Technology Author: Yingwei Fu Aug 29, 2020 12:53 PM (GMT+8)

... and its SaaS transition is adding more pressure to its operation.

EqualOcean

China’s biggest domestic ERP SaaS provider Yonyou (600588:SH) reported its 1H 2020 earnings. In the six-month period, the company recognized revenue CNY 2.95 billion with a YOY decrease of 10.95% and a net profit CNY 21.97 million.

In the first quarter, Yonyou made revenue of CNY 1.09 billion, with a YOY decrease of 13.06%. Apart from the pandemic impact, the cloud transition has also added financial pressure to the company.

Yonyou acquired ChanPay’s 55.82% stake in 2016 at CNY 196 million and planned to add another capital injection CNY 100 million. However, Yonyou announced that it canceled the capital increment plan in July 2020. Meanwhile, the company transferred all ChanPay’s share to its affiliated financial company Yonyou Ronglian.

The act of isolating financial business and ceding the investment brought the company’s focus on Software-as-a-Service (SaaS). The cloud business transition started in 2015 and the SaaS business share has been increasing at a high speed since the cloud blooming time began in the late 2010s.

The transition also eats into the company’s cashflows via data center construction, team expansion and research and development (R&D). Yonyou issued a CNY 6.4 billion private placement plan in June 2020. Over 70% of the private placement will be used to build YonBIP (Business Innovation Platform), 10% will be reserved for Nanchang data center development and the rest for financial liquidity.