Q1 2025 Bilibili Inc Earnings Call
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Speaker Change: Good day, and thank you and welcome to the Bill I believe first quarter 2025 financial results and business update conference call.
Speaker Change: Today's conference is being recorded at this time I would like to turn the conference over to Juliet Yang Executive Director of Investor Relations. Please go ahead.
Speaker Change: Thank you operator during this call well discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today.
Speaker Change: Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong stock exchange. The non-GAAP financial measure will provide are for comparison purposes only.
Speaker Change: The definition of this measure and a reconciliation tables are available in the news release, we issued earlier today as a reminder, this conference is being recorded in addition, an investor presentation and a webcast replay of this conference call will be available on the durability IR website at IR got there a bit.
Speaker Change: Dot com.
Mr. Chen: Joining us today from <unk> Senior management are mixture right Chen chairman of the board and Chief Executive Officer. Its colleagues Lee Vice chairwoman of the board and Chief operating Officer, and not sure Sam Fan Chief Financial Officer, I will now turn the call to Mr. Chen.
Speaker Change: Thank you Juliet.
Speaker Change: Thank you everyone for joining us today to discuss our 2025 first quarter results we.
Speaker Change: We started 2025 on promising ground delivering solid financial results and healthy community development in the first quarter.
Speaker Change: Our total revenues accelerated year over year, increasing by 24% to RMB 7 billion do you have.
Speaker Change: By strong performances in our high margin advertising and games businesses.
Speaker Change: Advertising revenues were up 20% year over year to RMB 2 billion.
Speaker Change: Supported by our ongoing product enhancements and infrastructure upgrades.
Speaker Change: Fueled by the sustained popularity of our F. L Gs hydro.
Speaker Change: Our games revenues also rose, 76% year over year to RMB 173 billion.
Speaker Change: The continued top line expansion in these high margin businesses combined with operating efficiency.
Speaker Change: Bided us with greater operating leverage.
Speaker Change: In the first quarter, our gross profit increased by 58% year over year with gross profit margin expanding to 36, 3% up from 28, 3% in the same period last year.
Speaker Change: As a result, we sustained positive adjusted net profit of RMB $362 million.
Speaker Change: And narrowed our GAAP net loss by 19, 9% year over year in the first quarter.
Speaker Change: While further strengthening our financial performance, we continue to grow our community and enhance user engagement.
Speaker Change: The successful collaboration with Cctv's Chinese new year Gala also helps bring the PDP the name to a broader audience.
In the first quarter <unk> reached $107 million and May use climbed to a new high of $368 million.
Speaker Change: Meanwhile, our compelling and diverse content drove users average daily time spent to a record 108 minutes.
Speaker Change: And that small Billy Billy will turn 60 looking.
Looking back it has been an incredible journey.
Speaker Change: One that is truly unique over.
Speaker Change: Over the years, our community has grown tremendously.
Speaker Change: What is most remarkable is that the sense of connection between users and creators and the welcoming inspiring bot that define Billy Billy has stayed the same.
Speaker Change: Over this time, our users have grown with us too.
Speaker Change: Today, the average age of our active users is 26.
Speaker Change: Stage, where consumption needs and purchasing power are both on the rise.
Speaker Change: As the go to platform for Gen Z plots to discover high quality.
Speaker Change: As video content in China, we are in a great position to meet their evolving needs and unlock even more monetization opportunities.
Speaker Change: With that overview.
Speaker Change: Let's take a closer look at our core pillars of content.
Speaker Change: Community and commercialization.
Speaker Change: Beginning with content and community.
Speaker Change: As we look at today's video landscape it.
Speaker Change: It is clear that people have more content than ever, especially with the explosion of short videos.
Speaker Change: But what really stands out is that people are craving.
And spending more time on high quality content.
Speaker Change: Absolutely believe.
Speaker Change: That has always been our focus.
Speaker Change: We have built a community known for the best content out there and we will keep prioritizing and promoting quality above all else.
Speaker Change: This commitment is showing up in our numbers.
Speaker Change: In the first quarter user spends an average of 108 minutes on our platform every day.
Speaker Change: Compared to 105 minutes in the same period last year.
Speaker Change: Marking a new record.
Speaker Change: Our monthly paying users also reached an all time high of $32 million.
Speaker Change: As our users discover and connect with more quality content they love.
Speaker Change: Monthly interactions, where nearly $16 7 billion in the first quarter.
Speaker Change: And our official member count reached $264 million by the end of Q1.
Speaker Change: Up 12% from last year.
Speaker Change: On top of that there are 12 month retention rate stayed strong at around 80%.
Speaker Change: Quality of our content is also showing up in our content categories.
Speaker Change: Our core ACG content continues to thrive and our game content is a great example.
Speaker Change: In the first quarter game related watch time increased 14% year over year, sorry in both long time fans and new gamers, who comparability for reviews walk throughs and game IP content.
Speaker Change: S. Gen Z plus users mature.
Speaker Change: And their spending power increases.
Speaker Change: Many are turning to Billy Billy with real purchase intent looking for trusted unbiased recommendations.
Speaker Change: That is reflected in our travel and lodging.
Speaker Change: In home appliance related content.
Speaker Change: With watch time growing by over 20% year over year in Q1 <unk>.
Speaker Change: Additionally, being the hospital curious minds and the best knowledge video Library, we saw a big surge in our AI related content.
Speaker Change: More young people are coming to ability to explore and learn about AI and AI related watch time more than doubled from Q1 last year, along with a 400% increase in advertiser demand.
Speaker Change: All of this is our amazing creator community.
Speaker Change: By the end of Q1, the number of creators with over 1000, 10000 100001 million followers, all grew by more than 20% year over year about.
Speaker Change: About $1 5 million creators made money on Billy Billy during the quarter.
Speaker Change: Not just through us or live streaming, but also by using our e-commerce tools and various fund support programs.
Speaker Change: In fact creators total income from our fans marketing program was up over 200% in Q1, showing how users truly appreciate and are willing to pay for quality content.
Speaker Change: Lastly, our partnership with CCTV for the Chinese new year Gala gave us a big boost in brand awareness.
Speaker Change: It's both attracted new users and strengthened engagement with our existing communities.
Speaker Change: What's more.
Viewers can now revisit all the past Chinese new year gala right here on delivery.
Speaker Change: It's another Great example of how we curate for quality content and deliver value through our unique community.
Speaker Change: Meanwhile, our self produced Chinese economy, the tails off hurting got more than he was well received.
Speaker Change: <unk> had over $560 million deal, so far and it's showing strong potential to become Billy belief, that's the long lasting nanometer IP.
Speaker Change: We also released our self produced title to be hero apps to be unusual.
Speaker Change: Worldwide in April a quickly gained attraction ranking number one on my enemy list for best spring titled 2025.
Speaker Change: Now, let's talk about our commercial businesses and their progress.
Speaker Change: Our advertising business continued to deliver solid results in the first quarter with revenues growing 20% year over year to RMB 2 billion.
Speaker Change: As Ara users mature and have more spending power they increasingly look to Billy Billy for content that informs their lifestyle and consumption choices.
Speaker Change: This trust within our community and the influence of our quality content have become powerful drivers for advertisers.
Speaker Change: In the first quarter, the number of advertisers, placing orders on our platform increased by more than 35% year over year.
Speaker Change: Meanwhile, we have been integrating a large language model to help us better understand the users' interests and commercial intent, enabling more accurate at targeting and smarter at delivery.
Speaker Change: We also upgraded our AIG see our content and tools to help advertisers generate more tailored and effective other titles and the coverage at scale, allowing them to reach users more efficiently through compelling and user friendly storytelling.
Speaker Change: These enhancements have fueled the growth of our performance based advertising, which grew by over 30% year over year in Q1, while grant and native ads continue to show steady momentum.
Speaker Change: Industry wise, we strengthened our position in core verticals, while we're attracting more advertisers from emerging sectors.
Speaker Change: In the first quarter, our top five verticals, where games Internet services E Commerce digital products and home appliances and automotive.
Speaker Change: By our vibrant and highly engaged the gaming community.
Speaker Change: Gaming App continued to contribute a strong share of our AD revenues with new formats like Billy Billy Mini games driving additional growth.
Oliver: Oliver we saw a notable increase from sectors targeting younger consumers.
Speaker Change: They enter new life stages with evolving needs.
Speaker Change: In the first quarter AD revenues from home appliances, and decorations grew by nearly 40% year over year.
Speaker Change: Similarly, AI related AD revenues surged by 400% year over year, reflecting deliveries growing appeal to emerging industries looking to engage our young high value user base through innovative AD formats, turning to our game business game revenues rose by 76% year over year to RMB.
Speaker Change: $1 73 billion.
Speaker Change: The ability to the continued strong performance of our <unk> title.
Speaker Change: Suncor molding sandals.
Speaker Change: Meanwhile, our legacy ACG titles.
Speaker Change: And <unk> continued to deliver stable revenues and demonstrated impressive longevity in the first quarter.
Speaker Change: We are encouraged to see that funnel is evolving into a long cycle title with enduring appeal.
With our expanded game development capabilities and upgraded gameplay some old active users and engagement in season seven improved from previous seasons demonstrating.
Speaker Change: Demonstrating the game's continued draw for core S. LG players.
Speaker Change: On May 31, we will kick off season late marking the game's biggest update since its initial launch.
Speaker Change: This highly anticipated anniversary edition will include a refreshed map new characters and the special in game events.
Speaker Change: These updates enhance the gaming experience and are designed to attract more younger players to the S. L genre.
Speaker Change: We expect this launch to Mark a meaningful milestone in samples continued growth and long term success.
The momentum behind funnel also highlights our gaming community strength and our ability to build differentiated experiences that resonate with diverse player groups.
Speaker Change: In addition to some old international launch later this year, we have several new games in our pipeline awaiting approval.
Speaker Change: As we expand our game portfolio.
Speaker Change: We are focused on creating titles with lasting value by leveraging our leadership in the gaming space.
Speaker Change: To re imagine gameplay for the next generation of gamers.
Speaker Change: And finally, let's look at our V. A S business.
Speaker Change: Revenues from our <unk> business.
Speaker Change: Creased by 11% year over year to RMB 281 billion.
Speaker Change: Our live broadcasting business regain the momentum during the first quarter fueled by the supply of more quality content and more paying users.
Speaker Change: We also further refined our operations and incentive plan.
Speaker Change: Which led to a meaningful improvement in the businesses margin profile.
Speaker Change: We are also unlocking more value from our broader V. A S portfolio.
Speaker Change: Josie plus users show a strong willingness to pay for content they care about.
By the end of the quarter premium memberships exceeded $23 5 million with over 80% on annual or auto renew plant's a clear sign of user loyalty.
Speaker Change: Revenues from our franchising program search to by over 200% year over year higher.
Speaker Change: Highlighting the potential of our direct will create a monetization tools.
Speaker Change: And lastly, while we are making solid progress on our commercialization efforts. We are also staying true to our role as a responsible cultural brand and corporate citizen.
Speaker Change: In April we published our 2020 for ESG report sharing the steps, we are taking to create social value and build a more sustainable business.
Speaker Change: We are proud to have received an a rating from MSCI for our ESG performance.
Speaker Change: While we keep growing our ecosystem with high quality content. We are also committed to pushing the industry forward through innovation, both in technology and storytelling.
Speaker Change: While continuing to spread positive energy and making a real difference in society as.
Speaker Change: As we move through the year, we will focus on advancing our commercialization capabilities with more enhanced and efficient commercial offerings.
Speaker Change: At the same time, we will continue promoting high quality content that defines our vibrant community.
Speaker Change: In addition, we are actively embracing gen AI to optimize user experience monetization efficiency and unlock new growth opportunities.
Sam: With that I will turn the call over to Sam to share more financial details.
Speaker Change: Sir Please go ahead.
Speaker Change: Thank you Mr. Chen Hello, everyone. This is Sam in the interest of time on today's call I will review, our first quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results in the first quarter, we accelerated revenue growth and further expanded our margins.
Speaker Change: By the strong performance of our high margin games and advertising businesses, while sustaining positive non-GAAP net profit.
Speaker Change: Total net revenues for the first quarter were RMB 7 billion up 24% year over year.
Speaker Change: Our revenue breakdown by revenue stream for Q1 was approximately 40%.
Speaker Change: 29% advertising, 25% mobile games, and 6% from our IP derivatives and other businesses.
Speaker Change: Our cost of revenues increased by 10% year over year to RMB 446 billion in the first quarter, while our gross profit rose 58% year over year to RMB 254 billion. Our gross profit margin reached 36, 3% in Q1 compared with 28, 3% in the same period last year.
Speaker Change: Our expanding gross profit and margin and show, how well our model adapts and scales as the business grows.
Speaker Change: Our total operating expenses increased 4% year over year to RMB, two $5 2 billion sales and marketing expenses increased 26% year over year to RMB 117 billion.
Speaker Change: The increase was mainly due to a one off marketing expense related to our partnership with CCTV for the 2025, Chinese new year gala and higher year over year promotional expenses for our <unk> game symbol <unk>.
Speaker Change: G&A expenses were RMB $516 million down 3% year over year.
R&D expenses were RMB 841 million down 13% year over year, mainly related to R&D efficiency improvements.
Speaker Change: These efforts allowed us to maintain positive operating results. Our operating profit was RMB $15 million and our adjusted operating profit was RMB 342 million, both compared with losses in Q1 2024.
Speaker Change: We also maintained a positive adjusted net profit of RMB $362 million versus a loss in the prior year period, and we narrowed our GAAP net loss by 99% year over year to RMB $11 million, our adjusted net profit ratio in the first quarter was 5% compared with an adjusted net loss ratio of 8% in the same period a year ago.
Speaker Change: Cash flow wise, we generated over RMB, one 3 billion in operating cash flow in the first quarter.
Speaker Change: As all of the 31st of March 2025, we had cash and cash equivalents time deposits.
Speaker Change: Short term investments of RMB, 17, 4 billion or USD, two 4 billion. Thank you for your attention we would now like to open the call to your questions. Operator. Please go ahead.
Speaker Change: We will now begin the question and answer session to ask a question. Please press star one on your telephone and wait trend name to be announced.
Speaker Change: For the benefit of all participants on today's call. If you wish to ask questions to management to Chinese please see <unk> repeat your questions in English the company will provide <unk> to petitions for management statements during the Q&A session.
Speaker Change: Please note that English interpretation is for convenience purposes only.
Pace of any Kubinski managements statements in the original language will prevail.
Speaker Change: One moment for the first question.
Speaker Change: Our first question comes from Lincoln, calling from Goldman Sachs. Please go ahead.
Lincoln: Hey, good morning, just a works right.
Is that how I'm getting basically yes, yes.
Lincoln: No what it wouldnt see.
Speaker Change: Good morning, Nathan Andrew Clark.
Lincoln: First on particular parts here recently.
Lincoln: Originally.
Lincoln: Okay.
Lincoln: Yes.
Lincoln: <unk> seen with Jack.
Lincoln: Sure.
Lincoln: Sure.
Lincoln: Okay got it.
Lincoln: Of course, you have somebody that's exactly true Scott.
Speaker Change: Alright. Thank you you mentioned and for taking my question. So congrats on a very solid first quarter results.
Lincoln: So my question is about the content I think last quarter.
Speaker Change: And when you mentioned about <unk>.
Speaker Change: Hey, how is building our quality content. So what's our specific plan this year to increase the user mindset.
Speaker Change: Quality content and then in terms of applications is there any progress or specific.
Speaker Change: Raw, where should we expect thank you.
Speaker Change: Okay.
Speaker Change: So youre seeing the Codell on industrial incinerator, Hugo South of Us shifting English, Rhode Island, which together should be layered on.
Speaker Change: Yes.
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Speaker Change: No the autoclave thats another half potash Hudson grandfather in Q3 to her cancer not okay.
Speaker Change: Rahul would you listen the thought that the shipping cut larger share youll ensure the needle in Jakarta.
Speaker Change: Hydro Sir.
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Speaker Change: Can you tell you ship a selfie.
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Speaker Change: There you go.
Speaker Change: I think we are in an era, where there is too much content, especially where the short video content is becoming increasingly abundant, especially for example, you can even launched shortly content shopping apps.
Speaker Change: And while we have a service that user or not lacking in content to watch rock there. They are seeking high quality content and what we observe is that user of dedicating more time to engage with premium quality content the growing demand for quality content mirror that.
Speaker Change: <unk> in consumer habits.
Speaker Change: Willing to pay more pay for content that brings them a sense of fulfillment and quality.
Peter: Sure Peter Egencia there you go.
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Speaker Change: Diesel teams in the Eagle Ford I'm quite happy with it but she does you don't need it.
Speaker Change: Let's see the needle needle since youre.
Speaker Change: So yes, those are cheaper year undergo to figure out does that.
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Speaker Change: Shifting people share the thing that took us to that woman on Gulf go harder.
Speaker Change: Which helps you to do that with us in Asia.
Speaker Change: Quality content.
Speaker Change: What we have been focused on and stand for <unk>.
Speaker Change: <unk> is probably one of the biggest.
Speaker Change: Plot content for it.
Speaker Change: That hurts the high quality content standards.
Speaker Change: And when people come to believe what they are consuming.
Speaker Change: And for a long time since it says if the film and not for our shortened stimulation or a hormone driven type of dissatisfaction.
Speaker Change: This will help visibility to stand and thrive in the next era of it.
Speaker Change: The competition to.
Speaker Change: So I'm kind of through either Fuji Tony Alethia women kill you either.
Speaker Change: Jim question, What's your house, if adding Bob and Don.
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Speaker Change: We'll wait for this year why don't they don't forfeit top leagues Homeaway to have certainly you got similar you've got some lift.
Speaker Change: This is showing in our Q1 data for example in Q1. The average daily user time spent reached a historical high of 108 minutes.
Speaker Change: <unk> user are increasingly willing to pay for premium content, our average monthly paying user hit a new record of $32 million and revenue from our fan charging feature over 200% year over year and this is all highlighting the potential substantial.
Speaker Change: Substantial revenue.
Speaker Change: In video platform, which is P project Rock Creek paying for content that they love and care about.
Speaker Change: It will depend on their home countries attention to the usual in order to the time to do it.
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Speaker Change: The opportunity set.
Speaker Change: These doesn't go quarter come to the rollout of the chip.
Speaker Change: Quality will stand for a place that even bigger and more important role in our strategy into 2025, we will continue to position high quality content as when it believes is most important attributes will also help our content creator the talented <unk>.
Speaker Change: Tim creator to gain fans more quickly and also receive better months monetary rewards.
Speaker Change: I hope.
Speaker Change: So you said it all in there on the European leg.
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Speaker Change: How much of the homebuilders out here these are cyclical.
Speaker Change: <unk> salvation, whether you order they only get rid of it all.
Speaker Change: Upholding high quality standards, we can feed the strategy working from the content category development.
Speaker Change: First of all on.
Speaker Change: Core core ACG content Pan knowledge content and its gradually evolving into.
Speaker Change: Lifestyle and consumption related all of this content categories are thriving and expanding daily dose.
Speaker Change: Paul.
Speaker Change: <unk> got water.
Speaker Change: Peter.
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Speaker Change: You don't have Colorado, Utah aboard and should I'll tell you even with all the talk about touches or would you sort of boil how the ultra narrow.
Speaker Change: Right.
Speaker Change: For me personally I learned great knowledge and consumption related.
Speaker Change: Advice on visibility such as how to wash and does that cover.
Speaker Change: Copper and how to pick up right. So far this is very easy and transparent.
Speaker Change: To the continental building be Super helpful and sit down I do I'm, putting their own oil high blood sugar.
Speaker Change: With the Zika solo film, Georgia.
Nathan: Hi, Nathan.
Nathan: Women will color the totality of the wheel you go but are you back.
Speaker Change: Optimal therapy.
Speaker Change: I think thats when D&O solar orders Hawala Ebola.
Speaker Change: The hard part of a demonstration.
John: Sure John.
Speaker Change: Yes.
Speaker Change: Absolutely.
Speaker Change: The dawn.
Speaker Change: Sure Tyler.
Speaker Change: Guangdong SaaS and valuable knowledge into other illustrates the Yougov said about household took ocean passionate low quarter I think the third quarter financial analysts yet.
Speaker Change: In addition to the content category involvement. We also seen we are also providing various monetization avenues to help our quality content creators to make more money. For example last month I discovered this content creator with less.
Speaker Change: <unk> 1 million followers made over 1 million RMB in the months to fend charging program and he.
Speaker Change: Knowledge sector content creator, even though what he is talking about is claim each and professional probably won't bring him a lot of followers, but if you do something really good in the segment category. You can also earn a lot of London appreciation in EBIT margin.
Speaker Change: Rewards on debit and leads through our monetization avenues.
Speaker Change: We're always trigger shrimp internally.
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Speaker Change: <unk> had higher well, yeah that real quick.
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Speaker Change: <unk> top selling attached.
Speaker Change: Video content become a necessity in term.
Speaker Change: Spiritual consumption, we discovered that the quality video in the longer term growth.
Speaker Change: Gradually pickup in potential and shell.
Speaker Change: Showing great value probably for people, who just access have the access to short video content.
Speaker Change: Two the video content he might be attracted to this.
Speaker Change: Very short stimulative content in a short period of time, but over a longer time horizon lets say five years people would naturally choose content that green, Denmark, and Celsus film and those quality content. That's why we have.
Speaker Change: <unk> and will continue to focus on promoting quality content.
Speaker Change: Client.
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Speaker Change: With a meaningful award Youll.
Speaker Change: Hi, guys.
Speaker Change: Qdoba through a tornado latonia and lotions that.
Daniel: So you'll generate on language English again is from Daniel.
Daniel: Shallow water you have your total hydro tornado year.
Daniel: So the answer to that.
Daniel:
Daniel: We're gonna warmer.
Daniel: One will create 500 pjs.
Daniel: The potential trade out the.
Daniel: <unk> shipped in the quarter tire sure.
Daniel: With regard to that I'll, let you go through an issue in the third.
Daniel: <unk> I think the team good Youll geological full Q2.
Daniel: AIG and attaches forget everything else.
Daniel: Lastly, I wanted to touch upon.
Daniel: The high quality content combined with the AI can bring great potential to our business.
Daniel: First of all is that.
Daniel: The quality content.
Daniel: 10 10 times.
Daniel: From early 2000 till now we can easily see that we will meet the quality content, Ken Mis and continue to produce value.
Daniel: Currently with the evolution of Nautilus hinges on access to high quality training data and be their daily happens to own the worlds largest respiratory.
Daniel: Chinese video content the high quality video content data will provide us a very unique and advantageous position in the time.
Daniel: AI.
Daniel: Made ed opportunity whats Youre seeing and as you listen I'm watching but it's not at all.
Daniel: She is a leading insurer to go haul attention to her.
Speaker Change: Some of you might have touched all of us are either Pfizer.
Speaker Change: Of course, you cannot see that tenure in that you don't view yet.
Daniel: Sure.
Daniel: I'd also emphasize how how to achieve about relative as a new Google <unk>.
Daniel: <unk>, which all cordova horrible pregnancy.
Daniel: Payments, you've only seen that owns it.
Daniel: So I'm not sure you go to attitude on charter to <unk>.
Daniel: With Eagle in Desert Beasley, who also have hundreds of women Doescher Alejandro finished the culture dominate with shifting the culture.
Daniel: <unk> share that hurdle.
Daniel: <unk> since it out tushar.
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Daniel: Which is obtained.
Daniel: So his hunting what really to serve the same type of electronics.
Daniel: And <unk>.
Daniel: Currently I would say the <unk>.
Daniel: <unk> has great computing power and influence and power and all of the historical tax space.
Daniel: The tech space.
Daniel: <unk> Corpus has already been provided to the.
Daniel: Various different models, but can they generate something new and provide creative and additional information is.
Daniel: But all of the video manufacturing trying to resort and from that aspect.
Daniel: <unk> stands a great advantage because our video content carries much more dense set its information for example, when I asked our own AI model, which rich mobile phone can take a better human portion of it.
Daniel: And our AI model can analyze the historical video and video data.
Daniel: Summarizing subtract the right information to provide me with that solution and this is something <unk> really only bill Bill can do without with Illinois, Yes, Hi, Alex.
Daniel: Has something easier power Jack the only Hagen, who the people are engaged at all so lithium for the fire. So currently either does or the heart.
Daniel: Sure sure somehow yoga culture download coaching leadership team here.
Daniel: So what does that tell you data set.
Daniel: Yeah.
Daniel: Should that how should we look at really the ocean.
Daniel: Well.
Daniel: Probably I can save a lot.
Daniel: Text based messages online as of now, but it's still a long way for AI to produce a high quality reliable trustworthy video content and from that perspective visibility holds a very valuable data asset on that.
Daniel: With that I'll just repeat that.
Speaker Change: China pathogens as needed on the teams on leisure search engine or sort of usual.
Daniel: What youll see.
Daniel: Sure sure sounds Glenda is yielding.
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Daniel: They ask for that.
Daniel: 100, <unk> partners here.
Daniel: Got it out on their own she told me a heart.
Daniel: No matter, how does sound all users to hear later on the jobs.
Speaker Change: Thank you.
Speaker Change: As you say <unk>.
Speaker Change: And deliberately holds a unique and.
Speaker Change: Leading offerings in cabin is certain content categories, such as animation gaming and knowledge and this.
Speaker Change: With the help of AI translation, we can easily multiple multiply those values into multiple language and unleash much greater potential and value of that content categories.
Speaker Change: Yes.
Speaker Change: We've done <unk> powerful yet simple should automatically triggers award J Gallagher would your cellular <unk> tissue that torture without it.
Speaker Change: And also from a commercial aspect I can also help us to improve our commercialization.
Speaker Change: Efficiency can you elaborate on that in the later question is understanding.
Speaker Change: That concludes Mr. Chen's answer operator next question. Please.
Speaker Change: One moment for the next question.
Stretching Chung: Our next question comes from stretching Chung from CIBC. Please go ahead.
Stretching Chung: Hey, guys good morning.
Speaker Change: Sure Ghansham, Australia, two agenda is about yes.
Stretching Chung: Now what Lindsay <unk> Yoshida.
Stretching Chung: It's almost <unk> SaaS and <unk>.
Stretching Chung: I hope I know, what you're for Novartis Amaya Johnson in yellow.
Stretching Chung: Ensign abandoning ocean magic.
Stretching Chung: No.
Stretching Chung: Canberra shop on Yea or shield is essential.
Stretching Chung: Youll see pipelines should company and Ccs.
Speaker Change: Thanks for taking my question My question <unk> business management.
Stretching Chung: Management will deal with the performance of Sam Moore, <unk>, six and seven.
Stretching Chung: <unk> has been launched for one year in June.
Stretching Chung: What are your expectations was it anniversary of aversion hot.
Stretching Chung: How does management deal that goes through it after the game business in the second half of the year.
Stretching Chung: Year and whats your okay. Thank you.
Stretching Chung: Okay.
Stretching Chung: Most of the assembled so it's only out Eagle <unk> chalk area.
Stretching Chung: I'll walk in summertime.
Stretching Chung: Carefully.
Stretching Chung: Yes sure.
Speaker Change: The Hollywood trade promotion, although you got a ton silver Eagle Roseland.
Speaker Change: Hopefully the hydro Nagel will do it took us almost they also addresses all of ammonia and <unk>.
Stretching Chung: With gender.
Nicole: Sure Nicole.
Pasha: We'll see you on that goes home in Oregon, Southern Connecticut Pasha.
Pasha: <unk>.
Stretching Chung: The most critical important Gulf assemble all three operations team.
Stretching Chung: To achieve our long term healthy operation with a leased.
Stretching Chung: Our five year or longer lifecycle and user attention has.
Stretching Chung: Something that I care most about in.
Stretching Chung: Also the most important topic every time, we have a staff meeting on this game operation My Ultimate goal is to help.
Stretching Chung: Help sangamo to become.
Stretching Chung: Game that gamers can play for a lifetime.
Stretching Chung: Firstly to invest some more suddenly all goes how hanging there you go.
Stretching Chung: While many of her first on maintenance.
Stretching Chung: Maybe you could size it.
Stretching Chung: A little bit.
Stretching Chung: Controlling system or you can say to you don't shoot.
Stretching Chung: Quarterly oncall teach with easier for Egypt.
Stretching Chung: The season based game system as one of the most important.
Stretching Chung: Mechanism to help this gain to sustain our long term up probation every game season, we listen very carefully about users' feedback and adapt to add into the next game design and promotion.
Stretching Chung: Or is it.
Speaker Change: Santander efforts, either short or long.
Speaker Change: So at Dania and Oakwood Cingal.
Speaker Change: Two receiver geography kind of award should.
Speaker Change: <unk> is totally you got to have gaijin, Walmart who are seeking liquidity.
Speaker Change: As matter of fact, the first day of game season, seven marks the highest.
Speaker Change: Odd daily.
Speaker Change: Record.
Speaker Change: In the year of 2025 and also represents how we are incorporating each new season to optimize the game design and attract and retain users.
Speaker Change: Two thirds of the tongue hanging in Guangdong.
Speaker Change: Until we can go three youll see their own team tightly hyacinthie assemble the yugo quarterly.
Speaker Change: <unk> already got hot Equatorial viewers, all your woman's edge handlers against northern Eagle to her PDD warranty cause he's assembled the Eagle Ford Eagle Ford on Petro to Repower. The CAGR lateral the hunter was partially a function.
Speaker Change: Q4.
Speaker Change: As one needs the largest gaming content community in China.
Speaker Change: The visibility community itself empowers the long term operation of funnel. For example, we did a joint marketing campaign with some more with the leading game streamers.
Speaker Change: PDD in warranty and that campaign was quite successful and help us to attract a lot of new user and a week and a lot of mint on end users.
Speaker Change: February or sell them and then they continue to work.
Speaker Change: I apologize.
Speaker Change: <unk> that should help.
Speaker Change: When the senior to walk to her neutral at all and those are the same mode the whole silicon.
Speaker Change: Teradata Memorial Sydney Metro the Sysco way Omega failure.
Speaker Change: Three in Ohio.
That's a possibility.
Speaker Change: Hospitals are cautious that you've been pushing up employment.
Speaker Change: And also another example is our.
Speaker Change: Our virtual virtual streamers are actually attracting their followers to join Billy Billy and do the live streaming sessions and define it quite interesting that when you say probably half or both ACG and S algae.
Speaker Change: Interest habits and this is also bringing a lot of incremental new users to the gain you a woman <unk> you are comfortable.
Speaker Change: So you see the other diseases for sure, but some more water to hurt that.
Speaker Change: Lee or CD.
Speaker Change: Perfect.
Speaker Change: <unk> had the highest heavier.
Speaker Change: Combined with those efforts and our operating strategy, we can see that.
Speaker Change: The current <unk> level and paying ratio and <unk> has ranked among the top level in the industry.
Speaker Change: Hello.
And Tony All you are going to Georgia.
Speaker Change: We essentially hold which don't Escobar, okay, not the ASP oxygen shearwater assemble the junior entity.
Speaker Change: Baidu wallet and actually the path to.
Speaker Change: Just a couple of it she don't consider the.
Speaker Change: The whole yield change.
Speaker Change: Joining us in the Sandy Lowe CFO highlights cilia Honeywell shoe that is on your senior legal hurdle sorry, the hydro one limited to that.
Speaker Change: Esteban on those holidays or some of the titanium double chamber illegally someday.
Speaker Change: Later this month on May 31st we will launch season eight and also this marks the anniversary edition of Sangamo and we will start the campaign to celebrate the anniversary with refresh map.
Speaker Change: Major new characters and limited anniversary scheme features and a lot of interesting in game events and we hope this anniversary edition will bring some more too.
Speaker Change: A new level and a long lasting lifecycle.
Speaker Change: Easily deployed or one woman or is that <unk> set out on the site.
Speaker Change: <unk> order from them.
Speaker Change: What are you trying to enable shoulders.
Speaker Change: Therapy, the satisfaction Yossi Joseph <unk> Joseph.
Speaker Change: Well no quick fix unplanned, Florida, just a ton more GE good patent for medical Nichols tissue, Philadelphia Tampa onshore.
Speaker Change: I'm sure they'll hydro's ethanol to acquire a woman <unk> Gov.
Speaker Change: Sure Josh about the Eagle, Ohio, Joshua <unk> with Macquarie.
Speaker Change: Third GMT.
Speaker Change: <unk> empty highlighting MTO market for labor.
Speaker Change: Similar to the patent he joined back.
Speaker Change: To call it.
Speaker Change: Darwin agile sure Nathan will not wait to award us some water total hot Shanghai closed Lenovo unless it's all a PC to undertake with that Marc just as willing dollar issue to repay virtually all quarter long.
Speaker Change: <unk> house to some modest cellulosic.
Speaker Change: <unk> bye.
Speaker Change: So we should see the powerful ways.
Speaker Change: Julio Cushy latasha.
Speaker Change: Many people ask me what's the next step after all from my answer has always been we wanted to be super focused on making some more sustainable and even more successful and often set the next summer will be the next game.
Speaker Change: The season will be focusing on making a better season.
Speaker Change: Each time and bring that experience to our users on top of that we have two more initiatives with this game one is in.
Speaker Change: And this year, we're looking to launch international version and traditional Chinese version is targeting four user or in Hong Kong, Taiwan, and Macau and the second initiative is that we are planning to.
Speaker Change: Rain sample into multiple devices and of last Q4, we launched the PC version, which helped us to win over a lot of the PC user next step we're looking to.
Speaker Change: This game on the mini game platform. This potentially will also open doors for us to attack new additional users.
Speaker Change: <unk> gone to that level.
Speaker Change: You guys sure she'd Hodge containing the Youll see Peugeot, particularly.
Speaker Change: Particularly there was a pillar of our agenda battling into there the holiday shift and procure that youre doing anything there.
Speaker Change: Bill I was going to ask you that of industrial AR to each of you mean nothing of that albeit lower than our typical fashion with the hydro thumbs up.
Speaker Change: While I.
Speaker Change: Hello.
Speaker Change: Bill on the <unk> that you originally anticipating lagging.
Speaker Change: The Eagle Ford vehicle from that.
Speaker Change:
Speaker Change: On top of some we will have two more important job to do one is.
Speaker Change: To sustain our legacy titles.
Speaker Change: The R&R, Julie and I will.
Speaker Change: We will be celebrating.
Speaker Change: <unk> eighth year anniversary this month and celebrating Fgo's ninth anniversary, Ed and if mid July and for both of the game people.
Speaker Change: You might be very familiar with with the long term are very sustainable and successful long term operation and from time to time, we can witness new incremental increase from those two games and we believe with the anniversary promotion.
Speaker Change: <unk> will come in.
Speaker Change: A new peak of da use in Meus PRA.
Speaker Change: They are a part of hard to assure scenarios.
Speaker Change: So you'll see C&I freeze and thaw hollow translate that don't that half will more with digital to cancel.
Speaker Change: It seems to later since you put.
Speaker Change: EMEA was against the forward option laden insulin pump to her at Walnut Hill with <unk>.
Speaker Change: Sure sure.
Speaker Change: <unk> assembled our jamba juice harsher.
Speaker Change: The second strategy is on the new games currently we have four to five games in line waiting for approval. We will also actively exploring more.
Speaker Change: Opportunities in new shower us.
Speaker Change: Similar to what we have done and with some more to re invent gains catering to new generation new generation of gamers preferences. We do think there are a few opportunities there and we will continue to invest.
Speaker Change: In fact in explorer.
Speaker Change: Okay that concludes Mr. Chen's answer next question. Please. Thank you. The next question will come from viewing Chung from China Renaissance. Please go ahead.
Viewing Chung: And so I just wanted to ship so to your question about it yet although not quite.
Speaker Change: One woman Coco you cut.
Viewing Chung: But all of them when you kill cohort showed up without a <unk> challenge I'll pay for that reality in your system.
Element.
Viewing Chung: Well why did you go technology shifts here. So first congrats on the very solid clean. So my question here regarding <unk>.
In short, we maintain 20% annual revenue growth well ahead of the industry average.
Viewing Chung: Can you give that but what are the underlying drivers are solid clear discuss how does <unk> play out here that's for sure I know what she is our ultra grows here.
Viewing Chung: Sure.
Viewing Chung: Yes.
Speaker Change: Oh, <unk> Monaco for tissue parts should I call you.
Speaker Change: Thank you to the solar Luna ship Adelaar.
Speaker Change: It won't be till now about Russia, while she is on the line.
Speaker Change: Shall I pick up on that is going to be thoughtful as heartworm recession. So your assortment. So you could see the work tahira.
Speaker Change: Each nikko securities on the imaging.
Speaker Change: In Q1, our advertising business continued to grow at a rate that is above industry average, reaching RMB 2 billion in revenue and up 20% year over year, notably our high margin performance based ads grew over by over 30%.
Year on year, and contributing significantly to our overall revenue growth and driving continued improvement in our gross margin.
Michael: Sure Michael.
Michael: It turns out that <unk> sure lagging pizza hut.
Speaker Change: Nigel said Youll G&A on the sensors that Joshua woman.
Michael: Scott without you.
Michael: T element beaten that Youll put opinion any interest are still setup to orchard hills without E rate or something of that sort of devo culturally solar gangl, Dr would've had shellfish housing.
Michael: It seems a ball park Hyatt can do digital some voice I'll take this one day silicone hydro her pizza Google option later cycle, you want to layer on top of it <unk>.
Michael: The whole tire.
Michael: Diego pilot couldn't go the collateral.
Michael: The key driving factor behind that growth is that.
Michael: That combination is high value user and our strong brand association with high quality content. This year.
Michael: Average user H has come to 'twenty six.
Michael: The year of 2006, the audiences represent increasing disposable income and a diverse consumption scenario on top of the spiritual consumption. They also come come to various.
Michael: Product consumption and the professional in.
Michael: In depth nature of our content continues to foster a deep connection with our users and content creators and all of that is leading to our continued growth in AD revenue per day.
Michael: Well here with existing environmental non correlating and aegis.
Michael: So that you.
Michael: You have another choice award.
Michael: It's happening, but it's usually you see generally unknown adventure.
Speaker Change: As a woman that.
Speaker Change: How many of those single press release, just a woman digital champion considerable agenda I'll move on yes women in their <unk>.
Speaker Change: The non lethal announcing <unk> power module or the way you go don't lever the whole, we'll learn in the quarter.
Speaker Change: The shelf is <unk> already got to amortize the dominoes enrollment alcohol considerable ego Legion story in Ohio.
Speaker Change: Orlando for the <unk> part of EV Kyocera issue.
Speaker Change: Similarly.
Speaker Change: The whole <unk> Lola use APM in the Eagle.
Speaker Change: So I figure I'll tell you on the detail.
Speaker Change: In the past we have a stake.
Speaker Change: They come to this strategy is one horizontal mom multiple vertical strategy and one horizontal refers to our product and infrastructure activity and multiple very close to refer to our integrated our solution across different.
At verticals, let me elaborate on that little debt within the one horizontal strategy, we have continuously to build a stronger at interop sure and product capabilities and in Q1, what we have really improved is in the AI related.
Speaker Change: Product product improvement, we have continued to upgrade our market data in fact structure by using the multi model.
Speaker Change: Our ability to better understand our users' purchase intent and all.
Speaker Change: On category level interest boosting our overall ad efficiency.
Speaker Change: <unk> also improved our deep conversion capabilities, leading to a greater budget allocation towards deep conversion campaigns. The proportion is deep conversion ASP and more than doubled in Q1 and leads to an increase in our performance based ads CPM.
Legal means that not only T social whether.
Speaker Change: Aig's either.
Speaker Change: Called need only a harsh winter in the U T cell.
Speaker Change: The English herpes and Tushar you go.
Speaker Change: Shifting to torture the heart to enrollment.
Speaker Change: Sure. So yeah. The Heartaches Sean here. So you could probably go down that you guys havent changed relative to tonnage into the coordinated harsher ddos out yet so either hot or Seattle in particular Gulf will do over the balance of it is a door dasher somewhat mango <unk> pay those local a suicide seizure hydro reported pro forma that long ago that <unk>.
Speaker Change: <unk> will hold or touch.
Speaker Change: Tushar noncore bundle Pseudoallele Hodgson Sharon Cook.
Speaker Change: These are challenging G. Amanda buchi aegis Gaucher pig PJ.
Speaker Change: Let me share a coke garbage enable the whole chivas in Angola.
Speaker Change: <unk> got to hotel, Montana Hydro AIC some technology.
Speaker Change: Silvio.
Speaker Change: Tushar CECO for Gallup, I mean, essentially that particular show Oklahoma yourself.
Speaker Change: Another big improvement is in our Gen AI assisted add material creation.
Speaker Change: Because the middle East product nature covers and add materials are quite important in terms of improving click through rate and improving our efficiency. We have upgraded our eight commercial aig's tools using those AI at 10 a M.
Speaker Change: Models to help advertisers to auto generate cover images and titles that really align with <unk> use your language and also creative style currently AI GC.
Speaker Change: <unk> accounts.
Speaker Change: For over 30% of that performance.
Speaker Change: <unk> spend.
Speaker Change: So insomuch assortment that trades.
Speaker Change: Tinder, Peugeot Youll ship Yoshida genre, Asher orland truly putting the dollars in legal fees linked to you Bob.
Speaker Change: Partly attributes under Eagle tunnel Youll ship to home at Walnut Hill.
Speaker Change: Sure.
Speaker Change: The virtual machines Lululemon.
Speaker Change: So you will see the <unk> IV, which is the other digital will be a core data usage support the angelic <unk>, sorry, Tahira youll sheath that truly industrial quarterly.
Speaker Change: Okay.
Speaker Change: But let me talk a little about our different AD verticals first of all games continue to remain our largest advertiser segment and we continue to improve our conversion path and tools and increased our market share.
Speaker Change: Gaming market.
Speaker Change: <unk> gained mass market and we also launched new formats, such as deliberately mini games and also in stream game, our game live streaming apps.
Speaker Change: Help up new AD and opening up new AD inventories and new opportunities.
Jeremy: Jeremy the whole choice out of her third.
Speaker Change: And Sheila alluded on so-called itself.
Speaker Change: One colleague at Tinder.
Speaker Change: So if a woman who conveniently continued although you could come up with when for example, the sulfate of illegal.
Speaker Change: These are the arbitral with that with the team that has to do with Atlanta, Georgia Chengdu.
Speaker Change: <unk> tornado cyclical trends on both sides and when you go to.
Speaker Change: Certainly the hydro handoff QE charged with charge off some nagel from illegal Gulf that home depot numbers hold up just azure.
Speaker Change: Hum.
Speaker Change: <unk> got the solar <unk> total assembly.
Speaker Change: And secondly is that as our user matures and becomes <unk> 20, <unk> 26, they have come to a life stage, where they have to face a lot of choices in terms of consumption.
Speaker Change: Consumption related needs and we have helped them and Theyre also are trustworthy content creator have done a lot of reviews and walk through any valuations on those categories.
Speaker Change: And establish greater connection between their followers for example in Q1, our home appliances related advertising revenue grew over 35% and baby maternity and a patch related advertisement revenue grew over three <unk>.
Speaker Change: <unk> hundred percent year over year.
Speaker Change: So two or so.
Speaker Change: The particular, so you guys have shown very good total digital Guangdong market, you're kind of in the assessor.
Speaker Change: Yeah.
Speaker Change: We caution you until you're at a party.
Speaker Change: These under normal conditions of the Hyatt <unk> Beach.
Speaker Change: <unk>, yeah, the needle isn't the highest fidelity called the mineral sorry, Please continue sir.
Speaker Change: So there you go.
Speaker Change: You can hold on Veeva.
Speaker Change: As a woman Creek, Colorado for that <unk>.
Speaker Change: <unk>.
Speaker Change: Sure Yeah, either someone legal settlement or the core voucher should sound legal Sunday tire.
Speaker Change: All of it goes to the general wealth, particularly the Eagle Fone guarding the profile.
Speaker Change: Okay.
Billy: Lastly on AI as everybody know Billy Billy hosted that most curious mind to understand that AI related knowledge and diligently also host the largest AI related knowledge type of video content, that's why almost all AI.
Billy: Manufacturers and companies has put a lot of effort.
Billy: Budget trying to connect with diligently users and convert them to become their users and that's why we've seen a big search in AI related advertising spending and also this help us to drive the overall online services sector become a top two pad vertical.
Billy: Yes.
Billy: Yes.
Speaker Change: So if you're somebody on the EBITA in the hotter for.
Hydro is a woman youll see in century box tissue culture.
Speaker Change: <unk> <unk> Nagel.
Harvey with also.
Speaker Change: So we're kind of over $2 a woman the Doj <unk> put some guard or you go.
Speaker Change: Gotcha.
Speaker Change: So it's you don't have the all year.
Speaker Change: Chances shooter genre.
Speaker Change: As for the guidance for the second half of this year, we're still quite confident to continue to grow at a pace that's above industry average combined with our key advantage.
High quality premium content user mindset.
Speaker Change: As well as the increasing user value.
Speaker Change: We remain very confident about our advertising business development and continue to extend our market share.
Speaker Change: Okay next question please.
Speaker Change: Okay.
Speaker Change: Thank you one moment for the next questions.
Speaker Change: Our next question comes from Felix Liu of UBS. Please go ahead.
Speaker Change: Excuse me, if I need to reschedule.
Speaker Change: Nicole sequels.
The one issue.
Speaker Change: Now I'll turn the time now, which we think we can do what you do.
Speaker Change: Chunky and I'd say the model can be.
Speaker Change: Yes sure.
Speaker Change: It will take all the shape.
Speaker Change: Sure.
Speaker Change: So that sounds like keeping with a small medium large immediate ship.
Speaker Change: Thank you.
Speaker Change: We don't.
Speaker Change: You bet.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Let me translate myself.
Speaker Change: Thank you management for taking my question and congratulations on a strong Q1.
Speaker Change: Especially at the record level capability, Humboldt GP margin and profit margin.
Speaker Change: My question is first.
Speaker Change: The margin trend.
Speaker Change: And the rest of this year.
Speaker Change: Sure your outlook on that.
Speaker Change: And my second question is on your midterm GP margin and net profit margin target. Thank you.
Speaker Change: Central Phoenix did affirm or to their question.
Speaker Change: In Q1, our margin reached a record high ultra tier three plus 3%, making 11 consecutive quarters of improvement the key contributor to this improvement in crude the rising share of high margin gaming and advertising revenue, which account for.
Speaker Change: Yes.
Speaker Change: If you added that together like 50 a foot.
Speaker Change: Of the total revenue compared with 47% in Q1 last year.
Speaker Change: Secondly, the relatively fixed cost include content several cost remained stable in terms of the absolute dollar value.
Speaker Change: The client their production of revenue from 19, 5% last year to 30% this year.
Speaker Change: And gross margins of our Tylee, our LIBOR casting business have been improving in Q1.
Speaker Change: We are confident that both our gross margin and net margin were achieved gradually improvement throughout the year.
Speaker Change: In the mid to long term, we are confident that our gross profit margin will be 40% to 45%.
Speaker Change: In Q1, the pulp the proportion of operating expenses to revenue decline from 43% last year to 36% this year.
Speaker Change: Adjusted operating margin improved by negative 9% in the same period last year to 5% in Q1 this year.
Speaker Change: For 2025, we expect.
<unk> R&D and G&A expenses to remain stable, while marketing expenses will fluctuate with Gan promotion cycles.
Speaker Change: As a result, the operating expenses as a percentage of total revenues will continue to decline.
Speaker Change: Our long term operating margin.
Speaker Change: Target remains the same that will be 15% to 20%.
Speaker Change: Thank you for your question.
Speaker Change: Thank you and that concludes our question and answer session. Thank you once again for joining <unk> first quarter 2025 financial results and business update conference call. Today. If you have any further questions. Please contact Juliet Yang and it can be.
Speaker Change: IR deck.
Speaker Change: <unk> financial communication.
Speaker Change: Their information.
Speaker Change: In both China and the U S can be found on today's press release, Thank you and have a great day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].