By Tom Kerr, CFA
NASDAQ: YOUL
READ THE FULL YOUL RESEARCH REPORT
6-Month Financial Report (period ending 6/30/26)
Youlife reported strong first half 2026 financial results which exceeded our expectations for both growth and profitability. Total revenues increased 114.8% year over year to $288.1 million in the first half of 2026, from $134.1 million in the first half of 2025. Growth was primarily driven by employee management services, while HR recruitment and vocational education services also recorded strong growth. Revenue was also driven by the acquisition of YouheHR in early 2026. We believe organic or same store growth was approximately 35%.
- Employee management services: Revenue increased 122.3% to $276.7 million from $124.4 million, driven by growth in corporate customers and demand for blue-collar labor, a greater focus on large-scale outsourcing clients in new-economy industries, and contributions from YouheHR, acquired on January 31, 2026.
- Vocational education services: Revenue increased 33.1% to $3.4 million from $2.5 million, largely due to growth in smart campus services.
- HR recruitment services: Revenue increased 93.7% to $2.6 million from $1.3 million, primarily reflecting stronger recruitment demand from clients.
- Marketing services and solutions: Revenue decreased 5.4% to $5.4 million from $5.8 million, primarily due to lower sales volumes through online retail platforms.
Gross Profit increased 31.7% to $24.8 million from $18.9 million in the first half of 2025, primarily driven by higher employee management services revenue. Gross margin declined to 8.6% from 14.1%, reflecting the larger contribution from YouheHR, where its employee management services generate lower margins than the company’s other businesses.
Operating income declined to $4.5 million from $6.7 million in the first half of 2025, reflecting lower gross margins and higher operating expenses associated with business development and other growth initiatives. Net profit decreased to $4.5 million from $5.5 million, as the company remained profitable while still investing heavily in its operating platform, strategic initiatives and technology capabilities. Basic and diluted EPS fell to $0.06 from $0.08, primarily due to an increase in weighted average shares outstanding to 80.2 million from 70.0 million following shares issued for the YouheHR acquisition.
Cash balances declined by $2.1 million during the first half of 2026, from $21.2 million as of December 31, 2025, to $19.1 million at June 30, 2026. The company remains focused on working-capital management and disciplined capital allocation while investing in YouheHR integration, technology capabilities, and long-term growth initiatives. The company has no significant long-term debt.
Business Updates
- In January 2026, the company’s subsidiary Shanghai Youerlan Information Technology entered into a 3-year nationwide outsourcing service cooperation with a major domestic retail group. The agreement covers production operations and business support for stores and large-scale warehouses nationwide which is expected to expand the company’s employee management services platform and enterprise customer base.
- In January 2026, the company’s subsidiary, Wuhan Tiankun Diyun Education Technology established a JV with Bole Chepinwang Information Technology to expand automotive school-enterprise cooperation, curriculum development and talent cultivation.
- In January 2026, Youlife completed the previously announced share exchange transaction and YouheHR Group became a wholly owned subsidiary of Youlife. This is expected to strengthen the company’s nationwide blue-collar service network and employee management delivery capabilities.
- In April 2026, the company reached a cooperation with Xinhui Technician College where both parties signed a cooperation agreement further expanding the company’s vocational education cooperation network in the Guangdong-Hong Kong-Macao Greater Bay Area and building a talent network for the extension of its business into Hong Kong and Macao.
- On June 18, 2026, the company entered into a long-term strategic cooperation with Anhui Thingo Intelligent Technology to jointly develop intelligent agent services and AI recruitment products and build an AI industry academy and related AI capabilities. The agreement has an initial term of at least 10 years.
- In July 2026, the company’s vocational education brand Tiankun Education entered into a ten-year school management cooperation agreement with Dazhou Technician College covering enrollment, curriculum co-development, industry-oriented training, faculty development, internships, employment placement and operational management.
- In August 2026, the company’s subsidiary Jiangxi Youlan Sci-Tech Industry Development entered into a strategic cooperation framework agreement with Ji’an Industry-Education Integration Technology to develop an industry-education integration platform centered on the High-Speed Rail New District Digital Economy Industrial Park, including opportunities involving vocational education, embodied robotics and related technologies.
- In August and September 2026, Youlife held ecosystem partner summits in Chengdu and Wuhan as part of its “Thousand Cities, Ten Thousand Enterprises” initiative. The program is designed to expand Youlife’s county-level partner network and advance collaboration across AI talent cultivation, industry-education integration, technology-enabled talent services and international employment.
Valuation
We believe Youlife can generate double-digit revenue growth over the next 5-10 years through organic growth and accretive acquisitions. We believe gross margins can reach the mid-teens range and over the long-term approach 20%. The Youlife businesses are considered asset light and do not consume high levels of capital expenditures.
Our primary valuation tool utilizes a Discounted Cash Flow process. Under the scenario described above, we arrive at a target valuation of $2.00 per share. Our target price may be conservative as it incorporates a high discount rate of 12.5% due to the unpredictability of earnings, prevailing interest rates, and the timeline for reaching its margin goals on an annual basis.
We also use forward EV/sales multiples to validate our target price. The average 2027 EV/sales multiple for two major staffing and work-force solution companies is 0.34x. The two peer comps include Adecco (ADEN) and Randstad (RAND). That would provide a relative valuation of approximately $1.50 per share for YOUL based on our 2027 revenue estimates. We believe the EV/sales for YOUL could be higher than those peers as it is in its early stages of global expansion while those peers are more established and mature. This methodology supports our $2.00 DCF derived price target.
As of June 30, 2026, the company had tangible equity of $110.4 million, or $1.38 per share. Youlife is selling at 19% of book value which seems irrational.
The company's current market capitalization of only $21.0 million also appears irrationally low relative to its tangible equity and growth prospects.
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