Thank you for joining us for iQIYI's First Quarter 2025 Earnings Conference Call. All participants are currently in listen-only mode. We will begin with a presentation, followed by a question-and-answer session. I will now turn the conference over to Ms. Chang You. Please proceed.

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; Mr. Jun Wang, our CFO; Mr. Xiaohui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business; Mr. Xianghua Yang, Senior Vice President of Movies and Overseas Business; and 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 expects to cement 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 sought-after content 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 one 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 production mechanism to deliver stronger, faster tests and more additive storytelling that rebounded strongly with audiences. Through the user-centric approach, we are confident in our ability to 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, we aim to effectively monetize our growing traffic on advertising and e-commerce. Beyond our content ecosystem, we are leveraging technical innovation to improve user experience. Standout even is the launch of our AI-powered feature. We transform our users' engagement with long-form videos with a simple swipe up or down on their mobile screen, allowing users to effortlessly skip between key highlights without missing an exciting moment, delivering a user-centric personalized experience tailored to their viewing habits. Highlight points are generated by AI based on user preferences and personalized behaviors of each user. As all investors are aware, the market is becoming increasingly unpredictable as it continues to evolve. However, in this volatile environment, the ability to create sustainable value is emerging as a realm and valuable asset. With this in mind, we are wrapping up our investments in strategic areas such as enriching our content ecosystem and enhancing the user experience. While this investment may lead to short-term costs, they are designed to deliver long-term benefits. Now let's move on to the details of our core business segments. Starting with long-form videos, which serves as the conviction of our content ecosystem. We maintained leadership in the core drama category as the current top part in terms of total viewership market share during the quarter, accounting for enlightened data. Our strong performance was highlighted by a breakthrough in our Jacobs specific cellular note as we have now template five in Signature brands, each future on content genres. In the suspense genre, our brand achieved a remarkable milestone with a release of drifting away, which is the first title to surpass that 10,000 popularity index score. It also generated the third heaviest single episode revenue in our history, just behind the mega hit, The Snow Cloud on Hongmiao and My Heroic Husband, Pei Xu. In the romance genre, the Laban Delta Mianne Zhutang brand made notable progress in this quarter, expanding our portfolio of content appealing to female audiences with the release of four captivating titles. Notably, our in-house produced fantasy drama, Modern Life, Mystic. Baiyue Fanxin garnered an impressive popularity index score of over 9,600. Our modern romance drama, The Best of Sea, anime was not only a success in the domestic market, but also the best-performing modern sea drama on our overseas platform drama and Chinese drama. From our masterpiece theater, we specialized in theater adaptation and realistic stories; they built their first title, North work. This summer, adapted from a modern literature award-winning novel, has further strengthened our reputation for popular drama. Lastly, our micro custom theater and the locked-on theater, Xiaozhou Yuchang, are focused on innovative drama series with fewer episodes and comedy respectively. Building on the success of past hits such as To the Wonder, Without a Time and The Great Novel Day, I want to point out that this brand is set to release an exciting lineup after this year. Turning to movies, we continue to dominate the category during the quarter with the highest viewership market share, according to investment. Premium content has a strong long-tail effect. For example, the success of Ninja 2 during Chinese New Year boosted viewership of the original Ninja, making it the most-watched movie on our platform this quarter. In addition, our original production, Bleed for past logo, achieved strong revenue and viewership, especially among male users drawn to action and crime channels. We already showed during the first quarter our flagship multi-phased IP become a final season fleet, made a strong comeback, sustaining strong traffic and positive word-of-mouth. Our brand-new IP, The Blooming Journey, excelled with a peak popularity index score of over 8,000, attracting audiences in lower-tier cities and among older audiences beyond commercial variety show viewers. In terms of animation, during the first quarter, we continue to improve our production capabilities. Key titles such as Super Cubed, Changli Huang, and Rofu: Season 2 generated positive user feedback during the quarter. Moving on to our content strategy and pipeline. In our core drama category, our focus is on creating a well-balanced content mix that aligns commercial success with artistic excellence. We are committed to three key genres: realistic, suspense, and female-focused drama. To cater to the pace of viewing habits, we are refining our content creation strategies. This includes reducing the episode cost for long-form dramas and increasing the number of high-quality short dramas, with each episode lasting between five to twenty minutes. This change will enhance the diversity of our offering, enrich the user experience, and drive deeper audience engagement. Our drama pipeline features an exceptional lineup of top-tier content. We have already released the Demand Hunter's rawness and lobbying daily, while retouching, which gathered widespread acclaim. Adding to the excitement, the highly anticipated film, A Dream within a Dream, Shuyuan Yima, will be released soon. In the first genre, our renowned Light on Celltrac brand recently debuted Breaking the Shadow and Life for Life Generation. We can also look forward to upcoming releases, including Justifiable Defense and Born with Luck, each adapted from the renowned novel Low IQ Crime. Additionally, the new science fiction suspense drama, What a Wonderful World, Zaiyun Jian, will be released shortly as well. Our lineup of realistic dramas includes highly anticipated titles, such as The Shrine, Slime, Shuanghu, and Gaoxing among others. For movies, we are increasing investments in original production, focusing on geological releases with strong box office potential. Notably, our original production, Momo, has already achieved a box office revenue of over RMB 140 million. We have six more titles scheduled for theatrical release throughout the rest of the year, including The Shadow's Edge. Additionally, we are boosting support for online movies with revenue-sharing models. Our diverse lineup includes eight original online movies, such as Ultimate Michelin, covering comedy and action. For licensed theatrical movies, we launched several hits, including Legends of the Call Door Pharaoh and Detective Chinatown 1900, both of which have successfully ranked during the Chinese New Year and are now performing well on our platform. So, in terms of variety shows, we will maintain our focus on producing top-quality programs while introducing exciting new content. This includes sequels to beloved classics like HAHAHAHAHA 5 and The Lack of China 2025, alongside fresh IPs such as SING! ASIA and the Reality Show. We also plan to launch a second season speaker this year. For animation, we are dedicated to increasing revenue contribution from original productions, especially high-quality Chinese animation. We also aim to broaden our collection of enduring successes and optimize our operations to maximize iQIYI value. Major titles set to be launched include animations over the Divine, and other key projects. Moreover, we are excited to announce that the highly acclaimed Japanese animation, One Piece, has resumed airing for a dedicated fan base. For children's content, we will concentrate on IP commercialization and develop a comprehensive IT ecosystem that spans the entire lifecycle, offering all age services tailored to parents and child audiences. Anticipated titles include Princess Doremi: Season 4 and Belle Squad: Season 4. Moving on to macro dramas, which have demonstrated their potential within our content ecosystem, harnessing this powerful momentum. We are poised to amplify our investments in micro drama content and strengthen user acquisition efforts. We have three key objectives, starting with assessing our user base and boosting business resilience by increasing micro dramas within our content ecosystem. Secondly, we view micro dramas as a catalyst for attracting new users and driving membership revenue growth, especially in lower-tier cities and among older audiences. Lastly, we are actively exploring monetization opportunities for our micro drama initiatives, such as advertising and e-commerce. We have successfully achieved the first objective by revamping our apps and rapidly expanding our micro drama portfolio to over 15,000 titles now available for free, with the other half exclusive to members. We've backed us positioned differently in terms of design and target audience. The main iQIYI app focuses primarily on long-form videos and mainly uses a subscription model, with micro dramas serving as a complementary value add. The iQIYI light app primarily focuses on free micro dramas and plans to monetize them soon through advertising and e-commerce. This meaningful progress has driven impressive growth in both daily viewing time and unique usage for micro dramas, with substantial increases of over 300% and 110% respectively when comparing the April to December periods. In the future, iQIYI Live will be represented as iQIYI micro dramas, and we are confident this transformation will tap into its full potential. We pioneered the concept of dedicated Chinese New Year place for micro dramas, releasing 28 premium titles, including hits like My Sweet Home and Please Come into My Heart. By consistently delivering premium content, we are reinforcing our position as the go-to platform for micro dramas. As the micro drama industry continues to evolve, the growing user demand for premium titles aligns perfectly with our core strengths in expert content, a trusted brand, and a loyal user base. We are uniquely positioned to capitalize on this trend. Coupled with our extensive resources, talent, teams, and advanced technologies, we deliver unique value to the micro drama industry. To that end, we are continuously enhancing our ability to produce original micro dramas, while exploring innovative genres to broaden our content offerings. These initiatives include notable projects such as the adaptation of around 100 classic Hong Kong movies and producing an extensive series of legal educational content, all to be developed as micro dramas. Additionally, we are integrating technologies like AI and workflow production to improve both efficiency and quality. Building on this initial piece, we are collaborating with partners to foster our thriving industry ecosystem. In March, we hosted the first Micro Drama Delivery Light ceremony, bringing together hundreds of main actors, creators, and industry professionals. The event sparked meaningful interest from attendees eager for future collaborations. As the first-ever ceremony dedicated to the micro drama industry, it not only enhanced our profile, but also reinforced our role as a key industry player. Moving on to membership services. Revenue regained growth momentum during the quarter, increasing 7% sequentially to RMB 4.4 billion, which was a healthy growth in subscriber base in Q1, supported by the strong performance of key titles such as DRIFTING AWAY, Moonlight, Mystic, and Not War. Average revenue per member remains healthy, thanks to our improved operating initiatives. Our strategy focuses on developing a membership business that caters to a broad audience, expands our subscriber base, delivers enhanced value, and ultimately accelerates revenue growth. As the core of our membership business, exceptional content remains vital; we strive to boost both member acquisition and retention by maintaining a consistent flow of premium long-form content and engaging macro dramas. We continue to strengthen our membership plans, delivering value to our members. We are refining product positions in collaboration to connect with our user base. The family-oriented premium ad diamond plan saw excellent growth after we introduced free unlimited express package benefits. Meanwhile, our ad-supported basic membership plan is designed to offer exceptional value at a lower price, which has historically attracted a high number of younger generations and users from low-tier cities, with many new members joining as first-time subscribers. We are focused on enhancing macro value through initiatives that boost loyalty and drive upgrades. Long-term members now enjoy greater discounts, while premium members receive free prize packages to drive conversions with expanded options like express packages. Our counterfeit express program rewards purchases of gift cards and bundled membership plans with added benefits. These steps make all membership services more attractive and valuable, supporting steady revenue growth and a strong membership community. Moving on to the advertising business. Advertising revenue in the first quarter decreased sequentially to RMB 1.3 billion, primarily due to macro pressure and typically lower season compared to Q4. For brand ads, our top-tier dramas and the brand-new shows remain a strong draw for advertisers, with content-driven ads contributing over half of revenue. Note that the sequel to our classic IP became a suite leading advertising sales, while the new IP, the growing journey, is more likely to generate widespread positive feedback. Looking ahead, brand ads show encouraging signs of recovery, with potential rebounds driven by premium content. We plan to drive sales by leveraging premium dramas and the genre's prolific sales pressure. For variety shows, we are focused on delivering high-impact projects and expanding opportunities for classic IP. Additionally, we aim to launch a mining-type media warranty show, micro dramas, and customized advertising products, providing innovative and tailored advertising solutions. On the performance ads side, we captured budgets from new high-potential customers in the internet services and education sectors, further diversifying our advertising service. Furthermore, incorporating API into advertising content creation has boosted ROI by over 20% compared to apps developed with our AI. Our future focus is on continuously enhancing our technologies and capabilities to drive revenue growth across internet services, e-commerce, gaming, and education. Moreover, we plan to seize growth opportunities in micro dramas and deepen the integration of AI to maximize monetization efficiency. Our commitment to enhancing ad efficiency is further demonstrated by the recent launch of our API-driven ad placement platform, integrating results from both our long-form and micro drama ecosystems. This platform empowers brands and performance users with sophisticated smart marketing solutions. Moving on to technology and products, we continue to advance video production through industrialization, enhancing cost efficiency and creativity. For example, we are scaling up the reuse of digital assets in major original dramas. Moreover, our interest in dubbing solutions is designed to convert the emotions of audiences in similar tier cities, which have already been applied to the English language for both long-form and macro dramas. On the user front, we are utilizing AI to define the unmet experiences in addition to newly developed measurement AI. They also use other AI products to enhance user engagement. Our AI chatbot, launched last April, features around one of our popular IPs and has engaged with over 100 million users. Recently, we introduced a more senior-friendly feature, tailored for older users, complementing an earlier call-designed feature for younger audiences. Moving on to our business performance in regions outside of mainland China, we maintained strong growth momentum in the first quarter. We saw revenues increasing by over 30% year-over-year, with the average daily number of subscribing members reaching a new high. Moreover, we are thrilled to see dramas gaining traction with our wider global audiences; according to Google Trend Data, worldwide search for our drama recently reached a five-year high, even surpassing the interest in Korean dramas. Our original productions have played a key role in this growing international appeal, with four of the top ten overseas dramas in the past six months coming from iQIYI, highlighting the best series on our international platform and establishing a new revenue benchmark for this genre. Additionally, our original Chinese animation has achieved the highest single-day revenue for Chinese animation within the first week of release. The influence of our premium content has driven advertising revenues up by 48% year-over-year, while our original dramas have garnered significant interest from brand advertisers. Looking ahead, we are focused on expanding our investment in original production to create high-quality content tailored to international audiences while integrating micro dramas into our global portfolio. We also aim to deepen collaboration with local partners and further enhance our brand presence across key markets. Last but not least, we have consistently pushed the rate of business innovation, as evidenced by our pursuit of new opportunities and exploration of untapped potential. We are leveraging digital technologies to think critically about integrating our IPs, extending their lifecycle, and unlocking greater commercial potential. We recently expanded our footprint with offline experience parks; the first to open in Hangzhou, with a second project underway, in addition to rapidly expanding VR immersive experiences. Popular IPs such as Lower Young are now available in over 50 stores across nearly 30 cities. We believe this immersive entertainment will deepen user engagement with our content and IPs. On the e-commerce front, the breadth of new content formats like micro dramas, combined with structured vertical content, has created significant opportunities to enhance our sales and user engagement. We have launched trial operations in e-commerce by leveraging our robust content portfolio, intensive artist resources, and a high-quality member base. We hold distinct advantages in this space, and this year, we are concentrating on building a foundation for content-driven e-commerce with the goal of driving accelerated growth in the year ahead. In summary, as the entertainment industry continues to evolve, we remain committed to investing in our content ecosystem and elevating the user experience. This strategic effort will enable us to accelerate our content flywheel, strengthen resilience, and lay a strong foundation for sustainable growth, delivering long-term value to our stakeholders. So, let me hand over to Jun for our financial performance.

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 RMB 7.2 billion, up 9% sequentially. Membership services revenue reached RMB 4.4 billion, up 7% sequentially. The increase was primarily driven by the strong performance of long-form dramas. Advertising revenue decreased by 7% sequentially to RMB 4.3 billion, primarily due to macro headwinds and seasonality. Accounting distribution revenue reached RMB 28.7 million, up 55% sequentially, driven by more common titles distributed during the quarter. Other revenues increased by 24% sequentially to RMB 830.9 million, primarily driven by the growth of certain business lines. Moving on to costs and expenses, content costs were RMB 3.8 billion, up 10% sequentially, driven by a higher number of premium dramas launched during the quarter. Total operating expenses were RMB 1.4 billion, up 8% sequentially, primarily driven by higher marketing spending. Turning to profit and cash flow, our non-GAAP operating income was RMB 458.5 million, up 13% on a sequential basis. The non-GAAP operating margin was 6%. The net cash provided by operating activities totaled RMB 339 million, positive for 12 consecutive 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 prepayments and other assets, totaling RMB 5.7 billion. In addition, the company had a loan of USD 522.5 million from PAG and recorded amounts due from other parties. When reviewing our financial performance, the results of our efforts to optimize the capital structure are very clear. Over the past two years, we have undertaken a series of initiatives to lower our debt levels, optimize repayment schedules, and make our debt restructuring more manageable. Notably, the outstanding principal balance of our convertible bond has sharply declined, dropping from RMB 2.9 billion at the end of the first quarter back in 2023 to RMB 1.17 billion this year. Of the current outstanding balance, the RMB 522.5 million, as we mentioned earlier, were resolved through equipment loan arrangements. As we continue to optimize our debt structure, we have achieved a substantial reduction in net interest expense, which has declined from RMB 223 million to RMB 155 million in the first quarter of this year, a decrease of 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.

Your first question is from Xueqing Zhang from CICC. Please go ahead.

Thanks for taking my question. I would like to know more about micro dramas. Gong provided some operational updates on micro dramas in the prepared remarks. Could management provide further details on the latest developments in micro dramas and highlight the key focus areas for its future development? Thank you.

Thanks for taking my question. My question is 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.

Our CEO, Mr. Gong, is responding to this question. Users have gradually developed the habit of watching micro dramas on our platform. We currently offer over 15,000 micro drama titles, with a mix of free content and member-exclusive content. Our mobile applications have been tailored to specific audiences. The main app caters to members who prefer free access, focusing on paid micro dramas, while the light app prioritizes free micro dramas funded by advertisements. This strategy has driven growth not only in user engagement but also in our user base for micro dramas, significantly increasing user retention. Comparing data from April to December of last year, the number of users spending 80% of their time on micro dramas has tripled. We have recently entered the micro drama production space and are seeing notable success with our original content. For instance, our recently launched original micro drama, China Capable Sporting, has consistently ranked first in viewing time for several weeks and has made it to the top 10 list in the industry. Among the high-profile titles we acquired, such as My Sweet Home and Please Come into My Heart, each surpassed RMB 1 million in revenue-sharing within a week, underscoring the strong recognition and appreciation for premium micro dramas. Typically, the production cost for each micro drama averages less than RMB 1 million, while top-tier titles generally cost under RMB 2 million. Achieving over RMB 1 million in revenue share within the first week for such titles is a notable accomplishment. Looking ahead, we are focusing on two main areas: producing a greater number of high-quality micro dramas and enhancing our user acquisition strategies. We are also investigating additional monetization opportunities through advertising and other commercial methods.

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

Thank you, management, for taking my question. Can you provide some insight into the change in loan video content strategy and the reasons behind it? Thank you.

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

First of all, long-form videos are the cornerstone of our content ecosystem, and we are firmly committed to this. Dramas are central to long-form videos. To better align with changing user preferences, our future drama strategy will focus on two main areas: first, releasing high-quality shorter episode premium dramas, and second, creating more high-quality short dramas with episodes lasting 5 to 20 minutes. Moving forward, we will increase the total number of drama titles, while also enhancing the quality and diversity of the content. This strategy will improve the flexibility and stability of our offerings and reduce our reliance on individual titles, effectively mitigating risk.

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

Could you provide more information about our international business, specifically regarding membership and content distribution? Also, from a financial standpoint, what is the current status of our overseas operations in terms of revenue and profit contribution? What can we anticipate from our international business in the next one to three years?

We started our overseas business in the second half of 2019, but the following three years were impacted by COVID, which made it challenging to increase our workforce and travel between mainland China and international markets. As a result, our development progressed slower than anticipated. However, in the last two years, following the pandemic, we have seen significant growth in our business. That said, we are facing some financial constraints that may limit our development. We've experienced substantial growth in our annual revenue and subscriber numbers, and we have made important strides in tailoring the right content mix for each international market. We assessed our operational strategies for each region, focusing on promoting our content to enhance user growth and revenue performance. When it comes to our content mix abroad, approximately half of what we provide consists of Chinese content, while the other half is made up of third-party content. Additionally, our data indicates that Chinese video content is gaining considerable value globally, which supports our overseas expansion. While the revenue contribution from international markets remains relatively low, its growth will rely on future investments in our overseas business, which are currently constrained by financial resources and funding options.

As the CFO, I would like to add to our CEO's comments. We have taken valuable lessons over the past few years regarding revenue growth, content mix, and operational insights from each market. These are the key takeaways from the past few years under a disciplined investment cycle. Our overseas business has been profitable over the past couple of years. Going forward, while maintaining profitability is important, it doesn't have to be a significant amount. Our goal is to take that profit and invest it back into the business to 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 in the call today. 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.