Bilibili, Inc. Q3 FY2024 earnings call

• Achieved first quarterly adjusted net profit in Q3 2024. - DAUs and MAUs reached record highs, with DAUs at 107 million and MAUs at 348 million in Q3. - Average daily time spent per user rose to 106 minutes. - Games revenue grew 84% y-o-y driven by strategy game 'San Guo: Mou Ding Tian Xia'. - Advertising revenue grew 28% y-o-y, with performance-based ads up nearly 50% y-o-y. - VAS revenue grew 9% y-o-y. - Average daily video views exceeded 5.7 billion, up 23% y-o-y. - Nearly 2.7 million content creators received income through various channels on the platform in the first nine months of 2024, with content creators' total income through fan charging product up over 400% y-o-y in the same period. - MSCI ESG rating upgraded to A.

Total revenues in the third quarter reached RMB7.3 billion, up 26% year-over-year. Games revenue surged by 84% year-over-year to RMB 1.8 billion, accounting for approximately 25% of total revenue. Advertising revenues increased by 28% year-over-year to RMB 2.1 billion, making up around 29% of total revenue. VAS revenues grew by 9% year-over-year to RMB 2.8 billion, contributing about 38% to total revenue. IP directives and other businesses accounted for about 8% of total revenue. Gross profit rose 76% year-over-year to RMB 2.5 billion, with the gross profit margin jumping to 34.9% from 25.0% in the same period last year.

• Expect revenue from gaming and advertising business to maintain strong growth momentum in Q4. - Anticipate further quarter-over-quarter improvement in gross profit margin and deliver further improved non-GAAP operating income in Q4. - Announced a share repurchase program of up to $200 million for securities over the next 24 months to enhance shareholder returns.

Actual events or results could differ materially from those mentioned due to a number of risks and uncertainties, including those mentioned in our most recent filing with the SEC and Hong Kong Stock Exchange.

Q: Management's strategic view on BILI after trading breakeven this quarter, what is our key focus in user and commercialization going forward? And how to strengthen our position in our core industry?

A: Rui Chen mentioned the vast potential of the video industry, Bilibili's unique PUGV community, and focus on community growth and commercial growth, especially on core businesses like games and advertising which have higher market TAM and gross margin. Juliet Yang added on user adoption of 4G/5G and Bilibili's advantage in high-quality content.

Q: On advertising, which is very strong. What's the key driver behind the third quarter advertising growth? And also for the fourth quarter, do we see there is a change in the kind of macro environment for the advertising demand? And also lastly, how is our performance in the Double 11 festival for our e-commerce-related business?

A: Carly Li said Q3 advertising revenue was good with performance-based ads growing nearly 50%. Key drivers included releasing more ad inventory while maintaining user experience, optimizing ad placement system, launching Creative Center and AIGC aiding ad efficiency. For Q4, mentioned potential for additional revenue from live streaming, etc., and optimistic about domestic economy mid to long-term. On Double 11, GMVs from video and live e-commerce increased over 150% y-o-y, participating content creators rose by 80%, new customer rates exceeded 50% across sectors.

Q: About the game business, which grow more than 80% in the third quarter. What is the outlook and the operation planning in the future for 'San Guo: Mou Ding Tian Xia'? And also, I would like to hear management’s thought about user acquisition for this game, and also the future pipeline in Bilibili's game business and also the potential new genre’s in the future?

A: Rui Chen said 'San Guo: Mou Ding Tian Xia' entered Season 3 and will enter Season 4 with new content. Focus on optimizing user experience and engagement, will continue to listen to user feedback. Plan to launch international version of 'San Guo' starting with traditional Chinese version. Next year, look to explore new genres.

Q: What is your GP margin and the profit margin outlook after you are successfully turning profitable this quarter? And also, we noticed that you announced share repurchase program. So how should we think about your shareholder reward scheme going forward?

A: Sam Fan said Q3 achieved adjusted net profit, gross profit margin improved due to high-margin game and advertising revenue. Believes with continued growth of titling and gaming business, gross profit margin will further improve in long-term. Announced $200 million repurchase plan over next 24 months to increase return to shareholders.

Q: About more the macro policy. Since end of September, we have seen quite a big shift in terms of those policy and more stimulus coming. So from the company's business level, have we seen any incremental better trends in terms of advertising, gaming, live streaming or user paying propensity?

A: Rui Chen and Juliet Yang mentioned positive economic policies are encouraging signals, Bilibili is part of platform economy and will benefit from economic improvement in long-term, but some policies may take time to materialize.