To The Moon

Q&A（Question-and-Answer Session）is a session after the company's prepared remarks where institutional investors and analysts ask management questions. In this dialogue, you may find some valuable information that might affect the stock price in the following weeks.

Now let's look at some key points from Bilibili Q3 2022 Q&A Session Transcript  $Bilibili Inc.(BILI)$ $BILIBILI-W(09626)$

Q:My question is about the gaming business. Given that Mr. Chen, you have personally taken control of the gaming business, what’s our sort of strategy and targets and change posture taking over? And after the reduction of the mostly gaming, how is the company are looking for our overall gaming business growth outlook, especially of our sales buildup games as well as the overseas gaming strategy and progress?

A:I raised the strategy of putting video and game as Bilibili’s is core business back in 2019. As a matter of fact, Bilibili is starting to explore game business from very early days. Actually, Bilibili is the platform that has the most condensed and concentrated gamer in China. At the same time, we have lots of content offerings in terms of live broadcasting and video on our platform. At the same time, the areas that we invested in regional animation and comics, has great synergies with our game business. So, naturally, it’s just a natural extension and natural course for Bilibili to put in at our core. In the past 2 years, the game business didn’t perform as well as we planned, which I believe is mainly due to the slower-than-expected self-developed game progress. The reason is that we were exploring in multiple directions by multiple teams at once, but end up spreading too thin and only just to double on many, but didn’t bear fruit. As I personally take on the game business, it doesn’t mean we are making any change to our original strategy. As a matter of fact, we will carry out more diligently to that strategy, which is develop high-quality game in-house and distribute globally and putting gaming business at our core. I intend to focus on only one or two directions focusing our best resource and our energy on doing the least, but the best towards the highest industry standards. At the same time, I will strengthen the life cycle management of our self development project to increase the investment in projects that meet patients and quickly iterate out projects that do not meet the expectations. Moving forward, my requirement for the gaming business will be to be very, very down to earth and do our best to produce the best product and try our best to increase – to enhance the business. Because we have the perfect environment in game content, I am still very confident whether it’s self-developed games or licensing games, we can deliver sustainable growth in the sector.

Q:My question is mainly on the profitability. I noticed that our operating loss narrowed in the third quarter. So how should we look at our gross margin and OP margin trend and which costs as we see for the room to control and also any change to our breakeven target?

A:We raised the target of reach breakeven by end of 2024, and we will stick to that mission and goal. And as we move through 2022, obviously, there is been multiple challenges across the macro environment to reduce loss and putting profitability first is the priority for the company. And this is something I personally work after and taking charge. We have already taken actions to reduce our cost and expense. And so far, the unit cost for our server and bandwidth continue to decline. And as I mentioned earlier, sales and marketing continued to decline year-on-year for three consecutive quarters. And move forward, we will take more efforts to reduce our sales and marketing expense as well as G&A and R&D expenses.

In terms of the efficiency improvement, I intend to reduce investment on the non-core business and allocating and centralize our resources in areas such as improving our commercialization efficiencies. At the same time, we will also take actions to optimize our organizational structure to reduce the fat and increase the lean, and we expect this adjustment will be completed by end of this year and will start to show on P&L starting from first quarter next year.

Q:My question in regards to advertising, considering the impact of COVID-19 and the weak macro environment, what’s your strategy for advertising business and how should we think about revenue growth in the first quarter and next year?

A:Despite weaken macro environment of the ad revenue in third quarter reached RMB1.35 billion, an increased 16% year-over-year. This we consider this is a job well done and especially the ad revenue from performance-related formats increased by over 20% year-over-year, and we have continued to take market share in the ad market. In 2023, we plan to continue to enhance our integrated marketing capability and to build a friendly and welcoming environment for advertisers. And we will continue to help advertisers to effectively reach our young generation through Bilibili’s multiple products and multiple scenarios and help them to build their brand equity.

The above Q&A are highlights that are edited for brevity. Click here for the full Bilibili Q3 2022 Earnings Call Transcript.​​​​​​​​

If you want to know more details, you can click here to re-watch the Bilibili Q3 2022 Earnings Conference Call