Yalla Group(YALA) - 2024 Q4 - Annual Report

Financial Performance - For the fiscal years ended December 31, 2022, 2023, and 2024, the parent company received cash inflows of $90.0 million,$ 178.0 million, and $130.9 million from a UAE subsidiary, and$ 25.0 million, $46.1 million, and$ 48.0 million from Hong Kong subsidiaries[35]. - Revenues grew by 5.0% from US $303.6 million in 2022 to US$ 318.9 million in 2023, and further increased by 6.5% to US $339.7 million in 2024[80]. - The average monthly active users (MAUs) increased from 32.0 million in Q4 2022 to 36.2 million in Q4 2023, and further to 41.4 million in Q4 2024[80]. - The company has experienced growth in active users and revenues, but future performance is uncertain due to competitive pressures and market dynamics[80]. Dividend Policy - No cash dividends were declared or paid by the company for the fiscal years ended December 31, 2022, 2023, and 2024, and there are no plans to pay dividends in the foreseeable future[36]. - The company has not declared or paid any cash dividends since its public offering in 2020, focusing instead on retaining funds for business development and growth[36]. - The company does not expect to pay cash dividends in the foreseeable future, intending to retain available funds for business development and growth[218]. Regulatory Environment - The company is monitoring regulatory developments in China regarding necessary approvals for overseas listings, with no current inquiries or sanctions from PRC authorities[44]. - The PCAOB completed inspections of registered public accounting firms in mainland China and Hong Kong in 2023, allowing the company to avoid being identified as an SEC-identified issuer[33]. - The New Overseas Listing Rules effective March 31, 2023, require PRC domestic companies to complete filing procedures with the CSRC for overseas listings, but the company is not currently required to obtain additional permissions for past securities offerings[46]. - The company has not received any permissions or approvals from PRC authorities for its current operations, and all necessary permissions have been obtained[43]. - The company is subject to PRC regulations regarding offshore investments, which may limit overseas investments and expose it to penalties[190]. - The company may be classified as a "resident enterprise" for PRC tax purposes, potentially subjecting it to a 25% enterprise income tax on worldwide income[195]. - Compliance with evolving data security regulations in mainland China may require additional resources and could impact operational costs[187]. Market and Competition - The company faces significant competition from other social networking and gaming platforms, which may impact user retention and engagement[79]. - The company faces risks related to user retention and engagement, which are critical for maintaining its business model and profitability[61]. - The company emphasizes the importance of maintaining and enhancing its brand to attract and retain users in a competitive market[71]. - The company may face challenges in adapting its products and marketing strategies to diverse cultural preferences in new markets[74]. User Engagement and Growth - The company is focused on expanding its user base and increasing user engagement to leverage the network effect of its platform[63]. - User growth and engagement are dependent on effective interoperation with mobile operating systems, which the company does not control[105]. - The platform does not require real-name registration, which may lead to user misconduct and impact brand image[108]. - The company relies heavily on converting non-paying users to paying users, which poses a risk to revenue growth[82]. Risks and Challenges - The company is subject to various risks associated with doing business in emerging markets, including economic and political instability, regulatory challenges, and compliance costs[75]. - Political and economic instability in the MENA region may adversely affect user spending and overall business performance[98]. - The company acknowledges the potential impact of negative publicity on its brand and reputation, which could adversely affect its business[73]. - The company faces potential liability for user-generated content, which could lead to regulatory actions and affect business operations[110]. - Security breaches in third-party payment platforms could damage reputation and user confidence, impacting revenue from virtual currency sales[114]. - The company may incur significant legal and accounting expenses if required to be listed in the UAE, affecting corporate activities[177]. Intellectual Property and Compliance - The company may be subject to intellectual property infringement claims, which could divert financial and management resources and result in substantial liabilities[141]. - The company's trademarks and intellectual property may not provide adequate protection, risking unauthorized use by third parties and harming its competitive position[143]. - The company has registered software copyrights, patents, and trademarks in certain jurisdictions, including MENA and the PRC, but the effectiveness of intellectual property protection may not be as strong as in the United States[145]. - The company relies on open source software, which poses risks of unanticipated conditions or restrictions that could negatively affect its proprietary software and services[146]. Financial and Operational Controls - The company must maintain effective internal controls over financial reporting to meet regulatory obligations; failure to do so could adversely affect investor confidence and the market price of its ADSs[152]. - The company may require additional capital to grow its business, which could lead to dilution of shareholders or restrictive covenants if additional equity or debt securities are issued[156]. - The company has limited business insurance coverage, which may result in substantial costs and resource diversion in the event of uninsured disruptions[158]. Taxation and Economic Conditions - The UAE's corporate tax law, effective from June 1, 2023, imposes a 9% tax on taxable income above AED375,000, which could impact the company's financial condition[169]. - A top-up tax rate of 15% will apply to multinational enterprises with annual global consolidated revenues of 750 million Euros or more, effective January 1, 2025[171]. - VAT at a rate of 5% is imposed on the supply of goods and services in the UAE, which could increase costs for users and adversely affect revenues[173]. - The AED has been pegged to the U.S. dollar at 3.6725 AEDs per U.S. dollar since November 1997, but future adjustments could negatively impact economic activities in the UAE[174]. Shareholder Dynamics - Mr. Tao Yang controls 84.7% of the voting power due to ownership of Class B shares, which may limit other shareholders' influence on corporate matters[103]. - The concentration of ownership could discourage changes in control, potentially reducing the value of investments and the price of ADSs[104]. - Major holders of ordinary shares have the right to register their shares under the Securities Act, which could lead to significant price declines for the ADSs if sold in the public market[221]. - The trading price of the American Depositary Shares (ADSs) has fluctuated between US$ 3.00 and US $41.35 since listing on September 30, 2020, with a last reported price of US$ 6.44 on April 21, 2025[214].