IQ beats - X post from NPI

I thought IQ’s EC was good - 55% rev growth. IQ makes money through membership, advert, licensed content sales, and other rev.

  1. Continued sub growth and they said 2019 should see same number of sub adds which takes them to around 125M subs by end of 2019.
  2. Membership ARPU has been holding steady over the last 8 Qs. They are not dropping member ARPU to increase subs. This is a big positive. If this ARPU was dropping I would be worried.
  3. Advert rev has dropped for 3Qs in a row. Last Q they said it was due to the WCup which pulled more revs into Q2. This time was it due to the macro issues like gov. regs? There was some talk about cleaning up risky ads. Clearly with a much higher ad platform and subs they should have a higher ad inventory. The fact that the ad rev is dropping suggests that much of the inventory is going sold. I doubt IQ can go into a fully ad free model like Netflix. More like a Hulu is realistic. They should really partner with TTD.
  4. Other rev and licensed content rev has risen well in the last few Qs. Going fwd I think the content rev will continue to grow as their content is top notch. I am not sure what the other content rev. comprises of. Is this the one related to developing video games, toys based on their in house show characters? Is this growth sustainable or is oneoff? There was talk about Skymoons being brought in.

In 2019 IQ will clearly grow subs 50% avg. over the 4Qs. But in 2018 their total ARPU (member, advert, other and content) dropped on avg. about 14% (yoy) mainly due to the ad ARPU dropping. IN 2019 can they ensure that the total ARPU does not drop as much? A 10% may still yield 40% rev growth. I think there is a good chance they will do that. A 40% grower with P/S of 5.6 sounds juicy. Of course the risks are China, and the financials of the company. They have $2B in the bank but the cash burn is huge.