XD Inc. 2021 Annual Report

Key insights

6 takeaways

01
XD Inc. reported a net loss of RMB 917.3 million in 2021, a significant decline from the previous year, primarily due to aggressive R&D spending and workforce expansion.See it on page 84
02
The company raised USD 280 million through convertible bonds and share placements with Bilibili and Taobao China, resulting in a year-end cash position of RMB 3.96 billion.See it on page 74
03
Game revenue declined by 13.8%, while the information services segment grew by 34.3%, supported by a 22.8% increase in TapTap China’s monthly active users.See it on page 13
04
Management is targeting a company-wide break-even point by 2023 by focusing on international market expansion and the TapTap ecosystem.See it on page 10
05
The company is navigating domestic regulatory pressures in China by utilizing contractual arrangements and prioritizing developer services.See it on page 72
06
Governance efforts in 2021 included the formalization of ESG compliance, anti-corruption measures, and investments in energy-efficient infrastructure.See it on page 75

Summary

The 2021 Annual Report for XD Inc. details a year of strategic transition characterized by significant investment in long-term growth despite immediate financial headwinds. The company’s primary thesis centers on pivoting toward international markets and enhancing the TapTap ecosystem, even as legacy game titles matured and regulatory pressures in China impacted domestic performance. While the company reported a net loss of RMB 917.3 million—a sharp decline from the previous year’s profit—this was largely driven by a deliberate, substantial increase in research and development expenditures and a strategic expansion of the workforce to support future scalability.

Operationally, the company experienced a 13.8% decline in game revenue, partially mitigated by the growth of the information services segment, which saw a 34.3% revenue increase fueled by a 22.8% rise in TapTap China’s mobile monthly active users. To fortify its balance sheet against these operational shifts, XD Inc. successfully raised capital through the issuance of USD 280 million in convertible bonds and a share placement to strategic partners, including Bilibili and Taobao China. These financing activities bolstered the company’s cash position to RMB 3.96 billion, providing the necessary liquidity to fund ongoing R&D and international initiatives through 2023.

Governance and sustainability remained central to the company’s 2021 agenda. XD Inc. maintained a robust oversight framework, utilizing specialized board committees to manage financial reporting, risk, and ESG compliance. The company prioritized information security and anti-corruption measures while formalizing its commitment to environmental sustainability through energy-efficient infrastructure. By leveraging contractual arrangements to navigate PRC regulatory requirements and maintaining a focus on developer services, the company aims to stabilize its financial trajectory, targeting a company-wide break-even point by 2023.