Yunji Inc. — FY2020 Form 20-F
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP; amounts below are in RMB unless otherwise noted.
Business context
Yunji operates a China-focused, membership-based social e-commerce platform. It sells products directly (merchandise business) and earns commissions from third-party merchants (marketplace business). Direct merchandise sales are reported gross, while marketplace commissions are reported net, making revenue comparisons sensitive to the changing business mix.
Financial and operating metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | RMB5,530.3 million (US$847.5 million) | RMB11,672.0 million |
| Operating loss | RMB97.5 million | RMB254.8 million |
| Net loss | RMB151.7 million (US$23.2 million) | RMB123.8 million |
| Net loss attributable to Yunji Inc. | RMB146.3 million | RMB125.8 million |
| Operating cash flow | Used RMB261.5 million | Used RMB1,116.8 million |
| Investing cash flow | Generated RMB551.0 million | Used RMB115.5 million |
| Financing cash flow | Used RMB13.9 million | Generated RMB623.4 million |
| Cash, cash equivalents and restricted cash, year-end | RMB1,189.7 million | RMB967.7 million |
| Total assets / total liabilities, year-end | RMB2,550.5 million / RMB1,235.6 million | RMB3,302.2 million / RMB1,837.5 million |
- Revenue fell 52.6%; cost of revenues fell 57.4%. Gross profit was approximately RMB1,590.3 million, or 28.8% of revenue, versus RMB2,422.5 million, or 20.8%, in 2019. The shift toward net-reported marketplace commissions affects comparability.
- Operating loss narrowed, but net loss increased, reflecting a swing from RMB121.4 million of net financial income in 2019 to RMB8.6 million of net financial expense in 2020, and income tax expense of RMB39.3 million versus a benefit of RMB16.7 million.
- Marketplace revenue rose 92.3% to RMB599.9 million; it was 10.8% of total revenue. Merchandise revenue declined 54.2% to RMB4,829.4 million. Membership revenue fell 94.5% to RMB42.4 million.
- GMV increased 1.8% to RMB35.9 billion, while buyers declined to 17.4 million from 22.5 million. Transacting members rose to 13.3 million from 9.6 million; fulfilled merchandise orders fell to 113.2 million from 166.6 million, while marketplace orders rose to 65.8 million from 34.6 million.
- Year-end current assets were RMB2,146.0 million and current liabilities RMB1,225.5 million (current ratio approximately 1.75). Cash and short-term investments totaled approximately RMB1,198.0 million; restricted cash was RMB125.8 million. No material interest-bearing debt balance is identified in the supplied filing text.
Material changes versus the prior period
- Management attributed the sharp revenue decline mainly to moving sales from the gross-reported merchandise model to the net-reported marketplace model. Marketplace order volume grew, but this did not translate into comparable reported revenue.
- Operating expenses declined 52.8%, with lower fulfillment, sales and marketing, technology, and general and administrative costs. Sales and marketing expense nevertheless rose to 14.6% of revenue from 10.2%.
- Operating cash use improved substantially from 2019 but remained negative. Working-capital movements included lower accounts payable and deferred revenue, partly offset by lower inventory; receivables increased.
- Inventory fell to RMB135.2 million from RMB428.3 million, while inventory turnover days increased to 25.7 from 21.5. Inventory write-downs rose to RMB40.6 million from RMB3.6 million.
Outlook, commentary, risks and unusual items
- Management said existing cash and expected operating cash flows should cover anticipated working capital and capital expenditures for at least 12 months from the report date. No quantified revenue, earnings or margin guidance is provided.
- Management cited member loyalty and retention, marketplace execution, competition, product quality, suppliers, logistics and the effectiveness of the business model as important factors. It reported that a significant portion of users acquired through large-scale 2019 campaigns did not remain loyal in 2020.
- COVID-19 disrupted operations and partners in early 2020, particularly in the first quarter. The company said normal operations gradually resumed from early March, while warning that renewed outbreaks could again disrupt operations and demand.
- The company changed its membership approach in January 2020 to allow free membership for one year; it ended free enrollment on April 1, 2021 and subsequently required new and renewing members to pay an annual fee. The effect of the revised model on retention and revenue remains uncertain.
- Refund-payable estimates reduced the liability by RMB23.5 million in 2020, recorded as an increase in merchandise revenue. The auditor identified this estimate as a critical audit matter because it depends on assumptions about member activity and referral incentives.
- Other notable items include the RMB40.6 million inventory write-down and a RMB56.4 million fair-value loss on the GXG investment. A historic RMB9.6 million fine for pre-February 2016 sales practices was paid in 2017; management says it changed practices, but regulatory interpretation risk remains.
- Putative IPO-related securities lawsuits remained unresolved in state court; the federal action was dismissed on March 31, 2021, after the plaintiffs’ time to amend expired. The company said it could not estimate possible loss. It also disclosed that certain business licenses, permits and filings were not yet obtained or completed.
- The company relies on contractual VIE arrangements to conduct restricted businesses in China. Their enforceability and regulatory treatment are uncertain. The filing also highlights China-related data, foreign-exchange and regulatory risks, and potential U.S. trading restrictions if the PCAOB cannot inspect the auditor.
Important facts for investors to verify
- Reconcile the revenue decline with the GMV increase, marketplace commission rates, and the shift from gross to net revenue recognition.
- Assess whether the marketplace can grow revenue and profitability while buyer counts and merchandise orders decline.
- Review operating cash flow, receivables and factoring exposure, working-capital requirements, and the accessibility of cash held in China or restricted accounts.
- Examine the assumptions behind the refund-payable estimate, elevated inventory write-downs, and tax valuation allowances.
- Track the post-April 2021 paid-membership model, member retention, repeat purchasing, and incentives to service managers and members.
- Monitor remaining litigation, licensing and filing gaps, VIE-related regulatory developments, and auditor-inspection and listing risks.