Core Viewpoint - The establishment of the "Good House Research Institute" in Suzhou aims to create a scientific evaluation system for quality housing, responding to the current transformation in the real estate market and promoting industry development [3][10]. Group 1: Event Overview - The unveiling ceremony of the Good House Research Institute took place in Suzhou, attended by industry leaders, experts, and representatives from various associations [1][3]. - The event was organized by the Good House Research Institute, with support from multiple local real estate and housing associations [3]. Group 2: Objectives and Vision - The primary goal of the Good House Research Institute is to build an open, diverse, and international communication platform to enhance the quality of housing [3][10]. - Future initiatives include global research activities and site visits to international housing projects to gather innovative ideas for quality housing construction [3][10]. Group 3: Future Plans - The Suzhou branch will collaborate with five authoritative associations to create a cross-sector cooperation platform, aiming to upgrade the entire housing industry chain [12]. - The institute plans to promote exemplary housing projects from Suzhou nationwide, fostering a competitive environment for quality improvement in the real estate sector [13]. - Activities such as "Good House Open Classes" and seminars will be organized to share the latest policies, technologies, and successful experiences, facilitating the practical application of research findings [14].

PART I [Key Information](index=8&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section details Leju's corporate structure, which relies on Variable Interest Entities (VIEs) for its operations in China, contributing 100% of total revenues in 2023, and presents selected financial data showing consistent revenue decline and persistent net losses, with the company also identified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes [Holding Company Structure and Contractual Arrangements](index=8&type=section&id=Holding%20Company%20Structure%20and%20Contractual%20Arrangements) Leju Holdings Limited is a Cayman Islands holding company that conducts its operations in China primarily through contractual arrangements with its Variable Interest Entities (VIEs), which are essential for navigating PRC restrictions on foreign investment in the internet and advertising sectors and constituted 100% of the company's total revenues in 2023 - Leju Holdings Limited is a Cayman Islands holding company with no direct equity ownership in its Chinese operating entities, known as Variable Interest Entities (VIEs)[15](index=15&type=chunk) - The company relies on a series of contractual arrangements (e.g., exclusive call option, equity pledge) to control the VIEs and consolidate their financial results[16](index=16&type=chunk) VIE Revenue Contribution | Fiscal Year | Revenue Contribution from VIEs | |:---|:---| | 2021 | 99.9% | | 2022 | 100.0% | | 2023 | 100.0% | - The company faces substantial risks related to the VIE structure, including potential PRC government intervention that could deem the arrangements non-compliant, leading to severe penalties or loss of control over operations[17](index=17&type=chunk) - As of the report date, the company believes it has obtained all necessary licenses for its business operations, except for internet publication and online audio-visual program transmission licenses, for which it relies on SINA's licenses[18](index=18&type=chunk) [Selected Consolidated Financial Data](index=14&type=section&id=Selected%20Consolidated%20Financial%20Data) The company's financial performance shows a consistent decline over the past three years, with total net revenues decreasing to $316.9 million and net losses persisting at $55.9 million in 2023, while total assets significantly reduced and shareholders' equity turned negative Selected Consolidated Statement of Operations Data (in millions of $) | | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | **Total net revenues** | 534.1 | 343.2 | 316.9 | | E-commerce | 411.1 | 278.5 | 266.1 | | Online advertising | 122.5 | 64.7 | 50.7 | | **Income (loss) from operations** | (166.7) | (105.6) | (58.7) | | **Net loss attributable to Leju** | (150.9) | (89.7) | (55.9) | | **Loss per ADS (Basic & Diluted)** | (11.05) | (6.54) | (4.07) | Selected Consolidated Balance Sheet Data (in millions of $) | | As of Dec 31, 2021 | As of Dec 31, 2022 | As of Dec 31, 2023 | |:---|---:|---:|---:| | Cash and cash equivalents | 250.3 | 123.4 | 48.2 | | Total assets | 437.2 | 216.1 | 102.2 | | Total liabilities | 286.2 | 163.2 | 103.5 | | **Total Leju Holdings Limited shareholders' equity** | 151.3 | 53.2 | (1.2) | Reconciliation of Non-GAAP Financial Measures (in millions of $) | | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | **Income (loss) from operations** | (166.7) | (105.6) | (58.7) | | Adjusted income (loss) from operations | (154.5) | (93.2) | (46.4) | | **Net loss** | (149.9) | (89.7) | (55.8) | | Adjusted net loss | (140.3) | (79.9) | (46.1) | | **Net loss attributable to Leju** | (150.9) | (89.7) | (55.9) | | Adjusted net loss attributable to Leju | (141.4) | (79.9) | (46.2) | [Risk Factors](index=20&type=section&id=D.%20Risk%20Factors) The company faces a multitude of significant risks, including business risks tied to the volatile Chinese real estate market, structural risks from the VIE arrangement, regulatory risks from both Chinese and U.S. authorities, and investment risks related to its ADSs delisting and PFIC classification - **Going Concern Risk**: The company has incurred significant net losses and negative operating cash flows in recent years (**$55.8M net loss** and **$73.6M negative operating cash flow** in 2023), and its auditors have expressed substantial doubt about its ability to continue as a going concern[57](index=57&type=chunk)[58](index=58&type=chunk) - **Business Risk**: The business is highly susceptible to fluctuations and government policies in China's real estate industry, which has been in a steep downturn, with a substantial portion of revenue (**64% in 2023**) concentrated in a few major urban centers[60](index=60&type=chunk)[62](index=62&type=chunk)[76](index=76&type=chunk) - **VIE Structure Risk**: The company relies on contractual arrangements with its VIEs, which may not be as effective as direct ownership and face risks of being deemed non-compliant with PRC laws, potentially leading to severe penalties or loss of control[49](index=49&type=chunk)[141](index=141&type=chunk)[147](index=147&type=chunk) - **Regulatory and Political Risk**: The company faces risks from PRC government oversight, potential changes in foreign investment laws, U.S.-China political tensions, and regulations like the HFCAA, which could lead to trading prohibitions if the PCAOB cannot inspect its auditor[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - **ADS & Investment Risk**: The company's ADSs were delisted from the NYSE in April 2024 and now trade on the OTC Pink market, which may reduce liquidity and depress the price, and the company also believes it was a Passive Foreign Investment Company (PFIC) in 2023, which could result in adverse U.S. federal income tax consequences for U.S. holders[55](index=55&type=chunk)[215](index=215&type=chunk)[245](index=245&type=chunk) [Information on the Company](index=55&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) Leju Holdings Limited is a leading O2O real estate service provider in China, operating through an extensive online platform and complementary offline services, with its business divided into E-commerce and Online Advertising, relying on a VIE framework and strategic relationships with major entities like E-House Enterprise, SINA, and Tencent, and recently delisted from the NYSE to the OTC market [History and Development of the Company](index=67&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Leju was incorporated in 2013 by E-House, went public on the NYSE in 2014, and became a subsidiary of E-House Enterprise in 2020, with TM Home becoming its direct parent in 2021, maintaining key strategic relationships with SINA and Tencent, and recently delisting its ADSs from the NYSE to the OTC Pink market in April 2024 - In November 2020, E-House Enterprise acquired a controlling stake in Leju, making it a subsidiary, and subsequently, in November 2021, TM Home (owned by E-House Enterprise and Alibaba) became Leju's direct parent company, holding approximately **55.4% of its shares** as of March 31, 2024[254](index=254&type=chunk) - E-House Enterprise is contemplating a restructuring plan which, if consummated, could result in it ceasing to be the controlling beneficial owner of Leju[137](index=137&type=chunk)[255](index=255&type=chunk) - The company's ADSs were delisted from the New York Stock Exchange (NYSE) on April 29, 2024, and have since been quoted on the OTC Pink market under the symbol 'LEJUY'[253](index=253&type=chunk) - On May 20, 2022, the company changed its ADS to ordinary share ratio from 1:1 to 1:10, effectively a one-for-ten reverse ADS split[252](index=252&type=chunk) [Business Overview](index=69&type=section&id=B.%20Business%20Overview) Leju operates as an O2O real estate service provider in China, connecting property buyers with developers through E-commerce (primarily discount and commission coupons) and Online Advertising, with its online presence covering 405 cities and mobile applications, and its business is highly seasonal - Leju is an O2O real estate service provider in China with an online platform covering **405 cities** and various mobile applications[263](index=263&type=chunk)[267](index=267&type=chunk) Revenue by Service (in millions of $) | Service | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | E-commerce | 411.1 | 278.5 | 266.1 | | Online Advertising | 122.5 | 64.7 | 50.7 | | Listing | 0.5 | 0.01 | 0 | | **Total Revenues** | **534.1** | **343.2** | **316.9** | - The E-commerce business has shifted significantly towards commission coupons, which generated **$237.7 million** in 2023, up from **$95.5 million** in 2022, while discount coupon revenue fell sharply to **$28.4 million** from **$183.0 million**[411](index=411&type=chunk) - The company faces intense competition from other real estate internet portals like fang.com and anjuke.com, as well as mobile news providers like toutiao.com[289](index=289&type=chunk) - The business is seasonal, with the first quarter being the weakest due to the Chinese New Year holiday, and the third and fourth quarters being the strongest[288](index=288&type=chunk) [Organizational Structure](index=88&type=section&id=C.%20Organizational%20Structure) Leju Holdings Limited, a Cayman Islands company, operates in China through a Variable Interest Entity (VIE) structure to comply with PRC restrictions on foreign investment in internet and advertising services, controlling its main operating entities through contractual arrangements that transfer economic benefits and generated virtually all of the company's revenue, while introducing significant legal and regulatory risks - The company operates in China through three main VIEs: Beijing Leju, Leju Hao Fang, and Beijing Jiajujiu, due to PRC restrictions on foreign ownership in internet services[385](index=385&type=chunk)[386](index=386&type=chunk) - Control over the VIEs is maintained through a series of contractual arrangements, including Exclusive Call Option Agreements, Loan Agreements, Powers of Attorney, and Equity Pledge Agreements[387](index=387&type=chunk)[391](index=391&type=chunk)[396](index=396&type=chunk) - Economic benefits are transferred from the VIEs to Leju's PRC subsidiaries via Exclusive Business Cooperation Agreements, under which the subsidiaries provide technical and consulting services in exchange for fees equivalent to **100% of the VIEs' consolidated profit**[401](index=401&type=chunk)[402](index=402&type=chunk) - In 2023, the VIEs contributed **100.0%** of the company's total net revenues, with total service fees received by PRC subsidiaries from the VIEs amounting to **$10.3 million**[388](index=388&type=chunk) - The company's PRC legal counsel believes the VIE structure complies with current PRC laws, but acknowledges substantial uncertainties regarding the interpretation and application of these laws by regulatory authorities[405](index=405&type=chunk)[406](index=406&type=chunk) [Property, Plants and Equipment](index=103&type=section&id=D.%20Property,%20Plants%20and%20Equipment) The company's principal executive offices are located in Beijing, and as of March 31, 2024, Leju leases approximately 10,100 square meters of office space across 15 local offices in China and one in Hong Kong, which it believes are adequate for its operations - As of March 31, 2024, the company leased an aggregate gross floor area of approximately **10,100 square meters** for its 15 local offices in China and its Hong Kong office[407](index=407&type=chunk) [Operating and Financial Review and Prospects](index=89&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) The company's financial performance continues to be heavily impacted by the downturn in China's real estate industry, with total revenues decreasing by 7.7% in 2023 and a net loss of $55.8 million, leading to a 'going concern' warning from auditors due to liquidity concerns and negative operating cash flow, while critical accounting estimates involve significant judgment [Operating Results](index=104&type=section&id=A.%20Operating%20Results) In 2023, total revenues fell 7.7% to $316.9 million, primarily due to the downturn in China's real estate market, with E-commerce revenue decreasing 4.4% despite a surge in commission coupon revenue, and online advertising revenue declining 21.6%, resulting in a net loss of $55.8 million despite reduced SG&A expenses Consolidated Results of Operations (in millions of $) | | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | Total net revenues | 534.1 | 343.2 | 316.9 | | Cost of revenues | (55.8) | (30.6) | (23.1) | | Selling, general and administrative expenses | (645.6) | (418.5) | (349.6) | | Loss from operations | (166.7) | (105.6) | (58.7) | | Net loss | (149.9) | (89.7) | (55.8) | - Total revenues decreased by **7.7%** in 2023, primarily due to the continued downturn in China's real estate industry and a change in revenue recognition policy for certain customers, where revenue is only recognized upon cash receipt[451](index=451&type=chunk) E-commerce Revenue Breakdown (in millions of $) | E-commerce Type | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | Discount Coupons | 411.1 | 183.0 | 28.4 | | Commission Coupons | 0.0 | 95.5 | 237.7 | | **Total E-commerce Revenue** | **411.1** | **278.5** | **266.1** | - Selling, general and administrative expenses decreased by **16.5%** in 2023, mainly due to reduced marketing expenses for the e-commerce business[453](index=453&type=chunk) [Liquidity and Capital Resources](index=115&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity position is critical, with cash and cash equivalents dropping to $48.2 million and significant negative operating cash flow of $73.7 million in 2023, leading auditors to issue a 'going concern' warning, while the company's ability to transfer funds from its PRC subsidiaries is restricted by regulations - Auditors have issued a 'going concern' warning due to significant operating losses, negative operating cash flows, and a negative working capital of **$15.3 million** as of Dec 31, 2023[470](index=470&type=chunk)[471](index=471&type=chunk)[697](index=697&type=chunk) Summary of Cash Flows (in millions of $) | | 2021 | 2022 | 2023 | |:---|---:|---:|---:| | Net cash used in operating activities | (39.9) | (108.0) | (73.6) | | Net cash provided by (used in) investing activities | (0.3) | 0.0 | 2.6 | | Net cash provided by (used in) financing activities | 1.0 | (0.1) | (0.7) | | **Net decrease in cash and cash equivalents** | **(33.3)** | **(124.7)** | **(73.3)** | - As of December 31, 2023, the company's PRC subsidiaries had restricted net assets of **$36.0 million**, which are not readily transferable to the holding company due to PRC regulations[479](index=479&type=chunk)[852](index=852&type=chunk) - The company's material cash requirements primarily consist of operating lease obligations, with total future lease payments amounting to **$12.3 million** as of December 31, 2023[481](index=481&type=chunk)[482](index=482&type=chunk) [Research and Development, Patents and Licenses, etc.](index=118&type=section&id=C.%20Research%20and%20Development,%20Patents%20and%20Licenses,%20etc.) Leju emphasizes technology development to maintain competitiveness, employing 130 software developers and technology personnel as of December 31, 2023, and has developed proprietary mobile applications, with its intellectual property portfolio including 152 registered copyrights, 332 owned or licensed trademarks, and 59 registered domain names as of March 31, 2024 - As of December 31, 2023, the company employed **130** software developers and other technology-related personnel[485](index=485&type=chunk) - As of March 31, 2024, the company's intellectual property included **152 registered copyrights**, **332 owned or licensed trademarks**, and **59 registered domain names**[486](index=486&type=chunk) [Trend Information](index=119&type=section&id=D.%20Trend%20Information) The company states that China's real estate industry has been in a steep downturn since the second half of 2021, directly and negatively impacting Leju's online advertising and e-commerce businesses, and is not aware of any other significant trends or events since January 1, 2024, that are likely to materially affect its financial condition or results of operations - The company acknowledges that the steep downturn in China's real estate industry since H2 2021 has directly and negatively impacted its business[488](index=488&type=chunk) [Critical Accounting Estimates](index=119&type=section&id=E.%20Critical%20Accounting%20Estimates) The company's financial reporting relies on critical accounting estimates that involve significant judgment and uncertainty, particularly the allowance for current expected credit losses (CECL) on receivables and the provision for income tax, including the valuation allowance for deferred tax assets, given its cumulative losses - A key critical accounting estimate is the allowance for current expected credit losses on receivables, which requires significant judgment in assessing customer credit risk based on historical data and forward-looking economic conditions[490](index=490&type=chunk)[703](index=703&type=chunk) - Another critical estimate is the provision for income tax and the valuation allowance for deferred tax assets, where the company considers cumulative losses as significant negative evidence, limiting its ability to rely on projections of future taxable income to realize these assets[491](index=491&type=chunk)[493](index=493&type=chunk)[834](index=834&type=chunk) [Directors, Senior Management, and Employees](index=104&type=section&id=ITEM%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and workforce, noting that the board consists of five directors led by Executive Chairman Xin Zhou, dissolved its audit, compensation, and corporate governance committees in May 2024, and has seen a significant decline in employee headcount to 871 by the end of 2023, with major shareholders including TM Home (55.4%), Tencent (15.4%), and SINA (12.1%) [Directors and Senior Management](index=120&type=section&id=A.%20Directors%20and%20Senior%20Management) The company is led by Executive Chairman Xin Zhou and Director & CEO Yinyu He, with a board of five directors and an executive team including COO Qiong Zuo and CFO Li Yuan, all possessing extensive experience in China's real estate, internet, and media industries Directors and Executive Officers | Name | Age | Position | |:---|:---:|:---| | Xin Zhou | 56 | Executive Chairman | | Yinyu He | 49 | Director and Chief Executive Officer | | Canhao Huang | 66 | Director | | Minyi Zhang | 47 | Director | | Haiyan Gu | 49 | Director | | Qiong Zuo | 44 | Chief Operating Officer | | Li Yuan | 43 | Chief Financial Officer | [Compensation](index=122&type=section&id=B.%20Compensation) For fiscal year 2023, the company paid approximately $0.3 million in cash to executive officers and $0.1 million to directors, with its 2013 Share Incentive Plan expiring in December 2023, leaving 9,507,804 options outstanding as of March 31, 2024, and recorded $1.8 million in share-based compensation expenses in 2023 - For the year ended December 31, 2023, the company paid an aggregate of approximately **$0.3 million** in cash to its executive officers and **$0.1 million** to its directors[505](index=505&type=chunk) - The 2013 Share Incentive Plan (Leju Plan) expired on December 1, 2023, and as of March 31, 2024, there were **9,507,804 options** outstanding under the plan[511](index=511&type=chunk)[515](index=515&type=chunk) - In 2023, the company recorded share-based compensation expenses of **$1.8 million**, and as of December 31, 2023, there was **$0.6 million** of unrecognized compensation expense related to unvested awards[511](index=511&type=chunk) [Board Practices](index=125&type=section&id=C.%20Board%20Practices) The board of directors consists of five members, and a significant governance change occurred in May 2024 when independent directors resigned, leading the full board to assume the functions of the audit, compensation, and nominating and corporate governance committees, resulting in no independent directors on the board as of the report date - On May 6, 2024, following the resignation of its independent directors, the company's board of directors resolved to dissolve the audit, compensation, and nominating and corporate governance committees[520](index=520&type=chunk) - The full board of directors has assumed the functions and responsibilities of these committees, and as of the date of the report, there are no independent directors on the board[520](index=520&type=chunk) [Employees](index=126&type=section&id=D.%20Employees) The company has significantly reduced its workforce amidst operational challenges, with the number of employees dropping from 2,434 in 2021 to 871 at the end of 2023, with Customer Support and Sales comprising over 55% of the total staff, and the company emphasizes employee training and performance-based incentives - The number of employees decreased significantly from **2,434** in 2021 to **1,326** in 2022, and further to **871** in 2023, primarily due to operational challenges and the downturn in the real estate market[524](index=524&type=chunk)[525](index=525&type=chunk) Employees by Function as of December 31, 2023 | Function | Number of Employees | Percentage of Employees | |:---|---:|---:| | Sales | 240 | 27.6% | | Software Developers & Technology | 130 | 14.9% | | Editorial | 137 | 15.7% | | Customer Support | 241 | 27.7% | | Corporate Offices | 123 | 14.1% | | **Total** | **871** | **100.0%** | [Share Ownership](index=128&type=section&id=E.%20Share%20Ownership) As of March 31, 2024, the company's ownership is concentrated among three principal shareholders: TM Home Limited (55.4%), Tencent Holdings Limited (15.4%), and SINA Corporation (12.1%), who together own approximately 82.9% of outstanding shares, while executive officers and directors as a group beneficially own approximately 1.3% Principal Shareholders as of March 31, 2024 | Shareholder | Shares Beneficially Owned | Percentage Ownership | |:---|---:|---:| | TM Home Limited | 76,401,247 | 55.4% | | Tencent Holdings Limited | 21,231,220 | 15.4% | | SINA Corporation | 16,642,623 | 12.1% | | All Directors and Executive Officers as a Group | 1,843,353 | 1.3% | - As of March 31, 2024, approximately **19.3%** of ordinary shares were held by record holders in the United States, with the depositary bank, JPMorgan Chase Bank, N.A., holding most of these on behalf of ADS holders[537](index=537&type=chunk) [Major Shareholders and Related Party Transactions](index=112&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details the company's significant transactions and extensive operational and financial interdependencies with its major shareholders and their affiliates, including E-House Enterprise, TM Home, SINA, and Tencent, highlighting key transactions in 2023 and complex historical agreements that define their operational relationship and present potential conflicts of interest - Leju has significant related party transactions with its controlling shareholder E-House Enterprise and its parent TM Home, recognizing **$9.6 million** in expenses for marketing services from E-House Enterprise and a **$3.1 million** operating loss from reimbursing TM Home for its online platform operations in 2023[539](index=539&type=chunk)[540](index=540&type=chunk) - The company has historical agreements with SINA for domain name/content licensing and advertising agency services, which were set to expire in March 2024, with renewal negotiations in process as of the report date, and minimal costs for advertising resources from SINA at **$35,259** in 2023[561](index=561&type=chunk)[567](index=567&type=chunk) - Leju has a strategic cooperation with Tencent, acting as its real estate advertising agent in various regions of China, with the cost for advertising resources purchased from Tencent being **$13.7 million** in 2023[568](index=568&type=chunk)[570](index=570&type=chunk) - E-House, Tencent, and SINA have demand, shelf, and piggyback registration rights for their ordinary shares under investor rights agreements, allowing them to require the company to register their shares for public sale[572](index=572&type=chunk)[573](index=573&type=chunk)[575](index=575&type=chunk) [Financial Information](index=120&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section contains the company's consolidated financial statements, noting no material legal proceedings, and states that the board has complete discretion regarding its dividend policy, with no present plan to pay cash dividends, intending to retain funds for business operations, and confirms no significant changes since the audited financial statements - The company is not currently involved in any material legal or arbitration proceedings[583](index=583&type=chunk) - The company has no present plan to pay cash dividends and intends to retain available funds to operate and expand its business, with the last dividend paid on May 15, 2015[584](index=584&type=chunk)[585](index=585&type=chunk) [The Offer and Listing](index=120&type=section&id=ITEM%209.%20THE%20OFFER%20AND%20LISTING) The company's American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE) from April 2014 until April 2024, when they were delisted and trading was suspended, and are now quoted on the OTC Pink market under the symbol 'LEJUY', with each ADS representing ten ordinary shares following a ratio change in May 2022 - On April 29, 2024, the NYSE filed a Form 25 to delist the company's ADSs, which had been suspended from trading on April 11, 2024[589](index=589&type=chunk) - The company's ADSs are now quoted on the OTC Pink market under the symbol 'LEJUY'[589](index=589&type=chunk) [Additional Information](index=121&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section outlines the company's corporate governance framework as a Cayman Islands exempted company, detailing provisions of its memorandum and articles of association regarding director appointments, shareholder rights, and changes in capital, and covers key taxation considerations, including the risk of being classified as a PRC resident enterprise and its belief that it was a Passive Foreign Investment Company (PFIC) for 2023, which has significant adverse U.S. federal income tax implications - The company is a Cayman Islands exempted company, which provides certain exemptions from requirements like holding annual general meetings, though its articles allow for them[606](index=606&type=chunk)[614](index=614&type=chunk) - Shareholders have the right to one vote per share, with an ordinary resolution requiring a simple majority and a special resolution (for major changes like amending articles) requiring a two-thirds majority[596](index=596&type=chunk)[597](index=597&type=chunk) - **PRC Taxation Risk**: The company faces the risk of being classified as a PRC resident enterprise if its 'de facto management body' is deemed to be in China, which would subject its worldwide income to a **25% PRC enterprise income tax**[620](index=620&type=chunk)[622](index=622&type=chunk) - **U.S. Taxation Risk (PFIC)**: The company believes it was a Passive Foreign Investment Company (PFIC) for the 2023 taxable year and likely will be for the current year, which can result in adverse U.S. federal income tax consequences for U.S. holders, including punitive tax rates on certain distributions and gains[628](index=628&type=chunk)[638](index=638&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=132&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are interest rate risk, which is considered minimal, and foreign exchange risk, which is more significant as substantially all revenues are in Renminbi (RMB) while ADSs are traded in U.S. dollars, meaning RMB/USD exchange rate fluctuations can materially affect reported value and potential distributions, and the company does not currently use derivative instruments to hedge these risks - Interest rate risk is minimal, primarily related to interest on bank deposits, and the company repaid its short-term bank borrowings in March 2023[646](index=646&type=chunk) - The company faces significant foreign exchange risk as its revenues are denominated in Renminbi (RMB) while its ADSs are traded in U.S. dollars, meaning the value of an investment in ADSs is affected by the RMB/USD exchange rate[647](index=647&type=chunk) - As of December 31, 2023, the company held **$53.9 million** in RMB or HKD-denominated cash balances and **$0.5 million** in USD-denominated cash balances[649](index=649&type=chunk) [Description of Securities Other Than Equity Securities](index=133&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECURITIES) This section details the fees and charges that holders of the company's American Depositary Shares (ADSs) may incur, levied by the depositary, JPMorgan Chase Bank, N.A., for services such as issuing or surrendering ADSs, processing cash distributions, and transferring ADRs, noting that the depositary may charge up to $5.00 per 100 ADSs for issuance or cancellation and up to $0.05 per ADS for cash distributions, and no reimbursement was received in 2023 - ADS holders may be charged fees by the depositary, including **$5.00 per 100 ADSs** for issuance or cancellation, and up to **$0.05 per ADS** for cash distributions[651](index=651&type=chunk)[652](index=652&type=chunk) - The depositary may also charge an annual administrative fee of up to **$0.05 per ADS** per calendar year[653](index=653&type=chunk) - For the year ended December 31, 2023, the company received no reimbursement from the depositary for expenses related to the ADR program[656](index=656&type=chunk) PART II [Controls and Procedures](index=136&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) As of December 31, 2023, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures and internal control over financial reporting were effective, and as a 'non-accelerated filer', the company is not required to provide an auditor's attestation report on its internal controls, with no material changes reported during 2023 - Management concluded that as of December 31, 2023, the company's disclosure controls and procedures were effective[659](index=659&type=chunk) - Based on the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2023[661](index=661&type=chunk) - As a 'non-accelerated filer', the company is not required to include an attestation report on internal control over financial reporting from its external auditor[661](index=661&type=chunk)[662](index=662&type=chunk) [Other Information](index=137&type=section&id=ITEM%2016.%20Other%20Information) This section covers various governance and compliance topics, including the company's determination that it does not have an audit committee financial expert, with the board assuming the committee's functions, its adoption of a code of ethics, audit fees paid to Yu CPA of $580,000 for 2023, the initiation of a share repurchase program in November 2023, and its cybersecurity risk management strategy overseen by the board of directors [Audit Committee Financial Expert](index=137&type=section&id=16A.%20Audit%20Committee%20Financial%20Expert) As of the report date, Leju's board of directors has determined that it does not have an audit committee financial expert, with the board itself assuming the functions and responsibilities of the audit committee, stating that retaining an independent director qualifying as such an expert would be overly costly and burdensome given its current scale - The company's board of directors has determined that it does not have an audit committee financial expert[665](index=665&type=chunk) - The board has assumed the functions of the audit committee and believes retaining a qualified expert would be too costly and burdensome[665](index=665&type=chunk) [Principal Accountant Fees and Services](index=137&type=section&id=16C.%20Principal%20Accountant%20Fees%20and%20Services) The company discloses the fees paid to its principal external auditor, Yu Certified Public Accountant, P.C., with audit fees of $560,000 for 2022 and $580,000 for 2023, and the audit committee's policy is to pre-approve all audit and non-audit services provided by the external auditor Principal Accountant Fees (in $) | Fee Type | 2022 | 2023 | |:---|---:|---:| | Audit fees | 560,000 | 580,000 | [Purchases of Equity Securities by the Issuer and Affiliated Purchasers](index=138&type=section&id=16E.%20Purchases%20of%20Equity%20Securities%20by%20the%20Issuer%20and%20Affiliated%20Purchasers) On November 14, 2023, the company announced a share repurchase program authorizing the buyback of up to $2 million of its ADSs over a 12-month period, and as of March 31, 2024, the company had repurchased 52,334 ADSs for a total of approximately $62,000 under this program - A share repurchase program of up to **$2 million** was authorized on November 14, 2023, valid for 12 months[670](index=670&type=chunk) Share Repurchase Activity (Nov 2023 - Dec 2023) | Period | Total ADSs Purchased | Average Price Paid per ADS (US$) | Maximum Value Remaining (US$) | |:---|---:|---:|---:| | Nov 2023 | 41,934 | 1.15 | 1,951,981.37 | | Dec 2023 | 10,400 | 1.34 | 1,938,015.21 | | **Total** | **52,334** | **N/A** | **N/A** | [Cybersecurity](index=138&type=section&id=16K.%20Cybersecurity) The company has established processes for managing cybersecurity risks, integrated into its overall enterprise risk management, with a multi-layered defense system in place and the board of directors overseeing cybersecurity risk management through quarterly updates from designated officers, and has not experienced any material cybersecurity incidents to date - The company has implemented processes for assessing, identifying, and managing material cybersecurity risks, which are integrated into its enterprise risk management system[672](index=672&type=chunk) - The board of directors has ultimate oversight of cybersecurity risk management, receiving quarterly updates from management[677](index=677&type=chunk) - As of the report date, the company has not experienced any material cybersecurity incidents that have materially affected its business, operations, or financial condition[676](index=676&type=chunk) PART III [Financial Statements](index=140&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section includes the company's audited consolidated financial statements for 2021-2023, prepared in accordance with U.S. GAAP, with the auditor's report highlighting a significant 'Emphasis of Matter' regarding the company's ability to continue as a going concern due to accumulated losses and negative cash flows, and detailing complex accounting for its VIE structure, revenue recognition, and critical estimates [Report of Independent Registered Public Accounting Firm](index=171&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor, Yu Certified Public Accountant, P.C., issued an opinion stating that the consolidated financial statements present fairly the financial position of the Group, but included a critical 'Emphasis of Matter' paragraph highlighting substantial doubt about the company's ability to continue as a going concern due to significant accumulated losses and negative cash flows, and identified 'Allowance for current expected credit losses (CECL)' and the 'Going Concern Assessment' as critical audit matters - The auditor's report contains an 'Emphasis of Matter' paragraph expressing substantial doubt about the Group's ability to continue as a going concern due to significant losses and negative cash flows[697](index=697&type=chunk) - The audit identified two Critical Audit Matters: 1) Allowance for current expected credit losses (CECL) on various receivables, and 2) the Going Concern Assessment itself, both involving significant management judgment[701](index=701&type=chunk)[702](index=702&type=chunk)[707](index=707&type=chunk) - The audit was conducted in accordance with PCAOB standards, and as the Group is not required to have an audit of its internal control over financial reporting, no opinion on its effectiveness was expressed[699](index=699&type=chunk) [Exhibits](index=140&type=section&id=ITEM%2019.%20EXHIBITS) This section lists all exhibits filed as part of the annual report, including foundational corporate documents, the extensive contractual arrangements forming the VIE structure, key strategic agreements with major partners like SINA and E-House, CEO/CFO certifications, and consents from legal counsel and the public accounting firm - The exhibits include foundational corporate documents such as the Amended and Restated Memorandum and Articles of Association (Exhibit 1.1) and the ADS Deposit Agreement (Exhibit 2.3)[683](index=683&type=chunk) - A significant portion of the exhibits consists of the various contractual arrangements that establish and govern the company's VIE structure, including Exclusive Call Option, Equity Pledge, and Exclusive Business Cooperation Agreements (Exhibits 4.4 through 4.30)[683](index=683&type=chunk)[685](index=685&type=chunk)[686](index=686&type=chunk) - Key strategic agreements are filed, such as those with SINA for licensing and advertising, and with E-House and Tencent regarding investor rights and cooperation (Exhibits 4.31 through 4.44)[687](index=687&type=chunk)[689](index=689&type=chunk)

Part I [Key Information](index=8&type=section&id=Item%203.%20KEY%20INFORMATION) This section outlines the company's VIE structure, associated risks, PRC regulatory oversight, and presents selected financial data and key risk factors - Leju Holdings Limited is a Cayman Islands holding company, not a Chinese operating company. It conducts its operations in China through contractual arrangements with Variable Interest Entities (VIEs). Revenues from these VIEs accounted for **100.0% of total revenues in 2022**[14](index=14&type=chunk)[132](index=132&type=chunk) - The company faces substantial risks from the PRC government, which could deem the VIE structure non-compliant, or impose new regulations on data security and overseas listings, potentially causing the value of ADSs to decline or become worthless[16](index=16&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk) - The company's auditor, Yu Certified Public Account, P.C., is a U.S.-based firm registered with the PCAOB and subject to inspection, which currently mitigates risks under the Holding Foreign Companies Accountable Act (HFCAA). However, future changes could impact this status[20](index=20&type=chunk)[50](index=50&type=chunk)[211](index=211&type=chunk) [Selected Consolidated Financial Data](index=12&type=section&id=Selected%20Consolidated%20Financial%20Data) This subsection provides a five-year overview of Leju's financial performance, including income statement, balance sheet, non-GAAP measures, and VIE financial data Selected Consolidated Statement of Operations Data (USD in thousands) | Indicator | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | **Total net revenues** | 719,526 | 534,117 | 343,182 | | **Income (loss) from operations** | 24,119 | (166,747) | (105,625) | | **Net income (loss) attributable to Leju** | 19,302 | (150,934) | (89,668) | | **Basic EPS (loss) per ADS** | 1.42 | (11.05) | (6.54) | Selected Consolidated Balance Sheet Data (USD in thousands) | Indicator | As of Dec 31, 2021 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 250,314 | 123,378 | | Total assets | 437,248 | 216,111 | | Total liabilities | 286,189 | 163,151 | | Total Leju Holdings Limited shareholders' equity | 151,255 | 53,235 | - The company provides non-GAAP financial measures, such as adjusted net income (loss), which it defines as net income (loss) excluding share-based compensation, amortization of intangible assets from business combinations, and goodwill impairment. For 2022, the adjusted net loss attributable to Leju shareholders was **$79.9 million**, compared to a GAAP net loss of **$89.7 million**[29](index=29&type=chunk)[30](index=30&type=chunk)[34](index=34&type=chunk) - Financial data for the Variable Interest Entities (VIEs) shows they generated **$376.3 million in revenue** and incurred a net loss of **$10.9 million in 2022**, highlighting their central role in the company's operations[37](index=37&type=chunk) [Risk Factors](index=18&type=section&id=D.%20Risk%20Factors) This subsection outlines material risks including China's real estate cyclicality, intense competition, VIE structure challenges, PRC policy changes, and potential delisting - The business is highly susceptible to fluctuations in China's real estate industry and government policies aimed at regulating the market, which can adversely affect transaction volumes and marketing spend[53](index=53&type=chunk)[54](index=54&type=chunk)[57](index=57&type=chunk) - The company faces intense competition from other online real estate platforms like fang.com and anjuke.com, as well as from other media that could reduce market share and profitability[58](index=58&type=chunk)[60](index=60&type=chunk) - The company's reliance on a VIE structure is a major risk. If the PRC government deems the contractual arrangements non-compliant, it could face severe penalties, including being forced to relinquish its interests in these operations, which generated **100% of revenue in 2022**[47](index=47&type=chunk)[132](index=132&type=chunk)[139](index=139&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the **2022 taxable year**, which could result in adverse U.S. federal income tax consequences for U.S. holders of its ADSs[244](index=244&type=chunk)[246](index=246&type=chunk) - The company's ADSs may be delisted from the NYSE for failure to meet continued listing requirements. The company previously received a non-compliance notice for its stock price falling below **$1.00**, which was cured by an ADS ratio change in May 2022[218](index=218&type=chunk)[219](index=219&type=chunk) [Information on the Company](index=64&type=section&id=Item%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Leju's business, history, corporate structure, strategic relationships, and O2O platform - Leju is a leading O2O real estate services provider in China, offering e-commerce, online advertising, and listing services through a platform of local websites, mobile apps, and Weixin mini programs[263](index=263&type=chunk)[416](index=416&type=chunk) - The company has significant strategic relationships: it operates SINA's real estate websites, is the exclusive real estate ad agent for Tencent in certain areas, and is a subsidiary of TM Home, which is controlled by E-House Enterprise and co-owned by Alibaba[252](index=252&type=chunk)[256](index=256&type=chunk)[259](index=259&type=chunk) - Due to PRC restrictions on foreign investment in internet and advertising businesses, Leju conducts these operations through contractual arrangements with its VIEs: Beijing Leju, Leju Hao Fang, and Beijing Jiajujiu[250](index=250&type=chunk)[392](index=392&type=chunk) [History and Development of the Company](index=64&type=section&id=4.A.%20History%20and%20Development%20of%20the%20Company) This subsection traces Leju's corporate history, including its IPO, becoming an E-House Enterprise subsidiary, and strategic relationships with SINA and Tencent - Leju became a subsidiary of E-House Enterprise in November 2020. In November 2021, TM Home, a company owned **70.23% by E-House Enterprise** and **29.77% by Alibaba**, acquired a **55.8% controlling stake in Leju**[252](index=252&type=chunk) - A proposed debt restructuring at E-House Enterprise could lead to it ceasing to be Leju's controlling beneficial owner, with a creditor SPV and Alibaba potentially taking larger stakes in TM Home[254](index=254&type=chunk)[570](index=570&type=chunk) - The company maintains crucial long-term relationships with SINA, for whom it operates real estate websites, and Tencent, a major shareholder and advertising partner[256](index=256&type=chunk)[258](index=258&type=chunk) [Business Overview](index=68&type=section&id=4.B.%20Business%20Overview) This subsection details Leju's O2O real estate platform, primary revenue streams (e-commerce, advertising, listing), and the extensive PRC regulatory framework Revenue by Service (USD in millions) | Service | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | E-Commerce | 547.9 | 411.1 | 278.5 | | Online Advertising | 170.8 | 122.5 | 64.7 | | Listing | 0.8 | 0.5 | 0.01 | - The company's O2O platform includes websites like leju.com and house.sina.com.cn, and mobile apps such as "Leju Home Purchase" and "Lai Ke" to connect consumers, developers, and agents[263](index=263&type=chunk)[268](index=268&type=chunk)[270](index=270&type=chunk) - The business is subject to a complex web of PRC regulations governing internet services (ICP licenses), data security (Cyber Security Law, Data Security Law), advertising content, e-commerce operations, and foreign investment[300](index=300&type=chunk)[342](index=342&type=chunk)[357](index=357&type=chunk)[364](index=364&type=chunk) [Organizational Structure](index=95&type=section&id=4.C.%20Organizational%20Structure) This subsection illustrates Leju's corporate structure, emphasizing its Cayman Islands holding company status and reliance on VIEs for PRC operations due to foreign ownership restrictions - Leju Holdings Limited is a Cayman Islands holding company that uses a VIE structure to conduct its internet and advertising business in China, complying with PRC foreign ownership restrictions[388](index=388&type=chunk)[392](index=392&type=chunk) - The VIEs (Beijing Leju, Leju Hao Fang, Beijing Jiajujiu) are controlled through a series of contractual arrangements, including Exclusive Call Option, Equity Pledge, and Exclusive Business Cooperation Agreements[396](index=396&type=chunk)[402](index=402&type=chunk)[407](index=407&type=chunk) - The VIEs are the primary source of revenue for the company, contributing **99.9% in 2021** and **100.0% in 2022**. In 2022, service fees paid from the VIEs to Leju's PRC subsidiaries amounted to **$29.8 million**[139](index=139&type=chunk)[394](index=394&type=chunk) [Operating and Financial Review and Prospects](index=100&type=section&id=Item%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes Leju's financial condition and operational results, highlighting the impact of China's real estate downturn, critical accounting policies, and liquidity - The company's financial performance is heavily impacted by the PRC real estate industry, which experienced a steep downturn starting in the second half of 2021, negatively affecting both e-commerce and online advertising businesses[420](index=420&type=chunk)[459](index=459&type=chunk) Financial Performance Comparison (USD in millions) | Metric | 2021 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | 534.1 | 343.2 | -36% | | E-commerce Revenues | 411.1 | 278.5 | -32% | | Online Advertising Revenues | 122.5 | 64.7 | -47% | | Loss from Operations | (166.7) | (105.6) | N/A | | Net Loss | (149.9) | (89.7) | N/A | - Since January 1, 2022, due to the decline in the real estate industry, the company has not recognized revenue from certain customers with uncertain payment recovery until the cash consideration is actually received[459](index=459&type=chunk)[468](index=468&type=chunk) - Liquidity has decreased, with cash and cash equivalents falling to **$123.4 million** at the end of 2022 from **$250.3 million** at the end of 2021. Net cash used in operating activities was **$108.0 million in 2022**[499](index=499&type=chunk)[500](index=500&type=chunk) [Directors, Senior Management, and Employees](index=120&type=section&id=Item%206.%20DIRECTORS,%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section introduces Leju's leadership, board, employee base, compensation, controlled company status, and major share ownership structure - The company's employee count dropped by **45.5%** from **2,434** at the end of 2021 to **1,326** at the end of 2022, primarily due to operational challenges in the real estate sector[559](index=559&type=chunk) - In 2022, aggregate cash compensation was approximately **$0.6 million** for executive officers and **$0.1 million** for directors[536](index=536&type=chunk) - As a "controlled company" due to TM Home's majority ownership, Leju is exempt from and does not comply with the NYSE requirement for a majority of independent directors on its board[222](index=222&type=chunk)[551](index=551&type=chunk)[709](index=709&type=chunk) Major Share Ownership (as of March 31, 2023) | Shareholder | Percentage Ownership | | :--- | :--- | | TM Home Limited | 55.7% | | Tencent Holdings Limited | 15.5% | | SINA Corporation | 12.1% | [Major Shareholders and Related Party Transactions](index=131&type=section&id=Item%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details significant transactions and agreements with major shareholders and related parties, including E-House Enterprise, SINA, and Tencent - Leju has extensive related party transactions with its controlling shareholder E-House Enterprise, including receiving marketing channel services (**$7.7 million in 2022**) and corporate support services (**$1.3 million in 2022**)[574](index=574&type=chunk) - The company's relationship with SINA is critical, governed by agreements for domain name/content licenses and advertising agency rights that extend through **2024**[595](index=595&type=chunk)[596](index=596&type=chunk)[597](index=597&type=chunk) - Leju has strategic advertising agency agreements with Tencent. In 2022, the cost of advertising resources purchased from Tencent was **$14.8 million**[604](index=604&type=chunk)[606](index=606&type=chunk) - Major shareholders E-House, Tencent, and SINA have been granted significant registration rights, including demand, shelf, and piggyback rights, for their holdings of the company's ordinary shares[608](index=608&type=chunk)[609](index=609&type=chunk)[610](index=610&type=chunk)[611](index=611&type=chunk) [Financial Information](index=139&type=section&id=Item%208.%20FINANCIAL%20INFORMATION) This section confirms the consolidated financial statements, absence of material legal proceedings, and discusses the company's dividend policy - The company is not currently involved in any material legal or arbitration proceedings[621](index=621&type=chunk) - The company's board has complete discretion on whether to distribute dividends. The last dividend was a cash dividend of **$0.20 per ordinary share** paid in May 2015[622](index=622&type=chunk)[623](index=623&type=chunk) - As a holding company, Leju relies on dividends from its PRC subsidiaries, but PRC regulations may restrict the ability of these subsidiaries to make payments[624](index=624&type=chunk) [Additional Information](index=141&type=section&id=Item%2010.%20ADDITIONAL%20INFORMATION) This section provides supplementary details on corporate governance, tax status, including PFIC implications, and anti-takeover provisions - The company is an exempted company incorporated in the Cayman Islands, and its corporate affairs are governed by its memorandum and articles of association and Cayman Islands law[628](index=628&type=chunk)[650](index=650&type=chunk) - The articles of association contain anti-takeover provisions, such as authorizing the board to issue preferred shares without shareholder approval, which could delay or prevent a change of control[228](index=228&type=chunk)[649](index=649&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the taxable year ended **December 31, 2022**. This could result in adverse tax consequences for U.S. holders, including punitive tax rates on certain distributions and gains[246](index=246&type=chunk)[665](index=665&type=chunk)[674](index=674&type=chunk) [Controls and Procedures](index=156&type=section&id=Item%2015.%20CONTROLS%20AND%20PROCEDURES) This section addresses the effectiveness of the company's disclosure controls and internal control over financial reporting as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2022**[697](index=697&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of **December 31, 2022**[699](index=699&type=chunk) - As a "non-accelerated filer," Leju is not required to have an attestation report on internal control over financial reporting from its registered public accounting firm[699](index=699&type=chunk)[700](index=700&type=chunk) Part III [Financial Statements](index=159&type=section&id=Item%2018.%20FINANCIAL%20STATEMENTS) This section contains the company's audited consolidated financial statements, including the auditor's report and critical audit matters [Report of Independent Registered Public Accounting Firm](index=166&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The auditor issued an unqualified opinion on Leju's financial statements, highlighting critical audit matters related to credit loss allowances and deferred tax assets - The auditor issued an unqualified opinion, stating the financial statements present fairly, in all material respects, the financial position of the Group[726](index=726&type=chunk) - A critical audit matter was the allowance for current expected credit losses (CECL) on receivables, which required subjective judgment, especially given the downturn in the real estate market[732](index=732&type=chunk)[733](index=733&type=chunk)[734](index=734&type=chunk) - A second critical audit matter was the valuation of deferred tax assets, as management's assessment of their realizability is complex and involves significant judgments about future earnings and tax strategies[736](index=736&type=chunk)[737](index=737&type=chunk) [Consolidated Financial Statements](index=169&type=section&id=Consolidated%20Financial%20Statements) This subsection presents the core audited financial statements, including the Consolidated Balance Sheet, Statement of Operations, and Statement of Cash Flows Consolidated Balance Sheet Highlights (USD) | Account | Dec 31, 2021 (USD) | Dec 31, 2022 (USD) | | :--- | :--- | :--- | | **Total Current Assets** | 320,875,132 | 143,503,303 | | **Total Assets** | 437,247,770 | 216,111,459 | | **Total Current Liabilities** | 260,708,319 | 144,193,896 | | **Total Liabilities** | 286,188,746 | 163,151,328 | | **Total Equity** | 151,059,024 | 52,960,131 | Consolidated Statement of Operations Highlights (USD) | Account | 2020 (USD) | 2021 (USD) | 2022 (USD) | | :--- | :--- | :--- | :--- | | **Total net revenues** | 719,525,983 | 534,116,970 | 343,182,184 | | **Loss from operations** | 24,118,514 | (166,747,022) | (105,624,755) | | **Net loss** | 20,998,219 | (149,924,023) | (89,690,677) | Consolidated Statement of Cash Flows Highlights (USD) | Account | 2020 (USD) | 2021 (USD) | 2022 (USD) | | :--- | :--- | :--- | :--- | | **Net cash provided by/(used in) operating activities** | 108,494,708 | (39,888,803) | (107,975,725) | | **Net cash provided by/(used in) investing activities** | 101,771 | (318,308) | 6,352 | | **Net cash provided by/(used in) financing activities** | 540,260 | 1,033,394 | (51,972) | | **Cash at end of year** | 285,706,696 | 252,395,902 | 127,648,729 | [Notes to Consolidated Financial Statements](index=174&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This subsection provides detailed disclosures supporting the financial statements, including VIE consolidation, revenue recognition, credit loss allowances, and related party transactions - The company's VIEs (Beijing Leju, Leju Hao Fang, Beijing Jiajujiu) are consolidated because Leju is deemed the primary beneficiary, having power to direct their activities and receive economic benefits through contractual arrangements[766](index=766&type=chunk)[767](index=767&type=chunk)[776](index=776&type=chunk) - In 2022, the company's e-commerce revenue was disaggregated into **$182.9 million** from discount coupons and **$95.5 million** from the newly commenced commission coupon business[809](index=809&type=chunk) - The allowance for credit losses on accounts receivable and contract assets stood at **$111.8 million** as of **December 31, 2022**, reflecting the challenging credit environment in the real estate sector[825](index=825&type=chunk)[826](index=826&type=chunk) - As of **December 31, 2022**, the company had **$35.9 million** in restricted net assets within its PRC subsidiaries and VIEs, which are not available for distribution as dividends due to PRC regulations[881](index=881&type=chunk)

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) This section provides an overview of Leju's financial performance for the second half and full year 2022, highlighting revenue declines and improved loss metrics [Second Half 2022 Financial Highlights](index=1&type=section&id=Second%20Half%202022%20Financial%20Highlights) In the second half of 2022, Leju's total revenues decreased by 25% year-on-year to $173.7 million, with declines in both e-commerce and online advertising services. Despite the revenue drop, the company significantly narrowed its losses, with loss from operations improving to $40.9 million from $116.9 million in the same period of 2021 Second Half 2022 vs 2021 Financial Performance (YoY) | Financial Metric | H2 2022 | H2 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$173.7M** | **$233.0M** | **-25%** | | E-commerce Services Revenue | $145.8M | $179.7M | -19% | | Online Advertising Services Revenue | $27.9M | $53.2M | -48% | | **Loss from Operations** | **($40.9M)** | **($116.9M)** | **Improved** | | Non-GAAP Loss from Operations | ($34.7M) | ($111.2M) | Improved | | **Net Loss Attributable to Shareholders** | **($36.8M)** | **($103.2M)** | **Improved** | | Loss per Diluted ADS | ($2.69) | ($7.54) | Improved | [Full Year 2022 Financial Highlights](index=1&type=section&id=Full%20Year%202022%20Financial%20Highlights) For the full year 2022, total revenues fell 36% year-on-year to $343.2 million. Both e-commerce and online advertising revenues saw significant declines. However, the company's loss from operations was reduced to $105.6 million from $166.7 million in 2021, and net loss attributable to shareholders also improved Full Year 2022 vs 2021 Financial Performance (YoY) | Financial Metric | FY 2022 | FY 2021 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$343.2M** | **$534.1M** | **-36%** | | E-commerce Services Revenue | $278.5M | $411.1M | -32% | | Online Advertising Services Revenue | $64.7M | $122.5M | -47% | | **Loss from Operations** | **($105.6M)** | **($166.7M)** | **Improved** | | Non-GAAP Loss from Operations | ($93.2M) | ($154.5M) | Improved | | **Net Loss Attributable to Shareholders** | **($89.7M)** | **($150.9M)** | **Improved** | | Loss per Diluted ADS | ($6.54) | ($11.05) | Improved | [Management Commentary and Business Outlook](index=2&type=section&id=Management%20Commentary%20and%20Business%20Outlook) This section presents the CEO's insights on market challenges and Leju's strategic adjustments and future outlook for 2023 [CEO's Statement](index=2&type=section&id=CEO%27s%20Statement) Leju's CEO, Mr. Geoffrey He, stated that the company's performance in the second half of 2022 was negatively impacted by the continued downturn in China's real estate industry, developer liquidity pressures, and declining market sales. In response, Leju has optimized its sales network and team structure. Looking ahead to 2023, the company anticipates a depressed market and will focus on brand building and new product development to prepare for a future recovery - The CEO attributed poor performance to the challenging macro environment in China's real estate industry, including developer liquidity issues and declining sales, which negatively impacted Leju's businesses[8](index=8&type=chunk) - The company has implemented adaptive optimizations and adjustments to its sales network and team structure in response to market projections[8](index=8&type=chunk) - Leju's forward-looking strategy for 2023 involves enhancing its focus on brand building and new product development to capitalize on a future market recovery[8](index=8&type=chunk) [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) This section provides a detailed breakdown of Leju's financial results for H2 and full year 2022, including revenue, expenses, and cash flow [Second Half 2022 Results](index=2&type=section&id=Second%20Half%202022%20Results) In H2 2022, total revenues decreased 25% YoY to $173.7 million. E-commerce revenue fell 19% due to fewer discount coupons redeemed, while online advertising revenue dropped 48% from lower developer demand. A significant 39% reduction in SG&A expenses, primarily from a $63.7 million decrease in bad debt provision, was the main driver for the improved operating loss of $40.9 million H2 2022 Revenue Breakdown (YoY) | Revenue Source | H2 2022 | H2 2021 | Change | | :--- | :--- | :--- | :--- | | E-commerce Services | $145.8M | $179.7M | -19% | | Online Advertising Services | $27.9M | $53.2M | -48% | | **Total Revenues** | **$173.7M** | **$233.0M** | **-25%** | - Selling, general and administrative (SG&A) expenses decreased by **39% YoY** to **$198.7 million**, mainly due to a **$63.7 million** decrease in bad debt provision[10](index=10&type=chunk) - Net loss attributable to shareholders improved significantly to **$36.8 million**, compared to **$103.2 million** in the same period of 2021[11](index=11&type=chunk) [Full year 2022 Results](index=3&type=section&id=Full%20year%202022%20Results) For the full year 2022, total revenues declined 36% YoY to $343.2 million. E-commerce revenue was down 32% and online advertising revenue fell 47%. SG&A expenses decreased by 35%, largely due to a $97.5 million reduction in bad debt provision compared to 2021. This cost management led to a smaller operating loss of $105.6 million for the year Full Year 2022 Revenue Breakdown (YoY) | Revenue Source | FY 2022 | FY 2021 | Change | | :--- | :--- | :--- | :--- | | E-commerce Services | $278.5M | $411.1M | -32% | | Online Advertising Services | $64.7M | $122.5M | -47% | | **Total Revenues** | **$343.2M** | **$534.1M** | **-36%** | - SG&A expenses decreased by **35% YoY** to **$418.5 million**, primarily driven by a **$97.5 million** decrease in bad debt provision[13](index=13&type=chunk) - Net loss attributable to shareholders for the full year was **$89.7 million**, an improvement from the **$150.9 million** loss in 2021[14](index=14&type=chunk) [Cash Flow](index=3&type=section&id=Cash%20Flow) As of December 31, 2022, Leju's cash, cash equivalents, and restricted cash stood at $127.6 million. The company experienced a net cash outflow from operating activities of $47.4 million during the second half of 2022 - The company's cash, cash equivalents, and restricted cash totaled **$127.6 million** as of December 31, 2022[15](index=15&type=chunk) - Net cash used in operating activities for the second half of 2022 was **$47.4 million**[15](index=15&type=chunk) [Financial Statements and Other Information](index=3&type=section&id=Financial%20Statements%20and%20Other%20Information) This section provides an overview of Leju, its unaudited financial statements, GAAP reconciliation, and selected operating data [About Leju](index=3&type=section&id=About%20Leju) Leju Holdings Limited is a prominent e-commerce and online media platform focused on the real estate and home furnishing sectors in China. Its integrated platform includes mobile apps and local websites covering over 380 cities. The company also operates the real estate and home furnishing websites for SINA Corporation and has a strategic partnership with Tencent - Leju is a leading e-commerce and online media platform for China's real estate and home furnishing industries[16](index=16&type=chunk) - The company's services cover more than **380 cities** and it maintains strategic partnerships with SINA and Tencent[16](index=16&type=chunk) [Unaudited Condensed Consolidated Financial Statements](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The unaudited financial statements show a significant contraction in the company's balance sheet, with total assets decreasing from $437.2 million in 2021 to $216.1 million in 2022. Total liabilities also decreased substantially. The statement of operations details the revenue decline and narrowed losses for H2 and the full year 2022 Consolidated Balance Sheet Highlights (Year-End) | Balance Sheet Item | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $123.4M | $250.3M | | **Total Assets** | **$216.1M** | **$437.2M** | | **Total Liabilities** | **$163.2M** | **$286.2M** | | **Total Equity** | **$53.0M** | **$151.1M** | Consolidated Statement of Operations Highlights (Full Year) | Income Statement Item | FY 2022 | FY 2021 | | :--- | :--- | :--- | | **Total Net Revenues** | **$343.2M** | **$534.1M** | | **Loss from Operations** | **($105.6M)** | **($166.7M)** | | **Net Loss** | **($89.7M)** | **($149.9M)** | [Unaudited Reconciliation of GAAP and Non-GAAP Results](index=8&type=section&id=Unaudited%20Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Results) This section reconciles GAAP results to non-GAAP measures by excluding non-cash items like share-based compensation and amortization of intangible assets. For the full year 2022, the Non-GAAP loss from operations was $93.2 million (vs. GAAP loss of $105.6 million), and the Non-GAAP net loss attributable to shareholders was $79.9 million (vs. GAAP loss of $89.7 million) Full Year 2022 GAAP vs. Non-GAAP Reconciliation | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | **Loss from Operations** | **($105.6M)** | **$12.4M** | **($93.2M)** | | **Net Loss Attributable to Shareholders** | **($89.7M)** | **$9.8M** | **($79.9M)** | - The primary adjustments between GAAP and Non-GAAP figures are share-based compensation expense (**$1.8M** for FY2022) and amortization of intangible assets from acquisitions (**$10.6M** for FY2022)[28](index=28&type=chunk) [Selected Operating Data](index=9&type=section&id=Selected%20Operating%20Data) The company's key operating metrics for its e-commerce services reflect the challenging market conditions. The number of discount coupons redeemed, a measure of transaction volume, decreased by approximately 49% from 138,230 in 2021 to 70,476 in 2022 E-commerce Services Operating Data (Full Year) | Operating Metric | FY 2022 | FY 2021 | Change | | :--- | :--- | :--- | :--- | | Number of discount coupons issued | 67,250 | 162,196 | -58.5% | | Number of discount coupons redeemed | 70,476 | 138,230 | -49.0% |

Leju Reports First Half Year 2022 Results [Financial Performance](index=1&type=section&id=Financial%20Performance) Leju's H1 2022 financial performance significantly declined due to real estate market downturns and the pandemic, resulting in substantial losses and negative cash flow [Financial Highlights](index=1&type=section&id=First%20Half%202022%20Financial%20Highlights) Financial Highlights: Revenue Performance | Financial Metric | H1 2022 | YoY Change | | :--- | :--- | :--- | | Total Revenues | $169.4 million | -44% | | E-commerce Services Revenue | $132.7 million | -43% | | Online Advertising Services Revenue | $36.8 million | -47% | Financial Highlights: Loss Metrics | Metric | H1 2022 | H1 2021 | | :--- | :--- | :--- | | **Loss from Operations (GAAP)** | **$64.8 million** | $49.9 million | | Loss from Operations (Non-GAAP) | $58.6 million | $43.4 million | | **Net Loss to Shareholders (GAAP)** | **$52.9 million** | $47.8 million | | Net Loss to Shareholders (Non-GAAP) | $48.0 million | $42.6 million | | **Loss per Diluted ADS (GAAP)** | **$3.86** | $3.50 | | Loss per Diluted ADS (Non-GAAP) | $3.50 | $3.12 | [Detailed Financial Results](index=1&type=section&id=First%20Half%202022%20Results) - The significant revenue decline was attributed to operational challenges faced by China's real estate developers and the resurgence of the COVID-19 pandemic. Due to uncertainty in collecting payments, the company has not recognized revenue from certain customers since January 1, 2022, until cash is received[3](index=3&type=chunk)[4](index=4&type=chunk) - E-commerce revenue decreased due to a lower number of discount coupons redeemed, while online advertising revenue fell because of reduced demand from property developers[7](index=7&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **31% YoY** to **$219.8 million**, primarily due to a **$33.9 million** decrease in bad debt provisions compared to H1 2021 and lower marketing expenses[8](index=8&type=chunk) - Effective May 20, 2022, Leju changed its ADS to ordinary share ratio from 1:1 to 1:10, which is equivalent to a one-for-ten reverse ADS split. Loss per ADS for H1 2021 was retrospectively adjusted[6](index=6&type=chunk) [Cash Flow](index=2&type=section&id=Cash%20Flow) - As of June 30, 2022, the company's cash, cash equivalents, and restricted cash balance was **$182.6 million**[10](index=10&type=chunk) - Net cash used in operating activities for the first half of 2022 was **$60.6 million**. This was primarily driven by a non-GAAP net loss of **$47.9 million** and decreases in other current liabilities and income tax payable[10](index=10&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents Leju's unaudited condensed consolidated financial statements for H1 2022, detailing balance sheets, income statements, and GAAP to non-GAAP reconciliations [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Balance Sheet Summary (in thousands) | Balance Sheet Items (in thousands) | Dec 31, 2021 | June 30, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$437,248** | **$308,970** | | Cash and cash equivalents | $250,314 | $178,202 | | Accounts receivable, net | $36,071 | $5,318 | | **Total Liabilities** | **$286,189** | **$215,128** | | Advances from customers | $82,788 | $55,905 | | **Total Equity** | **$151,059** | **$93,842** | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Statements of Operations (in thousands) | Income Statement (in thousands) | H1 2021 | H1 2022 | | :--- | :--- | :--- | | **Total net revenues** | **$301,092** | **$169,448** | | E-commerce | $231,401 | $132,654 | | Online advertising | $69,290 | $36,783 | | **Loss from operations** | **($49,852)** | **($64,763)** | | **Net loss** | **($46,887)** | **($52,805)** | | Net loss attributable to Leju shareholders | ($47,772) | ($52,852) | [Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)](index=7&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENT%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) Statement of Comprehensive Income (Loss) (in thousands) | Comprehensive Income (Loss) (in thousands) | H1 2021 | H1 2022 | | :--- | :--- | :--- | | Net loss | ($46,887) | ($52,805) | | Foreign currency translation adjustment | $2,400 | ($5,341) | | **Comprehensive loss** | **($44,487)** | **($58,146)** | [Unaudited Reconciliation of GAAP and Non-GAAP Results](index=8&type=section&id=Unaudited%20Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Results) Reconciliation of GAAP to Non-GAAP Loss from Operations (in thousands) | Reconciliation (in thousands) | H1 2021 | H1 2022 | | :--- | :--- | :--- | | **GAAP loss from operations** | **($49,852)** | **($64,763)** | | Share-based compensation | $1,194 | $929 | | Amortization of intangible assets | $5,279 | $5,279 | | **Non-GAAP loss from operations** | **($43,379)** | **($58,555)** | Reconciliation of GAAP to Non-GAAP Net Loss to Shareholders (in thousands) | Reconciliation (in thousands) | H1 2021 | H1 2022 | | :--- | :--- | :--- | | **GAAP net loss to shareholders** | **($47,772)** | **($52,852)** | | Adjustments (net) | $5,153 | $4,888 | | **Non-GAAP net loss to shareholders** | **($42,619)** | **($47,964)** | [Selected Operating Data](index=9&type=section&id=SELECTED%20OPERATING%20DATA) E-commerce Operating Data | E-commerce Operating Data | H1 2021 | H1 2022 | | :--- | :--- | :--- | | Number of discount coupons issued | 92,058 | 31,456 | | Number of discount coupons redeemed | 77,378 | 35,262 | [Supplementary Information](index=1&type=section&id=Supplementary%20Information) This section offers supplementary details on Leju's business, forward-looking statements, and explanations of non-GAAP financial measures [About Leju](index=2&type=section&id=About%20Leju) - Leju is a leading e-commerce and online media platform for real estate and home furnishing in China, offering services like e-commerce, online advertising, and listings across more than 380 cities. The company operates its own platforms and the real estate websites for SINA Corporation, and has a strategic partnership with Tencent[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Safe%20Harbor%3A%20Forward-Looking%20Statements) - The company identifies several risk factors that could cause actual results to differ from projections, including: fluctuations in China's real estate market, the highly regulated nature of the industry, competition, ability to expand service offerings, and reliance on strategic partners like SINA[12](index=12&type=chunk) [About Non-GAAP Financial Measures](index=1&type=section&id=About%20Non-GAAP%20Financial%20Measures) - Leju uses non-GAAP financial measures to supplement its GAAP results. These measures exclude share-based compensation expense, amortization of intangible assets from business acquisitions, and related income tax impacts[5](index=5&type=chunk)[13](index=13&type=chunk) - The company believes these non-GAAP measures provide meaningful supplemental information to investors by excluding items that may not be indicative of operating performance, thereby facilitating historical comparisons and decision-making[14](index=14&type=chunk)

PART I [Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section outlines Leju's holding company structure, its reliance on Chinese VIEs for **99.9% of revenues**, associated regulatory risks, and presents selected consolidated financial data including a **$81.5 million** net loss for VIEs in 2021 - Leju Holdings Limited, a Cayman Islands holding company, primarily operates through its PRC subsidiaries and consolidated VIEs, which generated **99.9% of total revenues** from 2019 to 2021[14](index=14&type=chunk) - The company's ADSs face potential delisting under the Holding Foreign Companies Accountable Act (HFCAA) if the PCAOB is unable to fully inspect its U.S.-based auditor, Yu Certified Public Account, P.C[21](index=21&type=chunk)[218](index=218&type=chunk)[220](index=220&type=chunk) Selected Consolidated Financial Data (2019-2021) | Indicator | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Total Net Revenues** | $692.6M | $719.5M | $534.1M | | **Income (Loss) from Operations** | $17.7M | $24.1M | ($166.7M) | | **Net Income (Loss)** | $10.9M | $21.0M | ($149.9M) | | **Basic EPS** | $0.08 | $0.14 | ($1.10) | Selected Consolidated Balance Sheet Data (As of Dec 31) | Indicator | 2020 | 2021 | | :--- | :--- | :--- | | **Total Assets** | $642.0M | $437.2M | | **Total Liabilities** | $347.2M | $286.2M | | **Total Leju Holdings Limited Shareholders' Equity** | $295.9M | $151.3M | - The company utilizes non-GAAP financial measures, including adjusted net income, to offer additional insight into operating performance, reporting an **adjusted net loss of $140.3 million** for 2021[31](index=31&type=chunk)[32](index=32&type=chunk)[37](index=37&type=chunk) [Risk Factors](index=18&type=section&id=D.%20Risk%20Factors) This section details significant business risks, including China's volatile real estate market, intense competition, VIE structure complexities, evolving PRC regulations, and ADS-specific risks like delisting and PFIC classification - The business is highly susceptible to fluctuations and government measures within China's real estate industry, impacting transaction volumes and marketing expenditures[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - Leju, a Cayman holding company, lacks equity ownership in its VIEs, risking severe penalties including forced relinquishment of interests if PRC authorities deem contractual arrangements non-compliant[49](index=49&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk) - The company received a NYSE notice on January 6, 2022, for non-compliance with the **$1.00 minimum average closing price**, potentially leading to delisting if compliance is not regained[226](index=226&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the 2021 tax year, potentially causing adverse U.S. federal income tax consequences for U.S. holders of its ADSs or ordinary shares[250](index=250&type=chunk)[252](index=252&type=chunk) - Evolving PRC data privacy and cybersecurity laws, including the Data Security Law, introduce uncertainty, potentially increasing compliance costs or subjecting the company to penalties for national security impacts or critical information infrastructure operations[89](index=89&type=chunk)[91](index=91&type=chunk)[94](index=94&type=chunk) [Information on the Company](index=79&type=section&id=Item%204.%20Information%20on%20the%20Company) This section outlines Leju's history, corporate structure, and business operations, detailing its evolution, key relationships with E-House, Alibaba, SINA, and Tencent, and its three service lines, emphasizing the VIE structure's role in China's restricted internet sector [History and Development of the Company](index=79&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Leju, incorporated in 2013, saw E-House Enterprise become its controlling shareholder in November 2020, followed by TM Home (E-House/Alibaba JV) acquiring a **55.8% stake** in November 2021, while maintaining strategic agreements with SINA and Tencent - In November 2020, E-House Enterprise acquired a **controlling stake** in Leju[260](index=260&type=chunk) - In November 2021, TM Home Limited, a joint venture of E-House Enterprise (**70.23%**) and Alibaba (**29.77%**), acquired a **55.8% interest** in Leju, making it a TM Home subsidiary[260](index=260&type=chunk) - Leju operates SINA's real estate websites under license agreements until 2024 and serves as SINA's **exclusive agent** for real estate advertising[263](index=263&type=chunk) - Leju holds exclusive advertising agency agreements with Tencent for real estate advertising across China, renewed in early 2021[267](index=267&type=chunk) [Business Overview](index=83&type=section&id=B.%20Business%20Overview) Leju is a leading O2O real estate service provider in China, operating across 401 cities with three segments: E-commerce (primary revenue), Online Advertising, and Listing, facing significant competition from platforms like fang.com and anjuke.com Revenue by Service (2019-2021) | Service | 2019 Revenue | 2020 Revenue | 2021 Revenue | | :--- | :--- | :--- | :--- | | E-Commerce | $547.2M (79.0%) | $547.9M (76.2%) | $411.1M (77.0%) | | Online Advertising | $143.8M (20.8%) | $170.8M (23.7%) | $122.5M (22.9%) | | Listing | $1.6M (0.2%) | $0.8M (0.1%) | $0.5M (0.1%) | - The company's O2O platform encompasses websites like house.sina.com.cn and leju.com, alongside mobile applications such as "Leju Home Purchase" and "Lai Ke"[276](index=276&type=chunk)[279](index=279&type=chunk) - The business exhibits seasonality, with the first quarter typically generating the lowest revenue due to Chinese New Year, while the third and fourth quarters contribute the largest portions[302](index=302&type=chunk) - Key competitors include fang.com, anjuke.com (operated by 58.com), and mobile-based news providers such as toutiao.com for online advertising[303](index=303&type=chunk) [Organizational Structure](index=112&type=section&id=C.%20Organizational%20Structure) Leju operates in China via a VIE structure to navigate foreign investment restrictions, with contractual arrangements providing effective control and economic benefits from VIEs, which contributed **99.9% of total net revenues** in 2021 - The VIE structure is essential due to PRC laws limiting foreign ownership in commercial internet information services to **50%**[393](index=393&type=chunk) - Contractual arrangements grant Leju the ability to direct VIE activities, receive substantial economic benefits, and hold an exclusive option to acquire their equity interests when permitted by PRC law[394](index=394&type=chunk) - In 2021, VIEs generated **$533.6 million** in revenue, significantly outweighing the **$0.5 million** generated by other group entities[482](index=482&type=chunk) - Leju's PRC subsidiaries received **$17.5 million** in total service fees from its VIEs in 2021[395](index=395&type=chunk) [Operating and Financial Review and Prospects](index=118&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section analyzes the company's financial performance, liquidity, and critical accounting policies, noting a **26% revenue decline** to **$534.1 million** and a **$149.9 million net loss** in 2021, driven by revenue decrease and increased bad debt provisions, with liquidity primarily from cash balances and **$39.9 million** net cash used in operations [Operating Results](index=118&type=section&id=A.%20Operating%20Results) In 2021, total revenues declined **26%** to **$534.1 million**, driven by drops in e-commerce and online advertising, while SG&A expenses rose **4%** due to a **$106.4 million** increase in bad debt provisions, resulting in a **$149.9 million net loss** Year-over-Year Performance (2020 vs 2021) | Metric | 2020 | 2021 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $719.5M | $534.1M | -26% | | E-commerce Revenues | $547.9M | $411.1M | -25% | | Online Advertising Revenues | $170.8M | $122.5M | -28% | | SG&A Expenses | $622.0M | $645.6M | +4% | | Net Income (Loss) | $21.0M | ($149.9M) | - | | Bad Debt Provision Increase | - | +$106.4M | - | - The decline in e-commerce revenue was primarily attributable to a reduction in the number of discount coupons redeemed[460](index=460&type=chunk) - The rise in SG&A expenses stemmed mainly from a substantial increase in bad debt provisions for outstanding receivables due to deteriorating customer credit quality[461](index=461&type=chunk) [Liquidity and Capital Resources](index=137&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's liquidity depends on cash from operations and **$250.3 million** in cash balances as of 2021, with net cash used in operations at **$39.9 million** in 2021, and **$35.8 million** in PRC subsidiary net assets restricted from distribution Cash Flow Summary (2019-2021) | Cash Flow | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $19.7M | $108.5M | ($39.9M) | | Net cash from investing activities | ($5.6M) | $0.1M | ($0.3M) | | Net cash from financing activities | $0.04M | $0.5M | $1.0M | - As of December 31, 2021, cash and cash equivalents totaled **$250.3 million**, a decrease from **$284.5 million** at the close of 2020[750](index=750&type=chunk) - Net assets of PRC subsidiaries and VIEs restricted from distribution amounted to **$35.8 million** as of December 31, 2021[518](index=518&type=chunk)[882](index=882&type=chunk) [Critical Accounting Estimates](index=141&type=section&id=E.%20Critical%20Accounting%20Estimates) Critical accounting estimates involve significant judgment, particularly for the allowance for current expected credit losses (CECL) on receivables and income tax provisions, with a **$26.7 million** valuation allowance recorded against deferred tax assets in 2021 due to cumulative losses - The allowance for current expected credit losses (CECL) on receivables is a critical estimate requiring significant judgment on customer credit risk, increasing from **$12.7 million** in 2020 to **$115.4 million** in 2021[531](index=531&type=chunk)[491](index=491&type=chunk) - A valuation allowance of **$26.7 million** was recorded against deferred tax assets as of December 31, 2021, up from **$5.7 million** in 2020, due to cumulative losses limiting asset realization[533](index=533&type=chunk)[861](index=861&type=chunk)[862](index=862&type=chunk) [Directors, Senior Management and Employees](index=142&type=section&id=Item%206.%20Directors,%20Senior%20Management%20and%20Employees) This section details the company's leadership, compensation, board structure, and workforce, noting an eight-director board, **2,434 employees** in 2021, and major shareholders including TM Home Limited (**55.8%**), Tencent (**15.5%**), and SINA (**12.2%**) [Compensation of Directors and Executive Officers](index=146&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) In 2021, the company paid **$1.3 million** in cash to executive officers and **$0.2 million** to directors, granting **800,000 options** to executives, with **15,550,652 options** and **616,668 restricted shares** outstanding under the Leju Share Incentive Plan as of March 31, 2022 - Aggregate cash compensation for 2021 totaled approximately **$1.3 million** for executive officers and **$0.2 million** for directors[548](index=548&type=chunk) - As of March 31, 2022, **15,550,652 options** and **616,668 restricted shares** were outstanding under the Leju Share Incentive Plan[559](index=559&type=chunk) [Board Practices](index=150&type=section&id=C.%20Board%20Practices) The board maintains audit, compensation, and nominating committees; as a 'controlled company' since November 2020, Leju is exempt from NYSE requirements for a majority of independent directors, though its audit committee is fully independent - Leju is classified as a 'controlled company' under NYSE rules, exempting it from the requirement for a majority of independent directors[564](index=564&type=chunk)[725](index=725&type=chunk) - The audit committee comprises three independent directors: Winston Li (Chair), Min Fan, and Jian Sun[566](index=566&type=chunk) [Employees](index=154&type=section&id=D.%20Employees) As of December 31, 2021, Leju employed **2,434 individuals**, with the largest functional groups in corporate offices (**28.8%**), editorial (**23.7%**), and sales (**22.2%**) Employees by Function (as of Dec 31, 2021) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Sales | 540 | 22.2% | | Software Developers & Tech | 313 | 12.9% | | Editorial | 578 | 23.7% | | Customer Support | 303 | 12.4% | | Corporate Offices | 700 | 28.8% | | **Total** | **2,434** | **100.0%** | [Share Ownership](index=154&type=section&id=E.%20Share%20Ownership) As of March 31, 2022, principal shareholders included TM Home Limited (**55.8%**), Tencent Holdings Limited (**15.5%**), and SINA Corporation (**12.2%**), with all directors and executive officers collectively owning **3.4%** of ordinary shares Principal Shareholders (as of March 31, 2022) | Shareholder | Percentage Ownership | | :--- | :--- | | TM Home Limited | 55.8% | | Tencent Holdings Limited | 15.5% | | SINA Corporation | 12.2% | [Major Shareholders and Related Party Transactions](index=157&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section details major shareholders and related party transactions, including extensive operational agreements with E-House Enterprise, E-House, SINA, and Tencent, with **$20.6 million** in marketing expenses from E-House Enterprise and **$10.1 million** in advertising costs from SINA in 2021 - Leju has master transaction and transitional services agreements with E-House for corporate support, incurring **$1.4 million** in charges in 2021[593](index=593&type=chunk)[605](index=605&type=chunk) - The company maintains crucial advertising inventory agency and license agreements with SINA, incurring **$10.1 million** in advertising resource costs from SINA in 2021[613](index=613&type=chunk)[619](index=619&type=chunk) - Leju holds strategic cooperation and advertising agency agreements with Tencent, with **$18.7 million** in advertising resource costs purchased from Tencent in 2021[620](index=620&type=chunk)[622](index=622&type=chunk) - E-House, Tencent, and SINA possess demand, shelf, and piggyback registration rights for their ordinary shares[624](index=624&type=chunk)[625](index=625&type=chunk)[626](index=626&type=chunk)[627](index=627&type=chunk) [Financial Information](index=168&type=section&id=Item%208.%20Financial%20Information) This section confirms consolidated financial statements, reports no material legal proceedings, and outlines the dividend policy, noting a **$0.20 per share** cash dividend paid in May 2015 with no current plans for future dividends, prioritizing earnings retention for business expansion - The company is not currently involved in any material legal proceedings[635](index=635&type=chunk) - The company paid a cash dividend of **$0.20 per share** in May 2015 but has no current plans for future dividends, intending to retain earnings for business operations and expansion[636](index=636&type=chunk)[637](index=637&type=chunk) [Additional Information](index=169&type=section&id=Item%2010.%20Additional%20Information) This section details the company's memorandum, material contracts, exchange controls, and taxation, including Cayman Islands, PRC, and U.S. federal income tax considerations, notably confirming its belief of being a Passive Foreign Investment Company (PFIC) for 2021, with adverse U.S. tax consequences for U.S. holders - The company is an exempted company incorporated in the Cayman Islands, governed by Cayman Islands law, which provides different shareholder rights compared to U.S. jurisdictions[642](index=642&type=chunk)[665](index=665&type=chunk) - Under PRC tax law, the company risks classification as a 'resident enterprise,' subjecting its global income to a **25% PRC enterprise income tax** and potentially non-PRC shareholders to withholding tax on dividends and gains[672](index=672&type=chunk)[675](index=675&type=chunk) - The company believes it was a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2021, subjecting U.S. holders to special, often unfavorable, tax rules on distributions and gains unless a mark-to-market election is made[681](index=681&type=chunk)[690](index=690&type=chunk) PART II [Controls and Procedures](index=184&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, and as a 'non-accelerated filer,' no auditor's attestation report on internal controls is required - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[711](index=711&type=chunk) - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2021[713](index=713&type=chunk)[714](index=714&type=chunk) - As a 'non-accelerated filer,' the company is not required to include an attestation report on internal control over financial reporting from its external auditor[714](index=714&type=chunk)[715](index=715&type=chunk) [Other Information](index=185&type=section&id=Item%2016.%20Other%20Information) This section covers governance and compliance, identifying Winston Li and Min Fan as audit committee financial experts, detailing fees paid to Yu CPA and Deloitte for 2020-2021, and reiterating the company's 'controlled company' status under NYSE rules - The board has identified Winston Li and Min Fan as independent audit committee financial experts[718](index=718&type=chunk) Principal Accountant Fees (Audit Fees) | Auditor | 2020 | 2021 | | :--- | :--- | :--- | | Deloitte | $137,449 | $85,692 | | Yu CPA | $618,000 | $620,000 | - As a 'controlled company,' Leju utilizes the NYSE exemption, thus not requiring a majority of independent directors on its board[725](index=725&type=chunk) PART III [Financial Statements](index=187&type=section&id=Item%2018.%20Financial%20Statements) This section presents the company's consolidated financial statements for 2019-2021, audited by Yu Certified Public Accountant, P.C., highlighting the allowance for current expected credit losses (CECL) as a critical audit matter due to subjective judgment - The independent auditor's report identifies the Allowance for Current Expected Credit Losses (CECL) on receivables as a critical audit matter due to the high degree of subjective management judgment required[744](index=744&type=chunk) Consolidated Balance Sheet Highlights (As of Dec 31, 2021) | Account | Amount (USD) | | :--- | :--- | | Total Current Assets | $320,875,132 | | Total Assets | $437,247,770 | | Total Current Liabilities | $260,708,319 | | Total Liabilities | $286,188,746 | | Total Equity | $151,059,024 | Consolidated Statement of Operations (Year Ended Dec 31, 2021) | Account | Amount (USD) | | :--- | :--- | | Total Net Revenues | $534,116,970 | | Loss from Operations | ($166,747,022) | | Net Loss | ($149,924,023) | | Net Loss Attributable to Leju Shareholders | ($150,933,535) |

Financial Data and Key Metrics Changes - For the second half of 2021, total revenues were $233 million, a decrease of 47% from $439.8 million in the same period of 2020 [9] - Full-year 2021 total revenues were $534.1 million, a decrease of 26% from $719.5 million in 2020 [12] - Net loss for the second half of 2021 was $103 million, compared to net income of $19.1 million for the same period of 2020 [11] - Full-year net loss was $149.9 million, compared to net income of $21 million in 2020 [14] Business Line Data and Key Metrics Changes - Revenues from e-commerce services in the second half of 2021 were $179.7 million, a decrease of 48% from $342.4 million in the same period of 2020 [9] - Revenues from online advertising services were $53.2 million, a decrease of 45% from $96.9 million in the same period of 2020 [9] - Revenues from listing services were $0.1 million, a decrease of 81% from $0.5 million in the same period of 2020 [10] - For the full year, e-commerce services revenues were $411.1 million, a decrease of 25% from $547.9 million in 2020 [12] Market Data and Key Metrics Changes - The real estate industry in China faced a steep downturn in the second half of 2021, negatively impacting Leju's online advertising and e-commerce businesses [6] - The demand for online advertising from property developers decreased significantly, affecting revenue [9] Company Strategy and Development Direction - Leju plans to accelerate the development and integration of its platforms with E-House and Alibaba, focusing on digitization in the real estate industry [8] - The company aims to explore new business models and revenue growth areas while consolidating online advertising and e-commerce services [8] Management Comments on Operating Environment and Future Outlook - Management acknowledged the severe operational challenges faced by many developers in the real estate sector, which led to increased bad debt provisions [6] - The company is adopting a result-oriented approach to improve operational efficiency amidst the current market situation [8] Other Important Information - As of December 31, 2021, the company's cash and cash equivalents and restricted cash were $252.4 million [15] - The bad debt provision increased significantly in 2021, primarily due to the recognition of additional loss allowance on expected credit loss from customers with deteriorating credit quality [13] Q&A Session Summary Question: No questions were raised during the Q&A session - There were no questions from participants during the conference call [16]

Financial Data and Key Metrics Changes - Total revenue for the first half of 2021 was $301.1 million, an increase of 8% compared to the same period last year [10] - E-commerce revenue increased by 13% to $231.4 million, contributing 77% of total revenues [10] - Online advertising revenues decreased by 6% to $69.3 million, contributing 23% of total revenues [10] - Loss from operations was $49.9 million, compared to income from operations of $1.2 million in the same period last year [11] - Net loss attributable to Leju shareholders was $47.8 million, compared to net income of $1.5 million for the same period in 2020 [11] - Cash and cash equivalents balance as of June 30, 2021, was $328 million [12] Business Line Data and Key Metrics Changes - E-commerce services saw a revenue increase of 13%, driven by more discount coupons redeemed [10] - Online advertising revenue decreased due to reduced demand from property developers [10] - Listing revenues increased by 18% due to higher demand from secondary real estate brokers [10] Market Data and Key Metrics Changes - The overall real estate market in China faced tightening regulations, impacting developers' operations and sales [6] - The company noted that the credit status of one major real estate developer client deteriorated, leading to increased bad debt provisions [6][7] Company Strategy and Development Direction - The company aims to leverage digitalization opportunities in real estate marketing and deepen cooperation with developers [9] - Focus on platform construction, content creation, and improving user experience to enhance market influence [9] - Plans to expand advertising business and develop new e-commerce models [9] Management Comments on Operating Environment and Future Outlook - Management indicated that the tightening regulations in the real estate industry are likely to continue, which may create new opportunities for the company [22][23] - The company expects that the second half of 2021 total revenues will be approximately between $300 million and $310 million, indicating flat growth compared to the first half [13] Other Important Information - The company held online promotional events, including the 2nd Online Real Estate Fair, which performed satisfactorily and increased traffic through collaboration with Tmall [26] - Future promotional activities are planned around key dates in the real estate market, such as November 11 and December 12 [29] Q&A Session Summary Question: Can you elaborate on the bad debt provision taken this quarter? - Management explained that the provision was necessary due to the deterioration of credit status of a major client, with specific figures provided regarding receivables [16][17] Question: Are there other clients being monitored for credit quality? - Management stated that the client base is diversified and currently feels safe, with ongoing monitoring of other clients [18][19] Question: How do you see the evolving regulatory landscape impacting the company? - Management anticipates continued tightening of regulations, which may pressure developers but create opportunities for the company in digital marketing [22][23] Question: How did the recent online promotional events perform? - Management reported satisfactory performance from the online fairs, with increased traffic and developer participation [25][26] Question: What promotional activities are planned for the second half of 2021? - Management outlined plans for significant promotional events in November and December, aiming to encourage more developers to participate [29]

PART I [ITEM 3. KEY INFORMATION](index=8&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section presents Leju's selected consolidated financial data for the fiscal years 2016 through 2020, including both U.S. GAAP and non-GAAP measures, and details a comprehensive list of risk factors related to its business, corporate structure, operations in China, and its American Depositary Shares (ADSs) [Selected Financial Data](index=8&type=section&id=A.%20Selected%20Financial%20Data) The company provides selected consolidated financial data for the years 2016 to 2020, prepared in accordance with U.S. GAAP, showing total net revenues grew from **$462.0 million** in 2018 to **$719.5 million** in 2020, and a shift from a net loss of **$13.5 million** attributable to shareholders in 2018 to a net income of **$19.3 million** in 2020, also including non-GAAP financial measures indicative of operating performance Selected Consolidated Statements of Operations Data | Indicator | 2018 (in millions) | 2019 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | :--- | | **Total net revenues** | $462.0M | $692.6M | $719.5M | | E-commerce | $320.3M | $547.2M | $547.9M | | Online advertising | $138.4M | $143.8M | $170.8M | | **Income (loss) from operations** | ($11.0M) | $17.7M | $24.1M | | **Net income (loss) attributable to Leju** | ($13.5M) | $11.5M | $19.3M | | **Basic EPS ($)** | ($0.10) | $0.08 | $0.14 | | **Diluted EPS ($)** | ($0.10) | $0.08 | $0.14 | Selected Consolidated Balance Sheet Data | Indicator | As of Dec 31, 2019 (in millions) | As of Dec 31, 2020 (in millions) | | :--- | :--- | :--- | | **Total assets** | $524.5M | $642.0M | | Cash and cash equivalents | $159.0M | $284.5M | | **Total liabilities** | $272.1M | $347.2M | | **Total Leju Holdings Limited shareholders' equity** | $255.4M | $295.9M | Selected Non-GAAP Financial Measures | Non-GAAP Measure | 2018 (in millions) | 2019 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | :--- | | **Adjusted income (loss) from operations** | $6.1M | $33.9M | $38.3M | | **Adjusted net income (loss)** | $1.0M | $23.9M | $32.4M | | **Adjusted net income (loss) attributable to Leju** | $0.4M | $24.6M | $30.7M | [Risk Factors](index=11&type=section&id=D.%20Risk%20Factors) The company identifies significant risks across four main categories: business operations, corporate structure, the Chinese operating environment, and its ADSs, including dependency on the volatile Chinese real estate market, intense competition, reliance on a VIE structure subject to PRC regulatory scrutiny, uncertainties in PRC law, and potential delisting from U.S. exchanges under the HFCA Act - The business is highly susceptible to fluctuations in China's real estate industry, which is influenced by government policies aimed at regulating the market, potentially impacting Leju's revenue[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The company faces significant competition from established real estate internet portals like fang.com and anjuke.com (operated by 58.com), as well as mobile-based news providers like toutiao.com for its advertising business[34](index=34&type=chunk) - A substantial portion of revenues (**38%** in 2020) is derived from major urban centers like Beijing, Hainan, Guangzhou, and Ningbo, creating market risk due to geographic concentration[45](index=45&type=chunk) - The COVID-19 pandemic had a severe negative impact in 2020, causing a slowdown in real estate transactions as developer clients closed sales centers, which adversely affected e-commerce services and online advertising expenditures[93](index=93&type=chunk)[95](index=95&type=chunk) - The company operates its internet and advertising businesses through a VIE structure due to PRC restrictions on foreign investment, relying on contractual arrangements which may be deemed non-compliant by PRC authorities, potentially leading to severe penalties[111](index=111&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - The Holding Foreign Companies Accountable Act (HFCA Act) poses a significant risk, as the company's ADSs could be delisted from U.S. exchanges if the PCAOB is unable to inspect the company's auditor for three consecutive years[187](index=187&type=chunk) [ITEM 4. INFORMATION ON THE COMPANY](index=45&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section details Leju's history, corporate development, and key relationships with E-House Enterprise, SINA, and Tencent, providing a comprehensive overview of its business, including its O2O platform, service offerings (e-commerce, online advertising, listing), operational aspects, and organizational structure, particularly the reliance on VIEs [History and Development of the Company](index=45&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Leju Holdings Limited was incorporated in 2013 by E-House and went public on the NYSE in 2014, with E-House (China) Enterprise Holdings Limited acquiring a controlling stake in November 2020, making Leju its subsidiary, while maintaining strategic relationships with SINA and Tencent for real estate website operations and advertising partnerships - In November 2020, E-House Enterprise acquired a controlling stake in Leju, becoming its parent company, and as of March 31, 2021, E-House Enterprise owned approximately **56%** of Leju's total outstanding ordinary shares[226](index=226&type=chunk) - The company operates SINA's real estate and home furnishing websites under agreements extending through 2024, making it the exclusive agent for selling real estate advertising on these platforms[229](index=229&type=chunk) - Tencent became a significant shareholder in 2014 and maintains a strategic partnership, with Leju acting as an exclusive or primary real estate advertising agent for Tencent in various regions across China[231](index=231&type=chunk)[233](index=233&type=chunk) [Business Overview](index=48&type=section&id=B.%20Business%20Overview) Leju is a leading O2O real estate services provider in China, offering e-commerce, online advertising, and listing services through its platform, which includes local websites covering 391 cities, mobile apps, and operation of SINA's real estate sites, with e-commerce being the largest revenue source at **76.2%** of total revenues in 2020, facing competition from major players like fang.com and anjuke.com Revenue Breakdown (in millions) | Revenue Stream | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | E-Commerce | $320.3M (69.3%) | $547.2M (79.0%) | $547.9M (76.2%) | | Online Advertising | $138.4M (30.0%) | $143.8M (20.8%) | $170.8M (23.7%) | | Listing | $3.4M (0.7%) | $1.6M (0.2%) | $0.8M (0.1%) | | **Total Revenues** | **$462.0M** | **$692.6M** | **$719.5M** | - The company operates an extensive O2O platform that includes its own websites (leju.com), SINA's real estate and home furnishing sites (e.g., house.sina.com.cn), and a suite of mobile applications like "Leju Home Purchase" and "Leju Finance"[241](index=241&type=chunk)[242](index=242&type=chunk)[245](index=245&type=chunk) - Key competitors include leading real estate internet portal fang.com and major online listing platform anjuke.com (operated by 58.com)[273](index=273&type=chunk) [Organizational Structure](index=65&type=section&id=C.%20Organizational%20Structure) Leju Holdings Limited is a Cayman Islands holding company that conducts its PRC operations through wholly-owned subsidiaries and consolidated variable interest entities (VIEs), utilizing contractual arrangements to control its VIEs (Beijing Leju, Leju Hao Fang, and Beijing Jiajujiu) which generate substantially all of its revenue, due to PRC restrictions on foreign investment in internet and advertising services - The company utilizes a VIE structure to conduct its internet information and advertising services in China, which are restricted for foreign investors, with the VIEs being Beijing Leju, Leju Hao Fang, and Beijing Jiajujiu[338](index=338&type=chunk) - Substantially all of the company's revenues are derived from its consolidated VIEs, contributing **99.5%**, **99.9%**, and **99.9%** of total net revenues in 2018, 2019, and 2020, respectively[118](index=118&type=chunk)[340](index=340&type=chunk) - Control over the VIEs is established through a series of contractual arrangements, including Exclusive Call Option Agreements, Loan Agreements, Powers of Attorney, Equity Pledge Agreements, and Exclusive Business Cooperation Agreements, which collectively allow Leju to direct activities and consolidate the VIEs' financial results[339](index=339&type=chunk)[342](index=342&type=chunk) [ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=72&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section provides a detailed analysis of Leju's operating results for the fiscal years 2018, 2019, and 2020, discussing key factors affecting performance, such as the PRC real estate industry and competition, highlighting a **4%** revenue increase in 2020 to **$719.5 million** and a rise in net income to **$21.0 million**, while also outlining critical accounting policies, liquidity, capital resources, and R&D efforts [Operating Results](index=72&type=section&id=A.%20Operating%20Results) Leju's total revenues increased by **4%** to **$719.5 million** in 2020 from **$692.6 million** in 2019, driven by a **19%** growth in online advertising revenue, with net income growing to **$21.0 million** in 2020 from **$10.9 million** in 2019, reflecting performance significantly influenced by the PRC real estate industry, government policies, and innovation, with critical accounting policies including revenue recognition under ASC 606 and the consolidation of its VIEs Operating Performance Summary (in millions) | Metric | 2019 | 2020 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $692.6M | $719.5M | +4% | | E-commerce Revenues | $547.2M | $547.9M | +0.1% | | Online Advertising Revenues | $143.8M | $170.8M | +19% | | **Income from Operations** | $17.7M | $24.1M | +36% | | **Net Income** | $10.9M | $21.0M | +93% | Operating Performance Summary (in millions) | Metric | 2018 | 2019 | Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $462.0M | $692.6M | +49.9% | | E-commerce Revenues | $320.3M | $547.2M | +70.9% | | **Income (Loss) from Operations** | ($11.0M) | $17.7M | - | | **Net Income (Loss)** | ($12.9M) | $10.9M | - | - The company's VIEs contributed **99.9%** of total revenues in 2020, with total assets held by the VIEs amounting to **$527.3 million** as of December 31, 2020[432](index=432&type=chunk)[434](index=434&type=chunk)[435](index=435&type=chunk) - The company adopted ASC 606 (Revenue from Contracts with Customers) on January 1, 2018, recognizing revenue from e-commerce discount coupons at a point in time when the coupon is used, while online advertising and listing services revenue is recognized over time[420](index=420&type=chunk)[422](index=422&type=chunk)[426](index=426&type=chunk) [Liquidity and Capital Resources](index=87&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company's primary sources of liquidity are cash from operations and existing cash balances, with net cash from operating activities increasing significantly to **$108.5 million** in 2020 from **$19.7 million** in 2019, and cash and cash equivalents standing at **$284.5 million** at the end of 2020, though PRC regulations restrict the ability of its Chinese subsidiaries to transfer net assets, with **$35.5 million** being restricted as of December 31, 2020 Consolidated Cash Flow Data (in millions) | Cash Flow | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | **Net cash from operating activities** | $1.7M | $19.7M | $108.5M | | **Net cash from (used in) investing activities** | $0.8M | ($5.6M) | $0.1M | | **Net cash from financing activities** | $0.0M | $0.0M | $0.5M | | **Cash and cash equivalents at end of year** | $147.3M | $159.0M | $285.7M | - As of December 31, 2020, the net assets of the company's PRC subsidiaries and VIEs that were restricted from distribution amounted to **$35.5 million** due to statutory reserve requirements and other regulations[468](index=468&type=chunk) - Capital expenditures were **$0.9 million**, **$8.0 million**, and **$1.6 million** in 2018, 2019, and 2020, respectively, consisting mainly of purchases of property, equipment, and intangible assets[470](index=470&type=chunk) [ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=90&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section provides information on the company's leadership, compensation, board practices, and employee base, highlighting key figures like Executive Chairman Xin Zhou and CEO Yinyu He, aggregate cash compensation for executive officers of **$2.4 million** in 2020, the board's three committees, the company's qualification as a "controlled company" under NYSE rules, and a total of **2,251** employees as of December 31, 2020 Leadership Team | Name | Position/Title | | :--- | :--- | | Xin Zhou | Executive Chairman | | Yinyu He | Chief Executive Officer | | Charles Chao | Director | | Canhao Huang | Director | | Juhong Chen | Director | | David Jian Sun | Independent Director | | Min Fan | Independent Director | | Winston Jin Li | Independent Director | | Hongchao Zhu | Independent Director | | Qiong Zuo | Chief Operating Officer | | Li-Lan Cheng | Acting Chief Financial Officer | - For the fiscal year 2020, the company paid approximately **$2.4 million** in aggregate cash compensation to its executive officers and **$0.2 million** to its directors[496](index=496&type=chunk) - As of December 31, 2020, the company had **2,251** employees, with the largest groups in Corporate Offices (**30.3%**) and Sales (**24.7%**)[525](index=525&type=chunk)[526](index=526&type=chunk) - As of March 31, 2021, the three principal shareholders were E-House Enterprise (**56.0%**), SINA Corporation (**12.9%**), and Tencent (**16.5%**)[533](index=533&type=chunk) [ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=102&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section details Leju's major shareholders and extensive related party transactions, primarily with E-House Enterprise, SINA, and Tencent, with E-House Enterprise as the controlling shareholder, and numerous ongoing agreements including a master transaction agreement with E-House, licensing and advertising agreements with SINA, and strategic cooperation and advertising agreements with Tencent, forming a critical part of Leju's operations - Leju became a subsidiary of E-House Enterprise in November 2020, and in 2020, Leju recognized **$21.4 million** in expenses for marketing channel services provided by E-House Enterprise[542](index=542&type=chunk) - The company has a series of foundational agreements with SINA, including an Advertising Inventory Agency Agreement and a Domain Name and Content License Agreement, extending through 2024, with the cost for advertising resources purchased from SINA being **$29.3 million** in 2020[565](index=565&type=chunk)[566](index=566&type=chunk)[567](index=567&type=chunk)[572](index=572&type=chunk) - Leju has strategic advertising agency agreements with Tencent, acting as its real estate advertising agent in many areas of China, with the cost for advertising resources purchased from Tencent being **$17.8 million** in 2020[573](index=573&type=chunk)[575](index=575&type=chunk) [ITEM 8. FINANCIAL INFORMATION](index=110&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section confirms that the consolidated financial statements are appended to the annual report, states that the company is not currently involved in any material legal proceedings, and notes that the dividend policy is at the discretion of the board of directors, with a cash dividend of **$0.20** per share last paid in May 2015 - The company is not currently involved in any material legal or arbitration proceedings[589](index=589&type=chunk) - The company's dividend policy is discretionary, with the last dividend paid being **$0.20** per ordinary share in May 2015[590](index=590&type=chunk)[591](index=591&type=chunk) [ITEM 10. ADDITIONAL INFORMATION](index=111&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section provides details on the company's memorandum and articles of association, material contracts, exchange controls, and taxation, including the rights of ordinary shareholders, board of director powers, anti-takeover provisions, and tax implications in the Cayman Islands, PRC, and for U.S. holders, noting the assessment that the company was not a Passive Foreign Investment Company (PFIC) for the 2020 taxable year - The company is a Cayman Islands exempted company, and its articles of association grant the board of directors the authority to issue preferred shares without shareholder approval, which could act as an anti-takeover measure[595](index=595&type=chunk)[619](index=619&type=chunk) - The company believes it was not a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the taxable year ended December 31, 2020, but notes that the determination is a factual one made annually and is subject to change[218](index=218&type=chunk)[637](index=637&type=chunk) - If the PRC tax authorities determine Leju is a PRC resident enterprise, dividends paid to non-resident enterprise shareholders (including ADS holders) may be subject to a **10%** withholding tax, and gains on the sale of ADSs may also be subject to a **10%** PRC tax[630](index=630&type=chunk) [ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=123&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks are interest rate risk and foreign exchange risk, with interest rate risk relating to income from bank deposits, and foreign exchange risk arising because revenues are denominated in Renminbi (RMB) while ADSs are traded in U.S. dollars, making the investment's value sensitive to fluctuations in the USD/RMB exchange rate - The company's main market risk exposures are interest rate risk on its cash deposits and foreign exchange risk related to the fluctuation of the Renminbi against the U.S. dollar[657](index=657&type=chunk)[658](index=658&type=chunk) - As of December 31, 2020, the company held **$283.8 million** in RMB or HKD-denominated cash balances and **$1.9 million** in USD-denominated cash balances, meaning a **1%** appreciation or depreciation of the RMB against the USD would have a corresponding impact on the value of these holdings when converted[660](index=660&type=chunk) [ITEM 15. CONTROLS AND PROCEDURES](index=125&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of December 31, 2020, also assessing the internal control over financial reporting using the COSO framework and concluding it was effective, and as a "non-accelerated filer," the company is not required to have an attestation report on internal control from its external auditor - Management concluded that as of December 31, 2020, the company's disclosure controls and procedures were effective[670](index=670&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[672](index=672&type=chunk) - The company is a "non-accelerated filer" and is therefore not required to provide an auditor's attestation report on its internal control over financial reporting[672](index=672&type=chunk)[673](index=673&type=chunk) [Other Corporate Governance and Disclosure Items](index=127&type=section&id=ITEM%2016.%20Other%20Items) This section covers various corporate governance matters, including the board's determination that Winston Li and Min Fan are audit committee financial experts, the adoption of a code of ethics applicable to all directors, officers, and employees, details on fees paid to its principal accountants, Deloitte and Yu CPA, for 2019 and 2020, and the company's status as a "controlled company" under NYSE rules due to E-House Enterprise's majority ownership - The board of directors has identified Winston Li and Min Fan as audit committee financial experts[677](index=677&type=chunk) - In May 2020, the company appointed Yu Certified Public Accountant, P.C. as its independent registered public accounting firm, replacing Deloitte Touche Tohmatsu Certified Public Accountants LLP[679](index=679&type=chunk)[682](index=682&type=chunk) - The company is a "controlled company" under NYSE rules because E-House Enterprise holds more than **50%** of the voting power, exempting it from the requirement to have a majority of independent directors[683](index=683&type=chunk) PART III [ITEM 18. FINANCIAL STATEMENTS](index=128&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section contains the consolidated financial statements of Leju Holdings Limited for the fiscal years ended December 31, 2018, 2019, and 2020, including reports of the independent registered public accounting firms, consolidated balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, along with detailed notes to the financial statements prepared in accordance with U.S. GAAP - The financial statements include reports from two independent registered public accounting firms: Yu Certified Public Accountant, P.C. for the 2019 and 2020 fiscal years, and Deloitte Touche Tohmatsu Certified Public Accountants LLP for the 2018 fiscal year[710](index=710&type=chunk)[723](index=723&type=chunk) - The notes to the financial statements confirm that on November 4, 2020, E-House Enterprise acquired a controlling stake, making Leju its subsidiary[747](index=747&type=chunk) - The company adopted new accounting standards, including ASC Topic 326 (Financial Instruments-Credit Losses), effective January 1, 2020[711](index=711&type=chunk)[828](index=828&type=chunk)

Financial Data and Key Metrics Changes - Total revenues for Q4 2020 were $230.4 million, a 2% increase from Q4 2019 [10] - E-commerce services revenues decreased by 8% to $170.1 million, contributing 74% of total revenues [10] - Online advertising services revenues increased by 43% to $60.1 million, contributing 26% of total revenues [10] - Income from operations was $10.1 million, a 12% increase from Q4 2019 [11] - Net income attributable to Leju shareholders was $6.1 million, a 36% increase from Q4 2019 [11] - For the full year 2020, total revenues were $719.5 million, a 4% increase from 2019 [13] - Net income attributable to Leju shareholders for 2020 was $19.3 million, a 68% increase from 2019 [14] Business Line Data and Key Metrics Changes - E-commerce services contributed 76% of total revenues for the full year 2020, with revenues of $547.9 million [13] - Online advertising revenues increased by 19% to $170.8 million for the full year 2020, contributing 24% of total revenues [13] - Listing services revenues decreased by 48% to $0.8 million for the full year 2020 [13] Market Data and Key Metrics Changes - The Chinese housing market experienced demand growth in transactions for the full year 2020, following a sharp decline at the beginning of the year due to COVID-19 [6] - The demand for digital marketing is expected to increase significantly in 2021 as developers shift from offline to online channels [25] Company Strategy and Development Direction - The company plans to leverage strategic cooperation with Alibaba and E-House to enhance digital marketing capabilities and expand business scale [9] - Focus on optimizing the Amoeba operating system base management model and improving operational efficiency [9] - Investment in technology and content production to generate more leads for sales [26] Management Comments on Operating Environment and Future Outlook - Management anticipates significant changes in the competitive landscape for developers due to government restrictions affecting marketing strategies [25] - The company estimates total revenues for 2021 to be between $755 million to $790 million, reflecting a 5% to 10% increase from 2020 [15] Other Important Information - Cash and cash equivalents and restricted cash balance as of December 31, 2020, was $285.7 million [14] - Non-GAAP net income attributable to Leju shareholders was $30.7 million for 2020, a 25% increase from 2019 [14] Q&A Session Summary Question: Update on Alibaba E-House and Tmall platform - Management discussed the strategic operation with E-House and Alibaba, focusing on building a new digital marketing infrastructure for developers [18][19] Question: Expectations for online advertising platform and potential cannibalization of e-commerce revenues - Management acknowledged early benefits from the advertising side and noted potential opportunities for trading on the new platform [22][23] Question: Expectations for the Chinese real estate market and major activities planned - Management highlighted trends in digital marketing demand and plans for online housing fairs and e-commerce festivals [25][28] Question: Clarification on customer deposits and advances from customers - Management explained the differences between customer deposits from developers and deposits from home buyers, noting fluctuations based on project dynamics [32][33][36]