PART I Key Information 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 202114 - 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.C21218220 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 2021313237 Risk Factors 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 expenditures545556 - 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-compliant49135138 - 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 regained226 - 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 shares250252 - 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 operations899194 Information on the Company 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 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 Leju260 - 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 subsidiary260 - Leju operates SINA's real estate websites under license agreements until 2024 and serves as SINA's exclusive agent for real estate advertising263 - Leju holds exclusive advertising agency agreements with Tencent for real estate advertising across China, renewed in early 2021267 Business Overview 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"276279 - 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 portions302 - Key competitors include fang.com, anjuke.com (operated by 58.com), and mobile-based news providers such as toutiao.com for online advertising303 Organizational Structure 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 - 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 law394 - In 2021, VIEs generated $533.6 million in revenue, significantly outweighing the $0.5 million generated by other group entities482 - Leju's PRC subsidiaries received $17.5 million in total service fees from its VIEs in 2021395 Operating and Financial Review and Prospects 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 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 redeemed460 - The rise in SG&A expenses stemmed mainly from a substantial increase in bad debt provisions for outstanding receivables due to deteriorating customer credit quality461 Liquidity and Capital Resources 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 2020750 - Net assets of PRC subsidiaries and VIEs restricted from distribution amounted to $35.8 million as of December 31, 2021518882 Critical Accounting Estimates 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 2021531491 - 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 realization533861862 Directors, Senior Management and Employees 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 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 directors548 - As of March 31, 2022, 15,550,652 options and 616,668 restricted shares were outstanding under the Leju Share Incentive Plan559 Board Practices 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 directors564725 - The audit committee comprises three independent directors: Winston Li (Chair), Min Fan, and Jian Sun566 Employees 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 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 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 2021593605 - The company maintains crucial advertising inventory agency and license agreements with SINA, incurring $10.1 million in advertising resource costs from SINA in 2021613619 - Leju holds strategic cooperation and advertising agency agreements with Tencent, with $18.7 million in advertising resource costs purchased from Tencent in 2021620622 - E-House, Tencent, and SINA possess demand, shelf, and piggyback registration rights for their ordinary shares624625626627 Financial Information 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 proceedings635 - 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 expansion636637 Additional Information 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. jurisdictions642665 - 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 gains672675 - 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 made681690 PART II Controls and Procedures 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, 2021711 - Based on the COSO framework, management concluded that internal control over financial reporting was effective as of December 31, 2021713714 - As a 'non-accelerated filer,' the company is not required to include an attestation report on internal control over financial reporting from its external auditor714715 Other Information 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 experts718 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 board725 PART III Financial Statements 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 required744 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) |
Leju(LEJU) - 2021 Q4 - Annual Report