Bilibili released 23Q1 results, with 23Q1 revenue of 5.07 billion yuan, +0.3% year on year; GAAP net loss of 630 million yuan, a year-on-year decrease of 72%; non-GAAP net loss of 1.03 billion yuan, a year-on-year decrease of 38%. Ad revenue resumed year-on-year growth, three key games will be launched in the summer, supply of high-quality OGVs will be strengthened in the second half of the year, and operational efficiency will continue to be improved in 2023. Maintain the buy rating.
Key points to support ratings
User stickiness continues to increase, increasing main monetization of UP. The number of monthly activity/daily active users of Station B in 23Q1 was 315 million/93.7 million, +7%/18% year on year; user stickiness (DAU/MAU) reached a new high of 29.7%, +2.7 ppts over the previous year; the average daily usage time of users was 96 points. The average number of daily video views was 4.1 billion, +37% year on year. Among them, the average number of daily video views of Story-Mode vertical screen video was +82% compared to the same period last year. The average number of active UP owners per day was +42% compared to the same period last year, and more than 1.5 million UP owners received revenue at Station B, and the number was +50% compared to the same period last year.
Ad revenue resumed year-on-year growth, and the overall performance of 618 e-commerce ads was good. 23Q1 advertising revenue was 1.27 billion yuan, +22% year on year. According to management's statement at the performance conference, the 23Q1 performance advertising revenue increased by more than 50% year-on-year. After the algorithm and delivery performance were optimized, the game category advertising eCPM increased markedly.
Furthermore, the company continues to cooperate with external e-commerce platforms to explore the big open loop model where UP mainly brings goods; on the eve of the 618 promotion, the distribution of goods delivery and the total revenue of e-commerce advertising increased 3-4 times over the same period last year.
Three key games will be launched in the summer, and the Q2 intermodal games performed well. In 23Q1, the company's gaming revenue was 1.13 billion yuan, -17% year on year. According to the management's statement at the performance conference, the company currently has 8 products in reserve to be launched domestically and 5 overseas. Three key games will be launched in the domestic market this summer: the agent game “Shine! The localization of “The Handsome Girl” (“The Jockey Girl”) is nearing completion. The game has performed well in Japan, Hong Kong and Macau; self-developed games include the national style women's product “Shaker Light” and the two-dimensional 3D air combat game “Sluder”. The intermodal games “Crash: Stardom Railroad” and “Back to the Future: 1999”, which went live in April-May, both performed well.
High quality animations will be distributed centrally to promote more UPs to start live streaming. 23Q1 value-added service revenue was 2.16 billion yuan, +5% year-on-year; the number of members in 23Q1 remained at the level of 200 million, with a retention rate of 80% in the past 12 months. More high-quality nationally creative animations will be released in the second half of the year, including “The Legend of Mortal Immortal Immortals” and “Zhenhun Street”. The company continues to encourage more UPs to start live streaming and get more monetization opportunities from them.
Q1 Gross margin increased sharply year over year, and marketing expenses fell 30% year over year. 23Q1 The company's gross profit margin was 21.8%, +5.8 ppts year on year, +1.4 ppts month on month; division cost -8% year on year. The 23Q1 marketing/R&D/management expense ratio was 17.4%/11.3%/20.3%, compared to -7.4/+0.7/+0.3 ppts.
valuations
We expect a continuation of the restorative growth trend of advertising in Q2. After the launch of key games in the summer, it is expected that game revenue growth will accelerate, and net loss will narrow significantly in 2023. Non-GAAP net profit for 2023/24/25 is expected to be $3747/-9.17/225 million. Maintain the buy rating.
The main risks faced by ratings
Macroeconomic growth has slowed; new tourism flows have fallen short of expectations; policy supervision has become stricter; user stickiness has declined.