Bilibili (NASDAQ:BILI), a leading provider of online entertainment services for younger audiences in China, reported second-quarter results on Monday. The company added 9 million active users in the second quarter while also collecting more revenue per user.

Bilibili's second-quarter results: The raw numbers

Metric

Q2 2019

Q2 2018

Change

Revenue

$224 million

$155 million

46%

Net loss

$45.9 million

$10.6 million

(333%)

GAAP loss per share (diluted)

$0.14

$0.04

(250%)

Data source: Bilibili. GAAP = generally accepted accounting principles.

What happened with Bilibili this quarter?

  • Bilibili's dollar-denominated revenue growth included a 3.7% headwind from currency conversion, as the U.S. dollar's exchange rate versus the Chinese yuan rose by that amount between the second quarters of 2018 and 2019. Revenue guidance for this period stopped at $214 million.
  • The company reported 110.4 monthly active users in the second quarter, 30% above the year-ago period's 85 million. Eighty-seven percent of these users accessed Bilibili's services through a mobile app, up from 84% a year ago.
  • Monthly paying users more than doubled from 3 million to 6.3 million, helping the company monetize its content. Users also engaged with Bilibili's services more often, as shown by a 41% increase in the shorter-term metric of average daily users.
  • Mobile game sales rose 16% in local currencies, reflecting a relatively mature platform with stable revenue flows. Meanwhile, live broadcasting and value-added services saw sales rush 175% higher. Here, management pointed to a successful monetization effort. Rising subscriber numbers play an important part in that project.
  • This company aims to maximize its user counts and revenue base. Earnings will just have to wait a while. Operating expenses surged 66% higher, outpacing Bilibili's revenue growth by a wide margin and pushing the bottom line deeper into red-ink territory.
A group of smiling Asian youngsters sitting on bean bags while on their smartphones.

Image source: Getty Images.

What management had to say

In the slide deck for the second-quarter earnings call, management underscored Bilibili's commitment to serving the so-called Generation Z. This population cohort of Chinese citizens born between 1990 and 2009 includes 328 million people or 24% of the country's total population. Bilibili sees Gen Z as a "driving force" in the online entertainment sector because this large age group often spends a lot of time on online media and are more willing to pay for high-quality services than their older peers.

"As our monetization efforts progress, we continue to convert more online traffic to paying users," said CFO Sam Fan. "As we move forward with our growth plan, our focus will be on obtaining high-quality growth while securing adequate return on our investments."

Looking ahead

For the third quarter of fiscal year 2019, Bilibili's management expects revenue to land near 1.75 billion yuan, which works out to roughly $255 million at the average exchange rates seen in the second quarter. That's approximately 62% above the year-ago quarter's result, whether you're measuring this change in dollars or in yuan.

Further currency exchange developments could throw this trend off-kilter, of course, and the dollar has indeed returned to rising against the yuan in recent months. At today's rate, the expected year-over-year growth would stop in the neighborhood of 55%.