Bilibili Inc.

Good day and welcome to the Bilibili'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 Juliette Young, Executive Director of Investor 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 Exchange. The non-GAAP financial measures we provide are for comparison purposes 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 ir.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, Juliette, 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 Bilibili. We closed the year with our first gap 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 sustains 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 36.1%, contributing to 68% year over year growth in gross profit. Building on these, we successfully achieved our first quarter of net profit on a GAAP 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 DeepSeek 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 holiday, 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 year-over-year basis. Ad revenue per DAU also increased by over 20% year-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% year-over-year for the full year. Meanwhile, despite the challenging macro environment, brand and native ad revenues also saw double-digit year-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 ROIs. In 2024, the number of advertisers on our platform grew by over 30% year 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% year 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 products. Industry-wise, we will continue to explore opportunities in our leading game vertical, including the launch of Bilibili minigames 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 year-over-year basis. The growth was driven by our hit strategy game, and a contribution from our Japanese ACG title, which we launched in overseas markets in November 2024. Sanmo's sustained popularity gives us confidence in its long-term potential. DAUs 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 22. As we expand its content and features, we believe more young players will be drawn to the SLG genre. Solidifying Sanmo 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 Sanmo 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 year-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% year 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 core 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 amid 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 GAAP 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% VAS, 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 36.1% in Q4, up 10 percentage points from 26.1% in the same period last year. Our strong gross profit and margin growth highlights 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. GNN 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 ADRs 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 a 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. And now we're going to take our first question. And it comes from Lincoln Kong from Goldman Sachs. Your line is open. Please ask your question.

Thank you for accepting my question. My question is about 2025. So thank you management for taking my question. My question is about 2025. So after we're reaching break-even last year, how should we think about our overall strategy into 2025? And we have seen an explosive opportunity from AI. How should we think about AI to integrate with our community? Thank you.

Okay. Actually, I want to say that in 2024, we should have completed a very important milestone, which is to achieve a comprehensive profit. I remember that we mentioned a time table for Bilibili's profit in 2022. At that time, we should have mentioned that in 2024, we will complete a profit of non-GAAP. Of course, we are also very happy to see that today,

So first of all, I would like to highlight that achieving both GAAP and non-GAAP profitability was a goal that we set around 2022. And looking at now, we are very glad that we have successfully reached it ahead of schedule by end of 2024.

I think that 2025 is indeed a new beginning. In 2025, we will stick to the development model of our content and community. And now, because we have entered a state of gravity and achieved a commercial cycle, we have added a new engine, which is business. Our long-term goal is the sustainable development of the community.

Looking at 2025, it indeed is a brand new chapter for us, and we will stick to the model that we have stick on in the past, which is content plus community. Now that we have reached profitability and achieved a positive operation circle within our commercial another engine to that business model. And achieve sustainable, healthy community growth will be our ultimate target. And for this year, we'll stick to our mission to expand our margin, increase profitability, and maintain a healthy growth of our community.

When we talk about the 2025 development strategy, I think about it in a different way. why Bilibili will keep growing and why Bilibili can continue to grow for 15 years to the present. I think from the user's point of view, the quality content is an irreplaceable position for Bilibili. At the same time, it is also a reason for them to use Bilibili for a long time. So, when we talk about the following strategy, I think the quality content must be We think about the strategy going beyond 2025.

I would like to reverse the thinking behind how Bilibili can sustain a very healthy growth for the past 15 years. From a user perspective, high quality content has been a replaceable positioning for Bilibili. This is also the same reason that our user has been using our platform for a very long time. When we're thinking about the strategy going forward, high quality content or videos will be the center of all of our planning and we believe the high quality content is something that can transcend economic cycles and serves as a gateway to the next era of video industry.

I'll just say three points about the quality content. The first point is that I want to talk about the value of quality content on PUGC. I believe that everyone is now in an era where you can watch videos on any app or platform. I think the current traffic of videos is over. People don't need to watch videos anymore. Yesterday, I was looking for a restaurant, but I didn't expect to see various videos on the app. I think the future of videos will be affected, especially short videos. So when we talk about videos now, we will find that Users don't need to watch videos, but they still want to watch better videos. In other words, I think the future of the video industry lies in the quality of content, not in the quantity of content. This is definitely the main point of Bilibili. If we ask any Chinese user, which video platform has the best video quality, I believe most people will say Bilibili. Bilibili does have And 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 form 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 appreciate high quality content the most. We believe this is a common understanding across 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.

对,我这儿就举个例子吧,就是我相信那个挺多的那个用户也都在看,我们有一个up主叫时频道,然后他做了一个美食纪录片系列,就人间喜剧系列,然后就是 Because we also make a lot of other documentaries. The annual income of this series is already tens of millions. That's the income of this series. You may not know that it is actually the most profitable documentary in China. And this documentary is made by an app. I can use this to explain the potential of high-quality content and the support of users for high-quality content. A high-quality content made by an app, users will spend a lot of money to support it.

And here I'll give an example of one of our content creators whose name is . 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 GMV 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's a great commercial value lies within the high-quality content.

第二点是想讲一讲优质内容和自制IP的结合。 我相信大家... Last year, it was also shocked by the blackened Wukong. This year, it was also shocked by the Nezha II box office. In fact, I think this is a trend. What I just said is that the quality content is what users need. In the case of quantity saturation, users will actually focus more on the quality content demand. It's the same on Bilibili. For example, we have a self-made work of the original animation, The Human Restoration, and it is now our full-length

And the second point I would like to raise is the high quality content plus our self-developed IP assets. I think everyone has been very impressed last year by the success of Black Myth Wukong and this year's blockbuster anime Noja. And those two success examples further approved 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, Immortals Journey, ,, 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 paid membership hit record highs within our community. And we plan to continue to develop that type of high-quality IP.

Because Bilibili is the home of animation and comics. Ten years ago, I wouldn't believe that Bilibili had the highest number of views and the highest income. It was a masterpiece. But now that we look back, we think this is reasonable. Yes, Xiyouji is also a masterpiece. This is a very typical topic with a good user base in China. So I think now, just arrived at this point in time, it can really give high rewards to high quality content if you continue to invest in it. So I think in the next few years, China, including our Bilibili, will definitely have more high quality self-produced content. China will definitely have a lot of self-produced works similar to the high quality long films such as The King of the Sea and Fire.

And if you tell me that 10 years ago that Bilibili's highest viewership and paid membership anime would be a topic surrounded with immortal to immortal type of topic themes, I would be surprised. But on a second thought, this type of IP would already have a large established viewer and similar to the 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 PUGB 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 math audience to see.

The third point I want to talk about is quality content plus AI. Because from the beginning of this year, the sudden acceleration of AI has brought us too many surprises or shocks. Then in fact, in this process, the value of the quality content of Bilibili will be reflected in another aspect. What is it? That is, AI needs good content or good language. And Bilibili should be recognized as the largest Chinese video language library in the world. And it is the most quality. And with that, a continuous evolution of the large-scale model, and then the industry has also gradually formed a consensus. That is, the progress of the large-scale model called AI is actually not mainly due to computing power and algorithm, but due to the previous good content and language that has been dug up. That is, the content and language generated by humans for thousands of years has been gradually absorbed by AI, and then its content is not enough to learn. 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 immersed 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 involvement of the large language model actually really need 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.

Yes, and we have another advantage in terms of content. In addition to having the best Chinese video on the whole network, it also has the highest quality user comments and chats. And these comments and chats are the best landmarks for these videos. Because it is played by millions of users every day. So I think Bilibili is a gold mine, or a gold mine of content, especially like DeepSeek, after this cheap and open model was created, we can think that Bilibili has very sufficient conditions to dig up the value of these high-quality content. In the past few months, we have actually made some small attempts internally. In fact, the result is still very surprising.

On top of the high quality video asset data asset, another advantage that Bilibili has is that on top of that video content, we have a large mass number of high quality comment and bullet chats which generated by millions and millions of users who are, which are just in sync with the video content itself. And for that part is really a gold mine for the data asset for AI to train and it continues to evolve. With the emergence of open source and cost-effective AI model like DeepSeq. 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 are 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 your question.

Thank you for accepting my question. Congratulations to Guan Licheng. Our company's advertising business in 2024 has achieved very bright results. My question is about advertising. First of all, can you please share with us what is the main driving force of the growth of the advertising business in 2024? Also, about the growth in 2024. Also, about the growth in 2025. Guan Licheng, what kind of advertising trend have you observed since the beginning of the year? Also, what kind of views and highlights will we have in the advertising in 2025? 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, et cetera, and what will be the key focus point and bright spot for your advertisement business in 2025? Thank you.

Indeed that our ad business was performing very good in 2024.

Total ad revenue reached nearly 8.4 million. 8.2 billion RMB for the full year, marking a 28% year-over-year growth. That is among the highest growth rates across the industry.

Among the high-performance advertising, its revenue has increased by more than 40%. The net profit of the advertising business this year has been significantly increased compared to 2023. Therefore, the advertising business has also led to an increase in the net profit of the entire company.

Notably, our high margin performance-based ads saw over 40% year-over-year growth. That's also driving a significant improvement in our overall growth margin for the advertising business. And that is a big plus to our overall growth margin on a group level as well.

我觉得广告业务的增长的本质, 我认为是因为B站是有着 The first characteristic is that we are a group of young users with high value. The second characteristic is that Bilibili has a sense of recognition in terms of high quality content. So these two characteristics make us some high quality advertisers.

The success, the reason that drives our advertising revenue comes from two uniqueness that Bilibili platform possess. One is the high quality user base. And secondly is that we have strong mind share or strong content offering in terms of high quality content. Those two reasons are the fundamental drivers for those advertisers to put ads on the Bilibili platform?

Especially in 2024, the average age of our users is 25 years old. 25 years old is an age where they can quickly grow in terms of consumer demand. So I think this is also an important reason for our advertising business to grow. We received two feedbacks during our communication with the advertisers. The first one is that

B站是最适合帮助广告主和年轻人沟通的平台。第二个呢,就是B站是最能够影响年轻人深度的一个消费决策的一个平台。 In 2024, our users' average age reached 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 the young generation and it is also a very effective platform to influence young users purchasing decisions.

In 2024, we have achieved a very good result in promoting the commercialization strategy of Yi Heng N.Zong. Yi Heng refers to the product capability of the platform. We can see that in 2024, the number of ads in Bilibili has increased by more than 30%. In terms of advertising,

And we also attribute our success to our continuous improvement to our one horizontal and verticals commercialization strategy and zone. Regarding to the one horizontal that refers to our add infrastructure and add our app product abilities. First of all, overall that in 2024, the number of advertisers grow over 30% year over year. We are attracting more advertisers across different industries to come to invest on our platform. And also, we improved our app product to attract more app budget from different advertisers. For example, now in Q4, over 65% of native advertisers will also purchase the content promotion product on our platform. And that ratio is 50% a year ago.

This is especially worth mentioning, this AI. The AIGC tool that we developed to improve advertising materials is very effective. The number of advertisements created by the AIGC tool is now more than 10%. It is much better than before in terms of advertising click-through rate to optimize cover titles.

And moreover, AI played a very important role in helping to drive ad efficiencies with our AIGC tools that we are helping our advertiser to improve material creation efficiencies and overall click-through rate. Currently, AI participated in over 10% of ad material creation regarding to the covers and the titles. For that part, we saw a very significant improvement in the ad conversion rate.

Let me talk about Enzone. Last year, we successfully acquired more advertising budgets in the Bilibili industry, and we also attracted more advertising clients in the new industry. For example, the game industry. Because the game industry is part of Bilibili, a more advantageous industry in terms of basic games. Based on our previous online budget, last year, we continued to get more advertising budget for new school games. Currently, we are testing the small program of Bilibili, which is called Bilibili. Let's touch based on the end verticals strategies.

In 2024, Bilibili continues to secure more ad budget from key industries while also attracting new advertisers from 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. And recently we launched Visibility Mini Games program which has gained a lot of traction and shows strong momentum among our advertisers. And we believe that will be one of the growth drivers for us to continue to gain more shares within the game advertising sector.

For example, e-commerce. In the past few years, we have continued to grow in the field of e-commerce. Because we have always insisted on a big open strategy. So, in other words, all the big e-commerce platforms Secondly, on our e-commerce sectors,

In 2024, 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 and brought over 50% new consumers. to the merchants for all participating industries. That ratio is very valuable under this very intensive competitive environment within the e-commerce industry.

For example, digital home appliances. Because young people have a very strong demand for digital products. At the same time, when our users reach the average age of 25, they will gradually have a demand for home appliances. Another example would be in the digital products and home appliances sectors.

As people know that the young users have very strong needs for digital products, and as the average age of our users enter 25, there's also a growing demand for home appliances as well. Plus, with the national subsidy stimulation within the home appliance sectors, we saw a very strong growth in the digital products and home appliances sectors. it contributes the highest incremental revenues in Q4 within our ad sectors.

Yes, what I was talking about was last year, the competitiveness of our advertising business and the results we produced in various jobs. In fact, everyone should be able to feel that the current advertising industry is a highly competitive industry that relies on your hard work. So in 2025, we will work hard to improve our competitiveness. Then we will continue to work more deeply in 2024. I am optimistic and positive about the development of the advertising industry in Bilibili in 2025. I am confident that we will continue to maintain an average growth in the industry in 2025.

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

Thank you. Now we're going to take our next question, and it comes from the line of Wei Fang from Mizuho. Your line is open. Please ask your question.

Thank you.

Hello, operator. I think the line is disconnected.

Excuse me, Mr. Weifang, are you still on the line? We'll proceed with our next participants. Just give us a moment. And the next question comes from the line of Xueqing Zhang from CICC. Your line is open. Please ask your question.

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

This is Sam. Thank you, Xueqing. I will take your question. Our profitability was mainly driven by gross profit and the gross profit margin expansion, which was 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 rising 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 costs, including content, staff, server, and bandwidth costs, further declined their proportion of the revenue from 25% in Q1 to 70% in Q4. Looking ahead, we expect the growth of revenue will continue, driving the steady margin growth across margin expansion in 2025. Over the long term, we are confident that growth 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-GAAP basis in Q4. In the long run, our operating profit margins 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, Manager Chen. Can you hear me? Yes, we can. Thank you. I'd like to ask about our entire game, especially the trilogy, because F6 will be released soon. What is our current performance of the game and how does it look like in 2025? Also, I'd like to ask Manager Chen to share the situation of the game being released. Thank you.

Last year, when people asked me about SEMO, I told them that the most important goal I set for SEMO is long-term operation. My request to the team is to maintain a good and stable operation cycle for at least five years. This is still one of the most important points I pay attention to in SEMO. From the performance of the first five seasons of SEMO, I think the team For us, the top priority for Sanmo is long-term operation, as I discussed in the previous quarter.

And the target life cycle for this game will be at least five years. And based on the performances of the first five seasons, we think the team and the game has meet that requirement. And the game has consistently rank among the industry best in terms of user engagement, retention, and the revenue generation.

So I should be confident that we, SEMO, will contribute a good performance and a stable operating result in the next five years. On the one hand, because I believe That's why I feel quite confident for the next five years, Asymo 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're hoping to make FEMO a game that a player can play for a lifelong time.

Yes, so you can see that every time the first week of the new season starts, we can still push forward to the first week of the new season.

And that's why whenever there's a new game season, the game will be back on the top 10 growth chart.

然后另一个方面的话,长线运营也一直是B站的理念, 就是我们有长线运营的决心,以及我们也有长线运营的能力和经验。 就是比如说FGO我们在运营9年之后的2024年,我们的流水还能实现。 And 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 Sunmo a long-life cycle game.

At the same time, we can also see that Samoa is still a new game, because it's only been half a year since it was released. So we pay great attention to listening to the players' feedback on the game experience. In this respect, I think the team did a good job. Our team is known as the team that listens to the players the most. So based on the feedback from the players, we are actively expressing our opinions and constantly making adjustments to the game. And then on this weekend, on the 22nd, we will open the sixth season of the third model, which is S6. In the sixth season, we have to make a lot of improvements based on the players' feedback. Then we make some improvements and some interesting designs. For example, we will have a new map, new tactics, and new skin in S6. It will also introduce a change in the weather system to increase the fun of the game.

And because SEMO is also, on the other hand, a new game, and we emphasize and very care about what our players are saying. We continuously listen to the player feedback on game experiences and mechanisms and actively collaborating the game developer to incorporate this insights and feedback and just the game. accordingly. For example, in the upcoming game season six on February 22nd, a lot of the updates and improvement is made according to the user feedback. For example, we'll be launching a new map and new battle strategies and new skin system and also bring a new weather system to enhance overall gameplay.

From now on, we will start to design for June, our anniversary festival. During the anniversary festival, we will release some important content. This will increase the content of the game and make the players feel more interested. We will continue to work hard in this regard.

And we're also preparing for the major updates for this June, which is going to be the one-year anniversary for Sunmole. We're looking to bring a lot of significant updates to increase the gameplay and improve the overall game experience for Sunmole.

Multi-platform expansion will also be one of the strategy for this game this year.

Last Q4, we have launched the game on the PC portal, and this year we're looking to bring this amazing gaming experience to multiple platforms and multiple scenarios to attract more users to enjoy the game.

Our main plan for the second half of the year will be to launch a version of the game in Mandarin. We will definitely make some changes to this version, because the domestic and foreign versions And for the second half of this year, the overseas launch will be one of the most important tasks for SunMall.

Right now, we're focused on the development of the traditional Chinese version of Sunmo to better serve the overseas players. We'll refine the game experience, adjust the game ecosystem design to better fit to different countries' gamers' preferences. We're also hoping to make Sunmo a favorite SLG strategy game for young players overseas. That concludes Mr. Chen's question and answer session, and we can move to one last question. Operator, please go ahead.

Yes, of course. Thank you so much. And now we're going to take our last question for today, and it comes from Lan of Wei Fang from Mizuho. Your line is open. Please ask your question.

Thank you for screaming me. Now looking ahead for 2025, can you help share your thoughts on how to further expand your user base and also enhance your brand awareness and also wondering if you could help comment more on the results from your partnership with CCTV New Gala. Thank you.

I will talk about the collaboration with Chunwan first, and then I will talk about how we can expand our brand's influence. This is our first collaboration with CCTV New Gala. We have become Chunwan's exclusive live broadcast platform. Firstly, I'll talk about the partnership with the Spring Festival Gala.

This year, for the very first time, we partner 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, unbelievably bringing users the highlights from the past 48, 42 years of the Gala history. And our users are welcoming this content with great enthusiasm.

Because I am also a 40-year-old person, I have indeed watched this show for more than 40 years. 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

compare the high-quality content in the past with the young generation's feedback through bullet chat and commentaries. It really sparkles new content and new experience.

这次春晚的合作是达到了我们做的计划的目标的。 我就说几个数吧。 第一个就是除夕当天我们春晚 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 target. First of all, on the user front, on Chinese New Year Eve, Bilibili'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 second achievement is that we find bully chats as a replaceable part of Bilibili's user experience.

is attracting a lot of users to come specifically for the unique bullet chat experience while watching Spring Festival Gala. During the live stream, total bullet chat exceeded 100 million.

Thirdly, I found that Bilibili is indeed very suitable for collecting high-quality content. Because Spring Festival Gala is undoubtedly a high-quality and unique content. Because after the live broadcast, all his programs will be uploaded to Bilibili. We can see that the comments and discussions under these videos are very exciting. Many users are also here to post comments, and then he will be here at Bilibili to watch the video of this product. Of course, more people are also here to see how other people comment. So this is also a way for us to get

Another point is Bilibili is well positioned to capture a high quality content on a national wide 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. And the success of this partnership have further solidified our judgment on Bilibili's positioning to host national-wide content and national-wide audiences.

The fourth discovery is that we found that Bilibili is a product with many screens and many scenarios. It is indeed particularly suitable for collecting He Jiahuan's content. This is also a unique advantage of Bilibili. Because Spring Festival Gala is a high-quality live broadcast content, it is very suitable to be presented on a large screen. So this time we found that our TV section

And our multi-screen, multi-scenario strategy and positioning has showed Bilibili's unique advantage in family viewing settings during the spring festivals. 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.

There is a song called the red envelope of spring. This song is actually a song that was originally composed by Bilibili. It was our original music in the half-year season of 2017. And then, uh, this time, it was also a content of Bilibili's own, and then it was on the spring night, and then it became a live-action program for the spring night. This program has reached 5.6 billion views on the whole network, and it has topped 183 hot posts with more than 1 billion views.

And another success example would be one of the programs that was showed during the New Year's Eve Gala is Bilibili's self-produced performance training Hongbao. which become a phenomenal show on the New Year's Gala. That is the 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 masked over 560 million views across platforms, topped 183 trending lists, and surpassed tons of impressions. The success of the show also proves that Bilibili not only understand young people and also proved our ability to produce high-quality, nationally loved content on a wider stage.

To sum up, I think this collaboration with ZTE is a very successful one. Bilibili left the young people to ZTE. To summarize the partnership,

The success of the program shows that Bilibili can bring young generation to the national-wide New Year's Spring Festival Gala. At the same time, increased our user base, further expanded Bilibili name, and also become their integrated campaign within the Bilibili organization. On all the aspects, it has been a very successful project.

From this Spring Festival Gala, we talked about how we can expand the brand influence of Bilibili and our user community. In fact, I think Spring Festival Gala is a typical case. Bilibili has always been a means of expanding our brand influence and our user community through major nodes. For example, we can think of it as our cross-gala every year. It is a node that expands the impact of the platform and attracts new users. By doing the cross-border well, we can continue to do this point. It is a project that can bring good results. For example, our graduation. We do graduation every year. This is also such a stage. Then this time everyone saw that we are on this point on the Spring Festival. We will also do such a thing on the Spring Festival.

And to answer your previous question, how do we expand our influence to a Bilibili brand is that to do projects 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. And we've done the similar things among the graduation season. And for this year we have tried out new partnership during Chinese New Year and we'll continue to launch more Chinese New Year's campaigns like this one going forward. And this year we're 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. That's all. Thank you. Turn back to you, operator.

Thank you so much. And that concludes the question and answer session. Thank you once again for joining Billy Billy's fourth quarter and fiscal year 2024 financial results and business update conference call today. If you have any further questions, please contact Juliette Young, Billy Billy'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.