XD Inc. 2021 Interim Report

Key insights

6 takeaways

01
XD Inc. shifted from a RMB 259.9 million net profit in H1 2020 to a net loss of RMB 322 million in H1 2021, driven by aggressive R&D spending and increased marketing costs.See it on page 33
02
Total revenue declined 4.3% to RMB 1.38 billion in the first half of 2021, primarily due to the maturity of the company's existing online game titles.See it on page 11
03
The TapTap platform experienced significant growth, with international monthly active users surging by 484.4% and domestic users increasing by 15.6%.See it on page 10
04
The company maintains a strong liquidity position with RMB 4.37 billion in cash and short-term investments as of June 30, 2021, supported by a US$280 million convertible bond issuance and strategic share placements with Bilibili and Taobao China.See it on page 16
05
XD Inc. is pursuing inorganic growth and infrastructure development through the acquisition of Lean Cloud and an increased stake in its subsidiary, Yiwan.See it on page 83
06
The company faces ongoing risks related to revenue concentration and a lack of separation between the chairman and CEO roles.See it on page 25

Summary

XD Inc. transitioned toward a long-term growth strategy during the first half of 2021, prioritizing aggressive research and development and international expansion over immediate profitability. While the company experienced a 4.3% decline in total revenue to RMB 1.38 billion—largely due to the maturity of existing online game titles—the TapTap platform demonstrated significant momentum. International monthly active users on the platform surged by 484.4%, complemented by a 15.6% increase in domestic users, signaling a successful pivot toward platform-centric scaling.

Financial performance reflected this strategic shift, as the company moved from a net profit of RMB 259.9 million in the first half of 2020 to a net loss of approximately RMB 322 million in the same period of 2021. This downturn was primarily driven by elevated operating expenses, including a sharp rise in employee benefits and increased marketing costs. Despite these losses, the company maintained a robust liquidity position, holding RMB 4.37 billion in cash and short-term investments as of June 30, 2021. This financial stability was bolstered by strategic capital raises, including a US$280 million convertible bond issuance and share placements with major industry partners like Bilibili and Taobao China.

The company’s operational focus remains concentrated on the game and information service segments, with the latter increasingly anchored by the TapTap ecosystem. To support this trajectory, XD Inc. pursued inorganic growth through the acquisition of Lean Cloud and increased its stake in the subsidiary Yiwan. While the company continues to navigate revenue concentration risks and a deviation from standard corporate governance regarding the separation of chairman and CEO roles, its current capital structure and investment in R&D are positioned to support long-term infrastructure development rather than short-term earnings.