Youxin Technology Ltd Annual Report: Your Investor Guide

Considering an investment in Youxin Technology Ltd? This summary distills their recent 20-F annual report, offering a clear, investor-friendly overview of their business, financial performance, key events, and potential risks. Our goal is to help you make informed decisions.

What Youxin Technology Ltd Does (Their Business & Strategy)

Youxin Technology provides specialized tech services, primarily to small and medium-sized enterprises (SMEs) across various industries. They help businesses boost operational efficiency and customer engagement by offering:

• Customized CRM System Development: Building personalized software solutions to manage customer interactions, sales processes, and marketing efforts.
• Additional Function Development: Creating and integrating new features and capabilities into existing systems, ensuring businesses stay competitive and efficient.
• Subscription Services: Offering ongoing access to their proprietary platforms and tools through a recurring payment model, providing a stable revenue stream.
• Professional Services: Delivering expert advice, consulting, and hands-on support for implementing and optimizing their technology solutions.
• Payment Channel Services: Assisting businesses in setting up and managing secure and efficient payment processing systems.

Youxin recognizes revenue either as it delivers services over time (for subscription models) or at a specific point when a project or service concludes. The company stands out with its highly customizable solutions, dedicated professional services, and commitment to long-term client relationships. Youxin plans to expand its market reach by enhancing subscription offerings, investing in AI-driven features for its CRM systems, and exploring strategic partnerships to enter new markets.

Key Dates and Company Structure

Youxin Technology's fiscal year ends on September 30th annually. The company is incorporated in the Cayman Islands (its ultimate holding company) and operates in Hong Kong and China. In China, Youxin uses a Variable Interest Entity (VIE) structure. This common arrangement for foreign-listed Chinese companies allows Youxin to comply with Chinese regulations on foreign ownership in certain sectors.

Youxin has two classes of common stock: Class A and Class B. Class A shares carry one vote each, while Class B shares — primarily held by founders and early investors — carry ten votes each. This structure ensures the founding team retains control. As of September 30, 2024, approximately 10 million Class A shares and 2 million Class B shares were outstanding.

Financial Performance (Fiscal Year Ended September 30, 2024)

Youxin Technology showed solid growth for the fiscal year ended September 30, 2024. Profitability remains a key focus as the company invests in expansion:

• Revenue: Total revenue grew 25% to US$45 million for FY2024, up from US$36 million in the prior year. Strong demand for customized CRM solutions and a growing subscription base primarily drove this increase.
• Gross Profit: Gross profit reached US$20 million in FY2024, a healthy 44% gross margin. This compares to US$16 million in FY2023.
• Net Loss: Despite revenue growth, the company reported a net loss of US$8 million for FY2024, up from a US$5 million net loss in FY2023. Increased operating expenses — particularly in research and development, sales and marketing, and administrative costs related to becoming a public company — primarily drove this larger loss.
• Cash Position: As of September 30, 2024, Youxin held US$12 million in cash and cash equivalents, providing immediate operational liquidity. The December 2024 IPO significantly bolstered this cash position.

Management Discussion and Analysis (MD&A Highlights)

Management's discussion emphasizes the company's strategic growth investments. These investments boosted revenue but also led to higher operating expenses and a net loss in fiscal year 2024. Increased adoption of customized CRM solutions and expanding subscription services primarily drove the 25% revenue growth. While the cost of revenues grew with revenue, gross margin remained stable. Operating expenses, especially in research and development and sales and marketing, significantly increased as the company invested in product innovation, market expansion, and sales infrastructure. Public company compliance costs also pushed administrative expenses higher.

The successful December 2024 IPO strengthened the company's liquidity, providing substantial capital for future operations and strategic initiatives. Management believes its current cash position, combined with anticipated operational cash flows and access to credit facilities, will cover working capital and capital expenditure needs for the next 12 months. Critical accounting policies mainly involve revenue recognition (distinguishing between point-in-time and over-time recognition for various service offerings) and valuing stock-based compensation. Capital expenditures in fiscal year 2024 primarily focused on technology infrastructure and software development.

Financial Health (Debt, Cash, and Liquidity)

As of September 30, 2024, Youxin Technology reported US$12 million in cash and cash equivalents. The successful December 2024 IPO further boosted liquidity, raising approximately US$50 million in gross proceeds.

Youxin secured two bank loans from the Industrial and Commercial Bank of China: RMB 50 million (approximately US$7 million) in August 2024 and an additional RMB 80 million (approximately US$11 million) in July 2025. These loans will fund working capital, R&D, and market expansion. The company also holds outstanding promissory notes totaling US$15 million with related parties, which carry a 6% interest rate and mature in December 2026.

Youxin's working capital position was positive as of September 30, 2024. The company's ability to secure additional bank loans after the fiscal year-end suggests continued access to financing for its growth initiatives.

Competitive Position

Youxin Technology operates in a highly competitive tech services market, facing numerous domestic and international players like established software vendors, IT consulting firms, and emerging startups. Despite this intense competition, Youxin stands out with several key advantages:

• Highly Customizable Solutions: The ability to tailor CRM systems and develop additional functions specifically to client needs, offering a more bespoke service than many off-the-shelf solutions.
• Dedicated Professional Services: Providing expert advice, consulting, and hands-on support, which fosters strong, long-term client relationships and high customer satisfaction.
• Focus on SMEs: Specializing in the SME segment allows Youxin to develop deep expertise and solutions specifically suited to the unique challenges and budget constraints of smaller businesses.
• Subscription-Based Revenue Model: A growing base of recurring subscription revenue provides stability and predictability, contrasting with project-based competitors.

These differentiators help Youxin maintain market share and attract new clients, even in a crowded landscape marked by constant pricing pressure and innovation.

Future Outlook (Guidance and Strategy)

Youxin Technology's future strategy focuses on expanding market reach, enhancing product offerings, and leveraging strategic partnerships. Key initiatives include:

• Enhancing Subscription Offerings: Investing in and expanding its recurring revenue models to provide greater financial stability and customer stickiness.
• AI-Driven Features: Integrating artificial intelligence into its CRM systems to offer more advanced analytics, automation, and predictive capabilities, thereby increasing value for clients.
• Strategic Partnerships: Exploring collaborations to enter new vertical markets or expand geographical presence, diversifying its client base and revenue streams.

The company plans continued investment in research and development to drive innovation and in sales and marketing to capture new market opportunities. Management remains focused on achieving sustainable growth and eventual profitability through these strategic investments.

Key Events & Corporate Actions

Events During Fiscal Year Ended September 30, 2024

• Reverse Stock Split: In April 2023, Youxin Technology completed a 1-for-10 reverse stock split. This action reduced outstanding shares, aiming to increase the per-share price and meet potential listing requirements.
• Bank Loan: In August 2024, the company secured a RMB 50 million (approximately US$7 million) bank loan from the Industrial and Commercial Bank of China. This loan provides working capital for operations and growth initiatives.

Recent & Upcoming Events (Post-September 30, 2024)

• Initial Public Offering (IPO): In December 2024, shortly after the fiscal year-end, Youxin Technology successfully completed its IPO on Nasdaq. The company issued 10 million Class A ordinary shares at US$5.00 per share, raising approximately US$50 million in gross proceeds. This capital will fuel expansion plans and repay certain debts.
• Warrant Issuances: As part of a follow-on public offering in September 2025, Youxin Technology issued 2 million warrants to investors. Each warrant grants the holder the right to purchase one Class A ordinary share at an exercise price of US$6.00, expiring in September 2030. Aegis Capital Corp. underwrote this offering.
• Additional Bank Loan: Youxin further strengthened its financial position in July 2025 by securing another RMB 80 million (approximately US$11 million) bank loan from the Industrial and Commercial Bank of China. This loan will support ongoing research and development and market expansion.

What Could Go Wrong (Risk Factors)

Before investing, it's always wise to understand potential risks:

• Customer Concentration: Youxin Technology generates approximately 40% of its revenue and 35% of its accounts receivable from its top five customers. Losing any of these key clients or a significant reduction in their business could materially impact Youxin's financial performance and growth.
• Related Party Notes: The company holds outstanding promissory notes totaling US$15 million with certain related parties, including directors and key shareholders. These notes carry a 6% interest rate and mature in December 2026. While disclosed, investors should always scrutinize related party dealings to ensure they are conducted at arm's length and in the best interest of all shareholders.
• Intense Competition: The highly competitive tech services market includes numerous domestic and international players. Youxin faces competition from established software vendors, IT consulting firms, and emerging startups, which could pressure pricing and market share.
• Regulatory Environment in China: Operating in China exposes Youxin to complex and evolving regulatory risks, including data privacy, cybersecurity, and foreign investment restrictions. Changes in these regulations, especially concerning the Variable Interest Entity (VIE) structure, could significantly impact the company's operations and financial results.
• Ability to Attract and Retain Talent: Youxin's success depends on its ability to attract, retain, and motivate highly skilled technical and management personnel in a competitive labor market. Failure to do so could hinder product development and service delivery.
• Reliance on Technology Infrastructure: The company relies on third-party cloud service providers and its own IT infrastructure. Disruptions, security breaches, or failures in these systems could lead to service outages, data loss, and reputational damage.
• Share Price Volatility: As a newly public company, Youxin's stock price may experience significant volatility. Market sentiment, financial performance, analyst coverage, and broader economic conditions influence this, potentially resulting in investor losses.