Morning Notes

iQIYI Inc. August 15, 2019

Content Control Constrains IQ’s Paying Member Growth iQIYI Inc. in 2Q19; The Situation May Get Better In 4Q19 IQ: N/A

IQ will report 2Q19 results on August 19th after the markets closed followed by a Price: $16.93 9pm EST conference call. 2019 is a tough year for the online media sector due to Target Price: N/A the government’s stricter control over media content as it is a political sensitive year. IQ and other online video vendors are limited to what they can broadcast on 52 Week Range: $14.35 - $32.46 their platforms. As a result, the paying user growth was slower. Subscribing Market Cap: $12.3B members in 2Q19 is likely to be 100.4M, vs. 96.8M in 1Q19 and 67.1M in 2Q18. In Avg. Daily Vol. (100 day): 7,915,971 addition, brand advertising may be weak from the slowdown in the economy, and 3-Yr. Est. Rev. CAGR: 29% performance ad is under pressure from ByteDance. Putting all together, we believe IQ’s 2Q19 revenue is likely to be in line with or slightly lower than consensus expectation at RMB7,021M. FY (Dec) 2018A 2019E 2020E  iQiyi focused on airing top dramas in 2Q19 and less on quantity – iQiyi Q1 4,877A 6,990A 8,209E aired all top 10 drama content in 2Q19E. Among the top 10, two titles “破冰行 Q2 6,170A 6,972E 8,633E 动 (The Thunder)”and “新白娘子传奇 (The Legend of White Snake)” are IQ Q3 6,914A 7,757E 9,537E in-house produced content tiles (Figure 1). The total number of actively viewed Q4 7,027A 8,247E 10,248E content titles for IQ decreased 7.5% Y/Y in 2Q19, vs. increase of 3.1% Y/Y in Revenue 24,989A 29,966E 36,627E 1Q19 (Figure 2); while for the three video platforms (iQiyi, Youku and Tencent

Video) combined - total number of actively viewed content titles decreased Q1 (13.80)A (2.52)A (2.20)E 1.1% Y/Y in 2Q19 (Figure 3). The total number of newly added titles for IQ Q2 (3.01)A (3.41)E (1.79)E decreased 10.5% Y/Y in 2Q19, vs. increase of 8.8% Y/Y in 1Q19 (Figure 4); which was below all three platforms combined - newly added active titles Q3 (4.34)A (4.11)E (1.91)E increased 5.1% Y/Y in 2Q19 and increased 3.2% Y/Y in June 2019 (Figure 5). Q4 (4.83)A (3.51)E (1.65)E The total number of in-house produced content titles for IQ increased 114.9% GAAP EPS (25.98)A (12.53)E (7.55)E Y/Y in 2Q19, vs. 220.8% Y/Y in 1Q19 (Figure 6); in-line with all three platforms P/S 3.8x 2.8x 2.3x combined - total actively viewed in-house content titles increased 119.2% Y/Y in 2Q19 and increased 96.6% Y/Y in June 2019 (Figure 7). All figures in RMB millions unless otherwise noted Figure 1: Top Ten Dramas, 1Q19 – 2Q19

$50 Top 10 Dramas $45 Quarter Rank Content Name Platform & in-house Producted $40 $35 1 知否知否应是绿肥红瘦(The Story of Ming Lan) iQiyi, Tencent Video, Youku $30 2 小女花不弃(I Will Never Let You Go) iQiyi, Tencent Video, Youku $25 $20 3 都挺好(All is Well) iQiyi, Tencent Video, Youku $15 4 独孤皇后(Queen Dugu) Youku, Mgtv $10 $5 5 招摇(The Legends) iQiyi Only $0 1Q19 6 皓镧传(Beauty Hao Lan) iQiyi Only 7 黄金瞳(The Golden Eyes) iQiyi - In-house Produced 8 逆流而上的你(Unbeatable You) iQiyi, Tencent Video, Youku 9 天衣无缝(Spy Hunter) iQiyi, Tencent Video, Youku, Mgtv 10 新倚天屠龙记(Relying on Heaven to Slaughter Dragons) Tencent Video 1 封神演义(Investiture of the Gods) iQiyi, Tencent Video, Youku, Mgtv Tian X. Hou; +86 10 8567 0989 2 白发(Princess Silver) iQiyi, Tencent Video, Youku [email protected] 3 破冰行动(The Thunder) iQiyi - In-house Produced 4 青春斗(Youth Struggle) iQiyi, Tencent Video, Youku, Mgtv Ethan Qin; +86 10 8567 0787 5 筑梦情缘(Architect`s Dream and Love) iQiyi, Tencent Video, Youku, Mgtv [email protected] 2Q19 6 如果可以这样爱(Merry Christmas) iQiyi, Tencent Video, Youku, Mgtv 7 我的真朋友(My True Friend) iQiyi, Tencent Video, Youku Jay Dong; +86 10 8567 0787 8 少年派(Growing Pain) iQiyi, Tencent Video, Youku, Mgtv [email protected] 9 新白娘子传奇(The Legend of White Snake) iQiyi - In-house Produced Gina Chen; (646) 389-8528 10 带着爸爸去留学(Over the Sea I Come to You) iQiyi, Tencent Video, Youku [email protected] Source: T.H. DATA (www.thdata.com)

TH Data Capital (AKA T. H. Capital, LLC) 5E, Tower D, Central International Trade Center 6 Jianguomenwai Avenue, Beijing 100022, China Please see end this report for full disclosures

August 15, 2019

Figure 2: iQiyi - Number of Actively Viewed Content Titles, Figure 3: Industry - Number of Actively Viewed Content Titles, 1/2018 – 6/2019 1/2018 – 6/2019

25,000 70,000

20,000 60,000 50,000 15,000 40,000 10,000 30,000

5,000 20,000 10,000 -

201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906

201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906 TV Dramas Movies Cartoons Variety Shows iQiyi Tencent Youku

Source: T.H. Data (www.thdata.com)

Figure 4: iQiyi - Number of Newly Added Actively Viewed Figure 5: Industry - Number of Newly Added Actively Viewed Content Titles, 1/2018 – 6/2019 Content Titles, 1/2018 – 6/2019

6,000 16,000 14,000 5,000 12,000 4,000 10,000 3,000 8,000 6,000 2,000 4,000 1,000 2,000

- -

201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906

iQiyi Tencent Youku TV Dramas Movies Cartoons Variety Shows

Source: T.H. Data (www.thdata.com)

Figure 6: iQiyi - Number of Newly Added In-House Produced, Figure 7: Industry - Number of In-House Content, 1/2018 – 6/2019 Content, 1/2018 – 6/2019

1,600 3,000 1,400 2,500 1,200 2,000 1,000 1,500 800 600 1,000 400 500 200 -

201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906

201801 201802 201803 201804 201805 201806 201807 201808 201809 201810 201811 201812 201901 201902 201903 201904 201905 201906 iQiyi Tencent Youku TV Dramas Movies Cartoons Variety Shows

Source: T.H. Data (www.thdata.com)

2 of 6 DATA DRIVEN INVESTMENT RESEARCH & ADVISORY

August 15, 2019

Figure 8: Earnings Model (in RMB Ms, except per share)

FY17A FY18A 1Q19A 2Q19E 3Q19E 4Q19E FY19E 1Q20E 2Q20E 3Q20E 4Q20E FY20E FY21E Income Statement (000's of RMB) 12/31/17 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 12/31/19 3/31/20 6/30/20 9/30/20 12/31/20 12/31/20 12/31/21 Membership services 6,536,028 10,622,769 3,445,343 3,493,000 3,711,834 3,989,874 14,640,051 4,080,376 4,318,795 4,591,275 4,795,634 17,786,080 20,033,897 Online advertising services 8,158,924 9,328,061 2,119,433 2,094,006 2,204,547 2,335,855 8,753,841 2,373,765 2,617,507 2,689,548 2,919,819 10,600,639 12,917,074 Content distribution 1,191,816 2,162,643 442,620 485,423 834,576 600,344 2,362,963 575,406 689,301 1,160,061 828,474 3,253,242 4,411,355 Others 1,491,582 2,875,643 982,523 899,948 1,005,638 1,320,799 4,208,908 1,179,028 1,007,942 1,096,146 1,703,831 4,986,946 5,697,946 Total revenue 17,378,350 24,989,116 6,989,919 6,972,377 7,756,596 8,246,872 29,965,763 8,208,575 8,633,545 9,537,028 10,247,758 36,626,906 43,060,272 Cost of revenues 17,386,563 27,132,811 7,277,196 7,167,603 8,532,255 8,659,216 31,636,270 7,633,974 7,727,023 8,678,696 9,222,982 33,262,675 36,667,613 Gross Profit (8,213) (2,143,695) (287,277) (195,227) (775,660) (412,344) (1,670,507) 574,600 906,522 858,333 1,024,776 3,364,231 6,392,659 Selling, general & administrative 2,674,990 4,167,889 1,140,611 1,240,611 1,440,611 1,370,611 5,192,444 1,388,611 1,408,611 1,441,611 1,406,611 5,645,444 5,677,444 Research and development 1,269,806 1,994,652 598,072 611,072 639,072 649,072 2,497,288 658,072 673,072 685,072 698,072 2,714,288 2,831,288 Operating expenses 3,944,796 6,162,541 1,738,683 1,851,683 2,079,683 2,019,683 7,689,732 2,046,683 2,081,683 2,126,683 2,104,683 8,359,732 8,508,732 Operating income (3,953,009) (8,306,236) (2,025,960) (2,046,910) (2,855,343) (2,432,027) (9,360,239) (1,472,083) (1,175,161) (1,268,350) (1,079,907) (4,995,501) (2,116,073) Non-GAAP Operating income (3,719,585) (7,750,236) (1,769,960) (1,788,350) (2,594,197) (2,168,270) (8,320,776) (1,205,688) (906,102) (996,601) (805,441) (3,913,832) (990,484) Interest income 83,127 213,969 65,097 65,097 70,097 75,097 275,388 75,297 75,497 75,697 75,897 302,388 321,200 Interest expense (277,577) (94,711) (135,247) (145,247) (145,497) (145,487) (571,478) (145,502) (145,492) (145,482) (145,472) (581,948) (581,888) Foreign exchange (loss)/gain, net 400,737 (970,796) 328,035 (300,000) - - 28,035 ------Loss from equity method investments (263) (16,965) (34,535) (34,545) (34,555) (34,565) (138,200) (34,575) (34,585) (34,595) (34,605) (138,360) (138,520) Other (expense)/income, net 2,488 192,309 (12,224) (12,224) (12,224) (12,224) (48,896) (12,224) (12,224) (12,224) (12,224) (48,896) (48,896) Total other (expenses)/income, net 208,512 (676,194) 211,126 (426,919) (122,179) (117,179) (455,151) (117,004) (116,804) (116,604) (116,404) (466,816) (448,104) Pretax income (3,744,497) (8,982,430) (1,814,834) (2,473,829) (2,977,522) (2,549,206) (9,815,390) (1,589,087) (1,291,965) (1,384,954) (1,196,311) (5,462,317) (2,564,177) Income tax expense/(benefit) (7,565) 78,801 7,443 10,146 12,211 10,455 40,255 15,891 12,920 13,850 11,963 54,623 25,642 Net income (3,736,932) (9,061,231) (1,822,277) (2,483,974) (2,989,733) (2,559,660) (9,855,645) (1,604,978) (1,304,884) (1,398,804) (1,208,274) (5,516,940) (2,589,819) Noncontrolling interests - 48,545 (8,301) (8,321) (8,341) (8,361) (33,324) (8,371) (8,381) (8,391) (8,401) (33,544) (33,704) Net loss attributable to iQiyi (3,736,932) (9,109,776) (1,813,976) (2,475,653) (2,981,392) (2,551,299) (9,822,321) (1,596,607) (1,296,503) (1,390,413) (1,199,873) (5,483,396) (2,556,115) Net income/(loss) attributable to ordinary shareholders 972,929 (9,408,766) (1,813,976) (2,475,653) (2,981,392) (2,551,299) (9,822,321) (1,596,607) (1,296,503) (1,390,413) (1,199,873) (5,483,396) (2,556,115) SBC 233,424 556,000 256,000 258,560 261,146 263,757 1,039,463 266,395 269,059 271,749 274,467 1,081,669 1,125,589 Fair value change of long-term investments, net 10,000 - - - - Non-GAAP net income 1,206,353 (8,842,766) (1,557,976) (2,217,093) (2,720,246) (2,287,542) (8,782,858) (1,330,212) (1,027,445) (1,118,664) (925,407) (4,401,727) (1,430,526) GAAP EPADS 2.10 (17.01) (2.52) (3.41) (4.11) (3.51) (13.53) (2.20) (1.79) (1.91) (1.65) (7.55) (3.52) Non-GAAP EPADS 2.60 (16.00) (2.15) (3.05) (3.75) (3.15) (12.10) (1.83) (1.41) (1.54) (1.27) (6.06) (1.97) Shares outstanding 3,243,147 3,867,932 5,083,031 5,083,056 5,083,081 5,083,106 5,083,068 5,083,131 5,083,156 5,083,181 5,083,206 5,083,168 5,083,268 Diluted ADS 463,307 552,562 726,147 726,151 726,154 726,158 726,153 726,162 726,165 726,169 726,172 726,167 726,181

Margins Cost of revenue 100.0% 108.6% 104.1% 102.8% 110.0% 105.0% 105.6% 93.0% 89.5% 91.0% 90.0% 90.8% 85.2% Gross Profit 0.0% -8.6% -4.1% -2.8% -10.0% -5.0% -5.6% 7.0% 10.5% 9.0% 10.0% 9.2% 14.8% Selling, general & administrative 15.4% 16.7% 16.3% 17.8% 18.6% 16.6% 17.3% 16.9% 16.3% 15.1% 13.7% 15.4% 13.2% Research and development 7.3% 8.0% 8.6% 8.8% 8.2% 7.9% 8.3% 8.0% 7.8% 7.2% 6.8% 7.4% 6.6% Operating expenses 22.7% 24.7% 24.9% 26.6% 26.8% 24.5% 25.7% 24.9% 24.1% 22.3% 20.5% 22.8% 19.8% Operating income -22.7% -33.2% -29.0% -29.4% -36.8% -29.5% -31.2% -17.9% -13.6% -13.3% -10.5% -13.6% -4.9% Non-GAAP Operating Margin -21.4% -31.0% -25.3% -25.6% -33.4% -26.3% -27.8% -14.7% -10.5% -10.4% -7.9% -10.7% -2.3% Total other (expenses)/income, net 1.2% -2.7% 3.0% -6.1% -1.6% -1.4% -1.5% -1.4% -1.4% -1.2% -1.1% -1.3% -1.0% Pretax income -21.5% -35.9% -26.0% -35.5% -38.4% -30.9% -32.8% -19.4% -15.0% -14.5% -11.7% -14.9% -6.0% Income tax expense/(benefit) -0.2% 0.9% 0.4% 0.4% 0.4% 0.4% 0.4% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Net income attributable to shareholders 5.6% -37.7% -26.0% -35.5% -38.4% -30.9% -32.8% -19.5% -15.0% -14.6% -11.7% -15.0% -5.9% SBC 1.3% 2.2% 3.7% 3.7% 3.4% 3.2% 3.5% 3.2% 3.1% 2.8% 2.7% 3.0% 2.6% Non-GAAP net income 6.9% -35.4% -22.3% -31.8% -35.1% -27.7% -29.3% -16.2% -11.9% -11.7% -9.0% -12.0% -3.3% Y/Y Growth Membership services 73.7% 62.5% 64.5% 41.2% 30.1% 24.6% 37.8% 18.4% 23.6% 23.7% 20.2% 21.5% 12.6% Online advertising services 44.4% 14.3% 0.4% -20.0% -8.0% 6.0% -6.2% 12.0% 25.0% 22.0% 25.0% 21.1% 21.9% Content distribution 137.9% 81.5% 66.0% -10.0% 0.0% 15.0% 9.3% 30.0% 42.0% 39.0% 38.0% 37.7% 35.6% Others 12.7% 92.8% 142.6% 67.0% 21.0% 20.0% 46.4% 20.0% 12.0% 9.0% 29.0% 18.5% 14.3% Total revenue 54.6% 43.8% 43.3% 13.0% 12.2% 17.4% 19.9% 17.4% 23.8% 23.0% 24.3% 22.2% 17.6% COGS 52.0% 56.1% 50.1% 17.4% 11.5% 1.6% 16.6% 4.9% 7.8% 1.7% 6.5% 5.1% 10.2% Gross Profit -95.9% 26001.2% -1087.7% -407.4% -4.7% 72.4% 22.1% 300.0% 564.3% -210.7% -348.5% 301.4% 90.0% Selling, general & administrative 51.5% 55.8% 62.0% 30.6% 11.5% 12.2% 24.6% 21.7% 13.5% 0.1% 2.6% 8.7% 0.6% Research and development 54.0% 57.1% 54.4% 38.4% 14.5% 6.8% 25.2% 10.0% 10.1% 7.2% 7.5% 8.7% 4.3% Operating expenses 52.3% 56.2% 59.3% 33.1% 12.4% 10.4% 24.8% 17.7% 12.4% 2.3% 4.2% 8.7% 1.8% Operating income -41.7% -110.1% -90.7% -54.1% -10.2% 26.8% -12.7% 27.3% 42.6% 55.6% 55.6% 46.6% 57.6% Non-GAAP Operating Margin -36.4% -108.4% -74.3% -43.8% -8.7% 30.1% -7.4% 31.9% 49.3% 61.6% 62.9% 53.0% 74.7% Total other (expenses)/income, net 176.8% 424.3% 68.3% 44.4% 77.3% -237.2% 32.7% 155.4% 72.6% 4.6% 0.7% -2.6% 4.0% Pretax income -22.3% -139.9% -358.0% -18.0% 4.9% 24.1% -9.3% 12.4% 47.8% 53.5% 53.1% 44.3% 53.1% Income tax expense/(benefit) -157.8% -1141.7% 1362.3% 108.8% -301.6% -86.8% -48.9% 113.5% 27.3% 13.4% 14.4% 35.7% -53.1% Net income attributable to shareholders 112.2% 1067.1% -164.8% -17.5% 5.1% 26.6% -4.4% 12.0% 47.6% 53.4% 53.0% 44.2% 53.4% SBC 274.1% 138.2% 444.7% 207.8% 28.0% 19.3% 87.0% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% Non-GAAP net income 115.3% 833.0% -144.2% -9.6% 7.5% 29.5% 0.7% 14.6% 53.7% 58.9% 59.5% 49.9% 67.5% Q/Q Growth Membership services 7.6% 1.4% 6.3% 7.5% 2.3% 5.8% 6.3% 4.5% Online advertising services -3.8% -1.2% 5.3% 6.0% 1.6% 10.3% 2.8% 8.6% Content distribution -15.2% 9.7% 71.9% -28.1% -4.2% 19.8% 68.3% -28.6% Others -10.7% -8.4% 11.7% 31.3% -10.7% -14.5% 8.8% 55.4% Total revenue -0.5% -0.3% 11.2% 6.3% -0.5% 5.2% 10.5% 7.5% COGS -14.6% -1.5% 19.0% 1.5% -11.8% 1.2% 12.3% 6.3% Gross Profit 80.8% 32.0% -297.3% -46.8% -239.3% 57.8% -5.3% 19.4% Selling, general & administrative -6.6% 8.8% 16.1% -4.9% 1.3% 1.4% 2.3% -2.4% Research and development -1.5% 2.2% 4.6% 1.6% 1.4% 2.3% 1.8% 1.9% Operating expenses -4.9% 6.5% 12.3% -2.9% 1.3% 1.7% 2.2% -1.0% Operating income 39.1% -1.0% -39.5% 14.8% 39.5% 20.2% -7.9% 14.9% Non-GAAP Operating Margin 43.0% -1.0% -45.1% 16.4% 44.4% 24.8% -10.0% 19.2% Total other (expenses)/income, net -707.5% -302.2% -71.4% -4.1% -0.1% -0.2% -0.2% -0.2% Pretax income 46.0% -36.3% -20.4% 14.4% 37.7% 18.7% -7.2% 13.6% Income tax expense/(benefit) -90.6% 36.3% 20.4% -14.4% 52.0% -18.7% 7.2% -13.6% Net income attributable to shareholders 47.8% -36.5% -20.4% 14.4% 37.4% 18.8% -7.2% 13.7% SBC 15.8% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% Non-GAAP net income 52.0% -42.3% -22.7% 15.9% 41.8% 22.8% -8.9% 17.3%

Source: Company data and T. H. Capital Research estimates

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Important Disclosures RESEARCH ANALYST CERTIFICATION

I, Tian X. Hou, am the Primary Analyst responsible for this research report accurately reflect my personal views about any and all of the subject securities or issuers as of the date of the report. No part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views I expressed in this research report.

This report constitutes a compendium report (covers six or more subject companies). As such, T.H. Capital, LLC chooses to provide specific disclosures for the subject companies by reference. To access current disclosures for the subject companies, clients may e- mail a request to [email protected] or may write or call T.H. Capital, LLC at 646-389-5868.

DEFINITION OF STOCK RATINGS

T. H. Capital Research’s ratings are defined as follows:

BUY – A stock that is expected at initiation to produce a positive total return of 15% or greater over the 12 months following the initial recommendation. The BUY rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return. SELL – A stock that is expected at initiation to produce a negative total return of 15% or greater over the next 12 months following the initial recommendation. The SELL rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the target to fall outside of the 15% return. HOLD – A stock that is not expected to appreciate or depreciate meaningfully over the next 12 months.

Expected absolute returns are based on share price at market close unless otherwise stated. Stock recommendations are based on absolute upside (downside) and have a 12-month horizon. Our target price represents the fair value of the stock based upon the analyst’s discretion. We note that future price fluctuations could lead to a temporary mismatch between upside/downside for a stock and our recommendation. T. H. Capital’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

DISCLOSURE OF DISTRIBUTION OF RATINGS

T. H. Capital, LLC must disclose in each research report the percentage of all securities rated by the member to which the member would assign a “buy”, “hold” or “sell” rating. All required disclosures, including price charts, designating ratings and price targets on all T. H. Capital rated stocks are available upon request by contacting [email protected].

Below is the distribution of T. H. Capital’s research recommendations as of May 21, 2018:

Distribution of Ratings, Firm wide T. H. Capital, LLC

Rating Count Percent

BUY (B) 14 82%

SELL (S) 0 0%

HOLD (H) 3 18%

INVESTMENT RECOMMENDATION RELATED RISK FACTORS

4 of 6 DATA DRIVEN INVESTMENT RESEARCH & ADVISORY

August 15, 2019

Investment risks associated with the recommendations and views herein include, but are not limited to, a company's failure to achieve T. H. Capital’s earnings and revenue estimates; unforeseen global and domestic macroeconomic and/or industry events that affect demand for a company's products or services; changes in investor sentiment regarding the specific company or industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability to recruit and retain competent personnel; and adverse market conditions This report reflects the results of our research as of the date of this report. Our research results are subject to change at any time as new or additional data and information is received and analyzed. T. H. Capital undertakes no duty to update this report, or to provide supplemental information to any client receiving this report, absent a specific arrangement to the contrary between TH Capital and individual clients, which arrangement may specify different frequency and depth of analysis and update commitments based on levels of service and fees selected by clients. Any opinions, forecasts or estimates in this report may present a possible outcome on the basis of assumptions set out herein and represent only one possible outcome and are the independent view of the author(s) of this report only. These opinions, forecasts or estimates are subject to risks, uncertainties and assumptions and there can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates.

T.H. CAPITAL, LLC DISCLOSURE LEGEND:

1. T.H. Capital, LLC is an independent research firm registered in China. It provides independent equity research services to institutional clients only. T.H. Capital, LLC is not a registered investment adviser, securities broker-dealer or a member of any association for other research providers. 2. T.H. Capital's compliance policy prohibits its research analysts from owning any positions in stocks under coverage. 3. T.H. Capital, LLC or its affiliates beneficially own 1% or more of the common stock of the subject company as calculated with Section 13(d) of the Securities Exchange Act of 1934. 4. The subject company is, or during the past 12 months was, a client of T.H. Capital, LLC, which provided non-investment banking, securities-related services to, and received compensation from, the subject company for such services. The analyst or employees of T.H. Capital, LLC with the ability to influence the substance of this report knows the foregoing facts.

5. An affiliate of T.H. Capital, LLC received compensation from the subject company for products or services other than investment banking services during the past 12 months. The analyst or employees of T. H. Capital, LLC with the ability to influence the substance of this report know or have reason to know the foregoing facts. 6. As of the date of publication of this Report, neither T. H. Capital nor any of their affiliates have an actual or material conflict of interest with either the research in this Report or the Analyst.

GENERAL INFORMATION

This report is for the institutional clients and prospective clients of T.H. Capital, LLC, each of whom assume all risk and liability with regard to any use or application of the data included herein. Other than disclosures relating to T. H. Capital, this research report is based on current information that T. H. Capital considers reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. T. H. Capital seeks to update our research reports as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment. Reproduction or editing by any means, in whole or in part, or any unauthorized use, disclosure or redistribution of the contents without the express written permission of T.H. Capital, LLC is strictly prohibited.

This research report is intended for informational purposes only. Under no circumstances is this report to be considered as an offer to sell or solicitation of an offer to buy any securities of any company. Users assume the entire cost and risk of any investment decision they choose to make, T.H. Capital, LLC shall not be liable for any loss or damages resulting from the use of the information contained in the report, or for error of transmission of information, or for any third party claims of any nature.

T. H. Capital provides the information and data contained herein on an “as is”, “as available” basis, without representations or warranties of any kind whatsoever, expressed or implied. The information in this report may be incomplete and may not contain material information relating to the subject matter of the report. T. H. Capital has no authority whatsoever to give any information or make any representation or warranty on behalf of the company or companies that are the subject of this report, any of its

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August 15, 2019 shareholders or any other person in connection therewith and this report has not been authorized or approved by said company or companies. Nothing herein shall constitute a waiver or limitation of any person’s rights under relevant federal or state securities laws.

It should be noted that all proprietary analyses provided by T. H. Capital in this report are derived from T. H. Capital’s analytic expertise, market knowledge, and use of the data it collects.

This research report is not an offer to sell, or the solicitation to buy, any security in any jurisdiction where such an offer or solicitation would be illegal or unlawful. It does not constitute a personal recommendation, nor does it take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

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