Preview of New US Stocks | After a year and a half of running for a US listing, can this insurance company succeed?

In January 2022, U-BX Technology Ltd. (also known as Youjia Insurance) from Beijing officially submitted its F-1 filing. Over the past year and a half, Youjia Insurance has updated its listing information multiple times in preparation for its IPO in the United States.

Recently, Youjia Insurance received a notice of filing for its IPO in the US. The company plans to issue no more than 5 million shares of common stock for overseas listing on the NASDAQ. Boustead Securities LLC will be the underwriter, and Jiangsu Junjin will serve as the domestic lawyer, further advancing the IPO process.

From the date of the filing notice, Youjia Insurance has 12 months to complete the overseas listing. If the listing is not completed within this timeframe, the company will need to update its filing materials to continue the process. Will Youjia Insurance's journey to the US market be successful this time?

Revenue relies on digital marketing, expected to turn a profit in the first half of 2023

According to the Zhitong Finance app, Youjia Insurance was established in 2018 and has always focused on providing value-added services to the insurance industry, including insurance operators and brokers, using AI-driven technology.

Currently, its main business areas include three services/products: 1. Digital marketing services, 2. Risk assessment services, and 3. Value-added bundled benefits.

Among them, digital marketing services help its institutional clients gain visibility on various social media platforms and generate revenue based on consumer clicks, views, or the promotion time through these channels. By using services and platforms provided by third parties to obtain traffic on certain platforms, including content-based online platforms (such as Douyin, Kuaishou, etc.) and offline scene marketing platforms, Youjia Insurance tracks the progress of work according to the client's specifications for promotional content, expected click-through rates, and views. It ensures that the client's standards are met at the end of each promotional cycle, analyzes the results of each promotion, and generates traffic reports for the client.

So far, digital marketing services account for more than 70% of the company's revenue and are the main source of income. The company earns commissions from clients based on the number of user clicks and the promotional time spent by institutional clients on promotional channels. At the beginning of each month, clients set a monthly promotional budget and reach an agreement with Youjia Insurance regarding the exact promotional orders and content. After receiving confirmation from the client regarding the effectiveness of the monthly promotion, Youjia Insurance sends the service invoice to the client in the second half of each month, and the client usually makes the payment at the end of each month. If the audit of the report by the client causes a delay, the payment will be postponed to the beginning of the next month.

In addition, a certain insurance company also provides risk assessment services. For this purpose, the company has developed an algorithm called "Magic Mirror" to calculate the claims risk of auto insurance. It can generate personalized risk reports based on the vehicle brand, model, travel area, and age. Currently, Magic Mirror has a user base of 50.

Furthermore, this insurance company also sells value-added bundled benefits to insurance companies. As part of the customer service package, customers can use a range of vehicle maintenance services, such as car wash, car maintenance, driver services, and vehicle movement notification services, by presenting the service codes.

To date, the company has a customer base of more than 300 city-level property and auto insurance operators nationwide. Approximately 200,000 insurance brokers use its products and services to conduct business every day.

In the past fiscal year 2021, fiscal year 2022 (with the fiscal year ending on June 30 each year), and the first six months of fiscal year 2023 (ending on December 31, 2022), the company's revenue was 72.3641 million, 86.6769 million, and 56.4751 million US dollars, respectively. The corresponding net profits were -0.0096 million, -0.049 million, and 0.1797 million US dollars. The company achieved a preliminary turnaround in the first half of fiscal year 2023.

The expansion of business scope and the stability of cash flow growth remain uncertain.

Although the company achieved a preliminary turnaround in the first half of fiscal year 2023, looking at the annual financial performance, the company has incurred net losses and negative cash flows from operating activities every year since its establishment. Even in the first half of the fiscal year with positive net profit, the company's operating cash flow is still in a loss state.

According to the Zhitong Finance APP, within the six months ending on December 31, 2022, the company's net cash used in operating activities was 0.1119 million US dollars, compared to 0.8676 million US dollars in the same period of 2021.

The company expects that in the foreseeable future, with the continued development of its business, acquisition of new users, investment in innovative technology infrastructure, further development of its products and services, and improvement of brand awareness, the operating costs and expenses of the company will continue to increase. This may result in significant capital investments and recurring costs, and the company may still be unable to achieve or maintain profitability or positive cash flow in the future.

To enhance its growth consolidation capabilities, the company will continue to focus on its digital marketing services. The company believes that its current digital marketing services are still in the early stages, and it plans to strengthen its marketing team and expand its promotion channels from online to offline, in order to reach more potential institutional customers who use marketing services.

At the same time, the company also plans to further expand its business scope to the life insurance and health insurance industries. The company plans to establish a separate department dedicated to health insurance customers. In the short term, the company believes that health insurance is comparable to property insurance in terms of insurance sales strategies, marketing efforts and development stages of insurance institutions, and purchasing habits of insurance buyers. In addition, on the market front, the company also plans to expand its business in Southeast Asia and other international markets, and provide online growth strategies for overseas customers. Currently, there is a company recruiting fresh graduates who are familiar with Southeast Asian languages and business culture to form an international business development team. The plan is to start operations in Vietnam and Indonesia next year, with profitability expected in these regions in two years.

In terms of the industry, the scale of the domestic insurance market in China increased from 2.4 trillion RMB in 2015-2019 to 4.3 trillion RMB, with a compound annual growth rate of 15.1%. It is expected to reach 7.8 trillion RMB in 2019-2024, with a compound annual growth rate of 12.9%, but at a slower pace. According to a report by iResearch, participants in the Chinese insurance industry invested a total of 32 billion RMB in technology in 2019, and it is expected to reach 56 billion RMB by 2023, with a less optimistic growth rate.

Facing the current situation, the company has not yet achieved stable profitability in the property insurance track it is in, and the expected overall market space is not enough to provide sufficient momentum for the company. In the face of competition from leading players with significant traffic advantages in other insurance tracks such as life insurance and health insurance, it remains uncertain whether the company can emerge as the winner.