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 this measures and our reconciliation table 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 Li, Vice Chairwoman of the Board and Chief Operating Officer, and Mr. Xin 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 the opening remarks on behalf of Mr. Chen. Our strong third quarter results, once again, demonstrate our ability to execute and deliver our growth strategy in our peak summer season. We added over 13 million MAU to our Bilibili community, bringing our total MAUs to 257 million, up 35% year-over-year. Mobile MAUs also rose to 250 million and the DAU coming at 72 million, representing growth of 36% and the 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 bigger. Expanded the video content across formats as new reels drove an increase in user's 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 really shows the quality of our old and new users, given how fast we have grown. Other key operating metrics also grew successfully. 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 18% to $10 million. Each of these measures represents all-time high and reflects the health of our community, as well as the strength of the engine that powers our growth. Our efforts to grow our user base while maintaining a strong and tight needs community also had a very positive impact on our commercialization program. Total revenues in Q3 reached $5.2 billion, up 51% year-over-year. Beating the high end of our previous guidance, and matching the right content to our growing number of Bilibili users, more…

For the benefit of all participants on today's call, if you wish to ask a question to management in Chinese, please immediately repeat your question in English. Please limit your question to one at a time. If your wish to have follow-up questions, please rejoin the queue. Please stand by while we compound . first questions come from the line of Q - Alex Poon from Morgan Stanley. Please go ahead.

My first question is regarding user growth. The user growth in Q3 has exceeded previous guidance of RMB 260 million. And also, the record -- the time spend has reached a record high of 88 minutes per user per day. I wonder if management can explain; What have we done in Q3 to achieve these results? And in Q4 and next year, what are our expectations? Thank you very much.

So, for all these years, principal for Bilibili to grow our user has remained the same, which is driven by our very healthy content ecosystem. And those content ecosystem will continuously produce high quality content to attract users.

Poon Poon

Every year we'll have evolved and precise to area. For example, last year, it was all about expansion and content categories. And for this year beside expansion of content categories, we also hope to achieve expansion of consumption scenarios, building a multi-use scenario, multi-content category, video community is our goal

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 evolve in such as 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.

So right now, our OTT smart TVs MAU has surpassed our MAUs on the PC side becoming our number 2 user component. And I still think there's plenty of room for to and in those areas.

So not only that we have more users on the smart TV side. Actually, the time spend on the smart TV is also much longer than the rest of the -- the rest of the terminals

t Yang Bilibili probably has the greatest number of video status in 4K. And that is also the reason why Bilibili 's content is most suitable for the screens.

t Yang 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 user could enjoy those quakes on entertainment content.

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 is also very, very good. For example, the time spend 88 minutes is the highest we've seen in our operation history. And also, the user engagement number also experienced very fast growth. All of those indicate that we have grown with quality. That's very important.

Our monthly user interactions -- average monthly user interaction in Q3 has reached 10 billion milestone.

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

Back in 2017, I predicted that Bilibili 's paying ratio could reach double-digit, 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 that in the end of the day, our -- revenue generated from our users will be faster than the increase of our users’ number.

preter As for Q4's outlook,

similar with our traditional seasonality, we expect Q4 seizures space to be stable or a slight increase. As for our user target for 2022 we raised our three-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're still very, very confident to be able to achieve that user goal by 2023.

t Yang 1 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, to the overlap is only about 20 %. And lot of the Smart TV users, are users coming from third quarter of this city. So, this instance gives us great confidence in terms of further penetrating our target cohort, and we believe with Bilibili's vast content library and the evolving scenario, we should be able to achieve our user target.

Thank you. Our next question comes from Daniel Chen from JP Morgan. Please go ahead.

I was translating myself. My question is related to advertising, so we have seen such a strong growth in the third quarter, our 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 a weak macro environment and also data security policies? Are we seeing those implications to our advertising revenue? Thank you.

In Q3, our ad revenue reached RMB 1.17 billion, up over 110% year-on-year. This is the 10th executive quarter of beating expectation level of growth.

So, we have repeatedly discussed the theory of Bilibili, our business logic, and our efforts in building our infrastructures as well as strategies in the past few quarters, which I will not going further details at this time. However, I will share some of the data and new changes we've seen so far in the fourth quarter and also in the third quarter.

First of all, we see continuous improvement in our ad efficiency thanks to our deep learning model’s involvement, as well as the further adoption of more innovative app scenarios. The click-through rate of our feet improved by 30% and we expect this will further our fourth quarter and next year add revenue growth.

t Yang Second is we further integrated multiple app scenarios, as we have mentioned, from our mobile app, on our mobile phones, to iPad, smart TV, and PC. We continue to add new ad inventory, including ad products like inline stories and moments. And as our user continues to expand, our ad can follow.

The third point is on Sparkle ad platform, we have over 150,000 content creators joined, this is up 25% year-on-year. And we also have repeated repetitive ad customers over 75 %, and Bilibili's content creator produced more and more highly creative native Ad content and it's becoming the new beacon in China Ad market. and we'll continue to build on that success and further to integrate on 1-stop solution of native ads, brand-outs, feed-outs, including our project takeoff, which all have been widely acknowledge in the added industry.

And the fourth point is during this year's Singles ' Day, our daily add GMV was over RMB 25 million, ranking number 5 in terms of ad budget market share, and overall conversion ROI ranked number 1 in the space. This further proves the high quality of our user and their potential consumption power. We expect next year in the overall, our consuming advertising -- consumers at the industry will continue to raise our performances and achieve greater success.

t Yang 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,

, skincare, and cosmetics. We see emerging growth vertically, such as automotive, handbag and apparel are also growing rapidly. Last but not least, is on our -- we see new format of video-based Ad has also driving the improvement of our Ad efficiency and forming one-stop absolution on Bilibili. Our Q3 number shows that video-based Ad is 2 times more efficient than the traditional picture and tax-based Ads. And we expect the ECPS will have the potential to further grow by a 100 %

The lastly feed on whether there's going to be impact of the recent data security regulations We still think there will be any visible impact to our app business. And we still have confidence to deliver our house the ad fast-growth in our ads segment in Q4 and in next year.

Thank you. The next question comes from the line of Brian Gong from Citi. Please go ahead.

I will translate myself. Our ecosystem, our streaming video loves screening, and actually, we already have our virtual community. BILI seems to be among those few platforms in China that explored at a worst opportunity. So, my question is that how those measurements see BILI 's positioning in these things, and how will BILI to seize this opportunity? Thank you.

As I mentioned in an 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 is virtual reality, a tight social community, or a system -- a social system, or self-reinforcing ecosystem. It's already existed and there are a lot of Company is already -- developing products on those concepts. For example, Facebook and Tencent. And actually, Bilibili is one of them.

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 years.

And I believe there is a very, very important element within the Metaverse concept, which is a self-reinforcing content ecosystem. When we talk about Metaverse, we think this is not something that 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 achieve benefit hence, bonding tighter -- even tighter within the system itself.

And Bilibili has a very large base of content creator are 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 that link to this concept for example, virtual off-loader. Our content creator can leverage technology like motion capture, virtuality, augmented reality. Turning themselves into another character in another world and creating content such as singing and dancing, talking jokes. All of that attracting user and make user fall in love with them. And itself, it is a perfect example of implementing the creation system into this Metaverse concept.

When we're talking about metaverse; Independent, separate universe that 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.

And Bilibili has a very outstanding and healthy content creation ecosystem. And surrounding that ecosystem, we have already attracted a tight community of over 267 million

267 million MAUs. And within that 267 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.

However, I do think Metaverse is the concept in a long-time horizon. And it's also a future objective with -- must heard a lot of discussion about Metaverse but I think it's mostly on a capital level or on the media level. I barely 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.

I do believe this is a very, very beautiful vision in the future which brings elevated user experience. The scenes that we seeing in the movie Ready Player One, or in the anime sort out online. This Metaverse concept does bring a very beautiful experience to users.

an

I read a recent report -- media report criticizing Metaverse, using examples like 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 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 Shanghai Auditorium that has the space

museum. And actually, a lot of the scene that in the museum can be achieved in a much greater effect in virtual reality or in the Metaverse. Let's imagine all those things that you're seeing in an auditorium 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 the is looking like. So, I believe that we will bring great benefit to the society. It really depends on the people itself.

Thank you. The next question comes from the line of Lei Zhang from Bank of America, Q - Lei Zhang, please go ahead.

Thanks management for taking my question. My question is mainly regarding live-streaming business. Notice that we have a good performance in elaborate recently. So, looking forward, how should we look at your live-streaming business, especially in content and monetization strategy? Thank you.

Indeed, for this year's S11, on the final game night, we have record high peak concurrent user. 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 as Bilibili 's S11 final game night has probably the highest concurrent user in China 's internet live broadcasting history.

Poon

At the same time, I wanted to emphasize that the S11 is not a 1-way content output. Actually, during the S11, we have massive live broadcasting hosts. It's doing as game-related live broadcasting. We also have tons of content creator s, creating derivative content associated with S11. For those videos alone we have a total video play of 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 for -- it is forming a self-reinforcing ecosystem or a positive feedback loop within our community.

And years ago, investors would ask me why Bilibili would do live broadcasting. My answer was live broadcasting is not content vertical, rather, a capability, and for Bilibili is an important component of our content ecosystem.

With us without S11, our live broadcasting has already deeply embedded into our video communities. 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.

an

Again, that -- I think Bilibili's live broadcasting is actually breaking a lot of people's stereotypes about live broadcasting. While in the past, when people start thinking about live broadcasting it is showroom for eSports. However, for Bilibili's live broadcasting, our content category covers a wide array of vertical is 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're also helping our content creator to expand their content creations category. For example, there's content -- there's a food content creator who is also very good at playing games. He is actually ranked in the top, a live broadcasting host in 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 kind of not not positive feedback it's probably not the best monetization method. But if you love a content creator so much, you would be very willing to watching his live broadcasting, buying his recommendation product, or just simply tip him to showcase your appreciation and that's also in the exact we using that we believe that live broadcasting is a very important component within Bilibili's community. and the chemistry that is playing in the community is creating very benefit -- has very large benefit to all the participants.

t Yang And as we look ahead,

we will continue to implement our content ecosystem driven business model, will continue to integrate live broadcasting with our video business, will continue to penetrate the -- to user groups, content creator, and live broadcasting host. And also, we do believe that all the user could have potentially become live broadcasting users. Secondly, as that would really to discover and develop Bilibili's unique live broadcasting category. And one of the reasons that our video platform is so successful is that we have our own unique content category, such as auto tune remix and knowledge sector. Those content verticals have Bilibili's unique taste to it. And so, as what we planned for our live broadcasting business, we want to develop our own unique content categories that has Bilibili's 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 IR Director or TPG Investor Relations, our contact information on for IR in both China and the U.S. can be found on today's press release. Have a great day. Bye-bye.