Jianzhi Education(JZ) - 2022 Q4 - Annual Report

Financial Performance - Revenue increased from RMB 404.9 million in 2020 to RMB 505.7 million (US $73.3 million) in 2022, representing a growth of 24.8%[305] - Net income decreased from RMB 86.9 million in 2020 to a net loss of RMB 196.6 million (US$ 28.5 million) in 2022[305] - Total revenues for the years ended December 31, 2020, 2021, and 2022 were RMB 404.9 million, RMB 473.2 million, and RMB 505.7 million (US $73.3 million) respectively, representing a year-over-year growth of 6.9% from 2021 to 2022[464] - The company reported a net income of RMB52.9 million in 2021, which shifted to a net loss of RMB196.6 million in 2022[483] - Operating income decreased from RMB50.8 million in 2021 to a loss of RMB207.4 million in 2022[483] - The company experienced a gross profit of RMB104.2 million in 2021, which turned into a gross loss of RMB5.5 million in 2022[483] - Operating expenses for 2022 totaled RMB 201.9 million, which is 39.9% of net revenues, compared to 11.4% in 2020 and 11.3% in 2021, reflecting a significant rise in operational costs[472] - Total operating expenses increased significantly from RMB53.4 million in 2021 to RMB201.9 million in 2022, marking a rise of 276.5%[483] Revenue Breakdown - Revenue from IT-related solution services accounted for 59.4% of total revenue in 2022, up from 22.9% in 2021[303] - Revenue from educational content services accounted for 40.6% of total revenue in 2022, while IT-related solution services accounted for 59.4%[461] - Revenue from educational content services and other services for 2022 was RMB 204.9 million, a decrease of 44% compared to RMB 365.1 million in 2021[466] - Revenue from IT related solution services increased significantly to RMB 300.8 million in 2022, up from RMB 108.2 million in 2021, marking a growth of 177%[466] - The company's revenue from subscription services in 2022 was RMB 59.2 million, a decline from RMB 148.0 million in 2021, indicating a shift in revenue generation strategies[466] - The company’s revenue from licensing services was RMB 141.6 million in 2022, down from RMB 204.4 million in 2021, highlighting challenges in this segment[466] - Revenue from IT related solution services surged by RMB192.6 million (US$ 27.9 million), or 178.1%, from RMB108.2 million in 2021 to RMB300.8 million (US $43.6 million) in 2022[487] Educational Content and Services - As of December 31, 2022, the educational content library consisted of approximately 39,000 online videos totaling about 10,080 hours, with over 75.8% self-developed[295] - The VIEs provided online learning platform services to approximately 2,000 higher education institutions in China as of December 31, 2022[298] - The VIEs' information technology training database offers over 18,400 online courses, catering to various skill levels, and aims to meet employers' needs[316] - The VIEs have developed 181 proprietary software copyrights as of December 31, 2022, supporting their IT solution services[303] - The VIEs' entrepreneurship digital library provides comprehensive guidance services to college students, covering essential aspects of starting a business[311] - The VIEs' employment digital library conducts comprehensive analysis of recruitment data, providing unique insights into labor market demands and salary levels[317] - The VIEs maintained a team of 32 professionals specialized in educational content and software development as of December 31, 2022[339] Market Position and Strategy - The company became the largest online career training services provider for higher education institutions in China in 2022, with revenues of RMB29.0 million and a market share of 66.4%[441] - The online education market in China is projected to grow from approximately RMB328.2 billion in 2021 to RMB690.8 billion in 2026, representing a CAGR of 16.0%[447] - The company has established long-term strategic relationships with leading telecommunications operators to enhance its market position[442] - The VIEs launched 10 Light Class products through WeChat as of December 31, 2022, including various subscription options[301] - The VIEs have launched 10 products under the Light Class initiative, which includes various subscription options for video courses related to entrepreneurship and career development[326] Employee and Corporate Governance - As of December 31, 2022, the company and its VIEs had a total of 62 full-time employees, a decrease from 95 employees in 2021[356] - The employee distribution by function as of December 31, 2022, shows that 52% (32 employees) are in technology, products, research, and development, while management accounts for 11% (7 employees)[359] - The company actively participates in various employee social security plans, including pension and medical insurance, as required by PRC law[360] - The company has established various social and corporate governance initiatives to improve corporate governance and benefit society[362] - The company maintains a good working relationship with employees and has not experienced any material labor disputes in the past three years[361] Regulatory Environment - The company is subject to the Foreign Investment Law, which provides foreign investors with pre-entry national treatment and a negative list management system[382] - Foreign investment in value-added telecommunications services is restricted to a maximum of 50% ownership, except for e-commerce businesses which can be 100% foreign-owned[387] - The corporate income tax rate in China is uniformly set at 25%, with a reduced rate of 10% for non-resident enterprises without established premises in the PRC[397] - The VAT tax rates applicable to goods and services are simplified to 17%, 11%, 6%, and 0%, with small-scale taxpayers subject to a 3% rate[398] - The Negative List 2021 outlines areas where foreign investment is prohibited or allowed under specific conditions, effective from January 1, 2022[383] Challenges and Risks - The company's cost of revenues as a percentage of total revenue increased from 68.1% in 2020 to 101.0% in 2022[452] - The significant decrease in educational content revenue was attributed to conservative investment strategies and a decline in customer subscriptions[485] - Subscription revenue from B2C services fell by RMB101.2 million (US$ 14.7 million), or 73.0%, due to a lack of new content offerings[486] - The company confirmed that there were no disputes or unresolved tax issues with tax authorities for the three years ended December 31, 2022[463]