9F Inc. — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP; amounts below are RMB unless stated otherwise. The filing was signed May 17, 2021.
Business context and reporting period
9F is a Cayman Islands holding company whose operations are principally in China through subsidiaries and variable interest entities (VIEs). It is transitioning from online lending toward financial-technology services, online wealth-management technology, Hong Kong securities services, and consumer-finance technology in Southeast Asia. In December 2020, it stopped offering new fixed-income investment opportunities on its Jiufu Puhui platform; licensed asset managers and other providers are expected to service investors’ remaining investments.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Net revenue | RMB 1,256.0 million | RMB 4,425.0 million |
| Net loss | RMB 2,251.2 million | RMB 2,153.6 million |
| Net loss attributable to 9F | RMB 2,258.9 million | RMB 2,159.6 million |
| Operating cash flow | Use of RMB 1,744.6 million | Use of RMB 429.0 million |
| Investing cash flow | Provided RMB 39.5 million | Used RMB 707.6 million |
| Financing cash flow | Provided RMB 12.9 million | Provided RMB 472.0 million |
| Cash, cash equivalents and restricted cash at year-end | RMB 3,117.4 million | RMB 4,809.4 million |
- Revenue fell 71.6%. Loan-facilitation revenue declined 94.9% to RMB 177.1 million; post-origination revenue rose 42.1% to RMB 859.1 million and represented 68.4% of revenue. Other revenue was RMB 219.8 million.
- Operating costs and expenses were RMB 2,538.2 million, or 202.1% of revenue. They included RMB 347.8 million of provision for doubtful contract assets and receivables. General and administrative expense was RMB 1,303.8 million, including RMB 290.6 million of share-based compensation.
- Additional unusual charges included RMB 462.5 million of investment impairment, RMB 50.3 million of goodwill impairment, and RMB 38.1 million of intangible-asset and property/equipment/software impairment. Income-tax expense was RMB 538.3 million.
- At year-end, cash and cash equivalents were RMB 2,726.7 million, restricted cash RMB 390.7 million, and term deposits RMB 133.8 million. Total assets were RMB 5,386.5 million, total liabilities RMB 1,163.2 million, and shareholders’ equity RMB 4,223.3 million. The summarized balance sheet does not show a separate interest-bearing debt balance; lease liabilities were RMB 29.5 million.
- Capital expenditures were nil in 2020; 2021 capex was estimated at approximately RMB 20 million. Contractual operating-lease payments totaled RMB 20.1 million, mostly due in 2021.
Material changes versus the prior comparable period
- Revenue contracted from RMB 4,425.0 million to RMB 1,256.0 million, reflecting reduced loan origination amid regulatory tightening, COVID-19, and the dispute with PICC. Loan origination volume had been RMB 55.1 billion in 2019; the filing does not provide a clear 2020 volume figure in the supplied text.
- Net loss widened 4.5%, while operating cash use increased substantially. The company attributed lower cash generation to the contraction and cessation of loan-facilitation activity.
- Sales and marketing expense fell 85.4% to RMB 343.1 million and origination and servicing expense fell 52.2% to RMB 543.5 million, consistent with lower lending activity. General and administrative expense rose 12.8%.
- Cash, cash equivalents and restricted cash fell RMB 1,692.0 million during 2020. Total liabilities declined from RMB 2,552.5 million to RMB 1,163.2 million.
- Headcount decreased from 1,946 to 1,091, which the company attributed to workforce optimization amid COVID-19 and economic slowdown.
Outlook, risks, contingencies, and unusual items
- Management said available cash, expected operating cash flow, and bank facilities were expected to meet anticipated needs for at least 12 months. The filing gives no numerical revenue or earnings guidance and cautions that historical results may not indicate future performance.
- Management identified the PICC dispute as a major uncertainty. 9F seeks approximately RMB 2.3 billion in service fees and late-payment losses; PICC disputes the contract amendment and seeks repayment of some fees plus interest. The cases were preliminary, and outcomes could not be determined.
- The filing reports 63 other civil cases involving private-lending guarantees, performance infringement, and labor arbitration, with stated disputed amounts of approximately RMB 48.8 million, RMB 5.4 million, RMB 1.4 million, and RMB 1.1 million, respectively. It also discloses U.S. and New York putative securities class actions concerning alleged IPO misstatements; both were preliminary.
- Key risks include rapidly changing PRC financial and internet regulation; uncertainty over the enforceability of the VIE structure; foreign-exchange and cross-border transfer restrictions; COVID-19 and overseas expansion; partner dependence; and potential U.S. trading restrictions under the Holding Foreign Companies Accountable Act. The company believed it was a PFIC for U.S. tax purposes in 2020 and likely would be in 2021.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end, citing three material weaknesses: insufficient U.S. GAAP/SEC reporting expertise, inadequate detailed account analysis and reconciliation, and insufficient documentation of processes, controls, and estimates. Remediation was underway but at an early stage; the auditor did not provide an internal-control attestation.
- The filing’s risk-factor discussion states 2020 operating cash use was RMB 1,967.8 million, while the selected financial data and audited cash-flow statement report RMB 1,744.6 million. The filing text does not reconcile this discrepancy.
Most important facts for investors to verify
- Reconcile the disclosed operating-cash-flow discrepancy and confirm the reported cash and restricted-cash balances and their accessibility.
- Track the PICC lawsuits, recoverability of the disputed receivable, and any further provisions or cash collections.
- Assess repayment progress and investor outcomes for existing fixed-income products transferred to licensed asset managers, including the stated 36-month repayment expectation.
- Verify revenue generation and profitability of the replacement technology, Hong Kong investment, and Southeast Asian businesses after the lending-platform exit.
- Monitor remediation of the three material weaknesses, the VIE and licensing risks, and PCAOB inspection-related listing exposure.