9F Inc. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP and reported in RMB; U.S. dollar figures are translations for convenience.
Business context
9F is a Cayman Islands holding company whose operations are conducted mainly through PRC subsidiaries and consolidated variable interest entities (VIEs). Its strategy has shifted toward internet securities and wealth management services, technology empowerment, and e-commerce after the online lending information intermediary business ceased taking new opportunities in 2020. Hong Kong securities and insurance services and technology services are among its continuing businesses.
The VIEs generated 94.9% of consolidated revenue in 2022. Investors in ADSs own shares of the Cayman Islands holding company, not equity interests in the PRC VIEs; consolidation depends on contractual arrangements whose enforceability is subject to PRC legal and regulatory uncertainty.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change or context |
|---|---|---|---|
| Net revenue | RMB561.7 million (US$81.4 million) | RMB761.5 million | Down 26.2% |
| Operating loss | RMB150.3 million | RMB55.5 million | Loss widened |
| Net loss | RMB594.9 million (US$86.3 million) | RMB233.7 million | Loss widened; net loss margin was 105.9% of revenue |
| Operating cash flow | RMB63.3 million provided | RMB229.7 million used | Improved, despite net loss |
| Investing cash flow | RMB277.8 million used | RMB321.5 million used | Primarily term deposits and marketable securities purchases |
| Cash and cash equivalents | RMB2,433.3 million | RMB2,443.4 million | Nearly unchanged |
| Restricted cash | RMB198.7 million | RMB295.9 million | Includes client funds and cash frozen in litigation |
| Total assets / liabilities | RMB4,310.6 million / RMB599.6 million | RMB5,049.6 million / RMB859.7 million | Equity was RMB3,711.0 million at year-end 2022 |
Revenue mix shifted further toward technical services (RMB327.2 million, down 21.6% year over year) and sales income (RMB154.9 million, down 23.7%). Post-origination revenue from legacy lending fell 10.1% to RMB35.8 million; there was no loan facilitation revenue in 2021 or 2022. Other revenue fell 56.8% to RMB43.7 million.
Operating expenses and fees totaled RMB711.9 million, or 126.8% of revenue. General and administrative expense declined 28.3% to RMB374.9 million, while provision for doubtful contract assets and receivables increased to RMB159.4 million from RMB22.4 million. The filing attributes this largely to impairment of RMB92.8 million in related-party loans. Other significant 2022 charges included RMB275.0 million impairment of a long-term prepayment/investment and RMB181.8 million impairment loss of investments. These unusual and non-cash items materially contributed to the net loss.
Cash, cash equivalents and restricted cash together were RMB2,632.0 million at year-end. The filing reports no net cash from financing activities in 2022 and no significant long-term debt or guarantees in its contractual-obligations discussion; total liabilities include operating and other obligations and should not be read as funded debt. Contractual operating lease payments were RMB8.5 million, mostly due in 2023. Capital expenditures were RMB35.0 million in 2022; management expected approximately RMB15 million in 2023.
Material changes and management outlook
- Revenue declined as pandemic resurgence and economic weakness reduced demand for e-commerce and technology services, and stock-market and regulatory conditions constrained brokerage-related activity.
- The legacy online lending platform remains closed to new loan facilitation. Remaining post-origination revenue relates to prior-period loans; management said settlement had been reached with a vast majority of investors by year-end 2022. Third parties provide services concerning remaining loan investments.
- Management stated that current cash and expected operating cash flow should cover anticipated needs for at least 12 months from the report date. It cautioned that additional financing may be needed and is not assured on acceptable terms.
- No specific revenue or earnings guidance was provided. The company said it planned to expand wealth management and securities services, technology empowerment and other offerings, while acknowledging execution, competition, cost and regulatory risks.
Risks, contingencies and unusual matters
- PICC litigation: 9F is seeking approximately RMB2.3 billion in service fees and late-payment losses; PICC disputes the agreement and seeks repayment of some previously paid fees plus interest. The cases were at preliminary stages, and the outcome could not be determined. The filing does not provide a clear value for any related financial-statement accrual.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2022, citing five material weaknesses, including insufficient U.S. GAAP/SEC reporting expertise, closing and reconciliation deficiencies, inadequate documentation, and delayed analysis of significant accounts. Remediation was underway but at an early stage. The auditor did not express an opinion on internal-control effectiveness.
- Regulatory exposure: The company lacks PRC licenses for securities brokerage and certain investment-consulting or fund-sales activities. It warns that authorities could determine some activities involving mainland China clients require licenses or violate regulations, potentially resulting in fines, suspension or restrictions.
- PRC listing and data rules: New overseas-listing filing and confidentiality rules took effect after year-end in March 2023. The company described uncertainty over their application and possible CSRC, CAC or other approvals and reviews.
- VIE and cash access: The PRC government could challenge the contractual structure, potentially requiring restructuring or preventing consolidation of VIE results. PRC dividend, reserve and foreign-exchange rules can also constrain transfers of cash to the offshore parent.
- Other investor risks: The filing identifies COVID-19 and macroeconomic uncertainty, foreign-exchange controls, cybersecurity and privacy requirements, market and investment volatility, and potential U.S. trading restrictions under the HFCAA if PCAOB inspection access again becomes unavailable. The PCAOB had removed mainland China and Hong Kong from its restricted list in December 2022; future access was not assured.
- Additional items: 9F believed it was a PFIC for U.S. tax purposes in 2022 and likely would be in 2023. No dividends were declared or paid, and the company did not expect cash dividends in the foreseeable future. The ADS ratio changed on January 18, 2023 to one ADS representing 20 Class A shares.
Important facts for investors to verify
- Whether 2023 results show sustained revenue stabilization, improved operating cash generation, and a reduction in losses and impairment charges.
- The collectability and aging of loans receivable: gross loans were RMB587.6 million against an RMB441.4 million allowance, with RMB350.0 million past due at year-end 2022.
- The status, potential accounting treatment and ultimate outcome of the RMB2.3 billion PICC claim and counterclaim, and the separate securities class actions.
- Progress in remediating all five internal-control material weaknesses and whether subsequent filings report effective controls.
- Whether related-party exposures, VIE cash and assets, and the concentration of revenue among three customers (approximately 75% of FY2022 revenue) create collection or continuity risks.
- Any required PRC regulatory filings, licenses or cybersecurity/data reviews affecting mainland-China clients, overseas listings, or the VIE structure.