Ucommune International Ltd. - Successful Asset-Light Business Transformation Amplified By New SaaS Market Opportunities

Rhea-AI Summary

Ucommune (Nasdaq: UK) reported its Q4 2020 earnings, showcasing a transition towards an asset-light model. This strategy increased operational efficiency, narrowing net loss by 36.8% to RMB149.1 million, and achieving a 51% reduction in GAAP EBITDA loss. Despite a year-over-year revenue decrease of 4.8% to RMB278.7 million, demand for flexible workspaces is rising, and Ucommune plans to harness SaaS solutions for growth. Cash reserves rose 104.2% to RMB400.8 million, bolstered by recent financing. They project Q1 2021 revenues between RMB180 million and RMB210 million.

Positive

• Net loss narrowed by 36.8% year-over-year to RMB149.1 million.
• GAAP EBITDA loss decreased by 51.0% year-over-year to RMB94.8 million.
• Cash reserves increased by 104.2% year-over-year to RMB400.8 million.
• Adoption of asset-light model led to a 166% increase in managed spaces.
• Established SaaS solutions are driving new revenue streams and market opportunities.

Negative

• Total revenues decreased by 4.8% year-over-year, primarily due to declines in Workspace Membership Services and Marketing Services.

NEW YORK, April 20, 2021 /PRNewswire/ -- Ucommune (Nasdaq: UK) released its quarterly earnings ended Dec. 31, 2020 on April 15, 2021.

The company's shifting its workspace management strategy from a self-managed approach to an asset-light management approach had resulted in improved financial performance in the fourth quarter. As of Dec. 31, 2020, 54.3% of the Company's total managed area was under the asset-light model. With greater operational efficiency under this business model, Ucommune was able to expand its managed areas/spaces more rapidly while narrowing its financial loss significantly, and has now established itself in the urban development efforts of local municipalities, able to quickly attain management contracts with many metropolitan landmark buildings across the country.

Utilizing the proprietary SaaS technology from its subsidiary Xiyu Information, the Company has built a fixed asset management system ("DOMES") to provide big data and other smart services for office buildings and industrial parks. 

Ucommune management believes that the Company's business roadmap is well aligned with the rising demand for more flexible, scalable, and efficient workspace solutions, triggered by government's restrictions on commercial property development and wind-down urbanization. With operational flexibility supported by asset-light business model and new market opportunities, the management remains confident that the Company is on the path to profitability over the foreseeable future.

Fourth Quarter of 2020 Financial Highlights 

Net revenues were RMB278.7 million in 4Q-2020, representing an increase of 39.4% from the previous quarter and a decrease of 4.8% from a year ago. Among which, revenues from Workspace Membership Services decreased by 44.5% year-over-year due to the closure of spaces during COVID-19 outbreak, revenues from Marketing and Branding Services decreased by 16.2% year-over-year, while Other Services revenues increased by 297.3% year-over-year, mainly driven by increased revenues from its SaaS services.

GAAP EBITDA loss narrowed by 51.0% year-over-year to RMB94.8 million, while adjusted EBITDA loss narrowed by 91.4% year-over-year to RMB9.4 million in the fourth quarter of 2020.

Net loss narrowed by 36.8% year-over-year to RMB149.1 million in the fourth quarter of 2020, while adjusted net income was RMB62.8 million compared to an adjusted net loss of RMB194.6 million in the previous year.

Basic and fully-diluted net loss per share were both RMB2.23 in the fourth quarter of 2020, narrowed by 53.3% from RMB4.78 in 4Q-2019. Basic and fully-diluted adjusted net income per share were both RMB1.02 in the fourth quarter of 2020, compared to RMB3.95 in the fourth quarter of 2019.

Cash, cash equivalents and restricted cash were RMB400.8 million as of December 31, 2020, representing a year-over-year increase of 104.2% from RMB196.3 million as of December 31, 2019, primarily due to the PIPE financing in connection with the Company's business combination, consummated on November 17, 2020.

Fourth Quarter of 2020 Operating Highlights

As of December 31, 2020, Ucommune had committed to 234 office spaces in 54 cities, up from 222 office spaces in 51 cities as of September 30, 2020. Among which, 163 spaces were in operation and provided approximately 647,700 square meters of managed area to 1,044,700 members, up from 158 spaces serving 860,400 members as of the end of third quarter of 2020.

Under Ucommune's asset-light model, the Company's total number of spaces under contract increased by 166% to 125 across 46 cities as of December 31, 2020, up from 47 across 25 cities as of December 31, 2019.  Ucommune's total managed area under contract increased by 105.3% to 351,500 square meters from 171,200 square meters as of December 31, 2019.

Recent Corporate Development

Ucommune concluded its public offering of Class A ordinary shares and warrants on February 2, 2021, with gross proceeds of approximately $20 million.

Ucommune's modern technical solutions for office space management has broadened the Company's business horizon into new market opportunities. Building on the foundation of the Company's asset-light model, Ucommune has expanded its service offerings to include corporate office space brokerage in 1Q-2021. By connecting various stakeholders within the office space brokerage ecosystem, including commercial landlords, enterprise tenants, brokerage firms, and independent brokers, Ucommune has constructed a one-stop platform providing end-to-end services throughout the entire office leasing process.

Recognizing the growing brand influence of Xiyu Information, the Company increased its Xiyu ownership to 53.2% from 51% in January 2021.

Business Outlook

For the first quarter of 2021, management expects the company's revenue to range between RMB180 million to RMB210 million.

The management also expects that revenue contribution from the Company's SaaS services to increase in 2021.  Going forward, Ucommune will continue its asset-light business transformation to enhance operational efficiency, and continue cultivating healthy business expansion through the development of a comprehensive platform offering value-add services to its members and partners.

DISCLOSURES AND DISCLAIMERS

Stone Street Group LLC ("Stone Street") publishes research reports on publicly-traded companies. Stone Street has been retained by the Company discussed in this report (the "Company") to provide ongoing digital investor relations services, including the creation and dissemination of this report. All research published by Stone Street is based on public information, or on information from the Company that the Company is required to promptly make public.

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NO GUARANTEE:  This research report is not a substitute for the exercise of an investor's independent due diligence and independent investment determinations. Information contained herein is based on sources we believe to be reliable but we do not guarantee their accuracy. It should be presumed that the analyst who authored this report has had discussions with the Company to endeavor to ensure factual accuracy prior to publication, however, no independent due diligence or verification has been undertaken by the analyst.  No endorsements are made in respect of information provided or published by the subject Company and relied upon by the analyst for purposes of this research report. Recipients of this report should consider this report as only one factor in making any investment decision. This report is for information purposes only and is not intended as an offer to sell or a solicitation to buy securities.  Any and all information provided by the Company which has been publicly disclosed as "forward looking information" remains subject to all uncertainties in such regard and Stone Street makes no assurances or guaranties of actual outcomes. 

NO CONFLICTS OF INTEREST:  Stone Street does NOT own securities of the issuers described herein, and Stone Street does not make a market in any securities. Stone Street does not engage in, or receive compensation from, any investment banking or corporate finance-related activities with the Company discussed in the report. Stone Street's contracts with issuers protect Stone Street's full editorial control of all research, timing of release of reports, and release from liability for negative reports.

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RISK FACTORS:  Earnings targets and opinions concerning the composition of market sectors included in this report reflect analyst judgments as of this date and are subject to change without notice. A risk to our earnings targets is that the analyst's estimates or forecasts may not be met. This report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from such forward-looking statements. Factors that may cause such differences include, but are not limited to, those discussed in the "Risk Factors" section in the issuer's SEC filings available in electronic format through SEC Edgar filings at www.sec.gov.

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ANALYST CERTIFICATION:  The research analyst certifies that this report accurately reflects his/her personal views about the Company's securities that none of the research analyst's compensation was, is or will be, directly or indirectly, related to the analyst's specific recommendations or views contained in this research report.

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SOURCE Ucommune International Ltd.

FAQ

What were Ucommune's earnings for Q4 2020?

Ucommune reported Q4 2020 revenues of RMB278.7 million, a 4.8% decrease from the previous year.

How did Ucommune's net loss change in Q4 2020?

The net loss for Q4 2020 was RMB149.1 million, a 36.8% reduction year-over-year.

What financial model is Ucommune adopting?

Ucommune is shifting to an asset-light management approach to enhance operational efficiency.

What is Ucommune's revenue outlook for Q1 2021?

Ucommune expects revenues between RMB180 million and RMB210 million for Q1 2021.

How has Ucommune's cash position changed?

Ucommune's cash and equivalents grew by 104.2% year-over-year to RMB400.8 million as of December 31, 2020.