AsiaIndustrial NetNews: Artificial intelligence is being hyped by the market, and the “popular fried chicken” is none other than iFlytek.
On March 21, iFLYTEK, which claims to be the “leader of the domestic intelligent voice and artificial intelligence industry”, released its 2016 annual report. The “Daily Economic News” reporter found that, on the one hand, the “artificial intelligence” in the 192-page report The keyword appears more than 100 times, reflecting the company’s emphasis on “artificial intelligence”. In 2016, the company achieved operating income of 3.320 billion yuan, a year-on-year increase of 32.78%; net profit of 484 million yuan, a year-on-year increase of 13.90%. However, the reporter of “Daily Economic News” found that on the other side of the popularity of “artificial intelligence”, in 2016, government subsidies and the acquisition of iFLYTEK became the investment income generated by the consolidation, and contributed more than half of the profits to iFLYTEK.
In terms of products, the top three in terms of revenue are education products and services (27.44%), information engineering (25.07%) and telecom value-added product operations (12.17%). To a certain extent, iFLYTEK is still an enterprise mainly engaged in software products, services and system integration. However, since the listing, part of iFLYTEK’s annual net profit comes from government subsidies. From 2008 to 2016, the company’s net profit totaled 2.134 billion yuan, of which more than 1/4 came from government subsidies.
Regarding government subsidies, iFLYTEK said in an interview with the “Daily Economic News” reporter that iFLYTEK has maintained a normal profit status since its listing, and its performance has grown steadily year by year. In 2016, the investment in R&D was 709 million yuan, and R&D accounted for 21.36% of the operating income. In 2016, the government subsidized 128 million yuan, and the subsidy accounted for 3.86% of the operating income, which has been declining year by year in recent years.
In an interview with the “Daily Economic News” reporter, Yuan Xiaoyu, the TMT research team of Huaan Securities, believed that the advantages of iFLYTEK mainly lie in technology and services. Because it is not an Internet company in the pure sense, it does not have obvious advantages in the C-side. Although the number of users is large, the portion that can be monetized is small. iFLYTEK’s focus is mainly on the B-side to drive the C-side, such as Zhixue.com from the government to schools and then to students and parents. Therefore, if the C-side wants to really increase the volume, it depends on educational products.
Education product revenue accounts for nearly 30%
As the first voice technology listed company in China, iFLYTEK’s market value has risen from more than 3 billion yuan at the beginning of its listing in 2008 to about 48 billion yuan at present, and is regarded as a leading company in A-share artificial intelligence concept stocks.
In February this year, a New York Times report on artificial intelligence in China and the United States also cited iFlytek as a case, saying that it is an artificial intelligence company focusing on speech recognition and natural language understanding, and its expertise in speech synthesis and Chinese and English He has won laurels in international competitions for translation and other technologies.
However, the 2016 annual report released by iFLYTEK did not see the specific contribution of artificial intelligence to profits. The data shows that government subsidies and iFLYTEK have both contributed to the investment income generated by the consolidation, and contributed more than half of the profits in 2016.
At the same time, iFLYTEK’s net profit attributable to the parent company in 2016 was 255 million yuan, a year-on-year decrease of 19.32%. In this regard, iFLYTEK responded to the reporter of “Daily Economic News” on the evening of March 25, saying that in 2016, the company increased R&D investment and marketing efforts to make reserves for future development, and R&D expenses and sales expenses increased accordingly. To a certain extent, it has affected the growth of short-term profits.
Yuan Xiaoyu believes that iFLYTEK’s net profit decline is mainly due to higher expenses. In 2016, iFLYTEK’s sales expenses increased by 72.78% year-on-year, and management expenses increased by 29.03% year-on-year.
The reporter of “Daily Economic News” analyzed its main business structure and found that in 2016, iFLYTEK’s main business categories were divided into software and information technology services, education and teaching, with revenue of 3.195 billion yuan and 114 million yuan respectively. , accounting for 96.23% and 3.42% of the revenue, respectively, an increase of 33.10% and 22.09% year-on-year;
In terms of products, the 2016 annual report shows that according to the proportion of revenue, the top three products are education products and services in the category of education industry products and services (27.44%), and information engineering in the category of system integration (25.07%). ), the operation of telecom value-added products in the category of Internet products and value-added operations (12.17%);
According to the year-on-year increase in revenue, the top three products are big data advertising platform (569.35%), intelligent hardware products (335.05%) and public safety industry products (99.28%), but the corresponding revenue ratios of the three products are respectively Only 2.67%, 1.06% and 7.32%. In addition, such as Internet operation services, although revenue increased by 50.59% year-on-year, revenue accounted for only 0.23% (0.20% in the previous year).
To a certain extent, these data show that iFLYTEK is still an enterprise mainly engaged in software products, services and system integration, and its main direction is education informatization.
Yuan Xiaoyu told reporters that education is an entry point for iFLYTEK to develop artificial intelligence, and the company has accumulated in this industry for about 10 years. In the future, the implementation of the field of medical intelligent diagnosis may gradually catch up, but now, it is education that can create revenue and profits in the short term. At present, education products account for nearly 30% of revenue. The 2016 annual report also shows that, in terms of products, education industry products and services account for 30.86% of revenue.
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At the 2016 online performance briefing, Liu Qingfeng, chairman and president of iFLYTEK, said that iFLYTEK’s R&D investment accounted for more than 20% of sales revenue for many years, and the main R&D direction was the core technology research in the field of artificial intelligence and the development of education, wisdom Artificial intelligence application development in cities, consumer products, public safety, smart cars, call centers, etc. In iFLYTEK’s AI (artificial intelligence) strategy, the education industry has formed a large-scale layout, which will form an important contribution to the company’s profit growth.
Company: The proportion of subsidies in revenue is declining year by year
The reporter of “Daily Economic News” further compared the financial reports over the years and found that from its listing in 2008 to 2016, iFLYTEK’s revenue and net profit both maintained double-digit year-on-year growth. Among them, in terms of revenue, the year-on-year growth rates from 2010, 2012, 2013 to 2015 were all over 40%; in terms of net profit, the year-on-year growth rates from 2008, 2011, 2012 to 2014 were all over 30%. In 2015, its net profit recorded the lowest year-on-year growth since its IPO, falling to 12.09% from 36% the previous year. The year-on-year growth rate of net profit in 2016 remained low at 13.90%.
At the same time, from 2008 to 2016, iFLYTEK achieved a cumulative net profit of 2.134 billion yuan, of which more than 1/4 (26.71%) came from government subsidies, and the government subsidies it received in recent years have generally been on the rise. The government subsidies received included in the current profits and losses were 11.8686 million yuan, 21.1763 million yuan, 18.9399 million yuan, 36.2401 million yuan, 61.0984 million yuan, 81.982 million yuan, 101 million yuan, 110 million yuan and 128 million yuan.
Regarding the long-term contribution of government subsidies to net profit, iFLYTEK said in an interview with a reporter from “Daily Economic News”, “Since its listing, iFLYTEK has maintained a normal profit status, and its performance has grown steadily year by year. In 2016, the year-on-year revenue increased by 32.78% over 3.3 billion, after-tax profit of 497 million, R&D investment of 709 million, and R&D accounting for 21.36% of operating income. In 2016, the government subsidy was 128 million, and subsidies accounted for 3.86% of operating income, and the proportion has declined year by year in recent years. Due to the rapid replacement characteristics of the technology industry, many former high-tech industry giants are short-lived, and research and development, especially the research and development of core technologies, is the foundation for technology companies to maintain long-term competitiveness and build long-term profitability.”
The company said that its R&D investment accounted for more than 21%, far exceeding the industry average. In addition, in the key application fields of artificial intelligence such as education, it adopted the innovative model of “free application promotion + value-added operation services”, and actively carried out market occupation layout. . Affected by the increased investment in research and development and the national free distribution of some products, although it has a certain impact on short-term performance, the increased investment has formed a strong guarantee for the company’s core competitiveness and future profitability. The most important thing for iFLYTEK at present is not how to compress investment, but in the strategic opportunity window period of artificial intelligence, dare to invest heavily in the research and development of core technology products, dare to invest heavily in product layout and promotion, and make efforts for a larger outbreak in the future. ready.
In an interview with the “Daily Economic News” reporter, Yuan Xiaoyu believed that “the subsidy should be sustainable, because iFLYTEK has done many government projects, and also opened a school in Wuhu. The subsidy for this school for one year is roughly 100%. 30 million yuan is still relatively (fixed).”
In her opinion, the amount of government subsidies received by the company has been rising in recent years because iFLYTEK has more businesses. However, although the absolute value of subsidies may rise in the later period, the proportion will continue to decline. At the same time, Xunfei Jicheng is a one-time change in fair value caused by consolidation. This income is unsustainable and may be an important reason why the overall profit of iFLYTEK in 2017 is difficult to increase significantly.
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