Yunji Inc. — FY2022 Form 20-F Summary
Period note: This is an annual report for the fiscal year ended December 31, 2022, filed April 26, 2023. It does not provide a clear standalone Q4 2022 financial-results summary; the figures below are primarily full-year or year-end figures. Financial statements are prepared under U.S. GAAP and reported in RMB.
Business context and reporting period
Yunji operates a China-based, membership-oriented social e-commerce platform, earning revenue from merchandise sales and commissions on third-party marketplace sales. Marketplace revenue is recognized net of the merchant’s proceeds, while merchandise revenue is recognized gross, so shifts in business mix affect reported revenue comparisons.
The company is a Cayman Islands holding company whose China operations include PRC subsidiaries and VIEs controlled through contractual arrangements. VIEs contributed 30.3% of consolidated revenue in 2022. ADSs trade on Nasdaq as YJ; each ADS represents ten Class A ordinary shares.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change or context |
|---|---|---|---|
| Revenue | RMB1,154.1m (US$167.3m) | RMB2,155.4m | Down 46.5% |
| Merchandise revenue | RMB965.8m | RMB1,798.9m | Down 46.3% |
| Marketplace revenue | RMB170.6m | RMB321.8m | Down 47.0% |
| Operating income/(loss) | Loss of RMB78.6m | Income of RMB17.4m | Returned to operating loss |
| Net income/(loss) | Loss of RMB138.4m (US$20.1m) | Income of RMB132.3m | Returned to net loss |
| Operating cash flow | Use of RMB216.8m (US$31.4m) | Use of RMB26.0m | Cash outflow increased |
Cost of revenues was RMB651.6m, or 56.5% of revenue, implying gross profit of approximately RMB502.5m and a 43.5% gross margin (calculated from reported figures). The operating loss margin was approximately 6.8%; the net loss margin was approximately 12.0%. Operating expenses totaled RMB1,254.3m, down 42.8% year over year, less than the revenue decline. All expense categories fell in absolute terms, while fulfillment, sales and marketing, technology and content, and general and administrative costs rose as percentages of revenue.
At December 31, 2022, cash and cash equivalents were RMB414.6m, restricted cash RMB42.1m, and short-term investments RMB212.0m. Cash, cash equivalents and restricted cash totaled RMB456.7m, down from RMB629.7m a year earlier. Current assets were RMB1,212.5m and current liabilities RMB536.4m, a calculated current ratio of about 2.3. Total liabilities were RMB536.5m and shareholders’ equity RMB1,355.9m. No material interest-bearing debt balance is identified in the provided financial statements; operating lease liabilities were RMB1.3m at year-end.
Investing activities generated RMB92.6m of cash, while financing activities used RMB94.6m, principally due to RMB95.4m of share repurchases. Capital expenditures were RMB92.3m. The filing states that management expects available cash and anticipated operating cash flows to cover working capital and capital expenditure needs for at least 12 months, while acknowledging potential need for additional financing.
Material changes versus comparable periods
- Revenue fell for a second consecutive year: from RMB5,530.3m in 2020 to RMB2,155.4m in 2021 and RMB1,154.1m in 2022. The company attributed the 2022 decline to COVID-related disruption and continued product, supplier and merchant selection changes focused on profitability.
- Average spending per buyer declined from RMB1,975 in 2021 to RMB1,658 in 2022. The cumulative member base was approximately 29.5m at year-end, and the repeat purchase rate among transacting members was 81.8%.
- Despite lower costs, operating results moved from a RMB17.4m profit in 2021 to a RMB78.6m loss in 2022. Financial income of RMB80.1m in 2021 became net financial expense of RMB14.4m in 2022; foreign-exchange losses increased to RMB15.7m from RMB1.3m.
- Operating cash use increased to RMB216.8m. Reported drivers included decreases in accounts payable, deferred revenue and member incentive payables.
- Year-end cash, cash equivalents and restricted cash declined by RMB173.0m. Inventory declined to RMB54.7m, while inventory turnover days increased to 38.4 from 29.4 in 2021.
Outlook, commentary, risks and unusual items
Management reported no quantified revenue or earnings guidance. It said it would continue curating products, optimizing suppliers and merchants, developing private-label and exclusive products, and pursuing profitability. It expected consumer confidence and spending to recover gradually following China’s late-2022 relaxation of COVID restrictions, but cautioned that the pandemic’s effects remained uncertain.
- China and VIE structure: Investors hold shares in the Cayman Islands parent, not equity in the VIEs. Enforceability of the contractual arrangements has not been tested in China courts; regulatory changes could affect control, consolidation, operations or value.
- Regulatory and listing exposure: The filing describes evolving PRC rules on data, cybersecurity, platform competition and overseas listings. The CSRC overseas-listing filing regime became effective March 31, 2023 and may apply to future offerings. PCAOB inspection access was restored in December 2022, but future loss of access could trigger HFCAA trading restrictions after two consecutive identified years.
- Nasdaq minimum bid price: The company received a deficiency notice on January 11, 2023 and had until July 10, 2023 to regain compliance, creating delisting risk if unresolved.
- Other operating risks: The filing highlights intense e-commerce competition, member retention, product quality and authenticity, supplier and logistics reliance, privacy and cybersecurity, and possible further consumer-demand or supply disruption.
- Unusual items and contingencies: A RMB9.6m fine imposed in 2017 for pre-February 2016 practices was paid; the company says it changed those practices. U.S. securities class actions relating to the 2019 IPO were closed after dismissal or voluntary discontinuance. No material legal or administrative proceedings were reported at year-end. The 2022 share-repurchase program bought approximately 13.9m ADSs at an average US$0.98 per ADS; about US$5.8m remained authorized at year-end.
- Controls and distributions: Management and the auditor concluded internal control over financial reporting was effective as of December 31, 2022. Yunji has not declared or paid cash dividends and does not expect to do so in the foreseeable future. RMB453.4m of net assets were restricted from distribution or transfer under PRC rules and the VIE structure.
Most important facts for investors to verify
- Review the audited FY2022 statements and notes for the revenue decline, loss, operating cash use, receivable credit-loss allowance and investment valuation effects.
- Confirm subsequent liquidity, operating cash flow and the location and availability of cash, including PRC remittance restrictions and the VIE-related limits on access.
- Track whether revenue, average spending per buyer, repeat purchasing and marketplace activity stabilize after the 2022 product and membership changes.
- Verify the status of Nasdaq minimum-bid-price compliance and any required CSRC filings for future offshore offerings.
- Assess the continuing enforceability and economic operation of the VIE contracts, and any material developments in data, cybersecurity, consumer-protection or platform regulation.