Good day, and welcome to the Bilibili Second 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 filings with the SEC and Hong Kong Stock Exchange. A non-GAAP financial measure, we provide are for comparison purpose only. The definition of this measure and the 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. Xin Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Thank you, Juliet, and everyone for joining us today to discuss our second quarter results for 2025. We maintained strong momentum in this quarter, achieving significant revenue growth and building our community of loyal young users. Our total net revenues increased by 20% year-over-year to RMB 7.3 billion, driven by strong performance in our Core Games and Advertising sectors. Game revenues surged 60% year-over-year to RMB 1.6 billion, boosted by new seasons of our popular SLG title, San Guo: Mou Ding Tian Xia. Advertising revenue also rose 20% year-over-year to RMB 2.4 billion, supported by enhanced AI integration that improved the efficiency and effectiveness of our app. Thanks to this operational efficiency, our growth in games and advertising led to a 46% year-over-year increase in gross profit, with gross margin expanding to 36.5%, up from 29.9% in the same period last year. We reported a GAAP net profit of RMB 218 million and an adjusted net profit of RMB 561 million. Our performance shows our increasing influence among China's Gen Z+ audience. By providing quality content, we promote deeper user engagement that enhances our commercial ecosystem. In the second quarter, daily active users reached a record high of 109 million, up 7% year-over-year, while monthly active users grew by 8% to 363 million. The number of paying users increased by 9% to 31 million, and the average daily time spent rose to 105 minutes, reflecting our commitment to high-quality videos that engage our community with meaningful content. Our expanding influence is evident both online and offline. Events like this year's Bilibili World and Bilibili Macro Link attracted a record crowd of over 400,000 participants, a 60% increase from last year, highlighting our brand's vitality and community strength. Our young users are significantly influencing mainstream trends, and many more interests are waiting to be explored. Looking forward, we will focus on enhancing the PUGV community experience to attract more users and grow with them. We will also continue to invest actively in monetization initiatives to achieve sustainable profitability. Through these efforts, we are confident in our ability to deliver long-term value to all our stakeholders. Now, let’s explore our core pillars of content, community, and commercialization. We firmly believe that high-quality content and an engaging community are vital for today’s young generation. Gen Z+ comes to Bilibili not for quick entertainment but for meaningful content that they care about. This commitment is translating into stronger influence, longer watch times, and greater commercial potential across our platform. The average daily time spent on our platform increased to 105 minutes in the second quarter, a six-minute rise year-over-year. Importantly, the watch time for videos longer than five minutes grew nearly 20% year-over-year in Q2, underscoring our users' preference for mid- to long-form content. More users are also paying for premium content, with monthly paying users increasing by 9% year-over-year to 31 million, fueled by membership, fan charging, and live broadcasting services. Meanwhile, our community remains active and loyal, with the number of official members rising by 11% year-over-year to 270 million and a 12-month retention rate around 80%. We continue to lead the ACG content space, with Chinese anime content seeing a watch time increase of 34% year-over-year, supported by popular titles like A Record of Mortal's Journey to Immortality, The Tales of Herding Gods, and Link Click Season 2. Game content also remains a top category, with watch time rising by 21% year-over-year. Additionally, AI-related content has become a breakout category, with watch time growing by 61% year-over-year, affirming Bilibili's status as the preferred platform for Gen Z+ to learn, explore, and create with AI. The demand from advertisers in the AI segment surged by about 150%, showcasing the synergy between content value and commercial potential. Consumption-related content categories are thriving as our Gen Z+ users become more financially independent, increasingly turning to peer creators for trusted reviews and tutorials when making buying decisions. Engagement across various verticals has surged, with watch time for home appliances rising 14% year-over-year, parenting and early education increasing more than 50%, and travel and lodging seeing an 11% growth. We are dedicated to enhancing our products and services to help creators earn more. In the first half of the year, around 2 million creators generated income on Bilibili through diverse channels. The overall income from our fan charging program more than doubled in the first half of the year, reflecting users' growing willingness to pay for quality content. The number of creators monetizing through Sparkle ads and video and live-stream e-commerce also grew by 19% and 49% year-over-year, respectively. Now, let’s review our commercial businesses and their progress. Our commercial growth showcases how our influence among younger users translates into commercial value. Advertising has been a key business line in this regard. In the second quarter, our ad business increased by 20% year-over-year to RMB 2.4 billion, outpacing the average growth rate in the industry. During this quarter, we enhanced our ad infrastructure, improving ad conversion efficiency through better recommendation algorithms, innovative content creation, and smart ad placements. With deeper integration of LLM and multimodal content understanding, we can capture user intent more effectively and deliver more personalized ad recommendations. Our upgrades to AIGC tools have also enabled advertisers to generate high-quality creative at scale. About 10% of new ad titles and over 30% of ad covers in the second quarter were created using these tools, enabling advertisers to connect with users more effectively. We also provide smart ad placement tools that optimize sequencing and monitor ad performance in real-time, which significantly decreases manual operations while maintaining the same ad spend. These enhancements are driving both efficiency and scalability, improving ECPM by over 10% year-over-year and generating around 30% year-over-year growth in performance-based advertising revenue in Q2. Revenues from brand and native advertising maintained a healthy growth trajectory. Across various industries, our top five advertising verticals in the second quarter were games, digital products, home appliances, e-commerce, and automotive. The number of advertisers increased by over 20% year-over-year, reflecting our growing appeal among brands that leverage our strong user engagement. Game developers are investing larger ad budgets into Bilibili to connect more deeply with young gamers. Demand in the 3C and digital product categories remains robust, bolstered by our leadership in these segments and supportive national subsidy policies. In e-commerce, Bilibili achieved an average customer acquisition rate of about 60% for advertisers during this year's sales season. GMV from products priced above RMB 1000 increased nearly 50% year-over-year, showcasing our users' strong purchasing power and our capability to turn user engagement into high-intent transactions. In our games business, revenues rose by 60% year-over-year to RMB 1.6 billion, thanks to the strong performance of San Mou in its first year and the ongoing success of evergreen titles like FGO and Azur Lane, which recently celebrated their ninth and eighth anniversaries, respectively. To commemorate San Mou's first anniversary, we released Season 8 on May 31, introducing new gameplay, characters, and in-game events, supported by targeted marketing efforts. Both user engagement and retention have been robust as we enhance onboarding, monetization strategies, and returning user experiences. Building on this momentum, we are developing new game seasons, exploring mini program options, and preparing for San Mou's international expansion later this year. We have several games awaiting approval, including multiple ACG titles and casual games, and we are ready to introduce them to our community upon receiving the necessary approvals. Lastly, let’s discuss our VAS business, which saw revenues grow by 11% year-over-year to RMB 2.8 billion, propelled by consistent momentum in live broadcasting, premium memberships, and other value-added services. Our ongoing focus is on refining live broadcasting operations by promoting higher quality content and diversifying monetization options to sustain growth. Thanks to our refined operations, the gross profit margin for live broadcasting continued to improve in the second quarter. Premium memberships grew steadily, reaching 23.7 million by the end of the quarter, with over 80% on annual or auto-renewal plans, demonstrating user loyalty to our platform. Furthermore, our other VAS products saw rapid growth in Q2, particularly our fan charging program, which increased by more than 100% year-over-year, as more users show support for the creators and quality content they love. Looking ahead, we remain focused on what distinguishes Bilibili: high-quality content that resonates with China's Gen Z+ generation. This focus is the foundation of our expanding influence and the drive behind our growing commercial opportunities. We are also embracing transformative opportunities brought by AI, enhancing operational efficiency, elevating user experience, accelerating monetization, and expanding our global reach. These advancements further solidify our foundation for sustained growth and long-term profitability. Now, I will hand the call over to Sam to provide further financial details. Sam, please proceed.

Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time on today's call, I will review our second quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the second quarter, we continued to grow revenues, expand our margins, and grow our profitability driven by growth across our commercial businesses, particularly in our high-margin advertising and games businesses. Total net revenues for the second quarter were RMB 7.3 billion, up 20% year-over-year. Our revenue breakdown for Q2 was approximately 39% from VAS, 33% from advertising, 22% from games, and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 9% year-over-year to RMB 4.7 billion in the second quarter, while our gross profit rose 46% year-over-year to RMB 2.7 billion. Our gross profit margin reached 36.5% in Q2 compared with 29.9% in the same period last year. Our expanding gross profit and margin show that our model is built to scale. Our total operating expenses were RMB 2.4 billion, remaining stable compared with the same period last year. Selling and marketing expenses increased 1% year-over-year to RMB 1 billion. General and administrative expenses were RMB 510 million, up 4% year-over-year. Research and development expenses were RMB 866 million, down 3% year-over-year, mainly related to R&D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 252 million, and our adjusted operating profit was RMB 573 million, both compared with losses in Q2 2024. Adjusted operating profit margin reached 7.8% in the second quarter. Net profit was RMB 218 million and adjusted net profit was RMB 561 million versus losses in the prior year period. Our adjusted net profit ratio in the second quarter was 7.6% compared with an adjusted net loss ratio of 4.4% in the same period a year ago. Cash flow-wise, we generated about RMB 2 billion in operating cash flow in the second quarter. As of the 30th of June 2025, we had cash and cash equivalents, time deposits, and short-term investments of RMB 22.3 billion, or USD 3.1 billion. During the second quarter, we enhanced our shareholder return by repurchasing approximately 5.6 million Class Z ordinary shares, each equal to 1 ADS for a total of HKD 783 million or USD 100 million as part of our ongoing share repurchase program. These shares have all been canceled as of the end of the second quarter of 2025. Under our USD 200 million share repurchase program approved by the Board in November 2024, we've repurchased a total of 6.4 million shares so far at a total cost of USD 116 million leaving about USD 84 million available for future buybacks as of June 30, 2025. Thank you for your attention. We would now like to open the call to your questions.

We will now take the first question from Xueqing Zhang from CICC.

Congratulations on the strong quarter. My question is about the user ecosystem. We have observed that the company's daily active users and monthly active users growth accelerated in the first half of this year, and the average daily time spent has also continued to rise. What are the main factors driving this, and what is your outlook for the future? Additionally, this summer, Bilibili is expected to achieve a record with 400,000 solid participants. What opportunities do you anticipate for the success of the Bilibili community?

In the past 16 years, we have focused on delivering high-quality content and nurturing a vibrant community culture. In today's Internet landscape, high-quality content and a supportive community environment are in short supply. While there is an abundance of video content available, viewers are seeking high-quality options. The same applies to online feedback and opinions; there are many voices, but what is truly lacking are the encouraging, resonant contributions from friendly communities. Bilibili will continue to prioritize curating top-notch content and cultivating a welcoming environment where people can connect over shared interests. We believe that by excelling in both quality content and community culture, users will be naturally attracted to this unique experience. In the second quarter, our daily active users grew by 7%, and our monthly active users increased by 8%, which reflects our commitment to quality content and a welcoming community. Just as lifestyle consumption is evolving, so is content consumption. Importantly, once someone has experienced high-quality content, it is difficult for them to revert to lower-quality options. Over the years, we have built a strong presence in users' minds in categories like anime, games, and knowledge-based content, and there remains ample opportunity to further engage with users' interests. Additionally, there are many avenues to explore beyond user-generated video content, such as podcasts, picture and text-based content, and AI-driven virtual companionship. Therefore, we view high-quality content and a positive community environment as essential and self-sustaining components. High-quality content attracts those who appreciate it, while the friendly support from users inspires content creators to continue producing exceptional work. We've observed that talented creators can be easily discovered by our users and often quickly grow into larger, more influential figures. Even when the same content is available elsewhere, the interactions and quality of those interactions are consistently best on Bilibili. High-quality content creators have the strongest and most loyal fan bases on our platform, a fact well acknowledged among content creators in China. This is why we see a wealth of exceptional content being discovered on Bilibili. For instance, the first preview of Black Myth: Wukong was discovered by our users and went viral across the Internet. Similarly, our co-production of the mini-animation Nobody Lang Lang Shan Xiao Yao Guai was embraced by Bilibili users and gained popularity within the community. We are thrilled that it has now evolved into a major movie, grossing over RMB 1 billion at the box office. Additionally, Black Myth: Zhong Kui premiered on Bilibili recently, achieving over 12 million views within just two days. This exemplifies our ability to create an environment where high-quality content can flourish. This year's Bilibili World set numerous records, attracting over 400,000 attendees from more than 20 countries and regions. Notably, about 70% of attendees were from outside Shanghai, and 11% of tickets were bought by international visitors. Thus, Bilibili has established itself as the largest ACG event in China in terms of both scale and impact. The Shanghai City has even coined the term ACG consumption or Bilibili, highlighting how the event drew substantial numbers of young people to the city, boosting local offline consumption and establishing a new cultural landmark. At its heart, Bilibili reflects our brand and community in real life. Users not only engage with Bilibili products but also attend offline events named after our platform, reaffirming the impact of our brand and community. Bilibili has truly become part of the lifestyle for the younger generation in China.

We will now take the next question from the line of Miranda Zhuang from Bank of America Securities.

My question is about the advertising business. So second quarter ad business beat expectations again. Can management share what are the drivers? And looking ahead into the second half, what are the trends you are seeing for the industry and what's your expectation about the company's business strength? And what kind of new products and technologies will you roll out?

In the second quarter, our advertising business showed strong growth that surpassed the overall industry performance. We achieved a record quarterly revenue of RMB 2.4 billion, which is a 20% increase compared to last year. The main reason for this growth is our continued emphasis on our horizontal and vertical strategy. We have been enhancing our advertising infrastructure, and improvements in our product and technology efficiency have enabled us to better capitalize on user value and traffic. There are three key points to note: First, we improved our integrated campaigns that combine seeding and conversion, with over 50% of Sparkle ads utilizing our traffic acquisition program in this quarter. Second, we have strengthened our marketing data infrastructure, which has significantly increased our ad delivery efficiency through the use of a multi-modal large model. Lastly, we have optimized our deep conversion capabilities, resulting in a doubling of deep conversion's share compared to last year, which has positively impacted our overall ad eCPM. From an industry perspective, while there were minor shifts in our top five advertiser verticals—paying digital products, home appliances, e-commerce, online services, and automotive—the number of advertisers grew by over 20% year-over-year. Games continue to be our largest vertical, and we are capitalizing on our strong full-chain conversion ability, while also expanding our market share in premium game advertising to new scenarios like Bilibili mini games and live streaming, which are creating additional revenue opportunities. Moreover, professional reviews and in-depth content from our creators are attracting advertisers targeting younger consumers. For example, the ad revenue from home decorations increased by nearly 70% year-over-year. We plan to further enhance our vertical marketing solutions while maintaining our leadership in key sectors, and we are also looking to branch out into wider consumer categories. As for the June 18 data, we are actively pursuing our open loop strategy to draw more advertisers to Bilibili, positioning us as a must-invest platform during significant sales seasons. During this campaign, the number of advertisers grew by 60% year-over-year, and engagement between creators and consumers has been increasing. The overall GMV for the June 18 campaign surged by over 33% year-over-year, and the number of creators who exceeded RMB 10 billion in GMV grew by over 60%. Consumer trends reveal that digital appliances rose over 50% during this season, while household goods grew by 85%. Even in categories like maternity and child care, food and beverage, and watches, growth exceeded 60% year-over-year, demonstrating the strong purchasing power of Bilibili users as they continue to engage with our platform. Looking ahead to the second half, we invite attention to two key areas. First, we will further link our products and technologies across various endpoints and scenarios, including but not limited to PC, OTT, story mode, live streaming, search, and trending topics, to enhance the connection between consumers and advertisers. Second, we believe AI will play a crucial role in improving both operational efficiency and actual advertising revenue. We will continue refining our recommendation algorithms for deeper content understanding and more accurate ad targeting based on user interests and past behavior. Additionally, we’ll leverage AIGC advertising tools to assist advertisers in creating ad covers, titles, and even content that resonate with Bilibili’s user base in a scalable manner. Currently, about 30% of ad covers are AI-generated, and we see potential for significant growth here. We also plan to introduce more AI-powered automated ad delivery products, enhancing our advertisers’ cost control and scaling capabilities. In terms of industry shifts, we expect advertisers' budgets to concentrate more on a few core platforms that are essential and distinctive, which will allow these platforms to capture a larger share of client budgets. In the long run, as China's consumer market develops, advertisers will increasingly focus on brand-building in addition to sales conversion budgets, as they cannot overlook the influence and purchasing power of young consumers. Bilibili holds a unique position in this respect. In summary, whether viewed from a long-term or short-term perspective, as our community thrives, the increasing value of Bilibili's advertising business will become clear over time, and we remain confident in our capacity to maintain growth that exceeds the industry average.

We will now take the next question from the line of Felix Liu from UBS.

My question is on the game business. Can management share any color on the recently concluded San Mou first anniversary season 8. How should we think about the second half trend for San Mou as well as for next year? And on your new game pipeline, what are the key games that you would like to highlight?

On June 13, San Mou celebrated its first anniversary, and during that time, the daily active users reached a new record for 2025. This milestone indicates that the game has firmly established itself and is well-positioned to become a lasting title. We believe that San Mou has the potential to evolve into a lifestyle brand with a lifecycle exceeding five years, contributing robust revenue for us. During the Season 8 and anniversary celebration, we introduced several new monetization tools, including limited edition skins, which have been positively received by our users. The sales from the anniversary skins have met our expectations, demonstrating that we have successfully introduced a healthier and more sustainable monetization approach. Looking ahead, we plan to integrate new card monetization with skins and explore innovative monetization models to enhance San Mou's sustainability. Our goal is to ensure that each game season is our best yet. If we consistently deliver that experience, we believe users will naturally want to continue playing. Overall, the development capacity for San Mou has significantly improved, and each new season will offer richer content. We will keep optimizing gameplay to make it more enjoyable, balanced, and engaging. In addition to acquiring new users, we will prioritize retaining and reactivating former players who have left the game for various reasons, as this is crucial for maintaining a healthy community. Currently, our user retention rate remains strong. We anticipate launching the traditional Chinese version of San Mou by the end of this year or early next year for players in Hong Kong, Macau, and Taiwan, and we are also considering potential releases in international markets like Japan and Korea. In our pipeline, we have four to five games pending licensing approval for release. In the short term, we expect to launch a casual game based on a popular intellectual property, which promises to be enjoyable. Moving forward, we will continue our strategy of creating and reinventing games for the new generation while exploring various game genres and driving innovation across them. We have several potential categories in our pipeline that we are excited about.

We will now take the next question from the line of Lincoln Kong from Goldman Sachs.

My question is about our profit margin. We have seen our group profit margin continued to trend high. So what are the potential areas of our cost efficiency and cost discipline going forward? How should we think about the second half in terms of profitability outlook? And any timeline to achieve our media targets, they are 15% above our operating margin. And in terms of use of the cash, what are the future areas of capital allocation? How should we think about our shareholder return policy?

Thank you, Lincoln. This is Sam. I will take your question. In Q2, our top line grew by 20%. Our gross profit increased by 46%. So we saw a very strong operating leverage here. Our gross margin has increased sequentially for 12 quarters. We expect the same trend to continue in the second half of this year, reaching around 37% by Q4, let's say. So we still maintain our midterm gross profit margin target at 40% to 45%. And for the operating expenses, we have continued to improve our efficiency of the operation. If you look at the absolute dollar amount of our operating expenses in the first half of this year, it's flat year-over-year. We expect to achieve a year-over-year decline of the operating expenses in the second half because in the second half of last year, we had more marketing spending on San Mou during the first two quarters. So for the profitability over the past two years, our gross profit margin grew very well, and our operating policy has grown even faster, outpacing our gross margin improvement. In Q2, the operating profit margin was 7.8%. So we are confident that we can achieve quarter-over-quarter improvement to achieve around a 10% adjusted operating margin by Q4 this year. So again, we maintain our midterm target of 15% to 20% for our operating margin. And regarding cash usage to enhance our shareholder returns, we already repurchased USD 100 million shares in our Hong Kong line in Q2, and we have canceled all those repurchased shares. Under the current USD 200 million buyback program, we still have USD 83 million remaining available as we have sufficient U.S. dollar cash reserves offshore. The repurchases will continue based on market conditions. Thank you for your questions.

We will now take the next question from the line of Yiwen Zhang from China Renaissance.

So my question is on AI. Can you discuss what kind of AI application we have on the platform? And what is the latest progress?

AI application adoption across various scenarios on Bilibili is beginning to yield value. For instance, advertising revenue has increased by 20% year-over-year, largely due to AI's contribution. AI-driven title generation has significantly enhanced the click-through rate. Additionally, AI has been instrumental in increasing monthly and daily active users by ensuring the right content reaches the right audience. When it comes to providing high-quality content and fostering a community, we've utilized AI to enhance Bilibili's strengths by swiftly identifying high-quality content through user comments. This approach has allowed us to promote valuable content early on, leading to improved user metrics and community engagement. I will detail three ways AI is enhancing Bilibili. First, AI can amplify our strengths in unique ways. Users generate over 1 million long comments daily, helping the AI to pinpoint high-quality content at an early stage. This long-form comment data is a valuable asset that we are leveraging with specific tools, and we plan to expand this technology across various content categories. Second, we are focusing on AI-assisted content creation for mid- to longer-form videos. While other players offer open-source tools for short videos, we believe that AI can also create compelling mid- to longer-form content. We have the most talented content creators who will enable us to develop a human-like video creation tool, which we plan to launch soon. This tool aims to lower barriers for our creators, enhance production efficiency, and contribute to the overall content supply rather than simply producing AI-generated videos. Lastly, in areas where Bilibili excels, such as animation, virtual idols, and virtual streamers, AI has significant potential to meet the needs of ACG enthusiasts. For example, AI can effectively provide virtual companionship through virtual streamers or idols. We are already exploring this area and will be launching a product soon.

All right. Thank you, operator. That concludes the question-and-answer session. Back to you.

And that concludes the question-and-answer session. Thank you once again for joining Bilibili's Second Quarter 2025 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili 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.