Q2 2024 Bilibili Inc Earnings Call

August 22, 2024

today and welcome to the vlibility second quarter two thousand and twenty four financial results and business update conference call

Financial Results and Business Update conference call.

Juliet Yang: To this conference is be recorded. At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please go ahead.

juliet young: do this conference is being recorded at this time i'would like to turn the conference to juliet young executive director of investor reladations please go ahead

Speaker Change: thank you operator during this call will discuss our business outlook and make forward-looking statements

Speaker Change: this comments are based on our predictions and expectitation as of today

Unknown Executive: Actual events or results could defer 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 the Hong Kong Stock Exchange. The non-GAAP financial measure will provide our for comparison purpose only. The definition of this measures and reconciliation table is available in the news release we issued earlier today.

Speaker Change: actual events or results could differ materially from those mention in today's news release and in this discussion due to a number of risks and uncertainties including those mentioning in our most recent filing with sec and the hong kong stocks change

Speaker Change: the non-gaap financial measure will provide our for comparison purpose only the definition of this measures and our reconciliation table are available in the news release we issued earlier today

Unknown Executive: 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.

Speaker Change: as a reminder this conference is being recorded in addition and investor presentation and a webcast replay of this conference call will be available on the visibility irour website at irdoll billiability dot com

Unknown Executive: Joining us today from Bilibili senior management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam San, Chief Financial Officer.

Speaker Change: joining us today from biabbility senior management are m cha ray en chairman of the board and chief expective officer miss collie lee vchair woman of the board and chief operating officer and miss her sam then chief financial officer

Xin Fan: I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Mr Fan: i will now turn the call over to mr fan who will read the prepared remarks on behalf of mr chen

Ray Chen: Thank you, Julia, and thank you everyone for participating in our second quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. We deliver solid second-quarter results with accelerated top-line growth, improved margins, and healthy community development. In the second quarter, our total revenues increased by 16% over year to be 6.13 billion. Our advertising ban is led this growth. With added revenue growing by 30% over year, revenue from our games and the better-add services also increased by 13% and the 11% over year respectively. The momentum across our billion lives is a strong testament to our execution in increasing our commercialization efficiency and unlocking the value of our community.

Li: thank you to li and essthank you everyone for participating our second quarter and twenty four conference core to discuss our financial and operating results i'm pleased to deliver today's opening remarks on behalf of m the chair

Operator: Financial Results and Business Update Conference Call.

Operator: Today's conference is being recorded.

Mr. Fan: with deliber solid ificsecond quarter results with accelerated the top line growth improve the margins and healthy community development

Operator: At this time, I would like to turn the conference over to Juliet Yang, Executive Director of Investor Relations.

Mr. Fan: in the second quarter our total reamvenues inuased by sixteen percent year over-year to be six point one threeet buildilling

Operator: Please go ahead.

Juliet Yang: Thank you, Operator.

Mr. Fan: our vertiding beners lled this growth with add revenue growing by thirty percent yearoveryear revenue for our gams and the venue services also increased by thirteen percent and the eleven percent the over-year respectivity

Speaker Change: the momentum across organion lies in a strong testament to our excution in including our commercialisation deficiency and unallocking the value of our community

Ray Chen: Increase the RAM news from our higher margin of advertising and game spinners boosted our growth profit by 49% over year. Growth for the margin rose to 29.9% in the second quarter, up from 23.1% in the same period last year, marking the eighth consecutive quarter of margin improvement. Consequently, with significant scenarios of our advertising operating loss and adjusted net loss by 69% and 72% respectively over year. Moreover, we generated a record IMB1.75 billing in operating cash flow in the second quarter. Our first round new balance at the end of Q2 also increased by R&B 730A milling from the end of Q1.

Speaker Change: increaseed the reamvenues for our higher margin of tiling and a gam spiners booste was poive by forty nine percent yearover year

Speaker Change: gross poket margin ro to twenty nine point nine percent in the second quarter are from twenty-three per one percent in the same period last year markingting the eghth conductive quarter of margin improvement

Speaker Change: consequently with significance and narrowed our adjging operating loss and are judg in their loss by sixty - nine percent and seventy-two percent respectivevly yearover-year

Juliet Yang: During this call, we'll discuss our business outlook and make forward-looking statements.

Speaker Change: more we generated a record ib one point se and five billing in operating cash flow in the second quarter

Speaker Change: or would there further revenue balance at the end of q two also increased by imb seven hundred and thirty a milling from the end of q one

Ray Chen: With this progress, we are confident that we can achieve our non-gabric-even target in the third quarter of this year and continue to improve our probability thereafter. While we have been accelerating our financial performance, our community continue to strive. In the second quarter, our DAU increased by 6% over year, reaching 102 million. And the MAUs grow to 336 million. Our community remains highly engaged with user spending at a daily average of 99 minutes on our platform. As we move into the summer season, we continue to see strong seasonality in terms of user engagement and retention. On June 26, we celebrated Bilibili's 15th anniversary.

Speaker Change: with this program we are confident that we can achieve our nongapbric even target in the third quarter of this year and continue to improve our proofitability thereafter

Juliet Yang: The definition of these measures and our reconciliation table are available in the news release we issued earlier today.

Speaker Change: while we have been accelerating our financial performance our community continuue to strive

Juliet Yang: 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.

Speaker Change: in the second quarter our d a u increased by six percent yearover year reaching a handry and two milling and the m ma use ro to three hundred and thirty six million

Speaker Change: our community remains highly engaged with user spending a daily average of ninein nine minutes on our platform

Speaker Change: as we mo into the summer season we continue to see strong seasonality in terms of user engagement and the retention

Juliet Yang: Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer.

Speaker Change: on through twenty six we celebrate here to be believeved fifteen anniversary over the part to fifteen years our platform have become a regular destination for nearly seventy percent of china gz plus population

Ray Chen: Over the past 15 years, our platforms have become a regular destination for nearly 70% of China Gen Z-plus population. This journey has brought us tremendous opportunities, as these users have become a major consumer force in society. We have seen it in our tiny growth as we enhance our infrastructure to facilitate our evolving consumption needs. We have seen it in our game business as we re-invent and study game to resonate more deeply with the preference of younger audience. As we continue to unlock the value of our community, we remain committed to our founding mission to build a welcoming home for talented Quaters and like-minded individuals to connect over shared interests and to satisfy their evolving needs for good content and service.

Speaker Change: the ney had bought us tremendous opportunities as these users have become a major consumer force in society

Speaker Change: we have seeing it our verting growth as we enhance our infrastructure to facilitate their involving consumption unique

Speaker Change: we have seeniyet in our gam benef as we rain band str again to resonate more deeply with the preference of younger audience

Speaker Change: as we continue to enlo the value of our community we remain committeated to our founding mission to build a wecoming home for talented equators and light marketate individuals to connect overshared interests

Speaker Change: and to sattiffy their involving needs for good tung ten and the service

Juliet Yang: I will now turn the call over to Mr.

Ray Chen: With that overview, I would like to discuss our co-pillars of content, community, and commercialization in more detail. Beginning with content and community, our strategy to encourage more high-quality Quaters to generate content continues to prove beneficial. In the second quarter, average daily video views increased by 18% over year to over 4.8 billion. Our leading content categories, such as games, knowledge, and technology, continue to show solid growth in video views, increasing by over 20% over year. Meanwhile, users' demand in consumption-related categories also continue to search in the second quarter. Video views in home appliance and decoration, automotive, and fashion and cosmetics all grow by more than 30% compared with the same period a year ago.

Speaker Change: with that overview i would like to discuss our copillars of content community and a commercialisation in more detail

Speaker Change: beginning with content and the community

Speaker Change: our strategy to encourage more high quality equatorors to generate counent continue to prove beneficial

Speaker Change: in the second quarter average dailyvide views increased by eighteen percent overyear to over four point eight billing our leading content categories such as gam knowledge and the technology continueed to show solid growth in the debuts

Speaker Change: or increasing by over twenty percent yearover-year meanwhile users de demand in consumption related categories also continue to search in the second quarter

Speaker Change: video views in home applies and declcoration automotive and affashion and cosmetics or grow by more than thirty percent compared with the sameplar rate a year ago

Ray Chen: We continue to provide effective and diversified monetization channels to incentivize our content Quaters. In the first half of 2024, about 2.1 million content Quaters received income on PDB. Content Quaters total income throughout our ads and vast products increased by 30% year-over-year. Notepoli, our innovative content-based products such as premium courses and fan charging programs, have been well received by our users. In the first half of 2024, content Quaters total income from these two products increased by over 40% and over 400 and 30% respectively year-over-year. Looking at our community matrix in the second quarter, our DAU spent an average of 99 minutes with us compared with 94 minutes in the same period last year, driving up user total time spent by 11% year-over-year.

Speaker Change: we continue to provide the effective and the der rest of ied the monetization channels to incentivisee our conent quatters in the first half of two thousand and twenty four about two point one million cond quatters received the income on bd b

Speaker Change: content quatters total income through our as and vest products increased by thirty percent yearover year

Speaker Change: notably our innovative contemped products such as premiing courses and fcharging programs have being well received byour users

Speaker Change: in the first half of two thousand and twenty four content quator total income from these two products increased by over forty percent and over four hundred and thirty percent respectivity yearover year looking at our community matrix

Speaker Change: in the second quarter our du than an aage of ninety nine minutes with us compared with ninety four minutes in the same period last year driving up user total times span by eleven percent yearoveryear

Ray Chen: Monthly interactions increased by 11% year-over-year, exceeding 16.5 billion in the second quarter. By the end of Q2, the number of our official members increased by 13% year-over-year to 243 million, and their 12 months retention rate remained strong at around 80%. Moreover, this July, we heard our signature offline events, Bilibili Word and Bilibili Micro-Link once again bringing our community together in Shanghai. More than 250,000 people traveled across the country to participate in events leading to a surge in Shanghai travel-related consumption. The growing enthusiasm as events showed our unparalleled influence among the young generation.

Speaker Change: monthlyate interactions increed by eleven percent yearoveryear exceeding sixteen point five billing in the second quarter

Speaker Change: by the end of q two the number of our official members increased by thirteen percent over a year to two hundred and forty three meilling and their twelve months tential rate remain a strong at r eighty percent

Speaker Change: more dt ly we heard our signature apply events theliility word at bdb macco linked once again bring our community gather in shanghai

Speaker Change: more than two hundred the fifty thousand people traveled across the country to by depending events leading to a thirty andour highest travel related consumption

Speaker Change: the growing enthusiasm as it bend showed our emparallel inferenonce among the young generation now i'd like to talk about our commercialization progress in each of busininess life

Sam Fan: Fan, who will read the prepared remarks on behalf of Mr. Chen.

Ray Chen: Now, I'd like to talk about our commercialization progress in each of our business lives. First, our advertising business. As our users mature with more disposable income, their commercial value unfolds and seeks more consumption-related content on Bilibili. The demand is there, and all we need to do is match the right ads with the right user. In the second quarter, we further improved our ad products and infrastructure to increase our ad efficiency. Specifically, we upgraded our ad placement system featuring user-friendly placement tools and enhanced conversion capabilities, attracting and retaining more advertisers on Bilibili. In the first half of the year, the number of advertisers on our platform increased by over 50% year-over-year.

Sam Fan: Thank you, Juliet.

Speaker Change: first hour hour what of the tiding piann

Speaker Change: allow users matrol with more disposedball income their commercial value and force and they seek more consumption related counten on billiability

Speaker Change: the demand at there and all we need to do to match the right as with the right user in the second quarter we further improved our ad products and infrastructure to inquase our ad efficiency

Speaker Change: specifically we upgraded our ad placement system featuring user frienddelay placement tools and enhanced conversion capabilities are attracting and retaining more of tiler on bdb

Speaker Change: in the first half of the year the number of ourvertiszers our platform increased by over fifty percent yearover year

Ray Chen: Moreover, we continue to invest and improve our ad-modeling capabilities to better understand our users' consumption behaviors and preferences, which enabled us to further enhance our ad-matching efficiency. Meanwhile, we incorporated more nature-video-style ad content, allowing us to expand ad load while maintaining user experience. We plan to further advance these initiatives in the foreign cultures and help our advertisers quit and material reels more easily and place advertisements more automatically. In the two wide, our top five advertising verticals were mobile games, e-commerce, digital products, and home appliance, food and privilege, and automotive in the second quarter. Our anchor verticals continued to deliver strong performance.

Speaker Change: more we continue to invest and improve our ad modertoring capabilities to better understand our users consumption behaviors and the preferences which enabled us to further enhance our ad mattering efficiency

Speaker Change: meanwhile we incorporated more nature weidd stle add content allowing us to extend as lo by maintaining you the experience

Speaker Change: we plan to further advance is initiative in the following quarters and help our advertisers qua as materials more easily and the place advertisement more automatically

Speaker Change: inusttru wise our top five of vertiding verticals were mobile gams e-commerce digital products and home appliance food and privilege and automotive in the second quarter

Speaker Change: our anchorverticals continue to deliver strong performance

Ray Chen: During the 6.1A shopping festival, we not only secured more ad budgets from e-commerce platforms, but also directly from online merchants in different verticals. Photo GNV, from video and live commerce, increased by over 140% over year during the period. Besides our leading verticals, we also saw incremental ad revenues from emerging verticals. In the second quarter, anchor revenue from internet services, AI, and education are increased, meaningfully. 2012 game business, game revenues resumed growth by 13% over year in the second quarter to R&B 1.01 bidding, led by the excellent performance of a recently launched distributed game, Sanguo Modeing Jinxia Samo, and the ACG game, RT Quactor.

Speaker Change: during the sixth one a shopping facival we not o always secured more ad burgers from an e-commerce platforms but also directly from online merchants in different verticals

Speaker Change: hotal g m v from video and live commerce increased by over a hundred forty percent yearoveryear during the period besides our leading verttoicals we also saw incremental add revenues from emerging verticals

Speaker Change: in the second quarter as revenue from internet services ai and education or inqued meanpoic

Speaker Change: twentying two our gambis gaam rvenues resumed the growth by thirteen percent yearover year in the second quarter d b one point zero one billning

Speaker Change: led by the excellent performance of recently laounch to strategy gaam sun mo gia summo and the acggam artu actor

Ray Chen: Our LXI titles also contribute to the steady-game RAM news and the demonstrated remarkable longevity. As FGO celebrated at 8th anniversary, it returned to the top 10 on the iOS game-grossing chart in July. As for Azureline, monthly active users reached new peak in June with the celebration of a seven-year anniversary. This trend strengthened our commitment to the long-term operation of high-quality games. We were delighted to see our first tragic game, Sanguo, become an immediate broadcaster. On the first day of its launch, granting the top three on the iOS game-grossing chart, attracting millions of gamers to the three-kinder battlefields.

Speaker Change: our lexi titles also contribute to the steady gam reamvenues and the demonstrta s remarkable longontervity

Speaker Change: as fd celebrated at eghth anniversary it returned to the top ten on the igme grossing chart in july

Speaker Change: and for azuna lie monthly active users reichard new peak in june with the celebration of a seven years anniversary

Speaker Change: the trend strengthen our commitment to the lunton operation of high quality gams

Speaker Change: we would lied to see our firstth to trag gam samal become an immediately broaduster on the first day office launch at granting the top three on ioscm growing chart attracting millings of gamas to the freak king om battle field

Ray Chen: Sanguo also set a new record in our operating history, being the farthest title that it hits R&B 1.001 game-grossing mark. With the launch of the second game season on August 3, Sanguo returned to the top three on the iOS game-grossing chart. The decent size of the SLG market, the early success of Sanguo, and the long-life cycle nature of SLG games give us confidence that it will become one of our flagship games within enduring longevity. Over the years, our community has expanded exponentially, and so has our game-based. Sanguo's success marks a breakthrough in our general diversification strategy and shows the vast potential of our game business.

Speaker Change: sbo was also set a new record in our operating history being the fgest title that a his aren't be one billing gam growrossing mark

Speaker Change: with the lunch of the second gagme season our orders third some will written to the top three on the is game growroting chart

Speaker Change: the decent size of the slg market the earliest success of sammo and the long lifecycle nature of slg gams give us confidence that it well become one of our fragship gams reading enduring lonurvity

Speaker Change: over the years our community has expanded expandnationally and so as our camera base

Speaker Change: some more success marks up with throughingin our general diversification strategy and show the value potential of our gambef

Ray Chen: We will continue leveraging our leading role at the top gaming community and the capitalization of our significant opportunities to reinvent games for the new generation of games. Turning to our vast benefits, RAM news from vast benefits increased by 11% over year to RMB 2.57 billion. We continue to add more live broadcasting content offerings, reinforcing the synergies between our live broadcasting and the PUBG ecosystem to better capture to use the diverse interests. We will also further explore opportunities in our other vast benefits as our Gen Z Plus users have demonstrated an increasing within this to directly pay for the content they love.

Speaker Change: we will continue leveraging our leading role at the top gaming community and a capitalization our significant opportunities to revan gams for the new generation of gamor

Speaker Change: turning toweour vast ben ef revenues from vast thantenis increased by eleven percent year over year to r b two point five seven buildilling

Speaker Change: we continue to add a more livebroadcastingencounter offerings reinforcing the synerorors brbetween our librhoad ting and the pugb ecossystem to better cr to useield the divering chests

Speaker Change: we will also further explore opportunities our other vast ben this as our changz plus users have demonstrated and increasing winin ia to directly paying for the counent they loven

Ray Chen: Our premium members continue to increase, reaching 22.3 million by the end of the second quarter, with over 80% of them subscribing annually or under all children with new packages. Showing their continued royalty and trusting our platform. Users spending our other vast portals of growth rapidly in the second quarter, particularly in premium courses, our fan charging program, and avatar decoration. We expect these portals to open more monetization potential across our massive PUBG content universe in the future. We believe good content and community can bring people together, and the value of our users are just starting to show its potential.

Speaker Change: our premium member continuue to increase reaching twenty two points three milling by the end of second quarter with over eighty percent of them subscribing annually or under allto withrenew packages

Speaker Change: showing their continue the royale and the trusting our platform

Speaker Change: you the spending our other bestare porters of grow rapullate in the second quarter

Speaker Change: particularly in qumiment courses our french charging program and ourt decoration we expectand these products to open more monetization potential across our massive pugv coun universe in the future

Speaker Change: we believe good counten and community can bring people together and the value of our users you j are starting to show its potential

Ray Chen: Our community is thriving, and our solid second quarter results place us just one step away from probability. We are excited to move forward and take Billy Billy to the next level.

Speaker Change: our community is driving and our solid second quarter results plays ioutll just one step away from proofitability

Speaker Change: we are excited to move forward and take bability to the next level

Ray Chen: This concludes Mr. Chan's remarks.

Sam Fan: Thank you, everyone, for participating in our second quarter 2024 conference call to discuss our financial and operating results.

Sam San: I will now provide a brief overview of our financial results for the second quarter of 2024. For a closer look at our financial results, we encourage you to refer to our press release issued early today. As a reminder, all amounts are in IMB unless otherwise noted. In the second quarter, we further advance our commercialization capabilities, delivering accelerated year-round new growth across our co-business. At the same time, we continue to expand our margins and considerably narrowed our losses. All of these financial improvements were frowned in our top-line growth with increased efficiency. Total RAM news for the second quarter were IMB 6.13 billion, up 16% year-over-year.

Sam Fan: I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.

Speaker Change: this concludes mister chance remarks i will now provide a brief overview of our financial results for the second quarter of two thousand and twenty four

Speaker Change: for a closer lo at our financial results we encourage you to refer our press release issued early today

Speaker Change: as a reminder or amounts iyeing iandb a less otherwise noted

Sam Fan: We delivered solid second quarter results with accelerated top-line growth, improved margins, and healthy community development. In the second quarter, our total revenues increased by 15 percent year-over-year to RMB 6.13 billion.

Speaker Change: in the second quarter we ve further advance our commercialization capabilities

Speaker Change: inlivering accelerated yearover-year revenue growth across our cobianis at the same time we continue to expand our margins and considerably narrowed our losses all of these financials improvements were fromly near the top line growth with increasase efficiency

Sam Fan: Our advertising business led this growth. With ad revenue growing by 30 percent year-over-year, revenue from our games and value-added services also increased by 13 percent and 11 percent year-over-year, respectively.

Sam Fan: The momentum across our business life is a strong testament to our execution in increasing our commercialization efficiency and unlocking the value of our community.

Speaker Change: total reamvenues for the second quarter while mb six point one three billing up sixteen percent yearover-year

Sam San: Our total RAM news breakdown by RAM stream for Q2 was unfortunately 42% vast, 33% are tiling, 17% mobile games, and 8% for our IP directives and other business. Our cost of RAM news increased by 5% year-over-year to IMB 4.3 billion in the second quarter, while growth profit rose 49% year-over-year to IMB 1.8 billion. Our growth profit margin reached 29.9% in Q2, are from 23.1% in the same period last year. Our total operating expenses were down 3% year-over-year to IMB 2.4 billion in the second quarter. Sales and marketing expenses increased by 13% over year to RMB 1 billion, mainly due to increased marketing expenses for the new game launch.

Speaker Change: our total revenue break down by revenue stream for q two was apppoortim ay forty two percent bars thir is three percent of tly seventeen percent mobile gams and eight percent our ipter achieved and other pendits

Sam Fan: Increased revenues from our higher-margin advertising and games business boosted our gross profit by 49 percent year-over-year. Gross profit margin rose to 29.9 percent in the second quarter, up from 23.1 percent in the same period last year, marking the eighth consecutive quarter of margin improvement.

Speaker Change: our cost of revenues increased by five percent yearover-year to beforefour point three billing in the second quarter while gross profiter road forty nine percent yearoveryear to m b one point eight billing

Speaker Change: our gross pocket margin reached twenty nine point nine percent in q two are fr twenty three point one percent in the same period last year

Speaker Change: our total operating expenses were down three percent over year to b two point four billing in the second quarter

Speaker Change: sales and the marketing spenses increased by thirteen percent yearover-year to rv one billing mainrely due to increase the marketing expenses for the newpm lunch

Sam San: DNA expenses were RMB 488 million, down 10% over year; RMB 895 million, down 15% over year, both related to reduced income expenses. We narrowed our adjusted operating loss and adjusted their loss to RMB 284 million and RMB 271 million in the second quarter. Reducing our losses by 69% and 52% over year, respectively. Our adjusted net loss ratio in the second quarter come down to 4% from 18% in same period like year ago. Cash flow wise, we generated a record RMB 1.75 billion in positive operating cash flow in the second quarter, and a total of RMB 2.4 billion in positive operating cash flow in the first half of the year.

Speaker Change: in jn expenses were on four hundred and eighty eight million down ten percent yearover year i the expenses will im b a hundred andninety five million down fifteen percent yearover year both related to reduce her cal expensive

Financial Results and Business Update Conference Call.

Unknown Executive: Financial Results and Business Update Conference Call.

Juliet Yang: To this conference is be recorded at this time I would like to turn the conference over to Juliet Yang Executive Director of Investor Relations.

Juliet Yang: To this conference is be recorded at this time I would like to turn the conference over to Juliet Yang Executive Director of Investor Relations. Please go ahead. Actual events or results could defer 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 SEC and the Hong Kong Stock Exchange.

Sam Fan: Consequently, we significantly narrowed our adjusting operating loss and adjusting net loss by 69 percent and 72 percent, respectively, year-over-year.

Unknown Executive: Please go ahead. Actual events or results could defer 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 SEC and the Hong Kong Stock Exchange.

Speaker Change: we narrowed our adjusted operating loss and are jud in their loss to be two hundred and eightyen four million and i m b two hundred and seventeen-one million in the second quarter

Speaker Change: reducing our losses by sixty-nine percent as seventty two percent yearover-year respectively

Speaker Change: our jacinand loss ratio in the second quarter come down to four percent for eighteen percent same periods last year ago

Sam Fan: Moreover, we generated a record RMB 1.75 billion in operating cash flow in the second quarter.

Sam Fan: While we have been accelerating our financial performance, our community continues to thrive.

Sam Fan: In the second quarter, our DAUs increased by 6% year-over-year, reaching $102 million, and the MAUs grew to $336 million.

Sam Fan: Our community remains highly engaged, with users spending a daily average of 99 minutes on our platform.

Speaker Change: cash flow wide we generated a record r b one per seventimpy five billing in positive operating cash flow in the second quarter and the total of imb two point four billing in positive operating cash flow in the first half of the year

Unknown Executive: The non-gap financial measure will provide our for comparison purpose only. The definition of this measures and reconciliation table are available in the news release we issued earlier today.

Juliet Yang: The non-gap financial measure will provide our for comparison purpose only. The definition of this measures and reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded.

Sam Fan: As we move into the summer season, we continue to see strong seasonality in terms of user engagement and retention.

Sam San: As I mentioned earlier, driven by the strong performances from our games and albinoists, our different revenue balance at the end of Q2 also increased by RMB 700 to 8 million. We are on the end of Q1, proving a solid path to achieve our name gap with even target net quarter, and the sustainable profitability thereafter. As of June 30, 2024, we had a cashier cashier equivalent, palm deposits and shorting investments of RMB 13.9 billion, or US dollar 1.9 billion.

Speaker Change: as i mentioned earlier driven by the strong performance ces from our gams and air been is our different revenue balance at the end of q two also increased by r and b seven hundreds at a meanilling from the end of q one

Juliet Yang: 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.

Speaker Change: proaving a solid path to achieve our n gapabric even targetin that quarter and the sustain ableul ofability thereafter

Unknown Executive: Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board, and Chief Operating Officer, and Mr. Sam San, Chief Financial Officer.

Juliet Yang: Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board, and Chief Operating Officer, and Mr. Sam San, Chief Financial Officer.

Speaker Change: as of june thirty twenty twenty four we had a casash casual equivalents pum deposits and shorting investments of rb thirteen point nine billing or u s dollar one point nine billing

Sam San: Thank you for your attention.

Unknown Executive: We are now left to open the call to your questions.

Unknown Executive: I will now turn the call over to Mr.

Unknown Executive: I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Unknown Executive: Operator, please go ahead. Thank you.

Speaker Change: thank you for your attention we will now like to open the call to your question operator or a political ahead thank you we will now begin the question and answer session to askwer a question please bre star one one on your telephone and wait for a name to be announced

Sam Fan: On June 26, we celebrated Bilibili's 15th anniversary.

Unknown Executive: We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for a name to be announced. For the benefit of all participants on today's calls, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretation for management segments during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management segments in the original language will prevail.

Mr. Fan: Thank you, Julia, and thank you everyone for participating in our second quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. We deliver solid second-quarter results with accelerated top-line growth, improved margins, and healthy community development.

Sam Fan: Over the past 15 years, our platform has become a regular destination for nearly 70% of China's Gen Z plus population.

Sam Fan: This journey has brought us tremendous opportunities as these users have become a major consumer force in society.

Speaker Change: for the benefit of all participants on today's call if you wish to ask your questions to management in chinese please immediately repeat your question in english

Xin Fan: Fan, who will read the prepared remarks on behalf of Mr. Chen.

Sam Fan: We have seen it in our advertising growth as we enhance our infrastructure to facilitate the evolving consumption needs.

Sam Fan: We have seen it in our game business as we reinvent strategy games to resonate more deeply with the preferences of younger audiences.

Sam Fan: As we continue to unlock the value of our community, we remain committed to our founding mission to build a welcoming home for talented creators and like-minded individuals to connect over shared interests and to satisfy their evolving needs for good content and service.

Xin Fan: Thank you, Julia, and thank you everyone for participating in our second quarter 2024 conference call to discuss our financial and operating results.

Speaker Change: the company will provide consecutive interpretation for management's rments during the q session is not that english interpretation is for convenience purposes only in the case of any discrepancy management's trestatement in the original language will prevail one moment for the first question

Xin Fan: I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.

Mr. Fan: In the second quarter, our total revenues increased by 16% over year to be 6.13 billion. Our advertising ban is led this growth. With added revenue growing by 30% over year, revenue from our games and the better-add services also increased by 13% and the 11% over year respectively. The momentum across our billion lives is a strong testament to our execution in increasing our commercialization efficiency and unlocking the value of our community. Increase the RAM news from our higher margin of advertising and game spinners boosted our growth profit by 49% over year.

Unknown Executive: One moment for the first question.

Xin Fan: We deliver solid second-quarter results with accelerated top-line growth, improved margins, and healthy community development. In the second quarter, our total revenues increased by 16% over year to be 6.13 billion.

Sam Fan: With that overview, I would like to discuss our core pillars of content, community, and commercialization in more detail.

Daniel Chen: How shall the line of Daniel Chen of JP Morgan Lisa, your question? Thank you. Thank you for the opportunity to ask questions.

Xin Fan: Our advertising ban is led this growth.

Speaker Change: first questionions i was not the lie of daniel chenne of jp m please ask your question

Sam Fan: Beginning with content and community, our strategy to encourage more high-quality creators to generate content continues to prove beneficial. In the second quarter, average daily video views increased by 18% year-over-year to over 4.8 billion. Our leading content categories, such as games, knowledge, and technology, continue to show solid growth in video views, all increasing by over 20% year-over-year.

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Sam Fan: Meanwhile, users' demand in consumption-related categories also continue to surge in the second quarter. Video views in home appliance and decoration, automotive and fashion and cosmetics all grew by more than 30% compared with the same period a year ago.

Sam Fan: We continue to provide effective and diversified monetization channels to incentivize our content creators. In the first half of 2024, about 2.1 million content creators received income on Bilibili. Content creators' total income through our ads and vast products increased by 30% year-over-year. Notably, our innovative content-based products, such as premium courses and fan-charging programs, have been well-received by our users. In the first half of 2024, content creators' total income from these two products increased by over 40% and over 430%, respectively, year-over-year.

Daniel Chen: My question is on the advertisement. We see that advertisement growth in the second quarter was very robust, growing about 30% over year, which is very strong. Could you share the key driver behind and also how should we expect the advertising growth for the second half? Thank you.

Speaker Change: findia thank you for the opportunity to ask question so my question is on the end of vertising we have withsee the add advertising growth in the second quarter was very roust growing about thirty percent yearlya year

Mr. Fan: Growth for the margin rose to 29.9% in the second quarter, up from 23.1% in the same period last year, marking the eighth consecutive quarter of margin improvement. Consequently, with significant scenarios of our advertising operating loss and adjusted net loss by 69% and 72% respectively over year. Moreover, we generated a record IMB1.75 billing in operating cash flow in the second quarter. Our first round new balance at the end of Q2 also increased by R&B 730A milling from the end of Q1.

Speaker Change: which is we't very strong so could you maybe share these key driver behind and also how should we expect the ad advertising growth for the second half thank you

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Ray Chen: In a challenging micro-environment, Bilibili's second quarter advertising business achieved a 30% year growth, with quarterly revenue exceeding 2 billion RMB for the very first time and contributing about one third of the company's total revenue. As you can see, that our advertising revenue has growth for several consecutive quarters, and the fundamental reason behind that is one that Bilibili's traffic is growing very healthily, and secondly, is that we are continuously unlocking the commercial value of our users. The second quarter, while our video views increased by 18% year over year, showing a continued growth in our commercial traffic.

Speaker Change: in a challengge of microing environment bility the second quarter advertising business achieved a thirty percent youngon year growth with re quarterly revenue exceed that two billion r for the very first time and contributing about one third of the company's total revenue

Mr. Fan: With this progress, we are confident that we can achieve our non-gabric-even target in the third quarter of this year and continue to improve our probability thereafter. While we have been accelerating our financial performance, our community continue to strive. In the second quarter, our DAU increased by 6% over year, reaching 102 milling. And the MAU's grow to 336 milling. Our community remains highly engaged with user spending at daily average of 99 minutes of our platform. As we move into the summer season, we continue to see strong seasonality in terms of user engagement and retention.

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Speaker Change: as you can see that our advertising revenue has gth for several consecutive quarters

Speaker Change: and the fundamental reason behind that is more that be the b traffic is growing very healthily and secondly is that we are continuously unlocking the commercial value of our users

Mr. Fan: On June 26, we celebrated Bilibili's 15th anniversary. Over the past 15 years, our platforms have become a regular destination for nearly 70% of China Gen Z-plus population. This journey has brought us tremendous opportunities as these users have become a major consumer force in society. We have seen it in our tiny growth as we enhance our infrastructure to facilitate our evolving consumption needs. We have seen it in our game business as we re-invent and study game to resonate more deeply with the preference of younger audience.

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Sam Fan: Looking at our community matrix, in the second quarter, our DAU spent an average of 99 minutes with us, compared with 94 minutes in the same period last year, driving up users' total time spent by 11% year-over-year.

Sam Fan: Monthly interactions increased by 11% year-over-year, exceeding 16.5 billion in the second quarter. By the end of Q2, the number of our official members increased by 13% year-over-year to 243 million, and their 12-month retention rate remained strong at around 80%.

Sam Fan: Moreover, this July, we held our signature offline events, Bilibili World and Bilibili MicroLink, once again bringing our community together in Shanghai. More than 250,000 people traveled across the country to participate in events, leading to a surge in Shanghai's travel-related consumption.

Sam Fan: The growing enthusiasm at the events showed our unparalleled influence among the young generation.

Sam Fan: Now, I'd like to talk about our commercialization progress in each of our business lines.

Speaker Change: ethis du grew by six percent yearover-year in the second quarter while our videoviews increased by eighteen percent year-over-year showing a continued growth in our commercial traffic

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Ray Chen: Over 70% of Chinese young generations are using Bilibili, and the average age of our user has reached 25. This is the stage where their commercial consumption needs and spending power are rapidly growing and being released. This is evident from the booming growth in our consumption related content categories in Q2. Video views in the categories such as home decor and real estate, automotive, fashion and beauty, or increased by over 30% year over year, while daily video views in baby and maternity experience over 80%. On top of that fundamental reason, what we need to do is to match the demand between advertisers and users with better infrastructure and the industry-based marketing solutions.

Mr. Fan: As we continue to unlock the value of our community, we remain committed to our founding mission to build a welcoming home for talented Quaters and like-minded individuals to connect over shared interests and to satisfy their evolving needs for good content and service.

Speaker Change: so seventy percent of china' young generations are using billibility and the average age of our user has reached twenty five this is a stage where their commerci consumption needs and spending power are raply growing and being released

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Xin Fan: With added revenue growing by 30% over year, revenue from our games and the better-add services also increased by 13% and the 11% over year respectively.

Mr. Fan: With that overview, I would like to discuss our co-pillars of content, community, and commercialization in more detail. Beginning with content and community, our strategy to encourage more high-quality Quaters to generate content continue to prove beneficial. In the second quarter, average daily video views increased by 18% over year to over 4.8 billion. Our leading content categories, such as games, knowledge and technology, continue to show solid growth in video views, or increasing by over 20% over year.

Xin Fan: The momentum across our billion lives is a strong testament to our execution in increasing our commercialization efficiency and unlocking the value of our community.

Speaker Change: this is evident from the booming growth in our consumption that related contting categories

Speaker Change: in q two really views in the categories such as home deick cor and real estate automotive fashion and beauty or increased by over thirty percent year over year while daily video views in babium maternities experienced a year-over year growth of over eighty percent

Mr. Fan: Meanwhile, users demand in consumption related categories also continue to search in the second quarter. Video views in home appliance and decoration, automotive and fashion and cosmetics all grow by more than 30% compared with the same period a year ago. We continue to provide effective and diversified monetization channels to incentivize our content Quaters. In the first half of 2024, about 2.1 million content Quaters received income on PDB. Content Quaters total income throughout our ads and vast products increased by 30% year-over-year.

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Speaker Change: on top of that fundamental reason what we need to do is to match the demand with between advertisour users with better infrastructure and the industry-based marketing solutions

Sam Fan: First, our advertising business.

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Ray Chen: And the one horizontal refers to the enhancement of a platform infrastructure, and the multiple verticals refers to the vertical industry-based solution. In the first half of the year, we implemented comprehensive upgrades to several of our advertising infrastructure modules. For example, we upgraded the placement platform on our PC and provided one-stop placement tools for K-account. And as such, in the first half of the year, the number of performance-based K-A advertisers increased by 50% year over year. In terms of app materials, are you willing to create a center and active application of AIGC technologies helps our advertisers to diagnose and improve their added materials after optimization.

Speaker Change: and the one horizontal recurs to the enhancement of platform infrastructure and the most the multiple verticalst refers to the vertical industry-based solutions

Mr. Fan: Notepoli, our innovative content-based products such as premium courses and fan charging programs have been well received by our users. In the first half of 2024 content Quaters total income from these two products increased by over 40% and over 400 and 30% respectively year-over-year. Looking at our community matrix in the second quarter, our DAU spent an average of 99 minutes with us compared with 94 minutes in the same period last year, driving up user total time spent by 11% year-over-year.

Sam Fan: As our users mature with more disposable income, their commercial value unfolds and they seek more consumption-related content on Bilibili. The demand is there, and all we need to do is to match the right ads with the right user. In the second quarter, we further improved our ad products and infrastructure to increase our ad efficiency. Specifically, we upgraded our ad placement system, featuring user-friendly placement tools and enhanced conversion capabilities, attracting and retaining more advertisers on Bilibili.

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Sam Fan: In the first half of the year, the number of advertisers on our platform increased by over 50% over a year. Moreover, we continued to invest and improve our ad monitoring capabilities to better understand our users' consumption behaviors and preferences, which enabled us to further enhance our ad matching efficiency. Meanwhile, we incorporated more native video-style ad content, allowing us to expand ad load while maintaining user experience. We plan to further advance this initiative in the following quarters and help our advertisers create ad materials more easily and place advertisements more automatically.

Speaker Change: in the fife first half of this year we implemented comprehensive upgrades to several of our advertising infrastruate structure modges for example we upgrade the placeicement platform on our pc pc and provide a onestop

Mr. Fan: Monthly interactions increased by 11% year-over-year exceeding 16.5 billion in the second quarter. By the end of Q2, the number of our official members increased by 13% year-over-year to 243 million and their 12 months retention rate remained strong at around 80%.

Speaker Change: placement tools for k accounts and as such in the first half of this year the number of performance-based ka advertisers increased by fifty percent to year-over- year

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Mr. Fan: Moreover, this July, we heard our signature offline events, Bilibili word and Bilibili micro-link once again bringing our community together in Shanghai. More than 250,000 people traveled across the country to participate in events leading to a surge in Shanghai travel-related consumption. The growing enthusiasm as events showed our unparalleled influence among the young generation.

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Sam Fan: Industry-wise, our top five advertising verticals were mobile games, e-commerce, digital products, and home appliances, food and beverage, and automotive in the second quarter.

Speaker Change: in terms of atp materials are newly launch creative center and active application a i g c technologies helps our advertisers to diginthose and improve their ad materials

Xin Fan: Increase the RAM news from our higher margin of advertising and game spinners boosted our growth profit by 49% over year.

Mr. Fan: Now, I'd like to talk about our commercialization progress in each of our business lives. First, our advertising business. As our users mature with more disposable income, their commercial value unfolds and seeks more consumption-related content on Bilibili. The demand is there and all we need to do is match the right ads with the right user. In the second quarter, we further improved our ad products and infrastructure to increase our ad efficiency. Specifically, we upgraded our ad placement system featuring user-friendly placement tools and enhanced conversion capabilities, attracting and retaining more advertisers on Bilibili.

Ray Chen: The CVR achieved over 30% year-over-year improvement. Now let's take a look at our industry verticals in Q2. Our top five advertisers came from mobile games, e-commerce, digital products, and home appliances, food and beverage, and automotive sectors. Here we look at the e-commerce and transaction-based sectors with our consistent open-loop strategy during this year's June 18 shopping festival. We have deepened the integrated marketing and advertising collaborations with e-commerce platforms as well as secured a larger share of e-commerce merchant budgets. During the June 18 period, the number of advertisers on 40% year-over-year improvement. Today, in June 28th, we have brought 50% of the new customers, and 50% of the customers that we brought to the merchants in different verticals were new customers.

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Sam Fan: Our anchor verticals continue to deliver strong performance. During the 618 Shopping Festival, we not only secured more ad budgets from e-commerce platforms, but also directly from online merchants in different verticals.

Speaker Change: now let's take a look at our industry verticals in q two our top five advertisers came from mobile gaines ecommas digital products and home appliances foot em beverage and automotive sectors

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Mr. Fan: In the first half of the year, the number of advertisers on our platform increased by over 50% year-over-year. Moreover, we continue to invest and improve our ad-modeling capabilities to better understand our users' consumption behaviors and preferences, which enabled us to further enhance our ad-matching efficiency. Meanwhile, we incorporated more nature-video-style ad content, allowing us to expand ad load while maintaining user experience. We plan to further advance these initiatives in the foreign cultures and help our advertisers quit and material reels more easily and place advertisements more automatically.

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Speaker Change: with our consistent open loop strategy during this year's june eighteen shopping festival we have deepen the integrate marketing and advertising collaborations with the e-commerce platforms

Speaker Change: as well as secured a larger share of ecommas merch' budget

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Sam Fan: Total GMV from video and live commerce increased by over 140% over the year during the period.

Mr. Fan: In the two wide, our top five advertising verticals were mobile games, e-commerce, digital products, and home appliance, food and privilege and automotive in the second quarter. Our anchor verticals continued to deliver strong performance. During the 6.1A shopping festival, we not only secured more ad budgets from e-commerce platforms, but also directly from online merchants in different verticals. Photo GNV, from video and live commerce, increased by over 140% over year during the period.

Speaker Change: during the june eighteenth period the number of advertisers from aliibility increased by over thirty percent three hundred percent year-over-year and our gmb from live and video comments increased by over one and forty percent year over-year

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Speaker Change: fifty percent of the customers that we brought to the merchants in different verticals were new customers and specifically for baby a maternity con sector we bought over sixty percent of the new users to them

Ray Chen: And specifically for the baby and maternity sector, we brought over 60% of the new users to them. On our transaction-based advertising, in the first and second quarter, nearly 40 million users have watched our live and video e-commerce related content, and this number increased by 70%. In Q2, the average daily content creator engaged in live and video e-commerce increased by over 130% year over year, and the number of commerce related videos grew by over 330%. In the number of live e-commerce sessions rose by 270% over year. The consumption potential of Bilibili's female users, which constitutes near half of our communities, is also gradually unlocked.

Mr. Fan: Besides our leading verticals, we also saw incremental ad revenues from emerging verticals. In the second quarter, anchor revenue from internet services, AI and education are increased, meaningfully. 2012 game business, game revenues resumed growth by 13% over year in the second quarter to R&B 1.01 bidding, led by the excellent performance of a recently launched distributed game, Sanguo Modeing Jinxia Samo, and the ACG game, RT Quactor. Our LXI titles also contribute to the steady-game RAM news and the demonstrated remarkable longevity.

Xin Fan: Growth for the margin rose to 29.9% in the second quarter, up from 23.1% in the same period last year, marking the eighth consecutive quarter of margin improvement.

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Speaker Change: on our transaction-based advertising

Speaker Change: in the first in the second quarter that nearly four to forty million users have watched our live and video ecommerce related content and this number increased by seventy percent to year or year

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Mr. Fan: As FGO celebrated at 8th anniversary, it returned to the top 10 on the iOS game-grossing chart in July. As for azureline, monthly active users reached new peak in June with the celebration of a seven-year anniversary. This trend strengthened our commitment to the long-term operation of high-quality games. We were delighted to see our first tragic game, Sanguo, become an immediate broadcaster. On the first day of its launch, granting the top three on the iOS game-grossing chart, attracting millions of gamers to the three-kinder battlefields.

Speaker Change: in q two the average daily content creator engaged in life and video ecommerce increased by over one hundred and thirty percent year -over -year and the number of commerressce related videos grew by over three hundred and thirty percent year over year

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Speaker Change: and the number of lively comm sessions rose by one hundred two hundred and seventy percent the over- year

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Mr. Fan: Sanguo also set a new record in our operating history, being the farthest title that it hits R&B 1.001 game-grossing mark. With the launch of the second game season on August 3, Sanguo returned to the top three on the iOS game-grossing chart. The decent size of the SLG market, the early success of Sanguo and the long-life cycle nature of SLG games give us confidence that it will become one of our flagship games within enduring longevity.

Speaker Change: the consumption potential of bib female users which constitutes near half of our communities is also gradually unlocked

Ray Chen: GMVs in apparel increased over four times year over year in the second quarter. GMVs in apparel increased over three times year over year in the second quarter.

Speaker Change: gmv in apparel increased over four times year-over- year in the second in the second quarter

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Mr. Fan: Over the years, our community has expanded exponentially and so has our game-based. Sanguo's success marks a breakthrough in our general diversification strategy and shows the vast potential of our game business. We will continue leveraging our leading role at the top gaming community and the capitalization of our significant opportunities to reinvent games for the new generation of games. Turning to our vast benefits, RAM news from vast benefits increased by 11% over year to RMB 2.57 billion.

Ray Chen: We've talked about the second quarter and its driver behind, and if we take a look into the second half of this year, we're quite confident in maintaining an above industry average advertising growth rate. On one hand, the outcome of product infrastructure optimization is being proved, and we'll continue to show its effects, and on the other hand, by enhancing our vertical industry solutions, we not only expand our market share in key industries, but we are also looking to achieve incremental growth in emerging industry verticals, such as online services, education, healthcare, and maybe a maternity.

Speaker Change: we've talked about the second quarter and its driver behindand if we look take a look into the second half of this year look quite confident in maintaining and above industry average advertising growth rate

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Xin Fan: Consequently, with significant scenarios of our advertising operating loss and adjusted net loss by 69% and 72% respectively over year.

Mr. Fan: We continue to add more live broadcasting content offerings, reinforcing the synergies between our live broadcasting and the PUGB ecosystem to better capture to use the diverse interests. We will also further explore opportunities in our other vast benefits as our Gen Z Plus users have demonstrated and increasing within this to directly pay for the content they love. Our premium members continue to increase, reaching 22.3 million by the end of second quarter, with over 80% of them subscribing annually or under all children with new packages.

Speaker Change: on one hand the outcome of product infrastructure optimization is being proved and we'will continue to show its effect

Speaker Change: and on other hand by enhancing our vertical industry solutions we not only expand our market share in key industries

Speaker Change: but we are also looking to achieve incremental growth in emergent industry verticals such as online services education health care and baby a maternity

Sam Fan: Besides our leading verticals, we also saw incremental ad revenues from emerging verticals. In the second quarter, ad revenue from Internet services, AI, and education all increased meaningfully.

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Mr. Fan: Showing their continued royalty and trusting our platform. Users spending our other vast portals of growth rapidly in the second quarter, particularly in premium courses, our fan charging program and avatar decoration. We expect these portals to open more monetization potential across our massive PUGB content universe in the future. We believe good content and community can bring people together and the value of our users are just starting to show its potential.

Ray Chen: Lastly, I want to emphasize that because we have our unique community aspect, Bilibili's revenue growth will never just be reliant on advertisement growth. We can pursue a N2C parallel strategy in our commercialization efforts, meaning that we can not only earn money from advertisers, we can also earn money directly from our consumers. Because we are a community, our users are more inclined to spend on content or content creators that they love to show their support and appreciation. To sum up, we will be pursuing a B2B N2C parallel strategy. On the one hand, we will continue to regroup our advertising platforms to drive the advertising growth.

Speaker Change #101: lastly i wanted to emphasize that because we have our unique community aspect

Speaker Change #102: visi bil revenue grows was never just being relily on advertisement growth

Speaker Change #103: we can pursue to be and to see parallel strategy in our commercial ization efforts meaning that we can not only our money from advertisers we can also earn money directly from our consumers

Mr. Fan: Our community is thriving and our solid second quarter results place us just one step away from probability. We are excited to move forward and take billy billy to the next level.

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Mr. Fan: This concludes Mr. Chan's remarks.

Xin Fan: Moreover, we generated a record IMB1.75 billing in operating cash flow in the second quarter.

Unknown Executive: I will now provide a brief overview of our financial results for the second quarter of 2024. For a closer look at our financial results, we encourage you to refer our press release issued early today. As a reminder, all amounts are in IMB unless otherwise noted. In the second quarter, we further advance our commercialization capabilities, delivering accelerated year-round new growth across our co-beinness. At the same time, we continue to expand our margins and considerable narrowed our losses.

Speaker Change #105: because we are community our users some more inclined to spend on content to our spend on conttem creator that they love to show there supported and appreciation

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Unknown Executive: All of these financial improvements were frowned in our top-line growth with increased efficiency. Total RAM news for the second quarter were IMB 6.13 billion, up 16% year-over-year. Our total RAM news breakdown by RAM stream for Q2 was unfortunately 42% vast, 33% are tiling, 17% mobile games, and 8% for our IP directives and other business. Our cost of RAM news increased by 5% year-over-year to IMB 4.3 billion in the second quarter, while growth profit rose 49% year-over-year to IMB 1.8 billion.

Speaker Change #108: to you sum up we will be pursuing on to be in two see parallel strategy on the one hand we'll continue to our reinforce our advertising platforms

Ray Chen: At the same time, we still believe there is great potential in our 2C business, meaning on mobile games, premium membership, live broadcasting, combining together will support our sustainable revenue growth.

Speaker Change #109: to drive the advertising growross at the same time we still believe their are screen potentialally in our two c business meaning on mobile gains premium membership live broadcast in combining together will support our sustainable revenue growth

Unknown Executive: Operator, next question, please. Thank you. One moment for the next question.

Unknown Executive: Our growth profit margin reached 29.9% in Q2 are from 23.1% in the same period last year. Our total operating expenses were down 3% year-over-year to IMB 2.4 billion in the second quarter. Sales and marketing expenses increased by 13% over year to RMB 1 billion, mainly due to increased marketing expenses for the new game launch. DNA expenses were RMB 488 million, down 10% over year, RMB 895 million, down 15% over year, both related to reduced income expenses.

Speaker Change #110: i'llperate next question please

Felix Liu: Next question comes from Felix Liu of UBS; please ask your question. Thank you for your question. My question is related to the mobile game. Thank you for your question. The Sunmo game, indeed, is a blockbuster in the first half of this year. We not only attracted millions of new players, we've also accumulated a very good user feedback and also have large influence among the game industry. The game Sunmo broke several records in our game operation history. Truly, after its launch, it quickly ranked among the top three on the ILS game top-grossing chart and maintained in top 10 for the entire month afterwards.

Speaker Change #111: thank you one moment for the next question next questions comes from phlix w of uubbs please ask your question

Sam Fan: Turning to our game business, game revenues resumed growth by 13% year-over-year in the second quarter to be 1.01 billion. Led by the excellent performance of our recently launched strategy game, San Guo Mou Ding Jian Xia San Mou, and the ACG game, Artic Raptor, our legacy titles also contributed steady game revenues and demonstrated remarkable longevity.

Sam Fan: As FGO celebrated its 8th anniversary, it returned to the top 10 on the iOS game growth chart in July.

Sam Fan: As for Azuline, monthly active users reached a new peak in June with the celebration of its seven-year anniversary.

Speaker Change #112: she order to any your ce do eas y if it are how some go mo g change that ty al no other want to issue going technolog y the long number of things if i would a whole chong an if you woman to your show me to the job when i want h on here ' h ly you ire to that

Sam Fan: This trend strengthened our commitment to the long-term operation of high-quality games.

Speaker Change #113: this year let me translate myself thank you much for taking a question congratulations on the strong quarter and your successful launch out con gomogin tentia

Unknown Executive: We narrowed our adjusted operating loss and adjusted their loss to RMB 284 million and RMB 271 million in the second quarter. Reducing our losses by 69% and 52% over year respectively. Our adjusted net loss ratio in the second quarter come down to 4% from 18% in same period like year ago. Cash flow wise, we generated a record RMB 1.75 billion in positive operating cash flow in the second quarter, and a total of RMB 2.4 billion in positive operating cash flow in the first half of the year.

Speaker Change #114: management sha was drivers for the gamess successful lunch and what is what are your expectation of the gain lifetime cycle

Speaker Change #115: and looking ahead what are the future yonger that you plan to further expandse or invest in the future thank you

Speaker Change #116: december moin k jana that show to some baniance and where you your heart year that you go all back you ll see something be you're see or subi why you each other art cha of justose the higher son young you know the co 't it on to

Speaker Change #117: the sun will game indeed is a blockbuster in the first half of this year we not only attracted millions of new players we've also accumulate a very good user feedback and also have large influence at on the game industry

Xin Fan: Our first round new balance at the end of Q2 also increased by R&B 730A milling from the end of Q1.

Unknown Executive: As I mentioned earlier, driven by the strong performances from our games and albinoists, our different revenue balance at the end of Q2 also increased by RMB 700 to 8 million. We are on the end of Q1, proving a solid path to achieve our name gap with even target net quarter, and the sustainable profitability thereafter. As of June 30, 2024, we had a cashier cashier equivalent, palm deposits and shorting investments of RMB 13.9 billion, or US dollar 1.9 billion.

Sam Fan: We were delighted to see our first strategy game, San Guo Mou, become an immediate blockbuster. On the first day of its launch, it ranked in the top three on the iOS game growth chart, attracting millions of gamers to the Three Kingdoms battlefield.

Xin Fan: With this progress, we are confident that we can achieve our non-gabric-even target in the third quarter of this year and continue to improve our probability thereafter.

Speaker Change #118: the aric tires huns donor

Speaker Change #119: these andms when you o you how do you could to do back re pey rote have somethingmion fo to tmsala i at a chance l about the cami your whole something the people to of that chance should mar a ther years p me or some

Xin Fan: While we have been accelerating our financial performance, our community continue to strive.

Speaker Change #120: please quite of three it taers com youer you'll seeit

Unknown Executive: Thank you for your attention.

Speaker Change #121: the g some will broke several records in our game operation history surely after launch it quickly ranked among the top three on the iil asking top growthing chart

Unknown Executive: We are now left to open the call to your questions. Operator, please go ahead. Thank you.

Ray Chen: And Sunmo also become the fastest game in Bilibili operation history to reach 1 billion R&B in revenue. Since last year, we've been emphasizing the importance of operating one game in an extended time for a longer period of time. And for Sunmo, especially the SOG genre, is a perfect game genre for long-term operation. And starting from August 3rd, we launched the game's second season. As of now, the performance of season 2 reflects gamers sustained in Suzy as a good retention rate. And this has given us very strong confidence to make this as an evergreen title. There are many people asking why Bilibili can become the third one.

Speaker Change #122: in maintained in top ten for the entire month afterwards and simal somemore also become the fastest game in billibility operation history to reach one billion rb in revenue

Speaker Change #123: what shouldun you need how they are also make a woman told you was year the ens just h tosees them on on yes

Speaker Change #123: mocal when chartering into and the e over ship buyers are how some more sure catch it of the itizit you're not to mo like canana to a cheggger

Speaker Change #123: no who do ig you see legacy allward to or hold on the food you don't go reachsee should be your dayal over youing hoj it v iceni

Daniel Chen: How shall the line of Daniel Chen of JP Morgan Lisa, your question? Thank you. Thank you for the opportunity to ask questions.

Speaker Change #124: since last year we've been emphasizing the importance of

Speaker Change #125: all creing one game and a extended time for a longer period of time and for sunmole especially the sog genre

Speaker Change #126: as a perfect game sha for a long-term operation and starting from august third we launched the game's second season

Xin Fan: In the second quarter, our DAU increased by 6% over year, reaching 102 milling.

Speaker Change #126: assets now the performance of season two we fl schemers sustained enthusiasm due to retention bate and this has given us very strong confidence to make this as a evergreen title

Speaker Change #127: to theopconor wound ward to her wisdom of be done ongo toal tmore you may d a cannot loly l age from digible cher were young way some what happens woman pij to group

Speaker Change #128: was surely on yeah each was that he defer if lineiating we got here what will the somemore to the ce thanthe s so there'are ready argguue

Xin Fan: And the MAU's grow to 336 milling.

Daniel Chen: In a challenging micro-environment, Bilibili's second quarter advertising business achieved a 30% year growth with quarterly revenue exceeded 2 billion RMB for the very first time and contributing about one third of the company's total revenue. As you can see that our advertising revenue has growth for several consecutive quarters and the fundamental reason behind that is one that Bilibili's traffic is growing very healthily and secondly is that we are continuously unlocking the commercial value of our users.

Speaker Change #129: the whole over told leg al you're not years so you'll had tp sure you go over land but you go j y the tired show j inbo gian ches to the call their hold show that they ining your you couldchoose

Ray Chen: Many people have asked me why Sunmo worked, how we picked this game. I think this is a result of our continuous effort in the strategy of making new games, reinventing games to catering to the younger generation. We actually saw this game back in 2022. And we also invested in the development team in 2022. The success of the game is now by accident. Under long period of time of thinking and strategy and decision-making. Starting from 2019 to 2019, our MAU grew by over 200%. And as we expand our gamers circle, they also continue to expand. They included more than ACG gamers.

Speaker Change #130: many people have asked me why some work how we picked the sgame i think this is a result of our continuous effort in the

Speaker Change #131: in the strategy of making new games reinventing games to caring into the younger generation we actually saw this game back in two twenty and twenty-two

Xin Fan: Our community remains highly engaged with user spending at daily average of 99 minutes of our platform.

Speaker Change #131: and we also invested in in the development team in two thousand and twenty two this the success of the game is now by accident is under

Speaker Change #131: under long period of time of thinking and strategy and decision-making

Speaker Change #132: she s ej hold the harb and the fease and the un should have something to her ma or anthanamb door raher she should say no cool each whool quiquite with ' rather four own when your cording a see so don't tget at that portion

Xin Fan: As we move into the summer season, we continue to see strong seasonality in terms of user engagement and retention.

Daniel Chen: The second quarter, while our video views increased by 18% year over year, showing a continued growth in our commercial traffic. Over 70% of Chinese young generations are using Bilibili and the average age of our user has reached 25. This is the stage where their commercial consumption needs and spending power are rapidly growing and being released. This is evident from the booming growth in our consumption related content categories in Q2, video views in the categories such as home decor and real estate, automotive, fashion and beauty or increased by over 30% year over year, while daily video views in baby and maternity experience over 80%.

Speaker Change #132: starting from

Speaker Change #133: to two thousand and nineteen our m mau grow by over two hundred percent and as we expand our ganger circle also continue to expand they included more than a g gamers they are gamers they love multiple different categories

Ray Chen: They are gamers. They love multiple categories. They are not only the players in our team, but also the players in our team. For example, there are a number of potential FOG players within the community who are generally interested in content categories, such as history, military, social, and science and knowledge. Those are very like those demographics that are perfectly with the SOG potential audiences. SOG is a very large market based on our observation of the existing products in the market. We estimate that there were tens of millions of users who have tried SOG games. And for this group of people, they are mostly dwell or active on Bilibili.

Xin Fan: On June 26, we celebrated Bilibili's 15th anniversary.

Speaker Change #134: when tell woman mailor jill you they ighborsa whole warner you would seek to hold the should manand no you sos don't tring to the caniser are saying see go

Xin Fan: Over the past 15 years, our platforms have become a regular destination for nearly 70% of China Gen Z-plus population.

Speaker Change #134: there s a ttownue ward and the ma o thought that sentend fu year hope warrender yo ud and the yois so don'tshow we have put es art the soal

Speaker Change #135: five years ago when we only have one hundred million mau

Speaker Change #136: the most com game or profile it would be acg lovers but as we evolve into a figure community with three hundred and forty million mmause what we cover of our gamamer community goes way beyond just then acg they love nog and many other hting categories

Speaker Change #137: to be resort to her womanaway f and that yzaning man to you you 't sureship him and nato he also at least he also trisship he she hearted it was so cle young word that into the okco hio door as they are t the y

Speaker Change #138: there are largeal number of potential frg players with the community who are generally interested in content categories such as history militaries social in science and arts and knowledge those are

Daniel Chen: On top of that fundamental reason, what we need to do is to match the demand between advertisers and users with better infrastructure and the industry-based marketing solutions. And the one horizontal refers to the enhancement of a platform infrastructure and the multiple verticals refers to the vertical industry-based solution. In the first half of the year, we implemented comprehensive upgrades to several of our advertising infrastructure modules. For example, we upgraded the placement platform on our PC and provided one-stop placement tools for K-account.

Speaker Change #139: they re like those demographics f's perfectly with the ssog penentciial audiences

Speaker Change #140: can you thity you see you go oiionent labor to that end of the sho fr trump you chairwell d some dva or auththirority of each hadat coning go to be art teacher cool u ction door chooses that would be done

Speaker Change #141: flg is a very large market based on our bitobervation of the existing products in the market we estimate that they were tens of millions of users who have tried to g games and their

Speaker Change #142: and for this group of people there mostly to well or active on billiability

Sam Fan: San Guo Mou also set a new record in our operation history, being the fastest title that achieved R&B 1 billion game growth mark.

Sam Fan: With the launch of the second game season on August 3rd, San Guo Mou returned to the top three on the iOS game growth chart.

Speaker Change #143: to it usual own five as it was should to go hold the half your whole woman until lever tri yougo trigger sverble modeing can have aterger some withte woman ag neibor to their hot ergy different new as their are je

Ray Chen: As we discover those factors, we have established this project. We name this project code name as NSOG, meaning New SOG. Why is it called New SOG? Because the first thing is that we think that the current SOG game is a bit of a pain. And if we change this pain, it will be a very big risk for players. The second thing is that we find that the current SOG product is a bit of a risk for young users. If we have this kind of game, we should be able to make them more confident. So this is our project.

Speaker Change #144: as we discover those factors we have established this project we named as co project co name as n sog meaneting new og

Daniel Chen: And as such, in the first half of the year, the number of performance-based K-A advertisers increased by 50% year-over-year. In terms of app materials, are you willing to create a center and active application of AIGC technologies helps our advertisers to diagnose and improve their added materials after optimization. The CVR achieved over 30% year-over-year improvement.

Speaker Change #145: with a major new as thirteen it even my realown way to rece as er having mecially at home the end you're see herear twenty and rewar

Speaker Change #146: but ha him to one japa so you go it have in the the arban i factans or s ither as there keeps him they are have to the engineer the she able to remore than to you trigger particular what you should two is just uning young guy go down ha acon see you know

Ray Chen: From the end to the end, we should be able to make these two points. We've discovered that in the current market, there are many players' pain points haven't been addressed. At the same time, the current SOG gain offerings in the market do not fully satisfy the young generation's needs in SOG. So we believe as we make more innovations and addressing their pain points, addressing the things we are involving needs, we could be successful, and the success launch of this game has proven our strategy has been right. This success behind Samuel, we will credit to the overall trend of the immersive, immense opportunity that lays behind re-inventing games to catering the young generation's needs.

Speaker Change #146: so in imagerical leader to the sum a twenty year go i c' sure that but they will net little do

Sam Fan: The decent size of the SLG market, the early success of San Guo Mou, and the long lifecycle nature of SLG games, give us confidence that it will become one of our flagship games with enduring longevity.

Sam Fan: Over the years, our community has expanded exponentially, and so has our gamer base.

Speaker Change #147: we've discovered that in the current market

Speaker Change #148: they are many players painpointts haven't been addressed

Speaker Change #149: at the same time the current as og gain offringsth in the market does not fully satisfy the yond generations' needs

Speaker Change #149: in fsog so we believe as we making more innovations and addressing their painpoint addressing singwe involving needs we could be successful and the success launch of this game proven our charge as been right

Sam Fan: San Guo Mou's success marks a breakthrough in our genre diversification strategy and shows the vast potential of our game business.

Daniel Chen: Now let's take a look at our industry verticals in Q2. Our top five advertisers came from mobile games, e-commerce, digital products, and home appliances, food and beverage, and automotive sectors. Here we look at the e-commerce and transaction-based sectors with our consistent open-loop strategy during this year's June 18 shopping festival. We have deepened the integrated marketing and advertising collaborations with e-commerce platforms as well as secured a larger share of e-commerce merchant budgets.

Speaker Change #150: youtwo with some moile inindthat showyer

Speaker Change #151: jo and le to her contact so that pallaniating apart would way trigger in that do you doally what you can 't you beay to go frcially the so the hard g year here other to chance senior see you could through

Speaker Change #152: this success behind some we will credit to the overall ch of

Speaker Change #153: the immersive in much imm opportunity that lays behind

Sam Fan: We will continue leveraging our leading role as a top gaming community and capitalizing our significant opportunities to reinvent games for the new generation of gamers.

Sam Fan: Turning to our VAS business, revenues from VAS business increased by 11% year-over-year to RMB 2.57 billion.

Sam Fan: We continue to add more live broadcasting content offerings, reinforcing the synergies between our live broadcasting and the PUGB ecosystem to better cater to user diverse interests.

Sam Fan: We will also further explore opportunities in our other VAS business as our Gen Z Plus users have demonstrated an increasing willingness to directly pay for the content they love.

Sam Fan: Our premium members continue to increase, reaching 22.3 million by the end of Q2, with over 80% of them subscribing annually or under auto-renew packages, showing their continued loyalty and trust in our platform. User spending on our other VAS products also grows rapidly in the second quarter, particularly in premium courses, our fan charging program, and avatar decoration.

Ray Chen: This not only addressed to the SOG categories, it could apply to multiple categories, and we will continue to explore in that direction. As for the estimation on its life cycle, we believe that SOG, by its nature, has longer life circles. We've noticed that our SOG gains in the market has been operating for eight years and five years. We have set the internal target of making Samuel the least of five years, more than five years game. I think it's still an important thing for the market. We have to realize that the game industry is not a very fast industry.

Sam Fan: We expect these products to open more monetization potential across our massive PUGB content universe in the future.

Speaker Change #154: they inventing games to catering the yond generations needet this not only just to that asmg categories it could apply to multiple categories and we will continue to exploit that direction

Sam Fan: We believe good content and community can bring people together, and the value of our users is just starting to show its potential.

Sam Fan: Our community is thriving, and our solid second quarter results place us just one step away from profitability.

Speaker Change #155: the show in other two uttake see some in j civer you could seewa tension as arch yo you should not go to doph sum don't you

Speaker Change #156: as for the estimation on its life cycle we believe that ojbice nature has longer like life circles

Sam Fan: We are excited to move forward and take Bilibili to the next level.

Sam Fan: This concludes Mr. Chen's remarks.

Speaker Change #157: do you ok kind of that hownearerly met your ton hunting you know what do in paner hold mo some

Daniel Chen: During the June 18 period, the number of advertisers on 40% year-over-year improvement. Today, in June 28th, we have brought 50% of the new customers, and 50% of the customers that we brought to the merchants in different verticals were new customers. And specifically for the baby and maternity sector, we brought over 60% of the new users to them. On our transaction based advertising, in the first and second quarter, nearly 40 million users have watched our live and video e-commerce related content, and this number increased by 70% In Q2, the average daily content creator engaged in live and video e-commerce increased by over 130% year over year, and the number of commerce related videos grew by over 330% In the number of live e-commerce sessions rose by 270% over year The consumption potential of Bilibili's female users, which constitutes near half of our communities, is also gradually unlocked. GMVs in apparel increased over four times year over year in the second quarter. GMVs in apparel increased over three times year over year in the second quarter.

Speaker Change #158: we've noticed that they are associate gains in the market has been operating for a years and five years

Speaker Change #159: so so you imagine pro what able to woman somemore e back in pl it h mob all eing up a have adoption per non go uning somebodywhere you got in

Speaker Change #159: we have set the internal target of making sl at least of five years more than five years skme

Speaker Change #160: thiryou carrow you may high yougo please h suple ' irabout those woman fif fe you of y ll to the half year tight him no so ' quite hand to here cut you days so you got j

Ray Chen: It has to be an important thing. The market has a sense of humor and a sense of humor. In the market, we have to focus on the longevity of the game. It all boils down to whether the company focuses on making a game into its longer life cycle, longer operation. We have to focus on the longevity of the game. The industry has evolved rapidly. This is no longer a time where everybody can make fast money. We are committed to be the top game who respect our users most, who listen to our users the most, and we hope to make this game evergreen tight.

Speaker Change #160: ch en your parting in your pari could he goh woman just out turn to show out high elementrating when j try know and jother doubl

Xin Fan: This journey has brought us tremendous opportunities as these users have become a major consumer force in society.

Speaker Change #161: the whole budget but you'll see go cho on the research and all boyses down to whether the company focus on making a game into its a longer life cycle longer operation we have to focus on the longevity of the games

Speaker Change #162: the industry has the evolved rapidly this is no longer a time where everybody can make fast money

Speaker Change #162: we we are committed to be the top game who respect our users of those who listen to our users the most and we hope to make this game of ever green titles

Unknown Executive: Next question, please. Thank you. One moment for the next question.

Speaker Change #163: thank you next question please thank you one moment for the next quest next quest comes from thomas chong off jeffre please ask your question

Thomas Chong: Next question comes from Thomas Chong of Jeffries. Please ask your question. Thanks, management, for taking my question. My question is related to the trend in our content offerings.

Speaker Change #164: what how says about sometimes whatever is rewon what that be hard you sharethere these are know who can un you can doll sha what is uncle even that is last you don't who end up once how me your pe better

Speaker Change #165: higheryourself say that addressing the trment thankence management for icking my question my question is related to the trend in our content operations as average age for bdg cosystem or any which hedi five g old can management share about

Speaker Change #166: the few relevant of our contest strategies and our contact categories outlook as well as the consumption trend going forward thank you

Ray Chen: Next question comes from Thomas Chong of Jeffries. Last quarter, I've mentioned that the average age of BD users has reached 25 years old. And that brought a lot of change in terms of the wealth and depth of our content offerings. As the users' needs evolve, we've noticed that in our community, there emerged many new content categories. And for Bilibili, we're not only a hub for young people's interests and hobbies, but also a commonplace for their lifestyle consumption. This is evident in the evolve of our content consumption data as young generation entering to new stages of life.

Speaker Change #167: what sounds what you know sounds the y botherers were her choth for woman they you put the inan and aging artshouldtail you' how you're looking any articles in a highyou ate and tal said p

Speaker Change #168: logic phana touural or should say check a n along the e handa woman the handling on the quanddo om'tnot your ent do you may see them up she go the naro since that the bej have po ent ion un and since you are for the lawyer tun years and engineernational go l that you go tr

Daniel Chen: We've talked about the second quarter and its driver behind, and if we take a look into the second half of this year, we're quite confident in maintaining and above industry average advertising growth rate. On one hand, the outcome of product infrastructure optimization is being proved, and we'll continue to show its effects, and on other hand, by enhancing our vertical industry solutions, we not only expand our market share in key industries, but we are also looking to achieve incremental growth in emerging industry verticals, such as online services, education, healthcare, and maybe a maternity.

Speaker Change #169: last quarter of mentioned that the average age is lly users have reached twenty-five year twenty- five years so and that bought a lot of change in terms the wealth and depth of our content offerings

Speaker Change #170: as the users needs evinolved we've noticed that in our community they're emerged many new content categories

Xin Fan: We have seen it in our tiny growth as we enhance our infrastructure to facilitate our evolving consumption needs.

billly: and for billly billly where no we are not only a hub for young people's interest and hobbyies but also a commonplace for their lifestyle consumption

Speaker Change #172: the chieous when we don't hold the eager can shoot him the eager foodgees on jok kind of will to pay con out

Speaker Change #173: these are me that the argue was does t may ion children show be young one that they don't jdown required the all judy boundap che were sociam how should been book to be so be centage that to understand that reention

Speaker Change #174: this is evident in the evolve of our content consumption data

Daniel Chen: Lastly, I want to emphasize that because we have our unique community aspect, Bilibili's revenue growth with never just being rely on advertisement growth, we can pursue to be N2C parallel strategy in our commercialization efforts, meaning that we can not only earn money from advertisers, we can also earn money directly from our consumers. Because we are a community, our users are more inclined to spend on content or content creators that they love to show their support and appreciation.

Speaker Change #174: as ge generation andentering into enternew stages of life

Ray Chen: The category related to their consumption are growing rapidly on Bilibili. For example, in the second quarter, VD views in the categories such as home decor and real estate, also motives, fashion beauty increased by 39, 43, and 30% year over year respectively. As I mentioned in the advertising question, the daily video views for baby and maternity category experience a year-over-year increase of 80%. And this is a natural outcome for our users' average age to evolve into 25. The average age of 25, meaning about a half of our users above 25. And those generations or those demographics naturally have wider interest and consumption needs, and they seek out on Bilibili.

Speaker Change #175: content category related to their consumptions are flowing rapidly bliability for example in the second quarter wedoviews in the categories such as home dde correa and realestate automotive

Speaker Change #176: fashion beauty increased by thirty nine forty to be and thirty percent year over a year respectively go with thejp go of a dollars more you choose looking very on tal bbasshould

Speaker Change #177: as a mission in the advertising question

Speaker Change #177: the daily video views for badium attorney category

Speaker Change #178: experienced a year over a year increase of eighty percent to tookbut to your welcome the reward uction engion art you appeararenand j you may genun art don't whether you bly course about say you bending or who en are fuol to you sound went to the new

Speaker Change #179: and this is natural outcome for our users average to evolve into twenty five theaverage age of twenty five meaning about a half of our users above twenty five

Speaker Change #180: and those generations or those demographics natationurally have wider interest and consumption needs and they see howge on bilability

Speaker Change #181: to ararcha u might pizz tio ch try year you times lookingking through the family orea so you hundred ppez inthe runs twent twent generer mta speak on looking up

Daniel Chen: To sum up, we will be pursuing a B2B N2C parallel strategy on the one hand, we will continue to regroup our advertising platforms, to drive the advertising growth. At the same time, we still believe there is great potential in our 2C business, meaning on mobile games, premium membership, live broadcasting, combining together will support our sustainable revenue growth.

Ray Chen: And because of the pandemic, we have a lot of work to do, and we have a lot of work to do. Make purchases. And the reason why behind or the reason behind people looking to bilibili for larger ticket items is because, first of all, the users have to trust the platform, trust the content creator in their view and professional judgment. And secondly, is that you can hardly make the decision to purchase a vehicle over 50 seconds of videos. Speaking of automotive content, in the first half of this year, on average, every month, there are 73 million users looking into automotive-related content.

Speaker Change #182: and because that availability have authentic and professional videos

Speaker Change #182: and most of most of the fuce are end mid to longer form it makes really we believe we go to destination for yon generation before they make big purchases

Speaker Change #182: you it

Speaker Change #183: children y my ad r and the fy sosocial hyroia on triger

Unknown Executive: Operator, next question please. Thank you one moment for the next question.

Speaker Change #184: she have what able to you senor yes sheyou are sure your kingdom ly you go to go by the jany are here the half car rior should in a gent is h up you can assume out genet for him to ism when you might had che

Felix Liu: Next question comes from Felix Liu of UBS, please ask your question. Thank you for your question. My question is related to the mobile game. Thank you for your question. The Sunmo game, indeed, is a blockbuster in the first half of this year. We not only attracted millions of new players, we've also accumulated a very good user feedback and also have large influence among the game industry. The game Sunmo broke several records in our game operation history.

Speaker Change #185: and the reason why behind or or the reason behind people looking to belo believe for larger ticket items is because

Speaker Change #186: first of all the user have to trust the platform trust the content creator in their view and professional judgment and secondly is that you can heartly make the decision to purchase a vehicle with re fifty seconds of feuse

Speaker Change #187: the produdos es were up to some man can you make the varo she can some they you ho that beter

Speaker Change #188: the doo is arch here the hu what a pance that you is don't so you can seen sucharch full

Speaker Change #189: simm should regga ego came have i was that h that be damage categor since you looking for fsure hundredyear artif shirking ty circle should forlogical doad are looking put

Speaker Change #190: speaking of automotive content in the first half of this year on average every month there are seventy-three millions of users are looking into

Ray Chen: We can say that Bilibili has one of the best quality new car reviews among all platforms. I personally look at the new new car reviews. They're extremely professional and well-made, and we think video as a content format is perfect for this type of reviews and walkthroughs.

Speaker Change #190: automotive related content

Billy: we can say that billy billy has one the bestast quality new car reviews among all platforms i personally look at the own new new car reviews their extremely professional and well made and we think

Speaker Change #192: video as a content format is perfect for this type of reviews and walk through

Speaker Change #193: we cont holderss repeat am seen in the some go out become whether they ro ra how s that i also ing who want an home children syi le they

Speaker Change #194: to the woman thatpatic they or youn actually yourorder ho with under thirteen n b r gue do the o ju could you tell in there should involve on those al talkgg r from be one down bia downam and reglargely that ra you so that regarded you

Felix Liu: Truly after its launch, it quickly ranked among the top three on the ILS game top-grossing chart and maintained in top 10 for the entire month afterwards. And Sunmo also become the fastest game in Bilibili operation history to reach 1 billion R&B in revenue. Since last year, we've been emphasizing the importance of operating one game in an extended time for a longer period of time. And for Sunmo, especially the SOG genre, is a perfect game genre for long-term operation.

Ray Chen: All of them are in the same position as the new car reviews, and the new car reviews are in the same position as the new car reviews.

Ray Chen: With talk about the emerging content carry, now let's take a look at our traditional leading content categories and young generations' interest. And the second quarter of VD views in the game's knowledge and tech categories, also over 20% year-over-year gross, which are 21, 29, 29% year-over-year gross rate respectively. This means we have established a very strong line that among generations where they seek out interest-based content. And speaking of games, two days ago on the day of Blackness, Wu Kong was released. There are tens of thousands of users are live-streaming their game experience on Bilibili. This is quite spectacular across the game history.

Speaker Change #195: with talk about the emerging content carey now let' let's take a look at the are traditional leading contting categories and yond generations's interest in the second quarter vide ws in the gme knowledge and tech

Speaker Change #196: categories also over twenty percent year overa year growth which are twenty-one twenty nine twenty nnine percent year-over year growth rate respectively

Speaker Change #197: to int you form ing whether the repurase here you think his some going to pin some cent in toer the instrum legal to our

Speaker Change #197: this means we have established a very sho man that among generations with they seekout interestspace content

Speaker Change #198: there is followlo yeosiah chen yen chris ofhahow hong sang sen and the un kian yke warian the pezand war cl on how we com

Speaker Change #200: just to take on down their down ha r should bo reg ing how we put hans ad hard there

Felix Liu: And starting from August 3rd, we launched the game's second season. As of now, the performance of season 2 reflects gamers sustained in Suzy as a good retention rate. And this has given us very strong confidence to make this as an evergreen title. [inaudible] Many people have asked me why Sunmo worked, how we picked this game. I think this is a result of our continuous effort in the strategy of making new games, reinventing games to catering to the younger generation.

Speaker Change #201: and speaking of games two days ago on the day of blacknesss cowas released

Speaker Change #202: there are t tens of thousands of user our life remain their game experience on bibility this is quite spectacular across the gaain history

Speaker Change #203: to may hear woman the repor taun red wastohoer down that particically here re very injy some woman that put that turn couns you that go should leave

Ray Chen: And on that day we saw over two million p-concurrent user watching the dark-knit Blackness that the interest-based content verticals.

Speaker Change #204: and on that day we saw over two mill and p concurrent user launatching the dark net blackness will call derelayated at content this number shows that we have continuously beaten that the interest based content verticals

Speaker Change #205: the triple you theories are children work wrongwith he sure shoe

Speaker Change #206: jim jong leader you could king yal age of your gs are socisugar you go qu are social quor ither you go the other kind into re soci renumberber to under chanceof scenariowhat is the course sho and the leeas ing in tell me that pe go put asunderstand scro

Xin Fan: We have seen it in our game business as we re-invent and study game to resonate more deeply with the preference of younger audience.

Ray Chen: We've always said that the evidence to show a community's competitiveness is the ability to continue to produce good and new content. And we think we have already proved that over the past 15 years, Bilibili has the ability and the power to continue to expand its content operates horizon and content categories.

Speaker Change #206: trauma or either you research you

Xin Fan: As we continue to unlock the value of our community, we remain committed to our founding mission to build a welcoming home for talented Quaters and like-minded individuals to connect over shared interests and to satisfy their evolving needs for good content and service.

Felix Liu: We actually saw this game back in 2022. And we also invested in the development team in 2022. The success of the game is now by accident. Under the long period of time of thinking and strategy and decision-making. Starting from 2019 to 2019 our MAU grow by over 200%. And as we expand our gamers circle, also continue to expand. They included more than ACG gamers. They are gamers. They love multiple different categories.

Speaker Change #207: he've always said that

Xin Fan: With that overview, I would like to discuss our co-pillars of content, community, and commercialization in more detail.

Speaker Change #208: the evidence to show a community's competitiveness

Xin Fan: Beginning with content and community, our strategy to encourage more high-quality Quaters to generate content continue to prove beneficial. In the second quarter, average daily video views increased by 18% over year to over 4.8 billion. Our leading content categories, such as games, knowledge and technology, continue to show solid growth in video views, or increasing by over 20% over year.

Speaker Change #209: is the ability to continuous produce good and new content and we think we have already proved that over the past fifteen years

Speaker Change #210: visibility has stability and the power to continuously expand its content office horizon and content categories

Unknown Executive: Thank you. Up for your next question, please.

Liao Sui Ching Zhang: Next question comes from the Liao Sui Ching Zhang from CIPC. Please ask your question. Thank you, Bilibili. Thank you for your question. Thank you, Bilibili.

m speci: thank you upfor your next question please m speci comes from the bio ing jun from c please ask your question

Speaker Change #212: itional ther now the should you the the do mention when she say quite i should should the our mental transuming sentment for taking my question my question ment look the company continu tion and c ca measurement show als in the second half of can four looking

Sam San: I'd like to ask you a question for Bilibili. My question goes on financial outlook. The company delivered a continual margin of extension and a robust tier cash flow is caught up. And the commission will share with us the outlook for the financials in the second half of 2024. Looking at the third quarter, we will work even on a profit. And there was a need to long-term profitability outlook. Thank you.

Felix Liu: In the past five years, we have only one MAU. At that time, we have used the most advanced MAU in the game system. But when our MAU reached 3.4 billion, our MAU used the most advanced MAU in the game system. Five years ago, when we only have 100 million MAUs, the most condensed gamer profile would be ACG lovers. But as we evolve into a bigger community with 340 million MAUs, what we cover of our gamer community goes way beyond just that ACG.

Speaker Change #213: the third cter will we break ema on the profit and what's the new to long-term profitability i dono thank you

Sam Fan: I will now provide a brief overview of our financial results for the second quarter of 2024.

Sam San: Let me take your question. Our financial performance in the second quarter demonstrates our banish model has great potential for increasing the growth profit margin. In Q2, our overall revenue grew by 16% while growth profit increase significantly by 49% over year.

Speaker Change #214: this is an limmeited to your question

Sam Fan: For a closer look at our financial results, we encourage you to refer our press release issued earlier today.

Speaker Change #215: our financial performance in the second quarter demonstrate our band is modelto has great potential for increasing the reco poofperit marin

Sam Fan: As a reminder, all amounts are in IMB, unless otherwise noted.

Felix Liu: They love ACG and many other content categories. [inaudible] the history of the game system, We've discovered that in the current market, there are many players' pain points haven't been addressed. At the same time, the current SOG gain offerings in the market does not fully satisfy the young generation's needs in SOG. So we believe as we make more innovations and addressing their pain points, addressing the things we are involving needs, we could be successful and the success launch of this game has proven our strategy has been right.

Speaker Change #216: into two our overall revenue grow by sixteen percentwhy' got popp increase significantly by forty nine percent over-year

Sam Fan: In the second quarter, we further advanced our commercialization capabilities, delivering accelerated year-over-year revenue growth across our core business. At the same time, we continued to expand our margins and considerably narrowed our losses. All of these financial improvements were founded in our top-line growth with increased efficiency. Total revenues for the second quarter were IMB 6.13 billion, up 16% year-over-year. Our total revenue breakdown by revenue stream for Q2 was approximately 42% VAT, 33% advertising, 17% mobile games, and 8% from our IP directives and other business.

Sam San: The growth profit margin increased nearly 7% points over year, on 23% to nearly 30%. The eighth concept of growth of margin improvement. This will primarily due to our ability to control costs when it should rapid revenue growth. With the continuing growth of our high margin advertising and the game business, there's still a substantial realm of further improvement for our growth margin.

Speaker Change #217: the gross poppty margin increase nearly seven percent points yearover-year on twenty three percent to nearly thirty percent the eighth kind of the portter of margin improvement

Sam Fan: Our cost of revenues increased by 5% year-over-year to IMB 4.3 billion in the second quarter, while gross profit rose 49% year-over-year to IMB 1.8 billion. Our gross profit margin reached 29.9% in Q2, up from 23.1% in the same period last year. Our total operating expenses were down 3% year-over-year to IMB 2.4 billion in the second quarter.

Sam Fan: Sales and marketing expenses increased by 13% year-over-year to RMB 1 billion, mainly due to increased marketing expenses for the new game launch.

Sam Fan: G&A expenses were RMB 488 million, down 10% year-over-year. R&D expenses were RMB 895 million, down 15% year-over-year, both related to reduced headcount expenses.

Speaker Change #217: this will primarily due to our ability to control cost where you reapid revenue growth with the continu growth our high margin our tiding and againam ben is just still a substantial zome or further improvement for our gross margin

Sam Fan: We narrowed our adjusted operating loss and adjusted net loss to RMB 284 million and RMB 271 million in the second quarter, reducing our losses by 69% and 72% year-over-year, respectively. Our adjusted net loss ratio in the second quarter came down to 4% from 18% in the same period last year.

Sam San: Additionally, it was noting that our operation can slow for the first half of the year with 2.4 billion RMB, and our cash flow reached 1.5 billion RMB. This indicates that our banish had entered into a positive cycle.

Sam Fan: Cash flow-wise, we generated a record RMB 1.75 billion in positive operating cash flow in the second quarter and a total of RMB 2.4 billion in positive operating cash flow in the first half of the year. As I mentioned earlier, driven by the strong performances from our games and ad business, our deferred revenue balance at the end of Q2 also increased by RMB 738 million from the end of Q1, proving a solid path to achieve our non-gap breakeven target next quarter and a sustainable profitability thereafter.

Speaker Change #217: additionally it is was noting that our operation cap for the first half of the year with two point four billing i mb and our forecast flow reach one five billion ib this indicate that our binard had entered into a positive cycle

Sam Fan: Thank you.

Operator: We will now begin the question and answer session.

Operator: To ask a question, please press star 11 on your telephone and wait for a name to be announced.

Sam San: Looking ahead to our financial performance in Q3, we see that the deferred revenue balance increased by over 770 million RMB quarter of a quarter, laying a good foundation for the third quarter of revenue growth. We expect the revenue from our games and advertising banish to maintain strong growth momentum, along with the significant cost of the quarter growth in growth margin. At the same time, in addition to achieving our initial growth of growth even in Q3, we now aim to achieve meaningful operating profit on the gap basis.

Speaker Change #218: looking ahead to our financial performance in q three we see that the defer revenue balance increased by over seven hundred and thirty seven hundred and seventy meeting i m be cagot over quarter laying a good foundation for the third quarter revenue growth

Speaker Change #218: we expect the revenue from our gams and ourverting benerss to maintain strong growth momentum along with a significant quar-over-quarter growth in gth margin

Speaker Change #218: at the same time in addition to achieving our initial grow of per even in q three we now am to actuallyve manyof operating pit and the gaap basis

Sam San: Meanwhile, we are delighted to see solid growth across our core business lives. Our growth momentum, along with the prudent cost and expense management, will lead us to continue expanding our revenue scale and the profitability in 2025, resulting in ongoing improvement in our operating market.

Speaker Change #218: meanwhile we are the largest to see solid growth across our cob flies our growth momentum along with the prudent cost and expense management will leaders to continue expanding our revenue scale as the possiofitability in twothousand and thirty five as the resulting ongoing improvement our operating margins

Operator: For the benefit of all participants on today's call, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English.

Unknown Executive: Thank you.

Unknown Executive: Next question, please. Thank you.

Ji Wen Zhang: The next question comes from Ji Wen Zhang from China Renaissance. Please go ahead.

Speaker Change #218: so

Speaker Change #219: thank you next question please thank you the next questions comes from ke when jangk from china reninaissance please go ahead

Operator: The company will provide consecutive interpretation for management's statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management's statements in their original language will prevail.

Operator: One moment for the first question.

Speaker Change #220: a sha invention what the cheum well you feel going you a just have much get concerant i shall me what had bes how don' you say your hi when at she ashest year

Ray Chen: So thanks for taking my question. My question regarding AI application, commitment discussed about how can we apply AI, AI, multiple users, and ability, and a secure potential. Thank you. We are very happy to have the most extensive and highest quality AI content across the internet. I think the reason behind that is, a most-door user receives higher education background and they are based in the first and second-tier city, who are curious? Based on our internal data, that for the first half of this year, on monthly average, over 80 million users are watching AI-related content on billy-billy.

Operator: First question comes from the line of Daniel Chen of JP Morgan.

Ke Wenjangk: so that s orting my question in mcion regarding our application commitment discuss mo home can apply idea while multiple users scenario ability and institutional potential thank you

Daniel Chen: Please ask your question.

Daniel Chen: Thank you for the opportunity to ask a question.

Speaker Change #222: your tal told ct with be dining removal shall so thankful to down ou that the anningual fac particularicallyly again ing where to do what they're going to pull the

Daniel Chen: Congratulations on your strong performance.

Speaker Change #223: to her assem illect were so tell you down see of y and we the jamp should based on goder

Speaker Change #224: as known that billavility has the most extensive and highest quality a i content across the internet think the reason behind that is a those roy user receive higheror education background and they are based in a first and secondaryor city work curious

Daniel Chen: My question is about advertising.

Daniel Chen: I see that the number of advertisements in the second quarter is increasing rapidly.

Speaker Change #225: to some many young woman and gerneighbor should you from see a may or how part him when they 't go pizja bl have a i m going the nema and whether they don't busush know so you have a mail itali on the mayor

Daniel Chen: Can you share with us the driving force behind this?

Daniel Chen: And how do you look at the trend of advertising development in the second half of the year?

Speaker Change #226: to howor sureve peach out f er dsolution do the rial they are now

Speaker Change #227: been based on our internal data that for the first half of this year on average am monthly average over eighty million is users

Ray Chen: And for those AI-related content, not just a one word for 15 second headlines, many of those content have extensive professional content in-depth discussion in AI. The second thing is that AI is the highest quality of AI content across the internet. The third thing is that AI-related content across the internet is the best way to use Google.

Felix Liu: This success behind Samuel, we will credit to the overall trend of the immersive, immense opportunity that lays behind re-inventing games to catering the young generation's needs. This not only addressed to the SOG categories, it could apply to multiple categories and we will continue to explore in that direction. As for the estimation on its life cycle, we believe that SOG by its nature has longer life circles. We've noticed that our SOG gains in the market has been operating for eight years and five years.

Speaker Change #228: are watching a i related content onbillliability and for those a related content

Speaker Change #228: not just a one word for or fif fifteen second head buines many of those content has extensive professional content in depth discussion in ai

Speaker Change #229: to see youwhat you v course from re with we are doing p stand tlava even ly in josha tromgo jum a i taatchion foter that pedj goard

Speaker Change #230: garland jter pd from go a years we can me regardthe chy t thousand anders ne orates h itultimately air hun you do the air hun sststrender that p and p hot who you go go home

Daniel Chen: Thank you for the opportunity to ask questions.

Ray Chen: That results in three, the most AI platform for Bilibili. First most is that we believe we have the most user who are genuinely interested in AI content. And second most is we have the most AI professionals active on Bilibili. Lastly, 90% of the domestic AI companies have set about towns and get in touch with Bilibili users on Bilibili. Because I just said that the advantage of the natural environment is that we are indeed more advanced in the AI platform. For example, we have created a lot of AI content in Bilibili. Because the high concentration and condensity of AI content and user gives us a natural advantage in explore AI application.

Speaker Change #231: that results in three demost ai platform

Speaker Change #232: for bbelieve first most is that we believe we have the most user who are gener genuinely interest in ai content and second moses we have the most

Speaker Change #233: ai professionals active onvisibility lawly as over ninety percent of the domestic ai company has set about town and getting touched with billi ability users onbvidility

Felix Liu: We have set the internal target of making Samuel the least of five years, more than five years game. I think it's still an important thing for the market. We have to realize that the game industry is not a very fast industry. It has to be an important thing. The market has a sense of humor and a sense of humor. In the market, we have to focus on the longevity of the game.

Daniel Chen: So my question is on the advertising.

Speaker Change #234: do you may will got us to sure to particular care and the orsho about so you ' hdro for nal war andensure you father that they added their handstore

Speaker Change #234: to sure make a world and here chicken in your people so to the fam trumble the ance you show your cool out facts to you know i transl how you you know know that be ending from io ning an you know chunle high er for rock book for the p should other as a and

Felix Liu: It all boils down to whether the company focuses on making a game into its longer life cycle, longer operation. We have to focus on the longevity of the game. The industry has evolved rapidly. This is no longer a time where everybody can make fast money. We are committed to be the top game who respect our users most, who listen to our users the most, and we hope to make this game evergreen tight. Thank you. Next question, please. Thank you. One moment for the next question.

Speaker Change #234: to res that be asked it to her make a you know may i sci answer hular they are influchange of the through a onage have al go so just you know a i money

Daniel Chen: We see that the advertising growth in the second quarter was very robust, growing about 30% year-over-year, which is very strong.

Speaker Change #235: becauseest the high concentration and convensity of air content and user giveves us natural advantage and explore ai application

Ray Chen: And as a platform, generally we see many of the users initiate their attempt in connecting AI with their content creation. Back in 2023, there was a user who used the AI tools to mimic a famous singer's voice singing a song in her original voice. And that actually triggered the original singer to come out and say this: she supports this type of creation and welcomes users to use it. For example, this year we saw a large amount of AI content in Bilibili. There are also a lot of AI tools and AI tools in Bilibili. And for this year, with various many AI powered music creation, AI powered animation, AI short plays were being released on Bilibili.

Daniel Chen: So could you maybe share the key driver behind?

Speaker Change #236: and as a platform generally we see many of user initide their attempt

Speaker Change #237: and connecting ai with their content creation back in two thousand and twenty three there was a user we use the ai to us to mimic a famous famous seners were a singing saalce

Thomas Chong: Next question comes from Thomas Chong of Jeffries. Please ask your question. Thanks management for taking my question. My question is related to the trend in our content offerings.

Speaker Change #237: in there in her original voice and that actually triggered the original singer to come out and say this she support this type of creation and welcome user to use it

Speaker Change #238: we inter be roting a woman mkindof star under chicken a i too

Speaker Change #239: the chicken min and may ontaijian tabu hio kingdo the children

Thomas Chong: As average age for BD ecosystem already reached 25 years old, can management share about the development of our content strategies and our content categories outlook as well as the consumption trend going forward? Thank you. Next question comes from Thomas Chong of Jeffries. Last quarter, I've mentioned that the average age of BD users have reached 25 years old. And that brought a lot of change in terms of the wealth and depth of our content offerings.

Speaker Change #240: a i saw a little part a i saw the plan two rehow that be dibook real woman iga sort later ing you have from and folob i don't you that whole or war oneum to other by look

Speaker Change #241: and for this year with nerous many ai powered music creation acored and mion the short place were being released billiability our oigin team has even made ai shortplay competition

Ray Chen: Our operation team has even made an AI short play competition and attracting a lot of users to participate. And we also added some tools in our own creative work. This is also a welcome to our app. And in terms of our own content creation tools, we have leveraged and implemented AI and our AI creation tools. We believe essentially the application will help to improve the content creation efficiency for existing content creators and also allowing regular users to leverage this tool to become a content creator themselves. And this is very beneficial from a content supply perspective.

Speaker Change #241: and attracting a lot of users to participate

Speaker Change #242: to arch the part woman fu omnamic a woman unttold you the truntal conriputing and you gener rul go new i food will found each year the tiar years of woman andthere' up to the finding 're way do you pizzand ed under under ither driving the charge hand and go job

Speaker Change #243: he s the ho h go tr the found that he li l dothe neighbor or good adeacies who can we toer social or the fancy to the door

Thomas Chong: As the users need evolve, we've noticed that in our community, there emerged many new content categories. And for Bilibili, we're not only a hub for young people's inches and hobbies, but also a commonplace for their lifestyle consumption. This is evident in the evolve of our content consumption data as young generation entering to new stages of life. The category related to their consumption are growing rapidly on Bilibili. For example, in the second quarter, VD views in the categories such as home decor and real estate, also motives, fashion beauty increased by 39, 43 and 30% year over year respectively.

Speaker Change #244: and in terms of our own content creation tools we have we have a leveraged and implement ai and our a i creation tools we believe essentially of the application will help to improve the conttemration efficiency is for our existing content creators also allowing regular users to leverage this tool to become a cont creator themselves

Speaker Change #244: and this is very beneficial from a content supply perspective

Speaker Change #245: rather ful sortur of power may assure you a either nor ly he's going from ma we to the d up be some seing mean ssorting coveron moment ithought it were to even peter comm you tly on the jud

Speaker Change #246: she her could some hi him thought so you know hard to re torophy on

Xin Fan: Meanwhile, users demand in consumption related categories also continue to search in the second quarter. Video views in home appliance and decoration, automotive and fashion and cosmetics all grow by more than 30% compared with the same period a year ago.

Speaker Change #247: how the rior do nato ru need to get one board a woman sho to your one how are you sis at the wood forthirty able how would you go the port of umpg

Xin Fan: We continue to provide effective and diversified monetization channels to incentivize our content Quaters. In the first half of 2024, about 2.1 million content Quaters received income on PDB.

Ray Chen: And we also use AI directly to enhance our user experiences. As if now, we have opened that the AI assistant and AI search to all of our users because we have a large amount of not based review based content. You can ask our AI assistant or AI search to summarize the keywords and key messages of videos. And this is very helpful and efficient for a user who wants to get a quick summary of our content. There are also some very practical tools such as AI translation and our AI translation, because it can really translate some of the content.

Speaker Change #248: and we also use a i directly to enhance our user experiences

Speaker Change #249: asif we have s i search to all of our users because we have a large amount of not based review based content you can ask assistant or a add search to summarize the key words and key messagings of videos and this is very health efficient for a user who wants to get quick summary of our content iful

Xin Fan: Content Quaters total income throughout our ads and vast products increased by 30% year-over-year.

Thomas Chong: As I mentioned in the advertising question, the daily video views for baby and maternity category experience a year over year increase of 80%. And this is a natural outcome for our user's average age to evolve into 25. The average age of 25 meaning about a half of our users above 25 and those generations or those demographics naturally have wider interest and consumption needs and they seek out on Bilibili.

Xin Fan: Notepoli, our innovative content-based products such as premium courses and fan charging programs have been well received by our users. In the first half of 2024 content Quaters total income from these two products increased by over 40% and over 400 and 30% respectively year-over-year.

Ray Chen: For example, some of the content that we use is not translated.

Speaker Change #250: you may pass the number of sign easi so youdon't

Speaker Change #251: ll woman igh your agger she's under bigger half bit tough ig we were shokking some ation and value got whole bigger bulkwar ior to sure a will map higher you playing going now jobge bigger payi that you know don't get we not your whole one out

Xin Fan: Looking at our community matrix in the second quarter, our DAU spent an average of 99 minutes with us compared with 94 minutes in the same period last year, driving up user total time spent by 11% year-over-year. Monthly interactions increased by 11% year-over-year exceeding 16.5 billion in the second quarter. By the end of Q2, the number of our official members increased by 13% year-over-year to 243 million and their 12 months retention rate remained strong at around 80%. Moreover, this July, we heard our signature offline events, Bilibili word and Bilibili micro-link once again bringing our community together in Shanghai.

Speaker Change #251: you some kind of pp better me red the not other shooting j taou down is a number body shshookking get m t hire to go should not should be back but what is this you going down you put sound here how to know coolyou u

Ray Chen: And there are two more examples of our AI tools. One is AI translations. Our AI translation tools can help to translate many different languages, such as the TV. We have a content creator from Tibet. The local language and our AI assistant can help him to translate into Mandarin. And we also have a tool called AI Assistant. While playing a video, if you don't have time to watch the whole thing, you call up on the AI assistant. The AI assistant will summarize into a short article to tell you what this video is about and the overlay that outlined the key points of that video, all of which we believe will effectively help our user to improve their user experience.

Xin Fan: More than 250,000 people traveled across the country to participate in events leading to a surge in Shanghai travel-related consumption.

Thomas Chong: [inaudible] as a content format as a content format With talk about the emerging content carry, now let's take a look at our traditional leading content categories and young generations interest. And the second quarter of VD views in the game's knowledge and tech categories, also over 20% year-over-year gross, which are 21, 29, 29% year-over-year gross rate respectively. This means we have established a very strong line that among generations where they seek out interest-based content.

Speaker Change #252: and there are two more examples of our ai tools one is ai translations

Speaker Change #253: our ai translation tools can help to translate many different languages

Speaker Change #254: suchas the tb content a content creator fony bad the spoking local language and oura per system can help him to translate into manandar and we also have a tool called ai assistant

Speaker Change #254: while playing a bigo if you don't have time to watch the whole thing you call up on the ir assistant

Speaker Change #255: that ai system will summarize into aasshred articles to tell you what what this v do is about and the overlid ioutlineed the key points of that video all of which we believe will effectively halve our user to improve their user experience

Ray Chen: After that, I think that AI is a technology that has been established. I think that all the platforms and all the users of AI will be affected by technology progress. So, it is not a technology that is in a platform or a company's internal environment. We are also in the field of AI. We think our own positioning is a platform. Then we are going to use AI technology to bring some value and income. We are also going to cooperate with the platform and share their value on the platform. So, we are in the field of AI. We are going to cooperate with many investors in the AI company.

Speaker Change #256: thecleho way ai part you don't quarly e

Speaker Change #256: so for what we soil of a pana

Speaker Change #257: so the sounds s or who to home a the chief will te put down show you so half you go say you you were b bor ation by ical you got youfood or many years make a gre children you getting wage for you got

Speaker Change #257: the whole woman you out no people p i will dilad each year you said js of us so you fun may sure look for b vention has done aughter ship company with udes so in just a ger think you want should talkk ud they i also

Speaker Change #258: which you though r ho was you and i go back ic more open to the ho the and is you numbergo around which total going to down looking agj far ac to the judge

Ray Chen: We always believe that AI should be a technology that benefits everyone, including users and platforms. And I believe that the development of AI requires a joint effort of multiple numerous companies to reach its full potential. Rather than a company doing the research in AI with and itself in a closed loop. So, as a platform, we always see a very proactive and open attitude. We are already working with several leading domestic AI companies on virus fronts. And we believe that with our joint efforts, we can bring user a better experience. And for those partners, they can also unleash their full potential and value with delivery and our users.

Speaker Change #259: we always believe i should be a technology that benefits everyone including users and platforms and i believe that development of a i requires a joint efforts the multiple numerous company to reachis full potential rather than a company doing the researching with then itself in the closeed sup

Speaker Change #260: so asa platform always very proactive and open attitude we are already working with several leading domestic i company on virus from

Speaker Change #260: and we believe that with our joint efforts we can bring user better experience and for those partners they can also leash in their full potential and value with visibility and our users

Ray Chen: For example, we are currently working with the AI technology that we are currently working with. For example, we are also looking forward to working with many AI companies to bring better energy to our users. And as many of you might notice, that our AI generated video capabilities is through our partnership with a leading AI company. And we expect to continue risk collaboration with various partners. And through this partnership, we aim to bring better, and more efficient, and more creative experience to our users.

Speaker Change #261: we should be roted and fullyll dollters your neghour will not attend that to the sent certainteen that lear

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Xin Fan: The growing enthusiasm as events showed our unparalleled influence among the young generation.

Speaker Change #263: and as many if you my notice that our a i generate a video capabilities is to our partnership with a leading a company and we expect to continue risk collaboration with various partners and through this part nership we end to bring better and more efficient more cre experience to our users

Xin Fan: Now, I'd like to talk about our commercialization progress in each of our business lives.

Thomas Chong: And speaking of games two days ago on the day of Blackness, Wu Kong was released, there are tens of thousands of users are life-streaming their game experience on Bilibili. This is quite spectacular across the game history. And on that day we saw over two million p-concurrent user watching the dark-knit Blackness that the interest-based content verticals.

Unknown Executive: Thank you.

Unknown Executive: That concludes today's answering session. Thank you.

Daniel Chen: And also, how should we expect the advertising growth for the second half?

Speaker Change #264: thank you that concludes today's as your inspeession thank you

Juliet Yang: Thank you once again for joining Billy Billy's second quarter, 2024 financial results and business update conference calls today. If you have any further questions, please contact Julet Young, Billy Billy's Executive IR Director, or Pay Sunday Financial Communications. Contact information for IR in both China and the US can be found on today's press release.

Speaker Change #265: thank you once again for joining babbe second quarter two thousand and twenty four financial results and business update conference callt today

Xin Fan: First, our advertising business. As our users mature with more disposable income, their commercial value unfolds and seeks more consumption-related content on Bilibili. The demand is there and all we need to do is match the right ads with the right user. In the second quarter, we further improved our ad products and infrastructure to increase our ad efficiency. Specifically, we upgraded our ad placement system featuring user-friendly placement tools and enhanced conversion capabilities, attracting and retaining more advertisers on Bilibili. In the first half of the year, the number of advertisers on our platform increased by over 50% year-over-year.

Julet Young: if you have any further quest please contact julet young will believease executive iio doctor or psun dayate financial communications contact informations for ir in both china and the u s can be found on today's brressle lease thank you and have a great day

Sam Fan: Thank you.

Sam Fan: 在第二季度宏觀經濟充滿挑戰的環境下,我們的廣告業務還是實現了30%的同比增長,單季度的收入首次突破了20億,貢獻了整個公司收入的三分之一。對,我們應該看到B站的廣告業務是連續幾個季度都在高速增長的,在我們看來,這個增長的一個底層的邏輯呢,本質上是我們平臺流量的增長加上我們用戶商業價值的一個逐步釋放。 B站第二季度的DAU同比增長6%,視訊播放量同比增長了18%。這也就意味著商業流量的底盤是在持續增長。 Bilibili's DAU grew by 6% year over year in the second quarter, while our video views increased by 18% year over year, showing a continued growth in our commercial traffic.

Sam Fan: 同時呢,我們知道就是中國超過七成的年輕人都在用B站,我們用戶的平均年齡已經到了25歲,就這個年齡正處在消費需求跟消費能力快速增長跟釋放的一個階段。這一點其實從我們的用戶他看的B站相關的視頻的品類也可以看得出來。除了上面所說的這個B站之外呢,我們也看到了其他的視頻。一橫指的是我們廣告業務的基礎建設,N縱指的是對於垂直行業的解決方案。我们一直在持续的去提升我们的一个广告平台的一个基建, 因为这样的话就可以能够让我们的这个广告和我们的用户需求更加的匹配比如说就是我们上半年是升级了这个我们PC端的投放平台, 提供了一站式的专业投放工具所以的话就是我们上半年效果KA广告组的数量同比增长了50% 我再举个例子,就是在那个广告投放素材方面我们新上线的一个投放平台, 我们是用了一种投放工具就是我们上半年是升级了这个我们PC端的一个基建, 因为这样的话就可以能够让我们的一个广告和我们的用户需求更加的匹配比如说就是我们上半年是升级了这个我们PC端的一个投放工具, 所以的话就是我们上半年是升级了这个我们PC端的一个基建广告投放素材方面, 我们新上线的这个素材的创意中心是应用了最新的这个AIGC的技术我们能够帮助广告组进行素材的诊断和优化, 所以的话就是就经过我们这个创意中心的升级过后我们的这个广告投放素材实现了30%以上的CVR的提升, In terms of app materials, our newly launched creative center and active application of AIGC technologies helps our advertisers to diagnose and improve their ad materials After optimization, the CVR achieved over 30% year-over-year improvement, 然后我再说一下这个N众就是这个垂直行业, 我们QR前五大的广告组是来自游戏、电商、数码家店游戏、电商、数码家店, 食品饮料和汽车这五个垂直行业其中电商跟数码家店是QR广告增长的最大的两个驱动力, Now let's take a look at our industry verticals In Q2, our top five advertisers came from mobile games, e-commerce, digital products and home appliances food and beverage and automotive sectors 对,我重点的说一下电商跟交易这一块, 因为我们电商是一直坚持大开环的一个战略所以在今年的618,B站实现了和各个电商平台, 更加深度的一个整合营销和广告的一个合作也拿到了更多电商商家的预算, I'll take a closer look at the e-commerce and transaction-based sectors with our consistent open loop strategy during this year's June 18th shopping festival we have deepened the integrated marketing and advertising collaborations with e-commerce platforms as well as secured a larger share of e-commerce merchants' budget 今年618,电商的客户在B站的投放广告同比增长了300% 我们带货的GMV同比增长超过了140% 今年618我们也为行业的商家带来了50%的新客率,其中母婴亲子行业我们是带来了超过70%的新客率。然后在交易方面,Q2有近4000万的用户看过我们B站上面的带货的内容,这个同比增长是70%。而且在今年我们B站有一半的用户是女性用户,这一半的女性用户的消费潜力也在逐步的释放。我们Q2服饰品类的GMV同比增长是超过4倍。我刚才讲的是我们Q2广告收入快速增长的一个原因。如果是展望今年下半年的话,我们是很有信心在下半年仍然保持高于行业的一个增速。另一方面,通过增强我们的垂直行业解决方案,我们不仅在关键行业增长市场份额, 我们还在尝试在增强行业垂直行业中获得增长, 例如网服、教育、医疗、子婴等行业。对,最后我还是想说,就是B站的收入并不是只靠广告,就是我们一直以来都是C端用户付费和B端广告主付费同时往前进的这么一个模型。所以我认为在未来我们仍然会是,比如说以这种游戏会员直播,包括我们的广告收入并进的一个收入模型。同时我们仍然认为我们的2C商业有很大的潜在潜在潜在,也就是在互联网游戏,互联网广告,广告,这些都会帮助我们的收入增长。 - 下一个问题,请, - 谢谢,下一个问题是来自UBS的Felix Liu,请问您的问题。

Felix Liu: - 谢谢管理层接受我的提问,也恭喜我们二季度的业绩,以及非常好的三国谋定天下的发行。

Felix Liu: 那我的问题是关于三谋这款游戏,请问公司能否分享这款游戏背后成功的原因,以及我们对游戏生命周期的展望,未来我们还有哪些游戏品类计划拓展和发展?

Sam Fan: 三国谋定天下确实是上半年整个游戏行业的一个爆款,游戏上线第一周就吸引了数百万用户的下载,而且在行业内的声量和用户的口碑都非常不错。对,而且它也创造了B站这个游戏业务的好几个纪录吧,然后比如说它这个上线初期就登上了iOS畅销榜的前三名,然后上线的第一个月都保持在前十,而且呢三谋也是B站游戏历史上最快达到十亿流水这个成绩的游戏。我们三谋这个项目的立项是在2022年,然后我们投资研发团队也是在2022年,所以它不是一个偶然的决定,它也是我们经过几年长期思考去做的游戏品的年轻化的一个决定。其实从2019年之后的话,我们的B站的用户数量是翻了三倍,就是MAU是翻了三倍多,然后其实在用户,我们B站用户快速增长和破圈的同时,我们用户里面的这个游戏的受众,他也在破圈。而这些用户有挺多就是在我们B站。对,其实我们发现了这个事实过后的话,然后我们就立了这一个叫三国谋定天下的项目,这个项目在我们的内部的代号叫NSLG,其实就是New SLG的意思。为什么叫New SLG呢?因为第一个就是我们认为就是现在的SARG游戏它里面是有些痛点的,然后这些痛点如果我们把它改进了,对玩家会是一个非常大的吸引力。第二个就是我们发现就是现在的SARG品类它对于年轻用户的吸引力不足,如果我们对于这一类的游戏去做一些创新,应该能够让他们更能吸引年轻用户。所以就是我们立的这个项目,从结果来看,这两个点我们应该都做到了。 We've discovered that in the current market, there are many players' pain points haven't been addressed.

Sam Fan: At the same time, the current SLG game offerings in the market, does not fully satisfy the young generation's needs in SLG. So we believe as we make more innovations and addressing their pain points, addressing their involving needs, we could be successful.

Sam Fan: And the success launch of this game has proven our strategy has been right.

Unknown Executive: Thank you, and have a great day.

Sam Fan: 而且我认为三谋它应该只是一个叫案例吧, 就是我刚才所说的这个品类年轻化我认为这个应该对于多个游戏品类, 它都具备有这个普世的一个作用所以的话这个也是我们接下来去尝试新游戏的一个主要的思路, 对于这个游戏成功的成绩我们会尊重它在整体的潜力上, 它背后的深奥的机会从重新创造游戏到应对年轻人的需要, 这不仅符合SLG的领域还可以符合多个领域, 我们会继续向这个方向进行研究最后说一下对于这个游戏生命周期的一个期望吧, 本身SLG游戏是能够做到很长的生命周期的因为我们可以看到在行业里面, 有同类产品应该说稳定运营了八年或者是五年以上所以其实在内部对我们三谋的一个发行团队提的目标, 也是一定要把它打造成一款能够持续运营五年以上的精品游戏在这块我认为它还是一个对长线运营是否重视吧, 就是我们必须意识到游戏这个行业它已经不能是一个挣快钱的行业, 它必须得是一个重视长线优化经营优化用户体验的这么一个行业, 我们至少争取做到行业里面最听玩家劝最尊重玩家的一家公司, 然后把这个游戏能够长线地运营下去, Thank you.

Operator: Next question please.

Operator: Thank you.

Xin Fan: Moreover, we continue to invest and improve our ad-modeling capabilities to better understand our users' consumption behaviors and preferences, which enabled us to further enhance our ad-matching efficiency.

Sam Fan: 詞曲李宗盛, 演唱李宗盛

Operator: One moment for the next question.

Operator: Next question comes from Thomas Chong of Jefferies.

Thomas Chong: Please ask your question.

Thomas Chong: 晚上好,謝謝管理層接受我的提問。我的問題是關於我們內容品內的變化趨勢的。 B站用戶平均年齡已經到了25歲。管理層可以分享一下隨著用戶年齡增長,觀察到內容品內發展,還有消費的一個新的趨勢嗎?

Thomas Chong: 謝謝管理層接受我的提問。我的問題是關於我們內容品的發展趨勢。 B站用戶平均年齡已經到了25歲。管理層可以分享一下隨著用戶年齡增長,觀察到內容品內發展,還有消費的一個新的趨勢嗎?

Sam Fan: 謝謝管理層接受我的提問。現在的B站它不僅是年輕人興趣愛好的樂園,同時也是年輕人生活消費的一個聚集地。這個從我們用戶看視頻的一個數據上就可以看得出來, 就是我們可以看到B站上面,就在第二季度,B站上面與年輕人消費相關的內容品類增長是最快的。比如說家居房產,汽車,時尚美妝,它的視頻播放量同比增長,是分別增長了39%,43%和30%。這也顯示了我們的內容消費數據的進步。當年輕人進入新的生活階段,他們消費的內容品類增長極快。對,剛才我在講廣告的時候,我也提到了母嬰親子品類的日均播放量的同比增長是超過80%的。對,這個其實就是我剛才所說的,就是我們的平均年齡到25歲之後的必然結果。因為平均年齡25歲就意味著有一半的用戶是大於25歲的,有一半的用戶會關注25歲以上的人關注的內容。

Sam Fan: And this is a natural outcome for our users' average age to evolve into 25.

Sam Fan: The average age of 25 meaning about half of our users above 25.

Sam Fan: And those generations or those demographics naturally have wider interest and consumption needs, and they seek out Bilibili.

Sam Fan: 而且因为B站它有真实专业以中长视频为主这三个特点,所以B站现在基本上成了中国年轻人买大价值钱必逛的平台。 And because Bilibili has authentic and professional videos, and most of our videos are in the mid to longer form, it makes Bilibili the go-to destination for young generation before they make big purchases.

Sam Fan: 对,因为你要买大价之前的话,你首先还是需要对这个平台或者up主要有信任,你也需要听更专业的一个购买的建议。而且的话,它的视频的时间确实得长一点,因为你很难在15秒钟之内就说清楚为什么你要买这台汽车。 And the reason why behind or the reason behind people looking to Bilibili for larger ticket items is because first of all, the user have to trust the platform, trust the content creator in their view and professional judgment.

Sam Fan: 我现在都是只在B站上面去看这个新车的评测,确实很专业,而且视频太适合去做这种大件的评测。说到汽车内容,上半年平均每个月有7300万的用户在B站研究汽车内容。刚才说的是B站上面新兴的与生活消费相关的内容,然后我现在还是要说一下我们叫传统的年轻人兴趣品类的内容,就是我们在这些内容上也仍然是有着很不错的一个增长。在今年第二季度,游戏知识科技三个品类的视频播放量都实现了超过20%的同比增长,分别增长了21%,29%和29%。 We've talked about the emerging content category.

Sam Fan: Now let's take a look at our traditional leading content categories, in young generation's interest.

Sam Fan: In the second quarter, videos in the games, knowledge, and tech categories also are over 20% year-over-year growth, which are 21%, 29%, 29% year-over-year growth rate, respectively.

Sam Fan: 这其实说明了在这些与信息相关的品类上, B站已经成为了年轻人的一个主要的新职务。说到游戏,前天黑神话悟空上线的当天, 有几万人在B站直播玩黑神话悟空。我估计全世界都看见了。对,那一天我们的直播的同时在线人数是超过了200万。这个其实也就是讲一讲就是我们在这个兴趣上面,我们仍然在不断的在增强自己的一个实力吧。最后也是总结一下吧,其实我认为体现社区竞争力的一个重要的一个指标就是社区的一个火力。而社区火力的一个重要的指标是看你这个社区是不是能够源源不断的产生新的内容。我觉得过去15年的历史已经证明了B站是一个能够源源不断的产生新内容充满火力的一个社区。下一个问题请。下一个问题是来自CICC的雪琴张。请问您的问题。

Sam Fan: This is Sam.

Sam Fan: Let me take your question.

Sam Fan: Our financial performance in the second quarter demonstrated our business model has great potential for increasing the gross profit margin. In Q2, our overall revenue grew by 16 percent, while gross profit increased significantly by 49 percent year-over-year. The gross profit margin increased nearly 7 percent points year-over-year from 23 percent to nearly 30 percent in the eighth consecutive quarter of margin improvement.

Sam Fan: This was primarily due to our ability to control costs when achieving rapid revenue growth.

Sam Fan: With the continued growth of our high-margin advertising and game business, there is still, substantial room for further improvement for our gross margin.

Sam Fan: Additionally, it is worth noting that our operation cash flow for the first half of the year reached 2.4 billion RMB and our cash flow reached 1.5 billion RMB.

Sam Fan: This indicates that our business has, entered into a positive cycle. Looking ahead to our financial performance in Q3, we see that the deferred revenue balance increased by over 770 million RMB quarter over quarter, laying a good foundation for the third quarter revenue growth. We expect the revenue from our games and advertising business to maintain strong growth momentum, along with a significant quarter over quarter growth in gross margin.

Sam Fan: At the same time, in addition to achieving our initial growth of break-even in Q3, we, now aim to achieve meaningful operating profit on a non-gap basis.

Sam Fan: Meanwhile, we are delighted to see solid growth across our core business lines. Our growth momentum, along with prudent cost and expense management, will lead us to continue expanding our revenue scale as a possibility in 2025, as a result of the ongoing improvement in our operating margins.

Sam Fan: Thank you.

Operator: Next question, please.

Operator: Thank you.

Operator: The next question comes from Yiwen

Yiwen Zhang: Zhang from China Renaissance.

Yiwen Zhang: Please go ahead.

Yiwen Zhang: Thank you, Gordon.

Yiwen Zhang: I have a question about AI.

Yiwen Zhang: I'd like to ask about the future potential, of our company in terms of AI applications and future potentials.

Yiwen Zhang: Thank you.

Yiwen Zhang: So thanks for taking my question.

Yiwen Zhang: My question is regarding AI application.

Yiwen Zhang: Can you discuss, about how can we apply AI in our multiple-user scenario, believe it or not, and its future potential?

Yiwen Zhang: Thank you.

Sam Fan: As we all know, Bilibili has the most extensive and highest-quality AI content on the Internet.

Sam Fan: The reason for this is that compared to our users, the level of education is higher, and, in the first and second cities, the user ratio is also very high.

Sam Fan: It is known that Bilibili has the most extensive and highest-quality AI content across the Internet.

Sam Fan: I think the reason behind that is most of our users receive higher education background, and they are based in the first and second tier cities.

Unknown Executive: I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you, I can't wait to see you.

Sam Fan: We are curious.

Sam Fan: 上半年我们的数据统计,每个月有超过八千万的用户在B站观看, AI相关的内容,而且这些AI相关的内容并不是那种所谓的一句话的报道, 里面有大量的内容,在我看来是比较专业和比较有深度的AI内容。所以我觉得这个也构成了,我认为在AI这个领域,B站有三个罪吧。第一个罪就是中国叫真正对AI感兴趣, 就是中国人对AI感兴趣, 第一个罪就是中国叫真正对AI感兴趣的人在B站是最多的。第二个就是B站也是中国AI从业者密度最高的社区。第三个就是国内超过九成的AI厂商, 最多的AI厂商是选择在B站建号和用户沟通。 That results in three, the most AI platform for Bilibili.

Sam Fan: First most is that we believe we have, the most user who are genuinely interested in AI content.

Sam Fan: And second most is we have the most AI professionals active on Bilibili.

Sam Fan: Lastly is over 90% of the domestic AI companies have set up accounts and get in touch with Bilibili users on Bilibili.

Sam Fan: Because of the natural advantage I just mentioned, we have been exploring our applications in the field of AI for a long time.

Sam Fan: For example, in the creative section, it was our users who first started to use AI to create content for Bilibili.

Sam Fan: For example, in 2023, the whole industry or many ordinary users should know that AI Sun Yanzi is on fire.

Sam Fan: Sun Yanzi is using AI to sing. And the real Sun Yanzi even posted an article saying that he supports using AI to simulate his own voice.

Xin Fan: Meanwhile, we incorporated more nature-video-style ad content, allowing us to expand ad load while maintaining user experience.

Thomas Chong: We've always said that the evidence to show a community's competitiveness is the ability to continue to produce good and new content. And we think we have already proved that over the past 15 years, Bilibili has the ability and the power to continue to expand its content operates horizon and content categories. Thank you.

Sam Fan: Because the high concentration and condensity of AI content and user give us a natural advantage and explore AI application.

Sam Fan: And as a platform, generally we see many of the user initiate their attempt in connecting AI with their content creation.

Sam Fan: Back in 2023, there was a user who used the AI tools to mimic a famous singer's voice singing songs in her original voice.

Sam Fan: And that actually triggered the original singer to come out and say that she supports this type of creation and welcomes users to use it.

Sam Fan: For example, this year, we saw a lot of AI song music being released in Bilibili.

Sam Fan: There are also a lot of AI animations and AI short films being released in Bilibili.

Sam Fan: And we have also held a special AI short film contest and attracted a lot of attention from creators.

Sam Fan: And for this year, we've noticed many AI-powered music creation, AI-powered animation, AI short plays were being released on Bilibili.

Sam Fan: Our operation team has even made an AI short play competition and attracting a lot of users to participate. Yes, and we have also added some AI-powered functions to our own creative tools.

Sam Fan: This is also very popular with our uploaders.

Sam Fan: I think AI has a very important value for Bilibili's creative team, which is that it can enhance the frequency of creators' releases and allow more ordinary users to become creators through this technology.

Sam Fan: And in terms of our own content creation tools, we have leveraged and implemented AI and our AI creation tools.

Sam Fan: We believe essentially the application will help to improve the content creation efficiencies for our existing content creators, and also allowing regular users to leverage this tool to become a content creator themselves.

Sam Fan: And this is very beneficial from a content supply perspective.

Sam Fan: 然后在用户侧的话,我们也是用一些AI的能力来提高用户体验吧。比如说就是大家应该注意到B站上面是已经面向所有的用户开放了我们的这个AI搜索的一个功能。因为B站上面有大量的知识、学科、课程还有评测。所以的话,这都是非常好的内容。如果你直接通过我们的这个AI搜索去直接问它的一个知识的答案或者说评测的一个结果, 然后它会直接告诉你,这个对用户是很方便的。 And we also use AI directly to enhance our user experiences.

Sam Fan: As of now, we have opened up the AI Assistant and AI Search to all of our users.

Sam Fan: Because we have a large amount of knowledge-based, review-based content, you can ask our AI Assistant or AI Search to summarize the keywords and key messagings of videos.

Xin Fan: We plan to further advance these initiatives in the foreign cultures and help our advertisers quit and material reels more easily and place advertisements more automatically.

Unknown Executive: Up for your next question please.

Sam Fan: And this is very helpful and efficient for a user who wants to get a quick summary of our content.

Sam Fan: 还有一些很实用的功能,比如说AI翻译。我们的这个AI翻译,因为它是真的能够翻译一些小语种。比如说有些西藏的up主发布的视频,藏语我们也是能翻译的。包括我们还有一个很有用的功能,叫AI的总结归纳。然后如果你要想看一个视频,但是没时间, 然后的话你就直接可以用我们的这个AI小助手, 然后让它总结归纳这个视频讲了什么。它就相当于是能够把这个视频总结成一篇段文, 让你很快的就能够知道这个视频大概讲了些啥。我觉得这些功能都已经逐步的上线, 然后对用户一定是很有帮助的。 And there are two more examples of our AI tools.

Sam Fan: One is AI translations.

Sam Fan: Our AI translation tools can help to translate many different languages, such as the content creator from Tibet.

Sam Fan: He spoke in the local language, and our AI assistant can help him to translate into Mandarin.

Sam Fan: And we also have a tool called AI assistant.

Sam Fan: While playing a video, if you don't have time to watch the whole thing, you call upon the AI assistant.

Sam Fan: The AI assistant will summarize into a short article, to tell you what this video is about, and overlay, outline the key points of that video, all of which we believe will effectively help our user to improve their user experience.

Sam Fan: 最后我认为AI它是一种普惠的一个技术,就是我认为所有的平台,所有的厂商和所有的用户都会从AI的技术进步当中受益,所以的话它不是一个在一个平台或者一个公司内部内循环的一个一个技术,我们也是在那个AI这个领域,我们就认为自己的一个定位就是一个平台,然后我们是要给用户提供AI技术带来的一些服务,然后我们也是在那个AI这个领域,我们就认为自己的一个定位就是一个平台,然后我们是要给用户提供AI技术带来的一些服务, 然后我们也是在那个AI这个领域,我们是要给用户提供一些服务带来的一些技术带来的一些服务带来的一些价值和收益,同时我们也是让合作伙伴然后在我们平台上更多地去贡献他们的一个价值。所以,我们在AI这个领域,我们是和多个投入的AI公司一起合作,然后我希望我们能够带给用户更多或者更好的体验,也希望能够让这些投入的AI公司在我们的平台上发挥更多的价值。而我认为AI的发展需要多个数量的企业一起努力达到它的全能,而不是一家企业在封闭式地研究AI。谢谢。再次感谢您参与Bilibili的第二个半月的2024财务结果和商业更新会议。如果您有任何问题,请与Juliet Yeung,Bilibili的行政总监或Piersante的财务联系联系。互联网信息在中国和美国都可以在今天发布会上发现。谢谢,祝您一天愉快!

Unknown Executive: Next question comes from the Liao Sui Ching Zhang from CIPC. Please ask your question. Thank you, Bilibili. Thank you for your question. Thank you, Bilibili. I'd like to ask you a question for Bilibili. My question goes on financial outlook. The company delivered a continual margin of extension and a robust tier cash flow is caught up. And the commission will share with us the outlook for the financials in the second half of 2024. Looking at the third quarter, we will work even on a profit. And there was a need to long-term profitability outlook.

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Unknown Executive: Thank you. Let me take your question. Our financial performance in the second quarter demonstrates our banish model has great potential for increasing the growth profit margin. In Q2, our overall revenue grew by 16% while growth profit increase significantly by 49% over year. The growth profit margin increased nearly 7% points over year, on 23% to nearly 30%. The eighth concept of growth of margin improvement. This will primarily due to our ability to control costs when it should rapid revenue growth.

Xin Fan: In the two wide, our top five advertising verticals were mobile games, e-commerce, digital products, and home appliance, food and privilege and automotive in the second quarter.

Xin Fan: Our anchor verticals continued to deliver strong performance. During the 6.1A shopping festival, we not only secured more ad budgets from e-commerce platforms, but also directly from online merchants in different verticals.

Xin Fan: Photo GNV, from video and live commerce, increased by over 140% over year during the period. Besides our leading verticals, we also saw incremental ad revenues from emerging verticals.

Unknown Executive: With the continuing growth of our high margin advertising and the game business, there's still substantial realm of further improvement for our growth margin. Additionally, it was noting that our operation can slow for the first half of the year with 2.4 billion RMB and our cash flow reached 1.5 billion RMB. This indicates that our banish had entered into a positive cycle. Looking ahead to our financial performance in Q3, we see that the deferred revenue balance increased by over 770 million RMB quarter of a quarter, laying a good foundation for the third quarter of revenue growth.

Unknown Executive: We expect the revenue from our games and advertising banish to maintain strong growth momentum, along with the significant cost of the quarter growth in growth margin. At the same time, in addition to achieving our initial growth of growth even in Q3, we now aim to achieve meaningful operating profit on the gap basis. Meanwhile, we are delighted to see solid growth across our core business lives. Our growth momentum, along with the prudent cost and expense management, will lead us to continue expanding our revenue scale and the profitability in 2025, resulting in ongoing improvement in our operating market.

Unknown Executive: Thank you. Next question please. Thank you.

Ji Wen Zhang: The next question comes from Ji Wen Zhang from China Renaissance. Please go ahead.

Unknown Executive: So thanks for taking my question, my question regarding AI application, commitment discussed about how can we apply AI, AI, multiple users, and ability, and a secure potential. Thank you. We are very happy to have the most extensive and highest quality AI content across the internet. I think the reason behind that is, a most-door user receives higher education background and they are based in the first and second-tier city, who are curious? Based on our internal data that for the first half of this year, on monthly average over 80 million users are watching AI-related content on billy-billy.

Xin Fan: In the second quarter, anchor revenue from internet services, AI and education are increased, meaningfully.

Xin Fan: 2012 game business, game revenues resumed growth by 13% over year in the second quarter to R&B 1.01 bidding, led by the excellent performance of a recently launched distributed game, Sanguo Modeing Jinxia Samo, and the ACG game, RT Quactor.

Xin Fan: Our LXI titles also contribute to the steady-game RAM news and the demonstrated remarkable longevity.

Xin Fan: As FGO celebrated at 8th anniversary, it returned to the top 10 on the iOS game-grossing chart in July.

Unknown Executive: And for those AI-related content, not just a one word for 15 second headlines, many of those content have extensive professional content in depth discussion in AI. The second thing is that AI is the highest quality of AI content across the internet. The third thing is that AI-related content across the internet is the best way to use Google. That results in three, the most AI platform for Bilibili. First most is that we believe we have the most user who are genuinely interested in AI content.

Xin Fan: As for azureline, monthly active users reached new peak in June with the celebration of a seven-year anniversary.

Xin Fan: This trend strengthened our commitment to the long-term operation of high-quality games.

Xin Fan: We were delighted to see our first tragic game, Sanguo, become an immediate broadcaster. On the first day of its launch, granting the top three on the iOS game-grossing chart, attracting millions of gamers to the three-kinder battlefields.

Xin Fan: Sanguo also set a new record in our operating history, being the farthest title that it hits R&B 1.001 game-grossing mark.

Xin Fan: With the launch of the second game season on August 3, Sanguo returned to the top three on the iOS game-grossing chart.

Unknown Executive: And second most is we have the most AI professionals active on Bilibili. Lastly is a 90% of the domestic AI companies have set about towns and get in touch with Bilibili users on Bilibili. Because I just said that the advantage of the natural environment is that we are indeed more advanced in the AI platform. For example, we have created a lot of AI content in Bilibili. Because the high concentration and condensity of AI content and user gives us a natural advantage in explore AI application.

Xin Fan: The decent size of the SLG market, the early success of Sanguo and the long-life cycle nature of SLG games give us confidence that it will become one of our flagship games within enduring longevity.

Xin Fan: Over the years, our community has expanded exponentially and so has our game-based.

Xin Fan: Sanguo's success marks a breakthrough in our general diversification strategy and shows the vast potential of our game business.

Xin Fan: We will continue leveraging our leading role at the top gaming community and the capitalization of our significant opportunities to reinvent games for the new generation of games.

Xin Fan: Turning to our vast benefits, RAM news from vast benefits increased by 11% over year to RMB 2.57 billion.

Xin Fan: We continue to add more live broadcasting content offerings, reinforcing the synergies between our live broadcasting and the PUGB ecosystem to better capture to use the diverse interests.

Unknown Executive: And as a platform, generally we see many of the users initiate their attempt in connecting AI with their content creation. Back in 2023, there was a user who used the AI tools to mimic a famous famous singer's voice singing song in her original voice. And that actually triggered the original singer to come out and say this she support this type of creation and welcome user to use it. For example, this year we saw a large amount of AI content in Bilibili.

Xin Fan: We will also further explore opportunities in our other vast benefits as our Gen Z Plus users have demonstrated and increasing within this to directly pay for the content they love.

Unknown Executive: There are also a lot of AI tools and AI tools in Bilibili. And for this year with various many AI powered music creation, AI powered animation, AI short plays were being released on Bilibili. Our operation team has even made an AI short play competition and attracting a lot of users to participate. And we also added some tools in our own creative work. This is also a welcome to our app. And in terms of our own content creation tools, we have leveraged and implemented AI and our AI creation tools.

Unknown Executive: We believe essentially the application will help to improve the content creation efficiency for existing content creators and also allowing regular users to leverage this tool to become a content creator themselves. And this is very beneficial from a content supply perspective. And we also use AI directly to enhance our user experiences as if now we have opened that the AI assistant and AI search to all of our users because we have a large amount of not based review based content.

Unknown Executive: You can ask our AI assistant or AI search to summarize the keywords and key messages of videos. And this is very helpful and efficient for a user who wants to get a quick summary of our content. There are also some very practical tools such as AI translation and our AI translation, because it can really translate some of the content. For example, some of the content that we use is not translated. And there are two more examples of our AI tools.

Unknown Executive: One is AI translations. Our AI translation tools can help to translate many different languages such as the TV. We have a content creator from Tibet. The local language and our AI assistant can help him to translate into Mandarin. And we also have a tool called AI assistant. While playing a video, if you don't have time to watch the whole thing, you call up on the AI assistant. The AI assistant will summarize into a short article to tell you what this video is about and the overlay that outlined the key points of that video, all of which we believe will effectively help our user to improve their user experience.

Unknown Executive: After that, I think that AI is a technology that has been established. I think that all the platforms and all the users of AI will be affected by technology progress. So, it is not a technology that is in a platform or a company's internal environment. We are also in the field of AI, we think our own positioning is a platform. Then we are going to use AI technology to bring some value and income.

Unknown Executive: We are also going to cooperate with the platform and share their value on the platform. So, we are in the field of AI, we are going to cooperate with many investors in the AI company. We always believe that AI should be a technology that benefits everyone, including users and platforms. And I believe that development of AI requires a joint effort of multiple numerous companies to reach its full potential. Rather than a company doing the research in AI with and itself in a closed loop.

Unknown Executive: So, as a platform, we always see a very proactive and open attitude. We are already working with several leading domestic AI company on virus fronts. And we believe that with our joint efforts, we can bring user better experience. And for those partners, they can also unleash their full potential and value with delivery and our users. For example, we are currently working with the AI technology that we are currently working with. For example, we are also looking forward to working with many AI companies to bring better energy to our users.

Unknown Executive: And as many of you might notice that our AI generated video capabilities is through our partnership with a leading AI company. And we expect to continue risk collaboration with various partners. And through this partnership, we aim to bring better and more efficient and more creative experience to our users.

Xin Fan: Our premium members continue to increase, reaching 22.3 million by the end of second quarter, with over 80% of them subscribing annually or under all children with new packages.

Unknown Executive: Thank you. That concludes today's answering session. Thank you.

Xin Fan: Showing their continued royalty and trusting our platform.

Unknown Executive: Thank you once again for joining Billy Billy's second quarter, 2024 financial results and business update conference calls today. If you have any further questions, please contact Julet Young, Billy Billy's Executive IR Director, or Pay Sunday Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Thank you and have a great day. Zhang, Zhang, Li, Xueqing Zhang[inaudible]

Xin Fan: Users spending our other vast portals of growth rapidly in the second quarter, particularly in premium courses, our fan charging program and avatar decoration.

Xin Fan: We expect these portals to open more monetization potential across our massive PUGB content universe in the future.

Xin Fan: We believe good content and community can bring people together and the value of our users are just starting to show its potential.

Xin Fan: Our community is thriving and our solid second quarter results place us just one step away from probability.

Xin Fan: We are excited to move forward and take billy billy to the next level.

Xin Fan: This concludes Mr. Chan's remarks.

Unknown Executive: I will now provide a brief overview of our financial results for the second quarter of 2024.

Unknown Executive: For a closer look at our financial results, we encourage you to refer our press release issued early today.

Unknown Executive: As a reminder, all amounts are in IMB unless otherwise noted.

Unknown Executive: In the second quarter, we further advance our commercialization capabilities, delivering accelerated year-round new growth across our co-beinness.

Unknown Executive: At the same time, we continue to expand our margins and considerable narrowed our losses.

Unknown Executive: All of these financial improvements were frowned in our top-line growth with increased efficiency.

Unknown Executive: Total RAM news for the second quarter were IMB 6.13 billion, up 16% year-over-year.

Unknown Executive: Our total RAM news breakdown by RAM stream for Q2 was unfortunately 42% vast, 33% are tiling, 17% mobile games, and 8% for our IP directives and other business.

Unknown Executive: Our cost of RAM news increased by 5% year-over-year to IMB 4.3 billion in the second quarter, while growth profit rose 49% year-over-year to IMB 1.8 billion. Our growth profit margin reached 29.9% in Q2 are from 23.1% in the same period last year.

Unknown Executive: Our total operating expenses were down 3% year-over-year to IMB 2.4 billion in the second quarter. Sales and marketing expenses increased by 13% over year to RMB 1 billion, mainly due to increased marketing expenses for the new game launch.

Unknown Executive: DNA expenses were RMB 488 million, down 10% over year, RMB 895 million, down 15% over year, both related to reduced income expenses.

Unknown Executive: Our adjusted net loss ratio in the second quarter come down to 4% from 18% in same period like year ago.

Unknown Executive: Cash flow wise, we generated a record RMB 1.75 billion in positive operating cash flow in the second quarter, and a total of RMB 2.4 billion in positive operating cash flow in the first half of the year.

Unknown Executive: As I mentioned earlier, driven by the strong performances from our games and albinoists, our different revenue balance at the end of Q2 also increased by RMB 700 to 8 million.

Unknown Executive: We are on the end of Q1, proving a solid path to achieve our name gap with even target net quarter, and the sustainable profitability thereafter.

Unknown Executive: As of June 30, 2024, we had a cashier cashier equivalent, palm deposits and shorting investments of RMB 13.9 billion, or US dollar 1.9 billion.

Unknown Executive: Thank you for your attention.

Unknown Executive: We are now left to open the call to your questions.

Unknown Executive: Operator, please go ahead.

Unknown Executive: Thank you.

Unknown Executive: We will now begin the question and answer session.

Unknown Executive: To ask a question, please press star 11 on your telephone and wait for a name to be announced.

Unknown Executive: For the benefit of all participants on today's calls, if you wish to ask your questions to management in Chinese, please immediately repeat your question in English.

Unknown Executive: The company will provide consecutive interpretation for management segments during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management segments in the original language will prevail.

Unknown Executive: One moment for the first question.

Felix Liu: How shall the line of Daniel Chen of JP Morgan Lisa, your question?

Felix Liu: Thank you.

Felix Liu: Thank you for the opportunity to ask questions.

Felix Liu: My question is on the advertisement.

Felix Liu: We see that advertisement growth in the second quarter was very robust, growing about 30% over year, which is very strong.

Felix Liu: Could you share the key driver behind and also how should we expect the advertising growth for the second half?

Felix Liu: Thank you.

Unknown Executive: In a challenging micro-environment, Bilibili's second quarter advertising business achieved a 30% year growth with quarterly revenue exceeded 2 billion RMB for the very first time and contributing about one third of the company's total revenue.

Unknown Executive: As you can see that our advertising revenue has growth for several consecutive quarters and the fundamental reason behind that is one that Bilibili's traffic is growing very healthily and secondly is that we are continuously unlocking the commercial value of our users. The second quarter, while our video views increased by 18% year over year, showing a continued growth in our commercial traffic.

Unknown Executive: Over 70% of Chinese young generations are using Bilibili and the average age of our user has reached 25. This is the stage where their commercial consumption needs and spending power are rapidly growing and being released.

Unknown Executive: This is evident from the booming growth in our consumption related content categories in Q2, video views in the categories such as home decor and real estate, automotive, fashion and beauty or increased by over 30% year over year, while daily video views in baby and maternity experience over 80%.

Unknown Executive: On top of that fundamental reason, what we need to do is to match the demand between advertisers and users with better infrastructure and the industry-based marketing solutions.

Unknown Executive: And the one horizontal refers to the enhancement of a platform infrastructure and the multiple verticals refers to the vertical industry-based solution. In the first half of the year, we implemented comprehensive upgrades to several of our advertising infrastructure modules. For example, we upgraded the placement platform on our PC and provided one-stop placement tools for K-account. And as such, in the first half of the year, the number of performance-based K-A advertisers increased by 50% year-over-year.

Unknown Executive: In terms of app materials, are you willing to create a center and active application of AIGC technologies helps our advertisers to diagnose and improve their added materials after optimization.

Unknown Executive: The CVR achieved over 30% year-over-year improvement.

Unknown Executive: Now let's take a look at our industry verticals in Q2. Our top five advertisers came from mobile games, e-commerce, digital products, and home appliances, food and beverage, and automotive sectors.

Unknown Executive: Here we look at the e-commerce and transaction-based sectors with our consistent open-loop strategy during this year's June 18 shopping festival. We have deepened the integrated marketing and advertising collaborations with e-commerce platforms as well as secured a larger share of e-commerce merchant budgets.

Unknown Executive: During the June 18 period, the number of advertisers on 40% year-over-year improvement.

Unknown Executive: Today, in June 28th, we have brought 50% of the new customers, and 50% of the customers that we brought to the merchants in different verticals were new customers.

Unknown Executive: And specifically for the baby and maternity sector, we brought over 60% of the new users to them.

Unknown Executive: On our transaction based advertising, in the first and second quarter, nearly 40 million users have watched our live and video e-commerce related content, and this number increased by 70% In Q2, the average daily content creator engaged in live and video e-commerce increased by over 130% year over year, and the number of commerce related videos grew by over 330% In the number of live e-commerce sessions rose by 270% over year The consumption potential of Bilibili's female users, which constitutes near half of our communities, is also gradually unlocked.

Unknown Executive: GMVs in apparel increased over four times year over year in the second quarter.

Unknown Executive: GMVs in apparel increased over three times year over year in the second quarter.

Unknown Executive: We've talked about the second quarter and its driver behind, and if we take a look into the second half of this year, we're quite confident in maintaining and above industry average advertising growth rate.

Unknown Executive: On one hand, the outcome of product infrastructure optimization is being proved, and we'll continue to show its effects, and on other hand, by enhancing our vertical industry solutions, we not only expand our market share in key industries, but we are also looking to achieve incremental growth in emerging industry verticals, such as online services, education, healthcare, and maybe a maternity.

Unknown Executive: Lastly, I want to emphasize that because we have our unique community aspect, Bilibili's revenue growth with never just being rely on advertisement growth, we can pursue to be N2C parallel strategy in our commercialization efforts, meaning that we can not only earn money from advertisers, we can also earn money directly from our consumers. Because we are a community, our users are more inclined to spend on content or content creators that they love to show their support and appreciation.

Unknown Executive: To sum up, we will be pursuing a B2B N2C parallel strategy on the one hand, we will continue to regroup our advertising platforms, to drive the advertising growth.

Unknown Executive: At the same time, we still believe there is great potential in our 2C business, meaning on mobile games, premium membership, live broadcasting, combining together will support our sustainable revenue growth.

Unknown Executive: Operator, next question please.

Unknown Executive: Thank you one moment for the next question.

Thomas Chong: Next question comes from Felix Liu of UBS, please ask your question.

Thomas Chong: Thank you for your question.

Thomas Chong: My question is related to the mobile game.

Unknown Executive: Thank you for your question.

Unknown Executive: The Sunmo game, indeed, is a blockbuster in the first half of this year. We not only attracted millions of new players, we've also accumulated a very good user feedback and also have large influence among the game industry. The game Sunmo broke several records in our game operation history. Truly after its launch, it quickly ranked among the top three on the ILS game top-grossing chart and maintained in top 10 for the entire month afterwards. And Sunmo also become the fastest game in Bilibili operation history to reach 1 billion R&B in revenue.

Unknown Executive: Since last year, we've been emphasizing the importance of operating one game in an extended time for a longer period of time. And for Sunmo, especially the SOG genre, is a perfect game genre for long-term operation.

Unknown Executive: And starting from August 3rd, we launched the game's second season.

Unknown Executive: As of now, the performance of season 2 reflects gamers sustained in Suzy as a good retention rate.

Unknown Executive: And this has given us very strong confidence to make this as an evergreen title.

Unknown Executive: [inaudible] Many people have asked me why Sunmo worked, how we picked this game.

Unknown Executive: I think this is a result of our continuous effort in the strategy of making new games, reinventing games to catering to the younger generation.

Unknown Executive: We actually saw this game back in 2022.

Unknown Executive: And we also invested in the development team in 2022.

Unknown Executive: The success of the game is now by accident.

Unknown Executive: Under the long period of time of thinking and strategy and decision-making.

Unknown Executive: Starting from 2019 to 2019 our MAU grow by over 200%.

Unknown Executive: And as we expand our gamers circle, also continue to expand.

Unknown Executive: They included more than ACG gamers. They are gamers. They love multiple different categories.

Unknown Executive: In the past five years, we have only one MAU.

Unknown Executive: At that time, we have used the most advanced MAU in the game system.

Unknown Executive: But when our MAU reached 3.4 billion, our MAU used the most advanced MAU in the game system.

Unknown Executive: Five years ago, when we only have 100 million MAUs, the most condensed gamer profile would be ACG lovers.

Unknown Executive: But as we evolve into a bigger community with 340 million MAUs, what we cover of our gamer community goes way beyond just that ACG. They love ACG and many other content categories.

Unknown Executive: [inaudible] the history of the game system, We've discovered that in the current market, there are many players' pain points haven't been addressed.

Unknown Executive: At the same time, the current SOG gain offerings in the market does not fully satisfy the young generation's needs in SOG.

Unknown Executive: So we believe as we make more innovations and addressing their pain points, addressing the things we are involving needs, we could be successful and the success launch of this game has proven our strategy has been right.

Unknown Executive: This success behind Samuel, we will credit to the overall trend of the immersive, immense opportunity that lays behind re-inventing games to catering the young generation's needs.

Unknown Executive: This not only addressed to the SOG categories, it could apply to multiple categories and we will continue to explore in that direction.

Unknown Executive: As for the estimation on its life cycle, we believe that SOG by its nature has longer life circles.

Unknown Executive: We've noticed that our SOG gains in the market has been operating for eight years and five years.

Unknown Executive: We have set the internal target of making Samuel the least of five years, more than five years game.

Unknown Executive: I think it's still an important thing for the market.

Unknown Executive: We have to realize that the game industry is not a very fast industry.

Unknown Executive: It has to be an important thing.

Unknown Executive: The market has a sense of humor and a sense of humor.

Unknown Executive: In the market, we have to focus on the longevity of the game. It all boils down to whether the company focuses on making a game into its longer life cycle, longer operation.

Unknown Executive: We have to focus on the longevity of the game.

Unknown Executive: The industry has evolved rapidly.

Unknown Executive: This is no longer a time where everybody can make fast money.

Unknown Executive: We are committed to be the top game who respect our users most, who listen to our users the most, and we hope to make this game evergreen tight.

Unknown Executive: Thank you.

Unknown Executive: Next question, please.

Unknown Executive: Thank you.

Unknown Executive: One moment for the next question.

Ji Wen Zhang: Next question comes from Thomas Chong of Jeffries.

Ji Wen Zhang: Please ask your question.

Ji Wen Zhang: Thanks management for taking my question.

Unknown Executive: My question is related to the trend in our content offerings.

Unknown Executive: As average age for BD ecosystem already reached 25 years old, can management share about the development of our content strategies and our content categories outlook as well as the consumption trend going forward?

Unknown Executive: Thank you.

Unknown Executive: Next question comes from Thomas Chong of Jeffries.

Unknown Executive: Last quarter, I've mentioned that the average age of BD users have reached 25 years old.

Unknown Executive: And that brought a lot of change in terms of the wealth and depth of our content offerings.

Unknown Executive: As the users need evolve, we've noticed that in our community, there emerged many new content categories.

Unknown Executive: And for Bilibili, we're not only a hub for young people's inches and hobbies, but also a commonplace for their lifestyle consumption.

Unknown Executive: This is evident in the evolve of our content consumption data as young generation entering to new stages of life.

Unknown Executive: The category related to their consumption are growing rapidly on Bilibili. For example, in the second quarter, VD views in the categories such as home decor and real estate, also motives, fashion beauty increased by 39, 43 and 30% year over year respectively.

Unknown Executive: As I mentioned in the advertising question, the daily video views for baby and maternity category experience a year over year increase of 80%.

Unknown Executive: And this is a natural outcome for our user's average age to evolve into 25.

Unknown Executive: The average age of 25 meaning about a half of our users above 25 and those generations or those demographics naturally have wider interest and consumption needs and they seek out on Bilibili.

Unknown Executive: [inaudible] as a content format as a content format With talk about the emerging content carry, now let's take a look at our traditional leading content categories and young generations interest.

Unknown Executive: And the second quarter of VD views in the game's knowledge and tech categories, also over 20% year-over-year gross, which are 21, 29, 29% year-over-year gross rate respectively.

Unknown Executive: This means we have established a very strong line that among generations where they seek out interest-based content.

Unknown Executive: And speaking of games two days ago on the day of Blackness, Wu Kong was released, there are tens of thousands of users are life-streaming their game experience on Bilibili.

Unknown Executive: This is quite spectacular across the game history.

Unknown Executive: And on that day we saw over two million p-concurrent user watching the dark-knit Blackness that the interest-based content verticals.

Unknown Executive: We've always said that the evidence to show a community's competitiveness is the ability to continue to produce good and new content. And we think we have already proved that over the past 15 years, Bilibili has the ability and the power to continue to expand its content operates horizon and content categories.

Unknown Executive: Thank you.

Unknown Executive: Up for your next question please.

Xueqing Zhang: Next question comes from the Liao Sui Ching Zhang from CIPC.

Xueqing Zhang: Please ask your question.

Xueqing Zhang: Thank you, Bilibili.

Xueqing Zhang: Thank you for your question.

Xueqing Zhang: Thank you, Bilibili.

Xueqing Zhang: I'd like to ask you a question for Bilibili.

Xueqing Zhang: My question goes on financial outlook.

Xueqing Zhang: The company delivered a continual margin of extension and a robust tier cash flow is caught up.

Xueqing Zhang: And the commission will share with us the outlook for the financials in the second half of 2024.

Xueqing Zhang: Looking at the third quarter, we will work even on a profit.

Xueqing Zhang: And there was a need to long-term profitability outlook.

Xueqing Zhang: Thank you.

Xueqing Zhang: Let me take your question.

Unknown Executive: Our financial performance in the second quarter demonstrates our banish model has great potential for increasing the growth profit margin. In Q2, our overall revenue grew by 16% while growth profit increase significantly by 49% over year. The growth profit margin increased nearly 7% points over year, on 23% to nearly 30%.

Unknown Executive: The eighth concept of growth of margin improvement.

Unknown Executive: This will primarily due to our ability to control costs when it should rapid revenue growth.

Unknown Executive: With the continuing growth of our high margin advertising and the game business, there's still substantial realm of further improvement for our growth margin.

Unknown Executive: Additionally, it was noting that our operation can slow for the first half of the year with 2.4 billion RMB and our cash flow reached 1.5 billion RMB.

Unknown Executive: This indicates that our banish had entered into a positive cycle.

Unknown Executive: Looking ahead to our financial performance in Q3, we see that the deferred revenue balance increased by over 770 million RMB quarter of a quarter, laying a good foundation for the third quarter of revenue growth.

Unknown Executive: We expect the revenue from our games and advertising banish to maintain strong growth momentum, along with the significant cost of the quarter growth in growth margin.

Unknown Executive: At the same time, in addition to achieving our initial growth of growth even in Q3, we now aim to achieve meaningful operating profit on the gap basis.

Unknown Executive: Meanwhile, we are delighted to see solid growth across our core business lives. Our growth momentum, along with the prudent cost and expense management, will lead us to continue expanding our revenue scale and the profitability in 2025, resulting in ongoing improvement in our operating market.

Unknown Executive: Thank you.

Unknown Executive: Next question please.

Unknown Executive: Thank you.

Unknown Executive: The next question comes from Ji Wen Zhang from China Renaissance.

Unknown Executive: Please go ahead.

Unknown Executive: So thanks for taking my question, my question regarding AI application, commitment discussed about how can we apply AI, AI, multiple users, and ability, and a secure potential.

Unknown Executive: Thank you.

Unknown Executive: We are very happy to have the most extensive and highest quality AI content across the internet.

Unknown Executive: I think the reason behind that is, a most-door user receives higher education background and they are based in the first and second-tier city, who are curious?

Unknown Executive: Based on our internal data that for the first half of this year, on monthly average over 80 million users are watching AI-related content on billy-billy.

Unknown Executive: And for those AI-related content, not just a one word for 15 second headlines, many of those content have extensive professional content in depth discussion in AI.

Unknown Executive: The second thing is that AI is the highest quality of AI content across the internet.

Unknown Executive: The third thing is that AI-related content across the internet is the best way to use Google.

Unknown Executive: That results in three, the most AI platform for Bilibili.

Unknown Executive: First most is that we believe we have the most user who are genuinely interested in AI content.

Unknown Executive: And second most is we have the most AI professionals active on Bilibili.

Unknown Executive: Lastly is a 90% of the domestic AI companies have set about towns and get in touch with Bilibili users on Bilibili.

Unknown Executive: Because I just said that the advantage of the natural environment is that we are indeed more advanced in the AI platform.

Unknown Executive: For example, we have created a lot of AI content in Bilibili.

Unknown Executive: Because the high concentration and condensity of AI content and user gives us a natural advantage in explore AI application.

Unknown Executive: And as a platform, generally we see many of the users initiate their attempt in connecting AI with their content creation.

Unknown Executive: Back in 2023, there was a user who used the AI tools to mimic a famous famous singer's voice singing song in her original voice.

Unknown Executive: And that actually triggered the original singer to come out and say this she support this type of creation and welcome user to use it.

Unknown Executive: For example, this year we saw a large amount of AI content in Bilibili.

Unknown Executive: There are also a lot of AI tools and AI tools in Bilibili.

Unknown Executive: And for this year with various many AI powered music creation, AI powered animation, AI short plays were being released on Bilibili. Our operation team has even made an AI short play competition and attracting a lot of users to participate.

Unknown Executive: And we also added some tools in our own creative work.

Unknown Executive: This is also a welcome to our app.

Unknown Executive: And in terms of our own content creation tools, we have leveraged and implemented AI and our AI creation tools.

Unknown Executive: And this is very beneficial from a content supply perspective.

Unknown Executive: And we also use AI directly to enhance our user experiences as if now we have opened that the AI assistant and AI search to all of our users because we have a large amount of not based review based content.

Unknown Executive: You can ask our AI assistant or AI search to summarize the keywords and key messages of videos.

Unknown Executive: And this is very helpful and efficient for a user who wants to get a quick summary of our content.

Unknown Executive: There are also some very practical tools such as AI translation and our AI translation, because it can really translate some of the content.

Unknown Executive: For example, some of the content that we use is not translated.

Unknown Executive: And there are two more examples of our AI tools.

Unknown Executive: One is AI translations.

Unknown Executive: Our AI translation tools can help to translate many different languages such as the TV.

Unknown Executive: We have a content creator from Tibet.

Unknown Executive: The local language and our AI assistant can help him to translate into Mandarin. And we also have a tool called AI assistant.

Unknown Executive: While playing a video, if you don't have time to watch the whole thing, you call up on the AI assistant.

Unknown Executive: The AI assistant will summarize into a short article to tell you what this video is about and the overlay that outlined the key points of that video, all of which we believe will effectively help our user to improve their user experience.

Unknown Executive: After that, I think that AI is a technology that has been established.

Unknown Executive: I think that all the platforms and all the users of AI will be affected by technology progress.

Unknown Executive: So, it is not a technology that is in a platform or a company's internal environment.

Unknown Executive: We are also in the field of AI, we think our own positioning is a platform.

Unknown Executive: Then we are going to use AI technology to bring some value and income.

Unknown Executive: We are also going to cooperate with the platform and share their value on the platform.

Unknown Executive: So, we are in the field of AI, we are going to cooperate with many investors in the AI company.

Unknown Executive: We always believe that AI should be a technology that benefits everyone, including users and platforms.

Unknown Executive: And I believe that development of AI requires a joint effort of multiple numerous companies to reach its full potential.

Unknown Executive: Rather than a company doing the research in AI with and itself in a closed loop.

Unknown Executive: So, as a platform, we always see a very proactive and open attitude.

Unknown Executive: We are already working with several leading domestic AI company on virus fronts.

Unknown Executive: And we believe that with our joint efforts, we can bring user better experience.

Unknown Executive: And for those partners, they can also unleash their full potential and value with delivery and our users.

Unknown Executive: For example, we are currently working with the AI technology that we are currently working with.

Unknown Executive: For example, we are also looking forward to working with many AI companies to bring better energy to our users.

Unknown Executive: And as many of you might notice that our AI generated video capabilities is through our partnership with a leading AI company.

Unknown Executive: And we expect to continue risk collaboration with various partners.

Unknown Executive: And through this partnership, we aim to bring better and more efficient and more creative experience to our users.

Unknown Executive: Thank you.

Unknown Executive: That concludes today's answering session.

Unknown Executive: Thank you.

Unknown Executive: Thank you once again for joining Billy Billy's second quarter, 2024 financial results and business update conference calls today.

Juliet Yang: If you have any further questions, please contact Julet Young, Billy Billy's Executive IR Director, or Pay Sunday Financial Communications. Contact information for IR in both China and the US can be found on today's press release.

Unknown Executive: Thank you and have a great day.

Unknown Executive: Zhang, Zhang, Li, Xueqing Zhang[inaudible]

Q2 2024 Bilibili Inc Earnings Call

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