Ucommune(UK) - 2024 Q2 - Quarterly Report

Financial Performance - Total revenue for the six months ended June 30, 2024, was RMB 118,912, a decrease of 56% compared to RMB 270,102 for the same period in 2023[10] - Workspace membership revenue decreased to RMB 39,418, down 44% from RMB 70,793 in the prior year[10] - The company reported a loss from operations of RMB 28,098 for the six months ended June 30, 2024, compared to a loss of RMB 59,505 for the same period in 2023[11] - Total comprehensive loss for the six months ended June 30, 2024, was RMB 55,455, compared to RMB 54,719 for the same period in 2023[13] - The company experienced a net loss of RMB 50,122 for the six months ended June 30, 2024, compared to a net loss of RMB 38,419 for the same period in 2023[15] - The net loss for the six months ended June 30, 2024, was RMB 55,569, compared to a net loss of RMB 50,016 for the same period in 2023[27] - For the six months ended June 30, 2024, net cash used in operating activities was RMB (4,916), compared to RMB 30,699 for the same period in 2023[17] Assets and Liabilities - Total assets decreased to RMB 493,925 as of June 30, 2024, from RMB 586,759 as of December 31, 2023[6] - Total liabilities decreased to RMB 458,390 as of June 30, 2024, from RMB 517,239 as of December 31, 2023[8] - Cash and cash equivalents increased to RMB 60,382 as of June 30, 2024, from RMB 54,288 as of December 31, 2023[4] - Total current assets for the VIEs as of June 30, 2024, were RMB 190,290, down from RMB 246,997 as of December 31, 2023[25] - The company had a total current liabilities of RMB 356,797 as of June 30, 2024, down from RMB 418,991 as of December 31, 2023[25] Revenue Breakdown - Other service revenue decreased to RMB 32,856, down 26% from RMB 44,392 in the same period last year[10] - Operating lease income from fixed payments decreased from RMB 70,793 in the six months ended June 30, 2023 to RMB 39,418 in the same period of 2024[58] - The Group's marketing and branding services revenue is recognized over time based on actual placement and agreed settlement statements[60] - Marketing and branding services revenue decreased significantly to RMB 46,638, a drop of 70% from RMB 154,917[165] Cost and Expenses - The cost of revenue (excluding impairment loss) for the six months ended June 30, 2024, was RMB 120,947, a decrease from RMB 271,875 in the same period of 2023[90] - The Group's workspace membership segment reported a cost of revenue of RMB 43,017, down 45% from RMB 78,640[165] - The marketing and branding services segment's cost of revenue decreased to RMB 47,045, a reduction of 69% from RMB 151,527[165] - The Group recorded a total lease expense of RMB 21,171 for the six months ended June 30, 2024, down from RMB 43,402 in the same period of 2023, reflecting a significant reduction in operating lease expenses[84] Shareholder and Equity Information - The weighted average shares used in calculating net loss per share increased to 806,427 for the six months ended June 30, 2024, from 443,883 in the prior year[11] - The company reported a capital contribution from shareholders of RMB 1,705 for the six months ended June 30, 2024[17] - The company issued 234,121 Class A ordinary shares in exchange for the conversion of $2,275 of principal balance on a convertible bond and $387 of accrued interest, totaling approximately RMB 18,892[122] Tax and Deferred Tax - For the six months ended June 30, 2024, the total current tax expense was RMB 5,142, compared to RMB 31 for the same period in 2023, indicating a significant increase[102] - As of June 30, 2024, total deferred tax assets amounted to RMB 451,375, up from RMB 403,682 as of December 31, 2023, reflecting a growth of approximately 11.7%[103] - The effective tax rate for the six months ended June 30, 2024, was impacted by a change in valuation allowance, resulting in a total tax expense of RMB 5,142 compared to RMB 31 in the same period in 2023[110] Operational Challenges and Future Plans - The COVID-19 pandemic has negatively impacted the company's business operations, leading to the closure and disposal of unprofitable spaces[28] - The company plans to transition from an asset-heavy model to an asset-light model to improve profitability and explore new business opportunities[33] - The company continues to face challenges in achieving a business scale sufficient to generate net profit and positive cash flows from operating activities[34] - The company is exploring additional financing options to support future operations, including debt and equity financing[33] Legal and Regulatory Matters - The Group is involved in an ongoing arbitration case with a claim amounting to RMB 140 million related to investment losses[160] - Ucommune Technology plans to terminate the VIE Agreements, leading to the deconsolidation of Ucommune Venture and its subsidiaries[166] - The restructuring will allow the Company to continue operating its core workspace membership and marketing businesses while disposing of non-core operations[166]