iQIYI (IQ.US) announces its best annual performance in history! The total revenue in 2023 reached 31.9 billion yuan, with all core financial indicators hitting record highs.

February 28, iQiyi (IQ.US) released its unaudited financial report for the fourth quarter and full year ending December 31, 2023. The total revenue for the year was 31.9 billion yuan, a 10% year-on-year increase. The annual operating profit based on non-GAAP financial indicators was 3.6 billion yuan, a 68% year-on-year increase, achieving operational profitability at scale for two consecutive years. Both annual revenue and non-GAAP operating profit saw double-digit year-on-year growth, with profit growth outpacing revenue growth. "After achieving a landmark turnaround in performance in 2022, the company continued its strong momentum and achieved its best annual performance in 2023, with total revenue, operating profit, net profit, and cash flow reaching historical highs. The monthly average revenue per member (ARM) has seen continuous quarter-over-quarter growth for five quarters, reflecting the popularity of our high-quality content and the continuous improvement of our member services. I am pleased to witness the resilience of the company's business and its outstanding operational capabilities," said Gong Yu, founder and CEO of iQiyi, during the earnings call on the same day. According to Yunhe Data, iQiyi has maintained the industry's top market share in the drama category for three consecutive years. In terms of online movies, iQiyi ranked first with a 47% market share for the whole year. User surveys show that iQiyi has become synonymous with high-quality film and television content. iQiyi leads the industry in terms of consumer engagement, content playback market share performance, content production, and technological innovation. "As an industry leader, we focus on the future, pay attention to long-term strategies, and adhere to a long-term approach. By continuously innovating in technology and content creation, and improving operational management capabilities, we systematically increase the return on content investment," Gong Yu said, emphasizing the importance of continuously improving content and service quality to attract a wider range of users, achieve long-term member retention, and enhance monetization capabilities to create more value for users, partners, and investors. Annual membership and advertising revenues both saw double-digit year-on-year growth, achieving performance breakthroughs in both domestic and international markets. Building on the growth momentum since 2022, iQiyi saw double-digit year-on-year growth in both membership services and online advertising revenues in 2023, with several core financial indicators reaching historical highs. iQiyi International achieved operational profitability for the first time in a full year. As a core business, iQiyi's membership business aims to drive long-term sustainable growth in member revenue. In 2023, iQiyi's membership services revenue reached 20.3 billion yuan, a 15% year-on-year increase. Revenue from membership services in the fourth quarter was 4.8 billion yuan. ARM and member lifetime value are currently the focus, and are core drivers of long-term economic value for members. In the fourth quarter, ARM increased by 13% year-on-year, reaching 15.98 yuan, a historical high and the fifth consecutive quarter of quarter-on-quarter growth for this indicator. In the fourth quarter, the average daily subscription member number of iQiyi was 100.3 million, with a total of 101.1 million subscription members as of December 31, 2023. In the fourth quarter, the percentage of annual card users on iQiyi increased significantly compared to the same period last year. The perceived value and willingness to pay for iQiyi membership have gradually increased. Thanks to the diverse high-quality content, iQiyi's innovative membership value-added services such as bonus episodes, offline events, merchandise benefits, and exclusive benefits for premium members are popular. More basic gold members are upgraded to premium platinum or diamond members. In the fourth quarter, iQiyi launched six popular drama series with bonus episodes, attracting nearly 50% more participants than the previous quarter. Among these, the number of participants in exchanging bonus episodes for membership points increased by 40% sequentially, and the number of people buying gift packs increased by over 250% sequentially. In terms of offline activities, in events such as the "Ning'an Dream Thank You Gift" and "iQiyi Scream Night," iQiyi provided ticket lottery privileges to V7 members and users who recharged stars for the event, receiving enthusiastic responses. In terms of visual and auditory experience, the number of TV models supporting the Fringe Qiyi MAX certification has increased to 157, and the number of high-quality content has reached 19,000 episodes. Gong Yu stated that in 2024, iQiyi will further optimize membership products, content scheduling and operations, as well as membership loyalty programs, to enhance member stickiness and extend member lifecycles. High-quality content has also brought growth opportunities for other businesses, including online advertising. In 2023, iQiyi's online advertising revenue reached 6.2 billion yuan, a 17% year-on-year increase. Revenue in the fourth quarter was 1.7 billion yuan, a 6% year-on-year increase, with both brand advertising and performance advertising seeing growth. Top dramas like "Ning'an Dream," "One Thought of the Great Mountain," and "Unstoppable" were favored by advertisers, with content-targeted advertising revenue accounting for over 50% of brand advertising revenue. It is worth mentioning that in performance advertising, the use of AI-generated advertising materials improved quality and conversion performance, driving a year-on-year increase in performance advertising revenue. Content distribution and other revenues in 2023 were 2.5 billion yuan and 2.9 billion yuan, respectively, with content distribution revenue in the fourth quarter reaching 506 million yuan and other revenue reaching 741 million yuan. In overseas markets, the international version saw double-digit year-on-year growth in membership and advertising service revenue in the fourth quarter. iQiyi's CFO Wang Jun said, "While achieving satisfactory revenue and profit performance, the company's financial health has significantly improved, with operating cash flow and free cash flow exceeding 3.3 billion yuan in 2023. We are steadily advancing on the correct path of creating long-term value for investors and partners." With high-quality content that is both popular and marketable, original content has become the main contributor to revenue for iQiyi. Behind the strong performance in 2023 is iQiyi's consistent strong performance in content throughout the year. Leading in the core content race, iQiyi has solidified its brand recognition as a diversified producer of high-quality content. According to Yunhe Data, iQiyi holds seven of the top ten spots in the effective playback rankings of newly released drama series for the whole year. Just in the fourth quarter, two drama series, "Ning'an Dream" and "One Thought of the Great Mountain," had content heat values exceeding 10,000, with "Ning'an Dream" being the first self-produced drama by iQiyi to surpass 10,000 in content heat value. The first drama series "Three Major Squads" after the return of the Mist Theater had a peak content heat value of over 9,800, setting a record for the heat level of the Mist Theater and 24-episode short drama projects; the influence of high-quality content has also expanded to overseas markets, with "Ning'an Dream" and "One Thought of the Great Mountain" topping the charts in multiple regions. Continuously delivering high-quality self-produced content is the key to iQiyi's efforts to maintainThe main reason for the leading position in the market is that in 2023, iQIYI's annual new releases focused on original series accounted for more than 65% of the total, reaching a record high in the company's history. This not only ensures the platform has stable and exclusive content supply, but also optimizes the content cost structure. In the past three years, the overall content cost ratio of series has improved year by year. In 2023, the content cost ratio of iQIYI's series decreased by 12 percentage points compared to 2022, directly driving profit growth. High-quality original content has become the main contributor to iQIYI's annual revenue. In terms of revenue from key series during the peak broadcasting period, the contribution of original series to revenue exceeds 80%, and has remained above 50% for seven consecutive quarters.Original content that is both acclaimed and popular cannot be achieved without iQIYI's open and innovative content and personnel management philosophy, continuously improving content production capabilities, and constantly improving operational mechanisms, which have become the moat of iQIYI's competitiveness. The content creation team widely uses the "iQIYI Film and Television Production Management System" to efficiently screen high-quality projects, enhance resource allocation and project management efficiency, and maximize input-output efficiency while outputting more innovative content. In 2023, the number of projects with a heat index of over 9000 on iQIYI increased by 71% compared to 2021. Currently, iQIYI's original strategy covers multiple tracks including dramas, movies, variety shows, children's, and animations. In 2023, there were 4 iQIYI original movies with box office revenues exceeding one billion yuan. The number of original animations launched in a year doubled compared to 2022, with revenue contribution increasing by over 90% year-on-year. The number of original IPs for children's content reached 11, of which 8 have already been made into seasonal shows. In the future, iQIYI's goal remains to stably and continuously provide users with high-quality and diversified content. While consolidating its advantage in the drama genre, iQIYI will continue to seek breakthroughs in other content areas. By focusing on top-tier content strategy, strengthening supply and quality, and improving revenue conversion. Outlook for 2024: Continue high-quality growth and strive to expand revenue and profits Entering 2024, iQIYI kicked off the year with a series of high-quality content releases such as "Going South, Coming North" and "Growing Vegetables 2", among which the top-tier content "Going South, Coming North" garnered excellent user feedback with a high heat index of 9959. Upcoming content includes series such as "Fox Spirit Matchmaker", "Wu Geng Ji: The Origin of the Flame", "Memorandum of Yan Xin", "Moonlight", and "Tang Dynasty Mysteries 2"; the Fog Theater will kick off a new chapter in 2024, airing series like "The Untold", "Above the Dark Clouds", and "The Shadowless Boy". Viewers can also anticipate works such as "City Within City", "Ball Lightning" adapted from Liu Cixin's sci-fi novel, and "Harbin 1944". On the film front, crime suspense film adapted from Keigo Higashino's novel "The Wandering Blade", and many other iQIYI-produced films will be released in theaters. In the variety show sector, the successful next-generation variety show will launch a new season, and in the children's animation category, new content will continue to be developed alongside existing IP content. Currently, more technological innovations are being applied to the shooting and production of top-tier original content. The key series "Dreams of the Yuan Dynasty" has accumulated over 3000 minutes of virtual shooting materials. More and more original content can be "cloud-produced" during the shooting phase, allowing production teams to remotely control shooting progress and real-time editing, greatly enhancing production and production efficiency. Over the past year, iQIYI has applied generative AI in content creation, development, and promotion. Posters generated by AI have shown higher click-through rates and viewing times than those created manually. AI's minute-level understanding of video content can distill detailed plot summaries at the album level, covering over 3,000 series. Looking ahead to 2024, Gong Yu stated that iQIYI will continue to adhere to a long-term approach, focus on high-quality growth, further increase revenue and profits. Through mature content production mechanisms and outstanding operational capabilities, the company will help achieve further breakthroughs, consolidate and expand its industry advantages in dramas, movies, and other fields, enhance competitiveness in vertical tracks such as animation and children's content; by utilizing the latest technology more deeply, improve content production and operational efficiency, enhance user experience; while continuously exploring new markets and opportunities, inject lasting momentum into the company's long-term development, and create a better future for all partners.