Part I Key Information 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 202214132 - 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 worthless164749 - 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 status2050211 Selected Consolidated Financial Data 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 million293034 - 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 operations37 Risk Factors 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 spend535457 - 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 profitability5860 - 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 202247132139 - 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 ADSs244246 - 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 2022218219 Information on the Company 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 programs263416 - 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 Alibaba252256259 - 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 Jiajujiu250392 History and Development of the Company 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 Leju252 - 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 Home254570 - The company maintains crucial long-term relationships with SINA, for whom it operates real estate websites, and Tencent, a major shareholder and advertising partner256258 Business Overview 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 agents263268270 - 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 investment300342357364 Organizational Structure 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 restrictions388392 - 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 Agreements396402407 - 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 million139394 Operating and Financial Review and Prospects 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 businesses420459 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 received459468 - 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 2022499500 Directors, Senior Management, and Employees 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 sector559 - In 2022, aggregate cash compensation was approximately $0.6 million for executive officers and $0.1 million for directors536 - 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 board222551709 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 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 - The company's relationship with SINA is critical, governed by agreements for domain name/content licenses and advertising agency rights that extend through 2024595596597 - Leju has strategic advertising agency agreements with Tencent. In 2022, the cost of advertising resources purchased from Tencent was $14.8 million604606 - 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 shares608609610611 Financial Information 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 proceedings621 - 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 2015622623 - As a holding company, Leju relies on dividends from its PRC subsidiaries, but PRC regulations may restrict the ability of these subsidiaries to make payments624 Additional Information 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 law628650 - 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 control228649 - 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 gains246665674 Controls and Procedures 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, 2022697 - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022699 - 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 firm699700 Part III Financial Statements 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 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 Group726 - 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 market732733734 - 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 strategies736737 Consolidated Financial Statements 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 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 arrangements766767776 - 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 business809 - 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 sector825826 - 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 regulations881
Leju(LEJU) - 2022 Q4 - Annual Report