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Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
11. FAIR VALUE MEASUREMENTS
As of December 31, 2023 and 2024, information about inputs into the fair value measurement of the Group’s assets and liabilities that are measured or disclosed at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:
 
           
Fair value measurement at reporting date using
  
Description
   
Fair value as of
December 31, 2023
     
Quoted prices in active
markets for identical

assets (Level 1)
     
Significant other
observable inputs

(Level 2)
     
Significant
unobservable
inputs
(Level 3)
  
    
RMB
     
RMB
     
RMB
     
RMB
  
Assets:
            
Short-term investments
            
Time deposits
      58,128        —         58,128        —   
Long-term investments
            
Available-for-sale debt securities
            
Jiayang Investment
(1)
      63,071        —         —         63,071  
Tale Base Investment
(1)
      32,176        —         —         32,176  
Lingdai Investment
(1)
      25,473        —         —         25,473  
Others
      5,621        —         —         5,621  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
      184,469        —         58,128        126,341  
  
 
 
     
 
 
     
 
 
     
 
 
  
Liabilities:
            
Derivative liabilities
            
Conversion feature
      100,279        —         —         100,279  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
           
Fair value measurement at reporting date using
  
Description
   
Fair value as of

December 31, 2024
     
Quoted prices in active
markets for identical

assets (Level 1)
     
Significant other
observable inputs

(Level 2)
     
Significant
unobservable
inputs
(Level 3)
  
    
RMB
     
RMB
     
RMB
     
RMB
  
Assets:
            
Long-term investments
            
Available-for-sale debt securities
            
Jiayang Investment
(1)
      61,426        —         —         61,426  
Tale Base Investment
(1)
      29,764        —         —         29,764  
Lingdai Investment
(1)
      17,981        —         —         17,981  
Others
      5,261        —         —         5,261  
  
 
 
     
 
 
     
 
 
     
 
 
  
Total assets
      114,432        —         —         114,432  
  
 
 
     
 
 
     
 
 
     
 
 
  
 
(1)
Refer to Note 10—Long-term investments for further information on the Company’s investments
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group measures fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates. Following is a description of the valuation techniques that the Group uses to measure the fair value of assets and liabilities that the Group reports in its Consolidated Balance Sheets at fair value.
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Short-Term Investments
Short-term investment consists of wealth management products and time deposits, which are valued by the Group on a recurring basis. The Group values its short-term wealth management products investments and time deposits held in certain banks using model-derived valuations based upon discounted cash flow, in which significant inputs, mainly including expected return, are observable or can be derived principally from, or corroborated by, observable market data, and accordingly, the Group classifies the valuation techniques that use these inputs as Level 2. The expected return of the financial products was determined based on the prevailing interest rates in the market.
Long-Term Investments
Our Level 3 available-for-sale debt securities as of December 31, 2023 and 2024 primarily consist of redeemable preferred stock investments in privately held companies without readily determinable fair values.
Depending on the investee’s financing activity in a reporting period, management’s estimate of fair value may be primarily derived from the investee’s financing transactions, such as the issuance of preferred stock to new investors. The price in these transactions generally provides the best indication of the enterprise value of the investee. If there are no investee’s financing transactions, the Group may estimate the fair value by using other valuation techniques, including the guideline public company approach. The guideline public company approach relies on publicly available market data of comparable companies and uses comparative valuation multiples of the investee’s revenue or net profit.
Once the fair value of the investee is estimated, an option-pricing model (“OPM”) is employed to allocate value to various classes of securities of the investee, including the class owned by the Group. The model involves making assumptions around the investees’ expected time to liquidity and volatility.
An increase or decrease in any of the unobservable inputs in isolation, such as the security price in a significant financing transaction of the investee, could result in a material increase or decrease in the Group’s estimate of fair value. If there are investee’s financing transactions, other unobservable inputs, including short-term revenue projections, expected terms (expiration/time to exit), and volatility are less sensitive to the valuation in the respective reporting periods, as a result of the primary weighting on the investee’s financing transactions. Depending on the existence of investee’s financing transaction, weight of evidence and valuation approaches used, these or other inputs may have a more significant impact on the Group’s estimate of fair value.
For any sales of equity and debt securities, it will be recorded for as realized gains or losses in the Interest and investment income in the Consolidated Statements of Comprehensive Loss.
 
The following table summarizes information about the significant unobservable inputs used in the fair value measurement for our long-term investments as of December 31, 2023 and 2024:

 
Investment
  
At initial
valuation

date
 
  
Fair value method at
initial valuation

date (and relative

weighting)
 
Fair value

as of

December 31,

2023
  
Fair value method as

of December 31,

2023 (and relative

weighting)
 
Key unobservable

inputs
 
Range
Financing transaction of Lingdai Investment
      31,980      Financing
transactions (100%)		    25,473    Market Approach -
Guideline company
method (100%)		    Revenue multiple   
1.5x-2.5x
               Volatility   
62%-67%
               Expected terms
(expiration/time to
exit)		   
1.5-2.5 years

Investment
  
At initial
valuation

date
 
  
Fair value method at
initial valuation

date (and relative

weighting)
 
Fair value

as of

December 31,

2023
  
Fair value method as

of December 31,

2023 (and relative

weighting)
 
Key unobservable

inputs
 
Range
Financing transaction of Jiayang Investment
      55,000      Financing
transactions (100%)		   63,071   
Market Approach -

Guideline company
method (100%)		   Net Profit multiples   
18x-20x
             Volatility   
35%-40%
             Expected terms
(expiration/time to
exit)		   
1.0-3.0
 years

Investment
  
 
At initial
valuation

date
 
  
Fair value method at
initial valuation

date (and relative

weighting)
 
Fair value

as of

December 31,

2023
  
Fair value method as

of December 31,

2023 (and relative

weighting)
 
Key unobservable

inputs
 
Range
Financing transaction of Tale Base Investment
   31,400   Financing
transactions (100%)		 32,176 Market Approach -
Guideline company
method (100%)		   Revenue multiples
3.8x-4.3x
          Volatility
35%-40%
        Expected terms
(expiration/time to
exit)
1.0-1.5
 years
 
Investment
  
At initial
valuation

date
 
  
Fair value method

at initial valuation

date (and relative

weighting)
 
  
Fair value

as of

December 31,

2024
 
  
Fair value method as

of December 31,

2024 (and relative

weighting)
  
Key unobservable

inputs
 
Range
Financing transaction of Lingdai Investment
     
31,980
     
 
 Financing
transactions (100%)
 
  
 
17,981
 
    Market Approach -
Guideline company
method (100%)		   Revenue multiples   
1.0x-2.5x
     
 
 
  
 
 
      Volatility   
50%-60%
     
 
 
  
 
 
      Expected terms
(expiration/time to
exit)		   
1.5-2.5
 years
 
Investment
  
At initial
valuation

date
 
  
Fair value method

at initial valuation

date (and relative

weighting)
 
Fair value

as of

December 31,

2024
  
Fair value method as

of December 31,

2024 (and relative

weighting)
 
Key unobservable

inputs
 
Range
Financing transaction of Jiayang Investment
     
55,000
      Financing
transactions (100%)		  
61,426
    Market Approach -
Guideline company
method (100%)		   Revenue multiples   
0.2x-1.2x
             Volatility   
40%-48%
             Expected terms
(expiration/time to
exit)		   
1.0-3.0
 years

Investment
  
At initial
valuation

date
 
  
Fair value method at
initial valuation

date (and relative

weighting)
 
Fair value

as of

December 31,

2024
  
Fair value method as

of December 31,

2024 (and relative

weighting)
 
Key unobservable

inputs
 
Range
Financing transaction of Tale Base Investment
     
31,400
      Financing
transactions (100%)		  
29,764
    Market Approach -
Guideline company
method (100%)		   Revenue multiples   
2.4x-3x
             Volatility   
38%-42%
             Expected terms
(expiration/time to
exit)		   
1.0-2.0
 years
 
 
Derivative Liabilities
For the years ended December 31, 2022, 2023 and 2024, respectively, the roll forward of these conversion features which required to be bifurcated and accounted for as derivative liabilities are as follows:

 
  
Year ended December 31,
 
 
  
2022
 
  
2023
 
  
2024
 
 
  
RMB
 
  
RMB
 
  
RMB
 
 
  
Conversion
feature
 
  
Conversion
feature
 
  
Conversion
feature
 
Balance at beginning of the year
      170,508        202,698        100,279  
The change in fair value
      32,190        (102,419 )       (34,378 ) 
Exercise of conversion features of convertible redeemable preferred shares upon the consummation of IPO
      —         —         (65,901 ) 
  
 
 
     
 
 
     
 
 
  
Balance at end of the year
      202,698        100,279        —   
  
 
 
     
 
 
     
 
 
  
Conversion Feature
Significant factors, assumptions and methodologies used in determining the business valuation include applying the discounted cash flow approach, and such approach involves certain significant estimates which are as follows:
 
    
As of December 31, 2023
    
As of December 31, 2024
(2)
  
Discount rate
      15.0 %      —   
Weighting between IPO scenario and Redemption scenario
     
IPO scenario-80

Redemption scenario-20
 %
% 
    
 — 
— 
  
 
 
(2)
Upon the consummation of the IPO and the automatic conversion of preferred shares on August 15, 2024, the conversion feature of preferred shares were exercised, consequently, the derivative liabilities of conversion features were reduced to zero.
Discount rates
The discount rates listed out in the table above were based on the weighted average cost of capital, which was determined based on a consideration of the factors including risk-free rate, comparative industry risk, equity risk premium, company size and
non-systemic
risk factors.
Comparable companies
In deriving the weighted average cost of capital used as the discount rates under the income approach, certain publicly traded companies were selected for reference as our guideline companies. The guideline companies were selected based on the following criteria: (i) they operate in the SaaS industry and (ii) their shares are publicly traded in the United States, Hong Kong and China.
 
 
The income approach involves applying appropriate discount rates to estimated cash flows that are based on earnings forecasts. The Group’s revenues and earnings growth rates, as well as major milestones that the Group has achieved. However, these fair values are inherently uncertain and highly subjective. The assumptions used in deriving the fair values are consistent with the Group’s business plan. These assumptions include: no material changes in the applicable future periods in the existing political, legal, fiscal or economic conditions in China; no material changes will occur in the current taxation law in China and the applicable tax rates will remain consistent; the Group has the ability to retain competent management and key personnel to support its ongoing operations; and industry trends and market conditions for the corporate training service business will not deviate significantly from current forecasts. These assumptions are inherently uncertain.
Assets and Liabilities Measured at Fair Value on a
Non-Recurring
Basis
See Note 9, Intangible assets, net, regarding the Group’s consolidated financial statements for fair value measurements of certain assets and liabilities on a
non-recurring
basis.