Bilibili Inc (BILI) 2018 Q4 法說會逐字稿

Good day, and welcome to the Bilibili 2018 Fourth Quarter and Full Year Earnings Conference Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations.

Please go ahead.

Thank you, operator.

Please note that discussion today will contain forward-looking statements relating to the company's future performance and are intended to qualify the safe harbor from liability as established by the U.S. Private Securities and Litigation Reform Act.

Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.

Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

A general discussion of the risk factors that could affect Bilibili's business and financial results is included in the certain filings of the company with the Securities and Exchange Commission.

The company does not undertake any obligation to update this forward-looking information, except as required by law.

During today's call, management will also discuss certain non-GAAP financial measures for comparison purpose only.

For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial measures, please see the 2018 fourth quarter and full year financial results news release 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 Bilibili Investor Relation's website at ir.bilibili.com.

Joining us today on the call 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 lead the prepared remarks on behalf of Mr. Chen.

Thank you, Juliet, and thank you, everyone, for participating in today's earnings call.

I'm pleased to deliver today's opening remarks on behalf of Mr. Chen.

2018 was an exciting year for Bilibili as we made great strides across our business.

In March, we successfully completed our IPO, and throughout the year, we continued to build on that success and grow each of our core divisions.

We added massive amounts of new diverse content through our robust Professional User Generated Video or PUGV ecosystem as well as entered a number of new cooperation agreements.

Our ever growing content supports our expanding community.

By the end of the year, our MAUs grew to record level of 92.8 million.

Importantly, we deepened the level of connectivity within our community and enhanced our monetization capabilities.

By the end of 2018, we had increased our revenue by 67% to RMB 4.1 billion, and the number of paying users quadrupled from 1.1 million to 4.4 million in the last 12 months.

The fourth quarter was an extension of this momentum, and the total net revenues increased 57% year-over-year to RMB 1.2 billion, once again surpassing our expectations and beating the high end of our guidance.

During the fourth quarter, we further grew our robust compilation of high-quality content through our PUGVs.

As we announced during the quarter, we entered strategic agreements with market giants Tencent and Alibaba, which considerably strengthened our capacity in anime, mobile games and commercialization.

Our extensive and growing library of content continues to attract young people to our community, generating substantial user growth.

In the fourth quarter, the number of monthly active users grew by 29% year-over-year, reaching 92.8 million.

Our mobile monthly active users grow even faster by 37% year-over-year to 79.5 million in the fourth quarter.

Our platform's exceptional user growth and increased engagement levels are a testament to our unparalleled community.

In the fourth quarter, our users spent a daily average of 78 minutes on our platform, excluding time spent playing our mobile games.

This is up 5 minutes compared to the same period last year, while an increasingly large number of new users also joined in our platform.

In 2018, the most popular content verticals were entertainment, lifestyle, games, anime and technology.

Within our massive user base, we have a unique core user group: official members.

They pride themselves on passing our community entrance exam and exhibit much more loyal and engaged user behavior compared to nonofficial members.

They are also considerably more inclined to pay for Bilibili's premium content, and their 12-month retention rate is over 80%.

By the end of 2018, our official members, once again, outpaced our MAU growth, increasing by 44% year-over-year to 45 million.

Through our entertainment ecosystem, our video content creation continues to be dominated by PUGVs.

Looking at the fourth quarter specifically, approximately 89% of our viewed videos came from PUGVs.

Finding ways to support this important constituency was one of our primary goals in 2018.

Today, our submission process has been more streamlined with technical updates on mobile content submission and streaming.

Our cash incentive program has over 100,000 enrollments, further activating and encouraging continuous content creation.

In the fourth quarter, we had on average of 570,000 active content creators uploading 1.7 million videos monthly, up 143% and 148%, respectively, compared to the same period last year.

In addition, we hosted Bilibili Top 100 Content Creators Awards Ceremony in January 2019, where we celebrated outstanding achievements of leading content creators in various categories.

We will continue to improve our platform's design competencies and expand our commercialization capabilities to help our content creators shine even brighter.

In addition to our diverse PUGVs, our premium licensed content in anime, variety shows and documentaries continues to thrill our community.

As we further our leadership in overseas anime offerings, we are also expanding our footprint in domestic anime.

In December, we hosted a "Made by Bilibili" press conference, where we released over 20 Bilibili-produced domestic animation shows.

Furthermore, our self-produced variety show, Storyman 2, and annual Bilibili New Year Gala gained instant successes among the younger generations following their releases.

Building partnerships with market leaders was also one of the important ways we extended our content offerings and improved our commercialization capabilities.

In early October, we announced Tencent's equity investment of USD 370 million and our subsequent partnership.

Under our agreement, both Bilibili and Tencent will exchange, co-produce and jointly invest in anime content as well as expand our partnership in mobile games operations.

As of the end of February 2019, we have already exchanged a number of domestic animation copyrights and more are planned for the rest of the year.

We are also jointly working on certain new anime-related projects, aiming to deliver more high-quality content to anime lovers.

Furthermore, in December 2018, we entered into a partnership with Taobao, China's largest mobile commerce destination under Alibaba for content driven e-commerce and the commercialization of Bilibili's IP assets.

Leveraging Taobao's gigantic platform and expertise in e-commerce, we expect to further help our content creators to realize and improve their commercial values while building a more virtuous content community and commercialization-focused ecosystem.

We are working closely with Taobao, and in the coming months, we expect to introduce the first batch of top content creators to promote merchandise on both platforms.

Our finger remains on the pulse of the online entertainment industry, particularly through our core Generation Z demographic and their continued enthusiasm for ACG content.

In November, we considerably strengthened our fundamental competencies in ACG with the launch of our new Bilibili Comic app, rounding out our offerings and fortifying our position as a leader in ACG.

We are rapidly accumulating exciting comic content, in December, we also acquired assets from NetEase's comics division to further build our complementary suite of premium licensed content.

We will continue to invest in ACG content to satisfy the growing demand for our eager community.

As we discussed in the past, technology is the cornerstone of our business.

We continue to improve our product design and AI power to connect users and grow our community.

Over 70% of our video views are now generated by our smart recommendation system, and over 1/3 of MAUs visited Bilibili Moments, a social interactive function that allows users to interact and engage with content creators and like-minded friends in the community.

Based on these functionalities and improved recommendation powers, our users are building deeper connections and engaging more with the platform and each other than ever before.

In the fourth quarter, we saw exciting participation levels with 436 million daily views and 1 billion monthly interactions through bullet chats, comments, likes and Bilibili Moment posts, up 107% and 298% year-over-year, respectively.

These unique interactions are central to our success and one of the ways that we continue to build our loyal offerings.

With that overview on content community, I'd like to take a few moments to review our commercialization progress.

Revenues from mobile games grew 15% year-over-year to RMB 713 million in the fourth quarter of 2018 or USD 104 million, led primarily Fate/Grand Order, or FGO.

The game's pervasive popularity continued throughout the fourth quarter, and users responded quite favorably to the release of the major content update, FGO Chapter 2.0, around the 2019 Chinese New Year.

Additionally, we released new titles, including Song of the Time in November, an exciting ACG-themed RPG based on a well-known IP, which has been gaining popularity among core users.

For our jointly operated games.

In the fourth quarter, we published several titles, including Naruto Online from Tencent and Night Falls: Survival from NetEase, both of which were well received by our users.

Looking at our pipeline, besides those titles we had previously announced, we have added a number of new games to our release lineup.

On the exclusively-licensed game front, we have Final Gear, a highly anticipated tactical RPG set against a doomsday backdrop.

We will also be jointly operating 2 thrilling ACG-themed mobile games, RWBY and Arknights.

These 3 games have already obtained regulatory approvals and are scheduled for launch on Bilibili's platform in the second quarter.

Turning to our advertising business.

Revenues from advertising increased by over 300% to RMB 160 million or USD 23 million in the fourth quarter of 2018.

Our 2 growth engines, brand advertising and performance-based advertising, gained considerable momentum throughout the year.

We are actively improving our advertising efficiencies while expanding the number of advertisers in different industry verticals.

The top 3 industry verticals for brand advertising in the fourth quarter were games, e-commerce and Internet services.

And the top 3 verticals for performance-based advertising were e-commerce, education and games.

Our live broadcasting and the VAS revenues increased by 276% year-over-year to RMB 202 million or USD 29 million in the fourth quarter of 2018 with contribution from both our live broadcasting business and premium memberships.

In 2018, we started a number of initiatives to expand our live broadcasting content, including bringing in a number of high-quality e-sports matches to capture our highly concentrated base of game lovers.

These include top matches in League of Legend and the Overwatch League Championships.

The results were encouraging: we recorded peak live streaming page views during the LPL S8 final game, which reached top industry levels.

We have also improved product design and the user experience, attracting more live streaming viewers and improving our monetization efficiency.

In the fourth quarter, live broadcasting paying users grew over 200% compared to the same period last year.

In January 2018, we launched a premium membership program allowing paying members to enjoy exclusive or advanced licensed content.

The program was an immediate hit in the community and attracted millions of subscriptions.

By the end of December, we had recorded 3.6 million valid premium members, demonstrating our user's high willingness to pay for premium content and Bilibili's heightened monetization potential.

Last but not least, we are delighted to share our e-commerce and others revenue reached RMB 81 million or USD 11.8 million in the fourth quarter, an increase of 254% from the same period of last year, largely thanks to the increase in sales of products through our e-commerce platform.

We are optimistic about the potential of this business with the growing demand for ACG-related products from our users.

As we move through 2019, we will continue to strategically grow our business by adding best-in-class content to our industry leading platform and further increase the bond within our dynamic community driven by the inquisitive minds of the Generation Z population.

This concludes Mr. Chen's remarks.

I will now provide a brief overview of our fourth quarter 2018 and full year financial results.

During the fourth quarter, each of our premium business lines continued to grow.

Our total net revenues increased by 57% year-over-year to RMB 1.2 billion or USD 168 million.

We further improved our revenue structure with increased gains from advertising and live broadcasting segments as well as our value-added services business.

Our nongame revenues accounted for 38% of total revenues in the fourth quarter, up from 31% in the third quarter and 16% in the fourth quarter of 2017.

As we execute our commercialization strategy, the number of paying users nearly quadrupled in 2018 versus 2017, reaching 4.4 million in the fourth quarter, demonstrating our heightened monetization potential.

Of note, this number accounts for each paying user, not each service a paying user purchases.

Cost of revenues increased by 72% to RMB 959 million or USD 139 million from the same period 2017.

Revenue-sharing costs, a primary component of cost of revenues, was RMB 434 million or USD 63 million, representing a 54% increase year-over-year.

Gross profit increased by 12% to RMB 197 million or USD 29 million from the same period of 2017.

Our gross profit margin declined to 17%, primarily due to increased bandwidth costs, content cost, staff costs and the lower revenue contribution mix from our higher-margin game business.

Total operating expenses increased by 104% to RMB 486 million or USD 71 million from the same period of 2017.

As we continued to grow our business and further optimize our monetization structure, we expect to see better operational leverage.

Selling and marketing expenses were RMB 182 million or USD 27 million, representing a 181% increase year-over-year.

The increase was primarily attributed to the increased channel and marketing expenses associated with our app and the brand, including promotional activities for our Made by Bilibili press conference as well as promotional expenses for our mobile games and increase in headcount in selling and marketing personnel.

General and administrative expenses were RMB 150 million or USD 22 million, representing a 75% increase year-over-year.

The increase was primarily due to increased general and administrative personnel-related expenses and increased other miscellaneous expenses.

Research and development expenses were RMB 153 million or USD 22 million, representing a 76% increase year-over-year.

The increase were primarily due to increased headcount in R&D personnel and increase in share-based compensation expenses.

Losses from operations were RMB 289 million or USD 42 million compared with a loss of RMB 62 million in the same period of 2017.

Income tax expenses were RMB 9 million or USD 1.3 million compared to RMB 2 million in the same period of 2017.

Investment income was RMB 75.1 million or USD 10.9 million, representing an increase of 892% from the same period of 2017.

The increase was primarily due to the gain arising from the revaluation for our previously held equity interest in one of our investees when we obtain control over it during the fourth quarter of 2018, partially offset by the impairment loss charged for other investees.

Net loss totaled RMB 191 million or USD 28 million for the fourth quarter of 2018 compared with RMB 51 million in the same period of 2017.

Adjusted net loss, which mainly excludes share-based compensation expenses and amortization expenses related to intangible assets acquired through business acquisitions, was RMB 152 million or USD 22 million from RMB 25 million in the prior year.

Basic and diluted loss per share were RMB 0.59.

Non-GAAP basic and diluted loss per share were RMB 0.46.

For the full year of 2018, total revenues increased by [67%] (corrected by company after the call) to RMB 4.1 billion or USD 601 million.

Revenues from mobile games increased 43% to RMB 2.9 billion or USD 427 million.

Revenues from live broadcasting and VAS increased 232% to RMB 586 million or USD 85 million.

Revenues from advertising increased 191% to RMB 464 million or USD 67 million.

Revenue from e-commerce increased 92% to RMB 143 million or USD 21 million.

Cost of revenues for 2018 increased by 71% to RMB 3.3 billion or USD 476 million.

Gross profit increased 56% to RMB 855 million or USD 124 million.

Total operating expenses increased 105% from 2017 to RMB 1.6 billion or USD 230 million.

Net loss for 2018 was RMB 565 million or USD 82 million compared to RMB 184 million in 2017.

Adjusted net loss for 2018 was RMB 377 million or USD 55 million compared to RMB 101 million in 2017.

Basic and diluted net loss per share for 2018 were RMB 2.64 or USD 0.38 compared to RMB 8.17 in 2017.

Adjusted basic and diluted net loss per share were RMB 1.84 or USD 0.27 compared to RMB 6.99 in 2017.

As of December 31, 2018, we had cash, cash equivalents as well as time deposits of RMB 4.3 billion or USD 624 million compared with [RMB 764.8 million] (corrected by company after the call) as of December 31, 2017.

As we look ahead, our financial goals are to further grow our business and improve our operational efficiency.

With that in mind, we are currently projecting net revenues for the first quarter of 2019 to be between RMB 1.27 billion and RMB 1.29 billion.

Thank you for your attention.

We would like now to open the call to your questions.

Operator, please go ahead.

(Operator Instructions) And our first question comes from the line of Thomas Chong from Crédit Suisse.

(foreign language) I have 2 questions.

My first question is about e-commerce strategy, our cooperation with Taobao.

Can management talk about more details about how we should think about this business line in 2019?

And any financial implications to the top line and the bottom line?

And my second question is about our user growth.

Given our strong user growth this quarter, can management share our thoughts in 2019 and 2020?

(foreign language)

Thank you, Thomas, for your questions.

I will translate Mr. Chen's answer.

The cooperation with Taobao we announced in December last year, the cooperation mainly includes content-driven e-commerce business and commercialization of Bilibili IP assets.

(foreign language)

For example, to Bilibili content creators, we'll register and operate a number of accounts on Taobao and promote merchandise by producing content on creative and interactive format on both platforms in a way to increase their commercial values.

(foreign language)

As for the Bilibili's IP assets, we'll connect both the front and the back end of the database and to improve our commercialization of our IP assets.

(foreign language)

And Taobao will provide Bilibili with e-commerce technical support to ensure a smooth and more efficient user experience.

(foreign language)

Currently, our collaboration with Taobao with regarding the content creators are progressing very smoothly.

(foreign language)

We are actually in a process of introducing our first batch of content creators who have over 1 million followers to to be set up on Taobao.

(foreign language)

The collaboration between Bilibili and Taobao is more of a union of 2 ecosystems, the Bilibili's content ecosystem as well as Taobao's commercial system.

As the 2 ecosystems united, we see a lot of synergies and commercialization opportunities.

(foreign language)

In the future, there will be multiple ways for us to work together.

That includes advertising opportunity related to e-commerce and for our content creators to better monetize their traffic.

(foreign language)

(foreign language)

(foreign language)

So Thomas, with regarding the user expansion plan Mr. Chen has discussed in the past, in 2019, our user goal is to reach a peak MAU around 110 million to 120 million and to reach 140 million to 150 million in 2020.

Currently, we are well on track to deliver that goal.

And our next question comes from the line of Alex Yao from JPMorgan.

(foreign language) So my first question is to follow up Thomas' question on the partnership with Alibaba.

Given the Alibaba partnership, how should we think about your revenue mix change over the next 2 to 3 years?

Then the second question is on the user acquisition costs to achieve our target of 2019 MAU.

To be able to achieve that target, what's your user acquisition strategy?

And how should we think about your sales marketing budget over the coming quarters?

(foreign language)

In the past, we have made revenue structure forecasts.

From a 3-year horizon, we projected by then we will have about a 50-50 revenue split, 50% games and 50% nongames.

Based on our current business plans, this goal is still on track.

(foreign language)

Okay.

Mr. Chen added, as he mentioned earlier, that the collaboration with Taobao is beyond just on the revenue lines, is more of a union of 2 ecosystems.

This will, for one, definitely help on our commercial advertising business which will help us to grow faster and healthier.

More importantly, they will also help us to build a stronger ecosystem with our content creators to better connect the user, the content and the merchandise.

In a way, it'll fundamentally reinforce our powers to generate revenue more healthily.

(foreign language)

Okay.

So the core competency in our commercial ability, one is to grow in a healthy way.

Second is more sustainable way.

It probably won't immediately show on the P&L but will help us not only not hurting our user experience but finding and providing more right content and right consumption products to our users and to help us grow in the longer run.

(foreign language)

As for the sustainability, we think our revenue growth will be a very healthy longer-term sustainable growth.

(foreign language)

Okay.

(foreign language)

So the fourth quarter user growth as well as the full year user growth is in line with our initial projections.

(foreign language)

The key driving force of that user growth is mainly driven by our content, specifically in PUGV and our OGV content as well as the stickiness and engagement level of our community.

(foreign language)

At the same time, based on our experience and advantage of our content offering, we'll also actively try to attract users from outside of our community to come to Bilibili.

(foreign language)

In 2018, our user acquisition strategy has gained a very deep experience in terms of evaluating the quality of the new users in terms of level of engagement and level of retention.

(foreign language)

So based on our internal analysis, we see the new users who came in, in 2018, their conversion to registered users and their conversion to paying users, the level is much higher compared to the same period in 2017.

(foreign language)

That results are strong improvements of our 2018 user acquisition strategy.

Looking into 2019, we'll continue to focus on the quality of new users and focus on the key metrics such as their engagement level, their conversion to paying users and to improve our user acquisition policy.

(foreign language)

So all in all, in 2018, we'll considerably add some budget as in terms of absolute dollar amount in user acquisition.

Yes.

Let me add some input for that.

Actually, there were 3 cost components in our selling and marketing expenses.

They are the promotion expenses for our online games and the quota to acquire the new users, as well as the personnel costs related to our commercial sales team person.

So as we mentioned that there will be more games to be released in this year, and we will enlarge our investment in the user acquisition.

We forecast that, overall, the selling expenses will account for around 60% of the total revenues, but the percentage will be varied through the different quarters.

Like in Q1, Q3, there will be higher percentage.

In Q2 and Q4, they will be a little bit lower.

And our next question comes from the line of Alex Poon from Morgan Stanley.

(foreign language) I'll translate my questions.

My first question is regarding MAU growth.

Could you give us some more color on where these new users will come from, whether they are students or nonstudents or come from higher tier cities, lower tier cities, age demographics, whether they are game streaming users or they are -- they watch [to win] and they don't go to win anymore or they come from Taobao because of the new partnership?

My second question is regarding gross margin improvement.

In the next 2 years, assuming fourth quarter, assuming the revenue mix is already 50-50 between games and nongame, what the gross margin would be today?

And for most of the business segments, you have a quite high revenue share for games, advertising and live streaming.

And in the next 2, 3 years, what are the plans to increase the gross margin of each of these businesses?

(foreign language)

So the driving force of our user growth is through content.

We use content to attract users and use our community to retain users.

We do not solely rely on pure traffic acquisition.

(foreign language)

So we have been relying on this model for the past years, and we'll be relying on this model in the future.

That -- the key reason behind our user growth is we have a content-driven business model.

As we expand our content categories and improve our content qualities, we will be attracting more and more users who are interested in those categories.

And because our strong community features that our own users have much higher retention level compared to other platforms, that's why we are able to continue to grow in the future.

(foreign language)

So I think, for the young generations in China, their demand for content will only grow stronger, and their demand for the quality of content is another way of consumption upgrade.

(foreign language)

So that's why more and more young people will become our users.

(foreign language)

So based on the second half of 2018 new user profile analysis, we see both first and second tier city as well as third and fourth tier, fifth tier city.

They are both growing.

(foreign language)

The user who are coming from third tier and below are growing faster than the first and second tier city.

(foreign language)

We think this trend will continue in the next few years.

Okay, let me take the question about the gross profit margin.

Actually, if you look at the revenue sharing costs that we already disclosed, in Q4, that number is around 78% of the revenues.

So that means that we don't pay too much to those kind of users.

For the individual business segments like games, actually, for exclusive games, the gross profit margin is quite stable, like 55% for exclusive game license.

Therefore, the whole operation model, we don't share any profit to third parties.

So that means that the GP margin will be around 100%.

And for the live broadcasting, currently, the gross profit is not that high, but actually, if you count the -- our subscription membership revenues, the overall margin is still reasonable.

So we will not like to calculate gross profit margin in like just to look at 1 quarter or 2 quarter numbers.

We will keep investing our Comic business so that we will incur more content cost for our comic, and we will also invest in different areas like virtual idol, Luo Tianyi, that will help us to grow our community.

So in the short term, like 1 or 2 quarters, the gross profit margin may have some fluctuations.

You already saw that in Q3 and Q4.

Also, there might be some pressure in Q1.

But in the long run, I think the investment for today is to have their value to help us to achieve more stabilized sales mix.

At that time, we foresee that when normalized, our gross profit margin, where we have 50% revenue from games and 30% from advertising and 20% from VAS, that means the gross profit margin will be around 40%.

That's our projection.

And our last question comes from the line of Hillman Chan from Citi.

(foreign language) So my first question is about our content strategy.

As we are getting more and more diverse in terms of the content offering, could management share more on our focuses and plans for particular content [show] in 2019 to attract more new users?

And related to that, how should we think about the impact to Bilibili branding and the potential impact to the core ACG user loyalty?

And related to the content investment budget, could management share more on that for 2019?

How should we think about the time line of turning around the business?

And then my second question is on the game.

Could management share more on the pipeline, the time line as well as the game approval process update?

(foreign language)

I will divide our content on our platform into 2 brackets: one is the core ACG-related content, including anime, comics and games; and the second part is more general entertainment-related content.

That includes lifestyle and entertainment, pop culture, celebrity related.

(foreign language)

Okay, so first of all, in the core ACG content target users, they themselves are growing bigger and bigger.

That includes, for example, for the domestic animations, we have more and more viewers who are interested in domestic animations.

And more and more users are starting to accept and grow fond of VTubers.

And e-sports, nevertheless to say, it's becoming country-wide sensation.

(foreign language)

We have a core competency in terms of ACG content.

In the near future, we'll continue to invest and keep our leadership position in this content category.

(foreign language)

So as for the more general entertainment content, where we actually offer is a very wide array category of content, that can also be seen from the data we show to our investors, the number of video views.

In terms of video views, entertainment content ranked #1.

(foreign language)

For example, there are a lot of traditional Chinese type of music are getting more and more popularity.

A lot of digital product review sessions are now available and gaining popularity as well.

And we are also seeing vlog as an important content category that's attracting more and more users.

(foreign language)

So from all those content mentioned above, they have one thing in common.

That is all of those fans, they follow those content based on their own interests and habits.

And they love those high-quality content produced by our content creators.

They also have established strong emotional bond and connection with those content creators.

(foreign language)

So in terms of different content categories within our community, we have one practice, which is we put the content quality a top priority.

The original content creation a priority.

We also value the positive feedback our users have given to the content creators.

(foreign language)

That's why since the community culture is one thing in common amongst those different content categories, that our users will proud themselves for being a Bilibili user.

Our Bilibili content creators will also be proud of themselves for being a content creator on Bilibili.

(foreign language)

We'll -- From a product design perspective, the whole Bilibili ecosystem is a decentralized system.

Each user will see a different Bilibili.

They only see the contents that they are interested in.

(foreign language)

Also, thanks to the big data-driven, AI-powered efficiency improvement, even though we have more and more user coming on our platform, more and more content submissions, our users can always find their favorite content.

(foreign language)

We are also improving our product experience by adding new functionalities that allow the content creators and the fans and like-minded friends to connect better.

For example, the Bilibili Moments function, essentially, it's Weibo and Instagram like products where people can post and share their day-to-day life through pictures and texts and a short-video form, long-video form content.

(foreign language)

So our data suggests over 1/3 of our MAUs will visit the Bilibili Moments function.

(foreign language)

And in 2018, every registered user, on average, follow 20 content creators.

This number is up 35% year-on-year.

This is another evidence showing that the connection within our community is becoming deeper and deeper.

(foreign language)

(foreign language)

As for the game approval process, we are delighted to see that the process was resumed in December 2018 and we, Bilibili, also are in the first batch of the approval list.

(foreign language)

In the fourth quarter, we launched exclusively licensed game, Song of The Time, that is based on Bilibili IP that has been well received.

(foreign language)

As for our pipeline, we have over 30 games, 30 exclusively licensed games in our pipeline.

(foreign language)

We have 30 games in our pipeline which are exclusively licensed, and 1 game already obtained approval and is scheduled to release in the second quarter and 2 licensed jointly operated games also obtained approval and will be scheduled to release in the second quarter.

(foreign language)

And as we discussed in the past, we have a number of games in our pipeline that have been ranked on top of the charts in Japanese iOS App Stores, and we are actively preparing for the game licenses.

(foreign language)

In addition to exclusively licensed games, on the jointly operated games, we also have hundreds of games in our pipeline.

(foreign language)

In terms of the license games that have already obtained game approval and are scheduled to release in the second quarter, one of the games is called RWBY that we will co-publish with Shanda Games, and another game is called Arknights, a very highly anticipated ACG RPG.

(foreign language)

Our collaboration with Tencent in terms of jointly operating more Tencent games will also help us to diversify our game offerings.

(foreign language)

So based on what Mr. Chen has mentioned earlier, because we have a very tight community and a very high engaged users, we'll continue to invest in our content.

(foreign language)

Based on our experience accumulated in 2018, we will invest more in the self-produced content categories.

(foreign language)

We'll focus on several verticals that have a lot of attractions from our users, for example, animation and documentaries.

(foreign language)

This will not only help us to attract and retain users.

This will also help us to promote our premium membership program.

(foreign language)

More importantly, the value of those IPs from those self-produced shows.

(foreign language)

This will give us profound values of the whole Bilibili ecosystem.

Yes.

And the percentage of the total amortized content cost with our total revenue, the percentage will be around 15% in this year, do not include our investment in Comic business.

That does not include the comic content costs.

And that concludes the question-and-answer session.

I would like to turn the conference back over to the management for any additional or closing comments.

Thank you, once again, for joining us today.

If you have any further questions, please contact myself, Juliet Yang, Bilibili's Senior IR Director, or TPG Investor Relations.

Our content information for IR in both China and the U.S. can be found in today's press release.

Have a great day.

And that does conclude the conference for today.

Thank you for participating.

You may all disconnect.