Terminus CEO Ai Yu set up a flag four months ago, "maybe there will be good news announced soon." Half a month ago, the "good news" finally surfaced, another round of financing was completed, and today's "better" news is coming again - Terminus is going to IPO.
According to China Investment, on September 26, "Chongqing Terminus Smart Technology Co., Ltd." submitted a prospectus to the Hong Kong Stock Exchange, and China Investment Network learned that according to investment bank insiders, the market value before the issuance may exceed 35 billion Hong Kong dollars.
Half a month ago, it was disclosed that Terminus was one of the new financings after the D round of 2 billion financing in April this year, and the investor was the Hong Kong listed company Meigaoyu Group, with an amount of 50 million yuan. It is worth noting that the price of this investment in Terminus is 20 yuan per share, with a valuation of about 21 billion yuan, and the prospectus shows that the price of this financing is actually the same as the D series financing that began to be subscribed in May 2022, but it has only been completed recently, and the valuation of this submission may rise sharply.
Therefore, the reason why investors pay attention to IPO is, of course, because this is the most important exit channel for domestic VC/PE, through IPO to find out the current water temperature of the secondary market, the final pricing of enterprises, can also reflect the market's recognition of the industry, track, and the most important thing is to adjust their own and the boss's expectations through these performances. It should be said that IPOs are a "barometer" that is more sensitive than the performance of secondary market indexes.
As a rule, let's first introduce the returns of major investors if Terminus is successfully listed. I don't know, some institutions may achieve a return of more than 80 times.
A return on investment of 80 times
Since its establishment in 2015, Terminus has conducted a total of 9 rounds of financing, attracting investment from VC/PE, strategic investment or financial investment companies or individuals, as well as artificial intelligence, such as Everbright, CITIC Industrial Capital, iFLYTEK, JD.com, Gemdale Group, Heavy Science and Technology Investment, Shenzhen Futian, Nanchang Wanglong, Xuzhou Zhenxin, and Yuyao Yangming. The total financing scale exceeded RMB 5 billion.
In the 9 years since its establishment, Terminus has left-handed capital and right-handed AI, in addition to encountering a lot of ups and downs during the epidemic, it can be said that it has developed smoothly, and as an important institutional investor in the angel round, it is worth mentioning that Everbright Harmony is worth mentioning.
CEL Harmony holds an 11.93% stake in Terminus. Based on the post-issuance market value of HK$35 billion, the value of these shares will exceed HK$4.17 billion, which will be more than 80 times higher than its investment of more than 4,600 yuan in the angel round. Even according to the investment that was settled more than ten days ago, the valuation of 21 billion yuan has already exceeded 45 times.
What about the returns of the "other investors" other than the two investors mentioned above?
For example, in the B1 round in 2017, SenseTime invested 100 million yuan in Terminus, accounting for 3% of the pre-IPO shareholding, and based on the valuation of 21 billion yuan in the D series round of Terminus, the shares held by SenseTime before the listing were worth about 630 million yuan. Based on the market value of HK$35 billion before the issuance, the market value of the shareholding is expected to be HK$1.05 billion, which may achieve a gain of about 9 times.
For another example, JD.com led the C-1 round of financing of Terminus. At that time, JD.com injected a total of 300 million yuan into Terminus, accounting for 3.07% of the pre-IPO ratio.
Before the listing, based on the market value of HK$35 billion before the issuance, the market value of the holding will exceed HK$1.07 billion, or more than 3 times the income.
It is expected to achieve a U-shaped curve
According to CIC, Terminus is the fifth-largest OS-based AIoT solution provider in China by revenue. The top four are two state-owned telecommunications companies, Huawei and Alibaba. According to the prospectus, during the reporting period (2021, 2022, and 2023), Terminus's operating income was 1.206 billion, 738 million, and 1.006 billion respectively.
It can be clearly seen that Terminus's revenue stayed in the range of 1 billion yuan during the reporting period, which shows that it has encountered a lot of challenges in the past three years, especially in 2022, due to the epidemic, which delayed product delivery and caused a significant decline in revenue. However, fortunately, in 2024, from the perspective of "loss reduction", "orders in hand" and "going overseas", Terminus is expected to shape a "U-shaped" curve and return to the track of growth.
During the reporting period, Terminus lost 2.828 billion yuan, 2.387 billion yuan and 802 million yuan respectively. Like most VC-backed IPO companies, most of them are fair value losses on preferred shares, which will not affect the actual operation of the company; From the perspective of adjusted net loss, from 2021 to 2023, they will be 639 million yuan, 983 million yuan, and 600 million yuan respectively, except for the impact of the epidemic in 2022, the narrowing trend is more obvious.
If the loss reduction can prove that the quality of Terminus is gradually improving, then the amount of orders in hand reaching 2 billion yuan is the basis for Terminus to hand over a better report card this year. The figure of 2 billion is more than twice the average annual revenue of Terminus during the reporting period, and the only way to achieve rapid growth is to improve delivery capacity and speed.
At present, Terminus focuses on four major directions: digital intelligence of AI industry, AI city intelligence, AI smart life, and AI smart energy. Among them, the digital intelligence of the AI industry and the intelligence of AI cities have always been the company's main sources of revenue: in 2022, the sub-revenue accounted for 64% and 20.7% of the total revenue, respectively; In 2023, it will be 62% and 22.3%. In 2023, the revenue of digital intelligence in the AI industry and AI city intelligence will increase by 32% and 47% year-on-year. At the same time, the revenue of the AI smart energy segment increased by 151% year-on-year.
At the overseas level, Terminus' prospectus shows that it is "the first to expand internationally among its AIoT peers in Asia". At present, Terminus has set up an international headquarters in the U.A.E. led by Chief Scientist Dr. Shao Ling. As of the end of the first quarter of this year, Terminus' AIoT products have been adopted by overseas customers from the United Arab Emirates, Qatar, Singapore, Australia and Zimbabwe, such as Mubadala's technology platform Injazat and Singapore's Punggol Digital Smart Park.
According to the prospectus, part of the funds obtained from the IPO will be used to expand overseas layout, which shows the importance that Terminus attaches to going overseas, and has previously said that based on the overseas business headquarters established in Dubai, the company is expected to strategically expand to key overseas markets such as the Middle East, Southeast Asia and Australia.
Step on a trillion-dollar track
On the whole, Terminus's financial data is not very impressive, but it is better than the rules and regulations of the prospectus, and the disclosure is very clear. However, what I am most curious about is whether it is necessary for Terminus to specifically mention that it is "the fifth largest operating system AIoT solution provider in China"?
After reading the prospectus, I came to the conclusion that it was really necessary. According to the prospectus, Terminus is positioned as a "pioneer and leader in China's public domain AIoT industry", and its main product, AIoT operating system TacOS, provides full-stack AIoT products (software, hardware, and services) to enterprises and public managers.
AIoT stands for AI+IoT (Artificial Intelligence Internet of Things), and AIoT and large models are rapidly integrating to promote the implementation of better scenarios for large models. According to CIC, the revenue of China's AIoT market is expected to grow from 821 billion yuan in 2023 to 1,393 billion yuan in 2028, with a compound annual growth rate of 11.1%. Among them, the market size of public domain AIoT will increase from 408 billion yuan in 2023 to 744 billion yuan in 2028, with a compound annual growth rate of 12.8%.
2015-2016: In the AIoT 1.0 era, we built intelligent infrastructure for customers.
2016-2019: Provide an end-to-end AIoT 2.0 era for personal scenario development
2020-2022: Launched Terminus Smart City Operating System and launched multiple AI CITY projects.
2023-present: With large model capabilities and TacOS, the AIoT 4.0 era will be opened.
With an expected market size of trillions, even the seemingly fine-grained "operating system-based AIoT solution provider" will be a huge market, and the competition is bound to be extremely fierce. It is no wonder that the second article of the risk warning in the prospectus mentions that "China's public domain AIoT industry is highly competitive". In order to survive and develop, enterprises are bound to have irreplaceable advantages and resources in products, industries, and scenarios.
As mentioned above, Terminus is currently focusing on four AIoT application scenarios, namely "AI Industry Digital Intelligence", "AI City Intelligence", "AI Smart Life" and "AI Smart Energy", accounting for 62%, 22.3%, 7.6% and 8.1% of revenue in 2023, respectively. Supporting these four scenarios is Terminus' core product, the TacOS operating system.
According to CIC, TacOS is one of the first public domain AIoT operating systems in Asia to support full-scenario applications in the public domain. "TacOS adopts a hierarchical design, which can not only be deployed on the overall platform, but also flexibly deployed with the componentization and modularization of each subsystem to achieve the large-scale implementation of the platform. The overall technical architecture of TacOS consists of five layers, namely intelligent computing Internet of Things, global digitalization, general agents, full-scenario applications, and developer platforms. ”
As of the first quarter of 2024, Terminus products, including TacOS, have been deployed by more than 800 customers in 150 cities around the world, and there are many benchmark projects, such as the 2020 Dubai World Expo, Shenzhen Qianhai City Smart Brain, Loncin General Green Intelligent Computing System, Shanghai Xuhui District Smart Community, etc.
But to be honest, from the perspective of the open market, TacOS is still too abstract, and it is quite complicated to describe AI+IoT clearly, and it is difficult to be perceived by the C-side. Therefore, Terminus also faces the problem of how to make public market investors better understand Terminus's products and value. If you have to find an intuitive benchmark, it can be said that Terminus is Tesla in the fields of smart city, smart life, and smart energy, which is not only the name that sounds like, but also the sound of it, AI is equivalent to Tesla's FSD intelligent driving brain, IoT is responsible for perceiving the surrounding environment + collecting massive data, and will continue to feed back and upgrade AI, and then combine with other modules to form a set of self-iterating ecosystem.
In addition, benefiting from the AI trained by massive data, Tesla is also constantly expanding its product matrix, in addition to cars, large models, embodied intelligent robots, brain-computer interfaces, ...... No one can define Musk's boundaries. Reminiscent of Terminus's previous launch of the Titan series of intelligent robots, which provided reception, information inquiry, travel and delivery services for more than 12.5 million visitors during the Dubai World Expo, Terminus may also develop more products directly oriented to the C-end in the future, one is to better give full play to the advantages of AI+IoT and expand to more scenarios; Second, investors can also feel the value of Terminus more easily.