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Moatable(MTBL) - 2023 Q4 - Annual Report
MTBLMoatable(MTBL)2024-04-03 21:04

SaaS Business Overview - The company's SaaS businesses generate the majority of its revenue, with sales almost exclusively to customers within the United States[18] - The company's SaaS businesses benefit from a large and growing customer base, which provides opportunities to offer additional paid products and services[21] - Revenue heavily depends on SaaS subscriptions, particularly from Lofty and Trucker Path services[57] - The SaaS market is highly competitive, with potential price reductions and unfavorable terms due to competitive pressures[62] Lofty Platform - Lofty, the company's SaaS platform for real estate professionals, has over 800,000 active users and almost 95,000 paid subscriptions as of December 31, 2023[28] - The company plans to market and sell LoftyWorks, a cloud-based property management SaaS platform, in the U.S. during the second quarter of 2024[27] - The company's engineering team for Lofty consists of 157 members as of December 31, 2023, and releases product updates every month based on user feedback[29] - Lofty's sales are primarily derived from online digital marketing, with a focus on enterprise customers requiring over 100 seats, which involves a longer sales cycle compared to SMB customers[33] - Lofty experienced net losses of 16.2millionin2022and16.2 million in 2022 and 10.7 million in 2023, with negative cash flows from operating activities of 3.8millionand3.8 million and 3.2 million, respectively[53] - The Lofty business is highly dependent on the health of the U.S. residential real estate market, which faces challenges like low inventory and fluctuating mortgage rates[67] - A 1.8billionjuryverdictintheNARClassActionlawsuitcouldsignificantlyimpactrealestatecommissionstructuresandtheLoftybusiness[69]TruckerPathPlatform−TruckerPath,thecompany′stransportationnetworkplatform,hasover370,000businesseslistedaspoints−of−interestandservesSMBtruckfleetswithitsenterpriseTransportationManagementSystemoffering[28]−TruckerPathhasanengineeringteamof125membersasofDecember31,2023,includingmobiledevelopers,front−end/back−endengineers,productmanagers,andQualityAssurancepersonnel[30]−TruckerPath′ssalesaredrivenbyactiveusers,primarilylong−haultruckdrivers,withseasonalityimpactingsalesduringwintermonthsandlongholidays[38]−TruckerPathcompeteswithmapserviceproviders,smallfleetnavigationservices,anddigitalloadboards,aswellascompaniessellingadvertisingtobusinessesservingtruckers[35]GrowthStrategy−Thecompany′sstrategyincludesgrowingitscustomerbase,increasingrevenuefromexistingcustomers,andpursuingpartnershipsandacquisitions[22][23]−Thecompanyplanstoexpandmarketing,sales,andcustomerserviceoperationstogrowitscustomerbase[72]−High−qualitycustomersupportiscriticalforretainingcustomersandexpandingintolargeenterpriseaccounts[76]FinancialPerformanceandRisks−NetcurrentassetsasofDecember31,2023,were1.8 billion jury verdict in the NAR Class Action lawsuit could significantly impact real estate commission structures and the Lofty business[69] Trucker Path Platform - Trucker Path, the company's transportation network platform, has over 370,000 businesses listed as points-of-interest and serves SMB truck fleets with its enterprise Transportation Management System offering[28] - Trucker Path has an engineering team of 125 members as of December 31, 2023, including mobile developers, front-end/back-end engineers, product managers, and Quality Assurance personnel[30] - Trucker Path's sales are driven by active users, primarily long-haul truck drivers, with seasonality impacting sales during winter months and long holidays[38] - Trucker Path competes with map service providers, small fleet navigation services, and digital load boards, as well as companies selling advertising to businesses serving truckers[35] Growth Strategy - The company's strategy includes growing its customer base, increasing revenue from existing customers, and pursuing partnerships and acquisitions[22][23] - The company plans to expand marketing, sales, and customer service operations to grow its customer base[72] - High-quality customer support is critical for retaining customers and expanding into large enterprise accounts[76] Financial Performance and Risks - Net current assets as of December 31, 2023, were 24.7 million, with an accumulated deficit of 716.3million[54]−Thecompanyhassufficientcashreservesforoperatingneedsforatleastthenexttwelvemonths[54]−Subscriptionrenewalratesmaydeclineduetopricingchanges,competition,oreconomicdownturns,impactingfuturerevenue[59]−Thecompanyrecorded716.3 million[54] - The company has sufficient cash reserves for operating needs for at least the next twelve months[54] - Subscription renewal rates may decline due to pricing changes, competition, or economic downturns, impacting future revenue[59] - The company recorded 22.4 million and 7.7millioninlossesfromitsequityinvestmentinKaixinAutoHoldingsduring2022and2023,respectively[98]−ThecompanyreimbursedEastWestBank7.7 million in losses from its equity investment in Kaixin Auto Holdings during 2022 and 2023, respectively[98] - The company reimbursed East West Bank 8.0 million due to a default by Kaixin Subsidiary, leaving 1.2millioninrestrictedcash[98]−Share−basedcompensationexpenseswere1.2 million in restricted cash[98] - Share-based compensation expenses were 8.5 million, 4.0million,and4.0 million, and 3.0 million for 2021, 2022, and 2023, respectively, with 2.5 million in unrecognized expenses as of December 31, 2023[106] - The company identified material weaknesses in internal control over financial reporting, which remain unremediated as of December 31, 2023[117] Operational Risks - The company faces risks related to customer renewals, competition, economic downturns, and the need to adapt to rapidly changing technology and customer needs[44] - Security concerns, service interruptions, and reliance on third-party data centers and online marketing services could adversely impact the company's operations[46] - The company relies heavily on third-party cloud infrastructure, particularly Amazon Web Services, for hosting its SaaS services, and any disruptions could significantly impact operations[87][88] - A significant portion of the company's R&D personnel and resources are based in China, making it vulnerable to disruptions in China's internet infrastructure and telecommunications networks[78][95] - The company faces risks from cyber-attacks, data breaches, and unauthorized access to its systems, which could result in reputational damage and financial losses[81][83][84] - The company depends on third-party online payment platforms, and any security breaches could harm its reputation and deter users from using its services[85][86] - The company's SaaS services rely on integrations with third-party applications like Amazon Web Services, Here Maps, and Google Cloud, and changes to these platforms could negatively impact its offerings[90] - The company's inbound lead generation and data center operating costs are heavily influenced by third-party marketing and hosting services, and cost increases could harm operating results[89] - Privacy and data security concerns may limit the adoption of the company's SaaS services, especially in industries handling sensitive personal information[94] Economic and Geopolitical Risks - The company's business could be adversely affected by unfavorable U.S. and global economic conditions, including inflation, geopolitical conflicts, and supply chain disruptions[100] - High inflation in the U.S. could increase operating costs, reduce liquidity, and limit access to credit, potentially harming the company's business[101] - The Russia-Ukraine conflict and related sanctions have disrupted trade, supply chains, and liquidity, increasing global market uncertainty[104] - The company employs the majority of its R&D personnel in China, and U.S. or China trade restrictions could adversely affect innovation and product development[105] Corporate Governance and Legal Risks - The company's dual-class voting structure allows the founder, chairman, and CEO to significantly influence corporate matters, potentially limiting shareholder influence[49] - The company's dual-class voting structure gives the founder 82.8% of total voting power, with Class B shares having 10 votes per share compared to 1 vote per Class A share[128][129] - The company relies on key personnel, including CEO Joseph Chen and COO James Jian Liu, whose potential loss could severely disrupt operations[120] - Competition for highly skilled personnel in the SaaS industry is intense, and failure to attract or retain talent could hinder growth[121] - Labor cost increases and changes in labor laws in operating countries may adversely affect the company's business and results[123] - Labor costs in the US, China, the Philippines, and other operating countries are expected to continue increasing due to inflation and rising wages[124] - Compliance costs in China have increased due to evolving PRC tax laws and regulations, including individual income tax withholding requirements[126] - Contractual arrangements with Qianxiang Tiancheng may not be as effective as direct ownership in providing operational control over China operations[136][137] - PRC regulatory authorities could disallow the company's contractual arrangements with Qianxiang Tiancheng, affecting China operations[134] - The company may need CSRC approval for future overseas securities offerings under new PRC regulations effective March 2023[141][142] - Internet platform operators with over 1 million users' personal information must undergo cybersecurity review before overseas listing[144] - PRC companies engaged in prohibited businesses under the Negative List must obtain government approval for overseas listings[145] - Potential regulatory risks from CSRC, CAC, or other PRC agencies regarding overseas securities offerings and ADS listing status, which could lead to fines, operational restrictions, or adverse effects on business and financial conditions[146][147] - Contractual arrangements with Qianxiang Tiancheng may face scrutiny by PRC tax authorities, potentially resulting in additional taxes, reduced net income, and penalties[148][149] - Conflicts of interest between Qianxiang Tiancheng shareholders and the company, particularly involving key executives and their dual roles, which could disrupt operations and require costly legal resolutions[150][151] - Uncertainties in the interpretation and implementation of the PRC Foreign Investment Law, which may impact the company's corporate structure, governance, and business operations[152][153][154] - PRC government oversight could lead to material adverse changes in operations, particularly due to potential interventions in overseas offerings or foreign investments in China-based issuers[156] - Fluctuations in exchange rates between RMB and USD could materially affect the company's costs, expenses, financial position, and the value of ADSs, with limited hedging options available in China[158][159][160] - Compliance risks with PRC regulations on employee share ownership or stock option plans, potentially resulting in fines or legal sanctions for the company or its employees[162][163][164] - Risks related to indirect transfers of equity interests in PRC resident enterprises by non-PRC holding companies, which may trigger PRC withholding taxes and interest charges under SAT Circular 7[165][166] ADS and Market Risks - The company's ADSs have experienced significant price fluctuations, ranging from 0.45 to 360.00 per ADS since listing on the NYSE on May 4, 2011[177] - The PCAOB completed inspections of audit firms in mainland China and Hong Kong in 2022, vacating the previous Determination Report[172] - The Accelerating Holding Foreign Companies Accountable Act reduced the non-inspection years triggering trading prohibitions from three to two years, increasing risks[175] - The company moved its headquarters and financial accounting leadership to the U.S. in 2021, while retaining R&D activities in China[173] - If identified as a Commission-Identified Issuer for two consecutive years, the company's securities could be prohibited from trading in the U.S.[176] - The company's auditor, Marcum Asia CPAs LLP, is headquartered in New York and not included in the PCAOB Identified Firms list[171] - The company may face increased income tax expenses for future acquisitions due to potential adjustments under SAT Circular 7[168] - The depositary may decide not to distribute certain cash dividends or other distributions to ADS holders if deemed impractical or inequitable[185] - ADS holders may not receive voting materials in time to exercise voting rights, and the depositary is not responsible for failed voting instructions[182] - The company's ADSs are subject to transfer limitations, with the depositary able to close transfer books at any time deemed expedient[186] - The company may be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, potentially leading to adverse tax consequences for U.S. holders of ADSs or ordinary shares[193][194] - The company's total market capitalization as of March 25, 2024, is under 15 million, and its total stockholders' equity as of December 31, 2023, is 48.1million[200]−ThecompanyisnotincompliancewithNYSEcontinuedlistingcriteriaduetotheaverageclosingpriceofitsADSsbeing48.1 million[200] - The company is not in compliance with NYSE continued listing criteria due to the average closing price of its ADSs being 0.99 over a 30 trading-day period ending December 6, 2023[199] Cybersecurity Measures - The company has implemented various cybersecurity measures, including SOC 2 Type 2 Review, ISO 27001 audit, and annual disaster recovery testing, to manage and mitigate material risks from cybersecurity threats[203][205] - The company's information technology department collaborates with security and compliance teams to identify, assess, and manage cybersecurity threats using manual and automated tools, internal and external audits, and third-party threat assessments[204]