Foretell Technologies reports cumulative losses nearing 2.3 billion: cost contraction and staff reduction, over 70% of revenue dependent on Geely

$Freetech (Zhejiang) Intelligent Technology Co., Ltd (810651.HK)$

Recently, Foretell Technologies (Zhejiang) Intelligent Technology Co., Ltd. (hereinafter referred to as Foretell Technologies) filed for an IPO on the Hong Kong Stock Exchange, with CITIC Securities, CICC, Huatai International, and HSBC acting as joint sponsors.

Public information shows that in January and June 2025, Freetech had filed for an IPO on the Hong Kong Stock Exchange twice, but both attempts ended due to the expiration of the documents after failing to pass the hearing within six months.

In this IPO, the company plans to use the proceeds mainly for enhancing R&D of its driving assistance solutions and products; as capital expenditures related to expanding and upgrading production capabilities over the next three years; for expanding sales and service networks over the next three years; and for working capital and general corporate purposes.

Accumulated losses reached 2.285 billion yuan, with gross margin increasing.

According to Tianyancha, Freetech was founded in 2016 and is a supplier of driving assistance solutions. The company’s solutions are built on the ODIN platform, consisting of four key technology modules: advanced controllers, precision sensors, powerful software and algorithms, and a stable data closed-loop platform.

As of June 30, 2025, 51 OEMs had purchased Freetech's solutions, cumulatively achieving mass production in over 290 projects.

During the historical performance period, Freetech's revenue primarily came from selling driving assistance products and solutions to OEMs. The company develops driving assistance products and solutions specifically designed for OEMs based on its ODIN platform. These driving assistance solutions can be categorized into three types according to their intelligence levels: FT Pro, FT Max, and FT Ultra.

From 2022 to 2024, and for the first half of 2025 (hereinafter referred to as the reporting period), the company's revenue from FT Pro amounted to 139 million yuan, 174 million yuan, 111 million yuan, and 59.366 million yuan respectively, accounting for 42.5%, 19.1%, 8.6%, and 6.4% of the total revenue during the respective periods.

Due to strategic resource optimization from 2022 to the first half of 2025, the revenue contribution of FT Pro significantly decreased. Instead, the company strategically shifted its focus to FT Max and FT Ultra, which typically have higher profit margins, leading to a noticeable adjustment in the product mix.

During the reporting period, the sales revenue of FT Max was 138 million yuan, 290 million yuan, 558 million yuan, and 333 million yuan, accounting for 42.1%, 32.0%, 43.5%, and 35.9% of the total revenue during the respective periods.

Meanwhile, the revenue from the FT Ultra solution fluctuated, primarily driven by changes in demand from OEM customers for L2+ and above driving assistance solutions, as these solutions went through stages from validation to commercialization. During the reporting period, FT Ultra achieved revenues of 50.352 million yuan, 444 million yuan, 614 million yuan, and 536 million yuan, accounting for 15.4%, 48.9%, 47.9%, and 57.7% of the total revenue during the respective periods.

Due to the increased proportion of higher-margin solutions, Freetech's overall revenue scale and gross margin have also seen significant growth.

During the reporting period, the company achieved revenues of 328 million yuan, 908 million yuan, 1.283 billion yuan, and 928 million yuan, with gross profits of 20.355 million yuan, 65.836 million yuan, 143 million yuan, and 122 million yuan, respectively. The gross margins were 6.2%, 7.3%, 11.2%, and 13.1%, respectively. In 2023, 2024, and the first half of 2025, the company’s revenue growth was 177.0%, 41.4%, and 197.5%, respectively.

A portion of Freetech's revenue includes other income derived from government subsidies, additional VAT input deductions, interest income from loans to related parties, and others. During each reporting period, the company's other income amounted to 10.376 million yuan, 15.978 million yuan, 23.41 million yuan, and 11.9 million yuan, respectively.

However, at the profit level, due to operating in the highly competitive driving assistance solutions industry, Freetech has inevitably been in a state of continuous losses.

At the end of each reporting period, the company's net profits were -855 million yuan, -738 million yuan, -528 million yuan, and -164 million yuan, respectively. The adjusted net profits were -691 million yuan, -627 million yuan, -445 million yuan, and -152 million yuan, respectively, with adjusted net profit margins of -211.1%, -69.1%, -34.7%, and -16.4%, respectively. During this period, the company's total losses amounted to 2.285 billion yuan.

Freetech stated: As the company's business expands, costs and expenses continue to increase, along with sustained investment in R&D, which may lead to continued losses. If the company cannot generate sufficient revenue and manage expenses effectively, it may continue to incur significant losses and may not be able to achieve profitability or sustain profitability.

Cost reductions and staff cuts; over 70% of revenue depends on Geely

Before achieving large-scale commercialization, Freetech also invested heavily in R&D for driving assistance technologies.

During the reporting period, the company's R&D expenditures were 515 million yuan, 561 million yuan, 447 million yuan, and 202 million yuan, accounting for 157.2%, 61.8%, 34.8%, and 21.7% of the total revenue for the respective periods. The company's R&D expenditures mainly include employee benefits, technology development expenses, depreciation and amortization expenses, share-based payments, and other miscellaneous R&D expenses.

During the same period, the company's selling expenses were 41.218 million yuan, 41.13 million yuan, 49.587 million yuan, and 18.322 million yuan, accounting for 12.6%, 4.5%, 3.9%, and 2.0% of the revenue for the respective periods. Administrative expenses were 182 million yuan, 91.236 million yuan, 100 million yuan, and 46.951 million yuan, accounting for 55.4%, 10.1%, 7.8%, and 5.1% of the revenue for the respective periods.

It is not difficult to see that Freetech has significantly reduced its various expense investments and optimized operational efficiency. However, this move has also raised external concerns that cutting R&D could lead to technological lag.

Zhang Xiang, Chief New Energy Expert at Grand International Exhibition Co., Ltd., stated that many companies in the autonomous driving industry struggle to turn a profit because the sector faces overcapacity. Many firms receive few orders, have minimal revenue but high expenses, while the industry continues to evolve rapidly. In this context, Freetech’s cost-cutting measures aim to boost profitability, differentiate itself from competitors, and attract investor attention, hoping that its self-generated profits will lead investors to perceive its technology as advanced with strong growth prospects.

As of the end of each reporting period, Freetech had 1,084, 896, 795, and 699 full-time employees respectively, reflecting a cumulative reduction of 385 employees over three years and six months. By the end of June 2025, the proportions of employees in R&D, manufacturing, sales and marketing, and management were 66.4%, 12.6%, 6.4%, and 14.6%, respectively.

A significant portion of Freetech's revenue comes from a relatively small number of clients, including Geely Holding Group. Given the high customer concentration, any substantial decline in sales from a major client could have a materially adverse impact on the company’s business.

During the reporting period, revenue from the top five clients accounted for approximately 73.6%, 76.4%, 91.2%, and 94.1% of total revenue. Freetech stated that the increase in customer concentration was mainly due to the overall increase in Geely Group's sales volume.

As the application of higher-level autonomous driving systems continues to expand, Freetech's product sales to Geely Holding Group have become increasingly concentrated, particularly for the FT Ultra system.

At the end of each reporting period, Freetech’s total revenue from Geely Group amounted to approximately 64.5 million yuan, 393 million yuan, 763 million yuan, and 7.06 billion yuan, accounting for about 19.7%, 43.3%, 59.4%, and 76.0% of the company’s total revenue, respectively.

In the first half of 2025, the company’s sales to Geely Group grew by 30.0% compared to the same period in 2024, surpassing the industry average growth rate of 11.4%. Sales of FT Ultra (with a relatively high average selling price) to Geely increased from 27.2 million yuan in 2022 to 303 million yuan in 2023, 525 million yuan in 2024, and further rose to 509 million yuan during the same period in 2025.

Zhang Xiang pointed out: Freetech faces significant risks due to its heavy reliance on major clients. Any adjustments in procurement strategy, fluctuations in sales volumes, or advancement in self-research by downstream key clients could severely impact its revenue.

At the end of each reporting period, the company’s inventory stood at 389 million yuan, 419 million yuan, 574 million yuan, and 606 million yuan, respectively, with inventory turnover days being 316.3 days, 172.8 days, 156.8 days, and 131.7 days, respectively.

During the same period, the company's trade receivables and notes receivable were 231 million yuan, 498 million yuan, 736 million yuan, and 601 million yuan respectively, with turnover days of trade receivables and notes receivable being 213 days, 144.6 days, 173 days, and 129.6 days respectively.

Due to continuous losses and working capital tied up in high levels of inventory and accounts receivable, Forretech’s internal cash flow has also been strained. At the end of each reporting period, net cash flows generated from operating activities were -703 million yuan, -498 million yuan, -153 million yuan, and -188 million yuan respectively, with a total outflow of 1.542 billion yuan.

As of the end of each reporting period, the company's cash and cash equivalents were 339 million yuan, 60.149 million yuan, 654 million yuan, and 914 million yuan respectively.

Borrowings continue to increase, with negative net assets

Due to business expansion and increasing cash demands, in order to continuously optimize the debt structure and better utilize debt financing resources while raising funds at lower costs, Forretech’s bank borrowings have also surged significantly.

As of the end of each reporting period, the company's total borrowings were 1.271 billion yuan, 1.232 billion yuan, 1.155 billion yuan, and 1.698 billion yuan respectively.

As of the end of each reporting period, the company's net asset value was -1.053 billion yuan, -1.769 billion yuan, 80.393 million yuan, and -69.879 million yuan respectively. As of the end of the reporting period, the company still recorded net liabilities, posing a risk of 'insolvency.'

In terms of solvency, at the end of each reporting period, Forretech’s current ratios were 1.32, 0.83, 1.2, and 1.21 respectively, while quick ratios were 0.83, 0.5, 0.86, and 0.88 respectively.

As of the date of signing the prospectus, the single largest shareholder group of Forretech includes Zhang Lin, the company founder, chairman, and CEO; Du Min; Harmolin LLC; Leap Zenith LLC; Ningbo Junma; Lin Tongmin; Hangzhou Litong; Hangzhou Lulixin; Hangzhou Foulixin; Jiaxing Jilixin; Jiaxing Yilixin; and Panhai Hongxin.

Thus, as of the latest practicable date, Zhang Lin and Du Min, through Harmolin LLC, Leap Zenith LLC, Ningbo Junma, Lin Tongmin, Hangzhou Litong, Hangzhou Lulixin, Hangzhou Foulixin, Jiaxing Jilixin, Jiaxing Yilixin, and Panhai Hongxin, are entitled to exercise 42.60% of the voting rights attached to 21.99% of the company's issued shares. (Produced by Harbor Finance)

"Harbor Business Observation" by Shi Zifu

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