Kingdee International: Lost in half a year and last year, how does the business model of frantically burning money continue

Kingdee International's loss in the first half of the year further expanded.

On July 15, Kingdee International issued a profit warning announcement that the loss in the first half of the year will be between RMB 347 million and 396 million; the revenue recorded in the first six months will beBetween RMB 2.153 billion and RMB 2.246 billion, an increase of approximately 15% to 20% year-on-year.Among them, the Group's cloud service business revenue increased by approximately 30% to 40% compared with the same period in 2021.

It has been 10 years since the company proposed "cloud transformation" in 2012.Kingdee is even more aggressive in "smashing" traditional businesses to show its determination to transform.In 2014, at a press conference of Kingdee, the founder of the company, Xu Shaochun, took a sledgehammer, smashed the server, and announced the establishment of the "ERP Cloud Service Division".What is the effect of the transformation in the past ten years?

Small, medium and micro customers don't make money?Continued loss of performance

Since the founders finished smashing the client server, Kingdee began to concentrate its strength and resources on cloud transformation. The proportion of cloud business in the company has increased year by year, and the proportion of revenue in 2021 will exceed 60%.

According to the 2021 financial report, the company achieved a total revenue of 4.174 billion yuan, a year-on-year increase of 24.4%.In terms of business segments, the cloud business continued to maintain rapid growth, achieving revenue of 2.758 billion yuan, a year-on-year increase of 44.2%, and the revenue share increased by 9.10 pct to 66.10% compared with 56.98% in the same period last year; since 2019, the proportion of cloud service business has continued to increase, a cumulative increase of 26.58 pct.The traditional business will achieve revenue of 1.416 billion yuan in 2021, a year-on-year decrease of 1.96%, and the revenue will account for 33.92%.

From the perspective of business structure, cloud business has become the company's core business.According to customer groups, the company's cloud business currently has three main products, namely Kingdee Cloud Skylight for large enterprises, Kingdee Cloud Starry Sky for medium-sized enterprises, and Kingdee Cloud Starlight for small and micro enterprises.

The company's basic business is still small, medium and micro customers.In 2021, the total revenue of Kingdee cloud business will be 2.758 billion yuan, of which the revenue of the two platforms, Sky and Star, will be 385 million and 1.418 billion respectively, and the revenue of small and medium-sized cloud products such as Star and Star will account for over 86%;There are 551, 25,400 and 11,000 contracted customers on the three platforms, Xingxing, Xingxing and Xingchen respectively.Therefore, from the perspective of revenue contribution ratio and the number of customers, small, medium and micro enterprises are still the main force of Kingdee cloud business.

Although the proportion of the company's cloud business revenue is increasing, the company's profitability is not optimistic with small, medium and micro customers as the mainstay.In recent years, there have been continuous losses, and there is an expanding trend.The data shows that in 2020 and 2021, the company's losses will be -335 million yuan and -302 million yuan, respectively.It is worth noting that the loss in the first half of this year may exceed that of last year, and the company's losses are further expanding.

High R&D capitalization ratio Aggressive accounting policies

Regarding the reasons for the loss of cloud service business, Kingdee International believes that: first, due to the SaaS business model (refer to the SaaS industry in the United States), the cloud service business requires a lot of pre-processing in the early stage.The fixed customer acquisition cost and R&D investment generate long-term sustainable recurring income and cash flow through customer subscription payment, as well as the scale effect of standard products, so as to achieve long-term sustainable profits; second, based on the digital transformation andLocalization replaces the superposition of double waves, which is caused by the increased investment in Kingdee Cloud·Sky and Xinghan products; third, Kingdee Cloud·Xingkong has achieved breakeven in 2019, and the profit margin has improved significantly in the first half of 2021.

In the past ten years, Kingdee's R&D investment has continued to increase, with a cumulative R&D investment of over 5 billion yuan in the past ten years.From 2012 to 2021, the R&D investment was 2.83