Bilibili Inc. — 2019 Form 20-F Summary
Period and scope: Fiscal year ended December 31, 2019; filed March 27, 2020. This is an annual report, not a standalone 2019 Q4 earnings filing. Financial amounts below are in RMB unless otherwise stated; U.S. dollar figures are included where useful. Financial statements use U.S. GAAP.
Business context and reporting period
Bilibili operates a China-focused online entertainment platform spanning user-created and licensed video, mobile games, live broadcasting, value-added services (VAS), advertising, comics, audio and e-commerce. The company reported one operating segment. Q4 operating metrics are available, but the filing does not provide a standalone Q4 income statement or cash-flow statement.
Financial and operating metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Net revenue | RMB 6.778 billion (US$973.6 million), up 64.2% | RMB 4.129 billion |
| Gross profit / gross margin | RMB 1.190 billion / 17.6% | RMB 855.4 million / 20.7% |
| Operating loss / operating margin | RMB 1.495 billion / 22.0% of revenue | RMB 729.0 million / 17.7% of revenue |
| Net loss | RMB 1.304 billion (US$187.2 million); basic and diluted loss per ADS: US$0.57 | RMB 565.0 million; basic and diluted loss per ADS: US$2.64 |
| Operating cash flow | RMB 194.6 million (US$27.9 million) | RMB 737.3 million |
| Investing / financing cash flow | Used RMB 3.958 billion / provided RMB 5.079 billion | Used RMB 3.196 billion / provided RMB 4.975 billion |
| Cash and cash equivalents at year-end | RMB 4.963 billion (US$712.8 million) | RMB 3.540 billion |
| Time deposits / short-term investments at year-end | RMB 1.845 billion / RMB 1.261 billion | RMB 749.4 million / RMB 945.3 million |
| Current assets / current liabilities | RMB 10.324 billion / RMB 4.273 billion | RMB 6.550 billion / RMB 3.299 billion |
| Long-term debt at year-end | RMB 3.415 billion carrying value; US$500 million principal issued in 2026 convertible notes | None reported |
Q4 average monthly active users were 130.3 million, up from 92.8 million in Q4 2018. Average monthly paying users rose to 8.82 million from 4.42 million, while average monthly revenue per paying user declined to RMB54.5 from RMB69.0. For 2019, mobile app users spent an average of 80.1 minutes daily, versus 78.4 minutes in 2018.
Material changes versus the prior comparable period
- Revenue increased 64.2%, with growth across all reported streams: mobile games rose 22.5% to RMB3.598 billion; live broadcasting and VAS rose 180.2% to RMB1.641 billion; advertising rose 76.3% to RMB817.0 million; and e-commerce and other revenue rose to RMB722.1 million from RMB143.5 million.
- Revenue mix shifted: mobile games fell to 53.1% of revenue from 71.1%, while live broadcasting and VAS increased to 24.2% from 14.2%.
- Cost of revenue grew 70.7%, faster than revenue, and gross margin declined 3.1 percentage points to 17.6%. Management cited higher revenue sharing, licensed-content spending, staffing and infrastructure costs.
- Operating expenses increased 69.5% to RMB2.685 billion, including a 104.6% rise in sales and marketing and a 66.4% rise in research and development. Operating and net losses widened.
- Operating cash flow fell to RMB194.6 million from RMB737.3 million, despite higher revenue. Investing outflows increased, including spending on investments, acquisitions, time deposits and intangible assets.
Outlook, commentary, risks and unusual items
- Outlook: The filing does not provide formal numeric guidance. Management said it expected paying users to grow and anticipated further growth in live broadcasting/VAS and advertising revenue, while continuing investment in content, technology and marketing. It stated that cash, cash equivalents and expected operating cash flows should meet working-capital and capital-expenditure needs for at least 12 months.
- Debt and commitments: The 2026 notes carry 1.375% annual interest and mature April 1, 2026; holders may require repurchase on April 1, 2024 or following certain fundamental changes. A December 2019 letter of intent commits RMB800 million for a three-year League of Legends World Championship broadcasting license beginning in 2020. Contractual obligations totaled RMB4.912 billion, including debt, leases and this purchase commitment.
- Concentration: Two mobile games represented 58.2% and 10.4% of 2019 mobile-game revenue, respectively. A single distribution channel generated 17% of total company revenue, down from 29% in 2018. The company also disclosed that two telecom providers accounted for 45% of server and bandwidth expenditure.
- Content, regulation and legal exposure: PRC content-review and licensing requirements may raise costs or disrupt operations; the app had been temporarily removed from certain app stores in 2018. The company disclosed fines of RMB20,000 in 2018 and RMB10,000 in 2019 for inappropriate content, and approximately 90 copyright lawsuits, none individually material. The filing identifies uncertainty around required licenses, online-game approvals and the company’s VIE arrangements.
- COVID-19: The outbreak began after year-end. Management described remote-work measures and possible effects on productivity, offline events and merchandise delivery; the ultimate impact was uncertain.
- Accounting and controls: The auditor identified revenue recognition for in-game virtual items as a critical audit matter because revenue is recognized over estimated player lives, generally three to seven months, relying on churn and game-comparability assumptions. A material weakness in financial-reporting controls identified in 2017 and 2018 was reported as remediated; management and the auditor concluded controls were effective at December 31, 2019.
- Other items: The company acquired Chaodian under common control, acquired Zenith’s remaining 28.1% interest, and reported a related-party investment transfer that generated investment income. These transactions and investment gains should be distinguished from recurring operating performance.
Important facts investors should verify
- Whether user and paying-user growth can translate into improving gross margin, operating leverage and a path to profitability.
- The durability of revenue from the leading mobile games, concentration in the largest games and dependence on the disclosed distribution channel.
- Cash-flow quality, including the impact of working-capital movements, investment activity and cash held within PRC subsidiaries and VIEs; access to VIE assets depends on contractual arrangements.
- The full cost, timing and commercial returns of the RMB800 million esports-rights commitment and other content investments.
- Compliance with PRC content, game, privacy and licensing rules, and developments affecting the VIE structure and foreign-investment restrictions.
- The assumptions behind in-game revenue recognition, acquisition accounting and investment valuations, as well as continued effectiveness of remediated financial controls.
- The realized business and financial effects of COVID-19 and any subsequent regulatory, legal or liquidity developments.