Half Year 2023 Hywin Holdings Ltd Earnings Call
Speaker 1: Good morning and good evening ladies and gentlemen. Thank you for standing by and welcome to Highway Holdings for half of fiscal year 2023 earnings conference call. At this time all participants are in a listen only mode.
Speaker 1: Before we start, I refer you to the Safe Harbor Statement and the company's earnings release, which also applies to the conference call today as our management will make full-looking statements.
Speaker 1: On the call today are the company's director and CEO , Madam Wang Dian and CFO , Mr. Lawrence Loke.
Speaker 1: Madam Wang will review the company's performance for the first half of fiscal year 2023.
Speaker 1: Mr. Loke will translate for Madam Wang.
Speaker 1: Then Mr. Loke will discuss the financials.
Speaker 1: We will be hosting a question and answer session after the management's prepared remarks.
Speaker 1: You may refer to our financial results of the first half of fiscal year 2023 on the company's IR website at ir.highwindwealth.com.
Speaker 1: I will now turn the call over to Director and CEO of High Wind Holdings, Madam Wang Dian. Please proceed.
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Speaker 3: Hello everyone and welcome to the High Wind Holdings earnings call for the first half of fiscal year 2023. On today's call I will review the results first and provide updates regarding the significant progress we have achieved across each of the company's main business segments.
Speaker 3: After that, I will turn the call over to Mr. Lawrence Locke, our CFO , to provide greater details on the company's first half of fiscal 23 financial performance.
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Speaker 3: when the second half of 2022, China's COVID-19 related lockdowns and a series of interest rate hikes from the US that presented challenges for China's economic flexibility and stability.
Speaker 3: resulting in a deep correction in overall domestic financial asset valuation.
Speaker 3: Since the pandemic has passed now, economic growth in the Chinese mainland has improved somewhat. But more time remains necessary to shore up the investment confidence of high net worth households and private corporate clients.
Speaker 3: China's investment market is therefore waiting to see more solid evidence of improvements in economic data, including consumption, manufacturing confidence, and social financing.
Speaker 3: taking into account these factors and in order to respond to market changes at Highwind we have implemented measures including proactive adjustment of our product matrix and client advice and reinforcement of our risk management.
Speaker 3: Thanks to these efforts, we have achieved steady, high-quality progress in our performance in this reporting period.
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Speaker 3: to rise over the past few quarters. Highwind has captured year-on-year growth in our transaction value.
Speaker 3: In the first half of fiscal year 2023, High Wind's wealth management transaction value reached 40.1 billion RMB, a year-on-year growth of 6.9%. Amongst which, our asset-backed product transaction value increased to 37.2 billion RMB.
Speaker 3: up 21.4% year on year.
Speaker 3: Characterized by a steady rate of return, these asset-backed products became a safe harbor for our clients' investment needs during a period of great market movements in 2022.
Speaker 3: On the other hand, transaction value for our hedge fund products have declined by 76.3% EOY to 710 million RMB. transaction value for our private equity and venture capital products.
Speaker 3: have declined by 42.4% year on year to 517 million RMB.
Speaker 3: These results reflect our proactive adjustments in our product shelf and our advice to clients against a backdrop of increased public market volatility and devaluation of private equity assets, NAB.
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Speaker 3: Next, on to our Asset Management business. Our strong investment research, investment management, and client service capabilities are also reflected in our outstanding Asset Management segment performance.
Speaker 3: Highwind's client assets under management, AUM, increased by 114.3% year-on-year to 7.0 billion RMB in the first half of fiscal 2023. Specifically, through three years of growth.
Speaker 3: Highwind International's EAM External Asset Management Service.
Speaker 3: This i.e. discretionary management of discretionary investment management services for ultra high network clients have now become our asset management flagship with AUM exceeding 5.8 billion RMB. The EAM service model which combines client accounts
Speaker 3: execution, investment management and custody into one holistic solution is a mainstream business model in the European and US markets.
Speaker 3: For example, in Europe , the EAM industry accounts for roughly one third of the wealth management industry's total AUM compared to only 3 to 5% in Asia.
Speaker 3: This does however imply that Asia still harbors great potential for the EAM industry.
Speaker 3: After sophistication of the Asian markets and clients continue to increase, we believe EAM, which is an intellectually driven, open architecture, safe, flexible and sticky asset management model, is positioned to capture the
Speaker 3: capture rapid growth in market share. Benefiting from our broad client base and our high-quality client coverage and service team, Highwind's first mover advantage in the Asian EAM market will be reinforced over time.
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Speaker 3: and the Chinese government. Highwind International's Cayman funds also continued to develop steadily, offering clients attractive and stable returns across a variety of strategies.
Speaker 3: with AUM currently exceeding 700 million RMB.
Speaker 3: Our Cayman Funds segment has now become a platform for High Wind to work with the world's top asset managers and is now a second growth engine apart from our EAM for our asset management services.
Speaker 3: In the future, we will continue to expand our Cayman Funds franchise by nurturing in-house active management strategies.
Speaker 3: as well as by building up index-based offerings. Highwind International's branding and achievements in the investment industry have also been further recognized recently. Hero Display and Toilets Administration Sun
Speaker 3: The Council of the Hong Kong Limited Partnership Fund Association, HKLPFA, elected Huyen International as Vice Chair. As such, we began to work with regional institutions such as Haitong International, SPDB International,
Speaker 3: China Life Insurance, CNCB Investments, and other members of the association to further promote the development of Hong Kong into a leading domicile for global alternatives managers. HKLPFA has also assigned a series of strategic projects.
Speaker 3: to hiring as lead, including promoting the synergies between the HKLPF regime and the private banking and family office sectors.
Speaker 3: piloting secondary funds as additional exit vehicles for investors and setting up feeder funds in the Middle East to channel investor capital towards Asia, etc.
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Speaker 3: Next, onto our family office services. Highwind's family office capabilities have also continued to develop as our services continue to diversify. On January 9, 2023, Highwind's family office team was included in the seventh annual Highwind
Speaker 3: Asia Pacific Wealth Forum's list of Top 50 Family Officers of the Year in China at the 2022 International Private and Family Wealth Management Award Ceremony.
Speaker 3: The forum hosted by the Wealth Management Magazine and the think tank Tai Chi has made these awards a benchmark for excellence in wealth management in the Asia Pacific region.
Speaker 3: As one of the industry's earliest providers of family office services, in addition to our consistent efforts to roll out our presence across the Chinese mainland, we have sought to explore and expand overseas markets via Hong Kong as a sub.
Speaker 3: As one of the first Chinese funded institutions to offer family office services in Hong Kong, Taiwan now sets an example promoted worldwide by the Hong Kong SAR government.
Speaker 3: In addition, this year, Highwind established the Highwind Cup, which specializes in value-added services for ultra-high-netward clients.
Speaker 3: The High Wind Club addresses client needs spanning from wealth management to family governance to corporate management and provides value added services to families across their life cycles which includes single family office operation, legal and tax planning and health management.
Speaker 3: Recently, High Wind Club customized a trip to Hong Kong for a group of ultra-high net worth to meet with top global private equity managers, private banks, and trust. In the first quarter of this year, High Wind Club's core team also put on road shows in Beijing, Shanghai, Shenzhen, and Chengdu in order to promote its
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Speaker 2: Please see the complete disclaimer at the end of the video.
Speaker 2: Thank you for your attention.
Speaker 2: Thank you for your attention.
Speaker 3: We have just discussed highlights in some of our key segments. Next, we will discuss highlights on operations.
Speaker 3: We have just discussed highlights in some of our key segments. Next, we will discuss highlights on operations. First, our client metrics.
Speaker 3: Client operations in the first half of fiscal year 2023 also continue to reflect our business development momentum.
Speaker 3: As of December 31, 2020, our total number of clients reached 146,000, a year-on-year increase of 8.7%. Of those, nearly 37,000 were active, up 3.9% year-on-year.
Speaker 3: Repeat investment rate reached 80.5%, average transaction value per private equity product transaction amounted to 3.6 million renminbi.
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Speaker 3: Some key highlights on our coverage network. Our relationship manager team expanded further during the first half of the school year. With the total number of relationship managers reaching 1,738, reflecting a year-on-year growth of 7.6%. Highwinds Public Market Fund Distribution Division.
Speaker 3: has also further elevated its NAV-based product capabilities at our 11 mainland branches. And with the support from an upgraded professional investment advisory team, our IA team, we expect to offer more NAV-based products.
Speaker 3: in 2023 and further diversify our revenue growth.
Speaker 3: In terms of our distribution footprint as of December 31, 2022, Highwind had 177 wealth centers covering 88 cities, same as 2021. Today we have a solid presence across the Yangtze River Delta.
Speaker 3: the Greater Bay Area, the Bohai Rim, the Central and Western regions, and other regions with high concentrations of high net worth clients.
Speaker 3: In addition, we believe that Hong Kong's recent reopening together with the Chinese mainland, plus with the continued implementation of cross-border wealth management connect in the Greater Bay Area, will further create demand for the wealth management industry in the Greater Bay Area.
Speaker 3: In this context, High Wind is strengthening links with the Greater Bay Area to capture opportunities in this regional development.
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Speaker 3: Next, our technology. Our technological upgrade strategy was designed to provide a better client experience and greater operational efficiency.
Speaker 3: Highwind has now migrated most of its on-premises applications to the cloud, adopting mature cloud computing technologies to achieve a more secure, greener hybrid cloud setup, which also gives our clients a high-quality financial service experience.
Speaker 3: Officially launched in 2022, our Zhi Huitong Invest Path service platform is a specialized platform for institutional client-fund trading designed to help our institutional clients trade funds fully online, improve fund investment efficiency, and control operational risks.
Speaker 3: Separately, Yo-Pay Tone Allomaster, our scenario-based sales and marketing system, also officially went live in 2022.
Speaker 3: This system aims to support relationship managers with the construction of fund portfolios, comparison of fund performances, analysis of post-investment holdings, as well as to help fulfill clients' personalized asset allocation needs.
Speaker 3: all of which give hiring the opportunity to provide more integrated one-stop work management services.
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Speaker 3: Next is our high wind health segment. Our long-standing relationship with many of our clients gave us the opportunity to expand into health management services.
Speaker 3: In 2022, we officially announced our Wealth plus Health dual platform strategy. Since then, Hyman Hodis entered the health management industry by acquiring Grand Doctor.
Speaker 3: like INFINITY and Sincerity and Compassion Health Management Center. The strategic vision of Highland Health is to create a new paradigm of high-end health management in China. Highland Health is differentiated.
Speaker 3: as we combine our own in-house core competencies in medical examinations and high-end health management together with the first-class international healthcare resources. High-end Health has also developed an AI-based,
Speaker 3: health evaluation system, and a digital health management platform. We will continue to refine our client data from both our medical examination business as well as our health management business, which will allow us to further customize our high-end solutions for clients.
Speaker 3: In the first half of fiscal 2023, Highland Health achieved revenue from fiscal examinations at 12.4 million renminbi and revenue from health management at 25.8 million renminbi.
Speaker 3: Total number of Taiwan Health clients reached 28,763 clients. Total number of medical examination visits was 4,936 with an average visit price of 2,520 RMB.
Speaker 3: and number of health management clients totaled 1,178 with an average revenue per client of 21,952 RMB, which is well above industry average.
Speaker 3: Through Hywind Health, we believe we are creating a new competitive moat for ourselves, while also earning the trust of our clients and their families by providing them with more comprehensive health safeguards.
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Speaker 3: first corporate social responsibility report and Hi-Wen received the 2022 ESG Award for Responsible Practices from a well-known Chinese media third paper in recognition of our efforts in creating long-term value for our shareholders.
Speaker 3: clients, employees, the industry, the public and other stakeholders.
Speaker 3: We also remain committed to further enhancing our corporate governance, creating an equal and diversified working environment for our employees, and giving back to the society through continued efforts in public welfare.
Speaker 2: The R&R is a key tool. The R&R is a key tool. The R&R is a key tool. The R&R is a key tool.
Speaker 2: Thank you for your attention.
Speaker 3: In conclusion, 2022 was a year of resilience and modest growth for Hi-Wen. As we look ahead into 2023, we believe there is a great opportunity for the growth management industry to reenergize.
Speaker 3: as China's economy as well as Chinese investor sentiment rebounds. Taking advantage of our leadership in wealth management.
Speaker 3: We also believe our new entry into health management gives us a dual platform to serve clients as well as add a second leg of growth to create additional value for our stockholders.
Speaker 3: Thank you, Madam Wang, and thank you for joining us today.
Speaker 3: Before we begin our detailed financial discussion, please note that unless otherwise stated, all financial numbers presented today are in remedy terms while comparisons are made year on year. This information is not going to bemted to third-party lorals rip
Speaker 3: In the six months ended December 31, 2022, our total net revenues were $1.0 billion, up 17.6%.
Speaker 3: Looking at our revenue breakdown, revenue for our wealth management segment was $970 million for the first half of fiscal 2023, up 13.4%. The strong growth in our wealth management services was primarily due to the increase in transaction value of private market investment products.
Speaker 3: especially asset backed products, which share similar characteristics with fixed income products. During this period, investor appetite favored asset backed products and fixed income like products over NAV based products such as hedge funds or private equity products. We believe this pendulum could swing the other way going forward.
Speaker 3: Its investment sentiment in China could recover significantly this year. We believe this is actually a strength in our business model versus competitors as we offer more products across more categories.
Speaker 3: It is also worth mentioning that our revenue from other financial products increased by 100.2% to 68.1 million RMB, which is mainly attributed to surging insurance demand during the COVID period.
Speaker 3: Revenue from our asset management segment for the six months was 16.2 million, up 79.4%. Asset management continues to be a high growth segment for us, mainly driven by increases in AUM. We have a starts on her while she has a
Speaker 3: We believe in our EAM business and our Cayman Funds business, we are a market leader in our industry.
Speaker 3: This is the first quarter where we consolidate Highland Health's financials after we completed three acquisitions in 2022. Highland Health segment revenue and net losses for the six months was $38.3 million and minus $24.2 million respectively.
Speaker 3: Last year, we were in the initial stage of integrating and transforming our health businesses.
Speaker 3: We expect to drive further revenue growth from our health businesses before they reach break even. On the cost and expenses side, total operating cost and expenses for the six months were $933.9 million, up 17.8%. The total budget and benefits increased 16.6% to $933.9 million.
Speaker 3: General and administrative expenses increased 21.4% to 146.2 million, mainly due to our investment in health as well as our continued deployment in technology.
Speaker 3: Our income from operations in the six months was 102.1 million, up 15.5%. Our reported net income for this period was 70.6 million, up 0.3%. Our net income for this period was 9.9% flat year on year.
Speaker 3: Our earnings per ADS for the six months was 2.52 per ADS on a basic basis and 2.43 per ADS on a diluted basis. Our balance sheet also remains healthy. As of December 31, 2012, we had $574.9 million in cash and cash equivalents.
Speaker 3: restricted cash on hand. This gives us a solid foundation to pursue further growth. In conclusion, we believe our financial results in this reporting period demonstrated resilience and a good balance between achieving business growth and managing macro risks.
Speaker 3: We showed strong client metrics and strength in our distribution model. Our international business once again shows market leadership and was a highlight in this period. At the same time, this reporting period also marked an exciting new entry into high-world health for us. Thank you everyone. This concludes our prepared remarks.
Speaker 1: name to be announced. To withdraw your question, please press star 1 1 again. Our first question comes from the line of Pung Chia from Nomura. Please ask your question, Pung.
Speaker 2: The reason we actually went to start with Japanese in August 2017, at this time, we did not implement Japanese with HERE. I will see you in the next video.
Speaker 3: Thank you, Madam, and congrats on the results. My question is that, can you tell us more about the company's recent product strategy as we saw the transaction value increase comparing with the same period from last year? Thank you. Thank You, Madam.
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equity market volatility was quite high in 2022, right? So although that said, we as a whole, our transaction value were solid and we had modest increase in our transaction value in 2022. We believe this.
has a lot to do with our proactive approach in product mix adjustments.
In the second half of last year, we were actually quite cautious in onboarding or recommending market products, secondary market products or NIV based products.
We did see that our clients were more inclined to products which have, generally speaking, shorter duration or lower volatility or more visible returns.
Looking forward though, I think there is a general sentiment that market could rebound significantly in 2023. Although I think largely speaking, people are still sort of waiting for more data to be seen.
looking for more evidence to strengthen this confidence. So I think one of our strategies this year is we will increase, I guess, our exposure or our allocation to more NAV-based products, secondary markets or secondary markets-length products.
For example, enhanced index funds or quant funds. I think in doing this, what we also have to pay attention to or what we think our clients will pay a lot of attention to is draw down
as well as the product, the fund manager's track records in handling drawdowns.
In terms of private equity, our strategy tends to and will continue to focus more on certain sectors such as high-end manufacturing and pharmaceutical or healthcare verticals.
That's on the onshore side. On the offshore or Hong Kong side, our strategies are very diversified, but I think this year given continued marketable opportunities, we may put high emphasis on private equity, for example, or overseas or Hong Kong-based insurance.
The question comes from the line of Ruoxiang Ye from China Citic. Please ask your question Ruoxiang.
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I saw the company's total revenue for this period increased by 17.6% while the net income increased only marginally by 0.3% year on year.
Could you please specify the reasons for this? Thanks. Okay. I'll answer this question. Yes. So actually, you know, I think thanks for pointing out our revenue and net income. Actually, I was looking at a...
some of the media pick up and I think some media headlines say our EPADS, Earnings Per ADF fell. But I think it's more correct to say that actually our earnings is flat year on year this year in renminbi terms but because of US dollar depreciation, if reported on a US dollar basis.
it fell. But I think, so I want to maybe handle this question with several points. First of all, our earnings was flat primarily because of the 24 million renminbi losses.
that we recorded from Highland Health in this period, and I'll explain more on this point. I want to talk about the wealth management side first. Our profitability on the wealth management side actually increased in this period. Our operating margin rose to...
As we went more digital during COVID and lockdowns, etc., we were actually able to realize cost savings and therefore an increase in our operating margin on the wealth management side. Now on the highland health side of things, I would offer a couple points.
One is, you know, this is the first time ever we begin to consolidate, right, the three acquisitions that we made in 2022 and the consolidation period of life infinity and sincerity and passion, compassion can do, right.
actually only began in September , right? So that's one. So that's what we're reporting is not necessarily reflecting the entire half year for some of these acquired businesses. The second point is we were in,
still in an initial phase of integration, right, post acquisition and transforming and, you know, tying together the three acquired businesses post acquisitions. So I would say the operating efficiency in our health business is still being fine-tuned.
And then I think the last point I wanted to make was because of COVID, because of lockdowns, the financial results of our health business was actually distorted, you know, based on, you know, just what you see in the reported numbers because the clinics basically were shut down for a significant amount of the reporting period.
So, going forward in the next reporting period in 2023, you will see a more true representation of what the happier results of Taiwan Health should be. I hope that answers.
your question on what's behind the 24 million renminbi losses from high wind health. Thank you. Our next question comes from the line of Sandy Mehta from Evaluate Research. Please ask your question, Sandy.
Yes, congratulations on the very strong results. Just to follow up on your previous comments on healthcare, when do you expect, what is the progression towards the healthcare business reporting break-even results?
And also, can you comment on from the small base, what sort of growth do you expect going forward? Thank you.
Thank you Sandy. Hi. Okay. So I will take this question as well. I think as I said just now, we are still in an initial phase of transforming, integrating the business. On your question on break-even, we don't have a- well, I'm not putting out a specific-
numbers here yet, but what I want to say here is what we're doing here is really, first of all, at step one, the clinics that we acquire, we are unifying the management, unifying the system, and unifying our service approach, et cetera, et cetera. And there is a lot of work that we're doing here.
Obviously, some friction, but that's very normal and very natural post-acquisitions. And I think we did a lot of that last year. And I think in this first quarter this year, we're doing a lot of that as well. I think we could hope to see narrowing …
on the profitability and then on the business growth side, I think what would be interesting, right, in the next reporting period is, you know, it's likely to see a very large increase, right, in the Highland Health revenue, right, because again, the reporting period in, you know, in this reporting period, you know, is heavily, heavily.
And the one thing I really wanted to point out is the very significant synergies that we believe there is between our wealth business and our health business. And ultimately, I think health is a great client acquisition, business model for us as well.
And on the medical examination side, larger volume, larger amount of traffic. And then on the health management side, really deep down, deep dive into client profiles and very personal, high end.
you know, health management services that we give to our clients. So we think there's a lot of synergies and a lot of complementariness in the business models. And to wrap this up, I think yes, we are very confident that there's a lot more growth.
that will be coming out of help and then we'll get to break even when we get to a critical volume in these businesses.
Thank you all for your questions. If there are no further questions at this time, I would like to hand the conference back to our management for closing remarks.
Okay, thank you again for joining us. If you have any questions, please feel free to contact us through the IR website. We look forward to speaking in our next call. Have a good day.
Thank you. This concludes the conference call. You may now disconnect your line. Thank you.
I have you.
I.