Bilibili Inc (BILI) 2024 Q2 法說會逐字稿

Good day, and welcome to Bilibili second quarter 2024 financial results and business update conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Juliet Yang, 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 filings with the SEC and the Hong Kong Stock Exchange.

The non-GAAP financial measure we provide are for comparison purpose only.

The definition of these measures and a 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. 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.

I will now turn the call over to Mr. Fan, who will read the prepared remarks on behalf of Mr. Chen.

Thank you, Juliet, and thank you, everyone, for participating in our second quarter 2024 conference call to discuss our financial and operating results.

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

We delivered solid second quarter results with accelerated topline growth, improved margins and healthy community development.

In the second quarter, our total revenues increased by 16% year-over-year to RMB6.13 billion.

Our advertising business led this growth, with ad revenue growing by 30% year-over-year.

Revenues from our games and value-added services also increased by 13% and 11% year-over-year, respectively.

The momentum across our business lines is a strong testament to our execution in increasing our commercialization efficiency and unlocking the value of our community.

Increased revenues from our higher-margin advertising and games business boosted our gross profit by 49% year-over-year.

Gross profit margin rose to 29.9% in the second quarter, up from 23.1% in the same period last year, marking the eighth consecutive quarter of margin improvement.

Consequently, we significantly narrowed our adjusted operating loss and adjusted net loss by 69% and 72%, respectively, year over year.

Moreover, we generated a record RMB1.75 billion in operating cash flow in the second quarter.

Our deferred revenue balance at the end of Q2 also increased by RMB738 million from the end of Q1.

With this progress, we are confident that we can achieve our non-GAAP breakeven target in the third quarter of this year and continue to improve our profitability thereafter.

While we have been accelerating our financial performance, our community continued to strive.

In the second quarter, our DAUs increased by 6% year over year, reaching 102 million, and MAUs grew to 336 million.

Our community remains highly engaged, with users spending a daily average of 99 minutes on our platform.

As we move into the summer season, we continue to see strong seasonality in terms of user engagement and the retention.

On June 26, we celebrated Bilibili's 15th Anniversary.

Over the past 15 years, our platform has become a regular destination for nearly 70% of China’s Gen Z plus population.

This journey has brought us tremendous opportunities as these users have become a major consumer force in society.

We have seen it in our advertising growth as we enhance our infrastructure to facilitate their evolving consumption needs.

We have seen it in our game business as we reinvent strategy game to resonate more deeply with the preference of younger audiences.

As we continue to unlock the value of our community, we remain committed to our founding vision: to build a welcoming home for talented creators and like-minded individuals to connect over shared interests and to satisfy their evolving needs for good content and service.

With that overview, I would like to discuss our core pillars of content, community and commercialization in more detail.

Beginning with content and community.

Our strategy to encourage more high-quality creators to generate content continues to prove beneficial.

In the second quarter, average daily video views increased by 18% year over year to over 4.8 billion.

Our leading content categories, such as games, knowledge and technology, continued to show solid growth in video views, all increasing by over 20% year over year.

Meanwhile, users’ demand in consumption-related categories also continued to surge in the second quarter.

Video views in home appliance and decoration, automotive and fashion and cosmetics all grew by more than 30% compared with the same period a year ago.

We continue to provide effective and diversified monetization channels to incentivize our content creators.

In the first half of 2024, about 2.1 million content creators received income on Bilibili.

Content creators' total income through our ads and VAS products increased by 30% year over year.

Notably, our innovative content-based products, such as premium courses and the fan charging programs, are being well received by our users.

In the first half of 2024, content creators’ total income from these two products increased by over 40% and over 430%, respectively, year over year.

Looking at our community metrics in the second quarter, our DAUs spend an average of 99 minutes with us, compared with 94 million in the same period last year, driving up users’ total time spent by 11% year-over-year.

Monthly interactions increased by 11% year over year, exceeding 16.5 billion in the second quarter.

By the end of Q2, the number of our official members increased by 13% year over year to 243 million, and their 12-month retention rate remained strong at around 80%.

Moreover, this July, we held our signature offline events, Bilibili World and Bilibili Micro Link once again bringing our community together in Shanghai.

More than 250,000 people traveled across the country to participant in event, leading to a surge in Shanghai’s travel-related consumption.

The growing enthusiasm at these events showed our unparalleled influence among the young generation.

Now, I'd like to talk about our commercialization progress in each of our business lines.

First on our advertising business.

As our users mature with more disposable income, their commercial value unfolds as they seek more consumption-related content on Bilibili.

The demand is there and all we need to do is to match the right ads with the right user.

In the second quarter, we further improved our ad products and infrastructure to increase our ad efficiency.

Specifically, we upgraded our ad placement system, featuring user-friendly placement tools and enhanced conversion capabilities, attracting and retaining more advertisers on Bilibili.

In the first half of the year, the number of advertisers on our platform increased by over 50% year over year.

Moreover, we continued to invest and improve our ad modeling capabilities to better understand our users' consumption behaviors and preferences, which enabled us to further enhance our ad matching efficiency.

Meanwhile, we incorporated more native video-style ad content, allowing us to expand ad load while maintaining user experience.

We plan to further advance these initiatives in the following quarters and help our advertisers create ad materials more easily and place advertisements more automatically.

Industry-wise, our top five advertising verticals were mobile games, e-commerce, digital products and home appliance. food and beverage, and automotive in the second quarter.

Our anchor verticals continued to deliver strong performance.

During the 618 shopping festival, we not only secured more ad budgets from e-commerce platforms, but also directly from online merchants in different verticals.

Total GMV from video and live commerce increased by over 140% year over year during the period.

Besides our leading verticals, we also saw incremental ad revenue from emerging verticals.

In the second quarter, ad revenues from internet services, AI and education all increased meaningfully.

Turning to our game business.

Game revenues resumed growth by 13% year over year in the second quarter to RMB1.01 billion, led by the excellent performance of our recently launched strategy game, San Guo: Mou Ding Tian Xia (San Mou) and ACG game, Articrafter.

Our legacy titles also contributed steady game revenues and demonstrated remarkable longevity.

As FGO celebrated its eighth anniversary, it returned to the top 10 on the iOS game grossing chart in July.

As for Azur Lane, monthly active users reached a new peak in June with the celebration of its 7-year anniversary.

These trends strengthened our commitment to the long-term operation of high-quality games.

We were delighted to see our first strategy game, San Mou, become an immediately blockbuster.

On the first day of its launch, it ranked in the Top 3 on the iOS game-grossing chart, attracting millions of gamers to the three kingdoms’ battlefields.

San Mou also set a new record in our operating history, being the fastest title that hits RMB1 billion game grossing mark.

With the launch of the second game season on August 3, San Mou returned to the Top 3 on the iOS game grossing chart.

The decent size of the SLG market, the early success of San Mou and the long-life cycle nature of SLG games give us confidence that it will become one of our flagship games within enduring longevity.

Over the years, our community has expanded exponentially and so has our gamer base.

San Mou's success marks a breakthrough in our general diversification strategy and shows the vast potential of our game business.

We will continue leveraging our leading role as a top gaming community and capitalization our significant opportunities to reinvent games for the new generation of gamers.

Turning to our VAS business.

Revenues from VAS business increased by 11% year over year to RMB2.57 billion.

We continued to add more live broadcasting content offerings, reinforcing the synergies between our live broadcasting and PUGV ecosystem to better cater to users’ diverse interests.

We will also further explore opportunities in our other VAS business as our Gen Z plus users have demonstrated and increasing willingness to directly pay for the content they love.

Our premium members continued to increase, reaching 22.3 million by the end of second quarter, with over 80% of them subscribing annually or under auto-renewal packages, showing their continued loyalty and trust in our platform.

Users spending our other VAS products also grew rapidly in the second quarter, particularly in premium courses, our fan charging program and avatar decoration.

We expect these products to open more monetization potential across our massive PUGV content universe in the future.

We believe good content and community can bring people together, and the value of our users is just starting to show its potential.

Our community is striving, and our solid second quarter results place us just one step away from profitability.

We are excited to move forward and take Bilibili to the next level.

This concludes Mr. Chen's remarks.

I will now provide a brief overview of our financial results for the second quarter of 2024.

For a closer look at our financial results, we encourage you to refer our press release issued earlier today.

As a reminder, all amounts are in RMB unless otherwise noted.

In the second quarter, we further advanced our commercialization capabilities, delivering accelerated year-over-year revenue growth across our core business.

At the same time, we continued to expand our margins and considerably narrowed our losses.

All of these financial improvements were founded on our topline growth with increased efficiency.

Total revenues for the second quarter were RMB6.13 billion, up 16% year over year.

Our total revenue breakdown by revenue stream for Q2 was approximately 42% VAS, 33% advertising, 17% mobile games and 8% of our IP derivatives and other business.

Our cost of revenues increased by 5% year over year to RMB4.3 billion in the second quarter, while our gross profit rose 49% year over year to RMB1.8 billion.

Our gross profit margin reached 29.9% in Q2, up from 23.1% in the same period last year.

Our total operating expenses were down 3% year over year to RMB2.4 billion in the second quarter.

Sales and marketing expenses increased by 13% year over year to RMB1 billion, mainly due to increased marketing expenses for the new game launch.

G&A expenses were RMB488 million, down 10% year over year.

R&D expenses was RMB895 million, down 15% year over year, both related to reduced headcount expenses.

We narrowed our adjusted operating loss and adjusted net loss to RMB284 million and RMB271 million in the second quarter, reducing our losses by 69% and 72% year over year, respectively.

Our adjusted net loss ratio in the second quarter come down to 4% from 18% in the same period a year ago.

Cash flow-wise, we generated a record RMB1.75 billion in positive operating cash flow in the second quarter, and a total of RMB2.4 billion in positive operating cash flow in the first half of the year.

As I mentioned earlier, driven by the strong performances from our games and ad business, our deferred revenue balance at the end of Q2 also increased by RMB738 million from the end of Q1, paving a solid path to achieve our non-GAAP breakeven target next quarter, and a sustainable profitability thereafter.

As of June 30, 2024, we had cash and cash equivalents, term deposits and short-term investments of RMB13.9 billion or USD1.9 billion.

Thank you for your attention.

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

Operator, please go ahead.

(Operator Instructions) Daniel Chen, JPMorgan.

(spoken in foreign language) So my question is on the advertising.

We see that the advertising growth in the second quarter was very robust, growing about 30% year-over-year, which is very strong.

So could you maybe share the key driver behind?

And also, how should we expect the advertising growth for the second half?

(spoken in foreign language)

(interpreted) In a challenging macro environment, Bilibili's second quarter advertising business achieved a 30% year-on-year growth with quarterly revenue exceeded RMB2 billion for the very first time and contributing about one-third of the company's total revenue.

As you can see that our advertising revenue has grown for several consecutive quarters and the fundamental reason behind that is one that Bilibili's traffic is growing very healthily and secondly is that we are continuously unlocking the commercial value of our users.

Bilibili's DAU grew by 6% year-over-year in the second quarter, while our video views increased by 18% year-over-year, showing continued growth in our commercial traffic.

Over 70% of China's young generations are using Bilibili, and the average age of our user has reached 25.

This is a stage where their consumption needs and spending power are rapidly growing and being released.

This is evident from the booming growth in our consumption-related content categories.

In Q2, video views in the categories such as home decor and real estate, automotive, fashion and beauty all increased by over 30% year-over-year, while daily video views in baby & maternity experienced a year-over-year growth of over 80%.

On top of that fundamental reason, what we need to do is to match the demand between advertiser and users with better infrastructure in the industry-based marketing solutions.

And the one horizontal refers to the enhancement of platform infrastructure and the multiple verticals refers to the vertical industry-based ad solutions.

In the first half of this year, we implemented comprehensive upgrades to several of our advertising infrastructure modules.

For example, we upgraded the placement platform on our PC and provide a one-stop placement tools for KA accounts.

And as such, in the first half of this year, the number of performance-based KA advertisers increased by 50% year-over-year.

In terms of ad materials, our newly launched creative center and active application of AIGC technologies helps our advertisers to diagnose and improve their ad materials.

After optimization, the CVR achieved over 30% year-over-year improvement.

Now let's take a look at our industry verticals in Q2, our top five advertisers came from mobile games, e-commerce, digital products & home appliances, food & beverage and automotive sectors,

[of which e-commerce and digital products & home appliances were two of the biggest drivers of ad growth in the second quarter] (added by company after the call).

I'll take a closer look at the e-commerce and transaction-based sectors.

With our consistent open loop strategy during this year's June 18th shopping festival, we have deepened the integrated marketing and advertising collaborations with e-commerce platforms as well as secured a larger share of e-commerce merchants budget.

During the June 18th period, the number of advertisers on Bilibili increased by over 300% year-over-year and our GMV from live and video commerce increased by over 140% year-over-year. 50% of the customers that we brought to the merchants in different verticals were new customers and specifically for baby & maternity sector, we bought over 70% of the new users to them.

On our transaction-based advertising, in the second quarter, that nearly 40 million users have watched our live and video e-commerce-related content, and this number increased by 70% year-over-year.

In Q2, the average daily content creator engaged in live and video e-commerce increased by over 130% year-over-year.

And the number of commerce-related videos grew by over 330% year-over-year.

And the number of live e-commerce sessions rose by 270% year-over-year.

The consumption potential of Bilibili's female users, which constitutes near half of our community, is also gradually unlocked.

GMVs in apparels increased over 4 times year-over-year in the second quarter.

We've talked about the second quarter and its driver behind -- and if we take a look into the second half of this year, we're quite confident in maintaining an above-industry average advertising growth rate.

On one hand, the outcome of product infrastructure optimization is being proved, and will continue to show its effect.

And on other hand, by enhancing our vertical industry solutions, we not only expand our market share in key industries, but we are also looking to achieve incremental growth in emerging industry verticals such as online services, education, healthcare and baby and maternity.

Lastly, I wanted to emphasize that because we have our unique community aspect, Bilibili's revenue growth was never just been relied on advertisement growth.

We can pursue B2B and B2C parallel strategy in our commercialization efforts, meaning that we can not only earn money from advertisers, we can also earn money directly from our consumers.

Because we are a community, our users are more inclined to spend on content or spend on content creators that they love to show their support and appreciation.

To sum up, we will be pursuing a B2B and B2C parallel strategy on the one hand.

We'll continue to reinforce our advertising platforms to drive the advertising growth.

At the same time, we still believe there is great potential in our B2C business, meaning on mobile games, premium membership, live broadcasting, combining together will support our sustainable revenue growth.

Operator, next question please.

Felix Liu, UBS.

(spoken in foreign language) Let me translate myself.

Congratulations on the strong quarter and your successful launch of San Guo: Mou Ding Tian Xia.

Could management share more drivers for the game's successful launch?

And what are your expectations of the game's lifetime cycle?

And looking ahead, what are the future genres that you plan to further expand or invest in the future?

(spoken in foreign language)

(interpreted) The San Mou game indeed is a blockbuster in the first half of this year.

We not only attracted millions of new players.

We've also accumulated a very good user feedback and also have large influence among the game industry.

The game San Mou broke several records in our game operation history.

Shortly after its launch, it quickly ranked among the Top 3 on the iOS game top grossing chart and maintained in Top 10 for the entire month afterwards.

And San Mou also become the fastest game in Bilibili's operation history to reach RMB1 billion in revenue.

Since last year, we've been emphasizing the importance of operating one game in an extended time - for a longer period of time.

And for San Mou, especially the SLG genre, is a perfect game genre for long-term operations.

And starting from August 3rd, we launched the game's second season.

As of now, the performance of Season 2 with vast gamers sustained enthusiast and good retention rate, and this has given us a very strong confidence to make this as an evergreen title.

Many people have asked me why San Mou would work, how we picked this game?

I think this is a result of our continuous effort in the strategy of making new games, reinventing games to catering to the younger generation.

We actually saw this game back in 2022.

And we also invested in the development team in 2022.

The success of the game is not by accident, it's under long period of time of thinking and strategy and decision-making.

Starting from 2019, our MAU grew by over 200%.

And as we expand, our gamer circle also continue to expand.

They included more than ACG gamers.

They are gamers.

They love multiple different categories.

Five years ago, when we only have 100 million MAUs, the most condensed gamer profile would be ACG lovers.

But as we evolve into a bigger community with 340 million MAUs, what we cover of our gamer community goes way beyond just ACG.

They love SLG and many other gaming categories.

There are a large number of potential SLG players within the community who are generally interested in content categories such as history, militaries, social & science and art & knowledge.

Those demographics fits perfectly with the SLG potential audiences.

SLG is a very large market.

Based on our observation of the existing products in the market, we estimate that there were tens of millions of users who have tried SLG games.

And for this group of people, they are mostly dwell or active on Bilibili.

As we discover those factors, we have established this project.

We named this project code name as NSLG, meaning new SLGs.

We've discovered that in the current market, there are many players pain points haven't been addressed.

At the same time, the current SLG game offerings in the market does not fully satisfy the young generation's needs in SLG.

So we believe as we're making more innovations and addressing their pain points, addressing their evolving needs, we could be successful.

And the success launch of this game has proven that our strategy has been right.

This success behind San Mou we will credit to the overall trend of the immense opportunity that lays behind reinventing games to catering the young generation’s needs.

This not only adjusts to the SLG categories.

It could apply to multiple categories, and we will continue to explore in that direction.

As for the estimation on its life cycle, we believe that SLG by its nature has longer life cycles.

We've noticed that there are SLG games in the market has been operating for eight years and five years.

We have set the internal target of making San Mou at least a more-than-five-years game.

And it all boils down to whether the company is focused on making a game into a longer life cycle, longer operation.

We have to focus on the longevity of the games.

The industry has evolved rapidly.

This is no longer a time where everybody can make fast money.

We are committed to be the top game who respect our users the most, who listen to our users the most, and we hope to make this game an evergreen title.

Okay.

Thank you.

Next question please.

Thomas Chong, Jefferies.

(spoken in foreign language) My question is related to the trend in our content offerings.

As average age for Bilibili ecosystem already reached 25 years old, can management share about the development of our content strategies and our content categories outlook as well as the consumption trend going forward?

(spoken in foreign language)

(interpreted) Last quarter, I've mentioned that the average age of Bilibili users have reached 25 years old.

And that brought a lot of change in terms of the width and depth of our content offerings.

As the users’ needs evolve, we've noticed that in our community there emerged many new content categories.

And for Bilibili, we are not only a hub for young people's interest and hobbies, but also a commonplace for their lifestyle consumption.

This is evident in the evolve of our content consumption data.

As young generation enter new stages of life, content category related to their consumptions are growing rapidly on Bilibili.

For example, in the second quarter, video views in the categories such as home decor and real estate, automotive, fashion beauty increased by 39%, 43% and 30% year-over-year, respectively.

As I mentioned in the advertising question, the daily video views for baby and maternity category experienced a year-over-year increase of 80%.

And this is a natural outcome for our users' average age to evolve into 25.

The average age of 25 meaning about half of our users are above 25.

And those generations or those demographics naturally have wider interest and consumption needs, and they seek out on Bilibili.

And because Bilibili has authentic and professional videos, and most of our videos are in the mid to longer form, it makes Bilibili the go-to destination for young generation before they make big purchases.

And the reason behind people looking to Bilibili for larger ticket items is because, first of all, the user has to trust the platform, trust the content creator in their view and professional judgment.

And secondly is that you can hardly make the decision to purchase a vehicle over 15 seconds of videos.

Speaking of automotive content, in the first half of this year, on average, every month, there are 73 millions of users are looking into automotive-related content.

We can say that Bilibili has the best quality new car reviews among all platforms.

I personally look at new car reviews.

They're extremely professional and well made.

And we think video as content format is perfect for this type of reviews and walkthroughs.

We've talked about the emerging content categories.

Now let's take a look at our traditional leading content categories and young generation's interest.

In the second quarter, video views in the games, knowledge and tech categories, all saw over 20% year-over-year growth. which are 21%, 29%, 29% year-over-year growth rate, respectively.

This means we have established a very strong mindset among young generations where they seek out interest-based content.

And speaking of games, two days ago, on the day of Black Myth: Wukong was released, there are tens of thousands of users are live streaming their game experience on Bilibili.

This is quite spectacular across the game history.

And on that day, we saw over 2 million peak concurrent user watching the Black Myth: Wukong related content.

This number shows that we have continuously led the interest-based content verticals.

We've always said that the evidence to show a community's competitiveness is the ability to continuously produce good and new content.

And we think we have already proved that over the past 15 years.

Bilibili has the ability and the power to continuously expand its content offerings horizon and content categories.

Thank you.

Operator, next question please.

Xueqing Zhang, CICC.

(spoken in foreign language) My question regards financial outlook.

The company delivered continued margin expansion and robust cash flow this quarter.

And could management share with us the outlook for the financials in the second half of 2024?

Looking at the third quarter, will we breakeven or make profit?

And what is the mid- to long-term profitability outlook?

This is Sam.

Let me take your question.

Our financial performance in the second quarter demonstrated our business model has great potential for increasing the gross profit margin.

In Q2, our overall revenue grew by 16%, while gross profit increased significantly by 49% year-over-year.

The gross profit margin increased nearly 7 percent points year-over-year from 23% to nearly 30% in the eight consecutive quarter of margin improvement.

This was primarily due to our ability to control costs, while achieving rapid revenue growth.

With the continued growth of our high-margin advertising and game business, there is still substantial room for further improvement for our gross margin.

Additionally, it is worth noting that our operating cash flow for the first half of the year was RMB2.4 billion, and our free cash flow reached RMB1.5 billion.

This indicates that our business has entered into a positive cycle.

Looking ahead to our financial performance in Q3, we see that the deferred revenue balance increased by over [RMB738 million] (corrected by company after the call) quarter-over-quarter, laying a good foundation for the third quarter revenue growth.

We expect the revenue from our games and advertising business to maintain strong growth momentum, along with a significant quarter-over-quarter growth in gross margin.

At the same time, in addition to achieving our initial goal of breakeven in Q3, we now aim to achieve meaningful operating profit on a non-GAAP basis.

Meanwhile, we are delighted to see solid growth across our core business lines.

Our growth momentum, along with the prudent cost and expense management will lead us to continue expanding our revenue scale and the profitability in 2025 and resulting in an ongoing improvement in our operating margins.

Yiwen Zhang, China Renaissance.

(spoken in foreign language) My question is regarding AI application.

Can management discuss about how can we apply AI in our multiple user scenario on Bilibili and its future potential?

Thank you.

(spoken in foreign language)

(interpreted) It is known that Bilibili has the most extensive and highest-quality AI content across the Internet.

I think the reason behind that is most of our user received higher education background and they are based in the first and second-tier city, who are curious.

And based on our internal data that for the first half of this year, a monthly average of over 80 million users are watching AI-related content on Bilibili.

And for those AI-related content, not just one word or 15-second headlines, many of those content has extensive professional content in-depth discussion in AI.

That results in three the most AI platform for Bilibili.

First most is that we believe we have the most user who are genuinely interested in AI content.

And second most is we have the most AI professionals active on Bilibili.

Lastly, is over 90% of the domestic AI companies have set up accounts and get in touch with Bilibili users on Bilibili.

Because the high concentration and condensity of AI content and users gives us a natural advantage in exploring AI application and as a platform, generally, we see many of the users initiate their attempt in connecting AI with their content creation.

Back in 2023, there was a user who used the AI tools to mimic a famous singer’s voice, singing song in her original voice.

And that actually triggered the original singer to come out and say that she supports this type of creation and welcome user to use it.

And for this year, we've noticed many AI-powered music creation, AI-powered animation, AI short-plays were being released on Bilibili.

Our operations team has even made an AI short play competition and attracting a lot of users to participate.

And in terms of our own content creation tools, we have leveraged and implement AI and our AI creation tools.

We believe essentially the application will help to improve the content creation efficiencies for our existing content creators and also allowing regular users to leverage this tool to become a content creator themselves.

And this is very beneficial from a content supply perspective.

And we also use AI directly to enhance our user experiences.

As of now, we have opened the AI Assistant and AI Search to all of our users because we have a large amount of knowledge-based, review-based content.

You can ask our AI Assistant or AI Search to summarize the keywords and key messages of videos, and this is very helpful and efficient for a user who wants to get a quick summary of our content.

And there are two more examples of our AI tools.

One is AI translations.

Our AI translation tools can help to translate many different languages such as the content creator from Tibet.

They spoke in their local language and our AI Assistant can help him to translate into Mandarin.

And we also have a tool called AI Assistant.

While playing a video if you don't have time to watch the whole thing, you call upon the AI Assistant, the AI Assistant will summarize into a short articles to tell you what this video is about and outline the key points of that video, all of which we believe will effectively help our users to improve their user experience.

We always believe that AI should be a technology that benefits everyone, including users and platforms.

And I believe that development of AI requires a joint efforts of multiple numerous companies to reach its full potential rather than a company doing the research in AI within itself in a closed loop.

So as a platform, we always take a very proactive and open attitude.

We are already working with several leading domestic AI company on various fronts.

And we believe that with our joint efforts, we can bring user better experience.

And for those partners, they can also unleash their full potential and value with Bilibili and our users.

And as many of you might notice that our AI generated video capabilities is through our partnership with a leading AI company and we expect to continue this collaboration with various partners.

And through this partnership, we aim to bring better and more efficient and more creative experience to our users.

Thank you.

That concludes today's answering session.

Thank you.

Thank you once again for joining Bilibili second quarter 2024 financial results and business update conference call today.

If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director or Piacente 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.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call.

The interpreter was provided by the company sponsoring this event.