A few days ago, Cloudwalk Technology (688327. SH) announced its annual results. In 2023, the company achieved revenue of 629 million yuan, a year-on-year increase of 19.33%, net profit attributable to the parent company of -643 million yuan, a year-on-year decrease of 25.95%, and net cash flow from operating activities of -240 million yuan.
Titanium media APP noticed that the company's loss was dragged down by excessive R&D investment, but its R&D strength was difficult to match its peers. In addition, high accounts receivable not only put bad debt pressure on the company, but also put pressure on its operating cash flow. It is worth noting that in the face of the global large-scale model melee gradually entering the second half, the company released a fixed increase of 3.6 billion yuan for the large-scale model project, but there is news that the amount of fundraising will be "cut in half".
The curse of loss is difficult to break, and the R&D strength may not be as good as that of peers
In May 2022, Cloudwalk Technology landed on the Science and Technology Innovation Board, focusing on the R&D and application of artificial intelligence algorithms, and relying on core technologies to build a human-machine collaborative operating system. The company, together with SenseTime, Megvii and YITU, is known as the "AI Four Tigers".
Although the company's revenue will increase in 2023 and the net profit loss will narrow, the loss will still be serious. In the long run, from 2018 to 2022, the company's net profit will be -181 million yuan, -639 million yuan, -813 million yuan, -632 million yuan, and -869 million yuan respectively, with a total loss of about 3 billion yuan.
Why is it difficult for companies to get out of a loss-making situation?
On the one hand, it is affected by low gross profit margin. From 2020 to 2023, the company's gross sales margin will be 43.36%, 37.01%, 34.06%, and 52.2% respectively. Since 2020, SenseTime's gross profit margin has reached more than 70%, YITU Technology's 63%, and Megvii's technology is close to 60%. In this regard, Yuncong Technology once replied to the exchange that the company has not independently developed computing hardware products, so related supporting software and hardware products need to be purchased from a third party. The purchased software and hardware are mainly servers, and the pricing is relatively market-oriented, so the gross profit margin is relatively low.
On the other hand, it was dragged down by high R&D expenses. From 2020 to 2023, the company's R&D expenses will be 578 million yuan, 534 million yuan, 560 million yuan, and 490 million yuan respectively, and the R&D expense rates will be 76.59%, 49.67%, 106.45%, and 78.1% respectively. It can be seen that the company has to invest at least half of its revenue in research and development every year, and if the necessary sales expenses, management expenses, financial expenses, etc. are added, the company's profit pressure can be imagined.
Although the company's R&D expenditure is large, its strength is not as good as that of its peers.
Generally speaking, technological innovation requires sufficient talent protection, but the company's R&D personnel are decreasing year by year. Financial data show that from 2020 to 2023, the company's R&D personnel will be 997, 557, 552 and 467 respectively. It is worth mentioning that in October 2023, Jiang Xun, deputy general manager and chief architect of the company, one of the company's three core technical personnel, chose to resign.
It is understood that there is a long-term shortage of talents in the domestic AI industry, especially the top talents are only 1/5 of the United States, and the algorithm talent gap is 1.7 million. On the other hand, there are more than 3,000 R&D personnel in peer companies, more than 1,400 in Megvii Technology, and more than 800 in YITU Technology.
More importantly, as the result of spending a huge amount of R&D investment, the company is also slightly inferior to its peers in terms of the number of invention patents. By the end of 2021, Hikvision, SenseTime, and Spire had 2,243, 2,194, and 210 invention patents, respectively. By the end of 2023, the number of invention patents of the company is only 187.
Accounts receivable are high, and the authenticity of supplier transactions is questionable
It is understood that the company's downstream customers are mainly large government and enterprise customers such as banks, public security, airports, etc., and the customer payment cycle is long, which also leads to the company's accounts receivable amount continues to be at a high level. From 2021 to 2023, the company's accounts receivable balances will be 353 million yuan, 200 million yuan and 371 million yuan respectively, accounting for about 33%, 40% and 55% of the current revenue.
The company's accounts receivable aged less than one year were 255 million yuan, accounting for about 41%, and those aged more than one year were 355 million yuan, accounting for about 59%. It can be seen that although the credit rating of the company's customers is high, the proportion of accounts receivable with long aging is large, and the risk of bad debts is not small.
In addition, high accounts receivable also put pressure on its operating cash flow. From 2021 to 2023, the company's net cash flow from operating activities will be -547 million yuan, -623 million yuan, and -240 million yuan respectively.
The continuous outflow of operating cash flow exposes the company to liquidity risks. As of the end of 2023, the company's monetary funds were 1.207 billion yuan, short-term borrowings were 579 million yuan, and bills payable were 271 million yuan. If calculated according to the company's average annual loss of 5-600 million yuan, the company's current monetary funds obviously cannot support it for too long.
According to the financial report, the company's procurement content is mainly divided into non-production materials and production materials. The company's top five suppliers purchased more than 100 million yuan, accounting for 37.27% of the total annual procurement. Compared with the top five suppliers in the same period last year, suppliers 1, 2, 3 and 5 are new suppliers. However, the company's transaction with Wuhan Qianye Technology Co., Ltd. (hereinafter referred to as "Qianye Technology"), the fifth largest supplier, of more than 15 million yuan is worth paying attention to.
According to Tianyancha, Qianye Technology was established on April 29, 2020 and is an enterprise mainly engaged in software and information technology services. Previously, Qianye Technology once carried out a simple cancellation, and then revoked the cancellation before starting normal operation. In addition, although Qianye Technology is known as a software service company, it has not had any intellectual property rights since its establishment nearly four years ago, and the successful transaction customer is only Cloudwalk Technology.
In this context, why would the company choose to work with it?
More critically, Qianye Technology seems to be a "one-person" company. According to Tianyancha, from 2020 to 2022, the number of insured people will be 0, 1, and 1 respectively. It should be noted that the shareholders of Qianye Technology are Zhang Xing and Zeng Ling, whose shareholding ratios are 42.75% and 57.25% respectively. Neither of these shareholders has any other surviving enterprises under their names, or there is no other enterprise under their control to pay social security on their behalf.
In addition, after checking the mailing address of Qianye Technology, it was found that it was located at Unit 2205, Building 2, Ziyu Mansion, No. 16, Jinqiao Avenue, Jiang'an District, Wuhan City, and the address seemed to be a commercial house. Why was Qianye Technology able to obtain orders of more than 15 million yuan? This also has to make people question whether the transaction between the company and Qianye Technology is genuine.
R&D personnel or working for customers
According to the financial report, in order to maintain its leading position in the industry, the company is continuously carrying out the research and development of related technology platforms and new products in the field of artificial intelligence.
Among the company's key R&D projects, the two projects of "knowledge computing" and "AI fusion data lake" in the human-machine collaborative operating system are noteworthy. As of the end of 2023, the above two R&D projects have been completed, among which the R&D personnel are Zhou Xi, Yang Jie, Ding Junyong, Fang Xiaoyun, etc.
Titanium Media APP found that among the above-mentioned R&D personnel, Fang Xiaoyun participated in two projects of the company at the same time, and his identity may be the controlling shareholder and general manager of the company's customers.
According to Tianyancha, on May 6, 2017, Fang Xiaoyun was the new shareholder of Dahao Venture, holding 3.97% of the shares of Dahao Venture. Dahao Venture is the sixth largest shareholder of the company. In addition, Fang Xiaoyun's external employment and shareholding enterprises also include Shanghai Kuanshu Information Technology Co., Ltd. (hereinafter referred to as "Kuanshu Information"). Fang Xiaoyun is the legal representative of Broadband Information, holding 74.69% of the shares of Broadband Information, and serving as the executive director and general manager of Broadband Information.
From the above, it can be seen that Fang Xiaoyun may be able to exert control over the broadband information, or be the actual controller of the broadband information.
Looking through the prospectus, it was found that there had been a transaction between the company and Kuanshu Information. It is understood that in June 2020, the company signed an important sales contract with Kuanshu Information, and the subject matter of the contract is the Rongzhi cloud service platform, with a contract price of 7.4 million yuan. As of July 30, 2021, the date of the signing of the prospectus, the contract has been fulfilled.
From the above situation, it can be seen that Fang Xiaoyun, the actual controller and director and general manager of Broaddigital Information, may be an employee of Yuncong Technology.
Fundraising is "cut in half", and there is still uncertainty about the fixed increase
In the face of the global large-scale model melee gradually entering the second half, the company is also actively planning for its cloud from the "industry elf" large-scale model research and development project. However, there is news that the amount of funds raised will be "cut in half".
According to the latest private placement plan, although the number of shares issued remains unchanged at 311 million shares, the amount of funds raised has been reduced from the original 3.635 billion yuan to 1.852 billion yuan. However, there is still uncertainty about whether the fixed increase can be implemented.
According to the original plan, 2.094 billion yuan will be used for the purchase of R&D equipment, but now this figure has dropped to 1.478 billion yuan, the site purchase and decoration costs have been completely cancelled, and human resource costs and other expenses have also been greatly reduced.
Titanium Media APP found that the reason why the company's fundraising amount was "cut in half" or touched two regulatory "red lines".
In May 2022, the company's IPO raised 1.728 billion yuan. But in March 2023, that is, only 10 months after the previous fundraising, the company plans to raise 3.635 billion yuan through a private placement, and it should be noted that the company has lost money for two consecutive years after listing.
According to regulatory requirements, if a listed company has suffered losses in the past two consecutive years, the resolution date of the board of directors of the refinancing plan shall not be less than 18 months from the date of the previous raised funds.
It is worth mentioning that the funds of the company's previous fundraising project have not been used. As of June 30, 2023, the company's net IPO proceeds of 1.627 billion yuan were used, accounting for 81%. Interestingly, the company said in the announcement that it had basically run out of use.
In addition, the company's fundraising and investment projects are also suspicious. It is understood that in the original 3.6 billion yuan fixed increase plan, the company plans to invest 760 million yuan to pay for human resource costs, of which 800 R&D engineers will be hired in Q1 of the fourth year of the fund-raising project, which is more than the current company's R&D numbers. But what makes people wonder why the company needs a lot of R&D personnel in the future, but it has been cutting R&D personnel year by year?
More importantly, the company's cloud from the "industry elf" large model research and development project, after the completion and implementation of the project, will bring losses to the company in the next four years, the first to the fourth year is expected to lose -154 million yuan, -518 million yuan, -864 million yuan, -502 million yuan respectively. (This article was first published on the Titanium Media App, by Zhai Zhichao)