Good day, and thank you, and welcome to the Bilibili First Quarter 2025 Financial Results and Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.

Thank you, operator. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purposes only. The definition of this measure and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili 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. I will now turn the call to Mr. Chen.

Thank you, Juliet, and thank you everyone for joining us today to discuss our 2025 first quarter results. We started 2025 on promising ground, delivering solid financial results and healthy community development in the first quarter. Our total revenues accelerated year-over-year, increasing by 24% to RMB7 billion, driven by strong performances in our high-margin advertising and game businesses. Advertising revenues were up 20% year-over-year to RMB2 billion, supported by our ongoing product enhancements and infrastructure upgrades, fueled by the sustained popularity of our SLG title San Mou. Our games revenues also rose 76% year-over-year to RMB1.73 billion. The continued top-line expansion in these high-margin businesses, combined with operating efficiency, provided us with greater operating leverage. In the first quarter, our gross profit increased by 58% year-over-year, with gross profit margin expanding to 36.3%, up from 28.3% in the same period last year. As a result, we sustained positive adjusted net profit of RMB362 million and narrowed our GAAP net loss by 99% year-over-year in the first quarter. While further strengthening our financial performance, we continued to grow our community and enhance user engagement. The successful collaboration with CCTV's Chinese New Year Gala also helped bring the Bilibili name to a broader audience. In the first quarter, DAUs reached 107 million, and MAUs climbed to a new high of 368 million. Meanwhile, our compelling and diverse content drove users' average daily time spent to a record 108 minutes. Next month, Bilibili will turn 16. Looking back, it has been an incredible journey, one that is truly unique. Over the years, our community has grown tremendously. What is most remarkable is that the sense of connection between users and creators and the welcoming, inspiring vibe that defines Bilibili has stayed the same. Over this time, our users have grown with us too. Today, the average age of our active users is 26, a life stage where consumption needs and purchasing power are both on the rise. As the go-to platform for Gen Z+ to discover high-quality, creative video content in China, we are in a great position to meet their evolving needs and unlock even more monetization opportunities. With that overview, let's take a closer look at our core pillars of content, community, and commercialization. Beginning with content and community, as we look at today's video landscape, it's clear that people have more content than ever, especially with the explosion of short videos. But what really stands out is that people are craving and spending more time on high-quality content. At Bilibili, that has always been our focus. We have built a community known for the best content out there, and we will keep prioritizing and promoting quality above all else. This commitment is showing up in our numbers. In the first quarter, users spent an average of 108 minutes on our platform every day, compared to 105 minutes in the same period last year, marking a new record. Our monthly paying users also reached an all-time high of 32 million, as our users discover and connect with more quality content they love. Monthly interactions were nearly 16.7 billion in the first quarter, and our official member count reached 264 million by the end of Q1, up 12% from last year. On top of that, their 12-month retention rate stayed strong at around 80%. The quality of our content is also showing up in our content categories. Our core ACG content continues to thrive, and our game content is a great example. In the first quarter, game-related watch time increased 14% year-over-year, drawing in both long-time fans and new gamers who come to Bilibili for reviews, walkthroughs, and game IP content. As Gen Z+ users mature and their spending power increases, many are turning to Bilibili with real purchase intent, looking for trusted, unbiased recommendations. That's reflected in our travel and lodging and home appliance-related content, with watch time growing by over 20% year-over-year in Q1. Additionally, being the hub for curious minds and the best knowledge video library, we saw a big surge in our AI-related content. More young people are coming to Bilibili to explore and learn about AI, and AI-related watch time more than doubled from Q1 last year, along with a 400% increase in advertiser demand. Behind all of this is our amazing creator community. By the end of Q1, the number of creators with over 1,000, 10,000, 100,000, and 1 million followers all grew by more than 20% year-over-year. About 1.5 million creators made money on Bilibili during the quarter, not just through ads or live streaming, but also by using our e-commerce tools and various fan-support programs. In fact, creators' total income from our fan-charging program was up over 200% in Q1, showing how users truly appreciate and are willing to pay for quality content. Lastly, our partnership with CCTV for the Chinese New Year Gala gave us a big boost in brand awareness. It attracted new users and strengthened engagement with our existing community. What's more? Viewers can now revisit all the past Chinese New Year Galas right here on Bilibili. It's another great example of how we curate quality content and deliver value through our unique community. Meanwhile, our self-produced Chinese anime, The Tales of Herding Gods, Mu Sheng Ji, was well received. It's garnered over 560 million views so far and is showing strong potential to become Bilibili's next long-lasting anime IP. We also released our self-produced title To Be Hero X, Tu Bian Yingxiong X, worldwide in April. It quickly gained traction, ranking #1 on MyAnimeList for best spring title 2025. Now, let's talk about our commercial businesses and their progress. Our advertising business continued to deliver solid results in the first quarter, with revenues growing 20% year-over-year to RMB2 billion. As our users mature and have more spending power, they increasingly look to Bilibili for content that informs their lifestyle and consumption choices. This trust within our community and the influence of our quality content have become powerful drivers for advertisers. In the first quarter, the number of advertisers placing orders on our platform increased by more than 35% year-over-year. Meanwhile, we have been integrating a large language model to help us better understand users' interests and commercial intent, enabling more accurate ad targeting and smarter ad delivery. We also upgraded our AIGC ad content tools to help advertisers generate more tailored and effective ad titles and covers at scale, allowing them to reach users more efficiently through compelling and user-friendly storytelling. These enhancements have fueled the growth of our performance-based advertising, which grew by over 30% year-over-year in Q1, while brand and native ads continue to show steady momentum. Industry-wise, we strengthened our position in core verticals while attracting more advertisers from emerging sectors. In the first quarter, our top five ad verticals were games, Internet services, e-commerce, digital products and home appliances, and automotive. Powered by our vibrant and highly engaged gaming community, gaming ads continue to contribute a strong share of our ad revenues, with new formats like Bilibili mini-games driving additional growth. Moreover, we saw a notable increase from sectors targeting younger consumers as they enter new life stages with evolving needs. In the first quarter, ad revenues from home appliances and decorations grew by nearly 40% year-over-year. Similarly, AI-related ad revenues surged by 400% year-over-year, reflecting Bilibili's growing appeal to emerging industries, looking to engage our young, high-value user base through innovative ad formats. Turning to our game business, game revenues rose by 76% year-over-year to RMB1.73 billion, attributed to the continued strong performance of our SLG title, San Guo: Mou Ding Tian Xia. Meanwhile, our legacy ACG titles, FGO and Azur Lane, continued to deliver stable revenues and demonstrated impressive longevity in the first quarter. We are encouraged to see that San Mou is evolving into a long-cycle title with enduring appeal. With our expanded game development capabilities and upgraded gameplay, San Mou's active users and engagement in Season 7 improved from previous seasons, demonstrating the game's continued draw for core SLG players. On May 31, we will kick off Season 8, marking the game's biggest update since its initial launch. This highly anticipated anniversary edition will include a refreshed map, new characters, and special in-game events. These updates enhance the gaming experience and are designed to attract more younger players to the SLG genre. We expect this launch to mark a meaningful milestone in San Mou's continued growth and long-term success. The momentum behind San Mou also highlights our gaming community's strength and our ability to build differentiated experiences that resonate with diverse player groups. In addition to San Mou's international launch later this year, we have several new games in our pipeline awaiting approval. As we expand our game portfolio, we are focused on creating titles with lasting value by leveraging our leadership in the gaming space to reimagine gameplay for the next generation of gamers. And finally, let's look at our VAS business. Revenues from our VAS business increased by 11% year-over-year to RMB2.81 billion. Our live broadcasting business regained momentum during the first quarter, fueled by the supply of more quality content and more paying users. We also further refined our operations and incentive plan, which led to a meaningful improvement in the business's margin profile. We are also unlocking more value from our broader VAS portfolio. Gen Z+ users show a strong willingness to pay for content they care about. By the end of the quarter, premium memberships exceeded 23.5 million, with over 80% on annual or auto-renew plans, a clear sign of user loyalty. In addition, revenues from our fan-charging program surged by over 200% year-over-year, highlighting the potential of our direct-to-creator monetization tools. Lastly, while we are making solid progress on our commercialization efforts, we are also staying true to our role as a responsible cultural brand and corporate citizen. In April, we published our 2024 ESG report, sharing the steps we are taking to create social value and build a more sustainable business. We are proud to have received an A rating from MSCI for our ESG performance. While we keep growing our ecosystem with high-quality content, we are also committed to pushing the industry forward through innovation, both in technology and storytelling, while continuing to spread positive energy and make a real difference in society. As we move through the year, we will focus on advancing our commercialization capabilities with more enhanced and efficient commercial offerings. At the same time, we will continue promoting high-quality content that defines our vibrant community. In addition, we are actively embracing GenAI to optimize user experience, monetization efficiency, and unlock new growth opportunities. With that, I will turn the call over to Sam to share more financial details.

Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time on today's call, I will review our first quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the first quarter, we accelerated revenue growth and further expanded our margins, fueled by the strong performance of our high-margin games and advertising businesses while sustaining positive non-GAAP net profit. Total net revenues for the first quarter were RMB7 billion, up 24% year-over-year. Our revenue breakdown by revenue stream for Q1 was approximately 40% VAS, 29% advertising, 25% mobile games, and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 10% year-over-year to RMB4.46 billion in the first quarter, while our gross profit rose 58% year-over-year to RMB2.54 billion. Our gross profit margin reached 36.3% in Q1 compared with 28.3% in the same period last year. Our expanding gross profit and margin show how well our model adapts and scales as the business grows. Our total operating expenses increased 4% year-over-year to RMB2.52 billion. Sales and marketing expenses increased 26% year-over-year to RMB1.17 billion. The increase was mainly due to a one-off marketing expense related to our partnership with CCTV for the 2025 Chinese New Year Gala and higher year-over-year promotion expenses for our SLG game, San Mou. G&A expenses were RMB516 million, down 3% year-over-year. R&D expenses were RMB841 million, down 13% year-over-year, mainly related to R&D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB15 million, and our adjusted operating profit was RMB342 million, both compared with losses in Q1 2024. We also maintained a positive adjusted net profit of RMB362 million versus a loss in the prior-year period, and we narrowed our GAAP net loss by 99% year-over-year to RMB11 million. Our adjusted net profit ratio in the first quarter was 5% compared with an adjusted net loss ratio of 8% in the same period a year ago. Cash flow-wise, we generated over RMB1.3 billion in operating cash flow in the first quarter. As of the 31st of March 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB17.4 billion, or US$2.4 billion. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Thank you. We will now begin the question-and-answer session. Our first question comes from Lincoln Kong from Goldman Sachs. Please go ahead.

Thank you, management, for taking my question. Congratulations on a solid first quarter result. My question is about the content. Last quarter, Rui Chen mentioned enhancing our quality content. What is our specific plan this year to improve user engagement or quality content? Additionally, regarding AI applications, is there any progress or specific rollout we should expect? Thank you.

I believe we are in an era where there is an abundance of content, particularly short video content. Users are not short on content to watch; instead, they are in search of high-quality content. We have noticed that users are spending more time engaging with premium-quality content. This increasing demand for quality aligns with changes in consumer habits, as people are willing to invest in content that offers fulfillment and quality. We are committed to producing quality content, which is a core value of Bilibili. Our platform is recognized for upholding high standards in quality content. When users come to Bilibili, they experience lasting fulfillment rather than just temporary satisfaction. This focus will enable Bilibili to succeed in the evolving video competition landscape. Our Q1 data reflects this trend. For instance, the average daily time spent by users reached a record high of 108 minutes. Additionally, there has been a notable willingness among users to pay for premium content, with our average monthly paying users reaching 32 million and revenue from our fan-charging feature increasing by over 200% year-over-year. This highlights the considerable revenue opportunities available on the video platform, driven by users directly paying for content they are passionate about. Quality will continue to play an essential role in our strategy. By 2025, we will prioritize high-quality content as one of Bilibili's key attributes, supporting our talented content creators in gaining fans more quickly and receiving better financial rewards. We can see our strategy working as content categories develop, with ACG content and pan-knowledge content expanding into lifestyle and consumption-related themes that are thriving on our platform. Personally, I have found valuable knowledge and practical advice on Bilibili, such as how to wash a duvet cover and select the right sofa. The content is straightforward and fulfilling. Moreover, we are providing various monetization options for quality content creators. For example, last month, I discovered a content creator with fewer than 1 million followers who earned over RMB1 million in a month through our fan-charging program. Even when a creator focuses on niche topics, excellence in their segment can lead to significant appreciation and monetary rewards on Bilibili. Video content is becoming an essential part of spiritual consumption. We are discovering that quality video will gradually demonstrate its long-term value. While users may be drawn to short, stimulating content initially, over time—say five years—they will naturally gravitate towards content that offers fulfillment. This is why we remain committed to promoting high-quality, fulfilling content. Lastly, I want to highlight the potential of combining high-quality content with AI. Quality content withstands the test of time, as evidenced by its continual value since the early 2000s. The evolution of AI models relies on access to high-quality training data, and Bilibili has the world's largest repository of Chinese video content, which positions us advantageously in the era of AI. Currently, the AI model exhibits strong computing and inference capabilities, with historical text-based data utilized across various models. However, the challenge remains in producing high-quality, creative video content. Bilibili is well-placed to leverage its rich video information. For instance, our AI model can analyze historical video data to provide informed recommendations, like identifying mobile phones that excel at capturing human portraits. This level of analysis is unique to Bilibili. While AI can generate numerous text-based messages, it still faces substantial hurdles in producing reliable, high-quality video content. In this respect, Bilibili’s data assets are highly valuable. Our platform also stands out in specific categories such as animation, gaming, and knowledge, and with AI translation, we can expand these offerings into multiple languages, unlocking greater potential and value. Commercially, AI can enhance our efficiency in monetization, and I can provide more details on that in response to any follow-up questions.

Yes, that concludes Mr. Chen's answer. Operator, next question, please?

Thank you. One moment for the next question. Our next question comes from Xueqing Zhang from CICC. Please go ahead.

Thank you, management, for taking my question. My question is about your game business. Can management reveal the performance of San Mou in Season 6 and 7? San Mou has been launched for one year in June. So, what are your expectations for the anniversary version? How does management view the growth rate of the game business in the second half of the year? And what's your game pipeline? Thank you.

The primary objective of the San Mou operations team is to establish a long-lasting and healthy operation with a life cycle of at least five years or more. I prioritize user retention, and it's a key topic in our staff meetings regarding this game. My ultimate aim is for San Mou to be a game that players can enjoy for a lifetime. The seasonal game system is crucial in helping maintain long-term operation. We carefully consider user feedback each season to inform the design and promotion of the next game. Notably, the first day of Season 7 saw the highest daily active users record for 2025, reflecting our efforts to enhance the game and retain users. As a significant gaming content community in China, the Bilibili community greatly supports San Mou's long-term operation. For instance, our joint marketing campaign featuring prominent game streamers was effective in attracting new users and re-engaging dormant ones. Additionally, our virtual streamers are drawing their followers to Bilibili for live sessions, indicating an overlap in user interests that brings more players to the game. Thanks to these initiatives and our operational strategies, San Mou's current daily active users, paying ratio, and average revenue per user rank among the industry's top levels. Later this month, on May 31, we will launch Season 8, our anniversary edition of San Mou, featuring a refreshed map, new characters, limited anniversary scheme features, and engaging in-game events. We hope this edition elevates San Mou and contributes to its longevity. Many have inquired about what’s next after San Mou, and I consistently emphasize our focus on sustaining and enhancing San Mou’s success. We see the next San Mou as each upcoming game season, aiming to provide an improved experience for our users each time. Furthermore, we have two additional initiatives planned. By the end of this year, we aim to launch an international version in traditional Chinese targeting users in Hong Kong, Taiwan, and Macau. Additionally, we plan to expand San Mou to multiple devices, having already launched the PC version, which attracted many PC gamers. Our next step is to introduce the game on a mini-game platform, which could bring in even more new users. Besides San Mou, we have two important tasks ahead: sustaining our legacy titles, Azur Lane and FGO, with Azur Lane’s eighth anniversary this month and FGO’s ninth anniversary at the end of July. Both games are known for their sustainable operations and we anticipate new peaks in daily and monthly active users due to anniversary promotions. Our second strategy focuses on new games, with four to five titles waiting for approval. We will also seek opportunities in new genres, similar to what we achieved with San Mou, to innovate in line with the preferences of new generations of gamers. We see potential in these areas and will continue to invest and explore further.

Okay. That concludes Mr. Chen's answer. Next question, please?

Thank you. The next questions will come from Yiwen Zhang from China Renaissance. Please go ahead.

Congratulations on the strong results. I have a question about our advertising business. In the first quarter, we achieved 20% annual revenue growth, which is above the industry average. Could you provide more details on the key drivers behind this growth? Additionally, how do you see these drivers influencing our future performance, and what is our outlook for ad growth moving forward? Thank you.

In the first quarter, our advertising business continued to grow at a pace above the industry average, generating RMB2 billion in revenue, which reflects a 20% year-over-year increase. Particularly noteworthy is the growth of our high-margin performance-based ads, which rose by over 30% year-on-year, significantly contributing to our overall revenue and enhancing our gross margin. The primary factor behind this growth is the combination of high-value users and our strong brand association with quality content. Our average user age has reached 26, indicating a growing disposable income and diverse consumption habits. These users engage not only in spiritual consumption but also in a variety of product purchases. The professional and in-depth nature of our content continues to foster strong connections with both users and content creators, resulting in sustained growth in ad revenue per daily active user. Historically, we have adhered to a strategy of one horizontal and multiple verticals. The one horizontal refers to our product and infrastructure capabilities, while the multiple verticals pertain to our integrated ad solutions across different sectors. Within this one horizontal strategy, we have consistently strengthened our advertising infrastructure and product capabilities. In the first quarter, we made significant advancements in AI-related product enhancements. We upgraded our marketing data infrastructure using multimodal AI to better grasp user intent and interests at the category level, thereby enhancing our overall ad efficiency. Additionally, we have improved our deep conversion capabilities, which has resulted in a higher budget allocation for deep conversion campaigns. The share of deep conversion ad spending more than doubled in the first quarter, contributing to an increase in our performance-based ad eCPM. Moreover, we have made notable advancements in our GenAI-assisted ad material creation, where the nature of Bilibili's products and ad materials plays a crucial role in boosting click-through rates and ad efficiency. We enhanced our commercial AIGC tools by employing AI models to assist advertisers in auto-generating cover images and titles that resonate with Bilibili's user language and creative style. Currently, AIGC-generated content constitutes over 30% of our performance ad spending. In terms of our various ad verticals, games remain our largest advertiser segment. We continue to refine our conversion pathways and tools while increasing our market share in the gaming ad sector. We also introduced new formats like Bilibili mini-games and in-stream game ads, which have created new advertising inventories and opportunities. As our users reach an average age of 26, they encounter various choices concerning their consumption needs. We, along with our reliable content creators, have provided numerous reviews and evaluations on various categories, establishing strong connections with their followers. For instance, in the first quarter, our advertising revenue from home appliances increased by over 35%, while revenue from advertising related to babies, maternity, and pets grew by over 300% year-over-year. Lastly, regarding AI, Bilibili is home to inquisitive minds with a strong understanding of AI knowledge. We host the largest repository of video content related to AI. Consequently, many AI manufacturers and companies are significantly increasing their advertising budgets to connect with Bilibili users and convert them into their own customers. This trend has led to a notable surge in AI-related advertising spending, which has also propelled the overall online services sector to become one of our top two advertising verticals. As for our outlook for the second half of this year, we are very optimistic about maintaining a growth rate above the industry average. Coupled with our strengths in high-quality premium content and the increasing value of our user base, we remain confident in the continued development of our advertising business and in expanding our market share.

Next question, please?

Thank you. One moment for the next question. Our next question comes from Felix Liu of UBS. Please go ahead.

Let me translate myself. First, thank you management for taking my questions and congratulations on the very strong Q1 results, especially the record level of profitability on both GP margin and then profit margin. The question is, first, on the margin trend in the rest of this year, can management share your outlook on that? And my second question is on your mid-term GP margin and net profit margin target. Thank you.

Thank you, Felix. This is Sam. I will take your question. In Q1, our gross margin reached a record high of 33.3%, marking the 11th consecutive quarter of improvement. The key contributors to this improvement include the growing share of high-margin gaming and advertising revenue, which account for, if you add that together, about 50% of the total revenue compared with 47% in Q1 last year. Secondly, the relatively fixed costs, including content, staff, and server costs, remain stable in terms of absolute dollar value, resulting in a further decline in the proportion of revenue from 25% last year to 20% this year. Gross margins in advertising and the live broadcasting business have also improved in Q1. We are confident that both our gross margin and net margin will achieve gradual improvement throughout the year. In the mid- to long-term, we are confident that our gross profit margin will reach 40% to 45%. In Q1, the proportion of operating expenses to revenue declined from 43% last year to 36% this year. Our adjusted operating margin improved from negative 9% in the same period last year to 5% in Q1 this year. For 2025, we expect R&D and G&A expenses to remain stable, while marketing expenses will fluctuate with game promotion cycles. As a result, the operating expenses as a percentage of total revenues will continue to decline. Our long-term operating margin target remains the same; that will be 15% to 20%. Thank you for your question.

Thank you. And that concludes the question-and-answer session. Thank you, once again, for joining Bilibili's first quarter 2025 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director or Piacente Financial Communications. Contact information for IR in both China and the U.S. can be found on today's press release. Thank you, and have a great day.