On August 23, UFIDA Network released its 2024 semi-annual report. In the first half of this year, the company achieved a total operating revenue of RMB 3.81 billion, a year-on-year increase of 12.9%; the net loss attributable to shareholders of listed companies decreased by RMB 51 million year-on-year; the net loss after deducting non-recurring items attributable to shareholders of listed companies decreased by RMB 146 million year-on-year.

Earlier, UFIDA's subsidiary Changjetong, which focuses on small and micro-enterprises, released its 2024 semi-annual report, showing a significant year-on-year increase of 21% in operating revenue to RMB 453 million in the first half of the year, setting a new record for the company's semi-annual revenue. Additionally, UFIDA disclosed in its semi-annual report that Changjetong's cloud subscription revenue reached RMB 308 million, a year-on-year increase of 35%.

Currently, UFIDA's cloud transformation is entering the "results verification phase." Changjetong, which focuses on small and micro-enterprises, has taken the lead in achieving success in its cloud transformation, with the company's management clearly stating during the earnings conference that it will achieve profitability this year. This will mark Changjetong's second annual profit after 2023, signifying a phased victory in the company's cloud transformation.

UFIDA's cloud services business, with a broader business scope, is also making continuous breakthroughs. In the first half of the year, UFIDA's revenue from large enterprise customers amounted to RMB 2.388 billion, of which cloud service revenue was RMB 1.765 billion, accounting for 73.91% of total revenue. Revenue from medium-sized enterprise customers was RMB 600 million, of which cloud service revenue was RMB 429 million, accounting for 71.5% of total revenue. Based on mainland accounting standards, cloud service revenue from small and micro-enterprises (Changjetong) accounted for 67.76% of total revenue.

In the same period last year, cloud service revenue accounted for 70.39%, 55.6%, and 60.58% of total revenue from large, medium, and small/micro enterprises, respectively. In other words, the proportion of cloud service revenue is increasing across all business segments, including large, medium, and small/micro enterprises.

In the first half of this year, UFIDA's gross margin reached 52.5%, an increase of 3.6 percentage points year-on-year; the second-quarter gross margin reached 54%, an increase of 3.2 percentage points from the previous quarter. At the same time, UFIDA's R&D expense ratio, sales expense ratio, and management expense ratio decreased by 2.1, 2.02, and 0.25 percentage points, respectively, year-on-year.

From various financial indicators, UFIDA's operational efficiency has significantly improved. It is understood that "comprehensive efficiency-driven operations" has become UFIDA's annual guideline for 2024. The company will continue to control costs and expenses while maintaining revenue growth to enhance operational quality.

After years of intense R&D investment, UFIDA's flagship products such as YonBIP and YonSuite have matured, with BIP products now capable of serving both small and medium-sized enterprises and large enterprises with a single codebase, enabling seamless usage and switching. Currently, the enterprise services market's acceptance of cloud services has significantly increased. It can be said that UFIDA's cloud transformation is entering the "harvest season."

UFIDA BIP on the Fast Track of Intelligence

UFIDA BIP is a platform-based, ecological cloud service group that UFIDA began building in 2017. It is also UFIDA's flagship product for large and medium-sized customers.

From both a technical and application perspective, UFIDA BIP can be considered the most powerful cloud service platform in the domestic enterprise services sector. A large number of state-owned enterprises and leading private enterprises use UFIDA BIP services, earning it the reputation as a "heavyweight" in the digital transformation of Chinese enterprises in the digital economy era.

UFIDA BIP continues to iterate. In August this year, the latest version of UFIDA BIP3 R6 was released, achieving six major technological breakthroughs and innovations in application architecture and service offerings.

According to official data, the number of application services for the new version of UFIDA BIP has increased to 564, with the number of intelligent services growing to 108 and data services to 50, marking a significant upgrade in intelligent and data service capabilities.

UFIDA BIP not only offers a wider range of applications but also boasts more powerful performance. Through innovative technologies, it achieves a 50% reduction in resource consumption, a 30% savings in operation and maintenance costs, and intelligent accounting that supports billions of transaction entries. Its multidimensional database can quickly merge hundreds of billions of main and subsidiary table data, and its multidimensional engine can process over 1 million calculation rules per minute, all while ensuring 100% autonomy, safety, and controllability.

Meanwhile, the enterprise service large model YonGPT has also been upgraded to version 2.0. With YonGPT 2.0, YonBIP boasts three key AI functions: "ZhiYou" (Intelligent Assistant), "Digital Intelligence Employee," and "Intelligent Search."

"ZhiYou" can be simply understood as an intelligent assistant for enterprise users. Users can complete business operations such as enterprise operation insights, contract risk audits, intelligent report generation, knowledge search, and recommendations through simple conversations with "ZhiYou."

"Digital Intelligence Employee" is a virtual employee with professional skills, possessing an avatar, voice, name, and user identity. It can undertake work within its area of expertise, including roles such as tax risk compliance officer, procurement compliance officer, contract review assistant, and customer service assistant, significantly reducing operational costs and improving efficiency.

"Intelligent Search" is a new application in YonBIP, providing enterprises with innovative knowledge management solutions based on YonGPT, including a document library, search, and intelligent Q&A. It enables knowledge access throughout business processes. For enterprises with large amounts of dispersed, unstructured private data, "Intelligent Search" helps build virtual knowledge bases, enabling rapid indexing and precise location of multiple types of data, facilitating knowledge transfer and scientific decision-making.

Currently, a large number of enterprises are already using services based on YonGPT. For example, China Minmetals has created a financial "Digital Intelligence Employee," reducing the time required for a task that previously took 180 minutes to just 1 minute, significantly improving efficiency while standardizing, detailing, and refining financial operations.

Shenzhen Far East Digital Intelligence uses "Intelligent Search" to intelligently search through massive bidding documents and rapidly generate intelligent bidding proposals. It has also built a new large model search portal, providing each user with rapid document retrieval capabilities and knowledge graph functionality alongside question-and-answer retrieval.

UFIDA Network Chairman and CEO Wang Wenjing believes that AI technology has progressed through three levels: perceptual, cognitive, and wisdom-level. At the enterprise application level, AI primarily serves four directions: intelligent business operations, natural human-computer interaction, intelligent knowledge generation, and semantic application generation.

During an investor open day event held in May this year, UFIDA management mentioned that data services and intelligent services would be the key directions for UFIDA BIP product innovation.

AI technology and functional innovations based on it enhance customer experience and create value for customers by reducing costs and improving efficiency. At the same time, they also contribute incremental revenue to UFIDA.

Overseas Markets Offer New Growth Opportunities

Apart from intelligence, globalization is another new opportunity facing Chinese software enterprises.

UFIDA's globalization strategy encompasses two parts: accompanying Chinese enterprises in their overseas expansion and serving local enterprises overseas. In particular, the enthusiasm for Chinese enterprises expanding overseas has surged in recent years.

According to Bain & Company, Chinese outbound investment increased by 11.4% year-on-year in 2023, with the number of non-financial outbound investment enterprises growing by 23.1%.

According to UFIDA management, Chinese enterprises expanding overseas have exhibited a trend from manufacturing and supply chain expansion to global operations. This trend has placed higher demands on enterprise service software.

A typical example is Rifeng Pipe Industry, which adopted UFIDA BIP's SaaS suite to quickly build and operate an integrated digital and intelligent platform for nearly 20 overseas companies, at a rate of one country company every three weeks, enabling efficient and low-cost global operations.

UFIDA began expanding its overseas market in 2003, establishing its overseas headquarters in Hong Kong, China, and completing its overseas business layout in Hong Kong, Macao, Taiwan, Southeast Asia, EMEA (Europe, Middle East, and Africa) by 2011.

Last May, UFIDA announced the launch of its Globalization 2.0 strategy, further deepening its presence in the Southeast Asian market while expanding into Europe, North America, Japan, and the Middle East, with plans to cover more than 100 countries within three years.

To date, UFIDA has 12 overseas branches, serving over 100 countries or regions, with a cumulative delivery of services to more than 1,000 overseas customers. Among them, 60% are local enterprises, and 40% are Chinese enterprises expanding overseas.

In recent years, UFIDA's overseas business has grown rapidly. From 2017 to 2023, the company's overseas revenue grew at a compound annual growth rate of 19.9%, significantly higher than the domestic growth rate of 7.3% over the same period.

China's Software Development Path: Standard Products + Professional Services

Over the past decade, the United States has seen the emergence of SaaS enterprises like Salesforce with market values exceeding USD 100 billion, while the market values of leading Chinese software enterprises are currently less than RMB 100 billion.

There are many reasons for this, but one significant factor is the relatively low cost of IT labor, which has prompted many companies to develop software through in-house development or outsourcing, resulting in many Chinese software companies operating primarily on a project-based model.

This has led to low profit margins and difficulties in profitability for Chinese software companies. It has also resulted in software products with limited functionality, poor flexibility, and difficulty in iteration. From a societal perspective, the repeated development of similar software functionalities represents a significant waste of resources.

It is reported that the practice of fully customized development to meet individual customer needs has proven unsuccessful in Japan, where large enterprises primarily use products from international vendors.

UFIDA has adhered to the development path of "Standard Products + Professional Services" for many years. UFIDA management has repeatedly emphasized that this model benefits the overall development of industrial products and enables customers to achieve a higher return on investment and lower costs when using enterprise software.

In the AI era, enterprise management software demands increasingly sophisticated underlying capabilities, such as large model investments and substantial data volume increases, making independent software development technically and financially challenging.

In terms of professional services, in addition to its in-house development team, UFIDA continues to promote ecosystem development. To date, UFIDA BIP boasts 3,680 ISV partners, 413 professional service partners, 4,508 certified consultants, over 310 ecological solutions, 1.155 million registered developers, and collaborations with 5,600 educational institutions for digital and intelligent teaching and education, providing customers with professional, convenient, and scalable digital and intelligent services.

After years of market investment, UFIDA has accumulated a significant number of high-quality customers. At the end of June this year, UFIDA's contract liabilities reached RMB 2.663 billion, of which subscription-related contract liabilities amounted to RMB 1.95 billion, an increase of 33.8% from the end of the first half of last year, accounting for 68.6% of total contract liabilities.

In the short term, there is an abundant backlog of orders. In the long term, after years of product and technology refinement, UFIDA is entering its "harvest season."

According to Gartner research, UFIDA is the only Asian-Pacific vendor among the top 10 in the global high-productivity aPaaS market, global ERP SaaS market, and global financial management systems (FMS) market. IDC data shows that UFIDA ranks first in market share for aPaaS and enterprise application SaaS in China and has consistently maintained the top market share position in the Chinese market for hyper-scale and large enterprise application SaaS for multiple consecutive years.

In May this year, UFIDA management stated that UFIDA's goal is to become a top three global provider of digital and intelligent software and services. While there is still a long way to go before achieving this goal, UFIDA, as the leading Chinese enterprise software provider, is steadily moving towards it, supported by factors such as localization, intelligence, and globalization.

The content and opinions expressed in this article are for reference only and do not constitute investment advice. Investment involves risks, and decisions should be made cautiously.