(Yicai Global) May 27 — Shares of iQiyi jumped 9.2% after the long-running Chinese video platform announced it posted a first-quarter profit, making money for the first time in its 12-year history, on a record high gross margin and lower operating expenses.
iQiyi share price [NASDAQ: IQ] closed at $3.91 yesterday, giving it a market capitalization of $3.4 billion. Shares of the Beijing-based company have lost nearly 70% of their value in the past 12 months.
iQiyi posted a net profit of CNY169.1 million (US$26.7 million) in the three months ended March 31, compared to losses of CNY1.3 billion (US$190 million) in the same period l year, according to the company’s latest earnings report. Revenue fell 9% to 7.3 billion CNY (1.1 billion USD) due to a 30% drop in advertising revenue.
“Our gross margin has steadily increased over the past three quarters and reached an all-time high in the first quarter of 2022. Our operating expenses, on the other hand, have also steadily decreased over the past three quarters,” Chief Financial Officer Wang Jun said.
iQiyi was able to effect the turnaround by reducing costs and increasing efficiency, the company told Yicai Global. It optimized its organizational structure to reduce labor expenses, it made better choices in content production and sourcing to reduce content costs, and it made full use of its existing resources to generate more advertising and membership revenue.
iQiyi had been losing money since its inception in 2010 due to high spending on original content and royalties. In March, founder and CEO Gong Yu said he wanted to break even this year.
iQiyi’s subscription revenue increased 4% in the first quarter year-on-year to CNY 4.5 billion (USD 705.4 million), largely due to a subscription price hike introduced at the late last year, according to the report.
Last December, iQiyi increased its monthly gold membership fee to CNY 22 (USD 3) from CNY 19, and its monthly non-consecutive VIP fee to CNY 30 from CNY 25. As a result, average monthly subscriber fees jumped to CNY 14.69 ($2.18) in the first quarter from CNY 13.64 a year ago, although the average daily number of paying users increased from 105.4 million to 101.4 million.
Editors: Dou Shicong, Kim Taylor