| Operations | 1. Operations Bilibili Inc. (the “Company” or “Bilibili”) is an online entertainment platform for young generations. Incorporated as a limited liability company in the Cayman Islands in December 2013, the Company, through its consolidated subsidiaries, variable interest entities (“VIEs”) and subsidiaries of the VIEs (collectively referred to as the “Group”), is primarily engaged in the operation of providing online entertainment services to users in the People’s Republic of China (the “PRC” or “China”). In April 2018, the Company completed its IPO on the NASDAQ Global Select Market. In March 2021, the Company successfully listed its Class Z ordinary shares on the main board of the Hong Kong Stock Exchange. The Company issued a total 28,750,000 Class Z ordinary shares in the global offering, including the fully exercised over-allotment option of 3,750,000 Class Z ordinary shares. Net proceeds from the global offering, including the over-allotment option, after deducting underwriting fees and other offering expenses, were approximately HKD22.9 billion (RMB19.3 billion). As of December 31, 2021, the Company’s major subsidiaries, VIEs and subsidiaries of the VIEs are as follows:
Major Subsidiaries Place and Year of Incorporation Percentage of Direct or Economic Ownership Principal Activities
Bilibili HK Limited Hong Kong, 2014 100 Investment holding
Hode HK Limited Hong Kong, 2014 100 Investment holding
Chaodian HK Limited Hong Kong, 2019 100 Investment holding
Bilibili Co., Ltd. Japan, 2014 100 Business development
Hode Shanghai Limited (“Hode Shanghai”) PRC, 2014 100 Technology development
Shanghai Bilibili Technology Co., Ltd. PRC, 2016 100 Technology development
Chaodian (Shanghai) Technology Co., Ltd. PRC, 2019 100 E-commerce and advertising
Major VIEs and VIEs’ subsidiaries Place and Year of Incorporation Acquisition Percentage of Direct or Indirect Economic Ownership Principal Activities
Shanghai Hode Information Technology Co., Ltd. (“Hode Information Technology”) PRC, 2013 100 Mobile game operation
Shanghai Kuanyu Digital Technology Co., Ltd. (“Shanghai Kuanyu”) PRC, 2014 100 Video distribution and game distribution
Sharejoy Network Technology Co., Ltd. (“Sharejoy Network”) PRC, 2014 100 Game distribution
Shanghai Hehehe Culture Communication Co., Ltd. (“Shanghai Hehehe”) PRC, 2014 100 Comics distribution
Shanghai Anime Tamashi Cultural Media Co., Ltd. (“Shanghai Anime Tamashi”) PRC, 2015 100 E-commerce platform Contractual agreements with major VIEs In order to comply with the PRC laws and regulations which prohibit or restrict foreign control of companies involved in provision of internet content services, the Group operates its restricted businesses in the PRC through its VIEs, whose equity interests are held by certain founders of the Group. The Company obtained control over these VIEs by entering into a series of contractual arrangements with the legal shareholders who are also referred to as nominee shareholders. These nominee shareholders are the legal owners of the VIEs. However, the rights of those nominee shareholders have been transferred to the Company through the contractual arrangements. The contractual arrangements that are used to control the VIEs include powers of attorney, exclusive technology consulting and services agreements or exclusive business cooperation agreements, equity pledge agreements and exclusive option agreements. Management concluded that the Company, through the contractual arrangements, has the power to direct the activities that most significantly impact the VIEs’ economic performance, bears the risks of and enjoys the rewards normally associated with ownership of the VIEs, and therefore the Company is the ultimate primary beneficiary of these VIEs. As such, the Company consolidates the financial statements of these VIEs. Consequently, the financial results of the VIEs were included in the Group’s consolidated financial statements in accordance with the presentation as stated in Note 2(a). The following is a summary of the contractual agreements entered into by and among the Company’s relevant subsidiaries, the VIEs, and respective nominee shareholders of the VIEs. Exclusive Technology Consulting and Services Agreements. Exclusive Option Agreements. Powers of Attorney attorney-in-fact Equity Pledge Agreements. Risks in relation to the VIE structure A significant part of the Group’s business is conducted through the VIEs of the Group, of which the Company is the ultimate primary beneficiary. In the opinion of management, the contractual arrangements with the VIEs and the nominee shareholders are in compliance with PRC laws and regulations and are legally binding and enforceable. The nominee shareholders are also shareholders of the Group and have indicated they will not act contrary to the contractual arrangements. However, there are substantial uncertainties regarding the interpretation and application of PRC laws and regulations including those that govern the contractual arrangements, which could limit the Group’s ability to enforce these contractual arrangements and if the nominee shareholders of the VIE were to reduce their interests in the Group, their interest may diverge from that of the Group and that may potentially increase the risk that they would seek to act contrary to the contractual arrangements. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, effective on January 1, 2020. The Foreign Investment Law has a catch-all The Company’s ability to control the VIEs also depends on the powers of attorney the founders have to vote on all matters requiring shareholder approval in the VIEs. As noted above, the Company believes these powers of attorney are legally enforceable but may not be as effective as direct equity ownership. In addition, if the Group’s corporate structure or the contractual arrangements with the VIEs were found to be in violation of any existing or future PRC laws and regulations, the PRC regulatory authorities could, within their respective jurisdictions:
• revoke the Group’s business and/or operating licenses;
• impose fines on the Group;
• confiscate any of the Group’s income that they deem to be obtained through illegal operations;
• discontinue or place restrictions or onerous conditions on the Group’s operations
• restrict the Group’s right to collect revenues;
• shut down the Group’s servers or block the Group’s app/websites;
• require the Group to restructure the operations, re-apply
• impose additional conditions or requirements with which the Group may not be able to comply; or
• take other regulatory or enforcement actions against the Group that could be harmful to the Group’s business. The imposition of any of these restrictions or actions could result in a material adverse effect on the Group’s ability to conduct its business. In such case, the Group may not be able to operate or control the VIEs, which may result in deconsolidation of the VIEs in the Group’s consolidated financial statements. In the opinion of management, the likelihood for the Group to lose such ability is remote based on current facts and circumstances. The Group believes that the contractual arrangements among each of the VIEs, their respective individual shareholders and relevant wholly foreign-owned enterprises are in compliance with PRC law and are legally enforceable. The Group’s operations depend on the VIEs to honor their contractual arrangements with the Group. These contractual arrangements are governed by PRC law and disputes arising out of these agreements are expected to be decided by arbitration in the PRC. Management believes that each of the contractual arrangements constitutes valid and legally binding obligations of each party to such contractual arrangements under PRC laws. However, the interpretation and implementation of the laws and regulations in the PRC and their application on the legality, binding effect and enforceability of contracts are subject to the discretion of competent PRC authorities, and therefore there is no assurance that relevant PRC authorities will take the same position as the Group herein in respect of the legality, binding effect and enforceability of each of the contractual arrangements. Meanwhile, since the PRC legal system continues to evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit legal protections available to the Group to enforce the contractual arrangements should the VIEs or the nominee shareholders of the VIEs fail to perform their obligations under those arrangements. Conflicts of interest may arise between the roles of them as shareholders, directors or officers of Group and as shareholders of the VIEs. The following combined financial information of the Group’s VIEs as of December 31, 2020 and 2021 and for the years ended December 31, 2019, 2020 and 2021 included in the accompanying consolidated financial statements of the Group was as follows:
December 31, December 31,
RMB in thousands
Cash and cash equivalents 349,190 377,114
Time deposits 22,161 6,997
Accounts receivable, net 343,099 524,311
Amounts due from Group companies 173,596 391,951
Amount due from related parties 59,117 101,983
Prepayments and other current assets 1,383,648 1,806,185
Short-term investments 1,175,309 927,124
Long-term investments, net 1,223,943 1,745,466
Other non-current assets 2,183,411 4,926,989
Total assets 6,913,474 10,808,120
Accounts payable 2,332,372 3,164,301
Salary and welfare payables 288,686 343,008
Taxes payable 106,492 128,817
Short-term loans 100,000 400,000
Deferred revenue 1,769,992 2,192,460
Accrued liabilities and other payables 449,370 1,184,523
Amounts due to the Group companies 3,752,973 7,214,146
Amounts due to related parties — 117,901
Other long-term payable 19,640 222,719
Total liabilities 8,819,525 14,967,875
Total Bilibili Inc’s shareholders’ deficit (1,941,724 ) (4,170,459 )
Noncontrolling interests 35,673 10,704
Total shareholders’ deficit (1,906,051 ) (4,159,755 )
Total liabilities and shareholders’ deficit 6,913,474 10,808,120
For the Year Ended December 31,
2019 2020 2021
RMB in thousands
Third-party revenues 6,056,332 9,651,207 12,867,536
Inter-company revenues 531,830 667,765 1,574,896
Total revenues 6,588,162 10,318,972 14,442,432
Third-party costs and expenses (5,795,826 ) (9,931,047 ) (16,283,295 )
Inter-company consulting and services costs and expenses (1,266,411 ) (1,021,596 ) (593,272 )
Other inter-company costs and expenses (75,552 ) (201,587 ) (271,096 )
Total costs and expenses (7,137,789 ) (11,154,230 ) (17,147,663 )
Gain/(Loss) from non-operations 122,116 8,368 (163,146 )
Loss before income tax expenses (427,511 ) (826,890 ) (2,868,377 )
Income tax expenses (20,603 ) (27,080 ) (38,997 )
Net loss (448,114 ) (853,970 ) (2,907,374 )
Net loss attributable to noncontrolling interests 1,936 8,501 10,367
Net loss attributable to Bilibili Inc.’s shareholders (446,178 ) (845,469 ) (2,897,007 )
For the Year Ended December 31,
2019 2020 2021
RMB in thousands
Consulting and services charges to Group companies (1,579,212 ) (1,074,899 ) (637,787 )
Other operating cashflow from Group companies 1,027,392 586,017 1,683,907
Operating cashflow from/(to) third-parties 823,119 1,965,376 (1,729,079 )
Net cash provided by/(used in) operating activities 271,299 1,476,494 (682,959 )
Purchase of short-term investments (6,535,669 ) (13,973,904 ) (12,610,305 )
Maturities of short-term investments 6,113,861 13,498,485 12,954,425
Placements of time deposits (7,584 ) (25,515 ) (39,318 )
Maturities of time deposits 7,584 7,896 54,319
Other investing activities (1,097,123 ) (1,928,125 ) (3,265,756 )
Net cash used in investing activities (1,518,931 ) (2,421,163 ) (2,906,635 )
Investments and loans from Group companies 1,300,740 990,287 3,307,226
Other financing activities — 100,000 300,000
Net cash provided by financing activities 1,300,740 1,090,287 3,607,226
In accordance with various contractual agreements, the Company has the power to direct the activities of the VIEs and can have assets transferred out of the VIEs. Therefore, the Company considers that there are assets in the respective VIEs that can be used only to settle obligations of the respective VIEs, except for the registered capital of the VIEs amounting to RMB million and RMB million, as of December , and , as well as certain non-distributable statutory reserves amounting to RMB million and RMB million, respectively, as of December , and . As the respective VIEs are incorporated as limited liability companies under the PRC Company Law, creditors do not have recourse to the general credit of the Company for the liabilities of the respective VIEs. There is currently contractual arrangement that would require the Company to provide additional financial support to the VIEs. As the Group is conducting certain businesses in the PRC through the VIEs, the Group may provide additional financial support on a discretionary basis in the future, which could expose the Group to a loss. There is no VIE in the Group where the Company or any subsidiary has a variable interest but is not the primary beneficiary. Liquidity The Group incurred net losses of RMB1,303.6 million, RMB3,054.0 million and RMB6,808.7 million for the years ended December 31, 2019, 2020 and 2021, respectively. Net cash provided by operating activities was RMB194.6 million, RMB753.1 million for the years ended December 31, 2019 and 2020, respectively, and net cash used in operating activities was RMB2,647.0 million for the year ended December 31, 2021. Accumulated deficit was RMB7,175.3 million and RMB13,971.3 million as of December 31, 2020 and 2021, respectively. The Group assesses its liquidity by its ability to generate cash from operating activities and attract investors’ investments. Historically, the Group has relied principally on both operational sources of cash and non-operational convertible senior notes due April 2026 ( “ ”) Corporation of America (“SCA”), a wholly owned subsidiary of Sony Corporation (“Sony”), In , raising HKD22.9 billion (RMB19.3 billion), commissions and December |
