JD(09618)2024-04-18 11:10Share Structure and Voting Rights - JD.com's dual-class share structure allows B-class shares to have 20 votes per share compared to 1 vote per A-class share, with B-class shares convertible to A-class shares under certain conditions[3] - As of March 31, 2024, JD.com's Chairman Richard Liu controls approximately 70.5% of the company's total voting rights, including 3.8% through Fortune Rising Holdings Limited[3] - If all outstanding B-class shares were converted to A-class shares, JD.com would issue 323,166,624 A-class shares, representing approximately 11.8% of the total outstanding A-class shares as of March 31, 2024[3] - B-class shares automatically convert to A-class shares if Richard Liu ceases to be a director, CEO, or beneficial owner of B-class shares, or becomes permanently incapacitated[5] Subsidiaries and Business Operations - JD.com's subsidiaries include JD Health, JD Logistics, JD Industrial, and JD Property, all of which are consolidated entities under the company's financial reporting[6] - JD Assets Holding Limited has 65 subsidiaries directly or indirectly holding non-logistics assets[18] - JD Asia Development Limited has 499 subsidiaries directly or indirectly holding logistics assets[18] - JD Century has 269 subsidiaries engaged in retail business[19] - JD.com Investment Limited owns 79 subsidiaries directly or indirectly holding investments in other companies[19] Risks and Challenges - JD faces significant risks related to its operations in Mainland China, which also apply to its businesses in Hong Kong and Macau, including legal and regulatory risks[8] - JD has experienced net losses in the past and may not maintain profitability in the future[9] - Failure to provide an excellent customer experience could significantly harm JD's business and reputation[9] - Uncertainties in the growth and profitability of China's retail and e-commerce sectors could adversely impact JD's revenue and business prospects[10] - Damage to JD's brand or reputation could have a material adverse effect on its business and operating results[10] - Inability to efficiently manage JD's nationwide logistics infrastructure could negatively affect its business prospects and operating performance[10] - JD faces intense competition, and failure to compete effectively could result in loss of market share and customers[10] - Expanding into new product categories and increasing product volume may expose JD to new challenges and risks[10] - Inefficient inventory management could significantly harm JD's operating performance, financial condition, and liquidity[10] - Failure to protect customer data and prevent cybersecurity breaches could damage JD's reputation and severely harm its business and operating results[10] Legal and Regulatory Risks - The company is registered in the Cayman Islands and operates through contractual arrangements with consolidated variable interest entities (VIEs) in China, which may face legal risks if Chinese authorities deem these arrangements non-compliant with local laws, potentially leading to severe penalties or loss of business interests[12] - Non-performance of contractual obligations by the consolidated VIEs or their shareholders could significantly adversely affect the company's business[13] - Potential conflicts of interest between the company and shareholders of the consolidated VIEs may negatively impact the company's business and financial condition[13] - The Chinese government's significant regulatory oversight could lead to restrictions on the company's ability to issue securities overseas, potentially causing a substantial decline in the value of its American Depositary Shares (ADS) or Class A ordinary shares[14] - Changes in China's or global economic, political, or social conditions, as well as government policies, could have a material adverse impact on the company's operations[14] - Uncertainty in China's legal system, including rapid changes in laws and regulations, may create risks and challenges for the company in complying with applicable laws[14] - Compliance with consumer protection laws in China may require changes to the company's business practices, leading to increased costs[14] - The complexity and frequent changes in China's internet-related business and corporate regulations could adversely affect the company[14] - Restrictions on cash transfers under Chinese laws may limit the company's ability to use funds from its Chinese subsidiaries or VIEs for business operations or other purposes outside China[15] - Future application of Chinese regulations to the company's Hong Kong entities could restrict the use of their funds for business operations or other purposes outside Hong Kong[15] Financial Performance and Market Risks - The company's ADS and Class A ordinary shares may experience significant price volatility, potentially causing substantial losses for shareholders[16] - The company's cash reserves may decrease due to share repurchase plans, which could also increase price volatility of its ADS and Class A ordinary shares[16] - The company's ADS and Class A ordinary shares may decline in market price and trading volume if analysts publish inaccurate or unfavorable research[16] - The company's future business development, financial condition, and operating results are subject to uncertainties and risks, as outlined in forward-looking statements[17] - The company expects growth in China's retail and online retail markets, which may impact its future performance[17] - The company plans to invest in logistics infrastructure, technology platforms, and new business initiatives[17] VIE Structure and Regulatory Compliance - The consolidated variable interest entities (VIEs) contributed 6.2%, 6.9%, and 7.8% of JD.com's total revenue in 2021, 2022, and 2023, respectively[20] - JD.com operates in China through its subsidiaries and contractual arrangements with VIEs, which are used to navigate foreign investment restrictions in certain sectors[20] - The company's contractual arrangements with VIEs may not be as effective as direct ownership, and there is a risk of government questioning their enforceability[20][21] - JD.com's holding company structure and VIE arrangements face risks if Chinese laws or regulations change, potentially leading to penalties or loss of business interests[22] - The company relies on a series of contractual agreements, including loan agreements, exclusive purchase agreements, and intellectual property licenses, to control the VIEs[21] - JD.com's investors do not hold direct equity in the VIEs but own shares in the Cayman Islands-based holding company[20] - The VIEs include entities such as Beijing Jingdong 360 E-commerce Co., Ltd., which holds the ICP license and operates JD.com's website[20] - There is significant uncertainty regarding the interpretation and application of Chinese laws and regulations related to VIE structures[22] - Regulatory actions by Chinese authorities could adversely affect the enforceability of VIE contracts and JD.com's financial performance[22] - The company's business operations in China are subject to restrictions on foreign investment in certain sectors, such as value-added telecommunications services[20] Cybersecurity and Data Privacy - The company faces risks related to operating in China, including regulatory approvals for overseas offerings, antitrust actions, and cybersecurity and data privacy supervision[23] - The company was identified under the HFCAA in May 2022 but was not designated as a Commission-Identified Issuer after submitting the 20-F form for the fiscal year ending December 31, 2022[24] - Future PCAOB determinations on the inability to inspect or investigate accounting firms in China and Hong Kong could lead to the company being designated as a Commission-Identified Issuer[25] - The company's operations in China require various licenses and permits, including ICP License, Express Delivery Business License, and Medical Institution Practice License[26] - The company may need to obtain additional licenses, permits, or approvals in the future due to uncertainties in the interpretation and implementation of laws and regulations[26] - The company is not currently required to obtain permits from the China Securities Regulatory Commission or submit cybersecurity review applications to the Cyberspace Administration of China[26] - Changes in applicable laws, regulations, or interpretations may require the company to obtain additional licenses or approvals in the future[26] - The company could face penalties, including fines, business suspension, and revocation of necessary licenses if it fails to obtain or renew required permits or approvals[26] - The China Securities Regulatory Commission issued the "Trial Measures for the Administration of Overseas Securities Offering and Listing by Domestic Companies" and five supporting guidelines, effective from March 31, 2023[26] Financial Management and Cash Flow - JD.com's Chinese subsidiaries and consolidated variable interest entities are subject to restrictions on transferring net assets, with restricted amounts totaling RMB 46.4 billion, RMB 58.2 billion, and RMB 67.6 billion as of December 31, 2021, 2022, and 2023, respectively[29] - The company's ability to pay dividends and repay debts depends on dividends from Chinese subsidiaries and service fees from consolidated variable interest entities, which may be limited by debt agreements or Chinese accounting regulations[28] - JD.com has established a centralized cash management policy to enhance efficiency and security in fund transfers between JD.com, Inc., subsidiaries, and consolidated variable interest entities[30] - The company's Chinese subsidiaries and consolidated variable interest entities are required to allocate funds to statutory reserves, which cannot be distributed as cash dividends unless the company is solvent upon liquidation[28] - JD.com, Inc. can only provide funds to its Chinese subsidiaries through capital contributions or loans, and to consolidated variable interest entities through loans, subject to government registration requirements[29] - The company's cash management policy requires appropriate review and approval processes for each internal fund transfer, depending on the nature and amount of the transfer[30] - JD.com's Chinese subsidiaries and consolidated variable interest entities must comply with Chinese government regulations on currency conversion when transferring cash outside of mainland China[29] - The company's board of directors has full discretion to decide on dividend distributions, subject to certain restrictions under Cayman Islands law and the company's articles of association[28] - JD.com provided loans of RMB 20.9 billion to its intermediate holding companies and received repayments of RMB 7.4 billion and RMB 12.6 billion (USD 1.8 billion) in 2021, 2022, and 2023 respectively[31] - The consolidated variable interest entities received funding of RMB 11.7 billion from intermediate holding companies in 2021 and repaid RMB 3.2 billion and RMB 3.3 billion (USD 500 million) in 2022 and 2023 respectively[31] - JD.com paid special cash dividends of USD 2 billion in 2022, USD 1 billion in 2023, and plans to pay USD 1.2 billion in 2024[32] Revenue and Profitability - Total revenue increased from RMB 951.592 billion in 2021 to RMB 1.084662 trillion (USD 152.771 billion) in 2023, with service revenue growing from RMB 135.937 billion to RMB 213.438 billion (USD 30.062 billion) over the same period[35] - Operating profit rose from RMB 4.141 billion in 2021 to RMB 26.025 billion (USD 3.665 billion) in 2023[35] - Net profit attributable to ordinary shareholders improved from a loss of RMB 3.560 billion in 2021 to a profit of RMB 24.167 billion (USD 3.403 billion) in 2023[35] - Cost of goods sold increased from RMB 822.526 billion in 2021 to RMB 924.958 billion (USD 130.277 billion) in 2023[35] - Fulfillment expenses grew from RMB 59.055 billion in 2021 to RMB 64.558 billion (USD 9.093 billion) in 2023[35] - Marketing expenses increased from RMB 38.743 billion in 2021 to RMB 40.133 billion (USD 5.653 billion) in 2023[35] - R&D expenses remained relatively stable, decreasing slightly from RMB 16.893 billion in 2022 to RMB 16.393 billion (USD 2.309 billion) in 2023[35] - Revenue for 2023 reached RMB 1,084,662 million (USD 152,771 million), with electronic products and home appliances contributing 49.7% (RMB 538,799 million) and daily necessities contributing 30.6% (RMB 332,425 million)[37] - Service revenue in 2023 grew to RMB 213,438 million (USD 30,062 million), accounting for 19.7% of total revenue, with logistics and other services contributing 11.9% (RMB 128,712 million)[37] - Basic earnings per share for 2023 were RMB 7.69 (USD 1.08), a significant increase from RMB 3.32 in 2022[36] - Total assets as of 2023 stood at RMB 628,958 million (USD 88,586 million), with cash and cash equivalents at RMB 71,892 million (USD 10,126 million)[41] - Total liabilities for 2023 were RMB 332,578 million (USD 46,842 million), with short-term debt at RMB 5,034 million (USD 709 million)[41] - R&D expenses in 2023 were RMB 859 million (USD 121 million), a decrease from RMB 1,557 million in 2022[38] - Marketing expenses in 2023 decreased to RMB 426 million (USD 60 million) from RMB 631 million in 2022[38] - Total equity attributable to JD.com, Inc. shareholders in 2023 was RMB 231,858 million (USD 32,657 million), up from RMB 213,366 million in 2022[41] - The number of outstanding ordinary shares as of 2023 was 3,137,663,915, slightly up from 3,135,679,247 in 2022[41] - Logistics and other service revenue grew significantly, reaching RMB 128,712 million (USD 18,129 million) in 2023, up from RMB 99,204 million in 2022[37] - Operating cash flow increased to RMB 59,521 million in 2023, up from RMB 57,819 million in 2022[42] - Net cash used in investing activities was RMB 59,543 million in 2023, compared to RMB 54,026 million in 2022[42] - Net cash used in financing activities was RMB 5,808 million in 2023, a significant change from RMB 1,180 million generated in 2022[42] - Total revenue for 2023 reached RMB 1,084,662 million, with third-party revenue accounting for RMB 991,705 million[44] - Operating profit for 2023 was RMB 26,025 million, a significant increase from RMB 19,723 million in 2022[44] - Net profit for 2023 stood at RMB 23,257 million, compared to RMB 9,691 million in 2022[44] - Marketing expenses decreased to RMB 40,133 million in 2023 from RMB 37,772 million in 2022[44] - R&D expenses remained relatively stable at RMB 16,393 million in 2023, compared to RMB 16,893 million in 2022[44] - General and administrative expenses decreased to RMB 9,710 million in 2023 from RMB 11,053 million in 2022[44] - Cash and cash equivalents at the end of 2023 were RMB 79,398 million, down from RMB 85,115 million at the end of 2022[42] - Cash and cash equivalents increased to RMB 71,892 million in 2023 from RMB 78,861 million in 2022, showing a decrease of 8.8%[47][48] - Short-term investments rose to RMB 118,254 million in 2023, up from RMB 141,095 million in 2022, a decrease of 16.2%[47][48] - Inventory (net) decreased to RMB 68,058 million in 2023 from RMB 77,949 million in 2022, a decline of 12.7%[47][48] - Total assets increased to RMB 628,958 million in 2023 from RMB 595,250 million in 2022, a growth of 5.7%[47][48] - Total liabilities rose to RMB 332,578 million in 2023 from RMB 321,127 million in 2022, an increase of 3.6%[47][48] - Equity increased to RMB 295,766 million in 2023 from RMB 273,533 million in 2022, a growth of 8.1%[47][48] - Property, equipment, and software (net) increased to RMB 70,035 million in 2023 from RMB 55,080 million in 2022, a rise of 27.1%[47][48] - Operating lease liabilities grew to RMB 21,431 million in 2023 from RMB 22,666 million in 2022, a decrease of 5.4%[47][48] - Long-term borrowings increased to RMB 31,555 million in 2023 from RMB 20,009 million in 2022, a significant rise of 57.7%[47][48] - Prepaid expenses and other assets decreased to RMB 114,462 million in 2023 from RMB 121,167 million in 2022, a decline of 5.5%[47][48] - Operating activities generated a net cash flow of RMB 59,521 million in 2023, compared to RMB 57,819 million in 2022[49][50] - Net cash used in investing activities was RMB 59,543 million in 2023, a significant increase from RMB 54,026 million in 2022[49][50] - Net cash used in financing activities was RMB 5,808 million in 2023, compared to a net cash inflow of RMB 1,180 million in 2022[49][50] - Cash and cash equivalents decreased by RMB 5,705 million in 2023, following an increase of RMB 8,463 million in 2022[49][50] - Short-term investments increased by RMB 23,579 million in 2023, compared to a decrease of RMB 15,198 million in 2022[49][50] - Long-term investments increased by RMB 74,924 million in 2023, compared to no significant change in 2022[49][50] - Cash paid for property, equipment, software, and construction in progress was RMB 15,031 million in 2023, down from RMB 17,667 million in 2022[49][50] - Cash dividends paid amounted to RMB 6,741 million in 2023, a decrease from RMB 13,087 million in 2022[49][50] - Cash and cash equivalents at the end of 2023 were RMB 79,398 million, down from RMB 85,115 million at the end of 2022[49][50] - Operating activities generated a net cash flow of RMB 42,301 million, with subsidiaries contributing RMB 64,468 million and the parent company using RMB 411 million[51] - Investment activities used a net cash flow of RMB 74,248 million, primarily due to short-term investments decreasing by RMB 54,322 million and payments for property