XD Inc. Interim Results Announcement for the Six Months Ended June 30, 2022

Key insights

6 takeaways

01
XD Inc. reported RMB 1.59 billion in revenue for H1 2022, a 15.6% year-over-year increase driven by the performance of Sausage Man and the domestic growth of the TapTap platform.See it on page 7
02
The company recorded a net loss of RMB 381.4 million, an increase from the RMB 322.4 million loss in H1 2021, due to aggressive spending on R&D, employee benefits, and new game marketing.See it on page 16
03
TapTap International experienced a significant operational setback, with monthly active users declining by 31.9%, forcing a strategic restructuring of the company's international expansion plans.See it on page 5
04
The firm maintains a stable liquidity position supported by 2021 convertible bonds and share placements, which are expected to fund operations through the end of 2023.See it on page 15
05
Basic loss per share reached RMB 0.82 as the company continues to prioritize long-term market positioning and platform scaling over immediate profitability.See it on page 30
06
Management has maintained a unified Chairman and CEO role to ensure leadership continuity while navigating market volatility and the maturation of existing game titles.See it on page 38

Summary

XD Inc. experienced a period of significant top-line expansion during the first half of 2022, reporting total revenues of RMB 1.59 billion, a 15.6% increase compared to the same period in 2021. This growth was primarily fueled by the robust performance of the title Sausage Man and the continued scaling of the TapTap platform within the People’s Republic of China. Despite these gains, the company faced a widening net loss of RMB 381.4 million, up from RMB 322.4 million in the prior year. This financial deficit reflects a deliberate strategic choice to prioritize long-term market positioning over immediate profitability through aggressive investment in research and development, employee benefits, and promotional activities for new game launches.

The operational landscape presents a dichotomy between domestic and international performance. While the TapTap ecosystem saw meaningful user growth in China, TapTap International struggled, recording a 31.9% decline in monthly active users. This contraction has necessitated a strategic pivot and restructuring of the company’s international expansion efforts. Concurrently, the firm maintains a stable liquidity position, managing trade receivables and payables within a standard three-month window. Capital requirements are currently supported by proceeds from 2021 convertible bonds and share placements, which are projected to sustain ongoing R&D and marketing initiatives through the end of 2023.

Ultimately, the company remains in a high-investment phase characterized by rising operating expenses and a basic loss per share of RMB 0.82. By maintaining a unified Chairman and CEO role to ensure leadership continuity, the organization is focused on navigating the challenges of maturing game titles and international market volatility. The current financial trajectory underscores a commitment to scaling the TapTap platform and diversifying the game portfolio, even as these efforts continue to exert downward pressure on short-term earnings.