Naas Technology Inc. annual report, Q4 FY2021

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NaaS Technology Inc. (20-F Shell Company Report)

Business context and reporting period. This is a shell company report arising from the June 10, 2022 merger, not a quarterly filing for 2021 Q4. The registrant changed its name from RISE Education Cayman Ltd. to NaaS Technology Inc., changed its Nasdaq ticker from REDU to NAAS, and began conducting NaaS’s EV-charging business. The financial highlights below primarily cover NaaS’s combined fiscal years ended December 31, 2020 and 2021, prepared under IFRS; RISE’s separate historical statements use U.S. GAAP and are not directly comparable. The filing also includes pro forma information.

Financial performance and position

  • Revenue: NaaS’s 2021 gross revenue was RMB160.9 million, up from RMB37.2 million in 2020. End-user incentives, recorded mainly as a reduction of revenue, were RMB143.1 million versus RMB31.4 million; net revenue was therefore RMB17.8 million, up from RMB5.8 million. Online EV charging solutions generated RMB153.2 million of 2021 gross revenue; offline solutions generated RMB7.1 million.
  • Profitability and margins: NaaS reported a 2021 operating loss of RMB251.3 million and net loss of RMB252.3 million, compared with losses of RMB82.2 million in 2020. Gross loss was RMB1.1 million in 2021 versus RMB2.8 million in 2020. The filing gives gross margin as negative 0.7% in 2021 versus negative 7.5% in 2020, using gross revenue as its stated basis. Selling and marketing expense increased to RMB183.2 million from RMB47.2 million; research and development expense rose to RMB37.2 million from RMB20.4 million.
  • Cash flow and liquidity: 2021 operating cash outflow was RMB250.0 million, compared with RMB63.0 million in 2020. Cash and cash equivalents at year-end were RMB8.7 million, versus RMB3.7 million a year earlier. In January 2022, NaaS raised US$87.3 million (RMB556.3 million) through preferred-share financing. Management stated that available funds were expected to cover needs for at least 12 months, subject to executing its business plan and continued financing support.
  • Debt and obligations: NaaS reported RMB20.5 million of lease liabilities at December 31, 2021, including RMB8.1 million current and RMB12.4 million non-current; it reported no material borrowings in its combined balance sheet. Operating lease commitments were RMB29.2 million. Separately, the filing says RMB69.3 million was due to Newlink as of May 31, 2022, including advances and amounts Newlink paid on NaaS’s behalf.
  • Balance sheet: NaaS reported total assets of RMB153.4 million, liabilities of RMB128.3 million, and equity of RMB25.1 million at December 31, 2021, compared with RMB67.6 million, RMB57.8 million, and RMB9.8 million, respectively, in 2020. The pro forma combined statement includes the January financing and merger-related adjustments; it shows cash of RMB581.1 million, total assets of RMB740.4 million, liabilities of RMB148.4 million, and equity of RMB592.0 million.

Material changes and unusual items

  • NaaS expanded its charging network and business lines: it reported 800 station operators on its network at year-end 2021, versus 217 at year-end 2020. By March 31, 2022, it reported more than 30,000 stations, 340,000 accessible chargers, and 2.2 million end-users. It said more than 80% of accessible chargers were DC fast chargers.
  • In early 2022, NaaS restructured its business. The Kuaidian app and related data access rights were transferred to a third-party service provider; NaaS entered a cooperation agreement for related services with an initial five-year term. The filing says the restructuring left NaaS with no VIE structure as of the report date.
  • RISE sold substantially all of its education business and assets in December 2021 and became a shell company. Its 2021 continuing-operations net income of RMB249.1 million was entirely attributable to a RMB279.1 million gain on troubled-debt restructuring; RISE’s total 2021 net loss, including discontinued operations, was RMB258.2 million.
  • The pro forma transaction accounting treats NaaS as the accounting acquirer and records a RMB375.9 million equity-settled listing cost in the 2021 pro forma statement. This is a transaction-accounting item, not NaaS’s reported operating expense for 2021.

Outlook, management commentary, and risks

  • NaaS expects continuing operating expenses and losses in the near term and stated that its net loss was expected to increase in 2022 versus 2021. It expects online charging revenue to benefit from network expansion and market-share growth, with offline and non-charging revenue intended to expand from newer offerings. No numerical revenue or profit guidance is provided.
  • Management cited rapid EV adoption, network expansion, and an asset-light model as growth drivers, but results depend on EV uptake, charging behavior, customer acquisition, and the ability to control incentives and sales and marketing spending. The top five station-operator customers accounted for about 48% of 2021 net revenue.
  • Key risks include the early-stage business and history of losses; reliance on Newlink and on the third-party Kuaidian operator; competition and customer concentration; COVID-19 impacts; and evolving PRC regulation, including cybersecurity, data privacy, overseas-listing approvals, and possible licensing issues. The filing also notes potential additional PRC regulatory approvals or filings in connection with the merger and restructuring.
  • Newlink held 91.5% of voting power as of the report date through the multi-class share structure. The company said it did not expect to pay dividends in the foreseeable future. Its China-based auditors were not then subject to PCAOB inspection; the company had been identified as a Commission Identified Issuer under the HFCAA, creating potential U.S. trading-prohibition and delisting risk.

Most important facts for investors to verify

  • Reconcile gross revenue, end-user incentives, and net revenue, and assess whether incentive spending can fall as transaction volume grows.
  • Track operating cash burn, the use of the January 2022 financing, subsequent Newlink advances, and funding needs against the stated 12-month liquidity expectation.
  • Confirm the economics and continuity of the Kuaidian third-party cooperation, access to relevant users and data, and the effect of the restructuring on charging volumes and monetization.
  • Monitor customer concentration, revenue contribution from online versus offline services, and progress toward positive gross profit and operating cash flow.
  • Check the status of PRC approvals, filings, licensing and cybersecurity requirements, and PCAOB inspection and HFCAA listing developments.