Bilibili Inc. (NASDAQ:BILI) Q4 2022 Earnings Call Transcript

Bilibili Inc. (NASDAQ:BILI) Q4 2022 Earnings Call Transcript March 2, 2023

Operator: Good day, and welcome to Bilibili Fourth Quarter and Fiscal Year 2022 Financial Results and Business Update Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Juliet Yang, Executive Director of Investor Relations. Please, go ahead.

Juliet Yang: 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 the SEC and Hong Kong Stock Exchange. The non-GAAP financial measures we provide are for comparison purpose only. Definition of these measures and a reconciliation table are available in the news release we issued earlier today. As a reminder, this conference call 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. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Sam Fan: Thank you, Juliet. And thank you, everyone, for participating in our 2022 fourth quarter and fiscal year financial and operating results conference call. I’m pleased to deliver today’s opening remarks on behalf of Mr. Chen. In 2022, we proactively adjusted our strategies and reprioritize our goal to better align ourselves with the new industry paradigm. Specifically, we placed our focus on DAU growth and how to reach profitability, beginning to our progress on these two fronts. First, our users and their engagement with our community remain the foundation of our business. By focusing on DAU growth, we are bringing higher-quality users to our platform, which ties in more closely to a monetization potential. In Q4, our DAUs increased to 93 million, up 29% year-on-year.

This brought our DAU to MAU ratio to 28%, a meaningful improvement from 26% in the same period last year. The average daily time spent per user on our platform reached 96 minutes, driving the total time spend on our platform, up by 51% year-on-year. We will continue to cumulate our DAUs with optimized product offerings and algorithms and further support our commercial prospects with controlled sales and marketing spending. Second, we improved our commercialization efficiency and elevated cost reduction measures to bring us closer to our goal of profitability. Our total net revenues for 2022 were RMB21.9 billion, and the total net revenues for Q4 were RMB6.1 billion, up 6% year-on-year. Our gross margin improved to 20% in Q4 compared with 18% in the previous quarter.

We continue to take measures to control our expenses, and improve our organization efficiency. Specifically, in the first quarter, we cut sales and marketing expenses by 28% year-on-year. Sales and marketing expenses as a percentage of total net revenues reduced from 30% in the same period last year to 21% in the fourth quarter. We have also streamlined our personnel and trimmed our noncore and underperforming business. As a result, our non-GAAP net loss in the first quarter narrowed by 21% year-on-year and 26% quarter-on-quarter. As we move through 2023, our operational goal is to become a more efficient company. We will centralize our resources to focus on less, but more important tasks. Specifically, we plan to continue to grow our DAUs, improving our gross margin and tightening our expenses.

And we are executing on these actions. We believe, we are on the right track to achieve our breakeven target by 2024. With that overview of our strategic approach and the progress, I’d now like to provide a brief update on our three core pillars of content, community and commercialization. Starting with content. Our ever-growing content ecosystem is our most valuable asset. In the fourth quarter, our platform hosts 3.8 million content creators, 25% more than the same period a year ago. Creator submitted 17.6 million videos, up 62% year-on-year, both on a monthly basis. To encourage more users to turn their ideas into creation, we will provide them with more easy-to-use tools to get what the creator started. At the same time, more traffic will be led towards mid and long-tail creators.

Our goal is to turn more users into creators, driving both our content offerings and the user engagement. Expanded content scenarios are also attracting more traffic to Bilibili. For the fourth quarter, total daily videos views were up 77% year-on-year to 3.9 billion. In particular, storing more daily video views increased by 175% year-on-year, while PUGV daily video views increased by 56% in the first quarter. Story mode has allowed us to expand into the vertical video market, broadening our DAUs, increasing user time spent on our platform and opening more commercial opportunities for us to pursue. To unlock our commercial potential, in 2022, we further integrated our commercial channels within our content ecosystem. The combination has created more immersive advertising opportunities and the various monetization channels for content creators.

Over 1.3 million content creators earn income through multiple channels on Bilibili in Q4, up 64% year-over-year. Looking at our community, our inclusive committee environment and the risk interaction tools are creating tighter bond between our users and our platform. In the fourth quarter, user’s average daily time spend on Bilibili reached 96 minutes. Monthly interactions also increased by 35% year-on-year to 13.6 billion. And for the core members of our community, the number of official members reached $195 million in the fourth quarter, up 34% year-on-year and their 12-month retention rate continued to exceed 80%. Now, let’s review our commercialization progress and how we think about it moving forward. For the fourth quarter, our total net revenues reached RMB6.1 billion, up 6% year-over-year and our full year revenue grew by 13% to RMB21.9 billion.

We are now more focused on improving our commercialization efficiency and specifically on improving our gross margin at the company level. Now, I’d like to share more color on each of our commercial business lines. First, our VAS business. Revenues from VAS was RMB2.3 billion for the fourth quarter and RMB8.7 billion for the year, up 24% and 26% year-on-year, respectively. Live broadcasting, in particular, has shown solid growth. For 2022, revenues from live broadcasting increased by over 30%. Our strategy to integrate live broadcasting within our video ecosystem has prompted more creators to tap into live broadcasting universe. This has helped to penetrate more video users, converting paying users, and optimize our revenue sharing structure organically.

In the fourth quarter, the number of monthly active live broadcasting holds increased by over 17% and MPUs for live broadcasting grew by over 40%, both on a year-on-year basis. Looking ahead, live broadcasting will continue to be one of our primary revenue growth drivers. We expect to optimize our revenue sharing ratio and further improve live broadcasting gross margin. By the end of the fourth quarter, we had added nearly 1 million premium members from the prior period, reaching a total of 21.4 million premium memberships. We launched multiple Chinese anime titles during the period, including the highly anticipated . In January 2023, our co-produced traditional Chinese style graphic anime, Yao Chinese folktale become a smart hit, generating over 200 million video views on our platform.

As for our advertising arm, we continue to gain market share in 2022. Advertising revenues were up by 12%, reached RMB5.1 billion in 2022 and RMB1.5 billion in Q4. Our top-performing verticals in the first quarter were mobile games, e-commerce, digital products, and home appliances, automotive, and skin care and cosmetics. In 2022, we further opened up our ecosystem to embrace more advertising opportunities across various video viewing scenarios. The new scenarios we introduced in story mode and improved sales conversion modules has proven our success in performance-based ads and carry higher ROIs. In the fourth quarter, our performance-based ad revenue grew by over 50% year-on-year. In addition, as our users getting mature and into new life stages, the new consumption needs such as automotive and home appliance also attract more advertisers and their ad budgets have been allocated to our platform.

Moving into 2023. We will continue to invest in and improve our ad infrastructure and further integrate our added capabilities within our content ecosystem. Turning into GaN, revenues for the year were RMB5 billion and RMB1.1 billion for the fourth quarter. We are committed to the strategy of development in-house distributed globally. In Q4, we restructured our game development to effectively align with this goal. Specifically, we eliminate underperforming self- development projects and centralize our resources to focus on general where we are already experts. In 2022, our self-development games contributed 5% of our total game revenues. We expect this ratio will continue to expand in 2023 as we roll out more self-development game. Looking at our pipeline, we are planning to launch two self-development games as well as six exclusively licensed titles in the second quarter of this year.

As game license approvals have gradually resumed in China, we expect to engage in more opportunities in the domestic market. In summary, the new industry dynamics call for more efficient operations. In 2023, we will continue to centralize our resources to grow our DAUs, increase our gross margin and narrow our losses. Throughout this process, we will continue to strengthen our execution and tighten our spending while selectively investing R&D will improve our commercialization efficiency. With these measures in place, we believe, we are on the right track to reach our financial goals and become a stronger, more resilient and efficient organization. This concludes Mr. Chen’s remarks. I will now provide a brief overview of our financial results for the fourth quarter of 2022 and outlook for the fiscal year of 2023.

For a review of our fiscal year 2022 results, please see our press release issued earlier today. Total net revenues for the fourth quarter were RMB 6.1 billion, up 6% from the same period 2021. Our total net revenues breakdown by revenue streams were approximately 38% VAS, 25% advertising, 19% mobile games and 18% for our e-commerce and other business. Cost of revenues increased by 4% year-over-year to RMB 4.9 billion. Our gross profit in the first quarter was RMB 1.2 billion, and our gross margin was 20.3%, up 2. 1 percentage points sequentially. With our tightly controlled cost structure, we expect to show continued margin improvement throughout 2023. Total operating expenses were RMB 3.6 billion, up 15% from the same period in 2021. As we work on increasing our commercial prospects, we are also keeping a lean cost structure, because sales and marketing expenses in Q4 by 28% year-on-year to RMB 1.3 billion, while DAU grew by 29% year-over-year.

Sales and marketing expenses as a percentage of total revenues, was also down to 21% compared to 30% in the same period last year. We will continue to control our sales and marketing expenses while delivering solid DAU growth in 2023. G&A expenses were RMB 870 million, up 52% year-over-year. The increase was primarily due to the one-off surveillance paid of RMB 252 million related to our organizational restructuring. R&D expenses was RMB 1.5 billion, representing an 87% increase year-over-year, which was primarily due to increased R&D personnel and a one-off consolidation cost of RMB 470 million related to our certain game projects. As we move through 2023, we will take additional actions to reduce our operational expenses. We think, our overall operating expenses peaked in 2022 and will start to decline in 2023.

Net loss and adjusted net loss was RMB 1.5 billion and RMB 1.3 billion, narrowing by 29% and 21% year-on-year, respectively. Our net loss ratio in the fourth quarter was 24%, a very notable improvement from 36% for the same period a year ago. We expect to continue to narrow our losses in 2023. Turning to our capital allocation and liability management. We are keenly aware of our cash reserves and have taken steps to improve our balance sheet, which gives us the flexibility we need to reach our breakeven target by 2024. We are actively managing our liabilities and to improve our balance sheet. In the fourth quarter, we repurchased and retailed a total principal amount of US$547 million notes for a total cash consideration of US$420 million. As a part of our liability management plan in January 2023, we completed US$409 million equity offerings and note exchange program.

We retailed a principal amount of US$385 million of convertible notes for a consideration of US$331 million cash funded by this offering. The remaining US$69 million in proceeds were used to replenish our cash reserves. After these transactions, we currently have three outstanding CBs that totaled US$1.6 billion. As of December 31, 2022, we had a cash and cash equivalents, time deposits and short-term investments of RMB 19.6 billion or US$2.8 billion. We believe this amount is sufficient to cover all of our remaining convertible bonds and fund our future operations while we take further action to narrow our losses and reached non-GAAP breakeven by 2024. With that in mind, we are currently projecting net revenues for the full year of 2023, to be between RMB 24 billion and RMB 26 billion.

Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Daniel Chen from JPMorgan. Please ask your question, Daniel.

Daniel Chen: Thanks, management, for giving me the opportunity to ask question. So my question is on the 2023 outlook. So with the macro economy gradually recovering, so what’s our core business strategy in 2023? And what are the key focus point from a management point of view? Thank you.

Rui Chen:

Juliet Yang: Starting from last year, we’ve noticed that the Internet industry has entered into a new era. Every company is more focused on the quality of the growth, the quality of revenue as well as improving gross margin and focus on cash flow, not just Chinese Internet company, we noticed many US companies are doing the same thing.

Rui Chen:

Juliet Yang: As for us, our key objective for 2023 would be to grow our top-line and narrow our losses and focus to achieve higher quality of user growth.

Rui Chen:

Juliet Yang: This will be our long-term strategy. It will not changing because the change of the environment. But of course, as you mentioned, the recovery of the overall economy will help us better executing on this strategy.

Rui Chen:

Juliet Yang: Overall, our business will be more focused there will be two important tasks. One is to increase our top-line and narrow our loss. Number two, is to increase our DAU.

Daniel Chen:

Rui Chen:

Juliet Yang: Number one task, increase our top-line. When I say increase our top-line, I’m referring to the increase of top-line as well as our gross profit. We’ll be focusing on improving our gross margin and narrowing our losses. In the fourth quarter, we’ve achieved gross margin improvement from a year-over-year and quarter-over-quarter basis. We also narrowed our net loss by 29% year-over-year. We expect that in 2023, our overall net loss will narrow more meaningfully, and to achieve our breakeven target by 2024.

Rui Chen:

Juliet Yang: On the user aspect, we will no longer just pursue the absolute number of MAU, but rather to focus on the growth of our DAU, as well as the sales conversion of each DAU that can bring to the company.

Rui Chen:

Juliet Yang: In 2023, we are expecting our DAU to MAU ratio will continue to improve. Currently, we’re at 28%. We expect to increase to 30% level.

Rui Chen:

Juliet Yang: This will mean better engagement, better stickiness of our company as well as higher commercialization potential.

Rui Chen:

Juliet Yang: I still want to emphasize that our community and content ecosystem is the cornerstone of our business, no matter what kind of strategy the community and the content ecosystem as the foundation of the business.

Rui Chen:

Juliet Yang: In this year, we’ll be celebrating our 14th anniversary. And in the past 14 years, we have experienced the industry cycle, which is the mobile PC era, mobile era and as we’re going through the AI-powered era, no matter how the technology industry is involving. For Bilibili, the community and the PUGV content ecosystem aspect is what has kept us going while others come and go.

Rui Chen:

Juliet Yang: We believe the value of high-quality content. We also believe in the value of the high talented content creator can bring. That is the biggest moat for our business. It is also the biggest competitive advantage that we own in this ever-changing landscape.

Rui Chen:

Juliet Yang: We believe in that our unique content ecosystem can continuously generate high-quality content and talented content creator. And the value of this content that bring to Bilibili is our core competitiveness. We’ll continue to cultivate that and continue to build on that and bring high-quality growth to our company. Operator, next question, please

Operator: Thank you. Next question comes from the line of Xueqing Zhang from CICC. Please ask your question, Xyeqing

Xueqing Zhang: Thank you, management, for taking my question. And my question in regards financial outlook. As Rui mentioned before, we see the company’s gross margin has continued to increase in the past few quarters. So how does management think about the trend of margin in 2020? And since we use the full year revenue guidance, what the growth of each segment that it imply? And lastly, on the bottom line, what’s the outlook for the loss narrowing in detail? Thank you.

Sam Fan: Yes, this is Sam. I will take your question. As Mr. Chen mentioned, the key objective of the company for this year to improve our gross margin and narrow our loss. So that’s why for 2023 revenue guidance, we are cutting down low-margin business, such as e-sports content supplying revenue business and certain low-margin e-commerce business. As a result, we expect our e-commerce and other revenue line for 2023 to decline by mid 20% to 30%. However, we expect the gross margin and the gross positive for e-commerce and other business to improve year-over-year. And for the non-e-commerce business revenue, including our Game, VAS and Advertising. If we combat these together, we still expect to grow by 20% plus year-over-year in 2023.

And in regarding to the gross profit, overall, the increase of the revenue will drive the increase of the gross margin, especially for certain fixed costs, such as server and bandwidth, staff costs and content costs. In 2023, as I mentioned, we will be more selective and ROI focused in terms of the content investment. We also expect the percentage of the server and bandwidth cost and staff cost will decline. In terms of the revenue sharing costs, we expect each business line gross margin will improve year-over-year. As high-margin business, gradually increase their contribution. There will be more meaningful improvement on revenue sharing cost. For OpEx, total OpEx had peaked in 2022. We expect OpEx will start to decline in 2023. We cut sales and marketing expenses by 15% in 2022.

We expect further cost cuts down for sales and marketing in 2023. Meanwhile, G&A and R&D expenses in terms of the absolute dollar amount will also decline slightly in 2023. We expect our gross margin to gradually improve to mid 20 throughout 2023, and we also expect meaningfully narrowed our non-GAAP operating loss in 2023.

Juliet Yang: Thank you. Operator, next question please.

Operator: Thank you. The next question comes from the line of Yiwen Zhang from China Renaissance. Please ask your question, Yiwen.

Yiwen Zhang: So my question is on the advertisement. Can you discuss about the outlook as market in 2023? And what kind of change have we seen? And secondly, on the product side, can you give us the latest update on the story mode and what kind of development should we expect on our business on the product side? Thank you.

Rui Chen: Firstly, on the story mode, our multi-screen and multi-scenario is one of our key strategies that’s driving Bilibili’s user growth. The 28% DAU to MAU ratio and 96 minutes daily user time spend means the strategy is working effectively. Story mode as a newly added scenario is an important supplement to our existing PUGV, OGV like broadcasting and big screen OTT scenario. We noticed that since the launch of story mode, it has played a vital role in terms of increasing user engagement, especially for users who are not as active. It has also helped us to attract new content creators across the video industry. At the same time, it has driven better than expected increase in terms of video views, as well as user time spend. Story mode has essentially allowed users to access their favorite Bilibili content anytime, anywhere.

Juliet Yang: Bilibili has always put high-quality content and content creator a top priority. Since inception, PUGV ecosystem has maintained a very healthy growth, when we are mentioning the Story Mode grow at a fast pace. Don’t forget that, PUGV also grew by 50% year-on-year and maintained a very healthy growth rate.

Rui Chen:

Juliet Yang: Whether as content creator or content consumer, their need for high-quality content will evolve. So will the sense of style. We think that Story Mode has served a very good vessel to carry PUGV content to support our ever-growing ecosystem. In addition, the combination of Story Mode and our existing ecosystem has helped us to increase our ad efficiency, and this has also brought new commercial opportunity for live broadcasting and advertising.

Rui Chen:

Juliet Yang: As you may already aware, it has been a very challenging market for advertising in 2022. The overall ad market only had low single-digit growth. And under this challenging market, we are continuing to gain market share. For Bilibili, its full year advertising revenue, we have reached RMB 5 billion.

Rui Chen:

Juliet Yang: As for 2023, there has been a recovery of confidence for advertisers. Maybe overall industry can achieve a double-digit growth. We will see that. However, we also noticed that for all advertisers, they will be more conscious and we’ll be focusing more on the core value of their ad investment and their ad investment efficiency.

Rui Chen: The key reason for advertisers to invest in ads, we have categorized for three main areas. One is new product launch. Number two is brand rejuvenation. Number three is continuously to increase their brand perception and drive sales conversion. The advantage for Bilibili advertising is that we can cover all above three core needs and we are confident our growth rate will beat the industry growth rate. In 2023, we will be looking to upgrade our sales model for different industry verticals. We believe the integrated marketing will continue to be our long-term growth driver. For our leading industry verticals, we’ll continue to build high barriers and upgrade four ad product matrix such as for games, 3C, and digital product.

Take games for an example. Bilibili has the largest gamer and game content community in China. And with near 90 million unique users consume content gain content on a monthly basis. We think the recent regularization of BanHao is also a favorable tailwind for us. In Q1, we have unified the for three key game teams, including game distribution, game ads and gain content in order to provide a more comprehensive service to game companies and improve the efficiency for game distribution. Our goal is to enable every game company to reach their target audiences in time and also achieve long operation cycle and higher conversion rate on Bilibili. Secondly, we expect to further gain market share and attract larger budget from areas like e-commerce, automotive and general FMCGs take e-commerce, for example.

Bilibili is… hello. Hello, operator?

Operator: Please carry on.

Juliet Yang: Yes, we were disconnected for a second. We were saying that Bilibili is the only radio community who has opened about e-commerce collaboration. Last year, together with Alibaba, Panoro and we have optimized our brand-leading conversion model on top of our traditional brand and performance apps. In 2022, over 1,000 new brands and over 10,000 SKUs have debuted on Bilibili through function, which also recorded better-than-expected performance based as revenue. We will continue to integrate video and e-commerce live — live broadcasting e-commerce system and explore Bilibili’s unique open loop transaction model. We also expect to quickly expand our market share in e-commerce apps and their budget this year.

Carly Li:

Juliet Yang: On top of all that, we are also working to improve our algorithm infrastructure and invest in AI GC application and also improve our data capacity to provide our customers with more scientific marketing data point. Also, we’ll continue to explore more at scenario in tens as friendly atmosphere in our community. All of which are the right thing to do, and we have — that’s what we have done in 2022 and will continue to carry into 2023. Operator, next question please.

Operator: Thank you. Our next question comes from the line of Lei Zhang from Bank of America Merrill Lynch. Please ask your question, Lei?

Lei Zhang: thanks management for taking my question. My question is mainly about the game business. Can you share with us your in-house game strategy and outlook? And any new game we can expect after the resume of game licensing? Thank you.

Rui Chen: We believe we have entered a new era for game business last year. Banhao is one of the reasons. Another reason was the increasing penetration rate for mobile gamers in China. And also gamers involving taste and their increasing demand for higher-quality games are also shaping the overall games industry as production cost rises, the success rate for games is declining. In the era of lower gamer penetration rate, it’s easy to make money for game company as well as they have good quality of titles. However, we believe in this new era, there will only be two kinds of gains can make money and succeed. One is the super mega titles. Number two would be the number one title in the segment genre, because it will have a longer life cycle.

And only the two kinds of games, we’ll be able to gain market share and survive in this new era. Bilibili’s game strategy is designed to serve the market the next market trend — the market trend in the next few years. We will be firmly executing the strategy of developing house and distribute globally. This will be the month to use for the next industry cycles because only global distribution could cover the increase in production cost and only the highest quality of games have €“ will have more operation cycle, hence, to achieve higher ROI.

Juliet Yang: In terms of genre, we will be more focused, whether it’s a done operated game or our self-development game, we will be focused on the area that we hold the most advantage. The ACG part will be one of the three same genes will be focusing on. And also, we’ll be looking to cut down the number of projects we will be developing and focus our best resources on the unlimited plot.

Rui Chen:

Juliet Yang: From a results perspective, the investment we made in self-development games is starting to bear fruit. In 2022, our self-development games revenue is already contributing about 5% of total game revenue. We expect this ratio will continue to increase in 2023.

Rui Chen:

Juliet Yang: As for the Banho, we believe the releasing of Banho has already been normalized. There has been quite regular for domestic Banho to be released on a monthly basis. We’ve also get in the imported titles there has also been a batch that’s been approved. So we believe that this has been an industry tailwind favorable to Bilibili, not only our self-developed games, it’s also being — it will also be favorable for our gained jointly operation as well as for our game advertising business.

Rui Chen:

Juliet Yang: Also, we are looking to launch two self-development titles in the second quarter this year.

Operator: Please remain the line conference will resume shortly.

Juliet Yang: Hello. Operator, next question, please. Can you hear me?

Operator: Thank you. Our next question comes from Lincoln Kong from Goldman Sachs. Please ask your question, Lincoln.

Lincoln Kong: So, thank you for taking my question. So my question is about AIGC. So basically, this is a pretty hot theme for this year. Can management elaborate a bit more how we think Bilibili can apply in the whole AIGC front and the potential on the product and monetization opportunity? Thank you.

Rui Chen: I believe that the opportunity that AIGC can bring is a mega event, not only for the industry players, but for the whole society to pay attention, we believe will bring a huge productivity increase in terms of content generation. First, an analogy would be the invention of mobile phone camera. It has allowed everyone to record video anytime, anywhere. And the AIGC can help to increase the productivity of those content and significantly lower the production cost. We believe it has brought a very big opportunity for Bilibili, as well as for many other players in this industry, but especially so for Bilibili is because, for one, we are a massive content platform. Number two, we are our UGC platform. First, as that would be on the search front, the ChatGPT similar experience will help users to find the video that they want more efficiently, such as product reviews, let’s say, people want to look for a new Airpod review.

For Bilibili who has our own data, we can easily accumulate up, find and organize and structure the useful information and present to the user and whether it’s in the format of video clips or in a format of text. It will largely enhance the user experience when they use the search function. As for Bilibili, because we have a massive amount of knowledge related content and knowledge content in a constructive way, it has more time value. Even after a few years back, we can still find that historical videos that continues to generate views and bring value to users, which ChatGPT like search experience will help us to enlarge the value of our historical video content at the same time to improve the consumption efficiency for our users. In terms of content creation tools, we believe the AGC can bring revolutionary experience that allow more users to start creating content.

For example, the same material can be presented in different formats in different videos and also allow many users who used to just be content consumers. Now they can easily create content like a professional. Lastly, on virtual content creators, as you may know, Bilibili is already currently the largest virtual content creator platform in China, we have tens of thousands virtual content creator, virtual live broadcasters on Bilibili. AIGC can bring more automatic more efficiency, more higher €“ higher user experience to the virtual characters. For example, our virtual content host, Luo Tianyi what AIGC can bring is transform her to a real person. And that will bring revolutionary experience for people who are fan. And this is €“ this has a massive imaginary space that we can do with it.

So we believe AIGC will serve very positive effects in terms of the virtual content creator, virtual live broadcasting host and the virtual idols that Bilibili can offer.

Rui Chen:

Juliet Yang: As a platform who’s connecting content creator with users, the evolution of production tool will serve very positive, bring very positive change to our platform. The change probably will be similar to the PC to mobile era. That’s allowing more people to access the Internet, allow more users to be able to create content easily. And that’s why our user has increased by tenfold in the past few years. And I’m personally very looking forward to the — the involvement of AIGC tool in terms of improving the video production efficiency, allowing more people to create content more easily that will definitely serve Bilibili as a content platform, the most. Okay. I think, that’s the time we have for today. Operator, we can wrap-up the call.

Operator: Thank you. I would now like to turn the conference back to management, for any additional or closing comments.

Juliet Yang: Well, thank you, everyone, for joining us today. If you have further questions, please feel free to contact our IR team or TPG Investor Relations. Our content information was presented in the news released earlier, that we issued earlier today. Thank you everyone. And have a great day. Bye-bye.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.