PART I Key Information This section details JOYY Inc.'s corporate structure, VIE reliance, associated risks, and condensed financial data for its China operations - JOYY Inc. is a Cayman Islands holding company that conducts its PRC operations through Variable Interest Entities (VIEs) due to foreign investment restrictions. The revenue contribution from these VIEs has been decreasing, accounting for 31.4%, 20.7%, and 17.1% of total revenues in 2019, 2020, and 2021, respectively31 - The company faces significant risks from PRC regulations, including potential requirements for CSRC or CAC approval for offshore offerings and cybersecurity reviews, which could materially impact operations and stock value343738 - Due to the Holding Foreign Companies Accountable Act (HFCAA), JOYY's ADSs could be prohibited from trading in the U.S. starting in 2024 if the PCAOB remains unable to inspect its China-based auditor. This risk could be accelerated to 2023 if proposed legislative changes are enacted40207 Condensed Financials for Variable Interest Entities (VIEs) - 2021 | Financial Item | Amount (US$ in thousands) | | :--- | :--- | | Operations | | | Total Revenue | 557,089 | | Operating Loss | (139,014) | | Net Loss | (122,292) | | Financial Position (as of Dec 31, 2021) | | | Total Assets | 2,260,828 | | Total Liabilities | 327,656 | | Cash Flows | | | Net Cash from Operating Activities | 259,520 | | Net Cash from Investing Activities | (49,441) | | Net Cash from Financing Activities | (91,820) | Risk Factors This section outlines JOYY Inc.'s principal risks across business, jurisdictional, corporate structure, and ADS-related categories - The company generates a substantial majority of its revenue (94.6% in 2021) from live streaming services, making its financial performance highly dependent on the continued popularity and monetization of this model8793 - The company is subject to complex and evolving international laws regarding cybersecurity and data privacy, such as the EU's GDPR and California's CCPA, which could increase compliance costs and potential liabilities101111113 - The PCAOB's inability to inspect the company's China-based auditor could lead to the delisting of its ADSs from U.S. exchanges as early as 2024 under the HFCAA, potentially sooner if legislative changes are enacted206207209 - The company believes it was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes for the 2021 taxable year, which could result in adverse tax consequences for U.S. holders of its ADSs or shares306307 - The company's dual-class share structure gives co-founder, chairman, and CEO Mr. David Xueling Li and his affiliates 78.5% of the total voting power as of March 31, 2022, allowing substantial influence over corporate matters278309310 Information on the Company This section provides an overview of JOYY Inc.'s history, global social media operations, platform details, and intellectual property portfolio - JOYY has transformed into a global social media company, primarily through the acquisition of Bigo in March 2019 and the divestiture of its PRC-based YY Live business, which was substantially completed in February 2021337343347 - The company's global mobile monthly active users (MAUs) reached 280 million in Q4 2021, diversified across its main platforms352 Platform Mobile MAUs (Q4 2021) | Platform | Mobile MAUs (millions) | | :--- | :--- | | Bigo Live | 32.2 | | Likee | 67.0 | | Hago | 9.5 | | imo | 171.3 | - Artificial intelligence (AI) is a core technology, used for personalized content recommendation, visual/voice recognition, and enhancing operational efficiency356382 - As of December 31, 2021, the company held a significant intellectual property portfolio, including 935 domain names, 796 software copyrights, 988 patents, and 2,015 trademarks, with thousands more applications pending397 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments550 Operating and Financial Review and Prospects This section provides management's discussion and analysis of JOYY's financial condition and results, highlighting revenue growth, net loss, and key operational drivers - The company's financial reporting has been significantly impacted by the deconsolidation of Huya (since Q2 2020) and the classification of YY Live as a discontinued operation (since Feb 2021), shifting the focus to the BIGO segment555556597 - Starting January 1, 2021, the company changed its reporting currency from Renminbi to U.S. dollars to better reflect its global operations, with historical results restated accordingly558 Consolidated Results of Operations (Continuing Operations) | Metric (US$ in millions) | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Total Net Revenues | 900.7 | 1,918.1 | 2,619.1 | | Live Streaming | 769.1 | 1,815.8 | 2,476.8 | | Others | 131.6 | 102.3 | 142.3 | | Gross Profit | 243.8 | 540.0 | 837.9 | | Operating Loss | (515.4) | (406.8) | (106.7) | | Net Loss from Continuing Operations | (68.7) | (21.8) | (129.6) | - The 36.4% increase in live streaming revenue in 2021 was driven by growth in the BIGO segment, where the number of paying users increased to 3.8 million and ARPU rose to $509601 - Sales and marketing expenses decreased in 2021 primarily due to reduced user acquisition spending for Likee and Hago605 Directors, Senior Management and Employees This section details JOYY's leadership, compensation, board practices, share incentive plans, and employee breakdown by function - For the fiscal year 2021, the aggregate cash compensation paid to directors and executive officers was US$1.7 million753 - As of March 31, 2022, there were 9,414,400 options, 16,154,922 restricted shares, and 44,755,859 restricted share units outstanding under the company's various share incentive plans758 Employee Breakdown by Function (as of Dec 31, 2021) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Customer services and operations | 4,016 | 54% | | Research and development | 2,660 | 36% | | Sales and marketing | 294 | 4% | | General and administration | 479 | 6% | | Total | 7,449 | 100% | - The board has four committees: Audit, Compensation, Corporate Governance & Nominating, and Investment. The company relies on foreign private issuer exemptions for certain independence requirements on its compensation and nominating committees788790792 Major Shareholders and Related Party Transactions This section details JOYY's ownership structure, related party transactions, and the contractual arrangements underpinning its VIE structure in China Beneficial Ownership (as of March 31, 2022) | Shareholder | Total Common Shares Beneficially Owned | Total Voting Power % | | :--- | :--- | :--- | | David Xueling Li | 364,273,346 | 78.5% | | All directors and executive officers as a group | 387,144,011 | 78.9% | | Top Brand Holdings Limited (Mr. Jun Lei) | 122,741,483 | — (Voting rights delegated to Mr. Li) | | T. ROWE PRICE ASSOCIATES, INC. | 107,383,120 | 2.5% | - The company utilizes a complex Variable Interest Entity (VIE) structure for its PRC operations to comply with foreign ownership restrictions. This structure is maintained through a series of contractual arrangements, including exclusive service, equity pledge, and proxy agreements813819 - The company has enhanced its VIE structure by having VIE equity held by PRC limited liability companies, which are in turn owned by PRC limited partnerships, to reduce key-man risk and improve stability813815 - Significant related party transactions in 2021 included receiving US$3.3 million in bandwidth services from Guangzhou Sunhongs, an investee of major shareholder Mr. Jun Lei882 Financial Information This section covers JOYY's legal proceedings, including a securities class action lawsuit, and its established quarterly dividend policy - The company is defending a putative securities class action lawsuit filed in November 2020. Although the case was dismissed in March 2022, the plaintiffs filed a notice of appeal in April 2022890305 - The company has a quarterly dividend policy established in 2020 for a three-year period, with a total expected payout of approximately US$300 million, supplemented by an additional policy for another US$200 million over three years892 - As of March 31, 2022, the company has paid an aggregate of US$160.1 million in dividends under its current policies892 The Offer and Listing This section details the trading of JOYY's American Depositary Shares (ADSs) on the Nasdaq Global Select Market - The company's ADSs are listed on the Nasdaq Global Select Market under the symbol "YY"898 - Each ADS represents twenty Class A common shares898 Additional Information This section details JOYY's corporate governance, dual-class share structure, anti-takeover provisions, and key tax considerations for investors - The company has a dual-class share structure. Class A common shares have one vote per share, while Class B common shares have ten votes per share. Class B shares are convertible into Class A shares on a one-for-one basis, but not vice-versa905914918 - The company's articles of association include anti-takeover provisions, such as the board's authority to issue preferred shares without shareholder approval, which could discourage a change in control317968 - For U.S. federal income tax purposes, the company believes it was a Passive Foreign Investment Company (PFIC) for the taxable year ended December 31, 2021, which could have significant adverse tax consequences for U.S. holders10151025 - The company's articles designate the United States District Court for the Southern District of New York as the exclusive U.S. forum for resolving complaints related to federal securities laws, which could limit shareholders' ability to choose a judicial forum319954 Quantitative and Qualitative Disclosures About Market Risk This section details JOYY's exposure to market risks, primarily foreign exchange and interest rate fluctuations, with sensitivity analyses - The company is exposed to foreign exchange risk as some revenues and expenses are in currencies other than its U.S. dollar reporting currency, notably the Renminbi1040 - A 10% depreciation of the RMB against the USD would result in a decrease of US$54.3 million in cash and cash equivalents and US$34.0 million in short-term deposits, based on December 31, 2021 balances1042 - The company is exposed to interest rate risk on its interest-earning deposits. A hypothetical 1% decrease in interest rates would have reduced interest income by US$17.5 million for the year ended December 31, 20211043 [Description of Securities Other Than Equity Securities](index=177&type=section&id=ITEM%2012.%20DESCRIPTION%20OF%20SECURITIES%20OTHER%20THAN%20EQUITY%20SECU RITIES) This section outlines the fees and charges applicable to holders of JOYY's American Depositary Shares (ADSs) ADS Holder Service Fees | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$5.00 per 100 ADSs | | Cancellation of ADSs | Up to US$5.00 per 100 ADSs | | Cash dividend distribution | Up to US$5.00 per 100 ADSs | | Distribution of other securities/rights | Up to US$5.00 per 100 ADSs | - In addition to service fees, ADS holders are responsible for charges such as taxes, registration fees, and foreign currency conversion expenses1047 - The depositary, Citibank N.A., may reimburse JOYY for certain expenses related to the ADS program1050 PART II Controls and Procedures This section confirms the effectiveness of JOYY's disclosure controls and internal control over financial reporting as of December 31, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 20211055 - Based on the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 20211057 - The independent registered public accounting firm, PricewaterhouseCoopers Zhong Tian LLP, audited and confirmed the effectiveness of the company's internal control over financial reporting as of December 31, 20211058 Principal Accountant Fees and Services This section discloses fees paid to the principal independent auditor and the audit committee's pre-approval policy Accountant Fees (US$ in thousands) | Fee Type | 2020 | 2021 | | :--- | :--- | :--- | | Audit fees | 2,505 | 2,772 | | Tax fees | 187 | — | | Others | 8 | — | - The audit committee's policy is to pre-approve all audit and non-audit services provided by the independent auditor1065 Purchases of Equity Securities by the Issuer and Affiliated Purchasers This section details JOYY's share repurchase activities, including new plans approved in 2021 and total ADSs repurchased - In 2021, the company's board approved two new share repurchase plans: one for up to US$200 million in September and another for up to US$1 billion in November10681071 2021 Share Repurchases | Period | Total ADSs Purchased | Average Price Paid Per ADS (US$) | | :--- | :--- | :--- | | January 2021 | 170,183 | 79.26 | | March 2021 | 458,507 | 95.60 | | April 2021 | 1,009,579 | 99.05 | | September 2021 | 328,075 | 50.96 | | October 2021 | 185,268 | 50.99 | | November 2021 | 782,605 | 49.72 | | December 2021 | 3,581,271 | 47.63 | | Total | 6,515,488 | 60.32 | Corporate Governance This section explains JOYY's corporate governance practices as a foreign private issuer, relying on home country exemptions - As a foreign private issuer, the company follows certain Cayman Islands corporate governance practices, which differ from Nasdaq requirements1075 - The company relies on exemptions for director independence on its compensation and corporate governance & nominating committees1076 - The company does not require shareholder approval for establishing or amending equity compensation plans, following home country practice1077 PART III Financial Statements This section presents JOYY's audited consolidated financial statements, auditor's opinion, and critical audit matters for 2019-2021 - The independent auditor issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 202111081109 - A critical audit matter was the goodwill impairment assessment for the Bigo reporting unit, which had a goodwill balance of US$1,854 million. The fair value of the unit was determined to exceed its carrying value by approximately 10% as of December 31, 202111181400 - Another critical audit matter was revenue recognition for live streaming, specifically the significant management judgment required to identify distinct performance obligations in complex contracts and estimate their standalone selling prices for transaction price allocation11221123 - The company adopted a change in accounting for convertible bonds in 2021, which simplified the accounting by no longer separating embedded conversion features from the host contract11101219 Exhibits This section lists all exhibits filed with the annual report, including corporate documents, incentive plans, and VIE agreements - The exhibits include the Third Amended and Restated Memorandum and Articles of Association1085 - Filed exhibits detail the company's share incentive plans, including the Amended and Restated 2011 Share Incentive Plan and the 2019 Share Incentive Awards Arrangement10851096 - A comprehensive set of contractual agreements governing the company's relationship with its Variable Interest Entities (VIEs) are included as exhibits108510861087
JOYY(YYINZ) - 2021 Q4 - Annual Report