UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of
--------------
Commission File Number:
----------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ___X____ Form 40-F _________
1
Exhibit Index
Exhibit 99.1—Unaudited Interim Condensed Consolidated Financial Statements
Exhibit 99.2—Management's Discussion and Analysis of Financial Condition and Results of Operations
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
iQIYI, Inc.
By |
: |
/s/ Jun Wang |
Name |
: |
Jun Wang |
Title |
: |
Chief Financial Officer |
Date: February 20, 2025
3
Exhibit 99.1
iQIYI, INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2023 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2024
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
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As of |
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December 31, |
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September 30, |
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September 30, |
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Note |
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2023 |
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2024 |
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2024 |
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RMB |
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RMB |
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US$ |
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(unaudited) |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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Restricted cash |
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Short-term investments |
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Accounts receivable, net of allowance of RMB |
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Prepayments and other assets |
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Amounts due from related parties |
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13 |
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Licensed copyrights, net |
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5 |
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Total current assets |
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Non-current assets: |
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Fixed assets, net |
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Long-term investments |
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4 |
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Licensed copyrights, net |
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5 |
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Intangible assets, net |
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Produced content, net |
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6 |
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Prepayments and other assets |
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Operating lease assets |
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Goodwill |
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Amounts due from related parties |
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13 |
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Total non-current assets |
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Total assets |
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1
iQIYI, INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2023 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2024 (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
|
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As of |
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December 31, |
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September 30, |
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September 30, |
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||||
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Note |
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2023 |
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2024 |
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2024 |
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||||
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RMB |
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RMB |
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|
US$ |
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||||
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(unaudited) |
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(unaudited) |
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||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities (including current liabilities of the |
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Accounts and notes payable |
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Amounts due to related parties |
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13 |
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Customer advances and deferred revenue |
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Short-term loans |
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7 |
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Long-term loans, current portion |
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7 |
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Convertible senior notes, current portion |
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8 |
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Operating lease liabilities, current portion |
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Accrued expenses |
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Other liabilities |
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Total current liabilities |
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Non-current liabilities (including non-current liabilities |
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Long-term loans |
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7 |
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Convertible senior notes |
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8 |
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Deferred tax liabilities |
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Amounts due to related parties |
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13 |
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Operating lease liabilities |
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Other non-current liabilities |
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Total non-current liabilities |
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Total liabilities |
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10 |
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2
iQIYI, INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2023 AND
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2024 (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
|
|
|
|
As of |
|
|||||||||
|
|
|
|
December 31, |
|
|
September 30, |
|
|
September 30, |
|
|||
|
|
Note |
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
|
|
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|
(unaudited) |
|
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(unaudited) |
|
|||
Shareholders’ equity: |
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Class A ordinary shares (US$ |
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3 |
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Class B ordinary shares (US$ |
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3 |
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Additional paid-in capital |
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3 |
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Accumulated deficit |
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3 |
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( |
) |
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( |
) |
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( |
) |
Accumulated other comprehensive income |
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15 |
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Noncontrolling interests |
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3 |
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Total shareholders’ equity |
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Total liabilities and shareholders' equity |
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3
iQIYI, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2024
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
|
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|
Nine months ended September 30, |
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Note |
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2023 |
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2024 |
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2024 |
|
||||
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RMB |
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RMB |
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US$ |
|
||||
|
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(unaudited) |
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(unaudited) |
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(unaudited) |
|
||||
Revenues: |
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Membership services |
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Online advertising services |
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Content distribution |
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Others |
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Total revenues |
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Operating costs and expenses: |
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Cost of revenues |
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( |
) |
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( |
) |
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( |
) |
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Selling, general and administrative |
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( |
) |
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( |
) |
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( |
) |
|
Research and development |
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( |
) |
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( |
) |
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( |
) |
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Total operating costs and expenses |
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( |
) |
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( |
) |
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( |
) |
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Operating income |
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Other income/(expenses): |
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||||
Interest income |
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Interest expenses |
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( |
) |
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( |
) |
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( |
) |
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Foreign exchange (loss)/gain, net |
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( |
) |
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|||
Share of (losses)/gains from equity method investments |
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( |
) |
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Others, net |
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( |
) |
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( |
) |
||
Total other expenses, net |
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( |
) |
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( |
) |
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( |
) |
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Income before income taxes |
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Income tax expense |
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9 |
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( |
) |
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( |
) |
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( |
) |
Net income |
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||||
Less: Net income attributable to noncontrolling interests |
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||||
Net income attributable to iQIYI, Inc. |
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Net income attributable to ordinary shareholders |
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Net income per Class A and Class B ordinary share: |
|
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12 |
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Basic |
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Diluted |
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Net income per ADS (1 ADS equals |
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Basic |
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Diluted |
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Shares used in net income per Class A and Class B |
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12 |
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Basic |
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Diluted |
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Other comprehensive loss: |
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Foreign currency translation adjustments |
|
|
15 |
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( |
) |
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( |
) |
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( |
) |
Unrealized gains/(losses) on available-for-sale debt securities |
|
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15 |
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( |
) |
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( |
) |
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Total other comprehensive loss, net of tax |
|
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15 |
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( |
) |
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( |
) |
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( |
) |
Comprehensive income |
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Less: Comprehensive income attributable to noncontrolling |
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||||
Comprehensive income attributable to iQIYI, Inc. |
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4
iQIYI, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2024
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
|
|
Nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
|||
Cash flows from operating activities: |
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|
|||
Net income |
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|
|||
Adjustments to reconcile net income to net cash |
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|
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Depreciation of fixed assets |
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|
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Amortization of intangible assets |
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|
|||
Amortization of licensed copyrights |
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|
|||
Amortization and impairment of produced content |
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|
|||
Provision/(reversal) of credit losses |
|
|
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( |
) |
|
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( |
) |
|
Unrealized foreign exchange loss/(gain) |
|
|
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|
|
( |
) |
|
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( |
) |
|
Gain on disposal of fixed assets |
|
|
( |
) |
|
|
( |
) |
|
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( |
) |
(Gain)/loss on disposal of subsidiaries or business |
|
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( |
) |
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|
||
Accretion on convertible senior notes and others |
|
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|
|||
Barter transaction revenue |
|
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( |
) |
|
|
( |
) |
|
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( |
) |
Share-based compensation |
|
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|
|||
Share of losses/(gains) from equity method investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Fair value change and impairment of long-term investments |
|
|
|
|
|
|
|
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|
|||
Deferred income tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other non-cash income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities |
|
|
|
|
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|
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|
|||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts due from related parties |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Licensed copyrights |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Produced content |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Prepayments and other assets |
|
|
( |
) |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
|
|
|
|
||
Amounts due to related parties |
|
|
|
|
|
|
|
|
|
|||
Customer advances and deferred revenue |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
|
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|
|||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Acquisition of fixed assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Acquisition of intangible assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchase of long-term investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from disposal of long-term investments |
|
|
|
|
|
|
|
|
|
|||
Film investments made as passive investor |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from film investments as passive investor |
|
|
|
|
|
|
|
|
|
|||
Loans provided to related parties |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of available-for-sale debt securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Maturities of available-for-sale debt securities |
|
|
|
|
|
|
|
|
|
|||
Other investing activities |
|
|
|
|
|
|
|
|
|
|||
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
5
iQIYI, INC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2024 (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. Dollars (“US$”),
except for number of shares and per share data)
|
|
Nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
|
|
(unaudited) |
|
|
(unaudited) |
|
|
(unaudited) |
|
|||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Repayments of loans from related parties |
|
|
( |
) |
|
|
|
|
|
|
||
Proceeds from short-term loans |
|
|
|
|
|
|
|
|
|
|||
Repayments of short-term loans |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from long-term loans |
|
|
|
|
|
|
|
|
|
|||
Repayments of long-term loans |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Proceeds from issuance of convertible senior notes, net |
|
|
|
|
|
|
|
|
|
|||
Repayments or redemption of convertible senior notes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Acquisition of noncontrolling interests in subsidiaries |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Proceeds from issuance of ordinary shares in the follow-on offering, net of issuance |
|
|
|
|
|
|
|
|
|
|||
Proceeds from exercise of share options |
|
|
|
|
|
|
|
|
|
|||
Finance lease payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Dividends paid to noncontrolling interest shareholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from other financing activities |
|
|
|
|
|
|
|
|
|
|||
Repayment for other financing activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash, cash |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net decrease in cash, cash equivalents |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at the |
|
|
|
|
|
|
|
|
|
|||
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
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|
|||
Supplemental disclosures of cash flow information: |
|
|
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|
|
|
|
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|
|||
Acquisition of fixed assets included in accounts payable |
|
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|
|
|
|
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|
|||
|
|
|
|
|
|
|
|
|
|
|||
Reconciliation of cash and cash equivalents and restricted cash: |
|
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|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|||
Restricted cash |
|
|
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|
|
|
|
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|
|||
Long-term restricted cash (i) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Total cash and cash equivalents and restricted cash shown in the statements of cash flows |
|
|
|
|
|
|
|
|
|
(i)
6
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
1. ORGANIZATION
iQIYI, Inc. (the “Company”) was incorporated under the laws of the Cayman Islands on November 27, 2009.
The Company, its wholly-owned subsidiaries, variable interest entities (“VIEs”) and VIEs’ subsidiaries are hereinafter collectively referred to as the “Group”. The Group is an innovative platform in China offering a diverse collection of high-quality internet video content, including professionally-produced content licensed from professional content providers and self-produced content, on its platform. The Group provides membership services, online advertising services, content distribution services and online games services. The Group’s principal geographic market is in mainland China. The Company does not conduct any substantive operations of its own but conducts its primary business operations through its wholly-owned subsidiaries, VIEs and VIEs’ subsidiaries in mainland China.
PRC laws and regulations prohibit or restrict foreign ownership of companies that engage in internet audio-video program services, value-added telecommunication services, radio and television program production and operation services, and certain other services. To comply with these foreign ownership restrictions, the Group operates its platforms and primarily conducts its business in the PRC through the VIEs. The paid-in capital of the VIEs was mainly funded by the Company or its subsidiaries through loans extended to the authorized individuals who were the shareholders of the VIEs. The Company has entered into certain agreements with the shareholders of the VIEs through the Company or its wholly-owned subsidiaries in the PRC, including loan agreements for the paid-in capital of the VIEs and share pledge agreements for the equity interests in the VIEs held by the shareholders of the VIEs. In addition, the Company or its wholly-owned subsidiaries have entered into shareholder voting rights trust agreements, powers of attorney and exclusive purchase option agreements with the VIEs and nominee shareholders of the VIEs, which give the Company or its wholly-owned subsidiaries the power to direct the activities that most significantly affect the economic performance of the VIEs and to acquire the equity interests in the VIEs when permitted by the PRC laws, respectively. Commitment letters have been entered into which obligate the Company to absorb losses of the VIEs that could potentially be significant to the VIEs and certain exclusive agreements have been entered into that entitle the Company or its wholly-owned subsidiaries to receive economic benefits from the VIEs that potentially could be significant to the VIEs.
Despite the lack of equity ownership, as a result of a series of contractual arrangements (the “Contractual Arrangements”), the shareholders of the VIEs effectively assigned all of their voting rights underlying their equity interests in the VIEs to the Company, which gives the Company the power to direct the activities that most significantly impact the VIEs’ economic performance. In addition, through the other exclusive agreements, which consist of the business operation agreements/exclusive management consulting and business cooperation agreements, exclusive technology consulting and services agreements, trademark license agreements and software usage license agreements and business cooperation agreement, the Company, through its wholly-owned subsidiaries in the PRC, has the right to receive economic benefits from the VIEs that potentially could be significant to the VIEs. Lastly, through the commitment letters, the Company has the obligation to absorb losses of the VIEs that could potentially be significant to the VIEs. Therefore, the Company is considered the primary beneficiary of the VIEs and consolidates the VIEs and their subsidiaries as required by Accounting Standards Codification (“ASC”) topic 810 (“ASC 810”), Consolidation.
In the opinion of the Company’s legal counsel, (i) the ownership structure relating to the VIEs of the Company is in compliance with existing PRC laws and regulations; (ii) each of the contractual arrangements with the VIEs and their shareholders are valid and legally binding upon each party to such agreement under PRC laws; and (iii) the execution, delivery and performance of the contractual arrangements do not result in any violation of the provisions of the articles of association and business licenses of the VIEs, and any violation of any explicit provisions of the current PRC laws and regulations.
On January 1, 2020, the Foreign Investment Law came into effect and became the principal laws and regulations governing foreign investment in the PRC. The Foreign Investment Law requires compliance with a negative industry catalog (“Negative List”), which sets forth the business that are restricted and prohibited from foreign investment. The Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign investment, but it contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. There are uncertainties regarding the interpretation of the Foreign Investment Law with respect to the contractual arrangements as a form of foreign investment. The VIEs’ internet audio-video program services, value-added telecommunication services, radio and television program production and operation services, and certain other services are included in the Negative List. If any of the contractual arrangements would be deemed as a foreign investment that is prohibited by the Foreign Investment Law or any other current or future laws, regulations or interpretations, the Company’s ability, through its wholly- owned subsidiaries in the PRC, to enforce its rights under these contractual arrangements with the VIEs and the Company’s ability to conduct business through the VIEs could be severely limited.
In addition, if the current organizational structure or any of the contractual arrangements were found to be in violation of any existing and/or future PRC laws or regulations, the Company may be subject to penalties, which may include but not be limited to: the cancellation or revocation of the Company’s business and operating licenses, being required to restructure the Company’s operations or discontinue the Company’s operating activities. The imposition of any of these or other penalties may cause the Company to lose its
7
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
right to direct the activities that most significantly impact the VIEs and/or the right to receive economic benefits that could potentially be significant to the VIEs based on the contractual arrangements, which may result in the Company no longer being able to consolidate the financial results of the VIEs in the consolidated financial statements.
Furthermore, shareholders of the VIEs may have interests that are different with those of the Company, which could potentially increase the risk that they would seek to breach the existing terms of the aforementioned agreements.
The carrying amounts of the assets, liabilities and the results of operations of the VIEs and VIEs’ subsidiaries included in the Company’s condensed consolidated balance sheets and statements of comprehensive income are as follows:
|
|
As of |
|
|||||||||
|
|
December 31, |
|
|
September 30, |
|
|
September 30, |
|
|||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|||
Current assets: |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|||
Short-term investments |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|||
Licensed copyrights, net |
|
|
|
|
|
|
|
|
|
|||
Prepayments and other assets |
|
|
|
|
|
|
|
|
|
|||
Total current assets |
|
|
|
|
|
|
|
|
|
|||
Non-current assets: |
|
|
|
|
|
|
|
|
|
|||
Fixed assets, net |
|
|
|
|
|
|
|
|
|
|||
Long-term investments |
|
|
|
|
|
|
|
|
|
|||
Licensed copyrights, net |
|
|
|
|
|
|
|
|
|
|||
Produced content, net |
|
|
|
|
|
|
|
|
|
|||
Operating lease assets |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
|
|
|
|
|
|
|
|
|||
Others |
|
|
|
|
|
|
|
|
|
|||
Total non-current assets |
|
|
|
|
|
|
|
|
|
|||
Total assets |
|
|
|
|
|
|
|
|
|
|||
LIABILITIES |
|
|
|
|
|
|
|
|
|
|||
Third-party liabilities |
|
|
|
|
|
|
|
|
|
|||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts and notes payable |
|
|
|
|
|
|
|
|
|
|||
Customer advances and deferred revenue |
|
|
|
|
|
|
|
|
|
|||
Short-term loans |
|
|
|
|
|
|
|
|
|
|||
Long-term loans, current portion |
|
|
|
|
|
|
|
|
|
|||
Operating lease liabilities, current portion |
|
|
|
|
|
|
|
|
|
|||
Accrued expenses and other liabilities |
|
|
|
|
|
|
|
|
|
|||
Total current liabilities |
|
|
|
|
|
|
|
|
|
|||
Non-current liabilities: |
|
|
|
|
|
|
|
|
|
|||
Long-term loans |
|
|
|
|
|
|
|
|
|
|||
Operating lease liabilities |
|
|
|
|
|
|
|
|
|
|||
Other non-current liabilities |
|
|
|
|
|
|
|
|
|
|||
Total non-current liabilities |
|
|
|
|
|
|
|
|
|
|||
Amounts due to the Company and its subsidiaries |
|
|
|
|
|
|
|
|
|
|||
Total liabilities |
|
|
|
|
|
|
|
|
|
8
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
|
|
Nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Total revenues |
|
|
|
|
|
|
|
|
|
|||
Third-party revenues |
|
|
|
|
|
|
|
|
|
|||
Inter-Group revenues |
|
|
|
|
|
|
|
|
|
|||
Cost of revenues |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Third-party cost of revenues |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Inter-Group cost of revenues |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income |
|
|
|
|
|
|
|
|
|
|||
Net cash provided by/(used for) operating activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by/(used for) investing activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net cash (used for)/provided by financing activities |
|
|
( |
) |
|
|
|
|
|
|
The carrying amounts of the assets, liabilities and the results of operations of the VIEs and their subsidiaries are presented in aggregate due to the similarity of the purpose and design of the VIEs and their subsidiaries, the nature of the assets in these VIEs and their subsidiaries and the type of the involvement of the Company in these VIEs and their subsidiaries.
Unrecognized revenue-producing assets held by the VIEs include certain internet content provisions and other licenses, domain names and trademarks. The internet content provisions and other licenses, which are held by the VIEs that provide the relevant services, are required under relevant PRC laws, rules and regulations for the operation of Internet businesses in the PRC, and therefore are integral to the Company’s operations. The VIEs and VIEs’ subsidiaries contributed an aggregate of
The VIEs’ third-party creditors did not have recourse to the general credit of the Company in the normal course of business. The Company did not provide or intend to provide financial or other support not previously contractually required to the VIEs and VIEs’ subsidiaries during the periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Group. In the opinion of management, the unaudited interim condensed consolidated financial statements, which comprise the unaudited condensed consolidated balance sheet as of September 30, 2024, the unaudited condensed consolidated statements of comprehensive income and the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2023 and 2024, reflect all adjustments, consisting of normal and recurring adjustments, necessary to present fairly the Company’s consolidated financial position as of September 30, 2024, the Company’s consolidated results of operations and consolidated cash flows for the nine months ended September 30, 2023 and 2024. The consolidated balance sheet data as of December 31, 2023 was derived from the Company’s audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP for annual financial statements. These unaudited interim condensed consolidated financial statements and the notes thereto should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023. Results for the nine months ended September 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or for any future period.
The results of the subsidiaries are consolidated from the date on which the Group obtains control and continues to be consolidated until the date that such control ceases. A controlling financial interest is typically determined when a company holds a majority of the voting equity interest in an entity. However, if the Company demonstrates its ability to control the VIEs through power to govern the activities which most significantly impact its economic performance and is obligated to absorb losses of the VIEs that could potentially be significant to the VIEs or the right to receive benefits from the VIEs that could potentially be significant to the VIEs, then the entity is consolidated. All intercompany balances and transactions between the Company, its subsidiaries, VIEs and VIEs’ subsidiaries have been eliminated on consolidation.
9
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Use of estimates
Convenience translation
Produced content, net
The Group produces original content in-house and in collaboration with external parties. Produced content primarily consists of films, episodic series, mini and short dramas, variety shows and animations. The costs incurred in the physical production of original content include direct production costs, production overhead and acquisition costs. Produced content also includes cash expenditures made to acquire a proportionate share of certain rights to films including profit sharing, distribution and/or other rights. Exploitation costs are expensed as incurred. Participation costs are accrued using the individual-film-forecast-computation method, which recognizes the costs in the same ratio as the associated ultimate revenue. Production costs for original content that are predominantly monetized in a film group are capitalized. Production costs for original content that are predominantly monetized on its own are capitalized to the extent that they are recoverable from total revenues expected to be earned (“ultimate revenue”); otherwise, they are expensed as cost of revenues. Ultimate revenue estimates include revenue expected to be earned from all sources, including exhibition, licensing, or exploitation of produced content if the Group has demonstrated a history of earning such revenue. The Group estimates ultimate revenue to be earned during the estimated useful lives of produced content based on anticipated release patterns and historical results of similar produced content, which are identified based on various factors, including cast and crew, target audience and popularity. The capitalized production costs are reported separately as noncurrent assets with caption of “Produced content, net” on the condensed consolidated balance sheets
Based on factors including historical and estimated future viewership consumption patterns, the Group amortizes produced content that is predominantly monetized in a film group. For produced content that is monetized on its own, the Group considers historical and estimated usage patterns to determine the pattern of amortization. Based on the estimated patterns, the Group amortizes produced content using an accelerated method over its estimated useful lives within
Licensed copyrights, net
Licensed copyrights consist of professionally-produced content such as films, drama series, mini and short dramas, variety shows and other video content acquired from external parties. The license fees are capitalized and, unless prepaid, a corresponding liability is recorded when the cost of the content is known, the content is accepted by the Group in accordance with the conditions of the license agreement and the content is available for its first showing on the Group’s platforms. Licensed copyrights are presented on the condensed consolidated balance sheets as current and non-current based on estimated time of usage.
The Group’s licensed copyrights include the right to broadcast and, in some instances, the right to sublicense. The broadcasting right refers to the right to broadcast the content on its own platforms and the sublicensing right refers to the right to sublicense the underlying content to external parties. When licensed copyrights include both broadcasting and sublicensing rights, the content costs are allocated to these two rights upon initial recognition, based on the relative proportion of the estimated total revenues that will be generated from each right over its estimated useful lives.
10
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
For the right to broadcast the contents on its own platforms that generates online advertising and membership services revenues, the content costs are amortized based on factors including historical and estimated future viewership patterns, using an accelerated method by content categories over the shorter of each content's contractual period or estimated useful lives within
Impairment of licensed copyrights and produced content
The Group’s business model is mainly subscription and advertising based, as such the majority of the Group’s content assets (licensed copyrights and produced content) are predominantly monetized with other content assets. A smaller portion of the Group’s content assets are predominantly monetized at a specific title level such as variety shows and investments in a proportionate share of certain film rights including profit sharing, distribution and/or other rights. Because the identifiable cash flows related to content launched on the Group’s Mainland China platform are largely independent of the cash flows of other content launched on the Group’s overseas platform, the Group has identified two separate film groups. The Group reviews its film groups and individual content for impairment when there are events or changes in circumstances that indicate the fair value of a film group or individual content may be less than its unamortized costs. Examples of such events or changes in circumstances include, a significant adverse change in technological, regulatory, legal, economic, or social factors that could affect the fair value of the film group or the public's perception of a film or the availability of a film for future showings, a significant decrease in the number of subscribers or forecasted subscribers, or the loss of a major distributor, a change in the predominant monetization strategy of a film that is currently monetized on its own, actual costs substantially in excess of budgeted costs, substantial delays in completion or release schedules, or actual performance subsequent to release failing to meet expectations set before release such as a significant decrease in the amount of ultimate revenue expected to be recognized.
When such events or changes in circumstances are identified, the Group assesses whether the fair value of an individual content (or film group) is less than its unamortized film costs, determines the fair value of an individual content (or film group) and recognizes an impairment charge for the amount by which the unamortized capitalized costs exceed the individual content’s (or film group’s) fair value. The Group mainly uses a discounted cash flow approach to determine the fair value of an individual content or film group, of which the most significant inputs include the forecasted future revenues, costs and operating expenses attributable to an individual content or the film group and the discount rate. An impairment loss attributable to a film group is allocated to individual licensed copyrights and produced content within the film group on a pro rata basis using the relative carrying values of those assets as the Group cannot estimate the fair value of individual contents in the film group without undue cost and effort.
Revenue Recognition
The Group’s revenues are derived principally from membership services, online advertising services and content distribution. Revenue is recognized when control of promised goods or services is transferred to the Group’s customers in an amount of consideration to which an entity expects to be entitled to in exchange for those goods or services. Value added taxes (“VAT”) are presented as a reduction of revenues.
The Group’s revenue recognition policies are set forth as follows:
Membership services
The Group offers membership services to subscribing members with various privileges, which primarily include access to exclusive and ad-free streaming of premium content 1080P/4K high-definition video, eXave Max, Dolby Audio, and accelerated downloads and others. When the receipt of membership fees is for services to be delivered over a period of time, the receipt is initially recorded as “Customer advances and deferred revenue” on the condensed consolidated balance sheets and revenue is recognized ratably over the membership period as services are rendered. Membership services revenue also includes fees earned from subscribing members for on-demand content purchases and early access to premium content. The Group is the principal in its relationships where partners, including consumer electronics manufacturers (TVs and cell phones), mobile operators, internet service providers and online payment agencies, provide access to the membership services or payment processing services as the Group retains control over its service delivery to its subscribing members. Typically, payments made to the partners, are recorded as cost of revenues. For the sale of the right to other membership services through strategic cooperation with other parties, the Group recognizes revenue on a net basis when the Group does not control the specified services before they are transferred to the customer.
11
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Online advertising services
The Group sells advertising services by delivering both brand advertising and performance-based advertising, primarily to third-party advertising agencies and a small portion is sold directly to advertisers. Advertising contracts are signed to establish the price and advertising services to be provided. For brand advertising, the Group provides advertisement placements on its platforms in different formats, including but not limited to video, banners, links, logos, brand placement and buttons. For contracts where the Group provides customers with multiple performance obligations, consideration is allocated to each performance obligation based on its relative standalone selling price and revenue is recognized as each performance obligation is satisfied through the Group’s display of the advertisements in accordance with the advertising contracts.
For performance-based advertising, the Group distributes its customers sponsored links or advertisements by leveraging the traffic of its own and other partners’ online properties in the same way. As the principal, the Group recognizes revenue from performance-based advertising on a gross basis and payments made to its partners are recorded as “Cost of revenues” in the unaudited interim condensed
consolidated statements of comprehensive income.
The Group provides various sales incentives to its customers for meeting certain cumulative purchase volume requirements, including cash rebates to certain third-party advertising agencies and non-cash credits which can be used to acquire future online advertising services in certain bundled arrangements, which are negotiated on a contract-by-contract basis with customers. The Group accounts for cash rebates granted to customers as variable consideration which is measured based on the most likely amount of incentive to be provided to customers. Non-cash credits granted to customers are considered options to acquire additional services that provide customers with a material right. The contract consideration related to these customer options to acquire additional services are deferred and recognized as revenue when future services are transferred or when the options expire.
Content distribution
The Group generates revenues from sub-licensing content assets within its authorized scope for cash or through nonmonetary exchanges mainly with other online video broadcasting companies as well as from the release of feature films for exhibition in theaters. For cash sub-licensing transactions, the Group is entitled to receive the sub-license fee under the sub-licensing arrangements and does not have any future obligation once it has provided the underlying content to the sub-licensee (which is provided at or before the beginning of the sub-license period). The sub-licensing of content assets represents a license of functional intellectual property which grants a right to use the Group’s content assets and is recognized at the point in time when the content asset is made available for the customer’s use and benefit.
The Group also enters into nonmonetary transactions to exchange online broadcasting rights of content assets with other online video broadcasting companies from time to time. The exchanged content assets provide rights for each party to broadcast the content assets received on its own platform only. Each transferring party retains the right to continue broadcasting the exclusive content on its own platform and/or sublicense the rights to the content it surrendered in the exchange. The Group accounts for these nonmonetary exchanges based on the fair value of the asset received. Barter revenues are recognized in accordance with the same revenue recognition criteria above. The Group estimates the fair value of the content assets received using a market approach based on various factors, including the purchase price of similar non-exclusive and/or exclusive contents, broadcasting schedule, cast and crew, theme, popularity and box office. The transaction price of barter transaction is calculated on the individual content asset basis. For a significant barter transaction, the Company further reviews the fair value by analyzing against the cost of the content assets bartered out and/or engages a third-party valuation firm to assess the reasonableness of its fair value. The attributable cost of sublicensing transactions, whether for cash or through nonmonetary exchanges, is recognized as cost of revenues through the amortization of the sublicensing right component of the exclusive content asset.
Others
Other revenues mainly include revenues from online games and other licensing.
Online games
The Group operates mobile games including both self-developed and licensed mobile games and generates mobile game revenues from the sale of in-game virtual items, including items, avatars, skills, privileges or other in-game consumables, features or functionality.
The Group records revenue generated from mobile games on a gross basis if the Group acts as the principal in the mobile game arrangements under which the Group controls the specified services before they are provided to the customer. In addition, when the Group acts as the principal, it is primarily responsible for fulfilling the promise to provide maintenance services and has discretion in setting the price for the services to the customer. Otherwise, the Group records revenue on a net basis based on the ratios pre-determined
12
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
with the online game developers when all the revenue recognition criteria set forth in ASC topic 606, Revenue from Contracts with Customers (“ASC 606”) are met, which is generally when the user purchases virtual currencies issued by the game developers.
For transactions where the Group is the principal, the Group determines that the in-game virtual items are identified as performance obligations. The Group provides on-going services to the end-users who purchase virtual items to gain an enhanced game-playing experience. For the sale of durable virtual items, the Group recognizes revenues ratably over the estimated average playing period of these paying players, starting from the point in time when durable virtual items are delivered to the players’ accounts. For the sale of consumable virtual items, the Group recognizes revenue as the items are consumed.
Other licensing
The Group grants rights to its customers to re-create short-form videos for selected content assets from its existing content library over a fixed license period. The transaction price is allocated based on the estimated standalone selling prices of the identified performance obligations, which consists of (i) the licensing of rights related to selected content assets in the existing content library; and (ii) future unspecified updates to the existing content library during the license period. The Group records revenue when the customer obtains the rights for the selected content assets from its existing content library at the commencement of the license period and as the updated contents are made available to the customer over the license period.
Contract balances
Payment terms and conditions vary by customer and are based on the billing schedule established in the Group’s contracts with customers, but the Group generally provides credit terms to customers within one year; therefore, the Group has determined that its contracts do not include a significant financing component.
When either party to a revenue contract has performed, the Group presents the contract in the condensed consolidated balance sheets as a contract asset or a contract liability, depending on the relationship between the entity’s performance and the customer’s payment.
Contract assets mainly represent unbilled amounts related to the Group’s rights to consideration for advertising services delivered and are included in “Prepayments and other assets” on the condensed consolidated balance sheets. As of December 31, 2023 and September 30, 2024, contract assets were RMB
Contract liabilities are the Group’s obligation to transfer goods or services to customers for which the Group has received consideration from customers, which are comprised of: i) payments received for membership fees and other services; ii) virtual currency sold for which the corresponding services have not yet been provided to customers; and iii) non-cash credits granted to customers. Contract liabilities are primarily presented as “Customer advances and deferred revenue” on the condensed consolidated balance sheets. Balances of contract liabilities were RMB
As of September 30, 2024, total transaction price allocated to performance obligations that were unsatisfied or partially unsatisfied for contracts with an original expected length of more than one year was RMB
Practical Expedients and Exemptions
The Group does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of
Earnings per share
The Company computes earnings per Class A and Class B ordinary shares in accordance with ASC topic 260, Earnings per Share (“ASC 260”) using the two-class method. Under the two-class method, net income is allocated between ordinary shares and participating securities based on dividends declared (or accumulated) and participating rights in undistributed earnings as if all the earnings for the reporting period had been distributed. The participating rights (liquidation and dividend rights) of the holders of the Company’s Class A and Class B ordinary shares are identical, except with respect to voting and conversion. As a result, and in accordance with ASC 260, the undistributed income is allocated based on the contractual participation rights of the Class A and Class B ordinary shares, respectively. As the liquidation and dividend rights are identical, the undistributed income is allocated on a proportionate basis.
13
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Diluted earnings per share is computed using the weighted average number of ordinary shares and, if dilutive, potential ordinary shares outstanding during the period. Potential ordinary shares consist of ordinary shares issuable upon the conversion of convertible senior notes using the if-converted method and ordinary shares issuable upon the exercise of share options and vesting of restricted share units, using the treasury stock method. Potential ordinary shares are excluded from the computation of diluted earnings per share if their effects are anti-dilutive. The computation of the diluted earnings per Class A ordinary share assumes the conversion of Class B ordinary shares to Class A ordinary shares, while diluted earnings per Class B ordinary share does not assume the conversion of such shares. The Company adjusts for the securities issued by subsidiaries and equity method investees in the calculation of income available to ordinary shareholders of the Company used in the diluted earnings per share calculation.
Concentration of credit risks
Financial instruments that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, restricted cash, short-term investments, accounts receivable, contract assets, amounts due from related parties and receivables from online payment agencies and long-term restricted cash included in prepayments and other assets. The carrying amounts of these assets represent the Group’s maximum exposure to credit risk. As of December 31, 2023 and September 30, 2024, the Group has RMB
Accounts receivable, contract assets, amounts due from related parties (other than loan due from PAG) and receivables from online payment agencies are typically unsecured and denominated in RMB, derived from revenue earned from customers and agencies in the PRC, which are exposed to credit risk. The risk is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances. The Group maintains an allowance for credit losses and the Group had
Recent accounting pronouncement
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which focuses on improving reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. A public entity shall disclose for each reportable segment the significant expense categories and amounts that are regularly provided to the CODM and included in reported segment profit or loss. ASU 2023-07 also requires public entities to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Public entities with a single reportable segment have to provide all the disclosures required by ASC topic 280, including the significant segment expense disclosures. Entities are permitted to disclose more than one measure of a segment’s profit or loss if such measures are used by the CODM to allocate resources and assess performance, as long as at least one of those measures is determined in a way that is most consistent with the measurement principles used to measure the corresponding amounts in the consolidated financial statements.
ASU 2023-07 is applied retrospectively to all periods presented in financial statements, unless it is impracticable. This update will be effective for the Group’s fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Group has evaluated that the disclosure impact of adopting ASU 2023-07 was not material.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures(“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. This ASU should be applied prospectively with the option to apply the standard retrospectively. The Group is currently evaluating the impact of the accounting standard updates on the unaudited interim condensed consolidated financial statements.
In December 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses(“ASU 2024-03”), which requires additional disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. This ASU should be applied prospectively with the option to apply the standard retrospectively. The Group is currently evaluating the impact of this new standard on the unaudited interim condensed consolidated financial statements.
14
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
3. SHAREHOLDERS’ EQUITY
The changes in shareholders’ equity for the nine months ended September 30, 2023 and 2024 are as follows:
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Attributable to iQIYI, INC. |
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Ordinary shares |
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Additional |
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Accumulated |
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Total |
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Number of |
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Amount |
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paid-in |
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comprehensive |
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Accumulated |
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Noncontrolling |
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shareholders' |
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(unaudited) |
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RMB |
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RMB |
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RMB |
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RMB |
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RMB |
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RMB |
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Balances as of December 31, 2022 |
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( |
) |
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Net income |
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— |
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— |
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— |
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— |
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Issuance of ordinary shares upon follow-on |
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— |
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— |
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— |
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Exercise of share-based awards |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
|
Dividends paid and payable to noncontrolling |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balances as of September 30, 2023 |
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( |
) |
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Balances as of December 31, 2023 |
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( |
) |
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||||||
Net income |
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— |
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— |
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— |
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— |
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Exercise of share-based awards |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
Dividends paid and payable to noncontrolling |
|
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Acquisition of noncontrolling interests in |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Balances as of September 30, 2024 |
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( |
) |
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Balances as of September 30, 2024, in US$ |
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( |
) |
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4. LONG-TERM INVESTMENTS
The Group’s long-term investments primarily consist of equity investments without readily determinable fair value, equity method investments and available-for-sale debt investments.
Equity investments without readily determinable fair value
As of December 31, 2023 and September 30, 2024, the carrying amounts of the Group’s equity investments without readily determinable fair value were as follows:
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As of |
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December 31, |
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September 30, |
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September 30, |
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2023 |
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2024 |
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2024 |
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RMB |
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RMB |
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US$ |
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Initial cost basis |
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Cumulative unrealized gains |
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Cumulative unrealized losses (including impairment) |
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( |
) |
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( |
) |
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( |
) |
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Total carrying amount |
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Impairment charges recognized on equity investments measured using the measurement alternative were RMB
15
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Total realized and unrealized gains and losses for equity securities without readily determinable fair values for the nine months ended September 30, 2023 and 2024 are as follows:
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For the nine months ended September 30, |
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2023 |
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2024 |
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2024 |
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RMB |
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RMB |
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US$ |
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Gross unrealized gains (upward adjustments) |
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Gross unrealized losses (downward adjustments excluding impairment) |
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( |
) |
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Net unrealized losses on equity securities held |
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( |
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Net realized gains on equity securities sold |
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Total net (losses)/gains recognized |
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( |
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Equity method investments
Strawbear Entertainment Group (or “Strawbear”), a company listed on the Hong Kong Stock Exchange (“HKSE”), is a major drama series producer and distributor in the PRC, covering the investment, development, production and distribution of TV series and web series. As of December 31, 2023 and September 30, 2024, the Group’s equity interest in Strawbear was
In January 2022, the Group entered into an amended shareholder agreement with other investors of Beijing Dreamagic Science and Technology Co., Ltd. (or “Dreamagic”), a subsidiary of the Group in the business of producing virtual reality equipment for which the Group held an
As of December 31, 2023 and September 30, 2024, the Group also held several other equity method investments through its subsidiaries or VIEs, all of which the Group can exercise significant influence but does not own a majority equity interest in or has control over. The other equity method investments were not significant. The carrying amounts of the Group’s equity method investments including Strawbear and Dreamagic were RMB
16
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Available-for-sale debt investments
Available-for-sale debt investments are measured at fair value and consist of convertible debt instruments issued by private companies and investments in equity securities that are redeemable at the Company’s option with no contractual maturity date.
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As of |
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December 31, |
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September 30, |
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September 30, |
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2023 |
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2024 |
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2024 |
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RMB |
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RMB |
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US$ |
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Cost or Amortized cost |
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Gross unrealized gains |
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Gross unrealized losses |
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( |
) |
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( |
) |
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( |
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Fair value |
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5. LICENSED COPYRIGHTS, NET
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As of December 31, 2023 |
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Gross carrying |
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Accumulated |
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Impairment |
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Net carrying |
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RMB |
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RMB |
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RMB |
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RMB |
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Licensed copyrights |
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—Broadcasting rights |
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( |
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( |
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—Sublicensing rights |
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( |
) |
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( |
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( |
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Less: current portion |
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—Broadcasting rights |
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( |
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( |
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—Sublicensing rights |
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( |
) |
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( |
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( |
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Licensed copyrights—non-current |
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—Broadcasting rights |
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( |
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( |
) |
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—Sublicensing rights |
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( |
) |
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( |
) |
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As of September 30, 2024 |
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Gross carrying |
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Accumulated |
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Impairment |
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Net carrying value |
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RMB |
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RMB |
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RMB |
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RMB |
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US$ |
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Licensed copyrights |
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—Broadcasting rights |
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( |
) |
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( |
) |
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—Sublicensing rights |
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( |
) |
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( |
) |
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( |
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Less: current portion |
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—Broadcasting rights |
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( |
) |
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( |
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|||
—Sublicensing rights |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
Licensed copyrights—non-current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
—Broadcasting rights |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
—Sublicensing rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
Amortization expense of RMB
17
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
|
|
RMB |
|
|
US$ |
|
||
Three months ending December 31, 2024 |
|
|
|
|
|
|
||
Year ending December 31, 2025 |
|
|
|
|
|
|
||
Year ending December 31, 2026 |
|
|
|
|
|
|
||
Year ending December 31, 2027 |
|
|
|
|
|
|
6. PRODUCED CONTENT, NET
|
|
As of December 31, |
|
|
As of September 30, |
|
||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Released, less amortization and impairment |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized with other contents |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized on its own |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
In production, less impairment |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized with other contents |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized on its own |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
In development, less impairment |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized with other contents |
|
|
|
|
|
|
|
|
|
|||
— Predominantly monetized on its own |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
Amortization expense for of RMB
Estimated amortization expense relating to the existing produced content for each of the next three years is as follows:
|
|
RMB |
|
|
US$ |
|
||
Three months ending December 31, 2024 |
|
|
|
|
|
|
||
Year ending December 31, 2025 |
|
|
|
|
|
|
||
Year ending December 31, 2026 |
|
|
|
|
|
|
||
Year ending December 31, 2027 |
|
|
|
|
|
|
7. LOANS PAYABLE
Short-term Loans
Short-term loans as of December 31, 2023 and September 30, 2024 amounted to RMB
Structured payable arrangements
In 2023 and 2024, the Group entered into structured payable arrangements with banks or other financial institutions (“factoring arrangements”). Under the factoring arrangements, the suppliers’ receivables collection process was accelerated through selling its receivables from the Group to the banks or other financial institutions at a discount. For the nine months ended September 30, 2023 and 2024, the Group was legally obligated to pay the banks or other financial institutions in the amount totaling RMB
18
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
As a result of the factoring arrangements, the payment terms of the Group’s original accounts payables were substantially modified and considered extinguished as the nature of the original liability has changed from accounts payables to loan borrowings from banks or other financial institutions. The proceeds from borrowings from banks or other financial institutions is a financing activity and is reported as “Proceeds from short-term loans” in the unaudited interim condensed consolidated statements of cash flows. As of December 31, 2023 and September 30, 2024, the outstanding borrowings from the factoring arrangements were RMB
The weighted average interest rate for all of the outstanding short-term borrowings mentioned above as of December 31, 2023 and September 30, 2024 was
Long-term Loans
Long-term loans as of December 31, 2023 and September 30, 2024 amounted to RMB
The weighted average interest rate for all of the outstanding long-term borrowings mentioned above as of December 31, 2023 and September 30, 2024 was
8. CONVERTIBLE SENIOR NOTES
2025 Convertible Senior Notes
On March 29, 2019, the Company issued US$
The initial conversion rate of the 2025 Notes is
The holders may require the Company to repurchase all or a portion of the 2025 Notes for cash on
In connection with the issuance of the 2025 Notes, the Company purchased capped call options (the “2025 Capped Call”) on the Company’s ADS with certain counterparties at a price of US$
19
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
and ADSs of the Company upon conversion of the 2025 Notes and/or offset any potential cash payments that the Company is required to make in excess of the principal amount of any converted notes, as the case may be, with such reduction and/or offset subject to a cap.
2026 Convertible Senior Notes
On December 21, 2020, the Company issued US$
The initial conversion rate of the 2026 Notes is
The holders may require the Company to repurchase all or a portion of the 2026 Notes for cash on
PAG Convertible Senior Notes
On December 30, 2022, the Company issued US$
The PAG Notes will be convertible at the holder's option at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date and subject to the terms of the PAG Notes, at an initial conversion rate of
Holders of the PAG Notes have the right to require the Company to repurchase for cash all or part of their Notes, at a repurchase price equal to
20
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
2028 Convertible Senior Notes
On March 7, 2023, the Company issued US$
The initial conversion rate of the 2028 Notes is
The holders may require the Company to repurchase all or a portion of the 2028 Notes for cash on
If
Accounting for Convertible Senior Notes
As the 2025 Notes, the 2026 Notes, the 2028 Notes and the PAG Notes (collectively as the “Notes”) were not issued at a substantial premium, all of the proceeds received from the issuance of the Notes are recorded as a liability on the condensed consolidated balance sheet in accordance with ASC 470-20. That is, no portion of the proceeds from issuing the Notes are attributed to the conversion option at inception. The difference between the principal amount of each of the Notes and net proceeds from the issuance is considered debt discount and is amortized at their respective effective interest rates to accrete the carrying value of the Notes to its face value (
The cost of the 2025 Capped Call of US$
In 2023, the net proceeds from the issuance of the 2028 Notes was US$
In accordance with the facility agreements entered into in August 2024 (Note 13), upon PAG's total drawdown of US$
21
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
the issuance date was waived. It was accounted for as a debt modification pursuant to ASC 470-50, Debt—Modifications and Extinguishment (“ASC 470-50”), resulting in the effective interest rates of the PAG Notes held by PAG decreased from
In 2023 and 2024, the Company repurchased the 2025 Notes and the 2026 Notes with aggregate principal amount of US$
The carrying amount of the Notes as of December 31, 2023 and September 30, 2024 were as follows:
|
|
As of December 31, |
|
|
As of September 30, |
|
||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Principal |
|
|
|
|
|
|
|
|
|
|||
Less: unamortized discount and debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net carrying amount |
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2023 and 2024, the amounts of interest cost recognized were as follows:
|
|
For the nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Contractual interest expense |
|
|
|
|
|
|
|
|
|
|||
Amortization of the discount and issuance costs |
|
|
|
|
|
|
|
|
|
|||
Total |
|
|
|
|
|
|
|
|
|
As of September 30, 2024, the PAG Notes will be accreted up to the principal amount of US$
The aggregate amounts upon scheduled maturities of US$
9. INCOME TAXES
The Company is incorporated in the Cayman Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC. It also has intermediate holding companies in Hong Kong and Singapore. Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gains. Additionally, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed. Under the Hong Kong tax laws, subsidiaries in Hong Kong are subject to the Hong Kong profits tax rate at
Under the PRC Enterprise Income Tax (“EIT”) Law, which has been effective since January 1, 2008, domestic enterprises and Foreign Investment Enterprises (the “FIEs”) are subject to a unified
22
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
The effective tax rates were
The effective tax rates are subject to change in subsequent periods as the estimates of pretax income or loss for the year increase or decrease and certain subsidiaries and VIEs of the Company may or may not continue to qualify for certain preferential tax rates.
Valuation allowances have been provided on the net deferred tax assets where, based on all available evidence, it was considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. Realization of the net deferred tax assets is dependent on factors including future reversals of existing taxable temporary differences and adequate future taxable income, exclusive of reversing deductible temporary differences and tax loss or credit carry forwards. The Group evaluates the potential realization of deferred tax assets on an entity-by-entity basis. As of December 31, 2023, and September 30, 2024, valuation allowances were provided against deferred tax assets in entities where it was determined it was more likely than not that the benefits of the deferred tax assets will not be realized.
The Group evaluated its income tax uncertainty under ASC 740. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the financial statements. The Group elects to classify interest and penalties related to an uncertain tax position, if and when required, as part of income tax expense in the unaudited interim condensed consolidated statements of comprehensive income. As of December 31, 2023 and September 30, 2024, there was
10. COMMITMENTS AND CONTINGENCIES
Commitments for property management fees
Future minimum payments under non-cancelable agreements for property management fees consist of the following as of September 30, 2024:
Commitments for property management fees |
|
RMB |
|
|
US$ |
|
||
Remainder of 2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 and thereafter |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
Commitments for Licensed Copyrights and Produced Content
Future minimum payments under non-cancelable agreements for licensed copyrights and produced content consist of the following as of September 30, 2024:
Commitments for Licensed Copyrights and Produced Content |
|
RMB |
|
|
US$ |
|
||
Remainder of 2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 and thereafter |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
23
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Capital commitments
Future minimum payments under non-cancelable agreements for the purchase of fixed assets consist of the following as of September 30, 2024:
Capital commitment |
|
RMB |
|
|
US$ |
|
||
Remainder of 2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 and thereafter |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
Litigation, claims and assessments
The Group is involved in a number of claims pending in various courts, in arbitration, or otherwise unresolved as of September 30, 2024. These claims are substantially related to alleged copyright infringement as well as routine and incidental matters to its business, with certain restricted deposits used as security against certain lawsuits, among others. Adverse results in these claims may include awards of damages and may also result in, or even compel, a change in the Group’s business practices, which could impact the Group’s future financial results. The Group has accrued RMB
Starting in April 2020, the Group and certain of its current and former officers and directors were named as defendants in several putative securities class actions filed in federal court, which were purportedly brought on behalf of a class of persons who allegedly suffered damages as a result of alleged misstatements and omissions in the Group’s public disclosure documents. In May 2021, these actions were consolidated under one case. In June 2021, lead plaintiffs filed the operative amended complaint. In July 2021, defendants filed motion to dismiss the case. Briefing on the motion to dismiss was completed on September 29, 2021. However, in light of the common questions of law and fact at issue in this case and a related action against Baidu, the Court terminated the motion to dismiss without prejudice and ordered a motion-to-dismiss briefing for the two cases under a new coordinated briefing schedule. In September 2024, the court granted defendant's motion to dismiss in its entirety with prejudice, and the case was closed. As a result, as of September 30, 2024, the Group did not record any liabilities for the loss contingencies pertaining to the cases described above.
The Group is unable to estimate the reasonably possible loss or a range of reasonably possible losses for proceedings in the early stages or where there is a lack of clear or consistent interpretation of laws specific to the industry-specific complaints among different jurisdictions. Although the results of unsettled litigations and claims cannot be predicted with certainty, the Group does not believe that, as of September 30, 2024, there was at least a reasonable possibility that the Group may have incurred a material loss, or a material loss in excess of the accrued expenses, with respect to such loss contingencies. The losses accrued include judgments made by the court and out-of-court settlements after September 30, 2024, but related to cases arising on or before September 30, 2024. The Group is in the process of appealing certain judgments for which losses have been accrued.
11. RESTRICTED NET ASSETS
As of December 31, 2023 and September 30, 2024, the Company’s PRC subsidiaries, VIEs and VIEs’ subsidiaries had appropriated RMB
Under the PRC laws and regulations, the subsidiaries, VIEs and the VIEs’ subsidiaries incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Group either in the form of dividends, loans or advances of the combined and consolidated net assets as of September 30, 2024. Even though the Group currently does not require any such dividends, loans or advances from the PRC subsidiaries, VIEs and VIEs’ subsidiaries for working capital and other funding purposes, the Company may in the future require additional cash resources from its PRC subsidiaries, VIEs and VIEs’ subsidiaries due to changes in business conditions, to fund future acquisitions and development, or merely declare and pay dividends to or distribution to its shareholders. Amounts of net assets restricted include paid-in capital of the Company’s PRC subsidiaries and the net assets of the VIEs and VIEs’ subsidiaries in which the Company has no legal ownership, totaling RMB
12. EARNINGS PER SHARE
24
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
Basic earnings per share is computed using the weighted average number of the ordinary shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of ordinary shares and potential ordinary shares outstanding during the period under the if-converted method and the treasury stock method. The effect of the convertible senior notes was excluded from the computation of diluted net earnings per share for the nine months ended September 30, 2023 and 2024, as its effect would be anti-dilutive.
Basic and diluted earnings per Class A and Class B ordinary share for the nine months ended September 30, 2023 and 2024 are calculated as follows:
|
|
For the nine months ended September 30, |
|
|||||||||||||||||||||
|
|
2023 |
|
|
2024 |
|
||||||||||||||||||
|
|
Class A |
|
|
Class B |
|
|
Class A |
|
|
Class B |
|
||||||||||||
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|
RMB |
|
|
US$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings per share—basic: |
|
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|
|
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|
|
|
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|
||||||
Numerator |
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|
||||||
Net income attributable |
|
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|
||||||
Numerator used for basic |
|
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|
||||||
Denominator |
|
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|
|
|
|
|
|
||||||
Weighted average number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Denominator used for basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Earnings per share—basic |
|
|
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|
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|
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|
|
|
||||||
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
||||||
Earnings per share—diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
||||||
Allocation of net income available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Reallocation of net income available |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Numerator used for diluted |
|
|
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|
|
|
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|
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|
|
|
|
|
|
|
||||||
Denominator |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||
Weighted average number of ordinary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Conversion of Class B to Class A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Share-based awards |
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
||||||
Denominator used for diluted |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
||||||
Earnings per share—diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
13. RELATED PARTY TRANSACTIONS
a) The table below sets forth the major related parties and their relationships with the Group:
Name of related parties
|
Relationship with the Group
|
Baidu and its subsidiaries (“Baidu Group”) |
The Company’s controlling shareholder and its subsidiaries |
PAGAC IV-4 (Cayman) Limited ("PAG") |
An entity, of which the co-founder and executive chairman is the director of the Company |
Others |
Equity investees that the Group or Baidu Group has significant influence over |
b) The Group had the following related party transactions with the major related parties:
|
|
For the nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Membership services |
|
|
|
|
|
|
|
|
|
|||
Membership services revenue earned from |
|
|
|
|
|
|
|
|
|
|||
Online advertising revenues |
|
|
|
|
|
|
|
|
|
|||
Advertising services provided to Baidu Group |
|
|
|
|
|
|
|
|
|
|||
Advertising services provided to Others |
|
|
|
|
|
|
|
|
|
|||
Content distribution revenues |
|
|
|
|
|
|
|
|
|
|||
Content licensed to Others (i) |
|
|
|
|
|
|
|
|
|
|||
Other revenues |
|
|
|
|
|
|
|
|
|
|||
Others |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
|
|
|
|
|
|
|
|||
Loan due from PAG |
|
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|
|
|
|
|
|
|
|||
Cost of revenues |
|
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|
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|
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|
|||
License fees to Baidu Group |
|
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|
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|
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|
|||
Bandwidth and cloud services fee to Baidu Group |
|
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|
|||
Others (ii) |
|
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|
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|
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|
|||
Selling, general and administrative |
|
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|
|||
Advertising services provided by Baidu Group |
|
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|
|||
Others |
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2023 and 2024, the Group purchased content and others from equity investees in an amount of RM
26
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
c) The Group had the following related party balances with the major related parties:
Except for the non-trade balances disclosed below, amounts due from/due to related parties as of December 31, 2023 and September 30, 2024 relate to transactions arising from the ordinary and usual course of business of the Group and were trade in nature.
|
|
As of |
|
|||||||||
|
|
December 31, |
|
|
September 30, |
|
|
September 30, |
|
|||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Amounts due from related parties, current: |
|
|
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|
|
|
|
|
|||
Due from Baidu Group (i) |
|
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|
|
|
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|
|||
Loan due from PAG (ii) |
|
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|
|||
Due from Others (iii) |
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|
|
|
|
|
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|
|||
|
|
|
|
|
|
|
|
|
|
|||
Amounts due from related parties, non-current: |
|
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|
|
|
|
|
|
|
|||
Loan due from PAG (ii) |
|
|
|
|
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|
|||
Due from Others (iv) |
|
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|
|
|
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|
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|
|||
|
|
|
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|
|
|
|
|
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|
|
As of |
|
|||||||||
|
|
December 31, |
|
|
September 30, |
|
|
September 30, |
|
|||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Amounts due to related parties, current: |
|
|
|
|
|
|
|
|
|
|||
Loans due to Baidu Group (v) |
|
|
|
|
|
|
|
|
|
|||
Due to Baidu Group (vi) |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue in relation to services to be provided |
|
|
|
|
|
|
|
|
|
|||
Due to Others (viii) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Amounts due to related parties, non-current: |
|
|
|
|
|
|
|
|
|
|||
Due to Baidu Group (vi) |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue in relation to services to be provided |
|
|
|
|
|
|
|
|
|
|||
Due to Others |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
27
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
14. FAIR VALUE MEASUREMENTS
The following table sets forth the financial instruments measured or disclosed at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2023 and September 30, 2024 and non-recurring fair value measurements as of December 31, 2023 and September 30, 2024:
|
|
Fair Value Measurements |
|
|
|
|
|
|
|
|||||||||||
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
|
Total Gain/ (Losses) |
|
||||||||
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||||
Recurring |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
As of December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Time deposits (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale debt securities (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale debt securities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity investments at fair value with readily determinable fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Convertible senior notes, current portion (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Convertible senior notes, non-current portion (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
As of September 30, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Time deposits (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Short-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale debt securities (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Available-for-sale debt securities (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity investments at fair value with readily determinable fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Convertible senior notes, current portion (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Convertible senior notes, non-current portion (iii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recurring |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
As of December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Produced content monetized on its own (iv) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Long-term investments (v) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Equity investments without readily determinable fair value (vi) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
As of September 30, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Produced content monetized on its own (iv) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Long-term investments (v) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Recurring
(i) The fair value of time deposits is determined based on the prevailing interest rates in the market. Due to maturities of less than
(ii)
28
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
|
|
For the nine months ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2024 |
|
|
2024 |
|
|||
|
|
RMB |
|
|
RMB |
|
|
US$ |
|
|||
Balance as of January 1, |
|
|
|
|
|
|
|
|
|
|||
Addition |
|
|
|
|
|
|
|
|
|
|||
Disposals |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Conversion |
|
|
|
|
|
|
|
|
|
|||
Accrued interest |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Foreign currency translation adjustments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30 |
|
|
|
|
|
|
|
|
|
(iii) The Company carries the convertible senior notes at face value less unamortized debt discount and issuance costs on its condensed consolidated balance sheets, and presents the fair value for disclosure purposes only. The fair values of the convertible senior notes are classified as Level 2 or Level 3 in the fair value hierarchy. For further information on the convertible senior notes, see Note 8.
Non-recurring
(iv) Due to adverse changes in the expected performance of certain produced content and the reduced amount of ultimate revenue expected to be recognized, the Group performed an assessment to determine whether the fair value was less than unamortized content costs. The Group uses a discounted cash flow approach to estimate the fair value of the produced content titles predominantly monetized on its own. The significant unobservable inputs (level 3) include forecasted future revenues, production costs required to complete the content and exploitation and participation costs. The Group considers the historical performance of similar content, the forecasted performance and/or preliminary actual performance subsequent to the release of the produced content in estimating the fair value. Based on the above assessment, certain produced content predominantly monetized on its own were determined to be impaired and re-measured to the fair value as of each quarter end. Impairment charges of RMB
(v) The Group measures certain financial assets, including equity method investments at fair value on a non-recurring basis only if an impairment charge recognized. The fair values of the Group’s investments in publicly listed companies are measured using quoted market prices. For estimating the fair value of investments without observable market prices, the Group uses valuation methodologies, primarily the market approach, which requires management to use unobservable inputs (Level 3) such as selection of comparable companies and multiples, expected volatility, discount for lack of marketability and probability of exit events as it relates to liquidation and redemption preferences when applicable. When there is impairment of equity securities accounted for under the measurement alternative and equity method investments, the non-recurring fair value measurements are measured at the date of impairment. As a result of the above assessment, certain long-term investments were determined to be impaired, and the impairment charges were recognized in the condensed consolidated statements of comprehensive income during the year ended December 31, 2023 and nine months ended September 30, 2024.
(vi) For equity investments accounted for under the measurement alternative, the equity investment is measured at fair value on a non-recurring basis when there is an orderly transaction for identical or similar investments of the same issuer. The fair values of these investments were categorized as Level 3 in the fair value hierarchy. The fair values of the Group’s privately held investments as disclosed are determined based on the observable transaction price of recent rounds of financing and a price adjustment for the different rights and obligations between a similar instrument of the same issuer with an observable price change in an orderly transaction and the investment held by the Group. These non-recurring fair value measurements were measured as of the observable transaction dates. As a result of the above assessment, certain equity investments accounted for under the measurement alternative were re-measured to their fair values, and the total net unrealized losses were recognized in "Others, net" in the condensed consolidated statements of comprehensive income for the year ended December 31, 2023.
29
iQIYI, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in thousands of Renminbi (“RMB”) and U.S. dollars (“US$”),
except for number of shares (or ADS) and per share (or ADS) data)
15. ACCUMULATED OTHER COMPREHENSIVE INCOME
The changes in accumulated other comprehensive income by component, net of tax, for the nine months ended September 30, 2023 and 2024 were as follows:
|
|
Foreign currency |
|
|
Unrealized gains/(losses) on |
|
|
Total |
|
|||
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|||
Balance at December 31, 2022 |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive (loss)/income before reclassification |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive (loss)/income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Other comprehensive income attributable to noncontrolling interests |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at September 30, 2023 |
|
|
|
|
|
( |
) |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Balance at December 31, 2023 |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive loss before reclassification |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amounts reclassified from accumulated other comprehensive income |
|
|
|
|
|
|
|
|
|
|||
Net current-period other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|||
Balance at September 30, 2024 |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at September 30, 2024 in US$ |
|
|
|
|
|
( |
) |
|
|
|
The amounts reclassified out of accumulated other comprehensive income represent realized gains on the available-for-sale debt securities upon their maturity. The amounts reclassified were determined on the basis of specific identification.
16. SUBSEQUENT EVENTS
In December 2024, PAG drew down the remaining of US$
30