Bilibili (BILI 1.03%) -- famously dubbed the YouTube of China -- ended 2021 with record-high user numbers. This trend has continued in 2022 as it grew average monthly active users (MAUs) to another high of 294 million in the first quarter.

While Bilibli's user growth is impressive, there are others aspects of the business investors should pay attention to when reviewing its latest results. Here are my biggest takeaways.

Young person holding cup watches movie on phone.

Image source: Getty Images.

Latest results fell short of guidance

In a previous article, I wrote that Bilibili's near-term outlook was uncertain even though it had a solid year in 2021. While I am not always right with my predictions, it was spot on this time.

For the first quarter, revenue grew 30% year over year to 5.1 billion  yuan ($797 million) on the back of higher revenue across all segments. Yet, its operating loss doubled to 2.0 billion yuan ($314 million) as the tech company ramped up investments to grow the business.

Growing losses were just one part of the problem. Revenue was also down from the previous quarter amid lower revenue in its advertising and e-commerce segments. On top of that, the top line fell short of management's guidance for 5.3 billion yuan to 5.5 billion yuan.

Another red flag to mention here is Bilibili's cash burn. In the first quarter, its cash and short-term investments balance fell 5.5 billion yuan from the previous quarter to 24.7 billion yuan ($3.9 billion). Investors need to keep a close eye on this trend as the company continues to spend heavily to sustain growth.

Operating metrics hit new records

While Bilibili failed to meet its guidance, there were still some bright spots in the quarter, especially in its operating metrics.

To start, average MAUs and average daily active users (DAUs) advanced 31% and 32% year over year to 294 million and 79 million, respectively. More impressively, daily time spent per user rose to a record high of 95 minutes, up from 82 minutes in the preceding quarter. The solid improvements in user engagement were a result of strong execution and also the impact of the recent COVID-19 lockdowns in China.

Another highlight of the quarter was the improvement in paying ratio to a record high 9.3%. A growing paying ratio is vital as it suggests customer stickiness has improved. It also hints that management's monetization strategy is working, justifying Bilibili's high capital investment and massive losses.

What to expect from Bilibili in the coming quarters

Bilibili benefited from a one-time boost in user engagement as China went through more lockdowns amid the resurgence of COVID-19 cases, but this boost will lapse as China reopens its cities. For example, Shanghai recently came out of a two-month lockdown.

As a result, Bilibili might see a sudden drop in user-engagement metrics in the coming months, especially on daily time spent per user (and potentially the numbers of MAUs and DAUs). These engagement metrics should resume their upward trajectories, but it could take some time before that happens.

Bilibili expects to generate about 4.9 billion yuan in revenue in the second quarter, or up 9% year over year (and down 4% sequentially). Meanwhile, losses will continue to stack up as the company remains focused on acquiring users and investing in content.

In short, it will be a volatile ride ahead for investors. They will need enormous patience and resilience to sit still on this journey.