Four Seasons Education (Cayman) Inc. — FY2023 Form 20-F
Reporting period: Fiscal year ended February 28, 2023, with audited comparisons for FY2021 and FY2022. This is an annual report, not a quarterly FY2022 Q4 filing. Financial figures below are in RMB unless otherwise stated; U.S. dollar translations are provided by the company for convenience.
Business context
Four Seasons is a Cayman Islands holding company whose China operations are conducted mainly through contractual arrangements with variable interest entities (VIEs), not through direct equity ownership of those operating companies. VIEs generated 97.6% of FY2023 revenue. Following China’s 2021 after-school tutoring restrictions, the company stopped K–9 academic after-school tutoring in mainland China by the end of 2021 and shifted toward non-academic learning services, study camps and trips, and learning technology and content solutions.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | RMB34.2 million (US$4.9 million) | RMB250.2 million |
| Gross profit / gross margin | RMB14.3 million / 41.8% | RMB100.6 million / 40.2% |
| Operating loss | RMB35.7 million | RMB66.2 million |
| Net loss | RMB33.5 million (US$4.8 million) | RMB118.7 million |
| Adjusted net loss (non-GAAP) | RMB32.2 million (US$4.7 million) | RMB58.4 million |
| Net cash used in operating activities | RMB25.5 million (US$3.7 million) | RMB91.3 million |
| Cash and cash equivalents at year-end | RMB175.7 million (US$25.3 million) | RMB262.4 million |
Revenue fell approximately 86% year over year, principally because K–9 academic tutoring revenue went to zero from RMB208.3 million in FY2022. FY2023 revenue comprised learning services of RMB18.5 million, learning technology and content solutions of RMB12.3 million, and study camps and learning trips of RMB3.5 million. Learning technology revenue included a meaningful related-party contribution: services to Shanghai Four Season Online School were RMB7.4 million, and the filing identifies that customer as representing 22% of FY2023 revenue.
The smaller net loss versus FY2022 was partly due to lower operating costs and the absence of the prior-year RMB44.6 million impairment of goodwill and intangible assets and RMB7.9 million impairment of other long-lived assets. The gross margin improved, but gross profit remained insufficient to cover operating expenses; the operating loss was RMB35.7 million. Adjusted net loss is a company-defined non-GAAP measure and should be considered alongside GAAP results.
Investing activities used RMB96.7 million net, including purchases of fair-value investments, other investments, and property and equipment, partly offset by investment maturities. Cash, cash equivalents and restricted cash together were RMB177.1 million at year-end. Total assets were RMB601.0 million, total liabilities RMB89.2 million, and equity RMB511.9 million. The filing does not report material conventional borrowings; lease obligations were RMB5.7 million, and current liabilities also included accrued expenses and taxes. Restricted net assets were RMB111.5 million.
Changes, outlook and material risks
- Business reset: The FY2023 revenue decline reflects the regulatory-driven exit from the former core K–9 academic tutoring business. Teacher headcount fell from 150 to 76 during the year; the company reported 167 total employees at year-end.
- Liquidity and investment: Management stated that available cash and cash equivalents should cover working capital and capital expenditures for the next 12 months. However, operating cash flow remained negative and cash and cash equivalents declined by RMB86.7 million year over year. FY2023 commitments included RMB5.8 million for camp construction and RMB17.5 million for investments, both expected within one year, in addition to lease obligations.
- Outlook: Management plans to develop non-academic learning services, study camps and trips, and learning technology and content solutions. The filing gives no quantified revenue, earnings, margin, or cash-flow guidance and cautions that newer businesses may not become profitable.
- Regulatory and structural exposure: The scope and enforcement of China’s education rules remain uncertain, including licensing requirements for non-academic tutoring and study-related activities, historical compliance exposure, and the enforceability of the VIE arrangements. The company relies on those contracts rather than direct ownership of the operating VIEs.
- Cash access: PRC dividend, foreign-exchange, and transfer restrictions may limit access to operating-company cash. The WFOE received RMB1.3 million in service fees from VIEs in FY2023 and made no dividend distribution.
- Controls and reporting: Management concluded that disclosure controls and internal control over financial reporting were ineffective at February 28, 2023 because of a material weakness involving insufficient and appropriate review of U.S. GAAP financial reporting. Remediation was underway; the auditor did not attest to internal-control effectiveness.
- Other risks and unusual items: COVID-related closures affected offline operations, though many restrictions were lifted from December 2022. The company reported a FY2023 fair-value investment loss of RMB1.9 million and RMB3.2 million of share-based compensation. It also disclosed that it believed it was a PFIC for U.S. tax purposes for FY2023. No material legal proceeding was identified by management.
Most important facts for investors to verify
- Whether replacement businesses can grow revenue and improve operating cash flow enough to offset the loss of K–9 academic tutoring.
- The quality, collectability, and concentration of FY2023 related-party revenue and receivables, including the SHFSOS relationship and terms.
- Cash availability by entity and jurisdiction, including restrictions on VIE and PRC subsidiary funds, and the timing of the RMB17.5 million investment and RMB5.8 million camp commitments.
- Current licensing and regulatory status of non-academic tutoring, study camps and trips, and learning technology activities, and any follow-on CSRC filing obligations for future offerings.
- Progress in remediating the material weakness and whether subsequent reporting demonstrates effective financial-reporting controls.
- Whether the company’s PFIC status continues and the resulting tax implications for U.S. holders; consult a tax adviser regarding individual circumstances.