Bilibili Inc (BILI) 2021 Q3 法說會逐字稿

Good day, and welcome to the Bilibili 2021 Third Quarter 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 Hong Kong Stock Exchange.

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

Definition of these measures and our reconciliation tables 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 Lee, 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.

Thank you, Juliet.

Thank you, everyone, for participating in our 2021 third quarter results conference call.

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

Our strong third quarter results once again demonstrated our ability to execute and deliver our growth strategy.

In our peak summer season, we added over 30 million MAUs to our Bilibili community, bringing our total MAUs to 267 million, up 35% year-over-year.

Mobile MAUs also rose to 250 million, and the DAUs came in at 72 million, representing growth of 36% and 35%, respectively, both on a year-over-year basis.

This solid growth makes us more confident than ever that we can reach our MAU growth target by 2023.

Importantly, our community is becoming more engaged and even sticker.

Expanded video content across formats and some scenarios drove an increase in users' daily time spent on Bilibili, which reached 88 minutes in Q3, the highest we have ever seen in our operating history.

This is particularly impressive, and it really shows the quality of our old and new users given how fast we have grown.

Other key operating metrics also grew substantially.

Daily video views were up 77% to 2.3 billion.

Monthly interactions were up 86% to 10 billion, and the monthly video submissions were up 80% to 10 million.

Each of these metrics represents all-time high and it reflects the health of our community as well as the strength of engine that powers our growth.

Our effort to grow our user base while maintaining a strong and a tight-knit community also had a very positive impact on our commercialization progress.

Total revenues in Q3 reached 5.2 billion, up 61% year-over-year, beating the high end of our previous guidance.

By matching the right content to our growing number of Bilibili users, more traffic was converted to paying users.

MPUs reached 24 million in the third quarter, up 59% year-on-year, and our paying ratio grew to 8.9%.

Another factor driving our top line is our increasing appeal to business partners.

This is particularly true for advertisers who are eager to gain visibility with the growing number of Gen Z+ users on our platform.

To reach an even broader number of users, last year, we redefined our brand proposition with the phrase All the Videos You Like.

Today, more users recognize and view Bilibili as the go-to destination for high-quality video content.

In a recent BrandZ Report, Bilibili was ranked as the #2 most-valuable brand name in China in terms of growth rate.

With the increasing recognition from advertisers across different industry verticals, our ad revenue grew by 110% year-on-year in the third quarter, even with macroeconomic challenges.

Looking ahead, videolization trends continue to surge, rapidly emerging as the preferred and the new norm.

As a premier video platform with broad content and community appeal, we expect to see continued benefit from the increasing videolization movement.

Carrying out our solid strategy to expand our content, community and commercialization, we believe we are on the right path to becoming a valuable new gateway to the Internet.

We have also strengthened our commitment to social responsibility.

Using our public influence, we are further developing an inclusive community, promoting positive content and enacting better ESG practice.

With that overview, I would now like to walk you through some details of our third quarter operations.

I will begin with the first part of our 3C model, our content.

The key to our user growth lies with our broad, unmatched PUGVs.

At the center of our video ecosystem, PUGVs continued to flourish, accounting for 93% of our video views in the third quarter.

We have carefully created an extensive platform for high-quality content creators to be recognized, appreciated and valued.

We continue to improve our tool kits and services to lower barriers of creation, including our evolving video editing app, Bijian, as well as various creator support programs.

In the third quarter, monthly video submission hit a milestone of 10 million, up 80% year-over-year.

The number of monthly active content creators also accelerated to 2.7 million, up 61% year-on-year.

With our continuous efforts to improve our traffic distribution mechanism, content creators can flourish and attract fans more easily.

In the third quarter, content creators with more than 10,000 followers grew by 42% year-over-year.

We continue to optimize and create new venues for them to realize their commercial value.

These include our advertising matching platform, Sparkle, and the live broadcasting platform, bringing more commercialization opportunities to content creators at all levels.

Our ongoing cash incentive program is also motivating an increasing number of mid-layer creators, encouraging their continuous content creation.

By the end of the third quarter, 481,000 creators had benefited from this plan.

Bilibili is a home to thousands of interest-based content categories, and we are excited by our road map to keep building great new content experience for users.

In the third quarter, the top 5 popular PUGV categories of lifestyle, games, entertainment, ACG and knowledge continued to flourish.

As we welcome more users across various demographics as emerging verticals such as fitness, food and travel are also gaining increasing interest.

In addition to expanding content categories, we are also expanding our content formats to meet users' different needs.

For example, Story-Mode, our short-form video content in our mobile app, offers quick on-the-go entertainment, which is designed to suit user fragmented and time.

Conversely, our Bilibili app on smart TV is a perfect solution for users seeking a high-quality, high-resolution, immersive video experience on a larger screen.

We are encouraged by the strong momentum in user growth and engagement and believe there is still a lot of room to grow ahead.

For our OGV department, our OGV content reinforces our leading PUGV verticals and introduces new ones to broaden our reach and our community horizons.

Leveraging both our platform and production capabilities, our OGVs are helping drive created-in-China content.

For example, Chinese anime can breathe new life into classic tales, helping Chinese culture resonate with young generations.

In the second half of this year, we released multiple Bilibili-produced anime titles, including the second season of mega-hit Carp Reborn, Yuan Long and Hundred Monsters, Bai Yao Pu, as well as The Daily Life of the Immortal King, Xian Wang de Richang Shenghuo, all of which were immediately revered by anime lovers.

Similarly, our documentaries and the variety shows are echoing within areas of young Chinese interest.

These have achieved great success in promoting the Bilibili brand and building influence within these content verticals.

Our self-produced matchmaking hit, 90 Hun Jie Suo, is a good example that deeply resonated with our Gen Z+ users and has given legs to discussions beyond the Bilibili community, trending on social media platforms for weeks.

We also released a music variety show, The Next Banger, Wo De Yin Yue Ni Ting Ma, in Q3.

This show supplements our newer music content creations and appeals to music lovers in our community.

In addition, we launched a series of self-produced, widely welcomed food-themed documentary with more to come, including the upcoming third season of The Story of Chuaner, Ren Sheng Yi Chuan 3, which reflects the growing interest in Chinese cuisine as well as the lifestyle categories.

Turning to our community.

Our [thriving] (corrected by company after the call) community shows the quality of our user growth.

In the third quarter, daily video views increased by 77% year-over-year to 2.3 billion, and the monthly interactions were up 86%, reaching over 10 billion.

Both metrics grew much faster than expected, and our users showed increasing engagement across our community.

These interactions are the essential elements that make Bilibili experience so unique.

At the same time, we are excited to see more casual users converting to official members by taking our unique community entrance exam.

By the end of the third quarter, we grew the number of official members by 38% year-on-year to 133.6 million.

For this core user cohort, the 12-month retention rate remained above 80% in the third quarter, once again showing the strength of our community.

Now let's look at our commercialization progress.

Our diverse revenue streams have become more and more balanced.

While revenue from each of our segments grew in the third quarter, our advertising [services] (corrected by company after the call) have become our largest growth engine, followed by our VAS and e-commerce offering.

Let's look at this in more detail.

Within our commercialization segments, starting with our games.

We see games as an advanced format of entertainment and the representation of cultural soft power.

Believing the positive power of good games, our goal is to bring users more high-quality game growth domestically and internationally with a heightened focus on internal development.

Leveraging our deep understanding of user preference and our rich game operating experience, we are devoted to building our development capabilities for the new generation of players.

At the same time, we are adamant for promoting exciting Chinese culture to large gaming world.

Looking specifically at our third quarter game performance, revenues from our mobile games increased by 9% year-over-year to RMB 1.4 billion.

We added 3 new titles domestically to a roster of exclusively licensed games or have been well received by their followers.

We also celebrated the five-year anniversary of our legacy title, FGO, in September.

Additionally, we successfully jointly published more premium games, including Tencent's League of Legends and the NetEase Harry Potter, continuing to expand game offerings in diverse genres.

As for our domestic game pipeline, 9 games have acquired approval and are ready for domestic release in the coming quarters.

In the meantime, we are rolling out more Chinese game masterpieces to global game market.

Following our success of RE:Final Gear, Zhong Zhuang Zhan Ji, we continued to build our distribution capabilities with the successfully launch Figure Story, Gao Neng Shou Ban Tuan, in South Korea in September.

The game became an instant hit, and we plan to replicate this success with more games overseas by leveraging our deep understanding of ACG lovers' tastes, our game selection know-how and our strong distribution power.

We are committed to operating responsibly to promote healthy game behaviors and protect teenagers from gaming addiction.

As early as 2019, we launched anti-addiction measures for teen players and have continued to strengthen control mechanism.

By the end of August, all Bilibili-operated games fully complied with the latest regulations on restricting minors' game play time in China.

We would also like to note that revenues from players under 18 accounted for less than 1% of game revenues in September of 2021.

Turning to our VAS business.

Our VAS business is the perfect illustration of our business-to-consumer, B2C, model.

It represents our users' trust in our brand and willingness to pay for Bilibili content and services.

In the third quarter, our VAS business continued to be our largest earner, reaching RMB 1.9 billion, up 95% year-over-year.

Unlike any other live broadcasting platform, Bilibili live broadcasting has been uniquely integrated in our content ecosystem from day 1. As a natural extension of video content, it amplifies our leading content verticals as well as the influence of our content creators.

We continued to enrich our live broadcasting content during the period, providing more tools to facilitate our virtual hosts' growth.

We are excited to see the increasing influence of various game live content for our community, including League of Legends, Honor of Kings and Genshin Impact.

For example, we saw record-breaking level of popularity for this year's League of Legends World Championship S11 on Bilibili.

On the final game night, the peak concurrent viewers increased by over [160%] (corrected by company after the call) compared with S10.

And we achieved the highest DAUs ever in our operating history.

We are also diversifying within more entertainment-related offerings, especially for virtual uploader or V-up- related content.

In Q3, we had triple digital year-over-year growth in both number of active V-ups and number of viewers in this category.

We will continue to add and expand and strengthen our position as the world's leading virtual live broadcasting community.

Thanks to our growing roster of high-quality OGV and the users' tendency to pay for content, our premium members grew to 18.2 million by the end of third quarter, an increase of 42% year-over-year.

For ACG lovers, our comics and audio drama content continued to attract more paying users, again, showing the high willingness of our users to pay for content they want and the vast potential that offers as we add exciting new content.

As for our advertising services, advertising represents our business-to-business B2B model and is also thriving.

Despite macroeconomic fact, our advertising revenue continued to be robust in the third quarter, reaching total advertising revenues of RMB 1.2 billion, an increase of 110% year-over-year.

Our enhanced brand influence and our growing number of quality user functions as the building blocks of sustainable growth.

As our integrated marketing campaign covers more industry customers, the creativity and the commercial value of our content creators is gaining wider recognition.

More native ad videos went viral in Q3, making Bilibili the most sought-after platform in China for advertisers.

We continue to promote our integrated marketing campaign and introduce more ad products to our inventory, helping our content creators monetize their talent.

During the third quarter, our top 5 advertising verticals were mobile games, skin care and cosmetics, e-commerce, digital products and the food and beverage.

As we move forward, we will continue to advance our growth strategy and create value for our stakeholders.

At the same time, we are committed to shouldering our social responsibility to make the world a better place, including supporting rural education, disaster relief, reducing our carbon footprint and furthering green initiatives.

Moreover, as a proud Chinese corporate citizen with increasing reach, we dream that one day, using art forms such as games, anime and PUGVs, we will be able to spread Chinese culture across the world.

This concludes Mr. Chen's remarks.

I will now provide a brief overview of our financial results for the third quarter of 2021 and the outlook for the fourth quarter.

Total net revenues for the third quarter were RMB 5.2 billion, up 61% from the same period of 2020.

We continue to see a more balanced revenue mix driven by our diversified commercialization channels.

Our total net revenue breakdown by revenue stream was approximately 27% mobile games, 37% VAS, 23% advertising and 13% e-commerce and other business.

Cost of revenues increased by 70% year-over-year to RMB 4.2 billion.

Revenue-sharing cost, a key component of cost of revenues, were RMB 2.2 billion, representing 83% increase from the same period in 2020.

Gross profit increased by 34% year-over-year to RMB 1 billion, and our gross margin was 19.6% in the third quarter.

Total operating expenses was RMB 2.9 billion, up 57% from the same period in 2020.

Selling and marketing expenses was RMB 1.6 billion, representing a 37% increase year-over-year.

The increase was primarily attributable to increased channel and marketing expenses to promote our app and brand as well as promotional expenses for our mobile games and an increase in our headcount in sales and marketing personnel.

Q3 is our peak season in brand marketing and user acquisition efforts.

We strategically allocated more resources and are pleased with the strong momentum showing in both user base growth, as well as the quality of our users in terms of engagement levels.

G&A expenses was RMB 474.9 million, representing an 87% increase year-over-year.

The increase was primarily due to increased headcount in general and administrative personnel, increased share-based compensation expenses and higher rental expenses.

R&D expenses were RMB 788.3 million, representing a 97% increase year-over-year.

The increase was primarily due to increased headcount in research and development personnel and increased share-based compensation expenses.

Net loss was RMB 2.69 billion for the third quarter of 2021 compared with RMB 1.1 billion in the same period of 2020.

Adjusted net loss, which is a non-GAAP measure that excludes share-based compensation expenses, amortization expense related to intangible assets acquired through business acquisition, income tax related to intangible assets acquired through business acquisitions and the loss on fair value change in publicly traded companies, was RMB 1.62 billion compared with RMB 0.97 billion in the same period of 2020.

Basic and diluted net loss per share were each RMB 6.90.

Adjusted basic and diluted net loss per share were each RMB 4.16.

As of September 30, 2021, we had cash and cash equivalents, time deposits as well as short-term investments of RMB 24.4 billion compared with RMB 12.8 billion as of December 31, 2020.

Our sufficient cash reserves gives us great confidence in our ability to execute our growth strategy, which we believe will yield considerable returns in the long run.

With that in mind, we are currently projecting net revenues for the fourth quarter of 2021 to be between RMB 5.7 billion and RMB 5.8 billion.

Thank you for your attention.

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

Operator, please go ahead.

(Operator Instructions) Our first question comes from the line of Alex Poon from Morgan Stanley.

(foreign language) My first question is regarding user growth.

The user growth in Q3 has exceeded previous guidance of 260 million.

And also the record -- the time spent has reached a record high of 88 minutes per user per day.

So I wonder, management can explain, what have we done in Q3 to achieve these results?

And in Q4 and next year, what are our expectations?

(foreign language)

[Interpreted] So for all these years, the principle for Bilibili to grow our user has remained the same, which is driven by very healthy content ecosystem.

And those content ecosystem will continuously produce high-quality content to attract users.

(foreign language)

[Interpreted] So every year, we'll have evolved, emphasized area.

For example, last year, it was all about expansion in content categories.

And for this year, beside expansion of content categories, we also hope to achieve expansion of consumption scenarios.

Building a multi-scenario, multi-content category video community is our goal.

(foreign language)

[Interpreted] So I have always thought that video's main battlefield is beyond just mobile phones.

Although nowadays, mobile phone is the main consumption scenario.

However, I think as the technology evolves in such as the 5G adoption and the overall hardware's evolvement, in the future, more and more screen will carry the purpose of running a video, for example, on a larger screen.

(foreign language)

[Interpreted] So right now, our OTT smart TV's MAUs have surpassed our MAUs on the PC side, becoming our #2 user component.

And I still think there's plenty of room for us to further expand in those areas.

(foreign language)

[Interpreted] So not only that we have more users on the smart TV side, actually, the time spent on the smart TV is also much longer than the rest of the terminals.

(foreign language)

[Interpreted] Bilibili probably has the most number of video status in 4K.

And that is also the reason why Bilibili's content is most suitable for those larger screens.

(foreign language)

[Interpreted] Another example would be our Story Mode.

Within the Story Mode, our content creator can upload video stats in the horizontal mode, which was also well loved by our users.

And within the scenario, our users can enjoy those quick on-the-go entertainment content.

(foreign language)

[Interpreted] Here, I wanted to point now that in the third quarter, we not only have a fast-growing number of user base, the quality of those users are also very, very good.

For example, the time spent, 88 minutes, is the highest we've seen in our operational history.

And also, the user engagement number also experienced a very fast growth.

All of those indicate that we have grown with quality.

That's very important.

(foreign language)

[Interpreted] Our monthly user interactions -- average monthly user interaction in Q3 has reached a 10 billion milestone.

(foreign language)

[Interpreted] And also on the paying conversion in Q3, our paying users reached 24 million, and our paying ratio continues to rise, reaching 8.9% in the third quarter.

(foreign language)

[Interpreted] Back in 2017, I predicted that Bilibili's paying ratio could reach double digits, and I still believe that.

Even though our users growing extremely fast, the quality of the user is also extremely high.

Those users love our content and are very willing to pay for this content.

We believe at the end of the day, our -- the revenue generated from our users will be faster than the increase of our users number.

(foreign language)

[Interpreted] So as for Q4's outlook, similar with our traditional seasonality, we expect Q4's users base to be stable or a slight increase.

As for our user target for 2022, we raised our 3-year MAU target of 400 million users by 2023.

And for next year, we will continue to execute on that strategy and to step-by-step achieving that target.

And we are still very, very confident to be able to achieve that user goal by 2023.

(foreign language)

[Interpreted] One thing I would like to add is about our smart TV users.

And originally, we thought this TV user versus our app user would have relatively higher overlap.

As a matter of fact, the overlap is only about 20%.

And a lot of the smart TV users are users coming from third-, fourth- and fifth-tier cities.

So these differences give us great confidence in terms of further penetrating our target cohort.

And we believe with Bilibili's fast content library and evolving scenario, we should be able to achieve our user target.

Our next question comes from Daniel Chen from JPMorgan.

(foreign language) I will translate myself.

My question is related to advertising.

So we have seen such a strong growth in the third quarter, a triple-digit year-over-year growth.

So what's our expectation into the fourth quarter of this year and also 2020?

And also, are we seeing the impact from like a weak macro environment and also like data security policies?

Are we seeing those implications to our advertising revenue?

(foreign language)

[Interpreted] In Q3, our ad revenue reached CNY 1.17 billion, up over 110% year-on-year.

This is the 10th effective quarter of beating expectation level of growth.

(foreign language)

[Interpreted] So we have repeatedly discussed the theory of Bilibili's ad business logic and our efforts in building our infrastructures as well as strategies in the past few quarters, which I would not go in further details at this time.

However, I will share some of the data and new changes we're seeing so far in the fourth quarter and also in the third quarter.

(foreign language)

[Interpreted] First of all, we see continuous improvement in our ad efficiency, thanks to our deep learning models' evolvement as well as the further adoption of more innovative ad scenarios, the click-through rate of our feed ads improved by 30%.

And we expect this will further drive our fourth quarter and next year ad revenue growth.

(foreign language)

[Interpreted] Second is we further integrated multiple ad scenarios, as Rui mentioned, from our mobile app on our mobile phones to iPads, smart TV and PC.

We continue to add new ad inventory, including ad products like in-line stories and moments.

And as our users continue to expand, our ads can follow.

(foreign language)

[Interpreted] The third point is on the Sparkle ad platform, we have over [15,000] (corrected by company after the call) content creators joined.

This is up 25% year-on-year.

We also have repetitive ad customers, over 75%.

And Bilibili's content creators produce more and more highly creative, native ad content and is becoming the new beacon in China ad market.

And we'll continue to build on that success and further to integrate our one-stop solution of native ads, brand ads, feed-outs, including our project takeoff, which all have been widely acknowledged in the ad industry.

(foreign language)

[Interpreted] And the fourth point is during this year's Singles' Day, our daily ad GMV was over RMB 25 million, ranking #5 in terms of ad budget market share, and the overall conversion ROI ranked #1 in the space.

This further proves the high quality of our users and their potential consumption power.

We expect next year in the overall consuming advertising -- consumers at the industry will continue to raise our performances and achieve greater success.

(foreign language)

[Interpreted] And the fifth and the sixth point is, first of all, on our ad clients, besides our traditional strong vertical like game, food and beverage, 3C, skin care and cosmetics, we see emerging verticals such as automotive, handbag and apparel are also growing rapidly.

Last but not least is on our -- we see new format of video-based ads as also driving the improvement of our ad efficiency and forming one-stop ad solution on Bilibili.

Our Q3 number shows that our video-based ad is 2x more efficient than the traditional picture and text-based ads.

And we expect the eCPM will have the potential to further grow by 100%.

(foreign language)

[Interpreted] So lastly, on the -- whether there's going to be impact of the recent data security regulations, we don't think there will be any visible impact to our ad business.

And we still have confidence to deliver healthy and fast growth in our ad segment in Q4 and in next year.

The next question comes from the line of Brian Gong from Citi.

(foreign language) I will translate myself.

Our ecosystem, our gaming, video, live streaming and, actually, we already have a virtual community, it seems to be among those key platforms in China that could explore metaverse opportunity.

So my question is that how does management maybe positioning in these themes?

And how will Bili to seize this opportunity?

(foreign language)

[Interpreted] As I mentioned in our investor conference earlier this year, metaverse is a concept.

It's not a product.

And before this concept emerged, actually, many of the elements associated with metaverse already existed.

Whether it's virtual reality, a tight social community or a system, social system or a self-reinforcing ecosystem, it's already existed.

And there are a lot of company is already developing product on those concepts, for example, Facebook and Tencent, and actually Bilibili is one of them.

(foreign language)

[Interpreted] So that's why I think that if someone hears the concept of metaverse and decided to get into this business probably would be a little bit too late.

That is because those elements such as social system, self-reinforcing ecosystem, all of which cannot be done in a couple of months or even in years.

(foreign language)

[Interpreted] And I believe there are some very, very important elements within the metaverse concept, which is the self-reinforcing content ecosystem.

When we talk about metaverse, we think this is not something can be done by a singular company.

You need to have massive content production capability to produce another world.

So that's why we believe it requires someone deeply connected into this system.

And through creating content, they will have achieved benefit, hence, bonding tighter, even tighter within the system itself.

(foreign language)

[Interpreted] And Bilibili has a very large base of content creator or creating content in Bilibili system, and they are benefiting from this creation process that makes Bilibili the ideal platform to further explore in this metaverse concept.

Actually, this is something Bilibili has always been practicing and believed in.

And we have many examples linked to this concept, for example, virtual uploader.

Our content creator can leverage technology like motion capture, virtual reality, augmented reality, turning themselves into another character in another world and creating content such as singing and dancing, talking jokes, all of that, attracting users and make user fall in love with them.

And itself, it is a perfect example of implementing the creation system into this metaverse concept.

(foreign language)

[Interpreted] When we're talking about metaverse, an independent separate universe that's attracting hundreds of millions of users who are getting attached to this, it requires way more than what we have now, those content creators to continuously create content and keep them attracted.

And that's the exact reason why we believe the metaverse requires a self-reinforcing, deep content creation ecosystem.

(foreign language)

[Interpreted] And Bilibili has some very outstanding and healthy content creation ecosystem.

And surrounded that ecosystem, we have already attracted a tight community of over 267 million MAUs.

And within that 267 million MAUs, a vast majority are the most creative, most energetic young Chinese.

So that's why I do think Bilibili is probably one of the best companies to practice or to get into the metaverse business.

(foreign language)

[Interpreted] However, I do think metaverse is a concept in a long-time horizon and it's also a future objective.

We've must heard a lot of discussion about metaverse, but I think it's mostly on a capital level or on a media level.

I really heard anything on the product level because it does require breakthrough in product and technologies.

So that's why I do think this is still far ahead, but it's the future.

(foreign language)

[Interpreted] I do believe this is a very, very beautiful vision in the future.

It brings elevated user experience.

The themes that we've seen in the movie Ready Player One or in the anime Sword Art Online, this metaverse concept does bring a very beautiful experience to users.

(foreign language)

[Interpreted] I read a recent report, a media report criticizing metaverse using examples like the movie Ready Player One, however, I disagree.

I believe technology is tool.

It's the person that matters to make this tool to be beneficial to the society or make bad influence on the society.

And metaverse represents a new choice, not a replacement of the existing reality.

It's always good to have an additional choice such as the invention of television and the invention of mobile phones.

It provides alternative for you to choose, not to replace the old thing.

And I recently visited the Shanghai [planetarium] (corrected by company after the call).

And actually, a lot of the things that in the museum can be achieved in a much greater effect in virtual reality or in the metaverse.

Let us imagine all those things that you're seeing in [planetarium] (corrected by company after the call) and in the museum can be spread in the Internet, allowing all the children, all the kids in China to physically see, get a touch of how the sun is looking like, how this saturn is looking like.

So I believe it will bring great benefit to the society.

It really depends on the people itself.

The next question comes from the line of Lei Zhang from Bank of America Merrill Lynch.

(foreign language) My question is mainly regarding livestreaming business.

I notice that we have a good performance in S11 recently.

So looking forward, how should we look at your livestreaming business, especially in content and the monetization strategy?

(foreign language)

[Interpreted] Indeed, for this year's S11, on the final game night, we have record high peak concurrent users.

And our platform's DAU also reached record high in our operating history.

I discussed this with our internal team, and we are predicting that the Bilibili's S11 final game night is probably -- has probably the highest peak concurrent users in China's live broadcasting history -- Internet live broadcasting history.

(foreign language)

[Interpreted] And at the same time, I want to emphasize that the S11 is not a one-way content output.

Actually, during the S11, we have massive live broadcasting host is doing S game-related live broadcasting.

We also have tons of content creator creating derivative content associated with S11.

For those videos alone, we have total video play over 2.8 billion times.

And all these data points support the argument that Bilibili's Live Broadcasting is a natural extension of our video community, and it is forming a self-reinforcing ecosystem or a positive feedback loop within our community.

(foreign language)

[Interpreted] And years ago, investor would ask me why Bilibili would do live broadcasting.

My answer was live broadcasting is not a content vertical, rather a capability.

And for Bilibili, it's an important component of our content ecosystem.

With or without S11, our live broadcasting has already deeply embedded into our video community.

For example, we see tons of knowledge, lifestyle and entertainment-related live broadcasting provided by our content creators, and we believe this has really integrated in our community.

And live broadcasting on Bilibili is spreading its wings and making multiple times of influence and impact to our content community.

(foreign language)

[Interpreted] Again that I think Bilibili's Live Broadcasting is actually breaking a lot of people's stereotypes about live broadcasting.

Well, in the past, when people start thinking about live broadcasting, it is showroom or e-sports.

However, for Bilibili's Live Broadcasting, our content category covers a wide array of verticals.

Basically, what content verticals we have on the video platform, we have it on live broadcasting.

And most importantly, we are forcing layers of positive feedback loop in terms of content verticals and as well as our content creators.

For example, our content creator in games, they can also do games-related live broadcasting.

And we are also helping our content creator to expand their content creation category.

For example, there's content -- there's a food content creator who's also very good at playing games.

He's actually ranking the top live broadcasting host in the Genshin Impact content creator.

And most importantly, I do believe that live broadcasting is a very healthy mechanism to help our content creator to make money.

For example, to charge people from watching videos, it's probably not the best monetization method.

But if you involve a content creator so much, you would be very willing to watching his live broadcasting, buying his recommended product or just simply tip him to showcase your appreciation.

And that's also the exact reason that we believe that live broadcasting is a very important component within Bilibili's community.

And this chemistry that is playing in the community is creating a very benefit -- is a very large benefit to all the participants.

(foreign language)

[Interpreted] And as we look ahead, we'll continue to implement our content ecosystem-driven business model.

We'll continue to integrate live broadcasting with our video business.

We'll continue to penetrate the 2 user groups: content creator and live broadcasting host.

And also, we do believe that all the video user could potentially become live broadcasting users.

Secondly is that will really to discover and develop Bilibili's unique live broadcasting categories.

I think one of the reasons that our video platform is so successful is that we have our own unique content category, such as auto to remix and knowledge sector.

Those content verticals has Bilibili's unique taste to it.

And so is what we plan for our live broadcasting business, we want to develop all unique content categories that has Bilibili flavor to it.

And that concludes the question-and-answer session.

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

Thank you once again for joining us today.

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

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

Have a great day.

Bye-bye.