Spencer Platt
iQIYI Inc. (NASDAQ: IQOne of China’s leading long-form video streaming platforms made annual profits for the first time last year, with a net profit of 1.9 billion yuan ($271 million) in 2023, according to its latest financial report, reversing a loss of $136.2 million the previous year. announcement Wednesday.
The company attributed the turnaround to a shift in priorities in 2022, when it begins to scale back non-core operations and further invest in premium original content. A commitment to original content in 2022 helped the company attract more paying customers, leading to improved financial performance.
“Building on the momentum of our iconic turnaround in 2022, 2023 is the best year in our company’s history,” said iQiyi founder and CEO Gong Tian. “Including total revenue, operating income, Key financial indicators, including net profit and cash flow, hit record highs.”
Driven by double-digit growth in paid membership and online advertising service revenue, the company’s full-year revenue grew 10% to 31.9 billion yuan.
Driven by the growth of average member revenue (ARM) and user base, annual membership service revenue increased by 15% to 20.3 billion yuan. Its ARM has achieved quarter-on-quarter growth for five consecutive quarters, hitting a record high of 15.98 yuan per month in the fourth quarter, an increase of 13% over the same period last year.
Last year, online advertising revenue grew 17% to 6.2 billion yuan, while content distribution revenue fell 4% to 2.5 billion yuan due to reduced barter transactions.
The company’s full-year non-GAAP operating profit was RMB 3.6 billion, an increase of 68% from the previous year. In addition to recording annual net profit for the first time, the company’s full-year cash flow reached 3.3 billion yuan, achieving positive cash flow for the first time.
Despite the upbeat annual figures, iQiyi’s fourth-quarter results, released simultaneously with its annual results, were mixed and raised concerns about future challenges it may face amid growing caution among Chinese consumers.
Revenue in the fourth quarter increased by 1% year-on-year to 7.7 billion yuan, and membership service revenue also increased by only 1%. The total number of average daily subscription members this quarter was 100.3 million, down from 111.6 million in the same period last year and down from 107.5 million in the previous quarter.
The company said it will provide more differentiated products for different user groups, optimize content arrangement and enhance loyalty programs to achieve higher user retention rates. It will focus on having more high-quality premium games, leading to higher monetization.
Shares of iQiyi were unchanged in Wednesday trading following the latest report. The stock has fallen 16.6% in the past three months and has lost nearly half its value over the past year.
Founded in 2010, iQiyi is a video website owned by Chinese Internet company Baidu. It was once called “China’s Netflix.” China’s video streaming market is highly competitive, with the company facing stiff competition from major rivals such as Alibaba’s Youku (BABA) and Tencent Video (OTCPK:TCEHY).
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Editor’s note: Summary highlights for this article were selected by Seeking Alpha editors.
