BILIBILI(BILI) - 2023 Q4 - Annual Report

VIE Structure and Financial Contributions - VIE revenues accounted for 74.5%, 73.4%, and 69.4% of total revenues in 2021, 2022, and 2023, respectively[15] - Capital contributions and loans to mainland China subsidiaries were RMB7.6 billion, RMB10.8 billion, and nil in 2021, 2022, and 2023, respectively[26] - VIEs received debt financings of RMB3.3 billion, RMB1.9 billion, and nil in 2021, 2022, and 2023, respectively[27] - VIEs repaid debt financings of nil, nil, and RMB0.7 billion (US $98.0 million) in 2021, 2022, and 2023, respectively[27] - VIEs received cash from WFOEs of RMB1.0 billion, RMB3.3 billion, and RMB1.1 billion (US$ 149.5 million) in 2021, 2022, and 2023, respectively[27] - Restricted net assets of PRC subsidiaries and VIEs totaled RMB3.8 billion, RMB7.8 billion, and RMB6.5 billion (US $0.9 billion) as of December 31, 2021, 2022, and 2023, respectively[28] - No dividends or distributions were made to Bilibili Inc. by subsidiaries in 2021, 2022, or 2023[28] - Bilibili Inc. has no present plan to pay cash dividends on its ordinary shares in the foreseeable future[29] - Hypothetical pre-tax earnings are 100.0%, with a statutory tax rate of 25%, resulting in net earnings of 75.0% available for distribution[30] - Withholding tax at a standard rate of 10% reduces net distribution to Parent/Shareholders to 67.5%[30] - If accumulated earnings of VIEs exceed fees paid to PRC subsidiaries, after-tax income could drop to approximately 50.6% of pre-tax income[31] Financial Performance and Losses - Consolidated third-party revenues for 2023 were RMB 22,527,987 thousand, with total revenues of RMB 22,527,987 thousand[33] - Consolidated third-party costs and expenses for 2023 were RMB 27,592,174 thousand, with total costs and expenses of RMB 27,592,174 thousand[33] - Net loss attributable to Bilibili Inc.'s shareholders for 2023 was RMB 4,822,321 thousand[33] - Consolidated third-party revenues for 2022 were RMB 21,899,167 thousand, with total revenues of RMB 21,899,167 thousand[34] - Consolidated third-party costs and expenses for 2022 were RMB 30,257,111 thousand, with total costs and expenses of RMB 30,257,111 thousand[34] - Net loss attributable to Bilibili Inc.'s shareholders for 2022 was RMB 7,497,013 thousand[34] - Consolidated third-party revenues for 2021 were RMB 19,383,684 thousand, with total revenues of RMB 19,383,684 thousand[34] - Bilibili's operating losses in 2021, 2022, and 2023 were RMB6,429.1 million, RMB8,357.9 million, and RMB5,064.2 million (US$ 713.3 million), respectively[49] Cash Flow and Investments - Net cash provided by operating activities in 2023 was RMB 266,622 thousand, compared to a net cash used of RMB 3,911,370 thousand in 2022[37] - Net cash provided by investing activities in 2023 was RMB 1,762,148 thousand, a significant improvement from RMB 10,609,218 thousand in 2022[37] - Net cash used in financing activities in 2023 was RMB 5,074,685 thousand, compared to RMB 4,354,919 thousand in 2022[37] - Maturities of short-term investments in 2023 amounted to RMB 16,328,255 thousand, a decrease from RMB 81,698,532 thousand in 2022[37] - Placements of time deposits in 2023 were RMB 9,961,925 thousand, slightly lower than RMB 10,245,026 thousand in 2022[37] - Repurchase of convertible senior notes in 2023 totaled RMB 7,675,227 thousand, higher than RMB 4,201,506 thousand in 2022[37] - Proceeds from issuance of ordinary shares in 2023 were RMB 2,689,380 thousand, compared to no issuance in 2022[37] - Consulting and services charges from/(to) Group companies in 2023 were RMB 751,786 thousand, up from RMB 610,600 thousand in 2022[37] - Other operating cashflow from/(to) Group companies in 2023 was RMB 6,285,694 thousand, a significant increase from RMB (3,152,834) thousand in 2022[37] - Operating cashflow (to)/from third-parties in 2023 was RMB 266,622 thousand, compared to RMB (3,911,370) thousand in 2022[37] Assets and Liabilities - Cash and cash equivalents total RMB 7,191,821 thousand, with Bilibili Inc. contributing RMB 106,498 thousand and other subsidiaries contributing RMB 2,144,794 thousand[35] - Time deposits amount to RMB 5,194,891 thousand, primarily from other subsidiaries with RMB 5,190,632 thousand[35] - Accounts receivable, net, total RMB 1,573,900 thousand, with significant contributions from VIEs and their subsidiaries at RMB 800,158 thousand[35] - Short-term investments are valued at RMB 2,653,065 thousand, with Bilibili Inc. holding RMB 625,474 thousand and other subsidiaries holding RMB 798,607 thousand[35] - Long-term investments, net, total RMB 4,366,632 thousand, with other subsidiaries contributing RMB 1,235,311 thousand and VIEs contributing RMB 1,633,932 thousand[35] - Total assets amount to RMB 33,159,067 thousand, with Bilibili Inc. contributing RMB 20,757,887 thousand and other subsidiaries contributing RMB 14,388,272 thousand[35] - Accounts payable total RMB 4,333,730 thousand, with VIEs and their subsidiaries contributing RMB 3,320,121 thousand[35] - Salary and welfare payables amount to RMB 1,219,355 thousand, with other subsidiaries contributing RMB 862,084 thousand[35] - Short-term loan and current portion of long-term debt total RMB 7,455,753 thousand, with Bilibili Inc. contributing RMB 6,053,767 thousand[35] - Total liabilities amount to RMB 18,754,800 thousand, with other subsidiaries contributing RMB 14,580,399 thousand and VIEs contributing RMB 20,038,653 thousand[35] - Cash and cash equivalents increased to RMB 10.17 billion in 2022 from RMB 7.52 billion in 2021, reflecting a 35.2% growth[36] - Time deposits decreased to RMB 4.77 billion in 2022 from RMB 7.63 billion in 2021, a decline of 37.5%[36] - Accounts receivable, net increased to RMB 1.33 billion in 2022 from RMB 1.38 billion in 2021, a slight decrease of 3.9%[36] - Short-term investments decreased significantly to RMB 4.62 billion in 2022 from RMB 15.06 billion in 2021, a drop of 69.3%[36] - Total assets decreased to RMB 41.83 billion in 2022 from RMB 52.05 billion in 2021, a decline of 19.6%[36] - Total liabilities decreased to RMB 26.59 billion in 2022 from RMB 30.34 billion in 2021, a reduction of 12.4%[36] - Total shareholders' equity decreased to RMB 15.24 billion in 2022 from RMB 21.72 billion in 2021, a decline of 29.8%[36] - Salary and welfare payables increased to RMB 1.40 billion in 2022 from RMB 995.45 million in 2021, a growth of 40.7%[36] - Taxes payable increased to RMB 316.24 million in 2022 from RMB 203.77 million in 2021, a rise of 55.2%[36] - Short-term loan and current portion of long-term debt increased to RMB 6.62 billion in 2022 from RMB 1.23 billion in 2021, a significant rise of 437.6%[36] Regulatory and Compliance Risks - Bilibili faces risks related to the PRC government's oversight, including potential penalties or forced relinquishment of interests in VIEs due to non-compliance with regulations[43] - The company's ADSs may be delisted from U.S. markets under the HFCAA if PCAOB inspections of auditors in China remain incomplete[44] - Data security and privacy compliance are critical, with potential penalties including fines, business suspension, or license revocation for non-compliance[57] - Network platform operators holding personal information of over one million users must apply for a cybersecurity review before public listing in a foreign country[58] - Data processors processing personal information of over one million users must apply for a cybersecurity review for foreign listings[58] - Cross-border data transfers of personal information exceeding one million people or sensitive personal information exceeding 10,000 people require security assessments[58] - The company may face additional compliance costs and regulatory risks due to evolving data security and personal information protection laws in China[62] - The company maintains a 24/7 content screening team to monitor user-uploaded content for compliance with regulations[69] - The company has not been involved in any formal cybersecurity review investigations by the Cyberspace Administration of China as of the report date[61] - The company updates its privacy policies and adopts technical measures to comply with the Personal Information Protection Law, effective November 1, 2021[59] - The company faces uncertainties regarding the interpretation and enforcement of new data-related legislation, including the Cybersecurity Review Measures[61] - The company may be subject to fines, penalties, or operational suspensions if it fails to comply with data security and privacy regulations[61] - The company's app was temporarily removed from app stores in the past due to inappropriate content, leading to increased content monitoring personnel and self-inspection measures[70] - The company faces uncertainties regarding compliance with Notice 78 and Notice 3, which may increase compliance burdens and impact live broadcasting business operations[77] - The company's live broadcasting business requires real-name registration and restrictions on minors for virtual gifting, but specific limits remain unclear[74] - The company's advertising revenues may be adversely affected by negative publicity or advertiser concerns over content management practices[73] - The company is exposed to risks in overseas market expansion, including political, social, and economic instability[79] - The company's online game operations face regulatory uncertainties, including potential delays in game registration and publication number approvals[85] - The company faces regulatory risks related to online games, including potential suspension or termination of operations if content is deemed inappropriate, which could materially impact financial results[87] - The company may be required to obtain an Internet Publishing Service License for online games and comics, and failure to do so could result in penalties such as revenue confiscation or fines[88] - The company has completed filings for some algorithms through the Internet Information Services Algorithm Filing System, with others under regulatory review[89] - The company is subject to restrictions on minors' online game playtime, limiting service to one hour per day on weekends and holidays, which may adversely affect revenue from minor users[93] - The company is upgrading systems to comply with anti-addiction regulations, but non-compliance could lead to penalties or license revocation[94] - The company's contractual arrangements with VIEs in mainland China contribute to 69.4% of its 2023 revenues, and any changes in PRC regulations on foreign investment could result in severe penalties or loss of control over these operations[191] - Substantial uncertainties exist regarding the interpretation and application of PRC laws and regulations, which could lead to penalties such as revoking business licenses, imposing fines, or restricting operations[192][193][195] - The company relies on contractual arrangements with VIEs for operations in mainland China, which may not be as effective as direct ownership and could result in loss of control over assets[196][197] - VIEs hold critical licenses for operations, and any bankruptcy or liquidation of VIEs could severely disrupt the company's business[199] - Contractual arrangements with VIEs may be scrutinized by PRC tax authorities, potentially leading to increased tax expenses and loss of preferential tax treatment[200] - The company may lose the ability to consolidate VIEs' financial results under U.S. GAAP if contractual control rights are not enforceable[193][195] - The Foreign Investment Law introduces uncertainties regarding the viability of the company's current corporate structure and operations[206][207] - The company may rely on dividends from PRC subsidiaries for funding, but PRC regulations limit the ability to pay dividends, potentially affecting liquidity[204][205] - Conflicts of interest may arise between the company and VIE shareholders, potentially impacting business operations[202] - The company's ability to enforce contractual arrangements in mainland China is subject to uncertainties due to the underdeveloped legal system[197] - The company's corporate governance could be compromised if company chops are stolen or misused[201] - Foreign investment restrictions in China may impact the company's operations in commercial internet information services, internet audio-visual program services, online cultural activities, and related industries[209] - Potential divestitures of non-core businesses could adversely affect the company's financial condition and earnings[210] - Divested businesses may involve continued financial obligations, such as guarantees or indemnities, which could impact future financial results[211] - Reducing ownership interests in certain businesses may limit the company's access to resources, diversification opportunities, and long-term value[212] - Uncertainties in the interpretation and enforcement of PRC laws and regulations could affect the company's legal protections and operations[213] - PRC government oversight and policy changes could materially impact the company's operations and the value of its shares[215] - Historical inability of the PCAOB to inspect the company's auditor in China may have affected investor confidence in audit quality[216] - The PCAOB's future access to inspect auditors in China remains uncertain, which could impact investor trust in the company's financial reporting[216] Content and User Engagement - 95.2% of total video views in 2023 were from Professional User Generated Video (PUGV), up from 94.6% in 2022[55] - The company's ability to retain and grow its user base depends on providing superior user experience, including quality content and innovative features[50] - The company is investing in artificial intelligence to enhance content creation efficiency and user experience, but faces competition and integration challenges[54] - The company's content library relies heavily on PUGV and OGV, requiring strong relationships with content creators and licensors to maintain and expand its offerings[52] - The company shifted its user growth focus from MAU (Monthly Active Users) to DAU (Daily Active Users) starting in 2022, emphasizing user engagement and sustainability[78] - The company anticipates slowing user growth rates as market penetration increases in China's internet population[78] - The company derived 35.8%, 39.8%, and 44.0% of its revenues from VAS (Value-Added Services) in 2021, 2022, and 2023, respectively[75] - The company faces potential revenue impact from future limits on virtual gifting, which currently has no explicit provisions under Notice 78[75] - The company's live broadcasting business requires real-name registration and restrictions on minors for virtual gifting, but specific limits remain unclear[74] - The company's advertising revenues may be adversely affected by negative publicity or advertiser concerns over content management practices[73] - The company is involved in approximately 200 lawsuits related to copyright infringement claims, which could result in financial and reputational damage[99] - The company may face intellectual property infringement claims in jurisdictions outside mainland China, potentially requiring payment of damages or content removal[102] - The company's apps could be temporarily removed from app stores due to copyright issues, disrupting operations[104] - The company has invested in intellectual property development but faces risks from unauthorized use by third parties, which could harm its competitive position[106] Competition and Market Risks - The company faces significant competition in the video-based industry, particularly from platforms targeting Generation Z+ users, which could impact user traffic and revenue[98] - Intense competition in the live broadcasting business for both users and hosts, focusing on game, entertainment, e-sports, and virtual live broadcasting[108] - Significant increase in hosts' compensation costs in mainland China, potentially impacting revenue growth and margins[110] - Revenue sharing arrangements with hosts and talent agencies, with potential increases in absolute amounts and percentages[111] - Strict regulatory supervision for live broadcasting, including real-name registration requirements and restrictions on minors[113][114] - Challenges in monitoring advertising content on the platform, with potential penalties for non-compliance[122][123] - Decrease in mobile games revenue by 19.9% from RMB5,021.3 million in 2022 to RMB4,021.1 million (US $566.4 million) in 2023[125] - Dependence on third-party game developers and publishers for mobile games, with risks of losing access to popular games[126] - Substantial development costs and risks associated with in-house game development, including delays and market trends[127] - Expenses of RMB354.8 million (US$ 50.0 million) incurred in 2023 for the termination of certain game projects[129] - Revenue model for online games reliant on in-game virtual item sales, with potential risks to player retention[129] - The company faces risks of delayed or canceled game launches due to technical difficulties, lack of resources, and regulatory approvals, which could negatively impact its business and reputation[130] - The mobile games market in China is rapidly evolving, and the company must adapt to new business models, player preferences, and emerging technologies like cloud and VR games to remain competitive[131] - Illegal game servers and cheating by users could harm the company's business, reputation