Lixiang Education Holding Co., Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone Q4 filing. Financial statements are prepared under U.S. GAAP and reported in RMB; U.S. dollar amounts are convenience translations.
Business context and reporting period
Lixiang is a Cayman Islands holding company whose China education operations are conducted through subsidiaries and contractual variable interest entity (VIE) arrangements. Its activities included high school and vocational education, course services, and human-resources services. The 2023 network included Qingtian International School, Lishui International School, Langfang School, Hainan Jiangcai and other vocational or employment-service entities.
Important reporting changes: Chuangmei Weiye was transferred back to Beijing S.K. affiliates on November 9, 2023 and reported as a discontinued operation. Qingtian International School was transferred to an entity affiliated with CEO and director Biao Wei for RMB23.161 million; the filing says the related contractual rights ended on December 31, 2023 and the school was deconsolidated as of that date. Lishui International School began operating in 2023.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net revenue | RMB50.8 million (US$7.2 million) | RMB41.4 million |
| Gross profit / margin | RMB4.0 million / 7.8% | RMB0.9 million / 2.3% |
| Operating loss | RMB109.3 million | RMB45.6 million |
| Loss from continuing operations, after tax | RMB103.6 million | RMB9.9 million |
| Net loss | RMB127.0 million (US$17.9 million) | RMB8.1 million |
| Cash and cash equivalents, year-end | RMB227.0 million | RMB246.3 million |
| Operating cash flow, continuing operations | RMB66.9 million used | RMB41.3 million provided |
| Investing cash flow, continuing operations | RMB7.6 million used | RMB1.1 million used |
| Financing cash flow, continuing operations | RMB51.9 million provided | RMB11.4 million used |
Revenue rose 22.9%, while gross margin improved from 2.3% to 7.8%, but operating and net losses widened substantially. Cost of revenue increased 16.0% to RMB46.9 million. General and administrative expense fell 8.0% to RMB25.4 million, which management attributed to organizational and cost controls.
Operating expenses included RMB22.7 million of goodwill impairment, following RMB18.8 million in 2022, and RMB65.1 million of expected credit losses on receivables and other assets, principally reflecting management’s view that collection from Beijing S.K. was remote. Other income was RMB12.3 million, down from RMB16.8 million; 2022 included government support for the Nasdaq listing. Interest expense was RMB3.6 million, versus RMB4.0 million.
At December 31, 2023, total assets were RMB434.0 million, total liabilities RMB276.9 million and shareholders’ equity RMB157.1 million. Net working capital was RMB141.7 million. Short-term borrowings were RMB74.0 million, with another RMB1.25 million of current long-term borrowings; total borrowings were RMB75.25 million. A further RMB173.7 million was due to the affected entity and classified as non-current. Contractual obligations totaled RMB251.6 million, including borrowings and lease obligations due within one year and the affected-entity amount due over two to three years.
Cash declined by RMB19.2 million during the year. Continuing-operations operating cash use reflected the net loss and working-capital movements, including repayment of amounts due to the affected entity. Management said existing cash and expected operating cash flows would cover working capital and capital expenditure for at least 12 months. Cash is not wholly located in the operating VIEs: the filing reports RMB13.8 million in China and approximately RMB212.8 million in the Cayman Islands at year-end.
Material changes, outlook and unusual items
- Student enrollment across Qingtian, Lishui, Langfang and Hainan Jiangcai increased from 1,580 at September 1, 2022 to 2,599 at September 1, 2023. Langfang accounted for 1,554 students; Qingtian 491; Lishui 74; and Hainan Jiangcai 480. These are school-year enrollment figures, not annual averages.
- The RMB6.36 million Chuangmei Weiye transfer consideration was added to debt owed by Beijing S.K. to Lishui Mengxiang. The company also fully provided for Beijing S.K.-related receivables and other assets, including an acquisition deposit and contingent-consideration receivable.
- In 2023 the company issued 50 million ordinary shares for aggregate consideration of US$6 million. Shares outstanding increased from 66.667 million to 116.667 million. A 1-for-2 reverse stock split took effect January 3, 2024; Nasdaq confirmed bid-price compliance on January 24, 2024.
- Management provided no numerical revenue or earnings guidance. It said it was monitoring regulatory developments and expected enrollment to grow steadily, while noting that tuition and accommodation charges are subject to government approval and results are seasonal.
- The filing states there were no significant changes after the audited financial-statement date, but also describes subsequent events through May 15, 2024. These include the Qingtian transfer and termination of contractual arrangements, and the final Langfang lease judgment requiring the school to vacate the disputed premises by July 30, 2024.
- Langfang’s first-instance judgment had ordered RMB25.235 million of overdue rent, but the April 19, 2024 final judgment eliminated the rent payment obligation and required the school to vacate. Separately, Lishui Mengxiang sought RMB72.41 million plus RMB20 million in liquidated damages from Beijing S.K. and affiliates in arbitration; the matter remained at the service-of-documents stage as of the report date.
Key risks and contingencies
- VIE and PRC regulatory exposure: Investors own shares in the offshore holding company, not equity in the VIEs. The filing warns that contractual control arrangements are untested in PRC courts and could be challenged or rendered unenforceable, potentially limiting access to operations, cash flows and assets.
- Private education rules and permits: Rules governing private schools, related-party transactions, classification registration and school sponsorship remain uncertain. Langfang’s sponsor-registration procedures and school permit renewal were incomplete; the filing also describes unresolved compliance adjustments in the Hainan Technical School cooperation arrangement.
- Cash mobility and distributions: PRC foreign-exchange controls, statutory reserves and restrictions applying to non-profit schools may constrain transfers to the holding company. No dividends have been paid, and the company said it had no present plan to pay cash dividends in the foreseeable future.
- Liquidity and debt: Continuing operations used cash in 2023, borrowings increased, and material amounts remain due to the affected entity. Management’s 12-month liquidity assessment depends partly on expected cash flows and available facilities; access to VIE cash may be limited by the contractual structure.
- Audit and controls: Audit Alliance LLP issued an unqualified FY2023 U.S. GAAP opinion, but did not audit internal control. Management reported disclosure controls and internal control over financial reporting effective at year-end; the filing includes no auditor attestation because Lixiang is an emerging growth company.
- Other investor risks: Risks include potential CSRC filing delays for the 2023 private placement, possible future cybersecurity or listing requirements, currency fluctuations, transfer restrictions, and volatility of the ADSs. The company reported that its auditor was not subject to PCAOB inspection restrictions as of the report date.
Most important facts for investors to verify
- Confirm the accounting and timing of Qingtian’s related-party transfer, the December 31, 2023 deconsolidation, the consideration received or receivable, and completion of required sponsor-registration procedures.
- Reconcile the RMB65.1 million credit-loss provision to the Beijing S.K. balances, the arbitration claim and the RMB6.36 million Chuangmei transfer amount; verify the expected recovery and repayment terms.
- Review the nature, maturity, security and refinancing status of the RMB75.25 million borrowings and the RMB173.7 million non-current amount due to the affected entity.
- Track Langfang’s relocation after the final lease judgment, permit and sponsor-registration status, and the compliance status of the Hainan cooperation arrangement.
- Assess whether VIE contractual arrangements remain enforceable and whether cash held in the VIEs can be transferred to the offshore parent in practice.
- Check the CSRC filing status for the 2023 private placement, subsequent Nasdaq listing compliance, and the implications of the 2024 share split for per-share comparisons.