Jianzhi Education Technology Group Company Limited Reports Fiscal Year 2022 Financial Results

BEIJING, Sept. 29, 2023 (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 2022.

Yong Hu, CEO of the Company commented: “In the fiscal year 2022, we remained committed to meeting China’s demand for high-quality vocational training resources and solidified our position as a leading digital educational content provider in the country. During the year ending December 31, 2022, our company achieved a revenue growth of about 6.9%, reaching approximately RMB505.7 million, compared to about RMB473.2 million in 2021. This growth was primarily driven by a significant increase in revenue from IT related solutions and services, which saw a substantial increase of RMB192.6 million ($US27.9 million), representing a growth rate of 178.1%.”

“Though our general and administrative expenses significantly increased in the past year, affecting our overall profitability to some extent, it is important to note that these expenses were primarily due to non-cash factors, including increased impairment expenses related to licensing copyrights and goodwill, as well as changes in provisions for doubtful accounts, mainly due to payment delays from educational content customers caused by the impact of COVID-19. We expect these factors that led to the increase to cease as we consolidate our market leadership and expand content promotion and distribution with our partners, thereby not affecting the company’s overall performance in the future.”

“With our expertise in vocational education and strong content development capabilities, we continued to build a comprehensive digital education content database in 2022. Our library comprises over 39,000 online videos and video courses, totaling approximately 10,080 hours, with over 75.8% of the content being self-developed. Our content covers a wide range of professional development topics, including employability skills, entrepreneurship guidance, professional skill training, skill enhancement, and professional certification exams, to meet the growing demand for online educational content.”

“In 2022, we continued to strengthen our collaboration with telecom operators. For example, the monthly subscription purchase volume via telecom operators of our own mobile video package product ‘Fish Learning launched the fourth quarter of 2017 reached approximately 31.4 million by December 31, 2022, and total monthly subscription purchases were approximately 2.8 million for the years ended December 31, 2022. We expect to continue leveraging the telecom operator’s platform to promote our content and provide subscription services through our ‘Fish Learning’ mobile application. We also collaborated with another telecom operator in China to offer educational content redemption services for their mobile users. Approximately 3.4 million times course redemptions were made in fiscal year 2022. This arrangement generated revenue for us through point rewards paid by the telecom operator’s subsidiary.”

“By December 31, 2022, we received over 5.9 million monthly subscriptions from our Light Class mobile video package product which we launched with telecom operator partner since in 2019, more than 570 quarterly subscriptions, and around 0.2 million annual subscriptions obtained from WeChat users and through the partnership.”

“In addition, we also collaborate with third-party content providers to supplement our own content database. These agreements allow us to use their educational videos and we aim to expand such partnerships.”

“Looking forward we are encouraged by our revenue growth and remain focused on optimizing our operations, improving the quality of our educational content, and exploring opportunities for further growth in the IT related solution services sector. We will keep committed to enhancing our performance and delivering value to our stakeholders.”

Fiscal Year 2022 Financial Results:

The following table sets forth a summary of our (including the VIEs’) consolidated results of operations for the years indicated, both in absolute amounts and as percentages of total income from us and the VIEs.

    For the Years Ended December 31,
    2021     2022    
    RMB   RMB % Change
 (in RMB million, except earnings per share; differences due to rounding)          
Net revenues   473.25     505.72   6.86 %
Gross profit (loss)   104.20     (5.54 (105.32 %)
Gross (loss) margin    22.02 %   (1.1 %)  N/A  
Income (loss) from operations   50.79     (207.45 ) (508.45 %)
Net income (loss)   52.93     (196.58 ) (471.40 %)
Earnings (loss) per share – basic and diluted   0.43     (1.68 ) (490.70 %)

Net Revenues

Net revenue increased by 6.9% from RMB473.2 million for the year ended December 31, 2021 to RMB505.7 million (US$73.3 million) for the year ended December 31, 2022. This increase was primarily driven by the net effects of an increase of RMB192.6 million (US$27.9 million) in revenue generated from IT related solution services, partially net off by a decrease of RMB160.2 million (US$23.2 million) in net revenues from the provision of educational content services and other services.

  • Net revenue from the educational content service and other services decreased by RMB160.2 million (US$23.2 million) from RMB365.1 million for the year ended December 31, 2021 to RMB204.9 million (US$29.7 million) for the year ended December 31, 2022. Because there is constant need for updating and developing educational content, the Company faced the risk of content becoming outdated before generating profits. Therefore In 2022, Jianzhi adopted conservative strategies, resulting in a significant decline in revenues and lost subscriptions. The decrease was primarily due to the absence of new courses and attractive content, leading to decreased subscriptions from end customers.
  • Net revenue from IT related solution services increased by RMB192.6 million (US$27.9 million), or 178.1% from RMB108.2 million for the year ended December 31, 2021 to RMB300.8 million (US$43.6 million) for the year ended December 31, 2022. The increase was primarily attributable to acquisition of a cloud-based customer in the year of 2022 which contributed revenues of RMB 197.5 million (US$28.6 million) in IT procurement and assembling of equipment.

Cost of Revenues

Cost of revenue increased by 38.5% from RMB369.1 million for the year ended December 31, 2021 to RMB511.3million (US$74.1 million) for the year ended December 31, 2022. The increase of cost of revenues was primarily in line with the increase of revenues in IT related solution services. Compared with the revenue growth, the higher percentage of increase in cost of revenues was mainly attributable to the high equipment purchase cost we incurred for IT procurement and assembling projects during the year ended December 31, 2022.

Gross profit (loss
)

Due to the aforementioned factors, gross profit declined from RMB104.2 million in 2021 to a gross loss of RMB5.5 million (US$0.8 million) in 2022. The decrease was mainly due to the decrease in the gross profits margin for IT related solution services for the year ended December 31, 2022, because we completed procurement and assembling equipment projects with contract value of RMB10.8 million (US$1.7 million) for the new customer, in which we incurred significant equipment purchasing cost, resulting in relatively lower gross profit margin.

Operating Expenses

Total operating expenses rose from RMB53.4 million in 2021 to RMB202.6million (US$29.4 million) in 2022.

  • Sales and marketing expenses decreased from RMB7.6 million in 2021 to RMB7.1 million (US$1.0 million) in 2022. This decrease was mainly driven by a decrease of RMB1.3 million (US$0.2 million) in salary and welfare expenses because we laid off certain salespersons and reduced marketing and promotion for educational content services, and there was a decrease of $0.7 million in travel and entertainment expenses as a result of decrease in salespersons, partially net off by an increase of RMB1.3 million (US$0.2 million) in the service fee which were used in tendering for IT solution service customers.
  • General and administrative expenses increased from RMB19.5 million in 2021 to RMB179.2 million (US$26.0 million) in 2022. This increase was caused by several factors, including an impairment of licensed copyrights due to outdated educational content, impairments of goodwill and customer relationships related to an acquisition, and changes in allowance of doubtful accounts due to delayed payments from educational content customers affected by COVID-19.
  • Research and development expenses decreased from RMB26.4 million in 2021 to RMB15.6 million (US$2.3 million) in 2022. This decrease was primarily due to reductions in salary and welfare expenses and outsourced labor costs as the VIEs reduced expenditures on the development of new educational content.

Income Tax Expenses

Income tax expenses changed from RMB4.3 million for the year ended December 31, 2021 to income tax benefits of RMB11.0 million (US$1.6 million) for the year ended December 31, 2022, because the Company incurred net operating losses during the year ended December 31, 2022 which could be carried forward for the next five years.

Net Income (Loss)
As a result of the foregoing, the Company reported net loss of RMB196.6 million (US$28.5 million) for the year ended December 31, 2022 compared to net income of RMB52.9 million for the year ended December 31, 2021.

Recent Development

On November 28, 2022, the Company announced its subsidiary Shanghai Ang’you Internet Technology Co., Ltd. has entered into strategic cooperation agreement with Jinqiao Management Bureau of Shanghai Pilot Free Trade Zone on its vocational training online platform.

On November 14, 2022, the Company announced it entered into a “Ten Schools and 100 Enterprises Action Plan” strategic cooperation agreement with Modern Industry-Education Integration Promotion Center of Shanghai Pudong New Area (the “Center”), to jointly develop initiatives to strengthen collaboration between local governments, schools and enterprises in order to cultivate cross-border e-commerce talents and create a platform ecosystem for modern vocational education (the “Cooperation”).

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 embed 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 (the “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
WFS Investor Relations Inc.
Phone: +86 13811768559
+1 628 283 9214
Email: [email protected]

JIANZHI EDUCATION TECHNOLOGY GROUP COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS

(Amounts in Renminbi (“RMB”) and U.S. dollars (“US$”),

except for number of shares and per share data)

    December 31,

2021
    December 31,

2022
    December 31,

2022
 
    RMB     RMB     US$  
Assets                  
Current assets:                  
Cash and cash equivalents     61,266,782       65,055,278       9,432,129  
Accounts receivable, net     104,775,266       17,173,021       2,489,854  
Inventories     1,960,277       399,439       57,913  
Deferred offering expenses     8,494,583              
Due from a related party     2,473,750       1,051,869       152,507  
Short-term prepayments     288,101,452       254,493,399       36,898,074  
Short-term investments     11,430,000       4,080,000       591,544  
Prepaid expenses and other current assets     5,123,221       9,518,326       1,380,029  
Total current assets     483,625,331       351,771,332       51,002,050  
                         
Non-current assets:                        
Right-of-use assets, net     300,024              
Deferred tax assets, net     388,321       9,176,875       1,330,522  
Property and equipment, net     214,717       153,880       22,310  
Educational contents, net     206,695,356       214,441,814       31,091,140  
Intangible assets, net     17,187,208              
Goodwill     7,712,011              
Long-term prepayments     143,494,187       151,779,105       22,005,902  
Total non-current assets     375,991,824       375,551,674       54,449,874  
Total assets     859,617,155       727,323,006       105,451,924  
                         
Liabilities                        
Current liabilities:                        
Accounts payable     24,286,309       8,037,004       1,165,256  
Contract liabilities     327,299,227       290,028,010       42,050,109  
Salary and welfare payable     3,411,486       2,302,646       333,852  
Income taxes payable     3,743,247       1,170,795       169,749  
Value added tax (“VAT”) and other tax payable     2,669,408       4,063,389       589,136  
Other payables     5,276,472       2,658,243       385,409  
Lease liabilities, current     295,367              
Amount due to related parties     71,707,642       52,711,457       7,642,443  
Total current liabilities     438,689,158       360,971,544       52,335,954  
                         
Non-current liabilities:                        
Deferred tax liabilities     2,191,500              
Total non-current liabilities     2,191,500              
Total liabilities     440,880,658       360,971,544       52,335,954  

    December 31,

2021
    December 31,

2022
    December 31,

2022
 
    RMB     RMB     US$  
Commitments and contingencies                  
                   
Mezzanine equity:                  
Redeemable ordinary shares (US$0.0001 par value; 11,110,000 and nil shares issued and outstanding as of December 31, 2021 and 2022, respectively)*     45,984,876              
                         
Shareholders’ equity                        
Ordinary shares (US$0.0001 par value; 500,000,000 shares authorized, 100,000,000 shares and 121,110,000 issued and outstanding as of December 31, 2021 and 2022)*     63,291       77,747       12,111  
Additional paid-in capital     54,045,908       242,093,942       35,099,483  
Statutory reserves     23,599,304       23,599,304       3,421,577  
Retained earnings     280,983,836       81,822,029       11,863,081  
Accumulated other comprehensive income     400,233       2,520,630       365,457  
Total Jianzhi Education Technology Group Company Limited’s shareholders’ equity     359,092,572       350,113,652       50,761,709  
Noncontrolling interests     13,659,049       16,237,810       2,354,261  
Total shareholders’ equity     372,751,621       366,351,462       53,115,970  
Total liabilities, mezzanine equity and shareholders’ equity     859,617,155       727,323,006       105,451,924  

JIANZHI EDUCATION TECHNOLOGY GROUP COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Amounts in Renminbi (“RMB”) and U.S. dollars (“US$”),

except for number of shares and per share data)

    For the Years Ended December 31,  
    2020     2021     2022     2022  
    RMB     RMB     RMB     US$  
Net revenues     404,931,954       473,247,283       505,724,311       73,323,133  
Cost of revenues     (275,790,112 )     (369,052,134 )     (511,265,334 )     (74,126,506 )
Gross profit (loss)     129,141,842       104,195,149       (5,541,023 )     (803,373 )
                                 
Operating expenses:                                
Sales and marketing expenses     5,031,526       7,576,963       7,087,625       1,027,609  
General and administrative expenses     26,054,063       19,476,375       179,249,830       25,988,783  
Research and development expenses     15,584,738       26,355,055       15,568,768       2,257,259  
Total operating expenses     46,670,327       53,408,393       201,906,223       29,273,651  
Income (loss) from operations     82,471,515       50,786,756       (207,447,246 )     (30,077,024 )
                                 
Other income (expenses):                                
Investment income     407,827       569,737       603,058       87,435  
Interest income (expenses), net     53,596       (892,906 )     (2,088,467 )     (302,799 )
Other expenses     (19,614 )     (12,563 )     (286,522 )     (41,539 )
Government grants     4,482,816       6,753,388       1,656,077       240,109  
Total other income, net     4,924,625       6,417,656       (115,854 )     (16,794 )
                                 
Income (loss) before income tax     87,396,140       57,204,412       (207,563,100 )     (30,093,818 )
                                 
Income tax (expense) benefits     (485,749 )     (4,273,788 )     10,980,054       1,591,958  
Net income (loss)     86,910,391       52,930,624       (196,583,046 )     (28,501,860 )
Net income attributable to noncontrolling interests     4,586,492       4,672,355       2,578,761       373,885  
Net income (loss) attributable to the Jianzhi Education Technology Group Company Limited’s shareholders     82,323,899       48,258,269       (199,161,807 )     (28,875,745 )
                                 
Net income (loss)     86,910,391       52,930,624       (196,583,046 )     (28,501,860 )
Other comprehensive (loss) income:                                
Foreign currency translation adjustments     (35,391 )     211,494       2,120,397       307,429  
Total other comprehensive (loss) income     (35,391 )     211,494       2,120,397       307,429  
Total comprehensive income (loss)     86,875,000       53,142,118       (194,462,649 )     (28,194,431 )
Net comprehensive income attributable to noncontrolling interests     4,586,492       4,672,355       2,578,761       373,885  
Comprehensive income (loss) attributable to the Jianzhi Education Technology Group Company Limited’s shareholders     82,288,508       48,469,763       (197,041,410 )     (28,568,316 )
                                 
Earnings (loss) per share                                
Basic and diluted*     0.74       0.43       (1.68 )     (0.24 )
                                 
Weighted average number of shares                                
Basic and diluted*     111,110,000       111,110,000       118,512,959       118,512,959  

JIANZHI EDUCATION TECHNOLOGY GROUP COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Renminbi (“RMB”) and U.S. dollars (“US$”)

    For the Years Ended December 31,  
    2020     2021     2022     2022  
    RMB     RMB     RMB     US$  
Cash flows from operating activities:                        
Net income (loss)     86,910,391       52,930,624       (196,583,046 )     (28,501,860 )
Adjustments to reconcile net income to net cash provided by operating activities:                                
Depreciation of property and equipment     538,303       78,000       60,837       8,821  
Amortization of educational contents     24,375,147       45,296,565       91,542,454       13,272,408  
Impairment of educational contents                     106,182,780       15,395,056  
Amortization of intangible assets     7,805,096       6,656,298       16,840,435       2,441,634  
Impairment of intangible assets                     12,139,226       1,760,022  
Impairment of goodwill                     7,712,011       1,118,136  
Amortization of operating lease right-of-use assets     3,592,290       2,362,967       300,024       43,499  
Provision (Reversal of provision) for doubtful accounts     210,433       (119,539 )     34,901,498       5,060,242  
Deferred tax benefit     (45,415 )     (649,078 )     (10,980,054 )     (1,591,958 )
Changes in operating assets and liabilities:                                
Accounts receivable     (31,439,946 )     10,148,705       52,700,747       7,640,890  
Inventories     1,877,720       15,655       1,560,838       226,300  
Prepaid expenses and other current assets     357,319       (2,197,407 )     3,127,291       453,415  
Short-term prepayments     12,940,022       (285,437,271 )     33,608,121       4,872,720  
Accounts payable     7,921,537       1,059,057       (16,249,305 )     (2,355,928 )
Salary and welfare payable     415,648       9,831       (1,108,840 )     (160,767 )
Contract liabilities     (9,365,507 )     319,904,579       (37,271,217 )     (5,403,819 )
Income taxes payable     (903,026 )     2,822,268       (2,572,452 )     (372,970 )
Value added tax (“VAT”) and other tax payable     (4,325,138 )     (1,122,235 )     1,393,981       202,108  
Other payables     455,342       (1,964,796 )     (2,787,853 )     (404,202 )
Lease liabilities     (3,566,734 )     (2,020,636 )     (295,367 )     (42,824 )
Net cash provided by operating activities     97,753,482       147,773,587       94,222,109       13,660,923  
                                 
Cash flows from investing activities:                                
Purchase of short-term investments     (140,145,000 )     (24,405,127 )     (3,850,000 )     (558,198 )
Proceeds from redemption of short-term investment     90,305,000       83,655,127       11,200,000       1,623,847  
Purchase of property and equipment     (39,980 )     (76,280 )            
Purchase of educational contents     (98,899,372 )     (64,811,320 )     (176,597,637 )     (25,604,251 )
Purchase of intangible assets     (3,669,811 )                  
Prepayment for educational contents     (12,407,962 )     (139,002,868 )     (46,223,984 )     (6,701,848 )
Lonas made to a third party                 (3,015,018 )     (437,137 )
Net cash used in investing activities     (164,857,125 )     (144,640,468 )     (218,486,639 )     (31,677,587 )
                                 
Cash flows from financing activities:                                
Repayment to related parties     (26,697 )           (17,064,116 )     (2,474,064 )
Borrowing from related parties     75,604       48,808,057              
Net proceeds raised in connection with initial public offering                 146,982,044       21,310,393  
Payments of issuance cost in relation with initial public offering           (8,621,261 )     (481,408 )     (69,798 )
Advance to a related party for issuance costs in relation with initial public offering           (2,512,809 )            
Refund from a related party for issuance costs in relation with initial public offering                 1,421,881       206,153  
Deposits made to a redeemable ordinary shareholder                 (4,296,606 )     (622,949 )
Net cash provided by financing activities     48,907       37,673,987       126,561,795       18,349,735  
                                 
Effect of exchange rate changes on cash and cash equivalents and restricted cash held in foreign currencies     (264,826 )     (489,011 )     1,491,231       216,210  
                                 
Net increase (decrease) in cash and cash equivalents and restricted cash     (67,319,562 )     40,318,095       3,788,496       549,281  
Cash and cash equivalents and restricted cash at beginning of the year     88,268,249       20,948,687       61,266,782       8,882,848  
Cash and cash equivalents and restricted cash at end of the year     20,948,687       61,266,782       65,055,278       9,432,129  
                                 
Supplemental disclosures of cash flows information:                                
Cash paid for income taxes     1,436,662       2,617,807       1,177,693       170,749  
Cash paid for interest expenses                        
                                 
Non-cash Investing and Financing activities:                                
Transfer of prepaid issuance cost to additional paid-in capital                 8,943,892       1,296,742