20-F: 36Kr Holdings Inc. Files 20-F for Fiscal Year 2024, Reports Revenue Decline and Net Loss

36Kr Holdings Inc. reports its 20-F filing for the fiscal year ended December 31, 2024, highlighting a decrease in revenue and a net loss compared to the previous year.

Summary

• 36Kr Holdings Inc. filed its 20-F report for the fiscal year ended December 31, 2024.
• The company experienced a revenue decrease of 32.1%, falling from RMB 340.2 million in 2023 to RMB 231.1 million in 2024.
• A net loss of RMB 140.8 million was reported for 2024, compared to a net loss of RMB 89.2 million in 2023.
• The company's corporate structure involves unique risks due to its use of a Variable Interest Entity (VIE) to operate in China.
• Revenues generated by the VIE accounted for 100% of the company's total net revenues in 2024.
• The company faces legal and operational risks as a company based in and primarily operating in China.
• The company identified one material weakness in its internal control over financial reporting related to a lack of sufficient competent financial reporting and accounting personnel with appropriate understanding of U.S. GAAP.
• The company believes it was likely a passive foreign investment company (PFIC) for 2024, which could result in adverse U.S. federal income tax consequences to U.S. investors.
• The company has not maintained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to decreased revenue, increased net loss, and identified material weaknesses. The company's future is uncertain due to regulatory risks and potential delisting.

Positives

• The company has total followers of 35.9 million as of December 31, 2024 across its self-operated platforms and its accounts on major third-party platforms.
• The company is taking measures to address the identified material weakness and control deficiencies.
• The company is planning to apply for the Internet publishing license for its business operation and has been continuously communicating with the competent authorities, and will apply for it when it is feasible to do so.

Negatives

• The company experienced a significant decrease in revenue and an increase in net loss.
• The company's reliance on a VIE structure poses risks due to PRC regulations.
• The company identified a material weakness in its internal control over financial reporting.
• The company was likely a passive foreign investment company (PFIC) for 2024.
• The company has not maintained compliance with the minimum bid price requirement of $1.00 per share for continued listing on the Nasdaq.

Risks

• The company's corporate structure involves unique risks due to its use of a Variable Interest Entity (VIE) to operate in China.
• The company faces legal and operational risks as a company based in and primarily operating in China.
• The company may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet businesses and companies, including limitations on our ability to own key assets such as our platform.
• Lack of Internet news information license may expose us to administrative sanctions, which would materially and adversely affect our business, results of operations and financial condition.
• Lack of Internet audio-visual program transmission license may expose us to administrative sanctions, which would materially and adversely affect our business, results of operations and financial condition.
• Lack of Internet publishing license may expose us to administrative sanctions, which would materially and adversely affect our business, results of operations and financial condition.
• Advertisements on our platform may subject us to penalties and other administrative actions.
• We may be classified as a PRC resident enterprise for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders and ADS holders and have a material adverse effect on our results of operations and the value of your investment.
• Trading in our securities may be prohibited under the HFCAA if the PCAOB determines that it is unable to inspect or investigate completely our auditor, and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities.

Future Outlook

The company intends to continue to refine its existing marketing strategies or introduce new effective marketing strategies in a cost-effective manner. The company plans to apply for the Internet news information license from the CAC through the VIE when it is feasible to do so. The company is planning to apply for the Internet publishing license for its business operation and we have been continuously communicating with the competent authorities, and will apply for it when it is feasible to do so.

Industry Context

The New Economy-focused business services market is highly competitive. The company's online advertising services face competition from other content-based online advertising services providers as well as technology channels of major Internet information portals, such as Sina and Tencent News. For our enterprise value-added services, we face competition from other New Economy-focused enterprise value-added services providers as well as traditional marketing, consulting and public relation companies. We also compete with paid content services providers and offline training agencies with respect to our subscription services. We also face competition from traditional advertising media.

Related Party Transactions

• In 2022, 2023 and 2024, the Group earned revenue for providing advertising and enterprise value-added services to Beijing Sanke Information Technology Co., Ltd.(Beijing Sanke), an associate of the Group, amounted to approximately RMB 0.3 million RMB 1.0 million and RMB 0.08 million, respectively.
• In 2022, 2023 and 2024, the Group purchased video production services from Shanghai Xuanke Technology Co., Ltd. (Shanghai Xuanke), an associate of the Group, amounted to RMB 0.3 million, RMB 49 thousand and RMB 0.5 million, respectively.
• In 2022, 2023 and 2024, the Group purchased overseas promotion services from Jijingzhiyu Information Technology Co., Ltd. (Jijingzhiyu), an associate of the Group, amounted to RMB 0.4 million, RMB 0.1 million and RMB 0.4 million, respectively.
• In 2024, the Group invested RMB 3.95 million to Wenzhou Qingke No.1 Venture Capital Partnership Enterprise (Limited Partnership) (Wenzhou Qingke) and acquired 79% equity interests in Wenzhou Qingke, which the Group recognized as equity investments using the equity method.

Stakeholder Impact

• Shareholders may experience a decline in the value of their investment due to the company's financial performance and regulatory risks.
• Employees may be affected by the company's restructuring and cost-cutting measures.
• Customers may experience changes in the company's service offerings as it refines its business model.

Next Steps

• The company is in the process of implementing a number of measures to address the identified material weakness and control deficiencies.
• The company plans to apply for the Internet news information license from the CAC through the VIE when it is feasible to do so.
• The company is planning to apply for the Internet publishing license for its business operation and has been continuously communicating with the competent authorities, and will apply for it when it is feasible to do so.

Key Dates

Keywords

20-F Filing, Financial Results, Revenue, Net Loss, VIE Structure, China, Regulations, Internal Controls, PFIC, Nasdaq, Minimum Bid Price, New Economy