Bilibili Inc. (BILI) Earnings Call Transcript & Summary

Good day, and thank you, and welcome to the Bilibili First Quarter 2025 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 filing with the SEC and Hong Kong Stock Exchange. The non-GAAP financial measure we provide are for comparison purpose only. The definition of this measure and the 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 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.

Thank you, Juliet, and thank you, everyone, for joining us today to discuss our 2025 first quarter results. We started 2025 on promising ground, delivering solid financial results and healthy community development in the first quarter. Our total revenues accelerated year-over-year, increasing by 24% to RMB 7 billion, driven by strong performances in our high-margin advertising and game businesses. Advertising revenues were up 20% year-over-year to RMB 2 billion, supported by our ongoing product enhancements and infrastructure upgrades, fueled by the sustained popularity of our SLG title San Mou. Our games revenues also rose 76% year-over-year to RMB 1.73 billion. The continued top line expansion in these high-margin businesses, combined with operating efficiency, provided us with greater operating leverage. In the first quarter, our gross profit increased by 58% year-over-year, with gross profit margin expanding to 36.3%, up from 28.3% in the same period last year. As a result, we sustained positive adjusted net profit of RMB 362 million and narrowed our GAAP net loss by 99% year-over-year in the first quarter. While further strengthening our financial performance, we continue to grow our community and enhance user engagement. The successful collaboration with CCTV's Chinese New Year Gala also helped bring the Bilibili name to a broader audience. In the first quarter, DAUs reached 107 million, and MAUs climbed to a new high of 368 million. Meanwhile, our compelling and diverse content drove users' average daily time spent to a record 108 minutes. Next month, Bilibili will turn 16. Looking back, it has been an incredible journey, one that is truly unique. Over the years, our community has grown tremendously. What is most remarkable is that the sense of connection between users and creators and the welcoming, inspiring vibe that defines Bilibili has stayed the same. Over this time, our users have grown with us, too. Today, the average age of our active users is 26, a life stage where consumption needs and purchasing power are both on the rise. As the go-to platform for Gen Z+ to discover high-quality, creative video content in China, we are in a great position to meet their evolving needs and unlock even more monetization opportunities. With that overview, let's take a closer look at our core pillars of content, community and commercialization. Beginning with content and community. As we look at today's video landscape, it's clear that people have more content than ever, especially with the explosion of short videos. But what really stands out is that people are craving and spending more time on high-quality content. At Bilibili, that has always been our focus. We have built a community known for the best content out there, and we will keep prioritizing and promoting quality above all else. This commitment is showing up in our numbers. In the first quarter, users spent an average of 108 minutes on our platform every day compared to 105 minutes in the same period last year, marking a new record. Our monthly paying users also reached an all-time high of 32 million as our users discover and connect with more quality content they love. Monthly interactions were nearly 16.7 billion in the first quarter, and our official member count reached 264 million by the end of Q1, up 12% from last year. On top of that, their 12-month retention rate stayed strong at around 80%. The quality of our content is also showing up in our content categories. Our core ACG content continues to thrive, and our game content is a great example. In the first quarter, game-related watch time increased 14% year-over-year, drawing in both long-time fans and new gamers who come to Bilibili for reviews, walk-throughs and game IP content. As Gen Z+ users mature and their spending power increases, many are turning to Bilibili with real purchase intent, looking for trusted, unbiased recommendations. That's reflected in our travel and lodging and home appliance-related content, with watch time growing by over 20% year-over-year in Q1. Additionally, being the hub for curious minds and the best knowledge video library, we saw a big surge in our AI-related content. More young people are coming to Bilibili to explore and learn about AI, and AI-related watch time more than doubled from Q1 last year, along with a 400% increase in advertiser demand. Behind all of this is our amazing creator community. By the end of Q1, the number of creators with over 1,000, 10,000, 100,000 and 1 million followers all grew by more than 20% year-over-year. About 1.5 million creators made money on Bilibili during the quarter, not just through ads or live streaming but also by using our e-commerce tools and various fan support programs. In fact, creators' total income from our fan-charging program was up over 200% in Q1, showing how users truly appreciate and are willing to pay for quality content. Lastly, our partnership with CCTV for the Chinese New Year Gala gave us a big boost in brand awareness. It both attracted new users and strengthened engagement with our existing community. What's more? Viewers can now revisit all the past Chinese New Year Galas right here on Bilibili. It's another great example of how we curate the quality content and deliver value through our unique community. Meanwhile, our self-produced Chinese anime, the Tales of Herding Gods, [Foreign Language], was well received. It's garnered over 560 million views so far and is showing strong potential to become Bilibili's next long-lasting anime IP. We also released our self-produced title To Be Hero X, [Foreign Language], worldwide in April. It quickly gained traction, ranking #1 on MyAnimeList for best spring title 2025. Now let's talk about our commercial businesses and their progress. Our advertising business continued to deliver solid results in the first quarter, with revenues growing 20% year-over-year to RMB 2 billion. As our users mature and have more spending power, they increasingly look to Bilibili for content that informs their lifestyle and consumption choices. This trust within our community and the influence of our quality content have become powerful drivers for advertisers. In the first quarter, the number of advertisers placing orders on our platform increased by more than 35% year-over-year. Meanwhile, we have been integrating a large language model to help us better understand the users' interests and commercial intent, enabling more accurate ad targeting and smarter ad delivery. We also upgraded our AIGC ad content tools to help advertisers generate more tailored and effective ad titles and coverage at scale, allowing them to reach users more efficiently through compelling and user-friendly storytelling. These enhancements have fueled the growth of our performance-based advertising, which grew by over 30% year-over-year in Q1 while brand and native ads continue to show steady momentum. Industry-wise, we strengthened our position in core verticals while attracting more advertisers from emerging sectors. In the first quarter, our top 5 ad verticals were games, Internet services, e-commerce, digital products and home appliances and automotive powered by our vibrant and highly engaged gaming community. Gaming ads continue to contribute a strong share of our ad revenues, with new formats like Bilibili Minigames driving additional growth. Moreover, we saw a notable increase from sectors targeting younger consumers as they enter new life stages with evolving needs. In the first quarter, ad revenues from home appliances and decorations grew by nearly 40% year-over-year. Similarly, AI-related ad revenues surged by 400% year-over-year, reflecting Bilibili's growing appeal to emerging industries, looking to engage our young high-value user base through innovative ad formats. Turning to our game business. Game revenues rose by 76% year-over-year to RMB 1.73 billion, attributed to the continued strong performance of our SLG title, San Guo: Mou Ding Tian Xia, San Mou. Meanwhile, our legacy ACG titles, FGO and Azur Lane, continued to deliver stable revenues and demonstrated impressive longevity in the first quarter. We are encouraged to see that San Mou is evolving into a long-cycle title with enduring appeal. With our expanded game development capabilities and upgraded gameplay, San Mou's active users and engagement in season 7 improved from previous seasons, demonstrating the game's continued draw for core SLG players. On May 31, we will kick off season 8, marking the game's biggest update since its initial launch. This highly anticipated anniversary addition will include a refreshed map, new characters and special in-game events. These updates enhance the gaming experience and are designed to attract more younger players to the SLG genre. We expect this launch to mark a meaningful milestone in San Mou's continued growth and long-term success. The momentum behind San Mou also highlights our gaming community's strength and our ability to build differentiated experiences that resonate with diverse player groups. In addition to San Mou's international launch later this year, we have several new games in our pipeline awaiting approval. As we expand our game portfolio, we are focused on creating titles with lasting value by leveraging our leadership in the gaming space to reimagine gameplay for the next generation of gamers. And finally, let's look at our VAS business. Revenues from our VAS business increased by 11% year-over-year to RMB 2.81 billion. Our live broadcasting business regained momentum during the first quarter, fueled by the supply of more quality content and more paying users. We also further refined our operations and incentive plan, which led to a meaningful improvement in the business' margin profile. We are also unlocking more value from our broader VAS portfolio. Gen Z+ users show a strong willingness to pay for content they care about. By the end of the quarter, premium memberships exceeded 23.5 million, with over 80% on annual or auto-renewal plants, a clear sign of user loyalty. In addition, revenues from our fan-charging program surged by over 200% year-over-year, highlighting the potential of our direct-to-creator monetization tools. And lastly, while we are making solid progress on our commercialization efforts, we are also staying true to our role as a responsible cultural brand and corporate citizen. In April, we published our 2024 ESG report, sharing the steps we are taking to create social value and build a more sustainable business. We are proud to have received an A rating from MSCI for our ESG performance. While we keep growing our ecosystem with high-quality content, we are also committed to pushing the industry forward through innovation, both in technology and storytelling, while continuing to spread positive energy and making a real difference in society. As we move through the year, we will focus on advancing our commercialization capabilities with more enhanced and efficient commercial offerings. At the same time, we will continue promoting high-quality content that defines our vibrant community. In addition, we are actively embracing GenAI to optimize user experience, monetization efficiency and unlock new growth opportunities. With that, I will turn the call over to Sam to share more financial details. Sam, please go ahead.

Thank you, Mr. Chen. Hello, everyone. This is Sam. In the interest of time on today's call, I will review our first quarter highlights. We encourage you to refer to our press release issued earlier today for a closer look at our results. In the first quarter, we accelerated revenue growth and further expanded our margins, fueled by the strong performance of our high-margin games and advertising businesses while sustaining positive non-GAAP net profit. Total net revenues for the first quarter were RMB 7 billion, up 24% year-over-year. Our revenue breakdown by revenue stream for Q1 was approximately 40% VAS, 29% advertising, 25% mobile games and 6% from our IP derivatives and other businesses. Our cost of revenues increased by 10% year-over-year to RMB 4.46 billion in the first quarter while our gross profit rose 58% year-over-year to RMB 2.54 billion. Our gross profit margin reached 36.3% in Q1 compared with 28.3% in the same period last year. Our expanding gross profit and margins show how well our model adapts and scales as the business grows. Our total operating expenses increased 4% year-over-year to RMB 2.52 billion. Sales and marketing expenses increased 26% year-over-year to RMB 1.17 billion. The increase was mainly due to a one-off marketing expense related to our partnership with CCTV for the 2025 Chinese New Year Gala and higher year-over-year promotion expenses for our SLG game San Mou. G&A expenses were RMB 516 million, down 3% year-over-year. R&D expenses were RMB 841 million, down 13% year-over-year, mainly related to R&D efficiency improvements. These efforts allowed us to maintain positive operating results. Our operating profit was RMB 15 million, and our adjusted operating profit was RMB 342 million, both compared with losses in Q1 2024. We also maintained a positive adjusted net profit of RMB 362 million versus a loss in the prior year period, and we narrowed our GAAP net loss by 99% year-over-year to RMB 11 million. Our adjusted net profit ratio in the first quarter was 5% compared with an adjusted net loss ratio of 8% in the same period a year ago. Cash flow-wise, we generated over RMB 1.3 billion in operating cash flow in the first quarter. As of the 31st of March 2025, we had cash and cash equivalents, time deposits and short-term investments of RMB 17.4 billion or USD 2.4 billion. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from Lincoln Kong from Goldman Sachs.

[Foreign Language] So congrats on a very solid first quarter results. So my question is about the content. I think last quarter, Rui Chen, you mentioned about enhance building our quality content. So what's our specific plan this year to increase the user mindset or quality content? And in terms of the AI applications, is there any progress or specific rollout which you expect?

[Foreign Language]

[Interpreted] I think we're in an era where there's too much content, especially where the short video content is becoming increasingly abundant. For example, you can even watch short video content on shopping apps. And what we have observed is that users are not lacking in content to watch. Rather, they are seeking high-quality content. And what we observe is that users are dedicating more time to engage with premium quality content. The growing demand for quality content mirrors the changes in consumer habits. People are willing to pay more -- pay for content that brings them a sense of fulfillment and quality.

[Foreign Language]

[Interpreted] Quality content is what we have been focused on and stand for. I think Bilibili is probably one of the biggest content platform that holds the high-quality content standards. And when people come to Bilibili, what they are consuming stands for a long-term sense of fulfillment, not for a short-term stimulation or a hormone-driven type of satisfaction, and this will help Bilibili to stand and thrive in the next era of video competition.

[Foreign Language]

[Interpreted] This is showing in our Q1 data. For example, in Q1, the average daily user time spent reached a historic high of 108 minutes. Additionally, users are increasingly willing to pay for premium content. Our average monthly paying user hit a new record of 32 million, and revenue from our fan-charging feature grew over 200% year-over-year, and this is all highlighting the potential -- substantial revenue in video platform, which is people directly paying for content that they love and care about.

[Foreign Language]

[Interpreted] Quality will stand for -- plays an even bigger and more important role in our strategy into 2025. We will continue to position high-quality content as one of Bilibili's most important attributes. We'll also help our content creator, the talented content creator, to gain fans more quickly and also receive better monetary rewards.

[Foreign Language]

[Interpreted] Upholding high quality as the standard, we can see the strategy working from the content category development. First of all, on the core ACG content, the pan-knowledge content, and it's gradually evolving into lifestyle related, consumption related. All of these content categories are thriving and expanding on Bilibili.

[Foreign Language]

[Interpreted] For me, personally, I learned great knowledge and consumption-related advice on Bilibili such as how to wash a duvet cover and how to pick a right sofa. This is very easy and transparent. I find the content on Bilibili super helpful and fulfilling.

[Foreign Language]

[Interpreted] In addition to the content category evolvement, we've also seen -- we are also providing various monetization avenues to help our quality content creators to make more money. For example, last month, I discovered this content creator with less than 1 million followers made over RMB 1 million in the month through fan-charging program, and he is a knowledge sector content creator. Even though what he's talking about is quite niche and professional, probably won't bring him a lot of followers, but if you do something really good in the segment category, you can also earn a lot of love and appreciation and even monetary rewards on Bilibili through our monetization avenues.

[Foreign Language]

[Interpreted] Video content become a necessity. In terms of spiritual consumption, we discovered that the quality video, in the longer term, will gradually pick up its potential and showing great value. Probably for people who just have the access to short video content or to the video content, you might be attracted to those very short, stimulative content in a short period of time. But over a longer time horizon, let's say, 5 years, people would naturally choose content that bring them a sense of fulfillment and those quality content. That's why we have been focused and will continue to focus on promoting quality content, fulfilling content.

[Foreign Language]

[Interpreted] Lastly, I wanted to touch upon the high-quality content combined with the AI can bring great potential to our business. First of all is that the quality content can transcend times. From early 2000 till now, we can easily see that only the quality content can live and continue to produce value. And currently, with the evolution of AI models, hinges on the access to high-quality training data. And Bilibili happens to own the world's largest repository of Chinese video content. The high-quality video content data will provide us a very unique and advantageous position in the time of AI-related opportunities.

[Foreign Language]

[Interpreted] And currently, I would say the model itself has great computing power and inferencing power. And all the historical text based -- the text-based data corpus has already been provided to the various different models. But can they generate something new and provide creative and additional information is what all of the video manufacturing is trying to resolve. And from that aspect, Bilibili stands a great advantage because our video content carries a much more dense set of information. For example, when I asked our own AI model which mobile phone can take a better human portrait and our AI model can analyze the historical video data and summarize and subtract the right information to provide me with that solution, and this is something Bilibili -- only Bilibili can do.

[Foreign Language]

[Interpreted] Well, probably AI can take a lot of text-based messages online as of now, but it's still a long way for AI to produce a high-quality, reliable, trustworthy video content. And from that perspective, Bilibili holds a very valuable data asset on that.

[Foreign Language]

[Interpreted] And Bilibili holds a unique and leading offerings in certain content categories such as animation, gaming and knowledge. And this -- with the help of AI translation, we can easily multiple -- multiply those values into multiple language and unleash much greater potential and value of that content categories.

[Foreign Language]

[Interpreted] And also from a commercial aspect, AI can also help us to improve our commercialization efficiency. I can elaborate on that in a later question, if there's any. Yes. That concludes Mr. Chen's answer.

Our next question comes from Xueqing Zhang from CICC.

[Foreign Language] My question about your game business. Could management review the performance of San Mou in season 6 and 7? And San Mou has been launched for 1 year in June. So what are your expectations for the anniversary version? How does management view the growth rate of the game business in the second half of the year? And what's your game pipeline?

[Foreign Language]

[Interpreted] The most critical and important goal for San Mou operation team is to achieve a long-term healthy operation, with at least a 5-year or longer life cycle. And user retention as -- is something that I care most about, and this is also the most important topic every time we have a staff meeting on this game operation. My ultimate goal is to help San Mou to become a game that the gamer can play for a lifetime.

[Foreign Language]

[Interpreted] The season-based game system is one of the most important mechanism to help this game to sustain a long-term operation. Every game season, we listen very carefully about users' feedback and adopt that into the next game design and promotion.

[Foreign Language]

[Interpreted] As a matter of fact, the first day of game season 7 marks the highest DAU daily record in the year of 2025 and also represents how we are incorporating each new season to optimize the game design and attract and retain users.

[Foreign Language]

[Interpreted] As one of the largest gaming content community in China, the Bilibili community itself empowers the long-term operation of San Mou. For example, we did a joint marketing campaign with San Mou with the leading game streamers, PDD and 1MD, and the campaign was quite successful and helped us to attract a lot of new users and awaken a lot of the dormant users.

[Foreign Language]

[Interpreted] And also another example is our virtual streamers are actually attracting their followers to join Bilibili and do the live streaming sessions. And we find it quite interesting that one user probably has both ACG and SLG interest habits, and this is also bringing a lot of incremental new users to the game.

[Foreign Language]

[Interpreted] Combined with those efforts and our operating strategy, we can see that San Mou, the current DAU level and paying ratio and ARPU has ranked among the top level in the industry.

[Foreign Language]

[Interpreted] Later this month, on May 31, we will launch season 8. And also, this marks the anniversary edition of San Mou, and we will start the campaign to celebrate the anniversary with refreshed map, major new characters and limited anniversary scheme features and a lot of interesting in-game events. And we hope this anniversary edition will bring San Mou to a new level and a long-lasting life cycle.

[Foreign Language]

[Interpreted] Many people will ask me, what's the next step after San Mou? My answer has always been, we wanted to be super focused on making San Mou sustainable and even more successful. I often said, the next San Mou will be the next game season. We'll be focusing on making a better season each time and bringing new experience to our users. On top of that, we have 2 more initiatives with this game. One is in the end of this year, we're looking to launch international version in traditional Chinese. This version is targeting for user, are in Hong Kong, Taiwan and Macau. And the second initiative is that we are planning to bring San Mou into multiple devices. End of last Q4, we launched the PC version, which helped us to win over a lot of the PC users. The next step, we are looking to bring this game on the Minigame platform. This potentially will also open doors for us to attract new additional users.

[Foreign Language]

[Interpreted] On top of San Mou, we will have 2 more important jobs to do. One is to sustain our legacy titles, one on our Azur Lane and FGO. We'll be celebrating Azur Lane's 8th year anniversary this month and celebrating FGO's 9th anniversary at end of the July. And for both of the game, people -- you might be very familiar with the long term -- a very sustainable and successful long-term operation. And from time to time, we can witness a new incremental increase from those 2 games. And we believe with the anniversary promotion, we should be welcoming a new peak of DAUs and MAUs.

[Foreign Language]

[Interpreted] The second strategy is on the new games. Currently, we have 4 to 5 games in line waiting for approval. We will also actively exploring more opportunities in new genres, similar to what we have done with San Mou to reinvent games catering to new generations, new generation of gamers' preferences. We do think there are a few opportunities there, and we will continue to invest and explore. Okay. That concludes Mr. Chen's answer.

The next questions will come from Yiwen Zhang from China Renaissance.

[Foreign Language] So first, congrats on the very solid print. So my question is regarding our advertising business. In Q1, we maintained 20% ad revenue growth, ahead of the industry average. Can you elaborate what are the underlying drivers? Also, can you discuss how these drivers will play out in the future? And what is our outlook for ad growth here?

[Foreign Language]

[Interpreted] In Q1, our advertising business continue to grow at a rate that is above industry average, reaching RMB 2 billion in revenue and up 20% year-over-year. Notably, our high-margin performance-based ad grew over -- by over 30% year-on-year and contributing significantly to our overall revenue growth and driving continued improvement in our gross margin.

[Foreign Language]

[Interpreted] The key driving factor behind that growth is the combination of high-value user and our strong brand association with high-quality content. This year, our average user age has come to 26. The year 26 -- the audiences represent an increasing disposable income and a diverse consumption scenario. On top of the spiritual consumption, they also come to various product consumption. And the professional in-depth nature of our content continues to foster a deep connection with our users and content creators. And all of that is leading to a continued growth in ad revenue per DAU.

[Foreign Language]

[Interpreted] In the past, we have stick onto the strategy of one horizontal, multiple vertical strategy, and one horizontal refers to our product and infrastructure ability, and the multiple verticals refer to our integrated ad solution across different ad verticals. Let me elaborate on this a little bit. Within the one horizontal strategy, we have continuously to build a stronger ad infrastructure and product capabilities. And in Q1, what we have really improved is in the AI-related product improvement. We have continued to upgrade our marketing data infrastructure by using the multi-model AI ability to better understand our users' purchase intent and on category level interest, boosting our overall ad efficiency. We have also improved our deep conversion capabilities, leading to a greater budget allocation towards deep conversion campaigns. The proportion of deep conversion ad spend more than doubled in Q1 and leads to an increase in our performance-based ad eCPM.

[Foreign Language]

[Interpreted] Another big improvement is in our GenAI-assisted ad material creation because Bilibili's product nature, covers and ad materials are quite important in terms of improving click-through rate and improving our ad efficiency. We have upgraded our commercial AIGC tools using those AI -- GenAI models to help advertisers to auto-generate cover images and titles that really align with Bilibili's user language and also creative style. Currently, AIGC created accounts for over 30% of the performance ad spend.

[Foreign Language]

[Interpreted] Let me talk a little bit our different ad verticals. First of all, games continue to remain our largest advertiser segment, and we continue to improve our conversion path and tools and increase our market share in the game market ad -- game ad market. And we also launched new formats such as Bilibili Minigames and also in-stream game live stream ads that help up new ad -- opening up new ad inventories and new opportunities.

[Foreign Language]

And secondly is that as our user matures and become age of 26 -- average age become 26, they have come to a life stage where they have to face a lot of choices in terms of consumption-related needs, and we have helped them. And also, our trustworthy content creator have done a lot of review things and walk-through and evaluations on those categories and establish great connection between their followers. For example, in Q1, our home appliances-related advertising revenue grew over 35%, and baby, maternity and pet-related advertisement revenue grew over 300% year-over-year.

[Foreign Language]

[Interpreted] Lastly, on AI, as everybody knows, Bilibili hosted the most curious minds who understand the AI-related knowledge, and Bilibili also host the largest AI-related knowledge type of video content. That's why almost all AI manufacturers and companies put a lot of efforts and ad budget, trying to connect with Bilibili users and convert them to become their users. And that's why we're seeing a big surge in AI-related advertising spending, and also, this help us to drive the overall online services sector become a top 2 ad vertical.

[Foreign Language]

[Interpreted] As for the guidance for the second half of this year, we're still quite confident to continue to grow at a pace that's above industry average, combined with our key advantage of high-quality premium content user mindset as well as the increasing user value. We remain very confident about our advertising business development and continue to expand our market share.

Our next question comes from Felix Liu of UBS.

[Foreign Language] Let me translate myself. First, congratulations on the very strong Q1 results, especially the record level of profitability on both GP margin and the profit margin. My question is first on the margin trend in rest of this year. Can management share your outlook on that? And my second question is on your midterm GP margin and net profit margin target.

Thank you, Felix. This is Sam. I will take your question. In Q1, our gross margin reached a record high of 33.3% (sic) [ 36.3% ], making 11 consecutive quarters of improvement. The key contributors to this improvement include the rising share of high-margin gaming and advertising revenue, which account for -- if you added that together, like 54% of the total revenue compared with 47% in Q1 last year. Second, the relatively fixed cost, include content, staff, server costs, remained stable in terms of the absolute dollar value. Further declined their proportion of revenue from 25% last year to 20% this year, and gross margins of advertising and live broadcasting business have been improving in Q1. We are confident that both our gross margin and net margin will achieve gradually improvement throughout the year. In the mid to long term, we are confident that our gross profit margin will be 40% to 45%. In Q1, the proportion of operating expenses to revenue declined from 43% last year to 36% this year. Our adjusted operating margin improved from negative 9% in the same period last year to 5% in Q1 this year. For 2025, we expect the R&D and G&A expenses to remain stable, while marketing expenses will fluctuate with game promotion cycles. As a result, the operating expenses as a percentage of total revenues will continue to decline. Our long-term operating margin target remains the same. That will be 15% to 20%. Thank you for your question.

Thank you. And that concludes the question-and-answer session. Thank you once again for joining Bilibili's First Quarter 2025 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 U.S. can be found on today's press release. Thank you, and have a great day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]