9F Inc. — FY2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023; filed May 15, 2024. This is an annual report, not a standalone Q4 report. Financial statements are prepared under U.S. GAAP and presented primarily in RMB; U.S. dollar figures are convenience translations.
Business context
9F describes itself as a digital technology service provider, offering technology services to institutional partners, wealth management services, and e-commerce. It ceased offering new online lending intermediary products in China in 2020; the remaining legacy-loan servicing and settlement activity is winding down. Its Hong Kong businesses include securities and insurance services. A Singapore subsidiary obtained a Capital Markets Services license in December 2023.
9F is a Cayman Islands holding company. A substantial part of its China operations is conducted through variable interest entities (VIEs) controlled by contract rather than direct ownership. The VIEs generated 96.17% of consolidated revenue in 2023.
Financial results and position
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue, excluding cost of goods sold | RMB 412.4 million (US$58.1 million) | RMB 561.7 million | Down 26.6% |
| Operating loss | RMB 193.6 million | RMB 150.3 million | Loss widened |
| Net loss | RMB 140.3 million (US$19.8 million) | RMB 594.9 million | Loss narrowed |
| Net loss per ordinary share | RMB 0.60 | RMB 2.55 | Improved |
| Cash provided by operating activities | RMB 62.5 million (US$8.8 million) | RMB 63.3 million | Nearly unchanged |
| Cash used in investing activities | RMB 949.0 million | RMB 277.8 million | Use increased |
Revenue declined across the main lines: technical services fell 24.3% to RMB 247.8 million; sales income fell 7.9% to RMB 142.6 million; post-origination services fell to RMB 3.6 million from RMB 35.8 million; and other revenue fell 57.8% to RMB 18.4 million. Management attributed the declines mainly to weak macroeconomic conditions, lower partner and customer demand, and reduced insurance revenue.
Gross profit was RMB 81.0 million, or 19.6% of total revenue as presented in the filing. Cost of goods sold rose 32.8% to RMB 61.7 million despite lower sales income. Operating expenses and fees totaled RMB 606.0 million, including RMB 192.8 million of provisions for doubtful contract assets and receivables. Management cited impairment of certain loans due to the company as a key reason for the higher provision.
Cash and cash equivalents were RMB 1.686 billion at year-end, down 30.7% from RMB 2.433 billion. Restricted cash was RMB 133.7 million; term deposits were RMB 346.6 million; and marketable securities were RMB 428.0 million. Total assets were RMB 4.039 billion and total liabilities RMB 466.7 million. The filing does not identify material interest-bearing borrowings in the presented balance-sheet summary. Investing outflows chiefly reflected purchases of long-term investments and term deposits. Cash, cash equivalents and restricted cash fell by RMB 812.0 million during the year.
Capital spending was RMB 3.5 million in 2023. Management expects approximately RMB 20 million of capital expenditures in 2024, mainly for business expansion and licenses. The filing reports no dividends paid and says none are expected in the foreseeable future.
Material changes, outlook and risks
- Loss reduction, but weaker core operating performance: Net loss narrowed substantially from 2022, when large investment and long-term prepayment impairments contributed to losses. However, revenue fell and the operating loss widened in 2023. Higher interest income and lower investment impairment losses partly helped the bottom line.
- Cash deployment and credit quality: Cash balances declined as the company bought investment products and funded operations. Net loans receivable fell to RMB 13.4 million after collections and impairment; the related allowance was RMB 575.2 million. The company also fully impaired RMB 154.6 million of loans to related parties during 2023.
- Management outlook: No formal revenue or earnings guidance is provided. Management expects the company to incur net losses in future periods, but believes available cash and anticipated operating cash flow can cover needs for at least 12 months from the report’s release date.
- Legacy and legal exposures: A consolidated court proceeding with PICC is awaiting a ruling. 9F seeks approximately RMB 2.3 billion in disputed service fees and late-payment losses; PICC seeks to invalidate an agreement amendment and recover some fees plus interest. Numerous small claims concerning the legacy lending business are also pending. A related securities class action in New York was dismissed with prejudice in March 2024 and appealed; a separate federal action remained pending on a motion to dismiss.
- Regulatory and structural risks: 9F says it does not hold a China license for securities brokerage and could face penalties or restrictions if its China-related activities are deemed to constitute regulated securities business. PRC oversight of overseas listings, data, foreign exchange, and VIE arrangements may affect operations or the ADSs. The VIE contracts have not been tested in court, and a regulatory challenge could undermine control or consolidation.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end because of three material weaknesses: insufficient U.S. GAAP/SEC reporting expertise, inadequate documentation for certain transactions and investment impairment analyses, and insufficient procedures for complex financial instruments. Remediation is underway but is not complete. The auditor gave an unqualified opinion on the financial statements and did not audit internal control effectiveness.
- Other investor risks: The filing identifies customer concentration (two customers represented 40% of 2023 revenue), possible PFIC status for U.S. tax purposes, potential restrictions on cash transfers from China, and substantial voting control held by the chairman through the dual-class share structure. The company also expects to cease qualifying as an emerging growth company for fiscal 2024.
Important facts for investors to verify
- Whether revenue and partner demand stabilize, and whether lower operating expenses can offset continuing credit provisions and the operating loss.
- Recoverability of receivables and loans, adequacy of the RMB 575.2 million loan allowance, and the performance and liquidity of the company’s investment portfolio.
- Progress and potential financial impact of the PICC litigation, legacy-loan investor claims, and the remaining securities class action.
- Whether the three material control weaknesses are remediated and whether future filings continue to report reliable investment valuations and impairment estimates.
- Current compliance status for VIE arrangements, China securities activities, CSRC filing requirements, cybersecurity/data rules, and cross-border cash transfers.
- How much cash is accessible to the Cayman parent after restrictions on PRC subsidiary distributions, and whether the stated 12-month liquidity outlook remains valid.