Q3 2024 Bilibili Inc Earnings Call

Thomson Reuters StreetEvents11-15

Participants Juliet Yang; Executive Director, IR; Bilibili Inc Rui Chen; Chairman of the Board, Chief Executive Officer; Bilibili Inc Xin Fan; Chief Financial Officer; Bilibili Inc Ni Li; Vice ...

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Thank you, Juliet, and thank you, everyone, for participating in our third-quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks. The third quarter of 2024 was a landmark quarter for Bilibili. We are excited to share that we achieved our first quarterly adjusted net profit while setting new records across our community metrics. These milestones are a strong testament to our ability to deliver profitable growth and the unique community value that we continue to unlock. Looking at our financials in more detail, total revenues in the third quarter accelerated, rising by 26% year over year, reaching RMB7.3 billion, driven by our successful diversification into the strategy game genre. Games revenue led our growth, surging by 84% year over year. Meanwhile, our advertising business maintained its strong performance in the third quarter, recording a 28%","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"BILI":"哔哩哔哩"},"translate_title":"2024年第三季度哔哩哔哩公司收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BILI":1},"content_text":"Participants\nJuliet Yang; Executive Director, IR; Bilibili Inc\nRui Chen; Chairman of the Board, Chief Executive Officer; Bilibili Inc\nXin Fan; Chief Financial Officer; Bilibili Inc\nNi Li; Vice Chairwoman of the Board, Chief Operating Officer; Bilibili Inc\nLei Zhang; Analyst; BofA Global Research (Hong Kong)\nDaniel Chen; Analyst; JPMorgan\nYang Liu; Analyst; Morgan Stanley Asia Ltd.\nFelix Liu; Analyst; UBS\nLincoln Kong; Analyst; Goldman Sachs (Asia) L.L.C.\nPresentation\nOperator\n Good day, and welcome to the Bilibili third-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.\nJuliet Yang\n 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 measures we'll 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's 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 to Mr. Chen.\nRui Chen\n Thank you, Juliet, and thank you, everyone, for participating in our third-quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks. The third quarter of 2024 was a landmark quarter for Bilibili. We are excited to share that we achieved our first quarterly adjusted net profit while setting new records across our community metrics. These milestones are a strong testament to our ability to deliver profitable growth and the unique community value that we continue to unlock. Looking at our financials in more detail, total revenues in the third quarter accelerated, rising by 26% year over year, reaching RMB7.3 billion, driven by our successful diversification into the strategy game genre. Games revenue led our growth, surging by 84% year over year. Meanwhile, our advertising business maintained its strong performance in the third quarter, recording a 28% year-over-year increase. The increasing top-line contribution from our high-margin games and advertising business propelled our gross profit, up by 76% year over year, driving our gross profit margin jump to 34.9% from 25.0% in the same period last year. As a result, we successfully exceeded our commitment to reaching breakeven in the third quarter, achieving an adjusted operating profit of RMB272 million and an adjusted net profit of RMB236 million. While making remarkable financial progress, we continue to grow and cultivate our community. Both DAUs and MAUs reached record highs in the third quarter, hitting 107 million and 348 million, respectively. Meanwhile, the average daily time spent per user rose to a new high of 106 minutes, with robust user retention and engagement. Our users have stayed with us and grown with the platform. The average age of Bilibili users is now 25. As these users enter new life stages with increasing spending power, we will continue to curate more diverse content and services that cater to their evolving needs. Moving ahead, we remain committed to building a welcoming and inspiring video community with all the videos you like. Our return to profitability marks a new starting point in our journey. We will continue to invest in key infrastructure that supports content creation and distribution, reinforcing our leading position in the high-quality video content space and creating value for all our stakeholders. With that overview, let's look at our core content, community, and commercialization pillars in more detail, beginning with content and community. In the third quarter, our average daily video views exceeded 5.7 billion, up 23% year over year. The growth reflects the effectiveness of our strategy to broaden content categories and encourage high-quality content creation. While our leading categories maintained their popularity, consumption-related categories continued rising. This is being driven by increasing user demand as the young generation becomes the mainstream of consumer society. Video views in fashion and home appliances and decoration grew by over 25% year over year, while views in automotive, baby and maternity, sports and fitness categories surged by more than 40% compared with the same period last year. The diverse commercialization channels we offer continue to empower our content creators to realize their commercial value while pursuing what they love. For the first nine months of 2024, nearly 2.7 million content creators received income through various channels on our platform. Content creators' total income through our various advertising and VAS products grew by 24% during this period. Notably, content creators' total income through our fan charging product saw an over 400% increase year over year in the same period. Turning to our community metrics, in the third quarter, our DAU spent nearly 106 minutes on our platform every day, compared with 100 minutes in the same period last year. Our monthly interactions surpassed 19.3 billion, marking a 14% year-over-year increase. By the end of Q3, our official members grew to 251 million, with our 12-month retention rate remaining around 80%. Additionally, our sponsored esports team, Bilibili Game, BLG, fought their way to second place in the League of Legends S14 World Championship, marking a new record in the team's history. We are proud of their achievement and look forward to their continued success in the upcoming year. Events like these continue to support our leadership in the game community and make Bilibili the top choice for young generations. Last but not least, we are excited to share that our MSCI ESG rating was upgraded to an A this year, a testament to our steady ESG improvements over the past few years. This achievement underscores our dedication to advancing our ESG practices, where we use our influence to impact communities and society positively. Now, I'd like to talk about the progress of our commercialization in each of our business lines. First, on our games business, in the third quarter, our games revenues increased by 84% year over year to RMB1.8 billion, driven by the outstanding performance of our strategy game, San Guo: Mou Ding Tian Xia, San Mou. The game's initial performance reinforces our confidence in the longevity of San Mou. We will continue to roll out new content updates and gameplay to deliver better gaming experiences to users. San Mou's success shows the vast potential that lies within our game community. We plan to leverage our unique game industry advantage to further explore other game opportunities in different genres. Meanwhile, we remain committed to bringing the best ACG titles to our users. Our legacy titles, FGO and Azur Lane, maintained their popularity as they celebrated their eighth- and seventh-year anniversaries, respectively. In addition, we launched the Japanese RPG game, Jujutsu Kaisen: Phantom Parade/Zhou Shu Hui Zhan: Huanying Youxing, in overseas markets in November which was well received. Turning to our advertising business, our advertising business continued to outperform the industry in the third quarter. Advertising revenues increased by 28% year over year to RMB2.1 billion. Robust revenue growth in our performance-based ads was the largest contributor, increasing nearly 50% year over year in the third quarter. We also achieved decent year-on-year growth in brand and native ad revenues, reinforcing our strength in integrated marketing capabilities. Our top five advertising industry verticals in the third quarter were games, e-commerce, digital products and home appliances, internet services, and automotive. As more and more e-commerce platforms recognize the commercial value of our unique young user base, they allocated larger advertising budgets to our platform. We saw a particular uptick over the summer vacation and back-to-school season, resulting in an 80% year-over-year surge in e-commerce advertising revenues. Meanwhile, we are also attracting more advertisers from emerging verticals. In the third quarter, ad revenues from education, baby and maternity, and travel and lodging all grew by over 100% year over year. In addition, we continue to enhance our ad infrastructure to improve efficiency, and we have seen early benefits from these efforts. For example, as we roll out a more user-friendly and effective ad placement system, the number of performance-based advertisers increased by over 40% year over year in the third quarter. We plan to further incorporate AI technologies into our smart ad delivery system and launch a series of tools for ad material creation with higher efficiency and lower costs. These initiatives are expected to attract and retain more advertisers on our platform. Turning to our VAS business, revenues from our VAS business increased by 9% year over year to RMB2.8 billion in the third quarter. This quarter, we welcomed the more users to join and enjoy our live broadcasting universe as we continued expanding our content offerings to meet their diverse interests. Simultaneously, we remain focused on refining our operations to ensure sustainable business growth while improving margins. Our premium membership program grew steadily year over year, reaching nearly 22 million members in the third quarter. Over 80% of these members are on annual subscription or auto renewal packages. Additionally, other VAS products experienced rapid growth. Fan charging revenues surged by over 500% year over year during the quarter, demonstrating our users' strong willingness to pay for good content. As we celebrate our first quarter of profitability, I want to thank our dedicated team, our loyal user community, and our supportive partners and shareholders. Looking back over the past 15 years, we've made significant breakthroughs in our content offerings, expanded our user base, and developed diverse commercialization products. These efforts have helped build a unique video community with a one-of-a-kind user experience in a competitive industry landscape. Turning profitable is just a new beginning. Building on this milestone, we will continue to reinforce our business' positive growth cycle to drive sustainable profits in the future. With that, I will turn the call over to Sam to share more financial details.\nXin Fan\n Thank you, Mr. Chen. Hello, everyone. This is Sam. I will now provide a brief overview of our financial results for third quarter of 2024. For a closer look at our financial results, we encourage you to refer to our press release issued earlier today. As a reminder, all amounts are in RMB, unless otherwise noted. In the third quarter, we greatly improved our financial profile. We accelerated our year-over-year revenue growth across our core businesses, continued expanding our margins, and turned profitable on a non-GAAP basis. Total revenues for the third quarter were RMB7.3 billion, up 26% year over year. Our total revenue breakdown by revenue stream for Q3 was approximately 38% VAS, 29% advertising, 25% mobile games, and 8% from our IP directives and other businesses. Our cost of revenues increased by 9% year over year to RMB4.8 billion in the third quarter, while gross profit rose 76% year over year to RMB2.5 billion. Our gross profit margin reached 34.9% in Q3, up from 25% in the same period last year. The significant improvement in our gross profit and gross profit margin this quarter indicates the elasticity and potential of our business model. Our total operating expenses were up 2% year over year to RMB2.6 billion in the third quarter. Sales and marketing expenses increased by 21% year over year to RMB1.2 billion, mainly due to increased marketing expenses for our exclusively licensed games. G&A expenses were RMB505 million, which was relatively flat year over year. R&D expenses were RMB906 million, down 15% year over year due to a higher base of termination expenses for certain game projects in Q3 last year. Our adjusted operating profit and adjusted net profit turned positive at RMB272 million and RMB236 million, respectively, marking significant gains from year-over-year losses. Our adjusted net profit ratio in the third quarter was 3%, compared with an adjusted net loss ratio of 15% in the same period a year ago. Cash flow-wise, we generated RMB2.2 billion in positive operating cash flow in the third quarter and RMB4.6 billion positive operating cash flow in the first nine months of the year. As of September 30, 2024, we had cash and cash equivalents, time deposits, and short-term investments of RMB15.2 billion, or USD2.2 billion. With a healthy cash balance, we announced a share repurchase program of up to USD200 million for our securities for the next 24 months, showcasing our commitment to enhance shareholder returns in the long term. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.\nQuestion and Answer Session\nOperator\n (Operator instructions) Lei Zhang, Bank of America Securities.\nLei Zhang\n (spoken in foreign language) Thanks, management, for taking my question, and congrats on the strong results. Since [Rui Chen] speaks English on the call for the first time, it's very well and pretty impressive. My question is really high-level, and I want to know management's strategic view on Bili after achieving breakeven this quarter. What is our key focus in user and commercialization going forward? And how to strengthen our position in the video industry? Thank you.\nRui Chen\n (interpreted) So actually, the English prepared remarks that was spoken by me was not really spoken by me. It's generated by AI. It's our self-developed proprietary index TPS model that only used 15 seconds of my speech during one of the events and generated that English prepared remark. I was quite surprised when I first hear it. It just sounded like me. And that shows the vast potential of the AI application could do for Bilibili, such as helping our content creators to make those narratives or engage better in real-time with their users. We are quite looking forward to further leverage that to our applications. Indeed, this marks our very first quarter of adjusted profitability. And just now, I was receiving a lot of congratulations from friends and investors. But as a matter of fact, we do believe this is a natural outcome of the involvement of our business model and expansion of the industry. And we just made it happen faster. So before I get into futures, I would like to look back a little bit on where we stand right now and the logic that's driving our profitability. First of all, industry that we are in, the video industry is a very large market, and China itself is the largest and a low market. And video is a large business. And within that industry, Bilibili has built a very unique one-of-a-kind PUGV community in China video market known for the high-quality video content, and we have secured that user mindset. So when we are thinking about what is the highest -- where to find highest quality of content or to find talented content creators, what's the go-to destination for mid to longer length of videos, Bilibili is always the number one brand name that pops up. And you can barely find -- think of number two in this market. And because video is such a large market, and video will serve as the main media platform for this outlet, the brand awareness, the user mindset is as precious as gold. So as the adoption of 4G, 5G network, our market has evolved from lack of supply of video content to enough supply of video content. And from users' perspective, they have evolved from wanting to look at any video to wanting to look at high-quality video, unique video. So in some extent, we are experiencing an upgrade in content consumption in terms of video market. And riding on that trend, Bilibili has a unique advantage because we have that user mindset and brand awareness about those high-quality, unique content. As we know that Bilibili has the highest condensity of Gen Z plus cohort, the 90s to 2000 generation, and because we have very high sticky user cohort and user retention rate over the past 15 years, our user has stayed and grown with us. And the average age of Bilibili now has come to 25 years. So 25 also means their commercial value is increasing every day. That's why we see this as an inevitable trend that our commercialization will accelerate, and it's a natural outcome of reaching profitability. And going forward, we think there's vast potential for our commercialization to be unleashed. And in the future -- in the past, we have stated our focus will be focusing on community growth and commercial growth. After reaching the profitability, our focus will remain unchanged. On commercialization, I'll share one thing that it will remain even more focused on the core business, such as games and advertising. Because for those two business segments, they have higher market TAM, and by its nature, it has higher gross margin. And that will result in more efficiency in terms of our commercialization growth. And the success of our commercialization will also support the prosperity of our content ecosystem, and we have been pursuing that formation of the positive flywheel effect between content ecosystem and our commercialization growth. As a matter of fact, in the first nine months of this year, leveraging our various commercial outlet, 2.7 million content creator has received income on Bilibili platform, and those commercialization, in one way, is helping our content creator to realize their commercial value and, hence, motivate their further and more content creation. And one thing I wanted to emphasize is that for Bilibili's commercialization outlets, it's more than just advertising because we are a comprehensive platform, and we provide more tools beyond advertising to help them realize their commercial value, establishing connection between their followers. For example, on top of the native ad Sparkle advertising platform, we have our fan charging program. We also have a crafts studio to encourage content creators to monetize their scale, such as handcrafts and drawing and also premium courses to help them make money in various ways. The profitability in Q3 is just a beginning, and we look forward to form a positive flywheel effect formed by our content ecosystem and commercialization growth. And the growth of our commercialization will, in fact, help Bilibili to become an even healthier organization and achieve sustainable, profitable growth.\nJuliet Yang\n Next question, please, operator.\nOperator\n Daniel Chen, JPMorgan.\nDaniel Chen\n (spoken in foreign language) So my question is on advertising, which is very strong. We have grown 28% year over year in the third quarter. So what's the key driver behind the third-quarter advertising growth? And also for the fourth quarter, do we see there is a change in the kind of macro environment for the advertising demand? And also lastly, how is our performance in the 11.11 festival for our e-commerce-related business? Thank you.\nNi Li\n (interpreted) Bilibili's Q3 advertising revenue indeed was a good performance. It reached close to RMB2.1 billion and maintained a strong growth rate of 28%. And behind that, performance-based ads grew nearly 50%, and this is helping us driving our gross margin on a group level. In Q3, we continued our [Yiheng N-Zone] strategy. To be more specific on Yiheng, that was more referring to the platform infrastructure construction. On the first point, we released more ad inventory while emphasizing on maintaining a good user experience. By maintaining a multi-screen, multi-scenario strategy, commercial inventory grew rapidly on our home page feed and story mode and also generated increased ad revenue across recommendations, search, PC, and even tablet platform in recent one to two quarters. Looking forward, there's more potential for additional revenue from live streaming video within video players and also hot topic search. And on top of that, through a blend of organic and commercial traffic and native ad integration, more high-quality ads received more distribution, effectively expanding our ad inventory. At the same time, we have achieved -- content is good commercial and good commercial is a good content effect. The second point is that we further optimized our ad placement system. In the third quarter, the number of clients and mobile smart app placement increased by 700% year on year. We will continue to improve our products and tools to make ad placement easier. Another example would be with the integration of Sparkle and our ad system. The proportion of Sparkle ads that engaged in ad promotion reached nearly 60% in Q3, further demonstrating the effectiveness of our Sparkle Plus [Qifei], aka ads promotion services model. The third point would be the launch of Creative Center and AIGC, also (inaudible) generated content, has also improved our ad efficiency. We plan to roll out additional AIGC tools to help advertisers automatically create or modify ad materials, further lowering their cost and barriers. And in Q4, we'll continue to enhancing our ad placement experience, improving algorithm efficiency, and we want it to attract more new advertisers to Bilibili to create content to connect with our users. And the N-Zone refers to the industry vertical ad solutions and the top five ad verticals in Q3 coming from, number one, games; number two, e-commerce; digital products; and online services; number five, automotive. In these leading verticals that we have clear advantage, we continue to expand our market share. And one example on game sectors, apart from our experience genre in the sector, daily ad placement for mini games sector increased by 200% quarter over quarter. In digital products and home appliances, we attract top tech brands like Apple, Huawei, and Vivo to launch their new products on Bilibili. And in Q3, we captured more advertising brands during non-shopping festival periods, with e-commerce ad revenue up nearly 80% year over year. Traditionally, we see e-commerce platforms to place more ads in the big shopping festival seasons, but in Q3, we were actually attracting more advertising budget during the summer vacation and the back-to-school seasons, reflecting the high value of our high-quality young audiences. And Bilibili's brand advertiser for those e-commerce players, they saw the value in our platform, as well as in our users. And while strengthening our advantageous categories, advertiser from more industries are choosing Bilibili. In Q3, sectors like education, baby and maternity, travel and lodging, et cetera, have all achieved high growth and will continue to expand to more industry verticals. For the 11.11, we maintained our open loop strategy, become a deep trusted partner for e-commerce platforms like Alibaba, Jingdong, Pinduoduo, and VIP shops. GMVs from video and live e-commerce increased over 150% year on year, and participating content creators rose by 80%. Among the customers we bring to those merchant shops, new customer rates exceeded, on average, 50% across all sectors, including 3C and digital products, home decor, beauty and baby and maternity, et cetera. We have become the key source for new customers across all e-commerce platforms. And this also helped us to achieve a close to 50% year-on-year increase in ad revenue during the 11.11 period. And you mentioned -- asked about macro environment, how does that bring changes to the advertising industry. Well, from our perspective, under the current macro environment, there is still some uncertainties in advertisers' budget, but the condition varies by industry -- different industries. For example, sectors supported by the national subsidy policies, such as the digital products and home appliances, are seeing a strong recovery. And on food and beverage, healthcare, and education are beginning to regain market confidence in a more gradual way, while the budget remains tight in sectors such as automotive, beauty and fashion, and real estate. Even though we expect short-term fluctuations across different industries, we remain optimistic and confident about the domestic economy in the mid to long term. Going back to Bilibili's advertising revenue, we remain confident that we can maintain faster-than-industry average growth rate for our advertising revenue in Q4 and further increasing our shares across all various industry verticals.\nJuliet Yang\n That concludes Carly's answers. Thank you. And operator, next question, please.\nOperator\n Yang Liu, Morgan Stanley.\nYang Liu\n (spoken in foreign language) My question is about the game business, which grew more than 80% in the third quarter. My question is about San Mou's performance and what is the outlook and the operation planning in the future for this game. And also, I would like to hear management's thoughts on user acquisition and also -- user acquisition for this game and also the future pipeline in Bilibili's game business and also the potential new genres in the future? Thank you.\nRui Chen\n (interpreted) The game San Guo: Mou Ding Tian Xia now has entered in the stage of game Season 3, and we're about to enter into game Season 4. So based on what we've seen so far, we can proudly say that San Mou is one of the best-performing games in the China gaming market this year. Besides the short-term performance, what I care the most is the longevity and sustainable operation at San Mou. And when I say longevity and long-term operation, I'm referring to at least five years -- 5 to 10 years. And to achieve the goal of long-term operation, we have made extensive plans in initial R&D phases and preparation in terms of the game design and operation strategy. Based on the performance of the first three seasons, we can say that the user engagement level and retention rates are among the highest in this genre in the industry. And the day after tomorrow, November 16, we will be launching the brand-new game Season 4. And the new game season will be featuring new map characters and new story line gameplay. And we are quite confident the new version content update will provide users with even more engaging and fun gaming experience. And many of you might know that San Mou has done a lot of innovation and differentiation compared to the similar genre games. The reason behind that is from day one, we have collected many, many users' feedback from our closed beta testing to the latest Season 3. We have welcomed feedback and actively engaged with our users to listen to their advice and make adjustments based on their feedback. And we also got the reputation of the best game company that listens to the users' feedback. And based on those user feedback, we have proactively adjusted within our new brand -- new Season 4. And going forward, the following seasons, we will continue to listen to our users and optimize and improve our games to give them best experience. And when I say the longevity of this game, that gives my next year goal as the top priority will be continue to optimize San Mou's user experience and user engagement. And for this particular strategy game genre, we'll be very focused on this one single title. And because we also have a big team of developers and operators, we will be really focusing our best resources on optimizing this game. And in the second half of this year, we will be starting to preparing for the international launch of San Mou, starting with the traditional Chinese version, and we also look forward to bring this high-quality strategy game to the users worldwide. And the success of San Mou is a testament to the strategy of reinventing new games for young generations and we have succeeded in this strategy genre. And on top of the strategy and the ACG genre, next year, we'll be looking to explore a new genre and adapting our methodology of reinventing games for young generations through this new genre and hopefully can bring another new pipe to Bilibili Game. And in terms of the ACG genre, many of you might have noticed, we have successfully launched Jujutsu Kaisen, the international version, globally, except Japan and China, on November 7. And so far, we have achieved very good results. The game reached top downloading charts number one in more than 70 countries and regions. And so far, the user feedback has been very positive. This marks a very successful attempt at our very first global distribution of ACG games. And for this particular game, in 2025, it will also be one of our important games to sustain and propel.\nJuliet Yang\n Thank you. Next question, please.\nOperator\n Felix Liu, UBS.\nFelix Liu\n (spoken in foreign language) Thank you, management, for taking my question. Congratulations on turning profitable this quarter. My question is more on the financial side. So what is your GP margin and profit margin outlook after successfully turning profitable this year -- this quarter? And also, we noticed that you announced a share repurchase program. So how should we think about your shareholder reward scheme going forward? Thank you.\nXin Fan\n This is Sam. I will take your question. In Q3, we not only met our previous committed breakeven goal, but also exceeded by achieving an adjusted OP of RMB270 million. This result demonstrates the potential of our business model. Our revenue in Q3 grew by 26% when gross profit was significant year-over-year increase of 76%, with the gross profit margin rising nearly 10 points from 25% to close to 35%. This improvement was mainly due to the increase of share of this high-margin game and advertising revenue, along with the effective control of our fixed costs. We believe that with the continued growth of our advertising and gaming business, they are furthest drone for long-term improvement in our gross profit margin. Additionally, it's worth mentioning that our operating cash flow reached RMB2.2 billion in Q3, with the operating cash flow for the first three quarters reaching RMB4.6 billion. This indicates that our business is heading to a healthy positive cycle. That's also the background that we -- why we announced in our financial report USD200 million repurchase plan to be carried out over the next 24 months to increase our return to our shareholders. Looking ahead to Q4, if you look at our deferred revenue balance, that balance in the end of Q3 increased by RMB380 million quarter over quarter, laying a solid foundation for Q4. So we expect the revenue from gaming and advertising business to maintain a strong growth momentum, with further quarter-over-quarter improvements in gross profit margin, and deliver further improved non-GAAP operating income. That's it.\nJuliet Yang\n For your next question, please.\nOperator\n Lincoln Kong, Goldman Sachs.\nLincoln Kong\n (spoken in foreign language) Thank you, management, for taking my question. My question is about more of the macro policy. Since the end of September, we have seen quite a big shift in terms of those policy and more stimulus coming. So from the company's business level, have we seen any incremental better trends in terms of advertising, gaming, live streaming, or user paying propensity? Thank you.\nRui Chen\n (interpreted) From a business perspective, we are very pleased to see a series of positive economic policy being introduced. We view this policy as highly encouraging signals that reflect the government's commitment to economic growth. And recently, we also felt the government's attention to private sectors and its determination to improve the business environment ourselves. While some of these policies are still in the pipeline and might take time for their effects to materialize, but we think it's just simply a matter of time as the overall direction has been set and clear. Well, Bilibili is part of the platform economy, and the platform economy is a key part of the broader economy in China. So when the overall economy improves, Bilibili will undoubtedly benefit from that improvement. Well, of course, as a company, we will be paying more attention to our own development, specifically on the path to achieve community and profitability growth, commercial growth, and we are planning for our next year and the year afterwards, we wouldn't factor in the overall economy will improve drastically. We'll be focusing on what we can do to improve our own business model to improve our product to give better content to our visitors. Well, Bilibili has always been known for focusing on the long-term, sustainable, healthy development, and because our users are also the young generation, so I'm very much looking forward to the landing of those stimulation policies that can bring the company, users, and the society to a better future. Thank you.\nJuliet Yang\n Operator, that concludes today's call. Thank you.\nOperator\n Thank you. And that concludes the question-and-answer session. Thank you once again for joining Bilibili's third-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.\n Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. 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