Bilibili Inc.
Q2 2020 Earnings Call Transcript

Published: 27 Aug 2020

[Operator:]

Good day and welcome to the Bilibili 2020 Second Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.

[Juliet Yang:]

Thank you, operator. Please note the discussion today will contain forward-looking statements, relating to the Company’s future performance, and are intended to qualify for the Safe Harbor from liability, as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.

[Sam Fan:]

Thank you, Juliet. And thank you everyone for participating in our 2020 second quarter conference call. I’m pleased to deliver today’s opening remarks on behalf of Mr. Chen. The second quarter was another strong quarter of growth for Bilibili. Owing to our increasingly diverse content and wider awareness of our brand, we are reaching a much broader audience. For the second quarter, MAUs were 172 million, up 55%, and DAUs were up 52% to 51 million, both on a year-over-year basis. Mobile MAUs continued to be our fastest grower, reaching 153 million in the period, up 59% compared to the same period in 2019. Along with the expanded user base, user engagement continues to be strong. In the second quarter, our users spent an average of 79 minutes per day on our Bilibili app, making us one of the most popular platforms among our peers. As we move into our peak summer season, with solid execution of our initiatives, we’re looking forward to further building on our user growth momentum. We continue to roll out more premium content and services, strengthen our monetization capabilities, and we are increasingly converting traffic to paid users. Our MPUs were up 105% year-over-year, reaching 12.9 million in the second quarter, and our paying ratio improved to 7.5%, compared to 5.7% from the same period last year. These increases fueled our top line growth and we once again reached record high revenues of RMB2.6 billion, beating the high-end of our guidance.

[Operator:]

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question in queue comes from the line of Alex Poon from Morgan Stanley. Alex. Please ask your question, your line is open.

[Alex Poon:]

My first question is regarding the user growth. First half, the user growth is very strong. May I know, can you share with us the quality and retention and the user profile of the new user growth in first half and about the second half growth and also next year, what is the key focuses of your strategy of user growth? How are you going to balance the user retention and maintain the fast user growth in second half of next year? Thank you very much.

[Rui Chen:]

I will translate for Mr. Chen. Last year, we have reinforced and reaffirmed user growth will be our key strategic focus and we have been carrying out the strategy efficiently going through the first half of this year and have made very positive progress. As for the new user profile you asked, there’s no significant change of the new user profile, we still see a lot of new young generations that are coming into average age of our new users, they are about 20 years old. However, we would like to emphasize during the user growth process, we’re more focused on the quality over quantity, and the quality of our users can be supported by the daily time spend, daily time spent 79 minutes per day and our user engagement were up to 5.2 billion on a monthly basis and our daily video views reached 1.2 billion. So all of these numbers supported, our users are not only growing very fast, and their quality are very, very high. And notably, we’ve noticed that the new user who come in during the first half of 2020 and also paid for our services within the same period, the ratio has significantly increased compared to the same period last year. And also the new users who came on our platform during 2017, 2018 and 2019 also stayed and paid for the next few years, their paying ratio is also increasing. So once again this set of numbers is a strong testimony of the quality of our new user growth. So here we also wanted to emphasize the methodology of our user growth. The reason why we’re very confident in the user growth trajectory is based on the concept that we have been really emphasizing that we use our content to attract user and use our community to retain users. And as you may notice in the first half of this year, we’ve done some significant progress to allow our content to reach a much broader audiences and this type of user growth cannot be achieved by purely channel acquisition or user acquisition, if a user comes to our platform simply through the channel acquisition, we cannot retain them if there’s no good content, and the key strategy is to allow our content to grow to a much broader category, and this opens up for us to new demographics. And Bilibili is a community with high engagement level and high retention level although our users increase significantly, our overall community staying in density and continues to be very sticky and with high retention rate. I’ll update you the schedule of our user plan. So everybody knows during Q1, the pandemic period, people have more time in their hands, so that gives us very good window to invest in user growth. And the second quarter as people are going back to work and return to school, it kind of came to a more stable life period that we’ll be focusing on raising our retention and converting those users to pay users. And notably, we’ve also made very good progress to raise our brand awareness in the second quarter and achieve pretty good results. And in the Q3 is traditionally strong peak season for us, so that we plan to make additional investment in both brand as well as channel acquisition. I would also update you with our branding campaigns in the second quarter starting from May, we have made a very successful marketing campaign trilogy profits with and we believe this series of campaign as a complete marketing content, which we consider to be the most successful branding campaign among Chinese Internet companies during the second quarter. This proves our ability to not only to do amazing events among our young generation, we also have the ability to touch much wider, broader audiences. And the reason why we want to emphasize on branding, branding can pay is based on our business model, we use content to attract user and community to retain user. As our content continues to evolve to reach broader audiences, one important path is to allow more people to know that Bilibili have so much content to offer which are in line with our new brand slogan Bilibili Positive. Okay. As far as our Q3 user outlook, we believe we’ll reach historical highs during this quarter and this summer is a little bit special because in July, a majority of the students are going school and August is a full month of summer vacation. And September will be a period where students are returning to school. So in August, we believe we’re able to achieve a pretty high MAU target and on quarterly, monthly average basis we believe we can reach historical high. So, on a single month basis, we believe we can achieve over RMB200 million annual target during Q3 on a single month basis.

[Carly Lee:]

Carly would like to supplement a few points. During our brand upgrade campaign this year, our overall brand exposure has achieved over 5 billion times and the brand recognition level among -- just among the age brackets in between 17 to 35 has raised to 80%, I’m sorry 60%. And in the second half, our main focus will be on to convert people from recognizing the Bilibili brand to turning to Bilibili users. And during the second half, the marketing campaign will still grounded our key activity around the key time slots such as the summer vacation and returning to school, as well as the League of Legends World Championship and our New Year Eve’s Gala and many work-like scenario among long generation and to create new content, new brand campaigns and further drive our user growth.

[Operator:]

Our next question comes from the line of Lei Zhang from Bank of America Merrill Lynch. Lei, your line is now open.

[Lei Zhang:]

Thanks, management, and congrats on the strong results, my question is actually regarding your game business which is quite solid in the second quarter. I wonder could you share more color on the performance of Princess Connect? Specifically, what’s your expectation on the longevity for this game? And secondly, can you give us some update on your game pipeline and a game launch we can expect specifically your expectation about the Mobile Version of Fall Guys. Thank you.

[Rui Chen:]

Regarding Princess Connect Re

[Operator:]

Our next question comes from the line of Daniel Chen from JPMorgan. Daniel, please ask your question. Your line is now open.

[Daniel Chen:]

Thanks management. I have a question on advertising. Our ad revenue growth actually accelerate on a year-over-year basis from in the second quarter. So we expect the ad revenue to sustain such strong momentum in the second half. What are the key drivers behind? Is it brand advertising? Or is it because of performance advertising, including fees? So what is our expectation for the new ad system we launched in the third quarter for the content providers? Thank you.

[Carly Lee:]

Overall 2020 is still full of uncertainties and lots of vitality. However, under this challenging macro environment, we still delivered a pretty good advertising growth rate at 108% year-over-year. So Bilibili has a video platform, we are one of the biggest manufacturer in the overall video-lization industry trend. And we have observed that the advertisers’ budget has shifted from the traditional portal to the video platforms. As we mentioned earlier, we have invested significantly in expanding our brand awareness and raise our brand influence in the first half. And we have become the must go-to-platform for advertisers, who wanted to reach the younger generation demographic at the same time we also become the media centre to create viral marketing event and Bilibili’s brand upgrade, brand awareness increases has direct relationship with advertisers’ perception towards Bilibili’s brand proposition. So as our user continue to grow and our PUGV ecosystem continue to drive, we’ve seen that decent progress in expanding advert content verticals, such as fashion, lifestyle, technology, fitness as well as autos. So we’re also hoping to reach, expand our advertisers customers into those industry verticals. So during the second quarter, we didn’t make any singular marketing campaign towards certain verticals, but rather emphasizing our overall marketing solutions as well as Bilibili’s brand propositions and influence. And it’s working well for us. And we aim to continue that strategy going forward. The reason that the supporting system behind our Q2 strong growth is on our improvement in terms of our advertising - advertising products and our advertisers verticals as well as our AI powered algorithms to improve our ad efficiencies. And we’re confident to carry on this good trajectory into the third quarter. So looking ahead in Q3 and Q4, we are quite confident we can deliver a continued growth rate on our advertisement business and to develop a Bilibili specialty advertisement solution campaign. So the area of focus could be on the e-commerce area. Bilibili’s vibrant and engaged community has become many e-commerce platforms’ ideal platform to promote shopping festivals and shopping events. So in the second half of this year, this could be a rising sector class. So as our content verticals expansion, we are quite confident to also expand our advertisers in those verticals. The third point would be on the continuous improvement on our algorithm. We will continue to invest in improving our advertisement efficiency to increase advertisers’ ROI. And the fourth point is on the big events in the second half. There could be new variations as well as new events and Gala. And this type of Bilibili specialty event has become advertisers - favorite advertising avenues to reach young audiences.

[Carly Lee:]

So the Sparkle platform is a new platform we launched to help our content creators to connect with brand advertisers. And this platform provides our content creators, a pricing system, order management as well as settlement services. We’re hoping this platform will better serve our content creators to increase and expand their commercial potentials and increase their incomes. Since its launch in July, we have over 8000 content creator have already participated and signed up for this platform. For the GMV, we’ll disclose when we reach a certain milestone. Lastly, we’ll continue to focus on when improving our data power to provide better decision making assistance, pre-sale or post-sale and to increase our content creators and earning power.

[Operator:]

Your next question comes from the line of Alex Liu from China Renaissance. Alex, please ask your question. Your line is now open.

[Alex Liu:]

I’ll translate myself very quickly. Just wondering what are the major difference in terms of operating know-how and the road map between large streaming business and all the core business, as we consider live streaming as a business that requires some time of incubations and will reach an inflection point on user adoptions? If that’s the case, how far are we standing from that inflection point? Thank you.

[Rui Chen:]

Live broadcasting business is as we mentioned earlier, has always been a part of our content ecosystem. This is not a singular commercialization avenues for us, but also an important part of our content. A live broadcasting also provides a very good avenue for our content creators to activate and they tend their followers as well as for them to increase their commercialization potential. So, in the past few years you may notice they’re such heavy competitions among other live broadcasting platform. However Bilibili has remained within our own self-sustaining ecosystem that will continuously have talented content creator rising above and they become our live broadcasting host and are providing very good content. This is quite different, Bilibili live broadcasting business is quite different from the other a singular live broadcasting platform. Our content offering on the live broadcasting business is actually mirroring what we have to offer on the video platform. For example, our popular game related video will also be our popular live broadcasting content. Hence that on live broadcasting verticals games and talent shows and lifestyle related content are top verticals. You may see on our platform, a lot of the popular live broadcasting codes are also our top popular top content creators. And there are two key factors among the live broadcasting industry. One is the good stage of live broadcasting host, and second as a good base of users. And we believe we have these secret audiences for the two factors. We have both the highest quality content creator live broadcasting host. And we also have a very high quality set of users who love to watch live broadcasting content. So compared to other live broadcasting platforms, you’re right about the revenue trajectory, we tend to have more stable growth instead of a sharply increased circle because of their platform life pursuing the signing top content host, they will drive the revenue in a short-term. But the merits of our business model is we tend to have a more stable and sustaining life cycle and our content creator the live broadcasting costs life cycle will also tend to be longer period And that concludes the question-and-answer session. We’re quite confident to become the fast platform for video content creators given that the video equals live broadcasting content on our platform, we’re also quite confident that will become one of the most popular live broadcasting platform in the future.

[Operator:]

And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments.

[Juliet Yang:]

Thank you once again for joining us today. If you have further questions, please contact myself Juliet Yang, Bilibili’s Senior IR Director, or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found on today’s press release. Have a great day.

[Operator:]

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating. Stay safe everyone. You may now disconnect.