Time will tell if the worst is over for Bilibili (NASDAQ:BILI) shareholders. The Chinese online hub for fans of anime, comics, and games posted another quarter of better-than-expected growth after the market closed on Monday.
The week was already heading in the right direction when the stock popped 6% higher yesterday after Bilibili's flagship app began populating smartphone app stores over the weekend. The Central Cyberspace Administration of the People's Republic of China had temporarily blocked the distribution of the app after a nationwide inspection of major online platforms providing short-form video content. The 30-day block issued back on July 26 was always considered temporary, but it's still a relief when regulatory action clears on a fully restored app without new sanctions.
The app's removal for a month from certain app stores had weighed on the stock, and it was also a rough climate for Chinese dot-coms with casual and mobile gaming interests. Regulators are also clamping down on the content of games, recently halting the approval of new game licenses in China. There's never a dull moment. Shares of Bilibili had started the week below its March IPO price of $11.50 and more than half off of the all-time highs it set back in June.
Strong second-quarter results
Revenue rose 76% to $155.1 million for the three months ending in June, well ahead of the $146.9 million that analysts were targeting and the $138.4 million that it rang up during this year's first quarter. Mobile gaming revenue rose 61%, and at $119.5 million, it remains the largest contributor, accounting for 77% of the top-line result.
All of its other money-making businesses -- advertising, live broadcasting, value-added services, and other revenue -- rose at even greater clips than gaming. Losses widened slightly during the period, but the adjusted net loss of $0.01 a share was in line with expectations.
Bilibili's platform continues to build its audience. There were 85 million average monthly active users during the quarter, 30% ahead of where it was a year earlier. Revenue growing at a much faster clip than its user base is a testament to Bilibili's ability to milk more money out of its largely young audience. The number of paying users has nearly tripled to 3 million, though that naturally remains a small part of its total user base.
Guidance for the current quarter is where things could've imploded in light of the app's temporary removal this summer and the crackdown on online gaming in general. The outlook isn't perfect. Revenue for the third quarter is expected to clock in between $151 million and $157 million, which would represent healthy year-over-year growth but a sequential decline if it lands at or below the midpoint of that range. However, it could've been worse, and Wall Street was actually bracing for a much larger sequential dip.
Bilibili is optimistic. It plans to cooperate with regulators to make sure that its app remains in compliance, including a comprehensive review of its platform that will double the number of content monitoring personnel. Challenges remain, but it's easy to see why bearish sentiment is starting to fade in light of the app being fully restored over the weekend and Bilibili coming through with a strong quarter and encouraging guidance.