BILIBILI(BILI) - 2023 Q4 - Annual Report

Executive Summary Third Quarter 2023 Highlights Bilibili reported flat total net revenues year-over-year but significant improvements in gross profit and a narrowing of net loss and adjusted net loss, with strong user growth as DAUs surpassed 100 million | Metric | Q3 2023 (RMB) | YoY Change | | :----- | :------------ | :--------- | | Total Net Revenues | 5.8 billion | Flat | | Advertising Revenues | 1.6 billion | +21% | | Gross Profit | 1.5 billion | +38% | | Gross Profit Margin | 25.0% | vs 18.2% in Q3 2022 | | Net Loss | 1.3 billion | Narrowed by 22% | | Adjusted Net Loss | 863.5 million | Narrowed by 51% | | Average Daily Active Users (DAUs) | 102.8 million | +14% | Management Commentary CEO Rui Chen highlighted strong user growth and engagement, with DAUs exceeding 100 million and average daily time spent reaching a historical high of 100 minutes, while CFO Sam Fan emphasized improved gross profit margin, controlled operating expenses, and positive operating cash flow, signaling a positive operational cycle - DAUs surpassed 100 million, a 14% YoY increase[3] - Users' average daily time spent reached a historical high of 100 minutes, boosting total user time spent by 19% year-over-year[3] - Advertising and value-added services revenues increased by 21% and 17% year-over-year, respectively, driven by enhanced commercialization efficiency[3] - Gross profit margin improved from 18% to 25% year-over-year, with gross profit growing by 38%[3] - Total operating expenses decreased by 12% year-over-year, and adjusted net loss narrowed by 51% year-over-year[3] - Operating cash flow turned positive in Q3, indicating a positive operational cycle[3] Third Quarter 2023 Financial Results Total Net Revenues Total net revenues for Q3 2023 were RMB5.8 billion (US$795.7 million), remaining flat compared to the same period in 2022 | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | Total Net Revenues | 5.8 billion | 5.79 billion | Flat | Revenue by Segment Value-added services and advertising revenues showed strong growth, increasing by 17% and 21% respectively, while mobile games and IP derivatives revenues experienced declines, with mobile games down 33% YoY due to a high base and new game performance Value-added Services (VAS) | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | VAS Revenues | 2.6 billion | 2.21 billion | +17% | Advertising | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | Advertising Revenues | 1.6 billion | 1.35 billion | +21% | Mobile Games | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | QoQ Change | | :----- | :------------ | :------------ | :--------- | :--------- | | Mobile Games Revenues | 991.8 million | 1.47 billion | -33% | +11% | - Year-over-year decrease was mainly due to the high base from the release of Space Hunter 3 in June 2022, as well as lower-than-expected revenues from certain new games in the third quarter of 2023[6] IP Derivatives and Others | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | IP Derivatives & Others Revenues | 580.0 million | 757.8 million | -23% | Cost of Revenues and Gross Profit Cost of revenues decreased by 8% year-over-year due to effective cost control, leading to a 38% increase in gross profit to RMB1.5 billion and an improved gross profit margin of 25.0% | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | Cost of Revenues | 4.4 billion | 4.74 billion | -8% | | Gross Profit | 1.5 billion | 1.05 billion | +38% | | Gross Profit Margin | 25.0% | 18.2% | +6.8 ppts | - The decrease in cost of revenues was mainly due to lower content costs, server and bandwidth costs, and other costs, led by effective cost control[7] Operating Expenses Total operating expenses decreased by 12% year-over-year, with reductions across sales and marketing, general and administrative, and research and development expenses, reflecting the company's cost control efforts Sales and Marketing Expenses | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | Sales & Marketing Expenses | 992.3 million | 1.23 billion | -19% | General and Administrative Expenses | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | G&A Expenses | 499.1 million | 543.4 million | -8% | Research and Development Expenses | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | R&D Expenses | 1.1 billion | 1.13 billion | -6% | Operating Loss and Net Loss Loss from operations narrowed by 40% year-over-year to RMB1.1 billion, net loss also narrowed by 22% to RMB1.3 billion, and adjusted net loss significantly narrowed by 51% to RMB863.5 million, reflecting improved operational efficiency and cost control | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | YoY Change | | :----- | :------------ | :------------ | :--------- | | Loss from Operations | (1.1 billion) | (1.85 billion) | Narrowed by 40% | | Adjusted Loss from Operations | (755.4 million) | (1.55 billion) | Narrowed by 51% | | Net Loss | (1.3 billion) | (1.72 billion) | Narrowed by 22% | | Adjusted Net Loss | (863.5 million) | (1.77 billion) | Narrowed by 51% | Other Income and Expenses The company reported a total investment loss of RMB245.0 million in Q3 2023, a significant change from an income of RMB178.6 million in Q3 2022, primarily due to fair value changes in investments in publicly traded companies | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | Change | | :----- | :------------ | :------------ | :----- | | Investment Income/(Loss), net | (245.0 million) | 178.6 million | (423.6 million) | | Fair Value Change in Investments | (137.4 million) | 343.0 million | (480.4 million) | Earnings Per Share (EPS) Basic and diluted net loss per share improved to RMB3.26, down from RMB4.34 in Q3 2022, with adjusted basic and diluted net loss per share also improving significantly to RMB2.12 from RMB4.46 | Metric | Q3 2023 (RMB) | Q3 2022 (RMB) | Change | | :----- | :------------ | :------------ | :----- | | Basic & Diluted Net Loss per Share | (3.26) | (4.34) | Improved by 25% | | Adjusted Basic & Diluted Net Loss per Share | (2.12) | (4.46) | Improved by 52% | Cash and Investments As of September 30, 2023, Bilibili held RMB14.5 billion (US$2.0 billion) in cash and cash equivalents, time deposits, and short-term investments | Metric | As of Sep 30, 2023 (RMB) | As of Dec 31, 2022 (RMB) | Change | | :----- | :----------------------- | :----------------------- | :----- | | Cash & Cash Equivalents, Time Deposits, Short-term Investments | 14.5 billion | 19.56 billion | -25.9% | Corporate Financial Activities Repurchase of Convertible Senior Notes In Q3 2023, Bilibili repurchased US$14.5 million (RMB104.0 million) of December 2026 Notes for US$13.0 million (RMB93.3 million) cash, with the aggregate outstanding principal amount of convertible senior notes as of September 30, 2023, being US$861.8 million (RMB6.3 billion) - Repurchased an aggregate principal amount of US$14.5 million (RMB104.0 million) December 2026 Notes[13] - Aggregate cash consideration for the repurchase was US$13.0 million (RMB93.3 million)[13] - As of September 30, 2023, the aggregate outstanding principal amount of April 2026 Notes, 2027 Notes and December 2026 Notes was US$861.8 million (RMB6.3 billion)[13] Outlook For the full year 2023, Bilibili expects total net revenues to be at the low-end of the RMB22.5 billion to RMB23.5 billion range, primarily due to lower-than-expected mobile game revenues - For the full year of 2023, total net revenues are expected to be at the low-end of the RMB22.5 billion to RMB23.5 billion range[14] - The revised outlook is primarily due to lower-than-expected mobile game revenues[14] Conference Call Information Bilibili's management will host an earnings conference call on November 29, 2023, at 7:00 AM U.S. Eastern Time, with participants required to register online to receive dial-in numbers and a personal PIN, and a live webcast and replay available on the company's investor relations website - Earnings conference call scheduled for November 29, 2023, at 7:00 AM U.S. Eastern Time (8:00 PM Beijing/Hong Kong Time)[15] - Participants are required to register online in advance to receive dial-in numbers and a personal PIN[15] - A live webcast and replay will be available on Bilibili's investor relations website (https://ir.bilibili.com/)[15](index=15&type=chunk) Company Overview About Bilibili Inc. Bilibili is an iconic brand and a leading video community in China, dedicated to enriching the lives of young generations, offering a wide array of video-based content, fostering a strong community, and pioneering the 'bullet chatting' feature - Bilibili is an iconic brand and a leading video community for young generations in China[16] - Mission: to enrich the everyday lives of young generations in China[16] - Value proposition: 'All the Videos You Like'[16] - Pioneered the 'bullet chatting' feature, a live comment function that transforms user viewing experience[16] Non-GAAP Financial Measures Use of Non-GAAP Financial Measures Bilibili uses non-GAAP measures (adjusted loss from operations, adjusted net loss, adjusted EPS) to evaluate operating results and for decision-making, excluding items like share-based compensation, amortization of acquired intangibles, fair value changes in investments, and organizational optimization expenses, to provide a clearer view of underlying business trends - The Company uses non-GAAP measures (adjusted loss from operations, adjusted net loss, and adjusted net loss per share) for evaluating operating results and financial/operational decision-making[17] - Non-GAAP measures exclude share-based compensation, amortization expense related to intangible assets acquired through business acquisitions, income tax related to acquired intangible assets, gain/loss on fair value change in investments in publicly traded companies, gain/loss on repurchase of convertible senior notes, expenses related to organizational optimization, and termination expenses of certain game projects[17][18] - The purpose is to help identify underlying trends, provide useful information, enhance understanding of past performance and future prospects, and allow for greater visibility into key metrics[17] Legal and Supplementary Information Exchange Rate Information The report translates RMB amounts to US dollars at a rate of RMB7.2960 to US$1.00, based on the exchange rate on September 29, 2023, for convenience only - Translations of RMB amounts into US$ are provided at a rate of RMB7.2960 to US$1.00[19] - The exchange rate is based on September 29, 2023, as set forth in the H.10 statistical release of the Federal Reserve Board[19] - Translations are solely for the convenience of the reader, and the Company makes no representation that amounts could be converted at any particular rate or at all[19] Safe Harbor Statement This section contains forward-looking statements subject to risks and uncertainties, including operational results, financial condition, strategies, user growth, competition, cost management, and regulatory policies, with the company undertaking no duty to update this information - The announcement contains forward-looking statements made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[20] - These statements involve inherent risks and uncertainties, and actual results could differ materially due to various factors[20] - Factors include results of operations, financial condition, strategies, user growth, content quality, competition, cost management, and PRC governmental policies and regulations[20] - The Company undertakes no duty to update such information, except as required under applicable law[20] Investor Relations Contact Provides contact information for investor and media inquiries in China and the United States - Contact details for Bilibili Inc. (Juliet Yang) and Piacente Financial Communications (Helen Wu in China, Brandi Piacente in US) are provided for investor and media inquiries[21] Unaudited Financial Statements Condensed Consolidated Statements of Operations Presents the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023, detailing revenues by segment, cost of revenues, operating expenses, and net loss | Metric (RMB thousands) | Q3 2022 | Q2 2023 | Q3 2023 | 9M 2022 | 9M 2023 | | :--------------------- | :------ | :------ | :------ | :------ | :------ | | Total Net Revenues | 5,793,651 | 5,304,199 | 5,805,081 | 15,756,681 | 16,178,891 | | Gross Profit | 1,054,216 | 1,227,534 | 1,450,417 | 2,599,742 | 3,781,883 | | Total Operating Expenses | (2,903,084) | (2,505,217) | (2,557,590) | (8,630,484) | (7,541,400) | | Loss from Operations | (1,848,868) | (1,277,683) | (1,107,173) | (6,030,742) | (3,759,517) | | Net Loss | (1,716,040) | (1,548,132) | (1,337,246) | (6,010,617) | (3,515,023) | | Net Loss per Share, Basic | (4.34) | (3.74) | (3.26) | (15.22) | (8.54) | Notes to Unaudited Financial Information Provides a breakdown of share-based compensation expenses included in cost of revenues and operating expenses for the three and nine months ended September 30, 2023 | Share-based Compensation (RMB thousands) | Q3 2022 | Q2 2023 | Q3 2023 | 9M 2022 | 9M 2023 | | :--------------------------------------- | :------ | :------ | :------ | :------ | :------ | | Cost of revenues | 16,076 | 17,440 | 18,808 | 54,188 | 48,710 | | Sales and marketing expenses | 15,295 | 14,662 | 13,523 | 41,226 | 42,689 | | General and administrative expenses | 135,420 | 153,597 | 155,511 | 418,295 | 446,724 | | Research and development expenses | 84,537 | 115,115 | 116,195 | 272,179 | 327,462 | | Total | 251,328 | 300,814 | 304,037 | 785,888 | 865,585 | Condensed Consolidated Balance Sheets Presents the unaudited condensed consolidated balance sheets as of December 31, 2022, and September 30, 2023, detailing assets, liabilities, and shareholders' equity | Metric (RMB thousands) | Dec 31, 2022 | Sep 30, 2023 | | :--------------------- | :----------- | :----------- | | Total Assets | 41,830,570 | 33,895,233 | | Total Liabilities | 26,590,983 | 18,420,210 | | Total Shareholders' Equity | 15,239,587 | 15,475,023 | | Cash and Cash Equivalents | 10,172,584 | 7,639,889 | | Short-term Investments | 4,623,452 | 2,469,203 | | Long-term Debt | 8,683,150 | 3,076,494 | Reconciliations of GAAP and Non-GAAP Results Provides detailed reconciliations of GAAP loss from operations and net loss to their respective non-GAAP adjusted measures, outlining the specific adjustments made for share-based compensation, amortization, fair value changes, and other non-recurring items | Metric (RMB thousands) | Q3 2022 | Q2 2023 | Q3 2023 | 9M 2022 | 9M 2023 | | :--------------------- | :------ | :------ | :------ | :------ | :------ | | Loss from operations (GAAP) | (1,848,868) | (1,277,683) | (1,107,173) | (6,030,742) | (3,759,517) | | Add: Share-based compensation expenses | 251,328 | 300,814 | 304,037 | 785,888 | 865,585 | | Add: Amortization expense related to intangible assets acquired through business acquisitions | 48,151 | 48,151 | 47,734 | 144,486 | 144,036 | | Adjusted loss from operations (Non-GAAP) | (1,549,389) | (928,718) | (755,402) | (4,901,664) | (2,749,896) | | Net loss (GAAP) | (1,716,040) | (1,548,132) | (1,337,246) | (6,010,617) | (3,515,023) | | Add: Share-based compensation expenses | 251,328 | 300,814 | 304,037 | 785,888 | 865,585 | | Add: Amortization expense related to intangible assets acquired through business acquisitions | 48,151 | 48,151 | 47,734 | 144,486 | 144,036 | | Add: (Gain)/Loss on fair value change in investments in publicly traded companies | (342,952) | 186,687 | 137,358 | (7,023) | (43,875) | | Adjusted net loss (Non-GAAP) | (1,765,138) | (964,062) | (863,451) | (5,387,986) | (2,858,303) | | Adjusted net loss per share, basic | (4.46) | (2.33) | (2.12) | (13.64) | (6.95) |