Interview with Stanley Yang, Chief Strategy Officer of Youlife Group
NASDAQ: YOUL
Tom Kerr, CFA: Hello everyone, my name is Tom Kerr. I’m a senior equity analyst at Zacks Small Cap Research , and welcome to another episode of our Fireside Chat program. Today we have the Chief Strategy Officer of Youlife Group (NASDAQ: YOUL), Stanley Yang. Youlife is China’s largest blue-collar lifetime service platform, and we’ll explain what that means in just a minute. The company is based in Shanghai, China. We initiated coverage of Youlife in late September with a price target of $2 per share.
Youlife has been providing blue-collar employment-related services in China for quite some time and offers four distinct services. Let’s get into it and talk about each one. The first is vocational education services. Can you explain that segment and what it does?
Stanley Yang: Thanks, Tom. The way I think of Youlife is as a connector of people, skills, and jobs. We are the leading blue-collar service provider in China and also the largest blue-collar education group in China. In our vocational education segment, we help our clients train, and we train a lot of blue-collar workers across different segments like manufacturing, logistics, and even cooking. Across these different industries, we provide the best services and find the most suitable blue-collar workers for all our clients.
TK: Got it. The second important segment is employee management services. Can you talk about that for a minute? What is employee management?
SY: As I mentioned, we are the leading blue-collar training platform in China. We train over 100,000 blue-collar workers every year, and we also help our enterprise clients recruit blue-collar workers. Every year, we send over 100,000 blue-collar workers to our clients, and we cover over 50% of the top manufacturing clients in China, like BYD, Foxconn, and Shunfeng. That’s our background. For these clients, we provide the best and most suitable services and licensed blue-collar workers.
TK: How does that differ from HR recruitment? You touched on it briefly, but what are HR recruitment services?
SY: Basically, our four business segments connect to one another. First, we help our clients recruit blue-collar workers. We have over 2,000 enterprise clients, and they have specialized needs and different requirements, so we help them recruit the right people. We also have over 100 branches and service centers across China, so we can reach the blue-collar workforce very quickly and meet our clients’ demand. After we help them recruit those workers, we provide staffing management services, like insurance and training. That’s the difference between these two business segments.
TK: The last one is market services, which you’ve touched on, but there are a lot of different things in market services. Maybe explain what’s involved in that segment.
SY: As I mentioned, we manage over 37 technical colleges across China, and we provide related services to them, such as dormitories, restaurants, and cafés. These services support the colleges and provide the best services to blue-collar workers and students.
TK: Got it. All four of these segments are integrated. Maybe explain how they complement each other through the whole blue-collar life cycle and how they work together.
SY: That’s exactly how we look at it. First, education helps people build relevant skills. Recruitment connects enterprise clients to our blue-collar workers, and employee management services support the workforce after placement. Lastly, market services provide practical support to our schools and to school life for students and blue-collar workers.
We are the only nationwide blue-collar staffing company, so we can reach the blue-collar workforce very quickly. We have over 90 offline service and delivery sites; we reach over 250 cities and counties, and we serve over 2,000 companies. That’s why our four segments connect to one another. The combination is the key to Youlife’s success.
TK: Got it. You mentioned you’re nationwide. Maybe talk about how big the blue-collar industry is, or how many people in China’s blue-collar workforce are potential people you can help. How big is it?
SY: As we know, China is the biggest manufacturer, and in total we have over 400 million blue-collar workers nationwide. Most of them are manufacturing workers, but there are also logistics, consumer, and other industries. This market is pretty fragmented. Even the biggest player has less than 5% market share, so we still have a lot of room to develop. And as the industry changes and society develops, we’ve expanded our original businesses into new segments like robotics and the embodied AI sector. We’re giving students new curriculum and helping enterprises meet their new demand.
TK: Sounds like there are still a lot of opportunities for the company going forward. Let’s move on to the financials for a little bit. Maybe talk about liquidity and cash position as of the latest filings.
SY: We just released our unaudited half-year financial results. For the six months ended June 30, revenue reached RMB1.9 billion, up over 100% year over year. Employee management services were the main growth engine, with revenue up 122% to RMB1.8 billion. This growth reflects strong customer demand, with an emphasis on large-scale outsourcing needs, and the contribution to our Youlife platform following the acquisition this year.
We also grew gross profit by 31% to RMB169 million and remained profitable, with net profit of RMB30 million. As we integrate this platform, we’re focused on service quality, operating efficiency, and improving margins over time. As for liquidity, we ended the half-year with RMB130 million in cash and cash equivalents, or about $19 million. We also generated positive operating cash flow of RMB9.1 million in the first half. That’s our general financial condition.
TK: I believe you don’t have a lot of debt, long-term or short-term, maybe just a tiny bit, so your net cash position is really strong. I did see the report, and the triple-digit growth rates are very impressive. Going forward, you can’t grow 100% every year, but do you still expect double-digit revenue growth for, let’s say, three to five years?
SY: That’s a very good question. There are two main reasons for the increase this half-year. First is organic growth, at a rate of around 25%. The rest of the growth is attributable to our merger with the YouHe platform in this financial period. As far as I can forecast, over the next couple of years organic growth should be stable, at around 20% to 30%.
TK: That’s still very strong organic growth. And I’m assuming margins and profit will continue to improve as well. Is that correct?
SY: Yes. We’re not only focused on the revenue side, but also on financial efficiency: better cost management and improving our margins. We have enough business customers, so we would select customers with higher margins and better cash cycles. We’re also more focused on new industries like robotics, which have higher margins. So we’ll focus on the margin side and the cash position side.
TK: Got it. Any closing comments or important information we may have missed that you’d like to close with?
SY: I would leave listeners with this: Youlife has built a real operating network around blue-collar workers, from education and recruitment to workforce delivery and practical support. We already work with thousands of companies, and we believe that gives us a strong base for the next stage, because the industry is changing a lot. We’re still focused on upgrading our technology and on our embodied AI platform. This can help us work more efficiently and provide the best services to our clients.
TK: All right. It’s still a great growth story with lots of opportunities. Thank you for your time today. To read all of our reports, Zacks SCR investors can go to scr.zacks.com , as well as our social media channels. For specific information on the company, you can also go to their website at ir.youlife.cn . That concludes our Fireside Chat. Thanks, Stanley.
SY: Thank you, Tom.
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