20-F: Youlife Group Completes Business Combination with Distoken, Commences Nasdaq Trading

Youlife Group Inc. has successfully consummated its business combination with Distoken Acquisition Corporation, leading to its American Depositary Shares commencing trading on Nasdaq under the symbol YOUL.

Summary

• Youlife Group Inc. completed its business combination with Distoken Acquisition Corporation on July 9, 2025, with Youlife and Distoken becoming wholly-owned subsidiaries of Youlife Group Inc.
• The aggregate merger consideration paid to Youlife shareholders was $700,000,000, paid entirely in newly issued Class A and Class B Ordinary Shares of Youlife Group Inc., valued at $10.00 per share.
• A PIPE Private Placement was consummated simultaneously with the business combination, raising an aggregate of $27,049,490 through the issuance of 2,704,949 Class A Ordinary Shares at $10.00 per share.
• As of July 9, 2025, Youlife Group Inc. has 76,048,600 Ordinary Shares outstanding, consisting of 64,887,792 Class A Ordinary Shares (including those represented by ADSs) and 11,160,808 Class B Ordinary Shares, along with 7,617,500 warrants.
• Youlife Group Inc.'s ADSs began trading on The Nasdaq Stock Market LLC under the symbol YOUL on July 10, 2025, while its warrants are quoted on the Over-the-Counter market.
• For the year ended December 31, 2024, Youlife International Holdings Inc. (the operating entity) reported revenues of RMB1,585.6 million (US$217.2 million), an increase of 16.1% from RMB1,365.9 million in 2023.
• Employee management services revenue increased by 33.7% to RMB1,382.6 million (US$189.4 million) in 2024, primarily driving overall revenue growth.
• Youlife International Holdings Inc. recorded a net loss of RMB52.4 million (US$7.2 million) for the year ended December 31, 2024, compared to a net profit of RMB79.3 million in 2023.
• The net loss in 2024 was primarily due to fair value losses from financial assets and a loss from disposal of equity investment.
• Operating expenses for Youlife International Holdings Inc. decreased by 14.0% from RMB219.3 million in 2023 to RMB188.6 million (US$25.8 million) in 2024, driven by reduced selling and marketing expenses.
• Youlife International Holdings Inc. had net cash provided by operating activities of RMB6.3 million (US$0.9 million) in 2024, a decrease from RMB11.5 million in 2023.
• Distoken Acquisition Corporation had a net income of $37,131 for the year ended December 31, 2024, and a net loss of $(405,712) for the three months ended March 31, 2025.
• Distoken Acquisition Corporation had a total shareholders deficit of $(2,975,977) as of December 31, 2024, and $(3,520,567) as of March 31, 2025, and faced substantial doubt about its ability to continue as a going concern prior to the business combination.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the business combination and Nasdaq listing are positive milestones, Youlife's operating entity reported a net loss in 2024, and two of its four business segments experienced significant revenue declines. The SPAC partner, Distoken, also had a going concern warning and accumulated deficit prior to the merger. The overall financial health of the combined entity needs careful monitoring despite the strategic move to go public.

Positives

• Successful completion of the business combination with Distoken Acquisition Corporation, enabling Youlife Group Inc. to become a publicly traded company on Nasdaq.
• Significant revenue growth in employee management services, increasing by 33.7% to RMB1,382.6 million (US$189.4 million) in 2024, indicating strong demand in this core segment.
• Overall revenue for Youlife International Holdings Inc. increased by 16.1% to RMB1,585.6 million (US$217.2 million) in 2024.
• Operating expenses for Youlife International Holdings Inc. decreased by 14.0% in 2024, reflecting improved cost efficiency, particularly in selling and marketing.
• Youlife International Holdings Inc. achieved a profit from operations of RMB40.5 million (US$5.6 million) in 2024, a turnaround from a loss of RMB18.9 million in 2023.
• The PIPE Private Placement raised $27.05 million, providing additional capital in connection with the business combination.

Negatives

• Youlife International Holdings Inc. reported a net loss of RMB52.4 million (US$7.2 million) for the year ended December 31, 2024, a decline from a net profit of RMB79.3 million in 2023.
• The net loss in 2024 was primarily driven by fair value losses from financial assets (RMB21.2 million) and a significant loss from disposal of equity investment (RMB59.0 million).
• Revenues from vocational education services decreased sharply by 72.1% to RMB50.0 million (US$6.9 million) in 2024, due to project completion and disposal of certain services.
• HR recruitment services revenue decreased by 67.9% to RMB24.2 million (US$3.3 million) in 2024, attributed to lower average service fees and discontinued operations.
• Youlife International Holdings Inc.'s net cash provided by operating activities decreased from RMB11.5 million in 2023 to RMB6.3 million (US$0.9 million) in 2024.
• Distoken Acquisition Corporation had a substantial accumulated deficit and faced going concern issues prior to the business combination, indicating financial instability of the SPAC partner.
• Distoken received deficiency letters from Nasdaq regarding its market value of listed securities and publicly held shares, posing a risk to its continued listing prior to the merger.

Risks

• Expectations regarding Youlife's strategies and future financial performance, including business plans, operating expenses, market trends, revenues, liquidity, cash flows, capital expenditures, and ability to invest in growth initiatives, involve substantial risks and uncertainties.
• The outcome of any legal proceedings that may be instituted against Distoken, Youlife, the Company, and others following the announcement of the Business Combination Agreement and related transactions.
• The ability to recognize the anticipated benefits of the Business Combination, which may be affected by competition, the Company's ability to grow and manage growth and profitability, maintain customer and supplier relationships, and retain its management team and key employees.
• Geopolitical risks, including the impacts of the ongoing conflict between Russia and Ukraine, and changes in applicable laws or regulations.
• Anticipated economic, business, and/or competitive factors.
• Anticipations regarding the impact of any major disease or epidemic that disrupts Youlife's business.
• Litigation and regulatory enforcement risks, including the diversion of management time and attention and additional costs and demands on Youlife's resources.
• Exchange rate instability.
• The possibility that expansion of Youlife's or the Company's customer offerings or certain operations may subject it to additional legal and regulatory requirements, including tort liability.
• Youlife's or the Company's ability to retain and grow its customer base.
• Youlife's or the Company's success in finding and maintaining future strategic partnerships and inorganic opportunities.
• The potential liquidity and trading of public securities of the Company.
• The ability to raise financing in the future by the Company.
• The ability of Youlife or the Company to respond to general economic conditions.
• Expansion and other plans and opportunities of Youlife or the Company.
• The ability of Youlife or the Company to manage its growth effectively.
• The ability of Youlife or the Company to develop and protect its brand.
• The ability of Youlife or the Company to compete with competitors in existing and new markets and offerings.

Future Outlook

Youlife Group Inc. aims to become the blue-collar talent's first-choice lifetime service platform in China, leveraging advanced technology to assist with skill improvement and career development. The company plans to continue expanding its business to increase cash inflow from operating activities and pursue financial support from credit facilities and equity financing to meet capital needs. Future growth is expected to be driven by expanding the customer base to attract larger and medium-sized customers in various industries and cities, and exploring relationships with customers in emerging industries. The company will continue to make capital expenditures to meet expected business growth, funded by existing cash and proceeds from the offering.

Management Comments

• Mr. Yunlei Wang, Chairman of the Board and Chief Executive Officer of Youlife and the Company, has served in these roles since July 2014.
• Mr. Lidong Zhu, Director, Chief Financial Officer, and Senior Vice President of Youlife and the Company, has served since January 2022.
• Mr. Xiaolin Gou, Director and Senior Vice President of Youlife and the Company, has served since May 2017.
• Ms. Yunqiu Dai, Director of the Company since May 2024, is the chairwoman and founder partner of Fengshi Capital.
• Mr. Clement Ka Hai Hung, Ms. Yeeli Hua Zheng, and Ms. Huifang Cheng were appointed as independent directors of the Company effective July 2025.
• Management believes that current cash and cash equivalents and anticipated cash flows from operations will be sufficient to meet anticipated working capital requirements and capital expenditures for at least the next 12 months.

Industry Context

The company operates within China's blue-collar lifetime service market, which is influenced by the country's overall economic growth, competitive environment, and challenges in hiring. The company's diversified service offerings, including vocational education, HR recruitment, employee management, and market services, are designed to complement each other and ensure financial growth. The industry is highly competitive and fragmented, with government policies strengthening supervision requirements. The company is focusing on new economy industries with high customer value and large-scale outsourcing service demands.

Management Changes

Corporate Governance

Legal Proceedings

• The company may from time to time be subject to legal proceedings, disputes, and claims in the ordinary course of business, primarily related to cooperation disputes and disputes regarding outsourcing employees with corporate customers.
• As of December 31, 2024, the company was not a party to any ongoing material litigation, arbitration, or administrative proceedings, and was not aware of any contemplated claims or proceedings that would materially and adversely affect its business.
• As of December 31, 2024, the Directors were not involved in any actual or threatened material claims or litigation.

Related Party Transactions

• Youlife and the Company had no significant related party transactions with related parties, other than a non-trade related balance of RMB978 thousand due from companies controlled by a main shareholder of the Company as of December 31, 2023, which was reduced to zero as of December 31, 2024.
• Distoken Acquisition Corporation had various related party transactions, including advances from and promissory notes to its Sponsor, and administrative service fees paid to the Sponsor or its affiliate.

Stakeholder Impact

• Shareholders: The business combination and Nasdaq listing provide liquidity and a public market for Youlife Group Inc. shares. Existing Youlife shareholders received shares in the new public entity, and Distoken shareholders converted their securities. The dual-class share structure gives Class B holders (primarily Mr. Yunlei Wang) 20 votes per share, concentrating voting power.
• Employees: The adoption of an RSU Plan provides equity incentives, which can aid in motivation and retention. The company's focus on the blue-collar lifetime service market directly impacts blue-collar talent by providing vocational education, HR recruitment, and employee management services.
• Customers: The company's ability to timely and continuously source adequate blue-collar talent is crucial for corporate customers' staffing needs. Maintaining major customers and expanding the customer base are key to continued growth.
• Suppliers: The company's operations involve procurement costs, including third-party recruitment services, indicating reliance on suppliers.
• Creditors: The company's liquidity and capital resources, including current cash and anticipated cash flows, are expected to meet working capital and capital expenditure needs. The going concern issues for Distoken prior to the merger highlight potential risks for its creditors, which are mitigated by the merger.

Next Steps

• Youlife Group Inc. ADSs commenced trading on The Nasdaq Stock Market LLC on July 10, 2025.
• The company plans to continue expanding its business to increase cash inflow from operating activities.
• The company intends to fund future capital expenditures with existing cash balance and proceeds from the offering.
• The company plans to pursue financial support from credit facilities and equity financing to meet capital needs.

Key Dates

Recommendation

Keywords

Youlife Group Inc., Distoken Acquisition Corporation, Business Combination, SPAC, Nasdaq Listing, American Depositary Shares, ADSs, SEC Filing, 20-F, Financial Results, Employee Management Services, HR Recruitment Services, Vocational Education, China Blue-Collar Market, PIPE Private Placement, Corporate Governance, Risk Factors, Financial Performance, Merger, Public Company