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Iqiyi executives understand Q4 financial report: in order to reduce losses, the company optimizes the organizational structure, reduces “bad content” and strengthens the publicity of long tail content

In the face of the double dilemma of loss and weak growth, iqiyi is not enough to just break its arm to survive. How to return the almost stagnant main business to growth is another big problem facing the management.

(edited by Li Yihui)

At the closing of US stocks on March 2, Chinese stocks rose and fell, of which IQ. US closed up 21.50%, and the share price rose nearly 40% during the session.

Before trading, iqiyi released its 2021q4 and full year financial report. The company’s non GAAP operating loss in the fourth quarter was 520 million yuan, and the operating loss rate was significantly narrowed to 7% from 13% in the same period last year; Throughout the year, iqiyi’s total revenue in 2021 was 30.6 billion yuan, non GAAP’s operating loss was 3 billion yuan, and the operating loss rate narrowed to 10% from 15% in the same period last year.

This is the report card obtained after iqiyi automatic control fee and layoffs. Gong Yu, founder and CEO of iqiyi, said that since the fourth quarter of 2021, iqiyi has launched a series of measures to optimize the organizational structure and focus on the core business, which has significantly improved the operation efficiency and will strive to further realize the operation profit and loss balance in 2022.

Despite the success of “slimming”, the total number of daily subscription members of iqiyi in the fourth quarter of last year was 97 million, a year-on-year decrease of 5.7 million; Meanwhile, in the cold winter of Internet advertising, the company’s advertising revenue in the fourth quarter decreased by 10% year-on-year.

According to this judgment, when iqiyi lived a hard life, its revenue growth dilemma still existed. According to the financial report, iqiyi’s total revenue in the fourth quarter was 7.4 billion yuan, down about 0.93% year-on-year; Iqiyi’s total revenue in fiscal year 2021 was 30.6 billion yuan, a year-on-year increase of 3% over 2020.

This also means that in the face of the double dilemma of loss and weak growth, iqiyi is not enough to just break its arm to survive. How to return the almost stagnant main business to growth is another big problem facing the management.

“Slimming measures” show results

In the fourth quarter of 2021, iqiyi’s total revenue was 7.389 billion yuan. Although it slightly exceeded the market expectation of 7.305 billion yuan, it still decreased by 0.93% year-on-year compared with 7.458 billion yuan in the same period of last year.

The market has certain expectations for the slowdown of iqiyi’s revenue growth. Historical financial data show that iqiyi’s revenue growth has never exceeded double digits in the past six quarters, and even recorded negative growth in the third and fourth quarters of last year.

In 2021, iqiyi’s total revenue was 30.6 billion yuan, a slight increase of 3% over 2020. The net loss attributable to iqiyi narrowed from 7 billion yuan in 2020 to 6.2 billion yuan, and the operating loss narrowed from 6 billion yuan in 2020 to 4.5 billion yuan. Under non GAAP, the operating loss decreased from 4.5 billion yuan in 2020 to 3 billion yuan.

From the fourth quarter alone, iqiyi’s operating loss in that quarter was 975 million yuan, with an operating loss rate of 13%; In the same period of 2020, the operating loss was 1.3 billion yuan, and the operating loss rate was 18%.

Under non GAAP, the company’s operating loss in the fourth quarter was 516 million yuan, and the non GAAP operating loss rate was 7%; In the same period of 2020, the non GAAP operating loss was 941 million yuan, with an operating loss rate of 13%.

However, its net loss in the fourth quarter still showed an expanding trend, with a net loss of 1.8 billion yuan in the fourth quarter, an increase of 20% year-on-year compared with the net loss of 1.5 billion yuan in the same period last year.

Nevertheless, iqiyi’s management is very satisfied. In the financial report, Gong Yu said, “from the fourth quarter of 2021, we have taken a series of measures to reduce costs, increase efficiency and optimize the organizational structure. The results are very exciting.”

As early as last year’s third quarterly report telephone conference, Gong Yu said that the next focus is to increase revenue and reduce expenditure, cut down inefficient businesses and projects, and increase and try new monetization opportunities.

Since then, iqiyi began to lay off staff and shrink its business simultaneously. According to China business news, iqiyi’s layoffs have ranged from 20% to 40% since early December last year.

Layoffs mainly involve business posts, such as marketing, launch, channel cooperation, intelligent production, instant, VR business, etc. At the same time, iqiyi’s “edge business”, such as games and other business lines, is the hardest hit area for layoffs; The main business, such as video business, is less affected by layoffs.

At the earnings conference call on the evening of March 1, Gong Yu explained in detail the company’s measures to increase revenue and reduce expenditure. In addition to the optimization of organizational structure, it also includes more refined selection and operation in content production, content procurement and content operation.

For the content of the head, iqiyi obtains more benefits through publicity; For “bad content” with broadcasting effect, reduce procurement and improve content production level. In addition, strengthen the operation of long tail content, so as to play a greater value.

According to the financial report, the company’s content cost in the fourth quarter was 4.9 billion yuan, down 5% from the same period in 2020, thanks to the company’s efforts to control costs and improve operational efficiency.

At the same time, after layoffs, the company’s sales, general and administrative expenses decreased by 17% compared with the same period in 2020, mainly due to the reduction of marketing expenses and equity incentive expenses, partially offset by non recurrent employee severance payments related to optimizing the organizational structure.

In addition, in the fourth quarter, the company’s R & D expenses increased by 15% compared with the same period in 2020, mainly due to the non recurrent employee severance pay related to the optimization of organizational structure.

Under the vigorous cost reduction, iqiyi’s gross profit margin increased from 7.4% in the third quarter to 11.9% in the fourth quarter, higher than 9% in the fourth quarter of 2020 and higher than 8.2% unanimously expected by analysts.

Gong Yu said that on the premise of maintaining a reasonable market share of revenue share and user traffic, the company will reduce personnel, content costs and market costs, and take various measures to reduce these costs and expenses.

Decline in the number of members and cold advertising business

A series of measures to save resources and open flow narrowed iqiyi’s operating losses, and the management saw the dawn of profitability. However, iqiyi’s dilemma is not only a perennial loss, but also another major challenge is the weak growth of its main business.

According to the financial report, iqiyi’s net loss increased from 3.7 billion in 2017 to 2019