Special topic: Focus on the financial report of the first quarter of 2024 of the US stock market
Bili Bili (Nasdaq: BILI; HKEX: 9626) released the financial report for the first quarter of 2024 as of March 31: the total net revenue was 5.66 billion yuan, up 12% year on year. The net loss was 764.6 million yuan, compared with 629.6 million yuan in the same period last year. Not in accordance with the US GAAP, the adjusted net loss was 455.9 million yuan, down 56% year on year.
See: The first quarter revenue of Bili Bili was 5.66 billion yuan, and the adjusted net loss was 456 million yuan
See the figure: Station B's revenue in the first quarter was 5.66 billion yuan, and the adjusted net loss narrowed year on year
After the release of the financial report, Chen Rui, Chairman and CEO of Bilibili, Li Ni, Vice Chairman and Chief Operating Officer, Fan Xin, CFO and other senior executives of the company attended the following financial report conference call to interpret the key points of the financial report and answer questions from analysts.
The following are the main contents of the analyst question and answer session of this teleconference:
Jeffery analyst Thomas Chong: The growth of the company's advertising business exceeded expectations. Could you please share with the management what is the main driving force? What improvements has the company made in advertising products and algorithms? Can you share the growth trend of advertising business during the 618 promotion in the second quarter? How to view the annual growth rate of advertising?
Li Ni: First quarter Station B Its overall advertising revenue exceeded 1.6 billion yuan, reaching 1.67 billion yuan, up 31% year on year. In terms of effect advertising revenue, the growth will be faster, with a year-on-year growth of 50%. We believe that there are the following core drivers. The first level is mainly users. The B station community is very concerned about user experience. On the basis of optimizing user experience, we have realized the improvement of advertising inventory.
In the first quarter, we expanded advertising scenarios such as dynamic and search. Most importantly, we also mixed natural and commercial traffic, so that high-quality advertising content can get more traffic and increase inventory. Even if we increase the advertising inventory, compared with the advertising volume of other platforms, our inventory level is relatively low. I believe there is still much room for improvement in the future.
Second, we got through the fireworks system and the advertising system, integrated and strengthened the overall launch tool for the customer side, and achieved intelligent launch. The launch in different scenarios can be completed only by flexible switching, so the penetration rate of fireworks launched in the first quarter has increased to more than 50%. At the same time, we have also launched the creative center. In the future, when customers are making materials, they can achieve batch processing. Also, with the application of AI to generate content, the efficiency will be higher.
In addition, we also care about the overall ecology of the UP owner. In terms of the launch and take-off function of the UP owner, we have upgraded it to a product called B Fire, which has been opened to all UP owners. The complete path of how to do content, heat, inflate powder and realize cash in Station B can be achieved through this product. The number of users who launched this product has increased by 190% year on year, and the repurchase and satisfaction are continuously improving.
Third, we have also improved the infrastructure of overall marketing data, improved the efficiency of algorithms, and deepened various commercial labels. We can provide advertisers with full link product promotion guidance, including data measurement. In the first quarter, we have launched this system for games, mobile phone manufacturers, beauty makers and other customers. We named it B-Data, including the application of the Z index. I believe that we will more comprehensively spread these metrics in the second and third quarters.
Fourth, our vertical industrial solutions are still further deepened The top three industries - games, digital appliances, and platform e-commerce - are growing at double-digit rates. In terms of game business, we have consolidated the advantages of high-quality games, provided full link services, and recently seized the increment of small games, with daily consumption increasing by more than 50%. At the level of digital appliances, the consumption share of the mobile phone industry in Station B has exceeded 10%. It is believed that there will be relatively large growth space in the digital, small and large household appliances industries in the future.
Finally, the platform e-commerce industry that everyone pays more attention to, we have also carried out some restructuring, in addition to JD.COM , Taobao, Tmall Pinduoduo In addition, we have also expanded Vipshop We have done a good job in improving the UP value of non e-commerce nodes through the cooperation of platforms such as Get Things and Leisure Fish. Another is that we actively introduce the budget of merchants together with the e-commerce platform, which will be a driving factor for achieving higher growth in the future.
It is believed that some of the methodologies in these three industries can be replicated to industries such as automobile, online service, medical care, education, etc. in the second quarter, so as to achieve relatively rapid growth. The above four points are our core growth drivers in Q1.
About the 618 you just mentioned, Compared with 618 last year, the increase was more than 30%. Station B's share of advertiser budget has been increasing, and it is also ranked in the top. We still adhere to the previous big open-loop strategy Ali Jingdong, Pinduoduo and Vipshop have established deeper cooperation.
However, compared with the past, we have also done two different things, or have some deepening. The first is that from the previous pure flow cooperation to both flow cooperation and content cooperation, for example, our brand hard advertising increased by 40% year on year, which can prove the crowd value of Station B. This year, Taobao and Tmall added a new game of fireworks+investment; JD still actively participated in all our conference activities, and formed a new mode by combining traffic and content value.
Second, the cooperation between platforms has changed from a single platform to a cooperation model between platforms and businesses, so 618 Our overall platform budget increased by more than 30%, but our merchant budget increased by more than 250% year on year 。 In the future, we will strengthen cooperation in this vertical industry, promote grass planting on station B, and realize the whole link process of transforming transaction consumption.
Speaking of 618, I also mentioned that the overall transaction of Station B is becoming more and more prosperous. I can use some data to make you feel the current status of the platform more clearly. In fact, the improvement of users' consumption mentality is relatively fast, In the first quarter, the number of users watching transactional content reached 37.2 million, with a year-on-year increase of more than 100% , which proves that users are increasingly aware of transaction scenarios.
The second data is that the main quantity of UP that earns revenue by carrying goods also increased by more than 100% year on year 。 These data all prove that there is still much room for growth of advertising revenue related to our transactions in the future. At present, the four industries with the largest transaction volume in Station B are 3C home appliances, food and beverage, clothing and cosmetics, which are some transaction data related to 618. To sum up, we are particularly confident that the advertising business will maintain rapid growth this year.
Lei Zhang, analyst of Bank of America Merrill Lynch: I have a question about the company's game business. I would like to ask the management to analyze the overall development trend of the game business this year, as well as the preliminary outlook for the company's new SLG game (strategy game), The Three Kingdoms: Plan for the World?
Chen Rui: Station B has always been the platform with the highest quality and richest categories of game videos in China, and is also a community with the highest concentration of game players in China. This advantage is the home advantage of Station B in game business. This year, our overall guidance for game agency distribution business is still two words, one is stable, the other is new. In terms of stability, we will pay more attention to the long-term operation of the classic old games in hand, the maintenance of users, and their continuous innovation in content.
This year, the players of these classic old games have improved their viscosity and become young again. FGO is the eighth year of its operation in China this year. In April, it successfully entered the top ten of the best selling list of iOS again. The Blue Route has been launched for seven years. During the seventh anniversary celebration this month, it entered the top ten of the best selling list of iOS. For these old games that have experienced time test, I think that if we can make them better, the efficiency is actually better than that of finding a new game, so we will certainly be committed to making the relevant operations more detailed.
Like FGO, I am a player of this game. After playing it for 8 years, it has become a part of my life. Many of my topics and friends are also involved in this game. For such a classic old game, we should be able to extend its stable operation time to the tenth year or even longer.
In addition, I will give two examples of new games, On the basis of doing well in the old games, we must explore new games to achieve greater growth potential. In April, we launched a national style two-dimensional game "Wu Hua Mi Xin". This game is aesthetically of a two-dimensional style, but it is a very typical national style work in terms of theme and cultural connotation. It is a game that uses personification to tell the world view from the perspective of Chinese cultural relics.
We see that this game has attracted many new users, covering those users that our game products have not covered before. Compared with the two-dimensional, this part of the audience is more inclined to accept the national style culture, but through this work, they begin to accept the two-dimensional aesthetic. Through such attempts, this game achieved the results that met our expectations in the second quarter, bringing significant growth to the game business of Station B in the second quarter. Such an attempt will be made actively in the future, which is the combination of the secondary category and vertical category users that we are good at.
For the second example of the new game, I would like to cite the Three Kingdoms: Making the World a Plan you mentioned just now. We have set the public beta date for this SLG game on June 13. At present, more than 2 million users have made reservations. Before that, we have conducted several rounds of closed beta, and achieved good results in the closed beta, which also has a good reputation among users.
With this game as an example, I would like to say how we do innovation and exploration in the game business. This game was signed by us the year before last. Our cooperation with the developer is not just on the spur of the moment, but we found that there are a large number of users interested in history, humanities, military, politics and economy in Station B. The knowledge content of Station B is very strong. The common feature of this type of users is that they like this kind of game with grand narrative themes. So we want to try this SLG game, and we have received very positive feedback.
After determining the theme of SLG games in the Three Kingdoms, we also made a lot of innovations, because the users of Station B are basically post-90s, post-95s and post-00s. Their aesthetic, including some preferences for games, must be different from the mainstream SLG games in the market. For example, they will pay more attention to fun rather than fighting. For example, they may pay more attention to the scale and dryness of a certain game. We have also optimized and improved this game for the needs of young users of Station B, which should also be the reason why this game can gain good reputation.
I want to use these two games as examples to prove our future oriented innovation and exploration in the game business. In fact, Station B is now the largest game content community in China, and we will certainly work hard in this field , constantly bring better game products to platform users.
Zhang Xueqing, analyst of CICC: I have a question about users. In the first quarter of the company, the user use duration reached a record high, and the average daily video browsing volume also grew very well year on year. Want to know the main driving force with the management? Which content categories are expected to have potential development in the future?
Chen Rui: I think the first thing is that we still maintain a significant growth in the original advantageous categories. Because B stands in the mind of some categories, in some categories and some content, such as knowledge, animation games, digital technology, our competitive advantage is still very obvious. These categories are also just needed by users, and our competitive advantage will bring growth. From last year to this year, the video playback volume of technology, knowledge and game content in Station B has increased by 37%, 28% and 24% year on year respectively. Our original advantageous categories will continue to be well developed to promote new growth.
In addition, we also attach great importance to the exploration of new needs. For example, we have announced that the average age of B station users has reached 24 years old. If they are 24 years old, their children should be one year old according to the most stringent late marriage standards. So we can see that categories such as mother and baby, home furnishing, home decoration, and cars are growing very fast this year. The growth rate of mothers and babies was more than 100%, reaching 118%, and that of cars and homes was 52% and 45% respectively. Moreover, through the expansion of these categories of business, we can actually get more user growth. The rapid development of these new categories can also bring more content creators to join us and achieve a more benign ecological cycle.
What we mentioned above is a strategy for our operation. In the first quarter, our daily active users increased by 9% year on year, and the video playback volume increased by 22% year on year. In addition, our daily average user use time also reached a record high of 105 minutes. This fully proves the sustainable and healthy ecological development of Station B, and we will try our best to maintain this momentum.
UBS Analyst Felix Liu: I have a question about the gross profit rate. In what aspect did we do better to promote the achievement of a better gross profit rate? How to look at the company's long-term profit margin? Has the profit target changed in the third quarter of this year?
Fan Xin: In the first quarter, our total revenue increased by 12% year on year, while the revenue and cost only increased by 2% year on year, so our gross profit increased by 45%. In addition, due to the improvement of operating efficiency, our operating expenses under non US GAAP fell by 2% year on year and 8% quarter on quarter, which also contributed to the further reduction of losses. Profitability is mainly increased by income Long and Driven by continuous gross margin improvement, we believe this is more sustainable.
Specifically, the gross profit margin has increased, reaching about 28% in the first quarter. This improvement is mainly due to the increase in the contribution of businesses with high profit margins. For example, our advertising revenue has increased by 31% year on year, and its proportion in the sales portfolio has also reached about 29%. Based on the current business development trend, We expect that with the continuous and rapid growth of the advertising business and the recovery of the game business, we will resume year-on-year growth in the second and third quarters. The gross profit margin will improve quarter on quarter and reach 30% in the third quarter. It will also achieve the balance of operating income and expenditure under non US GAAP in the third quarter We are very confident about this.
In the long run, the gross profit rate will depend on the income scale and the combination of business lines, which has great potential for change. At the same time, achieving balance of income and expenditure is only our first step. We will allocate more resources in improving the efficiency of commercialization, and continue to improve the operation strategy to strive for continuous improvement in both gross and net profit rates.
Goldman Sachs Analyst Lincoln Kong: I would like to ask you a question about the company's payment business. The company currently has nearly 30 million paying users. In addition to traditional members, it has also launched value-added services such as UP main charging, paid courses, community dressing and so on. How does the management think about the future development prospect of community content based payment service?
Li Ni: First of all, Station B is a video community based on interest as an anchor. Station B users have always had three characteristics - high retention rate, high activity rate and high UP value. Users have a strong sense of identity and belonging to the community, and promoting content payment or equity payment in the whole community is a realization mode for Station B.
In terms of large member business, By the end of the first quarter, we had nearly 22 million large member paying users An interesting data is that over the years, more than 80% of large members have chosen the long-term payment method such as annual large members, which is also based on the characteristics of our community different from other pure content platforms. In addition to live broadcast and large member business, we have also been continuously exploring and exploring some business models that combine community and content in the past two years, including some value-added businesses that you may often hear about such as paid classes, charging, community dressing, etc., which are all aimed at enabling users to achieve a better sense of gain and experience after paying, At the same time, you can also express fans' support for the UP owner or their favorite IP through these payments. UP owners can also expand new income channels through these new ways, so that the whole community can enter a healthier positive cycle.
In the first quarter, the total revenue of value-added services including paid class, charging and other content has reached nearly 1 billion yuan. In the paid classroom, in addition to the more traditional professional courses, it also covers multiple courses such as life skills, interests, knowledge, emotion, etc. The paid classroom has also become one of the main ways of realizing the UP in the knowledge area of Station B. In the first quarter, the number of paid class UP owners increased by more than 450% year on year, and the revenue increased by more than 45% year on year. In addition, we upgraded the original charging mode. In the first quarter, the number of main UPs participating in monthly charging increased by more than 47% year on year. A case that attracts people's attention is the UP owner named Poor Food Road. In the past six months, they only launched the fourth level high-quality documentary content, but so far, they have received more than 10 million charging income, all of which are fans' support for them and their content.
In the future, station B still has a lot of imagination in terms of popular short plays, short documentary and short animation. In the second half of the year, we will systemically sort out and upgrade the value-added services and content payment services in the community. We are still confident that we can continue to bring more positive cycle revenue and income to the main UP and B stations through this business. (End)
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