Q3 2023 Bilibili Inc Earnings Call
Okay.
Good day, and well covered to the pillar <unk> third quarter 2023 financial results and business update conference call. Today's conference call is being recorded at this time I would like to turn the conference over to Julia.
Could you start off.
Thank you. Please go ahead.
Thank you operator.
During this call well discuss 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 certainties, including those mentioned in our most recent filing with the SEC at Hong Kong stock exchange.
The non-GAAP financial measures, we provide are for comparison purposes only.
If a nation of those 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 webcast replay of this conference call will be available on the IR website at IR Dot Dot com.
Joining us today from availability senior management are Mr. <unk>, Chen Chairman of the Board and Chief Executive Officer, Ms. Carly Lee Vice chairwoman of the board and Chief operating Officer, and Mr. Zhang fan and Chief Financial Officer.
And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.
Thank you Juliet and thank you everyone for participating in our 2023 third quarter conference call to discuss our financial and operating results I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.
The recall high committed growth, we achieved in the third quarter.
Got two months to the power of our self driven content ecosystem.
It's a calculated drawing in more users and keeping them highly engaged.
Notably our D used increased by 14% year over year, surpassing the 100 million milestone and the lending at a handwritten screamingly in the third quarter.
May use also grow to a record high of 341 million and the da to EMEA ratio in this quarter improved to 32%.
Meanwhile, our users' daily time spent also reached a historical high of 100 minutes with total user time spend increasing by 19% year over year.
We are encouraged by the strong user growth momentum in the direct correlation with our monetization efforts.
Improving margins narrowing losses at the maintaining growth would be our key objective. This year in the first quarter, we leveraged our expanding traffic more efficiently integrating commercialization studio rails at a product in our content ecosystem to drive quality top line growth.
This is evident in our advertising in the SaaS business.
Which grew by 21% and 70% year over year, respectively.
Furthermore, our gross profit increased by 38% year over year, and our gross profit margin rose to 25% up from 18% in same period last year.
Marking the fifth consecutive quarter of gross margin improvement.
Our tight expense control measures reduce our total operating expenses by 12%.
Including a 19% decrease in sales and marketing expenses, an 8% decrease in G&A expenses and a 6% decrease in R&D expenses.
On year over year basis.
As a result, our adjusted operating loss and adjusted net loss, both narrowed by 51% yield by year in the third quarter.
Notably we achieved an important milestone of generating positive operating cash flow in the third quarter.
Demonstrating our business operations have entered a positive cycle and Mark have therefore award in our profitability goals.
2023 had been a year with continued changes across industries and markets.
To adapt to the new paradigm.
We are increasing our forecast our copay list.
Trimming expenses in areas, yielding lower returns.
In the fourth quarter, we have further streamlined our organization and expect our total head count to be around <unk> 100 by the end of 2023.
Compared with two you'll never sell them at the end of 2022.
Additionally, future project plans will continue to be a life forecast.
We give measures will become lindbergh as the organization to better align ourselves with the new environment.
In the state for BD believe long term success.
With that overview, let's look at our KOL payloads of content community and commercialization in more detail.
Beginning with content and community.
The key matrix that could represent the quality of our community continued to rise.
Number of daily active content creators our platform increased by 21% in the third quarter.
The monthly new content submissions or tied to $1 million up 37% both year over year.
More content creators.
More wider fan base during the third quarter.
The number of content creators with over 10000 followers grow by 36% year over year.
Total daily video views increased by 26% year over year to $4 7 billion.
Among which storyboard video views grew by 45% year over year.
As I mentioned users are spending more time with us than ever before.
With you that every time spend reaching an all time high of 100 minutes.
Meanwhile, monthly interactions among our users also increased by 18% year over year, reaching 17 billion.
By the end of the third quarter, we had 224 million official members who have taken in the past the hour community event.
23% increase year over year.
The Dow 12 months retention rate remains strong at around 80%.
Our content categories continued to expand.
Trucking more users and bringing new commercial opportunities for both content creators and the platform.
And back to Bali, our users had colliquative entered new life stages and new categories emerge.
Child home decoration relationship baby and maternity and automotive for.
For example, new content submissions in home decoration, and Perez Jarrod grew by nearly 90%.
In the third quarter.
In Paradise.
Content creators in this category and their earnings as well as advertising revenues generated from the same category.
<unk> improved.
Meanwhile, we have created more directed monetization opportunities for our content creator.
Total of one six to 8 million content creators generated income on <unk> in the third quarter up 34% from the same period last year.
The adoption of video and live Commerce and also brought additional channels for more creators to realize commercial value.
The number of content creators who are in the money through video and commerce in the third quarter grew by over 150% year over year.
Additionally December our two signature offline you've been really believed word and Billy Billy Macklowe link attracted a gathering of over 200000 young people in Shanghai to experience our unique committed culture.
The remarkable attendance underscores PD believe infrared among the young generation and brought us more brand advertisers with incremental budget allocation.
Lastly, I'd like to talk about commercialization.
Total revenue for the third quarter was RMB, five 8 billion flat year over year.
Advertising revenues in the Vas revenues increased by 21% and 17% year over year.
Offset by 33% year over year decrease in <unk> revenues.
We are encouraged by the progress our <expletive> and Bath business.
Where the revenue growth potential is that direct correlation with the AUR growth.
Meanwhile, we have taken a closer look at our game business and the Mesa adjustments to better align ourselves with the new industry landscape.
Looking at this in more detail.
Our growing and engaging community is a foundation of commercialization.
As people spend more time engaging more commodity activities. They are more willing to pay for Billy beauty content and services.
Looking at our Vas business.
<unk> revenue for the period increased by 17% year over year to $2 6 billion mainly.
Mainly led by our LIFO accounting business.
The ongoing interaction of LIFO costing into a video union birth.
News to yellow results.
More content creators stepping into lifeboat car T at home.
Further in reaching our LIBOR cutting offerings and enabling them to earn income.
By the end of September our premium member growth through 'twenty, one 1 million with over 80% on annual subscription auto renewal packages underscoring the trust and the right we have build with our brand.
In the third quarter, we launched the highly anticipated sale produced enemy link click ceded to <unk>, which was well received by many new and old fans.
In September we announced six to eight new Chinese anime titles at our six made by BD PD Chinese anime press event.
Both of these titles will be released in the next few years.
Ensuring a continuous stream of beloved content of our premium members.
Turning to our advertising business.
As we further integrate sales conversion tools within our AG products across in areas.
We have no more effectively converting our high quality traffic into substantial AD revenue growth.
In the third quarter.
Advertising revenues grew by 21% year over year.
RMB, one 6 billion.
Mainly led by performance based ads.
Which grow by over 40% year over year.
Notably our strong AD revenue growth contributed to meaningful gross profit growth with higher revenue contribution from our performance based ads.
For the third quarter, our top five verticals, what games digital products and home appliance.
E Commerce.
Food and the brokerage and automotive.
Despite the third quarter traditionally being an off peak season for E Commerce advertising.
Our strengthened advertising solutions enabled us to secure a greater share of advertising budget in this competitive industry.
During the double 11 shopping festival in the fourth quarter. We further strengthened our data collaboration with E Commerce platform and upgrading our we do a lot of commerce and product.
The total <unk> from reduced ally Congress products increased by over 250% year over year for the double 11 shopping season.
Turning to our gaming business.
Total revenues was RMB $992 million, representing an increase of 11% quarter over quarter, and a decrease of 33% year over year.
The reason for the year over year decrease was due to a high base from the 2022 summer relief of space under three as well as weaker than expected <unk> performance in the first quarter. This year.
Our legacy games.
<unk> and <unk> remained stable during the period.
32000, Twenty's Street, we launched our exclusive license for ACG title Brachytherapy.
On September eight 2023, the Gan was temporarily removed from the App store for content refinement and then we are working diligently to resume download excess as soon as possible.
The gambling industry.
<unk> dramatically in the past two years at the beginning of the fourth quarter, we translate reviewed our in house game development projects.
We further streamlined our in house development team and discontinued projects that did not meet our standards.
Consolidating these operations will help reduce our future R&D expenses that fad.
Community for the young generation.
We process natural advantages in the gambling industry.
And to further leverage our growing advertising capabilities.
Strengthen our game distribution power.
As well as selectively invest in our in house development.
To bring high quality games to our users.
And create value for our business partner.
In summary, we are dedicated to reach our financial goal of gross profit improvement in the loss reduction this year.
We have delivered on this goal with a 30% increase in gross profit.
And that 51% reduction of both adjusted operating loss and net loss in the third quarter.
And we will continue on this path.
At the same time.
Strongly believe in the power of good content and community.
<unk> use is address another beginning for us to build out.
We will stay true for our mission and continue to really reach the average life of the young generation in China.
This concludes Mr. Chen's remarks, I will now provide a brief overview of our financial results for the third quarter of 2023.
As mentioned in Mr. Chen's remarks, our financial profile.
Diffidently improved.
We continue to gain operating leverage.
<unk> building, our community and the video ecosystem.
We have increased our gross profit margin and narrowed our adjusted net loss for five consecutive quarters.
Total net revenues for the third quarter was RMB five a bidding.
On par with the same period last year.
Our total net revenues breaking down by revenue stream, while approximately 45% versus 28% advertising, 17% mobile game and 10% from all IP directives and other business.
Our cost of revenues decreased by 8% year over year to RMB four 4 billion.
Driving our growth path year to RMB, one 5 billion up.
38% yield a year.
Our gross profit margin reached 25%.
From 18% in the same period last year.
We expect our gross profit margin to continue to improve in the fourth quarter.
Our total operating expenses were down 12% year over year to RMB, two 6 billion.
In the third quarter, we cut our sales and marketing expenses by 19% year over year to RMB 992 million.
<unk> reached a record high.
Sales and marketing expenses, while 70% of total revenues compared with 31% in the same period last year.
G&A expenses was RMB $499 million.
8% year over year.
R&D expenses was RMB, one 1 billion down 6% year over year.
As a result, we narrowed our adjusted operating loss and adjusted net loss, both by 51% year over year in the third quarter.
Our adjusted net loss ratio in the third quarter were 15% in.
Improving from 30% for the same period a year ago.
Notably we generated positive operating cash flow in the third quarter.
Australia, our business operation has entered into a positive cycle.
As of September 32.
2023, we had cash and cash equivalents time deposits and short term investments of RMB 14 5 billion.
<unk> 2.0 bidding.
In the third quarter, we repurchased an aggregate principal amount of U S dollars $14 $5 million December 2026 notes with an aggregate cash consideration of USD $13 million.
As of September 32023, the aggregate outstanding principal amount of April 2026 notes 2027 notes in December 2026, Nos was <unk> dollars $862 million.
We believe our cash position is sufficient to cover all of our remaining convertible bonds.
Due to lower than expected again revenues.
We now expect our 2023 full year revenues to be at the lower end of RMB $22 5 billion to RMB $23 5 billion range.
Thank you for your attention we would now like to open the call to your questions.
<unk>. Please go ahead.
We will now begin the question and answer session to ask a question. Please press star one on your telephone and wait.
For our name to be announced.
All participants on today's call. If you wish to ask your question is diminished for instance, Chinese police immediately repeat your question in English the company will provide consecutive question call management's statements. During the Q&A session. Please note that into English into question English interpretation is for convenience purposes only.
In the case of any discrepancy management statements is India or reaching a language will prevail.
Make your questions to one at a time if you wish to have follow up question phase III trying to Cuba.
One moment for the first question.
Yeah.
Our first question comes from the line of John stretching from CIC. Please go ahead.
Okay Alright.
Hi, Vishal.
You have a good support for myself.
Please go ahead.
Thank you for joining us superbly.
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Luke.
I think it go even the management team.
My question and congrats on reflect on.
My question is about <unk>.
<unk> passed the milestone of 100 million for the first time.
Macarthur.
Yes.
<unk> reached a historical high as well.
What's your view on global growth potential.
Great.
Is that your company has in Cambodia.
Emily.
So can management share with us.
Yes.
Great.
Is there a correlation at thank you.
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<unk> got.
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Well the only woman for neighborhoods that Honeywell presented on this call.
Well I'm not sure I don't know if I should about having floor, our pushup from the Alco portfolio.
And the big movement.
Nation.
Very natural process for a good video product to grow bigger and bigger by itself.
That's why when we are talking about a used aircraft strategy internally, we've been emphasizing improving the content quality and improving the user experience not mainly through the ace acquisition.
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Sometimes the chiller.
Women's seizure.
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A woman.
Following up with us on that.
That's why and starting from second quarter last year, we have been emphasizing.
The rois of our user acquisition strategy as we are spending less and southern marketing, we're actually growing more and more.
They wanted to do it all heidrick homegoods hunting, neither tease on Pongolle, Saudi that he saw Egypt Congo.
Hollywood for essentially the Osha <unk> got shut out of the Diego the thumbs up each year.
Hopkins soundly opened on that.
And that is why we have been focusing on improving the operating efficiency, improving our product capability and pursue simultaneous commercialization as well as the user growth.
Virtuous cycle.
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Sure.
So you see you guys seemed the case due to Diego.
In the third quarter, our deal you'll have surpassed 100 million milestone and we also reached a record high of <unk> numbers and this is a strong evidence that we have.
Succeeded in our user growth strategy in the past year.
As Jeff a new beginning for us.
<unk>.
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<unk> confirmed for the Eagle.
Yeah.
The reason why we have been focusing on user growth and so I think for all the internet product.
User base will be one of the key competitive strengths the larger user base, we get them.
More content creators as well as the commercializing patient what comes with it.
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Harman that somehow but when do you want <unk>.
<unk>.
And for Internet product user basis also the foundation for commercialization as you can see from deliberately commercialization model advertising and live broadcasting has its revenue growth have Sara coordination with <unk> growth.
Thank you the woman.
Yes.
With that Rajeev woman.
Some of them are you able to compete on the entrepreneurs should see the whole women's Cartesian corner, you've got Europe grew more than some of our thoughts.
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Archie I the heart tissue.
Saudi that somehow bother you with how youre improving the solo.
Angel Tongo, what's orthopedics here.
The hotel no problems at all else equal with solar.
Welcome to the total, particularly acquisitive until somebody tells you.
And the third quarter, our AD revenue and Vas revenue grew by 21% and 17% respectively year on year and as we can see.
We have already.
Come to in strategy or form a virtuous cycle between our traffic growth and our revenue growth and advertising in the past.
Broadcasting.
Same time the revenue that grew from this two factor has also convert it to a certain part of that also converted to our content creators same pump and also with generally more content creation on our platform. So far my content ecosystem perspective. It has also.
And that we pass it off.
Overall, our content ecosystem.
How do you look at all of them it sounds like the local grew more haseltine, others have either way.
I think we don't go downtown Philadelphia, and therefore, if I can.
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Hey, Colby it's out there.
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Powers. Please go ahead.
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Curious are you, assuming just sort of a woman.
It sounds sounds like the circle.
At this point, we still see great growth potential for our user user scale when I do the user research I discover attach for availability users carousel, great word of mouth effect people feel good about the product that we're naturally.
<unk> worth and introduce new users and if you look at the past year stayed up not only we have achieved very strong user growth.
We have also exceeded many may tax in terms of.
Community gross video views and content creators numbers that means that we have achieved.
A virtuous cycle in between the content.
He was here as well.
Eddie.
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It seemed to me so I'm going to name a couple I don't see the phenom for sure this issue.
I believe.
Our content ecosystem continues to.
Prosper visibility should be able to attract more and more user because it's we think it's a very natural desire for all human beings to find good content and find friends who share the same interest.
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Sure.
We showed you wait till the actual result.
Well not quite that someone's listening jota background, what are your thoughts on the top of the Saudi you can mobile.
Going forward with we're still largely rely on product improvements content expansion to drive our user growth.
And pair with our ROI focused sales and marketing and only invest in user acquisition when the ROI makes sense.
That means.
Only to acquire user when we are making.
Well were making money.
By investing in that user acquisition strategy that has some mid to long term user growth strategy for us.
What do you see any ideas all work and <unk> seen that we constantly put out in the different geography.
Ali Cleveland bottoms up.
Sunday, when Michelle Punisher product.
Yeah sure.
Uh-huh end of last year I have raised the three key objectives for the company, which is in margin improvement loss narrowing.
And maintain growth we want to achieve this target at the same time.
Not by sector I think the first two target to achieve the last one.
So what's on the books.
Yes.
Thank you operator next question please.
Thanks.
One moment for the next question.
Next question comes from the line of.
Finally from Mizuho. Please go ahead.
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Tony.
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<unk>.
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Sure.
So commencement how are you.
Elaborate on the key drivers for our business.
Especially with Dr <expletive> in the quarter.
How is the performance given the couple of 11 promotional campaign.
<unk> can update us on your progress on my journey E Commerce and shopping to ecommerce.
And lastly, how should we expect the second growth such as from 'twenty four thanks.
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Of course, I mean, yeah, yeah, I don't want to be essential to keep all the attention.
And my third quarter, our advertising revenue grew by 21% year over year revenue as percentage of total revenue has grown from 23% in the same period last year to 28% in the third quarter of this year and also he has.
Trials.
Gross margin gross profit improvement on a complete company level.
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So we've introduced our key strategy and the driving force of our AD business in the past two quarter comprehensively, which has been the one horizontal industry solutions as well as the middle platform power improvement.
So no the audience on how he is on kind of what youll see going that somehow you each or total.
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So from a industry vertical perspective game and E. Commerce has been a very strong despite Q3 being a traditional slow season AD revenue from E Commerce still grew by 90%.
Additionally, we have been actively exploring other integrated solutions with other industries.
For example, we've seen positive performance from automotive and health care industry, which also grew by 20% quarter over quarter going forward.
Continuing to strengthen.
Those industries performance.
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So I'm not quite sure what Lady sitting there going out Tony Jones out you're talking about let's just wait until the kids aren't going to go you that you said are true.
All of that played on Libra.
We have also improved our AD efficiency on a platform level.
Leashing more commercial.
Value across different scenarios, and particularly our performance based ads grew by 40% year over year in the third quarter, which has become the main growth driver of our AD business.
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So in terms of the double 11 shopping festival performance says.
We think the overall experience and overall performance it has.
We exceeded our expectations.
AD revenue from the main e-commerce platforms grew by over 80% year over year, well continue to adhering to the open loop strategy and continue to deepen our data cooperation with the top e-commerce platforms.
For example at revenue generated by the Alibaba Shenhua project grew over 160% compare with the June 18th shopping Festival. This year, we've worked with more than 70 brand advertisers to bring.
News users to those.
To the advertisers.
Over 50% of the traffic converted to Alibaba, new users to those brand owners and this ratio even reached 89% for baby and maternity products.
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The incremental AD budget, Rob by Alibaba single project.
It's actually proven the conversion value of daily busiest performance ads. That's why in addition to Alibaba Shinwa project, where we're launched Jin.
Project, a collaboration program with Kingdom recently.
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We don't show the board that who are the late teachers with you. She should go dollar so Lilly yeah, Tony and she just aren't sure yet how about this about you saw there shouldnt you don't unkind, all well I mean, that's always fun way E. G that I wont go whole should are showing that social yeah no sure.
It shouldn't be they'll sign up.
During the double 11 shopping festival the G. N V generated from RFP do a live economists increase more of that in 'twenty, 250% year over year, and we have gradually built up our consumption and trading atmosphere.
Within our content community.
The shopping season, the number of video E Commerce related video increased by over 230% and the number of life E. Commerce sessions has also grew by 100%.
Visibility content creator Mr Me don't lie.
Life lively comments G. N V has reached 1.6 81.68 billion, which increased by over 400% from the trading atmosphere as well as the drop in your gross we're confident we can continue to build.
This momentum and continue to.
Grow our e-commerce related advertising property.
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Shanghai Guangzhou, so it's useful.
Absolutely yeah, so I won't go through them and I won't go to conquer a shallow well it'll go out golf well, yeah, I'm going to show little choice absolute ship, so it's actually cheaper oil.
As for the fourth quarter and two.
2020 force advertising revenue growth, our gross Protectory, we remain a cockpit and here are some ways. We are hoping to continue to enhance and improve first of all is that we are now available is content can deeply influence users' mindset.
And the brand perception.
It will be very focused and continue to build our brand ad capability.
The sparkle platform will be the lever and performance space that will be our accelerator.
Oh I see a question Keith Chunky they'll go on Gulf War <expletive> I should say.
So you've got killed or those type of T cell.
Oh that sounds like it's just like these on the Covanta leader like Ocean I should say, but he's unconscious that bought into a child's uniquely postage without doing a trial called the toll way. Just so you know I'm, telling you all of a sudden yeah, well, which I'll toss. It goes how cool is that these are the new young at different prices is that something that can be cut.
Yes, yes.
And secondly, as we will continue to upgrade our advertising model.
It's been emphasizing that the integrated marketing solutions that will be.
A strong advantage. The reason why is that we can choose from multiple media and scenario and achieve multiple AD revenue growth and in 2024 will continue to upgrade and help our client add clients to build their brand.
With the availability content community and help them to build a sustainable and measurable growth model.
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The housing will no question sits in Sellable sudden Pasha your questions Sydney, Brooklyn, Cobalt coalition target, yes, sure sorry, I won't go to some kind of telling me Oh Gee Buda. She had told US. They don't go down that's how you build out quite he showed it would only be on herself.
Uh huh.
He is to improve the.
Effectiveness and efficiency of our traditional asked scenarios and find new scenarios that simple for different advertising strategy going forward will continue to find a way to better collaborate between natural traffic and commercial traffic.
To improve our overall ad efficiency.
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Yes, the pouch.
Hi, Cindy and she entry E. G. G. Jamba you go.
Shifting they'll shut you decided you know should tell each other what they said, yes, that's about it getting yourself Joe if he doesn't jump wage you Cook, who does this sort of official that'd be doesn't go down you'll show the challenging.
Yes, I wouldn't say it can go kill so does that mean chunky. The Guangzhou show you that jumped up shop or what might you be thinking about post April caught us I won't eat them going I was just kind of don't look too.
Lastly is that will play close attention to the four key needs of our brand of our our customers number one neo product launch number two fear of aging number three transaction based on acne.
Lastly is that seasonal marketing campaigns, we will build on this work needs and to continue to build.
Butte, a very effective advertising solution, that's why I'm I'm still very confident.
Of our advertising property growth in the fourth quarter and the year.
We aim to continue to each time expand our marketing market share going forward.
Thanks, Operator next question.
Okay.
One moment for the next question.
Our next question comes from the line of Felix Liu from UBS. Please go ahead.
Since they want anytime you win a win win.
He shook when you want to know Youll see L. A tweet.
So without taking you always hear cheese or little higher should take hold particularly you'll see gayle a corner youll see lung tissue and Julian MB NT did so usually sandtown kinds of elements in that C. A T. C. I always say that you guys didn't get drunk on somebody out when my when I say Youll see I would've told you a year.
Uh huh.
So why is this show a man.
Thank you to wash them, the pretty Derby to come with that and then you've got 10-Quad pole hole, but you always hear too.
Obviously the compute.
Let me translate myself. So we noticed that too my question is on the gaming business. We noticed the game competitive landscape remain continue to be intense and one of our peer recently exited their gaming business.
Mike Your thought on you are all in house game R&D progress, how you think of the game business from here and any update on our game pretty therapy. Thank you.
Oh, well, it's always a pleasure you say oh, you'll just telling you that they go when Teva.
He or she aren't telling them if they don't answer one geography it.
It would seem quite one's home tissue Johan Sverdrup.
So hopefully you will see that sounds good.
So firstly I'll talk about the Derby.
We really value the scheme at the same time were valuable user experience I'm sure. That's why we'll also conduct minor content refinement and technical upgrade as soon as possible and trying to get and getting back to the App store.
Oh sure using saw relatively you'll see the lunch commentary you thought those are hot.
And one thing I wanted to add is that for us are already download the game on their feedback and experience.
The feedback has been very positive.
So we'll see how that that's always how Glenn in your neighborhood for women's either so the player and you will see though until sometime.
Yeah sure Don you're sure seems like when he says he was just for Tom It seems you'll consider it.
Or do the senior notes.
She says on the same comp hotel.
So it seems on cereal.
What's your the.
Pardon me the other day and you should talk to them with all the Yugo Concord Triple year on the C U E.
You'll see on cool Pacino critical needs.
Patients with all the Yugo, Belgium, the tornado James I'm going to save us at least.
How do you see.
You said it seems aquifer fired on my behalf.
As he mentioned there has been a very competitive landscape and our game market. This year.
More than that.
Thank the girls games business or game industry has entered into a new phase.
It's very hard to get new users and it has become more of a saturated market.
She knows who leave us a whole season sure hungry you seem tempting for your heart.
Gianni.
Youll see the kudos for the op two months okay.
<unk> also known as you're doing a twofer.
You'll see it you don't just sort of how Cologne.
Yeah.
Yamana in Philadelphia.
No man, that's usually take for the computer.
Yeah.
And passed a year, where where you still see incremental great Rosa gamers in the market. That's the secret to success is to bring a good quality game, but in the market, whereas a saturated market pet only quality.
He is not enough unless you have them.
Top of the top game quality and the right timing.
So the woman.
I know you mentioned that you've done Andy of them. Okay. You cannot you yes sure.
I'll go through the same father, Youll see those or could you see the seizure or my country Osseomucoid fucking public Sturdhal excuses for Teamhealth professional.
Top female.
The contestants.
Yeah, I'm not sure you might come in total financial lease all of them, but some of them.
Mr. Horner it maybe it's all yours, you Michelle Qi senior Okle-dokle neither.
How much of a shock Hollywood film about cigarettes hunting Tau pathology call you took a lease on that thing weight.
It's come to the end of this year with notice that we will find out that most of the making launch this year has not meet our original expectation, but the quality of those games has been good the reason why is that.
<unk> was set up three years, probably three years ago, where there was still a incremental gamer grows their target is to build a good game not necessarily has to be the top game or the most unique game and three years later.
Time has changed.
So for you towards the junior So you don't go to Toluca legs, if you will.
C J O C path for yoga come through the bottom of.
Oh part of female condoms.
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Possible.
The bathroom for the whole part of mix was a positive.
Best of luck.
Plus just a single dollar you got to promote here.
But you shouldn't nature.
Oh took a pimple courtyard or what are you doing now to watch it quite Yoshi hustle.
You are.
From the user perspective, they would notice that for this year, there's a lot of new games, but they all look kind of the same probably with different artistic designs.
And for those game developers they have turned into a rat maze of all the minor details.
Those rat race wouldn't necessarily means new users and new income and new profit.
For users they don't necessarily have to try out this new game will look the same with others because they've already have a game there they're they've been devoted in.
So you know how youre only talking before he or she says home solar.
Well first of all she says.
Huh.
Well, Glenn Hoddle sure Nicole Youll. She won't work, we're doing around say Hong Kong U S. Navy.
Peter This is Jim Sheehan.
No.
Carlos Daniela I guess huh.
The common doesn't eager when youre just looking at the Ada also put under Abengoa.
Okay.
It's not really how many are coming.
Coming up I'm glad routine use.
So they've been pushed.
Pushout, shoebox and you'll see that.
Touches are so probably won't be all short homes or Hollywood. He was asking us what we're trying to do that.
Well I think that you said, you'll see neither one of them.
Here's all scenarios he of course will follow.
So you'd have to show up.
Tony or there about two years ago.
Chipotle chilli Youll see somehow our museum.
So that means I'm not that me and not necessarily the game market is shrinking or less active on the contrary, we still see a gamer has been a very active from Billy really stayed a perspective, the viewers and our <unk>.
AME content verticals, there that D. A U and their time spent are actually increasing a lot. They also pay close attention to new games.
But the new game, which can come bird rail new users needs to be very unique very different from what the market.
It's already offering.
So he is a hydrophilic.
She said that she was on Eagle should help I mean, so what youll see probably sell them. There you go.
Think of Golden copy of Hollow <expletive>, what's interesting as you go through.
You'll see it pop the synergy called children, who seem to be able to do for these hunton meal. The hump yard of hydrogen just holiday. So you got to wait later copel to no matter for Hugo soil. He later told me It was home depot, who know about regulatory identical design lanotte neither.
Hopefully those homes for the you mean someone has already opened up some here.
The whole she's of course should the NIPA someday I hope it'll come from so that eats up the social political in nature and <expletive> computer.
Who was hobbyists, who can't make it shouldn't be roommates.
They're going to call the two quarters that it would follow that path symbol.
Given set that.
I think the time has changed the standards too.
Invest in new games has changed now we think there are three key criterias for new game to succeed one is long term operation.
S to be the top of each market RBS Super top.
Titles in the market.
Lastly is focused on the R y.
And in the past the copycats type of.
Ah projects set up or the rat race type of R&D investment.
It's not work anymore.
And he says I.
And I'll take the Delta there shortly on the neighborhood Eva player in Jumbo deals or you mean, why make an idea that's quite a different woman named Telangana you too. So she can go there.
In total what contracts what sort of catering to her.
They all are you say Oh, my God should be sound as a whole.
Just a few months, who will come to us for the Belgium is yourself, Joe Nigro truthfully, our children. So you work.
But college on the hardtop told us honestly on the silver tier point of Hussein's, either certainly also tie up a lot of sleep.
So you should see how the aboutus shoot for children.
That's exactly why we have been reviewing and adjusting our in house development project because some of the projects were established based on the old standards and based on the new market and new standards those project as very likely.
Be lossmaking when the game came online that's why we are doing dose adjustment and streamlined our project.
Jingle opinion, I told them about women's systems that enable Lauren or Paul.
Alicia woman Pamela.
This is how you accumulate yourself, oh, well, mostly by a woman that C benches on that just yet.
Some of them.
After this adjustment of our in House development game, we still kept few titles that we think will remain competitive.
And current market, we will be very paying close attention to the to the money invested in and focus our limited resource on the very selective titles, who can meet those new standards.
What is interesting, but something to the Eagle Ford Saba aren't yet or what are the only company with a joke.
These are the type that Florida.
Yes, he's a doughnut torture you dishes.
Well, it's just not to the seems logical chicken club do you see a higher loss recovery visual pleasure you might have.
Youll see exactly how they're going to.
Sure.
Puppy.
Peter functionally.
Public So you go to the terms of the key central.
You continue to leave any volume.
Yes.
We think the thing that we're doing with our project adjustment. Its correct. This movement is not only been done by visibility and it's actually across the industry and it's not necessarily a bad thing yeah. We have returned to.
The fundamental upscale developing which this part of this industry the key competitiveness.
Nation, and who can really succeeding.
She is the one with the most brilliant idea are they the one with the most innovative.
In making can propel and succeed.
Okay.
Oh, Hi, South Florida hardware.
Just a thought on the Singapore, you're the ones that hasn't made Kendall query whether that be touch on that.
Yeah sure so I'm going to ensure that cause you to recall arch here, you'll see Frankfurt Jose Gordo shifting team.
The hydrogel will easily go away.
Theodora, partially or the tenant of yours sugar beet.
Sure Yeah, Youll larger children.
What you don't want me all towards the children, possibly Yoshi Heartworm is yes.
Sure.
Yeah.
Lastly, and I want to emphasize that.
Literally platform they are large amounts of young users.
Young gamers has been very very active on that.
Thanks.
There are still the most popular game video content popular in China.
A very high density of young generations.
And also for our teams game development team. They also have the sense and understanding of Chinese gamers, what we need to do as realized stopes at vantage and translate that into game developing.
Thank you.
Our next question please.
Certainly one moment for the next questions.
Next question comes from the line of Chung Li from Bank of America. Please go ahead.
Oh, Hi, I wanted to tell all my sound harsh. This is just something that's you want all the ones. You can also going is how we'll call me and they all kind of interesting you called Quito I'll leave at that Tricia hacking towards okay.
How long is that you'll have killed.
But really the thing called Io women, India that you'll go trunnion, yeah quite a move gallium it'll be on Y O Y hotel shall constitute Chang all keyed off wildly Hartson Union Quaking home Doctor go Gosh. If okay. You should know how can you think that Oh, she kind of losing I think the thing that I think Matt is medical team. My question a question for me lately.
Martin.
He noticed that the we have a great day out distance improvements in gross margin and can you gave us some outlook for Q4 and how store you look at your full year lots controlled target you made could work.
And any changes to our breakeven target by 2024. Thank you.
Okay.
Sam I will take this question.
In Q3, our gross profit grew by 48% year over year, and our GPM improved five consecutive quarter to 25%.
We expect our gross profit margin continued to improve sequentially in the Q4 as there is more revenue contribution from AD revenue.
At the same time, we narrowed our non-GAAP operating loss by 51% in Q3, and then we expand we can narrow our non-GAAP operating loss, even more in Q4 compared with Q3 that will help us to achieve our initial financial target that to reduce our non-GAAP operating loss by <unk>.
<unk> 3 billion in 2023, so we still keep our initial financial go unchecked.
<unk>.
Our operating cash flow has turned positive in Q3 and indicating their business operation had entered into a positive cycle.
That we can continue to generate positive operating cash flow in Q4.
Looking to 2010 before we will continue our path of growth profit improvement in the loss narrowing.
And we have confidence in the growth our high margin business like either revenue, which will continue to contribute the growth path.
Profit growth.
And that will be the main driver to narrow the loss on the other hand, we have some recent structural adjustments, we expect operating expenses, including R&D expenses to further decline in 2024.
Further I think we will continue to work towards the goal of Steven Thank you.
Yes.
Oh, yeah. Thank you as a management.
Thank you for the questions and that concludes the question and answer session. Thank you once again for Chinese Felipe released third quarter 2023 financial results and business update conference call today.
You have any further questions. Please contact Juliet Yang <unk> IR director of <unk>.
Okay.
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.
Yes.
[music].
Okay.
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