Climate Change Data

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Decline in monthly active users in 2016.
• Complaints from users regarding privacy settings and third-party website promotion activities.
• Uncertainty as to whether continued growth in, or successful monetization of, mobile business operations can be achieved.
• Intense competition in mobile and internet spaces.
• Limited operating history in international markets.
• Relatively few proven models for monetizing mobile traffic.
• Significant portion of revenues from a limited number of customers.
• Majority of revenues from online marketing, which is subject to decline.
• Rapidly evolving internet industry with unpredictable future results.
• Security threats and optimization challenges in mobile and PC applications.
• System failures and downtime risks.
• Dependence on third-party mobile application distribution channels.
• Dependence on Android ecosystem.
• Reliance on third-party online games and user-generated content for IVAS revenues.
• Potential liability for information or content displayed on applications.
• Risk of unauthorized use of intellectual property.
• Dependence on management team and key employees.
• Potential for allegations or lawsuits.
• Significant capital investment in strategic investments, acquisitions, and partnerships with uncertain success.
• Challenges in managing rapid growth and implementing business strategies.
• Reliance on assumptions in calculating user metrics.
• Seasonal fluctuations in results of operations.
• Challenges in building, maintaining, and enhancing brands.
• Risks associated with third-party non-compliance.
• Complex and evolving laws and regulations regarding privacy, data protection, and other matters.
• Dependence on internet infrastructure in China.
• Net loss for the year ended December 31, 2016.
• Share-based compensation expenses.
• Controlled company status with exemptions from certain corporate governance requirements.
• Potential conflicts of interest with Kingsoft Corporation.
• Potential for anti-competitive, harassing, or other detrimental conduct.
• Risk of ineffective internal control system.
• Limited business insurance coverage.
• Vulnerability to economic downturns.
• Vulnerability to catastrophes and health pandemics.
• Risks related to corporate structure and compliance with PRC regulations on foreign investment.
• Reliance on contractual arrangements with VIEs.
• Uncertainties regarding the draft PRC Foreign Investment Law.
• Potential conflicts of interest with VIE shareholders.
• Substantial influence of controlling shareholder and founders.
• Risk of losing access to vital assets held by VIEs.
• Uncertainties in the interpretation and enforcement of Chinese laws and regulations.
• Vulnerability to changes in China’s economic, political, or social conditions.
• Complexity and uncertainties in PRC regulation on mobile and PC internet businesses.
• Potential for objectionable content on platforms and applications.
• Potential classification as a PRC “resident enterprise” with unfavorable tax consequences.
• Uncertainties regarding indirect transfer of assets or equity interests in PRC resident enterprises.
• Potential revocation of preferential tax treatments.
• Complex procedures for acquisitions of Chinese companies by foreign investors.
• PRC regulations relating to offshore investment activities by PRC residents.
• PRC regulations regarding registration requirements for employee stock ownership plans.
• Governmental control of currency conversion.
• Increased costs as a result of being a public company.
• Potential for securities class action lawsuits.
• Uncertainty regarding PFIC status for U.S. federal income tax purposes.
• Volatility in the trading price of ADSs.
• Potential for difficulties in protecting shareholder interests due to Cayman Islands incorporation.
• Limited ability to exercise voting rights for ADS holders.
• Discretionary proxy for unvoted ADS shares.
• No expectation of dividend payments in the foreseeable future.
• Potential limitations on transfer of ADSs.
• Potential for dilution of holdings due to rights offerings.

Mitigation Strategies

• Intend to increase user engagement by developing content-driven products and introducing content on News Republic.
• No material costs incurred to address user complaints, but efforts to address future complaints may require substantial expenditures.
• Implementing content strategy and exploring monetization models for mobile business.
• Focusing on innovation and advanced technology to attract and retain users.
• Expanding global operations while addressing challenges in local sales and marketing strategies, business partnerships, and compliance with foreign laws and regulations.
• Exploring various monetization models for mobile business.
• Diversifying customer base and improving relationships with existing customers.
• Improving operational and financial systems, procedures, and controls.
• Improving products and services to address security threats and optimize system performance.
• Locating servers in multiple data centers.
• Developing products and technologies compatible with alternative devices.
• Working with third-party mobile application distribution channels.
• Developing applications for both Android and iOS platforms.
• Sourcing suitable third-party online games and encouraging user content contributions to Live.me.
• Implementing control procedures and technologies to monitor content on Live.me.
• Protecting intellectual property rights through legal means and agreements.
• Adopting a code of business conduct and ethics.
• Managing and defending litigation and related indemnity obligations.
• Careful selection of acquisition targets and effective integration of acquired businesses.
• Improving operational and financial systems, procedures, and controls.
• Improving internal statistics and using reliable third-party data.
• Addressing seasonal fluctuations through strategic planning.
• Investing in brand building and enhancement activities.
• Requiring third-party compliance with regulations.
• Complying with data privacy and protection laws and regulations.
• Implementing measures to prevent security breaches and hacking incidents.
• Maintaining sufficient controls to prevent intentional disruptions.
• Investing in mobile platform, marketing, and content-driven applications.
• Controlling costs relating to existing PC and mobile utility applications.
• Investing in artificial intelligence and machine learning technologies.
• Reliance on exemptions from certain corporate governance requirements.
• Addressing potential conflicts of interest with Kingsoft Corporation.
• Implementing and maintaining an effective system of internal control.
• Seeking to obtain additional business insurance coverage.
• Diversifying revenue streams and managing exposure to economic downturns.
• Developing disaster recovery plans.
• Addressing risks related to corporate structure and compliance with PRC regulations.
• Maintaining contractual arrangements with VIEs.
• Monitoring and adapting to changes in PRC laws and regulations.
• Managing risks associated with VIE structure.
• Complying with PRC regulations on foreign investment.
• Addressing potential conflicts of interest with VIE shareholders.
• Complying with PRC regulations on offshore investment activities by PRC residents.
• Complying with PRC regulations regarding registration requirements for employee stock ownership plans.
• Managing exposure to exchange rate fluctuations.
• Complying with the requirements of the Sarbanes-Oxley Act and other regulations.
• Implementing measures to mitigate risks associated with PFIC status.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Decreased mobile monthly active users in key markets (US, Europe, China).
• Significant portion of revenue from a limited number of customers.
• Allegations about some products causing revenue decrease.
• Google Play Store, Google AdMob, and Google AdManager accounts disabled.
• Challenges in international markets (revenue decrease).
• Adverse effects from COVID-19 outbreak.
• Compatibility issues with various mobile devices.
• Potential for major mobile application distribution channel changes.
• System failures or downtime.
• Decrease in popularity of the Android ecosystem.
• Putative shareholder class action lawsuit.
• Intellectual property infringement risks.
• Supply chain disruptions and component shortages.
• Difficulty forecasting consumer demand and managing inventory.
• Dependence on key personnel.
• Allegations or lawsuits against the company or management.
• Significant capital investment in strategic investments, acquisitions, and partnerships with uncertain outcomes.
• Inaccuracies in user metrics.
• Seasonal fluctuations in operating results.
• Brand building challenges.
• Non-compliance by third parties.
• Regulatory compliance challenges in China and overseas.
• Internet infrastructure performance and reliability in China.
• Inability to achieve future profitability.
• Increased share-based compensation expenses.
• Limited business insurance coverage.
• Vulnerability to catastrophes.
• Potential conflicts of interest with VIE shareholders.
• Substantial influence of Kingsoft Corporation and founders.
• VIE structure compliance risks.
• Complexity and uncertainties in PRC regulations.
• Objectionable content on platforms.
• Difficulties in enforcing legal process in China.
• Potential classification as a PRC resident enterprise for tax purposes.
• Uncertainties in indirect transfer of assets or equity interest in PRC resident enterprises.
• Potential revocation of preferential tax treatments.
• Complexity of PRC M&A rules.
• PRC regulations on offshore investment activities.
• PRC regulations on employee stock ownership plans.
• PRC regulations on loans and direct investment.
• Limitations on dividend payments from subsidiaries.
• Exchange rate fluctuations.
• Governmental control of currency conversion.
• Increased labor costs in the PRC.
• Potential misappropriation of corporate assets.
• PCAOB inspection limitations for the auditor.
• Potential delisting from NYSE due to audit access issues.
• Volatility in ADS trading price.
• Analyst reports and recommendations.
• Sales of substantial amounts of ADSs or ordinary shares.
• Anti-takeover provisions in articles of association.
• Limitations on transfer of ADSs.
• Increased costs as a public company.
• Potential legal and administrative claims.
• PFIC classification for US federal income tax purposes.

Mitigation Strategies

• Developing innovative products and services.
• Diversifying product offerings.
• Addressing user complaints.
• Scaling back from international markets.
• Public statements to clarify allegations.
• Adjusting models to respond to Google’s policy adjustment.
• Improving operational and financial systems.
• Expanding and training employee base.
• Engaging users, customers, and business partners.
• Implementing marketing initiatives.
• Defending against lawsuit.
• Implementing policies and procedures to monitor intellectual property.
• Identifying alternate sources of supply.
• Improving sales and production forecasts.
• Implementing a code of business conduct and ethics.
• Contesting allegations vigorously.
• Integrating acquired businesses and personnel.
• Adjusting models to respond to Google’s policy adjustment.
• Implementing measures to comply with data protection laws and regulations.
• Improving IT systems security.
• Implementing measures to comply with data protection laws and regulations.
• Improving IT systems security.
• Improving operational and financial systems.
• Expanding and training employee base.
• Engaging users, customers, and business partners.
• Implementing marketing initiatives.
• Share repurchase program.
• Special cash dividend.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Decreasing mobile monthly active users.
• Loss of significant customers (Google Play Store, Google AdMob, Google AdManager accounts disabled; Facebook advertising collaborations suspended).
• Disruption to business due to allegations against some products.
• Disposal of major gaming-related business.
• Putative shareholder class action lawsuit.
• Rapid technological changes in the industry.
• Intense competition.
• Limited operating history in international markets.
• Challenges in developing applications for various mobile devices.
• System failures and interruptions.
• Decrease in the popularity of the Android ecosystem.
• Seasonal fluctuations in operating results.
• Inability to accurately forecast consumer demand.
• Loss of key personnel.
• Allegations or lawsuits against the company or management.
• Material weakness in internal control over financial reporting.
• Limited business insurance coverage.
• Potential for catastrophes (natural disasters, pandemics).
• PRC government restrictions on foreign investment in internet businesses.
• Data privacy and protection laws and regulations.
• Security breaches or hacking incidents.
• Complex and evolving laws and regulations.
• Performance and reliability of internet infrastructure in China.
• Inability to regain profitability.
• Increased share-based compensation expenses.
• Anti-competitive, harassing, or other detrimental conduct.
• Fluctuations in exchange rates.
• Governmental control of currency conversion.
• Increases in labor costs in the PRC.
• Potential conflicts of interest with VIE shareholders.
• Influence of Kingsoft Corporation and founders.
• Potential for VIE bankruptcy or liquidation.
• Uncertainties in the interpretation and enforcement of PRC laws and regulations.
• Severe or prolonged downturn in the global economy.
• Complexity of PRC regulation on mobile and PC internet businesses.
• Uncertainty relating to licensing practices and real-name registrations.
• Evolving PRC regulatory system for the internet industry.
• Objectionable content posted on platforms.
• Difficulties in effecting service of legal process in China.
• Difficulties for overseas regulators to conduct investigations in China.
• Potential classification as a PRC “resident enterprise” for tax purposes.
• Uncertainties with respect to indirect transfer of assets or equity interest in PRC resident enterprises.
• Revocation of preferential tax treatments.
• Complexity of China’s M&A Rules and other PRC regulations.
• PRC regulations relating to offshore investment activities.
• PRC regulations regarding employee stock ownership plans.
• PRC regulation of loans to PRC entities by offshore holding companies.
• Limitations on dividend distributions from PRC subsidiaries.
• Volatility in the trading price of ADSs.
• SEC investigation relating to disclosures and Rule 10b5-1 trading plans.
• Anti-takeover provisions in articles of association.
• Difficulties in protecting shareholder interests due to Cayman Islands incorporation.
• Limitations on transfer of ADSs.
• Increased costs of being a public company.
• Potential legal or administrative claims and proceedings.
• Potential classification as a PFIC for US federal income tax purposes.

Mitigation Strategies

• Developing innovative products and services.
• Implementing measures to address material weakness in internal control over financial reporting.
• Efforts to resume collaborations with lost customers (Google, Facebook).
• Scaling back from international markets.
• Adjusting models to respond to Google’s policy adjustment.
• Implementing marketing initiatives to promote brand.
• Implementing measures to protect against security breaches.
• Working to comply with data protection laws and regulations.
• Implementing measures to monitor content on platform.
• Implementing measures to ensure compliance with PRC laws and regulations.
• Strengthening internal controls.
• Actively defending against lawsuits.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Decreasing product users.
• Concentration of revenue from a limited number of customers.
• Rapidly evolving industry with intense competition.
• Challenges in international markets.
• Risks related to corporate structure and contractual arrangements with VIEs.
• Complex and evolving PRC laws and regulations.
• Data security and privacy concerns.
• Potential delisting under the Holding Foreign Companies Accountable Act.
• Seasonal fluctuations in revenue.
• Brand maintenance challenges.
• Risks associated with third-party relationships.
• Material weakness in internal control over financial reporting.
• Limited business insurance coverage.
• Vulnerability to catastrophes and pandemics.
• Share-based compensation expenses.
• Potential for anti-competitive conduct.
• Potential for lawsuits and allegations.
• Significant capital investments with uncertain outcomes.
• Inability to regain profitability.
• Fluctuations in exchange rates.
• Governmental control of currency conversion.
• Increased labor costs in the PRC.
• Risks associated with custodians of controlling non-tangible assets.
• Limitations on transfer of ADSs.
• Increased costs as a public company.
• Potential for PFIC classification.

Mitigation Strategies

• Developing innovative products and services.
• Implementing measures to address material weakness in internal control.
• Continuous efforts to improve operational and financial systems.
• Expanding and engaging with users, customers, and business partners.
• Implementing measures to comply with data security and privacy regulations.
• Monitoring regulatory developments and adapting business practices.
• Implementing measures to address material weakness in internal control over financial reporting.

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

Climate Goals & Targets

Environmental Challenges

• Decreased product users in past years and potential for continued decrease.
• Risks and uncertainties related to doing business in China (regulatory approvals, cybersecurity, data privacy).
• Potential trading prohibition of securities under the Holding Foreign Companies Accountable Act (HFCAA).
• Need for additional licenses and permits for platform functions and services.
• Restrictions on paying dividends or transferring net assets from PRC subsidiaries.
• Withholding tax on dividend payments from PRC subsidiaries.
• Complex cash and asset flows through the organization due to VIE structure.
• Intense competition in rapidly evolving internet and AI industry.
• Challenges in international markets (marketing, partnerships, compliance).
• Limited adoption of applications developed for various mobile devices.
• Dependence on third-party mobile application distribution channels.
• Potential for system failures, interruptions, or downtime.
• Reliance on third-party cloud-based services.
• Dependence on Android ecosystem.
• Potential disposal of internet products.
• Potential shareholder class action lawsuits.
• Challenges in protecting intellectual property.
• Limited experience commercializing service robots at large scale.
• Reliance on suppliers and service providers for robot parts and manufacturing.
• Potential disputes with partners and adverse publicity.
• Difficulty in forecasting customer demand and managing inventory.
• Reliance on management team and key employees.
• Potential anti-competitive or detrimental conduct.
• Material weakness over financial reporting.
• Limited business insurance coverage.
• Vulnerability to catastrophes (natural disasters, pandemics).
• Risks related to corporate structure (VIEs, PRC government restrictions).
• Potential conflicts of interest with VIE shareholders.
• Influence of Kingsoft Corporation and founders.
• Potential loss of assets if VIEs go bankrupt.
• Uncertainties in interpretation and enforcement of Chinese laws and regulations.
• Complex regulatory requirements in China.
• Need for CSRC approval for future offshore offerings.
• Impact of global economic downturn.
• Complexity and uncertainties in PRC regulation of internet and AI businesses.
• Objectionable content on platforms.
• Difficulties in legal processes in China.
• Difficulties in overseas regulator investigations in China.
• Potential classification as a PRC resident enterprise for tax purposes.
• Uncertainties with respect to indirect transfer of assets.
• Potential revocation of preferential tax treatments.
• Complex procedures for acquisitions of Chinese companies.
• PRC regulations on offshore investment activities.
• Regulations on employee stock ownership plans.
• PRC regulation of loans and direct investment.
• Reliance on dividends from subsidiaries.
• Fluctuations in exchange rates.
• Governmental control of currency conversion.
• Increases in labor costs in PRC.
• Potential misappropriation of corporate assets.
• Potential delisting from NYSE.
• Volatility in ADS trading price.
• Sales of substantial amounts of ADSs.
• Anti-takeover provisions in articles of association.
• Limitations on transfer of ADSs.
• Increased costs as a public company.
• Potential legal or administrative claims.
• Potential classification as a PFIC for US federal income tax purposes.

Supply Chain Management

Climate-Related Risks & Opportunities