Jianzhi Education Technology Group Company Limited Reports Fiscal Year 2023 Financial Results
- Improved gross profit margin from negative 1.1% to 3.7% in 2023.
- Net revenue decreased by 12.9% to RMB440.5 million in 2023.
- Net loss increased to RMB382.8 million in 2023 compared to RMB196.6 million in 2022.
- Strategic shift towards IT system design services contributed to improved profitability.
- Plans for 2024 include expanding operations in 5G messaging, digital solutions, and education industry partnerships.
- Significant decrease in revenue from educational content services.
- Impairment of assets led to a negative impact on profitability.
- Operating expenses increased to RMB399.0 million in 2023.
- Net loss almost doubled in 2023 compared to 2022.
- Impairment of goodwill and other non-current assets affected financial performance.
Insights
Reviewing Jianzhi Education Technology Group's financial results reveals a company navigating through a turbulent period. The 12.9% decline in net revenues year-over-year signifies a contraction in their core business, particularly within educational content services. This contraction could raise concerns among investors regarding the company's ability to maintain market share and revenue streams in a competitive digital education sector. However, the shift towards IT-related solution services, which saw a 22.6% increase in net revenue, indicates a strategic pivot that may offer a new growth avenue. This diversification could be perceived positively if the market views it as a sustainable and profitable segment.
Notably, there was a significant improvement in gross profit, turning a gross loss into a profit year-over-year. This suggests that Jianzhi's cost optimization strategies, possibly through reduced investment in less profitable segments and a focus on higher-margin IT services, are bearing fruit. However, the stark 94.7% increase in net loss is alarming and could overshadow the gross profit achievement, pointing to substantial operational challenges. The losses were compounded by asset impairments, which while described as non-recurring, may still prompt investors to scrutinize the company's asset management and future risk of similar write-downs.
Furthermore, the ADS Ratio Change effectively functions as a reverse stock split, which companies often use to shore up stock prices and maintain compliance with exchange listing requirements. This may indicate underlying concerns about the company's valuation and could be a red flag for investors. Overall, while Jianzhi is taking steps to adapt to market conditions, the financial performance suggests a period of uncertainty and potential volatility for the company's stock.
The digital education industry in China is highly dynamic, influenced by government policies and technological advancements. Jianzhi's decision to reduce investment in educational content services is reflective of the broader industry trend where companies are seeking to align with national policies and new market demands post-Covid. The pivot towards customized IT system design and development services aligns with the growing digitalization of education and the workforce. The company's ability to secure new cloud-based customers and expand operations in areas such as 5G messaging and digital workforce solutions could position it well within the technology integration space.
However, the termination of the partnership with China Telecom and the subsequent revenue decline from mobile video packages signal potential challenges in the B2C segment. This may suggest difficulties in sustaining consumer-based revenue streams or adapting to changes in consumer preferences. The reported decline in subscriptions on the 'Fish Learning' platform further underscores the importance of continuously updating and improving content to retain and attract customers.
The company's strategic partnerships with telecom operators could be a critical move to leverage infrastructure and broaden its service offerings. As Jianzhi seeks to capitalize on emerging opportunities, its success will likely depend on its ability to execute its revised strategy effectively and differentiate itself in a crowded market. Stakeholders should monitor the company's progress in enhancing its IT solutions portfolio and its impact on revenue diversification and long-term profitability.
BEIJING, April 09, 2024 (GLOBE NEWSWIRE) -- Jianzhi Education Technology Group Company Limited (the “Company” or “Jianzhi”) (NASDAQ: JZ), a leading provider of digital educational content in China, today announced its financial results for fiscal year ended December 31, 2023.
- Net revenues were 440.5 million (US
$62.0 million ) for fiscal year 2023, compared to RMB505.7 million during the same period in 2022. - Gross profit was RMB16.2 million (US
$2.3 million ) for fiscal year 2023, and a gross loss of RMB5.5 million for the same period in 2022. - Net loss for 2023 was RMB382.8 million (US
$53.9 million ), compared to net loss of RMB196.6 million during the same period in 2022.
The following table sets forth a summary of the consolidated results of operations for the years indicated:
| For the Years Ended December 31, | |||||||||
| 2022 | 2023 | ||||||||
| RMB | RMB | US$ | % Change | ||||||
| (in million, except for percentages) | |||||||||
| Net revenues | 505.7 | 440.5 | 62.0 | ( | |||||
| Gross (loss) profit | (5.5 | ) | 16.2 | 2.3 | |||||
| Loss from operations | (207.4 | ) | (382.8 | ) | (53.9 | ) | |||
| Net loss | (196.6 | ) | (382.8 | ) | (53.9 | ) | |||
Mr. Yong Hu, CEO of the Company, commented: “In 2023, the Company faced a challenging year marked by policy headwinds and the evolving landscape of the vocational education industry following the Covid pandemic. To effectively respond to these changes, the Company proactively adjusted its strategy. It pursued a two-pronged approach by reducing investment in the educational content services segment while cementing efforts to expand its highly profitable customized IT system design and development services.”
“As a result of these strategic actions, the Company recorded a top line of RMB440.5 million, with a gross profit of RMB16.2 million for the fiscal year 2023. This represents a significant improvement compared to the previous year’s corresponding period, which recorded a gross loss of RMB5.5 million. It is important to note that the Company’s overall profitability was temporarily affected by the impairment of assets resulting from the reduced procurement of courses and subscriptions to course content in the educational content services division. However, it is our firm belief that this impairment of customized courseware assets is non-recurring and we anticipate this will not have a sustained impact on the Company’s future profitability.”
“Looking ahead to 2024, the Company has undertaken a comprehensive reassessment of its business strategy with the primary objective of restoring and enhancing its profitability. To achieve this, the Company will vigorously expand its operations in critical business areas that align with national policies, such as 5G messaging, digital workforce solutions, and the education industry. Furthermore, the Company will establish strategic partnerships with telecom operators in China, across multiple provinces to facilitate the successful implementation of these strategic plans.”
“In addition to these initiatives, the Company remains dedicated to collaborating with vocational institutions to design and develop cutting-edge courses. Through comprehensive teaching and training, our ultimate goal is to provide students with a distinguished 1+X certification. Here, the ‘1’ signifies specialized proficiency in a specific field or industry, while ‘X’ represents a series of certificates within the same professional domain.”
Fiscal Year 2023 Financial Results:
Net revenues
For the year ended December 31, 2023, our revenue decreased by
- Educational content service and other services. Net revenue from the educational content service and other services decreased by RMB133.2 million (US
$18.8 million ) to RMB71.7 million (US$10.1 million ) for the year ended December 31, 2023, from RMB204.9 million for the year ended December 31, 2022.- The decrease was primarily due to: (i) a decrease of RMB112.3 million (US
$15.8 million ), or100% in revenue from offering selected mobile video package to end mobile users under a B2C model through our cooperation with a subsidiary of China Telecom, primarily because the Company terminated corporation with China Telecom, and (ii) a decrease of revenues by RMB23.3 million (US$3.3 million ) in “Fish Learning” platform. Such decrease in revenues were primarily because we did not provide new and attractive contents on the platform leading to decreased subscriptions form end customers.
- The decrease was primarily due to: (i) a decrease of RMB112.3 million (US
- IT related solution services. Net revenue from IT related solution services increased by RMB68.0 million (US
$9.6 million ), or22.6% to RMB368.8 million (US$51.9 million ) for the year ended December 31, 2023 from RMB300.8 million for the year ended December 31, 2022. The increase was primarily attributable to acquisition of new cloud-based customers in the year of 2023 in design and development of customized IT system.
The following table sets forth a breakdown of the revenue by business segments for the years indicated:
| 2022 | 2023 | ||||||
| RMB | RMB | US$ | |||||
| (in million) | |||||||
| Educational content service and other services | |||||||
| – Educational content service | |||||||
| – B2B2C | 51.5 | 28.6 | 4.0 | ||||
| – B2C | 149.7 | 4.5 | 0.6 | ||||
| – Other services | 3.7 | 38.7 | 5.4 | ||||
| Subtotal | 204.9 | 71.7 | 10.1 | ||||
| IT related solution services | |||||||
| – Design and development of customized IT system | 71.4 | 243.3 | 34.3 | ||||
| – Procurement and assembling of equipment | 228.4 | 125.4 | 17.7 | ||||
| – Technological support and maintenance | 1.0 | - | - | ||||
| Subtotal | 300.8 | 368.8 | 51.9 | ||||
| Total revenues | 505.7 | 440.5 | 62.0 | ||||
Cost of revenues
Cost of revenues decreased by
Compared with the decrease in revenues growth, the higher percentage of decrease in cost of revenues was mainly attributable to the higher gross profit we earned from IT solution services in the year of 2023 as compared with that in the year of 2022.
Gross profit
As a result of the foregoing, the Company reported a gross profit of RMB16.2 million (US
Operating expenses
The total operating expenses increased to RMB399.0 million (US
- Sales and Marketing Expenses: The sales and marketing expenses was RMB7.6 million (US
$1.1 million ) and RMB7.1 million for the fiscal years 2023 and 2022, respectively. This increase was mainly driven by an increase of RMB0.3 million in salary and welfare expenses because we incurred compensation expense, and an increase of$0.3 million in travel and entertainment expenses. - General and Administrative Expenses: The general and administrative expenses decreased to RMB22.2 million (US
$3.1 million ) for the fiscal year 2023 from RMB53.2 million for the fiscal year 2022. This decrease was primarily due to a decrease of RMB34.5 million in allowance of doubtful accounts from a provision of doubtful allowance of RMB36.0 million for the year of 2022 to a provision of RMB1.5 million for the same period of 2023, partially offset by an increase of RMB2.1 million in professional expenses associated with our IPO in August 2022. - Research and Development Expenses: The research and development expenses decreased to RMB11.8 million (US
$1.7 million ) for 2023 from RMB15.6 million for 2022. This decrease was mainly driven by a decrease of RMB3.2 million in outsourced labor costs, because the Company further reduced its expenditures on development of new educational contents. - Impairment of goodwill: The Company did not provide impairment of goodwill for the year ended December 31, 2023. It provided full impairment of RMB7.7 million against goodwill for the year ended December 31, 2022, which was caused by termination of business partnership with a major customer and it was assessed that the fair value of the reporting unit would exceed its carrying amount.
- Impairment of other non-current assets: For the year ended December 31, 2023 and 2022, the Company provided impairment of non-current assets, including long-term prepayment, educational contents and intangible assets. The details were as the following:
- Impairment of long-term prepayments: As of December 31, 2023, the Company reviewed the long-term prepayments for educational content. It expected that these educational contents would be outdated when they are delivered to the Company. The cash flows generated from subscription for these educational contents may not cover the purchase price. Accordingly, the Company charged impairment of RMB155.3 million (US
$21.9 million ) against long-term prepayments for the year ended December 31, 2023. - Impairment of intangible assets: For the year ended December 31, 2023 and 2022, the Company assessed that its current software and technology would not support newly purchased educational contents. The Company charged impairment of RMB4.6 million (US
$0.6 million ) and RMB12.1 million against software and technology, respectively. - Impairment of educational contents: For the year ended December 31, 2023 and 2022, because certain contents were obsolete, the Company assessed that it is not likely that end customers would subscribe for related educational contents. The Company charged impairment of RMB197.5 million (US
$27.8 million ) and RMB106.1 million against purchased educational contents, respectively.
- Impairment of long-term prepayments: As of December 31, 2023, the Company reviewed the long-term prepayments for educational content. It expected that these educational contents would be outdated when they are delivered to the Company. The cash flows generated from subscription for these educational contents may not cover the purchase price. Accordingly, the Company charged impairment of RMB155.3 million (US
Income Tax benefit (expenses)
The Company reported income tax expenses of RMB0.2 million for the year ended December 31, 2023, compared with income tax benefits of RMB11.0 million for the year ended December 31, 2022, this was because the Company utilized net operating loss carried forwards in the year of 2023.
Net loss
As a result of the foregoing, the Company reported net loss of RMB382.8 million (US
Recent Event:
On February 20, 2024, the Company changed the ratio of its American Depositary Shares (“ADSs”) from current one (1) ADS representing two (2) ordinary shares to one (1) ADS representing six (6) ordinary shares (the “ADS Ratio Change”). For Jianzhi’s ADS holders, the ADS Ratio Change had the same effect as a one-for-three reverse ADS split. Each ADS holder of record at the close of business on February 20, 2024 was to surrender and exchange every three (3) existing ADSs then held for one (1) new ADS.
About Jianzhi Education Technology Group Company Limited
Headquartered in Beijing and established in 2011, Jianzhi is a leading provider of digital educational content in China and has been committed to developing educational content to fulfill the massive demand for high-quality, professional development training resources in China. Jianzhi started operations by providing educational content products and IT services to higher education institutions. Jianzhi also provides products to individual customers. Leveraging its strong capabilities in developing proprietary professional development training content and success in consolidating educational content resources within the industry, Jianzhi has successfully built up a comprehensive, multi-dimensional digital educational content database which offers a wide range of professional development products. Jianzhi embeds proprietary digital education content into the self-developed online learning platforms, which are provided to a wide range of customers through its omni-channel sales system. Jianzhi is also fully committed to the digitalization and informatization of the education sector in China. For more information, please visit: www.jianzhi-jiaoyu.com.
Safe Harbor Statement
This press release contains statements that may constitute “forward-looking” statements pursuant to the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “aims,” “future,” “intends,” “plans,” “believes,” “estimates,” “likely to,” and similar statements. Statements that are not historical facts, including statements about the Company’s beliefs, plans, and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
For investor and media inquiries, please contact:
Janice Wang
Wealth Financial Services LLC
Phone: +86 13811768559
+1 628 283 9214
Email: services@wealthfsllc.com
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