Bilibili Inc

NASDAQ:BILI

Earnings Call Analysis

Bilibili Achieves Milestone: First Profitable Quarter

In the third quarter of 2024, Bilibili marked a significant milestone by achieving its first quarterly adjusted net profit. This development is notable considering the backdrop of a highly competitive video industry. The company posted total revenues of RMB 7.3 billion, reflecting a robust 26% year-over-year growth. This performance is largely attributed to the success of its diversification strategy, particularly within the strategy game genre which saw its revenues soar by 84% year-over-year.

Strong Growth Across Revenue Streams

Bilibili's growth trajectory was driven primarily by its gaming and advertising sectors. Revenue from games reached RMB 1.8 billion, while the advertising segment brought in RMB 2.1 billion, both illustrating strong contributions to the company's growth. The advertising sector alone grew by an impressive 28% year-over-year. High-margin contributions from both segments significantly boosted the overall gross profit, which jumped 76% year-over-year to RMB 2.5 billion, resulting in a gross profit margin increase from 25% to 34.9%.

Record Community Engagement Impresses Stakeholders

Bilibili's user metrics also reached record highs, with Daily Active Users (DAUs) climbing to 107 million and Monthly Active Users (MAUs) to 348 million. Additionally, users are now spending an average of 106 minutes daily on the platform, up from 100 minutes a year ago. This increase in user engagement is attributed to the company's ongoing focus on broadening content categories and enhancing the quality of user-generated content.

Future Strategic Focus on Sustainability and Growth

Looking ahead, Bilibili is committed to maintaining its momentum. The company's leadership expressed confidence that the growth observed in gaming and advertising would persist into the fourth quarter, buoyed by an increase in deferred revenue of RMB 380 million. The development of new content and continuous optimization of user experiences are critical strategies moving forward as the company aims to solidify its position in the marketplace.

Positive Cash Flow and Shareholder Returns

Bilibili generated RMB 2.2 billion in operating cash flow in the latest quarter, contributing to a total of RMB 4.6 billion for the first nine months of 2024. The company has announced a share repurchase program of up to USD 200 million over the next 24 months, signaling its commitment to returning value to shareholders as it continues to prioritize strong cash generation amidst its strategic expansions.

Navigating External Forces and Market Trends

In light of recent macroeconomic policy shifts aimed at stabilizing the economy, Bilibili's management noted a positive outlook and perceived opportunities to capitalize on these changes. The company remains optimistic about advertising budgets increasing as sectors begin to recover. As it aligns its internal growth strategies with these external developments, Bilibili anticipates growth in emerging verticals and continued enhancements to its advertising infrastructure.

Earnings Call Transcript 2024-Q3

[Operator]

Good day, and welcome to the Bilibili Third Quarter 2024 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 Yang, Executive Director of Investor Relations. Please go ahead.

[Juliet Yang, executive]

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 in this discussion due to a number of risks and uncertainties, including those mentioned in our most recent filings with the SEC and Hong Kong Stock Exchange.

The non-GAAP financial measure we'll provide are for comparison purpose only. The definition of this measure and a reconciliation table are available in the news release we issued earlier today.

As a reminder, this conference 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.com.

Joining us today from Bilibili senior management are Mr. Rui Chen, Chairman of the Board and Chief Executive Officer; Ms. Carly Li, Vice Chairwoman of the Board and Chief Operating Officer; and Mr. Sam Fan, Chief Financial Officer.

I will now turn the call to Mr. Chen.

[Rui Chen, executive]

Thank you, Juliet, and thank you, everyone, for participating in our third quarter 2024 conference call to discuss our financial and operating results. I'm pleased to deliver today's opening remarks. The third quarter of 2024 was a landmark quarter for Bilibili. We are excited to share that we achieved our first quarterly adjusted net profit while setting new records across our community metrics. These milestones are a strong testament to our ability to deliver profitable growth and the unique community value that we continue to unlock.

Looking at our financials in more detail. Total revenues in the third quarter accelerated, rising by 26% year-over-year, reaching RMB 7.3 billion, driven by our successful diversification into the strategy game genre. Games revenue led our growth, surging by 84% year-over-year. Meanwhile, our advertising business maintained its strong performance in the third quarter, recording a 28% year-over-year increase. The increasing top line contribution from our high-margin games and advertising business propelled our gross profit, up by 76% year-over-year, driving our gross profit margin jumped to 34.9% from 25.0% in the same period last year. As a result, we successfully exceeded our commitment to reaching breakeven in the third quarter, achieving an adjusted operating profit of RMB 272 million and an adjusted net profit of RMB 236 million.

While making remarkable financial progress, we continue to grow and cultivate our community. Both DAUs and MAUs reached record highs in the third quarter, hitting 107 million and 348 million, respectively. Meanwhile, the average daily time spent per user rose to a new high of 106 minutes with robust user retention and engagement. Our users have stayed with us and grown with the platform. The average age of Bilibili users is now 25. As these users enter new life stages with increasing spending power, we will continue to curate more diverse content and services that cater to their evolving needs. Moving ahead, we remain committed to building a welcoming and inspiring video community with all the videos you like. Our return to profitability we point in our journey. We will continue to invest in key infrastructure that supports content creation and distribution, reinforcing our leading position in the high-quality video space and creating value for all our stakeholders.

With that overview, -- let's look at our core content, community and commercialization pillars in more detail, beginning with Tantan community. In the third quarter, our average daily video views exceeded 5.7 billion, up 23% year-over-year. The growth reflects the effectiveness of our strategy to broaden content categories and encourage high-quality content creation. While our leading categories maintained their popularity, consumption-related categories continued rising. This is being driven by increasing user demand as the young generation becomes the mainstream of consumer society. Video views in fashion and home appliances and decoration grew by over 25% year-over-year, while views in automotive, baby and maternity, sports and fitness categories, surged by more than 40% compared with the same period last year.

The diverse commercialization channels we offer continue to empower our content creators to realize their commercial value while pursuing what they love. For the first 9 months of 2024, nearly 2.7 million content creators received income through various channels on our platform. Content creators' total income through our various advertising and VAS products grew by 24% during this period. Notably, content creators' total income through our fan charging product saw an over 400% increase year-over-year in the same period.

Turning to our community metrics. In the third quarter, our DIU spent nearly 106 minutes on our platform every day compared with 100 minutes in the same period last year. Our monthly interactions surpassed 19.3 billion, marking a 14% year-over-year increase. By the end of Q3, our official member's grew to 251 million with our 12-month retention rate remaining around 80%. Additionally, our sponsored eSports team, Bilibili Game, BLG, fought their way to second place in the League of Legends S14 World Championship, marking a new record in the team's history. We are proud of their achievement and look forward to their continued success in the upcoming year.

Events like these continue to support our leadership in the game community and make Bilibili the top choice for young generations. Last but not least, we are excited to share that our MSCI ESG rating was upgraded to an A this year, a testament to our steady ESG improvements over the past few years. This achievement underscores our dedication to advancing our ESG practices where we use our influence to impact communities and society positively.

Now I'd like to talk about the progress of our commercialization in each of our business lines. First, on our Games business. In the third quarter, our games revenues increased by 84% year-over-year to RMB 1.8 billion, driven by the outstanding performance of our strategy game, San Guo [indiscernible]. The game's initial performance reinforces our confidence in the longevity of San Guo. We will continue to roll out new content updates and gameplay to deliver better gaming experiences to users. San Guo's success shows the vast potential that lies within our game community. We plan to leverage our unique game industry advantage to further explore other game opportunities in different genres.

Meanwhile, we remain committed to bringing the best ACG titles to our users. Our legacy titles, FGO and Azur Lane maintained their popularity as they celebrated their eighth and seventh-year anniversaries, respectively. In addition, we launched the Japanese RPG game, [indiscernible], Santen Pared, Joshua, wines in overseas markets in November, which was well received.

Turning to our advertising business. Our advertising business continued to outperform the industry in the third quarter. Advertising revenues increased by 28% year-over-year to RMB 2.1 billion. Robust revenue growth in our performance-based ads was the largest contributor, increasing nearly 50% year-over-year in the third quarter. We also achieved decent year-on-year growth in brand and native ad revenues, reinforcing our strength in integrated marketing capabilities. Our top 5 advertising industry verticals in the third quarter were games, e-commerce, digital products and home appliances, Internet services and automotive. As more and more e-commerce platforms recognize the commercial value of our unique young user base, they allocated larger advertising budgets to our platform. We saw a particular uptick over the summer vacation and back-to-school season, resulting in an 80% year-over-year surge in e-commerce advertising revenues. Meanwhile, we are also attracting more advertisers from emerging verticals. In the third quarter, ad revenues from education, baby and maternity, and travel and lodging all grew by over 100% year-over-year.

In addition, we continue to enhance our ad infrastructure to improve efficiency, and we have seen early benefits from these efforts. For example, as we roll out a more user-friendly and effective ad placement system, the number of performance-based advertisers increased by over 40% year-over-year in the third quarter. We plan to further incorporate AI technologies into our smart ad delivery system and launch a series of tools for ad material creation with higher efficiency and lower costs. These initiatives are expected to attract and retain more advertisers on our platform.

Turning to our VAS business. Revenues from our VAS business increased by 9% year-over-year to RMB 2.8 billion in the third quarter. This quarter, we welcomed the more users to join and enjoy our live broadcasting universe as we continued expanding our content offerings to meet their diverse interests. Simultaneously, we remain focused on refining our operations to ensure sustainable business growth while improving margins. Our premium membership program grew steadily year-over-year, reaching nearly 22 million members in the third quarter. Over 80% of these members are on annual subscription or auto renewal packages. Additionally, other VAS products experienced rapid growth. Fan-charging revenues surged by over 500% year-over-year during the quarter, demonstrating our users' strong willingness to pay for good content.

As we celebrate our first quarter of profitability, I want to thank our dedicated team, our loyal user community and our supportive partners and shareholders. Looking back over the past 15 years, we've made significant breakthroughs in our content offerings, expanded our user base and develop diverse commercialization products. These efforts have helped build a unique video community with a one-of-a-kind user experience in a competitive industry landscape.

Turning profitable is just a new beginning. Building on this milestone, we will continue to reinforce our business' positive growth cycle to drive sustainable profits in the future.

With that, I will turn the call over to Sam to share more financial details.

[Xin Fan, executive]

Thank you, Mr. Chen. Hello, everyone. This is Sam. I will now provide a brief overview of our financial results for third quarter of 2024. For a closer look at our financial results, we encourage you to refer to our press release issued earlier today. As a reminder, all amounts are in RMB unless otherwise noted. In the third quarter, we greatly improved our financial profile. We accelerated our year-over-year revenue growth across our core businesses, continued expanding our margins and turned profitable on a non-GAAP basis. Total revenues for the third quarter were RMB 7.3 billion, up 26% year-over-year. Our total revenue breakdown by revenue stream for Q3 was approximately 38% VAS, 29% advertising, 25% mobile games and 8% from our IP directives and other businesses. Our cost of revenues increased by 9% year-over-year to RMB 4.8 billion in the third quarter, while gross profit rose 76% year-over-year to RMB 2.5 billion. Our gross profit margin reached 34.9% in Q3, up from 25% in the same period last year. The significant improvement in our gross profit and gross profit margin this quarter indicates the elasticity and potential of our business model.

Our total operating expenses were up 2% year-over-year to RMB 2.6 billion in the third quarter. Sales and marketing expenses increased by 21% year-over-year to RMB 1.2 billion, mainly due to increased marketing expenses for our exclusively licensed games.

G&A expenses were RMB 505 million, which was relatively flat year-over-year. R&D expenses were RMB 906 million, down 15% year-over-year due to a higher base of termination expenses for certain game purchases in Q3 last year. Our adjusted operating profit and adjusted net profit turned positive at RMB 272 million and RMB 236 million, respectively, marking significant gains from year-over-year losses. Our adjusted net profit ratio in the third quarter was 3% compared with an adjusted net loss ratio of 15% in the same period a year ago.

Cash flow-wise, we generated RMB 2.2 billion in positive operating cash flow in the third quarter and RMB 4.6 billion positive operating cash flow in the first 9 months of the year. As of September 30, 2024, we had cash and cash equivalents, time deposits and short-term investments of RMB 15.2 billion or USD 2.2 billion.

With a healthy cash balance, we announced a share repurchase program of up to USD 200 million for our securities for the next 24 months, showcasing our commitment to enhance shareholder returns in the long term. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

[Operator]

We will now take our first question from the line of Lei Zhang from Bank of America Securities.

[Lei Zhang, analyst]

[Foreign Language] Congrats on strong results. See that rate on English the call for the first time, it's very well and pretty impressive. My [indiscernible] is really high level, and I want to know management strategic view on bill after trading on breakeven this quarter, what is our key focus in user and commercialization going forward? And how to strengthen our prediction in our redo industry?

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] So actually, the English prepared remarks spoken by me was not really spoken by me, it's generated by AI. It's our self-developed proprietary index PDF model that only use 15 seconds of my speech during 1 of the event and generated that English prepared remark. I was quite surprised when I first hear it, it was just sounds like me. And that shows the vast potential of the application could do for Bilibili such as helping our content careers to make those narratives for engage better on a real time with their users. We are quite looking forward to further leverage that to our applications.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Indeed, this marks our very first quarter of adjusted profitability. And just now, I was receiving a lot of congratulations from friends and investors, but as a matter of fact, we do believe this is a natural outcome of the evolvement of our business model and expansion of the industry. And we just made it happen faster.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] So before I get into futures, I would like to look back a little bit on where we stand right now and the logic that's driving our profitability. First of all, industry that we are in, the video industry is a very large market. And China itself is the largest and a low market. And video is large business. And within that industry, Bilibili has built a very unique wine of a-kind PUGV community in China video market known for the high-quality video content, and we have secured that user mindset.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] So when we are thinking about what is the highest -- where to find highest quality of content or to find talented content creator, what's the go-to destination for mid- to longer lines of videos. Bilibili is always the #1 brand name that pops up. and you can really find, think of #2 in this market. And because video is such a large market, and video will serve as the main media platform for this outlet, the brand awareness, the user mindset that is as precious as gold.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Well, as the adoption of 4G, 5G network, our market has evolved from lack of supply of video content to enough supply of video content. And from a user perspective, they have evolved from wanting to look at any video to wanting to look at high-quality video, unique video. So in some instance, we are experienced an upgrade in content consumption in terms of video market. And riding on that trend, Bilibili has unique advantage because we have that user mindset and brand awareness about those high-quality content.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] As we know that Bilibili has the highest [indiscernible] of Gen Zs cohort, the 90s, the 2000 generation, and because we have very high sticky user cohort and user retention rate, over the past [ 15 ] years, our user has stayed and grown with us. And the average age of Bilibili now has come to 25 years. So 25 also means their commercial value is increasing every day. That's why we see this is an inevitable trend that our commercialization will accelerate and it's a natural outcome of reaching profitability. And going forward, we think there's vast potential for our commercialization to be unleashed.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And in the future -- in the past, we have stated our focus will be focusing on community growth and our commercial growth. After reaching the profitability, our focus will remain unchanged.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] On commercialization, I'll share one thing that is we'll remain even more focused on the core business, such as games and advertising. Because for those 2 business segments, they have higher market TAM and by its nature, it has higher gross margin and that will result in more efficiency in terms of our commercialization growth.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And the success of our commercialization will also support the prosperity of our content ecosystem, and we have been pursuing that formation of the positive flywheel effect between quantity ecosystem and our commercialization growth. As a matter of fact, in the first 9 months of this year, leveraging our various commercial outlet, 2.7 million content creator has received income on Bilibili platform in those commercialization in one way of helping our content creator to realize their commercial value and hence, motivate their further and more content creation.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And one thing I wanted to emphasize is that for Bilibili's commercialization outlets, it's more than just advertising because we are a comprehensive platform, and we provide more tool beyond advertising to help them realize their commercial value, establishing connection between their followers. For example, on top of the native ad Sparkle advertising platform, we have our fan charging program. We also have [indiscernible] to encourage content creators to monetize their scale such as handcrafts and drawing and also premium courses to help them make money in various ways.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] The profitability in Q3 is just a beginning, and we look forward to form a positive flywheel effect formed by our content ecosystem and commercialization growth. And the growth of our commercialization will, in fact, help the Bilibili to become an even healthier organization and achieve sustainable, profitable growth.

[Operator]

Our next question comes from the line of Daniel Chen from JPMorgan.

[Qi Chen, analyst]

[Interpreted] So my question is on advertising, which is very strong. We have grown 28% year-over-year in the third quarter. So what's the key driver behind the third quarter advertising growth? And also for the fourth quarter, do we see there is a change in the kind of macro environment for the advertising demand? And also lastly, how is our performance in the Double 11 festival for our e-commerce-related business?

[Ni Li, executive]

[Foreign Language].

[Juliet Yang, executive]

[Interpreted] Bilibili's Q3 advertising revenue indeed was a good performance. It was reached close to RMB 2.1 billion and maintained a strong growth rate of 28%. And behind that performance-based ads grew nearly 50%, and this is helping us driving our gross margin and on a group level.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] In Q3, we continued our [indiscernible] strategy. To be more specific on e-Home, that was more referring to the platform and structure -- infrastructure construction. On first point, we released more ad inventory while emphasizing on maintaining a good user experience. By maintaining a multiscreen, multi-scenario strategy, commercial inventory grow rapidly on our home page feed and story mode and also generate increased increased ad revenue across recommendations, search, PC and even tablet platform in recent 1 to 2 quarters. Looking forward, there's more potential for additional revenue from live streaming video within video players and also hot topic search. And on top of that, through a blend of organic and commercial traffic and native ad integration, more high-quality ads received more distribution effectively expanding our ad inventory. At the same time, we have achieved content is good commercial and good commercial is a good content effect.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] The second point is that we further optimized our ad placement system. In the third quarter, the number of clients and mobile smart app placement increased by 700% year-on-year. We will continue to improve our products and tools to make ad placement easier. Another example would be with the integration of Sparkle and our ad system, the proportion of Sparkle ads that engaged in ad promotion reached nearly 60% in Q3 and further demonstrating the effectiveness of our Sparks Plus AKA ads promotion services model.

[Ni Li, executive]

[Foreign Language]

[Rui Chen, executive]

[Interpreted] The third point would be the launch of Creative Center and AIGC also [indiscernible] content has also improved our ad efficiency. We plan to roll out additional AIGC tools to help advertiser automatically create or modify ad materials, further lowering their cost and barriers. And in Q4, we'll continue to enhancing our app placement experience, improving algorithm efficiency and we wanted to attract more new advertisers to Bilibili to create content to connect with our users.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And the end zone refers to the industry vertical ad solutions and the top 5 ad verticals in Q3 coming from, #1 games, #2, e-commerce digital products and online services as times automotive. In this leading or leading verticals that we have clear advantage we continue to expand our market share. And one example on game sectors, apart from our experience genre in the sector, daily app placement for mini games sector increased by 200% quarter-over-quarter. In digital products and home appliances, we attract top tech brands like Apple, Huawei and Vivo to launch their new products on Bilibili.

In Q3, we captured more advertising brands during non-shopping festival periods, with e-commerce ad revenue up nearly 80% year-over-year. Traditionally, we see e-commerce platforms to place more ads in the big shopping festival seasons, but in Q3, you are actually attracting more advertising budget during the summer vacation and the back-to-school seasons, reflecting the high value of our high-quality young audiences. And Bilibili's brand advertiser for those e-commerce player, they saw the value in our platform as well as in our users.

And while strengthening our advantageous categories, advertiser from more industries are choosing Bilibili. In Q3, sectors like education, baby and maternity, travel and launching, et cetera, have all reachieved high growth, and we will continue to expand to more industry verticals.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] For the Double 11, we maintained our open-loop strategy, become a deep trusted partner for e-commerce platforms like Alibaba, Jingdong, Pinduduo and VIP shops. GMVs from video and live e-commerce increased over 150% year-on-year, and participating content creators rose by 80%. Among the customers we bring the to those merchant shops, new customer rates exceeded on average 50% across all sectors, including 3C and digital products, home decor, beauty and baby and maternity, et cetera. We have become the key source for new customers across all eCommerce platforms. And this also helped us to achieve close to 50% year-on-year increase in ad revenue during the Double 11 period.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] You mentioned -- asked about macro environment, how that bring changes to the advertising industry. Well, from our perspective, under the current macro environment, there is still some uncertainties in advertisers' budget, but the condition varies by industry -- different industries. For example, factors supported by the national subsidy policies such as the digital products and home appliances are seeing a strong recovery. And on food and beverage, health care and education are beginning to regain market confidence in a more gradual way while the budget remains tight in sectors such as automotive, beauty and fashion and real estate. Even though we expect short-term fluctuations across different industries, we remain optimistic and confident about the domestic economy in the mid- to long term.

[Ni Li, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Going back to Bilibili's advertising revenue, we remain confident that we can maintain faster than industry average growth rate for our advertising revenue in Q4 and further increasing our shares in this -- across all various industry verticals. That concludes Carly's answers.

[Operator]

Next question comes from the line of Yang Liu from Morgan Stanley.

[Yang Liu, analyst]

[Interpreted] My question is about the game business, which grow more than 80% in the third quarter. My question is about the [indiscernible] performance and what is the outlook and the operation planning in the future for this game? And also, I would like to hear management thought about user acquisition and also -- user acquisition for this game and also the future pipeline in Bilibili's game business and also the potential new [indiscernible] in the future?

[Rui Chen, executive]

[Interpreted]

[Juliet Yang, executive]

[Interpreted] The game San Guo: Mou Ding Tian Xia has now has entered in the stage of game season 3, and we're about to enter into game Season 4. So based on what we've seen so far, we can proudly say that San Mou is one of the best-performing games in the China gaming market this year.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Besides the short-term performance, what I care the most is the longevity and sustainable operation of San Mou. And when I say longevity and long-term operation, I'm referring to at least 5 years, 5 to 10 years.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And to achieve the goal of long-term operation, we have made extensive plans in initial R&D phases and preparation in terms of the game design and operation strategy. Based on the performance of the first 3 seasons, we can say that the user engagement level and retention rates are among the highest in this genre in the industry.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Day after tomorrow, November 16, we will be launching the brand new game season for and the new game season, we'll be featuring a new map characters and new star line gameplay. And we are quite confident with the new version content update will provide users with even more engaging and fun gaming experience.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And many of you might know that the San Mou has done a lot of innovation and differentiation compared to the similar genre games. The reason behind that is from day 1, we have collected many, many users' feedback from our closed beta testing to the latest Season 3. We have welcomed feedback and actively engage with our users to listen to their advice and make adjustments based on their feedback. And we also got the reputation of the best game company that listens to the user's feedback. And based on those user feedback, we have proactively adjusted within our new brand -- new Season 4. And going forward, the following seasons, we will continue to listen to our user and optimize and improve our games to give them best experience.

[Rui Chen, executive]

.

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] So when I say the longevity of this game, that gives my next year goal as the top priority will be continue to optimize San Mou's user experience and user engagement. And for this particular strategy game genere, will be very focused on this 1 single title. And because we also have a big team of developers and operators, we will be really focusing our best resources on optimizing this game. And in the second half of this year, we will be starting to preparing for the international launch of San Guo starting with the traditional Chinese version, and we also look forward to bring this high-quality strategy game to the users worldwide.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And the success of San Guo is a testament to the strategy of reinventing new games for young generations. And we have succeeded in the strategy genre and on top of the strategy and the ACG genre, next year, we'll be looking to explore a new genere and adapting our methodology of reinventing games for young generations through this new genre and hopefully can bring another new pipe to be Bilibili Game.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] And in terms of the [indiscernible], many of you noticed, we have successfully launched the Jeju Kaizen international version globally, except Japan and China on November 7. And so far, we have achieved very good results. The game reached Top Downloading Charts #1 in more than 70 countries and regions. And so far, the user feedback has been very positive. This marks a very successful attempt at our very first global distribution of ACG games. And for this particular gain in 2025, it will also be one of our important games to sustain and propel.

[Operator]

Our next question comes from the line of Felix Liu from UBS.

[Felix Liu, analyst]

[Interpreted] Congratulations on turning profitable this quarter. My question is more on the financial side. So what is your GP margin and the profit margin outlook after you are successfully turning profitable this year -- sorry, this quarter? And also, we noticed that you announced share repurchase program. So how should we think about your shareholder reward scheme going forward?

[Xin Fan, executive]

This is Sam. I will answer your question. In Q3, we not only met our previous committed breakeven goal, but also exceeded by achieving an adjusted of RMB 270 million. This result demonstrate the potential of our business model. Our revenue in Q3 grew by 26% when gross profit was significant year-over-year increase of 76%, with the gross profit margin rise nearly 10 points from 25% to close to 35%. This improvement was mainly due to the increase of share of this high-margin game and advertising revenue. allowing the effective control of our fixed costs. We believe that with the continued growth of our [indiscernible] and gaming business, they are further down for long-term improvement in our gross profit margin.

Additionally, it's worth mentioning that our operating cash flow reached RMB 2.2 billion in Q3 with the operating cash flow for the first 3 quarters reaching RMB 4.6 billion. This indicates that our business is heading to a healthy positive cycle. That's also the background that we -- while we announced in our financial report USD 200 million repurchase plan to be carried out over the next 24 months to increase our return to our shareholders.

Looking ahead to Q4, if you look at our deferred revenue balance, that balance in the end of Q3 increased by RMB 380 million quarter-over-quarter, laying solid foundation for Q4. So we expect the revenue from gaming and advertising business to maintain a strong growth momentum, with further quarter-over-quarter improvement in gross profit margin and deliver further improved non-GAAP operating income.

[Operator]

We will now take our last question from the line of Lincoln Kong from Goldman Sachs.

[Lincoln Kong, analyst]

[Interpreted] My question is about more the macro policy. Since end of September, we have seen quite a big shift in terms of those policy and more stimulus coming. So from the company's business level, have we seen any incremental better trends in terms of advertising, gaming, live streaming or user paying propensity?

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] From a business perspective, we are very pleased to see a series of positive economic policy being introduced. We view this policy as highly encouraging signals that reflects the government's commitment to economic growth. And recently, we also -- we felt the government's attention to private sectors and its determination to improve the business environment ourselves.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] While some of these policies are still in the pipeline and might take time for their effects to materialize, but we think it's just simply a matter of time as the overall direction has been set and clear.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Bilibili is part of the platform economy is a key part of the broader economy in China. So when the overall economy improves, Bilibili will undoubtedly benefit from that improvement.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Well, of course, as a company, we will be paying more attention to our own development, specifically on the path we achieved community and profitability growth, commercial growth, and we are planning for our next year and the year afterwards. We wouldn't factor in the overall economy will improve drastically. We'll be focusing on how we -- what we can do to improve our own business model to improve our product to give better content to our visitors.

[Rui Chen, executive]

[Foreign Language]

[Juliet Yang, executive]

[Interpreted] Well, Bilibili has always been known for focusing on the long-term sustainable, healthy development and because our users are also beyond generation, so I'm very much looking forward to the landing of those stimulation policies that can bring the company user and this is tied to a better future.

Operator, that concludes today's call. Thank you.

[Operator]

Thank you. And that concludes the question-and-answer session. Thank you once again for joining Bilibili's Third Quarter 2024 Financial Results and Business Update Conference Call today. If you have any further questions, please contact Juliet Yang, Bilibili's Executive IR Director of Picante Financial Communications. Contact information for IR in both China and the U.S. can be found on today's press release. Thank you, and have a great day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]