Bilibili (Minutes): Currently, four to five games are waiting for approval of their licenses

The following is the FY25Q1 earnings call minutes for $Bilibili(BILI.US) . For the earnings interpretation, please refer to Bilibili: Games Supporting the Scene, User Return, Can the Little Station Revive? .

I. Review of Key Financial Information

1. Profitability Continues to Improve Slightly: Thanks to better-than-expected game revenue and slightly restrained operating expenses, Bilibili managed to withstand the seasonal fluctuations brought by advertising and maintained positive profitability.

2. User Growth Returns to Former Glory: Since management emphasized the importance of DAU metrics, market expectations for Bilibili's traffic expansion have been quite low. Therefore, the net increase of 28 million users in one quarter indeed feels like a return to former glory.

However, Dolphin Research speculates that user growth may be attributed to the short-term effects of the Spring Festival Gala broadcast collaboration, including the establishment of an official account for the gala and the contribution of broadcasting highlights from previous years. Whether users can be retained in the long term remains to be observed, as Q1 stickiness has slightly declined.

Combining QM data from April, traffic has temporarily stabilized, with total viewing time having resumed year-on-year growth for two consecutive months.

2. Games May Have the Largest Expectation Gap: Channel monitoring indicated that "Three Strategies" has performed poorly since the beginning of the year, leading to a conservative market outlook on game revenue before the earnings report, along with heightened concerns about the pressure from high base numbers ahead.

However, the expectation gap is here. In reality, game revenue in Q1 was not bad, with a year-on-year growth rate of 76%, similar to the growth rate of the previous quarter. At least from a seasonal trend perspective, the revenue of "Three Strategies" may not have deteriorated as much as the market anticipated.

3. Advertising Growth Barely Meets Expectations: Q1 advertising growth met the guidance of 20%, but Dolphin Research feels this performance is quite average. Considering the unexpected growth in traffic, as well as potential industries like gaming and AI that align well with Bilibili, the actual growth rate should have been higher in Q1. Either the company controlled the release of loading rates, or the conversion effects are still inferior compared to peers.

5. Value-Added Services Continue to Warm Up: Revenue from live streaming and premium membership subscriptions accelerated growth by 11% in Q1. A simple breakdown estimate suggests that premium memberships, live streaming, and other value-added services (such as batteries, captains, paid videos, etc.) all show a marginal warming trend to some extent.

Among these, the ability of live streaming to maintain a growth trend under a high base is somewhat beyond Dolphin Research's expectations 6. IP E-commerce Stabilization: Benefiting from the millet economy that surged at the end of last year, the self-operated e-commerce business, which has been sluggish after actively shrinking its operations, did not decline in the first quarter, a non-shopping season, and has stabilized faster than expected.

7. Cash Flow Stabilization and Improvement: Both gaming and advertising are cash-generating businesses. In the first quarter, Bilibili's cash, deposits, and short-term investments on the books, after deducting short-term debts, amounted to a net cash of 15.6 billion yuan, an increase of 600 million compared to the fourth quarter.

II. Detailed Content of the Earnings Call

2.1 Executive Statements on Core Information

1. User and Community Development:

a. User Scale: DAU 107 million, MAU 368 million, average daily usage duration: 108 minutes (up 3 minutes year-on-year).

b. Paying Users: Monthly interaction volume close to 16.7 billion times, monthly paying users 32 million, official membership count 264 million (up 12% year-on-year), 12-month retention rate approximately 80%.

2. Content Ecosystem:

a. Core ACG: Viewing time related to games increased by 14% year-on-year, covering strategies and IP derivative content.

b. Emerging Verticals: AI content viewing time doubled, advertiser demand increased by 400%; travel/home appliance content viewing time increased by 20%.

3. Creator Ecosystem: The number of creators with over 10,000 / 100,000 / 1 million fans increased by 20% year-on-year, with 1.5 million creators monetizing through diverse methods such as advertising, live streaming, and e-commerce. Fan charging revenue increased by 200% year-on-year, with users showing a strong willingness to pay for quality content.

4. Progress in Commercialization:

a. Advertising Business: Revenue of 2 billion yuan (up 20% year-on-year), number of advertisers increased by 35%, and performance-based advertising grew over 30%. Integrated large language models to optimize placement accuracy, and AIGC tools generated customized advertising content in bulk. The top five sectors are gaming, internet services, e-commerce, digital home appliances, and automobiles; AI-related advertising revenue increased by 400% year-on-year, and home appliance/decorative categories increased by 40% year-on-year.

b. Gaming Business: Revenue of 1.73 billion yuan (up 76% year-on-year), with core growth coming from the SLG game "Three Kingdoms: Strategy of the World," while older games "FGO" and "Azur Lane" maintained stable revenue. The 8th season of "Three Kingdoms: Strategy of the World" (largest version update) will be launched on May 31, introducing new maps, characters, and events to attract young players. Plans for international release within the year and reserve multiple new games pending approval, focusing on long-term IP development.

c. Value-Added Services: The live streaming business has revived due to quality content and growth in paying users. Premium members total 23.5 million, with 80% on annual/automatic renewal, fan charging revenue up by 200%, and the potential of direct monetization tools being released.

5. Future Strategy and Focus:

a. Deepen core advantages in ACG, expand into knowledge, lifestyle, and other verticals, and continue to invest in high-quality self-produced content (such as anime and game IP) b. Advertising: Leverage AI technology to enhance native advertising innovation and explore the influence of young users' consumption decisions.

c. Gaming: Promote the globalization of "Three Kingdoms: Strategizing the World," explore cross-category gameplay innovation, and attract the next generation of players.

d. Value-added services: Optimize live streaming incentive mechanisms and explore diverse monetization models such as virtual gifts and e-commerce collaborations.

e. Embrace GenAI, apply it to content recommendation, ad generation, and user experience optimization, and unleash new growth momentum.

2.2 Q&A

Q: What specific plans do you have this year to enhance users' awareness of quality content or increase quality content?

A: Strategy: Focus on quality content, strengthen the recognition of a "high-quality content platform" by expanding content categories and supporting creators.

Measures: ① Deepen ACG (Animation, Comics, Games) core content while expanding general knowledge, lifestyle, and consumption-related content (such as practical content on home cleaning and furniture selection) to meet users' diverse needs.

② Help quality creators quickly gain followers and achieve higher earnings through diverse channels such as advertising revenue sharing, live streaming rewards, e-commerce sales, and fan charging plans.

③ Guided by "long-term satisfaction," filter out short-term stimulating content and prioritize recommending knowledge-based and emotionally valuable works.

Long-term value orientation: User consumption habits will shift from "short-term stimulation" to "long-term enrichment." The plan is to validate the lasting appeal of quality content over the next five years and establish user mindset through continuous production of high-quality content.

Q: What progress or specific launch plans are there regarding the application of artificial intelligence?

A: Integration of AI and quality content: Relying on Bilibili's largest Chinese video library globally, utilize high-quality video data to train AI models to solve the industry's challenge of "AI generating reliable video content."

Application scenarios: AI can analyze historical video data to answer specific user questions and generate professional answers by integrating video information. Through AI translation technology, efficiently convert anime, gaming, and knowledge-based content into multilingual versions to expand overseas markets. Customized advertising titles and covers have been generated using AIGC tools, optimizing advertising placement accuracy (Q1 effect ads up +30% year-on-year).

The competitiveness of AI models relies on high-quality training data. The "high-density information" characteristic of Bilibili's video content (combining images, sound, and text) gives it a unique advantage in the AI era. Short-term focus on AI-assisted content production and commercialization optimization, long-term exploration of the possibility of "AI-generated original video content," but emphasizing that "reliable, high-quality content still requires human creation."

AI can help advertisers reach users more accurately and enhance ad conversion rates through personalized content generation, with further disclosure of specific technological implementation progress in the future.

**Q: How did "Three Kingdoms" perform in the S6 and S7 seasons? What are your expectations for the anniversary version launched in June? How do you view the growth of the gaming business in the second half of 2025? What is the progress of the gaming reserve pipeline? **

A: Performance of "Three Strategies" in S6 and S7 Seasons: No specific evaluation of the S6 season was mentioned. The first day of the S7 season set a record for the highest daily active users (DAU) in 2025, reflecting the effectiveness of attracting and retaining users through seasonal optimization. The season focuses on "asymmetric camp confrontation SLG gameplay," incorporating innovative mechanisms such as AI technology and dynamic battlefields, receiving positive feedback from players, with full servers.

Outlook: The eighth season launched on May 31 is an anniversary version, with plans to initiate anniversary celebration activities, including map updates, new character releases, limited anniversary skins, and in-game events. The goal is to elevate the game to new heights through the anniversary version, achieving a more sustainable lifecycle.

Game Business in the Second Half of the Year: "Three Kingdoms: Strategizing the World" plans to launch a traditional Chinese international version by the end of the year, targeting players in Hong Kong, Taiwan, and Macau. Plans are in place to introduce the game to multiple device platforms, with the next step being to bring the game to mini-game platforms to attract more new users. "Azur Lane" (8th Anniversary) and "FGO" (9th Anniversary) will celebrate their anniversaries, expecting to reach new peaks in daily active users (DAU) and monthly active users (MAU), driving user growth and revenue. Through the continuous operation of the above products and new initiatives, the game business aims to achieve growth in the second half of 2025.

Progress of Game Pipeline: Currently, four to five games are awaiting approval (for licensing). Actively exploring new game opportunities similar to "Three Kingdoms: Strategizing the World," focusing on game development that aligns with the preferences of the new generation of players, continuously investing in and exploring related fields.

Q: What are the driving factors behind the 20% revenue growth in the advertising business in Q1, which outpaces the industry average? How will these driving factors play a role in the future?

A: ① Users & Content: The average age of users is 26, with high disposable income and diverse consumption scenarios (covering both spiritual and product consumption). The professionalism and depth of content promote a deep connection between users and creators, driving growth in advertising revenue per active user (ARPU).

② "One Horizontal and Multiple Verticals" Strategy: "One Horizontal": Upgrading AI marketing data infrastructure to understand user purchasing intentions and category interests through multimodal AI, enhancing advertising efficiency. Strengthening deep conversion capabilities, doubling the proportion of deep conversion advertising spending, and increasing effective advertising revenue per thousand impressions (ECPM). Launching 8 GenAI-assisted tools to automatically generate advertising materials that align with user language styles, with AIGC materials accounting for over 30% of effective advertising spending.

"Multiple Verticals": Games: Optimizing conversion tools and introducing new formats such as mini-games and live-streaming interstitial ads to expand market share.

Home Appliances / Maternal and Infant Pets: 26-year-old users are entering the consumption decision-making period, with creator review content strongly connecting with fans, driving home appliance advertising revenue growth of over 35% and maternal and infant pet category growth of over 300% AI-related fields: Platforms gather AI knowledge users and content, attracting AI manufacturers to concentrate their investments, promoting online services to become the second-largest advertising vertical.

Q: What is the outlook for the advertising business?

A: With the core advantages of high-quality content user mindset and continuously improving user value, we remain confident in continuing to grow at a rate higher than the industry average. We maintain high confidence in the development of the advertising business and will continue to expand market share.

Q: What is the outlook for profit margin trends for the remaining time this year? What are the mid-term gross margin and profit margin targets?

A: Gross margin and net margin will gradually improve throughout the year; the mid-to-long-term gross margin target is 40%-45%; by 2025, the operating expense ratio will continue to decline, with a long-term operating profit margin target of 15%-20% (R&D/general administrative expenses stable, marketing expenses fluctuate with game promotion cycles).

Risk disclosure and statement of this article: Dolphin Research Disclaimer and General Disclosure