Chinese video-sharing and online gaming specialist Bilibili (NASDAQ:BILI) reported first-quarter results on Wednesday, May 15. The company reached 100 million monthly users for the first time, driving top-line sales 48% above the year-ago period's result. Here's a closer look at Bilibili's operations.

Bilibili's first-quarter results: The raw numbers

Metric

Q1 2019

Q1 2018

Revenue

$205 million

$138 million

Net loss

$29.2 million

$9.2 million

GAAP loss per American Depositary Share (diluted)

$0.09

$0.28

Data source: Bilibili.

What happened with Bilibili this quarter?

  • Management's revenue guidance for this period stopped at roughly $191 million. Bilibili exceeded that target by 7%.
  • The company's online gaming and video-sharing platforms served 101.3 million average monthly users in the first quarter, up from 92.8 million in the fourth quarter and 77.3 million in the year-ago period. And 31% year-over-year growth in user activity resulted in 48% revenue growth, indicating a 55% increase in revenues per monthly user.
  • Paying users added up to 5.7 million accounts, a 132% year-over-year boost and a 30% increase from the fourth quarter of 2018.
  • About 87% of Bilibili's users accessed the service through their mobile devices, up from 86% in the fourth quarter and 82% a year ago.
  • Yes, Bilibili tripled its net losses, but it also reduced its losses per share by roughly two-thirds. The company worked this magic by lifting its share count 350% higher. You'll recall that Bilibili launched its American IPO at the end of March last year, and that event more than quadrupled the number of shares on the market. The rest is simple mathematics: Splitting a negative profit among four times as many shares can result in a smaller loss per share. This will be the last time investors have to worry about this particular anomaly, since the next report will compare two post-IPO periods -- an apples-to-apples analysis.
Bilibili's logo, showing the company name in white on a blue background patterend with various simple icons.

Image source: Bilibili.

What management had to say

On the earnings call, CFO Sam Fan highlighted his company's first quarter of serving more than 100 million users, adding particular weight to Bilibili's booming growth in mobile usage. Then he explained how China's Generation Z -- people born in the two-decade span between 1990 and 2009 -- form the perfect target demographic for his company's services.

"Based on our high-quality content and unique community experience, Bilibili is becoming a must-have among our primary audience of Gen Z users. This generation readily pays for premium content, more so than any other generation," Fan said. He added:

During the first quarter, our users generated 514 million daily views and 1.4 billion monthly interactions through bullet-chats, comments, likes and Bilibili Moment posts, up 93% and over 360% year-over-year, respectively. Active interfaces among our community further engage our content creators to produce more content. Over 40% of our [monthly active users] now visit our Bilibili Moment functions, all of which promotes our growing community and help to raise Bilibili's profile among our core demographic of Gen Z users.

Looking ahead

Bilibili's management expects second-quarter revenues to land near $214 million, calculated at the current exchange rate of 1.45 Chinese yuan per U.S. dollar. Reaching that target would amount to 43% year-over-year growth in constant currencies and a 38% gain in dollar terms. A recent combination of new debt papers and a secondary ADS offering added $734 million to Bilibili's coffers in April, and the company intends to sink most of this additional cash into R&D and content production. In short, Bilibili's management is optimizing the company's business model for maximum growth. Positive bottom-line earnings won't be a focus for the foreseeable future here.