Bilibili Inc.

Good day and welcome to the Billy Billy's fourth quarter and fiscal year 2024 financial results and business update conference call. Today's conference call is being recorded. At this time, I would like to turn the conference over to Juliet Young, Executive Director of Invest Relations. Please go ahead.

Thank you, operator. During this call, we'll 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 change. The non-GAAP financial measure 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 Billy Billy IR website at .billybilly.com. Joining us today from Billy Billy Senior Management are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer. Ms. Collie 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 today's call to discuss our fourth quarter and 2024 year end results. 2024 marks a pivotal year for Billy Billy. We close the year with our first GAAP net profit in the fourth quarter while achieving solid growth across the board. We attribute these achievements to the unique proposition of our video community, the growing value of our user base and our enhanced commercialization efficiency. Looking at these in more detail. First, on our financial performance, we are very happy with the progress made in improving our overall financial metrics this year. Total revenues came in at RMB 7.7 billion in the fourth quarter and RMB 26.8 billion for the full year, reflecting year over year increases of 22% and 19% respectively. Driven by continued improvements in our ad products and infrastructure, our advertising business sustained strong growth with revenues increasing 24% year over year in the fourth quarter and 28% for the year. Meanwhile, our mobile games revenues surged by 79% year over year in the fourth quarter and 40% for the year as we successfully expanded into the strategy game genre. The rapid growth of these high margin businesses and improved operating leverage drove our Q4 gross profit margin to .1% contributing to 68% year over year growth in gross profit. Building on these, we successfully achieved our first quarter of net profit on a gap basis at RMB 89 million and our adjusted net profit reached RMB 452 million in Q4. While opening a new chapter of profitability, our community remains vibrant and highly engaged. In the fourth quarter, DAUs and MAUs reached 103 million and 340 million respectively, with users spending an average of 99 minutes daily on our platform. Our user base represents nearly 70% of China's Gen Z Plus population, with an average age of 25. They are the golden cohort of consumers with rising spending power and consumption demand. We are also seeing a growing desire among users for fulfillment and empowerment through high quality video content. As the hub for the young generation, BDBD is uniquely positioned to meet these evolving needs while unlocking greater commercial value. In addition, under the tailwind of fast evolving AI technology, the rise of open source models like DeepSeq is opening up new frontiers for innovation. These models will enable more companies like us to skip the demanding and capital intensive process of developing a model on our own. And build on the foundation to develop and implement solutions in a cost effective way. In this context, high quality and exclusive data assets are becoming increasingly significant. With our extensive accumulation of high quality video content and rich community interaction data over the past decade, we are uniquely positioned to apply these AI innovations and fully unleash the potential of our community. Building on the momentum of 2024, we look forward to driving even greater value for our users, creators and stakeholders in the year ahead. With that overview, let's look at our core pillars of content, community and commercialization in more detail. Beginning with content and community, growing with our users continues to fuel the natural expansion of our high quality content offerings. In Q4, our average daily video views exceeded 4.8 billion, up 14% year over year. On top of our dominance in ACG related content, we have also built strong user mindshare in pan entertainment and pan knowledge categories. Meanwhile, as our users enter new life stages, our content offerings are naturally expanding into broader lifestyle and consumption related areas. In 2024, video views in automotive and baby and maternity grew by nearly 40% and over 70% year over year respectively. Content creators are also the cornerstone of our ecosystem. In January, we honored the top creators at our 2024 Bilibili Power Up Awards ceremony, recognizing their incredible talent and outstanding contributions to our community. This year's honorees, covering over 100 million followers and spanning diverse categories, are known for their high quality and fulfilling content. Over 90% of them have been creating content on Bilibili for more than five years. Notably, 36 out of the top 100 content creators were first time winners. Meanwhile, we remain committed to empowering content creators to earn more income through our diverse commercialization channels, while pursuing their creative passion. In 2024, nearly 3.1 million content creators earned income on our platform. Content creators total income through our advertising products and VAS services increased by 21% year over year. Notably, our fan charging program has been a standout feature where creators total earnings increased by nearly 500% in 2024. Turning to our community metrics, our DAUs were more engaged and spent an average of 99 minutes per day on our platform in the fourth quarter, compared with 95 minutes in the same period last year. Monthly interactions grew by 10% year over year, exceeding 15.5 billion. By the end of the year, our official memberships increased by 12% to 258 million and their 12 month retention rate continued to be around 80%. Moreover, we were thrilled to close 2024 with our New Year's Eve Gala, the most beautiful night of 2024. The event once again proved a must-watch for young audiences, attracting over 230 million views. In addition, during the recent Chinese New Year holidays, we partnered with CCTV for the Spring Festival Gala. As its exclusive bullet chat live broadcasting platform and content partner, we offered a unique and interactive viewing experience for this iconic most watched TV event in China. On the day of the broadcast, our DAUs increased by nearly 20% compared with Chinese New Year's Eve in 2024. These community events have reinforced our leadership among China's young generation, while expanding our appeal to a broader user group, bringing more people to our vibrant community. Now, I'd like to talk about the progress of our commercialization in our business lines. First, we made some exciting headway in our advertising business. Our total ad revenues grew by 24% to RMB 2.4 billion for the fourth quarter and increased by 28% to RMB 8.2 billion for the full year, both on a -over-year basis. Ad revenue per DAU also increased by over 20% -over-year for both Q4 and the full year of 2024. We attribute our industry-leading ad growth to the growing value of our user base, as well as our improved ad efficiency. In 2024, we further opened our ecosystem to embrace more advertising opportunities, while enhancing our ad infrastructure, optimizing ad matching algorithms, and upgrading ad products. These improvements fueled our strong and sustained advertising growth throughout the year, particularly in performance-based ad revenues, which grew over 40% -over-year for the full year. Meanwhile, despite the challenging macro environment, brand and native ad revenues also saw double-digit -over-year growth in 2024. As we gained a deeper insight into our users' consumption preferences and patterns throughout the year, more advertisers turned to Bilibili to reach new consumers with better ROI. In 2024, the number of advertisers on our platform grew by over 30% -over-year. Games, digital products, and home appliances, e-commerce, internet services, and automotive were the top five industry verticals in the fourth quarter. With the recent macro stimulus policy, Bilibili played an important role in empowering 3C and home appliance advertisers to strengthen their brand equity, influence purchasing decisions, and drive direct sales conversions. Additionally, we are attracting more advertisers from emerging verticals. In the fourth quarter, revenues from transportation and education advertisers grew by over 100% -over-year. Looking ahead, we remain optimistic about our ad business growth, as we are still in the early stages of unlocking the commercial value of our community. In 2025, we will continue deploying our best resources to build a more efficient ad platform and ad product. Industry-wise, we will continue to explore opportunities in our leading game vertical, including the launch of Bilibili mini games and more. We will also actively pursue wider and deeper partnerships with consumer brand advertisers, connecting them with our high-value user base. Turning to our games business, our games revenues increased by 79% to RMB 1.8 billion in Q4 and 40% to RMB 5.6 billion for 2024, both on a -over-year basis. The growth was driven by our hit strategy game, San guo maoding tianxia san mou, and a contribution from our Japanese ACG title, jujutsu kaisen, Phantom Parade, zhou shu hui zhan huai ye xing, which we launched in overseas markets in November 2024. San mou's sustained popularity gives us confidence in its long-term potential. DAU's remain stable across the first five game seasons through our focus on high-quality gameplay while carefully balancing commercialization. We will also enter into its sixth game season on February 22nd. As we expand its content and features, we believe more young players will be drawn to the SLG genre, solidifying San mou as one of our flagship evergreen titles. The game's success is also a milestone in our strategy to diversify game genres, highlighting the strengths of our gaming community. We'll actively explore opportunities like San mou to better serve the new generation of gamers. And finally, let's look at our VAS business. Revenues from our VAS business increased by 8% in Q4 to RMB 3.1 billion and 11% for the full year to RMB 11 billion, both on a -over-year basis. During the year, both live broadcasting and premium memberships sustained healthy growth, with the gross margin for live broadcasting continuing to improve. By the end of the year, our premium memberships reached 22.7 million, with over 80% on annual subscriptions or auto-renewal packages. As we nurture a healthy live broadcasting ecosystem and a steady premium membership program, we continue to explore products and services uniquely suited to our community features. Notably, our newly introduced fan charging program, which allows paid users to access exclusive, high-quality videos from subscribed creators attracted over 8 million participants in 2024. Revenues from the fan charging program surged by over 400% -over-year during the year, creating a new revenue stream for talented creators to monetize their content. The program's early success also highlights our platform's strength and our users' strong willingness to pay for quality content. In summary, building on our unique community and distinctive product offering, we will continue to unlock its full commercial potential, driving sustainable growth and increased profitability. We are also excited to ride the new wave of AI advancement and further expand beyond what we could have previously imagined. Above all, our co-mission remains unchanged, to provide a space where creators and fans come together, connect through shared passion, and enjoy the content and experiences they love. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead. Thank you, Mr. Chen.

Hello, everyone. This is Sam. In the interest of time on today's call, I will review our fourth quarter highlights as Mr. Chen's remarks have touched on 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 the year, we steadily improved our financials, showing the elasticity of our business and our ability to generate profits and make growth. We can see the fruits of our efforts in our fourth quarter results, showing continued revenue growth in our core high margin advertising and games businesses, continued margin expansion, and our first full quarter of gap profitability. Total net revenues for the fourth quarter were RMB 7.7 billion, up 22% year over year. Our total revenue breakdown by revenue stream for Q4 was approximately 40% via 31% advertising, 23% mobile games, and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 5% year over year to RMB 4.9 billion in the fourth quarter, while our gross profit rose 68% year over year to RMB 2.8 billion. Our gross profit margin reached .1% in Q4, up 10 percentage points from .1% in the same period last year. Our strong gross profit and margin growth highlight the flexibility and the scalability of our business model. Our total operating expenses were down 10% year over year to RMB 2.7 billion in the fourth quarter. Sales and marketing expenses increased by 10% year over year to RMB 1.2 billion, mainly due to increased marketing expenses for our exclusively licensed games. G&A expenses were RMB 506 million flat year over year. R&D expenses were RMB 919 million, down 31% year over year, mainly due to a one off game termination expense in Q4 2023. Our operating profit and net profit turned positive to RMB 126 million and RMB 89 million for the fourth quarter, respectively, marking significant gains from year over year losses. Furthermore, our adjusted operating profit and adjusted net profit reached RMB 463 million and RMB 452 million, respectively. Our adjusted net profit ratio in the fourth quarter was 6%, compared with an adjusted net loss ratio of 9% in the same period a year ago. Cash flow wise, we generated RMB 1.4 billion in operating cash flow in the fourth quarter and RMB 6 billion for the full year. We also recorded RMB 4.3 billion in free cash flow for the full year. As of December 31, 2024, we had cash and cash equivalents, time deposits and short term investments of RMB 16.5 billion or USD 2.3 billion. In November 2024, we completed the repurchase rights offer for our December 2026 notes. After the completion of this transaction, the aggregate outstanding principal amount of April 2026 notes, 2027 notes and December 2026 notes was USD 13.4 million. Lastly, we announced a share repurchase program of up to USD 200 million in November 2024 for a 24-month period. The program underscores our commitment to enhancing shareholder returns and reaffirms our confidence in our business's cash flow generation. As of the end of the year, we had repurchased approximately 0.8 million ADS under this program for a total cost of USD 16.4 million. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 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 the management statement during the Q&A session. Please note that English interpretation is for the convenience purposes only. In the case of any discrepancy, management statements in their original language will prevail. Now we're going to take our first question. It comes from Lincoln Kong from Goldman Sachs. Your line is open. Please ask your question.

Thank you, Mr. Wang, for answering my question. My question is about 2025. We're looking at 2024. After the full-scale profit, we'll look at our strategy this year. What do you think about this? AI has many opportunities to think about how to combine AI with some of our social media platforms. Thank you, management, for taking my question. My question is about 2025. After we reached break-even last year, how should we think about our overall strategy into 2025? We have seen an explosive opportunity from AI. How should we think about AI to integrate with our community? Thank you.

In 2024, we should have completed a very important milestone, which is to achieve full profit. I remember that we mentioned the B-Plan for the 2022 B-Plan. We mentioned that we would have to complete a non-GAAP profit in 2024. Of course, we are also very happy to see that we have not only completed a non-GAAP profit in 2024, but also a GAAP profit. It's a milestone goal that we have completed in advance.

Looking at now, we are very glad that we have successfully reached it ahead of schedule by end of 2024.

We will continue to develop the community health and sustainability as a long-term goal. In the next 25 years, we will continue to keep our growth momentum and increase our profit.

We will continue to increase profitability and achieve a positive operating circle across our commercialization. We will add another engine to that business model and achieve sustainable, healthy community growth. We will stick to our mission to expand our margin, increase profitability, and maintain a healthy growth of our community.

From the perspective of the user, I think that the quality of the content is an irreplaceable position for B-Plan. At the same time, it is also a reason for them to use B-Plan for a long time. So when we talk about the strategy behind it, I think that the quality of the content must be the center of all our strategies. I believe that the quality of the content can be passed through the whole process. It is the entry point for us to enter the next AI era.

The high quality content has been a replaceable positioning for B-Plan. This is also the same reason that our user has been using our platform for a very long time. When we are thinking about the strategy going forward, high quality content or videos will be the center of all of our planning. We believe that high quality content is something that can transcend economic cycles and serves as a gateway to the next era of video industry.

I think that the current trend of video is over. I was looking for a restaurant yesterday, but I didn't expect that they would launch a new video on the app. I think that video will be a great success in the future, especially short videos. So when we talk about video, we will find that users are not lacking in video, but they still want to watch better videos. In other words, I think that the future video industry is about the quality of content, not the quantity. This is definitely the main reason for B-Plan. If we ask any Chinese user which video platform has the best quality content, I believe that most people will say B-Plan. B-Plan is indeed the app that has the most serious content creation in the industry and has the best quality content. So I think that in the next era, the position of B-Plan's quality content will have greater appeal and value.

First of all, I'd like to touch upon high quality content plus PUGB's value. I believe that we have already entered an era where there's a very sufficient supply of video content. And probably there's been the era of mass video consumption, the era has already ended. There will be no shortage of video content supply anymore, especially for short video. And the future of video lies in the quality, not quantity. And Bilibili has a strong user mind share of high quality content. We have gathered the most talented content creator and the user who appreciates high quality content the most. We believe this is a common understanding across the majority of the video users. And being the high quality video content platform, we will become even more competitive and stand a competitive advantage position in the next era of video market.

We have made a lot of other video records. This series has a annual income of tens of millions. This series has a revenue of tens of millions. You may not know that this series is actually the most profitable video record in China. And this video is made by an uploader. I can use this to explain the potential of high quality content and the support of user's high quality content. A high quality video made by an uploader will cost a lot of money to support.

And here I'll give an example of one of our content creators whose name is Shiping Dao. He has been producing a series of food documentaries. And as a documentary producer ourselves, we know the competitive advantage of this particular content creator, which he already earned over tens of millions of GMB through monetizing his documentary content. And from that example, you can tell that the users are very willing to pay for high quality content. And there is a great commercial value lies within the high quality content.

And this is a combination of high quality content and high quality content. I believe that last year, everyone was shocked by the Black Mythic Wukong. This year, everyone was shocked by the Nezha 2's ticket box. In fact, I think this is a trend. What I just said is that high quality content is what the user needs. In the case of a high quality content, the user will be more focused on high quality content. The same is true for Bilibili. For example, we have our own animated series, The Return of the Deity. It is now the highest animated series in our whole station, with a play volume and membership revenue. It has been updated for five years.

And those two successful examples further improved our argument that under this trend of oversupply of video content or content in general, the high quality content has larger demand. And people will be more inclined to look over the top content, top quality content. And Bilibili, ourselves, we have built a strong portfolio of self-developed IP. For example, our original Chinese anime, Immortal's Journey, Financial Xianzhen, We have been running for five consecutive years and have become a well-established Chinese IP. And particularly last year in 2024, both its viewership and paint membership hit record highs within our community. And we plan to continue to develop that type of high quality IP.

I believe that the highest play volume and the highest revenue animation in Bilibili is a very good work. But now we think that this is reasonable. Xiyouji itself is a very good work. This is a very typical theme of China with a very good user base. So I think that we have reached a point where we can really give higher rewards to high quality content. If you continue to invest in it. So I think that in the coming years, including Bilibili, China will definitely introduce more high quality content. We will definitely also release a lot of high quality content like The Pirates of the Caribbean.

I would be surprised if this type of IP would already have a large established viewer and similar to Journey to the West. So that is another supporting evidence that our users or user in general will appreciate high quality content and reward it with much higher revenue. And I believe that Bilibili as a platform and the center, the highest quality platform, there will be more and more high quality IP content emerged from our platform. And in no time, we should be able to produce those very high quality and worldwide known IPs for the mass audience to see.

So I think that this is a very important point. I think that in the coming years, we will definitely have a lot of high quality content and high quality IP content. So I think that in the coming years, we will definitely have a lot of high quality IP content and high quality IP content emerged from our platform. I think that in the coming years, we will definitely have a lot of high quality IP content and high quality IP content emerged from our platform. And

the last point I would like to raise is the power of the combination of AI plus high quality content. I think everyone was very excited about the immense opportunity that AI brings starting from two years ago. And that brings a lot of excitement and progress within every sector. And Bilibili's value lies within the era of AI is that we have the best Chinese video content and data assets across the world. And the evolvement of the large language model actually really needs more high quality data assets to unleash its value. And Bilibili happens to be that place that continues to generate high quality video content and the real time user feedback towards that content. And for that perspective, it's the best combination between Bilibili and the future AI opportunity.

So I think Bilibili is a gold mine of language content. Especially after the large language model of deepseek, which is cheap and open source, we can think that Bilibili has a very sufficient condition to dig up the value of high quality content. In the past few months, we have actually made some small attempts within the industry. The results are still very surprising. In the following years, I will report to you some of the results of our applications in the AI field. Please look forward to it.

The biggest challenge for us is that on top of that video content, we have a large mass number of high quality comments and bullet chats, which are generated by millions and millions of users, which are just in sync with the video content itself. And for that part, it's really a gold mine for the data assets for AI to train and it continues to evolve. With the emergence of open source and cost effective AI model like deepseek, it makes Bilibili in a much better position to leverage that low cost AI model to further unleash and discover the value lies within the Bilibili data assets. And we have been doing a lot of tests in the past few weeks and months. There's a lot of surprise for us. I will be introducing more progress in the following quarters. Please stay tuned and we're very excited to share with you. All right, that concludes Mr. Chen's answer. Next question, please.

Thank you. And now we're going to take our next question. And it comes from the line of Felix Liu from UBS. Your line is open. Please ask a question.

Thank you for your question. And congratulations to the management for your very good results in the 2024 advertising business. My question is about advertising. First, can the management share with you what the main driving force for the growth of the advertising business in 2024 is? In addition, about the 2025 growth number, what kind of advertising trend has the management observed since the beginning of the year? In addition, what kind of views and opinions will we have in the 2025 advertising? Thank you, management, for taking my question and congratulations on the very strong advertisement performance in 2024. Could management share more color on the driver for the strong 2024 advertisement growth? And for the advertisement outlook for 2025, what has management observed here today from the advertiser sentiment, etc.? And what will be the key focus point and bright spot for your advertising business in 2025? Thank you.

Indeed, our ad business was performing very good in 2024. In 2024, total ad revenue reached nearly 8.2 billion RMB for the full year, marking a 28% -over-year growth. That is among the highest growth rate across the industry.

Among them, the high-efficiency advertising revenue growth is over 40%. The average profit per year of the advertising business has significantly improved compared to 2023. So advertising business has also driven the company's profit growth.

I think

the essence of advertising business growth is that Bilibili has a high degree of uniqueness. The first uniqueness is that we are a young group of people with high values. The second uniqueness is that Bilibili has a clear mind when it comes to high-quality content. These two characteristics have made us some of the best advertisers.

The second is that we have a strong mindshare or strong content offering in terms of high-quality content. Those two reasons are the fundamental drivers for those advertisers to put ads on Bilibili platforms.

This is also an important reason for advertising business growth. We have two feedbacks on the process of communicating with advertisers. The first is that Bilibili is the platform that is most suitable for advertising and young people to communicate. The second is that Bilibili is the platform that can affect the deep consumer choices of young people.

Our users' average age is 25 years old, a stage of life where consumer demand grows rapidly. This makes Bilibili the most ideal and effective platform for advertisers to engage with young consumers based on our communication with various advertisers. It has been a consensus that Bilibili is a perfect platform to help connect and communicate with young generations. It is also a very effective platform to influence young users' purchasing decisions.

We can see that in the past 24 years, the number of advertisers on Bilibili has increased by more than 30%. In terms of the number of advertisers, we have a 65% increase in the number of advertisers on Bilibili. This has led to a 50%

increase in the number of advertisers on Bilibili. Regarding the one horizontal that refers to our infrastructure and our product abilities, First of all, overall, in 2024, the number of advertisers grew over 30% year over year. We are attracting more advertisers across different industries to come to invest on our platform. Also, we improved our app product to attract more app budgets from different advertisers. For example, now in Q4, over 65% of native advertisers will also purchase the content promotion product on our platform. That ratio was 50% a year ago.

The effect of the promotion material is very obvious. The number of advertisers participating in the promotion has now exceeded 10%. The effect of optimizing the ad click rate of the cover title is much better than before.

We are helping our advertisers to improve material creation efficiency and overall click-through rate. Currently, we have participated in over 10% of ad material creation regarding the covers and the titles. For that part, we saw a very significant improvement in the ad conversion rate.

We have successfully acquired more advertising budgets in the Bilibili advertising industry last year. We also attracted more new advertising customers. For example, the game is a relatively advantageous industry on the basic platform. We have continued to acquire more new advertising budgets for the game. Currently, we are testing the Bilibili app, which is now called Bilibili. The user feedback is expected. We believe that this will continue to generate a potential growth this year.

We are also working on the creation of new emerging sectors for the key industries such as games. In 2024, while solidifying our new game open beta testing budgets, we also continue to gain more shares from mini games budgeting. Recently, we launched the Bilibili mini games program, which has gained a lot of traction and shows strong momentum among our advertisers. We believe that will be one of the growth drivers for us to continue to gain more shares within the game advertising sector.

We have continued to stick to the strategy of open beta trading. All major e-commerce platforms have been working with us for a long time. During the double 11 last year, our total GMA share growth was more than 150%. We have brought in more than 50% of new customers for all major e-commerce platforms. This is a very rare data in the e-commerce competition today.

In the year of 2020, we remain committed to the open loop strategy, further strengthening our partnership with all the major e-commerce platforms. In the past, double 11 shopping festivals, our overall GMV increased by over 150% year over year. Bilibili brought over 50% new consumers to the merchants for all participating industries. That ratio is very valuable under the very intensive competitive environment within the e-commerce industry.

In addition to the fact that the e-commerce industry has been receiving national subsidies, we have contributed the most to the digital e-commerce advertising industry in the last year.

In the year of 2020, we have received a growing demand for home appliances. In addition, the national subsidy stimulation in the home appliance sector has also been increased. We have seen a very strong growth in the digital products and home appliances sector. It contributes the highest incremental revenues in Q4 within our ad sectors.

In the year of 2020, we have seen a very strong growth in the digital products and home appliances sector. We have talked about

what we have done in 2024. We believe the advertising sector is a fully competitive market and requires a lot of competition. We have a strong competitive edge to deliver real results in order to gain shares. Looking at 2025 and beyond, we need to continue to strengthen our advertising infrastructure and drive efficiency. We remain overall optimistic and confident about the growth of our advertising business in 2025. We expect to maintain above industry growth rate. That concludes Mr. Chen's answer. Next question please.

Thank you. Now we are going to take our next question and it comes from Wei Fang from Mizuha. Your line is open. Please ask your question.

Thank you. Hello operator, I think the line is disconnected.

Excuse me Mr. Wei Fang, are you still on the line? We will proceed with our next participant. Just give us a moment. The next question comes from Xue Qing Zhang from CICC. Your line is open. Please ask your question.

Thank you. Thank you for taking my question. My question about your margins. The company's gross profit margin has reached 36% in Q4. How do we view the trends of the gross margin and net margin in 2025 and in the mid to long term? Thank you.

This is Sam. Thank you Xue Qing. I will take your question. Our profitability was mainly driven by gross profit and gross profit margin expansion, which is healthy and sustainable. In Q4, our gross margin reached a record high of 36%, making 10% conservative quarters of improvement. The key contributors to this improvement include the riding share of high margin gaming and advertising revenues. They now contribute over half of our total revenue, account for 54% of total revenue in Q4. And our fixed life cost, including content, staff, server bandwidth cost, further declined their proportion of the revenue from 25% in Q1 to 70% in Q4. Looking at hand, we expect the growth of revenue will continue, driving the steady margin growth of gross margin expansion in 2025. Over the long term, we are confident that gross margin will reach 40% to 45%. On the expensive side, our operating expenses as a percentage of total revenues declined from 36% to 36% in 2024, and there's more room for the reduction in the future. We have already achieved 6% operating profit non-gap basis in Q4. In the long run, our operating profit margin target remains 15% to 20%. Thank you for your question.

Operator, next question please.

Thank you. And the next question comes from Lei Zhang from Bank of America. Hi,

can you hear me? Yes, we can. Thank you. I want to ask about the game, especially the 3D model, because F6 is about to be released. And what is the current performance of this game and the outlook for 2025? And I would like to ask the manager to share with us the important game situation after the release. Thank you.

Last year, when everyone asked about the 3D model, I told everyone that my most important goal for 3D model is to operate in the long run. I asked the team to maintain a stable and high-quality operating cycle for at least 55 years. This is still my most important point in the 3D model. From the performance of the first five seasons of the 3D model, I think the team has met my requirements. The first five seasons of the 3D model have maintained a stable and high-quality operating cycle for the players. For us,

the top priority for the 3D model is long-term operation, as I discussed in the previous quarter. The target life cycle for this game will be at least five years. Based on the performances of the first five seasons, we think the team and the game have met that requirement. The game has consistently ranked among the industry best in terms of user engagement, retention, and the revenue generation.

We hope that the 3D model will contribute to a good performance and stable operating cycle in the next five years. On the one hand, I believe that everyone should have this SLG player. SLG itself is a track that can be done for a long term. And we have a better level of retention and retention in the same kind of products. I told the team that we wanted to make the 3D model a game that could make users play until they get old.

That's why I feel quite confident that for the next five years, 3D model will continue to contribute steady performances. And we are also confident that because SLG by its nature has a longer life cycle, the target that I always bring to the team is that we are hoping to make SLG a game that a player can play for a lifelong time.

So everyone should be able to see that every time the new season of the first week of the opening, we can still rush to the front of

the ranking.

On the other hand, the long-term operation has always been the concept of B station. We have the determination and the ability and experience to operate long-term. For example, after the FGO operation in 2024, our flow rate can still achieve a two-digit increase. Including our B-line, after entering the eighth year, we can see that the overall flow rate of our operation is still going up. So I believe we can also make SLG a game that has a long life cycle.

The reason why we are very confident is that we have the determination and also experience in running a long life cycle game. For example, FGO, after nine years of its launch, we still see a double-digit revenue growth for this game. Another game, Azure Lane, which is celebrating its eighth year anniversary, we continue to see the overall growth improving year over year. That's why we are very confident and also determined to make FGO a long life cycle game.

So we, according to the feedback of the players, we are actively accepting these opinions and constantly making this game better and better. Then, this weekend, on the 22nd, we will start the sixth season of the third round, which is the S6. In fact, in the sixth season, we will launch a lot of improvements based on the feedback of the players. Then we will make some improvements and some interesting designs. For example, in S6, we will have new maps, new battle styles, new skins, and we will also introduce a change in the weather system to add a fun to the game.

Because Zenmo is also, on the other hand, a new game, and we emphasize and very care about what our players are saying. We continue to listen to the player feedback on game experiences and mechanisms and actively collaborating the game developer to incorporate this insight and feedback and adjust the game accordingly. For example, in the upcoming game, S6, on February 22nd, a lot of the updates and improvement is made according to the user feedback. For example, we will be launching a new map, new battle strategies, and new skin system, and also bring a new weather system to enhance overall gameplay. We are also preparing for the major updates for this June, which is going to be the one-year anniversary for Zenmo. We are looking to bring a lot of significant updates to increase the gameplay and improve the overall game experience for Zenmo.

In addition to the game content and gameplay, we will also actively diversify this year, so that players from different platforms can experience the game content of Zenmo. Last year, we uploaded the PC part of the game, which is also available on the computer. This year, we will continue to upload more scenes and platforms.

Last year, we have launched the game on the PC portal, and this year we are looking to bring this amazing game experience to multiple platforms and scenarios to attract more users to enjoy the game.

For the second

half of this year, the Oversea launch will be one of the most important tasks for Zenmo. Right now, we are focused on the development of the traditional Chinese version of Zenmo to better serve the Chinese community. Overseas players will refine the game experience, adjust the game ecosystem design to better fit to different countries' gamers' preferences. We are also hoping to make Zenmo a favorite SLG strategy game for young players overseas. That concludes Mr. Chen's question and answer session. We can move to one last question, operator. Yes,

of course. Thank you so much. Now we are going to take our last question for today, and it comes from Wei Fang from Mizuho. Your line is open. Please ask your question.

Thank you for screaming me. I have a question about platforms and brands. In 2025, I heard that management has no plans to expand the brand's influence and expand the user group. How will the cooperation with Chunwan be performed? Can you comment on that? Looking ahead to 2025, can you help share your thoughts on how to further expand your user base, enhance your brand awareness, and also wondering if you could help comment more on the results from your partnership with CCTV Newgala? Thank you.

Firstly,

I'll talk about the partnership with Spring Festival Gala. This year, for the very first time, we partnered with CCTV's Spring Festival Gala as its exclusive bullet chat live streaming platform. At the same time, CCTV also opened an official Spring Festival Gala account on Fibibili, bringing users the highlights from the past 42 years of the Gala history. And our users are welcoming this content with great enthusiasm.

As

a 40 years old, I've been watching Spring Festival Gala for 40 years, but I find out there's going to be new chemistry compared to high quality content in the past with the young generation's feedback to bullet chat and commentaries. I think that's a great opportunity to see how we can improve the brand and really spark new content and new experiences. And I'll talk about some of the results from this project. First of all, I would say through this Spring Festival Gala project, we have achieved various targets. First of all, on the user front, on Chinese New Year Eve, Fibibili's overall DAU increased by 20% year over year compared to the New Year's Eve in 2024. As a platform with over 1 million DAU, one single project can bring 20% DAU increase. That's an amazing result.

The number of live comments is over 100 million. Many users are here to comment and watch this live stream.

The total bullet chat exceeded 100 million.

Fibibili will watch this live stream on Bilibili's website. Of course, more people will watch other people's live stream. This is a result of our determination. Bilibili can receive comprehensive content as long as it is good content.

This is a high quality content on a nationwide basis because by itself Spring Festival Gala is high quality and unique content. Beyond live broadcasting, our user will come specifically to watch or to send bullet chat and commentary on Bilibili to gain exclusive and unique experience. The success of this partnership have further solidified our judgment on Bilibili's positioning to host nationwide content and nationwide audiences.

Spring Festival Gala is a high quality content that is very suitable for live broadcasting. This time, we found that our TV channel's user increase is beyond our expectations. We have a strong audience. I think our advantage in the big screen will continue in

the future. Our scenario strategy and positioning have showed Bilibili's unique advantage in family viewing settings during the Spring Festival. Especially for New Year's Eve Gala, which is a high definition horizontal format video content is very well suited for the big screen viewing. As a result, the OTT user growth exceeded our expectation during the partnership and further reinforced our leadership and user mind share in the living room scenario. Another successful example would be one of the biggest success of Bilibili's platform. Another program that was shown during the New Year's Eve Gala is Bilibili's self-produced performance training Hong Bao, which became a phenomenal show on the New Year's Gala. That is an original song produced for our own show back in 2017 and we made it and put it on the New Year's Gala stage. It massed over 560 million views across the platform, topped 183 trending lists, and surpassed tons of impressions. The success of the show also proves that Bilibili not only understands young people and also proved our ability to produce high quality, nationally loved content on a wider stage.

To sum up, I think the cooperation with the CEO of Bilibili was a very successful one. Bilibili attracted young people to the show and also increased the popularity of the show. I think Bilibili not only achieved user growth but also achieved further breakthroughs in the brand. It also proved that Bilibili can deliver comprehensive content. I think that no matter the result or the training process, it was a successful project.

From

what Chunwan said, how we will expand the brand's influence and our users' group. I think Chunwan is a typical example. For example, the Bilibili company is a very successful company. Bilibili has been expanding the brand's influence and users' group through major node projects. For example, we can think of our cross-border network every year as a node that expands the brand's influence and draws new users. We can do this through cross-border network. It is a project that can bring good results. For example, we are a graduate school every year. This is also a stage. As you can see, we will do this in the Spring Festival season. Then you will see that we will have good cases in the summer. We will continue this method.

The Bilibili brand is a to-do project like this. In the past, our most beautiful night, the New Year's Gala, has been a very successful campaign to attract new users and improve our brand equities. We have done similar things among the graduation season. For this year, we have tried out new partnerships during Chinese New Year and will continue to launch more Chinese New Year campaigns like this one going forward. This year, we are also looking to do campaigns, tailored, targeted campaigns, among summer vacations. We think this type of collaboration and project will further help us to improve our brand equity, improve our brand influences, at the same time to facilitate our user growth strategy. Thank you. I will turn back to you, operator.

Thank you so much. That concludes the question and answer session. Thank you once again for joining Bilibili's fourth quarter and fiscal year 2024 financial results and business update conference call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director or PR Center Financial Communications. Contact information for IR in both China and the US can be found on today's press release. Thank you and have a great day.