20-F: Cloopen Group Faces Declining Revenue, Mounting Losses in 2025

Cloopen Group Holding Limited reported a 6.6% revenue decrease and a 62.6% increase in net loss for 2025, alongside ongoing internal control weaknesses and a pending going-private proposal.

Summary

• Total revenues decreased by 6.6% to RMB535.7 million (US$76.6 million) in 2025, following a slight 0.4% increase in 2024 to RMB573.6 million.
• Net loss increased by 62.6% to RMB238.8 million (US$34.1 million) in 2025, compared to RMB146.8 million in 2024 and RMB412.4 million in 2023.
• Operating loss increased by 24.2% from RMB197.8 million in 2024 to RMB245.7 million (US$35.1 million) in 2025.
• Gross profit decreased by 30.6% to RMB146.7 million (US$21.0 million) in 2025, with the gross profit margin falling to 27.4% from 36.8% in 2024.
• Active customer base declined to 6,151 enterprises in 2025 from 7,529 in 2024 and 8,703 in 2023.
• Large-enterprise customers decreased to 102 in 2025 from 114 in 2024 and 121 in 2023, though their revenue contribution increased to 70.1% in 2025.
• Dollar-based net customer retention rate for recurring solutions slightly increased to 76.7% in 2025 from 74.6% in 2024, primarily due to cross-selling efforts offsetting declines in CPaaS and cloud-based CC.
• Identified material weaknesses in internal control over financial reporting as of December 31, 2025, related to accounting personnel, financial closing procedures, revenue recognition, accounts receivable monitoring, and long-term investment due diligence.
• The company was delisted from the NYSE on October 25, 2023, and its ADSs are now quoted on the OTC market under the symbol RAASY.
• A preliminary non-binding going-private proposal was received on December 22, 2025, from a buyer group including the founder and CEO, Mr. Changxun Sun, to acquire outstanding shares at US$0.4940 per ordinary share or US$2.9641 per ADS.
• Settled securities class action lawsuits for US$12.0 million in cash, with final approval granted on January 23, 2024.
• Reached a settlement with the SEC on February 6, 2024, regarding employee misconduct and transaction irregularities, with no civil penalties due to self-reporting, cooperation, and remediation.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative filing due to declining revenues, increasing net losses, negative operating cash flow, and significant corporate governance issues like delisting and internal control weaknesses, despite a pending going-private proposal.

Positives

• Dollar-based net customer retention rate for recurring solutions showed a slight increase to 76.7% in 2025, driven by successful cross-selling to existing customers.
• Revenues from cloud-based UC&C solutions increased by 40.3% to RMB162.8 million (US$23.3 million) in 2025, indicating growth in this segment.
• The company received several awards and recognitions for its research and development capabilities in 2023, 2024, and 2025, including the 'Co-Innovation Award' and 'Best Support Award' from Guangfa Bank Credit Card Center, and its 'Chitu Big Model' being recognized in the 2024 China AI Large Model Industry Development Report.
• The SEC did not impose civil penalties against the company in its settlement regarding employee misconduct, acknowledging prompt self-reporting, substantial cooperation, and remedial measures.

Negatives

• Total revenues decreased by 6.6% in 2025, indicating a contraction in overall business.
• Net loss significantly increased by 62.6% in 2025, highlighting worsening profitability.
• Operating cash outflow remained negative at RMB231.0 million (US$33.0 million) in 2025, indicating continued cash burn from operations.
• Gross profit margin declined to 27.4% in 2025 from 36.8% in 2024, reflecting reduced profitability per unit of revenue.
• Active customer base and large-enterprise customers both decreased in 2024 and 2025, suggesting challenges in customer acquisition and retention.
• Dollar-based net customer retention rate for CPaaS solutions decreased to 56.0% in 2025, and for cloud-based CC solutions to 83.7% in 2025, indicating existing customers are spending less in these core areas.
• Identified material weaknesses in internal control over financial reporting as of December 31, 2025, pose significant risks to financial accuracy and compliance.
• The company was delisted from the NYSE on October 25, 2023, and now trades on the less liquid OTC market, which adversely affects share price and access to capital.
• Days sales outstanding increased to 158 days in 2025 from 131 days in 2024, indicating slower collection of accounts receivable.
• The company believes it was a Passive Foreign Investment Company (PFIC) for 2025 and may continue to be, which has adverse U.S. federal income tax consequences for U.S. investors.

Risks

• Legal proceedings, investigations, and inquiries related to past employee misconduct and transaction irregularities, potentially leading to significant damages, penalties, and reputational harm.
• Adverse publicity and potential concerns from customers and business partners due to the independent investigation and financial restatement.
• Failure to implement and maintain an effective system of internal control over financial reporting, leading to inaccurate financial reporting, non-compliance with SEC obligations, and potential fraud.
• Inability to attract new customers or retain existing ones, impacting revenue growth and future profitability.
• Dependence on the continued development of cloud-based communications solutions and market adoption, which is subject to technological and competitive uncertainties.
• Limited operating history makes forecasting revenues and evaluating business prospects difficult.
• Inability to achieve or sustain profitability and positive cash flows, given historical net losses and negative operating cash flows.
• Reliance on collaborations with China's major mobile network operators, with risks of contract termination, fluctuating fees, and reduced operating flexibility.
• Failure to enhance or upgrade existing solutions and introduce new ones that meet evolving customer demands in a timely and cost-effective manner.
• Inability to maintain compatibility of solutions across various devices, business systems, applications, and physical infrastructure, leading to increased integration costs and lowered customer satisfaction.
• Operating in a highly competitive market with competitors having greater resources, brand recognition, and marketing budgets.
• Failure to collect contract assets and accounts receivable from customers in a timely manner, affecting liquidity and cash flows.
• Inability to maintain and enhance brand image and generate positive publicity, potentially harming reputation and customer acquisition.
• Failure to optimize pricing for solutions, impacting revenues and profit margins.
• Lengthy and unpredictable sales cycles for large enterprises, causing delays in revenue recognition and increased expenses.
• Complexity and compliance requirements when conducting business with state-owned enterprises in China.
• Real or perceived errors, defects, failures, vulnerabilities, or bugs in solutions, leading to diminished customer demand, reputational harm, and liability.
• Inability to successfully integrate acquired businesses and technologies or achieve expected benefits from acquisitions.
• Substantial costs in protecting or defending intellectual property rights, with potential for infringement claims.
• Failure to comply with laws and contractual obligations related to data privacy, protection, and cybersecurity, leading to government actions, fines, and business disruption.
• Extensive and evolving regulatory environment in the PRC, with uncertainties in interpretation and enforcement, potentially requiring additional licenses or leading to penalties.
• Adverse effects on brand image, business, and results of operations due to third-party misconduct and misuse of solutions.
• Discontinuation of preferential tax treatments, increasing tax liabilities.
• Non-registration of most property lease agreements with PRC authorities, potentially leading to fines.
• Failure to make adequate contributions to social insurance and housing funds for employees, potentially leading to penalties.
• Liability for information and content displayed on websites or posted on third-party platforms, potentially leading to fines and reputational harm.
• Non-compliance with anti-corruption, anti-bribery, anti-money laundering, and economic sanctions laws.
• Limited insurance coverage, exposing the company to significant costs and business disruption.
• Changes in China's economic, political, or social conditions or government policies, adversely affecting business and operations.
• Chinese government's significant authority to intervene or influence operations and exert control over overseas offerings and foreign investment.
• Uncertainty regarding CSRC approval and filing requirements for future offshore offerings or listings.
• The ADSs may be prohibited from trading over the counter in the United States under the HFCAA if the PCAOB is unable to inspect auditors completely.
• Difficulties for overseas regulators to conduct investigations or collect evidence within China, limiting investor protection.
• Custodians or authorized users of non-tangible assets (chops and seals) may fail to fulfill responsibilities or misuse assets.
• Fluctuations in exchange rates between Renminbi and U.S. dollar, affecting results of operations and investment value.
• Governmental control of currency conversion limiting ability to utilize foreign currency revenues effectively.
• Complex procedures for foreign investors acquiring Chinese companies, hindering growth through acquisitions.
• PRC regulations on loans and direct investment by offshore holding companies, affecting ability to fund PRC operations.
• PRC regulations on foreign exchange registration for employee stock ownership plans, potentially leading to fines or sanctions.
• Classification as a PRC resident enterprise for tax purposes, resulting in unfavorable tax consequences for the company and non-PRC shareholders.
• Uncertainties regarding indirect transfer of equity interests in PRC resident enterprises by non-PRC holding companies.
• Increases in labor costs in the PRC.
• Increased regulatory scrutiny and negative publicity surrounding China-based companies listed in the United States.
• Severe or prolonged downturn in the global or Chinese economy.
• Tension in international trade and rising political tension, particularly between the United States and China, impacting business.
• Uncertainties regarding the interpretation and implementation of the newly enacted Foreign Investment Law and its impact on the VIE structure.
• Limitations on the ability of PRC subsidiaries to pay dividends to the holding company.
• Status as a foreign private issuer and emerging growth company, leading to reduced reporting requirements and potentially less investor protection.
• Significant costs incurred as a public company, especially after ceasing to qualify as an emerging growth company.
• Dual-class voting structure limiting influence of Class A ordinary shareholders and potentially discouraging change of control transactions.
• Adverse effects on the trading market for ADSs due to the dual-class structure.
• Volatility of the trading price of the ADSs, leading to substantial losses for investors.
• Sale or availability for sale of substantial amounts of ADSs could adversely affect market price.
• Techniques employed by short sellers may drive down the market price of the ADSs.
• Lack of research or adverse changes in recommendations by securities analysts could cause market price and trading volume to decline.
• Reliance on price appreciation of ADSs for return on investment, as no dividends are expected in the foreseeable future.
• Difficulties in protecting interests and limited ability to protect rights through U.S. courts due to incorporation under Cayman Islands law and primary operations in emerging markets.
• Judgments obtained against the company by shareholders may not be enforceable.
• Limited voting rights for ADS holders due to deposit agreement terms.
• Depositary may give a discretionary proxy to vote Class A ordinary shares if no instructions are given.
• Depositary and company can amend deposit agreement and change ADS holder rights without prior consent.
• Dilution of holdings due to inability to participate in rights offerings.
• Limitations on transfer of ADSs.
• ADS holders may not be entitled to a jury trial for claims under the deposit agreement.
• Classification as a PFIC for 2025 and potentially future years, leading to adverse U.S. federal income tax consequences for U.S. investors.

Future Outlook

The company expects to continue distributing earnings and settling service fees based on business needs, but does not anticipate declaring dividends in the foreseeable future. It plans to continue investing in business operations, technological improvements, marketing campaigns, and international expansion. The company aims to optimize its product offering mix towards higher-margin solutions and standardize industry-specific solutions to achieve economies of scale. It also expects its dollar-based net customer retention rate to remain stable at a relatively high level as the regulatory framework becomes more established and solutions are optimized.

Management Comments

• We believe that we are well-positioned to capitalize on the great opportunity in the emerging China market and continue to contribute to the growth of this market.
• We believe our capabilities in attracting and retaining these large-enterprise customers rest on our ability to develop and offer industry-specific features and functionalities that satisfy their disparate needs and complex internal deployment and integration requirements.
• We are committed to continually innovating our technologies and solutions to stay ahead of our customers rapidly evolving communications needs.
• We believe our online and offline branding and customer acquisition efforts have contributed to our brand awareness and reputation and effectively fueled our business growth.
• We believe our existing premises are adequate for our current business operations and that additional space can be obtained on commercially reasonable terms to accommodate our future expansion plans.
• We believe that our existing cash and cash equivalents and anticipated cash flows from operating and financing activities will be sufficient to meet our anticipated working capital requirements, and capital expenditures in the ordinary course of business for the next 12 months.
• Our management believes that the likelihood to lose the Company's current ownership structure or the contractual arrangements with the VIE is remote based on the current facts and circumstances.

Industry Context

StockSavvy.ai notes that Cloopen Group operates in China's rapidly evolving and highly competitive cloud-based communications industry, which is still in early stages compared to global markets. The industry is driven by advancements in cloud and AI technologies, with enterprises increasingly adopting digital solutions. The company's focus on multi-capability offerings and industry-specific solutions positions it to address China's unique market dynamics, but it faces intense competition from various vendors, including SMS-focused, CC-focused, VC-focused, AI-based, ICT, and internet companies. The regulatory environment in China, particularly concerning data security and foreign investment in telecommunications, continues to be a significant factor shaping the industry landscape.

Comparison to Industry Standards

• The company's dollar-based net customer retention rate for recurring solutions of 76.7% in 2025, while showing a slight increase from 2024, remains below the 100%+ rates often seen in high-growth SaaS companies like Salesforce or Zoom, indicating potential churn or reduced spending from existing customers.
• The decline in active customers and large-enterprise customers suggests a struggle to expand or even maintain market share in a competitive environment, contrasting with the growth trends observed in leading global cloud communication providers such as Twilio or RingCentral, which typically report expanding customer bases.
• The identified material weaknesses in internal control over financial reporting, particularly concerning U.S. GAAP knowledge and financial closing procedures, indicate a significant gap compared to the robust financial governance expected of publicly traded companies, including those in the global tech sector.
• The delisting from the NYSE and subsequent trading on the OTC market places the company at a disadvantage compared to its globally listed peers, affecting liquidity, investor confidence, and access to capital markets, similar to other China-based companies facing increased regulatory scrutiny in the U.S.

Management Changes

Corporate Governance

Legal Proceedings

• Settled securities class action lawsuits (Sonny St. John v. Cloopen Group Holding Limited et al. and Dong v. Cloopen Group Holding Limited et al.) for a total of US$12.0 million in cash, with final approval granted on January 23, 2024.
• Reached a settlement with the SEC on February 6, 2024, regarding employee misconduct and transaction irregularities, consenting to a cease and desist order without admitting or denying findings. No civil penalties were imposed due to prompt self-reporting, cooperation, and remediation efforts.

Related Party Transactions

• Recorded revenues of RMB0.3 million (US$48,000) from CPaaS services to Shenyang Yunrongxin Technology Co., Ltd. in 2025.
• Amounts due from Shenyang Yunrongxin Technology Co., Ltd. were RMB0.5 million (US$70,000) as of December 31, 2025.
• Amounts due to Shenyang Yunrongxin Technology Co., Ltd. were RMB0.2 million (US$33,000) as of December 31, 2025, for outsourcing services.
• Purchased project development services from Shanghai Keshen Information Technology Co., Ltd. totaling RMB2.2 million (US$0.3 million) in 2025.
• Amounts due from Shanghai Keshen Information Technology Co., Ltd. were RMB3.3 million (US$0.5 million) as of December 31, 2025, as prepayment for services.
• Amounts due to Shanghai Keshen Information Technology Co., Ltd. were RMB62,000 (US$9,000) as of December 31, 2025.
• Purchased business process outsourcing (BPO) services from Shanghai Gaozhi Lefu Intelligent Technology Co., Ltd. totaling RMB171,000 in 2025.
• Amounts due from Shanghai Gaozhi Lefu Intelligent Technology Co., Ltd. were RMB101,000 as of December 31, 2025, as prepayment for BPO services.
• A preliminary non-binding going-private proposal was received on December 22, 2025, from a buyer group including the founder and CEO, Mr. Changxun Sun, and Trustbridge Partners VII, L.P.

Stakeholder Impact

• Shareholders: Face significant risks due to declining financial performance, delisting from NYSE, and potential adverse U.S. tax consequences if classified as a PFIC. The going-private proposal offers a potential exit at a specific price, but its outcome is uncertain.
• Employees: The decrease in R&D and sales & marketing staff expenses suggests potential workforce reductions or lower compensation levels, which could impact morale. The company's ability to attract and retain talent is crucial for future growth.
• Customers: Decreased active customer base and retention rates in key segments indicate potential dissatisfaction or competitive pressures. The company's focus on high-margin customers and cross-selling aims to improve customer lifetime value.
• Suppliers: The company's effective management of payments to equipment and outsourcing service providers is noted, but slower collection of accounts receivable could indirectly impact its ability to pay suppliers promptly in the future if liquidity tightens.
• Creditors: Negative operating cash flows and increasing net losses could raise concerns about the company's ability to service debt, although no short-term bank borrowings were outstanding as of December 31, 2025.

Next Steps

• Continue to improve internal control over financial reporting, including U.S. GAAP training, refining financial close policies, and enhancing accounts receivable monitoring.
• Launch remaining functionalities of the Project Management System (PMS) in 2026 upon completion of user acceptance testing.
• Evaluate and consider the preliminary non-binding going-private proposal from the Buyer Group.
• Continue to invest in business operations, technological improvements, marketing campaigns, and international expansion.
• Focus on optimizing product offering mix towards higher-margin solutions.
• Standardize industry-specific solutions to achieve greater economies of scale.

Key Dates

Recommendation

The company faces significant headwinds, including declining revenues, increasing net losses, and persistent negative operating cash flows. The delisting from the NYSE to the less liquid OTC market severely impacts investor access and valuation. Material weaknesses in internal controls indicate fundamental operational and governance issues. While a going-private proposal exists, its non-binding nature and the company's underlying financial and operational challenges suggest a high degree of risk and uncertainty for current shareholders. The overall trend points to a deteriorating financial position and increased risk profile, warranting a sell recommendation.

Keywords

Cloud Communications, CPaaS, Cloud-based Contact Center, Cloud-based UC&C, China, SEC Filing, Financial Results, Net Loss, Revenue Decline, Internal Controls, Delisting, Going Private, VIE Structure, Risk Factors, AI, Video Technologies, Enterprise Solutions, Telecommunications, Data Privacy, Cybersecurity, PFIC