iQIYI, Inc.

Thank you for standing by and welcome to the IQU second quarter 2025 earnings conference call. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms. Cheng Yu. Please go ahead.

Thank you, Operator. Thank you, operator. Hello, everyone, and thank you for joining ITE's second quarter 2025 earnings conference call. The company's results were released earlier today and are available on the company's investor relations website at ir.ite.com. On the call today are Mr. Li Gong, our founder, director, and CEO, Mr. Jun Wang, our CFO, Mr. Xiaohui Wang, our CCO, chief content officer, Mr. Youqiao Duan, senior vice president of our membership system, Mr. Xiang Haoyang, Senior Vice President of Movie and Overseas Business. Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session. Before we proceed, please note that the discussion today will come in for looking through money under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include or are not limited to those aligning in our public filings with the FCC. ITE does not undertake any obligation to update any forward-looking statement except as required under applicable law. I will now hand over to Mr. Boone. Please go ahead.

Hello, everyone, and thank you for joining us today. Throughout the second quarter and the summer season, we delivered a vibrant, diverse line-up of content, securing our leadership in total drama, leadership, market share, according to Enlightened, our robust offerings were headlined by three original blockbuster drummers that generated an IT popularity index score of over 10,000, namely Field, Ding Jiangxian, Coroner's Theory, Zhao Xuelu, and the thriving lab, Sheng Wanwu. Among them, Field and Coroner's Theory resonated especially well with female viewers, while the thriving land captured the hearts of audiences of all ages and genders. These blockbusters further solidified our dominance in both the female and realistic genres. The performance of our variety shows was equally impressive. In the summer season, IT accounted for four of the top five spots in an enlightened total viewership list. The highly anticipated return of our flagship IP, the king of stand-up comedy season two, Xi Zhiguang, and the rep of China 2025, Xin Shouchang, generated impressive viewership with a king of stand-up comedy season 2 commanding the industry's highest wheel-shaped market share in its category in the summer. The strong performance of our premium content drove up key operating metrics in the summer, reflecting our commitment on delivering high quality that worth storing while continuing elevating the user experience across our platform. Building on the strong momentum of our content ecosystem, we are proactively exploring new opportunities to foster sustainable long-term value creation and achieve meaningful progress in our experience business and overseas business Let me begin with our experience business. Well, we are focusing on two key areas, IP-based consumer products and offline experiences. We are leveraging our extensive and unique IP collection to enhance our competitive edge and tap into the booming IP merchandising market in the first half of the year. our self-operated collect table. Trading cards achieved over 100 million RMB in GMB, with popular IPs such as a lobbying pavilion, Huai Shui Du Ting Field, setting new sales records. We'll also bring our IPs to offline experiences like IT land and immersive shelters. following an asset-light strategy. Currently, two IT labs in Yangzhou and Kaifeng are in development, while over 50 immersive shelters are already operating in around 30 cities nationwide. Our business outside mainland China continues to show strong growth momentum. In the second quarter, both the subscriber base and the revenue from the membership services reached record highs. We have now established four major operating regions, Southeast Asia, North America, Japan, and Korea, and the Middle East and North Africa. We have meaningfully enhanced our brand influence and expanded our global recognition by combining premium CPOP content with targeted localized operations, unlocking exciting opportunities for further growth. Now let's dive into the details of our business performance in Q2. Starting with content, which serves as the foundation of our business, we maintained our leadership of the core long-form drummer category, securing the top spot in total bill ship market share for four consecutive quarters, according to Enlightened data. Our performance in the second quarter was driven by our diverse content offering, highlighted by an enhanced lineup of female-oriented drummers, notably field achieved an ITA popularity index score of over 10,000, topping the enlightened list. Our original series, Demon Hunters Romance Will Do, is an in-house production that achieved a peak ITA popularity index score of over 9,800 thanks to its perfect blend of traditional Chinese tales and arts. Other Sanda Autotitles include A Dream Within a Dream, Shu Juan Yi Meng, and Loving Pavilion from our rumored theme, Heartbeat Shelter, Bian Yuan Qu Chang, which scores over 9,600 and 8,900 for popularity index, respectively. We also broadened our appeal with multiple suspense and realistic serials, including The Secret Path, and two drummers from our suspense theater, Breaking the Shadow, and Life for Life, The Secret Path and Breaking the Shadow were especially well-received by live-screen viewers, ranking among the top five most-watched titles on TVs. Our premium content has won high recognition from the industry and the latest Magnolia Award, one of the most prestigious honors of Chinese drummers. 13 titles produced by, all broadcasted on IT received an impressive total of 29 nominations, with four titles winning combined. eight awards, notably our original drama, To the Wanderer, or The Other Time, from our microcosm theater, which received the highest honor, the Best TV Series Award, along with the International Communication Award and Best Cinematography Award. Additionally, City of the City, Changchong Zhicheng won the special award, and VR Criminal Police, Washington, received both the Grand Prix and Best Original Screenplay Award. Moving on to microgrammers, a valuable complement to our content ecosystem, more people are turning into ITU to watch micro-dramas. In the second quarter, both average daily viewing time and unique visitors have double-digit sequential growth. Our library boasts a diverse collection of about 15,000 titles, forming a strong portfolio of micro-dramas. Since the second quarter, we have shifted our strategy focused on games consistently delivering premium microgrammers through original production and licensing, aiming to drive user growth and accelerate revenue expansion. Internal data indicates that premium microgrammers consistently outperform across key metrics, including subscriber conversion, viewing time, user engagement, and retention. Developing premium content is our core stress. Built upon years of experience, production, long-term video blockbusters, our expertise in content production and advanced technology can be seen as applied to premium microgrammers additionally. Our expensive IP collection provides us with a unique result for success IP adaptation. In Q2, we made great strides with original microgrammers and launched multiple titles that performed exceptionally well with audiences, including In Is Capable, Squawking Love, how dare you, for my dearest, notably, how dare you, our first IP-adapted micro-drama hit a new milestone by reaching a peak IT popularity index score of 5,500, a historical high for our platform. It even outperformed the latest hit My Sweet Home in both average daily unique visitors and revenue from new subscriptions in the first week of release. Its success extended beyond numbers. It broadened the typical micro-drama audience, attracting a younger and more diverse demographic. It's a great example of how we are successfully developing IP across multiple formats. The strong reception of this micro-drama traveled reservations for the long-form drama version and the second season of the animation based on the same IP. It also increased rewards of the animation's first season. showing the power of strategic IP development to drive engagement across formats. Turning to movies, we have dominated this category in view shape market shell for 14 consecutive quarters according to enlightened data. In the second quarter, we launched over 10 major titles catering to a diverse range of Audiences with a variety of genres, including crime, female, realistic, martial arts, comedy, and action. Some of the titles included the licensed movie, Detective Chinatown, 1900, and our original movie, The Only Way. We have been actively promoting Innovating our movie business model to drive long-term industry growth. This quarter, we were the first in the industry to use the revenue showing model typically seen with online films for newly released serial article movies. This approach includes revenue potential for titles with limited box office performance. A great example is our pilot project, Trapped Dapengshan, which generated over RMB 28 million in revenue sharing income in our platform, the highest for any movie title this year. Remarkably, this amount even surpassed its box office revenue share. showcasing the potential of this model to amplify returns. For variety shows, our focus on delivering top titles has yielded great results. According to Enlightened Data, IT released five S-plus rated variety shows in the first half of the year, the highest among all long-form video platforms, with four of them being original productions. Our flagship IT 5HAS Season 5 made a strong comeback with a record-high IT popularity score, surpassing member revenue expansion and securing its status nationally. renowned IP. Additionally, the competition formats in the latest season of The Wrap of China 2025 strongly connected with the audience, driving the popularity index score to over 9,500 and affecting a new record for the show. For animations, we continued to improve our original original production capabilities revenue from all over the divine realms, ShenGuoZhiShang has consistently ranked as a top performing Chinese animation out during the same period on our platform. Moving on to our content strategy and the pipeline. For long-form drivers, focus on crafting top-notch premium stories that balance high commercial value with innovation and artistic excellence. At the same time, we are committed to delivering a steady, diverse slate of content that resonates with our broad audience to elevate engagement. We are also reducing episodes' cost For a tighter, more compelling VR experience for the summer season, we introduced female-oriented key titles such as Coroner's Diary and The Wanted Detective, Ding Peng Bo. Among them, Coroner's Diary stood out as another in-house produced original that delivered exceptional performance surpassing an IT popularity index score of 10,000. Its attractive class generated a strong word-of-mouth buzz, further cementing its success. In addition, we also prepared a variety of new titles and our drama theater brands, notably The Thriving Land, a realistic theme drama from our masterpiece shelter, which exceeded an IT popularity index score of 10,000 within just four days of its release, driven by its compelling storyline that resonated with a broad audience. Its popularity also extended beyond our platform, topping both the industry's enlightened data and traditional TV station charts. Other highlights from our suspense theater include justifiable defense, Zheng Dang Fang Wei, and dead-end Shu Ying Li Gong. In the upcoming fourth quarter, we are excited about our lineup of Anticipated titles including Eight Thousand Miles of Clouds and Moon, Ba Qian Bi Lu Yun He Yue, Legend of the Magnet, Da Shu Ni Ren, Born with Luck, Bi Zhi Shang Fan Zui, Fox's Forest, Marchmaker, Sword and Beloved, Hu Yao Xiao Hong Yang, Wang Quan Pian, Strange Tale of Tang Dynasty, Sui to Chang'an, Tang Chao Gui Shi Lu Zhi Chang An, and Speed and La Shuang Gui. For micro-dramas, we focus on preeminent titles. We released two to three preeminent titles each week during the summer season, including Sorry of the Ruo Xi, Ruo Xi Zhuan, A Moment of Romance, Tian Ruo You Qing, Bastard Ray of Spirits Oven, Bai Yao Pu, The Sword, Revenge, Jin Ji Yu, Bai Yue Guang, Story of Zhao Yue, Zhao Yue Duan, and others. Drifting to movies, we are aiming to build a vibrant ecosystem for original production with three key projects. First, our blockbuster project, where we team up with top filmmakers to deliver and sell article hits. Second, the slipper-hit project, Baoqian Jihua, where we partner with rising directors to create bold self-article films that blend commercial appeal with fresh ideas. And third, the emerging film project, Miao Yue Jihua, is an innovative, collaborative, approach for original online movie under the minimum guarantee and revenue sharing model designed to spark creativity. Looking ahead, our original production pipeline features several titles for self-article release, including crime, action movie, The Shadow's Edge, action comedy, Enough is enough. The shadow's edge and the skin, notably the shadow's edge, recently premiered in theaters, achieving an impressive initial box office of over 300 million within just five days. For online original productions, we launched a ultimate mission, and never a thief, with upcoming titles such as Hero World Cable Placement, Wings of Dread, Wan Mi Weiki, and others. Additionally, we have enriched our lineup by bringing licensed CR article movies to our platform as the second window, such as the Maga Heat, Nezha 2, and the highly anticipated upcoming title like Amelie's Eyi, she's got no name, Jiang Yuenong, and the reaching role, Changzi Li Zhi. Notably, Nezha 2 has extended its success from filters to the online domain. becoming the first movie to exceed a popularity index score of 10,000 on our platform. For variety shows, we are committed to delivering top-tier content, enhancing the value of our multiple season IPs. In summer season, our eagerly awaited show, The Drap of China 2025 and The King of Sanda Comedy Season 2 made a strong return. In addition, our new observation reality show her prime jiejidangjia resonated positively with audiences. Entering the fourth quarter, we are thrilled to bring forth new seasons of of our acclaimed IPs such as the blooming journey season two, and the high young farmer season. Along with the new IP, One Year Together. For animations, we are committed to elevating our original project's key Original animations launched during summer include Over the Divine Realms, Shen Guo Zhi Shang, Embers, Yu Jin Xing Zhe, Celestial Bonds, Xian Chong, and Demon's Ascension, Mo Tian Ji, or highly acclaimed original production love between February and July, has returned with a second season in July and received positive feedback. For children's content, we are dedicated to turning beloved IPs into fully immersive ecosystem delivering experiences that grow with families and have something special for every stage of the parent-child journey. For the second half of the year, we will launch a number of key original productions, including a new season of our classical IP, DL Squad Season 4, and a brand new IP, Carmen and Bert's food truck, Xiao Tu Miao Central. Moving on to membership services, we focused on building a membership experience that connects with a broad audience, powered by a vibrant content ecosystem and the best-in-class services by constantly Enhancing the depth and variety of what we offer, we are delivering even more value to our members. One notable highlight is our family-oriented ice diamond plan, which integrates express packages that grant early access to show finals as part of its exclusive privilege. This approach has proven to be a key catalyst in driving new subscriptions and upgrades to this premium tier. In Q2, 78% of new Star Diamond subscription revenues come from upgrades. Additionally, our ad-supported basic membership plan provided an attractive option for prize-sensitive viewers to further enhance the member experience. We have launched over 10 bundled membership plans to foster stronger connections within the member community while supporting revenue growth. Looking ahead, we are focused on expanding this bundle of membership initiatives to reach even more audiences. We also made meaningful strides in improving perceived membership value. A highlight of the quarter is our Contrary Experience programs. This program enables content lovers brand advertisers, and more to gift virtual seats. Essentially, granting membership access for being watching content. This feature has driven higher engagement and amplified the popularity of key titles on our platform. So far in 2025, these purchases have already tripled the total from 2024, with show lovers accounting for the majority. Beyond that, we made membership even more rewarding this quarter by letting membership gift the Express package to friends and launching a dedicated channel for members to redeem points for projects. On top of that, we hosted 12 VIP-only events, including fun meet-ups, advanced screenings, and live variety show recording. Moving on to advertising business. In the second quarter, brand ad benefited from enhanced premium variety shows offering and seasonality. Our flagship content continued to be highly attractive to advertisers during the first half of the year. Our premium variety shows the industry in both the total and average number of advertisers attracted in Q2, and revenue from key advertisers delivered Double-digit growth annually and sequentially. Notably, several key industries are showing positive recovering trend with food and beverage and communication services achieving double-digit annual and sequential growth in Q2. Looking ahead, we will sharpen Our focus on maximizing ad sales from premium variety shows, dramas, and all drama theater brands. We see effecting potential in multiple season variety shows. For example, ad revenue from the King of Sanda comedy season two doubled compared to its first season. Additionally, we are capitalizing on new budgets for micro and short drummers, micro shows and customized programs. Early sales of micro shows are encouraging opening new marketing opportunities. We have also introduced a program product placements within micro-dramas and are preparing to launch dedicated ad products for our micro-drama center. Additionally, we are boosting monetization on smart TVs and expanding ad inventory with innovative formats. For performance ads, stress in relationship with Exciting clients while capturing budgets from high-growth sectors are our focus. In Internet services, we expanded our advertiser base by bringing in new partners. For e-commerce, we utilized programmatic advertising to maximize opportunities during the June 18 Shopping Festival. In the education sector, we expanded our advertiser base to include wellness management services and other industries, driving a year-over-year doubling in revenue. Moving forward, we will harness AI to optimize both advertising materials and placement strategies. unlocking even greater budget opportunities. In fact, AI-powered video ads dropped 20% increase in click-through rates, compared to those created without AI. Moving on to technology and products, we are committed to harnessing AI to transform entertainment experiences. amplifying content value and enhancing user engagement. In the second quarter, we introduced the industry's first AI-powered iJump ChaoKa feature, redefining VR engagement with long-form video by offering fast-paced micro-drama-like experiences. With a simple swipe up or down on mobile phone, users can effortlessly skip between key paths without missing any captivating moments. This feature is now available for over 2,300 drivers and already shows on our main IT mobile app. and has quickly become a popular feature of binge-watching and re-watching favorite shows, clearly boosting user engagement. Another pioneering example is Taodou World, Taodou Shujian, launched in early 2024 as an industry-first AI-based NPC dialogue platform. realizing our vision of AI-powered human-machine interaction, featuring over 102,000 NPC agents from our most popular content. It engages fans 24-7 in new and exciting ways. A standout is Paoto, an AI agent acting as a personal assistant offering support like video search, recommendation, and cloud insights. These innovations are transforming fan engagement and creating new value for our content. Beyond that, our harness AI to upgrade content production. A good example is our application of AI to streamline digital asset production. On the side of the great nobody tool, AI boosted the efficiency of digital asset generation by over tenfold, cutting costs and shortening production time. For the pre-production for romance dramas, we achieved a broke zone in qualitative script analysis now supporting in depth evaluation of the leading characters' romantic relationships and interactions. In addition to that, AI also helps in identifying unneeded plants. Moving on to our business performance in regions outside of mainland China, Our overseas business continues its strong growth momentum with membership revenue and membership scale expanding for eight consecutive quarters. In Q2, membership revenue grew by around 35% annually, driven by send-out performances in markets like Brazil, Mexico, Indonesia, and five Spanish-speaking regions. all reporting annual growth over 80%. Average daily subscribers reached all-time highs during the quarter. The outstanding performance is anchored in our exceptional content lineup, especially as the C drama popularity continues to grow globally. The original C-drama filled top popularity charts in 15 overseas markets on Premier Day. The winner, Nimitz, doubled version of A Dream Within a Dream set a new record for the highest daily revenue in its language segment on release day. Coroner's Corona's story achieved the highest popularity ranking in 13 overseas markets and led Google Trends in five markets within its first week, expanding its domestic success internationally. On top of the long-term video, We have been expanding our offering by introducing micro drummers overseas since March and have gained strong momentum. Membership revenue attributed to micro drummers surged month by month during the second quarter. By the end of June, micro drummers ran as the second largest category, attracting new subscriptions in Indonesia, Korea, and Brazil. Our original micro-drama is capable of squashing love, gathering widespread international acclaim, expanding the reach and influence of our micro-dramas beyond the domestic market. Building on the initial success, we plan to ramp up original microclimate production overseas in the second half of the year. Expanding beyond content, we continue to amplify the global influence of CPOPs on offline marketing events such as fan meetings and media conferences that spotlight Chinese celebrities In the second quarter alone, we hosted three events that drew widespread engagement from users, media partners, and advertisers. Looking ahead, we are gearing up to scale these events internationally, further driving the reach of Chinese content globally. In summary, we are committed to building a beloved national brand and strengthening our market leadership with exceptional user experiences and a vibrant company ecosystem. And at the same time, we are focusing on innovation and investing in key growth areas such as AI applications, micro drummers, experience business, and global expansion. all with the goal of planning sustainable long-term success. Wang Jun. Okay. Thanks, Mr. Gong, and hello, everyone. Let me walk you through the key numbers for second quarter. In the second quarter, the total revenues were RMB 6.6 million. the membership services revenue reached RMB 4.1 billion, down 9% annually, primarily due to our lighter content slate compared to the same period last year. The online advertising revenue was 1.3 billion, decreased by 13% annually. During the quarter, some advertisers adjusted their advertising and promotion strategies in response to macro pressures. The account and distribution revenue reached RMB 436.6 million, down 37% annually, primarily due to the decrease in barter transactions. Other revenues increased by 6% annually to RMB 829.3 million. Moving on to costs and expenses. We have maintained a discipline in the cost and expense management. The accounting cost with RMB is 3.8 billion, representing a saving of 8% annually, primarily due to a lighter content slate in the quarter. And the total operating expenses were RMB 1.4 billion, represents a saving of 3% annually. Turning to profits and cash flows. The non-GAAP operating income was RMB $58.7 million. The non-GAAP operating income margin was 1%. As of the end of the second quarter, we had cash, cash equivalents, restricted cash, short-term investments, and long-term restricted cash included in prepayments and other assets. The total of RMB was $5.1 billion. In addition, the company had a loan of US$522.5 million to PAG recorded under a month deal from Roget Parties. We continue to improve our capital structure. In the second quarter, we repurchased a total principal amount of $85 million of the 2028 notes for cash, and outstanding principal balance remaining for the 2028 notes is $208 million as of the end of the second quarter. As we continue to optimize our debt structure, our net interest expense decreased by 33% compared to the same period last year. For detailed financial data, please refer to our press release on our IR website. Now we will open the floor for Q&A.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question.

Your first question comes from Maggie Yeh with CLSA.

晚上好,感谢管理层提供的机会。 近期我们看到行业们有一些政策上的变化, 能否请管理层分享一下这些变化对我们公司的影响? Regarding the recent change of policy in China's long-form video industry, could management share with us your look on the potential impact to the company? Thank you.

Or invite our chief content officer, Xiaofei, to take this question. Okay, thank you. Let me answer another question. The launch of the new policy is indeed a major benefit to the entire film industry. The whole industry and we are all happy about it and fully support it. The specific benefits are reflected in several dimensions. First, it can effectively shorten the period from production to review to broadcast, so that the work can meet the audience more happily. The introduction of the new policies represents a significant positive development for the overall long-term video industry, which we and the entire industry welcome and fully support.

These policies bring benefits across multiple aspects, First, the time cycle from content production and review to broadcast can be effectively shortened, allowing content to reach audiences more quickly. This not only improves scheduling stability, but also ensures that the content aligns more closely with current social sentiment and resonates with the audience. Additionally, it also enhances the efficiency of the company's capital visualization.

Second, these policies enhance the flexibility of content creation, providing creators with greater creative freedom.

This, in turn, can significantly boost the content appeal and promote greater content diversity.

Third, the policies could strengthen the synergy between online video platforms and traditional TV networks.

More content can benefit from simultaneous online and linear TV broadcasting, expanding distribution channels for quality production, stabilizing content distribution prices, and enhancing the reach and influence of content. This is beneficial for both online video platforms and traditional broadcasters. Last but not least, after the release of these new policies is sending a strong signal and the signal can attract more talent and capital into the content production, driving the healthy and vigorous development of the entire industry. Thank you.

Your next question comes from Xiuqing Zheng with CICC.

谢谢管理层接受我的提问。 那刚才公博提到了非常多的暑期档的爆款剧集和综艺。 我们也注意到最近深万物的热度过万,口碑很好。 那想请管理层帮我们整体回顾一下暑期的内容表现。 我也想请教一下考虑广电总局新规的影响下,我们未来的内容策略是怎么样的。 谢谢。 Thanks, management, for taking my question. 龚博 mentioned a great number of hit dramas and variety shows during the summer seasons in your prepared remarks. We have also noticed that recently Austin Stone has achieved the IT popularity index of over 10,000 and received excellent reviews. Could management provide an open-hour review of the content performance this summer? Additionally, considering the impact of the new regulations, what's your future content strategy?

Thank you.

I would like to start with a question from Xiaohui. I would like to say that we will be more innovative in the field of comprehensive learning behavior. For example, in the field of broadcasts, for example, in terms of different specifications, um um

The CEO is taking the first part of the question. He's commenting on the new policies. After the release of the policies, I think from the company standpoint, we will promote innovation in different aspects of the content production. For example, multi-season content and also different formats of the innovative dramas can be produced in the future. And then next, we'll invite our chief content officer, Xiao Hui, to take the rest.

Okay, I'll answer your question next. In fact, in the 6th to 8th months, we have achieved outstanding performance in the field of drama, variety shows, and movies. Among our three self-produced feature films, Lin Jiangxian, Zhao Xuelu, and Sheng Wanwu, we have reached 10,000 views. We have reached 10,000 views. We have reached 10,000 views. We have reached 10,000 views. The drama king of the Chinese-language generation, Dan Kouji, and the new novel, 2025, have also taken over the variety of variety shows in the market. The recent box office revenue of the movie, Pufeng Chuiying, has surpassed 300 million yuan. The overall box office of the third-party institutions in the market is expected to exceed 1 billion yuan. These useful contents once again prove the audience's high love for the head content, and further reflect the powerful strength of our head content.

During this year's summer season from June to August, we delivered outstanding performances across drama, variety shows, film, and microdramas. Three of our original drama blockbusters, namely Field, Coroner's Diary, and Describing Land, all achieved ITE Popularity Index score of over 10,000. For microdrama, How Dare You hit a new milestone for ITE Popularity Index score. And for variety shows, returning flagship titles such as The King of Stand-Up Comedy Season 2 and The Wrap of China 2025 led the market. Last but not least, on the film front, the theatrical release The Shadow's Edge recently surpassed RMB $300 million in box office revenue, and the third-party market forecast predicted total box office revenue to exceed RMB $1 billion. And all of these, once again, demonstrate the audience's strong affection for premium content,

that further demonstrated our strength in producing top-tier content. In the long-term, we will continue to focus on top-notch dramas with high commercial value. As Tim mentioned, we will not only focus on long-term dramas, but also on super short-term dramas with higher commercial value. At the same time, we will cover our suspense, romance, reality, comedy and other core content in all five theaters. In the future, benefiting from the new policies for the industry, we aim to strengthen our content strategies across different categories for the long-form

dramas, we will continue to focus on premium productions with high commercial value. And like Tim mentioned earlier, that not only will focus on innovations for long-form video dramas, and it will also to improve our innovative for short dramas as well. And also for long-form video dramas, we will leverage our five major drama theaters to comprehensively cover key content genres such as suspense, romance, realistic, and comedy. For the production side, we'll focus on creating innovative contemporary storylines with a tighter pacing and a greater viewer appeal. In terms of content promotion, we'll place a stronger emphasis on creativity, thus working on emotional resonance, adopting strategies that better engage younger audiences.

In terms of micro-structure, we hope to attract more users who have never seen micro-structure before. We will continue to adopt some long-term development experience, expand the cooperation with head creators, create more head micro-structures, and try to develop in series. In terms of commercialization, in addition to the existing membership mode plus free mode, we will actively explore the opportunity to launch, commercialize, and generate IT.

For microdramas, our approach toward premium quality production is expected to attract more users who previously did not watch microdramas to the content genre. We'll continue to apply our long-form drama development expertise, expand collaborations with top creators, and produce more flagship titles while exploring serialized formats. On the monetization side, beyond our existing membership and free models, We will actively explore opportunities such as content distribution, branded content integration, and IP merchandising development.

In addition to the details, we will also continue to seek for more breakthroughs. Zongyi will continue to focus on the IP of the first generation of Zongwen, and explore its latest expression of innovation. In terms of movies, in the future, we will use the three major strategic modules of the big screen project, the money-raising project, and the message project to systematically set up the production of self-produced movies. We will further expand the continuous influence of IT movies on the online market and on the online market, as well as the co-operative ability of IT online and offline. In terms of the content of Song Man and Shang Wan, we will continue to improve our self-produced ability in the future, and focus on the commercialization of children's IT with high-quality Chinese comics. Thank you.

Beyond dramas, we're also striving for research across the different other categories. For variety shows, our focus remains on the flagship multi-season IPs while continuing to explore innovative content formats. For films, we're working on a comprehensive framework to strengthen our original film projects through our three strategic initiatives, namely Blockbuster Project, Sleeper Hit Project, and Immersion Film Project. These efforts will expand our market share in online video, online movie streaming, enhancing our influence in theatrical releases, and strengthen synergies between IT's online and offline platforms. And for animation and children's content, we'll continue to improve our original production capabilities, focusing on high quality domestic animations while enhancing the monetization of children's . Thank you.

So our next question comes from Jijie Zhu with Guangfa.

Thank you for your question. I would like to ask a question related to the source and IP extension. Can you share with us your thoughts on this? We also see that the company is preparing a new asset model for iQIYI. I will translate the question myself. This year we have seen that IT is preparing for the offline theme park, at the same time selling related IT products during the broadcasting of some top key dramas. Could you share about these strategies in the future and how do you think of this market size? Thank you.

I have a question. There are two parts to the IP experience business. One part is the IP consumer product, and the other part is the offline experience business, which is the entertainment business. The IP consumer product business used to only do authorization, but the proportion of GMA for authorization is too low. So we started trying to do it ourselves this year, which is from the IP consumer product's specialization design to production and production, and finally to sales.

Our CEO, Gong Yu, is taking this question. So for IT's experience business, we have two key areas, IP-based consumer products and offline experiences. For IT consumer products, in the past, we solely operated in IT licensing, but the percentage of GME is relatively low in the whole market as a whole. So starting this year, we're now transitioned to self-operation, building a consumer product system that includes planning and design, manufacturing and sales.

现在只尝试了部分的产品做卡牌。 Right now, we're starting to test the water, starting from the collectible carbs.

And then also we're testing the water for different sales channels. So we will expand that effort in the future.

There are two types of in-house experience business. One is a stronghold. This is a real estate model. That is, each store is a collaborative investment construction. There are now more than 30 cities and 50 businesses operating. And for the offline experiences, we overall would take an afterlife approach to this strategy.

It mainly has two parts. The immersive theaters, which now is a licensed model that we operate with different stores, now have Over 30 cities have more than 50 stores. And also for IT events, we also take the outside light approach. we support in terms of content management. And also technology, sorry.

乐园旅除了有基于爱奇艺IP的游乐项目以外, 还有这个IP消息的销售扩大, 这个两个业务相互有协同效应, 来促进爱奇艺衍生品的销售。

For IT land, in addition to the gains and also the experiences based on our IPs, we also have the derivative product, the IT consumer goods, that will be selling in the stores. So collectively, it will create synergy of our overall experience business.

现在除了已经确定的扬州公开封以外,可能年底前还有一两家确定的。

Right now, we have the Yangzhou and Kaifeng locations are in development. And by the end of this year, probably we'll have more locations to be announced. Thank you. Thank you.

So our next question comes from Thomas Chong with Jefferies.

Good evening. Thank you, Manager Chong, for accepting my question. My question is how do we look at the subsequent financial management plans? Thank you. Good evening, management. My question is about our debt management plan. Can management share more color about this? Thank you.

Okay. Thank you, Thomas. I'm Wang Jun.

I'll answer this question. As you can see here, Aichi's debt is mainly divided into two parts, which are US dollars and RMB.

Thanks. Our CFO Wang Jun is taking this question. As you probably mentioned and noted, that for our debt, we have to price overseas U.S. dollars and domestic RMB.

Then in the foreign dollar part, the debt that investors have the right to buy back is in the first quarter of next year. As of the end of the second quarter, you will notice that the outstanding balance for the 2028 quarter

Convertible notes is only $208 million. And currently, the company has sufficient cash to meet the debt application if the CP holders decided to put that to us.

At the same time, in the domestic RMB debt, in the past few seasons, we have noticed a significant change in the long-term ratio. Currently, our long-term debt, which is more than a year, and the short-term debt ratio are close to 1 to 1.

所以这个比例从管理层的角度来讲是非常的健康,能够顺利地支撑未来的我们的业务的运营和业务的增长。 In terms of the domestic debt dominating in RMB, you probably would notice in the past few quarters, the long-term... loan versus short-term loan has significantly improved. Currently, the portion is like 50-50 in terms of our outstanding loans as a whole. And so overall speaking, the capital structure now is pretty healthy enough to support our daily operations and also the long-term development and growth in the future. Thank you.

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

Thank you, everyone, for joining the call today. And if you have any questions, don't hesitate to contact us. See you next quarter. Thank you. Bye-bye. Thank you. Thank you.

That does conclude our conference for today. Thank you for participating in my down disconnect.