36Kr Holdings Inc. — FY2019 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a quarterly filing; the supplied filing text does not provide standalone fourth-quarter financial results. Financial statements are audited and prepared under U.S. GAAP. Amounts below are in RMB unless otherwise noted.
Business context
36Kr operates a China-focused content and business-services platform for “New Economy” participants. Revenue comes from online advertising, enterprise value-added services—including integrated marketing, events and consulting—and subscriptions. Its content reaches users through its own app and website as well as third-party platforms. The company completed its Nasdaq IPO in November 2019.
Key financial metrics
| Metric | FY2019 | FY2018 | Change or context |
|---|---|---|---|
| Revenue | RMB655.6m (US$94.2m) | RMB299.1m | Up 119.2% |
| Online advertising revenue | RMB283.4m | RMB173.8m | Up 63.1%; 43.2% of total revenue, down from 58.1% |
| Enterprise value-added services revenue | RMB319.5m | RMB100.2m | Up 218.7%, mainly integrated marketing and consulting |
| Subscription revenue | RMB52.7m | RMB25.1m | Up 110.2% |
| Gross profit / margin | RMB275.3m / 42.0% | RMB158.8m / 53.1% | Margin fell as integrated marketing grew; it had relatively lower margins |
| Operating income (loss) | (RMB22.9m) | RMB45.6m | Operating expenses rose 163.4% |
| Net income (loss) | (RMB25.9m) | RMB40.5m | Turned to a GAAP loss |
| Adjusted net income, non-GAAP | RMB65.3m | RMB45.6m | Excludes share-based compensation |
| Adjusted EBITDA, non-GAAP | RMB89.1m | RMB62.1m | Management-defined supplemental measure |
| Net cash used in operating activities | RMB158.9m | RMB45.6m | Outflow widened, principally due to receivables growth |
| Cash, cash equivalents and restricted cash | RMB177.9m | RMB49.0m | Year-end balance |
| Short-term investments | RMB86.4m | RMB145.5m | Year-end balance |
| Accounts receivable, net | RMB538.5m | RMB182.3m | Up substantially; customer terms generally 90–270 days |
| Total current liabilities | RMB266.9m | RMB84.7m | Current assets were RMB849.2m at year-end |
The filing does not show a conventional year-end debt balance or report a material debt facility. It does disclose third-party loan proceeds and repayments during 2019. Management said cash, restricted cash and short-term investments were expected to cover anticipated needs for at least 12 months, while noting potential need for additional financing.
Reported loss attributable to ordinary shareholders was RMB850.4m, materially greater than consolidated net loss, chiefly because of preferred-share accretion and re-designations recorded in connection with the 2019 restructuring and IPO. The preferred shares converted to Class A ordinary shares upon the IPO; the large attributable loss should not be confused with the consolidated operating loss.
Material changes and unusual items
- Revenue growth was led by enterprise value-added services; integrated marketing revenue rose to RMB250.3m from RMB40.0m. The mix shift contributed to lower gross margin.
- General and administrative expense increased to RMB131.1m from RMB24.1m, reflecting higher payroll, IPO-related professional fees and share-based compensation. Total share-based compensation rose to RMB91.2m from RMB5.1m.
- Accounts receivable increased RMB365.8m during the year. The allowance for doubtful accounts reached RMB11.4m at year-end, versus RMB2.1m a year earlier; the 2019 charge was RMB10.0m.
- Financing cash inflows included approximately RMB109.0m of IPO proceeds net of issuance costs in the cash-flow statement and RMB169.8m from Series D preferred shares. The filing’s IPO disclosures also state approximately RMB86.2m of net IPO proceeds; investors should reconcile these figures.
- The company transferred 51% of 36Kr Global Holding to Lotus Walk, retained 49% and recognized a disposal gain of RMB11.5m. Lotus Walk also provided resources and technology valued at approximately US$6.27m, and the company agreed to invest US$6m in cash.
- The filing reports top-five customer concentration of 52% of 2019 revenue and a largest-customer share of 31%. The largest customer was an agency through which 36Kr served seven end companies.
Outlook, risks and contingencies
Management provided no numerical revenue, earnings or cash-flow guidance. It expects costs and expenses to rise in absolute terms as the business expands, while aiming for lower expense ratios through scale and efficiency. Its stated priorities include expanding content and services, improving monetization and retention, building data capabilities, and selectively pursuing partnerships, investment and geographic expansion.
- COVID-19: The filing, dated April 30, 2020, reports delays or cancellations of offline events and training, reduced advertising spending by some clients, slower receivable collection and possible additional credit-loss allowances or asset impairment. The duration and financial impact were uncertain.
- Licensing and regulation: The company disclosed that it lacked several potentially required permits, including Internet news information, Internet audio-visual transmission and Internet publishing licenses; it was applying for some licenses. It had applied for a radio and television program production license. Authorities could require suspension of affected services or impose penalties.
- VIE structure: Substantially all China operations are conducted through a variable interest entity under contractual arrangements, rather than direct ownership. Enforceability and regulatory treatment are subject to PRC legal and policy uncertainty; the VIE generated substantially all revenue.
- Internal controls: Management and the auditor identified a material weakness: insufficient U.S. GAAP-qualified financial reporting personnel and formal period-end reporting controls. Remediation was underway, but completion was not assured. Management nevertheless concluded disclosure controls were effective at December 31, 2019.
- Customer and collection risk: Revenue and receivables are concentrated, customer contracts are often short-term, and receivables are typically unsecured with extended payment terms.
- Governance and market risks: Dual-class shares carry 25 votes per Class B share; the CEO and acting-in-concert arrangements hold substantial voting power. The company also relies on third-party platforms for most reported page views and does not expect to pay dividends in the foreseeable future.
- Commitments and litigation: Operating lease commitments totaled RMB51.4m, including RMB17.6m due within one year. The company reported no material litigation or material capital commitments at year-end.
Important facts for investors to verify
- Reconcile the IPO proceeds disclosures: approximately RMB109.0m in the cash-flow statement versus approximately RMB86.2m in the IPO note.
- Track receivable aging, subsequent collections, customer concentration and any further allowance charges, particularly given the year-end receivable balance of RMB538.5m.
- Confirm progress and outcomes of applications for required content and media licenses, and assess any implications for the VIE structure under the Foreign Investment Law.
- Assess whether operating cash outflows can narrow and whether the stated liquidity runway remains adequate as the business grows.
- Monitor remediation of the material weakness and the future impact of share-based compensation; RMB87.4m of unrecognized option compensation remained at year-end.
- Separate recurring operating performance from the IPO-related preferred-share accounting, the disposal gain and non-GAAP adjustments when evaluating profitability.