On November 29, 2023, Bilibili (NASDAQ: BILI;HK: 09626) released its Q3 2023 results: revenue in the first three quarters was 161800 million, a year-on-year increase of 27%；Operating loss of 37600 million, a year-on-year decrease of 55%;The average daily active users (DAUS) exceeded 100 million for the first time in Q3, an increase of 81%, a year-on-year increase of 14%;The average monthly active users (MAUS) in Q3 reached 3400 million, a new high. In the ** meeting after the financial report, the executives of station B believe that there is still a lot of room for growth in users and revenue, and it is expected that in 2024, they will "continue to increase gross profits, reduce losses, and work towards the goal of breakeven". Station B switched from "high-speed gear" to "low-speed gear", aiming to pursue high-quality growth. The growth of daily active users exceeding 100 million can be divided into two types: "organic growth" attracted by content and "accelerated growth" by marketing fees. In 2016, the market cost of station B exceeded 100 million yuan, and the average monthly active users in Q4 reached 49.38 millionIn 2017, the market cost exceeded 200 million yuan, and the average monthly active users in Q4 reached 71.76 million, a year-on-year increase of 45%.In Q4 2018, the number of monthly active users further increased to 92.77 million, but the growth rate dropped to 293%。In Q1 2020, the average monthly active users were about 1700 million;The average daily active users were about 50.8 million, with a year-on-year growth rate of 69%.The daily life is the monthly life of 268%。By Q1 2022, the average monthly active users will increase to 2900 million;The average daily active users were 79.4 million, with a year-on-year growth rate of 32%.The daily life is the monthly life of 270%。In Q3 2023, market expenses will decrease by 19 year-on-year2%, the average daily active users maintained double-digit growth (14%) and exceeded 100 million for the first timeThe daily life is 30 of the monthly life1%。
For the whole year of 2022, the average monthly active users are 3100 million, a year-on-year increase of 259%；The average daily active users were 86.5 million, a year-on-year increase of 296%；Each active user spends an average of 94 minutes per day using the app. In Q3, the average daily usage time of users exceeded 100 minutes for the first time. The sharp reduction of market fees is obviously to turn around losses, and at the same time, it shows that station B is more confident in relying on the natural growth of content. Revenue DiversificationBilibili divides its revenue into four segments: mobile games, live streaming and value-added services, advertising, e-commerce and others. The mobile gaming business is primarily about publishing games for "third parties", where users play and purchase virtual items for free** and with a Bilibili account. Live streaming and value-added services are also mainly monetized by the sale of virtual items, in addition to "big member subscription fees". Ads include ads that appear on the splash page and top of the page of a mobile app, a branded banner at the top of the homepage, and performance ads next to online pushes. E-commerce revenue comes from ticket revenue from ACG (animation)-related merchandise and offline performances and events.
Mobile gamesMobile games are the main monetization force of Bilibili, with revenue of 2.9 billion yuan in 2018, accounting for 71% of that year's revenue, a decrease of 13 percentage points from 2017. In 2020, mobile game revenue increased to 4.8 billion, a year-on-year increase of 335%, but the proportion of revenue has dropped to 40%. In 2022, mobile game revenue will be 5.1 billion, accounting for 26% of revenue;In the first three quarters of 2023, mobile game revenue will be 5 billion, accounting for 23% of revenue. Mobile games accounted for revenue from 83% in 2017 to 23% in 2022 and 19% in the first three quarters of 2023. The reason is simple: on the one hand, the mobile game industry has entered the stage of stock competition and the growth rate has slowed down;On the other hand, the rapid growth of live broadcast, advertising, and e-commerce at station B. The diversification of the company's income is a good thing for investors. However, Bilibili is the leading platform with the highest concentration of young people in China and the richest accumulation of game content, and its natural advantages should not be abandoned. At the first meeting after the financial report, CEO Chen Rui said that according to the new market competition pattern, the self-developed games will be reorganized, and the projects with poor expected benefits will be cut, and the projects with strong competitiveness will be focused on striving for a larger market share and more profits. Live broadcast and value-added services"Live broadcast and value-added services" have sprung up, accounting for the first place in the revenue of station B. In 2015, the income was only a paltry 6.2 million yuan;In 2017, the revenue reached 17.6 billion, reaching 38 in 20204.6 billion, with an average annual compound growth rate of 179%, and its share in revenue jumped to 32%. In 2021, the revenue from live streaming and value-added services reached 69300 million, accounting for 36% of revenue, surpassing mobile games to become the largest revenue of station B**. In the first three quarters of 2022 and 2023, the revenue of this segment will be 87200 million, 60500 million, accounting for the proportion of the year's revenue has increased to %. In 2023, "Double 11", the live streaming turnover (GMV) of Station B will increase by 250% year-on-year. Stable advertising revenue and high gross profit margin are the most important businesses for Internet investors. Station B started advertising monetization relatively late, but the growth rate is considerable. In 2015, the advertising revenue was less than 20 million, and in 2017, it reached 1600 million, 8100 million ......In 2022, advertising revenue reached 50700 million;From 2015 to 2022, advertising revenue has increased by 267 times, with an average annual compound growth rate of 222%. In the first three quarters of 2023, advertising revenue was 44800 million, a year-on-year increase of 261%, accounting for 28% of total revenue. Value-added services and advertising have become the two troikas of station B, the former gathering popularity to earn revenue, and the latter making huge gross profits, which is the main driving factor for turning losses into profits. E-commerce and other e-commerce businesses started later than advertising, with revenue of 15100 million, a year-on-year growth rate of more than 100%, accounting for 13% of total revenue. In 2021, e-commerce revenue will be 2.8 billion, accounting for 146%。In the first three quarters of 2022 and 2023, the growth of e-commerce revenue will slow down, accounting for 10% of revenue. Station B has a daily activity of more than 100 million, and the e-commerce revenue in 2022 will only be 3 billion, so there is still a lot of room for imagination. Profitability analysis 1) Gross profit margin of station B fluctuates cyclically, 176%；Year 20, 20209%；23. in the first three quarters of 20224%。Q4 2020 is the high point of the cycle, with a gross profit of 9400 million, gross profit margin 246%；Q2 2022 is the bottom of the cycle, with a gross profit of 7300 million, gross profit margin of 15%. Q3 of 2023 will come to the high point of the cycle again, with a gross profit of 14500 million, gross profit margin of 25%, double set a historical record.
The gross profit margin of Internet companies is often low, and the gross profit margin of Bilibili is less than 30%, mainly due to the revenue sharing arrangement with anchors and content creators. In 2022, Station B's expenditure revenue share will be 9.1 billion, a year-on-year increase of 179%, accounting for 416%。The growth of users and advertising revenue requires a huge group of creators, and nearly 1.7 million UP owners will receive a share of income in Q3 2023. For station B, although the amount of sharing is huge, it can motivate UP owners to create more and better content, which in turn drives the growth of users and revenue, forming a "positive cycle" of ecology. 1) Expense controlIn 2019, revenue increased by 64% year-on-year2%, the total cost of marketing, administration and R&D is 2.7 billion, and the total expense ratio is 396%；In 2020, the total cost of the three expenses was 6 billion, and the total expense ratio was 498%, and the year-on-year growth rate of revenue increased to 77%;In 2021, the total of the three expenses will be 10.5 billion, the total expense ratio will be 54%, and the revenue will increase by 61% year-on-year5%；In 2022, the total cost of the three expenses will be 12.2 billion, and the total expense ratio will be 557%, and the year-on-year growth rate of revenue fell to 13%;In 2023, Bilibili adjusted its strategy, and the total cost in the first three quarters decreased by 126%, with a total expense ratio of 466%, a year-on-year decrease of 82 percentage points. In the case of revenue growth (year-on-year growth of 2.7%), and the operating loss fell by 55%.
An important reason for the improvement in performance is the focus on customer acquisition and value for money. In the first three quarters of 2023, market expenses decreased by 8 percent year-on-year600 million, the expense ratio decreased by 59 percentage points. 2) The intensity of equity incentives has not decreasedIn 2021, Station B has increased the intensity of equity incentives. 5 of them500 million is included in administrative expenses, accounting for 2. % of revenue9%, which is used to motivate the middle and senior management teams;The expenditure on motivating the technical backbone amounted to 3200 million, accounting for 16%；The total expenditure of equity incentives amounted to 1 billion yuan (of which 1.).300 million included in operating costs, marketing expenses), accounting for 52%；In 2022, equity incentive expenses continued to grow, but the magnitude was lower than revenue, so the proportion of revenue decreased to 48%。In the first three quarters of 2022, the expense ratio of station B dropped significantly, but the equity incentive expenses did not fall but rose, reaching 8700 million, a year-on-year increase of 10%, accounting for 54%；4500 million included in administrative expenses, 3300 million included in R&D expenses.
Bilibili's new strategy is to maintain revenue growth, optimize revenue structure, not burn money, strengthen equity incentives, and improve morale. 3) The operating loss narrowed and the operating loss of station B showed "non-cyclical fluctuations", with an operating loss of 900 million yuan in Q3 of 2020 and a loss rate of 24%;In Q2 2022, the operating loss will expand to 2.2 billion, with a loss rate of 45%;Entering 2023, the painting style of Station B has changed abruptly, and the operating loss has decreased quarter by quarter, with a loss of 1.1 billion in Q3 and a loss rate of less than 20% for the first time.
At the ** meeting after the earnings report, the executives of Station B expect that the loss will be further reduced in Q4 2023. If this momentum is maintained, the first quarterly profit in 2024 is likely.
The above analysis is for reference only and does not constitute any investment advice!