Thank you for standing by, and welcome to the iQIYI's First Quarter 2025 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. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's first quarter 2025 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; Moving on Mr. Chang Hu, Senior Vice President of Brand Advertising 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 U.S. 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. Potential risks 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. We delivered a solid first quarter, gaining sequential growth in both total revenues and progress. This was built on a strong rebound in our long-term premium content and strategic investments in vertical format macro dramas. iQIYI expected cementing its position as a go-to platform for users, making seamless plans of long-form and short-form entertainment, creating exciting opportunities for future commercialization. This will strengthen our confidence and commitment to drive even deeper upgrades across our business model, and the content ecosystem in response to evolving market and user demand. For the core long-form video content, we are committed to delivering, engaging and soft after tariff as we left in our strong IR of top-tier drama, notably, drifting away from our flagship man-on-site brand surpassed the 10,000 IT popularity index score, where the Hunters drama will do 1 more slide mistakes, right? Financial both achieved the score of over 9,600. Looking ahead, we are dedicated to focusing on premium content with a strong commercial value, while also upholding excellence. Additionally, we will further enhance our certain production mechanism to deliver stronger, faster test and more additive storytelling that rebounded strongly with audiences. Through the user-centric approach, we are confident in our ability to and reach our full creative potential and foster our work tools, content ecosystem for micro dramas. We made notable programs on HG Life micro dramas, now second in terms of daily time depend and first in the number of daily unique visitors. This shows the growing appeal in capital rating orders, reinforcing our confidence in further unlocking their full potential. Moving forward, we are committed to expanding our macro drama portfolio, placing a strong appetite on premium micro dramas by enhancing original production and acquisition capabilities. At the same time,…

Thank you, Mr. Gong, and hello, everyone. Now let's take a look at the Q1 key numbers. In the first quarter, total revenues were RMB7.2 billion, up 9% sequentially. Membership services revenue reached RMB4.4 billion, up 7% sequentially. The increase was primarily driven by the strong performance of the long-form dramas. From advertising revenue decreased by 7% sequentially to RMB4.3 billion, primarily due to macro headwinds and seasonality. Accounting distribution revenue reached RMB28.7 million, up 55% sequentially, driven by more common titles distributed during the quarter. Other revenues increased by 24% sequentially to RMB830.9 million, primarily driven by the growth of certain business lines. Moving on to costs and expenses. Content cost was RMB3.8 billion, up 10% sequentially, driven by higher number of premium dramas launched during the quarter. Total operating expenses were RMB1.4 billion, up 8% sequentially, primarily driven by higher marketing spending. Turning to profit and cash flow. Our non-GAAP operating income was RMB458.5 million, up 13% on a sequential basis. The non-GAAP operating margin was 6%. The net cash provided by operating activities totaled RMB339 million, positive for 12 contractual quarters. As of the end of the first quarter, we had cash, cash equivalents, restricted cash, short-term investments and long-term restricted cash included in the prepayments and other assets, the total of RMB5.7 billion. In addition, the company had a loan of USD522.5 million to PAG, recorded amounts due from other parties. When reviewing our financial performance, the result of our efforts to optimize the capital structure are very clear. Over the past 2 years, we have onetime the scope through a serious initiative to lower our debt levels, optimize repayment schedules and make our debt restructure more manageable. Notably, the outstanding principal balance of our convertible bond has sharply declined, dropping from RMB2.9 billion at the end of first quarter back in 2023 to RMB1.17 billion this year. And of the current outstanding balance, the rate RMB522.5 million, as we mentioned earlier, were resolved through equipment loan arrangements with the. As we continue to optimize that debt structure, we have also achieved a substantial reduction in net interest expense, which has declined from RMB223 million to RMB155 million in the first quarter of this year decreased by over 30% year-over-year. For detailed financial performance and data, please refer to our press release on our IR website. Now we will open the floor for Q&A.

[Operator Instructions]. Your first question is from Xueqing Zhang from CICC. Please go ahead.

[Foreign Language]. Thanks for taking my question. My question about micro dramas. Gong mentioned some operational updates on micro dramas in your prepared remarks. Could management elaborate a little more on the latest developments of micro dramas and outline the key focus points for its future development? Thank you.

[Foreign Language].

[Interpreted] our CEO, Mr. Gong is answering this question. First of all, the users have gradually developed the habit of watching micro dramas on IT. We now have over 15,000 micro dramas titles with free content and a member-exclusive content about tax. Our mobile apps have also developed very tenanted positioning. The main IT app focuses on members who are for free model, primarily using paid micro dramas, while the IT light app primarily focuses on free micro dramas supported by advertising. [Foreign Language]. This development, as I mentioned earlier, have chosen data growth in both user time spend and user base for micrograms, while significantly enhancing the user stickiness. So, when we compare the April to December of last year, the number of heavy micro dramas users are IT, which are users will spend 80% of their time watching micro drama has increased about 3 times. [Foreign Language]. We just step into the micro drama field for not so long and then just started our original production and seeing some impressive proper for example, a recently released original micro drama called China capable sporting, ranks first in IT's micro drama busing time for several competitive consecutive weeks and also successfully entered the EDX top 10 list, which is well renowned list in the micro drama field. So, amount the acquired top-tier titles, for example, like My Sweet Home a and Please Come into My Heart to worldwide each achieved revenue-sharing milestone of over RMB 1 million within a week, and this progress reflecting the high user recognition and appreciation of high-property in micro dramas. [Foreign Language]. I would like to share with everyone. For example, the content cost for each micro drama on average cost less than RMB1 million. And the top-tier titles usually will be less than RMB2 million per title. [Foreign Language]. So as such, within the week, the revenue share dollar RMB reached 1 million is actually a very sizable and on income. [Foreign Language]. Going forward, there are two areas we're focusing on. First is to have more and better-quality micro dramas, and second, to invest more on user acquisition. User form. [Foreign Language]. In addition, we'll try more ways to monetize the growing traffic, for example, advertising and also commercial.

Thank you. The next question is from Vicky Wei from Citi. Please go ahead.

[Foreign Language]. Thanks management for taking my question. Will management share some color about the change of loan video content strategy and the rationale behind it? Thank you.

Thank you. I will invite our Chief Content Officer, Mr. Xiaohui, to answer this question.

[Foreign Language]. First of all, long-form video are the cornerstone of IT's content ecosystem and our commitment to this remains unwavering. [Foreign Language]. Dramas are at the core of long-form videos. So, to better cater to involving user preferences, our future drama strategy will focus on two key areas. First of all, releasing high-quality shorter episode premium dramas and second, producing more high-quality short dramas with each episode lasting 5 minutes to 20 minutes. [Foreign Language]. Going forward, the total number of drama titles will increase, accompanied by enhanced content quality and greater diversity. This approach will not only improve the flexibility and stability of content settling, but will also reduce reliance on individual titles and effectively mitigate risk.

Thank you. The next question is from Maggie Ye from CLSA. Please go ahead.

[Foreign Language]. Would just please share more details on the latest of our overseas business such as membership and content distribution as well? From a financial perspective, what is the current situation of the overseas business in terms of revenue and profit contribution? And how should we expect from -- what shall we expect from overseas in the next 1 years to 3 years?

[Foreign Language]. We started our overseas business in the second half of 2019. And after that, we experienced 3 years of COVID. So, there were some difficulties in terms of getting head count and also trouble them between Mainland China and overseas. So, the development were actually quite slower than expectation. But after COVID, in the recent 2 years, the business has been going through a very rapid development phase. But however, we do have some restrictions in terms of the financial resources, so there is some limitations to the development. [Foreign Language]. In addition to what I mentioned in the opening remarks that we experienced very rapid growth in terms of the annual revenue growth and also subscriber account, et cetera. So, there are some very important progress we made very importantly that we kind of figure out the right content mix for each region, overseas. And also, what can we do from the content mix to drive user growth and also to drive our revenue performance. [Foreign Language]. In addition to that, we also take out how we can really operate in each region, for example, how we can promote our content to acquire a better user growth and also in terms of the user growth, how we can improve that as well. [Foreign Language]. In terms of the content mix for our overseas business, the Chinese content actually accounts for about half of the content and the other half are a company. [Foreign Language]. Based on the data that we collected, the Chinese video content actually devalued that are increasing in the global, which is very beneficial to our overuse business growth. [Foreign Language]. Right now, currently, the revenue contribution from the overseas market is still at a relatively low percentage, but it also depends on the future investment into the overseas business, limited to, for example, the scale of our financial support and also the financing source. So, these are the areas where we look out for the overseas business.

[Foreign Language]. As the CFO just added to our CEO's comments. So, we really took from the past few years are really valuable revenue growth, as well as the content mix as well as the operating takeaways from each market, and these are the key takeaways in the past few years. Of course, these are under a very disciplined investment cycle that we did over the past few years as well. And from the management accounting perspective, the overseas business are profitable in the past couple of years. And in the future going forward, of course, maintaining our profitability it's important. However, it doesn't have to be a meaningful amount. What we want is to invest, take that profit and invest into the business. Hopefully, it will drive greater growth opportunities in the future.

There are no further questions at this time. I'll now hand back to management for closing remarks.

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

Thank you.

Thank you.

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