Bilibili Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 1, 2023

There are 7 speakers on the call.

Operator

Good day, and welcome to the Bilibili First Quarter 2023 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 Young, Executive Director of Investor Relations. Please go ahead.

Speaker 1

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 end 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 measures we provide are for comparison purpose only.

Speaker 1

Definition of these measures and a reconciliation table are available in the news release we issued earlier As a reminder, this conference call 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 dot com. Joining us today from Bilibili Senior Management Are Mr. Ray Chen, Chairman of the Board and Chief Executive Officer Ms.

Speaker 1

Carly Li, Vice Chairwoman of the Board and Chief Operating Officer And Mr. Sam Fan, Chief Financial Officer. And I will now turn the call over to Mr. Fan, Who will read the prepared remarks on behalf of Mr. Chen?

Speaker 2

Thank you, Juliet, and thank you everyone for participating in our 2023 First Quarter Conference Call. I'm pleased to deliver today's opening remarks On behalf of Mr. Chen, our top priority for 2023 is to improve our commercialization efficiency And to narrow our losses, our first quarter results demonstrate that we are making solid progress on these goals. First, We delivered over 20% year on year revenue growth from our advertising business. Our gross margin Improved to 22% in the Q1, up from 16% a year ago, Driving gross profit to increase by 37% year over year.

Speaker 2

2nd, We continue to take measures to strengthen the execution of our expense controls. As a result, we reduced the total operating expenses in the first Quarter by 11% year over year. Specifically, we cut our sales and marketing expenses by 30% year over year While continuing to expand our DAUs, these actions are proving effective in strengthening our bottom line. In the Q1, We narrowed our net loss by 72% year over year. The progress we have made give us confidence that we are on the right track To achieve our breakeven target, while we focus on improving our financial metrics, we continue to attract more users and enhance The engagement levels of our community.

Speaker 2

In the Q1, our DAUs grew by 18% year over year To 93,700,000 while our MAUs reached 350,000,000, Driving our DM ratio up to 29.7% from 27% a year ago. Our users continue to value our evolving and diverse content with the average user daily time spent on Bilibili Reached 96 minutes in the Q1. This brought the total time spent on our platform up 19% year over year. As we move through the year, we will continue to populate our DAUs in a cost effective manner, Stimulate our organization and improve our overall commercialization efficiency. In this way, we can better allocate our resources To areas that further solidify our community, namely, we are working to expand our creator base and help our creators make more money.

Speaker 2

We will also continue to invest in commercialization capabilities, including improving our ad infrastructure, Further integrating live broadcasting and video operations, developing high quality in house games, as well as exploring AIGC opportunities Your content community, all of which will help us build a tighter community and unleash more commercial potential of our platform. With that overview of our progress, I'd now like to provide a brief update on our 3 core pillars: Content, Community and Commercialization. Starting with content, our content creator is an essential component of our ecosystem. We are dedicated to building a community that enables them to recognize and be rewarded. As we provide more user friendly editing cues, professional content operation support and improve the traffic distribution mechanisms If we allow to make tail content creators, we can increase the volume of content creation and attract more creators to our platform.

Speaker 2

In the Q1, the number of our daily active content creators increased by 42% with 79% increase in monthly content submissions, both on a year over year basis. By further integrating our commercial channels within our Content ecosystem, we continue to empower more content creators to realize their commercial value through diverse avenues. Different talent creators can monetize their talent from what they are good at such as advertising, live broadcasting, online paid courses And workshop, leveraging our platform and support over 1,500,000 content creators earned income through multiple channels in the Q1, An increase of 50% year over year. Among them, the number of content creators who earn income by channels Other than our cash incentive program increased by over 55% year over year. Going forward, We will continue to develop more channels and products to enable our content creators to achieve their commercial value.

Speaker 2

Our Motis and Nail Real products, such as Dolry Mode, also contribute to attract broad attention from our users And they satisfy their diversified video watching preferences. For the Q1, our total daily video views Increased by 37 percent to RMB4,100,000,000. Storey more steady video views grew by 82% And the PUGV video views were up 26% in the Q1, both on a year over year basis. Solid consumption trends in Storey Mode are ongoing and continue to present more opportunities For accumulating our DAUs, enhancing community engagement levels as well as increasing our commercialization potential. In addition, we are exploring the integration of AI applications into our content ecosystem.

Speaker 2

Utilizing AIGC can enhance both content creation efficiency and our user experience. We believe it holds great promise and tremendous potential for the video industry. Leveraging these evolving technologies, We can further enrich our content supply, empowering our creators to bring their vision to life more easily and effectively. We are also beta testing new features powered by AIGC to further enhance user experience. As for our community, our user base remains sticky and highly engaged.

Speaker 2

As for our community, our user base remains sticky and highly engaged. The users' average daily time spent on Bilibili Continue to show stability at 96 minutes. Monthly interactions was also up 15% year over year To 14,200,000,000, our co user co hold of official members reached 205,000,000 in the 1st quarter, Showing a 29% increase year over year. The 12 months retention rate for official members also remained around 80%. Our loyal and active community allow us to explore more diverse and community based exclusive products and services, Further opening up more commercial opportunities.

Speaker 2

Now, let's review our commercialization Where we are improving how we monetize our offerings to drive margin expansion and narrow our losses. For the Q1, our total revenues reached RMB5.1 billion. Specifically, Revenue from our taidin business increased by 22% year over year. We continue to take proactive steps to improve our commercialization efficiency To support our top line and increase our gross margin at the company level. Looking at this in more detail.

Speaker 2

First, revenue from our VAS business increased by 5% year over year to RMB2.2 billion for the Q1, Mainly driven by the growth of our live broadcasting business, we continue to integrate our live broadcasting capabilities within our video ecosystem And one of the primary ways for creators to monetize their talent, more creators are making the transaction to live broadcasting hosts. In the Q1, the number of monthly active live broadcasting hosts increased by 34% year over year and the number of live broadcasting paying users Increased by 15% year over year. We have also improved the gross margin of live broadcasting business on both sequential and year on year basis, And we expect the trend will continue. By the end of March, we had 20,200,000 premium members, over 80% of these We are annual auto renew packages subscribers, which represents users' strong trust in our brand and content offerings. Turning to our advertising business.

Speaker 2

Our ad revenues increased by 22% year over year to RMB1.3 billion in the Q1, Largely resulting from our ad infrastructure improvements. Over the past year, we have expanded and optimized our ad product offerings. At the same time, we have been continuously building our commercial database and improving our ad algorithm To drive better ROI for ad clients, the results are encouraging. Performance based ad revenue record Nearly 50% year on year growth in the Q1, while brand ads and native ads also record positive year on year growth. Our top performing verticals for the Q1 were GaN, digital products and home appliance, E Commerce, Skincare and Cosmetics and Automotive, users are showing increased spending power And diversified consumption needs as they grow to new life stages.

Speaker 2

This dynamic is attracting more advertisers from broader vehicles to our platform such as automotive and home appliance. Looking now at our game business, Revenues for the Q1 were RMB1.1 billion. As the rate of game approvals begin to normalize, We welcome the more titles into our pipeline. We plan to release 8 new titles in the domestic market in coming quarters. This includes Cygames' highly anticipated game Pretty Debbie, Our first self development game in the female remains JIRA and our self development ACG card game, Jiruxia.

Speaker 2

In addition, we successfully co published the Honkai Star Rail in April And reverse 1999, Tongban Weilai, in May, demonstrating our strong distribution capabilities. Turning to our IP directives and others, previously known as e commerce and others. Revenues for the Q1 were RMB510 1,000,000, a decrease of 15% year over year. The decrease in revenue was mainly due to a proactive strategy shift to focus on increasing profitability. In the Q1, Margin for IP Derivatives and others improved meaningfully by this approach and we expect this will continue to improve going forward.

Speaker 2

Lastly, we recently published our 2022 annual E and S report, which highlights the value we create And bring to young generations in China. We are committed to sharing our social responsibilities, Forstering a welcoming community for our users and creators and working towards a sustainable future for all. In summary, the actions we have taken are effectively improving our financial performance and operating capabilities. While we continue to grow our dynamic community throughout this year, we will further execute our strategy and continue to expand our gross margin And narrow our losses. This concludes Mr.

Speaker 2

Chen's remarks. I will now provide a brief overview of our financial results for the Q1 of 2023 And our outlook for the year. Total net revenues for the Q1 was RMB5.1 billion, flat Compared with the same period last year, our total net revenue breakdown by revenue stream was approximately 43% VAS, 25% advertising, 22% mobile games and 10% from our IP derivatives and others. Our cost of revenues decreased by 7% year over year, driving our gross profit to RMB1.1 billion, Up 37% year over year, while our gross margin was 22%, up from 16% from the same period last year. With our tightly controlled cost structure, we expect to show continued margin improvements throughout 2023.

Speaker 2

Our total operating expenses were down 11% year over year and fell to 1% quarter over quarter. We are maintaining tight control of our expenses, while we work to increase our commercial prospects. We cut sales and marketing expenses by 30% year over year, while our DAUs grew by 18% year over year. As a percentage of total revenue, Sales and marketing was 17%, compared with 25% in the same period last year. G and A expenses RMB572 1,000,000, up 7% year over year.

Speaker 2

R and D expenses was RMB1 1,000,000,000, Representing a 2% increase year over year. We expect to continue strict control of our operating expenses going forward. Our net loss and adjusted net loss were RMB630 1,000,000,000 and RMB 1,000,000,000, Narrowing by 72% 38% year over year, respectively. Our net loss ratio in the Q1 was 12%, Narrows are 45% from same period a year ago. Turning to our capital allocation and the liability management.

Speaker 2

We currently have 3 outstanding CDs that totaled US1.6 billion dollars Among these, A total principal amount of US746 million dollars of 227 CB has upcoming pool rights, which are accessible through June of this year. As of March 31, 2023, we had cash and cash equivalents, Time deposits and short term investments of RMB19.4 billion or US2.8 billion dollars We believe this amount is sufficient to cover all of our remaining common core CBs and fund our future operations, Including the put rights on our 20 27 CBs. With that in mind, we reiterate our expectation for net revenue for the full year of 2023 To be between RMB24 1,000,000,000 and RMB26 1,000,000,000. Thank you for your attention. We would now like to open the call to your questions.

Speaker 2

Operator, please go ahead.

Operator

For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. A third party interpreter will provide consecutive interpretation for management's statement during the Q and A session. Please note that English interpretation is for the convenience purposes only. In the case of any discrepancy, management statements in their original language will Please standby, we will compile the Q and A roster. This will take a few moments.

Operator

Now we're going to take the first question. And the question comes from the line of Daniel Chan from JPMorgan. Your line is open. Please ask your question.

Speaker 3

I will translate myself. So I have a question related to the user growth. So we saw that we have Under the situation that of lower sales marketing expense in the Q1, we actually have a sustainable growth of the active user in the 1st quarter and higher DAU to MAU ratio in the Q1. So could management maybe share a little bit on the future user growth Like I said on previous earnings calls, We have adopted a more quality oriented approach to user growth. And by quality, I'm specifically referring to DAU growth.

Speaker 3

At this current stage, one of our top priorities To improve the efficiency of commercialization, high quality DAU growth and user engagement are the cornerstone of strengthening commercialization. This quality oriented user growth strategy means that we have to pivot away from MAU toward DAU and over the last several quarters, we have achieved sales and marketing expense reductions, while our DAU number continued to climb up. In Q1, sales and marketing expense was down by 30%, but our DAU increased by 18% to RMB 93,700,000. So compared to MAU, DAU is a better indicator of user engagement And our strategy will continue to focus more on DAU going forward And we will use this indicator to monitor our performance and drive up average user datetime spend and DAU MAU ratio. Building on a stable MAU, we now want to further improve retention and engagement.

Speaker 3

In Q1, DAU to MAU ratio grew to 29.7% An average user daily time spent reached 96 minutes. Going forward, we expect to see further increase in the DAU to MAU ratio. Going forward, I think Bilibili's business model is one of a virtuous cycle Because the content creators, the content supply and the quality of content here means that we're able to attract high quality users. And the community here means that those users will stay and they will remain engaged and then that creates momentum for the content creators Generate even better content. So this is like a virtuous cycle.

Speaker 3

That's why looking at our user growth trend, I think we'll be able to continue to grow our DAU in the future.

Operator

Thank you. Now we're going to take our next question. Please standby.

Speaker 3

Next.

Operator

And the next question comes from the line of Yiwen Zhang from China Renaissance. Your line is open. Please ask your question.

Speaker 4

So my question is regarding advertisement. You delivered 22% YY growth in ad revenue, which was faster than in actual average. Can you show more color on And lastly, recently we observed many e commerce exploration in either the video format or live streaming format.

Speaker 3

So in Q1, we saw that advertising market in China started Walmart and is expected to achieve double digit growth. But at Bilibili, our growth in Q1 was 22%, which I believe is greater than the industry average. And of course, we managed to capture more market share. If If you look at performance ads specifically, the year on year growth for us was higher than 50%, five-zero. So just Mr.

Speaker 3

Chen, just like Mr. Chen mentioned, in the context Of healthy DAU growth, we're very confident that this will feed back into our advertising revenue growth. And specifically, I think our ad business It's driven by both horizontal and vertical improvements as well as by new opportunities that come with vibrant transactions in our community. By horizontal improvement, I'm referring to strengthening technical and data capabilities on the middle platform for greater ad efficiency. 1st, algorithm optimization can help increase the ratio of so called deep conversion, which commands higher eCPM than shallow conversion.

Speaker 3

Take game industry, for example, the ratio has now increased to 35%. 2nd, we want to increase the supply of commercial traffic. Users' commercial behavior is now one of the indicators we monitor for traffic management. Thirdly, data structure is also essential. We've established a science backed marketing methodology.

Speaker 3

In In 2022, we put forward the MACE model, which helps clients refine their advertising plans prior to ad purchase And then help to measure the outcome afterwards. This model was further validated in the auto and FMCG sector in Q1. And lastly, AIGC will also contribute to ad operation and conversion efficiency. So that's what I'm talking about when I said As for vertical improvement, starting last year, we've been building and creating tailored models for 6 Key industries so that their ads can target the right users at BBB. Here are some here are two examples.

Speaker 3

For instance, gaming. BBB is known for our concentration of highly active, high value gamers. In Q1, more than 40% of our mobile users watched game videos or live broadcasting on a daily basis, And our teams responsible for game content, game distribution and game advertising now work closely together towards shared goals, Which paves the way for better than expected in-depth user conversion and branding outcomes. The video views for Our latest game, Hongkai Star Rail, in the initial 2 weeks is 3.7 times that of Jinsheng impact for the same time frame. And as a result, The game distribution and ad revenue are also higher than Jinsheng impact over that same time frame in the 1st week.

Speaker 3

As for e commerce, thanks to our data partnerships with Alibaba, PDD and JD, ad efficiency has improved meaningfully With Q1 revenue growing by more than 110% year on year during the June 18th shopping festival with a well rounded marketing Including Sparkle, branding ads, e commerce and performance ads, we project that our revenue could potentially triple or even quadruple. And for our verticals, electronics, FMCG and auto sector, we're confident that we'll be able With regard to video and live broadcasting e commerce, I think of it as incremental growth for both ad revenue and content creators' incomes. This is the result of vibrant transactions in our community. Since last year, as all the other content platforms were building closed loop e commerce systems, we have remained committed To building an open ecosystem that is connected with all the other e commerce sites out there, it is about shaping the users' mindset to view Bilibili The performance in Q1 exceeded our expectations. In Q1, there were over 10,000,000 users Placing e commerce orders on Bilibili every day, and we also launched a dual performance product that facilitates both wish lifting and transactions, Which accounted for about 30% of our performance adds in Q1.

Speaker 3

E commerce is also a new income stream for content creators. About 50,000 content creators engaged in e commerce sales on a monthly basis in Q1, and there is now a smooth e commerce work for categories such as cosmetics, food and electronics. Going forward, the momentum for consumption and transactions will get even stronger at Bilibili. So that's my take on how video and live broadcast and e commerce will evolve on the platform. Next question.

Operator

Thank you. Now we're going to take our next question.

Speaker 3

Go ahead.

Operator

Just give us a moment. And the next question comes from the line of Linke Kong from Goldman Sachs. Your line is open. Please ask your question.

Speaker 5

Thank you, management, for taking my question. So the question is about the live streaming business. We've been seeing a relatively Quickly growing our business for live streaming, how should we think about the future strategy and outlook, Especially in terms of the integration of our live streaming and on demand as well as the overall gross Margin, trend for the live streaming business. Thank you.

Speaker 3

We've always said that live streaming is a natural extension of our video ecosystem. So operationally, we have always considered So Live broadcasting and videos on Bilibili sometimes often target the same demographics and there is a lot of overlap in category as well. And a lot of The live broadcasters are video creators. And last year since last year, we have been focusing The fusion and integration between live broadcasting and the videos, so as to empower the live broadcasting business I think the success we have been able to achieve with live broadcasting is precisely due to the efforts we have put in to integrate video and live In Q1, the number of video creators who also do live streams increased by 38%, 90% of new live streamers were either average users or video creators. The video ecosystem is a source of vitality and content for our live streaming business.

Speaker 3

And in Q1, the number of active live streamers Increased by 34% and the number of MPUs grew by 15%. That's how we are empowering live streaming through our video ecosystem. So Bilibili boasts Very diversified categories of video content and this has also contributed to the diversity of our live streaming content. One hallmark of that is our VTuber, which is BBB is now home to the largest group of VTubers in China, And this is a national extension of our ACG content from the video side. And today, VTubers are important source of income for live streaming.

Speaker 3

The VTubers are a very active group of live streamers on Bilibili and with the help of AIGC, I think they will be able to generate even more Vivid and lively images and content for the users and the whole experience can be more interactive for the users as well. So I'm personally very optimistic about the prospects. And Bilibili also aims to be diversified and cover as many verticals as possible. And you wouldn't believe that, but Lawyers and legal matters is a very popular category on Bilibili. Some lawyers, they also double as live Streamers on our platform answering legal questions to the viewers.

Speaker 3

Sometimes they have to answer very insignificant, Inconsequential tiny questions, whatever the viewers want to ask them, and it's also something that BBD offers. Another example would be Gold. We have roughly Thousands of gold players in China and the vast majority of whom have already joined the Bilibili community as Live streamers and even though it's a very niche hobby, they somehow ended up together on our platform. We even have a lot of gold players from the province of These examples goes to show that live streaming itself is very dynamic and diversified On Bilibili, it's not just another revenue stream for us. It actually has a lot of content to offer and holds Tremendous potential.

Speaker 3

And as our video business grows stronger and bigger, I believe our live streaming, live broadcasting business During previous earnings calls, I've said that live streaming business could potentially at least double, and I could say that again at this call, I believe live streaming has at least the potential to double at BBB, and the fusion between video and live streaming will continue to enhance. Theoretically, every user can be a video viewer as well as a live stream viewer, and every broadcaster can generate video content as well as live streaming content. And this is now also an important income stream for creators. In Q1, 700,000 And fusion between Videos and live streaming could also drive out our gross margin and reduce cost as more ordinary users are doing live streams on their own and the Cost of bandwidth being spread out even further, we believe the gross margin for live streaming business will continue to improve.

Operator

Thank you.

Speaker 3

Thank you.

Operator

And the next question comes from the line of Lei Zhang from Bank of America Securities. Your line is open. Please ask your question.

Speaker 6

Thank you management for taking my question. Want to ask mainly about monetization of the content creator, which we noted that previously have some widely Discussion on Internet. So can you share us more color on how we can improve either the total income or the commercial value for the content creators on Bilibili. Thank you.

Speaker 3

So I think you're referring to an article released In April, about many the article claims that many creators on Bilibili stopped Uploading new content to the platform, I read it myself and I think this article is nothing but misleading. And this article mentioned 3 content creators who paused their video content updates Out of millions of content creators we have on Bilibili, the article mentioned only 3 and 2 of Those 3, you actually have released new content since then. And so I think even though the article has a Quite clickbait title, the content and the reasoning in this article was misleading. I think this article was able to start a heated debate as proof that people are paying attention to B2B very closely and some media Even went on to write derivative reports on this article, and that's why we and that discussion ended up on the Hot topic list of Weibo. And internally, we have been making a lot of efforts to improve commercialization We have done a lot of work to help our content creators monetize.

Speaker 3

In Q1 alone, 1,500,000 Content creators earned net income on Bilibili, up by 50% year on year and the amount they are making from advertising, live And in this article, it is also said that BBB is cutting incentives for content creation, which could Have some ramifications. This is again very misleading because the incentive programs we have is only for Content creators with fewer than 10,000 followers, basically, we provide them the subsidy to help them tide over the initial period of content creation When they did not have the ability to generate income for themselves and for content creators that have more than 10,000 followers, We help them find the tools to make money on their own. So this incentive program doesn't really matter for the vast majority of the creators Helping our creators monetize has always been a priority in our work. We have established the Sparkle system to help Content creators get commercial deals. We have also been empowering video creators to switch to live streams so that they can make an income there.

Speaker 3

So this effort will never stop. We'll step up our efforts to help them make an income. That's why that's because we believe Only when those content creators don't have to worry about money, they will be able to invest more energy into generating high quality content. So this article is able to trigger such a discussion and Shows that users actually care a lot about the creators and the Bilibili platform. And the reason why we're able to have Such a high concentration of high caliber creators because we believe in the value of high quality content and the power of creators.

Speaker 3

This has always been and will always be a guiding principle in our operation. We have always treated creators nicely because we understand their needs And we are going to spare no effort in supporting those creators and helping them to earn an income that they deserve. This is a work we'll carry out Thank you.

Operator

Thank you. Now we're going to take our next question. Just give us a moment.

Speaker 3

Next question please.

Operator

And the next question comes from the line of Xueting Zhang from CICC. Your line is open. Please ask your question. Good evening, management. Thanks for taking my question.

Operator

And my question is mainly about the gaming business. You mentioned in your prepared remarks that Didi has some newly approved gains. So can management share with us the game pipeline

Speaker 3

This year is going to be a big year for gaming industry. Licenses for domestic games are now issued regularly every month. For imported games, 2 batches of licenses have been handed out since last year, which is great not just In the next several quarters, we have 13 games to be launched at home and abroad, 8 of which have acquired domestic game licenses and will be published in China, 5 of them will be published overseas. We are now preparing for the launch of a high File game we distribute called Pretty Derby, and we are now working around the clock to finish the last bit of localization work for this game before launch. And we also have 2 self developed titles outlined records, which is the female romance game and also Iruso, Bilibili is home to the largest group of ACG gamers and fans and also boasts a very young user base, Which makes us the core channel for distributing ACG games.

Speaker 3

Since the beginning of the year, we've successfully distributed many ACG titles, Proving our worth once again, Honkai Star Wheel by Nihao is a great example of that, which achieved a whopping 2,800,000 first day download And just yesterday, our distribution game, Reversed 1999 was published Many people are interested In our self developed games, 3 examples I mentioned just now are Arcade Land Records and Eruso, And we have more pipeline games under development. But since self developed games, we only want to be Delivering high quality games, so the cycle will be relatively long and each game will take about 3 years for development and the next Self developed game will probably be published around the year after next. We will stick to the strategy of self developed quality games And global distribution, in terms of game genres, we will focus more on our forte, such as ACG card games. Our goal is to develop top ranking games in niche segments and manage them well over a long life cycle, And we're putting the hard effort needed to achieve that success on this front.

Operator

Now I will take our last question. Please standby. And the question comes from the line of Felix Lu from UBS. Your line is open. Please ask your question.

Speaker 3

Thank you, management, for taking my question and congratulations on the notable improvement on GP margin and overall bottom line. Can management elaborate a little bit for measures you have taken and your drivers for future GP margin and loss narrowing drivers? Thank you.

Speaker 2

This is Sam. I will take your question. Our focus of This year is very clear to improve the gross margin. In the same time, we will reduce our net loss. So in the Q1, our gross profit year over year growth grew about 37% and net loss narrowed considerably about 72% year over year and 58% quarter over quarter.

Speaker 2

From the revenue side, we continue to improve the quality The advertising business, as we mentioned, grow by 22% year over year. So it's a high margin business. And as of course, we still keep improving our operational efficiency And achieved a year on year decrease of 7% of total cost. And so that results, the GP Increased by 37% and the GP margin improved to 22% compared with 16% last year. So we use the technology upgrading and to operational management.

Speaker 2

The bandwidth cost, for example, continue to decline, down about 16% year on year And the 12% quarter over quarter. And other fixed costs, for example, label and other operational costs also fall about 7% year on year and quarter over quarter. So from the expense side, you already saw the overall So now operating expenses decreased significantly, about 11% year over year and DAU increased by 18% year over year. So we will keep actively control our operating expenses, especially the marketing expenses, which are already Down about 30% year over year in Q1. I think that will be that trend will continue in the foreign quarter.

Speaker 2

So we are quite confident that we've controlled our cost and expenses. Our gross profit margin will improve quarter over quarter And the operating expenses will also show meaningful year on year decline and to achieve a further narrowing

Operator

Thank you. And that concludes the question and answer session. Thank you once If you have any further questions, Please contact Juliet Yang, Bilibili's Executive IR Director OR PI Center Financial Communications. Contact information for IR in both China and the U. S.

Operator

Can be found on today's press release. Have a great day.

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