Youlife : Annual Report for Fiscal Year Ending December 31, 2025 (Form 20-F)
YOUL
Published on 04/30/2026 at 06:40 pm EDT
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See "Forward-Looking Statements" for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under "Item 3.D. Key Information-Risk Factors" and elsewhere in this annual report.
A. Operating Results
Key Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by the general factors affecting China's blue-collar lifetime service market, including, among others, China's overall economic growth, the competitive environment in China and greater challenges in hiring. In addition, our results of operations and financial condition are also affected by factors driving the blue-collar lifetime service market in China, such as growth of the blue-collar sector. Unfavorable changes in any of these general factors could materially and adversely affect our results of operations.
While our business is influenced by general factors affecting our industry, our results of operations are more directly affected by the following specific factors.
Our business mix
We have broad and diversified blue-collar lifetime service offerings, each of which complement and benefit each other and ensure our ability to withstand market while maintaining a strong financial growth trajectory. A shift in our revenue mix would affect our gross profit margin, as the gross profit margin of each business segment varies. Any change in the revenue mix or change in the profitability of any service offered may have a corresponding impact on our overall profitability. We may in the future further adjust our business structure and strategies to improve our profitability. Any further changes on our business mix may affect our profitability.
Our brand positioning and pricing ability
We rely on our well-established brand awareness and recognition, such as our brands "Youlan" and "Tiankun Education," and our reputation in providing quality services. Our ability to maintain our relationship with existing customers and attract new customers depends, to a large extent, on our ability to continue to enhance brand recognition. We believe trusted brands enable us to expand our customer base, collaborate with more third parties, make our services more acceptable and lead to more business opportunities.
Our results of operations are also affected by the level of fees which we are able to charge. As we operate in a highly competitive and fragmented industry, our ability to price our services at the level we desire, while at the same time maintaining competitive, is dependent on a number of factors, including the pricing guideline and/or restriction issued or imposed by the relevant government authorities, the demand for our services, the supply of similar services in the market, prices set by our competitors and the competitive landscape of blue-collar lifetime service industry in China. To maintain our prices, we endeavor to diversify our services by offering more solution based, customized curricula and services. We aim to achieve a balance between pricing our services competitively while maintaining our position as a quality blue-collar lifetime service provider and ensuring an attractive profit margin. Failure to balance various factors in determining our pricing could materially and adversely affect our financial condition and results of operations.
Our ability to control operating costs and expenses
Our profitability is also affected by our ability to control our operating costs and expenses. We have been continuously improving our cost efficiency. In 2023, 2024 and 2025, our cost of sales represented 85.3%, 85.5% and 89.6% of our total revenue, respectively. Our cost of sales primarily consists of personnel costs, constituting approximately 79.8%, 70.0% and 88.6% of our cost of sales in 2023, 2024 and 2025, respectively, and most of the personnel costs were the staff costs of blue-collar talent associated with our employee management services.
We expect the cost of sales to continue to be our most significant operating costs and expenses going forward, in light of our continuous expansion. If we are unable to control our operating costs and expenses, our profitability may be materially and adversely affected.
Our ability to timely and continuously source adequate blue-collar talent who meets the requirements of our customers
We generated a significant portion of our revenue from our employee management services in 2023, 2024 and 2025. Our business depends on our ability to timely and continuously source large number of suitable blue-collar talent to support our corporate customers' staffing needs. Our ability to continue to drive the organic growth of our blue-collar talent potential is primarily driven by factors including our ability to match them with career opportunities, the quality of our services, the range and effectiveness of our recruitment service and delivery sites, and our brand reputation.
Competition for blue-collar talent with certain skills and experience may be intense, and qualified blue-collar talent may not be available to us in a sufficient number and on terms of employment acceptable to us. Going forward, our ability to recruit enough blue-collar talent who possesses the skills and experience necessary to meet the requirements of our corporate customers in a timely manner will be largely affected by various factors including our customers' willingness to pay, the competition in the market and the customer stickiness with us.
Our ability to maintain major customers and expand our customer base
Our success is largely dependent on our ability to attract and maintain major customers and expand our customer base, which in turn is affected by our ability to deliver quality services amid a changing landscape of the blue-collar lifetime service industry in China. In 2023, 2024 and 2025, approximately 25.5%, 28.5% and 28.1% of our total revenue were generated from our top five customers, respectively. There is no guarantee that we will continue to obtain new contracts with these major customers or maintain our relationships with them in the future. In addition, we have a proven record of serving leading domestic and international corporate customers with a deep understanding of their needs and delivery, which we believe would be important to enhance our branding. Our continuous growth will be driven by our ability to expand our customer base to attract larger and medium-sized customers of different industries in more cities and regions. In addition, our success will also be affected by our ability to explore relationships with customers focused on emerging industries with great growth potential.
Our ability to keep up with rapid changes in the blue-collar lifetime service industry
Our ability to grow our business and increase profitability largely depends on our ability to keep up with the rapid changes in both market conditions and relevant laws and regulations of the blue-collar lifetime service industry. Government policies have strengthened supervision requirements in the blue-collar lifetime service industry. Although we have taken measures to comply with the laws and regulations that are applicable to our business operations and avoid conducting any non-compliant activities under the applicable laws and regulations, the PRC government authorities may promulgate new laws and regulations regulating the blue-collar lifetime service industry from time to time. Any of these changes in the blue-collar lifetime service industry may result in the prohibition or restriction of certain types of services we offer, or the imposition of new or additional licensing or other requirements could also reduce our revenue and earnings.
Seasonality
Our financial condition and results of operations are subject to seasonal fluctuations due to various factors. The seasonality for each of our business segments varies. For example, we may generate lower revenue from our employee management services and HR recruitment services in the first quarter of a year, when blue-collar talent tend to return to their hometown to celebrate the Chinese New Year holidays with their families. As a result, any comparison of our sales and results of operations between different periods within a single financial year, or between different periods in different financial years is not necessarily meaningful and may not indicate our future performance.
Non-GAAP Financial Measures
To supplement our consolidated financial statements which are presented in accordance with U.S. GAAP, we use adjusted net profit/loss and adjusted EBITDA, which are non-GAAP financial measures, in evaluating our results of operations and for financial and operational decision-making purposes. Adjusted net profit/loss represents net profit before share-based compensation expenses, fair value gains from financial assets at fair value through profit or loss and deemed dividend to Series C and Series C+ preferred shareholders at modification of Series C and Series C+ Preferred Shares. Adjusted EBITDA represents adjusted net profit/loss before income tax expense, depreciation, amortization and interest expense. We believe that adjusted net profit/loss and adjusted EBITDA help identify underlying trends in our business that could otherwise be distorted by the effect of non-GAAP adjustments. We believe that such non-GAAP financial measures also provide useful information about our results of operations, enhance the overall understanding of our past performance and prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision making.
The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. It should not be considered in isolation or construed as alternatives to net loss or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical non-GAAP financial measures considering the most directly comparable GAAP measures, as shown below. The non-GAAP financial measures presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
Key Components of Results of Operations
Revenues
We generated revenues from our vocational education services, HR recruitment services, employee management services and market services and solutions. The following table sets forth a breakdown of our revenues by business line, both by absolute amount and as a percentage of our total revenues for the periods indicated.
We have provided vocational education services since our inception, and we usually charge the relevant service fee. The service fees are decided based on the size and fee level of the schools we provide service with.
We provide our corporate customers with comprehensive HR recruitment services and charge them service fees, which are mainly determined by the number of blue-collar talents we recruited and the fee level.
Our employee management services primarily include outsourcing services and other HR solutions. We charge our corporate customers service fees for outsourcing services, which are determined by several factors, including, among others, costs and expenses of the services, the industries and the competitive landscape.
We also provide blue-collar talents, students of school customers and corporate customers and other end customers with market services comprising sale of retail goods via online platform and value-added services, such as shopping services, catering services, student and blue-collar talents dormitory services and welfare services.
Cost of revenues
Our cost of sales primarily consists of (1) personnel costs and (2) procurement costs, mainly including our costs of procuring third party recruitment services, commodities and raw materials. The following table sets forth a breakdown of our cost of revenues by nature, both by absolute amount and as a percentage of our total revenues for the periods indicated.
Operating expenses
Our operating expenses primarily consist of sales and distribution expenses, administrative expenses and research and development expenses. The following table sets forth the components of our operating expenses, both by absolute amount and as a percentage of our total revenues for the periods indicated.
Selling and marketing expenses. Our selling and marketing expenses primarily consist of (1) personnel costs of our sales team; (2) marketing and promotion expenses paid to online channels for advertising; (3) office and rental fees; (4) travel expenses; and (5) depreciation and amortization.
Administrative expenses. Our administrative expenses primarily include (1) personnel costs of our administrative staff; (2) professional service fees relating to our financing and listing activities; (3) depreciation and amortization; (4) credit impairment losses and (5) office and other miscellaneous expenses.
Research and development expenses. Our research and development expenses mainly consist of (1) payroll expenses, (2) technologies service expenses related to platform development and data analysis to support our business operations, and (3) other expenses related to research and development functions.
Taxation
Cayman Islands
The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, capital gains or appreciation and there is no taxation in inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in or brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on payments of dividends.
Hong Kong
Under the current Hong Kong Inland Revenue Ordinance, our subsidiaries incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by our subsidiaries incorporated in Hong Kong are not subject to any Hong Kong withholding tax.
PRC
Generally, our subsidiaries incorporated in China are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. One of our PRC subsidiaries is entitled to a favorable statutory tax rate of 15% for the three years from 2021 to 2024 because of its qualification as a "High and New Technology Enterprise." Such qualification lapsed in 2025, and the subsidiary is no longer entitled to the 15% preferential tax rate.
Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%.
Results of Operations
The following table sets forth a summary of our results of operations for the periods presented.
In January 2024, we completed our reorganization and discontinued operations of some of our business operations. In accordance with ASC 205-20-45, the results of all discontinued operations, less applicable income taxes, are reported as components of net income (loss) separate from the net loss of continuing operations for 2023, 2024 and 2025, as comparative statements of operations.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. Our results of operations in any period are not necessarily indicative of our future trends.
Year ended December 31, 2025, compared to year ended December 31, 2024
Revenues
Our revenues increased by 16.9% from RMB1,585.6 million in 2024 to RMB1,854.3 million (US$265.2 million) in 2025, with increases in revenues generated from employee management services as the mainly driven to the increase. The following table sets forth a breakdown of our revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Vocational education services. Revenues generated from vocational education services decreased by 9.8% from RMB50.0 million in 2024 to RMB45.1 million (US$6.4 million) in 2025, primarily due to the discontinuation of a minor service in 2025, which had the long-term payback period.
Employee management services. Revenues generated from employee management services increased by 24.4% from RMB1,382.6 million in 2024 to RMB1719.6 million (US$245.9 million) in 2025, primarily due to (1) the increase of our corporate customers and their growing demands of blue-collar labors, which was attributable to comprehensive adjustments and optimizations we have achieved on business control and development under fully utilizing our mix business model of blue-collar lifecycle value chain service; and (2) greater likelihood that our target customers are focusing on new economy industries with high customer value and large scale of outsourcing services demands.
HR recruitment services. Revenues generated from HR recruitment services decreased by 27.0% from RMB24.2 million in 2024 to RMB17.7 million (US$2.5 million) in 2025, primarily due to (1) our average service fee decreased as our large-scale corporate customers would choose multi-settlement of high fluidity jobs; and (2) part of our HR recruitment services had been disposed with the discontinued operations.
Marketing services. Revenues generated from marketing services decreased by 44.2% from RMB128.8 million in 2024 to RMB71.9 million (US$10.3 million) in 2025, primarily due to the discontinuation of a minor service in 2025.
Cost of revenues
Our cost of revenues increased by 23.4% from RMB1,356.5 million in 2024 to RMB1662.2 million (US$237.7 million) fin 2025, in line with the growth of our business scale. The following table sets forth a breakdown of our cost of revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Costs related to personnel procurement costs increased by 10.5% from RMB949.9 million in 2024 to RMB1,049.4 million (US$150.1 million) in 2025. Costs related to Procurement costs increased by 74.0% from RMB336.8 million in 2024 to RMB586.1 million (US$83.8 million) in 2025. Both the variance of personnel costs and procurement costs are primarily because we acquired more clients, which was in line with the revenue increase.
Gross profits and margin
Our gross margin decreased from 14.5% in 2024 to 10.4% in 2025, primarily because we discontinued part of Vocational education services, while expanding cooperation with key strategic clients in employee management service.
Operating expenses
Our operating expenses decreased from RMB188.6 million in 2024, to RMB185.3 million (US$26.5 million) in 2025, representing a decrease of 1.7%. The following table sets forth a breakdown of our cost of revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Selling and marketing expenses. Our selling and marketing expenses increased by 53.8% from RMB51.9 million in 2024 to RMB79.7 million (US$11.4 million) in 2025, primarily because we developed a number of strategic clients.
Administrative expenses. Our administrative expenses decreased by 30.0% from RMB126.7 million in 2024 to RMB88.7 million (US$12.7 million) in 2025, primarily due to cost-saving measures, including the streamlining of certain management departments and a reduction in rental expenses.
Research and development expenses. Our research and development expenses increased by 68.4% from RMB10.0 million in 2024 to RMB16.9 million (US$2.4 million) in 2025, primarily due to increased R&D investment in innovative fields, such as industrial robotics.
(Loss)/income from operations
As a result of the foregoing, we recorded profits from operations of RMB6.8 million (US$0.9 million) in 2025, compared with profits from operation of RMB40.5million in 2024, primarily due to our business development efforts and increased efficiency.
Other income/(expense), net
We incurred other expense, net of RMB81.8 million and other income, net of RMB43.7 million (US$6.2 million) in 2024 and 2025, respectively, primarily due to the restructuring of low-profit business and subsidiaries and other gain or loss.
Income taxes
Our income tax expenses decreased from RMB11.1 million in 2024 to RMB7.7 million (US$1.1 million) in 2025, primarily due to the increase of net profit and deferred tax assets.
Net profit/(loss)
As a result of the foregoing, we recorded net profit of RMB42.7 million (US$6.1 million) in 2025, compared to net loss of RMB52.4 million in 2024.
Year ended December 31, 2024, compared to year ended December 31, 2023
Revenues
Our revenues increased by 16.1% from RMB1,365.9 million in 2023 to RMB1,585.6 million in 2024, with increases in revenues generated from employee management services as the mainly driven to the increase. The following table sets forth a breakdown of our revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Vocational education services. Revenues generated from vocational education services decreased by 72.1% from RMB179.0 million in 2023 to RMB50.0 million fin 2024, primarily due to (1) the decrease in our smart campus services resulting from we had completed most of our smart campus projects in 2023; and (2) our vocational training services and self-operated vocational school services had been disposed with the discontinued operations.
Employee management services. Revenues generated from employee management services increased by 33.7% from RMB1,033.8 million in 2023 to RMB1,382.6 million in 2024, primarily due to (1) the increase of our corporate customers and their growing demands of blue-collar labors, which was attributable to comprehensive adjustments and optimizations we have achieved on business control and development under fully utilizing our mix business model of blue-collar lifecycle value chain service; and (2) greater likelihood that our target customers are focusing on new economy industries with high customer value and large scale of outsourcing services demands.
HR recruitment services. Revenues generated from HR recruitment services decreased by 67.9% from RMB75.5 million in 2023 to RMB24.2 million in 2024, primarily due to (1) our average service fee decreased as our large-scale corporate customers would choose multi-settlement of high fluidity jobs; and (2) part of our HR recruitment services had been disposed with the discontinued operations.
Marketing services. Revenues generated from marketing services remained relatively stable at RMB129.7 million and RMB128.8 million in 2023 and 2024, respectively.
Cost of revenues
Our cost of revenues increased by 15.6% from RMB1,165.4 million in 2023 to RMB1,356.5 million in 2024, in line with the growth of our business scale. The following table sets forth a breakdown of our cost of revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Procurement costs. Costs related to procurement costs increased by 54.9% from RMB217.5 million in 2023 to RMB336.8 million in 2024, primarily due to the increase in revenue in cost paid to third-party services providers engaged in the employee management services, generally in line with our revenue growth.
Gross profits and margin
Our gross margin decreased from 14.7% in 2023 to 14.5% fin 2024, primarily due to the decrease of HR recruitment services which has a higher gross margin with almost 55.5% margin. The percentage of the gross profit from HR recruitment services decreased from 25.1% in 2023 to 5.9% in 2024.
Operating expenses
Our operating expenses decreased from RMB219.3 million in 2023 to RMB196.5 million in 2024, representing a decrease of 10.4%. The following table sets forth a breakdown of our cost of revenues, each expressed in the absolute amount and as a percentage of our total revenues, for the periods indicated.
Selling and marketing expenses. Our selling and marketing expenses decreased by 47.1% from RMB98.1 million in 2023 to RMB51.9 million in 2024, primarily because we reduced related marketing and promotion activities for retail services.
Administrative expenses. Our administrative expenses decreased by 2.3% from RMB129.7 million in 2023 to RMB126.7 million in 2024, primarily because RMB13.0 million of credit losses of other receivables and RMB2.4 million of credit losses of accounts receivable were reversed in 2023 due to effective receivables collection but RMB1.6 million (US$0.2 million) credit losses of other receivables were reversed and RMB1.8 million (US$0.3 million) credit losses of accounts receivable charged to expense in 2024.
Research and development expenses. Our research and development expenses decreased by 18.5% from RMB12.3 million in 2023 to RMB10.0 million in 2024, primarily due to the decrease in technologies services expenses resulting from the continuous investment in our platforms.
(Loss)/income from operations
As a result of the foregoing, we recorded profits from operations of RMB40.5 million in 2024, compared with loss from operation of RMB18.9 million in 2023, primarily due to our business development efforts and increased efficiency.
Other income/(expense), net
We incurred other incomes, net of RMB67.9 million and other expense, net of RMB81.8 million in 2023, and 2024, respectively, primarily due to the fair value loss and disposal loss from our equity investment.
Income taxes
Our income tax expenses were RMB11.1 million in 2024, compared to income tax benefits RMB30.3 million in 2023, primarily due to the recognition of deferred tax assets have been utilized.
Net profit/(loss)
As a result of the foregoing, we recorded net loss of RMB52.4 million in 2024, compared to net profit of RMB79.3 million in 2023.
B. Liquidity and Capital Resources
Our cash and cash equivalents consist of cash on hand, demand deposit.
The following table sets forth a summary of our cash flow for the year presented.
We believe that our current cash and cash equivalents and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for at least the next 12 months. In the future, we may decide to enhance our liquidity position or increase our cash reserve for future investments through additional capital and finance funding. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
Operating activities
Our net cash provided by operating activities in 2025 was RMB11.9 million (US$1.7 million), primarily due to our net profit of RMB42.7 million (US$6.1 million), as adjusted to reflect certain non-cash or non-operating activities related items, which primarily included (1) reversal of credit loss of other receivables and (2) gain from disposal of equity investment.
Our net cash provided by operating activities in 2024 was RMB6.3 million, primarily due to our net loss of RMB52.4 million, as adjusted to reflect certain non-cash or non-operating activities related items, which primarily included fair value losses from financial assets at fair value through profit or loss of RMB21.2 million and loss from disposal of equity investment of RMB59.1 million. Changes in the working capital mainly included (1) a decrease in accounts payables of RMB32.0 million; (2) an increase in other payables and accruals of RMB29.4 million; and (3) a decrease in contract liabilities of RMB19.3 million.
Our net cash provided by operating activities in 2023 was RMB11.5 million, primarily due to our net profit of RMB79.3 million, as adjusted to reflect certain non-cash or non-operating activities related items, which primarily included fair value gains from financial assets at fair value through profit or loss of RMB36.5 million. Changes in the working capital mainly included (1) an increase of RMB140.8 million in trade receivables; (2) an increase in contract liability of RMB36.6 million; (3) an increase in other payables and accruals of RMB82.4 million; and (4) principle of lease payments of RMB8.1 million and the net cash provided by operating activities from discontinued operations of RMB1.2 million.
Investing activities
Our net cash used in investing activities in 2025 was RMB98.5 million (US$14.1 million), primarily due to long-term investment.
Our net cash used in investing activities in 2024 was RMB10.9 million, primarily due to (1) net cash paid for business acquisitions of RMB9.6 million, and (2) cash used in purchase of items of property and equipment of RMB1.1 million.
Our net cash used in investing activities in 2023 was RMB22.6 million, primarily due to (1) cash used in purchase of items of property and equipment of RMB94.7 million; (2) cash used in purchase of intangible assets of RMB8.7 million; and (3) cash received of short-term investment of RMB84.2 million and the net cash used in investing activities from discontinued operations of RMB3.5 million.
Financing activities
Our net cash provided by financing activities in 2025 was RMB104.2 million (US$14.9 million), primarily due to (1) proceed from PIPE investors and (2) payment for listing expenses.
Our net cash used in financing activities in 2024 was RMB54.3 million, primarily due to repayment of advances from third parties of RMB58.6 million.
Our net cash used in financing activities in 2023 was RMB231.8 million, primarily due to (1) repayment of advances from third parties of RMB96.5 million; and (2) repayment of bank and other borrowings of RMB9.0 million and the net cash used in financing activities from discontinued operations of RMB115.2 million.
Material Cash Requirements
Our material cash requirements as of December 31, 2025, and any subsequent period primarily included our capital expenditures and contractual obligations.
Capital Expenditures
We did not incur capital expenditure in 2024 and 2025. Capital expenditure primarily represents capital payment to the new vocational facility. We will continue to make capital expenditures to meet the expected growth of our business. We intend to fund our future capital expenditure with our existing cash balance and proceed with this offering.
Contractual Obligations
The following table sets forth our contractual obligations as of December 31, 2025.
Other than as shown above, we did not have any other significant capital and other commitments, long-term obligations, or guarantees as of December 31, 2025.
Internal Control over Financial Reporting
In the course of auditing our consolidated financial statements as of and for the year ended December 31, 2025, we identified one material weakness in our internal control over financial reporting as of December 31, 2025. As defined in the standards established by the PCAOB, a "material weakness" is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
The material weakness identified is related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purpose of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.
We have taken, and are taking, certain actions to remediate the material weakness related to our lack of U.S. GAAP and SEC reporting experience. We engaged a consultant with U.S. GAAP knowledge and experience to supplement our current internal accounting personnel and assist us in the preparation of our financial statements to ensure that our financial statements are prepared in accordance with U.S. GAAP. We also engaged an internal control consulting firm in 2024 to review, test and improve our internal accounting controls and internal control over financial reporting. We have adopted and are implementing policies, procedures and practices recommended in the report of the consultant and have arranged training of internal control for our employees and management on disclosure controls and procedures. We continue to make efforts to implementing our existing and newly adopted procedures to improve our disclosure controls and internal controls over financing reporting.
However, we cannot assure you that we will remediate our material weakness in a timely manner. The process of designing and implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligation. See "Item 3. Key Information-D. Risk Factors -Risks Relating to Our Operations-If we fail to implement and maintain effective internal controls to remediate the material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of the Class A Ordinary Shares may be materially adversely affected."
As a company with less than US$1.235 billion in revenue for the last year, we qualify as an "emerging growth company" pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company's internal control over financial reporting.
Off-Balance Sheet Commitments and Arrangements
We have not entered any financial guarantees or other commitments to guarantee the payment obligations of any third party. In addition, we have not entered any derivative contracts that are indexed to our shares and classified as shareholders' equity or that are not reflected in our consolidated and combined financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or product development services with us.
Holding Company Structure
The Company is a holding company with no material operations of its own. We conduct our operations primarily through our PRC subsidiaries in China. As a result, although other means are available for us to obtain financing at the holding company level, our ability to pay dividends to the shareholders and to service any debt we may incur may depend upon dividends paid by our PRC subsidiaries.
If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our PRC subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In addition, our wholly foreign-owned subsidiaries in China may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at their discretion. Statutory reserve funds and discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.
Quantitative and Qualitative Disclosures about Market Risk
Currency risk
Currency risk arises from the possibility that fluctuations in foreign exchange rates will impact the financial instruments. We are not exposed to significant transactional foreign currency risk since we usually recognize revenues and purchases in RMB. At the same time, we are not exposed to translational foreign currency risk since most operating subsidiaries are in the PRC, which has RMB as the functional currency.
Credit Risk
The carrying amounts of cash and bank balances, trade receivables, financial assets included in prepayments, other receivables and other assets, and financial assets included in other non-current assets included in the consolidated statements of financial position represent our maximum exposure to credit risk in relation to its financial assets as of December 31, 2023, 2024 and 2025. We classify financial instruments based on shared credit risk characteristics, such as instrument types and credit risk ratings for the purpose of determining significant increases in credit risk and calculation of impairment.
Cash and cash balances
As of December 31, 2023, 2024 and 2025, all cash and bank balances were deposited in high-credit-quality financial institutions without significant credit risk. These financial assets were not yet past due, and their credit exposure is classified as stage 1.
Account receivable
To manage the risk arising from trade receivables, we have policies in place to ensure that credit terms are made only to counterparties with an appropriate credit history and management performs ongoing credit evaluations of our counterparties. The credit period granted to the customers is generally within 30 days to 90 days and the credit quality of these customers is assessed, considering their financial position, experience and other factors. We also have other monitoring procedures to ensure that follow-up action is taken to recover overdue receivables. In addition, we review regularly the recoverable amount of trade receivables to ensure that adequate impairment losses are made. We have no significant concentrations of credit risk, with exposure spread over many counterparties and customers.
Other receivables
Management makes periodic collective assessments for other receivables as well as individual assessment on the recoverability of other receivables based on historical settlement records and experience. We recognized allowance for these financial assets based on lifetime ECLs and adjusted for forward-looking macroeconomic data.
Liquidity Risk
Liquidity risk is the risk that we will encounter difficulty in meeting financial obligations due to shortage of funds. Our exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. Our objective is to maintain a balance for continuity of funding to finance its working capital needs as well as capital expenditure.
Long-term investment
We have elected to apply the NAV practical expedient under ASC 820-10-15-4 to measure the fair value of this investment. The investment represents an equity interest in a segregated portfolio of an SPC fund and meets the eligibility criteria. Accordingly, the investment is excluded from the Level 1/2/3 fair value hierarchy, no additional independent valuation support is required, and disclosures will be provided in accordance with ASC 820-10-50-6A through 50-6B. The investment is subject to a mandatory 10-year lock-up period, which represents a restriction on redemption. The investment was made in May 2025.
Critical Accounting Policies and Estimates
Basis of presentation
Our consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America ("U.S. GAAP"). Significant accounting policies followed by us in the preparation of the accompanying consolidated financial statements are summarized below.
The accompanying consolidated financial statements have been prepared on the basis that we will be able to continue as a going concern for a period of one year after the issuance of the Consolidated Financial Statements. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Principle of consolidation
The consolidated financial statements include the financial statements of our company and our subsidiaries. All significant inter-company transactions and balances have been eliminated upon consolidation.
Fair value measurement
We measure our financial assets at fair value through profit or loss at the end of each of the Relevant Years. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by us. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, if market participants act in their best economic interest.
A fair value measurement of a non-financial asset considers a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
We use valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximize the use of relevant observable inputs and minimize the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
The carrying value of financial instruments included in current assets and liabilities approximate their fair values because of the short-term nature of these instruments.
Impairment of non-financial assets other than goodwill
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets), the asset's recoverable amount is estimated. An asset's recoverable amount is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. In testing a cash-generating unit for impairment, a portion of the carrying amount of a corporate asset is allocated to an individual cash-generating unit if it can be allocated on a reasonable and consistent basis or, otherwise, to the smallest group of cash-generating units.
An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. In assessing recoverable amount, the estimated future cash flows are undiscounted expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group recognizes an impairment loss based on the excess of the carrying amount of the assets over their fair value. Fair value is generally determined by discounting the cash flows expected to be generated by the assets when the market prices are not readily available. An impairment loss is charged to the profit or loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
Business combination
We account for our business combinations using the purchase method of accounting in accordance with ASC 805, Business Combinations ("ASC 805"). The purchase method of accounting requires that we allocate the fair value of purchase consideration to the separately identifiable tangible and intangible assets acquired as well as liabilities assumed based on their estimated fair values. The consideration transferred in an acquisition includes the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent consideration and all contractual contingencies as of the acquisition date. The excess of the total of cost of acquisition, over the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the businesses acquired, the difference is recognized directly in earnings. Transaction costs directly attributable to the acquisitions are expensed as incurred. The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed, and non-controlling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. Significant estimates include but are not limited to future expected cash flows from acquired assets, assumptions on useful lives, discount rates and terminal values. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We determine discount rates to be used based on the risk inherent in the related activity's current business model and industry comparisons. Terminal values are based on the expected life of assets, forecasted life cycle and forecasted cash flows over that period.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e., removed from the Group's consolidated balance sheet) when:
When we have transferred our rights to receive cash flows from an asset or has entered into a pass-through arrangement, we evaluate if, and to what extent, we have retained the risk and rewards of ownership of the asset. When we have neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, we continue to recognize the transferred asset to the extent of our continuing involvement. In that case, we also recognize an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that we have retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported revenues, costs and expenses during the reported year in the consolidated financial statements and accompanying notes. These accounting estimates reflected in our consolidated financial statements mainly include, but are not limited to, current expected credit losses, useful lives of intangible assets and property and equipment, provision of income tax, valuation allowance for deferred tax assets and fair value measurement of convertible redeemable preferred shares and unlisted equity investments. Actual results could differ from those estimates.
Foreign currency translation
The functional currency and booking currency are both RMB for substantial all entities of our Group, transactions, assets and liabilities dominated in foreign currency were few within 2025.
For the purpose of such translation in cost-efficiency way, the financial statements are translated into USD in the convenience rate (USD 1 = RMB 6.9931) prevailing at the balance date. No translation adjustments incurred to comprehensive income (loss).
Current expected credit losses
We adopted ASC Topic 326, "Financial Instruments-Credit Losses", for credit loss assessment using the modified retrospective approach for all in-scope assets. Our in-scope assets are primarily account receivables, prepayments and other receivables. To estimate expected credit losses, the Group has identified the relevant risk factors which include clients' credits and accounts aging. Accounts with similar risk factors have been grouped into pools. For each pool, the Group considers the collection experience, current economic conditions and future economic conditions.
Property and equipment
Property and equipment, is stated at historical cost less accumulated depreciation and impairment, if any, and is depreciated using straight-line method over the following useful lives. The residual rate is determined based on the economic value of the asset at the end of the estimated useful lives as a percentage of the original cost. Certain events or changes in circumstances may indicate that the recoverability of the carrying amount of property, plant and equipment should be assessed, including, among others, a significant decrease in market value, a significant change in the business climate in a particular market, or a current period operating or cash flow loss combined with historical losses or projected future losses. When such events or changes in circumstances are present and a recoverability test is performed, we estimate the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment charge. The impairment charge recognized is the amount by which the carrying amount of the asset or asset group exceeds the fair value. We may use a variety of methodologies to determine the fair value of property, plant and equipment, including appraisals and discounted cash flow models. These appraisals and models include assumptions we believe are consistent with those a market participant would use.
Depreciation is calculated on the straight-line basis to write off the cost of each item of property and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:
Leases
We follow ASC Topic 842, Leases. We lease office spaces, warehouse, and farmland which are classified as operating leases in accordance with Topic 842. Under Topic 842, lessees are required to recognize the following for all leases (with the exception of short-term leases, usually with initial term of 12 months or less) on the commencement date: (i) lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) right-of-use ("ROU") asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and includes initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expenses for minimum lease payments are recognized on a straight-line basis over the lease term. All operating lease ROU assets are reviewed for impairment annually.
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.
Revenue is presented net of value-added taxes ("VAT") collected on behalf of tax authorities, as we act as an agent in collecting such taxes from customers.
When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which we will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between us and the customer at contract inception. When the contract contains a financing component which provides us with a significant financial benefit for more than one year, revenue recognized under the contract includes the interest expense accredited on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component.
(a) Vocational education services
We provide vocational education services mainly including vocational education entrusted management services, self-operated vocational school services, curriculum co-development projects services, vocational training services and connotation construction services.
For vocational education entrusted management services, we agree the price with the sponsors of managed schools upfront and recognizes the management fee received or receivable as its revenue on a straight-line basis over the agreed management period based on pre-agreed fixed amounts or unit rate per students for management services provided or the estimated operating results of the managed schools in the whole management period.
For self-operated vocational school services, the tuition and boarding fees from students are paid in advance at the beginning of each semester of an academic year and are initially recorded as contract liabilities. Tuition and boarding fees are recognized on a straight-line basis over the relevant period of the applicable program. The portion of tuition payments received from students but not earned is recorded as contract liabilities and is reflected as a current liability as such amounts represent revenue that we expect to earn within one year. The academic year of our schools is generally from September to June of the following year and has two semesters.
For curriculum co-development projects services, we agree the price with the curriculum or subordinate schools upfront and recognizes the service fee received or receivable as its revenue on a straight-line basis over the relevant period of the applicable program based on pre-agreed fixed unit rate per student for services provided in the whole period.
For vocational training services, we recognize the training fee received or receivable as its revenue on a straight-line basis over the training period as the customers simultaneously receives and consumes the benefits provided by us.
For connotation construction services, revenue is recognized at the point in time when control of the asset is transferred to the customer, generally on acceptance by the customer.
(b) HR recruitment services
We provide HR recruitment services regarding blue-collar talent to customers, and revenue is recognized at the point in time when the services are rendered and accepted by the customers.
(c) Employee management services
We provide employee management services mainly including labor outsourcing services and labor dispatch services and others.
For labor outsourcing services, we charged service fees in respect of the labor outsourcing services on a lump sum basis. We act as principal and are primarily responsible for providing the labor outsourcing services to customers. We recognize the fee received or receivable from customers as its revenue and all related labor outsourcing services costs as its cost of services. We recognize the labor outsourcing services fee received or receivable as our revenue over time in the period in which the customer simultaneously receives and consumes the benefits provided by us.
For labor dispatch services, we act as a dispatching agent and is mainly responsible for administrative work, which is considered as one performance obligation, and the we do not control employee's labor services; therefore, our labor dispatch revenue is recorded on a net basis over time in the period in which the customer simultaneously receives and consumes the benefits provided by the administration work performed by us, while the labor costs paid to the employees are recorded to net off revenue.
Our other revenue includes income from the provision of HR agency services, which is recognized when the services are rendered and accepted by the customers.
(d) Market services
We provide market services mainly including sale of retail goods to end customers via online retail platform and provision of value-added services to students of vocational schools, such as shopping, catering and dormitory management services.
For market services, revenue is recognized at the point in time when the services are rendered and accepted by the customers.
Newly adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of our portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In November 2019, the FASB issued ASU 2019-10, which extends the adoption date for certain registrants. The amendments in ASU 2016-13 are effective for fiscal years beginning after December 15, 2022, including interim periods within fiscal years beginning after December 15, 2023. In February 2020 the FASB issued ASU 2020-02 which updated SEC Staff Accounting Bulletin No. 119 providing interpretive guidance on methodology and supporting documentation for measuring credit losses. The Group adopted the ASU on January 1, 2022, which did not have a material impact on the consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06")-Simplifying the accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. We adopted ASU on January 1, 2022, which did not have a material impact on the consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted. The ASU is effective for us on July 1, 2023 and the Group does not expect a significant impact to the consolidated financial statements upon adoption. However, the ultimate impact is dependent upon the size and frequency of future acquisitions.
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280)". The amendment in this Update is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments also require a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for us on December 15, 2023 and we are in the process determine the impact of the adoption of this standard on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". The Update requires that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate). The ASU is effective for public business entities for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. The Group is in the process determine the impact of the adoption of this standard on its consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (collectively with subsequent amendments in ASU 2025-01, "ASU 2024-03"). This ASU requires new financial statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. ASU 2024-03 will be effective for the Company beginning December 15, 2026. Early adoption is permitted. We are currently evaluating the impact of adopting the standard.
Disclaimer
Youlife Group Inc. published this content on April 30, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2026 at 22:31 UTC.