"When the new wave of industry comes, enterprises should take the initiative to promote the new stage of product and business innovation, so that they can go to the front of the industry when the new wave becomes the mainstream, otherwise they will fall from the trend of industrial development." Wang Wenjing, the founder of Yonyou Network, once used "surfing theory" to describe the secret of a company's success.
After more than 20 years of ups and downs in the capital market, Yonyou Network, which has been at the forefront of the industry, has handed over a "falling" financial answer sheet for the first time. Net profit, surging costs and expenses, and negative cash flow...... All these situations together question the strategic correctness of the UFIDA network.
This performance report, which can hardly be called "qualified", is undoubtedly unexpected by the capital market, but for Yonyou Network, which is seeking to transform, it is the inevitable pain of nirvana in the run-in of the two gears of a single accounting service and an integrated cloud service.
When talking about the business plan, Yonyou said that the upgrade of its business organization model has been completed, and the phased impact on business and performance has passed. In the future, how should the company continue to grasp the new mainstream wave, give full play to UFIDA's advantages, and then achieve comprehensive and efficient operation?
First, costs have soared, and profits have fallen off a cliff
According to the financial report, Yonyou Network will achieve operating income of 9.796 billion yuan in 2023, an increase of only 5.8% from 9.262 billion yuan in 2022. It is worth noting that this is the fourth year that Yonyou has seen single-digit revenue growth, with the company's revenue growth rates from 2020 to 2022 being 0.2%, 4.7% and 3.7%, respectively.
Compared with the revenue performance of the slowdown in growth, but still in a positive growth trend as a whole, the profitability of Yonyou Network is greatly reduced, and it will even record a loss of -967 million yuan in 2023, and a net loss of 1.104 billion yuan after deducting non-profits, which is also the first time that the company has suffered a negative net profit since its listing.
Yonyou explained in its financial report that the loss in 2023 is mainly due to structural changes in revenue contracting, including a decrease in revenue growth from large enterprises, as well as a decline in business income from the government and other public organizations. In addition, the company's operating costs and expenses increased more during the reporting period, which also squeezed the profit side to a certain extent.
However, Bedo Finance found that the revenue of Yonyou Network's large enterprise customer business was 6.519 billion yuan, a year-on-year increase of 4.3%. And although the revenue of the government and other public organizations fell by 12.5% year-on-year, the proportion of this service in the total revenue is only about 10%, and the impact on the profit side is obviously not so significant when the base is not large.
Looking at the cost of Yonyou Network, the company's operating costs will reach 4.826 billion yuan in 2023, a year-on-year increase of 19.5%; sales expenses were 2.743 billion yuan, an increase of 22.7% year-on-year; R&D expenses were 2.106 billion yuan, an increase of 20.1% year-on-year, and the growth rate of the three indicators far exceeded the growth rate of the revenue side.
Although Yonyou said in its financial report that its "wages and salaries increased more than year-on-year", the number of employees in its parent company and major subsidiaries in 2023 will be about 24,900, which is actually a decrease from 25,400 in the same period in 2022. Overall, the logic of the decline in performance given by Yonyou Network is not convincing.
In fact, the company's profit of 1.183 billion yuan in 2019 began to decline, and the net profit attributable to the parent company in 2020, 2021 and 2022 was 985 million yuan, 708 million yuan and 219 million yuan respectively, narrowing by 16.7%, 28.2% and 69.0% year-on-year.
The fundamental reason affecting the performance of Yonyou Network is the organizational transformation of the business model initiated by the company based on the needs of the industry.
According to the financial report, Yonyou Network will launch the largest business organization model upgrade in history in 2023, upgrading the business of large enterprise customers from the original region-based organizational model to an industry-based organizational model, and establishing 23 industry customer and solution divisions to carry out business in a national integrated manner.
At the same time, Yonyou's medium-sized enterprise customer business will continue to be carried out according to the region, but the national unified and vertical organization will be carried out. Yonyou said in its financial report that although this move has a phased impact on the company's performance, it meets customer requirements and is also a more efficient and mainstream organizational model for the software and service business of large global enterprises.
Second, the competition is fierce, and the initiative is transformed for development
Why would a leading enterprise that has been rooted in the industry for many years take the initiative to change its business organization model at the critical juncture of enterprise digital intelligence? The transformation motivation behind this needs to start from the development of the UFIDA network.
Founded in 1988, Yonyou Network, formerly known as a financial software service agency, serves the computerized accounting of more than 400,000 enterprises and institutions. After gaining insight into the development path of enterprise integrated management, Yonyou bet on ERP (enterprise management software) research and development, and ranked first in the industry through diversified ERP product layout.
In 2015, Yonyou, which anchored the "cloud service" track, removed the word "software" from the company's name and changed its name to Yonyou Network Technology Co., Ltd., and changed its stock abbreviation from "Yonyou Software" to "Yonyou Network", conforming to industry changes and user needs, and leading the development of the SaaS market.
In 2020, Yonyou announced that it had entered the second phase of the "Enterprise Internet Service" 3.0 strategy, and developed a business innovation platform - Yonyou BIP, which set off another revolution in information technology. It was also in this year that Yonyou became the first Chinese software company to exceed 100 billion yuan in market value.
"After the enterprise has formulated the strategy, how to innovate in the business aspect, how to change the organizational aspect, and how to cooperate with the operation and management mode are all integrated. BIP will enable business innovation to transcend the barriers of technology, commerce and cost, and become simple, convenient, popular and social," Wang Wenjing, founder of Yonyou Network, once predicted.
However, the reality is that with the highly systematic operation and management of enterprises, the competitive situation of the enterprise service industry is also developing in the direction of specialization. Standing at the fork in the road of the times, Yonyou Network, which started as an accounting software manufacturer, inevitably has a short-term confrontation with Internet giants that have more advantages in technology, cost, and efficiency.
Under external pressure, Yonyou's transformation to a cloud service and software provider has not been smooth, and since 2020, revenue has stagnated and profits have fallen, and it is urgent to readjust its existing business model and strategic layout. In 2021, Wang Wenjing, who had already "retired", came out again to serve as the president of Yonyou Network.
Yonyou said that the personnel adjustment is to seize the strategic opportunity for the development of cloud service business of enterprises and public organizations. At the 2023 Global Business Innovation Conference, Wang Wenjing mentioned that services classified by industry are "particularly effective" and can effectively improve the level of digital innovation for customers.
As for the performance changes accompanied by organizational changes, Wang Wenjing believes that although the adjustment will affect the performance to a certain extent, the new organizational model can effectively boost the performance of contract signing. In addition, after the joint innovation of the industry's leading enterprises, Yonyou Network can quickly replicate its leading position to other industries, and the growth momentum is sustainable.
Third, the reform is completed, and the performance is expected to meet the inflection point
As of the end of 2023, Yonyou's cloud service business achieved revenue of 7.091 billion yuan, a year-on-year increase of 11.6%, accounting for about 72.4% of the company's total revenue; The cumulative number of paying customers of cloud services was 715,000, of which 633,000 were enterprise users, and the number of new paying customers of cloud services was 143,500, of which 130,000 were enterprise users.
From this perspective, after nearly five years of implementing the cloud service transformation strategy, Yonyou's cloud service business has shifted from quantitative to qualitative change, becoming the main driver of revenue growth. At the same time, the company's subsidiary, Chanjet, ranked first in the country in terms of market coverage in the field of financial cloud services for small and micro enterprises, and achieved a turnaround.
However, Bedo Finance combed through the financial reports of previous years and learned that the growth rate of Yonyou Network's cloud service business revenue from the large enterprise customer market is not very stable, after the revenue in 2022 is 4.393 billion yuan, achieving a growth of 17.6%, the corresponding business income from such customers in 2023 will be 4.731 billion yuan, a year-on-year increase of 7.7%, and the growth rate has slowed down significantly.
Not only that, the net cash flow generated by yonyou network's operating activities as of the end of the same period has fallen to a negative number, at -90.5015 million yuan. Prior to this, this indicator had declined for three consecutive years, narrowing from 1.613 billion yuan in 2020 to 1.304 billion yuan in 2021, and then plummeting to 286 million yuan in 2022.
However, according to Yonyou's latest performance report, the company's operating income in the first quarter of 2024 increased by 18.6% year-on-year to 1.749 billion yuan, mainly due to the 20% growth in business revenue of large enterprise customers, of which the cloud service business increased by 38.9% year-on-year.
Although Yonyou Network is still in the red, with net profit attributable to the parent company and net profit after deduction of non-profit attributable to the parent company of -453 million yuan and -451 million yuan respectively, its net profit after deducting non-profit actually decreased by 44.47 million yuan year-on-year, and the operating cost has been effectively controlled, narrowing by 10.7% year-on-year. The gross profit margin increased by 6.3 percentage points year-on-year, and the efficiency operation has achieved initial results.
It is worth noting that at the beginning of 2024, Wang Wenjing, who has been in the "line of fire" for less than three years, applied for resignation as president again, and the relevant positions were taken over by Chen Qiangbing. Tianfeng Securities pointed out in the research report that the adjustment of management means that UFIDA's high-intensity R&D and organizational strategy adjustment are expected to come to an end.
The management of Yonyou Network is also optimistic about its development in 2024, saying that it has in-depth insight into market demand and opportunities, and will make every effort to fight the performance offensive battle in the new year. A number of securities companies represented by Tianfeng Securities also gave the company a "buy" rating, believing that it is expected to usher in an inflection point in the statement.
The future development trend of Yonyou Network, Beduo Finance will also continue to pay attention.