Bilibili Inc. Q1 FY2020 Earnings Call

Ladies and gentlemen, good morning, and welcome to the Bilibili 2020 First Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would now like to hand the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.

Thank you, operator. Please note, the discussion today will contain forward-looking statements relating to the company’s future performances and are intended to qualify the Safe Harbor from liability, as established by the U.S. Private Security Litigation Reform Act. Such statements are not guarantees of future performances and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risk factors are beyond the company’s control and could cause actual results to differ materially from those mentioned in today’s press release and this discussion. A general discussion of the risk factors that could affect Bilibili’s business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today’s call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For definitions of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2020 first quarter financial results news release issued earlier today. As a reminder, this conference call is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili Investor Relations website at ir.bilibili.com. Joining us today on the call from Bilibili’s senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Thank you, Juliet. Thank you, everyone, for participating in our 2020 first quarter conference call. I’m pleased to deliver today’s opening remarks on behalf of Mr. Chen. 2020 is off to a remarkable start. We are proud to deliver stellar results and set new records within our key operating and financial metrics. For the first quarter, our MAU grew by 70% year-over-year, reaching 172 million and our mobile MAU grew even faster at 77% year-over-year to 156 million. Our user engagement level also reached a new height. Our DAUs achieved a major milestone, up 69% year-over-year to 51 million. Along with our large user numbers, we saw a striking increase in the amount of daily time spent on our platform, up 10 minutes from Q4 to an average of 87 minutes. This is the highest level we have seen in our corporate history. These statistics once again demonstrate our strong execution and high-quality growth we aim to deliver. We attribute our success to our increasingly broad content, a friendly and sticky community, as well as improved brand awareness. Building on the success of our New Year’s Eve Gala event, we welcomed more new users, especially during the extended winter holiday. Bilibili is becoming many people’s first choice when it comes to content creation and consumption. In 2019, we affirmed our user growth as one of our key objectives and raised our target of MAUs for 2021 to 220 million. We are pleased to say, with the solid execution on our initiatives, we are on a fast track to meet these targets. As we roll out more premium content and services and strengthen our monetization capabilities, we are converting more traffic to paying users. Our MPUs grew by 134% year-over-year to an impressive 13.4 million in the first quarter. The paying ratio also grew to 7.8%, more than doubled from two years ago. Our revenues reached an all-time high of RMB2.3 billion, surpassing the top-end of our guidance by more than RMB100 million. As our top line expands, we have seen increasing operating leverage. Gross margin jumped to 23% in the first quarter, up from 14% for the same period last year, marking the fourth consecutive quarter of margin improvements. Our strategic partnerships are also expanding. On the heels of our agreement with Tencent and Alibaba, we were excited to bring our longstanding partnership with Sony to the next level with its $400 million equity investment and business collaboration plans. Under the agreement, we plan to bring even more world-class anime and mobile game content to the domestic market, further enhancing our advantages in these sectors. The equity investment will not only fuel our future growth but also demonstrate Sony’s confidence in our unique positioning and growth prospects. With that overview, I’d like to walk through some of our initiatives and the trends we are seeing in each of our core areas of content, community, and commercialization, and how they fit into our long-term strategy. I will begin with content. Bilibili has cultivated one of the most attractive and friendly environments for our creators. Creators can easily upload content, actively interact with users and gain broader fanbase access. For these reasons, Bilibili has become many people’s first choice for PUGV creation, especially during the extended winter holiday, when more people were looking for ways to express themselves. We saw a significant increase in the number of active content creators and video submissions during the first quarter. We had about 1.8 million content creators uploading 4.9 million videos per month, representing increases of 146% and 138%, respectively, both year-over-year. With a growing number of creators and the effective operational campaign, we are getting even more diverse and innovative content submissions and further increasing our mass market appeal. For the first quarter, our most heavily trusted verticals were lifestyle, gaming, entertainment, animation, tech, and knowledge. For lifestyle, during the extended holiday, people were looking for ways to entertain themselves while staying at home. We actively promoted subcategories such as foodie, online fitness, and vlogs as many people looked for ways to cook, stay fit, and express themselves. Similarly, games overtook entertainment verticals, and we fortified our game content library, becoming the host for more and more gamers. With our recent partnership with Tencent Music and Sony Music, our music content is also attracting a growing amount of traffic, given its universal appeal. In addition, we expanded our technology and education categories in order to support those looking to catch up on their studies, learn a new skill, or simply gain more general knowledge during the long holiday. Turning to our OGV business. Building on our years of investment and key leadership in anime, documentaries, and other categories, we continue to turn our OGV library into valuable IP, attracting new users as well as converting paying users. During the first quarter, we launched the Daily Life of Immortal King, a Bilibili produced Chinese anime series. This high-quality series quickly gained over 100 million video views in less than 30 days, setting a new record for our OGV history. It not only attracted many new anime fans to our platform, but also converted a considerable amount of premium members. Similarly, we further expanded our documentary and variety show offerings to attract a broader audience. Our reality show, Animal Hospital Season 2, and First Man Out of China, a documentary that we co-produced with Discovery, were also welcomed by many pets and survival show lovers respectively. Turning to our community. As I mentioned, we are seeing record highs across all of our primary user metrics. With this rapid influx to our community, the quality of our platform, our content, and our users has gotten even stronger. In the first quarter, our daily video views reached a record high of 1.1 billion, up 113% year-over-year. Our users were more engaged with content and each other than ever before, and our overall community retention levels improved. In the first quarter, our users generated nearly 4.9 billion monthly interactions through bullet chats, comments, likes, and Bilibili moment posts, more than tripling the amount from the same period in 2019. Members of our official membership also grew at an accelerated pace in the first quarter. By the end of Q1, we had 82 million official members who passed our 100-question exam, up 66% year-over-year, and the 12-month retention rate for these users remained high as well, well above 80%. The strong community engagement and retention levels continue to be excellent indicators of the quality of our user growth. Turning to our commercialization progress. I will first review the status of our game business. Revenue from our games increased 32% year-over-year to RMB1.15 billion, accounting for 50% of our total first quarter revenues. Fate/Grand Order, or FGO, delivered a robust performance for the period, following a major content update. Other exclusively licensed titles such as Azur Lane and Furious Yama also continued their popularity during the first quarter. In April, we launched the highly anticipated Japanese RPG, Princess Connect! This exclusively licensed game was an immediate hit, attracting millions of players and topping China’s iOS download and grossing charts within a week after release. The phenomenal success of this release once again proves our strong distribution power and deep understanding of the ACG game market. Our jointly operated games also continued their growth momentum in the first quarter. Newly released updates for Arknights were welcomed by many existing and new players. With an increasing number of gamers gathering and more efficient distribution operations, our platform is an inevitable channel for game developers, who want to maximize their exposure to quality players and reach potential new fans. Later this year, we’ll be further expanding our game offerings. With 30 high-quality games in our upcoming game pipeline, we are looking forward to further diversifying our portfolio. We have eight titles that have acquired approvals and are scheduled to be released in the coming months. This includes Animistic, a thrilling ACG title that we plan to roll out this summer. On the jointly operated games front, we will continue to work with leading game developers to bring our users premium games, such as Mihoyo’s Genshin and NetEase’s Harry Potter. Turning to our VAS business. Revenues from VAS increased by 172% year-over-year, reaching RMB794 million in the first quarter. Our growth was mainly driven by increased contributions from premium members, live broadcasting, and other value-added services. As part of our video content ecosystem, we continued to enrich our live broadcasting offerings and increase our live broadcasting penetration among our growing user traffic. Our investment in top live broadcasting IP continues to fuel our user growth and attract more live broadcasting hosts to our platform. We are seeing more talent agencies and individuals turn to Bilibili to grow their influence on our fast-developing platform. With access to our exclusive programs, members have become accustomed to paying for high-quality content. By the end of the first quarter, our premium members reached an exciting milestone, exceeding 10 million, with a record of 10.9 million subscribers. This represents an increase of 127% year-over-year and further demonstrates that our users represent a golden cohort with a high willingness to pay for premium entertainment material. As for our advertising business, our rapidly growing community and increasing brand equity are making Bilibili a leading platform for advertisers. Despite macro headwinds, revenues from our advertising segment continued to increase year-over-year, up 90% to RMB214 million in the first quarter. The leading three industry verticals for brand advertising were e-commerce, games, and 3C products. And the top three verticals for performance-based ads were games, education, and e-commerce. Advertisers are seeking out new and innovative ways to increase their visibility, and online channels represent a popular, heavily trafficked avenue. Beginning this year, we hosted multiple online new product launch conferences, including Huawei, Vivo, Oppo, and McDonald’s. We expect this offline to online marketing transaction to continue throughout the year. Advertisers in other industries such as online education and e-commerce are also seeking out our platform to increase their brand reach. To summarize, we had an outstanding first quarter, marked by excellent growth across our primary operational and financial metrics. The success was attributable to years of devotion in building a healthy content ecosystem, a friendly community, and improved commercialization capabilities. We are also pleased with our strong execution in raising our brand awareness, growing our user base, as well as forming high-level strategic partnerships. Building on this early 2020 momentum, we will continue our user growth strategy, improve our top line, and drive value for all of our supporters, our growing community, and our stakeholders. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the first quarter of 2020. Our total net revenues increased by 69% year-over-year to RMB2.3 billion, exceeding the high-end of our guidance. With a 50-50 revenue split from our game and non-game business, we are pleased with our commercialization progress and the implications of this diversity. We are also converting more and more online traffic to paying users. The average number of monthly paying users increased by 134% year-over-year, reaching 13.4 million in the first quarter. Cost of revenues increased by 51% year-over-year to RMB1.8 billion. Revenue-sharing cost, a key component of cost of revenues, was RMB889 million, a 61% increase from the same period in 2019. Gross profit increased by 180% year-over-year to RMB530 million. We are also starting to see operating leverage from our diversified revenue streams. With more revenue contribution from our higher-margin business, as well as additional income from paying users, our gross profit margin continued to improve, reaching 23% in the first quarter. Total operating expenses increased to RMB1.1 billion, up 117% from the same period in 2019. Selling and marketing expenses were RMB606 million, representing a 234% increase year-over-year. The increase was primarily attributable to the increased channel and marketing expenses associated with Bilibili’s app and brand, as well as expenses for the company’s mobile games and the sales and marketing personnel. Building on the success of our New Year’s Eve Gala and strong user demand during the extended holiday, we made additional investments in branding and the channels to further drive user growth and raise brand awareness, which we believe will yield considerable returns in the long run. G&A expenses were RMB171 million, representing a 33% increase year-over-year. The increase was primarily due to increased headcount in general and administrative personnel and increased share-based compensation expenses. R&D expenses were RMB297 million, representing a 60% increase year-over-year. The increase was primarily due to increased headcount in research and development personnel. Net loss was RMB539 million for the first quarter of 2020, compared with RMB196 million in the same period of 2019. Adjusted net loss, which is a non-GAAP measure that excludes share-based compensation expenses and amortization expense related to intangible assets acquired through business acquisition, was RMB475 million, compared with RMB145 million in the same period of 2019. Basic and diluted net loss per share were RMB1.62. Adjusted basic and diluted net loss per share were RMB1.43. As of March 31, 2020, before Sony's investment, we had cash and cash equivalents, time deposits, as well as short-term investments of RMB7.9 billion, or US$1.1 billion, compared to RMB8.1 billion as of December 31, 2019. To further grow our business, we plan to improve our monetization by leveraging our considerable and growing traffic. We also see benefits in further expanding our diverse revenue streams and continuing to improve our paying ratio. Longer-term, we believe our monetization efforts, high-paying user conversion rates and scale will yield and improve the bottom line. With that in mind, we are currently projecting net revenue for the second quarter of 2020 to be between RMB2.50 billion and RMB2.55 billion. Thank you for your attention. We would like now to open the call to your questions. Operator, please go ahead.

Thank you, everyone. We will now start the Q&A session. The first question today comes from Jialong Shi from Nomura. Please go ahead.

Congratulations on a very solid quarter. My question is about MAU. We saw a significant increase this quarter. Could management provide insights on how much of this growth was due to the pandemic in the first quarter and how much was organic? As conditions in China return to normal, how should we view the trend of MAU growth after the pandemic? For the new users acquired this quarter, how does their engagement level compare to that of existing users? Lastly, regarding China’s PUGV market, could you share what size the user base in this segment could potentially reach? Thank you.

Could management provide insights on how much of the growth in the first quarter was pandemic-driven and how much was organic? As the situation in China returns to normal, what should we expect regarding the trend of your monthly active user growth after the pandemic? For the new users gained in the quarter, how does their engagement level compare to that of existing users? Finally, regarding China's PUGV market, can you share potential estimates for the size of the user base in this segment? Thank you.

Your first question on the MAU, indeed, we had an outstanding first quarter in terms of user growth. And we believe that user growth is based on two factors. One is 10 years of devotion and dedication in building a healthy content ecosystem and friendly community to ensure that we always have the highest quality content to offer to our users. And second of all, is our continuously raising brand awareness and our actively impressive user acquisition strategy.

We had an outstanding first quarter in terms of user growth. We believe that this growth is due to two factors. First, our 10 years of commitment to creating a healthy content ecosystem and a friendly community that guarantees we provide the highest quality content to our users. Second, our ongoing efforts to increase brand awareness and our effective user acquisition strategy.

Probably we have already experienced that, Bilibili has become not only for the younger generation, but more for mass market people’s first choice when it comes to content creation or content consumption. And there’s more and more chatter about what type of videos you’ve seen on Bilibili.

Bilibili has become not only the go-to platform for the younger generation but also the preferred choice for a broader audience when it comes to content creation and consumption. There's increasing discussion about the types of videos available on Bilibili.

So all of these factors that we’ve mentioned above actually has nothing to do with the extended holiday resulting from the pandemic.

Bilibili has increasingly become the go-to platform for content creation and consumption, not just for the younger generation but also for the broader market. There's a lot of discussion about the types of videos being watched on Bilibili. All of these factors we've mentioned are unrelated to the extended holiday caused by the pandemic.

So we believe the pandemic only helped us to accelerate our user growth process, but it will not change or become a main factor in how our users grow.

We believe the pandemic only helped us to accelerate our user growth process, but it will not change or become a main factor in how our users grow.

So regarding your second question about how the MAU is trending after people are returning back to school or work. As I mentioned earlier, the accelerated user growth that we’ve seen in the first quarter has more to do with the fundamentals of our company and the extended holiday only helped us to accelerate our process. So we’re still quite confident that in the second and third quarter, we’ll still be seeing a relatively decent rate of user growth.

Regarding your second question about how the monthly active users are trending as people return to school or work, the accelerated user growth we experienced in the first quarter is largely due to the fundamentals of our company, and the extended holiday merely helped speed up our progress. We remain quite confident that in the second and third quarters, we will continue to see a relatively decent rate of user growth.

So in terms of the new user profile that we’ve seen in the first quarter, there’s no big difference between the new users and the old users. There’s still a majority of the younger generation. Their average age is around 20 years old, and over 50% of the new users come from very long third-tier cities or below.

I am quite confident that in the second and third quarter, we’ll still be seeing a relatively decent rate of user growth. In terms of the new user profile that we’ve seen in the first quarter, there’s no significant difference between the new users and the old users. The majority are still from the younger generation, with an average age of around 20 years old, and over 50% of the new users come from very long third-tier cities or below.

So in terms of user growth, we never just purely focus on quantity, but we always put quality first. As you can see from the user metrics, our MAU grew 70% year-on-year. Our DAU also grew 69% year-on-year. Our time spent for DAU increased 10 minutes quarter-over-quarter to 87 minutes per day, and our video views surpassed 10 billion, reaching 1.1 billion on a daily basis. And the overall retention rate and engagement level of our user base is also very strong. The 12-month retention rate of our official members who took and passed the 100-question test is also well above 80%. All of this matrix was achieved under the environment as the overall user increased significantly. So this is another set of results that demonstrate our quality of growth.

Our average daily time spent by users increased to 87 minutes, and we exceeded 10 billion video views, reaching 1.1 billion daily. The retention rate and engagement of our users are notably high. Specifically, the 12-month retention rate for official members who completed the 100-question test remains above 80%. These metrics were achieved despite a significant increase in the overall user base, highlighting the quality of our growth.

So at the same time, as you can see, our paying users are also experiencing very fast growth. Our paying user has reached over 13 million this quarter, which means we’re converting more traffic to paying users. So this is another very strong metric that supports the quality growth.

This quarter, our paying users have surpassed 13 million, indicating a robust conversion of traffic into paying customers. This is another strong metric that reinforces the quality of our growth.

According to the latest CNIC report, the overall Chinese video user base has already reached 860 million. As the adoption of 5G technology, we believe video will become the most common format of content consumption or creation. By that time, we believe the overall video user base is probably going to be equivalent to the overall Internet users.

According to the latest CNIC report, the overall Chinese video user base has already reached 860 million. With the adoption of 5G technology, we believe that video will become the most common format for content consumption or creation. At that point, we anticipate that the overall video user base will likely match the total number of Internet users.

So the reason why we call PUGV is the professional part of the term because it’s professionally produced. So it has higher quality. We don’t believe anybody will say no to higher quality video content. And because of that, we think that all the video users could potentially be PUGV users.

We believe that by that time, the overall video user base will likely match the total number of Internet users. The term PUGV refers to professionally produced content, which ensures higher quality. We think that no one would turn down better quality video content, and due to this, we anticipate that all video users might become PUGV users.

We believe in the near future, everything will be video-centered, which is a great opportunity for Bilibili. From what we have observed, we believe video is not just pure content or communication; it has become a service or an important part of entertainment. Based on what we have seen so far, there’s a trend that everything marketing-related has become more video-oriented. And there are tons of users studying, learning new things, and gaining general knowledge on Bilibili. This video becoming a format of gaining knowledge. In the longer-term, we believe video is going to be the new connector that connects everything. Hope that answers your question, Jialong?

Yes, indeed, and thanks very much for the color.

Your next question comes from the line of Lei Zhang. Please ask your question Lei.

My question is mainly about the commercialization of the non-game business. We have seen strong revenue growth in the fourth quarter of non-game, especially in the less emphasized areas, and we also noticed some positive business development recently in music and live streaming. Could management share more details on the efforts we have made in the non-game business, particularly regarding our policy with live streaming? Additionally, I would like to know your growth outlook for the non-game business in live streaming and advertising in 2020. Thank you.

Can management provide more details about our efforts in the non-game business, particularly regarding our live streaming policy? Additionally, what is the growth outlook for the non-game sector in live streaming and advertising in 2020? Thank you.

So we haven’t changed our concept in our non-game business plan or strategies since our IPO.

We have observed some positive business developments lately in music and live streaming. Could management provide additional details on our initiatives in the non-game sector, particularly our approach to live streaming? Additionally, I would like to know your growth expectations for the non-game business in live streaming and advertising in 2020. Thank you. Rui Chen, CEO. Juliet Yang, Senior Director of Investor Relations, stated that we have not altered our concept or strategies for our non-game business plan since our IPO.

So from every part of our live broadcasting business, we’ve always emphasized live broadcasting for Bilibili as an ability. It is based on the current view content ecosystem, and we have massive users gathering around Bilibili content, live entertainment content, such as animation and other professionally generated content, where we launched our premium membership services to satisfy their growing needs. And if I have to talk about our strategy, again, it still comes back to the same logic that we have, the user— we understand the need and we recommend the right products to suit their right needs.

Bilibili is an ability. It is based on the current view content ecosystem, and we have massive users gathering around Bilibili content, live entertainment content, such as animation and other professionally generated content, where we launched our premium membership services to satisfy their growing needs. If I have to talk about our strategy, again, it still comes back to the same logic that we have, the user — we understand the need and we recommend the right products to suit their right needs.

Our strategy is always to attract massive loyal engaged users through PUGV at the same time to provide them live broadcasting content and professional OGV content to satisfy their growing needs.

Our strategy is always to attract a large base of loyal, engaged users through user-generated video content, while also providing them with live broadcasting and professional original content to meet their increasing demands.

So in terms of the growth potential of our VAS business, we believe for many years to come, we will maintain a high growth rate for a relatively longer-term; to be more specific, regarding the high growth rate, we will be over 100%.

Our strategy is always to attract a large number of loyal, engaged users through PUGV while also providing them with live broadcasting content and professional OGV content to meet their increasing demands. In terms of the growth potential of our VAS business, we believe we will sustain a high growth rate for many years to come; specifically, this growth rate will exceed 100%.

We avoid using monetization when we talk about our commercialization progress because we believe, essentially, our commercialization process is providing users better services for more premium content. This is beneficial for our users.

Okay. Your next question comes from the line of Alex Liu from China Renaissance. Please ask your question, Alex.

Thanks for this opportunity. My question is about sales and marketing spending. Could management provide us with a breakdown of this quarter’s sales and marketing expenses? Additionally, could management share more updates on this year’s brand image upgrade, considering our recent platform branding initiative sparked a considerable discussion among users? Thank you.

Okay. Alex, I will take your question and Carly will add more color about upgrades. As Chairman generally mentioned, our user growth is still the top priority of our business this year. So it’s also the cornerstone of our commercial monetization progress. If you look at all the numbers, the main component for our marketing expenses are channel promotion, the channels like app store, as well as the feedback channel and our brand liability activities, as well as promotions related to our game releases. The incremental part, if we compare that with our Q4 numbers, is mainly for the channel promotion and brand activities. We don’t set a very specific market cost target for financial purposes. Instead, we monitor these closely to ensure high-quality user growth. Decisions will be made according to both quality and quantity observations on all the newly added users, including their activity rate, for example, the DAU, their retention level, time spent, and average daily views as well as the numbers of their interactions. When market opportunities arise and ROI is found reasonable, we will continue to invest. At the same time, with deepening our commercialization progress, the new users we see also effectively converted into our paying users. In Q1, MAU growth increased by 70% year-on-year, but the number of paying users increased over 130% year-over-year, and our overall paying ratio is also improving. This demonstrates that we still have room to raise our paying ratio to get a better long-term return from our user growth strategies. This growth in users will also lead to the growth of the top line. You will see that the leverage is still there; the top line increased by 69% in Q1 and our gross profit increased by 180%. This means we just need to accelerate our commercialization process to achieve better returns from our investment. Currently, we have over 10 billion cash reserves after Sony’s capital injection, and all the strategic shareholders are still very supportive of our user growth strategy. Generally, in Q1, we still generated positive operating cash flow, and the actual cash burn for Q1 was just RMB200 million, which is much less than the loss recorded in our P&L payment. So the financial status is quite healthy. We believe the market is still booming, and the opportunity is still there. We’re just on the right track to catch those kinds of opportunities. I will let Carly comment about the brand upgrade profile.

Shareholders remain very supportive of our user growth strategy. In Q1, we generated positive operating cash flow, and our actual cash burn was only RMB200 million, significantly lower than the losses recorded in our profit and loss statement. Our financial status is quite healthy. We believe the market is still thriving, and opportunities are abundant. We are well-positioned to seize these opportunities. I'll hand it over to Carly to discuss the brand upgrade profile.

So as you can see, user growth will be our primary focus for 2020, and we have set up a comprehensive plan to grow our user base since last year that includes raising brand awareness and correcting some misperceptions of how our brand represents or some of our content verticals represent among users or content consumers.

Carly will comment on the brand upgrade profile. User growth will be our primary focus for 2020, and we have established a comprehensive plan to expand our user base since last year, which includes enhancing brand awareness and addressing some misconceptions about how our brand and certain content verticals are perceived by users and content consumers.

From late last year, we have tried some independent marketing campaigns, including our investment in The World Championship in League of Legends, our New Year’s Eve Gala, and most recently, the Youth Day campaign rewarding the new generations. All of these have resonated strongly with our existing and potential users.

From late last year, we have tried some independent marketing campaigns, including our investment in The World Championship in League of Legends, our New Year’s Eve Gala, and most recently, the Youth Day campaign rewarding the new generations. All of these have resonated strongly with our existing and potential users.

Additionally, we will actively promote our content verticals within the mobile ecosystem such as studying and blogs, letting people know this is the go-to platform to consume those content verticals. This is also helping us to raise more brand awareness and platform awareness.

Additionally, we will actively promote our content verticals within the mobile ecosystem such as studying and blogs, letting people know this is the go-to platform to consume those content verticals. This is also helping us to raise more brand awareness and platform awareness.

From the Q1 operating data, it’s already pretty obvious that the efforts and initiatives we have taken have significantly raised our brand awareness and influence among Internet users aged 16 to 35. We take great pride in what we have done so far.

From the Q1 operating data, it’s already pretty obvious that the efforts and initiatives we have taken have significantly raised our brand awareness and influence among Internet users aged 16 to 35. We take great pride in what we have done so far.

Going forward, we will continue to promote our brand through online and offline campaigns, creating festivals, organizing more events, and continuing to educate our users about our categories and content offerings.

It is already quite clear that the efforts and initiatives we have implemented have greatly enhanced our brand awareness and influence among Internet users aged 16 to 35. We are very proud of what we have accomplished thus far. Moving forward, we will keep promoting our brand through online and offline campaigns, creating festivals, organizing more events, and continuing to educate our users about our categories and content offerings.

We’re going to launch a series of campaigns to raise our brand awareness, brand mission, and positioning through various online and offline activities. The timeline will be surrounded by several important timestamps, such as graduation season and Bilibili’s anniversary, and special applications.

We’re going to launch a series of campaigns to raise our brand awareness, brand mission, and positioning through various online and offline activities. The timeline will be surrounded by several important timestamps, such as graduation season and Bilibili’s anniversary, and special applications.

Tomorrow, on March 20, it is also a very interesting time of the year. We will collaborate with a famous singer, Mao Buyi, to launch a graduation theme song to dedicate that to the new generation that is about to graduate from schools and enter society, and we look forward to that piece to meet everybody.

Tomorrow, on March 20, it is also a very interesting time of the year. We will collaborate with a famous singer, Mao Buyi, to launch a graduation theme song dedicated to the new generation that is about to graduate from schools and enter society, and we look forward to that piece meeting everyone.

Your next question comes from the line of Wendy Chen from Goldman Sachs. Please ask your question, Wendy.

Thank you, management, for taking my question. My question is related to the mobile game business. Following up on the previous question, how do we view the growth of the mobile game business for the coming quarter, considering many gamers might have returned to work and school, which could reduce gaming time? Additionally, since we are implementing some very innovative marketing campaigns for our new title, Princess Connect!, will we apply similar marketing strategies for future game launches? Lastly, could management share insights on our strategic partnership with Sony regarding the game business? Thank you.

Given the expected growth for the next quarter, especially with many gamers possibly returning to school and reducing their gaming time, I have a couple of questions. First, since we are implementing some innovative marketing campaigns for our new title, Princess Connect!, will we use similar marketing strategies for future game releases? Secondly, could management provide insights on our strategic partnership with Sony in relation to the gaming sector? Thank you.

We actually don’t believe the whole pandemic has a big influence on our game business. Actually, our confidence throughout the rest of the year with our game business is strong; we currently have 30 exclusively licensed games in our pipeline. Eight of those have already acquired approval, and the majority of those pipelines are domestic titles and relatively smaller scales that are from imported titles. So it’s a very healthy component.

We actually don’t believe the whole pandemic has a big influence on our game business. Our confidence throughout the rest of the year with our game business is strong; we currently have 30 exclusively licensed games in our pipeline. Eight of those have already acquired approval, and the majority of those pipelines are domestic titles and relatively smaller scales that are from imported titles. So it’s a very healthy component.

The success of Princess Connect! We believe this is another strong testimony of our strong distribution power and our understanding of ACG games. Before the game was launched, it had over 6.5 million preregistered users. Since its release on April 16, it has topped on China’s iOS top downloads charts for a week and has reached number two on the top browsing list. Based on our strong execution, we believe this is a very, very successful event.

The success of Princess Connect! is a strong testament to our distribution strength and understanding of ACG games. Before the game launched, it had over 6.5 million preregistered users. Since its release on April 16, it topped China’s iOS downloads charts for a week and reached number two on the browsing list. We believe this is an exceptionally successful event based on our strong execution.

Based on the existing data and feedback that we have received, we believe this is going to be a title with a very long lifecycle—probably over three years.

It had over 6.5 million preregistered users. Since its release on April 16, it has topped China’s iOS top downloads charts for a week and has reached number two on the top browsing list. Based on our strong execution, we believe this is a very, very successful event. Based on the existing data and feedback that we have received, we believe this is going to be a title with a very long lifecycle—probably over three years.

As I mentioned, Princess Connect! is a strong testimony of our distribution power in terms of ACG games, and we are rapidly becoming the inevitable channel in China to launch ACG-related titles. We believe this advantage will further expand as our overall community grows and our overall users in-game become more active.

We believe this title will have a very long lifecycle, probably over three years. Princess Connect! showcases our distribution strength in ACG games, and we are quickly becoming the main channel in China for launching ACG-related titles. We expect this advantage to grow as our overall community expands and more users become active in-game.

Going forward, with further expansion of our content verticals, we’ll also seek to expand our game offerings into more high-quality content, high-quality titles, and we are quite confident this will also be very successful.

Rapidly becoming the inevitable channel in China to launch ACG-related titles. We believe this advantage will further expand as our overall community grows and our overall users in-game become more active. Going forward, with further expansion of our content verticals, we’ll also seek to expand our game offerings into more high-quality content, high-quality titles, and we are quite confident this will also be very successful.

We indeed have a longstanding relationship with Sony. Before the equity investment, we were already working with them on multiple business aspects, including animations and games. With this strategic partnership, we are going to further solidify and bring our partnership to the next level in terms of animation and mobile games.

We indeed have a longstanding relationship with Sony. Before the equity investment, we were already working with them on multiple business aspects, including animations and games. With this strategic partnership, we are going to further solidify and bring our partnership to the next level in terms of animation and mobile games.

Sure. Carly wants to add something on. First of all, Sony is the world leader in terms of entertainment and technology. Sony’s strategic investments really demonstrate their confidence in Bilibili’s growth potential and our unique positioning in the entertainment market. On top of the animation and games, Mr. Chen mentioned that we are also hoping to work with Sony on other aspects, including music, as well as movies, which are hoping to really bring more world-class premium content to satisfy our growing user needs.

First of all, Sony is the world leader in terms of entertainment and technology. Sony’s strategic investments really demonstrate their confidence in Bilibili’s growth potential and our unique positioning in the entertainment market. On top of the animation and games, we are also hoping to work with Sony on other aspects, including music, as well as movies, which we hope will bring more world-class premium content to satisfy our growing user needs.

And your next question comes from Alex Poon from Morgan Stanley. Please ask your question, Alex.

I’ll translate my question. My first question is regarding the MAU target. Since we have already achieved more than 170 million MAUs in the first quarter, should we expect an upward revision for the full-year target and also for next year? My second question is about PUGV competition. There are many more platforms that enable content creators to upload their content and they also offer a variety of easy tools and cash incentives to these creators. How should we assess the ROI of PUGV going forward? Thank you.

I’ll translate my question. My first question is regarding MAU target. As we already achieved more than 170 million MAUs in the first quarter, should we expect to revise up to full-year target and also next year? My second question is related to PUGV competition. There are many more platforms that allow content creators to upload content and they also provide a lot of easy tools and cash returns to these content creators. So how should we see the ROI of PUGV in the future? Thank you.

Regarding your first question on the user target, we are confident to say, we will achieve our user target in advance. When we get there, we’ll talk further about raising our user target. And your second question about the competition. The foundation of your question relies on how we are able to keep our content creators and grow our content creators. As you can see from our Q1 data, we have experienced a very fast growth in terms of our active content creator and their content creation; the number of content creators with more than over 10,000 followers is also rapidly growing. All of this means we have cultivated a very healthy ecosystem that allows our content creators to grow on our platform. The message behind that is to truly respect high-quality content, and we expect the high-quality content creators to always prioritize quality. It’s much easier said than done. You have to present that principle over 10 years to ensure this mechanism that helps you keep attracting and retaining those users. As you can see, those top content creators are staying with us and growing with Bilibili, and that’s the key competitive edge Bilibili has compared to competitors.

And that concludes the question-and-answer session for today. I would now like to hand the conference back over to management for any additional or closing comments.

All right. Thank you once again for joining us today. If you have any further questions, please contact myself, Juliet Yang, Bilibili’s Senior IR Director, or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found on today’s press release. Have a great day.

Ladies and gentlemen, that does conclude today’s conference call. Thank you for all participating today. You may now disconnect.