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spk07: Good day and welcome to the Bilibili's 2023 Fourth Quarter and Fiscal Year Financial Results and Business Update conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliette Yang, Executive Director of Investor Relations. Please go ahead.
spk03: Thank you, Operator.
spk02: During this call, we'll discuss business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Center 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. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.
spk08: Thank you, Juliette, and thank you, everyone, for participating in our 2023 year-end conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. In 2023, we navigated a landscape of challenges and opportunities and achieved a number of important milestones on community growth, commercialization efficiency improvement, margin expansion, and loss cutting. Let's review these achievements in more detail. To begin with, we exist a year with over 100 million DAUs 336 million MAUs and other healthy community metrics across the board. Daily user time span remained robust at over 95 minutes on average in the fourth quarter. We continue to emphasize and dedicate resources to reinforce our content ecosystem, support our creators and foster an inspiring community. In 2023, Over 3 million content creators earn income on our platform, up 30% year-over-year. Further enabling talented content creators to expand their fan base and make money will be one of our most important tasks for 2024. Another highlight for the year was our progress in improving our commercialization efficiency. We stepped up our efforts to incorporate advertising and vast business in a way that native to our content ecosystem. Driven by strong performance-based ads, our ad revenue grew by 28% in the fourth quarter and 27% for the full year. Vast revenues grew by 22% in the fourth quarter and 14% for the full year, all on year-over-year basis. With this growth, our total revenues for the full year came in at RMB 22.5 billion, among which ad revenue made a higher contribution, rising from 23% in 2022 to 28% in 2023. Increased revenue contribution from our high-margin advertising business and effective cost controls drove our gross profit up by 33% year-over-year, and our gross profit margin reached 26.1% in the fourth quarter, marking the sixth consecutive quarter of margin improvement. For the full year, our gross profit grew by 41%. and our gross profit margin increased to 24.2% from 17.6% in 2022. Consequently, we significantly narrowed our adjustment net loss by 58% year-over-year in the fourth quarter and by 49% for the full year. Notably, we generated RMB 640 million in positive operating cash flow in the fourth quarter, and our full-year operating cash flow also turned positive in 2023. These gains placed us on a solid footing to reach our profitability growth. 2023 has shown the effectiveness of our strategy and provided a solid foundation for our success in 2024. As we approach profitability, we are keeping our fundamental goal in mind to create value for our users. We do this by expanding our content offerings, supporting our creators, and fostering a vibrant and growing community that people love. Our industry is still benefiting from the wave of visualization with the fast-evolving generative AI as a tailwind. This leaves us with a long runway for growth. We remain confident that our virtuous growth cycle of user expansion and commercial capabilities will create increasing value for our users, creators, and shareholders. With that overview, I'd like to discuss our core pillars of content, community, and commercialization in more detail. Beginning with content and community. An ever-growing content ecosystem is vital for our community's health and vibrancy. For the fourth quarter, Daily active content creators grow by 16% and the monthly new content submission rose by 31% both year over year. As we continue to facilitate connections between high quality content and creators with fans, content creators with over 10,000 followers were up 30% year over year in the fourth quarter. In January 2024, We honored top 100 content creators at our sixth annual Bilibili Power Up 2023 awards ceremony to recognize their creations and contributions to our community, among which 39 content creators received the award for the first time. These top 100 content creators excelled on our platform, successfully accumulating a total of over 400 million followers. With a thriving content ecosystem, Bilibili has become our favorite platform across different age groups and agendas. In the fourth quarter, the average age of our active user base was 24. As our existing users gradually mature, their interests evolve and consumption increases. In 2023, baby and maternity, automotive, traveling, fashion and clothing categories demonstrated the highest growth in the video views. Each of these categories carry significant commercial value. The boundary between interest-based and commercial content has also improved. In 2023, the number of commercial related content with over 1 million video views more than doubled year over year. Meanwhile, over 3 million content creators made money through our various channels in 2023, among which the number of content creators who earned income via video and live commerce was up 133% year-over-year. With more content creators and a better content ecosystem, our users remained highly engaged, and the community continued to thrive. For the full year 2023, our average daily video views increased by 25% year-over-year to 4.3 billion. Our users spent 97 minutes daily on the platform during the same period. Monthly average interactions also grew by 14% year-over-year to over 15 billion in 2023. By the end of 2023, we had 230 million official members 18% more than in the prior year, and their 12-month retention rate remains strong at around 80%. Additionally, we close the year with our fifth New Year's Eve Gala, the most beautiful night of 2023, emerging as a youth must-watch online New Year celebration. The event garnered 100 million playbacks within 24 hours, and received the most industry-sponsored participation ever in its history. Lastly, I'd like to talk about commercialization and dive into each of our business lines. Our surviving interactive community is the cornerstone of our commercialization model. In the fourth quarter, our vast revenue was up 22% year-over-year to RMB $2.9 billion. and up 14% to RMB 9.9 billion for the full year. These increases were primarily driven by robust growth in our live broadcasting revenues. Our live broadcasting universe continues to be more diverse as we convert more host talent from our video content creator pool. In 2024, we will continue to integrate live broadcasting into our video ecosystem. By introducing more high-quality hosts and enhancing various tools and recommendation algorithms, we aim to convert more paying users on our platform. At the same time, our featured live broadcasting content and products, like VTubers and a celebration system, will continue to elevate payment activities and offer more monetization opportunities for us. In terms of memberships, By the end of 2023, we had 21.9 million premium members. Our members continue to demonstrate high brand loyalty and trust, with over 80% subscribing annual or auto-renewed packages. Additionally, users continue to exert increasing spending power on other featured products and experiences. Turning to our advertising business, we made some exciting progress. In 2023, our total advertising revenues increased by 28% to RMB 1.9 billion for the fourth quarter and were up by 27% to RMB 6.4 billion for the full year, both on year-over-year basis. Robust revenue growth in our performance-based ads was the most significant contributor. including over 60% year-over-year for the quarter and over 50% for the full year. We also achieved positive young year growth in brand and native ad revenues throughout the year. We credit our solid ad revenue growth to our unique position as the most densely populated community of the young generation and our ability to connect with them in their own language. In the meantime, we continue to enhance our ad infrastructure, including product optimization and algorithms improvement. This enables advertisers not only to improve their brand equity and influence user purchasing traditions, but also direct convert sales on Bilibili. In the fourth quarter, our top five advertising verticals were GAMS, e-commerce, digital products and home appliance, automotive and skincare and cosmetics. Among these verticals, the e-commerce and game sectors stood out with impressive results. Over the course of 2023, we deepened our collaboration with e-commerce advertisers. We further integrated direct sales conversion tools into our video and live commerce ad products. This enabled our users to seamlessly transition from viewing content to making relevant purchase, enhancing our ad conversion efficiency and user experience. Meanwhile, our deeper data collaboration with key e-commerce platforms further improved the accuracy and efficiency of our ad recommendation algorithms. In 2023, the number of users engaging in consumption-related behaviors increased by over 200% year-over-year. Meanwhile, we successfully gained more marketing budgets from key game developers during the fourth quarter, as they launched new games and promoted existing game updates. We maintained our position as an effective channel to convert gamers and a must-investing community to build game IP, thanks to our integrated advertising strategy and extensive resources within our gaming ecosystem. While we are encouraged by the progress we made in our advertising business in 2023, we believe there are still great potential and ample room for growth. In 2024, we will further integrate ads with our content ecosystem in a more native, natural, and a seamless way. We will prioritize our resources to improve ad infrastructure, including upgrading and refining our ad products, further optimizing the accuracy and efficiency of ad algorithms. We will also actively explore generative AI for ad material creation, supporting productivity for advertisers, Industry-wise, we'll continue to expand our shares in our leading games and e-commerce sectors and gain more presence in digital products and home appliances, skincare and cosmetics, and automotive verticals. Turning to our game benefits, total game revenues increased 2% quarter-over-quarter to RMB $1 billion in the fourth quarter, coming in at RMB $4 billion for the full year. Currently, three titles in our pipeline have been approved for release in the domestic market in the coming quarters. One Japanese card game, Heaven Burn Red, Zhi Yan Qian Qiong. One domestic SLG game, San Guo, Mou Jing Tian Xia. And other domestic card game, Artifactors, Wu Hua Ni Xin. In addition, We are able to create value for our broader game partners by increasing integrating our advertising products with our game distribution capabilities. As for our self-development game, we stimulate our resources and adapt a more selective game development strategy in 2023. The refined strategy will enable us to reduce our R&D expenses in 2024 while keeping us lean and focused on top-quality projects. Looking forward, our priorities in 2024 are consistent with 2023. We will further improve our commercialization capabilities by strengthening our technology infrastructure and improving our product offerings. particularly for our advertising and live broadcasting business. Company-wide, we aim to further improve our operation efficiency with a tight and targeted expense structure. Overall, we are dedicated to developing content ecosystem, enabling our content creators to earn more money and further expanding our user base. We believe these endeavors will lead us to reach our goal of profitability and set the stage for sustainable growth for many years ahead. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the fourth quarter of 2023. In the interest of time, on today's call, I will be reviewing our fourth quarter highlights as Mr. Chen's remarks have touched our full-year results at a high level. We encourage you to refer to our press release issued earlier today for a closer look at our full-year results. Throughout 2023, our financial profile improved significantly alongside our committee growth and ecosystem expansion. Of particular importance, and the gains we made in our revenues, gross profit, and reduction in adjusted net loss, which we narrowed for the sixth consecutive quarter. Total net revenues for the fourth quarter was RMB 6.3 billion, up 3% year-over-year. Our total net revenues breakdown by the revenues team for the fourth quarter was approximately 45% VAT, 30% advertising, 16% mobile games, and 9% for our IP directives and other businesses. Our cost of revenues decreased by 4% year-over-year to RMB 4.7 billion in the fourth quarter, driving our gross profit to RMB 1.7 billion, up 33% year-over-year. Our gross profit margin exceeded 26% in the fourth quarter, up from 20% in the same period last year. We expect our gross profit margin to continue to improve in 2024. Our total operating expenses were down 17% year-over-year to RMB 3 billion in the fourth quarter. We cut our sales marketing expenses by 11% year-over-year to RMB 1.1 billion. Sales and marketing expenses were 18% of total revenues, compared with 21% in the same period last year. G&E expenses was RMB 512 million, down 37% year-over-year. R&D expenses was RMB 1.3 billion, down 11% year-over-year. As a result, we narrowed our adjusted operating loss and adjusted net loss by 53% and 58% year-over-year in the fourth quarter, respectively. Our adjusted net loss ratio for the fourth quarter was 9%, improving from 21% for the same period a year ago. Notably, for the fourth quarter, we also generated RMB 640 million positive operating cash flow, demonstrating that our business has entered a healthy path for sustainable development. We expect to reach positive net gap operating profit in Q3 2024 through our sustained top-line growth and the growth margin improvement. As of December 31, 2023, we had cash and cash equivalents, time deposits and short-term investments of RMB 15 billion or 2.1 billion US dollars. As of December 31, 2023, the aggregate outstanding principal amount of our convertible bonds was $862 million. We believe our cash position is sufficient to cover all of our remaining capital bonds. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.
spk07: Thank you. We will now begin the question and answer session. To ask the questions on the phone, please press star 11 and wait for a name to be announced. If you'd like to cancel your request, you can press star 11 again. For the benefits 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. The company will provide consecutive interpretations for management statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Please submit your questions to one at a time. If you wish to have a follow-up questions, please join the queue.
spk03: One moment for the first question. Our first question comes from Thomas Chong of Jefferies.
spk07: Please ask your question.
spk06: Hi, good evening. Thanks management for taking my question. My question is about our 2024 outlook. Can management share about your thoughts and strategies on our product offerings, user growth and commercialization? Thank you.
spk05: Before I answer the question for 2024, I would like to take a moment to review our work done in 2023, which we have made decent progress in both community development and commercialization. So first of all, our DAU surpassed 100 million, demonstrating our continuous healthy development of our community. Secondly, as our advertising started to accelerate,
spk02: achieved a 27% year-over-year growth. And this marks, even among our peers, should be one of the highest advertising revenue growth rates.
spk05: Our net profit has been continuously improved in the past six seasons. Q4's net profit reached 26%, and it rose by six points year-over-year. In 2023,
spk02: Our gross profit margin continued to increase over the past six quarters, reaching 26% in the fourth quarter, up six percentage points year over year. And our adjusted land loss narrowed by almost half, 49% year over year for the full year of 2023. And notably, we've also achieved positive operating cash flow for the full year.
spk05: Actually, we're very delighted to see that our community
spk02: Our community ecosystem has become more aligned with our commercial value. The commercial effort does not hurt our community development, but in contrary, it's helping our community content ecosystem to be even stronger. In 2013, over 3 million of content creators earned income on Bilibili. This is reinforcing the development of our content creator.
spk05: And also over 1.8 million creators earn income on Bilibili through our live broadcasting services. And the number of creators earn income via advertising services almost double year over year. In 2024, our direction of work will be the same as in 2023. There are two most important things for us to do. The first is to achieve the goal of profit. We will continue to strengthen our commercialization ability, and then continue to improve our business efficiency, further optimize our profit margin, and manage our expenses. We have confidence in the Q3 profit transfer in 2024, and we will start to make profit.
spk02: Looking ahead into 2024, our focus remains consistent with 2023 with two main tasks. First of all is focused on our profitability. We'll continue to strengthen our commercial capabilities and improve our commercialization efficiency at the same time to improve our gross margin and manage our cost. We expect We will continue to strengthen our content ecosystem by expanding our content richness and fostering very specific content categories to ensure the mindset of Bilibili being the go-to place for highest quality content.
spk05: This year, we will focus more on the development and activity of high-quality app owners and
spk02: And in 2024, we'll focus on the discovering top content creator development and supporting them to make more money. . In terms of content categories, we'll continue to solidify our existing advantages in ACG, gaming, tech, knowledge, and other categories while providing more support and assistance to new categories. that has grown in response to users' change of consumption demands, such as baby and maternity, travel, automotive, and home decorations.
spk05: We believe with this effort,
spk02: And after achieving profitability, we'll further achieve and enhance the virtuous cycle of our community ecosystem and to ensure sustainable growth in our both community and our profitability.
spk07: Thank you for the questions. Our next question comes from Yiwen Zhang from China Renaissance. Please ask your question.
spk01: So that's what I think in my question. My question is regarding value-added service so can you give us update on our you know development strategy for uh this business segment in 24 and then including business line including live broadcasting premium membership and other value-added service thank you there are a lot of good content on Bilibili there are a lot of good creators and then he
spk05: On Bilibili, we have gathered a massive amount of high quality content creator and it's also a welcoming home for diverse interests.
spk02: Our users feel a strong sense of belonging on Bilibili. All of this combined results in users very much willing to spend for content that they like, spend for content creators that they adore.
spk05: So, in my opinion, Bilibili is the most natural business model. After users pay for it, their experience will increase because they will be happy. At the same time, when the app owner gets the content or rewards from the users, they will have the value of being recognized by the fans. And then it's this kind of income for the app It's actually more sense of accomplishment and motivation For example, one of our app owners He sold a class at B station The customer bought his class and got the income In fact, the same income than he is on B station The sense of accomplishment of advertising will be much higher That's why it's this one itself That's the kind of service that increases value It's for the whole community of B station It's also a very positive, very healthy experience
spk02: On Bilibili, users pay for content and services that they love. It's the most natural business model for us. As people pay for the content and services they love, they actually are happy for that experience and they feel good about that experience. As for content creator, when they earn the income through this kind of services, they will have an even stronger sense of value and appreciation. And for our content creators, they will be even more motivated to continue to create content on Bilibili. For example, if our content creator are earning more income on Bilibili through selling his proprietary premium classes, this money will represent a much more sense of value over what he could have made in advertising.
spk05: Yes, it is also due to the above reasons that we have developed a series of products and service projects such as live broadcasts such as conference members such as comics such as audio dramas and then there are paid classes, charging, etc. Then this series of services and product functions will form our WAAS income. The growth of our WAAS income
spk02: Based on that service model or the connection within our community, we have developed our value-added services combining live broadcasting, premium membership, comic audio drama, premium course, fan charging, etc. And all of that is closely related to the current community and our content. In the fourth quarter, our overall fast revenue grew by 22% year-over-year.
spk05: And in these WAAS services, I think the one with the most potential growth and the fastest growth will be live streaming. Why? Because live streaming is still Among all that services, we believe within that, live broadcasting probably has the biggest potential and could grow the fastest.
spk02: because we believe live broadcasting is more universal. Anyone could be a live broadcasting host. Last year, 1.8 million of content creators earned income on Bilibili through live broadcasting. And this is a universal and very low entry barrier monetization model for all content creators.
spk05: Although it is a platform now, there will be live broadcasts. Even though there are many platforms who are doing live broadcasting business, but Bilibili's live broadcasting is still very, very unique. That is because in terms of the content creators slash hosts,
spk02: as well as the content categories of our live broadcasting has very much similar offerings or mirrors what we have in the PUGB community.
spk05: Let me give you an example. When we think of live streaming, we often think of live streaming as impulsive consumption, such as hormones and so on. But Bilibili's live broadcast is different. Most of our live broadcasts are actually fans' emotions for their long-term attention. Let me give you an example. In 2023, DaHangHai's monthly subscription income accounts for one-third of our live broadcast income. DaHangHai's project has the shortest time of one month. I'll make an example here. While many others might think live broadcasting is an impulse or whole hormone-driven payment, however, if you're looking at Bilibili's live broadcasting revenue component,
spk02: close to one-third of our revenue actually generated from a multi-subscription model called The Great Voyage. And for this particular payment, it's a reflection or representation of a fan's devotion and appreciation for our content creator over at least a month. And many of our paid users are actually subscribing for several months ahead. Their renewal rate is very high. This example distincts us from the traditional live broadcasting platform because the connection with our content creators, the host and the user is quite unique and lasting.
spk05: Our live broadcast business is still based on the PUDC ecosystem of Bilibili. There are nearly 1 million live broadcasts on Bilibili on Q4, and only a part of these live broadcasts come from the third party. Most of them actually come from our own ecosystem, which is the up主 who make videos on Bilibili. As for the content supplier, which is the host, if we look at the fourth quarter, near a million hosts were active on Bilibili. Only a small portion of them were from professional guilds.
spk02: Most of them are actually native content creator from our PUGV ecosystem. And this also sets us apart from other traditional web broadcasting platform is because that we're cultivating our own supply and demand within our PUGV ecosystem.
spk05: Actually, it's the same in terms of quality. Our live broadcasts have a lot of quality that has the characteristics and advantages of Bilibili. It is the same as the competitive advantage of our video. For example, in terms of virtual broadcasting, we should be the most powerful and leading in China. Then, for example, in terms of content categories, the content category in our PUGV ecosystem can also be our live broadcasting categories, especially the categories where Bilibili has our own unique advantage,
spk02: such as the virtual content creators, we are considered to be, if not the most leading platform in China. And also knowledge-based content, such as legal-related live broadcasting. It's hard to imagine this category to be a top vertical on other platforms, but it is very popular on Bilibili.
spk05: As for our priorities for live broadcasting business in 2024,
spk02: we'll be putting a lot of priorities in terms of the quality of our revenues, as well as the gross profit and profit margin of this business. We hope to achieve sustainable and high-quality revenue growth in live broadcasting in 2024. Thank you.
spk07: One moment for the next questions. Our next question comes from Felix Liu from UBS. Please go ahead.
spk00: Thank you for accepting my question. My question is about our advertising business. The income of four-week advertising exceeds the expectation of the market, and our increase in momentum is much faster than the industry. So I would like to ask what is the main driver of the four-week advertising income increase? Let me translate myself. Thank you, management, for taking my question. My question is on the advertisement business. I noticed that your first quarter advertisement delivered a strong growth momentum. So may I check the reason behind this good performance? And what is your outlook for the advertisement business for 2024? What will be the key growth drivers from here? Thank you.
spk11: In 2023, the annual advertising revenue exceeded 6.4 billion, and the same growth exceeded 27%. In Q4, our advertising revenue increased 28%. So the overall advertising revenue ratio increased from 25% last year to 30%. Our advertising revenue in 2023 totaled about over $6.4 billion, marking a 27% young year growth.
spk02: And in fourth quarter, advertising revenue grew by 28% year over year, contributing 30% of our total revenue. up from 25% the same period of last year. The increase in as revenue and its proportion has directly a result of improving our gross margin and gross profit.
spk11: This is a summary of Q4 and 2023, some growth driving forces for the whole year. First of all, let's look back at Q1 of 2023. In fact, we proposed a strategy for the whole year, one red and one heavy. and at the same time focus on the opportunity of community trading. Yiheng refers to the ability of the business center, including the flow strategy we mentioned, the ability to calculate and the data construction. Yizhong refers to the vertical industry strategy. We turned the original brand-based advertising, the effective advertising, and the model of integration and marketing into the ten largest vertical industries. The ultimate goal is to provide customers with better experience and ROI. And the first, please allow me to recap what we have done in 2023 and in the fourth quarter and the growth driver.
spk02: In the beginning of 2023, we have put forward Yi Heng Yi Zou strategy while paying close attention to the opportunity brought by the active commerce activities within our community. Yi Heng refers to the middle platform capabilities for commercialization, including our traffic strategy, algorithm capabilities, and our data power development. and refers to our vertical industry strategies. Our ultimate goal is to provide customers with a better ad placement experience and higher ROI, and we have formed 10 vertical strategies for different industry verticals. We believe We also believe in the revenue potential that fall from active commerce related activities within our community. As we sticking to the open loop strategy, we plan to connect Bilibili into a more broader ecosystem with our e-commerce partners.
spk11: As we have already shared a lot of information and cases about eco-neutral strategy in previous calls, I will not dive into more detail here.
spk02: However, because of that strategy, our advertising revenue has also exceeded expectations for the first three quarters of 2024. And now I will share some additional highlights in fourth quarter.
spk11: One of them is that we still insist on grasping and amplifying the advantages of large-scale industries, as well as the performance of customers when they ship new products. For example, First, we are able to leverage our advantage in the big events in specific verticals and to catch the momentum of the new product launch stage.
spk02: I'll make two examples here. First of all, in the gaming industry, we have made record high grossing during few new games open beta testing stage, such as the Dream Star, as well as the Girls Frontline 2.
spk11: The second example is a relatively familiar ad related to revenue. In the future, at Double 11 and Double 12, as well as the annual goods festival, and held a number of large e-commerce events. Among them, Double 11 brought more than 250% growth compared to GMV. The live broadcasts also brought more than 100% growth compared to GMV. In fact, there are some interesting data, including the mother-child care industry. For Bilibili users who are looking for Bilibili, it still brought 90% growth compared to e-commerce platforms and our brand customers.
spk02: Another example is what we've seen in the e-commerce sector. So we actually hosted several e-commerce promotion events during Double 11, Double 12, and our New Year Shopping Festival, leveraging our video and live e-commerce capabilities. Here are some interesting numbers to share. During Double 11, the total GMV generated from our live and video e-commerce increased over 250% year over year. The number of live e-commerce sessions that happened on Bilibili also increased over 100%. And additionally, here are some interesting verticals. Maybe in maternities, it might sound a little bit too mature for our users. However, we're still able to bring over 90% of new users to the baby and maternity clients through our video and live e-commerce campaigns.
spk11: The second point is that Q4, we have further strengthened our investment capabilities. Our 24-hour ROI, our order transaction, from the perspective of the ability to turn the effect around, has clearly improved. So we have increased the cost of our customers, and increased the efficiency of our customers. So we have received more budget.
spk02: Secondly is that we have strengthened our advertisement placement capabilities. In the fourth quarter, our deep conversion capabilities, including provide ROI and order information within 24 hours, has gradually improved and matured. As a result, we're able to achieve the budget target for our customers more accurately and therefore gain more budget from them. Advertising with deep conversion pocket contributed over 30% of our total performance as revenue in the fourth quarter.
spk11: Thirdly, in Q4, we first tried to integrate multi-product lines. including the organization and business strategy. The interoperable firework platform has further expanded the supply of raw materials and improved the value of it. It has increased the consumption of the entire life cycle of advertising that customers put on Bilibili. These three points are the points that are worth paying attention to in addition to the big strategy we just mentioned in Q4.
spk02: And thirdly is that we have integrated our multiple product lines in terms of organizational structure as well as the product offerings. And for example, by integrating our Sparkle ads platform with our other ad products, we have further expanded the quantity and the quality of our native content Therefore, it enhanced and expanded our customers' lifespan and investment cycles on our platform. Those three reasons combined with what we have said about the Yi Heng, Yi Zhong strategy is the key drivers for our fourth quarter advertising revenue growth.
spk11: In the Q4 summary, I would like to talk about our trading business that everyone is concerned about. You may call it DaiHua, but it is a trading business within us. In 2023, we will completely incorporate the context of the transaction into the content ecosystem, and realize the transformation of Bilibili from a heavy market to a trading market. We now have more than 26 million users a year who will watch related content related to DaiHua. As for the video and live e-commerce business that many investors were very interested about, I will share more detail on that in 2023.
spk02: We further integrated the commercial scenarios into our content ecosystem, influencing our users from product seeding to transaction conversion. In 2023, on daily average, over 26 million users have viewed our video e-commerce related content, and the number of users click on the comments related videos and redirect to external platforms increased over 200%. 第二点的话呢,其实带货类的广告也为UP主带来了新的收入通路。 在Q4的话,平均每天有6万多的UP主进行全日带货这个业务。
spk11: Among them, the most familiar one, Up主, Li Deng, has sold more than 1.6 billion GMVs in the past 11 years. At this point, it's still surprising to find out what Bilibili's unique advantage is. It actually verifies the representative of home-based digital products, and combines Bilibili's video content with a longer way of expression. including this deep evaluation model, is our unique advantage.
spk02: Actually, on the other side, the video and live e-commerce product also introduced new monetization and commercialization avenues for our content creators. In the fourth quarter, over 60,000 content creators have participated in video and live e-commerce related activities on a daily basis. During 2011, our home and decoration content creator, Mr. Meaden, has generated over 1.6 billion RMB GNV through Bilibili. This demonstrates Bilibili's unique advantage in depth, in comprehensive and in-depth long-form content, especially in durable consumer and retail factors, such as home and decoration and technologies and digital products.
spk11: The second upshot is our women's clothing upshot. In December, the current single-stage transaction GNV broke 50 million. This actually further proves that the consumption potential of BZEN's women users is huge. 我觉得这两个案例放置于所有就全网的内容平台,应该都是超预期的一个案例,也是证明了B站在往后的交易业务上面的一个优势。 Another example would be one of our female content creator, Ying Wuli. In December, the total GME of her single live e-commerce session
spk02: hosted by her were over 50 million RMB. And this also represents the significant consumption potential of Bilibili's female user base. And with Mr. Mita and Ms. Yingwu, these two cases, we believe this is considered to be the leading showcase across our industry peers and also showed the great potential commercialization potential of Bilibili's community.
spk11: In 2023, the total GMV on Bilibili's video and live e-commerce
spk02: were over 10 billion RMB. We believe that the commercial value of Bilibili's user base has just started to be realized, and there are enormous rooms for our future growth.
spk11: For 2024, we are very positive about the expectation of the advertising business. We are also very confident that we can maintain this high growth rate in 2023. Then let's look back at why we are so confident. Let's look back at what is the core competitiveness of Bilibili. In fact, Bilibili is the most dense platform for young people in China. At the same time, the value of the advertising platform lies in the value of the users. These young people have actually left the school. They are at an average age of 14 years old. When they reach the space of increased consumption, We maintain a very positive outlook for our advertising business in 2024. And we are quite confident to achieve a high growth rate in terms of advertising revenue. So first of all,
spk02: Let's review Bilibili's core advantage in advertising, which will be our user base. Bilibili has the highest density of young populations in China, and the value of our advertising platform lies within its own user base. With the average age of our user being 24 years old, We believe our users' consuming power, buying power, has just gradually, is gradually, and Bilibili has now become the go-to platform for advertisers to, whether it's improve their brand equity in the longer term or influence users' purchasing decision and convert sales in the short term. Bilibili has become the must-invest advertising platform.
spk11: In 2024, we will stick to the original strategy and make some upgrades. For example, we will upgrade our investment capabilities and efficiency. We will integrate all investment systems. We will implement smart investment and multi-end investment. We will achieve reliable services as soon as possible. We will also let customers see investment data at any time. They will be able to see Bilibili's data to determine the effect of investment. In addition to this, we also pay special attention to AIGC's improvement in advertising efficiency. The first part is that we pay special attention to the improvement in investment capability and efficiency, which is also part of the upgrade. The second part is the penetration of community scenarios and the upgrade of traffic strategy. This will further stimulate the ad load of effective advertising. In fact, in 2023, it is more important for us to expand the story, PC, OTT, and other scenarios. In 2024, we will focus on combining Bilibili's large traffic scene, including our dynamic, our search, our hot search, and other community natural scenes to form a new advertising model. In fact, technically, we have also implemented this mixed-race algorithm strategy, including our native ads, which will further improve our traffic flow. In conclusion, this may release more ad deposits,
spk02: Additionally, for 2024, we plan to further upgrade our e-hung strategy. First of all, we will enhance our ad placement capabilities and improve its efficiency. This includes integrating our ad placement system, achieving intelligent and multi-terminal ad placement experience. And we plan to achieve automatic placement for our advertisers at some point this year. And we'll further develop our data visualization tools, allowing clients to validate the results of their ad placement through multi-dimensional data placement. And we'll also be very paying close attention and looking to what AIGC can bring to help us to improve ad efficiency. Secondly is that we will penetrate more community scenarios and upgrading our traffic strategies to improve our outload efficiency effectively. For example, building on our last year's expansion into multi-scenarios like story mode, PC and OTT, we will focus on integrating those scenarios as well as the moment page, the search function, and other community scenarios. Meanwhile, we are also looking to enhance our monetization efficiency by arranging ads videos in a hybrid mode in the recommendation page and further promote native ads. To summarize, we'll be effectively leveraging and increase our ad inventory and ad load in 2024.
spk11: Thirdly, this is also a relatively low-level trial. We let customers become app owners. This original way is actually to let customers enter Bilibili and become an app owner, become an app owner. With the identity of the app owner, we will participate in the community ecosystem of Bilibili. We will release Bilibili's unique privacy and interaction advantages to customers. Lastly, we'll be actively for the client as content creator model to encourage our advertising clients to create native content and open their own brand accounts on Bilibili.
spk02: On the other hand, we will also be releasing the private domains for those advertisers and launch more interactive functions for them to interact with our users. Through those efforts, we aim to convert a single ad placement into a long-term operation and increase our clients' brand equity.
spk11: The general strategy is relatively simple. In fact, in 2023, we will be able to quickly expand our customer size and flow. So I predict that this year, we will be able to achieve a high-speed growth in the industry, including in cars, digital, housing, electricity, internet, finance, education, and so on.
spk02: Thirdly is on our strategy. We believe we can replicate the successful experience we had in e-commerce and games last year and replicate that model into other fast-growing sectors, such as automotive, tech, home and decoration, online services, finance and education, etc. And we do believe we can achieve high-speed growth rate in those verticals as well. Lastly, to summarize, we believe the further flourishing of our e-commerce ecosystem will bring us more pleasant surprises in advertising revenue in 2024. Thank you. Operator, next question, please.
spk07: Thank you for the questions. Our next question comes from Lei Zhang from Bank of America Securities. Please go ahead.
spk12: Hi. Thank you, management, for taking my question. Can you give us more color on your financial outlook for 2024, including revenue, break-even path, and our cash flow trend? Thank you.
spk08: Thank you. I will take this question. As Mr. Chen mentioned earlier, one of our most important tasks for 2024 is to improve our financials and achieve a probability. The way we plan to achieve the target will be similar to what we have done in 2023. largely through the growth of the growth profit, as well as expense management. Let me go through this in more detail. In 2023, our top line grew by 3% year-over-year. Our growth profit increased by over 40% year-over-year. In 2024, we expect our top line growth will accelerate and achieve double-digit growth rate, with ad revenue grow at even faster rate. We expect our gross profit will also maintain high growth in 2024 as we further improve our gross profit margin, attributed by higher contribution from high margin as business. Expense-wise, we will keep improving our operational efficiency. We expect to reach non-gap operating break-even in Q3 this year. And let me share more color on our cash flow and balance sheet side. We have achieved positive operating cash flow in Q3 and Q4 2023. Especially in Q3, we have generated over 600 million RMB operating cash flow. That means our company has entered into a positive cycle for development. We expect to keep doing that and maintain positive operating cash flow throughout 2024. From the liability side, we have repurchased of repaid 1.2 billion U.S. dollar CB last year. Now, on December 31, 2023, we had approximately 2.1 billion U.S. dollar cash reserve on our balance sheet. Compared with outstanding CB of 860 million U.S. dollar, our cash reserves are sufficient to cover all of our company debt. Thank you.
spk07: Thank you for the questions. And that concludes the Q&A session. Thank you once again for joining Bilibili's fourth quarter and fiscal year 2023 financial results and business updates conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director of Piacente Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Have a great day. That does conclude today's conference call. You may now disconnect your lines. Thank you. Thank you. Thank you. Thank you. Thank you. Good day and welcome to the Bilibili's 2023 Fourth Quarter and Fiscal Year Financial Results and Business Update conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliette Yang, Executive Director of Investor Relations. Please go ahead.
spk03: Thank you, Operator.
spk02: During this call, we'll discuss business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially from those mentioned in today's news release and in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filing with SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the Bilibili IR website at ir.bilibili.com. Joining us today from Bilibili Center 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. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.
spk08: Thank you, Juliette, and thank you, everyone, for participating in our 2023 year-end conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks on behalf of Mr. Chen. In 2023, we navigated a landscape of challenges and opportunities and achieved a number of important milestones on community growth, commercialization efficiency improvement, margin expansion, and loss cutting. Let's review these achievements in more detail. To begin with, we exist a year with over 100 million DAUs 336 million MAUs and other healthy community matrix across the board. Daily user time span remained robust at over 95 minutes on average in the fourth quarter. We continue to emphasize and dedicate resources to reinforce our content ecosystem, support our creators and foster an inspiring community. In 2023, Over 3 million content creators earn income on our platform, up 30% year-over-year. Further enabling talented content creators to expand their fan base and make money will be one of our most important tasks for 2024. Another highlight for the year was our progress in improving our commercialization efficiency. We stepped up our efforts to incorporate advertising and vast business in a way that native to our content ecosystem. Driven by strong performance-based ads, our ad revenue grew by 28% in the fourth quarter and 27% for the full year. Vast revenues grow by 22% in the fourth quarter and 14% for the full year on year-over-year basis. With this growth, our total revenues for the full year came in at RMB 22.5 billion, among which ad revenue made a higher contribution, rising from 23% in 2022 to 28% in 2023. Increased revenue contribution from our high-margin advertising business and effective cost controls drove our gross profit up by 33% year-over-year, and our gross profit margin reached 26.1% in the fourth quarter, marking the sixth consecutive quarter of margin improvement. For the full year, our gross profit grew by 41%. and our gross profit margin increased to 24.2% from 17.6% in 2022. Consequently, we significantly narrowed our adjustment net loss by 58% year-over-year in the fourth quarter and by 49% for the full year. Notably, we generated RMB 640 million in positive operating cash flow in the fourth quarter, and our full-year operating cash flow also turned positive in 2023. These gains placed us on a solid footing to reach our profitability growth. 2023 has shown the effectiveness of our strategy and provided a solid foundation for our success in 2024. As we approach profitability, we are keeping our fundamental goal in mind to create value for our users. We do this by expanding our content offerings, supporting our creators, and fostering a vibrant and growing community that people love. Our industry is still benefiting from the wave of visualization with the fast-evolving generative AI and tailwind. This leaves us with a long runway for growth. We remain confident that our virtuous growth cycle of user expansion and commercial capabilities will create increasing value for our users, creators, and shareholders. With that overview, I'd like to discuss our core pillars of content, community, and commercialization in more detail. Beginning with content and community. An ever-growing content ecosystem is vital for our community's health and vibrancy. For the fourth quarter, Daily active content creators grow by 16% and the monthly new content submission rose by 31% both year over year. As we continue to facilitate connections between high quality content and creators with fans, content creators with over 10,000 followers were up 30% year over year in the fourth quarter. In January 2024, We honored top 100 content creators our sixth annual Bilibili Power Up 2023 awards ceremony to recognize their creations and contributions to our community, among which 39 content creators received the award for the first time. These top 100 content creators excelled on our platform, successfully accumulating a total of over 400 million followers. With a thriving content ecosystem, Bilibili has become our favorite platform across different age groups and agendas. In the fourth quarter, the average age of our active user base was 24. As our existing users gradually mature, their interests evolve and consumption increases. In 2023, baby and maternity, automotive, traveling, Session and clothing categories demonstrated the highest growth in the video views. Each of these categories carries significant commercial value. The boundary between interest-based and commercial content has also improved. In 2023, the number of commercial related content with over 1 million video views more than doubled year over year. Meanwhile, over 3 million content creators made money through our various channels in 2023, among which the number of content creators who earned income via video and live commerce was up 133% year-over-year. With more content creators and a better content ecosystem, our users remained highly engaged, and the community continued to thrive. For the full year 2023, our average daily video views increased by 25% year-over-year to 4.3 billion. Our users spent 97 minutes daily on the platform during the same period. Monthly average interactions also grew by 14% year-over-year to over 15 billion in 2023. By the end of 2023, we had 230 million official members 18% more than in the prior year, and their 12-month retention rate remains strong at around 80%. Additionally, we close the year with our fifth New Year's Eve Gala, the most beautiful night of 2023, emerging as a youth must-watch online New Year celebration. The event garnered 100 million playbacks within 24 hours, and received the most industry-sponsored participation ever in its history. Lastly, I'd like to talk about commercialization and dive into each of our business lines. Our surviving interactive community is the cornerstone of our commercialization model. In the fourth quarter, our vast revenue was up 22% year-over-year to RMB $2.9 billion. and up 14% to RMB 9.9 billion for the full year. These increases were primarily driven by robust growth in our live broadcasting revenues. Our live broadcasting universe continues to be more diverse as we convert more host talent from our video content creator pool. In 2024, we will continue to integrate live broadcasting into our video ecosystem. By introducing more high-quality hosts and enhancing various tools and recommendation algorithms, we aim to convert more paying users on our platform. At the same time, our featured live broadcasting content and products, like VTubers and a celebration system, will continue to elevate payment activities and offer more monetization opportunities for us. In terms of memberships, By the end of 2023, we had 21.9 million premium members. Our members continue to demonstrate high brand loyalty and trust, with over 80% subscribing annual or auto-renewed packages. Additionally, users continue to exert increasing spending power on other featured products and experiences. Turning to our advertising business, we made some exciting progress. In 2023, our total advertising revenues increased by 28% to RMB 1.9 billion for the fourth quarter and were up by 27% to RMB 6.4 billion for the full year, both on year-over-year basis. Robust revenue growth in our performance-based ads was the most significant contributor. including over 60% year-over-year for the quarter and over 50% for the full year. We also achieved positive young year growth in brand and native ad revenues throughout the year. We credit our solid ad revenue growth to our unique position as the most densely populated community of the young generation and our ability to connect with them in their own language. In the meantime, we continue to enhance our ad infrastructure, including product optimization and algorithms improvement. This enables advertisers not only to improve their brand equity and influence user purchasing decisions, but also direct convert sales on Bilibili. In the fourth quarter, our top five advertising verticals were GAMS, e-commerce, digital products and home appliance, automotive and skincare and cosmetics. Among these verticals, the e-commerce and game sectors stood out with impressive results. Over the course of 2023, we deepened our collaboration with e-commerce advertisers. We further integrated direct sales conversion tools into our video and live commerce ad products. This enabled our users to seamlessly transition from viewing content to making relevant purchase, enhancing our ad conversion efficiency and user experience. Meanwhile, our deeper data collaboration with key e-commerce platforms further improved the accuracy and efficiency of our ad recommendation algorithms. In 2023, the number of users engaging in consumption-related behaviors increased by over 200% year-over-year. Meanwhile, we successfully gained more marketing budgets from key game developers during the fourth quarter, as they launched new games and promoted existing game updates. We maintained our position as an effective channel to convert gamers and a must-investing community to build game IP, thanks to our integrated advertising strategy and extensive resources within our gaming ecosystem. While we are encouraged by the progress we made in our advertising business in 2023, we believe there is still great potential and ample room for growth. In 2024, we will further integrate ads with our content ecosystem in a more native, natural, and a seamless way. We will prioritize our resources to improve ad infrastructure, including upgrading and refining our ad products, further optimizing the accuracy and efficiency of ad aggregators. We will also actively explore generative AI for ad material creation, supporting productivity for advertisers, Industry-wise, we'll continue to expand our shares in our leading games and e-commerce sectors and gain more presence in digital products and home appliances, skincare and cosmetics, and automotive verticals. Turning to our game business, total game revenues increased 2% quarter-over-quarter to RMB $1 billion in the fourth quarter, coming in at RMB $4 billion for the full year. Currently, three titles in our pipeline have been approved for release in the domestic market in the coming quarters. One Japanese card game, Heaven Burn Red, Zhi Yan Qian Qiong. One domestic SLG game, San Guo, Mou Jing Tian Xia. And other domestic card game, Artifactors, Wu Hua Ni Xin. In addition, We are able to create value for our broader game partners by increasing integrating our advertising products with our game distribution capabilities. As for our self-development game, we stimulate our resources and adapt a more selective game development strategy in 2023. The refined strategy will enable us to reduce our R&D expenses in 2024 while keeping us lean and focused on top-quality projects. Looking forward, our priorities in 2024 are consistent with 2023. We will further improve our commercialization capabilities by strengthening our technology infrastructure and improving our product offerings. particularly for our advertising and live broadcasting business. Company-wide, we aim to further improve our operation efficiency with a tight and targeted expense structure. Overall, we are dedicated to developing content ecosystem, enabling our content creators to earn more money and further expanding our user base. We believe these endeavors will lead us to reach our goal of profitability and set the stage for sustainable growth for many years ahead. This concludes Mr. Chen's remarks. I will now provide a brief overview of our financial results for the fourth quarter of 2023. In the interest of time, on today's call, I will be reviewing our fourth quarter highlights as Mr. Chen's remarks have touched our full-year results at a high level. We encourage you to refer to our press release issued earlier today for a closer look at our full-year results. Throughout 2023, our financial profile improved significantly alongside our community growth and ecosystem expansion. Of particular importance, the gains we made in our revenues, gross profit, and reduction in adjusted net loss, which we narrowed for the sixth consecutive quarter. Total net revenues for the fourth quarter was RMB 6.3 billion, up 3% year-over-year. Our total net revenues breakdown by the revenues team for the fourth quarter was approximately 45% VAS, 30% advertising, 16% mobile games, and 9% for our IP directives and other businesses. Our cost of revenues decreased by 4% year-over-year to RMB 4.7 billion in the fourth quarter, driving our gross profit to RMB 1.7 billion, up 33% year-over-year. Our gross profit margin exceeds 26% in the fourth quarter, up from 20% in the same period last year. We expect our gross profit margin to continue to improve in 2024. Our total operating expenses were down 17% year-over-year to RMB 3 billion in the fourth quarter. We cut our sales marketing expenses by 11% year-over-year to RMB 1.1 billion. Sales and marketing expenses were 18% of total revenues, compared with 21% in the same period last year. G&E expenses was RMB 512 million, down 37% year-over-year. R&D expenses was RMB 1.3 billion, down 11% year-over-year. As a result, we narrowed our adjusted operating loss and adjusted net loss by 53% and 58% year-over-year in the first quarter, respectively. Our adjusted net loss ratio for the fourth quarter was 9%, improving from 21% for the same period a year ago. Notably, for the fourth quarter, we also generated RMB 640 million positive operating cash flow, demonstrating that our business has entered a healthy path for sustainable development. We expect to reach positive net gap operating profit in Q3 2024 through our sustained top-line growth and growth margin improvement. As of December 31, 2023, we had cash and cash equivalents, time deposits, and short-term investments of RMB 15 billion, or $2.1 billion. As of December 31, 2023, the aggregate outstanding principal amount of our convertible bonds was $862 million. We believe our cash position is sufficient to cover all of our remaining capital bonds. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.
spk07: Thank you. We will now begin the question and answer session. To ask questions on the phone, please press star 1 1 and wait for a name to be announced. If you'd like to cancel your request, you can press star 11 again. For the benefits 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. The company will provide consecutive interpretations for management statements during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Please submit your questions to one at a time. If you wish to have a follow-up question, please join the queue. One moment for the first question. Our first question comes from Thomas Chong of Jefferies. Please ask your question. 晚上好,谢谢管理层介绍我的提问。
spk05: In 2023, we have made good progress in terms of community and commercialization.
spk02: Before I answer the question for 2024, I would like to take a moment to review our work done in 2023, which we have made decent progress in both community development and commercialization.
spk05: First of all, our DAU has broken 100 million barriers and achieved continuous health growth in the community. Secondly, our advertising business has started to grow in two or three years. Our annual advertising revenue has increased by 27%. This figure should be relatively prominent in the industry.
spk02: And this marks even for the among our peers should be the one of the highest advertising revenue growth rate.
spk05: Our interest rate has been continuously increasing in the past six seasons. Q4's interest rate reached 26% and grew by six points year-on-year. Our year-on-year net loss in 2023 was narrowed by 49% and achieved a positive financial flow throughout the year.
spk02: Our gross profit margin continued to increase over the past six quarters, reaching 26% in the fourth quarter, up six percentage points year over year. And our adjusted land loss narrowed by almost half, 49% year over year for the full year of 2023. And notably, we've also achieved positive operating cash flow for the full year.
spk05: Actually, we're very delighted to see that our community ecosystem
spk02: has become more aligned with our commercial value. The commercial efforts does not hurt our community development, but in contrary, it's helping our community content ecosystem to be even stronger. In 2023, over 3 million of content creator earned income on Bilibili. This is reinforcing the development of our content creator.
spk05: In these apps, through live streaming, And also over 1.8 million creators earn income on Bilibili through our live broadcasting services. And the number of creators earn income via advertising services almost double year over year. The direction of our work in 2024 will be the same as in 2023. There are two most important tasks for us. The first is to achieve the goal of profit. We will continue to strengthen our commercialization ability and then continue to improve our business efficiency, further optimize our profit margin, and manage our expenses in a reasonable way. We have confidence in the Q3 profit transfer in 2024, and we will start to make profit.
spk02: Looking ahead into 2024, our focus remains consistent with 2023 with two main tasks. First of all is focused on our profitability. We'll continue to strengthen our commercial capabilities and improve our commercialization efficiency at the same time to improve our gross margin and manage our cost. We expect We will continue to strengthen our content ecosystem by expanding our content richness and fostering very specific content categories to ensure the mindset of Bilibili being the go-to place for highest quality content.
spk05: This year, we will focus more on the development and activity of high-quality app owners. Moreover,
spk02: And in 2024, we'll focus on the discovering top content creator development and supporting them to make more money.
spk05: And we will continue to consolidate the advantages of our ACG digital knowledge. At the same time, we will also
spk02: In terms of content categories, we'll continue to solidify our existing advantages in ACG, gaming, tech, knowledge, and other categories while providing more support and assistance to new categories. that has grown in response to users' change of consumption demands, such as baby and maternity, travel, automotive, and home decoration.
spk05: We believe with this effort,
spk02: And after achieving profitability, we'll further achieve and enhance the virtuous cycle of our community ecosystem and to ensure sustainable growth in our both community and our profitability.
spk07: Thank you for the questions. Our next question comes from Yiwen Zhang from China Renaissance. Please ask your question.
spk01: So that's what I think in my question. My question is regarding There is a lot of good content on Bilibili. There are a lot of good creators.
spk05: On Bilibili, we have gathered a massive amount of high quality content creator and it's also a welcoming home for diverse interests.
spk02: our users feel a strong sense of belonging, unbelievably. All of this combined results in users very much willing to spend for content that they like, spend for content creators that they adore.
spk05: So in other words, these functions that pay for content and experiences for the community, In fact, Bilibili is the most natural business model. After the user pays for it, his experience will increase because he will be happy. At the same time, when the app owner gets the content or rewards for the user, he will have the value of being recognized by fans. And then it's this kind of income for the app It's actually more sense of accomplishment and motivation For example, one of our app owners He sold a class at B station The customer bought his class and got the income In fact, the same income than he is at B station The sense of accomplishment of advertising will be much higher That's why it's this one itself That's the kind of service that increases value It's for the whole community of B station It's also a very positive, very healthy experience
spk02: On Bilibili, users pay for content and services that they love. It's the most natural business model for us. As people pay for the content and services they love, they actually are happy for that experience and they feel good about that experience. As for content creator, when they earn the income through this kind of services, they will have an even stronger sense of value and appreciation. And for our content creators, they will be even more motivated to continue to create content on Bilibili. For example, if our content creator are earning more income on Bilibili through selling his proprietary premium classes, this money will represent a much more sense of value over what he could have made in advertising.
spk05: Yes, it is also due to the above reasons that we have developed a series of increased products and service projects, such as live broadcasts, such as conference members, such as comics, such as audio dramas, and then there are paid classes, charging, etc. Then this series of services and product functions will form our WAAS income. The growth of our WAAS income is still
spk02: Based on that service model or the connection within our community, we have developed our value-added services combining live broadcasting, premium membership, comic audio drama, premium course, fan charging, etc. And all of that is closely related to the current community and our content. In the fourth quarter, our overall fast revenue grew by 22% year-over-year.
spk05: In these WAF services, I think the fastest way to grow is live streaming. Why? Because live streaming is still Among all that services, we believe within that, live broadcasting probably has the biggest potential and could grow the fastest.
spk02: because we believe live broadcasting is more universal. Anyone could be a live broadcasting host. Last year, 1.8 million of content creators earned income on Bilibili through live broadcasting. And this is a universal and very low entry barrier monetization model for all content creators.
spk05: Although it is a platform now, there will be live broadcasts. Even though there are many platforms who are doing live broadcasting business, but Bilibili's live broadcasting is still very, very unique. That is because in terms of the content creators slash hosts,
spk02: as well as the content categories of our live broadcasting has very much similar offerings or minerals what we have in the PUGV community.
spk05: Let me give you an example. When we think of live streaming, we often think of live streaming as impulsive consumption, such as hormones and so on. But the live broadcast of Bilibili is different. Most of our live broadcasts are actually fans' emotions for their long-term attention. Let me give you an example. In 2023, our DaHangHai's monthly subscription income accounted for one-third of our entire live broadcast income. DaHangHai's project has the shortest time of one month. I'll make an example here. While many others might think live broadcasting is an impulse or hormone-driven payment, however, if you're looking at Bilibili's live broadcasting revenue component,
spk02: close to one-third of our revenue actually generated from a multi-subscription model called The Great Voyage. And for this particular payment, it's a reflection or representation of a fan's devotion and appreciation for our content creator over at least a month. And many of our paid users are actually subscribing for several months ahead. Their renewal rate is very high. This example distincts us from the traditional live broadcasting platform because the connection with our content creators, the host and the user is quite unique and lasting.
spk05: Our live broadcast business is still based on the POTC ecosystem of Bilibili. There are nearly 1 million live broadcasts on Bilibili on Q4. And then these live broadcasts, only a part of them come from the third party. Most of them actually come from our own ecosystem, which is the upstream of our video on Bilibili. As for the content supplier, which is the host, if we look at the fourth quarter, near a million hosts were active on Bilibili. Only a small portion of them were from professional guilds.
spk02: Most of them are actually native content creator from our PUGV ecosystem. And this also sets us apart from other traditional web broadcasting platform is because now we're cultivating our own supply and demand within our PUGV ecosystem.
spk05: Actually, it's the same in terms of quality. Our live stream has a lot of quality that has the characteristics and advantages of Bilibili. It is the same as the competitive advantage of our video. For example, in terms of virtual streamers, we should be the most powerful and leading in China. Then, for example, in terms of content categories, the content category in our PUGV ecosystem can also be our live broadcasting categories, especially the categories where Bilibili has our own unique advantage,
spk02: such as the virtual content creators, we are considered to be, if not the most leading platform in China. And also knowledge-based content, such as legal-related live broadcasting. It's hard to imagine this category to be a top vertical on other platforms, but it is very popular on Bilibili.
spk05: As for our priorities for live broadcasting business in 2024,
spk02: We'll be putting a lot of priorities in terms of the quality of our revenues as the gross profit and profit margin of this business. We hope to achieve sustainable and high-quality revenue growth in live broadcasting in 2024. Thank you.
spk07: One moment for the next questions. Our next question comes from Felix Liu from UBS. Please go ahead.
spk00: Thank you for accepting my question. My question is about our advertising business. The income of 4G advertising exceeds the expectation of the market, and our increase in momentum is much faster than the industry. So I would like to ask what is the main driver of the 4G advertising income increase? Let me translate myself. Thank you, management, for taking my question. My question is on the advertisement business. I noticed that your first quarter advertisement delivered a strong world momentum. So may I check the reason behind this good performance? and what is your outlook for the advertisement business for 2024? What will be the key growth drivers from here? Thank you.
spk11: In 2023, the annual advertising revenue exceeded 6.4 billion, and the net growth exceeded 27%. In Q4, the net growth of our advertising revenue is 28%. So the overall advertising revenue ratio has increased from 25% last year to 30%. Our advertising revenue in 2023 totaled about over $6.4 billion, marking a 27% young year growth.
spk02: And in fourth quarter, advertising revenue grew by 28% year over year, contributing 30% of our total revenue. up from 25% the same period of last year. The increase in as revenue and its proportion has directly a result of improving our gross margin and gross profit.
spk11: This is a summary of Q4 and 2023, some of the growth driving forces of the whole year. First of all, let's look back at Q1 of 2023. In fact, we proposed a strategy for the whole year, which is one red and one heavy. and at the same time pay attention to the opportunities of community trading. Yi Heng refers to the ability of the business center, including the flow strategy we mentioned, the ability to calculate and the data construction. Yi Zhong refers to the vertical industry strategy. We turned the original brand-based advertising, the effective advertising, and the model of integration and marketing into the ten largest vertical industries. In the end, the purpose is to provide customers with better experiences and ROI. And the first, please allow me to recap what we have done in 2023 and in the fourth quarter and the growth driver.
spk02: In the beginning of 2023, we have put forward Yi Heng Yi Zou strategy while paying close attention to the opportunity brought by the active commerce activities within our community. Yi Heng refers to the middle platform capabilities for commercialization, including our traffic strategy, algorithm capabilities, and our data power development. and refers to our vertical industry strategies. Our ultimate goal is to provide customers with a better ad placement experience and higher ROI, and we have formed 10 vertical strategies for different industry verticals. We believe We also believe in the revenue potential that fall from active commerce related activities within our community. As we sticking to the open loop strategy, we plan to connect Bilibili into a more broader ecosystem with our e-commerce partners.
spk11: As we have already shared a lot of information and cases about eco-neutral strategy in previous calls, I will not dive into more detail here.
spk02: However, because of that strategy, our advertising revenue has also exceeded expectations for the first three quarters of 2024. And now I will share some additional highlights in fourth quarter.
spk11: First, we are able to leverage our advantage in the big events in specific verticals and to catch the momentum of the new product launch stage.
spk02: I'll make two examples here. First of all, in the gaming industry, we have made record high growth during the new games open beta testing stage, such as the Dream Star, as well as the Girls Frontline 2.
spk11: The second example is a relatively familiar ad about revenue. In the future, at Double 11 and Double 12, as well as the year-end festival, and held a number of large e-commerce events. Among them, Double 11 brought the same growth of more than 250% compared to GMV, and the same growth of more than 100% in the field of live broadcasting. In fact, there are some interesting data, including the mother-child care industry. In everyone's view, for Bilibili users, the situation is a little bit early. It still brought the e-commerce platform and our brand customers nearly 90% of new customers.
spk02: Another example is what we've seen in the e-commerce sector. So we actually hosted several e-commerce promotion events during Double 11, Double 12, and our New Year Shopping Festival, leveraging our video and live e-commerce capabilities. Here are some interesting numbers to share. During Double 11, the total GMV generated from our live and video e-commerce increased over 250% year over year. The number of live e-commerce sessions that happened on Bilibili also increased over 100%. And additionally, here are some interesting verticals. Maybe in maternities, it might sound a little bit too mature for our users. However, we're still able to bring over 90% of new users to the baby and maternity clients through our video and live e-commerce campaigns.
spk11: The second point is that Q4, our investment capacity has been further strengthened. Our 24-hour ROI, our order transaction, from the perspective of the ability to turn the effect around, has clearly improved. So we have increased the cost of our customers, and we have increased the cost of our customers' efficiency. So we have received more budget.
spk02: Secondly is that we have strengthened our advertisement placement capabilities. In the fourth quarter, our deep conversion capabilities, including provide ROI and order information within 24 hours, has gradually improved and matured. As a result, we're able to achieve the budget target for our customers more accurately and therefore gain more budget from them. Advertising with deep conversion pocket contributed over 30% of our total performance as revenue in the fourth quarter.
spk11: Thirdly, in Q4, we first tried to integrate multi-product lines. including the organization and business strategy. The interoperable firework platform has further expanded the supply of raw materials and its value. It has increased the customer's consumption of the ad's full life cycle. These three points are the points that are worth paying attention to in Q4, in addition to the big strategy we mentioned just now.
spk02: And thirdly is that we have integrated our multiple product lines in terms of organizational structure as well as the product offerings. And for example, by integrating our Sparkle ads platform with our other ad products, we have further expanded the quantity and the quality of our native content Therefore, it enhanced and expanded our customers' lifespan and investment cycles on our platform. Those three reasons combined with what we have said about the Yi Heng, Yi Zhong strategy is the key drivers for our fourth quarter advertising revenue growth.
spk11: In the Q4 summary, I would like to talk about our trading business that everyone is concerned about. You may call it DaiHua, but it is a trading business within us. In 2023, we will completely incorporate the context of the transaction into the content ecosystem, and realize the transformation of Bilibili from a heavy market to a trading platform. We now have more than 26 million users a year who will watch the relevant content of DaiHua. As for the video and live e-commerce business that many investors were very interested about, I will share more detail on that in 2023.
spk02: We further integrated the commercial scenarios into our content ecosystem, influencing our users from product seeding to transaction conversion. In 2023, on daily average, over 26 million users have viewed our video e-commerce related content, and the number of users click on the comments related videos and redirect to external platforms increased over 200%. 第二点的话呢,其实带货类的广告也为UP主带来了新的收入通路。 在Q4的话,平均每天有6万多的UP主进行全日带货这个业务。
spk11: Among them, the most familiar one, Upzoo, a home-based app, has more than 1.6 billion transactions during the double 11 period. At this point, it's still surprising to find out the unique advantage of Bilibili. It actually verifies the representative of home-based digital sales, combining Bilibili's video content with a longer way of expression. including this deep evaluation model, is our unique advantage.
spk02: Actually, on the other side, the video and live e-commerce product also introduced new monetization and commercialization avenues for our content creators. In the fourth quarter, over 60,000 content creators have participated in video and live e-commerce related activities on a daily basis. During Double 11, our home and decoration content creator, Mr. Maiden, has generated over 1.6 billion RMB GNV through Bilibili. This demonstrates Bilibili's unique advantage in depth, in comprehensive and in-depth long-form content, especially in durable consumer and retail factors such as home and decoration and technologies and digital products.
spk11: 第二个up主是我们女性服装类的up主英武里面。 在12月份直播带货的当场单一场次的交易GMV突破了5000万。 这个其实进一步证明了B站的女性用户的消费潜力是巨大的。 Another example would be one of our female content creator, Ying Wuli. In December, the total GME of her single live e-commerce session
spk02: hosted by her were over 50 million RMB. And this also represents the significant consumption potential of Bilibili's female user base. And with Mr. Mita and Ms. Yingwu, these two cases, we believe this is considered to be the leading showcase across our industry peers and also showed the great potential commercialization potential of Bilibili's community.
spk11: In 2023, the total GMV on Bilibili's video and live e-commerce
spk02: were over 10 billion RMB. We believe that the commercial value of Bilibili's user base has just started to be realized, and there are enormous rooms for our future growth.
spk11: Yes, for 2024, we are very positive about the expectation of the advertising business. We are also very confident that we can maintain this high growth rate in 2023. Let's look back at the core competitiveness of Bilibili. Bilibili is the most densely-sourced platform for young people in China. At the same time, the value of the advertising platform lies in the value of the users. These young people have already left school and have reached the age of puberty. They have reached the age of increasing consumption. We maintain a very positive outlook for our advertising business in 2024, and we are quite confident to achieve a high growth rate in terms of advertising revenue.
spk02: Let's review Bilibili's core advantage in advertising, which will be our user base. Bilibili has the highest density of young populations in China, and the value of our advertising platform lies within its own user base. With the average age of our user being 24 years old, We believe our users' consuming power, buying power, has just gradually, is gradually, and Bilibili has now become the go-to platform for advertisers to, whether it's improve their brand equity in the longer term or influence users' purchasing decision and convert sales in the short term. Bilibili has become the must-invest advertising platform.
spk11: In 2024, we will stick to the original strategy and make some upgrades. For example, we will upgrade our investment capabilities and efficiency. We will integrate all investment systems. We will implement smart investment and multidirectional investment. We will achieve reliable services as soon as possible. We will also let customers see investment data at any time. They will be able to see Bilibili's data to determine the effect of investment. In addition to this, we will also pay special attention to AIGC's improvement in advertising efficiency. The first part is that we will pay special attention to the improvement in investment capability and efficiency, which is also part of the upgrade. The second part is the improvement in community scene penetration and traffic strategy. This will further drive the ad load of effective advertising. In fact, from 2020 to 2021, it is more important for us to expand the story, PC, OTT, and many other scenes. In 2024, we will focus on combining Bilibili's large traffic scene, including our dynamic, our search, our hot search, and other community natural scenes to form a new advertising model. In fact, technically, we have also implemented this mixed-race algorithm strategy, including our original ads, which will further improve our traffic flow. In short, this may release more ad deposits,
spk02: Additionally, for 2024, we plan to further upgrade our e-hung strategy. First of all, we will enhance our ad placement capabilities and improve its efficiency. This includes integrating our ad placement system, achieving intelligent and multi-terminal ad placement experience. And we plan to achieve automatic placement for our advertisers. at some point this year. And we'll further develop our data visualization tools, allowing clients to validate the results of their ad placement through multi-dimensional data placement. And we'll also be very paying close attention and looking to what AIGC can bring to help us to improve ad efficiency. Secondly is that we will penetrate more community scenarios and upgrading our traffic strategies to improve our outload efficiency effectively. For example, building on our last year's expansion into multi-scenarios like story mode, PC and OTT, we will focus on integrating those scenarios as well as the moment page, the search function and other community scenarios. Meanwhile, we are also looking to enhance our monetization efficiency by arranging ads videos in a hybrid mode in the recommendation page and further promote native ads. To summarize, we'll be effectively leveraging and increase our ad inventory and ad load in 2024.
spk11: Thirdly, this is also a relatively low-level trial. We let the client become the app owner. This original method actually allows the client to log in to Bilibili and become an app owner, become a Lanvi account, and participate in the community ecosystem of Bilibili with the identity of the app owner. We will release Bilibili's unique privacy and interaction advantages to the client, and realize the budget from the end of one investment. In fact, it can be operated in Bilibili for a long time.
spk02: Lastly, we'll be actively for the client as content creator model to encourage our advertising clients to create native content and open their own brand accounts on Bilibili. On the other hand, we will also be releasing the private domains for those advertisers and launch more interactive functions for them to interact with our users. Through these efforts, we aim to convert a single ad placement into a long-term operation and increase our clients' brand equity.
spk11: The upgrade of the general strategy is relatively simple. In fact, in 2023, we will see a significant increase in the growth rate of the e-commerce and game industry. Thank you.
spk02: Thirdly is on our Yizhong strategy. We believe we can replicate the successful experience we had in e-commerce and games last year and replicate that model into other fast-growing sectors such as automotive, tech, home and decoration, online services, finance and education, etc. And we do believe we can achieve high-speed growth rate in those verticals as well. Lastly, to summarize, we believe the further flourishing of our e-commerce ecosystem will bring us more pleasant surprises in advertising revenue in 2024. Thank you. Operator, next question, please.
spk07: Thank you for the question. Our next question comes from Lei Zhang from Bank of America Securities. Please go ahead.
spk12: Thanks, Benjamin, for taking my question. Can you give us more color on your financial outlook for 2024, including revenue, break-even path, and our cash flow trend? Thank you.
spk08: Thank you. I will take this question. As Mr. Chen mentioned earlier, one of our most important tasks for 2024 is to improve our financials and achieve a probability. The way we plan to achieve the target will be similar to what we have done in 2023. largely through the growth of the gross profit as well as expense management. Let me go through this in more detail. In 2023, our top line grew by 3% year-over-year. Our gross profit increased by over 40% year-over-year. In 2024, we expect our top line growth will accelerate and achieve double-digit growth rate, with ad revenue grow at even faster rate. We expect our gross profit will also maintain high growth in 2024 as we further improve our gross profit margin, attributed by higher contribution from high margin as business. Expense-wise, we will keep improving our operational efficiency. We expect to reach non-GAAP operating break-even in Q3 this year. And let me share more color our cash flow and balance sheet side. We have achieved positive operating cash flow in Q3 and Q4 2023. Especially in Q3, we have generated over 600 million RMB operating cash flow. That means our company has entered into a positive cycle for development. We expect to keep doing that and maintain positive operating cash flow throughout 2024. From the liability side, we have repurchased of repaid 1.2 billion U.S. dollar CB last year. Now, on December 31, 2023, we had approximate 2.1 billion U.S. dollar cash reserve on our balance sheet. Compared with outstanding CB of 860 million U.S. dollar, our cash reserves are sufficient to cover all of our company debt.
spk07: Thank you. Thank you for the questions. And that concludes the Q&A session. Thank you once again for joining Bilibili's fourth quarter and fiscal year 2023 financial results and business updates conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director of Biasente Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Have a great day. That does conclude today's conference call. You may now disconnect your lines.
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