On August 22, Bilibili (NASDAQ: BILI, HKEX: 9626; hereinafter referred to as "Bilibili") announced its unaudited financial report for the second quarter. In the second quarter, Bilibili's total revenue was 6.13 billion yuan, a year-on-year increase of 16%, mainly driven by advertising and games; the net loss of Bilibili in the second quarter was 608 million yuan, narrowing by 61% year-on-year; the adjusted net loss was 271 million yuan, narrowing by 72% year-on-year.

Dolphin Investment Research analysis believes that Bilibili's second-quarter report slightly exceeded expectations, with only the value-added service revenue slightly below expectations. "The most unexpected is the performance on the profit side. On the one hand, the proportion of game and advertising revenue increased, driving the overall gross margin up. On the other hand, the company is still laying off employees, especially after strategically giving up self-research, the compensation of R&D personnel has decreased. Ultimately, the Non-GAAP net profit margin narrowed to a loss of 4.4%."

In this quarter, Bilibili's gross margin increased from 23.1% in the same period last year to 29.9%, achieving an increase for the eighth consecutive quarter. In addition, Bilibili's daily active users reached 102 million, a year-on-year increase of 6%, and the monthly active users reached 336 million. After the release of the financial report, Bilibili's U.S. stock price once rose by more than 6% before the market, and as of the time of writing, Bilibili's U.S. stock fell by 5.28%, reporting $13.28 per share, with a total market value of $5.496 billion.

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Dolphin Investment Research believes that in the third quarter, with the game "Three Kingdoms: Strategize the World" ("Three Strategies") and the high advertising investment in the summer game battle, it is expected that Bilibili will turn a profit. However, the main reason for the ups and downs of Bilibili's market value is still the lack of confidence in the market's long-term growth and profit margin targets. After all, the macro pressure is visible to the naked eye, "For the market, the long-term pie is not in a hurry to be eaten now."

In terms of business distribution, value-added services, advertising, games, and IP derivatives and other businesses contributed 42%, 33%, 17%, and 8% of Bilibili's revenue in this quarter, respectively.

Bilibili's value-added service business revenue in the second quarter reached 2.57 billion yuan, a year-on-year increase of 11%. In terms of the big member business, as of the end of the second quarter, the number of effective big members exceeded 22.3 million, a year-on-year increase of 9%, with more than 80% being annual subscribers or automatic renewal members.

Advertising business is the fastest-growing business of Bilibili. In the second quarter, advertising revenue increased by 30% year-on-year, reaching 2.04 billion yuan. In the first half of the year, the number of Bilibili advertisers increased by 50% year-on-year. Bilibili mentioned that more advertisers from emerging industries have joined Bilibili, with AI manufacturers covering more than 90%.

In the post-earnings call, the management mentioned that e-commerce and digital home appliances are the two largest areas of Bilibili's Q2 advertising growth. This year's 618, the advertising investment of e-commerce customers on Bilibili increased by 300% year-on-year. In terms of the industry, in the first half of this year, the top five advertising vertical industries of Bilibili are games, e-commerce, digital products and home appliances, automobiles, and food and beverages. In addition, in the first half of this year, the revenue from emerging vertical industries such as internet services, AI, and education also achieved growth.

In terms of the gaming business, Bilibili's gaming revenue in the second quarter increased by 13% year-on-year, reaching 1.01 billion yuan. In the first half of the year, Bilibili successfully launched its first SLG strategy game "Three Strategies." The game ranked third on the iOS game bestseller list on the first day of its launch and remained in the top ten for a month, which once drove the stock price to soar.

In the call, Bilibili Chairman and CEO Chen Rui mentioned that many people asked why Bilibili could succeed in "Three Strategies," "I think it is the result of the game category's youth that we have been doing in the past two years. The establishment of the 'Three Strategies' project was in 2022, and the investment in the R&D team was also in 2022. It is not an accidental decision, but a decision made after several years of long-term thinking about the game category's youth." He mentioned that this is the main idea for Bilibili to try new games in the future.Chen Rui stated that the internal goal for the "Three Strategies" distribution team is to definitely make it a high-quality game that can be operated continuously for over 5 years. "We must realize that the gaming industry is no longer an industry for making quick money; it must be an industry that values long-term optimization and management, and optimizes user experience. Then, we should at least strive to be the company in the industry that listens to players the most and respects players the most."

Dolphin Research believes that although "Three Strategies" has fluctuations in ranking, it still ranks at the forefront, and the growth pull for a revenue scale like Bilibili's will still be very obvious.

With the growth of high-profit business and the improvement of operational efficiency, Bilibili's gross profit in the second quarter of the year increased by 49% year-on-year, reaching 1.8 billion yuan. In addition, Bilibili achieved a positive operating cash flow of 1.75 billion yuan in the second quarter, and a total of 2.4 billion yuan of positive operating cash flow in the first half of the year.

In terms of UP masters, Bilibili mentioned that nearly 2.1 million UP masters earned income on Bilibili in the first half of the year, and their total income from advertising and value-added services increased by 30% year-on-year; as more and more users are willing to pay for high-quality content, the income of UP masters through classrooms increased by more than 40% year-on-year, and the income obtained through workshops and charging maintained a triple-digit year-on-year increase.

As of June 30, 2024, Bilibili held a total of 13.9 billion yuan in cash and cash equivalents, term deposits, and short-term investments.