XD Inc. 2023 Annual Report

Key insights

6 takeaways

01
XD Inc. achieved a financial turnaround in 2023, reporting a positive adjusted EBITDA of RMB 158.4 million compared to a RMB 353.0 million loss in 2022.See it on page 107
02
The company narrowed its annual net loss to RMB 65.4 million by streamlining operations, including a workforce reduction from 1,706 to 1,452 employees.See it on page 14
03
The TapTap platform emerged as a key growth driver with a 32.6% revenue increase and an 84% gross margin, offsetting a 14.7% revenue decline in the game development segment.See it on page 12
04
As of year-end 2023, XD Inc. held RMB 3.35 billion in cash and short-term investments, which is earmarked for the redemption of all outstanding convertible bonds in 2024.See it on page 88
05
The company maintains a strong compliance record with zero reported violations regarding data privacy or corruption while enforcing strict playtime management for minors.See it on page 45
06
Future strategic initiatives focus on integrating AIGC technology to improve content production efficiency and platform performance.See it on page 9

Summary

The 2023 Annual Report for XD Inc. details a pivotal fiscal year characterized by a successful transition toward operational efficiency and financial stabilization. The company’s primary thesis centers on achieving a turnaround from significant losses to a positive adjusted EBITDA of RMB 158.4 million, a marked improvement from the RMB 353.0 million loss recorded in 2022. This recovery was driven by a strategic reduction in operating costs, including a streamlined R&D headcount and a workforce reduction from 1,706 to 1,452 employees, which collectively narrowed the annual net loss to RMB 65.4 million.

The company operates primarily within the game development and distribution sectors, supported by its proprietary TapTap platform. While the game segment faced a 14.7% revenue decline due to the maturity of flagship titles like Sausage Man, the TapTap platform demonstrated resilience with a 32.6% revenue increase and an 84% gross margin. Geographically focused on the Chinese market, XD Inc. manages its operations through complex contractual arrangements to navigate foreign investment restrictions, ensuring the consolidation of its PRC-based entities. As of year-end 2023, the company maintained a strong liquidity position with RMB 3.35 billion in cash and short-term investments, which management intends to utilize for the redemption of all outstanding convertible bonds in 2024.

Corporate governance and social responsibility remain central to the company’s operational framework. XD Inc. maintains a robust compliance structure, reporting zero violations regarding data privacy or corruption, and emphasizes the protection of minors through rigorous verification and playtime management. The board of directors maintains oversight through four specialized committees, ensuring adherence to regulatory standards and ESG commitments. Looking forward, the company is prioritizing the integration of AIGC technology to enhance content production and platform performance, while continuing to leverage its internal resources to support long-term growth and strategic acquisitions.