Image source @ Visual China
Text | Journal of Mathematics, author | Lemon Creek
On April 21, iFLYTEK officially announced its 2021 financial report and the first quarter report for 2022.
It is worth noting that HKUST's net profit in the first quarter of 2022 fell by more than 20%, mainly due to the loss of 154 million yuan in stock speculation. According to the securities investment disclosed in the 2021 annual report, iFLYTEK holds a threesome and a Cambrian ending book value of 373 million yuan and 406 million yuan respectively. As of the close of trading on April 21, Cambrian shares have fallen 40% since 2022, and The Threesome has fallen nearly 30%.
This also makes the industry ridicule iFLYTEK for "speculating in stocks and becoming a shareholder".
However, in fact, from the annual report data, in the context of the economic downturn in 2021, iFLYTEK can continue the performance of revenue growth and profit expansion for two consecutive years, which also shows to a large extent that their strategy of finding their own development direction has achieved certain results.
According to this financial report, iFLYTEK achieved revenue of more than 18.3 billion yuan in 2021, an increase of 40.61% year-on-year, and net profit of 979 million yuan after deduction of non-attributable to the mother, an increase of 27.54% year-on-year, and the scale and efficiency of operation continued to grow.
Among them, the revenue of smart education business, which is the core business of the five major base areas, was 6.007 billion yuan, an increase of 49.47% year-on-year, and the revenue of open platform and consumer business was 4.687 billion yuan, an increase of 52.19% year-on-year.
In addition, iFLYTEK also announced the 2021 profit distribution plan, which intends to distribute a cash dividend of 1.00 yuan (including tax) to all shareholders for every 10 shares based on the total share capital of 2.324 billion shares as of March 31, 2022, and not to increase the share capital by the provident fund.
The 2821 financial report continued the growth trend from the revenue of 2019 after breaking 10 billion, and it can be seen that the compound annual growth rate of iFLYTEK's net profit in the past two years has reached 37.8%.
Looking at this number alone, it seems that there is nothing, but if you compare the AI Four Xiaolong enterprises that are eager to be listed and have just been listed, you will find that when AI companies generally still take losses as the normal daily operation, iFLYTEK, which was once mainly based on losses, seems to have opened up the second pulse of Ren Dou.
But challenges remain.
01 An eye-catching financial report
In 2021, iFLYTEK's quarterly earnings data showed a trend of rising revenue and profit quarter by quarter. Among them, the single-quarter revenue and net profit in the fourth quarter were 7.446 billion yuan and 828 million yuan, respectively, which were the best single-quarter levels since the listing.
Among them, the base business is the foundation of iFLYTEK and the business as the basis of revenue, and in the previous strategic concept, this part of the business exceeded 50% of all revenue.
It is said that in early 2021, iFLYTEK held a seminar involving middle management. At the meeting, combining the opinions of all parties, the 100 billion target and the basic business were corresponding and split one-to-one.
According to reports at the time, according to the plan, by the end of the 14th Five-Year Plan, the education business will contribute 30 billion yuan, the medical, consumer intelligent hardware and open platform will each contribute 20 billion yuan; the automotive business, operators, and smart cities will each contribute 10 billion yuan.
This is the logic and plan of iFLYTEK to achieve 100 billion revenue.
In addition, according to the opinions of all parties, the management of iFLYTEK finally confirmed that the endogenous growth of the company's business accounted for 80% of the 100 billion yuan revenue target, that is, 80 billion yuan, and the other 20 billion yuan was generated through ecological mergers and acquisitions and cooperation.
After that, Liu Qingfeng, chairman of the company, publicly stated on many occasions that 2021 is the year when the base business takes root, and the five core base businesses will support the development path of iFLYTEK.
According to the annual report data, in 2021, iFLYTEK's base business accounted for more than 50% of the total revenue. From the perspective of intuitive data, education, smart city, open platform and consumer business are still the three "main players", contributing revenue of 6.23 billion yuan, 4.97 billion yuan and 4.69 billion yuan respectively, accounting for more than 80% of the main business income.
In the education sector, which is also a star business, iFLYTEK's AI learning machine sales in 2021 increased by 150%, the revenue target growth rate of the aforementioned products in 2022 was 200%, and it is expected to break 10 billion by the end of the 14th Five-Year Plan; the regional teaching solution according to talents will add nearly 20 districts and counties in 2021, with revenue growth of more than 40%, and the growth target for 2022 is 80%.
However, this eye-catching financial report does hide no small problems.
02 Hidden dangers depend
This imbalance in the development of the underlying business will play the same role in the process of the enterprise's rise stage, and narrow the space for revenue and strategic expansion within the enterprise.
This is a lesson that many listed companies have exchanged for blood and tears.
Therefore, if there is no capital injection, it is very difficult to rely solely on iFLYTEK's own capital to promote such a huge market expansion.
Therefore, in August last year, iFLYTEK announced that it had begun to plan the spin-off and listing of iFLYTEK Medical, and intended to use the capital market to help the track business enter the fast lane.
In addition, in 2021, not only will there be problems in the core business of iFLYTEK, but its cash flow will also change.
According to the financial report, iFLYTEK's net operating net cash flow for the whole year of 2021 was 893 million yuan, down 60% year-on-year, or even lower than the net profit value of the year.
From the financial report, it can be seen that iFLYTEK concentrated on the repayment of a number of debts at the end of last year.
Key In the fourth quarter of last year, iFLYTEK's net profit exceeded 800 million, but its profit in the first quarter of 2022 was only about 110 million. This shows from another aspect that iFLYTEK's 2022 start will not be good, and there may be problems behind it that have not been exposed.
03 All problems come from research and development
In a sense, iFLYTEK is a company with research and development as the main body. The financial report shows that R&D investment in 2021 will exceed 2.9 billion, accounting for more than 16% of operating income.
Before iFLYTEK had a serious loss, an important reason was that the cost of investing in research and development was too large. The 2021 annual report can be seen that the proportion of its research and development revenue fell by 2.52%.
In fact, it can be seen that iFLYTEK believes that its artificial intelligence technology is gradually productized and mature, and the cost of investing in the basic field can be reduced in order to make the financial statements and cost statements look better.
But here's the problem.
At the beginning of the year, iFLYTEK grandly released the advanced version of "AI" - iFLYTEK Super Brain 2030 Plan, which improves the integration of software and hardware in three stages and allows robots to enter every home. According to the plan, in the next 2 years, three major products such as professional virtual human family, cultivatable pet toys, and adolescent depression screening platform will be launched.
Moreover, in order to support the aforementioned plan, iFLYTEK launched the "Wild Goose Array Plan" to recruit ten leading talents, 100 leading talents and 1,000 backbone talents around the world.
In fact, this is the same as Baidu's intelligent brain and SenseTime's intelligent device, which are artificial intelligence enterprises, and at a certain stage of technology development, they will create an artificial intelligence technology hub in order to improve the efficiency and ability of artificial intelligence terminal processing.
This will mean that iFLYTEK will have to have a huge R&D investment for a long time to come, and it is likely to exceed the previous investment level.
Therefore, whether its basic core business can support such a large cash flow has become a concern for everyone.
In addition, whether this order has been reversed is also worth pondering by the management of iFLYTEK. After all, whether it is Baidu, SenseTime or Huawei, in the field of artificial intelligence, they first build an intelligent core or intelligent brain, and then gradually refine the corresponding applications. The advantage of this is that a single investment can be dispersed to dilute the corresponding capital, while ensuring the coordination and unification of all technologies.
To some extent, iFLYTEK's decision is a kind of supplementary lesson in the field of technology research and development. This will make its mature obstetric examination and technology go through an internal grooming process linked to the intelligent center.
That's the problem.
However, as China's core AI technology service provider and the first few companies with mature business systems, IFLYTEK still hopes that iFLYTEK will find a mature development path and truly achieve the revenue target of 140 billion yuan at the end of 1455.
Stanislav Lem, who many have called "futurists," once said: "We always like to extend the future development of new technologies in a straight line, so that nineteenth-century dreamers and blueprintists conceived of a 'world full of balloons' and 'a world full of steam'—both of which seem ridiculous today, and history has nothing to do with this simplified presentation." It will never show us any linear development path, but will only show the non-linear evolutionary trajectory with tortuous lines."
Professor Li Shanyou, the founder of Chaos University, also feels the same way, he once said in his speech that whether or not to overcome discontinuity is the first reason for the rise and fall of enterprises, and the first cause of innovation.