20-F: Lichen International Reports Significant Revenue Decline in 2025

Lichen International Limited's annual report for the fiscal year ended December 31, 2025, reveals a substantial decrease in total revenue, primarily driven by a decline in financial and taxation solution services and the strategic termination of its education support services.

Summary

• Lichen International Limited experienced a significant revenue drop in 2025, with total revenue decreasing by 40.89% to $24.52 million from $41.48 million in 2024.
• This decline was largely attributed to a $14.33 million decrease in financial and taxation solution services revenue, a $2.09 million reduction in education support services revenue, and a $1.35 million decrease in software and maintenance services revenue.
• The company reported a net loss of $21.79 million for 2025, a substantial increase from the $6.12 million net loss in 2024.
• A goodwill impairment of $3.66 million was recognized due to the underperformance of Bondly HK.
• The company successfully regained compliance with Nasdaq's minimum bid price requirement after a reverse stock split and subsequent trading performance, avoiding delisting.
• Lichen International Limited has strategically decided to terminate its education support services operations.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to the substantial revenue decline, widening net loss, goodwill impairment, and identified material weaknesses in internal controls, despite regaining Nasdaq compliance.

Positives

• The company regained compliance with Nasdaq's minimum bid price requirement, avoiding delisting, following a 1-for-200 reverse stock split and subsequent trading performance.
• The company launched Pre-IPO advisory services in 2025, generating $0.81 million in revenue.
• Despite a significant revenue decline, the company maintained its workforce, indicating a commitment to future operations.
• The company has a strong cash position with $26.91 million in cash and cash equivalents as of December 31, 2025.

Negatives

• Total revenue decreased by 40.89% to $24.52 million in 2025 from $41.48 million in 2024.
• Revenue from financial and taxation solution services decreased by 41.79% to $19.96 million in 2025.
• Revenue from education support services decreased by 71.97% to $0.81 million in 2025, due to the company's strategic decision to terminate these operations.
• Revenue from software and maintenance services decreased by 31.51% to $2.94 million in 2025.
• The company incurred a net loss of $21.79 million in 2025, compared to a net loss of $6.12 million in 2024.
• Operating expenses as a percentage of revenue increased for both selling and marketing (43.35% in 2025 vs. 30.21% in 2024) and general and administrative (52.67% in 2025 vs. 42.66% in 2024).
• A goodwill impairment of $3.66 million was recorded for Bondly HK due to underperformance.
• The company has a material weakness in its internal control over financial reporting due to a lack of sufficient financial reporting and accounting personnel with U.S. GAAP and SEC reporting experience.

Risks

• The company faces significant competition in the financial and taxation solution services market in China, which could lead to loss of market share and reduced profitability.
• Changes in China's economic, political, or social conditions, or government policies, could adversely affect the company's business and results of operations.
• Uncertainties in the PRC legal system, including the enforcement of laws and sudden changes in regulations, could negatively impact the company.
• The company's reliance on dividends from its PRC subsidiaries for cash requirements could be affected by PRC government restrictions on capital transfers.
• Fluctuations in exchange rates between RMB and USD could adversely affect the company's results of operations and the value of its shares.
• The company's ability to maintain its listing on the Nasdaq Capital Market is subject to ongoing compliance with listing requirements, including minimum bid price rules.
• The company is subject to risks related to cybersecurity and data protection laws in the PRC.
• The company may not be able to successfully implement its business strategies or achieve its objectives, which could materially and adversely affect its financial position.
• The company has limited insurance coverage, exposing it to risks associated with damage to assets or business disruptions.
• The company's revenue is primarily derived from non-recurring financial and taxation solution services projects, with no assurance of future business from existing customers.

Future Outlook

The company's future outlook is impacted by the significant revenue decline in 2025 and the strategic shift away from education support services. The company is focusing on its financial and taxation solution services and has launched Pre-IPO advisory services. The company's ability to navigate intense competition, adapt to AI technologies, and manage regulatory changes in China will be crucial for its future performance. The company has also implemented measures to address material weaknesses in its internal controls.

Management Comments

• The company's revenue from financial and taxation solution services decreased mainly due to price competition among former bookkeeping agencies transforming into consulting service providers.
• The decrease in education support services revenue was attributable to the Company's gradual termination of operations in this segment.
• The decrease in software and maintenance services revenue was due to market contraction and the increasing replacement of conventional software functions by AI software.
• The company recognized a goodwill impairment charge for Bondly HK because it incurred a loss and failed to reach projected performance.
• The company has implemented measures to improve its internal control over financial reporting, including hiring experienced financial consultants and providing additional training to its CFO.

Industry Context

StockSavvy.ai notes that Lichen International's performance reflects broader trends in the Chinese financial and taxation consulting sector, including increased competition and the disruptive impact of AI technologies. The company's strategic decision to reduce its focus on education support services aligns with a potential industry consolidation or a strategic refocusing on core competencies.

Comparison to Industry Standards

• The filing indicates that the top 10 financial and taxation solution service providers in China accounted for approximately 2.6% of the total market share in 2019, suggesting a highly fragmented market.
• Lichen International's revenue from financial and taxation solution services decreased by 41.79% in 2025, which is a significant underperformance compared to the general growth expectations for the Chinese economy and the demand for such services.
• The company's increased selling and marketing expenses as a percentage of revenue (43.35% in 2025) compared to industry benchmarks for similar service providers would need further analysis to determine if it's an efficient customer acquisition strategy or a sign of market pressure.

Corporate Governance

Legal Proceedings

• The company is not aware of any legal proceedings or claims that are expected to have a material adverse effect on its business or financial condition.

Related Party Transactions

• The company provided marketing, operation, and technical support services, processed academic education applications, and sold teaching and learning materials to Jinjiang School and Quanzhou School, which are controlled by the company's controlling shareholder. These transactions generated minimal revenue in prior years and none in 2025.
• As of December 31, 2025, there was no amount due to Mr. Ya Li (CEO, Chairman, Director), whereas $0.87 million was due in 2024.

Stakeholder Impact

• Shareholders may experience continued volatility in share price due to the company's financial performance and Nasdaq compliance challenges.
• Employees may face uncertainty due to the company's financial performance and the identified material weaknesses in internal controls.
• Customers of financial and taxation solution services may be impacted by the company's reduced marketing efforts and potential competitive pressures.
• The strategic termination of education support services will impact partnered institutions that relied on these services.

Next Steps

• Continue to integrate the DeepSeek optimization framework into its AI model, with technical upgrades scheduled for completion by the end of Q2 2026.
• Focus on growing revenue from financial and taxation solution services and Pre-IPO advisory services.
• Address the material weaknesses in internal control over financial reporting by hiring qualified accounting personnel and implementing training programs.
• Continue to monitor and comply with Nasdaq listing requirements to maintain the listing of its Class A Ordinary Shares.

Key Dates

Recommendation

While the company has regained Nasdaq compliance, the significant revenue decline, widening net loss, and material weaknesses in internal controls present considerable risks. The company's ability to execute its AI strategy and improve financial reporting are key factors for future performance. A 'hold' recommendation reflects a cautious approach given the current financial performance and ongoing operational challenges.

Keywords

Lichen International, Form 20-F, Annual Report, Financial Services, Taxation Services, China, Revenue Decline, Net Loss, Goodwill Impairment, Nasdaq Compliance, Reverse Stock Split, SEC Filing