Where does iFly fly to?

iFlytek has become very popular recently and has become a leader in artificial intelligence. Let’s take a look at what iFlytek is capable of.

Let's first take a look at whether iFLYTEK is currently making money. The total pre-tax profit in 2016 is as follows:

560 million doesn’t seem bad. Let’s look at the picture below:

Of the total profit of 560 million, non-operating income was 191 million and investment income was 147 million. Check non-operating income:

Non-operating income is basically government subsidies.

Check investment income again:

Among the investment income, except for the top one: the long-term equity investment income of 12.23 million calculated under the equity method can be regarded as the income generated by the company's main business, the others are not related to the main business. And the big one is very confusing "through multiple transactions..." What kind of profit is realized and what is this?

To put it simply, this 116 million profit was generated like this:

iFlytek previously spent 21.74 million to buy some shares of Jiecheng Company, and then spent 101 million to buy more shares. Since the second purchase was more expensive, iFlytek said that it made a profit from the first purchase. How much did it make? It made 116 million. This is how the profit came from. This is the first time that Mr. Sun has seen such an easy way to "make money".

So, after deducting the above-mentioned irrelevant "profits" and retaining the investment income of 12 million, what is the actual "profit" generated by the business? There is still 236 million left.

236 million is not a small number, right? Let's take a look:

The following figure shows the intangible assets of iFLYTEK, which do not include the expenses of self-developed software but include them in intangible assets. The new amount in this period is as follows: 565 million minus 366 million, which is almost exactly 200 million.

The profit of 236 million minus the 200 million newly added software development intangible assets in this period, there is still 36 million left.

The amazing thing about iFLYTEK is that its development expenses are recorded in the balance sheet as two types of assets. The one above is an intangible asset, and it also has a development expense, as shown below:

Net increase in this period: 291 million - 255 million = 36 million

So: 36 million - 36 million = 0

It's amazing, the number is exactly equal to 0. As for the fact that iFLYTEK lists all the purchased books as fixed assets, we don't need to calculate it.

To summarize the above process:

iFLYTEK's pre-tax profit in 2016 was 561 million yuan, of which 190 million yuan was non-operating income mainly from government subsidies, and investment income was from "re-recording the less money spent on past acquisitions as 116 million yuan in profit". The 236 million yuan earned from the main business just came from the capitalized software development money, that is to say:

In 2016, iFLYTEK did not make a single cent of profit from its business.

After a lot of talk, we know that iFlytek has not made any money so far, but at least it has not lost money either. Not losing money is not bad for such a high-tech enterprise that belongs to the future. In fact, it is hard to say whether it has lost money or not, because: iFlytek's turnover of 3.32 billion in 2016, of which 1.37 billion has not been collected, plus 279 million from Shenma installment sales, that is to say, exactly 50% of iFlytek's turnover in 2016 has not been collected at all. So how much of these receivables will not be collected in the future? We can look at the historical collection status:

The upper part of the above table is the amount of accounts receivable of different ages, the lower part is the proportion of accounts receivable of corresponding ages that cannot be collected in this period, and the bottom yellow part is the proportion of accounts receivable that cannot be collected at all based on historical data to the annual turnover. The 0.05 above is the proportion of operating income from 4 years ago that has not been collected until now, and it was only 2% in the previous year.

According to the above figure, we can see that the proportion of money that iFlytek cannot collect is rising rapidly (comparison figures in the lower half of the above figure). According to the current proportion, the 1.37 billion yuan in payment that iFlytek did not collect in 2016 will not be less than: 13.7x0.34=460 million yuan in 2017, plus more than 200 million yuan in installments, which means that out of the 3.3 billion yuan in operating income of iFlytek in 2016, at least about 700 million yuan could not be collected by the end of 2017. These 700 million yuan in payment that had to be collected in 2018 were already recorded as profits in 2016.

But what if it doesn’t make money? Does Amazon’s failure to make money for many years mean that it is bad? Isn’t it ridiculous for a super leader in artificial intelligence to just look back at history? Isn’t it the most important thing to look to the future?

What I said makes a lot of sense. Although LeTV has been pushed down by everyone, how can iFlytek, a company that has won many international technology championships, be compared with LeTV, a middleman?

Let's take a look at what business iFLYTEK has done:

It may seem a bit confusing, but it doesn’t matter. Mr. Sun has reorganized it for you. iFLYTEK’s own classification is very confusing. Mr. Sun has reorganized it according to business type and customer type as follows:

According to Mr. Sun's analysis, iFLYTEK has 15 business dimensions, among which the largest one is "education", which accounts for 30% of the turnover. Many people may think that education is just one big business, but it is not. First of all, iFLYTEK is very strange that it has run a school, which belongs to the category of education. In terms of educational software, iFLYTEK has two completely different businesses, teaching and examination. According to common sense, the target customers of teaching are schools, while the target customers of examinations are obviously not determined by schools. Therefore, iFLYTEK's education sector is actually three unrelated businesses.

The second-ranked business is engineering, which accounted for 26% in 2016. Let's take a look at the specific situation of this business:

Let’s take a look at the description of this business in iFlytek’s 2008 financial statements when it first went public:

From the above two figures, we can see that information engineering is a long-term major business of iFLYTEK, accounting for 46% of the turnover when it was first listed, and it was still 26% in 2016. The gross profit of this business is very low, only a dozen percent. From the operating costs of this business, we can see that this so-called information engineering is a hardware-based system integration business, which obviously has nothing to do with iFLYTEK's core business. The main reason for retaining it and not giving it up should be: to supplement operating income.

iFLYTEK's operator business is the same as its education business, consisting of two unrelated businesses: one is for consumers, and the other is for operators.

The following public security and government smart cities are obviously two completely different businesses with completely different customers and products.

Then we come to corporate customers, call centers, automotive human-computer interaction, medical care... They all seem to be enterprise markets, but any of them has nothing to do with other things from customer positioning to product technology.

Everyone knows that iFlytek recently launched a translation machine, which has been very popular online. What’s even more amazing is that iFlytek also has a consumer-oriented hardware business!

As for advertising and Internet operations facing developers, they have nothing to do with any of the above businesses.

After reading about iFLYTEK's business, it is simply too amazing. From running schools to doing government projects, from taking exams to selling advertisements, from providing business analysis to operators to providing Internet platforms to developers, from selling artificial intelligence to hospitals to making electronic hardware for ordinary people... Regarding this omnipotent person, someone recently said something:

Of course, we are not the prodigy of USTC. What if Liu Qingfeng, the founder of iFLYTEK, is really that awesome? He can run 15 businesses without any back pain or breathlessness? Let's see what they think. The following is iFLYTEK's business plan for 2017:

Education, government, and consumers are all important, and other things must be done along the way. iFlytek itself knows that it can’t do everything well, and the medical and driving businesses are just for bragging. Let’s take a look at the revenue of the three pillars of iFlytek’s strategy in the past two years (the reason why only two years are summarized is that in iFlytek’s previous financial statements, the revenue of the last two pillars was mixed with other businesses, so the specific figures are unknown):

The three major players had a total turnover of 1.1 billion in 2016, up 29% from the previous year. The operating income of smart cities declined, and the turnover of smart hardware accounted for only 3% of the three major players. With Mr. Sun's many years of experience in the copycat electronics industry, iFLYTEK has no chance to gain attention for its so-called smart hardware except bragging. It seems that the only reliable player is education.

Let’s look at iFlytek’s acquisitions in recent years. Except for Ruiyuan, which is engaged in the operator business, the other three companies, Lezhixing, Jiecheng, and Qiming, are all engaged in the education industry. It can be seen that the carriage that iFlytek knows best is actually: education.

As an aside, please enlarge the above picture and take a closer look at the comparison between the performance promised by the acquired companies and the actual performance achieved, which is summarized by Mr. Sun. Taking Ruiyuan and Qiming, which have completed the performance commitment period, as examples, you will be surprised to find that the actual performance is so perfectly close to the promised performance. Even the owner of a small store may not be able to predict his own profits in the next three years to such an accurate degree. Everyone can interpret the meaning behind this behavior by themselves.

iFLYTEK disclosed the gross profit of three products in its 2016 annual report.

It can be seen that the gross profit of education is only 55.7%, which is much lower than the average gross profit of the software industry. If you think that you can have higher profits than the industry by labeling it as artificial intelligence, you can forget about it.

To sum up, let's roughly summarize iFLYTEK's business status:

Bragging with messy concepts like driving/medical care/safety/smart city, attracting attention with unreliable hardware such as translation machines, and filling performance with unprofitable system integration, the only thing that really bets on the future is: education.

Seeing this, Sun Laoshi thinks everyone should ask:

“Is iFlytek’s education industry, which has average gross profit margins, the most powerful artificial intelligence industry?”

Who knows what the future will be like? Let’s take a look at some of iFLYTEK’s patents in education, and perhaps we can get a glimpse of what iFLYTEK thinks the future of education will be like:

Seeing these patents, "concentration", "writing attitude".....Sun Laoshi couldn't help but wonder: The day iFlytek succeeds in Chinese education, will it be the day when Chinese primary and secondary school students are completely controlled mentally? Of course, this is just Sun Laoshi's fantasy, and it does not represent any reality.........

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.