Our Holding Company Structure Sunlands Technology Group is a Cayman Islands holding company that does not conduct operations by itself. The Group’s operations in China are conducted through our PRC subsidiaries and the consolidated variable interest entities, or the VIEs. However, we and our direct and indirect subsidiaries do not, and it is virtually impossible for them to, have any equity interests in the VIEs in practice as current PRC laws and regulations restrict foreign investment in companies that engage in value-added telecommunication services. As a result, we depend on certain contractual arrangements with the VIEs to operate a significant portion of the Group’s business. This structure allows us to be considered the primary beneficiary of the VIEs for accounting purposes, which serves as the basis for consolidating the VIEs’ operating results in the Group’s financial statements under U.S. GAAP. The VIEs are owned by certain nominee shareholders, not us. Most of the nominee shareholders of the VIEs are also beneficial owners of our company. Investors in the ADSs are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by our subsidiaries and the VIEs. Investors who are non-PRC residents may never directly hold equity interests in the VIEs under current PRC laws and regulations. As used in this annual report, “we,” “us,” “our company” or “our” refers to Sunlands Technology Group and its subsidiaries. “Variable interest entities” or “VIEs” refers to Wuhan Xiaoyan Technology Co., Ltd., or Wuhan Xiaoyan, and Beijing Lingding Management Consulting Co., Ltd., or Beijing Lingding. The VIEs primarily conduct operations in China. The VIEs are consolidated for accounting purposes but are not entities in which we own equity. The following chart illustrates the Group’s organizational structure, including our significant subsidiaries as “significant” is defined under Section 1-02 of Regulation S-X under the Securities Act and certain other subsidiaries and certain VIE as of the date of this annual report. ———— Equity interest ------------ Contractual arrangements 3 The Group’s corporate structure involves unique risks to investors in the ADSs. In 2023, 2024 and 2025, the amount of revenues generated by the VIEs accounted for 63.4%, 83.9% and 48.5%, respectively, of the Group’s total net revenues. As of December 31, 2024 and 2025, the total assets of the VIEs, excluding amounts due from other consolidated entities in the Group, equaled to 21.4% and 3.3% of the Group’s consolidated total assets as of the same dates, respectively. As of the date of this annual report, to the best knowledge of our directors and management, the VIE agreements have not been tested in a court of law in the PRC. If the PRC government deems that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to material penalties or be forced to relinquish our contractual interests in those operations or otherwise significantly change the Group’s corporate structure. We and our investors face significant uncertainty about potential future actions by the PRC government that could affect the legality and enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect our ability to consolidate the financial results of the VIEs and the financial performance of the Group as a whole. The ADSs may decline in value or become worthless if we are unable to effectively enforce our contractual control rights over the assets and operations of the VIEs that conduct a significant portion of the Group’s business in China. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure” for detailed discussion. Contractual Arrangements and Corporate Structure We are a Cayman Islands exempted company and currently conduct substantially all business operations in the PRC through our subsidiaries incorporated in the PRC and the contractual arrangements among our PRC subsidiaries and the VIEs. It is the VIEs that hold key operating licenses, provide services to customers, and enter into contracts with suppliers. We operate the Group’s business this way because PRC laws and regulations restrict foreign investment in companies that engage in value-added telecommunication services. These contractual arrangements entered into with the VIEs allow us to (i) direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law. The VIE structure is used to provide investors with exposure to foreign investment in China-based companies where PRC law restricts direct foreign investment in such operating companies in the PRC. These contractual arrangements include the operating agreements, equity pledge agreements, exclusive purchase option agreements, shareholder voting right trust agreements, loan agreements, and cooperation agreements, as the case may be. As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs for accounting purposes and are able to consolidate their operating results in the Group’s financial statements under U.S. GAAP. It is important to note that investors in the ADSs are purchasing equity securities of a Cayman Islands holding company rather than equity securities issued by our subsidiaries and the VIEs. More specifically, investors in the ADSs or our ordinary shares would not be holding any ownership interest, directly or indirectly, in the VIEs under current PRC laws and regulations as investors would only have the contractual relationship with the operating entities in the PRC. Neither such investors nor the holding company itself have an equity ownership in, direct investment in, or control of, through such ownership or investment, the VIEs. Investors who are non-PRC residents may never directly hold equity interests in the VIEs under current PRC laws and regulations. We do not have any equity interests in the VIEs who are owned by certain nominee shareholders. Any of such nominee shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. In the event that the shareholders of the VIEs breach the terms of these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy and all or part of their assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all business operations or otherwise benefit from the assets held by the VIEs and their shareholders, which could have a material adverse effect on the Group’s business, financial condition and results of operations. As a result, the contractual arrangements may be less effective than direct ownership, and we could face heightened challenges, risks and costs in enforcing these contractual arrangements due to legal uncertainties and jurisdictional limits, because there are uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the legality and enforceability of these contractual arrangements. If the PRC government finds such agreements to be illegal, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs. Contractual Arrangements with Consolidated VIEs and Their Shareholders Currently, the Group’s online education service business in China is operated partially through the VIEs and their subsidiaries due to PRC legal restrictions on foreign ownership in value-added telecommunication services and other internet related business, and we are considered the primary beneficiary of each of the VIEs for accounting purposes through a series of contractual arrangements. In August 2017 and March 2023, Wuhan Studyvip Online Education Co. Limited, or Wuhan Zhibo, a wholly-owned subsidiary of us, entered into a series of contractual arrangements with Beijing Yuanchilaxiang Education Technology Co., Ltd (formerly known as “Beijing Shangde Online Education Technology Co., Ltd.”), or Beijing Sunlands, as well as its shareholders and, where applicable, its operating subsidiaries pursuant to which we became the primary beneficiary of 4 Beijing Sunlands for accounting purposes. In December 2025, Wuhan Zhibo terminated those contractual arrangements with Beijing Sunlands and the other relevant parties, and Beijing Sunlands became a wholly-owned subsidiary of Wuhan Zhibo. Our wholly-owned subsidiaries have entered into a series of contractual arrangements with the VIEs, their shareholders and operating subsidiaries, where applicable, respectively. Through such contractual agreements, our wholly-owned subsidiaries are able to (i) direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by PRC law. The Group is therefore considered the primary beneficiaries of the VIEs and their subsidiaries for accounting purposes and are able to consolidate their operating results in the Group’s financial statements under U.S. GAAP. The following sets forth the principal terms of the contractual arrangements entered into among our subsidiaries, the relevant VIEs and their respective shareholders and, where applicable, subsidiaries. Exclusive Technical Consultation and Service Agreement. Under the exclusive technical consultation and service agreement among Wuhan Zhibo and the VIEs, Wuhan Zhibo has the exclusive right to provide, among other things, technical consultation and services to the VIEs and their subsidiaries, and the VIEs and their subsidiaries agree to accept all the consultation and services provided by Wuhan Zhibo. Without Wuhan Zhibo’s prior written consent, the VIEs and their subsidiaries are prohibited from engaging any third party to provide any services contemplated by this agreement. In addition, Wuhan Zhibo has exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of this agreement. The VIEs and their subsidiaries agree to pay a quarterly service fee to Wuhan Zhibo at an aggregate amount of a certain percentage ranging from 10% to 100% of monthly revenue of the VIEs and their subsidiaries. Unless terminated by Wuhan Zhibo, this agreement will remain effective until the dissolution of the VIEs and their subsidiaries. Without Wuhan Zhibo’s prior written consent, the VIEs and their subsidiaries do not have the right to terminate this exclusive technical consultation and service agreement. Business Operation Agreement. Under the business operation agreement, each of the VIEs, their subsidiaries and their shareholders confirmed and agreed that, without Wuhan Zhibo’s prior written consent, they shall not make any transaction that has a material adverse effect on the assets, business, personnel, obligations, rights or operations of the VIEs and their subsidiaries, including but not limited to sale or purchase of any assets or rights exceeding RMB50,000, incurrence of any encumbrance on any of their assets, including intellectual property rights, in favor of a third party, amendment of their articles of association or business scope, or change of their normal operation procedures. The VIEs, their subsidiaries and their shareholders shall accept and execute opinions and instructions of Wuhan Zhibo in connection with the employee engagement and dismissal, daily operations and financial management systems. The shareholders of the VIEs shall elect or appoint the candidates recommended by Wuhan Zhibo as the VIEs’ respective directors and supervisors, and procure the appointment of the VIEs’ respective chairman of the board and senior management pursuant to Wuhan Zhibo’s designation. The agreement also provides that if any of the agreements among Wuhan Zhibo, the VIEs and their subsidiaries is terminated, Wuhan Zhibo is entitled to terminate all of the other agreements among itself, the VIEs and their subsidiaries. This agreement will remain binding until dissolution of the VIEs and all the subsidiaries of the VIEs. Equity Interest Pledge Agreement. Under the equity interest pledge agreement among Wuhan Zhibo, the shareholders of the VIEs and the VIEs, the shareholders of the VIEs pledged all of their respective equity interests in the VIEs to Wuhan Zhibo as security for performance of the obligations of the VIEs and their shareholders under the exclusive technical consultation and service agreement, the option agreement and the business operation agreement. The shareholders of the VIEs shall instruct respective VIEs not to distribute any dividends and shall not approve any profit distribution plan. If any of the specified events of default occurs, Wuhan Zhibo may exercise the right to enforce the pledges after giving a notice of default to the shareholders of the VIEs. Wuhan Zhibo may assign any and all of its rights and obligations under the equity interest pledge agreement to its designee(s) at any time. The equity interest pledge agreement is binding on the shareholders of the VIEs and their successors. Option Agreement. Pursuant to the option agreement among Wuhan Zhibo, the shareholders of the VIEs and the VIEs, each of the shareholders irrevocably granted Wuhan Zhibo a right to purchase, or designate a third party to purchase, equity interests in the VIEs then held by each shareholder at once or at multiple times at any time in part or in whole at Wuhan Zhibo’s sole and absolute discretion to the extent permitted by PRC law. The shareholders of the VIEs shall promptly surrender all considerations they received from the exercise of the options to Wuhan Zhibo or the designated third party free of charge. Without Wuhan Zhibo’s prior written consent, the shareholders of the VIEs shall not, individually or collectively, make or procure the VIEs to make in any transaction or conduct that has a material adverse effect on the assets, liabilities, operations, equity and other legal rights of the VIEs. Without Wuhan Zhibo’s prior written consent, the VIEs shall not enter into any contract exceeding RMB50,000, except the contracts in the ordinary course of the business. The VIEs shall not be dissolved or liquidated without prior written consent by Wuhan Zhibo. The shareholders of the VIEs waive their rights of pre-emption in regard to the transfer of equity interest by any other shareholder of the VIEs to Wuhan Zhibo as instructed. Powers of Attorney. Pursuant to the powers of attorney executed by the shareholders of the VIEs, the shareholders of the VIEs each irrevocably authorized Wuhan Zhibo to act on their respective behalf as exclusive agent and attorney with 5 respect to all rights of shareholders concerning all equity interests held by each of them in the VIEs, including but not limited to propose to convene shareholder meetings, accept any notice with respect to the convening and proceeding of the shareholder meeting, attend shareholder meetings, sign the shareholders resolutions on their behalf, exercise all the shareholder’s rights according to laws and regulations and the VIEs’ articles of association (including but not limited to voting rights and the sale transfer, pledge or dispose of all equity interests held in part or in whole) and designate and appoint on their respective behalf the president, directors, supervisors, chief executive officer, chief financial officer and other senior management members of the VIEs. In addition, in case where shareholders have spouses, the spouses of the shareholders of the VIEs also executed spousal consent letters to confirm that the equity interests of the VIEs are the own property of the shareholders and shall not constitute the jointly possessed property of the couples, and irrevocably waived any potential right or interest that may be granted by operation of applicable law in connection with the equity interests of the VIEs held by the shareholders. As a result of the contractual arrangements above, our wholly-owned subsidiaries bear the economic risks and receive the economic benefits of the VIEs, hold the power in directing the significant activities of the VIEs, and are the primary beneficiary of the VIEs for accounting purposes. Therefore, we have consolidated the financial results of the VIEs and their subsidiaries in the Group’s consolidated financial statements. In the opinion of Tian Yuan Law Firm, our PRC legal counsel, (i) the contractual arrangements among our wholly-owned PRC subsidiaries, the VIEs, the VIEs’ respective shareholders and the VIEs’ respective subsidiaries are valid, binding and enforceable under the PRC laws and regulations currently in effect; and (ii) the ownership structures of the VIEs and our WFOEs under the contractual arrangements aforesaid currently are not in violation of applicable PRC laws and regulations currently in effect. However, these contractual arrangements may not be as effective in providing control as direct ownership. There are uncertainties regarding the interpretation and application of current or future PRC laws and regulations. Accordingly, Chinese regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. For a description of the risks related to our corporate structure, please see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure.” Licenses and Approvals As advised by Tian Yuan Law Firm, our PRC legal counsel, except for the filings associated with our mobile apps under Notice on the Filing of Mobile Internet Apps, we believe our PRC subsidiaries and the VIEs have obtained all licenses and approvals explicitly required and necessary for the Group’s operations in China; however, a number of the Group’s operating entities currently do not hold certain licenses and approvals or complete certain regulatory filings which are not explicitly required under the current PRC laws and regulations to date for their business operations but may be required in the future if the PRC regulatory authorities change their views as to the interpretation and implementation of such laws and regulations. To the extent such licenses, approvals or filings are required, the Group’s failure to secure such licenses, permits or filings in a timely manner, or at all, could have a material adverse impact on its business operations. These licenses, approvals or filings include the filings associated with our mobile apps under the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps, the Private School Operating Permit, the License for Online Transmission of Audio-Visual Programs, the Internet Publishing License, the Value-Added Telecommunications Business Operating License, the License for the Production and Operation of Radio and Television Program, the Internet News Information License, the Publication License, and the filing as a live-streaming platform. For details, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementation Rules,” “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group faces regulatory risks and uncertainties with respect to the licensing requirement for the online transmission of internet audio-visual programs,” “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The failure to obtain and maintain other approvals, licenses, permits or filings applicable to the Group’s business could have a material adverse impact on the Group’s business, financial conditions and results of operations,” and “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group is subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on the Group’s business, financial condition and results of operations.” The following table sets forth a list of licenses and approvals, subject to further renewal, that our PRC subsidiaries and the VIEs are explicitly required to obtain and necessary to carry out the Group’s operations in China as of the date of this annual report and none of such licenses and approvals obtained had been denied or rescinded. License Entity Holding the License Status Value-added telecommunications business license (ICP certificate) Beijing Odysseus Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained 6 Beijing Yuanmashijie Technology Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Fangtang Technology Co., Ltd. (formerly known as Wuhan Fangtang Technology Co., Ltd.) (Subsidiary of a VIE) Obtained Beijing Zhiziyuanshui Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Wuhan Guanshu Culture Development Co., Ltd. (Subsidiary of a VIE) Obtained Wuhan Youshi Technology Co., Ltd. (Subsidiary of a VIE) Obtained Wuhan Lexueyun Technology Co., Ltd. (Subsidiary of a VIE) Obtained Beijing Yangfan Changchun Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Houduan Yuanli Technology Co., Ltd. (formerly known as Wuhan Houduan Yuanli Technology Co., Ltd.) (Subsidiary of a VIE) Obtained Beijing Shangkaotong Online Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Xiangyang Shufan Education Technology Co., Ltd. (formerly known as Shufan Education (Wuhan) Co., Ltd.) (Subsidiary of a VIE) Obtained Publication business operating license Hubei Zhidao Online Education Technology Co., Ltd., or Wuhan Shangde (PRC subsidiary) Obtained Hubei Fangtang Technology Co., Ltd. (formerly known as Wuhan Fangtang Technology Co., Ltd.) (Subsidiary of a VIE) Obtained Wuhan Xiaoyan Technology Co., Ltd. (a non-significant VIE) Obtained Beijing Feibian Education Technology Co., Ltd. (PRC subsidiary) Obtained Chengdu Xin Ketang Culture Transmission Co., Ltd. (Subsidiary of a VIE) Obtained Beijing Zhiziyuanshui Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Shufan Education Technology Co., Ltd. (formerly known as Shufan Education (Wuhan) Co., Ltd. and Xiangyang Shufan Education Technology Co., Ltd.) (Subsidiary of a VIE) Obtained Wuhan Guanshu Culture Development Co., Ltd. (Subsidiary of a VIE) Obtained 7 Wuhan Youshi Technology Co., Ltd. (Subsidiary of a VIE) Obtained Wuhan Lexueyun Technology Co., Ltd. (Subsidiary of a VIE) Obtained Beijing Shangkaotong Online Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Beijing Yangfan Changchun Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Wuhan Yilisu Technology Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Houduan Yuanli Technology Co., Ltd. (formerly known as Wuhan Houduan Yuanli Technology Co., Ltd.) Obtained Hangzhou Qingxuetang Stationery Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Yuanji Online Technology Co., Ltd. (formerly known as Wuhan Yuanji Online Technology Co., Ltd.) (PRC Subsidiary) Obtained Beijing Yuanmashijie Technology Co., Ltd. (Subsidiary of a VIE) Obtained License for the Production and Operation of Radio and Television Program Chengdu Xin Ketang Culture Transmission Co., Ltd. (Subsidiary of a VIE) Obtained Food Business License Hubei Houduan Yuanli Technology Co., Ltd. (formerly known as Wuhan Houduan Yuanli Technology Co., Ltd.) (Subsidiary of a VIE) Obtained Travel Agency License Beijing Fanghua International Tourism Co., Ltd. (formerly known as Beijing Xiangtutianxia International Tourist Co., Ltd.) (Subsidiary of a VIE) Obtained Beijing Zhiziyuanshui Education Technology Co., Ltd. (Subsidiary of a VIE) Obtained Filing for Class II Medical Device Business Operation Wuhan Yilisu Technology Co., Ltd. (Subsidiary of a VIE) Obtained Hubei Houduan Yuanli Technology Co., Ltd. (Subsidiary of a VIE) Obtained Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, the Group may be required to obtain additional licenses, permits, filings, registrations or approvals for business operations in the future. If the Group is found to be in violation of any existing or future PRC laws or regulations, or fails to obtain or maintain any of the required licenses, permits, filings, registrations or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. In addition, if the Group had inadvertently concluded that such licenses, approvals, permits, registrations or filings were not required, or if applicable laws, regulations or interpretations change in a way that requires the Group to obtain such licenses, approval, permits, registrations or filings in the future, the Group may be unable to obtain such necessary licenses, approvals, permits, registrations or filings in a timely manner, or at all, and such licenses, approvals, permits, registrations or filings may be rescinded even if obtained. Any such circumstance may subject the Group to fines and other regulatory, civil or criminal liabilities, and the Group may be ordered by the competent government authorities to suspend relevant operations, which will materially and adversely affect the Group’s business operation. For 8 risks relating to licenses and approvals required for business operations in China, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business.” As advised by our PRC legal counsel, under the currently effective PRC laws and regulations, except as disclosed in “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group is subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on the Group’s business, financial condition and results of operations,” Sunlands Technology Group, our subsidiaries and the VIEs are not subject to the permission requirements from the CAC with respect to business operations, based on the fact that, as of the date of this annual report, none of Sunlands Technology Group, our subsidiaries and the VIEs has been identified by any PRC governmental authority as an “critical information infrastructure operator” that will be subject to the CAC’s cybersecurity review requirements. However, there remain uncertainties on the interpretation and implementations of the Cybersecurity Review Measures and other laws and regulations regarding cybersecurity and data protection. If the CAC or other regulatory agencies subsequently require that their approvals be obtained for the Group’s respective data processing activities, the Group may be unable to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. For details, see “Item 3. Key Information—Recent Regulatory Development—Cybersecurity Review Measures.” In addition, the PRC government has recently indicated an intent to exert more oversight over overseas securities offerings and published a series of laws and regulations to regulate such transactions. In connection with our prior overseas offerings and listing status on the New York Stock Exchange (the “NYSE”), as of the date of this annual report, we (i) have not been required to obtain any permission from or complete any filing with the CSRC, and (ii) have not been required to go through a cybersecurity review by the CAC. As advised by our PRC legal counsel, under the currently effective PRC laws and regulations, as a group that has been listed on a foreign stock exchange before the promulgation of the Revised Cybersecurity Review Measures, Sunlands Technology Group, our subsidiaries and the VIEs are not required to go through a cybersecurity review by the CAC to conduct a security offering or maintain our listing status on the NYSE, based on their consultation with competent government authorities. According to the press conference held by CSRC for the release of the Overseas Listing Trial Measures and the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, as a group that has been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures, Sunlands Technology Group, our subsidiaries and the VIEs are not required to complete the filing with the CSRC to maintain our listing status on the NYSE, but we will be required to undergo the filing procedures with the CSRC for our future offerings, listing or any other capital raising activities within the applicable scope of the Overseas Listing Trial Measures. Since the Overseas Listing Trial Measures were newly promulgated, there remain significant uncertainties surrounding the interpretation, application and enforcement of such measures. We cannot assure you that we could complete the filing procedure as required with the CSRC under the Overseas Listing Trial Measures for any of our future offerings, listing or any other capital raising activities in a timely manner, or at all, and such filings may be rescinded even if completed. Any such circumstance could subject the Group to penalties, including fines, suspension of business and revocation of required licenses, significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. For more detailed information, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China—The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas, and if required, we cannot predict whether or for how long the Group will be able to obtain such approval or complete such filing or other requirements.” Recent Regulatory Development Cybersecurity Review Measures On January 4, 2022, the Cyberspace Administration of China, or the CAC, published the Revised Cybersecurity Review Measures, which became effective on February 15, 2022 and repeal the Cybersecurity Review Measures promulgated on April 13, 2020. The Revised Cybersecurity Review Measures provide that a critical information infrastructure operator purchasing network products and services, and platform operators carrying out data processing activities, which affect or may affect national security, shall apply for cybersecurity review and that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review. As the Revised Cybersecurity Review Measures is newly promulgated, it is uncertain how the measures will be interpreted or implemented and how they will affect the Group. We cannot predict the impact of the Revised Cybersecurity Review Measures, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. In anticipation of the strengthened implementation of cybersecurity laws and regulations and the continued expansion of the Group’s business, the Group faces potential risks if the Group is deemed as a “critical information infrastructure operator” or “platform operator” under the PRC cybersecurity laws and regulations, and would be required to follow cybersecurity review procedures. During such review, the Group may be required to suspend providing any existing or new services to the Group’s customers and/or experience other disruptions of the Group’s operations, and such review could also result in negative publicity with respect to the Group and diversion of the Group’s managerial and financial resources. 9 As of the date of this annual report, the Group has not been involved in any investigations or becomes subject to a cybersecurity review initiated by the CAC based on the Revised Cybersecurity Review Measures, and the Group has not received any inquiry, notice, warning, sanctions in such respect or any regulatory objections to our listing status from the CAC. As advised by our PRC legal counsel, Tian Yuan Law Firm, under the currently effective PRC laws and regulations, except as disclosed in “Item 3. Key Information—3.D. Risk Factors—Risks Related to the Group’s Business—The Group is subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on the Group’s business, financial condition and results of operations,” Sunlands Technology Group, our subsidiaries and the VIEs are not covered by permission requirements from the CAC (i) to conduct a security offering or maintain our listing status on the NYSE, or (ii) to conduct business operations, on the following grounds: (i) our PRC legal counsel has consulted the competent government authorities which acknowledged that, under the currently effective PRC laws and regulations, a company that has been listed on a foreign stock exchange before the promulgation of the Revised Cybersecurity Review Measures is not required to go through a cybersecurity review by the CAC to conduct a securities offering or to maintain its listing status on the foreign stock exchange on which its securities have been listed; (ii) as of the date of this annual report, none of Sunlands Technology Group, our subsidiaries and the VIEs has been identified by any PRC governmental authority as a “critical information infrastructure operator” that will be subject to the CAC’s cybersecurity review requirements. However, there remain uncertainties on the interpretation and implementations of the Revised Cybersecurity Review Measures and other laws and regulations regarding cybersecurity and data protection. If the CAC or other regulatory agencies later require that the Group obtains their approvals for our future offshore offerings or for the Group’s data processing activities, the Group may be unable to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance may significantly limit or completely hinder our ability to continue to offer securities to investors, subject the Group to penalties, or cause the Group to alter the Group’s business model or practices and cause the value of such securities to significantly decline or be worthless. Potential CSRC Filing Required for the Listing of the ADSs On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, effective on March 31, 2023. Pursuant to the Overseas Listing Trial Measures, PRC domestic companies that seek to offer or list securities overseas, either in direct or indirect means, are required to report and file required documents with the CSRC. On the same day, the CSRC also held a press conference for the release of the Overseas Listing Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, which, among others, clarifies that domestic companies that have been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures are required to file with the CSRC within three working days of the completion of fundraising activities on the same overseas capital market and shall make the required filing immediately after they submit the application for their listing or offering securities in other overseas capital markets. As advised by our PRC legal counsel, Tian Yuan Law Firm, as a group that has been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures, Sunlands Technology Group, our subsidiaries and the VIEs are not required to complete the filing with the CSRC only to maintain our listing status on the NYSE. However, Sunlands Technology Group, our subsidiaries or the VIEs will be required to conduct the filing procedures with the CSRS for our future offerings, listing or any other capital raising activities within the applicable scope of the Overseas Listing Trial Measures. As of the date of this annual report, we have not received any inquiry, notice, warning, sanctions or regulatory objection from the CSRC. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement of the Overseas Listing Trial Measures remain unclear and we cannot assure you that we could be able to complete the required filing procedure in relation to our further capital raising activities in a timely manner, or at all. For more detailed information, see “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China—The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas, and if required, we cannot predict whether or for how long the Group will be able to obtain such approval or complete such filing or other requirements.” Transfer of Funds and Other Assets Under relevant PRC laws and regulations, we are permitted to remit funds to the VIEs through loans rather than capital contributions. The VIEs funded their operations primarily using cash generated from operating and financing activities. In addition, we and the VIEs may, from time to time, lend cash to each other to settle the payment obligations on each other’s behalf to provide temporary working capital support. In 2023 and 2024, the net amounts of working capital support provided by the VIEs to our PRC subsidiaries were RMB602.9 million and RMB924.6 million . In 2025, the net amounts of working capital support provided by our PRC subsidiaries to the VIEs were RMB148.4 million (US$21.2 million). For more information, see “Item 3. Key Information—Condensed Consolidating Schedule,” and consolidated financial statements included elsewhere in this annual report. 10 As of December 31, 2025, Sunlands Technology Group had made cumulative capital contributions of US$200.2 million to our PRC subsidiaries through an intermediate holding company. These funds have been used by our PRC subsidiaries for their operations. Our PRC subsidiaries maintained certain personnel for sales and marketing, research and development, and general and administrative functions to support the operations of the VIEs. In 2023, 2024 and 2025, the VIEs transferred RMB26.8 million, RMB60.1 million and RMB132.6 million (US$19.0 million) of service fees to our PRC subsidiaries pursuant to the contractual arrangements, respectively. The outstanding balance of service fees owed by the VIEs to our PRC subsidiaries was nil as of each of December 31, 2023, 2024 and 2025. There were no other assets transferred between us and the VIEs in 2023, 2024 and 2025. As advised by our PRC legal counsel, for any amounts owed by the VIEs to our PRC subsidiaries under the VIE agreements, unless otherwise required by PRC tax authorities, the Group is able to settle such amounts without limitations under the current effective PRC laws and regulations, provided that the VIEs have sufficient funds to do so and that the VIEs, in case in the form of non-enterprise institution, follow the principles of openness, fairness and impartiality, fix the price reasonably and regulate the decision-making, and do not damage the state interests, the interests of the non-enterprise institution or the rights and interests of the teachers and students when conducting such related party transaction. Our subsidiaries are permitted to pay dividends to their shareholders, and eventually to Sunlands Technology Group, only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Such payment of dividends by entities registered in China is subject to limitations, which could result in limitations on the availability of cash to fund dividends or make distributions to shareholders of our securities. For example, our PRC subsidiaries and the VIEs are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of these subsidiaries in the PRC, including Hong Kong, to make payments to us could have a material and adverse effect on our ability to conduct the Group’s business.” Sunlands Technology Group has previously declared a special cash dividend of US$1.36 per ordinary share (or US$0.68 per ADS) to holders of its ordinary shares and ADSs on June 14, 2022, which had been fully paid. We have no plan to declare or pay any dividends in the near future on our shares or the ADSs representing our ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand the Group’s business. See “Item 8. Financial Information—8.A. Consolidated Statements and Other Financial Information—Dividend Policy.” On December 5, 2024, Wuhan Shangde declared a cash dividend of RMB100.0 million (US$13.7 million) to its sole shareholder, Wuhan Zhibo, which has been fully paid by December 31, 2024. On March 31, 2025, Wuhan Zhibo declared a cash dividend of RMB19.0 million (US$2.6 million) to its sole shareholder, Sunlands HK, which has been fully paid by April 10, 2025. On July 10, 2025, Wuhan Zhibo declared a cash dividend of RMB19.0 million (US$2.7 million) to its sole shareholder, Sunlands HK, which had been fully paid by July 30, 2025. As of the date of this annual report, no transfers, dividends, or distributions between Sunlands Technology Group, our PRC subsidiaries, and the VIEs, other than those described in this annual report, have been made. As of the date of this annual report, we do not have cash management policies in place that dictate how funds are transferred between Sunlands Technology Group, our subsidiaries, the VIEs and the investors. Rather, the funds can be transferred in accordance with the applicable laws and regulations discussed in this section. To the extent cash or assets in the business are in the PRC, including Hong Kong, or a PRC (including Hong Kong) entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of Sunlands Technology Group, our subsidiaries, or the VIEs by the PRC government to transfer cash or assets. There is no assurance the PRC government will not intervene in or impose restrictions on the ability of Sunlands Technology Group, our subsidiaries, or the VIEs to transfer cash or assets. See “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of these subsidiaries in the PRC, including Hong Kong, to make payments to us could have a material and adverse effect on our ability to conduct the Group’s business.” For the purpose of illustration, the below table reflects the hypothetical taxes that might be required to be paid within China, assuming that: (i) we have taxable earnings, and (ii) we determine to pay a dividend in the future: 11 Taxation Scenario(1) Statutory Tax and Standard Rates Hypothetical pre-tax earnings(2) 100 % Tax on earnings at statutory rate of 25%(3) (25 )% Net earnings available for distribution 75 % Withholding tax at standard rate of 10%(4) (7.5 )% Net distribution to Parent/Shareholders 67.5 % Notes: (1) The tax calculation has been simplified for the purpose of this example. The hypothetical book pre-tax earnings amount, which does not consider timing differences, is assumed to equal the taxable income in the PRC. (2) Under the terms of the VIE agreements, sales service fees are charged by our PRC subsidiaries to the VIEs. For all the periods presented, these fees are recognized as cost of revenues of the VIEs, with a corresponding amount as service income by our PRC subsidiaries and eliminated in consolidation. For income tax purposes, our PRC subsidiaries and the VIEs file income taxes on a separate company basis. The fees paid are recognized as a tax deduction by the VIEs and as income by our PRC subsidiaries and are tax neutral. (3) Certain of our subsidiaries qualify for a 15% preferential income tax rate in China. However, such rate is temporary in nature, and may not be available in a future period. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective. (4) Upon the instance that the VIEs reach a cumulative level of profitability, because our PRC subsidiaries occupy certain trademarks and copyrights, the agreements will be updated to reflect charges for such trademarks and copyrights usage on the basis that they will qualify for tax neutral treatment. China’s Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprises, or the FIE, to its immediate holding company outside of China. A lower withholding income tax rate of 5% is applied if the FIE’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with China, subject to a qualification review at the time of the distribution. For the purpose of this hypothetical example, this table has been prepared based on a taxation scenario under which the full withholding tax would be applied. In addition, this table has been prepared under the assumption that all profits of the VIEs will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If in the future, the accumulated earnings of the VIEs exceed the fees paid to our PRC subsidiaries, or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities, we have other tax-planning strategies that can be deployed on a tax neutral basis. Should all tax planning strategies fail, the VIEs could, as a matter of last resort, make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the VIEs. This would result in the double taxation of earnings: one at the VIE level (for non-deductible expenses) and one at the PRC subsidiary level (for presumptive earnings on the transfer). Such a transfer and the related tax burdens would reduce our after-tax income to approximately 50.6% of the pre-tax income. The Group’s management is of the view that the likelihood that this scenario would happen is remote. Condensed Consolidating Schedule The following tables present the summary statements of operations for the VIEs and other entities for the periods presented. For the Year Ended Decrmber 31, 2025 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Third-party net revenues — 824 1,040,265 978,792 — 2,019,881 Inter-company revenues — 57,871 132,618 — (190,489 ) — Total costs and operating expenses (68,915 ) (16,316 ) (871,985 ) (876,608 ) 190,489 (1,643,335 ) Income/(loss) from subsidiaries and VIEs 422,835 383,556 71,703 — (878,094 ) — Income from non-operations 11,711 4,387 34,092 2,722 — 52,912 Income/(loss) before income tax expenses and loss from equity method investments 365,631 430,322 406,693 104,906 (878,094 ) 429,458 Income tax expenses — (7,487 ) (23,137 ) (28,673 ) — (59,297 ) Loss from equity method investments — — — (4,530 ) — (4,530 ) Net income/(loss) 365,631 422,835 383,556 71,703 (878,094 ) 365,631 Less: net income attribute to non-controlling interests — — — — — — Net income/(loss) attributable to Sunlands Technology Group 365,631 422,835 383,556 71,703 (878,094 ) 365,631 12 For the Year Ended December 31, 2024 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Third-party net revenues — 1,559 319,350 1,669,295 — 1,990,204 Inter-company revenues — 28,308 60,130 266 (88,704 ) — Total costs and operating expenses (36,499 ) (6,609 ) (525,516 ) (1,212,379 ) 88,704 (1,692,299 ) Income/(loss) from subsidiaries and VIEs 351,181 329,394 445,476 — (1,126,051 ) — Income from non-operations 27,400 1,335 21,930 8,324 — 58,989 Income/(loss) before income tax expenses and loss from equity method investments 342,082 353,987 321,370 465,506 (1,126,051 ) 356,894 Income tax expenses — (2,806 ) 8,024 (6,518 ) — (1,300 ) Loss from equity method investments — — — (13,512 ) — (13,512 ) Net income/(loss) 342,082 351,181 329,394 445,476 (1,126,051 ) 342,082 Less: net income attribute to non-controlling interests — — — — — — Net income/(loss) attributable to Sunlands Technology Group 342,082 351,181 329,394 445,476 (1,126,051 ) 342,082 13 For the Year Ended December 31, 2023 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Third-party net revenues — 6,526 783,773 1,369,285 — 2,159,584 Inter-company revenues — 23,017 26,799 87 (49,903 ) — Total costs and operating expenses (34,462 ) (14,496 ) (860,016 ) (725,620 ) 49,903 (1,584,691 ) Income/(loss) from subsidiaries and VIEs 650,424 633,039 689,578 — (1,973,041 ) — Income from non-operations 24,868 2,402 12,775 61,143 — 101,188 Income/(loss) before income tax expenses and loss from equity method investments 640,830 650,488 652,909 704,895 (1,973,041 ) 676,081 Income tax expenses — (64 ) (19,870 ) (5,232 ) — (25,166 ) Loss from equity method investments — — — (10,084 ) — (10,084 ) Net income/(loss) 640,830 650,424 633,039 689,579 (1,973,041 ) 640,831 Less: net income attribute to non-controlling interests — — — 1 — 1 Net income/(loss) attributable to Sunlands Technology Group 640,830 650,424 633,039 689,578 (1,973,041 ) 640,830 14 The following tables present the summary balance sheet data for the VIEs and other entities as of the dates presented. As of December 31, 2025 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Assets Cash, cash equivalents, and restricted cash 198,933 164,613 199,936 13,281 — 576,763 Amount due from Group companies — 663 52,830 112,590 (166,083 ) — Other current assets 11,498 2,796 297,894 28,440 — 340,628 Property and equipment, net — 9 662,030 139 — 662,178 Investments in subsidiaries and VlEs 705,268 400,196 — — (1,105,464 ) — Other non-current assets 37,668 193,148 212,000 24,833 — 467,649 Total assets 953,367 761,425 1,424,690 179,283 (1,271,547 ) 2,047,218 Liabilities Deferred revenue — 53 483,852 101,389 — 585,294 Amount due to Group companies 663 52,830 112,590 — (166,083 ) — Other current liabilities 7,150 3,274 261,913 102,778 — 375,115 Other non-current liabilities — — 141,557 1,185 — 142,742 Deficits of investments in subsidiaries and VIEs — — 24,582 — (24,582 ) — Total liabilities 7,813 56,157 1,024,494 205,352 (190,665 ) 1,103,151 Non-controlling interest — — — (1,487 ) — (1,487 ) Total Sunlands Technology Group shareholders’ equity/(deficit) 945,554 705,268 400,196 (24,582 ) (1,080,882 ) 945,554 Total liabilities and equity 953,367 761,425 1,424,690 179,283 (1,271,547 ) 2,047,218 As of December 31, 2024 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Assets Cash, cash equivalents, and restricted cash 328,460 31,034 102,792 44,943 — 507,229 Amount due from Group companies — 1,196 725,896 — (727,092 ) — Other current assets 19,984 224 304,888 51,988 — 377,084 Property and equipment, net — 12 555,422 202,781 — 758,215 Investments in subsidiaries, VIEs and VIEs’ subsidiaries 218,964 50,511 — — (269,475 ) — Other non-current assets 40,700 189,422 94,320 154,193 — 478,635 Total assets 608,108 272,399 1,783,318 453,905 (996,567 ) 2,121,163 Liabilities Deferred revenue — 105 527,188 389,217 — 916,510 Amount due to Group companies 1,196 52,330 — 673,566 (727,092 ) — Other current liabilities 5,567 1,000 176,164 236,605 — 419,336 Other non-current liabilities — — 50,050 135,409 — 185,459 Deficits of investments in subsidiaries and VIEs — — 979,405 — (979,405 ) — Total liabilities 6,763 53,435 1,732,807 1,434,797 (1,706,497 ) 1,521,305 Non-controlling interest — — — (1,487 ) — (1,487 ) Total Sunlands Technology Group shareholders’ equity/(deficit) 601,345 218,964 50,511 (979,405 ) 709,930 601,345 Total liabilities and equity 608,108 272,399 1,783,318 453,905 (996,567 ) 2,121,163 The following tables present the summary cash flow data for the VIEs and other entities for the periods presented. 15 For the Year Ended December 31, 2025 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Net cash (used in)/generated from operating activities (50,635 ) (3,121 ) 378,447 (177,882 ) — 146,809 Loan and working capital support within the Group — — (198,400 ) — 198,400 — Capital contribution to a subsidiary (62,976 ) (9,913 ) — — 72,889 — Cash dividends received from subsidiaries — 38,000 — — (38,000 ) — Other investing activities 2,721 — (13,277 ) (2,179 ) — (12,735 ) Net cash (used in)/generated from investing activities (60,255 ) 28,087 (211,677 ) (2,179 ) 233,289 (12,735 ) Net proceeds from loan and working capital support from entities within the Group — 50,000 — 148,400 (198,400 ) — Dividends payment to parent companies — — (38,000 ) — 38,000 — Proceeds of capital contribution — 62,976 9,913 — (72,889 ) — Other financing activities (6,168 ) — (41,540 ) — — (47,708 ) Net cash (used in)/generated from financing activities (6,168 ) 112,976 (69,627 ) 148,400 (233,289 ) (47,708 ) For the Year Ended December 31, 2024 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Net cash (used in)/generated from operating activities (16,630 ) 23,197 (563,948 ) 752,900 - 195,519 Loan and working capital support within the Group - - 922,307 - (922,307 ) - Capital contribution to a subsidiary (143,089 ) - - - 143,089 - Other investing activities (3,212 ) (213,505 ) (244,989 ) 102,846 - (358,860 ) Net cash (used in)/generated from investing activities (146,301 ) (213,505 ) 677,318 102,846 (779,218 ) (358,860 ) Net proceeds from loan and working capital support from entities within the Group - 2,330 - (924,637 ) 922,307 - Proceeds of capital contribution - 143,089 - - (143,089 ) - Other financing activities (10,949 ) - (101,779 ) - - (112,728 ) Net cash (used in)/generated from financing activities (10,949 ) 145,419 (101,779 ) (924,637 ) 779,218 (112,728 ) For the Year Ended December 31, 2023 The Company Other Subsidiaries Primary Beneficiary of VIEs VIEs and VIEs’ Subsidiaries Eliminations Consolidated Total (RMB in thousands) Net cash (used in)/generated from operating activities (66,321 ) 95,950 (481,352 ) 592,521 — 140,798 Loan and working capital support within the Group 33,559 — 552,864 — (586,423 ) — Other investing activities (1,958 ) — (41,822 ) (28,038 ) — (71,818 ) Net cash generated from/(used in) investing activities 31,601 — 511,042 (28,038 ) (586,423 ) (71,818 ) Net proceeds from loan and working capital support from entities within the Group — 16,441 — (602,864 ) 586,423 — Other financing activities (36,004 ) — (38,654 ) — — (74,658 ) Net cash (used in)/generated from financing activities (36,004 ) 16,441 (38,654 ) (602,864 ) 586,423 (74,658 ) Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors 16 Sunlands Technology Group’s ability to pay dividends, if any, to its shareholders and ADS holders and to service any debt it may incur will depend upon dividends paid by our PRC subsidiaries. Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets offshore to Sunlands Technology Group. In particular, under the current effective PRC laws and regulations, dividends may be paid only out of distributable profits. Distributable profits are the net profit as determined under PRC GAAP, less any recovery of accumulated losses and appropriations to statutory and other reserves required to be made. Each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. As a result, our PRC subsidiaries may not have sufficient distributable profits to pay dividends to us in the near future. Furthermore, if certain procedural requirements are satisfied, the payment of current account items, including profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from State Administration of Foreign Exchange, or the SAFE, or its local branches. However, where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in foreign currencies, approval from or registration with competent government authorities or its authorized banks is required. The PRC government may take measures at its discretion from time to time to restrict access to foreign currencies for current account or capital account transactions. If the foreign exchange control system prevents the Group from obtaining sufficient foreign currencies to satisfy the Group’s foreign currency demands, the Group may not be able to pay dividends in foreign currencies to our offshore intermediary holding companies or ultimate parent company, and therefore, our shareholders or investors in the ADSs. Further, we cannot assure you that new regulations or policies will not be promulgated in the future, which may further restrict the remittance of Renminbi into or out of the PRC. We cannot assure you, in light of the restrictions in place, or any amendment to be made from time to time, that our current or future PRC subsidiaries will be able to satisfy their respective payment obligations that are denominated in foreign currencies, including the remittance of dividends outside of the PRC. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to Sunlands Technology Group. In addition, our PRC subsidiaries are required to make appropriations to certain statutory reserve funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For PRC and United States federal income tax considerations of an investment in the ADSs, see “Item 10. Additional Information—10.E. Taxation.” Impact of Holding Foreign Companies Accountable Act Trading in our securities on U.S. markets, including the NYSE, may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCAA”) if the Public Company Accounting Oversight Board (the “PCAOB”) determines that it is unable to inspect or investigate completely our auditor for two consecutive years. On December 16, 2021, the PCAOB issued the HFCAA Determination Report to notify the SEC of its determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong (the “2021 Determinations”), including our auditor. On May 26, 2022, we were conclusively identified by the SEC under the HFCAA as having filed audit reports issued by a registered public accounting firm that cannot be inspected or investigated completely by the PCAOB in connection with the filing of our 2021 Form 20-F. The inability of the PCAOB to conduct inspections in the past also deprived our investors of the benefits of such inspections. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022. The PCAOB vacated its previous 2021 Determinations accordingly. As a result, we were not at risk of having our securities subject to trading prohibition under the HFCAA unless a new determination is made by the PCAOB. However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s, control, including positions taken by authorities of the PRC. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections going forward. The PCAOB is required under the HFCAA to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong. The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities. If the PCAOB determines in the future that it no longer has full access to inspect and investigate accounting firms headquartered in mainland China and Hong Kong and we continue to use such accounting firm to conduct audit work, we would be identified as a “Commission-Identified Issuer” under the HFCAA following the filing of the annual report for the relevant fiscal year, and if we were so identified for two consecutive years, trading in our securities on U.S. markets would be prohibited. For details, see “Item 3. Key Information—3.D Risk Factors—Risks Related to Doing Business in China—The ADSs will be delisted and the ADSs and shares will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or investigate completely auditors located in China for two consecutive years.” 17 3.A. [Reserved] 3.B. Capitalization and Indebtedness Not applicable. 3.C. Reason for the Offer and Use of Proceeds Not applicable. 3.D. Risk Factors The Group faces various legal and operational risks and uncertainties as a group based in and primarily operating in China. The PRC government has significant authority to exert influence on the ability of China-based issuers, like us, to conduct its business, accept foreign investments or be listed on a U.S. stock exchange. For example, the Group faces risks associated with regulatory approvals of offshore offerings, anti-monopoly regulatory actions, cybersecurity and data privacy, as well as the uncertainty on whether the PCAOB will continue to be able to satisfactorily inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PRC government may also intervene with or influence the Group’s operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that significantly affected educational industry and we cannot rule out the possibility that it will in the future further release regulations or policies regarding educational industry that could adversely affect the Group’s business, financial condition and results of operations. Any such action, once taken by the PRC government, could significantly limit or completely hinder the Group’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless. Furthermore, Sunlands Technology Group is a Cayman Islands holding company. The Group’s operations in China are conducted through our PRC subsidiaries and the VIEs. Thus, the Group’s corporate structure involves unique risks to investors in the ADSs. You should carefully consider all of the information in this annual report before making an investment in the ADSs. Below please find a summary of the principal risks and uncertainties the Group faces, organized under relevant headings. In particular, as we are a China-based issuer incorporated in the Cayman Islands, you should pay special attention to subsections headed “Item 3. Key Information—3.D. Risk Factors—Risks Related to Doing Business in China” and “Item 3. Key Information—3.D. Risk Factors—Risks Related to Our Corporate Structure.” Summary of Risk Factors Investing in the ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in the ADSs. Below please find a summary of the principal risks we face, organized under relevant headings. Risks Related to the Group’s Business •If the Group fails to increase student enrollments, the Group’s net revenues may decline, and the Group may not be able to maintain growth. •If the Group fails to manage its business growth effectively, the success of the Group’s business model will be compromised. •The Group is subject to the uncertainty to continue to achieve profitability in the future. •If the Group is unable to conduct sales and marketing activities cost-effectively, the Group’s results of operations and financial condition may be materially and adversely affected. •The Group may be adversely affected by any negative publicity concerning the Group and the Group’s business, shareholders, affiliates, directors, officers and employees and the industry in which the Group operates, regardless of its accuracy, which could harm the Group’s reputation and business. •We are subject to risks and uncertainties associated with the PRC laws, regulations and policies on the broader education industry. •The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementation Rules. •The Group faces regulatory risks and uncertainties associated with the Group’s teachers’ lack of teaching licenses. •The Group faces regulatory risks and uncertainties with respect to the licensing requirement for the online transmission of internet audio-visual programs. 18 •The failure to obtain and maintain other approvals, licenses, permits or filings applicable to the Group’s business could have a material adverse impact on the Group’s business, financial conditions and results of operations. •The Group may not be able to continue to recruit, train and retain a sufficient number of qualified faculty members. Risks Related to Our Corporate Structure •There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for the Group’s operations in China, including potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the Group’s financial condition and results of operations. If the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if these laws, regulations and rules or the interpretation thereof change in the future, we could be subject to severe penalties or be forced to relinquish our interests in the VIEs. •We rely on contractual arrangements with the VIEs and their respective shareholders for a significant portion of the Group’s business operations which may not be as effective as direct ownership. •Any failure by the VIEs or their respective shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on the Group’s business. •Our contractual arrangements are governed by PRC laws. Accordingly, these contracts would be interpreted in accordance with PRC laws, and any disputes would be resolved in accordance with PRC legal procedures. •The shareholders of the VIEs may have actual or potential conflicts of interest with us, which may materially and adversely affect the Group’s business and financial condition. Risks Related to Doing Business in China •The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas, and if required, we cannot predict whether or for how long the Group will be able to obtain such approval or complete such filing or other requirements. For details, please see page 41 and 42. •Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on the Group’s business and operations. For details, please see page 42. •Evolution of the PRC legal system, including changes in policies, laws and regulations in China, could adversely affect the Group. The enforcement of laws and rules and regulations in China may change quickly, which could result in a material adverse change in the Group’s operations and the value of the ADSs. For details, please see page 42 and 43. •The PRC government’s significant oversight over the Group’s business operation in China could result in a material adverse change in the Group’s operations in China and the value of the ADSs. The Chinese government may intervene or influence the Group’s operations in China at any time, or may exert more regulation over offerings conducted overseas and/or foreign investment in China-based issuers. Any actions by the Chinese government to exert more oversight and regulation over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. For details, please see pages 43. •You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China, including Hong Kong, against the Group or the Group’s management named in the annual report based on foreign laws. For details, please see page 43. •We may rely on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of these subsidiaries in the PRC, including Hong Kong, to make payments to us could have a material and adverse effect on our ability to conduct the Group’s business. For details, please see pages 43 to 44. Also see “Item 3. Key Information—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors” on page 17 for more information. •The PCAOB had previously been unable to inspect our auditor in relation to their audit work performed for the Group’s financial statements, and any future inability to do so would deprive our investors of the benefits of such inspections. For details, please see page 48 and 49. •The ADSs will be delisted and the ADSs and shares will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or investigate completely auditors located in China for two consecutive years. For details, please see pages 49. 19 Risks Related to the ADSs •If the market price for the ADSs falls below US$1.00 for an extended period of time, or falls to US$0.16 at any time, the ADSs may be delisted from the NYSE. •The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. •If securities or industry analysts do not publish research or reports about the Group’s business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. •The sale or availability for sale of substantial amounts of ADSs could adversely affect their market price. •Techniques employed by short sellers may drive down the market price of the ADSs. •Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment. Risks Related to the Group’s Business If the Group fails to increase student enrollments, the Group’s net revenues may decline, and the Group may not be able to maintain growth. The Group generates revenue primarily from the tuition the Group collects from students. It is critical for the Group to enroll prospective students in a cost-effective manner. Some of the factors, many of which are largely beyond the Group’s control, could prevent the Group from successfully increasing enrollments of new students in a cost-effective manner, or at all. These factors include, among other things, (i) reduced interest in the interests, certifications, professions, skills, degrees or diplomas for which our course offerings are designed; (ii) negative publicity or perceptions regarding us, or online education services in general; (iii) the emergence of alternative course delivery models; (iv) the inability of students to pay the tuition; (v) increasing market competition, particularly price reductions by competitors that the Group is unable or unwilling to match; and (vi) adverse changes in relevant government policies or general economic conditions. If one or more of these factors reduce market demand for the Group’s services, the Group’s student enrollments could be negatively affected or the Group’s costs associated with student acquisition and retention could increase, or both, any of which could materially affect the Group’s ability to grow the Group’s gross billings and net revenues. These developments could also harm the Group’s brand and reputation, which would negatively impact the Group’s ability to expand the Group’s business. If the Group fails to manage its business growth effectively, the success of the Group’s business model will be compromised. The Group’s growth strategy has placed, and will continue to place, a significant strain on the Group’s sales and marketing capacities, administrative and operating infrastructure, facilities and other resources. To maintain the Group’s growth, the Group needs to continue to acquire more students, scale up the Group’s course offerings, increase the Group’s academic and administrative faculty, as well as strengthen the Group’s platforms and systems. The Group will also be required to refine the Group’s operational, financial and management controls and reporting systems and procedures. If the Group fails to efficiently manage the Group’s business expansion, the Group’s costs and expenses may increase more than the Group plans and the Group may not successfully attract a sufficient number of students and qualified academic and administrative faculty in a cost-effective manner, respond to competitive challenges, or otherwise execute the Group’s business plans. In addition, the Group may, as part of carrying out the Group’s growth strategies, adopt new initiatives to offer additional course packages and educational content and to implement new pricing models and strategies. We cannot assure you that these initiatives may achieve the anticipated results. These proposed changes may not be well received by the Group’s existing and prospective students, in which case their experience with the Group’s education services may suffer, which could damage the Group’s reputation and business prospect. The Group’s ability to effectively implement the Group’s strategies and manage the Group’s business growth will depend on a number of factors, including the Group’s ability to: (i) identify and effectively market the Group’s products and services in new markets with sufficient growth potential; (ii) develop and improve course offerings and educational contents to make them appealing to existing and prospective students, including working adult students; (iii) maintain and increase the Group’s student enrollments; (iv) effectively recruit, train and motivate a large number of new employees, including the Group’s faculty members and sales and marketing personnel; (v) successfully implement enhancements and improvements to the systems and platforms; (vi) continue to improve the Group’s operational, financial and management controls and efficiencies; (vii) protect and further develop the Group’s intellectual property rights; and (viii) make sound business decisions in light of the scrutiny associated with operating as a public company. These activities require significant capital expenditures and investment of valuable management and financial resources, and the Group’s growth will continue to place significant demands on the Group’s management. There are no guarantees that the Group will be able to effectively manage any future growth in an efficient, cost-effective and timely manner, or at all. The Group’s growth in a relatively short period of time is not necessarily indicative of results that the Group may achieve in the future. If the Group does not effectively manage the growth of the Group’s business and operations, the Group’s reputation, results of operations and 20 overall business and prospects could be negatively impacted. The Group’s net revenues were RMB2,159.6 million, RMB1,990.2 million and RMB2,019.9 million (US$288.8 million), respectively, in 2023, 2024 and 2025. During the same periods, the Group’s gross billings were RMB1,504.6 million, RMB1,555.4 million and RMB1,467.4 million (US$209.8 million), respectively, and the Group’s new student enrollments were 616,341, 674,649 and 579,788, respectively. The Group is seeking to offer a broader range of courses, foster a more social and entertaining learning experience, and use cutting-edge technologies to improve students’ learning experience and outcomes. All of these endeavors involve risks and will require significant management, financial and human resources. We cannot assure you that they will achieve the anticipated results or that the Group’s gross billings and new student enrollments will not decline in the future due to the risks and uncertainties discussed in this “Item 3. Key Information—3.D. Risk Factors.” If the Group is not able to achieve growth in the Group’s gross billings and new student enrollments effectively, or at all, the Group’s business and prospects may be materially and adversely affected. The Group is subject to the uncertainty to continue to achieve profitability in the future. The Group had net income of RMB640.8 million, RMB342.1 million and RMB365.6 million (US$52.3 million) in 2023, 2024 and 2025, respectively. Historically, the Group had recorded net losses. We cannot assure you that the Group will be able to continue to generate net profits in the future. The Group intends to continue to invest heavily for the foreseeable future in increasing the Group’s market share, improving the capacity of the Group’s technology infrastructure to better support an even larger student base and to offer additional courses and educational content. These efforts may be more costly than the Group expects and the Group’s net revenues may not increase sufficiently to offset these expenses. The Group may continue to take actions and make investments that do not generate optimal short-term financial results and may even result in increased operating losses in the short term with no assurance that the Group will eventually achieve the Group’s intended long-term benefits or profitability. These factors, among others set out in this “Item 3. Key Information—3.D. Risk Factors,” may negatively affect the Group’s ability to achieve profitability in the near term, if at all. If the Group is unable to conduct sales and marketing activities cost-effectively, the Group’s results of operations and financial condition may be materially and adversely affected. The Group relies on its sales and marketing efforts to increase student enrollments. The Group’s sales and marketing expenses primarily include expenses incurred in relation to sales and marketing personnel and marketing spending. The Group incurred approximately RMB1,142.2 million, RMB1,216.9 million and RMB1,137.6 million (US$162.7 million), respectively, in sales and marketing expenses in 2023, 2024 and 2025. The Group’s sales and marketing activities may not be well received by the market and may not result in the levels of sales that the Group anticipates. The Group also may not be able to retain or engage a sufficient number of experienced sales and marketing personnel, or to train newly onboard sales and marketing personnel, which we believe is critical to implementing the Group’s sales and marketing strategies cost-effectively. Further, sales and marketing approaches and tools in China’s online education market are evolving rapidly. This requires the Group to continually enhance its sales and marketing approaches and experiment with new methods to keep pace with industry developments and student preferences. Moreover, the Group’s sales and marketing activities may be deemed to violate PRC laws and regulations, and the Group may be exposed to administrative penalties, such as paying fines or publishing explanatory notes to limit the adverse effects of the Group’s marketing efforts. If deemed guilty of significant infringements, the Group may be ordered to cease sales and marketing activities temporarily and the Group’s business license may be revoked. Failure to engage in sales and marketing activities in a compliant and cost-effective manner may reduce the Group’s market share, cause the Group’s revenues and gross billings to decline, negatively impact the Group’s profitability, and materially harm the Group’s business, financial condition and results of operations. The Group may be adversely affected by any negative publicity concerning the Group and the Group’s business, shareholders, affiliates, directors, officers and employees and the industry in which the Group operates, regardless of its accuracy, which could harm the Group’s reputation and business. Negative publicity about the Group and the Group’s business, shareholders, affiliates, directors, officers, and teachers and other employees, as well as the industry in which the Group operates, can harm the Group’s operations. The Group has been exposed to negative publicity concerning refund dispute, administrative penalty, alleged improper or misleading statement made in the Group’s sales and marketing activities, and student recruitment for unqualified institutions in the past. For example, the Group was reported to have recruited students from January 2021 to January 2022 for Morrison University in the state of Nevada. The recruitments were made pursuant to the Group’s cooperation with a company in China (the “Partnering Company”) claiming to have obtained authorization from Morrison University. It was revealed that the authorization was inauthentic and Morrison University had no legal right to operate within the state of Nevada. As of the date of this annual report, the Group is seeking to hold the Partnering Company liable through legal actions. The negative publicity surrounding this incident has and may in the future harm the Group’s reputation. The Group may be 21 involved in disputes with the affected students, especially if the Group is not able to fulfil the Group’s obligations under the agreements between the Group and the students. While the Group endeavors to ensure that the overseas institutions with whom the Group partners are qualified, we cannot assure you that the Group’s partnering institutions will timely renew their necessary licenses or qualifications when they become due or that the Group will be able to identify any unqualified institutions accurately in a timely manner or at all. Negative publicity concerning these parties could be related to a wide variety of matters, including, but are not limited to: •alleged misconduct or other improper activities committed by students or the Group’s directors, officers, and teachers and other employees, including misrepresentation made by the Group’s employees to potential students during sales and marketing activities; •false or malicious allegations or rumors about the Group or the Group’s directors, shareholders, affiliates, officers, and teachers and other employees; •complaints by students about the Group’s education services and sales and marketing activities; •tuition refund disputes between the Group and students or administrative penalties; •security breaches of confidential student or employee information; •employment-related claims relating to alleged employment discrimination, wage and hour violations; and •governmental and regulatory investigations or penalties resulting from the Group’s failure to comply with applicable laws and regulations. In addition to traditional media, there has been an increasing use of social media platforms and similar devices in China, including instant messaging applications, such as Weixin/WeChat, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on instant messaging applications and social media platforms is virtually immediate as is its impact without affording the Group an opportunity for redress or correction. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Group and the Group’s shareholders, directors, officers and employees may be posted on such platforms at any time. The risks associated with any such negative publicity or incorrect information cannot be completely eliminated or mitigated and may materially harm the Group’s reputation, business, financial condition and results of operations. The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementation Rules. Certain of our subsidiaries and the VIEs through which the Group operates its online education business, currently do not hold a private school operating permit, and the Group may be subject to risks of administrative sanctions due to the lack of such permit. On November 7, 2016, China’s National People’s Congress passed an amendment to the Promotion of Private Education Law, or the Amendment, which became effective on September 1, 2017. The Amendment applies different regulatory requirements to non-profit and for-profit private schools. In December 2016, several PRC government agencies, including the MOE, the State Administration for Industry and Commerce which has now merged into the newly-established State Administration for Market Regulation, or the SAMR, and the Ministry of Human Resources and Social Welfare, jointly promulgated the Implementation Rules on the Supervision and Administration of For-profit Private Schools, or the Implementation Rules. Under the Implementation Rules, the establishment, division, merger or any other material change in a for-profit private school shall be approved by the competent education authorities or the authorities in charge of labor and social welfare and be registered with the competent local branch of SAMR, and a duly approved private school will be granted a private school operating permit. The Implementation Rules also provide that the provisions contained therein should be applicable to “for-profit private training institutions” in an analogous manner. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulation Relating to Private Education—The Law for Promoting Private Education and its Implementing Rules.” As of the date of this annual report, the Group has not received any notice of warning or been subject to any penalties or disciplinary action from government authorities due to the lack of a private school operating permit for online education services. In April 2021, the State Council promulgated the Amended Regulations on the Implementation of Law for Promotion Private Education Law of PRC, or Amended Implementing Rules, which became effective on September 1, 2021. The Amended Implementing Rules provide, among others, that a private school engaging in online education activities using internet technology shall obtain an appropriate private school operating permit. The Amended Implementing Rules, however, do not specify whether an online tutoring service provider like the Group shall obtain such private school operating permit and what requirements that an online tutoring service provider like the Group need to 22 satisfy in order to obtain a private school operating permit, nor does it specify which level of government authority has the authority to accept and examine the Group’s application for the private school operating permit. According to the Q&A published on the official website of Beijing Municipal Education Commission in April 2022, the education department is only responsible for the issues related to institutions providing academic subjects tutoring services for primary and secondary school. We cannot assure you that the PRC government will not in the future require the Group to obtain a private school operating permit. If the PRC government requires the Group to obtain a private school operating permit or introduces additional amendments and guidelines to expand the coverage of the Amendment or Amended Implementing Rules to explicitly cover online education service providers, and if the Group fails to do so, the Group may be subject to fines up to five times the illegitimate gains generated from the provision of training services without a proper license, other administrative sanctions, such as being ordered to refund tuition payments to the students, or criminal liabilities, for the lack of a private school operating permit. The Group may also be subject to regulatory requirements that are more stringent than the ones currently applicable to the Group, including those relating to sales and marketing, courses and educational content offerings, teachers’ qualification, as well as tuition fee rates and tuition refund policies, or laws and regulations that require the Group to obtain and maintain additional licenses and permits, and the Group may incur substantial expenses or alter or change the Group’s business to comply with these requirements. For example, pursuant to the Interim Measures of Wuhan for the Administration of Private Training Institutions promulgated by Wuhan Municipal Government effective on March 15, 2018, private training institutions shall abide by the following provisions with respect of refund fees: (i) if a student requires a refund before the beginning of the course, the institution shall refund all the fees paid to it with deduction of the educational service fees and other fees actually incurred; (ii) if a student requires a refund after the beginning of the course, the institution shall refund the remaining part of the fees after deducting the corresponding proportion of the tuition fees, the fees for collection and management and the relevant taxes and fees in accordance with the proportion of the class hours completed; (iii) where an institution fails to fulfill the commitments with the student, and the student requires a refund, the institution shall refund all the fees paid by the student; and (iv) the institution shall complete the examination and verification within three working days upon the receipt of the refund requirement and shall refund to the student within 30 days. It is uncertain as to whether and how such measures and rules would be applicable to the Group, and whether any future laws and regulations with respect to the tuition refund requirements for online education service providers like the Group will be introduced. The Group has been exposed to refund dispute between the Group and students in the past. We cannot assure you that if the Group is subject to more stringent refund regulatory requirements, the Group can adjust the Group’s refund policy to comply with these requirements on a timely manner, which may cause the Group’s more refund disputes with students and may have a material and adverse effect on the Group’s business, operating results and financial condition. Under the Amendment and the Implementation Rules, a material change in a for-profit private school shall be approved by the competent education authorities or the authorities in charge of labor and social welfare before it can be registered with the competent local branch of SAMR. If the Group was required to expand the authorized scope of the Group’s business license to cover the Group’s business of online education services, which shall be registered with the SAMR, to comply with applicable licensing requirements, the Group may not able to do so before the Group has obtained a private school operating permit. If any of the foregoing were to happen, the Group’s business operations may be disrupted, and the Group’s financial condition, results of operations and reputation may be materially and adversely affected. Moreover, the MOE, jointly with certain other PRC government authorities, promulgated the Opinions on Guiding and Regulating the Orderly and Healthy Development of Educational Mobile Apps on August 10, 2019, or the Opinions on Educational Apps, which requires, among others, mobile apps that offer services for school teaching and management, student learning and student life, or home-school interactions, with school faculty, students or parents as the main users, and with education or learning as the main application scenarios, be filed with the competent provincial regulatory authorities for education before the end of 2019. Subsequently, on November 11, 2019, MOE issued the Administrative Measures on Filing of Educational Mobile Apps, which requires, among others, that educational mobile app providers shall file their educational mobile apps and that filings of existing educational mobile apps shall be completed before January 31, 2020. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations on Online and Distance Education.” The educational mobile apps Shangde Jigou and Shangde Zikao had been filed with competent regulatory authority as required under the Opinions on Educational Apps. However, as the Opinions on Educational Apps are relatively new and evolving, and the Group’s business model and practices are continuing to evolve and adapt, we cannot assure you that the Group will be in full compliance with all applicable laws, regulations and rules. Additionally, the Group may face challenges in completing or maintaining required filings for any new educational apps it introduces in the future in a timely manner, or at all. For example, as of the date of this annual report, the filings of certain of our or the VIEs’ educational mobile apps, such as Jixiang Jiaoyu, Shufan Jiaoyu, Zhizi Ketang, Tiantian Bannixue, Lexueyun Ketang and Qingzhou Yun Ketang, have not been completed. If the Group fails to promptly complete such filing and comply with other applicable regulatory requirements, the Group may be blacklisted by the MOE or its local counterparts and prohibited from submitting any filings for six months, or may be subject to fines, regulatory orders to suspend the Group’s operations or other regulatory and disciplinary sanctions. In addition to the existing regulatory regime, it is uncertain whether and how the PRC government would promulgate additional laws and regulations regarding the online education industry, and there is no assurance that the Group can comply with any such newly promulgated laws and regulations in a timely manner, or at all. The Group’s failure to fully comply 23 with these existing and future laws and regulations may materially and adversely affect the Group’s business, financial condition and results of operations. We are subject to risks and uncertainties associated with the PRC laws, regulations and policies on the broader education industry. The education industry in China is highly regulated and subject to ongoing policy changes, creating uncertainties that could impact our business, financial condition, and results of operations. The PRC government has implemented strict regulatory oversight over the private education sector in recent years, particularly in areas such as after-school tutoring, vocational training, and online education. Future changes in laws, regulations, or enforcement practices could create new compliance challenges for market participants, including our business. While the Group’s primary focus is adult online education, the most restrictive policies, such as the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the Alleviating Burden Opinion) introduced in 2021, are primarily targeted at K-12 after-school tutoring, the broader regulatory environment for private education is evolving and subject to change. The regulatory authorities may introduce new requirements, restrictions or compliance obligations that could directly or indirectly affect our business operations. As of the date of this annual report, the Group’s business, financial condition, results of operations and prospect have not been materially and adversely affected by recent regulatory changes in the PRC private education industry. It is uncertain whether and how the PRC government would introduce additional laws, regulations and guidance that may impact adult education, vocational training, or other aspects of our business. If new regulations impose stricter operational, financial, or ethical standards, or if the authorities expand their enforcement efforts, we may be required to adjust our business model, obtain new approvals, or modify our service offerings, which could lead to increased compliance costs, operational disruptions, or limitations on our growth prospects. Due to the complexity and uncertainty of the regulatory environment, we cannot assure you that the Group will be in full compliance with newly introduced laws and regulations in a timely manner, or at all. Failure to regain compliance may subject the Group to fines or other penalties or be required to terminate certain operations, in which case the Group’s business, financial condition and results of operations could be materially and adversely affected further. For more details of the relevant laws and regulations, please refer to “Item 4. Information on the Company—4.B. Business Overview—Regulation.” The Group faces regulatory risks and uncertainties associated with the Group’s teachers’ lack of teaching licenses. Pursuant to the Amended Implementing Rules and the Implementation Rules, the teachers employed by a for-profit private school shall obtain the teaching licenses or relevant professional skill qualifications required by PRC laws and regulations, although the definition or the scope of the “relevant professional skill qualifications” is not explicitly stated in the Implementation Rules. A substantial majority of the Group’s teachers currently do not hold teaching licenses. As of the date of this annual report, the Group has not received any notice of warning or been subject to any penalties or disciplinary action from government authorities due to the lack of teaching licenses. The current PRC laws and regulations, including the Amendment, the Amended Implementing Rules and the Implementation Rules, remain unclear as to whether the teachers of an online education service provider who provides adult online education and adult personal interest learning education like the Group are required to obtain and hold teaching licenses. We cannot assure you that the PRC government authorities will not take a contrary view. In the event that in the future the Group’s teachers are required by laws to obtain teaching licenses, we cannot assure you that they can meet the requirements for applying for teaching licenses. If the Group’s teachers are not able to apply for and obtain the teaching licenses on a timely basis, or at all, the Group may be ordered to rectify such noncompliance or subject to penalties under the then-effective PRC laws and regulations, in which case the Group’s business may be disrupted, and the Group’s financial condition, reputation and prospects would be materially and adversely affected. The Group faces regulatory risks and uncertainties with respect to the licensing requirement for the online transmission of internet audio-visual programs. On December 20, 2007, the State Administration of Press Publication Radio Film and Television, or SAPPRFT, and the Ministry of Industry and Information Technology, or MIIT, jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Services, or the Audio-Visual Program Provisions, which became effective on January 31, 2008 and were amended on August 28, 2015. Among other things, the Audio-Visual Program Provisions stipulate that no entities or individuals may provide Internet audio-visual program services without a License for Online Transmission of Audio-Visual Programs issued by SAPPRFT or completing the relevant filing with SAPPRFT or its local bureaus, and only state-owned or state-controlled entities are eligible to apply for a License for Online Transmission of Audio-Visual Programs. On April 1, 2010, SAPPRFT promulgated the Provisional Implementations of Tentative Categories of Internet Audio-Visual Program Services, or the Categories, which clarified the scope of Internet audio-visual programs services, which was amended on March 10, 2017. According to the Categories, there are four categories of Internet audio-visual program services which are further divided into seventeen sub-categories. Sub-category No. 3 to the second category covers the making and editing of certain specialized audio-visual programs concerning, among other things, educational content, and broadcasting such content to the general public online. Sub-category No. 5 of the first category and sub-category No. 24 7 of the second category cover the live broadcasting of important political, martial, economic, social, cultural, sports activities or events or general social or community cultural activities, sports games and other organized activities. However, there are still significant uncertainties relating to the interpretation and implementation of the Audio-Visual Program Provisions, in particular, the scope of “internet audio-visual programs.” See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Online Transmission of Audio-Visual Programs.” The Group delivers courses in live streaming format. The Group’s teachers and students communicate and interact live with each other via the Group’s virtual learning community. The audio and video data are transmitted through the platforms between specific recipients instantly without any further redaction. We believe the nature of the raw data the Group transmits distinguishes the Group from general providers of internet audio-visual program services, such as the operator of online video websites, and the provision of the Audio-Visual Program Provisions are not applicable with regard to the Group’s offering of the courses. However, we cannot assure you that the competent PRC government authorities will not ultimately take a view contrary to the Group’s opinion. In addition, the Group also offers video recordings of live streaming courses and certain other audio-video contents on the Group’s online platforms to students as supplementary course materials. If the government authorities determine that the Group’s offering of the courses fall within the relevant category of Internet audio-visual program services under the Categories, the Group may be required to obtain the License for Online Transmission of Audio-Visual Programs. The Categories describe “Internet audio-visual program services” in a very broad, vague manner and are unclear as to whether online courses, whether delivered in a live streaming format or through video recordings, fall into the definition of audio-visual programs. The Group has made inquiries to the relevant bureaus of SAPPRFT and was informed that online educational content provided through live streaming or recorded courses does not fall within the scope of internet audio-visual programs, the transmission of which does not require a License for Online Transmission of Audio-Visual Programs. We cannot assure you that the PRC government will not ultimately take a view that live streaming or recorded courses or any other content offered on the Group’s platforms are subject to the Audio-Visual Program Provisions. The Group currently does not hold a License for Online Transmission of Audio-Visual Programs. If the PRC government determines that the Group’s content should be considered as “internet audio-visual programs” for the purpose of the Audio-Visual Program Provisions, the Group may be required to obtain a License for Online Transmission of Audio-Visual Programs. The Group is, however, not eligible to apply for such license since the Group is not a state-owned or state-controlled entity. If this were to occur, the Group may be subject to penalties, fines, legal sanctions or an order to suspend the provision of the Group’s live streaming courses. As of the date of this annual report, the Group has not received any notice of warning or been subject to penalties or other disciplinary action from the relevant governmental authorities regarding the lack of a License for Online Transmission of Audio-Visual Programs in conducting of the Group’s business. The failure to obtain and maintain other approvals, licenses, permits or filings applicable to the Group’s business could have a material adverse impact on the Group’s business, financial conditions and results of operations. A number of PRC regulatory authorities, such as the SAMR, the Cyberspace Administration of China, the MITT, the SAPPRFT, and the State Council Information Office, the Ministry of Civil Affairs, and the Ministry of Human Resources and Social Welfare, oversee different aspects of the Group’s business operations, and the Group is required to obtain a wide range of government approvals, licenses, permits and filings in connection with the Group’s operations. The Group currently does not hold several approvals, licenses and permits that may be required for certain aspects of the Group’s business operations. Under the current PRC laws and regulations, the provision of the Group’s educational content through the Group’s online platform may be considered “online publishing” and may require the Group to obtain an Internet Publishing License, which the Group currently does not have. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Online Publishing.” As of the date of this annual report, the Group has not received any notice of warning or been subject to any penalties or disciplinary action from government authorities due to the lack of an Internet Publishing License for online education services. One of our subsidiaries, Wuhan Shangde, has registered “computer technology training” and “art training” in its authorized scope of business. However, the VIEs and certain of their operating subsidiaries currently do not include “occupational training” and “educational facilitation services” in their authorized scope of business. Based on the Group’s consultation with the competent government authorities in Beijing, such government authorities currently may not accept applications for inclusion of “occupational training,” “educational facilitation services” or similar items in the scope of business of companies that do not hold a private school operating permit. For additional information about the private school operating permit, see “—The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementation Rules.” Even if the application were to be accepted, there is no assurance that it will be approved by the government authorities in a timely fashion, or at all. Furthermore, certain of the VIEs and their operating subsidiaries that engage in online educational services may be required by relevant government authorities to obtain the Value-Added Telecommunications Business Operating License and the License for the Production and Operation of Radio and Television Program. In addition, certain mobile apps do not complete the filing procedures under the Notice on the Filing of Mobile Internet Apps. The Group and/or third parties post information on the Group’s mobile apps and websites that may be viewed as news information, and the release of such 25 information on the Group’s mobile apps and websites may be deemed as Internet news information services and therefore require the VIEs or their operating subsidiaries to obtain Internet news information licenses. In addition, if the government authorities deem printing and providing physical education materials to users as “publication distribution” under Administrative Provisions on the Publications Market, we, the VIEs or their operating subsidiaries may be required to obtain the Publication License. Furthermore, although certain of the VIEs and their operating subsidiaries have obtained the Value-Added Telecommunications Business Operating License, also known as the ICP License, that specifically permits such VIEs to provide certain internet information services, due to uncertainties with respect to the interpretation of relevant laws and regulations by PRC government authorities, we cannot assure you that such ICP License covers all the telecommunication services the VIEs and their operating subsidiaries currently provide, and in the event that such ICP License is found not to cover all the telecommunication services the VIEs and their operating subsidiaries currently provide, the VIEs and their operating subsidiaries may be required to obtain an additional Value-Added Telecommunications Business Operating License or to update their existing ICP License. If it comes to the attention of the government authorities that the VIEs and their operating subsidiaries are operating beyond their respective authorized scope of business, the Group may be subject to fines, confiscation of the gains derived from the noncompliant operations, or may be required to cease the VIEs’ noncompliant operations. In addition, the Group delivers courses in live streaming format on the Group’s proprietary live streaming platform which the relevant authorities may regard as a live-streaming platform and may thus require the Group to make necessary filings as a live-streaming platform. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Internet Live Streaming Services.” As of the date of this annual report, the Group has not been subject to any fines or other form of regulatory or administrative penalties or sanctions due to the lack of any aforementioned approvals, licenses or, permits or filings. However, we cannot guarantee that the government authorities will not impose any penalties or sanctions on the Group in the future, which may include warnings, fines, mandates to remedy any violations, confiscation of the gains derived from the services for which approvals, licenses, permits or filings are required, and/or an order to cease to provide such services. In addition, we cannot guarantee that the government will not promulgate new laws and regulations that require additional licenses, permits, approvals and/or filings for the operation of any of the Group’s existing or future business. Besides, the Group may develop new business lines or change the operations of certain of the Group’s current business among our PRC subsidiaries or the VIEs, which may require the Group to obtain additional licenses, approvals, permits, registrations and filings while there can be no assurance that the Group is able to successfully obtain such licenses, approvals, permits, registrations and filings in a timely manner or at all. In addition, there can be no assurance that the Group will be able to maintain their existing licenses, approvals, registrations or permits necessary to provide the Group’s current online services in China, renew any of them when their current term expires, or update existing licenses or obtain additional licenses, approvals, permits, registrations or filings necessary for the Group’s business expansion from time to time. If the Group is unable to obtain or maintain such licenses, permits, approvals or filings in a timely fashion, the Group could be subject to penalties and operational disruption and the Group’s financial condition and results of operations could be adversely affected. The Group may not be able to continue to recruit, train and retain a sufficient number of qualified faculty members. The Group’s faculty members are key to the quality of the Group’s educational services, as well as the Group’s brand and reputation. The Group’s ability to continue to attract faculty members, including teachers and mentors, with necessary experience and qualifications is a key driver in the success of the Group’s business. The Group seeks to recruit qualified faculty members who are dedicated to teaching and are able to communicate with students in an interactive online setting. Additionally, given the interactive nature of the Group’s live streaming lessons, the Group tends to hire teachers and mentors with strong education background and good communication skills enabling them to engage and interact with students. The market for recruitment of faculty members in China is competitive. In order to recruit qualified full-time teachers and mentors, the Group must provide candidates with competitive compensation packages and offer attractive career development opportunities. Although the Group has not experienced major difficulties in recruiting or training qualified teachers and mentors in the past, we cannot guarantee the Group will be able to continue to recruit, train and retain a sufficient number of qualified faculty members in the future as the Group continues to expand course offerings and business scale, which may have a material adverse effect on the Group’s business, financial condition and results of operations. The Group may not be able to timely improve or expand course and educational content offerings in a cost-effective manner to make them appealing to existing and prospective students, or at all. The Group regularly and constantly updates existing courses and educational content and develops new courses and educational content to meet student’s demand and the latest market trends. The revisions, improvements and expansions of existing course and content offerings and the development of new course and content offerings may not be accepted by existing or prospective students. Even if the Group is able to develop acceptable new course and educational content offerings, the Group may not be able to introduce them as quickly as students require or as quickly as the Group’s competitors introduce competing offerings. The process of performing detailed market research and recruiting qualified faculty for new course and educational content offerings could be costly and time-consuming. Furthermore, offering new courses or content or upgrading existing ones may require the Group to make significant investments in educational content 26 development, increase sales and marketing efforts and reallocate resources from other uses, all of which may not be successful. If the Group is unsuccessful in pursuing course and educational content development and upgrading opportunities due to the financial constraints, failure to attract qualified faculty, or other factors, the Group’s ability to attract and retain students could be impaired and the Group’s financial results could suffer. The Group faces risks associated with the online live streaming course delivery model. We believe that, even with the proliferation of internet and mobile devices in China, some of the Group’s target students may still be inclined to choose traditional face-to-face lessons offered by offline learning providers over online courses as they find the former more intimate and reliable. We cannot assure you that the Group’s live streaming course delivery format will continue to be attractive to students in the future. If the Group’s live streaming course delivery model becomes less appealing to students, the Group’s business and prospects may be affected. In addition, there is no assurance that the Group’s live streaming capacity will be able to support a growing number of students accessing the Group’s courses online without any service interruptions. Furthermore, we cannot assure that the Group will be able to address PRC regulatory and legislative developments relating to online streaming business. See “—The Group faces regulatory risks and uncertainties with respect to the licensing requirement for the online transmission of internet audio-visual programs” and “—The failure to obtain and maintain other approvals, licenses, permits or filings applicable to the Group’s business could have a material adverse impact on the Group’s business, financial conditions and results of operations.” The Group is subject to the risks associated with third-party live streaming service providers. Currently, while the Group relies on the proprietary live streaming platform to deliver online courses, the Group also uses certain third-party vendors to provide live streaming services to support the Group’s online course delivery. Because the live streaming technologies and infrastructure are owned and managed by third parties, any problems with the reliability and performance of such technologies and infrastructure could result in unanticipated delays and unscheduled service interruption could further cause the Group to be unable to deliver the Group’s courses in a live streaming format, forcing the Group to resort to using prerecorded lectures. The Group’s inability to deliver live streaming courses during service interruptions may damage the quality of the Group’s education service and student engagement and experience and negatively impact the Group’s reputation, financial condition and results of operations. The Group does not maintain long-term arrangements with the live streaming service providers, including the third-party service providers related to live streaming technologies and infrastructure. The term of the service agreements the Group enters into with third-party live streaming service providers are generally one year. If the Group cannot renew such agreements upon their expirations or terminations on commercially reasonable terms, or at all, or if the live streaming service providers become unwilling or unable to provide the Group with live streaming services at any time for any reasons, the Group’s ability to deliver live streaming online courses will be severely impacted, and the students’ learning experience and the Group’s reputation will be harmed. Failure to adequately and promptly respond to changes in the exams students must take to pursue their desired degrees, diplomas or certifications could cause the Group’s education services to be less attractive to students. There have been continuous changes in the curriculum requirements associated with, and the format of, the exams the Group’s existing and prospective students must take to pursue their desired degrees, diplomas or certifications, the manner in which the exams are administered, as well as topics frequently tested in the exams. These changes require the Group to continually update and enhance the Group’s course offerings, educational content and teaching methods. Any inability to track and respond to these changes in a timely and cost-effective manner would make the Group’s education services less attractive to students, which may materially and adversely affect the Group’s reputation and ability to continue to attract students without a significant decrease in the Group’s tuition. In addition, as the Group further expands the course offerings, we cannot assure that the Group will be able to adapt the Group’s existing educational content and methods to new courses that the Group has limited experience in teaching. The Group may face risks associated with the installment tuition payment plan the Group offers to its students. In 2015, the Group launched an installment payment option enabling eligible students to obtain loans from accredited third-party credit providers in China to finance all or part of their tuition. The third-party credit providers are responsible for performing credit assessment, approving loan applications, providing the funds, and collecting delinquent loan payments. Under the loan agreement between the borrowing student and the lending credit provider, the borrowing student is obligated to repay the loan principal in installments over a period ranging from 3 to 12 months. Under the cooperation agreement between the Group and each credit provider, the Group is obligated to pay the full amount of interest payable under a loan to the credit providers. The Group does not provide any guarantees for the repayment of student loans in favor of the credit providers. In 2023, 2024 and 2025, the Group’s student loan coverage ratio was 1.3%, 1.9% and 1.7%, respectively. For the same periods, the Group made interest payments of RMB1.5 million, RMB1.7 million and RMB1.9 million (US$0.3 million), respectively, to the credit providers. The decrease was mainly due to the students’ preference for lump-sum payment for interest, professional skills and professional certification preparation courses. However, the Group plans to continue to make the interest payments for students under their loans and pay service 27 fees to the credit providers, which may place strains on the Group’s financial resources in the future. The Group may be subject to risks associated with an increase in interest rates to the extent that the Group continues to make interest payments for the loans taken by students. If the Group ceases to do so due to increases in interest rates or for other reasons, the Group’s course packages may become more costly for students to purchase, which could in turn negatively impact the Group’s business, financial condition and reputation. The availability of funding from the Group’s existing and potential credit providers depends on many factors, such as their liquidity and capital sufficiency, the legal and regulatory environment, the general economic conditions, default rates of students on the loans, and, where applicable, the availability of lenders on the credit providers’ platforms. In addition, the Group’s credit providers may seek to acquire borrowers independently instead of through cooperation with us. The Group currently works with a limited number of credit providers and we cannot assure you that the Group’s credit providers will continue to cooperate with the Group on commercially favorable terms, or at all, or that existing or potential credit providers will be able to provide loans in a sufficient amount to meet students’ borrowing needs. If any of these were to occur, the Group’s course packages may become less compelling to prospective students who wish to obtain student loans, and as a result the Group’s business and financial condition may be negatively affected. Disruption to or failures of the Group’s IT infrastructure could reduce student satisfaction and could harm the Group’s operations. The performance and reliability of the Group’s IT infrastructure is critical to the Group’s operations and reputation. The Group provides course offerings and educational content to students and faculty primarily through the Group’s applications and platforms built upon Genesis, the Group’s proprietary IT infrastructure. In addition, the Group’s employees, including the faculty and sales and marketing personnel, rely on the Group’s integrated IT infrastructure to carry out their marketing, sales, operation and teaching functions. As part of their educational experience, students interact with their peers and the Group’s faculty via the platforms on a frequent basis. Accordingly, any errors, defects, disruptions or other performance problems with the Group’s IT infrastructure could damage the Group’s reputation, decrease student satisfaction and retention, adversely impact the Group’s ability to attract new students and expand the Group’s course offerings, and materially disrupt the Group’s operations. If any of these occur, the Group’s business operations, reputation and prospects could be harmed. The Group’s business depends on the continued success of the Group’s brand “Sunlands,” and if the Group fails to maintain and enhance recognition of the Group’s brand, the Group may face difficulty enrolling new students, and the Group’s reputation and operating results may be harmed. We believe that market awareness of the Group’s brand “Sunlands” has contributed significantly to the success of the Group’s business. Maintaining and enhancing the Group’s brand are critical to the Group’s efforts to grow the Group’s student enrollments and gross billings. Failure to maintain and enhance the Group’s brand recognition could have a material and adverse effect on the Group’s business, operating results and financial condition. The Group has devoted significant resources to the Group’s brand promotion efforts in recent years, but the Group cannot assure you that these efforts will be successful. If the Group are unable to further enhance the Group’s brand recognition, or if the Group incur excessive marketing and promotion expenses, or if the Group’s brand image is negatively impacted by any negative publicity, the Group’s business and results of operations may be materially and adversely affected. Students may decide not to continue taking the Group’s courses for a number of reasons, including a perceived lack of improvement in their academic performance or general dissatisfaction with the Group’s course and educational content offerings, which may adversely affect the Group’s business, financial condition, results of operations and reputation. The success of the Group’s business depends on the Group’s ability to deliver high-quality learning experiences and help students achieve their learning objectives. The Group may not always be able to meet students’ expectations in terms of academic performance due to a variety of reasons, many of which are outside of the Group’s control. The Group may face increased dropout rates and student dissatisfaction due to students’ perceptions of the Group’s failure to help them achieve their anticipated academic goals, students’ overall dissatisfaction with the quality of the Group’s course and educational content offerings and the Group’s faculty, as well as changing views of the value of the diplomas, degrees and qualifications they are pursuing through taking the Group’s courses. These factors may contribute to reduced student engagement and increased challenges in attracting and enrolling prospective students, all of which may adversely affect the Group’s prospects, business, financial condition, results of operations and reputation. To the extent the Group relies on certain types of course offerings to generate revenues, the Group will be subject to concentration risks, including risks resulting from changes in government policies. The Group’s reliance on certain types of course offerings may expose the Group to concentration risks. For example, the Group has historically relied on the Group’s Self-taught Higher Education Examination, or the STE course offerings, to generate revenues. In recent years, the interest, professional skills and professional certification preparation course offerings have contributed to an increasing proportion of the Group’s overall revenues. In 2023, 2024 and 2025, the Group’s 28 interest, professional skills and professional certification preparation courses represented approximately 67.1%, 75.3% and 74.2%, respectively, of the Group’s net revenues, and approximately 98.4%, 99.1% and 99.9%, respectively, of the Group’s gross billings. In addition, the Group’s interest, professional skills and professional certification preparation courses represented approximately 95.0%, 97.6% and 98.1%, respectively, of the Group’s new student enrollments in 2023, 2024 and 2025. The interest, professional skills and professional certification preparation course offerings include diversified course offerings, and thus we believe the Group currently is not reliant on certain types of course offerings for revenue generation. However, if the Group become reliant on certain types of course offerings to generate revenues in the future, and if there are significant reductions in the perceived value of any of the courses on which the Group relies significantly to generate the Group’s revenues or gross billings, the demand for and attractiveness of the Group’s course offerings may be adversely affected, which could have an adverse impact on the Group’s financial condition and results of operations. If the Group fails to effectively identify, pursue and consummate strategic alliances or acquisitions, the Group’s ability to grow and to achieve profitability could be impacted. The Group may from time to time engage in evaluations of, and discussions with, possible domestic and international acquisition or alliance candidates. The Group may not be able to identify suitable strategic alliances or acquisition opportunities, complete such transactions on commercially favorable terms, or successfully integrate business operations, infrastructure and management philosophies of acquired businesses and companies. There may be particular complexities, regulatory or otherwise, associated with the Group’s expansion into new markets, and the Group’s strategies may not succeed beyond the Group’s current markets. If the Group are unable to effectively address these challenges, the Group’s ability to execute acquisitions as a component of the Group’s long-term strategy will be impaired, which could have an adverse effect on the Group’s growth. The Group faces intense competition in the Group’s industry, which could divert student to the Group’s competitors, lead to pricing pressure and loss of market share, and significantly reduce the Group’s gross billings and net revenues. China’s adult online education market and adult personal interest learning market are intensely competitive. The Group competes with other online education service providers or traditional offline players, for student enrollments and engagement, high-quality academic and administrative faculty, and sales and marketing personnel, among other things. Some of the Group’s current and future competitors may have substantially greater name recognition and financial and other resources than the Group does, which may enable them to compete more effectively for potential students and decrease the Group’s market share. The Group also expects to face competition as a result of new entrants to the adult online education market and the adult personal interest learning market. The Group may not be able to compete successfully against current or future competitors and may face competitive pressures that could adversely affect the Group’s business or results of operations. For example, increased competition may result in pricing pressure for the Group in terms of the tuition the Group are able to negotiate to receive from a student. In addition, online education is characterized by rapid changes in students’ technological requirements and expectations and evolving market standards, and the Group’s competitors may develop platforms or other technologies that are superior to the platform and technology the Group uses. These differences may affect the Group’s ability to recruit and retain students, which may render the Group’s online course offerings less competitive. The increasingly competitive landscape may also result in longer and more complex sales cycles with a prospective student or a decrease in the Group’s market share, any of which could negatively affect the Group’s gross billings and net revenues and the Group’s ability to grow the Group’s business. If the Group’s security measures are breached or fail and result in unauthorized disclosure of data by the Group’s employees or the Group’s third-party agents, the Group could lose existing students, fail to attract new students and be exposed to protracted and costly litigation. Maintaining platform security is of critical importance to students because the platform stores and transmits proprietary and confidential information, which may include sensitive personally identifiable information that may be subject to stringent legal and regulatory obligations. As an online education service provider, the Group faces an increasing number of threats to the Group’s IT infrastructure, including unauthorized activity and access by the Group’s employees or third-party agents, system viruses, worms, malicious code and organized cyberattacks, which could breach the Group’s security and disrupt the Group’s business. For example, the Group has introduced data security and confidentiality protocols into the cooperation agreements the Group enters into with third-party sales agents with whom the Group shares prospective students’ contact information, and the Group has made technical improvements in the Group’s IT infrastructure to prevent unauthorized access of confidential or sensitive personal information by the Group’s employees and third-party sales agents in the process of engaging prospective students. These measures, however, may not be as effective as the Group anticipates. In addition, there is no assurance that the Group’s third-party sales agents will comply with contractual and legal requirements with respect to data privacy when they collect data from the Group’s prospective students. If the Group’s 29 security measures are breached or fail as a result of third-party action, employee error, malfeasance or otherwise, the Group could be subject to liability or the Group’s business could be interrupted, potentially over an extended period of time. Any or all of these issues could harm the Group’s reputation, adversely affect the Group’s ability to attract and enroll prospective students, cause prospective students not to enroll or stay enrolled, or subject the Group to third-party lawsuits, regulatory fines or other action or liability. Further, any reputational damage resulting from breach of the Group’s security measures could create distrust of the Group’s company by prospective students or investors. The Group may be required to expend significant additional resources to protect against the threat of these disruptions and security breaches or to alleviate problems caused by such disruptions or breaches. Privacy concerns could limit the Group’s ability to collect and leverage the Group’s user data and disclosure of user data could adversely impact the Group’s business and reputation. In the ordinary course of the Group’s business and in particular in connection with conducting sales and marketing activities with the Group’s existing and prospective students as well as the utilization of the Group’s personalized study programs, the Group collects and utilizes data supplied by the users. The Group currently faces certain legal obligations regarding the manner in which the Group treats such information. Increased regulation of data utilization practices, including self-regulation or findings under existing laws that limit the Group’s ability to collect, transfer and use data, could have an adverse effect on the Group’s business. While we have security measures in place to protect the data of the Group’s users, the Group’s study programs and underlying infrastructure may be materially damaged or compromised as a result of various factors, such as efforts by individuals or groups of hackers and sophisticated organizations, cyberattacks on the Group’s internally built infrastructure, and vulnerabilities in systems and applications from third-party service providers. In addition, if the Group were to disclose data about the Group’s users in a manner that was objectionable to them, the Group’s business reputation could be adversely affected, and the Group could face potential legal claims and administrative penalties that could impact the Group’s operating results. For further details, see “Item 4. Information on the Company—4.B. Business Overview—Data Privacy and Security” and “Item 16K. Cybersecurity.” Internationally, the Group may become subject to additional and/or more stringent legal obligations concerning the Group’s treatment of customer and other personal information, such as laws regarding data localization and/or restrictions on data export. Failure to comply with these obligations could subject the Group to liability, and to the extent that the Group need to alter the Group’s business model or practices to adapt to these obligations, the Group could incur additional expenses. The Group is subject to a variety of laws and other obligations regarding data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on the Group’s business, financial condition and results of operations. The Group is subject to various regulatory requirements relating to the security and privacy of data, including restrictions on the collection, storage and use of personal information and requirements to take steps to prevent personal data from being divulged, stolen, or tampered with. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Internet Information Security and Privacy Protection.” Regulatory requirements regarding the protection of data are constantly evolving and can be subject to differing interpretations or significant change, making the extent of the Group’s responsibilities in that regard uncertain. For example, the Cyber Security Law of the PRC became effective in June 2017, but there are great uncertainties as to the interpretation and application of the law. It is possible that those regulatory requirements may be interpreted and applied in a manner that is inconsistent with the Group’s practices. In addition, the Office of the Central Cyberspace Affairs Commission, the MIIT, the Ministry of Public Security, and the SAMR jointly issued an announcement on January 23, 2019 regarding carrying out special campaigns against mobile internet application programs collecting and using personal information in violation of applicable laws and regulations, which prohibits business operators from collecting personal information irrelevant to their services, or forcing users to give authorization in disguised manner. In addition, the PRC regulatory authorities have recently taken steps to strengthen the regulation on data protection and conducted several rounds of relevant inspections recently. The Group has been taking and will continue to take reasonable measures to comply with such announcement, provisions and inspection requirements. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, effective on September 1, 2021. On July 30, 2021, the State Council promulgated the Regulations on Critical Information Infrastructure Security Protection, which became effective on September 1, 2021. On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Personal Information Protection Law, which came into effect on November 1, 2021. In addition, on January 4, 2022, the CAC announced the adoption of the Revised Cybersecurity Review Measures, which became effective on February 15, 2022 and repealed the Cybersecurity Review Measures promulgated on April 13, 2020. Such Measures further restate and expand the applicable scope of the cybersecurity review. Pursuant to the Revised Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and network platform operators engaging in data processing activities, must be subject to the cybersecurity review if their activities affect or may affect national security. In addition, network platform operators holding over one million users’ personal information shall apply with the Cybersecurity Review Office for a cybersecurity review before listing abroad. On January 4, 2022, the CAC published the Administrative Provisions on 30 Internet Information Service Algorithm Recommendation on its website, which became effective on March 1, 2022. Furthermore, on July 7, 2022, the CAC promulgated the Security Assessment Measures for Outbound Data Transfer, effective from September 1, 2022, to regulate outbound data transfer activities, protect the rights and interests of personal information, safeguard national security and social public interests, and promote the cross-border security and free flow of data. On March 22, 2024, the CAC published the Provisions on Promoting and Regulating Cross-bound Data Flows, which streamline and provide clarity to the governance framework for outbound data transfer. These newly promulgated laws and regulations reflect PRC government further attempts to strengthen the legal protection for the national network security, data security, the security of critical information infrastructure and the security of personal information protection. For details on regulations over cybersecurity, data protection and privacy in the PRC, see “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations Relating to Internet Information Security and Privacy Protection.” Based on the Group’s understanding of the above PRC laws and regulations and assessment of our cybersecurity, data protection, and privacy practices, the Group’s business operations do not violate any of the above PRC laws and regulations currently in force in all material aspects except for the uncertainties as disclosed in this annual report. The Group has not relied upon the opinion of PRC legal counsel with respect to its conclusion that the Group is compliant with PRC laws and regulations regarding cybersecurity, data protection, and privacy. As advised by Tian Yuan Law Firm, our PRC legal counsel, the Group is not legally required under PRC laws and regulations to engage an external legal counsel to conduct a review of its cybersecurity, data protection, and privacy practices in the PRC. The PRC laws and regulations impose enhanced compliance requirements for critical information infrastructure operators; however, as of the date of this annual report, the Group has not been identified by the PRC regulators as a “critical information infrastructure operator” under the relevant cybersecurity laws and regulations. Nevertheless, the Group strives to adhere to heightened standards of cybersecurity and data privacy for the interests of its users and shareholders, and accordingly the Group has established compliance procedures and programs to identify and mitigate risks in this regard. As a result, the Group’s portal system, operation system and major mobile app have achieved scores of approximately 80 / 100 on tests conducted by independent third-party institutions, which speaks to effective measures adopted by the Group in compliance with applicable cybersecurity and data privacy laws and regulations. Therefore, we believe that the business operations of the Group do not violate any of the laws and regulations over cybersecurity and data privacy currently in force in any material aspect. However, should it become necessary or required under PRC laws and regulations, the Group will promptly engage external legal counsel to assess and provide an opinion on its compliance status with respect to cybersecurity and data privacy and disclose the findings of such review in accordance with SEC rules. The Group has been taking and will continue to take reasonable measures to comply with the aforementioned laws, regulations, announcement, provisions and inspection requirements; however, as these laws, regulations, announcements and provisions are relatively new, and the related implementation rules have not yet been promulgated, it remains uncertain how these laws, regulations, announcements and provisions will be implemented. For example, there have been no clarifications from the relevant authorities as to the detailed standards for determining whether an activity is one that “affects or may affect national security”, thus uncertainties remain as to whether the Groups’ data processing activities shall be subject to a cybersecurity review. We cannot assure you the Group can adapt the operations to these laws, regulations, announcement and provisions in a timely manner. Evolving interpretations of such laws, regulations, announcements and provisions or any future regulatory changes might impose additional restrictions on or obligations of the Group generating and processing personal information and other data. The Group may be subject to additional regulations, laws and policies adopted by the PRC government to apply more stringent social and ethical standards in cybersecurity and data privacy resulting from the increased global focus on this area. To the extent that the Group needs to alter the Group’s business model or practices to adapt to these announcement and provisions and future regulations, laws and policies, the Group could incur additional expenses. Any failure, or perceived failure by the Group, or by third-party partners to maintain the security of students’ data and other confidential information or to comply with applicable privacy, cybersecurity, data security and personal information protection laws, regulations, policies, contractual provisions, industry standards, and other requirements, may result in civil or regulatory liability, including governmental or data protection authority enforcement actions and investigations, fines, penalties, enforcement orders requiring the Group to cease operating in a certain way, litigation, or adverse publicity, and may require the Group to expend significant resources in responding to and defending allegations and claims. Moreover, claims or allegations that the Group has failed to adequately protect users’ data, or otherwise violated applicable privacy, cybersecurity, data security and personal information protection laws, regulations, policies, contractual provisions, industry standards, or other requirements, may result in damage to the Group’s reputation and a loss of confidence in the Group by users or partners, potentially causing the Group to lose users, business partners and revenues, which could have a material adverse effect on the Group’s business, financial condition and results of operations. Furthermore, the PRC regulatory and enforcement regime with regard to privacy, cybersecurity, data security and personal information protection is still evolving. PRC regulators have been increasingly focused on regulation in the areas of cybersecurity, data security and data protection. We cannot assure you that relevant regulators will not interpret or implement these laws or regulations in ways that negatively affect the Group. It is possible that the Group may become subject to additional or new laws and regulations, policies and interpretations, which may result in additional expenses to the Group and subject the Group to potential liability and negative publicity. The Group expects that these areas will receive greater attention and focus from regulators, and 31 attract continued or greater public scrutiny and attention going forward, which could increase compliance costs and subject the Group to heightened risks and challenges associated with data security and protection. If the Group is unable to manage these risks, the Group could become subject to penalties, fines, suspension of business and revocation of required licenses, and the Group’s reputation and results of operations could be materially and adversely affected. Tuition refunds or potential refund disputes may negatively affect the Group’s cash flow, financial condition, and reputation. The Group offers different tuition refund options to students depending on the time of enrollment and subject to certain conditions and restrictions in the service contract between the Group and each student. Generally, a student is offered a full, unconditional refund within 24 hours upon enrollment. If the student makes a refund request after taking at least one live streaming course lasting 30 minutes by reason of any material academic issue of the Group’s courses within certain refund period, the Group offers a refund excluding the registration fees and the fees of delivered courses upon the Group’s confirmation. In addition, the Group offers students a refund for the undelivered courses excluding the registration fees. Starting from June 2019, the Group offers such refund during the entire service period. When calculating gross billings for a specific period, the Group deducts the total amount of refunds from the total amount of cash received for the sale of course packages for such period. See “Item 4. Information on the Company—4.B. Business Overview—Tuition and Fees.” In 2023, 2024 and 2025, the Group had made RMB94.2 million, RMB76.3 million and RMB101.6 million (US$14.5 million) of refund payments, respectively, most of which were made pursuant to the Group’s tuition refund policy, see “Item 4. Information on the Company—4.B. Business Overview—Tuition and Fees.” The number of refund requests and the amount of refunds could be affected by a number of factors. These factors include, without limitation to, student dissatisfaction with the Group’s teaching quality and the Group’s course and educational content offerings, privacy concerns relating to the Group’s online platforms, negative publicity regarding the Group or online education in general, the terms and scope of the Group’s refund policy, and any change or development in PRC laws and regulations with respect to fees and tuitions charged by online education providers like the Group. See “—The Group faces risks associated with the lack of a private school operating permit for online education services as well as uncertainties surrounding PRC laws and regulations governing the education industry in general, including the Law for Promoting Private Education and its Implementing Rules.” As part of the Group’s efforts to enhance user experience, from June 2019, the Group amended certain terms of refund policy to facilitate a more flexible and smoother refund process. Any refund payments that the Group may be required to make to the students, as well as the expenses the Group could incur for processing refunds and resolving refund disputes, could be substantial and could adversely affect the Group’s gross billings, net revenues, liquidity and financial condition. A high volume of refunds and refund disputes may also generate negative publicity that could harm the Group’s reputation. The Group has experienced in the past, and may experience in the future, negative publicity in relation to refund disputes between the Group and the students, which may significantly harm the Group’s brand name and divert the Group’s attention from operating business. We cannot assure you that the Group will not be subject to liability claims or legal or regulatory liability for any inappropriate or illegal content, which could subject the Group to liabilities and cause damages to the Group’s reputation. Although the Group implements various monitoring procedures to identify and remove inappropriate or illegal content, we cannot assure you that there will be no inappropriate or illegal content included in the Group’s content offerings including content generated and uploaded to the Group’s online platforms by the users. For example, the Group has been historically penalized for inaccurate advertising. The Group may face civil, administrative or criminal liability or legal or regulatory sanctions, such as requiring the Group to restrict or discontinue the Group’s content, products or services, if an individual or corporate, governmental or other entity believes that any of the content offerings violates any laws, regulations or governmental policies or infringes upon its legal rights. Even if such a claim were not successful, defending such a claim may cause the Group to incur substantial costs. Moreover, any accusation of inappropriate or illegal content in the Group’s content offerings could lead to significant negative publicity, which could harm the Group’s reputation, business, financial condition and results of operations. The Group’s success depends on the continuing efforts of the Group’s senior management team and other key employees. The Group depends on the continued contributions of our senior management and other key employees, including, in particular, Mr. Jianhong Yin, also known as Peng Ou, our founder and the chairman of our board of directors, and Mr. Tongbo Liu, our director and Chief Executive Officer. The loss of the services of any of the Group’s senior management or other key employees could harm the Group’s business. Competition for qualified talents in China is intense. If one or more of the Group’s senior management or other key employees are unable or unwilling to continue in their present positions, the Group may not be able to find replacements in a timely manner, or at all, and the Group’s business may be disrupted. Moreover, if any member of the Group’s senior management team or any of the Group’s other key personnel joins a competitor or forms or invests in a competing business, the Group may lose student enrollments, qualified teaching faculty members and other key sales and marketing personnel to the Group’s competitors. The Group’s future success is 32 also dependent on the Group’s ability to attract a significant number of qualified employees and retain existing key employees. If the Group is unable to do so, the Group’s business and growth may be materially and adversely affected. The Group’s need to significantly increase the number of qualified employees and retain key employees may cause the Group to materially increase compensation-related costs, including share-based compensation. If the Group cannot maintain the corporate culture as the Group grows, the Group could lose the innovation, collaboration and focus that contribute to the Group’s business. We believe that a critical component of the Group’s success is the corporate culture, which fosters innovations and has roots in a deep understanding of the students and the evolving education industry in China. As the Group continues to expand and grow its business, it may find it difficult to maintain these valuable aspects of the Group’s corporate culture. Any failure to preserve the culture could undermine the Group’s reputation in the marketplace and negatively impact the Group’s ability to attract and retain employees and students, which would in turn jeopardize the Group’s future success. The Group may from time to time be subject to infringement claims relating to intellectual properties of third parties. We cannot assure you that the Group’s course offerings and educational contents and the Group’s IT technologies and platforms do not or will not infringe upon copyrights or other intellectual property rights held by third parties. The Group may encounter disputes from time to time over rights and obligations concerning intellectual properties, and the Group may not prevail in those disputes. The Group has adopted policies and procedures to prohibit the students and employees from infringing upon third-party copyright or intellectual property rights. However, we cannot ensure that they will not, against the Group’s policies, use third-party copyrighted materials or intellectual property without proper authorization in the Group’s classes or via any medium through which the Group provides services. The Group may incur liability for unauthorized duplication or distribution of materials posted on the Group’s websites or used in the Group’s classes. The Group has been involved in claims against the Group alleging the Group’s infringement of third-party intellectual property rights and the Group may be subject to such claims in the future. The Group has not entered into any licensing arrangements with, or otherwise obtained any consent from, the government agencies administering the STE exams for using certain exam questions in the Group’s quiz banks. Although the Group has never been subject to any legal or administrative penalties or proceedings relating to the Group’s use of these sample questions, we cannot assure you that the Group will not be subject to infringement claims associated with the Group’s use of real STE questions in the future. Any such intellectual property infringement claim could result in costly litigation and divert the Group’s management attention and resources, which in turn could negatively affect the Group’s business, financial condition and prospect. If the Group fails to protect the Group’s intellectual property rights, the Group’s brand and business may suffer. The Group relies on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect the Group’s intellectual property rights. Although the Group seeks to obtain copyright or patent protection for the Group’s intellectual property when applicable, it is possible that the Group may not be able to do so successfully or that the copyright or patent the Group has obtained may not be sufficient to protect all of the Group’s intellectual property rights. In particular, the Group relies, to the great extent, upon the Group’s educational content developed in-house, including course syllabi and outlines, quiz banks, teaching notes, and learning outcomes trees, to provide high-quality online education services. Despite the Group’s efforts to protect the proprietary education contents and other intellectual property rights, unauthorized parties may attempt to copy or duplicate the Group’s intellectual property or otherwise use the Group’s intellectual properties without obtaining the Group’s consent. Monitoring unauthorized use of the Group’s intellectual property is difficult and costly, and we cannot be certain that the steps the Group has taken will effectively prevent misappropriation of the Group’s intellectual properties. If the Group is not successful in protecting the Group’s intellectual property rights, the Group’s business and results of operations may be adversely affected. The Group’s students, employees and third-party vendors may engage in intentional or negligent misconduct or other improper activities or misuse the Group’s platform, which could harm the Group’s brand and reputation. The Group is exposed to the risk of fraud or other misconducts committed by students, employees and vendors, including certain third-party sales and marketing agencies. For example, in some instances, students and faculty members may post to the Group’s platform articles or other third-party content for use in class discussions. The PRC laws governing the fair use of these third-party materials are imprecise and adjudicated on a case-by-case basis, which makes it challenging for the Group to adopt and implement policies governing these practices. The Group could, as a result, incur liability to third parties for the unauthorized duplication, distribution or other use of these materials. Any such claims could subject the Group to costly litigation and impose a significant strain on the Group’s financial resources and attention of management personnel regardless of whether the claims have merit. The Group may be required to alter or cease the Group’s uses of such materials, which may include changing or removing content from courses or altering the functionality of the Group’s platform, or to pay monetary damages. Fraud or other misconducts by students, employees or third parties may also involve engaging in unauthorized misrepresentation to the Group’s potential students and misappropriating 33 third-party intellectual property and other propitiatory rights during marketing activities, misusing sensitive personal information of students, and engaging in bribery or other unlawful payments, any of which could result in customer complaints, regulatory and legal liabilities, as well as serious harm to the Group’s brand and reputation. The Group’s courses undergo multiple rounds of internal review before being broadly released. While the Group proactively monitors the live courses and other content and communications to ensure that the Group is able to identify content that may be deemed inappropriate or in violation of laws, regulations and government policies, since the Group has limited control over the real-time and offline behavior of the Group’s users and employees, to the extent any improper behavior is associated with the Group’s content and services, the Group’s ability to protect its reputation may be limited. If any of the Group’s users and employees suffer or allege to have suffered harm following contact initiated through the Group’s services, the Group may face civil lawsuits or other liabilities. In response to allegations of illegal or inappropriate activities, PRC government authorities may intervene and hold the Group liable for non-compliance with PRC laws and regulations concerning the dissemination of information on the internet and subject the Group to administrative penalties or other sanctions, such as requiring the Group to restrict or discontinue the Group’s content or services. As a result, the Group’s business may suffer and the Group’s reputation, business, financial condition and results of operations may be materially and adversely affected. The Group may be the subject of detrimental conduct by third parties such as the Group’s competitors, including complaints to regulatory agencies and the public dissemination of malicious assessments of the Group’s business, which could have a negative impact on the Group’s reputation and cause the Group to lose market share, students and revenues, and adversely affect the price of the ADSs. The Group has been, and in the future may be, the target of anti-competitive, harassing or other detrimental conduct by third parties including the Group’s competitors. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies regarding the Group’s operations, accounting, business relationships, business prospects and business ethics. Additionally, allegations, directly or indirectly against the Group, may be posted online by anyone, whether or not related to the Group, on an anonymous basis. The Group may be subject to government or regulatory investigation as a result of such third-party conduct and may be required to expend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that the Group will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. The Group’s reputation may also be materially negatively affected as a result of the public dissemination of anonymous allegations or malicious statements about the Group’s business, which in turn may cause the Group to lose students and revenues, and adversely affect the price of the ADSs. The Group’s user metrics and other estimates are subject to inaccuracy in measuring the Group’s operating performance, which may harm the Group’s reputation. The Group continually reviews the number of students, new student enrollments, gross billings per new student enrollment, and other operating metrics to evaluate growth trends, measure the Group’s performance and make strategic decisions. These metrics are calculated using internal data, have not been validated by an independent third party and may not be indicative of the Group’s future operating performance. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring how the Group’s website and mobile application are used across a large student base. For example, the Group may not be able to identify individual students who have multiple accounts from multiple students who share one account on the Group’s website or mobile application. In addition, the Group collects student reviews to measure student satisfaction rate and other student engagement metrics, but these reviews may not be representative of the Group’s entire student population. Errors or inaccuracies in the Group’s metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of student satisfaction or marketing spending were to occur, the Group might expend resources to implement unnecessary business measures or fail to take required actions to remedy an unfavorable trend. If investors do not perceive the Group’s operating metrics to accurately represent the Group’s operating performance, or if the Group discovers material inaccuracies in the Group’s operating metrics, the Group’s reputation may be harmed. If the Group fails to maintain an effective internal control over financial reporting, the Group may be unable to accurately and timely report our results of operations, meet our reporting obligations or prevent fraud and investor confidence in our company and the market price of the ADSs may decline. As a public company, we are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and determine the effectiveness of the Group’s internal control over financial reporting, report any material weaknesses in such internal controls and provide a management report on internal control over financial reporting. The Group’s management has concluded that the Group’s internal control over financial reporting was effective as of December 31, 2025. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” We are exempt from the requirement of an attestation report issued by our registered public accounting firm because we are a non-accelerated filer. The Group will endeavor to maintain an effective internal control system, but any failure may cause the Group’s management not be able to conclude that the Group has effective internal 34 control over financial reporting at a reasonable assurance level. To the extent the Group’s independent registered public accounting firm is required to attest to, and report on, the effectiveness of the Group’s internal control over financial reporting in the future, it may not be able to conclude that the Group has effective internal control over financial reporting at a reasonable assurance level. This could in turn result in the loss of investor confidence in the reliability of the Group’s financial statements and negatively impact the trading price of the ADSs. Furthermore, the Group has incurred and may need to incur additional costs and use additional management and other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward. In addition, there is no assurance that we or our auditor will not identify deficiencies in the Group’s internal control over financial reporting that are deemed to be material weaknesses and render the Group’s internal control over financial reporting ineffective for any future periods. If the Group fails to maintain the adequacy of its internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, the Group may not be able to conclude on an ongoing basis that the Group has effective internal control over financial reporting in accordance with Section 404. Generally speaking, if the Group fails to achieve and to maintain effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which could cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a negative impact on the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose the Group to increased risk of fraud or misuse of corporate assets and subject the Group to potential delisting from the NYSE, regulatory investigations and civil or criminal sanctions. We have incurred increased costs as a result of being a public company, particularly after we ceased to qualify as an “emerging growth company.” We are a public company and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the U.S. Securities and Exchange Commission, or the SEC, and the NYSE, impose various requirements on the corporate governance practices of public companies. We will incur additional costs associated with our public company reporting requirements. It may also be more difficult for the Group to find qualified persons to serve on our board of directors or as executive officers. In addition, as we have ceased to be an “emerging growth company” as such term is defined in the JOBS Act, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 and the other rules and regulations of the SEC. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs. We have granted, and may continue to grant, share incentives, which may result in increased share-based compensation expenses. We adopted an equity incentive plan in October 2017, or the 2017 Plan, for the purpose of granting share-based compensation awards to employees, officers, directors and consultants to incentivize their performance and promote the success of the Group’s business. We account for compensation costs for all share-based awards using a fair-value based method and recognize expenses in our consolidated statements of operations in accordance with U.S. GAAP. Under the 2017 Plan, we are authorized to grant options, restricted stock units and other types of awards the administrator of the 2017 Plan decides. Under the 2017 Plan, the maximum aggregate number of shares which may be issued pursuant to all awards is 829,349 shares. As of the date of this annual report, options to purchase a total of 31,550 ordinary shares were outstanding under the 2017 Plan. We believe the granting of share-based awards is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based awards in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. If the Group fails to make adequate contributions to various employee benefits plans as required by PRC regulations, the Group may be subject to penalties. Companies operating in China are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where the Group’s employees are based. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. If the Group fails to make adequate contributions to various employee benefit plans and comply with applicable PRC labor-related laws, the Group may be subject to late payment penalties, and the Group could be required to make up the contributions for these plans as well as to pay late fees and fines. If the Group is subject to late fees or fines in relation to the underpaid employee benefits, the Group’s financial condition and results of operations may be adversely affected. In addition, to the extent that the Group can make a reasonable estimate of the liability arising from the Group’s failure in making full contributions to various employee benefit plans, the Group will record a related contingent liability. However, the amount of the Group’s estimates may be inaccurate, in which case 35 the Group’s financial condition and cash flow may be adversely affected if the Group were to pay late fees or fines in relation to the underpaid employee benefits. Increases in labor costs in the PRC may adversely affect the Group’s business and results of operations. The currently effective PRC Labor Contract Law was first adopted on June 29, 2007 and later amended on December 28, 2012. The PRC Labor Contract Law has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to have written employment contracts, to enter into employment contracts with no fixed term under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. Furthermore, the PRC Labor Contract Law sets forth additional restrictions and increases the costs involved with dismissing employees. To the extent that the Group needs to significantly reduce the Group’s workforce, the PRC Labor Contract Law could adversely affect the Group’s ability to do so in a timely and cost-effective manner, and the Group’s results of operations could be adversely affected. In addition, for employees whose employment contracts include noncompetition terms, the PRC Labor Contract Law requires the Group to pay monthly compensation after such employment is terminated, which will increase the Group’s operating expenses. In addition, the Group is required by PRC laws and regulations to make social insurance registration and open housing fund account with relevant governmental authorities and pay various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of the Group’s employees. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. If the Group fails to make adequate social insurance and housing fund contributions, the Group may be subject to fines and legal sanctions, and the Group’s business, financial condition and results of operations may be adversely affected. We expect that the Group’s labor costs, including wages and employee benefits, will continue to increase. Unless the Group is able to pass on these increased labor costs to the Group’s customers by increasing the prices of the Group’s products and services, the Group’s financial conditions and results of operations would be materially and adversely affected. The Group faces certain risks relating to the real properties that the Group leases. The Group leases real properties from third parties primarily for the Group’s office use in China, and the lease agreements for most of these leased properties have not been registered with the PRC governmental authorities as required by PRC law. Although the failure to do so does not in itself invalidate the leases, the Group may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance were not rectified within a given period of time, the Group may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for the Group’s lease agreements that have not been registered with the relevant PRC governmental authorities. As of the date of this annual report, the Group is not aware of any regulatory or governmental actions, claims or investigations being contemplated or any challenges by third parties to the Group’s use of the Group’s leased properties the lease agreements of which have not been registered with the government authorities. However, we cannot assure you that the government authorities will not impose fines on the Group due to the Group’s failure to register any of the Group’s lease agreements, which may negatively impact the Group’s financial condition. The Group leases real properties from third parties in China for marketing and providing offline consultation related to the Group’s online services for potential students or existing students. Some of the ownership certificates or other similar proof of certain leased properties have not been provided to the Group by the relevant lessors. Therefore, we cannot assure you that such lessors are entitled to lease the relevant real properties to us. If the lessors are not entitled to lease the real properties to the Group and the owners of such real properties decline to ratify the lease agreements between the Group and the respective lessors, the Group may not be able to enforce the Group’s rights to lease such properties under the respective lease agreements against the owners. As of the date of this annual report, the Group is not aware of any claim or challenge brought by any third parties concerning the use of the Group’s leased properties without obtaining proper ownership proof. If the Group’s lease agreements are claimed as null and void by third parties who are the real owners of such leased real properties, the Group could be required to vacate the properties, in the event of which the Group could only initiate the claim against the lessors under relevant lease agreements for indemnities for their breach of the relevant leasing agreements. We cannot assure you that suitable alternative locations are readily available on commercially reasonable terms, or at all, and if the Group is unable to relocate the Group’s operations in a timely manner, the Group’s operations may be interrupted. The Group’s operations depend on the performance of the internet infrastructure and telecommunications networks in China. The successful operation of the Group’s business depends on the performance of the internet infrastructure and telecommunications networks in China. Almost all access to the internet is maintained through state-owned telecommunications operators under the administrative control and regulatory supervision of the MIIT. Moreover, the 36 Group has entered into contracts with various subsidiaries of a limited number of telecommunications service providers at provincial level and rely on them to provide the Group with data communications capacity through local telecommunications lines. The Group has limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the telecommunications networks provided by telecommunications service providers. The Group’s platform regularly serves a large number of users and advertisers. With the expansion of the Group’s business, the Group may be required to upgrade the Group’s technology and infrastructure to keep up with the increasing traffic on the Group’s platform. However, the Group has no control over the costs of the services provided by telecommunications service providers. If the prices the Group pays for telecommunications and internet services rise significantly, the Group’s results of operations may be materially and adversely affected. If internet access fees or other charges to internet users increase, the Group’s user traffic may decline and the Group’s business may be harmed. The Group may be subject to litigations, allegations, complaints and investigations from time to time arising out of business operations. We and certain of our directors and officers have been named as defendants in a shareholder class action lawsuit, which could have a material adverse impact on the Group’s business, financial condition, results of operation, cash flows and reputation. The Group has been and may continue to be involved in legal and other disputes in the ordinary course of business operations. For example, we and certain of our directors and officers have been named as defendants in a class action lawsuit. For details, see “Item 8. Financial Information—8.A. Consolidated Statements and Other Financial Information—Legal Proceedings.” We cannot guarantee that the Group will not be a target for lawsuits in the future, including putative class action lawsuits brought by shareholders. There can be no assurance that the Group will be able to prevail in the Group’s defense or reverse any unfavorable judgment on appeal, and the Group may decide to settle lawsuits on unfavorable terms. Any adverse outcome of these cases, including any plaintiffs’ appeal of the judgment in these cases, could result in payments of substantial monetary damages or fines, or changes to the Group’s business practices, and thus have a material adverse effect on the Group’s business, financial condition, results of operation, cash flows and reputation. In addition, there can be no assurance that the Group’s insurance carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of the Group’s cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm the Group’s business. The Group also may be subject to claims for indemnification related to these matters, and the Group cannot predict the impact that indemnification claims may have on the Group’s business or financial results. The Group currently does not have any business insurance coverage. Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, the Group does not have any business liability or disruption insurance to cover the Group’s operations. The Group has determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for the Group to have such insurance. Any uninsured business disruptions may result in the Group’s incurring substantial costs and the diversion of resources, which could have an adverse effect on the Group’s results of operations and financial condition. The Group faces risks related to natural disasters, extreme weather conditions, health epidemics and other catastrophic incidents, which could significantly disrupt the Group’s operations. China has in the past experienced significant natural disasters, including earthquakes, extreme weather conditions, as well as health scares related to epidemic diseases, and any similar event could materially impact the Group’s business in the future. If a disaster or other disruption were to occur in the future that affects the regions where the Group operates business, the Group’s operations could be materially and adversely affected due to loss of personnel and damages to property. Even if the Group is not directly affected, such a disaster or disruption could affect the operations or financial condition of the Group’s ecosystem participants, which could harm the Group’s results of operations. In addition, accidents, disasters and public health challenges in China and globally could impact the Group’s business and results of operations. These types of events could negatively impact user activity and the Group’s local operations, if any, in the affected regions, or, depending upon the severity, across China or globally, which could adversely impact the Group’s business and results of operations. Risks Related to Our Corporate Structure There are uncertainties regarding the interpretation and application of current and future PRC laws, regulations, and rules relating to the agreements that establish the VIE structure for the Group’s operations in China, including potential future actions by the PRC government, which could affect the enforceability of our contractual arrangements with the VIEs and, consequently, significantly affect the Group’s financial condition and results of operations. If the PRC government finds such agreements non-compliant with relevant PRC laws, regulations, and rules, or if these laws, regulations and rules or the interpretation thereof change in the future, we could be subject to 37 severe penalties or be forced to relinquish our interests in the VIEs. Foreign investment in the value-added telecommunication services industry in China is extensively regulated and subject to numerous restrictions. Pursuant to the latest list of special management measures for the market entry of foreign investment, or the Negative List, published by the National Development and Reform Commission and the Ministry of Commerce and effective on November 1, 2024, with a few exceptions, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider. We are a Cayman Islands exempted company and our wholly-owned PRC subsidiaries are currently considered foreign-invested enterprise. Accordingly, our PRC subsidiaries are not eligible to provide value-added telecommunication services in China. To ensure strict compliance with the PRC laws and regulations, such business activities were conducted through the VIEs and their respective subsidiaries. Our wholly-owned subsidiaries in China have entered into a series of contractual arrangements with the VIEs, their respective shareholders and their respective subsidiaries, which enable us to (i) direct the activities of the VIEs that most significantly impact the VIEs’ economic performance, (ii) receive substantially all of the economic benefits of the VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in the VIEs when and to the extent permitted by PRC law. As a result of these contractual arrangements, we are considered the primary beneficiary of the VIEs for accounting purposes and are able to consolidate their operating results in the Group’s financial statements under U.S. GAAP. See “Item 4. Information on the Company—4.C. Organizational Structure” for further details. Since the laws and regulations are still evolving and new PRC laws, regulations, rules and interpretations may be introduced to impose additional requirements, posing additional challenges to our corporate structure and contractual arrangements, there are uncertainties regarding whether the Group could comply with new laws, regulations, rules and interpretations in a timely manner, or at all. Any failure to comply with such regulatory requirements may challenge the validity and enforceability of the Group’s contractual arrangements. If the PRC government finds that the Group’s contractual arrangements do not comply with its restrictions on foreign investment in the value-added telecommunication services, or if the PRC government otherwise finds that we, the VIEs, or any of their subsidiaries are in violation of PRC laws or regulations or lack the necessary permits or licenses to operate the Group’s business, the relevant PRC regulatory authorities, including the MIIT and SAMR, would have broad discretion in dealing with such violations or failures, including, without limitation: •revoking the business licenses and/or operating licenses of such entities; •discontinuing or placing restrictions or onerous conditions on the Group’ operation through any transactions between our PRC subsidiaries and the VIEs; •imposing fines, confiscating the income from our PRC subsidiaries or the VIEs, or imposing other requirements with which the Group may not be able to comply; •requiring the Group to restructure the Group’s ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate or derive economic interests from the VIEs; or •restricting or prohibiting our use of the proceeds of our initial public offering to finance the Group’s business and operations in China. Any of these actions could cause significant disruptions to the Group’s business operations and severely damage the Group’s reputation, which would in turn materially and adversely affect the Group’s business, financial condition and results of operations. In addition, new PRC laws, regulations, and rules may be introduced to impose additional requirements, posing additional challenges to the Group’s corporate structure and contractual arrangements. If any of these occurrences results in our inability to direct the activities of the VIEs or our failure to receive the economic benefits from the VIEs and/or our inability to claim our contractual rights over the assets of the VIEs that conduct the Group’s operations in China, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP, which could materially and adversely affect the Group’s financial condition and results of operations and cause the ADSs to significantly decline in value or become worthless. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, effective on March 31, 2023. At the press conference held for the Overseas Listing Trial Measures on the same day, officials from the CSRC clarified that, as for companies seeking overseas listing with contractual arrangements, the CSRC will solicit opinions from relevant regulatory authorities and complete the filing of the overseas listing of such companies if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. If the Group fails to complete the filing with the CSRC in a timely manner or at all, for any future offerings, listing or any other capital raising activities, which are subject to the filings under the Overseas Listing Trial Measures, due to the Group’s contractual arrangements, our ability to raise or utilize funds could be materially and adversely affected, and we may even need to unwind the Group’s contractual arrangements or restructure the Group’s business operations to rectify the failure to complete the filings. However, given that the Overseas Listing Trial Measures 38 were recently promulgated, there remain substantial uncertainties as to their interpretation, application, and enforcement and how they will affect the Group’s operations and future financing. We rely on contractual arrangements with the VIEs and their respective shareholders for a significant portion of the Group’s business operations which may not be as effective as direct ownership. We have relied and expect to continue to rely on contractual arrangements with the VIEs, their respective shareholders and their respective subsidiaries to operate the Group’s online education services business in China. These contractual arrangements may not be as effective as direct ownership. For example, the VIEs and their respective shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. The revenues contributed by the VIEs and their respective subsidiaries constituted 63.4%, 83.9% and 48.5% of the Group’s total net revenues in 2023, 2024 and 2025, respectively. If we had direct ownership of the VIEs, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIEs, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by the VIEs and their respective shareholders of their obligations under the contracts. The shareholders of the VIEs may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of the Group’s business through the contractual arrangements with the VIEs. If any disputes relating to these contracts remain unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings and therefore will be subject to uncertainties in the PRC legal system. Therefore, our contractual arrangements with the VIEs may not be as effective as direct ownership would be. Any failure by the VIEs or their respective shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on the Group’s business. If any of the VIEs or their respective shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure will be effective under PRC law. For example, if the shareholders of the VIEs refuse to transfer their equity interest in the VIEs to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third parties claim any interest in such shareholders’ equity interests in the VIEs, our ability to exercise shareholders’ rights or foreclose the share pledge according to the contractual arrangements may be impaired. If these or other disputes between the shareholders of the VIEs and third parties were to impair the contractual arrangements that make us the primary beneficiary of the VIEs for accounting purposes, our ability to consolidate the financial results of the VIEs would be affected, which would in turn result in a material adverse effect on the Group’s business, operations and financial condition. Our contractual arrangements are governed by PRC laws. Accordingly, these contracts would be interpreted in accordance with PRC laws, and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is evolving and the evolution of the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not be considered as the primary beneficiary of the VIEs for accounting purposes, and the Group’s ability to conduct business may be negatively affected. The shareholders of the VIEs may have actual or potential conflicts of interest with us, which may materially and adversely affect the Group’s business and financial condition. The shareholders of the VIEs may have actual or potential conflicts of interest with us. These shareholders may refuse to sign or breach, or cause the VIEs to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIEs, which would have a material and adverse effect on our ability to be considered as the primary beneficiary of the VIEs for accounting purposes and receive economic benefits from the VIEs. For example, the shareholders may be able to cause our agreements with the VIEs to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved 39 in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company. If we cannot resolve any conflict of interest or dispute between us and these shareholders, we would have to rely on legal proceedings, which could result in disruption of the Group’s business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. Contractual arrangements in relation to the VIEs may be subject to scrutiny by the PRC tax authorities and they may determine that the Group owes additional taxes, which could negatively affect the Group’s financial condition and the value of your investment. Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable year when the transactions are conducted. The Group could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s-length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of the VIEs in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIEs for PRC tax purposes, which could in turn increase tax liabilities without reducing our PRC subsidiary’s tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on the VIEs for the adjusted but unpaid taxes according to the applicable regulations. The Group’s financial position could be materially and adversely affected if the VIEs’ tax liabilities increase or if it is required to pay late payment fees and other penalties. We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by the VIEs, which could severely disrupt the Group’s business, render the Group unable to conduct some or all of the business operations and constrain the Group’s growth. As part of our contractual arrangements with the VIEs, the VIEs hold certain assets, licenses and permits that are material to their business operations, such as the ICP License and the License for the Production and Operation of Radio and Television Program. The contractual arrangements contain terms that specifically obligate VIEs’ shareholders to ensure the valid existence of the VIEs and restrict the disposal of material assets of the VIEs. However, in the event the VIEs’ shareholders breach the terms of these contractual arrangements and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of the Group’s business operations or otherwise benefit from the assets held by the VIEs, which could have a material adverse effect on the Group’s business, financial condition and results of operations. Furthermore, if the VIEs undergo a voluntary or involuntary liquidation proceeding, their shareholders or unrelated third-party creditors may claim rights to some or all of the assets of the VIEs, thereby hindering the Group’s ability to operate business as well as constrain the Group’s growth. Certain of our existing shareholders have substantial influence over our company, and their interests may not be aligned with the interests of our other stockholders. Mr. Peng Ou, our founder and the chairman of our board of directors, owns approximately 65.7% of our voting power and Mr. Tongbo Liu, our director and our Chief Executive Officer, owns approximately 11.7% of our voting power as of the date of this annual report. In addition, Mr. Peng Ou, Mr. Tongbo Liu and certain of our senior management and employees collectively beneficially own approximately 8.2% of our issued and outstanding Class A ordinary shares and 96.2% of our issued and outstanding Class C ordinary shares, which constitute approximately 77.6% of the aggregate voting power of our total issued and outstanding share capital as of the date of this annual report. See “—Risks Related to the ADSs—Our triple-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.” As a result, Mr. Peng Ou, Mr. Tongbo Liu and certain of our senior management and employees have significant influence over the Group’s business, including decisions regarding mergers, consolidations, liquidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership may also have the effect of discouraging, delaying or preventing a future change of control, which could deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of the ADSs. Risks Related to Doing Business in China The approval, filing or other requirements of the China Securities Regulatory Commission or other PRC government authorities may be required under PRC law in connection with our issuance of securities overseas, and if required, we cannot predict whether or for how long the Group will be able to obtain such approval or complete such filing or other requirements. The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, purport to require offshore special purpose vehicles that are controlled by PRC companies or individuals and that acquire PRC domestic companies or assets by using such offshore special purpose vehicles’ shares as a means of payment for the purpose of seeking a public listing on an overseas stock exchange, to obtain CSRC approval prior to publicly listing their 40 securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear. If CSRC approval under the M&A Rules is required, it is uncertain whether it would be possible for the Group to obtain the approval, and any failure to obtain or delay in obtaining CSRC approval for our future issuance of securities overseas would subject the Group to sanctions imposed by the CSRC and other PRC regulatory agencies. Furthermore, the Opinions on Strictly Cracking Down on Illegal Securities Activities emphasized the need to strengthen the administration over “illegal securities activities” and the supervision on overseas listings by China-based companies, and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies, although such opinions did not specify the definition of “illegal securities activities.” Such opinions further provided that the special provisions of the State Council on overseas offerings and listings by those companies limited by shares will be revised and therefore the duties of domestic industry competent authorities and regulatory agencies will be clarified. On February 17, 2023, the CSRC released the Overseas Listing Trial Measures, and five supporting guidelines, effective on March 31, 2023. Pursuant to the Overseas Listing Trial Measures, domestic companies that seek to offer or list securities overseas, either in direct or indirect means, are required to report and file required documents with the CSRC. In addition, domestic companies that have been listed on a foreign stock exchange prior to the effective date of the Overseas Listing Trial Measures are required to file with the CSRC within three working days of the completion of fund raising activities on the same overseas capital market and shall make required filing immediately after they submit application for their listing or offering securities in other overseas capital markets. If a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—M&A Regulations and Overseas Listings.” However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement of Overseas Listing Trial Measures remain unclear. We cannot assure you that we could complete the filing procedure in relation to any further capital raising activities as required in a timely manner, or at all. The CSRC or other PRC regulatory agencies also may take further actions requiring the Group, or making it advisable for the Group, not to proceed with such offering or maintain the listing status of the ADSs. If we proceed with any of such offering or maintain the listing status of the ADSs without obtaining the CSRC’s approval to the extent it is required, or if the Group is unable to comply with any new approval or filing requirements which might be adopted for offerings that we have completed prior to the effective date of the Overseas Listing Trial Measures, the Group may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on the Group’s operations in China, limit the Group’s ability to pay dividends outside of China, limit the Group’s operating privileges in China, delay or restrict the repatriation of the proceeds from offering of securities overseas into China or take other actions that could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects, as well as the trading price of the ADSs. Furthermore, if there are any other approvals, filings and/or other administration procedures to be obtained from or completed with the CSRC or other PRC regulatory agencies as required by any new laws and regulations for any of our future proposed offering of securities overseas or the listing of the ADSs, we cannot assure you that the Group can obtain the required approval or complete the required filings or other regulatory procedures in a timely manner, or at all. Any failure to obtain the relevant approvals or complete the filings and other relevant regulatory procedures may subject the Group to regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies, which may have a material adverse effect on the Group’s business, financial condition or results of operations. Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on the Group’s business and operations. Substantially all of the Group’s assets and operations are located in China. Accordingly, the Group’s business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant regulation over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Meanwhile, economic conditions in China are sensitive to global economic conditions, changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. There have been concerns over the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes. In recent years, there have also been ongoing concerns about the relationship and the trade disputes between the United States and China. These tensions have been marked by the imposition of higher tariffs and retaliatory measures from both sides, reflecting broader strategies to address perceived trade imbalances. While these developments have not directly impacted our business, prolonged trade disputes may disrupt global economic conditions, potentially impacting our business and growth prospects. In addition, on October 28, 2024, the U.S. Department of the Treasury issued a final rule on outbound investment, 41 effective January 2, 2025, which restricts or requires notification of certain investments by U.S. persons in Chinese entities involved in semiconductors, quantum technologies, and artificial intelligence. Although we believe we are not currently subject to these restrictions, future developments in our business or changes in law may result in such designation, which may materially and adversely affect our ability to raise capital. On February 21, 2025, the United States President Donald Trump issued a National Security Presidential Memorandum titled the America First Investment Policy (the “America First Investment Policy”) to provide guidance on investment oversight. The America First Investment Policy includes directives to, among other things, (i) determine if adequate financial auditing standards are upheld for companies covered by the HFCAA, and (ii) review the variable interest entity and subsidiary structures used by “foreign-adversary companies” to trade on United States exchanges, as well as allegations of fraudulent behavior by these companies, to protect United States investors. More recently, in May 2025, top Republican officers in the United States have asked SEC to consider whether Chinese companies listed on the U.S. stock exchange should be delisted for failing to protect U.S. investors. We face risks of losing deposits in the event of the closure or systematic failures of banks and if banks or financial institutions close or fail due to issues such as bankruptcy, fraud, or insolvency. These failures can destabilize the financial system and harm the wider economy as a whole. It is unclear whether these challenges and uncertainties will be addressed or resolved, and how they might impact global political and economic conditions over the long term. While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect the Group’s business and operating results, lead to a reduction in demand for the Group’s services and adversely affect the Group’s competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, the Group’s financial condition and results of operations may be adversely affected by government regulation over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment. It is uncertain whether these measures would cause decreased economic activity in China, which may adversely affect the Group’s business and operating results. Evolution of the PRC legal system, including changes in policies, laws and regulations in China, could adversely affect the Group. The enforcement of laws and rules and regulations in China may change quickly, which could result in a material adverse change in the Group’s operations and the value of the ADSs. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, the PRC legal system continues to evolve rapidly, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties and may change quickly with short notice, which could result in a material adverse change in the Group’s operations and the value of the ADSs. Since PRC administrative and court authorities have discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection the Group enjoys. These uncertainties may affect the Group’s judgment on the relevance of legal requirements and the Group’s ability to enforce contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from the Group. However, as there are still regulatory uncertainties in this regard, we cannot assure you that the Group will be able to comply with new laws and regulations in all respects in a timely manner, and the Group may be ordered to rectify, suspend or terminate any actions or services that are deemed illegal by the regulatory authorities and become subject to material penalties, which may materially harm the Group’s business, financial condition, results of operations and prospects. Furthermore, the PRC legal system is based in part on government policies and rules, some of which are not published on a timely basis or are published with short notice. As a result, we may not be aware of the Group’s violation of any of these policies and rules until sometime after the violation. In addition, administrative and court proceedings may be protracted, resulting in substantial costs and diversion of resources and management attention. The PRC government’s significant oversight over the Group’s business operation in China could result in a material adverse change in the Group’s operations in China and the value of the ADSs. The Chinese government may intervene or influence the Group’s operations in China at any time, or may exert more regulation over offerings conducted overseas and/or foreign investment in China-based issuers. Any actions by the Chinese government to exert more oversight and regulation over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless. The PRC government has significant oversight and discretion over the conduct of the Group’s business and may 42 intervene with or influence the Group’s operations as the government deems appropriate to further regulatory, political and societal goals. The PRC government has recently published new policies that adversely affected educational industry, especially the educational services related to K-12 students, and we cannot rule out the possibility whether it will in the future further release regulations or policies regarding educational industry that could further adversely affect the Group’s business, financial condition and results of operations. Furthermore, the PRC government has also recently indicated an intent to exert more oversight and regulation over securities offerings and other capital markets activities that are conducted overseas and foreign investment in China-based issuers like us. For details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Evolution of the PRC legal system, including changes in policies, laws and regulations in China, could adversely affect the Group. The enforcement of laws and rules and regulations in China may change quickly, which could result in a material adverse change in the Group’s operations and the value of the ADSs.” Any such action, once taken by the PRC government, could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or in extreme cases, become worthless. You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China, including Hong Kong, against the Group or the Group’s management named in the annual report based on foreign laws. We are a Cayman Islands exempted company and currently substantially all of the Group’s business operations are conducted in the PRC through our subsidiaries incorporated in the PRC and the contractual arrangements among our PRC subsidiaries and the VIEs. Substantially all of the Group’s assets are located in China. In addition, all our directors and senior executive officers reside within China for a significant portion of the time and most are PRC nationals, while two of our directors are Hong Kong residents. The Group does not have any material operations or assets in Hong Kong. It may be difficult for our shareholders to effect service of process upon the Group or those persons inside China, including Hong Kong. In addition, neither China nor Hong Kong has treaties providing for the reciprocal recognition and enforcement of judgments of courts with the Cayman Islands and many other countries and regions. Therefore, recognition and enforcement in China or Hong Kong of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. We may rely on dividends and other distributions on equity paid by our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of these subsidiaries in the PRC, including Hong Kong, to make payments to us could have a material and adverse effect on our ability to conduct the Group’s business. We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our PRC and Hong Kong subsidiaries for our cash requirements, including for services of any debt we may incur. To the extent cash in the business is in the PRC, including Hong Kong, or a PRC (including Hong Kong) entity, the funds may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations by the PRC government to transfer cash from a PRC entity to the use outside the PRC. Our subsidiaries are permitted to pay dividends to their shareholders, and eventually to Sunlands Technology Group, only out of their retained earnings, if any, as determined in accordance with the applicable accounting standards and regulations. Such payment of dividends by entities registered in China, including Hong Kong, is subject to limitations, which could result in limitations on the availability of cash to fund dividends or make distributions to holders of our securities. For example, our PRC subsidiaries and the VIEs are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. Our PRC subsidiary’s ability to distribute dividends is based upon its distributable earnings. Current PRC regulations permit our PRC subsidiaries to pay dividends to its respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, each of our PRC subsidiary, the VIEs and their respective subsidiaries are required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to their respective shareholders could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to the Group’s businesses, pay dividends or otherwise fund and conduct the Group’s business. To address the persistent capital outflow and the depreciation of Renminbi against U.S. dollars in the fourth quarter of 2016, the People’s Bank of China and the State Administration of Foreign Exchange, or SAFE, implemented a series of capital regulation measures in the subsequent months, including stricter vetting procedures for China-based companies to remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. For instance, the Circular on Promoting the Reform of Foreign Exchange Management and Improving Authenticity and Compliance Review, or the SAFE Circular 3, issued on January 26, 2017, provides that the banks shall, when dealing with dividend remittance transactions from domestic enterprise to its offshore shareholders of more than US$50,000, review the relevant 43 board resolutions, original tax filing form and audited financial statements of such domestic enterprise based on the principal of genuine transaction. It is uncertain whether the PRC government would continue to strengthen its capital regulation and our PRC subsidiaries’ dividends and whether other distributions would be subject to tightened scrutiny in the future. Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to the Group’s business, pay dividends, or otherwise fund and conduct the Group’s business. In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC resident enterprises are incorporated. For details about the applicable regulations and rules relating to such cash transfers through our Group, see “Item 3. Key Information—Restrictions on Foreign Exchange and the Ability to Transfer Cash between Entities, Across Borders and to U.S. Investors.” and “—Governmental regulation of currency conversion may limit the Group’s ability to utilize the Group’s net revenues effectively and affect the value of your investment.” The custodians or authorized users of the Group’s controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets. Under the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC industry and commerce authorities. In order to secure the use of the Group’s chops and seals, the Group has established internal control procedures and rules for using these chops and seals. In any event that the chops and seals are intended to be used, the responsible personnel will submit the application through the Group’s office automation system and the application will be verified and approved by authorized employees in accordance with the Group’s internal control procedures and rules. In addition, in order to maintain the physical security of the Group’s chops, the Group generally has them stored in secured locations accessible only to authorized employees. Although the Group monitors such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that the Group’s employees could abuse their authority, for example, by entering into a contract not approved by the Group or seeking to gain control of one of the Group’s subsidiaries or the VIEs. If any employee obtains, misuses or misappropriates the Group’s chops and seals or other controlling non-tangible assets for whatever reason, the Group could experience disruption to the Group’s normal business operations. The Group may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from the Group’s operations. Fluctuations in exchange rates could have a material and adverse effect on the Group’s results of operations and the value of your investment. The value of Renminbi against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the governments of the PRC, the United States or other countries. On July 21, 2005, the PRC government changed its policy of pegging the value of Renminbi to U.S. dollars. Following the removal of the U.S. dollar peg, Renminbi appreciated more than 20% against U.S. dollars over the following three years. Since June 2010, Renminbi has started to appreciate slowly against U.S. dollars, though there have been periods when U.S. dollars has appreciated against Renminbi. On August 11, 2015, the PBOC allowed Renminbi to depreciate by approximately 2% against U.S. dollars. Since then and until the end of 2016, Renminbi has depreciated against U.S. dollars by approximately 10%. It is difficult to predict how long such depreciation of Renminbi against U.S. dollars may last and when and how the relationship between Renminbi and U.S. dollars may change again. All of the Group’s revenue and substantially all of the Group’s costs are denominated in Renminbi. We are a holding company and we rely on dividends paid by our operating subsidiaries in China for our cash needs. Any significant revaluation of Renminbi may materially and adversely affect the Group’s results of operations and financial position reported in Renminbi when translated into U.S. dollars, and the value of, and any dividends payable on, the ADSs in U.S. dollars. To the extent that we need to convert U.S. dollars we receive from the initial public offering into Renminbi for our operations, appreciation of Renminbi against U.S. dollars would have an adverse effect on Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of U.S. dollars against Renminbi would have a negative effect on the amount of U.S. dollars. Governmental regulation of currency conversion may limit the Group’s ability to utilize the Group’s net revenues effectively and affect the value of your investment. The PRC government imposes regulation on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. The Group receives substantially all revenues in Renminbi. Under the Group’s current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our 44 PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our PRC subsidiaries in China may be used to pay dividends to our company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries and the VIEs to pay off their respective debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange regulation system prevents the Group from obtaining sufficient foreign currencies to satisfy the Group’s foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs. Certain PRC regulations may make it more difficult for the Group to pursue growth through acquisitions. Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council in 2008 and recently amended in 2024, are triggered. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress which became effective in 2008 and was amended in June 2022, requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the relevant governmental authorities before they can be completed. On February 7, 2021, the Anti-monopoly Commission of the State Council, published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector that aims at specifying some of the circumstances under which an activity of internet platforms may be identified as monopolistic act as well as setting out merger controlling filing procedures involving variable interest entities. In addition, PRC national security review rules which became effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. The Measures for the Security Review of Foreign Investments promulgated by the National Development and Reform Commission and MOFCOM which became effective from January 2021 further requires that security review by relevant governmental authorities shall be conducted in accordance with the provisions of the Measures for foreign investments that affect or may affect national security. The Group may pursue potential strategic acquisitions that are complementary to the Group’s business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the MOFCOM, may delay or inhibit the Group’s ability to complete such transactions, which could affect the Group’s ability to expand the Group’s business or maintain the Group’s market share. PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liabilities or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect the Group. In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37, to replace the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents’ Financing and Roundtrip Investment Through Offshore Special Purpose Vehicles, or SAFE Circular 75, which ceased to be effective upon the promulgation of SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. Under SAFE Circular 37, PRC residents who make, or have prior to the implementation of SAFE Circular 37 made, direct or indirect investments in offshore special purpose vehicles, or SPVs, will be required to register such investments with SAFE or its local branches. In addition, any PRC resident who is a direct or indirect shareholder of an SPV is required to update its filed registration with the local branch of SAFE with respect to that SPV, to reflect any material change. Moreover, any subsidiary of such SPV in China is required to urge the PRC resident shareholders to update their registration with the local branch of SAFE. If any PRC shareholder of such SPV fails to make the required registration or to update the previously filed registration, the subsidiary of such SPV in China may be prohibited from distributing its profits or the proceeds from any capital reduction, share transfer or liquidation to the SPV, and the SPV may also be prohibited from 45 making additional capital contributions into its subsidiary in China. On February 13, 2015, the SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, which became effective on June 1, 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE. SAFE Notice 13 further provides that annual inspection of inbound foreign direct investments and outbound overseas direct investments is canceled. Instead, relevant entities or individuals, as the case may be, shall register data and information with respect to their inbound foreign direct investments and outbound overseas direct investment interests with SAFE. We have requested our shareholders that we are aware of being subject to SAFE regulations to make all necessary registrations, filings and amendments with the local SAFE branch or qualified banks as required by SAFE Circular 37. We cannot assure you, however, that all of these individuals may continue to make required registrations, filings or updates on a timely manner, or at all. We can provide no assurance that we are or will in the future continue to be informed of identities of all PRC residents holding direct or indirect interest in our company. Any failure or inability by such individuals to comply with SAFE regulations may subject the Group to fines or legal sanctions, such as restrictions on our cross-border investment activities or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, the Group’s business operations and our ability to make distributions to you could be materially and adversely affected. Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. For example, the Group may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect the Group’s financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect the Group’s business and prospects. Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or the Group to fines and other legal or administrative sanctions. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options will be subject to these regulations because we are an overseas-listed company. Failure to complete the SAFE registrations may subject them to fines and legal sanctions, there may be additional restrictions on the ability of them to exercise their stock options or remit proceeds gained from sale of their stock into the PRC. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company—4.B. Business Overview—Regulation—Regulations on Foreign Exchange—Regulations on Stock Incentive Plans.” If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to the Group and our non-PRC shareholders and ADS holders. Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation, or SAT, issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the 46 day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. We believe our company is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company is a PRC resident enterprise for enterprise income tax purposes, we will be subject to PRC enterprise income on our worldwide income at the rate of 25%. Furthermore, we are required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be subject to PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders (including the ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or ordinary shares. We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies. On February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on the Group’s financial condition and results of operations. Uncertainties exist with respect to the interpretation and implementation of the newly enacted Foreign Investment Law and how it may impact the Group’s business, financial condition and results of operations. On March 15, 2019, the National People’s Congress promulgated the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The enacted Foreign Investment Law does not touch upon the relevant concepts and regulatory regimes of “actual control” in determining whether a company is considered a foreign invested enterprise, and thus this regulatory 47 topic remains unclear under the Foreign Investment Law. On December 26, 2019, the State Council published the Implementation Rules of Foreign Investment Law, which came into effect on January 1, 2020. The Implementation Rules of Foreign Investment Law restates certain principles of the Foreign Investment Law. However, since the Foreign Investment Law and the Implementation Rules of Foreign Investment Law are relatively new, uncertainties still exist in relation to its interpretation and implementation. For instance, though the Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign investment, it contains a catch-all provision under the definition of “foreign investment,” which includes investments made by foreign investors in China through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the State Council to provide for contractual arrangements as a form of foreign investment. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, such as unwinding the Group’s existing contractual arrangements and/or disposal of the Group’s related business operations, the Group may face uncertainties as to whether the Group can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect the Group’s current corporate structure, financial condition and business operations. The PCAOB had previously been unable to inspect our auditor in relation to their audit work performed for the Group's financial statements, and any future inability to do so would deprive investors of the benefits of such inspections. Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in mainland China, a jurisdiction where the PCAOB had been unable to conduct inspections without the approval of the Chinese authorities until 2022, our auditor was historically uninspected by the PCAOB. On August 26, 2022, the PCAOB signed a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in China, which marks the first step toward providing access for the PCAOB to inspect and investigate registered public accounting firms headquartered in Mainland China and Hong Kong. On December 15, 2022, the PCAOB announced that it was able to conduct inspections and investigations completely of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong in 2022, and vacated its previous 2021 Determinations accordingly. This marks the first time that Chinese authorities allowed access for complete inspections and investigations meeting U.S. standards, as required under the Sarbanes-Oxley Act. Notwithstanding the foregoing, the past lack of the PCAOB inspections in mainland China prevented the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm, which made it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of mainland China that were subject to the PCAOB inspections. Any future lack of the PCAOB inspections in mainland China would prevent the PCAOB from fully evaluating audits and quality control procedures of our auditor, as a result of which the Group and investors will be deprived of the benefits of such PCAOB inspections, which could cause investors to lose confidence in our audit procedures and the quality of the Group’s financial statements. The ADSs will be delisted and the ADSs and shares will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, if the PCAOB is unable to inspect or investigate completely auditors located in China for two consecutive years. The HFCAA was signed into law on December 18, 2020. Under the HFCAA, as amended by the Consolidated Appropriations Act of 2023, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to complete PCAOB inspection or investigation for two consecutive years, the SEC shall prohibit our ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 2, 2021, the SEC adopted final amendments implementing the HFCAA, which include requirements to disclose the auditor's name and location, the percentage of shares owned by governmental entities, whether any governmental entity has a controlling financial interest in the issuer, the name of each Chinese Communist Party official who is a member of the issuer's board of directors, and whether the issuer's articles of incorporation contain any charter of the Chinese Communist Party. On December 16, 2021, the PCAOB issued a determination that it was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. We were consequently identified as a Commission-identified issuer under the HFCAA. On December 15, 2022, the PCAOB vacated that determination after securing complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong for the first time in history. As a result, we were removed from the Commission-identified issuer list and 48 are not currently at risk of a trading prohibition under the HFCAA. As of the date of this annual report, there are no PCAOB determinations in effect with respect to auditors headquartered in mainland China or Hong Kong. Notwithstanding the foregoing, the PCAOB conducts annual assessments of whether it continues to have complete access. Should PRC authorities obstruct or otherwise fail to facilitate the PCAOB's access at any point in the future, the PCAOB may immediately consider issuing a new determination, which could result in our being re-identified as a Commission-identified issuer and, if the determination remains in effect for two consecutive years, subject our ADSs to a trading prohibition under the HFCAA. Whether complete access will be maintained is subject to uncertainty and depends on factors outside our and our auditor's control, including the state of U.S.-China relations and the continued cooperation of PRC regulatory authorities.The current geopolitical environment introduces additional dimensions of risk. Escalating trade tensions between the United States and China, including sweeping tariff measures and technology-sector restrictions imposed in 2025, have materially increased bilateral regulatory uncertainty. Separately, proposals under consideration in the U.S. Congress in 2025 to dissolve the PCAOB and transfer its functions to the SEC, if enacted, could undermine the existing inspection framework: the PCAOB's status as a non-governmental entity was integral to China's agreement to the 2022 inspection arrangement, and it is uncertain whether PRC authorities would extend the same cooperation to a direct U.S. government agency. Any such structural change, or any deterioration in U.S.-China relations that leads PRC authorities to restrict PCAOB access, could result in our being re-identified as a Commission-identified issuer and, if that determination remains in effect for two consecutive years, subject our ADSs to a trading prohibition under the HFCAA. Any prohibition on trading in our ADSs would substantially impair shareholders’ ability to buy or sell the ADSs, adversely affect the price of the ADSs, significantly impair our ability to raise capital on acceptable terms, and have a material adverse effect on our business, financial condition and prospects. There is no certainty that we would be able to list the ADSs on a non-U.S. exchange or develop an alternative trading market for our shares outside the United States on a timely basis or at all. Regulation and censorship of information disseminated over the internet in China may adversely affect the Group’s business and reputation and subject the Group to liability for information displayed on our website. The PRC government has adopted regulations governing internet access and the distribution of news and other information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If the Group’s website is found to be in violation of any such requirements, the Group may be penalized by relevant authorities, and the Group’s operations or reputation could be adversely affected. It may be difficult for overseas regulators to conduct investigation or collect evidence within China. Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, prohibits, without the approval of the securities regulatory authority in China, (i) foreign securities regulators from engaging in any inspection activities within China and (ii) anyone from providing any documents or materials relating to capital markets activities to foreign parties. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. In addition, the Overseas Listing Trial Measures provides, among others, that domestic companies or individuals shall obtain the consent from the CSRC and relevant competent departments, if they provide relevant documents and materials in accordance with the requirements of overseas securities regulators for investigation and collection of evidence. However, since the Overseas Listing Trial Measures was newly promulgated, the interpretation, application and enforcement of Overseas Listing Trial Measures remain unclear. If the Group is required to obtain the consent from the CSRC and relevant competent departments when providing information needed for regulatory investigations or litigation initiated outside China, it is uncertain whether the Group could obtain such consent in a timely manner, or at all. See also “—Risks Related to the ADSs—You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands company. Risks Related to the ADSs If the market price for the ADSs falls below US$1.00 for an extended period of time, or falls to US$0.16 at any time, the 49 ADSs may be delisted from the NYSE. Pursuant to NYSE Rule 802.01C, a company will be considered to be below compliance standards if the average closing price of a security as reported on the consolidated tape is less than US$1.00 over a consecutive 30 trading-day period. Once notified, the company must bring its share price and average share price back above US$1.00 within the applicable cure period following receipt of the notification. The company can regain compliance at any time during the cure period if on the last trading day of any calendar month during the cure period the company has a closing share price of at least US$1.00 and an average closing share price of at least US$1.00 over the 30 trading-day period ending on the last trading day of that month. In the event that at the expiration of the cure period, both a US$1.00 closing share price on the last trading day of the cure period and a US$1.00 average closing share price over the 30 trading-day period ending on the last trading day of the cure period are not attained, the NYSE will commence suspension and delisting procedures. In addition, we understand that the NYSE has a policy to suspend trading immediately and commence delisting procedures if the market price of securities falls to US$0.16 or less. We received a letter from the NYSE dated July 23, 2021 notifying us that the stock prices of the ADSs are below compliance standards due to the fact that the average closing price of the ADSs was less than $1.00 for a consecutive 30 trading-day period. In response to the letter from the NYSE, we changed the ratio of the ADSs representing our Class A ordinary shares from each 25 ADSs representing one Class A ordinary share to each two ADSs representing one Class A ordinary share, effective August 31, 2021. However, we cannot assure you that the ADSs will remain in compliance with the NYSE listing rules going forward. If the ADSs are delisted from the NYSE, the liquidity and value of an investment in the ADSs will be materially and adversely affected. The trading price of the ADSs is likely to be volatile, which could result in substantial losses to investors. The trading price of the ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: •variations in our revenues, earnings and cash flows; •announcements of new investments, acquisitions, strategic partnerships or joint ventures by the Group or our competitors; •announcements of new offerings, solutions and expansions by the Group or our competitors; •changes in financial estimates by securities analysts; •detrimental adverse publicity about the Group, the Group’s services or the Group’s industry; •announcements of new regulations, rules or policies relevant for the Group’s business; •additions or departures of key personnel; •release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; •potential litigation or regulatory investigations; •allegations of a lack of effective internal control over financial reporting resulting in financial; inadequate corporate governance policies, or allegations of fraud, among other things, involving China-based issuers; and •any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade. In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of management’s attention and other resources from the Group’s business and operations and require the Group to incur significant expenses to defend the suit, which could harm the Group’s results of operations. Any such class action suit, whether or not successful, could harm the Group’s reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on the Group’s financial condition and results of operations. If securities or industry analysts do not publish research or reports about the Group’s business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline. The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about the Group’s business. If one or more analysts who cover the Group downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover the Group or fail to regularly publish reports on the Group, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the ADSs to decline. 50 The sale or availability for sale of substantial amounts of ADSs could adversely affect their market price. Sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs. Techniques employed by short sellers may drive down the market price of the ADSs. Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market. Public companies that have substantially all of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or enforcement actions by the SEC or other U.S. authorities. It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing the Group’s business. Even if such allegations are ultimately proven to be groundless, allegations against the Group could severely impact the Group’s business operations, and any investment in the ADSs could be greatly reduced or even rendered worthless. Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of the ADSs for a return on your investment. We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of the Group’s business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. Under Cayman Islands law, a Cayman Islands exempted company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by the Group from our subsidiaries, the Group’s financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs. You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. We are an exempted company with limited liability incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, as amended from time to time, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to the Group under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In 51 addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect or obtain copies of register of members or corporate records (other than copies of the memorandum and articles of association, the register of mortgages and charges, and any special resolutions passed by the shareholders) of these companies. The Registrar of Companies of the Cayman Islands shall make available the list of the names of the current directors of the Company (and where applicable the current alternate directors of the Company) for inspection by any person upon payment of a fee by such person. Our directors have discretion under our articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of the Group’s current operations are conducted in China. In addition, most of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of your Class A ordinary shares underlying the ADSs. Holders of ADSs do not have the same rights as our registered shareholders. As a holder of the ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which attach to the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreement, you may vote only by giving voting instructions to the depositary, as holder of the underlying Class A ordinary shares represented by your ADSs. Upon receipt of your voting instructions, the depositary may try to vote the underlying Class A ordinary shares represented by your ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with those instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise any right to vote with respect to the underlying Class A ordinary shares unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to enable you to withdraw the underlying Class A ordinary shares represented by your ADSs and become the registered holder of such shares prior to the record date for the general meeting to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our fourth amended and restated articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the Class A ordinary shares underlying your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will notify you of the upcoming vote and to deliver our voting materials to you. We cannot assure you that you will receive the voting material in time to ensure you can direct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to direct how the underlying Class A ordinary shares represented by your ADSs are voted and you may have no legal remedy if the underlying Class A ordinary shares represented by your ADSs are not voted as you requested. Our triple-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial. We have adopted a triple-class share structure such that our ordinary shares consist of Class A ordinary shares, Class 52 B ordinary shares and Class C ordinary shares. In respect of matters requiring the votes of shareholders, each Class A ordinary share is entitled to one vote, each Class B ordinary share is entitled to seven votes, and each Class C ordinary share is entitled to ten votes. Each Class B ordinary share or Class C ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares or Class C ordinary shares, Class B ordinary shares are not convertible into Class C ordinary shares, and Class C ordinary shares are not convertible into Class B ordinary shares under any circumstances. Mr. Peng Ou, our founder and chairman of our board of directors, Mr. Tongbo Liu, our chief executive officer and director, and certain of our current and prior senior management and employees collectively beneficially own all of our issued and outstanding Class C ordinary shares. These Class C ordinary shares constitute approximately 49.8% of our total issued and outstanding share capital and 80.0% of the aggregate voting power of our total issued and outstanding share capital as of the date of this annual report. PV PLUTO LIMITED, an entity wholly owned and controlled by Primavera Capital Fund, beneficially owns all of our issued and outstanding Class B ordinary shares, which constitutes approximately 12.3% of our total issued and outstanding share capital and 13.9% of the aggregate voting power of our total issued and outstanding share capital as of the date of this annual report. As a result of this triple-class share structure and the concentration of ownership, Mr. Peng Ou, Mr. Tongbo Liu and certain of our senior management and employees will have significant influence over the Group’s business, including decisions regarding mergers, consolidations, liquidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interest of the Group or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial. Our triple-class voting structure may render the ADSs representing our class A ordinary shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of the ADSs. We cannot predict whether our triple-class share structure with different voting rights will result in a lower or more volatile market price of the ADSs, in adverse publicity, or other adverse consequences. Certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. For example, S&P Dow Jones and FTSE Russell have changed their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. As a result, our triple-class voting structure may prevent the inclusion of the ADSs representing our class A ordinary shares in such indices, which could adversely affect the trading price and liquidity of the ADSs representing our class A ordinary shares. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structure and our triple-class structure may cause shareholder advisory firms to publish negative commentary about our corporate governance, in which case the market price and liquidity of the ADSs could be adversely affected. You may experience dilution of your holdings due to the inability to participate in rights offerings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient in connection with the performance of its duties. The depositary may close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies. Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the 53 securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: •the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; •the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and •the selective disclosure rules by issuers of material nonpublic information under Regulation FD We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the NYSE. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC are less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer. As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards. As a Cayman Islands exempted company listed on the New York Stock Exchange, we are subject to New York Stock Exchange corporate governance listing standards. However, New York Stock Exchange rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the New York Stock Exchange corporate governance listing standards. We have followed and intend to continue to follow Cayman Islands corporate governance practices in lieu of the corporate governance requirements of the New York Stock Exchange that listed companies must have: (i) a majority of independent directors; (ii) a nominating/corporate governance committee composed entirely of independent directors; and (iii) a compensation committee composed entirely of independent directors. To the extent we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under New York Stock Exchange corporate governance listing standards applicable to U.S. domestic issuers. We believe that we likely were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our 2025 taxable year, and that there is a risk that we may be a PFIC for the current and possibly future taxable years, which could result in adverse U.S. federal income tax consequences to U.S. investors in the ADSs or our ordinary shares. In general, a non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (i) 75% or more of its gross income consists of passive income or (ii) 50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest, rents, royalties and investment gains. Cash is a passive asset for these purposes. Goodwill and other intangible assets are active assets under the PFIC rules to the extent attributable to activities that produce active income. The determination of our PFIC status is subject to certain uncertainties and is made by applying principles and methodologies that are in some circumstances unclear. Based on the composition of our income and assets and the value of our assets, including goodwill and other intangible assets, which is based on the market price of the ADSs, we believe that we were likely a PFIC for the 2025 taxable year. In addition, it is not entirely clear how the contractual arrangements between our wholly-owned PRC subsidiaries, our consolidated affiliated entities and the shareholders of our consolidated affiliated entities will be treated for purposes of the PFIC rules. Because the treatment of the contractual arrangements is not entirely clear, because we hold a substantial amount of cash and because our PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time (which may be determined, in part, by reference to the market price of the ADSs or ordinary shares, which has been, and may continue to be, volatile), there is a risk that we may be a PFIC for our current taxable year and possibly future taxable years. If we are or were a PFIC for any taxable year during which a U.S. investor holds ADSs or ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. investor. See “Item 10. Additional Information—10.E. Taxation—Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules.” 54