(Yicai) Aug. 23 -- Chinese video streaming platform Bilibili narrowed its loss by 61 percent in the second quarter from a year ago because of strong advertising and gaming revenue growth.

The net loss was CNY608.1 million (USD83.7 million) in the three months ended June 30, according to the Shanghai-based company’s financial report released yesterday. Revenue jumped 16 percent to CNY6.1 billion (USD843.1 million).

Advertising revenue surged 30 percent to CNY2.04 billion, while that from mobile games jumped 13 percent to CNY1.01 billion, mainly as a result of new titles such as San Guo: Mou Ding Tian Xia. Average daily active users on Bilibili, which marked its 15th anniversary on June 26, rose 6 percent to 102.3 million.

“Our second quarter results highlight how we are accelerating our financial performance while cultivating a vibrant community,” Chairman and Chief Executive Officer Daniel Chen said in a statement released with the results.

That “vibrant community” was cited by Nomura Securities for raising its rating on Bilibili to ‘buy’ from ‘neutral,’ with a share price target of USD18. Citi also reaffirmed its ‘neutral’ rating and USD18 target.

In pre-market trading in New York today, Bilibili [NASDAQ: BILI] was up 4.9 percent at USD13.59 a share as of 6.34 a.m. local time, after sinking 7.6 percent yesterday. The company’s stock in Hong Kong [HKG: 9626] climbed 0.8 percent today to end at HKD107.10 (USD13.73).

Unlocking Community Value

On an earnings conference call, Chief Financial Officer Sam Fan said on behalf of Chen: “Over the past 15 years, our platform has become a regular destination for nearly 70 percent of China Gen Z plus population. This journey has brought us tremendous opportunities as these users have become a major consumer force in society.

“We have seen it in our advertising growth as we enhance our infrastructure to facilitate their evolving consumption needs. We have seen it in our game business as we reinvent strategy to resonate more deeply with the preference of younger audience,” Fan said. 

“We were delighted to see our first strategy game San Mou become an immediate blockbuster” when launched in June, Fan said. “On the first day of first launch ranking the top three on the iOS game grossing chart, attracting millions of gamers to the three kingdoms battlefield.”

"We believe our enhanced commercialization capabilities will further unlock the value of our community, and position us well for profitability and future growth,” Chen’s statement said.

Higher-Margin Businesses

Increasing revenues from the firm’s higher-margin advertising and gaming businesses widened its gross profit margin to 30 percent from 23 percent in the same period of last year, marking an eighth straight quarterly expansion, Fan noted.

As a result, Bilibili's adjusted operating loss and net loss narrowed 69 percent and 72 percent, respectively, he explained. The firm had nearly CNY1.8 billion in operating cash flow in the second quarter, and its deferred revenue balance as of June 30 soared by CNY738 million from March 31, driven by advertising and gaming.

“The solid progress in our financials has put us on the right track toward profitability and paved the way for sustainable growth in the future,” Fan said.

For the first half, Bilibili's revenue rose 14 percent to CNY11.8 billion (UD1.7 billion) from a year ago, and its net loss shrank 37 percent to CNY1.4 billion.

Editor: Futura Costaglione