FEDU

Business Context and Reporting Period

Company: Four Seasons Education (Cayman) Inc. (NYSE: FEDU)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended February 28, 2026
Business Overview: The Company is a Cayman Islands holding company operating primarily in the People's Republic of China (PRC) through Variable Interest Entities (VIEs). Following regulatory changes in 2021, the Company ceased K-9 academic tutoring services and pivoted to enrichment learning services, tourism services (including study camps), and learning technology solutions. VIEs contributed 99.9% of consolidated revenue for the fiscal year.

Key Financial Metrics (Fiscal Year 2026)

Material Changes vs. Prior Period (FY 2025)

• Revenue Growth: Revenue increased 1.3% to RMB254.4 million, driven by growth in learning services, partially offset by a decline in tourism services.
• Profitability Turnaround: The Company returned to profitability with a net income of RMB29.1 million, compared to a net loss of RMB0.6 million in FY 2025. This improvement was significantly aided by a one-time gain of RMB8.8 million from the deregistration of subsidiaries.
• Cost Management: Cost of revenue decreased 7.4% to RMB188.8 million, and sales and marketing expenses dropped 25.2% to RMB10.5 million due to reduced labor and advertising costs.
• Investment Activity: Net cash used in investing activities was RMB108.1 million, primarily due to significant purchases of short-term and long-term investments under fair value, offset by proceeds from investment maturities.

Guidance, Outlook, and Risks

Management Commentary: Management emphasizes a strategic shift toward enrichment learning and tourism services to align with PRC regulatory policies. The Company has completed the construction of study camps in Jiangxi province, which are now fully operational. No specific forward-looking financial guidance was provided in the text.

Key Risks and Contingencies:

• VIE Structure: The Company relies on contractual arrangements with VIEs for 99.9% of revenue. Uncertainty regarding PRC laws could render these arrangements unenforceable, potentially preventing consolidation of VIE results.
• Regulatory Environment: Significant risks exist regarding PRC regulations on foreign investment in education, data privacy, cybersecurity, and overseas listings (CSRC filing requirements).
• Internal Controls: A material weakness in internal controls identified in FY 2025 was remediated as of February 28, 2026. However, the Company is not an accelerated filer and does not require an auditor attestation on internal controls.
• PCAOB Inspections: While the Company's auditor (Marcum Asia CPAs LLP) is based in New York and subject to PCAOB inspection, risks remain regarding the inspection of PRC-based auditors under the Holding Foreign Companies Accountable Act.
• PFIC Status: The Company believes it was a Passive Foreign Investment Company (PFIC) for the fiscal year ended February 28, 2026, which may have adverse tax consequences for U.S. holders.

Investor Verification Checklist

• VIE Enforceability: Verify the current legal status of the contractual arrangements with VIEs and any recent PRC regulatory actions affecting similar structures.
• One-Time Gains: Assess the sustainability of earnings by excluding the RMB8.8 million gain from subsidiary deregistration when evaluating core operational performance.
• Investment Portfolio: Review the composition and risk profile of the significant short-term and long-term investments under fair value (RMB150.8 million total) that drove investing cash outflows.
• Regulatory Compliance: Confirm the Company's compliance status with the CSRC's Overseas Listing Trial Measures and any pending cybersecurity reviews.
• Internal Controls: Monitor future filings for any recurrence of material weaknesses in internal controls over financial reporting.