SenseTime Group (20) H2 2023 earnings summary

Executive summary

• FY2023 revenue fell 10.6% to RMB3,405.8m; Generative AI revenue rose 199.9% to RMB1,183.7m, or 34.8% of revenue, while Traditional AI contracted.

• Gross profit declined 41.0% and net loss widened to RMB6,494.7m; FY2024 priorities included growth, technology leadership and improving profitability in core businesses.

Financial highlights

• Revenue was RMB3,405.8m in FY2023 versus RMB3,808.5m in FY2022; cost of sales rose 50.5% to RMB1,905.1m.

• Gross profit fell 41.0% to RMB1,500.8m and gross margin declined to 44.1% from 66.8%, reflecting higher hardware and AIDC-related costs.

• Operating loss was RMB6,646.6m versus RMB6,528.3m; net loss was RMB6,494.7m versus RMB6,093.0m.

• EBITDA loss narrowed 2.2% to RMB5,449.6m; adjusted EBITDA loss was RMB4,369.0m versus RMB4,213.4m, and adjusted net loss was RMB5,414.1m versus RMB4,736.2m.

• Operating expenses including share-based compensation declined 10.6% to RMB5,795.4m; R&D expenses fell 13.7% to RMB3,465.8m.

Outlook and guidance

• FY2024 priorities included expanding AI computing capacity, iterating SenseNova models, improving inference efficiency, accelerating Generative AI commercialization and improving cash flow.

• SenseNova 5.0 was expected in April 2024, with a million-word context and capabilities targeted to match GPT-4-turbo and GPT-4V.

• Computing network nodes were planned to expand in 2024, alongside urban NOA mass production.

• Priorities included focusing resources on Generative AI, incubating or spinning off non-core businesses, reducing losses and maintaining steady Traditional AI growth.