Shulou(Shulou.com)11/24 Report--

On September 8, bilibili released his financial results for the second quarter of 2022, which ended June 30. Bilibili's total net income in the second quarter was 4.9 billion yuan ($732.9 million), up 9 percent from a year earlier, according to the financial report. The net loss was 2.0104 billion yuan ($300.2 million), compared with a net loss of 1.1218 billion yuan in the same period last year. Excluding non-GAAP, the adjusted net loss was 1.9679 billion yuan ($293.8 million), compared with an adjusted net loss of 1.3247 billion yuan a year earlier.

After the release of the results, bilibili Chairman and CEO Chen Rui, Vice Chairman and Chief operating Officer Li Mi and CFO Fan Xin and other executives attended the subsequent earnings conference call to interpret the main points of the results and answer analysts' questions.

The following is the transcript of the question and answer session of the analyst in this conference call:

Lei Zhang, analyst at Merrill Lynch: my question is about costs and profit margins. We can see that bilibili actually did some measures to reduce costs and increase efficiency in the first half of the year, especially in terms of marketing expenses. May I ask the management whether there is room for further improvement in other costs and expenses? How does the management view bilibili's overall gross profit margin and the trend of future profit margins?

Chen Rui: first of all, I would like to talk about our understanding of "reducing costs and increasing efficiency". In my opinion, the focus of "reducing cost and increasing efficiency" is not only "reducing cost", but also "increasing efficiency". The so-called "efficiency" is actually that we "spend our money in the right place, spend it more wisely, and make it more efficient". Including the epidemic, the current macro environment makes the external environment facing the company extremely challenging, so I put special emphasis on "focus" within the company, that is, to do less, to do important things, to do things deeply and thoroughly. If it's something non-core, don't do it if you can't do it.

So what is bilibili's core work? I think the first thing is video and growth, and growth includes user growth and revenue growth. So in the first half of this year, I was very concerned about spending resources and money on these core tasks, including video, user growth and revenue growth. Although the overall external environment is very challenging now, I still stress internally that "growth is still bilibili's most important work."

Bilibili is a very typical Internet platform economy, and the characteristic of this model is that all its value comes from user value. We attach great importance to the work on user growth, and in the first half of this year, we also attach great importance to improving the efficiency of user growth and reducing the cost of user acquisition. We can see that bilibili's acquisition cost for new users is constantly declining. Our market expenses in the second quarter dropped 16% compared with the same period last year, and our share of revenue also dropped to 24% from 31% last year. This should be a very effective result of work. And as you can see, while the user acquisition cost is declining, the activity of our user retention rate is on the rise. "improving the efficiency of spending money" is actually reflected in that we use technological means to optimize the allocation of technological resources, and make use of improvements in technological infrastructure to improve and save costs. For example, you can see that our DAU (daily active users) increased by 33% year-on-year in the second quarter and 83% year-on-year. In addition, we all know that bilibili's video definition has been getting higher and higher. In this case, through the optimization technology, the bandwidth cost of station B single VV has actually decreased by 37%. My prediction is that while DAU has risen sharply this year and user usage has increased, our overall investment in IT technology, such as bandwidth and servers, will not be more than last year. In fact, this is an example of how we use technology to optimize costs and achieve cost reduction and efficiency.

Fan Xin: let me answer the question about cost and gross profit. In fact, our second-quarter results report has already reflected the impact of epidemic control. We expect revenue to return to month-on-month growth in the third and fourth quarters of the second half of this year, and gross margin will gradually improve to about 20% in the fourth quarter. In the future, we will continue to take strict measures to reduce costs and increase efficiency. In addition, we expect the company's Non-GAAP net loss rate to narrow to about 30% in the fourth quarter from about 40% in the second quarter.

JPMorgan analyst Daniel Chen: my question mainly revolves around the user side. The company's MAU (monthly active users) exceeded 300 million this quarter. The performance is strong. We also see that the overall growth of DAU, MAU and the duration of users in the second quarter is very good, especially the growth rate of DAU is faster than that of MAU. Excuse me, what is the driving reason behind this? How does the management view the growth of DAU and MAU in the second half of this year and next year?

Chen Rui: I will mainly talk about three points here. I want to talk about the fundamentals that support bilibili's user growth. In the past year, everyone knows that the external environment has undergone great changes, but bilibili's fundamentals have not been affected in any way.

First, I think video is a global wave that will last for at least three years. In my opinion, this will make bilibili's growth continue not only this year, but also next year and the year after next. Second, I think the younger generation needs their own cultural and entertainment content. Half of our users are under the age of 25. Why do so many young people like bilibili? The reason is that the younger generation needs content that belongs to them. Third, I think consumption upgrading is still a major trend in society, and content consumption is an important part of consumption upgrading. Young people of Generation Z are more willing to invest their money in spiritual and cultural consumption. Therefore, I think bilibili is actually a tuyere business, which is the basis of our continued growth.

Just now you mentioned that people are concerned that our DAU growth rate is faster than that of MAU, and this is indeed the case. The reason is that we put great emphasis on the quality of growth this year, and the same is true of "reducing costs and increasing efficiency" and "improving the efficiency of spending money" that I mentioned just now. Not only is the growth rate of DAU faster than that of MAU, but you can also see that our daily active hours are gradually increasing. In addition, you can see that the growth of our daily average number of broadcasts and interactions is even higher than that of DAU. So this is a really healthy model: interaction is more than VV, VV is more than DAU, DAU is more than MAU.

To be able to achieve such a high-quality and healthy growth model, in addition to the fact that bilibili, which I just mentioned, pays more attention to improving the quality of money, I think the inherent reason is that bilibili's content-driven model itself is a healthier growth model. The development of various content categories of bilibili is very healthy. In the past, everyone's favorite category of bilibili, including animation, food, music and other categories, their growth is still very fast and healthy. At the same time, many new categories are still expanding. In this way, bilibili can continue to produce many new and good creators, as well as new and good works, and even many phenomenal works, such as "go back to the village for three days." the spread of my second uncle cured my mental internal friction is one of the examples of bilibili's phenomenal works.

In addition, I think the multi-category development strategy that bilibili has always emphasized in the past has also played a good role in healthy growth. As you can see, bilibili's PUGV (videos produced by professional users), live streaming, OGV (videos produced by organizations) and even Story-Mode are all growing rapidly, which is also our move to fill in more new scenes for our users.

Finally, I would like to stress that we are confident of achieving the aforementioned goal of achieving 400 million MAU by 2023, and that we do not achieve it by handing in our homework. As you can see, we actually attach more importance to DAU than MAU, and our job must be to achieve our user growth goals while ensuring health.

Related readings:

Bilibili's revenue in the second quarter was 4.9 billion yuan, an increase of 9% over the same period last year, and the number of monthly active users reached a record of 305.7 million.

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