(Yicai Global) Feb. 23 -- Shares of iQiyi, a leading Chinese video streaming site operator, climbed after the company made an annual profit for the first time last year.

IQiyi’s stock price [NASDAQ: QI] was 2.5 percent higher at USD7.50 in pre-market trading in New York as of 6.57 a.m. local time, after gaining 1.1 percent yesterday.

Based on non-generally accepted accounting principles, iQiyi had a net profit of CNY1.3 billion (USD186.2 million) in the 12 months ended Dec. 31,  compared with a non-GAAP net loss of CNY4.5 billion in 2021, the Beijing-based firm’s earnings report showed yesterday. Revenue fell 5 percent from the year before to CNY29 billion (USD4.2 billion).

The Baidu-backed company’s net loss narrowed 98 percent to CNY140 million (USD20.3 million) in 2022, versus CNY6.2 billion (USD901 million) the year before.

IQiyi hit its goal to break even on a non-GAAP basis thanks to cost-cutting efforts, higher membership revenue, and fundraisers. Cost of revenues was CNY22.3 billion (USD3.2 billion), a 19 percent decline, primarily due to lower content costs.

IQiyi had a net addition of 10.6 million to 112 million in the fourth quarter from a year earlier, driven by its original blockbuster series The Knockout. Membership service revenue, the company's main source of income, jumped 15 percent to CNY4.7 billion in the quarter and rose 6 percent to CNY17.7 billion in 2022.

Eliminating debt pressure through financing rounds was a key reason behind breaking even, iQiyi said, after raising almost USD1.3 billion in three fundraisers last year.

Revenue from online advertising sank 25 percent to CNY5.3 billion in 2022, impacted by an economic environment full of challenges. Revenue from content distribution fell about CNY400 million (USD58.1 million) to CNY2.5 billion. 

“We wrapped up a remarkable year of turnaround with outstanding performance in the fourth quarter,” the streaming site’s founder and Chief Executive Officer Yu Gong said.

Non-GAAP net profit was CNY856.4 million in the three months ended Dec. 31, versus a non-GAAP net loss of CNY1 billion the year before. Revenue was up 3 percent from a year earlier at CNY7.6 billion.

But in recent months iQiyi's membership rights proved controversial, despite a revenue jump, after the firm limited its high-definition streaming option to the most expensive subscription plans while also hiking prices. Rivals, including Youku and Tencent Videos, took similar steps and also faced a user backlash.

On Feb. 20, iQiyi apologized to users and reenabled users paying for its low-cost membership plans to watch videos in 720 pixels and 1080P resolution.

Editors: Shi Yi, Martin Kadiev