Cheche Group Inc. annual report, Q4 FY2023

Cheche Group Inc. — FY 2023 Form 20-F

Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report; the filing does not provide clear Q4-only financial results. Amounts below are in RMB unless stated otherwise. Cheche completed its SPAC business combination and began Nasdaq trading in September 2023. Its Cayman Islands parent conducts substantially all operations in China through subsidiaries and a contractual VIE structure.

Financial results and liquidity

Metric	FY 2023	FY 2022	Change
Revenue	RMB 3,301.4 million	RMB 2,679.1 million	+23.2%
Gross profit / margin	RMB 140.2 million / 4.2%	RMB 142.3 million / 5.3%	Profit down 1.5%; margin contracted
Operating loss / margin	RMB 167.8 million / -5.1%	RMB 116.0 million / -4.3%	Loss widened
Net loss / margin	RMB 159.6 million / -4.8%	RMB 91.0 million / -3.4%	Loss widened
Adjusted net loss (non-GAAP)	RMB 33.2 million	RMB 51.6 million	Loss narrowed
Cash used in operating activities	RMB 27.0 million	RMB 158.9 million	Outflow reduced
Cash and cash equivalents at year-end	RMB 243.4 million	RMB 114.9 million	Increased

• Revenue was overwhelmingly transaction-based: insurance transaction services supplied RMB 3,275.2 million, or 99.2% of FY 2023 revenue. SaaS and technical services contributed RMB 25.1 million.
• Gross written premiums facilitated through the platform reached RMB 22.6 billion, up 36.1%; policies written rose 28.5% to approximately 15.8 million. The average transaction service fee rate declined to 14.5% from 15.8%.
• Referral partner costs were RMB 3,017.9 million, about 95.5% of cost of revenue. Revenue growth therefore did not translate into gross-profit growth.
• Operating cash outflow improved, but the filing attributes much of the working-capital support to higher accounts payable. Accounts receivable rose to RMB 466.1 million from RMB 401.7 million; RMB 379.0 million of the year-end 2023 balance was collected by March 31, 2024. The allowance for expected credit losses was RMB 2.2 million.
• Year-end current assets were RMB 780.3 million and current liabilities RMB 501.5 million, a current ratio of approximately 1.56. Cash plus short-term investments totaled RMB 264.9 million; RMB 5.0 million was restricted cash.
• Year-end liabilities totaled RMB 515.8 million. Short-term bank borrowings were RMB 20.0 million, and RMB 55.3 million was due to related-party lender Fanhua Group, with repayment due October 26, 2024. Operating lease liabilities were RMB 9.3 million.
• Cash increased by RMB 128.4 million in 2023, with financing cash inflow of RMB 140.3 million, including RMB 137.9 million from share issuance and RMB 20.0 million of bank borrowings, partly offset by debt repayments and financing costs.

Material changes and unusual items

• Revenue growth slowed from 54.4% in 2022 to 23.2% in 2023. Gross margin fell from 5.3% to 4.2%; operating and net losses widened.
• General and administrative expense doubled to RMB 139.4 million, driven mainly by share-based compensation and personnel costs. Total share-based compensation rose to RMB 110.0 million from RMB 16.2 million, including a substantial increase in G&A expense.
• Sky Frontier subscription revenue declined to RMB 11.6 million from RMB 51.2 million; paying customers fell from 72 to 17, which management attributed to tighter customer budgets and system disruptions during product and service-process adjustments. Digital Surge revenue also declined, to RMB 5.1 million from RMB 8.6 million, despite increased paying customers.
• The September 2023 business combination converted preferred shares into ordinary shares and included private placements. Year-end shares outstanding were 75.4 million, comprising 56.8 million Class A and 18.6 million Class B shares; 13.7 million warrants were also outstanding. Class B shares carry three votes each. Founder Lei Zhang held approximately 49.4% of voting power, according to the filing.
• The filing reports a RMB 762.2 million preferred-share redemption-value accretion before the September 2023 conversion. This significantly affected loss attributable to ordinary shareholders and reported per-share loss, but not consolidated net loss. FY 2023 basic and diluted loss per share attributable to ordinary shareholders was RMB 20.30.
• Management reported no goodwill impairment; goodwill remained RMB 84.6 million. Government grants declined to RMB 12.4 million from RMB 20.3 million.

Outlook, risks and contingencies

• No quantitative revenue, earnings or cash-flow guidance is provided. Management says available cash and operating cash flows are expected to cover planned operations and commitments for at least 12 months from issuance of the financial statements, while acknowledging dependence on execution, expense control and potential outside financing.
• Management identifies auto insurance transaction services as the core business and describes expansion in new-energy-vehicle insurance, non-auto products and SaaS as opportunities. The filing also says Insurance Marketplace was discontinued in April 2024 as a strategic adjustment.
• Major structural risk: Cheche is a Cayman Islands holding company and relies on contractual arrangements, rather than equity ownership, to consolidate and receive economic benefits from its China VIE. PRC authorities could challenge the structure or restrict operations, cash transfers or offshore fundraising. The VIE and subsidiaries generated 93.9% of FY 2023 consolidated revenue.
• PRC restrictions limited RMB 328.5 million of net assets from transfer to the parent at December 31, 2023. Foreign-exchange controls, statutory reserve requirements and approval or filing rules may constrain cash movement and dividends. No dividends have been paid, and none are planned in the foreseeable future.
• A 14.24% VIE equity interest was frozen by a court through July 27, 2025, subject to earlier release. The company says it does not expect a material operational impact, but acknowledges uncertainty over exercising its contractual option over those shares.
• Two material weaknesses in internal control over financial reporting remained at year-end: insufficient accounting personnel with U.S. GAAP expertise and inadequate formal financial-close and reporting controls. Management concluded disclosure controls and procedures were not effective. Remediation is underway; completion is not assured. The filing also notes that prior-period employee-benefit disclosure figures were revised for a formula error, with no effect on previously reported financial statements.
• Other exposures include possible penalties relating to historical consumer incentives and referral-fee practices, incomplete social-insurance and housing-fund contributions, evolving insurance and data-protection rules, cybersecurity risks, customer and fee concentration, and China-related regulatory and currency risks. The company reports no material legal proceedings known to management at filing and no material cybersecurity incident in 2023.
• The auditor issued an unqualified U.S. GAAP opinion. The company’s auditor is headquartered in Shanghai; continued PCAOB inspection access and HFCAA delisting risk remain matters to monitor.

Investor verification priorities

• Confirm whether the reduced operating cash outflow is sustainable, particularly given rising accounts payable, receivables and the timing of insurance-carrier collections.
• Track gross margin, transaction fee rates and referral-partner costs, and whether NEV, non-auto and SaaS activities can improve the revenue mix and profitability.
• Verify repayment or refinancing of the RMB 55.3 million Fanhua Group balance due in October 2024 and the status of bank facilities and borrowings.
• Assess progress in remediating the two material weaknesses and whether subsequent filings show effective financial-reporting controls.
• Monitor the VIE structure, frozen VIE interest, PRC cash-transfer restrictions, future CSRC filing requirements and PCAOB inspection access.
• Review dilution and voting control from outstanding warrants, incentive awards, Class B shares and any future share issuance; compare non-GAAP adjusted loss with GAAP results.