Thank you for standing by, and welcome to the iQIYI's Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Ms. Chang You, IR Director of the company. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. The company's results were released earlier today and available on the company's Investor Relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; and Mr. Jun Wang, our CFO; Mr. Xiaohui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business; and Mr. Xianghua Yang, Senior Vice President of Movies and Overseas Business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate 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 US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations and potential risk and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. IQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead.

Hello, everyone, and thank you for joining us today. Starting from late November, we have observed a significant rebound in business performance across multiple metrics, including net additions of subscribing members and user time spent, along with a reinforced leading position in the total drama will shape market share according to enlightened data. This was boosted by the robust comeback of our top-tier content. In just the three months, two of our highly popular drama's, We Are Criminal Police were Qin Chuan and DRIFTING AWAY, Piao Bai surpassed 10,000 in the IT popularity index, and for the solidifying IT's unrival leadership in the suspense genre. We also enhanced our supply of premium female-oriented content, which is also one of our key content categories with Moon [indiscernible] in exceeding 9,500 and last time in winter Dong Zhi Yi exceeding 9,000 in IT popularity index. Alongside, the strong return of our premium long-form video content, we have made breakthrough in the mini drama space. Now our portfolio carries a selection of over 10,000 titles. We have also revamped our products to improve user experiences. On top of that, we have upgraded our ad placement system to more effectively monetize the growing traffic of mini dramas. All these efforts have led to swift growth in our user base, and look forward to what the future holds. In addition to operational improvements, we are encouraged by the healthy recovery in consumer and settlement towards quality for videos as by historical high theatrical movie box office performance during the Chinese New Year. This track reinforced our confidence in the quality of long-form video content and we are optimistic for long-form video industry in the coming year. As we step into 2025, we aim to boost membership revenue by listing the quality and the share of…

Thank you, Mr. Gong, and hello, everyone. As Mr. Gong mentioned earlier, driven by the premium content, we have experienced a significant rebound in main operating performance in comparison to November 2024. Now let's take a look at Q4 key numbers. In Q4, the total revenues were RMB 6.6 billion, down 14% annually. Membership services revenue reached RMB 4.1 billion, down 15% annually, primarily due to a lighter content slate. However, as Mr. Gong just mentioned, premium content had a strong rebound from late November 2024 to now. For online advertising, revenue decreased by 13% year-over-year to RMB 1.4 billion. This was primarily due to the decrease in brand advertisement business, partially offset by the growth in performance ad business. Content distribution revenue reached RMB 406.6 million, down 20% annually, primarily due to a lower revenue from distribution of theatrical movies invested by iQIYI and a decrease in barter transactions, partially offset by increased revenue from cash transaction. Other revenues decreased by 10% annually to RMB 670.2 million. Moving on to cost and expenses. Content costs was RMB 3.4 billion, down 9% annually, primarily driven by our improvement in the content strategy as well as a lighter content slate in the quarter. Total operating expenses were RMB 1.3 billion, down 5% annually, primarily due to disciplined marketing spending. Turning to profits and cash flows. Non-GAAP operating income was RMB 405.9 million and its corresponding margin was 6%. Net cash provided by operating activities totaled RMB 519 million, positive for 11 consecutive quarters. As of the end of Q4, we had cash, cash equivalents, short-term investments and long-term restricted cash included in the prepayments and other assets around RMB 4.5 billion. For detailed financial data, please refer to our press release on our IR website. Now I will open the floor for Q&A.

Thank you. [Operator Instructions] Your first question comes from Xueqing Zhang with CICC. Please go ahead.

[Foreign Language] Thanks management for taking my question. We have noticed that iQIYI had launched many drama series since the beginning of this year. Looking ahead to 2025, what's your content pipeline about the quality of these titles? How many of them have the potential to become blockbusters? Thank you.

Thank you, Xueqing. We will invite our Chief Content Officer, Mr. Xiaohui Wang to answer this question. Go ahead.

[Foreign Language] We had a good start of the year for 2025 with the new season of ride on theater drama testing away launched in January, reaching iQIYI popularity index of over 10,000 in just six days. It is a milestone for us, because it is not only the first drama of the year to break the 10,000 in popularity, but it also is iQIYI's ride on theaters, and our first drama with limited number of episodes to achieve this milestone. Our main goal for this year 2025 is to intend both the quality and the share of our premium top long-form video content, also ensuring a greater stability and continued the strong start to the year. In most -- the most critical areas such as the drama genre, the number of premium top-tier dramas claims for release this year were significantly increased compared to last year. We will also focus on creating a tighter narrative pace that better align with the current social sentiment and users embedded changes. And then for suspense and drama and female-oriented content that our two main programming pillars, for this year, we will continue to maintain our absolute leading advantage in the sustained and crime genre and for this year, the Light on Theater has several works planned in addition to the already launched Drifting Away, there will be more releases, such as Breaking the Shadows, Justifiable Defense, A Life for a Life, Low IQ Crime, Dead End and Beneath the Undertow.

[Foreign Language]

In terms of the female-oriented content and market season title, we will further strengthen our offering and continuous programming with launch titles such as The Best Thing, Love in Pavilion, Fox Spirit Matchmaker: Sword and Beloved, A Dream Within a Dream, Build and Strange Tales of Tang Dynasty Season 3.

[Foreign Language]

Additionally, we will continue to maintain our investment in the realm of realistic genre. The pipeline includes What a Wonderful, How Things Born [ph], Eight Thousand Miles of Cloud and Moon, Tao Jin, Lonely Old Town [ph].

[Foreign Language]

Thank you.

Your next question comes from Lei Zhang with Bank of America Securities. Please go ahead.

[Foreign Language] Thanks management for taking my question. I want to know further updates on your short mini drama area? And do we have any strategic plan on mini drama in 2025?

[Foreign Language]

Our CEO is actually taking this question. He, first of all, would like to clear the definition of mini dramas that we've been talking about in his opening remarks. So for mini dramas, we identified them after vertical format, one to three minutes long. And then this is the main area that we're focusing on. For the horizontal mini dramas, which is quite similar to the long form video content that we have the edge on, so this is something different. So we decided to invest in the mini drama business about one quarter ago. The reason there are two aspects. First of all, right now, because the users are more to the fast pace content and they have a shorter attention spend, and then they also enjoy content in a more fragmented time look. So that's the first reason. And also from the industry perspective and a market perspective, for 2024, the market size for mini dramas, although there are different data that estimated by third parties, but we believe it should be greater than the Chinese office for 2024. For 2025, we are ramping some rebound of the office during the Chinese New Year. However, that we still think the mini drama market should still over exceed the Chinese box office in 2025. Our mini drama business actually have successfully completed [indiscernible] that we set for the first phase, achieving significant results in three areas for user product transformation, content portfolio and also building a [indiscernible] system development. Currently, actually, our mini drama content library has over 10,000 titles, and it has reached a – that's comparable to the leading mini drama platforms in the industry. There are two reasons about how we achieved such a significant improvement in a very short amount of time. First of all,…

Thank you.

Your next question comes from Lincoln Kong with Goldman Sachs. Please go ahead.

[Foreign Language] So, thank you management for taking my questions. My question is about the membership business. So regarding the recent content performance and how is the impact from those measures like Semi-Card or Star Diamond member extra content gives on those -- the impact on the membership business, as well as the strategy for full year 2025? Thank you.

Thank you, Lincoln, and I will invite Mr. Youqiao Duan, the Senior Vice President of Membership Business, who will take this question. Go ahead.

[Foreign Language] Since late November 2024, the continuous programming of premium titles dramas have actually driven the membership business to a turning point, resulting in a significant increase in subscribing members. We actually rolled out several key initiatives for 2024. We have reclassified our membership offering into two primary categories, one for individuals and for families. For individuals, there are actually two plans with no large-string access. And for families, there's three plans with large-string access. The membership rights and benefits are divided into three tiers; basic, standard and premium. The new reclassified membership system actually allows users seeking either high cost effectiveness or premium benefits experience to find products that suite their needs. Second, we strengthened the crackdown on password sharing, while introducing the actual account service as an authorized sharing solution, effectively expanding the membership base and improving member retention. The third point that we did was we enhanced the benefits for members. The newly added benefit for S Diamond members, the limited complementary early access to the Express Packages that provide early access to finales of a premium content, increased value and perception of premium membership. After the launch of the new benefits, the number of S Diamond members have largely increased with most of the new members attracted by the Express Package benefits and the existing S Diamond members have also been noticeably more active on the platform. [Foreign Language] We have a few areas that we're focusing on for 2025. First, we'll continuously enhance the stability and continuity of our top care premium content programming and strengthening the prerelease promotion for upcoming content, establish mindshare among users to improve their loyalty to iQIYI. [Foreign Language] Second, we'll build -- focusing on building a mass-market membership service to increase membership sales and revenue, while focusing on attracting new members will prioritize improving member retention and user engagement and also will increase the revenue scale and revenue share from external channels. [Foreign Language] Third, we will systematically continue to optimize the membership product and operations including further refining the membership product system and pricing strategy, also membership benefits and for improving the member user experience and also crafting a membership model tailored for mini-dramas. [Foreign Language] The fourth, we will strengthen the quality of membership services and iQIYI brand, enhance the perception of membership benefits and privileges and also improve the overall net promoter score for iQIYI members. Thank you.

Your next question comes from Maggie Ye with CLSA. Please go ahead.

[Foreign Language] Just now we heard about some encouraging performance in overseas markets in terms of both membership revenue and subscribing members. Could you please provide an update on the core strategy for our overseas business in 2025? Thank you.

Thank you, Maggie. We'll invite Mr. Xianghua Yang, the Senior Vice President of our Overseas Business to take those questions. Go ahead.

[Foreign Language]

The overall strategy for our business outside of Mainland China in 2025 is to pursue rapid revenue growth while maintaining profitability.

[Foreign Language]

In the past few years, we have focused on several markets, including Southeast Asia, Hong Kong, Macau and North America and have achieved satisfactory development. And for 2025, we have set different strategies for different markets.

[Foreign Language]

For the markets we entered since the early days, such as Thailand, Malaysia and North America, our goal is to achieve both profit and revenue growth.

[Foreign Language]

For the new explored markets such as Indonesia and South Korea, the focus is on revenue growth for 2025.

[Foreign Language]

At the same time, we're also plenty and preparing for the long-term growth of our business, I hope to break into new markets in 2025, such as the Middle East, the Spanish-speaking Latin American region and also Brazil.

[Foreign Language]

For content wise, we will strengthen the programming dramas in 2025, and the contemplate is actually more suitable for the preferences of overseas viewers in 2025 compared to the content we launched last year.

[Foreign Language]

In terms of local drama, local content, after years of efforts, we have actually simulated some experience that we'll continue to invest in markets such as Thailand and Malaysia, which will serve an important support for our user growth in the future.

[Foreign Language]

For content promotion, advertising placement and also the collaboration with telecom carriers and other channels, our core methods of at least the content value, so in 2025, we will increase our investment in these areas and in more markets.

[Foreign Language]

So overall speaking for 2024 for overseas business, in terms of the membership growth and also revenue also maintained a relatively high-speed growth. And since December 2024, with the ongoing month of high-quality content, the overall growth rate of our business has been even faster than 2024, so which gives us more confidence in the revenue growth for 2025. Thank you.

That concludes our question-and-answer session. I'll now hand back to management for closing remarks.

Thank you, everyone, for participating in the call today. If you have any questions, don't hesitate to contact us. Thank you, and see you next quarter.

That does conclude our conference for today. Thank you for participating. You may now disconnect.