NaaS(NAAS) - 2024 Q4 - Annual Report

PART I Key Information This section details the company's holding structure, key risks, regulatory environment, and financial data, with a focus on its China operations Holding Company Structure and VIE History NaaS Technology Inc. operates as a Cayman Islands holding company through PRC subsidiaries, having terminated its historical VIE structure in April 2022 - NaaS Technology Inc. is a Cayman Islands holding company with operations primarily conducted through its PRC subsidiaries. Investors purchase equity in the holding company, not the operating entities[55] - The company previously used a VIE structure involving Kuaidian Power Beijing, which was terminated in April 2022. The company currently has no VIEs and conducts its China operations through subsidiaries[56][90] - The company acknowledges risks that PRC authorities could disallow its holding company structure, which could materially impact operations and security value[55][56] PRC Government Permissions and Filings The company has obtained necessary PRC business licenses and was not subject to CAC cybersecurity review for 2022 mergers, but future offerings require CSRC filings - The company asserts it has obtained all required licenses for its business operations in the PRC under current laws[63] - A cybersecurity review by the CAC was not required for the 2022 Mergers because NaaS did not possess personal information of over one million individuals at the time, having transferred ownership of the Kuaidian app[64] - Future overseas securities offerings are subject to filing requirements under the CSRC's Overseas Listing Measures, which took effect on March 31, 2023[66] Cash and Asset Flows The holding company relies on PRC subsidiary dividends, subject to regulatory restrictions on retained earnings, statutory reserves, and foreign currency exchange controls - The ability to pay dividends and service debt at the holding company level depends on distributions from PRC subsidiaries, which are restricted by PRC laws on retained earnings and statutory reserves[69] - PRC government controls on currency conversion may restrict the transfer of cash from mainland China to fund operations or for other uses outside of China[69][72] Inter-company Fund Flows (RMB millions) | Year | Payments Among Consolidated Entities | Advances Among Consolidated Entities | Dividends/Distributions | | :--- | :--- | :--- | :--- | | 2021 | 279.8 | 497.9 | 0 | | 2022 | 1,677.4 | 1,675.7 | 0 | | 2023 | 1,400.1 | 2,401.2 | 0 | | 2024 | 297.6 | 884.1 | 0 | Risk Factors This section details significant risks for ADS investors, covering business operations, the complex Chinese regulatory environment, and market-related factors including HFCAA compliance - Business Risks: The company is an early-stage entity with a history of net losses (RMB 914.4 million in 2024) and expects to incur further losses. It faces intense competition and its success is highly dependent on the continued rapid adoption of EVs[76][85][95] - China-Related Risks: The PRC government has significant oversight and may intervene in operations. The legal system is complex and evolving, particularly concerning cybersecurity, data privacy, and overseas listings, which could hinder the ability to offer securities and may cause their value to decline[80][167][174] - ADS & Market Risks: The ADS trading price is likely to be volatile. The multi-class share structure gives disproportionate voting power to holders of Class B and C shares, limiting the influence of ADS holders. As a foreign private issuer, the company is exempt from certain U.S. reporting requirements[82][218][220] - HFCAA Risk: The company's ADSs may be prohibited from trading in the U.S. in the future if the PCAOB is unable to inspect its China-based auditor for two consecutive years. While the PCAOB can currently conduct inspections, this status could change[62][179] Information on the Company This section provides a comprehensive overview of NaaS Technology Inc.'s corporate history, business operations across three segments, and the complex PRC regulatory environment History and Development of the Company The company transformed from RISE Education into NaaS Technology Inc. via a 2022 reverse merger, followed by significant financing and strategic acquisitions - The company was formerly RISE Education Cayman Ltd, which sold its education business in December 2021 to become a shell company[257][258][262] - On June 10, 2022, the company completed a reverse merger with Dada Auto (the NaaS business), changing its name to NaaS Technology Inc. and its ticker to "NAAS"[268][270] - Post-merger activities include significant capital raising efforts, such as a US$30 million share sale in Dec 2022, a US$21 million offering in May 2023, and multiple convertible note agreements and share subscription facilities through 2024 and 2025[271][272][282][283] - The company acquired 89.999% of Sinopower Holdings in June 2023 and entered into an agreement to acquire Charge Amps in August 2023, though the latter was terminated in November 2023[272][273] Business Overview NaaS provides AI-optimized EV charging services across three segments: Charging Services, Energy Solutions, and New Initiatives, leveraging an asset-light model - Charging Services: Provides integrated online EV charging solutions, including mobility connectivity via the Kuaidian platform and SaaS products for station management[291][292] - Energy Solutions: Offers comprehensive solutions for energy asset owners, including site selection, hardware procurement, EPC services, and station maintenance[294][296] - New Initiatives: Focuses on electricity procurement services to secure favorable prices for its network of charging stations and developing non-charging retail services to boost station revenue[300][302] - In 2024, the company's network helped reduce carbon emissions by approximately 3,224,900 tons, a 74.5% increase in reduction efforts compared to 2022[303] Regulatory Environment The company's operations are subject to extensive PRC regulations covering foreign investment, telecommunications, online payments, cybersecurity, data privacy, and overseas listings - Foreign Investment: Operations are governed by the PRC Foreign Investment Law and the "Negative List," which restricts or prohibits foreign investment in certain industries[312][313] - Cybersecurity & Data Privacy: The company is subject to a complex framework including the Cybersecurity Law, Data Security Law, and Personal Information Protection Law, which regulate data collection, use, and cross-border transfers. The 2022 Cybersecurity Review Measures require review for foreign listings of platform operators with over one million users' data[131][133][335] - Overseas Listing: The CSRC's Overseas Listing Measures, effective March 31, 2023, established a filing-based system for indirect overseas offerings by domestic companies, which applies to the company's future offerings[374] - Online Payment: Providing payment services in China requires a payment business license from the People's Bank of China. The company notes that its prior business model involving prepayments could have been interpreted as requiring such a license[183][323] Property, Plants and Equipment As of December 31, 2024, NaaS leased all its office properties and anticipates seeking additional space for future growth Leased Properties as of December 31, 2024 | Location | Space (sq. meters) | Use | Lease Term | | :--- | :--- | :--- | :--- | | Huitong Times Square, Beijing | 2,400 | Office | 5 years from Nov 9, 2020 | | Bamboo Expo Park, Huzhou, Zhejiang | 2760.42 | Office | from Apr 16, 2022 to Apr 15, 2028 | Operating and Financial Review and Prospects This section analyzes the company's financial performance, highlighting decreased total revenues due to strategic shifts, reduced net losses, and liquidity management Operating Results Total revenues decreased in 2024 to RMB 201.0 million due to a strategic shift, while net loss improved to RMB 914.4 million from reduced operating expenses Key Financial Results (RMB in millions) | Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Total Revenues | 92.8 | 233.4 | 201.0 | | Gross Profit | 6.2 | 63.2 | 88.5 | | Operating Loss | (2,460.5) | (1,055.2) | (807.0) | | Net Loss | (5,637.4) | (1,307.2) | (914.4) | Revenue by Segment (RMB in millions) | Revenue Stream | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Charging services | 82.6 | 129.4 | 169.1 | | Energy solutions | 8.1 | 100.5 | 25.5 | | New initiatives | 2.1 | 3.4 | 6.4 | - The decrease in total revenue in 2024 was primarily due to a strategic shift away from low-margin energy solution projects, with that segment's revenue dropping from RMB 100.5 million in 2023 to RMB 25.5 million in 2024[410] - Selling and marketing expenses decreased significantly from RMB 438.6 million in 2023 to RMB 198.9 million in 2024, mainly due to a RMB 160.9 million reduction in user incentives[415] Liquidity and Capital Resources The company's liquidity is supported by financing activities, with cash and cash equivalents at RMB 126.7 million as of December 31, 2024, despite continued negative operating cash flow Summary of Cash Flows (RMB in thousands) | Cash Flow Activity | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | (586,118) | (567,604) | (179,138) | | Net cash used in investing activities | (161,335) | (339,610) | (201,671) | | Net cash generated from financing activities | 1,252,315 | 830,105 | 71,270 | | Cash and cash equivalents at end of year | 513,351 | 436,242 | 126,703 | - The company has actively raised capital through various means, including a US$30 million share sale in 2022, a US$21 million offering in May 2023, convertible notes issued to LMR in 2023, and multiple share subscription facilities in 2024 and 2025[442][282] - As of December 31, 2024, the company had contractual lease obligations totaling RMB 5.0 million[457] Research and Development, Patents and Licenses The company invests in R&D for charging software and energy solutions, protecting its technology through patents, trademarks, copyrights, and trade secrets R&D Expenses (RMB in millions) | Year | R&D Expense | | :--- | :--- | | 2022 | 36.6 | | 2023 | 61.6 | | 2024 | 42.1 | - As of December 31, 2024, the company held 65 issued patents and had 322 pending patent applications globally, along with 23 copyrights and 34 registered domain names[463] Directors, Senior Management and Employees This section details the company's leadership, compensation, board structure, and employee base, highlighting the multi-class share structure and significant voting power Directors and Senior Management The company's leadership includes co-founders Zhen Dai as Chairman and Yang Wang as CEO, with Steven Sim appointed CFO in August 2024 - Zhen Dai, co-founder of NaaS and NewLink, serves as Chairman of the Board[473] - Yang Wang, co-founder of NaaS and NewLink, serves as Chief Executive Officer and Director[474] - Steven Sim was appointed Chief Financial Officer in August 2024, having previously served as CFO at Pintec Group and VP of Finance at Sohu[475] Compensation Aggregate cash compensation for directors and executive officers was RMB 4.5 million in 2024, supplemented by a multi-amended share incentive plan - Aggregate cash compensation for directors and executive officers was RMB 4.5 million (US$0.6 million) for the year ended December 31, 2024[480] - The company utilizes the Fourth Amended and Restated New 2022 Share Incentive Plan, which permits awards of options, restricted shares, and other equity incentives[488][489] - As of the report date, key executives hold a significant number of options, with Chairman Zhen Dai holding options for over 112 million shares and CEO Yang Wang holding options for over 37 million shares from grants made in March 2022[497] Employees As of December 31, 2024, NaaS had 225 full-time employees, primarily in Administration and Operating & Marketing, with standard employment agreements Full-Time Employees by Function (as of Dec 31, 2024) | Function | Number of Employees | Percentage | | :--- | :--- | :--- | | Business Development | 4 | 1% | | Administration | 106 | 47% | | Research and development | 37 | 17% | | Operating & Marketing | 78 | 35% | | Total | 225 | 100% | Share Ownership The company's multi-class share structure, with 7.47 billion ordinary shares outstanding, grants Newlinks Technology Limited 41.58% of total voting power - As of June 18, 2025, Newlinks Technology Limited was the principal shareholder, controlling 41.58% of the total voting power[518][219] - The company has a multi-class share structure: Class A (1 vote/share), Class B (10 votes/share), and Class C (2 votes/share)[218][559] - Chairman Zhen Dai beneficially owns shares representing 19.39% of the voting power, which could increase to 23.21% upon full distribution of shares from NewLink[518][520] Major Shareholders and Related Party Transactions This section details major shareholders, primarily Newlinks Technology Limited, and significant related party transactions, including financial support and share-based compensation - NewLink, the controlling shareholder, provided significant financial support, including waiving RMB 27.2 million due from the company in 2022[531] - In 2024, NewLink paid RMB 24.9 million on behalf of NaaS for expenses including payroll (RMB 7.3 million), rent (RMB 2.5 million), and other expenses (RMB 15.1 million)[534] - The company engaged in energy solution service transactions with related parties amounting to RMB 0.5 million in 2024, a significant decrease from RMB 75.2 million in 2023[535] Short-term Employee Benefits to Directors & Executive Officers (RMB in millions) | Year | Amount | | :--- | :--- | | 2022 | 2.7 | | 2023 | 7.5 | | 2024 | 4.5 | Financial Information This section confirms the appended financial statements, absence of material legal proceedings, and the company's policy of retaining earnings rather than paying dividends - The company is not currently a party to any material legal or administrative proceedings[538] - The company has no present plan to pay cash dividends and intends to retain future earnings for business operations and expansion[539] Additional Information This section details the company's multi-class share capital, Cayman Islands corporate governance, and tax implications, including potential PFIC status for U.S. holders - The company's ordinary shares are divided into Class A (1 vote), Class B (10 votes), and Class C (2 votes), with Class B and C shares being convertible to Class A, concentrating voting power[555][559] - The articles of association contain anti-takeover provisions, such as authorizing the board to issue preferred shares without shareholder approval[576][578] - U.S. Tax Risk (PFIC): There is a risk that the company could be classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes, which could result in adverse tax consequences for U.S. Holders of its ADSs or shares[243][610][611] - PRC Tax: If deemed a PRC "resident enterprise," the company could be subject to a 25% EIT on its global income, and dividends paid to non-PRC shareholders could be subject to PRC withholding tax[592][593] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks including foreign exchange, credit, and interest rate fluctuations, with a 100-basis-point rate change impacting pre-tax loss by RMB 7.6 million - The company's primary market risks are foreign exchange, credit, and interest rate risk[626][629] - Interest rate risk stems from variable-rate bank borrowings of RMB 683.0 million. A 100-basis-point rate change would affect pre-tax loss by RMB 7.6 million[631] - Foreign exchange risk is currently considered low as most transactions are in RMB, but PRC currency controls and exchange rate volatility remain a factor[626][627] PART II Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with prior material weaknesses remediated - Management concluded that disclosure controls and procedures were effective as of December 31, 2024[645] - Management concluded that internal control over financial reporting was effective as of December 31, 2024, based on the COSO 2013 framework[647] - Two material weaknesses identified as of December 31, 2022 were successfully remediated by December 31, 2023[648] Corporate Governance and Other Disclosures This section covers corporate governance, including multiple auditor changes, adherence to Cayman Islands home country practices, and a board-overseen cybersecurity risk framework - The company has experienced multiple changes in its independent registered public accounting firm: dismissing Centurion for EY in Oct 2022, dismissing EY for Centurion in Apr 2024, and dismissing Centurion for Enrome LLP in Jun 2024[658][664][668] - As a foreign private issuer, the company follows home country (Cayman Islands) corporate governance practices, exempting it from certain Nasdaq rules, such as requiring a majority-independent board[671] - The company has established a cybersecurity risk management framework with board oversight and a dedicated cybersecurity disclosure committee to assess and manage threats[675][678] Principal Accountant Fees (RMB in thousands) | Fee Type | 2023 | 2024 | | :--- | :--- | :--- | | Audit Fees | 16,460 | 5,547 | | Audit Related Fees | 2,518 | 730 | PART III Financial Statements This section presents the audited consolidated financial statements, highlighting a material uncertainty regarding going concern and critical audit matters like revenue recognition and asset recoverability Report of Independent Registered Public Accounting Firm The auditor's report includes a material uncertainty regarding going concern due to negative cash flows and net losses, and identifies critical audit matters for revenue and asset recoverability - Going Concern Uncertainty: The auditor highlights a material uncertainty related to the company's ability to continue as a going concern due to negative operating cash flows (RMB 179.1 million), a net loss (RMB 914.4 million) in 2024, and a working capital deficit (RMB 910.9 million)[696] - Critical Audit Matter 1 - Revenue Recognition: The recognition of revenue from mobility connectivity services was identified as a critical audit matter due to its significance and dependence on the accuracy of IT systems[701] - Critical Audit Matter 2 & 3 - Recoverability: The recoverability of trade receivables (ECL allowance of RMB 69.14 million) and other financial assets were deemed critical audit matters due to the complex and subjective judgments involved in estimating expected credit losses and impairment[704][709] Consolidated Financial Statements The consolidated financial statements show total assets decreased to RMB 650.6 million in 2024, with a net loss of RMB 914.4 million and continued negative operating cash flow Consolidated Statement of Financial Position (RMB '000) | | Dec 31, 2023 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | 1,465,099 | 650,644 | | Total Current Assets | 1,143,967 | 439,497 | | Total Non-current Assets | 321,132 | 211,147 | | Total Liabilities | 1,508,704 | 1,404,778 | | Total Current Liabilities | 817,030 | 1,350,413 | | Total Non-current Liabilities | 691,674 | 54,365 | | Total Equity | (43,605) | (754,134) | Consolidated Statement of Profit or Loss (RMB '000) | | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Total Revenues | 92,814 | 233,363 | 200,976 | | Gross Profit | 6,167 | 63,189 | 88,542 | | Operating Loss | (2,460,484) | (1,055,207) | (807,028) | | Net Loss for the Year | (5,637,365) | (1,307,150) | (914,442) | | Basic Loss Per Share (RMB) | (2.92) | (0.58) | (0.35) | Notes to the Consolidated Financial Statements The notes detail accounting policies, confirm going concern uncertainty, disclose discontinued operations, convertible bond terms, share-based payments, and related party transactions - Going Concern (Note 1.5): Management's plans to address the going concern uncertainty include seeking additional debt/equity financing, reducing costs by moving from low-margin projects, freezing non-essential hiring, and reducing marketing spend[744] - Discontinued Operations (Note 5): The Group disposed of its solar energy subsidiary, Sinopower, in August 2024 and has classified its energy storage solutions business as held for sale. These are reported as discontinued operations[915][916] - Share-Based Payments (Note 28): The company operates multiple share incentive plans. In 2024, total share-based compensation expense was RMB 160.4 million. The fair value of options is determined using binomial and Monte-Carlo simulation models[994][1001] - Related Party Transactions (Note 32): In 2024, controlling shareholder Newlink paid RMB 24.9 million in expenses on behalf of the Group. Compensation for key management personnel totaled RMB 27.5 million in 2024, of which RMB 23.0 million was share-based compensation[1006][1010]