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IQIYI Inc. (IQ) Q4 2020 Earnings Call Transcript

IQ Earnings Call - Final Transcript

IQIYI Inc. (NASDAQ: IQ) Q4 2020 earnings call dated Feb. 17, 2021

Corporate Participants:

Fan Liu — Head of Investor Relations

Yu Gong — Founder, Chief Executive Officer and Director

Xiaodong Wang — Chief Financial Officer

Xianghua Yang — Senior Vice President

Analysts:

Thomas Chong — Jefferies — Analyst

Eddie Leung — Bank of America Merrill Lynch — Analyst

Yiwen Zhang — Citigroup — Analyst

Alex Xie — Credit Suisse — Analyst

Zhijing Liu — UBS — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the iQIYI Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your first speaker today, Investor Relations Director of iQIYI, Fan Liu. Thank you. Please go ahead.

Fan Liu — Head of Investor Relations

Thank you, operator. Hello everyone and thank you for joining iQIYI fourth quarter and fiscal year 2020 earnings conference call. The company’s results were released earlier today, and are available on the company’s Investor Relations website, at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; Mr. Xiaodong Wang, our CFO; Mr. Xiaohui Wang, our Chief Content Officer; and Mr. Xianghua Yang, Senior Vice President of our Membership business. Mr. Gong will give a brief overview of the company’s business operations and highlights, followed by Xiaodong who will go through the financials and guidance. After their propelled the remarks, Xiaohui and Xianghua will join Mr. Gong and Xiaodong in the Q&A session.

Before we proceed, please note that, the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC. iQIYI doesn’t undertake any obligation to update any forward-looking statements, except as required under applicable law.

With that I would now turn the call over to Mr. Gong. Please go ahead.

Yu Gong — Founder, Chief Executive Officer and Director

During the quarter, [Technical Issues]. We believe that as long as we focus on our core strategies, which counter on content, we were able to secure sustainable long-term growth. Up to now, we have already seen some clear rebound of our membership business.

Now, let’s go through our business segments. Membership; first let’s start with membership. As of December 31, 2020, our total subscribers reached 101.7 million. Membership services revenue declined by 3.5% year-over-year to RMB3.8 billion, mainly attributable to the decrease of subscriber numbers. During the quarter, our subscribers declined by 3 million, which was mainly impacted by the lack of top content. During the first half of the quarter, in Q4, we launched several movies that performed well during the quarter, including The Eight Hundred; Babai, The Sacrifice; Jingang Chuan, Legend of Deification; Jiang Ziya, and others. However, we didn’t have enough exclusive blockbusters in the drama or variety show before November 15.

Starting in the second half of the quarter, we launched several well-received new dramas and shows, such as Ultimate Note, Zhong Ji Bi Ji; Qipa Talk, Qipa Shuo; and My Best Friend’s Story, Liu Jin Sui Yue; which to some extent helped to relieve the sliding trend of the subscribers. Despite the volatility in our membership during the first quarter, we observed some positive data points. First, our lifetime membership, which can be used on all terminals and QIYI GUO membership, which can be used on smart TV, both recorded the highest quarterly net additions for the past three quarters. We believe it reflects user recognition of our premium membership benefits and experience on the TV side.

Second, our diversified high-quality content caters to the varied interest of our membership, which significantly increased our membership conversion. And third, we rolled out a number of membership benefit upgrades during the quarter. For example, we merged our Literature Membership into our VIP membership, providing an exclusive library of premium books for free. We also established partnership with famous brands, such as, Starbucks and McDonald’s, to provide more value-added benefits to our membership.

In 2020, we provided more than 2,300 benefits for our membership, more than 60 million members have received over RMB200 million benefits for the whole year, which was more than four times higher than last year. Despite the volatility in total subscriber numbers in the short-term, we remain confident in the mid-and long-term development of our membership services business. Our confidence is largely a result of our continuous exploration of premium original content and the enhancement of our in-house production capabilities.

Meanwhile, we continue to develop new innovative business model across various content categories, to further open room for revenue growth. Take movies, for example, we made breakthroughs in our Premium Video on Demand or PVOD mode and in original movie during the quarter. For PVOD in December 31, we launched Fight For Love, Tong Ju Mi You [Indecipherable], the online movie with a huge fan base, in iQIYI’s Super Cinema through PVOD mode. The title was triggered with word-of-mouth on social platform. During the Chinese New Year, iQIYI Super Cinema launched two cinema level films, [Indecipherable], and Legend of [Indecipherable] in Shaolin Temple, with revenue exceeding our expectations.

On January 4, 2021, our new revenue-sharing rule for online movies was rolled out. For original movies, the PVOD mode without theatrical release, is a key leading direction to expect in the future. We believe there are only a very limited number of online platforms that is capable to provide this kind of service.

As you know, with the pricing adjustment which took effect since November 16. Specifically, we lift the price for our Golden membership on non-iOS devices to the same level as that on iOS devices. This adjustment has some temporary impact to our subscriber numbers, but the impact was very minimal and we have already seen very healthy growth of subscribers now.

Moving over to our advertising business. Overall, the Chinese advertising market continues to recover and our advertising business has stabilized. While the first quarter is a transitional off-season for advertising, our advertising revenue achieved a stable growth both, year-over-year and quarter-over-quarter. This is mainly due to our strong revenue from content marketing, which contributed 53% of our brand ad revenue, up 2 to 3 percentage points over last quarter.

For brand ads, the number of advertisers on our platform continued to recover, almost to the same level of last year. Despite the situation that advertisers from food and beverage, cosmetics, as well as toiletry, traditionally spend less in fourth quarter. E-commerce, medical services as well as mobile phone advertisers contributed most of the incremental growth during the fourth quarter.

For performance ads, the sequential growth during the quarter was largely attributable to the contribution of e-commerce and network services industry. The conversion rates and monetization capabilities of this industry improved with the rollout of new products and technologies. The year-over-year decrease was mainly driven by a decline in available inventory, as well as tightened regulation, such as the app rectification that was ordered by the Ministry of Industry and Information Technology.

Content; we continue to execute our content strategy, with a focus on top-tier content, in-house production and innovation. This is critical for capturing the entertainment demands of different user cohorts, allowing us to launch hit dramas, variety shows and animations in innovative forms. During the first quarter, dramas, variety shows, animations and children channels retained their leading position among all the platforms in terms of number of top titles and video viewerships. According to the third party data, video viewers of our drama account were 41% of overall market viewership in Q4. The comparable number of animations, including children animations, was 43%, we led in both of these two verticals.

In terms of original content, we continued to advance several development of IPs, catering to both the basic needs of mass users and in-depth needs of different user segments. One, for drama, following the completion of the Sound of the Providence, Chong Qi Zhi Ji Hai Ting Lei. We launched a new young adventure drama Ultimate Note, Zhong Ji Bi Ji, adapted from Nanpai Sanshu’s Daomu series, which have been well received by our users and have immediately gained in popularity since it first aired. Similarly, following Marry Me, San Jia Re Jun Xin; and Love is Sweet, Ban Shi Mitang Ban Shi Shang; or young romance titles, like My Best Friend’s Story, Liu Jin Sui Yue; Dear Missy, Liu Bat Hei Di Neui Haai; The Blooms at Ruyi Pavilion, ru yi fang fei; and The Moon Brightens For You, Ming Yue Zeng Zhao Jiang Dong Han, continued to satisfy strong user demand for the emotional content. We also would like to recommend Hikaru No Go sequel adapted from Japanese animation. The title has been deeply loved by the younger generation. This success demonstrates that we are deepening penetration of the original young drama vertical.

Two, in terms of variety shows, our original content launched during the quarter, includes Qipa Talk, Dimension Nova, Kua Ciyuan Xinxing; Glory Is Back, [Indecipherable], and Ladies’ Talk, [Indecipherable], among these titles, our classic self-produced show, Qipa Talk, continued to give our audience surprises in its seventh consecutive year of running. Dimension Nova creates dialogs between humans in real world and virtual figures, penetrating the younger generation. Glory Is Back combines documentary-style and reality show shooting methods, incorporating new and popular elements into its historical documentary.

Third; for animation, we continued to update our most popular self-produced animation. For example, Be My wife, and the children’s animation, Deer Squad Episode 21-40. Deer Squad has been a remarkable success, not only in China, but also in various overseas countries. On January 24 to 25, 2021, Deer Squad was aired in the U.S. and became the first original Chinese animation that was launched in the U.S. channel of Nickelodeon. According to Nickelodeon data, Deer Squad was well received by the kids overseas. For example, during the broadcasting period in Australia and the Philippines, the average rating of Deer Squad topped their kids channels, surpassing some famous IPs such as Peppa Pig.

For the first quarter of 2021, our key dramas will include My Dear Guardian, Qin Ai De Rong Zhuang; My Heroic Husband, Zhui Xu; A Little Dilemma, Xiao She De; Breath of Destiny, Yi Qi Shen Hu Xi; Spirit Realm, Ling Yu; Good Life, Sheng Huo Wan Sui; and Vacation of Love, Jia Ri Nuan Yang Yang. Among which, Spirit Realm was aired on 9 January and widely followed by its fans. Vacation of Love was aired on 25 January, which is a first light comedy produced by the long-form [Phonetic] video platform to celebrate the Chinese New Year. For variety shows, Theatre for Living was launched on 16 January and scored 9.2 in Douban. Our blockbuster title, Youth with You Season 3 was released yesterday. Others to be launched in the first quarter include RiCH BOOM, Youth With You, and [Indecipherable] About You. For animations, the key programs include Tuktak Man, etc.

You may have noticed that there was a resurgence of COVID-19 in a lot of places in China since December, although our users returned to normal life and work, large group gathering and cross-region travel for business were still largely limited. This new outbreak also caused an impact on our offline production work. We will follow the strict quarantine requirements, and try our best to meet the schedule of our content launch.

Technology; during the quarter, we continued to implement more precise and efficient user growth strategies, by using proprietary algorithms and technology, we can more effectively match content and user in various scenarios. Two technology details worth highlighting this quarter includes; one, personalization. We’ve enhanced our user satisfaction via our personalized algorithm in multiple scenarios, such as in iQIYI App homepage and channel page as a result. The number of users who watch the content recommended by iQIYI’s App homepage doubled year-on-year in Q4.

Two, user interaction; we took the lead in initiating the screen bullet with no spoiler feature. The feature essentially blocks the early disclosure of storyline by the user, in less than a month since its launch, report of spoilers was reduced by about 30%.

Meanwhile, we continue to assist our content production by the intelligent technology. Two developments worth highlighting this quarter includes; one, an IMS delivery standard adoption. We took the lead in adopting the IMS delivery standard in China, applying this standard, we collaborate with domestic production companies to standardize the process of post-production network delivery, sample submission for censorship, and production by online platform. Additionally it can unify our delivery standards with international mainstream OTT platform, such as Netflix and HBO. Currently, we have adopted the standard in our self-produced dramas, and we expect it can double our delivery efficiency.

Two, iQIYI’s proprietary intelligent film and television production systems. This provides an intelligent script dismantling function, which can identify the things, characters,and other elements from the scripts. This analysis can achieve up to 95% accuracy rate. Furthermore, the efficiency is greatly improved by more than 20 times versus the manual work. For example, the dismantling of 200,000-character scripts can be completed within minutes. The system has been used in many self-produced dramas, such as Good Life, Out of the Dream, Crush, and My Treasure.

During the quarter, we maintained our leading position in TV time spend under traffic. We believe that larger screen is an important feature trend in the long-form video industry compared with developed markets like the United States, China’s TV user traffic and monetization has greater growth potential. We entered into a formal agreement with BMW China in December. The agreement allowed us to create connected car services on BMW’s luxury models, with updated film and drama content, and with an AI-driven interactive experience.

In terms of VR, we stick to our strategy that allows us to capitalize our content through various approach. On content iQIYI’s pulsating interactive movie, [Indecipherable], was launched in November. Another movie, The Minister of Kunlun [Phonetic], will be launched in Q1. We are also advancing the offline operations that utilize our VR contents. Following the opening of our flagship VR full seating cinema in Shanghai. Cinema spots are being delivered or are under trial operations in Beijing, Shenzhen, Ningbo, Suzhou, etc.

You may have also noticed that our VR devices subsidiary, which mainly focused on VR head gear, recently completed Series B financing round of more than RMB100 million. This is China’s largest financing in VR arena since the end of 2019. This round of financing will be used for research and development of the key VR technologies, algorithms, new products and the construction of a more robust content ecosystem.

2020 conclusion and 2021 outlook. 2020 has been unusual and challenging year for us as well as other players in the industry. On one hand, our Mist Theater became industry benchmark for self-produced content and generated both strong reputation and ROI. This validated the success of the vertical content theater mode. On the other hand, COVID-19 pulled forward quite a lot of users consumption of long-form videos in the first quarter, and the lack of content, especially the scarcity of movies in the first nine months, caused a great volatility in our subscriber numbers. However, as we began to aggressively launch more content in the second half of the fourth quarter, our subscribers’ retention rate started to improve steadily.

In 2021, our more than 50 in-house studios will enter full production. These studios focus on diversified content categories, that cater to the viewing demand of different user cohorts. We expect the originality of our platform as well as diversification of our content will be largely improved. This will undoubtedly promote sustainable development of our membership business. At the same time, we strive to make breakthrough in movies, especially, original movies. Despite the recent resurgence of COVID-19 in multiple regions in China, we will try our best to cope with interruptions to our shooting schedule. We believe that with a positive large-scale promotion of vaccines later this year, the pandemic will be well-contained, and our business can restart the growth instant [Phonetic].

With that, I’ll turn it over to Xiaodong to talk about our financials.

Xiaodong Wang — Chief Financial Officer

Morning, everyone. Let me review our key financial highlights for December quarter. For the first quarter, total revenue reached RMB7.5 billion. Membership business continued to be our largest business pillar, accounting for 51% of our total revenue. Our advertising business remained stabilized both on a year-over-year and Q-over-Q basis, despite the weak seasonality. Our cost of revenues decreased 14% year-over-year, mainly due to the 10% year-over-year decline of the content costs.

SG&A expenses decreased 6% year-over-year. As a result, our operating loss margin narrowed to 18% from 34% in the same period last year. As of December 31, 2020, the company had cash, cash equivalents, restricted cash and short-term investments of RMB14.3 billion. We closed our $800 million and convertible senior notes offering and a public follow-on offering of 40 million ADS at a price to public of $17.50 per ADS on December 21, 2020. The underwriters exercised their option in full to purchase additional $100 million aggregated principal amount of the notes under the option, in part to purchase 4.6 million additional ADS, which closed on January 8, 2021. For details on our financial data, our CD and the follow-on offering, please refer to our press release on our IR website. For the first quarter of 2021, we expect total revenues to be between RMB7.07 billion and RMB7.53 billion, an 8% to 2% decrease year-over-year. This forecast reflects iQIYI’s current and preliminary view, subject to change.

I will now open the floor for Q&A.

Questions and Answers:

 

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Thomas Chong from Jefferies. Please ask your question.

Thomas Chong — Jefferies — Analyst

[Foreign Speech]

Thanks management for taking my questions. I have a question regarding the membership revenue. Management has just talked about the number of studios in 2021 will be more than 2020, producing diversified content, as well as some data points showing the recovery in terms of the paying subs. Can management talk about how we should envision the medium to long-term paying subs trend? And on the other hand, how we should think about the ARPU outlook in the coming years? Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

[Foreign Speech]

Okay. So as you may know, we actually were at a peak in terms of our subscriber numbers in the first quarter last year. However, because of several reasons, for example, our first reason is our COVID-19 pandemic, were lack of theatrical movies supply in most of the time last year, so this will actually impact our film supply in our platform as well. The second reason is we actually got negatively impacted by our drama supply delay and also there is some censorship impact for our drama category. Third reason is that our advertisers’ budget, have also massively impacted our variety show supply. There is also some reason for our animation content delay. So, all these reasons actually lead to quite significant volatility for our subscriber numbers last year. However, we have seen a very significant improvement for this situation coming into this year. We have actually seen a very good improvement in terms of both our self-produced content broadcasting and also the license content supply.

And also, as you have already observed during the Spring Festival, during our Chinese New Year, we have seen very strong performance for the theatrical movies. That will actually suggest that we will also see a quite good performance for the film category in our platform as well. So overall, we see a very good improvement for the subscriber’s growth trend up to now.

[Foreign Speech]

I need to add-on a point. Although we see a very healthy growth trend for subscribers, we also have some certainty for the growth subscribers growing trend. We need to keep — we need to remind investors to keep that in mind.

[Foreign Speech]

We expect our growth for our ARPU. However, it’s one that has a very big magnitude, because it’s basically for our pricing adjustment, we just — with the pricing on the Android devices to the similar or with iOS. So that will actually lead to not very big overall improvement for our overall ARPU.

Thomas Chong — Jefferies — Analyst

Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

Thank you.

Operator

[Operator Instructions] Your next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask the question.

Eddie Leung — Bank of America Merrill Lynch — Analyst

Hey, good morning, guys.

[Foreign Speech]

So I have two quick questions. The first one is a follow-up on first quarter. Wondering if there is any outlook or points to note about the content cost in the first quarter, given more content being released? And then the second question is about the so-called big screen strategy mentioned before. We notice that there has been more — there have been more users assessing video content via smart TVs. So wondering whether there has been any change in the time spent or users on TV versus mobile and PC, and whether there will be any indication on our production strategy? Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

[Foreign Speech]

Okay. I will turn over to Xiaodong for your question for the content cost. For TV side, we have already observed that Internet-connected TV and have already — has similar or even slightly higher traffic share than mobile devices. Mobile devices include the phones, plus tablets. So our TV side, we have already contributed more than 40% of our user traffic. So the combined user traffic share of the TV side and the mobile side have already been 90%.

Xiaodong Wang — Chief Financial Officer

Good morning. I think when we talk about like releasing more hit content or blockbuster content, the keyword here is not more, but hit or blockbuster. So as we discussed before, I think and if we talk about, like, say, total content cost investment for our membership business; the entire investment, I think, would have been about the same level. What we are going to do is, to increase the quality of the content and not the number or the quantity of the content for now. But you’re right, to some extent, we are talking about like say — some new drivers of the content costs, you might have observed some slightly content cost increase. For example, we are going to expand slightly in overseas areas to enhance the foundation of our future growth. I think when we talk about like the additional or new business scope or areas, you will only, by then observe like the some content cost increase. Otherwise, if you talk about like the — our core business, we remain, as we discussed before, the outlook, the content cost will be well controlled. Thank you.

Eddie Leung — Bank of America Merrill Lynch — Analyst

Thank you.

Operator

Your next question comes from Yiwen Zhang from Citi. Please ask the question.

Yiwen Zhang — Citigroup — Analyst

[Foreign Speech]

Thank you for taking my question. So the first part is on the user preference change on drama series. This implication on self-production capabilities and such add. In the past year, we have — we may have like one broadcaster in one year. But now, we have several large titles in a year. I believe that users like — show a more diversified content preference and also different content format of preference as well. This is the first part. And the second part is on the content broadcasting strategy. Noted in the past, sometimes would swap drama series with the other video guys. Now we also — saw content on the variety show. Can you talk about what drives this? Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

[Foreign Speech]

Okay. So as you have mentioned Galaxy Guo is actually — was actually a phenomenal success, not only in China, but also in various overseas countries. You have mentioned that there are fewer blockbusters in recent years. I would say, this is actually in more perception sense. So that might be attributable to two reasons. One is the tightened regulation or tightened censorship. Second is that we have observed, there are more and more entertainment consumption matters. For example, if you observed over the past year, since ’17, ’18 and ’19, we have observed higher theatrical movie consumption. And also, we have seen less popularity of the short-form video.

However, I would say it’s more from a perception way, that you have feel that there are fewer broadcasters. However, from the data point perspective, not only for the numbers of the title, numbers of the top blockbusters, all the user traffic from the top TV dramas or variety shows, we have actually seen very stable numbers from the so-called blockbusters. So if you see for the overall industry per year, we have around six to 10 TV dramas that we can call top blockbuster TV dramas. So we observe that our users have actually elastic demand for the TV dramas. So this is actually very strong — it’s actually a very stabilized demand.

And also, we are doing very — a number of innovation in terms of our content. For example, you have observed that we recently launched [Indecipherable]. This is actually very creative format of the TV dramas, and it has generated very strong user traffic.

[Foreign Speech]

And also for the variety shows, as you have observed, our Qipa Talk, it’s already within its seventh consecutive year of running. However, we observed the improving traffic for this new season. It’s actually seen consecutively improving traffic for all seasons of our Qipa Talk. This actually validates all the success of our IP operation for the variety show.

[Foreign Speech]

Okay. For your question about the further transaction of the line production, it actually needs to be there on a case by case. For example, for some licensed drama shows, which are mainly broadcasting on the TV station, those are mostly will be broadcasting in multiple platforms. Then, for example, also for the TV — variety shows for [Indecipherable], is license producted by an independent studio, which is actually co-invested by both iQIYI and Tencent.

[Foreign Speech]

The principle for — whether we want to be the self — I mean, only broadcasted by our platform, only two reasons. One is the self-produced content, and the secondary reason is about the pure Internet broadcasting content. So for all our platforms, there will be like some of this kind of content will be actually only by — only broadcasted in one platform. Thank you.

Yiwen Zhang — Citigroup — Analyst

Thank you.

Operator

Your next question comes from Alex Xie from Credit Suisse. Please ask the question.

Alex Xie — Credit Suisse — Analyst

[Foreign Speech]

Thank you management for taking my question. So I would like to ask about the cost control side. You did very well in Q4 2020, and we have seen year-over-year decrease in opex. How should we think about it, the trend in 2021? Thank you.

Xiaodong Wang — Chief Financial Officer

This is Xiaodong. I think in general, definitely, we believe the trend will continue in the next few years. When we talk about like cost expense, I think there are two main elements, the content cost and sum expenses. When we talk about the content cost, as I just said, if you look at the core business, not only as a percentage of revenue, but even the dollar amount, I think you will see a very healthy growth trend in the next few years. The only driver will increase the content costs. As we just mentioned, there will be only two other drivers that could possibly increase the content cost in the next few years. One is the category of the content. We are talking about like entering into some new areas like original movies. And the second one is, when we talk about like expansion to the overseas regions, I think these are the only two drivers that could raise the content cost in the next few years. But from time to time, you might observe something like fluctuation of the content costs, because of like the efficiency of the [Indecipherable], something like that.

And besides the content cost, I think the only major items left is something like the marketing expenses, including the content cost — content promotion, something like branding or family app promotion, something like that. Definitely, I think you will observe economy of scale in the next few years. So gradually, those costs or expense as a percentage of revenue, you will observe a very healthy trend in the next few years. Thank you.

Alex Xie — Credit Suisse — Analyst

Got it. Thank you.

Operator

We got time for one last question. And your final question comes from Zhijing Liu from UBS. Please ask the question.

Zhijing Liu — UBS — Analyst

[Foreign Speech]

Thank you, management for taking my question. What is the latest progress of our Suike app? What is the strategic importance of Suike mid-form video for our core long-form video business? Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

[Foreign Speech]

Happy New Year. And as you may know, Suike is already in its second year of operation. We have determined its position, it’s actually a video-based interest community. So it’s a comprehensive video community, which contains all, short video content, middle video content and long video content. However, the most viewed content is the short video content, which usually last for five to 60 minutes or to 10 minutes, something. It has a very comprehensive content categories. For example, they have some interest based content, for example, slime, should I and also, of course, it includes a lot of popular TV drama or variety show content. In terms of the user traffic for Suike, it has some volatility in over the past year. However, we believe if will — actually our strategy, correct. We can see a quite healthy trend for like Suike for this year.

[Foreign Speech]

Okay. Just to add on one point. So take their ability for example. As you may know, our ability has done a good job over the past year, and they try to penetrate. So they originate from SAG content, but they try to penetrate into a more user cohort. So this actually is host to you to actually in a contrast way. So we originated from a more, I mean, mass user interest, but we try to penetrate into more vertical content category or like interest communities.

And also, we want to add some elaboration for our pricing adjustments. I will turn over to Xianghua Yang, our Senior Vice President of our Membership Business.

Xianghua Yang — Senior Vice President

[Foreign Speech]

Okay. I want to elaborate the impact from the pricing adjustment we did last November. So specifically, we raised the pricing on the non-iOS devices to the same level on iOS level — iOS devices. So our observation is that after the pricing adjustment, our orders on the iOS devices are actually improved.

However, there is some net impact for our non-iOS order on non-iOS devices. However, overall, our ARPU is actually improved. And although, as you may know, we did some pricing guarantee program for the existing users on the non-iOS devices. We observed that for these kind of users the next month retention rate is actually improved. And also for some new added users, new added subscribers, later the first month retention rate is also improved.

So overall, the impact from the pricing adjustment program has shown better actually was better than our expectations. And we believe the impact is very temporary and very minimal. However, this pricing adjustment will have a very positive impact for our ARPU and also the long-term subscriber growth. Thank you. Thank you.

Operator

I would now like to hand the conference back to management for closing remarks. Please continue.

Fan Liu — Head of Investor Relations

So, okay, this is the end to our earnings call. We just keep in touch after the results. Happy New Year for 2021. Thank you.

Yu Gong — Founder, Chief Executive Officer and Director

Thank you.

Operator

[Operator Closing Remarks]

Disclaimer

This transcript is produced by AlphaStreet, Inc. While we strive to produce the best transcripts, it may contain misspellings and other inaccuracies. This transcript is provided as is without express or implied warranties of any kind. As with all our articles, AlphaStreet, Inc. does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Neither the information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of AlphaStreet, Inc.

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