10-Q: Moatable Swings to Profit on Strong SaaS Growth

Moatable, Inc. reported a significant turnaround to net income in Q2 2025, driven by robust revenue growth in its SaaS segments, Lofty and Trucker Path, despite ongoing internal control weaknesses.

Summary

• Total revenues increased by 26.1% to $19.3 million for the three months ended June 30, 2025, from $15.3 million in the prior year period.
• The company achieved a net income of $0.4 million for the three months ended June 30, 2025, a significant improvement from a net loss of $0.5 million in the same period of 2024.
• Operating income for the three months ended June 30, 2025, was $0.4 million, compared to an operating loss of $0.8 million in the prior year period.
• For the six months ended June 30, 2025, total revenues grew by 27.3% to $37.3 million, up from $29.3 million in the same period of 2024.
• Net loss for the six months ended June 30, 2025, significantly narrowed to $0.7 million from $3.6 million in the corresponding period of 2024.
• The company acquired Truckers Best Insurance LLC (TBI) on May 1, 2025, for $1.0 million cash and $1.826 million in contingent consideration, expanding into the insurance brokerage business.
• Paying subscriptions for Trucker Path increased by 30% to 144,800 as of June 30, 2025, from 111,600 in 2024.
• Lofty's purchased seats increased by 9% to 85,600 as of June 30, 2025, from 78,500 in 2024, despite a 5% decrease in paying subscriptions to 3,900.
• The company declared and paid a special cash dividend of approximately $11 million in March 2025.
• Cash and cash equivalents decreased to $17.1 million as of June 30, 2025, from $26.6 million at December 31, 2024, primarily due to the special cash dividend.
• Three material weaknesses in internal control over financial reporting remain unremediated as of June 30, 2025, related to risk assessment, sales tax accrual, and internal control component evaluation.

Sentiment

Score: 7

Explanation: The company demonstrated strong financial performance with a significant turnaround to profitability and robust revenue growth in its core SaaS segments. This positive operational momentum is a strong indicator. However, the presence of three unremediated material weaknesses in internal control over financial reporting introduces a notable risk regarding financial reporting reliability and operational integrity, tempering the overall positive sentiment.

Positives

• Significant turnaround to net income of $0.4 million for the three months ended June 30, 2025, from a net loss of $0.5 million in the prior year.
• Operating income of $0.4 million for the three months ended June 30, 2025, a substantial improvement from an operating loss of $0.8 million in the prior year.
• Strong revenue growth, with total revenues increasing by 26.1% to $19.3 million for the three months and 27.3% to $37.3 million for the six months ended June 30, 2025.
• Trucker Path segment showed robust growth, with paying subscriptions increasing by 30% to 144,800.
• Lofty's purchased seats increased by 9% to 85,600, indicating an expanded user base despite a slight dip in paying subscriptions.
• Strategic acquisition of Truckers Best Insurance LLC (TBI) on May 1, 2025, for $2.826 million (including contingent consideration), diversifying business into insurance brokerage.
• Selling and marketing expenses decreased by 10.2% for the three months ended June 30, 2025, due to lower sales tax expense.
• Significant reduction in net loss for the six months ended June 30, 2025, to $0.7 million from $3.6 million in the prior year.
• Cash reserve of $17.1 million (excluding restricted cash) is expected to meet operating needs for at least the next twelve months.

Negatives

• Gross margin decreased by 3.0% to 74.1% for the three months and 2.4% to 74.3% for the six months ended June 30, 2025, primarily due to increased cost of service features and expansion of lower margin Lofty SaaS businesses.
• Cost of revenues increased by 42.9% for the three months and 41.2% for the six months ended June 30, 2025, driven by software expenses for cloud hosting and SaaS business growth.
• Lofty's paying subscriptions decreased by 5% to 3,900 as of June 30, 2025.
• Net cash used in operating activities significantly increased to $2.8 million for the six months ended June 30, 2025, compared to $0.3 million in the prior year.
• A special cash dividend of approximately $11 million led to a substantial decrease in cash and cash equivalents.
• Research and development expenses increased by 32.6% for the three months and 31.1% for the six months ended June 30, 2025, due to increased headcount for new projects.
• General and administrative expenses increased by 6.5% for the three months ended June 30, 2025, due to increased headcount and professional service fees.
• The newly acquired TBI business incurred a net loss of $465,000 since the acquisition date.

Risks

• Three unremediated material weaknesses in internal control over financial reporting as of June 30, 2025, including a lack of integrated risk assessment, issues with sales tax accrual, and insufficient evaluation of internal control components.
• Reliance on a Variable Interest Entity (VIE) structure in China due to PRC regulations, which introduces structural and regulatory complexities.
• Ability to attract, hire, and retain key talent, including sales, software development, and management personnel, is crucial for operational expansion.
• Potential impact from macro-economic events such as pandemics, wars, and deteriorating relations between sovereign entities.
• Exposure to future regulatory, judicial, and legislative changes in the U.S. and foreign countries, particularly China.
• Business relationships and operating risks that impact the ability to compete within the served industries.
• The contingent earn-out payments of up to $2.723 million for the TBI acquisition could introduce volatility in future operating results due to fair value changes.

Future Outlook

The company expects research and development expenses to increase on an absolute basis due to hiring additional personnel for new features, new SaaS products, customer experience, and technology infrastructure. General and administrative expenses are also expected to increase on an absolute basis as the SaaS businesses grow. The company intends to increasingly invest in developing Lofty products to serve property managers and landlords. The cash reserve is expected to meet operating needs for at least the next twelve months. The company is evaluating the impact of adopting new accounting standards (ASU 2024-03 and ASU 2025-05) and will include required income tax disclosures in its 2025 annual report.

Management Comments

• Our business model has been evolving continuously since our initial public offering in May 2011.
• Net income for the three months ended June 2025 was driven primarily by income from operations of $0.4 million and interest income of $0.2 million, partially offset by income tax expenses of $0.3 million.
• We believe that historical period-to-period comparisons of our results of operations may not be indicative of future performance.
• Our research and development efforts focus on developing and improving the scalability, features and functions of our SaaS services, including the compilation and use of data to increase automation of our services and enhance the customer experience.
• We have a large team of approximately 380 engineers and developers as of June 30, 2025, accounting for approximately 58% of our employees as of that date. Most of our engineers and developers are based at our subsidiary offices in China.
• In 2024, with the acquisition of LoftyWorks by Lofty, we expect to increasingly invest in developing Lofty products to serve property managers and landlords.
• We periodically shift the priorities of our research and development personnel to ensure we continually develop new products and services to extend our customer reach and meet the needs of our user base and customers.
• Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures... and concluded that, as of June 30, 2025, our disclosure controls and procedures were not effective, due to the three material weaknesses in our internal control over financial reporting.
• We believe that we are taking the steps necessary for remediation of the material weaknesses identified above, and we will continue to monitor the effectiveness of these steps and to make any changes that our management deems appropriate.

Industry Context

Moatable, Inc. operates primarily in the Software-as-a-Service (SaaS) sector, specifically targeting the real estate (Lofty) and logistics/trucking (Trucker Path) industries. The recent acquisition of Truckers Best Insurance LLC marks an expansion into the insurance brokerage business, leveraging its existing trucking industry presence. The strong revenue growth in both SaaS segments suggests a positive market demand for specialized software solutions in these industries. The company's focus on R&D and headcount expansion indicates a commitment to innovation and market share growth within its niches.

Corporate Governance

Legal Proceedings

• Not currently a party to any material legal proceedings.
• Not aware of any pending or threatened legal proceedings that could reasonably be expected to have a material adverse effect on the business, financial condition, or results of operations.

Related Party Transactions

• Amounts due from Infinities Technology (Cayman) Holding Limited: $672 thousand as of June 30, 2025, related to the disposition of the SNS business.
• Amounts due from Oak Pacific Investment (OPI) and its subsidiaries: $11 thousand as of June 30, 2025.
• Amounts due to Infinities Technology (Cayman) Holding Limited: $635 thousand as of June 30, 2025.

Stakeholder Impact

• Shareholders: Benefited from a special cash dividend of approximately $11 million and ongoing stock repurchase program. The return to net income and strong revenue growth are positive for shareholder value, though internal control weaknesses pose a risk.
• Employees: Increased headcount in research and development (380 engineers/developers, 58% of employees) and general and administrative functions, indicating job growth and investment in human capital. Share-based compensation continues to be a component of employee remuneration.
• Customers: Continued investment in R&D aims to improve scalability, features, and user experience for SaaS services, potentially leading to enhanced product offerings and satisfaction.
• Creditors: The company's cash reserve is expected to meet operating needs for at least the next twelve months, suggesting adequate short-term liquidity, though net cash used in operating activities increased.

Next Steps

• Continue remediation efforts for the three identified material weaknesses in internal control over financial reporting.
• Increase investment in research and development, including hiring additional personnel, to develop new features for SaaS services, invest in new SaaS products, and improve technology infrastructure.
• Further improve the customer experience across SaaS platforms.
• Expand Lofty products to serve property managers and landlords.
• Evaluate the impact and adopt new accounting standards (ASU 2024-03 and ASU 2025-05) in upcoming reporting periods.
• Include applicable and relevant required income tax disclosures in the Form 10-K for the year ending December 31, 2025.

Key Dates

Recommendation

The company demonstrated strong financial performance with a significant turnaround to profitability and robust revenue growth in its core SaaS segments, particularly Trucker Path. This positive operational momentum is a strong indicator of business health and market traction. The strategic acquisition of Truckers Best Insurance LLC also signals a proactive approach to diversification and growth. However, the persistent presence of three unremediated material weaknesses in internal control over financial reporting is a substantial concern. These weaknesses can undermine the reliability of financial statements and expose the company to operational and compliance risks. While management has outlined remediation plans, the unremediated status as of the reporting date suggests ongoing challenges. The large special cash dividend also significantly reduced the company's cash reserves, which, while a return to shareholders, could limit future strategic flexibility if operating cash flow does not improve substantially. Therefore, a 'Hold' recommendation is prudent, advising investors to monitor the remediation of internal control weaknesses closely before considering further investment, despite the positive operational momentum.

Keywords

SaaS, Real Estate Technology, Logistics Technology, Trucking, Insurance Brokerage, SEC Filing, 10-Q, Moatable, Lofty, Trucker Path