Bilibili Inc.

Good day and welcome to the Bilibili Third Quarter 2024 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.

Thank you, Operator. During this call, we will discuss our 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. The definition of this measure and the 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 .Bilibili.com. Joining us today from Bilibili Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer, Ms. Kali Lee, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Sam Fan, Chief Financial Officer. I will now turn the call to Mr. Chen.

Thank you, Juliet, and thank you, everyone, for participating in our third quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks. The third quarter of 2024 was a landmark quarter for Bilibili. We are excited to share that we achieved our first quarterly adjusted net profit while setting new records across our community metrics. These milestones are a strong testament to our ability to deliver profitable growth and the unique community value that we continue to unlock. Looking at our financials in more detail, total revenues in the third quarter accelerated, rising by 26% year over year, reaching RMB 7.3 billion. Driven by our successful diversification into the strategy game genre, games revenue led our growth, surging by 84% year over year. Meanwhile, our advertising business maintained its strong performance in the third quarter, recording a 28% year over year increase. The increasing top line contribution from our high margin games and advertising business propelled our gross profit up by 76% year over year, driving our gross profit margin jumped to .9% from .0% in the same period last year. As a result, we successfully exceeded our commitment to reaching breakeven in the third achieving an adjusted operating profit of RMB 272 million and an adjusted net profit of RMB 236 million. While making remarkable financial progress, we continue to grow and cultivate our community. Both DAUs and MAUs reached record highs in the third quarter, hitting 107 million and 348 million respectively. Meanwhile, the average daily time spent per user rose to a new high of 106 minutes. With robust user retention and engagement, our users have stayed with us and grown with the platform. The average age of BDBD users is now 25. As these users enter new life stages with increasing spending power, we will continue to create more diverse content and services that cater to their evolving needs. Moving ahead, we remain committed to building a welcoming and inspiring video community with all the videos you like. Our return to profitability marks a new starting point in our journey. We will continue to invest in key infrastructure that supports content creation and distribution, reinforcing our leading position in the high quality video content space and creating value for all our stakeholders. With that overview, let's look at our core content, community and commercialization pillars in more detail. Beginning with content and community. In the third quarter, our average daily video views exceeded 5.7 billion, up 23% year over year. The growth reflects the effectiveness of our strategy to broaden content categories and encourage high quality content creation. While our leading categories maintained their popularity, consumption related categories continued rising. This is being driven by increasing user demand as the young generation becomes the mainstream of consumer society. Video views in fashion and home appliances and decoration grew by over 25% year over year. While views in automotive, baby and maternity, sports and fitness categories surged by more than 40% compared with the same period last year. The diverse commercialization channels we offer continue to empower our content creators to realize their commercial value while pursuing what they love. For the first nine months of 2024, nearly 2.7 million content creators received income through various channels on our platform. Content creators' total income through our various advertising and vast products grew by 24% during this period. Notably, content creators' total income through our fan charging product saw an over 400% increase year over year in the same period. Turning to our community metrics, in the third quarter, our DIU spent nearly 106 minutes on our platform every day compared with 100 minutes in the same period last year. Our monthly interactions surpassed 19.3 billion. Marking a 14% year over year increase. By the end of Q3, our official members grew to 251 million with our 12-month retention rate remaining around 80%. Additionally, our sponsored e-sports team, Billy Billy Game, BLG, fought their way to second place in the League of Legends S14 World Championship, marking a new record in the team's history. We are proud of their achievement and look forward to their continued success in the upcoming year. Events like these continue to support our leadership in the game community and make Billy Billy the top choice for young generations. Last but not least, we are excited to share that our MSCI ESG rating was upgraded to an A this year, a testament to our steady ESG improvements over the past few years. This achievement underscores our dedication to advancing our ESG practices, where we use our influence to impact communities and society positively. Now, I'd like to talk about the progress of our commercialization in each of our business lines. First, on our games business. In the third quarter, our games revenues increased by 84% year over year to RMB 1.8 billion, driven by the outstanding performance of our strategy game, San guo, maoding tianxia, San mo. The game's initial performance reinforces our confidence in the longevity of San mo. We will continue to roll out new content updates and gameplay to deliver better gaming experiences to users. San mo's success shows the vast potential that lies within our game community. We plan to leverage our unique game industry advantage to further explore other game opportunities in different genres. Meanwhile, we remain committed to bringing the best ACG titles to our users. Our legacy titles, FGO and Azure Lane, maintained their popularity as they celebrated their eighth and seventh year anniversaries, respectively. In addition, we launched the Japanese RPG game, juju es kaisen, Phantom Parade, Zhou hui zhan, hua yin ye xing, in overseas markets in November, which was well received. Turning to our advertising business. Our advertising business continued to outperform the industry in the third quarter. Advertising revenues increased by 28% year over year to RMB 2.1 billion. Robust revenue growth in our performance-based ads was the largest contributor, increasing nearly 50% year over year in the third quarter. We also achieved decent year on year growth in brand and native ad revenues, reinforcing our strength in integrated marketing capabilities. Our top five advertising industry verticals in the third quarter were games, e-commerce, digital products and home appliances, internet services and automotive. As more and more e-commerce platforms recognized the commercial value of our unique young user They allocated larger advertising budgets to our platform. We saw a particular uptick over the summer vacation and back to school season, resulting in an 80% year over year surge in e-commerce advertising revenues. Meanwhile, we are also attracting more advertisers from emerging verticals in the third quarter ad revenues from education, baby and maternity, and travel and lodging all grew by over 100% year over year. In addition, we continue to enhance our ad infrastructure to improve efficiency, and we have seen early benefits from these efforts. For example, as we roll out a more user-friendly and effective ad placement system, the number of performance-based advertisers increased by over 40% year over year in the third quarter. We plan to further incorporate AI technologies into our smart ad delivery system and launch a series of tools for ad material creation with higher efficiency and lower costs. These initiatives are expected to attract and retain more advertisers on our platform. Turning to our vast business, revenues from our vast business increased by 9% year over year to RMB 2.8 billion in the third quarter. This quarter, we welcome the more users to join and enjoy our live broadcasting universe as we continued expanding our content offerings to meet their diverse interests. Simultaneously, we remain focused on refining our operations to ensure sustainable business growth while improving margins. Our premium membership program grew steadily year over year, reaching nearly 22 million members in the third quarter. Over 80% of these members are on annual subscription or auto renewal packages. Additionally, other vast products experienced rapid growth, fan charging revenues surged by over 500% year over year during the quarter, demonstrating our users' strong willingness to pay for good content. As we celebrate our first quarter of profitability, I want to thank our dedicated team, our loyal user community, and our supportive partners and shareholders. Looking back over the past 15 years, we've made significant breakthroughs in our content offerings, expanded our user base, and developed diverse commercialization products. These efforts have helped us build a unique video community with a -a-kind user experience in a competitive industry landscape. Turning profitable is just a new beginning. Building on this milestone, we will continue to reinforce our business's positive growth cycle to drive sustainable profits in the future. With that, I will turn the call over to Sam to share more financial details.

Thank you, Mr. Chen. Hello everyone, this is Sam. I will now provide a brief overview of our financial results for this quarter of 2024. For a closer look at our financial results, we encourage you to refer to our press release issued earlier today. As a reminder, all amounts are in IMB unless otherwise noted. In the third quarter, we greatly improved our financial profile. We accelerated our -over-year revenue growth across our co-benices, continued expanding our margins, and turned profitable on a non-GAB basis. Total revenues for the third quarter were IMB 7.3 billion, up 26% -over-year. Our total revenue breakdown by revenue stream for Q3 was approximately 38% vast, 29% advertising, 25% mobile games, and 8% from our IP directives and other businesses. Our cost of revenues increased by 9% -over-year to IMB 4.8 billion in the third quarter, while our gross profit rose 76% -over-year to IMB 2.5 billion. Our gross profit margin reached .9% in Q3, up from 25% in the same period last year. The significant improvement in our gross profit margin this quarter indicates the elasticity and potential of our business model. Our total operating expenses were up 2% -over-year to IMB 2.6 billion in the third quarter. Sales and marketing expenses increased by 21% -over-year to IMB 1.2 billion, mainly due to increased marketing expenses for our exclusively licensed games. G&A expenses were IMB 505 million, which was relatively flat -over-year. R&D expenses were IMB 906 million, down 15% -over-year due to a higher base of termination expenses for certain game projects in Q3 last year. Our adjusted operating profit and adjusted net profit turned positive at IMB 272 million and IMB 236 million respectively, marking significant gains from -over-year losses. Our adjusted net profit ratio in the third quarter was 3%, compared with an adjusted net loss ratio of 15% in the same period a year ago. Cash flow wise, we generated IMB 2.2 billion in positive operating cash flow in the third quarter and IMB 4.6 billion in positive operating cash flow in the first nine months of the year. As of September 30, 2024, we had cash and cash equivalents, time deposits and short-term investments of IMB 15.2 billion or US dollar 2.2 billion. With a healthy cash balance, we announced a share-reportage program of up to 200 million US dollars for our securities for the next 24 months, showcasing our commitment to enhance shareholder returns in the long term. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Thank you. We will now begin the question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. The company will provide consecutive interpretation for management statement during the Q&A session. Please note that English interpretation is for convenience purposes only. In the case of any discrepancy, management statements in the original language

will prevail.

Once again, that's star 1-1 for question. We will now take our first question from the line of Lei Zhang from Bank of America Securities. Please go ahead, Lei.

Hi, good evening, manager. Thank you for answering my question. Congratulations on your performance. I am also very surprised that Mr. Rui spoke English on the call for the first time. I hope that you can continue. My question is probably a bit high-level. I would like to ask, after the Break Even, how did the management think about the future strategy of the B station, especially in terms of the growth of the community and commercialization? And how can we continue to enhance our advantages in the video industry? Thank you. I will translate it for you. Thanks, management, for taking my question and congratulations on your strong results. It seems that Mr. Rui speaks English on the call for the first time. It's very well and pretty impressive. My question is really high-level and I want to know management's strategic view on the future strategy of the B station. What is our key focus in user and commercialization going forward and how to strengthen our positioning in the video industry? Thank you.

What you just heard on the call was not my real words. It was the AI-generated. It's the TTS of our self-proclaimed index model. It took a 15-second video to produce this English voice. Anyway, it was the first time I heard that I was the next one. So I think this is what I said. This also fully proves the AI technology. Actually,

the English prepared remarks that were spoken by me was not really spoken by me. It's generated by AI. It's our self-developed proprietary index TTS model that only used 15 seconds of my speech during one of the events and generated that English prepared remark. I was quite surprised when I first hear it. It just sounded like me. And that shows the vast potential of the application could do for Billy Billy, such as helping our content creators to make those narratives or engage better on a real time with their users. We are quite looking forward to further leverage that to our application. This

is the first time that Bilibili has achieved a single-season profit. Many of our friends have sent me their best wishes. Of course, in my opinion, this is a milestone in Bilibili. But I think it's a natural result. I think our work in the past two years has only allowed us to reach the profit earlier.

Indeed, this marks our very first quarter of adjusted profitability. And just now I was receiving a lot of congratulations from friends and investors. But as a matter of fact, we do believe this is a natural outcome of the involvement of our business model and expansion of the industry. And we just made it happen faster.

Before I talk about our future strategy, I would like to briefly summarize the logic behind Bilibili's success. First of all, I think video is a huge market. And China is certainly one of the biggest video markets in the world. Video is also a big business. And in such a big market, Bilibili is a platform with unique content, high quality content, and medium-term video content.

So before I get into the future, I would like to look back a little bit on where we stand right now and the logic that's driving our profitability. First of all, the industry that we're in, the video industry, is a very large market. And China itself is the largest and the low market. And video is a large business. And within that industry, Bilibili has built a very unique, -a-kind, -G-V community in China video market, known for the high quality video content. And we have secured that user mindset.

So when we

are thinking about what is the highest, where to find highest quality content, where to find talented content creator, what's the go-to destination for -to-longer length of videos, Bilibili is always the number one brand name that pops up. And you can barely find, think of number two in this market. And because video is such a large market, and video will serve as the main media platform for this outlet, the brand awareness, the user mindset is as precious as gold.

And in the last 10 years, the video industry has been developing for a long time. I think that video content has become extremely insufficient, extremely insufficient. I think that the supply of video is becoming more and more sufficient. And the user wants to watch videos, and they want to watch high quality videos, they want to watch unique videos. So I think that the video industry has already had a very obvious trend called content consumption upgrade. And in this trend, Bilibili is definitely the biggest advantage. Because we are in the user's mind, representing high quality content, representing interest, he is interested, he likes it, it's unique.

Well, as the adoption of 4G, 5G network, our market has evolved from lack of supply of video content to enough supply of video content. And from user perspective, they have evolved from wanting to look at any video to wanting to look at high quality video, unique video. So in some extent, we are experiencing an upgrade in content consumption in terms of video market. And riding on that trend, Bilibili has a unique advantage because we have that user mindset and the brand awareness about those high quality, unique content.

So Bilibili is the most dense video platform. And in the past 15 years, our users have been very good at saving. They have grown step by step with Bilibili. Currently, the average age of our users on our platform has reached 25 years old. This age also keeps the business value of our users increasing. So we can see that because of the series of reasons I just mentioned, our business development must be accelerated. The profit is a inevitable result. And if we look at it later, the potential in the business will be further released.

And because we have very high sticky user cohort and user retention rate over the past 15 years, our user has stayed and grown with us. And the average age of Bilibili now has come to 25 years. So 25 also means their commercial value is increasing every day. That's why we see this as an inevitable trend that our commercialization will accelerate. And it's a natural outcome of reaching profitability. And going forward, we think there's vast potential for our commercialization to be unleashed. And in the future, in the past, we have stated our focus will be focusing on community growth and commercial growth. After reaching the profitability, our focus will remain unchanged.

In terms of business, I'll just say two things. First, we will focus more on our core business, such as advertising and games. Because these core businesses have higher revenue and higher profit. So we focus on these jobs to make our business growth more efficient.

And we will even more focus on the core business, such as games and advertising. Because for those two business sectors, they have higher market time and by its nature, it has higher growth margin. And that will result in more efficiency in terms of our commercialization growth.

And the second point is that we will always focus on commercialization to counteract our content ecosystem. And it will form our content, which is a better content growth and commercial growth, a positive feedback. And in the past, we have been constantly guiding the way to increase revenue through commercialization. In the first nine months of this year, we have received revenue from nearly 2.7 million advertisers. So we believe that the growth of the business can also help us to create better content.

And the success of our commercialization will also support the prosperity of our content ecosystem. And we have been pursuing that formation of the positive flywheel effect between content ecosystem and our commercialization growth. And as a matter of fact, in the first nine months of this year, leveraging our various commercial outlets, 2.7 million content creators have received income on Bilibili platform. And those commercialization in one way is helping our content creator to realize their commercial value and has motivate their further and more content creation.

And one thing

I wanted to emphasize that for Bilibili platform, is that we have been using our various commercialization outlets more than just advertising because we are a comprehensive platform. And we provide more tools beyond advertising to help them realize their commercial value, establishing connection between their followers. For example, on top of the native ads sparkle advertising platform, we have our fan charging program. We also have a craft studio encourage content creator to monitor their skills such as handcrafts and drawing and also premium courses to help them make money in various ways.

I think the growth of business can make Bilibili

more healthy and sustainable.

Thank you. Our next question comes from the line of Daniel Chen from JP Morgan. Please ask your question, Daniel.

Thank you for giving me this opportunity to ask questions. My question is about advertising. My question is about advertising. Which is very strong. We have grow 28% year over year in the third quarter. So what's the key driver behind the third quarter advertising growth? And also for the fourth quarter, do we see a change in the kind of a macro environment for the advertising demand? And also lastly, how is our performance in the Double Eleven Festival for our e-commerce related business? Thank you.

So

Bilibili's

Q3 advertising revenue indeed with a good performance, it reached close to 2.1 billion RMB and maintained a strong growth rate of 28%. And behind that performance base that grow nearly 50% and this is helping us driving our growth margin and on a good level.

We still have to pay attention to the experience of the third quarter users. But we have to do enough to release more advertising stocks. How do we do that? We still stick to the strategy of multi-screen multi-scene. We can see the stock market in the first page of the information flow, including the way of Story Mode, can quickly get growth. In addition to the recent one or two Q, we can see that in the related recommendations, search, even PC and Pad, this port has also contributed more advertising revenue than ever before. In fact, it is worth looking forward to, maybe we will have more advertising revenue in the live broadcast scenes, the live broadcast scenes, the hot search, etc. In addition, we have tried to mix the natural and commercial flow, so that the original advertising can get more natural flow and achieve a commercial-based advertising scene. Now, we have received a better and more effective stock. This is the first part.

In addition to the scenario strategy, commercial inventory grew rapidly on our homepage feed and Story Mode and also generated increased ad revenue across recommendations, search, PC and even tablet platform in recent one to two quarters. Looking forward, there is more potential for additional revenue from live streaming within video players and also hot topic search. On top of that, through a blend of organic and commercial traffic and native ad integration, more high quality ads received more distribution, effectively expanding our ad inventory. At the same time, we have achieved content is a good commercial and good commercial is a good content effect.

On the second point, we further optimized the connection of the ad. For example, through the mobile end of the whole smart ad setting, the number of customers has increased by seven times. In the future, we will continue to help the overall advertising group to reduce the number of ad posts.

The second point is that we further optimized our ad placement system. In the third quarter, the number of clients and mobile smart app placement increased by 700% year on year. We will continue to improve our products and tools to make ad placement easier. Another example would be with the integration of Sparkle and our ad system, the proportion of Sparkle ads that engaged in ad promotion reached nearly 60% in Q3, further demonstrating the effectiveness of our Sparkle Plus Qifei, aka ad promotion services model.

The third point is that we have also launched the creative center and the AIGC to generate the content. Now, we have some results. In the future, I will further launch more AIGC tools to help the advertising group to automatically generate or modify a large number of content and ad materials. We will further achieve the reduction of cost. This is also very critical. So in Q4, we will continue to optimize the basic construction that we just mentioned, and we will also improve the efficiency of the algorithm. Therefore, we should be more confident in making more new advertising groups enter the B station's whole community atmosphere, become our content creators, and become our advertising customers.

The third point would be the launch of creative center and AIGC automated content has also improved our ad efficiency. We plan to roll out additional AIGC tools to help advertisers automatically create or modify ad materials, further lowering their cost and barriers. And in Q4, we will continue to enhancing our ad placement experience, improving algorithm efficiency, and we wanted to attract more new advertisers to billiably to create content to connect with our users.

In addition to the fact that these advantages can continue to maintain a relatively large budget, we can also see that in the game industry, in addition to the games we are good at, the daily play of Q3 games has improved by 200%. In addition, in the digital home appliances industry, in the scene of new products, it attracts companies like Apple, Huawei, Vivo, etc. Q3 also has a point, we still catch the e-commerce advertising that is not a big node, but from the same number of ads from industry, it is also close to 80%. In history, we will bring new growth in the double 11, 618, and double 12 nodes, but this time in the non-big node, we also got a relatively large growth. You can also see that the most sensitive platform to money can also know what node to put in the ad, and you can see the advertising value of the B-Zone platform. So while we are strengthening our advantage, we will actively explore more new categories. In addition to the advantages mentioned earlier in Q3, the industry has achieved a relatively large growth in education, mothering, and literature.

We are at verticals in Q3 coming from number one games, number two e-commerce, digital products, and online services, number five is automotive. In these leading verticals that we have clear advantage, we continue to expand our market share. In one example on game sectors, apart from our experienced genre in the sector, daily app placement for mini games sector increased by 200% quarter over quarter. In digital products and home appliances, we attract top tech brands like Apple, Huawei, and Vivo to launch their new products on billability. In Q3, we captured more advertising brands during non-shopping festival periods with e-commerce ad revenue up nearly 80% year over year. Traditionally, we see e-commerce platforms to place more ads in the big shopping festival seasons, but in Q3, you are actually attracting more advertising budget during the summer vacation and the -to-school seasons, reflecting the high value of our high quality young audiences. And for those brand advertisers, for those e-commerce players, they saw the value in our platform as well as in our users. And while strengthening our advantageous categories, advertisers from more industries are choosing billability. In Q3, sectors like education, baby and maternity, travel and lodging, etc. have all achieved high growth and will continue to expand to more industry verticals.

We have also seen the growth of e-commerce platforms. The growth of G&V has increased by more than 150%. The growth of Up主 has also increased by nearly 80% to 79%. Bilibili has brought more than 50% of the new customers to all industries. Including 3C digital, furniture, makeup, clothing, clothing, and so on. We have all become the main sources of e-commerce platforms and new customers. So during Q3, we have also brought the same growth of Bilibili to Bilibili.

For the Double 11, we maintained our open loop strategy, become a trusted partner for e-commerce platforms like Alibaba, Jingdong, Kindle, and VIP shops. G&Vs from video and live e-commerce increased over 150% -on-year. And participating content creators rose by 80%. Among the customers we bring to those merchant shops, new customer rates exceeded on average 50% across all sectors. Including 3C and digital products, home decor, beauty, and baby and maternity, etc. We have become the key source for new customers across all e-commerce platforms. And this also helped us to achieve a close to 50% -on-year increase in ad revenue during the Double 11 period.

We have also seen a difference in the different industries. But from the mid-term, we are still very optimistic and confident about our domestic economy.

And in the market environment, there are still some uncertainties in the advertisers' budget. But the condition varies by industry, different industries. For example, sectors supported by the national subsidy policies, such as the digital products and home appliances, are seeing a strong recovery. And on food and beverage, health care, and education are beginning to regain market confidence in a more gradual way. While the budget remains tight in sectors such as automotive, beauty and fashion, and real estate, even though we expect short-term fluctuations across different industries, we remain optimistic and confident about the domestic economy in the mid to long term. Going back to BilliBilli's advertising revenue, we remain confident that we can maintain a faster than industry average growth rate for our advertising revenue in Q4. And further increasing our shares across all various industry verticals. That concludes Ka-Wei's answers. Thank you. Operator, next question please. Thank

you. Next question comes from the line of Yang Liu from Morgan Stanley. Please ask your question,

Yang. Thank you for the opportunity to ask. First of all, congratulations to the company for making a profit this quarter. My question is about games. This quarter's game business has been very bright, with an increase of over 80% in revenue. I would like to ask how the most important game, Sanmo, performs and what kind of operations are planned in the future? How will the company consider the strength and rhythm of the future Sanmo users? I would also like to ask the management to update the pipeline and quality planning of the new game. Let me translate my question. My question is about the game business, which grows more than 80% in the third quarter. My question is about Sanmo's performance and what is the outlook and the operation planning in the future for this game. I would also like to hear management thoughts on user acquisition for this game and also the future pipeline in Bilibili's game business and also the potential new generation in the future. Thank you.

Sanmo is one of the best games this year. We have been in the top three in the App Store for many times.

I would like to ask about Sanmo. Sanmo is one of the best-performing games in the China gaming market this year.

In addition to the short-term performance, I personally value the long-term operation of Sanmo. My team also says that Sanmo's most important goal is to achieve long-term operation. In my opinion, the long-term operation is a stable operation for at least five years.

The long-term operation is the longevity and sustainable operation of Sanmo. When I say longevity and long-term operation, I'm referring to at least five years, five to ten years.

So, in the first three seasons, Sanmo's user activity and storage should be at the top of the industry. Because this user activity and storage is the premise for our long-term operation.

In the first three seasons, we can say that the user engagement level and retention rate is among the highest in this genre in the industry. The day after tomorrow, November 16th, we will be launching the brand new game season 4. In the new game season, we will be featuring a new map, characters, and new storyline gameplay. We are quite confident that the new version content update will provide users with even more engaging and fun gaming experience.

As you can see, in Sanmo, we have done a lot of innovation and differentiation compared to other companies. These innovations and differentiations are from the feedback of the users in the collection industry. And from our style to the third season, we will frequently find users and listen to their opinions. The players are the ones who listen to the players the most. So, in the first three seasons, we have collected a lot of players' opinions. We should pay attention to these opinions. And we will also do some improvements to the S4 and S5 that we are about to launch. And many

of you might know that Sanmo has done a lot of innovation and differentiation compared to the similar genre games. The reason behind that is from day one, we have collected many, many users' feedback from our closed data testing to the latest season 3. We have welcomed feedback and actively engaged with our users to listen to their advice and make adjustments based on their feedback. And we also got the reputation of the best game company that listens to the users' feedback. And based on those users' feedback, we have proactively adjusted within our new season 4. And going forward, the following seasons, we will continue to listen to our users and optimize and improve our games to give them the best experience.

In the strategy game, we will only make one game for a long period of time. And we will make this game in the right order. Because I think the -the-range version of this game is high enough. And our entire development team is quite elite. We will focus on making this game in the right order, which is to make a curve that can be raised. And at the same time, we will also prepare to release the overseas version of this game in the second half of next year. And we will also focus on this game and increase the number of users of this game. And we will send it to other countries around the world.

And for this particular strategy game genre, we'll be very focused on this one single title. And because we also have a big team of developers and operators, we will be really focusing our best resources on optimizing this game. And in the second half of this year, we will be starting to preparing for the international launch of Sanmo, starting with the traditional Chinese version. And we also look forward to bring this high-quality strategy game to the users worldwide.

This is the SLG game. And it's appearance is the result of the internal evaluation of the youth of the game. So, in addition to the second round and SLG, we have already made these two tracks. We will try a new track next year and try to improve the youth of the game. And the

success of Sanmo is attachment to the strategy of reinventing games for young generations. And we have succeeded in that strategy genre. And on top of the strategy and the ACG genre, next year we'll be looking to explore a new genre and adapting our methodology of reinventing games for young generations to this new genre. And hopefully can bring another new pie to the newly game. The

second is the game of the 20th anniversary. You should have noticed that on November 7th, we had a week-long return war overseas. This is also the first time we have had a game in a country outside of Japan. And the feedback of the players is good. We are the first place in the download list in more than 70 countries and regions. And from what we have seen so far, the operating situation is also within our expectations. This is a global experiment. I think the return war is also a more important game for us next year. And

in terms of the ACG genre, many of you might have noticed we have successfully launched the Jujutsu Kaisen, the international version, globally except Japan and China, on November 7th. And so far we have very good results. We have the game reached top downloading charts number one in more than 70 countries and regions. And so far the user feedback has been very positive. This marks a very successful attempt at our very first global distribution of ACG games. And for this particular game in 2025, it will also be one of our important games to sustain and propel.

Okay.

Thank you. Next question, please.

Thank you. Next question comes from the line of Felix Liu from UBS. Please ask your question, Felix.

Thank you, Mr. Guan. This is my question. And congratulations on your first win this year. I would like to ask you about some financial issues. After this win, I would like to ask you about your next profit and profit-revenue growth. I would also like to mention that our company has announced a $1 billion return. This is a very good progress. I would like to ask you about your next plan for shareholding. Thank you, management, for taking my question. Congratulations on turning profitable this quarter. My question is more on the financial side. So what is your GP margin and profit margin outlook after it very successfully turning profitable this year? Sorry, this quarter. And also we noticed that you announced a new share repurchase program. So how should we think about your shareholder reward scheme going forward? Thank you.

This is Sam. I want to do a question. In Q3, we not only met our previous committed breakeven goal, but also exceeded by achieving an adjusted profit of $270 million RMB. This result demonstrates the potential of our business model. Our revenue in Q3 grew by 26% when gross profits saw a significant -over-year increase of 76%, with the gross profit margin rising at 10 points from 25 to close to 35%. This improvement was mainly due to the increase of share of the high margin gain and advertising revenue, along with the effective control of our fixed cost. We believe that with the continued growth of our tidings and gaming business, there is a further room for long-term improvement in our gross profit margin. Additionally, it's worth mentioning that our operating cash flow reached 2.2 billion RMB in Q3, with the operating cash flow for the first three quarters reaching 4.6 billion RMB. This indicates that our business has entered a healthy positive cycle. That's also the background why we announced our financial support $200 million US dollar repurchase plan to be carried out over the next 24 months to increase our return to our shareholders. Looking ahead to Q4, if you look at our deferred revenue balance, that balance in the end of Q3 increased by 380 million RMB -over-quarter, laying a solid foundation for Q4. So we expect the revenue from gaming and our tidings business to maintain a strong growth momentum, with further -over-quarter improvements in gross profit margin, and to deliver further improved non-GAAP operating income. That's it.

I'll offer your next question, please. Thank you. We will now take our last question from the line of Lincoln Kong from Goldman Sachs. Please ask your question, Lincoln.

So thank you, Manchun, for taking my question. My question is about more the macro policy since the end of September. We have seen quite a big shift in terms of those policy and the more stimulus coming. So from the company's business level, have we seen an incremental growth in the macro policy? Or incremental better trends in terms of advertising, gaming, live streaming, or user pay in propensity? Thank you.

From a business perspective, we are very pleased to see a series of positive economic policies being introduced. We view this policy as highly encouraging signals that reflect the government's commitment to economic growth. And recently, we also felt ourselves, we felt the government's attention to private sectors and its determination to improve the business environment ourselves. While some of these policies are still in the pipeline and might take time for their effects to materialize, but we think it's just simply a matter of time as the overall direction has been set and clear.

So this is a part of the entire national economy. If the overall national economy is good, then Bilibili will be one of the

beneficiaries.

Of course, because we are a business, the job we can do is to do our best. I think the macro economy is definitely a plus. If we do our best, the macro economy will be good, too, then it will be good on top. But all the plans we are making, including our expectations of the future, we are not considering the macro economy to be a better factor. We are considering what we can do without external factors. We are doing this

as a plan. Well, of course, as a company, we will be paying more attention to our own development, specifically on the path to achieve community and profitability growth, commercial growth. We are planning for our next year and the year afterwards, the wooden sector and the overall economy will improve drastically. We will be focusing on what we can do to improve our own business model, to improve our product, to give better content to our users. Well, Bilibili has always been known for focusing on the long-term sustainable, healthy development. And because our users are also beyond generation, so I'm very much looking forward to the landing of those stimulation policies that can bring the company, user, and the society to a better place. Thank you, operator. That concludes today's call. Thank you.

Thank you. And that concludes the question and answer session. Thank you once again for joining Bilibili's third quarter 2024 financial results and business update conference call today. If you have any further questions, please contact Juliette Young, Bilibili's Executive IR Director of Pichante Financial Communications. Contact information for IR in both China and the U.S. can be found on today's press release. Thank you and have a great day.