498) (22,206) and restricted cash

Net (decrease)/increase in cash, cashequivalents and (1,461,195) (659,194) 649,751 restricted cash

Net cash used for operating activities (1,929,077) (1,425,910) (2,080,544)

Less: Capital expenditures ^(2) (89,938) (60,728) (116,320)

Free cash flow (2,019,015) (1,486,638) (2,196,864)

(1) Net cash provided by investing activities primarily consists of netcash flows from investing in debt securities, purchase of long-term investmentsand capital expenditures.

(2) Capital expenditures are incurred primarily in connection withleasehold improvements, computers and servers.

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SOURCE iQIYI, Inc.