Source: Beast Finance Author: Beast Finance
Financial Results
On March 2, 2023, Bilibili (BILI) announced its financial results for the fourth quarter of 2022 and the full year of fiscal year 2022. The financial report shows that the number of users and revenue of Bilibili have achieved steady growth . The total revenue in the fourth quarter of 2022 reached 6.1 billion yuan, a year-on-year increase of 6%, and the total annual revenue reached 21.9 billion yuan, a year-on-year increase of 13%.
Source: Bilibili Investor Relations
At the same time, Bilibili's net loss in the fourth quarter of 2022 also reached 1.5 billion yuan, and the annual net loss reached 7.5 billion yuan. The adjusted net loss in the fourth quarter of 2022 reached 1.3 billion yuan, and the adjusted net loss for the whole year reached 6.7 billion yuan, an increase of 22%.
Source: Bilibili Investor Relations
But in terms of user growth, the number of Bilibili users has grown significantly, with an average daily active user (DAU) of 92.8 million, a year-on-year increase of 29%, and an average monthly active user (MAU) of 326 million, a year-on-year increase. 20%. Bilibili also highlighted in its earnings report that average monthly paying users (MPUs) were also increasing, reaching 28.1 million, a 15% year-on-year increase.
Source: Bilibili Investor Relations
Chen Rui, chairman and CEO of Bilibili, said at the financial report meeting: The reason why the number of daily active users can grow in the fourth quarter is because we have shifted our focus to the growth of the number of daily active users. He also highlighted the company's highly engaged community, which saw an average of 96 minutes per user per day spent on the platform in the fourth quarter, driving a 51% year-over-year increase in total time per user per day on the platform as well. %.
Chief Financial Officer Sam Fan stated that our sales and marketing expenses decreased by 28% year-over-year in the fourth quarter, while the number of daily active users continued to grow. He also noted that the company has more actively managed its balance sheet through repurchases of convertible senior notes, reducing the total principal amount of outstanding convertible senior notes by $932 million. Looking ahead, we will continue to maintain strict cost control measures while improving margins and narrowing losses.
Valuation
Since 2015, Bilibili has achieved only one positive EBITDA in 2017 (despite revenue growth from $20 million to $3.2 billion). Therefore, it is inappropriate to calculate Bilibili’s valuation with a discounted cash flow valuation model, so we choose to calculate Bilibili by comparing it to iQiyi’s (IQ) share price-to-sales ratio Bilibili's valuation, after calculation, we concluded that Bilibili's sales ratio is 2.7 times, while iQiyi's sales ratio is 1.5 times.
Through the comparison with iQiyi, Boldbeast Finance believes that the market pays more attention to Bilibili’s sales ratio, because Bilibili’s growth rate is faster than iQiyi.
However, the market is ignoring two important factors, i.e., iQiyi’s revenue is still larger than Bilibili’s in absolute terms ($4.2 billion for iQiyi vs. $3.2 billion for Bilibili) , and iQiyi's EBITDA is currently positive, while Bilibili's EBITDA is currently still negative ($197m for iQiyi, -$858m for Bilibili). Unless Bilibili turns profitable soon, we don't think Bilibili's current valuation is justified.
Risks
Boldbeast Finance believes that the biggest risk Bilibili is currently facing is competition risk, especially in the field of games and live broadcasting. And it's uncertain whether Bilibili will be able to effectively monetize its massive user base in the future (as the company has kept ads to a minimum to protect the user experience).
Competition: Although Bilibili faces fierce competition from big companies such as Tencent (00700) and ByteDance in the field of games and live broadcasting. But the network effects of its platform provide protection against competitive threats.
Profit: In order to protect the user experience, Bilibili has kept the advertisements to a minimum level, but it can only make money by adding more advertisements, and doing so may lead to a decline in the number of its users and user stickiness, so its revenue Growth and margins can both be negatively impacted.
Two-tier voting structure: Bilibili currently has a two-tier voting structure, with chairman and CEO Chen Rui holding about 43% of the voting rights. Xu Yi, the company's founder, director and president, controls nearly 24 percent of the voting power.
Chen Rui and Xu Yi own more than 60% of the voting rights and have significant control over the company's management. Such a structure makes it possible for them to take actions that are not in the interests of minority shareholders.
Conclusion
Bilibili still has huge growth potential as its user base continues to expand, especially with many young users who are very attractive to advertisers. However, there is still uncertainty about the company's ability to realize large-scale realization in the future, which may lead to further expansion of its operating losses. Although Bilibili's revenue has grown 8x since 2018, its current valuation may no longer be justified and there may be further downside risks.