Cambrian's losses continued to grow.
Recently, Cambrian disclosed its 2022 performance forecast. According to the announcement, in 2022, Cambrian achieved operating income of 725 million yuan to 75,000 million yuan, a slight increase over the same period of the previous year; The net profit attributable to the owners of the parent company is expected to lose 1.03 billion yuan to 1.27 billion yuan, an increase of 25.46% to 53.34% compared with the same period of the previous year.
Based on the loss of 1.025 billion yuan in 2022, Cambrian has accumulated a loss of nearly 4 billion yuan in the past five years. Cambrian, which was listed with the halo of "the first AI chip stock", why is it here? And when will it turn a profit?
In the performance forecast, Cambrian gave three major reasons for the non-net loss of more than 1.3 billion yuan: excessive R&D investment, inventory backlog and bad debts. DoNews combed Cambrian's financial situation in the past 5 years and found that in addition to the above problems, Cambrian also has problems such as dependence on large customers and reduced government subsidies. Judging from the current Cambrian financial situation and business competitiveness, there is not much time left for Cambrian to turn around against the wind.
01. The three main businesses all rely on large customers
In 2021, Cambrian's total annual revenue will be 720 million yuan, and Cambrian's revenue growth is not large, only 4.17%, based on the high value of the revenue range in the 2022 performance forecast.
In 2018, Cambrian's revenue all came from the smart terminal IP licensing business, but after losing Huawei, a large customer, the proportion of revenue in this part of the revenue gradually shrank to negligible. At present, Cambrian's main business consists of three parts: intelligent computing cluster system, cloud intelligent chip and acceleration card, and edge intelligent chip and acceleration card.
Cambrian's source of revenue is intelligent computing cluster systems. Although Cambrian has not fully announced the revenue of this business line, in the recently released "2022 Annual Prospectus for Issuance of A-Shares to Specific Objects (Registration Draft)" (hereinafter referred to as the "Memorandum"), Cambrian revealed that the revenue of intelligent computing cluster system in 2022 is basically the same as in 2021, and the income comes from the intelligent computing equipment (phase II) of the Nanjing Intelligent Computing Center project (phase II) of the second and third phases.
Cambrian intelligent computing cluster system is mainly aimed at the government, and mainly large-scale projects. A single large government project can support the revenue of this business line in Cambrian. In 2019, the revenue of Cambrian intelligent computing cluster system business came from two major customers, namely the Commerce Bureau of the Administrative Committee of Hengqin New Area of Zhuhai and Xi'an Peidong Yixiang Technology Service Co., Ltd., with a total revenue contribution ratio of 97.29%.
In 2020, the procurement of intelligent computing equipment in the Nanjing Intelligent Computing Center Project (Phase I) alone contributed 81.54% of the revenue to the intelligent computing cluster system business. In that year, the revenue of intelligent computing cluster system accounted for more than 70% of the company's total revenue.
It is not difficult to see that Cambrian's intelligent computing cluster system business relies on large customers, and large customers are not stable, and the company's top five customers in 2021 are not duplicated with the top five customers in the same period of the previous year, which means that Cambrian will bear more pressure in terms of customer acquisition costs, and the stability of customers is also declining.
Cambrian also mentions dependence on large customers in its manual. In 2019, 2020, 2021 and January-September 2022, the total sales amount of the top five customers accounted for 95.44%, 82.11%, 88.60% and 79.30% of the operating revenue, respectively, and the customer concentration was high.
More importantly, the intelligent computing cluster system is mainly for government customers. Government projects have a common feature – slow payment collection increases cash flow pressure for enterprises. As of the third quarter of 2022, Cambrian has notes receivable and accounts receivable exceeding 530 million yuan. From 2019 to 2021, this data is 61 million yuan, 208 million yuan, 478 million yuan, respectively, the amount has expanded year by year, but its turnover rate has decreased year by year, in turn 9.13 (1 turnover in about 40 days), 3.37 (1 turnover in 108 days), 2.1 (1 turnover in 174 days), and it has been reduced to 0.52 in the third quarter of 2022, and 702 days to return the payment of sold goods once.
In the performance forecast, Cambrian revealed that the asset impairment loss caused by inventory backlog alone in 2022 will exceed 100 million yuan, an increase of three to four times over the same period of the previous year. In 2021, Cambrian edge chip sales increased significantly, it is reasonable to guess that Cambrian increased the stock of edge chips, but in the first half of 2022, edge chip sales fell significantly, and the same should be true throughout the year, resulting in a large number of edge chips that cannot be sold were recorded as impairment losses.
Edge computing chips rely on mature application scenarios, and as an upstream chip manufacturer, the sales volume of Cambrian edge products is also extremely dependent on downstream customers' exploration of scenarios. In the manual, Cambrian mentioned that the edge product line business is still in the expansion period, the cooperation with customers is not stable, and it is currently more dependent on the head customers of the intelligent Internet of Things industry, and the customer demand for the edge product changes in 2022, resulting in the company's product sales falling short of expectations, and the revenue of the edge product line has fallen sharply compared with the same period of the previous year.
Some of it comes from "declining sales of cloud products at the end of their lifecycle." Cambrian cloud products are mainly used in the Internet, finance and other fields, the main customers include server manufacturers, Internet companies, has completed the fifth generation of research and development, early smart chips into the end of the life cycle. From the revenue situation from 2019 to 2021, its sales are tepid and the inventory accumulation is normal.
However, in the first half of 2022, Cambrian cloud chip sales have increased significantly, with revenue of 130 million yuan, 60% higher than the revenue of the whole year of 2021, and the annual revenue growth may reach more than 3 times. It is understood that the revenue of Cambrian cloud product line in the first half of 2022 soared, largely due to the cooperation between Cambrian and Ali. On August 30, 2022, Alibaba Cloud launched the intelligent computing solution "Feitian Intelligent Computing Platform", and the cooperative manufacturers behind it include Cambrian.
02. High government subsidies mask cash flow constraints
In 2022, Cambrian's net profit after deducting non-recurring profit and loss is expected to lose 1.3 billion to 1.6 billion yuan, the largest reason is that R&D investment spent 1.4 billion to 1.7 billion yuan, an increase of 23.6% to 51% over the same period in 2021.
As of September 2022, Cambrian currently has $2.2 billion in cash and equivalents on its books, which is less than two years at its current rate of consumption. Previously, Cambrian's cash inflow from operating activities has been higher than revenue, but due to government subsidies, from 2019 to the first half of 2022, the government's subsidies to Cambrian were 107 million yuan, 573 million yuan, 277 million yuan and 62 million yuan, including the subsidy amount included in the profit and loss of the current period.
Roughly speaking, net cash flow from operating activities = total operating income - cost - increase in accounts receivable + government subsidies. In the past two years, the government's subsidies to Cambrian have become less and less, and the shortcomings of Cambrian's slow payment cycle previously covered by large subsidies will be exposed, which will also bring greater cash flow pressure to Cambrian.
At present, Cambrian's total operating income has not increased much every year, but the cost increase is greater than the increase in revenue, and the accounts receivable are also increasing year by year, in order to alleviate the pressure on cash flow, Cambrian chose to raise funds again. In September 2022, Cambrian issued an announcement that it intends to raise no more than 2.65 billion yuan through a fixed increase.
However, the market did not give Cambrian positive feedback. In November 2022, Cambrian adjusted the total amount of funds raised for the first time, reducing it to 2.472 billion yuan. In December 2022, Cambrian issued another announcement that the upper limit of the total amount of fixed additional funds raised was lowered from 2.472 billion yuan to 1.672 billion yuan.
Image source: Cambrian instructions
As for why it chose to raise funds to invest in these three projects, Cambrian explained that the advanced process platform project is mainly used for the iterative update of cloud chip products, the stable process platform chip project is used for edge end products, and the general intelligent processor basic research and development project for emerging application scenarios is mainly for emerging scenarios such as AR/VR and digital twins closely related to intelligent computing in the future.
It is worth noting that none of the three projects used by Cambrian to raise funds has started construction, and from the Cambrian project schedule, the construction period of these three projects is 36 months. In this way, research and development investment will remain high for at least the next three years in the Cambrian.
03. Conclusion
Public data shows that as of the first half of 2022, Cambrian has applied for a total of 2,607 patents. Even so, Cambrian was still "abandoned" by investment institutions and shareholders. In 2021, many institutions, including Guotai Junan, Zhishi Private Placement, Everbright Securities, etc., cashed out or even liquidated their positions. In the first half of 2022, SDIC Ningbo Hangao, Changjiang Zhaoyin, iFLYTEK, and Beijing Nayuan once again reduced their holdings and even liquidated their positions.
In addition to the financial situation with no end in sight of profitability, there are also Cambrian seemingly high industry barriers, but in fact not solid.
Cambrian's ambition is not small, starting from the layout of cloud, edge, terminal chips, reasoning training chips, software and hardware platforms and other all-round product lines, it has pointed the spearhead at NVIDIA, Huawei HiSilicon, Intel, Samsung, MediaTek and other head chip manufacturers. In June 2021, Cambrian Xingge (Nanjing) Technology Co., Ltd., a wholly-owned subsidiary of Cambrian, planned to increase the registered capital by 170 million yuan and introduce investors.
At the beginning of this year, Cambrian revealed that Xingge Technology is designing and developing automotive intelligent chips for high-level intelligent driving application scenarios. However, at present, in the field of automotive smart chips, Cambrian has not yet achieved commercialization.
But everything has to be done, may be done generally, before Huawei HiSilicon self-developed terminal intelligent processor, immediately abandoned Cambrian, so that the latter had to change the business focus and revenue structure.
In a media interview in 2020, Cambrian founder Chen Tianshi once said: "Intel is 52 years old this year, AMD is 51 years old this year, and Nvidia is 27 years old this year." Cambrian is only 4 years old, and he is only a child compared to his predecessors in the industry. Rome was not built in a day, and the benchmarks of our predecessors are all from the blue strands of the road, we have great ambitions, but the long-distance running has just begun. ”
However, given the plummeting market value and losses in sight, what Cambrian needs to do now may be to run the road in front of it rather than expect to run far.
Written by | Su Shu
Editor | Li Xinma
Title image | IC Photo