AMTD Digital(US:HKD)2025-02-28 21:17PART I Key Information This section outlines principal risks related to the company's business, controlling shareholder, and American Depositary Shares (ADSs) - The company operates as a Cayman Islands holding company, relying on subsidiary dividends for cash flow, which may be restricted3040 - During FY2024, US$25.1 million was transferred from the holding company to subsidiaries, with no dividends declared or paid to date3132 - The company is a "controlled company" under NYSE rules, allowing exemptions from certain corporate governance requirements due to its Controlling Shareholder's majority voting power180 Risk Factors This subsection details comprehensive business, financial, operational, and governance risks, including competition, liquidity, cybersecurity, and dual-class share structure - The company operates in multiple competitive industries, including digital financial services, media and entertainment, and hospitality, making future prospects difficult to evaluate424445 - The ADSs trading price has been extremely volatile since its IPO, ranging from US$2.40 to US$2,555.30185 - The dual-class share structure grants Class B shareholders twenty votes per share (vs. one for Class A), with AMTD IDEA Group holding 92.3% of aggregate voting power194195 - Strategic investments are concentrated in few industries and regions, with a fair value of US$24.7 million as of October 31, 202497100101 - The company faces cybersecurity risks from unauthorized access to sensitive information and is investing in protective measures against sophisticated attacks105106107 Information on the Company This section details the company's history, business operations across digital solutions, media, and hotel segments, corporate structure, and regulatory frameworks - The company operates three main business lines: Digital Solutions Services, Media and Entertainment Services, and Hotel Operations, Hospitality and VIP Services238239 - In October 2024, the company acquired a controlling stake in World Media and Entertainment Universal Inc. (WM&E), consolidating L'Officiel and The Art Newspaper businesses235 - The company owns majority interests in two hotel properties in Hong Kong and Singapore, plus a luxury property in New York382384386 - Key agreements with the Controlling Shareholder, including Master Transaction, Transitional Services, and Non-competition Agreements, govern their ongoing relationship and business scope360361368 Operating and Financial Review and Prospects This section analyzes the company's financial performance, reporting US$22.8 million revenue and US$41.7 million net profit in FY2024, highlighting revenue mix shifts and cash flow Financial Performance Summary (FY 2024 vs FY 2023) | Financial Metric | FY ended Oct 31, 2024 (US$M) | FY ended Apr 30, 2023 (US$M) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | 22.8 | 33.1 | -31.1% | | Digital Solutions Services | 3.4 | 29.6 | -88.5% | | Hotel Operations | 19.4 | 2.2 | +781.8% | | Net Profit | 41.7 | 40.8 | +2.2% | | Changes in Fair Value (FVTPL) | (3.0) | 15.4 | - | | Other Gains and Losses | 37.0 | 0.2 | +18400% | - The significant increase in 'Other gains and losses' to US$37.0 million in FY2024 was primarily due to the disposal of certain digital solution and hotel operation subsidiaries442839 - Net cash used in investing activities was US$75.5 million in FY2024, primarily due to US$89.5 million advances to AMTD Group for intra-group treasury fund allocation489 - As of October 31, 2024, the company held US$27.9 million in cash and equivalents and US$257.6 million in total bank borrowings480481 Directors, Senior Management and Employees This section details the company's leadership, compensation, board structure, and employee count, including the CEO's rotating appointment and US$0.4 million aggregate compensation in FY2024 - The company's CEO is appointed by the executive management committee on a 6-month rotation basis; the current CEO is Giampietro Baudo504523 - Aggregate cash and benefits paid to directors and executive officers totaled US$0.4 million for FY2024509 - The company had 196 employees as of October 31, 2024, with hotel operations staff comprising 54.6%536538 - The AMTD SpiderNet Share Incentive Plan, approved in May 2021 for up to 6,500,000 ordinary shares, has not yet granted any awards513 Major Shareholders and Related Party Transactions This section details ownership structure and related party transactions, with AMTD IDEA Group holding 92.3% voting power and managing centralized treasury functions Principal Shareholder Ownership | Shareholder | Class B Ordinary Shares | % of Beneficial Ownership | % of Aggregate Voting Power | | :--- | :--- | :--- | :--- | | AMTD IDEA Group | 46,902,440 | 37.2% | 92.3% | - The company charged its Controlling Shareholder US$2.6 million for digital solutions services in FY2024548 - Centralized treasury functions are managed by the Controlling Shareholder, with US$1.5 million due from group companies as of October 31, 2024, down from US$126.4 million in April 2023549 Financial Information This section confirms appended financial statements, absence of material legal proceedings, and future dividend intentions, with no significant changes since the audit date - The company is not currently party to any litigation, arbitration, or administrative proceedings with a material adverse effect on its business553 - The company has not paid past dividends but intends to do so in the future, subject to board discretion and without a fixed policy555 Additional Information This section details the company's dual-class share structure, Cayman Islands tax implications, and potential PFIC classification risk for U.S. holders - The company has a dual-class share structure, with Class B ordinary shares entitled to twenty votes per share versus one for Class A567571 - The company is incorporated in the Cayman Islands, which currently levies no taxes on corporate profits, income, or capital gains596 - There is a risk of the company being classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, potentially leading to adverse tax consequences for U.S. Holders223603604 Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including foreign exchange, equity price, interest rate, and credit risks from receivables and AMTD Group amounts - The company is exposed to foreign exchange, equity price, interest rate, and credit risks from its operations, investments, and intercompany balances625628630631 PART II Material Modifications to the Rights of Security Holders and Use of Proceeds This section details the use of US$129.2 million IPO net proceeds, with US$7.1 million used for business expansion and remaining funds for future applications and acquisitions - The company raised US$129.2 million in net proceeds from its July 2022 IPO644 - As of October 31, 2024, US$7.1 million of IPO proceeds have been used for business expansion and general corporate purposes645 Controls and Procedures This section confirms management's conclusion that disclosure controls and internal control over financial reporting were effective as of October 31, 2024 - Management concluded that the company's disclosure controls and procedures were effective as of October 31, 2024646 - Management concluded that internal control over financial reporting was effective as of October 31, 2024, based on the COSO framework648 Other Information This section covers auditor changes, share repurchase programs, reliance on governance exemptions, and the company's cybersecurity risk management framework - Effective June 24, 2024, Assentsure PAC replaced Deloitte Touche Tohmatsu as the independent registered public accounting firm, aligning with auditor rotation policy661 - The company completed two share repurchase programs in FY2024, with authorized amounts of US$50 million (extended from US$30 million) and US$20 million658659660 - The company follows Cayman Islands home country practices, differing from NYSE listing standards regarding board committee size and shareholder approval for share issuances664 - The company's cybersecurity risk management framework involves board oversight and a management-level taskforce for daily management and policy formulation670673674 Financial Statements Consolidated Financial Statements The consolidated financial statements present the company's financial position and performance, reflecting US$502.9 million total assets and US$158.8 million total equity in FY2024, following significant restructuring Consolidated Statement of Profit or Loss (Year ended Oct 31, 2024) | Item | Amount (US$ thousands) | | :--- | :--- | | Revenue from contracts with customers | 22,814 | | Total revenue (incl. other items) | 20,445 | | Profit before tax | 42,460 | | Income tax expense | (785) | | Profit for the year | 41,675 | | Total comprehensive income | 46,621 | Consolidated Statement of Financial Position (as of Oct 31, 2024) | Item | Amount (US$ thousands) | | :--- | :--- | | Total Assets | 502,931 | | Non-current assets | 418,379 | | Current assets | 84,552 | | Total Liabilities | 344,172 | | Current liabilities | 162,643 | | Non-current liabilities | 181,529 | | Total Equity | 158,759 | Consolidated Statement of Cash Flows (Year ended Oct 31, 2024) | Item | Amount (US$ thousands) | | :--- | :--- | | Net cash from operating activities | 4,245 | | Net cash used in investing activities | (75,528) | | Net cash used in financing activities | (35,812) | | Net decrease in cash and cash equivalents | (107,095) | | Cash and cash equivalents at end of year | 27,861 | - In February 2023, the company acquired a 96.1% equity interest in WME Assets, accounted for as a business combination under common control846 - In October 2024, the company acquired a controlling stake in World Media and Entertainment Universal Inc. (WM&E), consolidating 'L'Officiel' and 'The Art Newspaper' businesses under common control853855