Visual China.
Blue Whale financial reporter Wang Jianwen.
On the evening of January 9, iFLYTEK announced that it would spin off its subsidiary iFLYTEK Medical to be listed on the Hong Kong Stock Exchange.
iFLYTEK is one of the few AI companies in China that can achieve profitability. In recent years, affected by factors such as the decline in the gross profit margin of the main business and the large-scale investment in the research and development of large-scale model projects, the company's net profit level has gradually decreased, and the debt pressure has also increased. In this context, iFLYTEK threw out the spin-off plan, not only to promote the further development of the subsidiary, but also to reduce its own financial burden.
iFLYTEK Medical was spun off and listed, and the latter's performance reported a loss.
On the evening of January 9, iFLYTEK announced that it would spin off its holding subsidiary, iFLYTEK Medical, to be listed on the main board of the Hong Kong Stock Exchange. After the completion of this spin-off, iFLYTEK will still maintain control of iFLYTEK Medical.
Founded in 1999, iFLYTEK is an intelligent voice and artificial intelligence company. At present, iFLYTEK's main business covers education, healthcare, smart city, digital and intelligent transformation of enterprises, and other aspects.
As a subsidiary of iFLYTEK, iFLYTEK Medical has also "inherited" iFLYTEK's AI genes. According to the official website, iFLYTEK Medical was established in 2016 and mainly relies on artificial intelligence technology related to the medical industry to carry out AI medical guidance, voice electronic medical records, image recognition, auxiliary diagnosis and other businesses.
From the perspective of equity structure, at present, iFLYTEK holds 5247% of the shares. In addition, the shareholders of iFLYTEK Medical also include well-known investment institutions such as China Merchants Capital, Tianzhi Investment, and Guoke Ruihua.
However, in recent years, although iFLYTEK Medical's operating income has continued to grow, its net profit has declined. According to the announcement, from 2020 to 2022, iFLYTEK Medical's operating income will be 32.1 billion yuan, 35.6 billion yuan, 49.4 billion yuan, and the net profit attributable to the parent company was 00.8 billion yuan, -08 billion yuan, -20.4 billion yuan.
On why the company fell into losses and how to improve profitability in the future, Blue Whale Finance also sent an interview letter to iFLYTEK, but has not received a reply as of press time.
For AI-enabled smart healthcare companies, achieving profitability is a practical problem that all enterprises have to face.
For example, YITU Healthcare, which was established by YITU Technology, one of the "AI Four Dragons", focuses on intelligent imaging-assisted diagnosis and treatment. However, due to continuous losses, in 2021, YITU Technology gave YITU Medical** to another medical AI company, Shenrui Medical. In addition, AI medical imaging company Eagle Eye Technology has also continued to record losses since its listing in 2021.
One of the reasons for the general loss of companies in the industry is that the relevant market is still immature. According to Frost & Sullivan data, even the more mature AI image-assisted diagnosis and treatment market in AI diagnosis and treatment will only have a market size of about 19 in 2023500 million RMB.
In order to improve the accuracy and practicability of AI products, companies in the industry also need to invest a lot of R&D funds to continuously upgrade and iterate their products.
In the announcement released by iFLYTEK, the company also said that the R&D and deployment in the field of artificial intelligence often require large-scale capital investment. With the continuous evolution of technology and the continuous change of downstream demand, iFLYTEK Medical may face high capital expenditure pressure in technology research, talent training and the purchase of hardware facilities.
Heavy bets on large models, debt ratios climb.
As a leading AI company in China, iFLYTEK is one of the few companies that can rely on AI model products to achieve profitability. However, in recent years, iFLYTEK's net profit has shown a downward trend.
In 2021, 2022 and the first three quarters of 2023, iFLYTEK's operating income will be 1831.4 billion yuan, 1882 billion yuan, 126$1.4 billion; The net profit was 161.1 billion yuan, 49.9 billion yuan, 04.5 billion yuan.
Behind the decline in net profit is the continuous decline in the gross profit margin of iFLYTEK. In the first three quarters of 2021, 2022 and 2023, the comprehensive gross profit margin of iFLYTEK's main business was .35%。During the same period, the gross profit margins of the company's main business education products and services were .64%, which is also declining.
In addition, in the third quarter report of 2023, iFLYTEK also said that the decline in the company's net profit was due to increased investment in general artificial intelligence cognitive large models. According to the financial report, in 2021 and 2022, the company's R&D investment will be 293.6 billion yuan, 395.5 billion yuan, accounting for 1603% to 1783%。
Under the influence of the above factors, iFLYTEK's debt level has also continued to rise.
Wind data shows that in the first three quarters of 2021, 2022 and 2023, iFLYTEK's asset-liability ratio will be ., respectively52%, while the cash-to-short-debt ratio was .81。
"Large model" is a track that iFLYTEK has bet heavily on in recent years. With the popularity of ChatGPT, technology companies such as Alibaba, and Huawei have begun to lay out large models. In May 2023, iFLYTEK also launched the iFLYTEK Xinghuo cognitive model.
At the Global 1024 Developer Festival held in October 2023, Liu Qingfeng, chairman of iFLYTEK, further said that the training of the Xinghuo large model with larger parameters and scales against GPT-4 was officially launched, and GPT-4 will be benchmarked in the first half of 2024.
However, it is still unknown whether the large model can bring new growth momentum to iFLYTEK. The company's semi-annual report disclosed that after the release of the Spark model, from May to June 2023, the company's C-end hardware GMV hit a record high, doubling year-on-year. Taking the learning machine as an example, in May and June, the GMV of the learning machine increased by 136% and 217% year-on-year respectively after the blessing of the large model; iFLYTEK AI hardware sales increased by 125% year-on-year during the "618" period. But even so, in the first half of 2023, the company's revenue fell by 2 year-on-year26%。
Or because of this, before the results are implemented, iFLYTEK chooses to reduce financial pressure by spinning off its subsidiaries. For listed companies, the spin-off of subsidiaries can not only allow enterprises to better focus on their main business, but also allow subsidiaries to obtain more funds and resources, reduce the difficulty of follow-up financing, and reduce the financing pressure of the parent company.
In the announcement, iFLYTEK also said frankly that after the spin-off and listing of iFLYTEK Medical, it will be able to use the capital market to independently carry out equity and debt financing to meet the capital needs of continuous R&D investment and market expansion, reduce the company's financial burden, and also enable the company to allocate more resources to general model research and development and other strategic emerging directions in the future.