Form S-1 · Bilibili Inc

Bilibili

Priced March 28, 2018 · $11.50 a share · Original on SEC EDGAR · PDF

Prospectus Summary


PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under "Risk Factors," before deciding whether to buy our ADSs. This prospectus contains information from an industry report dated February 9, 2018 commissioned by us and prepared by iResearch, an independent research firm, to provide information regarding our industry and our market position in China. We refer to this report as the "iResearch Report." We also procured certain data included in this prospectus from QuestMobile, a third-party independent research firm.

Our Business

We enrich the everyday life of young generations in China.

We represent the iconic brand of online entertainment for the young generations in China. We provide high-quality content and an immersive entertainment experience, and have built our platform based on the strong emotional connections of our users to our content and communities. We started as a content community inspired by anime, comics and games, or ACG, and have evolved into a full-spectrum online entertainment world covering a wide array of genres and media formats, including videos, live broadcasting and mobile games. We have now become the welcoming home of diverse cultures and interests and destination for discovering cultural trends and phenomena for young generations in China. We rank No.1 in terms of monthly average time spent per device and monthly average visits per device among online video platforms, an integral part of online entertainment in China, on a monthly aggregate basis in 2017, according to QuestMobile. We believe China will become the world's largest online entertainment market in the future and our brand recognition and market leadership among the young generations in China position us well to capture the significant opportunities.

We have a young and culturally aspirational user base willing to invest in a high-quality entertainment experience. According to QuestMobile, as of December 31, 2017, approximately 81.7% of our user base were Generation Z, individuals born from 1990 to 2009 in China. They typically receive quality education and are technology savvy, with strong demand for culture products and avenues for self-expression and social interaction. In the fourth quarter of 2017, we had 71.8 million average monthly active users, an increase of 45.3% from 49.4 million in the same period of 2016. We believe our users will be the driving force and trend-setters of entertainment consumption in China as they grow with us.

We capture the hearts and minds of our users with superior content experience and carefully designed interactive features. Our user base has demonstrated strong engagement and loyalty to our communities. In 2017, the average daily time spent per active user on our mobile app was approximately 76.3 minutes, as compared to 72.2 minutes in 2016. We pioneered the "bullet chatting" feature, a live commenting function that has transformed the viewing experience by displaying thoughts and feelings of other audience viewing the same video. This signature feature fosters a highly interactive and enjoyable viewing experience and allows our users to benefit from the strong emotional bonds with other users who share similar aspiration and interests.

Our vibrant communities fuel the ever-growing supply of creative professional user generated content, or PUGC. We have developed a robust system and nurtured an encouraging community culture that respects and rewards content creators and motivates the creation of inspirational content. The average monthly number of our active content creators grew by 104% from approximately 100,200 in 2016 to approximately 204,100 in 2017. In addition to PUGC, our diversified content offerings include licensed videos, live broadcasting and mobile games. We focus on offering content that caters to the evolving and diversified interests of our users and our communities.

We attract our users with engaging content, retain users with our vibrant communities, and curate the right content to satisfy our users' entertainment needs. We have successfully developed an ecosystem comprised of highly-engaged users, talented content creators, as well as business partners, forming a virtuous cycle for monetization. We primarily generate revenues from mobile games, live broadcasting and online advertising. Our net revenues grew from RMB131.0 million (US$20.1 million) in 2015 to RMB523.3 million (US$80.4 million) in 2016 and further to RMB2,468.4 million (US$379.4 million) in 2017. We incurred net loss of RMB373.5 million (US$57.4 million), RMB911.5 million (US$140.1 million) and RMB183.8 million (US$28.2 million) in 2015, 2016 and 2017, respectively.

Our Industry

Online entertainment is a large and fast growing industry in China. According to the iResearch Report, China's online entertainment industry market reached RMB205.8 billion in 2016 and is expected to grow at a compound annual growth rate, or CAGR, of 29.6% to RMB752.7 billion in 2021. In particular, Generation Z, the demographic cohort in China of individuals born from 1990 to 2009, is redefining the online entertainment industry because this cohort of individuals have grown up in a unique socio-environment, especially in the following aspects: (i) consumption upgrades to address cultural needs, (ii) deep internet adoption in daily lives and (iii) strong desire for self-expression. According to the iResearch Report, the population of Generation Z has reached 328 million in 2016. Their market share contribution to the online entertainment industry in China in terms of dollar spending is expected to grow from 45.8% in 2014, to 54.8% in 2017 and further to 62.1% in 2020.

As traditional media outlets, which provide content covering limited themes and subjects through a simplex "one-way" form, can no longer satisfy the evolving entertainment needs, online entertainment powered by mobile internet and technology, diversified content and interactive features has become the mainstream media format. Quality content attracts and retains users, which in turn incentivize content providers to create more engaging content. This virtuous cycle propels the healthy development of the online entertainment industry. A large number of Generation Z are actively involved in content generation and promotion, rather than passive content viewing and consumption. According to the iResearch Report, as of the end of 2016, there were 636 million online entertainment consumers in China, who on average spent 1.4 hours every day on online entertainment. Among them, 282 million were Generation Z, and they on average spent more than 1.6 hours every day on online entertainment.

China's online entertainment industry has been expanding rapidly to meet the increasing demand of Generation Z for quality content. Such content covers a wide variety of themes, including anime and comics, game, music, fashion, lifestyle, technology, movie and television serial drama. Driven by the increasing demand on a diverse range of entertainment content, key sectors of the online entertainment industry, including video, games and live broadcasting, have been growing exponentially.

Our Strengths

We believe that the following competitive strengths contribute to our success and differentiate us from our competitors:

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    iconic brand for online entertainment serving the young generations in China;
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    aspirational and fast growing user base;
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    highly sticky communities with a strong sense of belonging;
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    ever-growing supply of creative content;
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    a thriving ecosystem fueling strong monetization potential; and
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    visionary, experienced and passionate management team.

Our Strategies

We intend to achieve our goals by pursuing the following strategies:

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    enhance our content offerings;
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    improve user experience on our platform;
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    further enhance our technologies and infrastructure; and
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    strengthen our monetization capabilities.

Our Challenges

Our ability to realize our mission and execute our strategies is subject to risks and uncertainties, including those relating to our ability to:

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    maintain our culture and brand image within our addressable user communities;
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    address the evolving entertainment needs of our users and provide quality content, products and services to attract and retain users;
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    successfully implement our monetization strategies and generate sustainable revenues and profit;
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    sustain our growth and the increased complexity of our business;
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    manage our costs and expenses;
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    identify and prevent illegal or inappropriate content from being displayed on our platform; and
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    launch new games and release upgrades to grow our game player base.

Please see "Risk Factors" and other information included in this prospectus for a discussion of these and other risks and uncertainties that we face.

Corporate History and Structure

Our website was first launched in June 2009 and was officially named "bilibili" in January 2010. We commenced our commercial operations in 2011 and established Shanghai Hode Information Technology Co., Ltd., or Shanghai Hode, to expand our operations in May 2013. Subsequently, we obtained control over Shanghai Kuanyu Digital Technology Co., Ltd., or Shanghai Kuanyu, in July 2014 to further expand our operations.

We incorporated Bilibili Inc. under the laws of the Cayman Islands as our offshore holding company in December 2013. In February 2014, we established Hode HK Limited, or Hode HK, a wholly-owned Hong Kong subsidiary. In September 2014, Hode HK established a wholly-owned PRC subsidiary, Hode Shanghai Limited, which we refer to as Hode Technology or our WFOE in this prospectus.

Due to restrictions imposed by PRC laws and regulations on foreign ownership of companies that engage in internet and other related business, our WFOE later entered into a series of contractual arrangements with Shanghai Hode and Shanghai Kuanyu, which two entities we collectively refer to as our VIEs in this prospectus, and their respective shareholders. For more details, please see "Corporate History and Structure—Contractual Arrangements with Our VIEs and Their Respective Shareholders."

As a result of our direct ownership in our WFOE and the variable interest entity contractual arrangements, we are regarded as the primary beneficiary of our VIEs. We treat them and their subsidiaries as our consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of these entities in our consolidated financial statements in accordance with U.S. GAAP.

The following diagram illustrates our corporate structure, including our principal subsidiaries and our VIEs and their respective principal subsidiaries, as of the date of this prospectus:

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Notes:

(1)
Rui Chen is a beneficial owner of the shares of Bilibili Inc. and holds 100% equity interests in Shanghai Kuanyu. He is also the chairman of our board of directors and our cheif executive officer.
(2)
Rui Chen, Yi Xu, Qian Wei, Ni Li and Xi Cao are beneficial owners of the shares of Bilibili Inc. and hold 52.3%, 34.8%, 7.0%, 3.4% and 2.5% equity interests in Shanghai Hode, respectively. Among them, Mr. Chen, Mr. Xu and Ms. Li are also directors and officers of our company.

Implication of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an "emerging growth company" pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the preceding three-year period, issued more than US$1.00 billion in non-convertible debt; or (d) the date on which we are deemed to be a "large accelerated filer" under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

Corporate Information

Our principal executive offices are located at Building 3, Guozheng Center, No. 485 Zhengli Road, Yangpu District, Shanghai, People's Republic of China. Our telephone number at this address is +86 21-25099255. Our registered office in the Cayman Islands is located at office of Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.bilibili.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 801 2nd Avenue, Suite 403, New York, New York 10017.

Conventions that Apply to this Prospectus

Unless otherwise indicated or the context otherwise requires, references in this prospectus to:

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    "ADRs" are to the American depositary receipts that evidence our ADSs;
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    "ADSs" are to our American depositary shares, each of which represents Class Z ordinary shares;
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    "average monthly paying user" for a period is calculated by dividing the total number of monthly paying users during the specified period by the number of months in such period;
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    "average monthly paying user for mobile games" for a period is calculated by dividing the total number of monthly paying users for mobile games during the specified period by the number of months in such period;
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    "average monthly revenue per paying user" for a period is calculated by dividing the sum of revenues from mobile games and live broadcasting and other value-added services during the specified period by the total number of monthly paying users during such period;
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    "Bilibili," "we," "us," "our company" and "our" are to Bilibili Inc., its subsidiaries and its consolidated affiliated entities;
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    "bullet chatting" are to a live commenting function that enables content viewers to send comments that fly across the screen like bullets, which we refer to as B-chats herein. B-chats are frame- and context-specific and can be seen by all viewers who watch the same content at different times, and therefore can intrigue interactive commenting among content viewers. Only registered users who have passed our membership exam can send B-chats on our platform;
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    "China" or the "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Hong Kong, Macau and Taiwan;
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    "Class Y ordinary shares" refers to our Class Y ordinary shares, par value US$0.0001 per share;
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    "Class Z ordinary shares" refers to our Class Z ordinary shares, par value US$0.0001 per share;
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    "Generation Z" are to, for the purposes of this prospectus, the demographic cohort in China of individuals born from 1990 to 2009;
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    "monthly active users" or "MAUs" are to the sum of our mobile app MAUs and PC MAUs after eliminating duplicates so that each active registered user that logged on both our mobile app and our PC website would only be counted towards mobile app MAUs and not PC MAUs during a given month. We calculate mobile app MAUs based on the number of mobile devices that launched our mobile app during a given month. We calculate PC MAUs by dividing the total number of IP addresses used by users to visit our PC website during a given month by an estimate of the average number of IP addresses used by each user. When calculating monthly active users for games, we eliminate duplicates so that a user that played multiple games would be counted as one active user for games during a given month;
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    "our platform" are to our "bilibili" mobile app, mobile and PC websites and a variety of related features, functionalities, tools and services that we provide to users and content creators;
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    "paying users" on our platform are to users who make payments for various products and services on our platform, including purchases in mobile games offered on our platform, and payments for virtual items in our live broadcasting programs and for value-added services, or VAS. A user who makes payments across different products and services offered on our platform using the same registered account is counted as one paying user;
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    "professional user generated content" or "PUGC" are to a category of content generated by users that exhibits creativity as well as a certain level of professional production and editing capabilities, and we refer to video content in this category as "PUG video";
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    "retention rate", as applied to any cohort of users who visit our platform in a given period, are to the percentage of these users who make at least one repeat visit after a certain duration; the "12th-month retention rate" for any cohort of users in a given month is the retention rate in the twelfth month after the applicable month;
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    "RMB" and "Renminbi" are to the legal currency of China;
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    "shares" or "ordinary shares" refers to our ordinary shares, par value US$0.0001 per share, and upon and after the completion of this offering, are to our Class Y and Class Z ordinary shares, par value US$0.0001 per share;
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    "US$," "U.S. dollars," "$," and "dollars" are to the legal currency of the United States.

Unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.

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