Bilibili Inc. (BILI) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day, and welcome to the Bilibili 2021 First Quarter 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, Senior Director of Investor Relations. Please go ahead. Juliet Yang: Thank you, operator. During this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectation 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 the SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures 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. Xin Fan: Thank you, Juliet, and thank you everyone for participating in our 2021 first quarter results conference call. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. 2021 is off to an excellent start for Bilibili. On March 29, we successfully completed our secondary listing of Hong Kong Stock Exchange, three years after we listed on NASDAQ. We would like to take this opportunity to thank our supporting shareholders as well as our talented content creators. Video users are the dedicated colleagues that helped make this happen. With our secondary listing, we see an opportunity to broaden our investor base and attract more high-quality shareholders. We also gain more strength in the capital markets, laying a solid foundation to better acute our growth strategy and tap into the massive video-based market in China in the coming years. After officially starting to the 200 million MAU Club in 2020, we continued the momentum, further increasing our influence among China's Gen Z+ cohort and expanding our user base. In the first quarter of 2021, our MAUs were up 30% to 223 million and our mobile MAUs grew by 33% to 209 million, both on year-over-year basis. And our DAUs reached 16 million, up 18% year-on-year. It's particularly impressive given last year's remarkable high base. As a testament to our rich offerings and engaged community, our users spent an average of 82 minutes per day on our platform in the first quarter. During this time, we roll out more premium content and the services and strengthened our commercialization capabilities while converting more traffic to paying users. Our MPUs grew to 21 million, increasing by 53% versus Q1 2020, and our paying ratio is a record high of 9.2% compared with 7.8% for the same period last year. Advertisers are widely turning to Bilibili as the destination to reach young generations. As a result, our ad revenue once again achieved accelerated growth, increasing by 234% year-over-year. On the back of this strong momentum, our total revenues reached RMB3.9 billion, up 68% and our gross margin improved to 24% from 23%, both compared with the same period of last year. Throughout the first quarter, we continued to increase our content offerings and enhance our market share as the go-to video community for Gen Z+ Gen Z+ is deeply influencing society as the mainstream ideals as well as driving all kinds of consumption in China. By offering diversified content in great brands and deals, we aim to further increase our market share among these core Gen Z+ user base, while expanding our appeals to all video users. We are confident we are on the right track to achieve our three-year user target. Operator: Your first question comes from the line of Alex Poon of Morgan Stanley. Please ask your question. Alex Poon: The question I have is regarding advertising business. We have seen continuous acceleration in year-over-year growth for eight consecutive quarters. Could management share with us the drivers behind this growth and how should we think about the growth in the next one to three years? Thank you very much Carly Li: Okay. I'll briefly translate for Ms. Carly Li. So, we think the value of platform's advertising business actually equals the values of the user itself and also accurate MediPharm would be many other platforms out there, they are running a rental or a tourist model, you never know when your user will come, when they will go. So the easiest way is to leverage advertising to quickly achieve monetization and use the money that they make to buy more content. This is the traditional Internet model, but for Bilibili, what we are trying to do is to build a city. We are trying to gather the young users with similar interest, ask them to become residents of the city. We provide different type of consumption scenarios to them to cater their needs, including such as games, live broadcasting, movie and content, and derivative products, and even offline activities, and they will grow fund of the city and even fall in love with it and they will be inviting more friends to join the neighborhood. And for this process, it might start really - probably start really slow, but once the momentum is built, it will accelerate and has great potential. So, what does the Bilibili's advertisement potential is look at the residents. We have captured nearly half of the China's young generation. On our platform, the average age of our user is about 22.8 years old, and 86% of our user is aged 35 and below. And our users, about 50% of them live in the first and second-tier city. They are deeply influencing the mainstream ideals, and they are the key driving force for all kinds of consumption, and they are the most wanted cohorts that chased by all advertisers. So, we believe in the next few years, as Bilibili continue to grow its brand awareness and expand the boundary of our content offerings, we will be welcoming more diverse and more dynamic type of users to join our city and continue a very healthy and fast growth. So, we are quite confident that pretty much all of the brand, they will be looking, turning to Bilibili and become part of our community. And secondly, we think a good advertisement could also be a good content. And for a user, they never repel good content. So, on the customer side, we'll continue to work with high-quality brand and potential brand to establish deep collaboration and to build very success cases for all the key accounts. And we'll also continue to improve our product, our recent inefficiencies, and launch more creative and interesting integrated marketing solutions across multi-scenario and multi-devices. And additionally, we think there is a very big portion of the creative activity that we could leverage our content creators. We are working with the content creators to pick their brand, to pick their mind, to ask them to work with our brand advertisers together. And on the Sparkle advertising platform, currently we already have over 10,000 content creators joining this platform and the overall performance is exceeding our expectations. The last but not least, it's also very, very important is that we'll continue to enhance our middle platform capabilities and continue to improve our ad products, including the integrated marketing solutions that combines both brand ads and performance ads and our advertising power will not only be reflecting on the increase of our advertising revenue, but also on many of our two customer businesses such as the efficiency of our jointly operated games and live broadcasting. So, for the next one to three years, as we continue to grow our content ecosystem and extend the boundary of our content offering, we're quite confident to maintain a healthy and fast advertising dollar growth. Operator: Your next question comes from the line of Lei Zhang of Bank of America Securities. Please ask your question. Lei Zhang: Thanks, management, for taking my question. My question is mainly about user engagement. We noticed that some king indicators like DAU versus MAU interaction and types saw sequential improvements. So, wondering can you share with us what's the churn going forward? And what is your plan to further improve your engagement? Thank you. Rui Chen: So, indeed from last year, we see a temporary job for the DAU to MAU ratio. And we have to look into the reason behind it. And the reasons are not - it's not because there is some matrix decline, but for a certain period of time, the growth rate of our MAU exceeded significantly of our DAU. So, we think the temporary job is absolutely normal given that last year we have raised our MAU target and we are really focusing on growing our overall users. And during that process, we think this is just a temporary effect given that when the user joins the community, it really takes time for them to become part of them - part of the community. We need time to cultivate user habit and establishing community behavior such as following different content creators, they have to get in touch with the content creator and other users in the community. And if they come to Bilibili for one and specific interest point, they also need time to establish and expand their interest point on Bilibili. So, all of that takes time and there will be some lap during the process. So, we think for products at Bilibili, we actually stand a pretty good DAU to MAU ratio in terms of that community product and because we also have very vast content offering. We think during a fast user growth period, a temporary job of the engagement ratio is absolutely normal, and as long as we see the ratio starting to bounce back and we continue to maintain a very fast user growth phase, it should be fine. And we'll definitely continue to be very focused on elevating the engagement level, and there are several ways. One is to whether we can help our users to become part of the community a little bit quicker, and the measurement would be help them to connect with more content creators, follow - allow them to follow more content creators that fits their interest, allow them to establish more engagement between content creators and other users. And secondly is on our AI-powered recommendation system. We will continue to improve the recommendation efficiency to allow our algorithms to discover more interest points for certain users and to push more relevant content that fits to different users' need. And for that, we will continue to invest in R&D in our algorithm to improve our AI-powered recommendation system. So, these above-mentioned points will be our constant areas for improvement. Operator: Your next question comes from the line of Xi Jing Xu of UBS. Please ask your question. Unidentified Analyst: Thank you, management, for taking my question. I have one question. Recently, we see BILI has quite a few investment deals on other game-related companies. What's the reason behind? Are we going to consider more acquisition or investments in this space for coming quarters? Thank you. Rui Chen: So, I always say that game is one of the most important business for Bilibili because, for us, it's not only just monetization, it's also a very important component or content and there's just great synergies between our game offerings as well as our video game, space game related video content. And for Bilibili, for this game - regular game business, it's just very natural as long as we started to offer better content, the monetization just happens very naturally. So, second of all, we think for game industry, there is still plenty of room for growth, I believe, that in the next few years, and they could be multiple times growth for this segment. So, I personally take great care and put in a lot of efforts in looking into this market. And for Bilibili, it's not just game department, it's dealing with or facing the game industry. It's across all business department and it's through our whole company. For example, game-related video content has always been our top three content verticals and for our live broadcasting, game related live broadcasting is our number one content on our platform, and we are also working with majority of the game content developers in this industry, establishing close partnerships. And for the game distribution business currently is playing a very important role in our business and it's also contributing very decent portion of our revenue. So, why we want to invest in this area? Because we wanted to establish strategic collaborations. Like I mentioned, there is multiple departments that's jointly working in the game space, so the reason why we invest in this area is hoping to further enhance our partnership across different legs of our business. So, for example, the investment we made in because we see a lot of the synergy and collaboration in terms of game distribution. So, all of the investment that we make has a prior purpose of establishing strategic collaborations. And that goes with the same with all our investment in other area. The purpose is hoping to achieve business collaboration and achieve business synergies across different departments. Operator: Your next question comes from the line of Daniel Chen of JP Morgan. Please ask your question. Daniel Chen: I will translate myself. My question is on the - I would say more on the product side and on the content side. So, as we target to reach 400 million MAU by 2023, just wondering what's our plan in 2021 in terms of product feature, innovation, and content vertical expansion? Thank you. Rui Chen: So, Bilibili's growth model is content ecosystem driven and essentially is through our content creator producing more and more high-quality content across different content verticals and attract more users. And what we are - what we have been constantly doing is to view such platform to keep attracting more content creators. So, what we have been doing is to focus on the categories that can attract young user, can resonate with young generations, and over the year, we have established unparallel leadership in categories like games, lifestyle, entertainment, knowledge, and digital products. And step by step, we continued to be more and more diversity of content, and more and more high-quality content. As we move forward, we'll be focusing on improving the diversity of that content and continue to let out more high-quality content and to attract more wider range of content creators. And moving forward for this year, while we continue to enhance our leader categories such as knowledge and lifestyle-related content, we aim to further expand our content offering in categories like relationship, automotive, anime-related, fitness, and health. Those categories that fits the Gen Z+ interest points and also open up us to more wider demographics. Operator: Your next question comes from the line of Jialong Shi of Nomura. Please ask your question. Jialong Shi: Thanks. Good evening, management, and thanks for taking my question. So, my question is about the live broadcasting service. Can you give us some colors on the growth trends for live broadcasting service? We saw industry-wide slowdown in this live broadcasting revenue since last year. I just wonder what is the outlook for the live broadcasting service in this year and for the next few years? Rui Chen: So, two years ago, I forecasted our live broadcasting business will keep a very high growth rate. The reason why I said that is because I believe Bilibili's live broadcasting has always been a part of the PUGV content ecosystem. It's a natural extension of video content. And as a matter of fact, live broadcasting should be part of the video product. So, once again, that live broadcasting is a natural extension of Bilibili's overall content ecosystem. We don't need to deliberately expand the content categories. We don't necessarily have to pay extra high price to attract live broadcasting host. All of the content offering is growing out of our content ecosystem is based on our content creators, is based on the popular content on our video platform. So, like I mentioned earlier that our - on our video platform, game is our top three contemporary hosts and it's a number one contemporary host on our live broadcasting business. And for the game categories, the live broadcasting host and the video content creator has 40% overall. And lifestyle and entertainment-related content is also very popular and entertainment live broadcasting is also our second most popular live broadcasting content. In many cases, for Bilibili, our content creators is our live broadcasting host and the video content, it's a neutral up beneficial relationship. We think the live broadcasting can help our content creators to establish better interaction with their followers and their video submission can feedback to their live broadcasting traffic. And on the other hand, we think live broadcasting is a good revenue avenue for content creators to monetize their traffic. So, on Bilibili live broadcasting and video, they are born to get - born to be together as they have great synergies. So, from my perspective, I think Bilibili's live broadcasting still is at the early stages and has great potential to grow. Currently, we have over 2 million monthly active content creators. In my view, pretty much everybody could potentially become our live broadcasting host. So, there is great growth route ahead of us. So, I think the nature of live broadcasting was never just about monetization. It's more of ability. It's ability of our platform, it's also ability of our content creator. For the content creator they can leverage live casting to connect with their followers to improve their relationship and also, they can gain monetary rewards. So, I believe for - this type of capability should be widely adopted in the future, it's like how our content creator can write an introduction of the video, can create a cover page for a video. And probably in the next few years, every content creator would have the ability to do live broadcasting. And our live broadcasting business still is really internally growing, it's growing from our content ecosystem. So, the external environment will not really have any impact on our live broadcasting business, because we don't need to acquire live broadcasting host from other platform, as we think it's organically grown within our ecosystem. Operator: And that concludes the question-and-answer session. I would like to turn the conference back to - over to management for additional or closing comments. Juliet Yang: Thank you, once again, for joining us today. If you have further questions, please contact me, Juliet Yang, Bilibili's Senior IR Director, or TPG Investor Relations. Our contact information for IR in both, China and US can be found on today's press release. Have a great day. Bye-bye.
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Bilibili Inc. (NASDAQ:BILI) Q2 Financial Performance Highlights

  • Bilibili Inc. (NASDAQ:BILI) reported a Q2 loss of $0.09 per share, beating the Zacks Consensus Estimate by $0.01.
  • The company showcased a significant revenue of approximately $6.13 billion, indicating a strong business model.
  • Despite a net income loss of around $609 million, Bilibili's strategic investments in content and technology highlight its growth potential.

Bilibili Inc. (NASDAQ:BILI), a prominent player in the Chinese online entertainment sector, recently disclosed its financial outcomes for the second quarter, showcasing a loss of $0.09 per share. This figure slightly outperformed the expectations set by the Zacks Consensus Estimate, which had predicted a loss of $0.10 per share. This performance is a notable improvement compared to the same period last year, where Bilibili reported a loss of $0.33 per share. Such an improvement is a clear indicator of Bilibili's strengthening financial health and its potential trajectory towards profitability.

The company's financial report highlighted a quarterly revenue of approximately $6.13 billion, underlining a robust business model despite the reported losses. This revenue figure is crucial as it demonstrates Bilibili's ability to generate significant sales from its diverse range of services, including mobile gaming, live broadcasting, and video hosting. The gross profit of about $1.83 billion further emphasizes the company's efficient cost management and operational effectiveness.

However, Bilibili faced a net income loss of around $609 million and an operating income loss of approximately $585 million. These figures, although indicative of current financial challenges, must be viewed in the context of the company's growth strategy and investment in content and technology to capture a larger market share. The reported EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of roughly $97.46 million provides a glimpse into the company's underlying operational performance, excluding non-cash expenses and tax considerations.

The cost of revenue, standing at about $4.29 billion, reflects the significant investment Bilibili makes in content creation and licensing, a critical component of its business model. Despite these substantial costs, the company's strategic focus on content diversification and user engagement continues to drive its revenue growth. The earnings per share (EPS) of -1.46, although indicating a loss, must be interpreted in the light of the company's long-term growth potential and ongoing investments in expanding its user base and content portfolio.

In summary, Bilibili's latest financial report reveals a company in the midst of a strategic expansion, investing heavily in content and technology to solidify its position in the competitive online entertainment industry. Despite the reported losses, the positive trend in its financial performance and the substantial revenue generation point towards a promising future for Bilibili as it continues to evolve and adapt in a rapidly changing digital landscape.

Bilibili Started With Buy Rating at Mizuho Securities

Mizuho analysts initiated a Buy rating for Bilibili (NASDAQ:BILI) with an $18 price target, citing the company's potential to more than double its total addressable market through product transitions.

The analysts anticipate Bilibili to accelerate its revenue growth to double digits and achieve profitability by fiscal 2024. The analysts also highlighted Bilibili's efforts in enhancing ad monetization and expanding into live streaming.

Despite Bilibili's stock dropping 43% in 2023, Fang finds the valuation compelling, noting it trades at a similar EBITDA multiple to peers but with a 50% faster estimated revenue growth rate from 2023 to 2026.

Bilibili Started With Buy Rating at Mizuho Securities

Mizuho analysts initiated a Buy rating for Bilibili (NASDAQ:BILI) with an $18 price target, citing the company's potential to more than double its total addressable market through product transitions.

The analysts anticipate Bilibili to accelerate its revenue growth to double digits and achieve profitability by fiscal 2024. The analysts also highlighted Bilibili's efforts in enhancing ad monetization and expanding into live streaming.

Despite Bilibili's stock dropping 43% in 2023, Fang finds the valuation compelling, noting it trades at a similar EBITDA multiple to peers but with a 50% faster estimated revenue growth rate from 2023 to 2026.