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spk07: Good morning and good evening, ladies and gentlemen. Thank you for standing by. Welcome to Highwind Holdings Limited's first half of fiscal year 2022 earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after that management's prepared remarks. I will turn the call over to the first speaker today, Mr. Ryan Tang, Investor Relations Director of Highwind. Please go ahead, sir.
spk04: Thank you, operator. Thank you all for joining today's call for high winds on audited financial results for the first half of fiscal year 2022. Before we start, I refer you to the safe harbor statement in the company's earnings release, which also applies to the conference call today as our management will make forward-looking statements. On the call with me today are our director and CEO, Madam Wang Dian, and our CFO, Mr. Lawrence Locke. Madam Wang will review the company's performance for the first half of fiscal year 2022. Mr. Locke will translate for Madam Wang. You may refer to our financial results of first half of fiscal year 2022 on the company's IR website at ir.highwindwealth.com. I will now turn the call over to the director and the CEO of Highwind Holdings, Madam Wang Dian.
spk08: Hello, investors and analysts. Welcome to the first half of 2022 Haiyin Control Group's performance release. On today's call, I will review the performance of Haiyin Control Group in the first half of 2022 and introduce the company's important progress in the strategic transformation process.
spk02: Hi everyone, welcome to Hiwin Holdings earnings call for the first half of fiscal year 2022. On today's call, I will review our first half results and update you on the significant progress across our business segments. I will also share some highlights from our ongoing strategic transformation. After that, I will turn the call over to Mr. Lawrence Locke, our Chief Financial Officer, to provide greater details on the company's first half financial performance.
spk08: We see that the rapid economic growth has also brought a huge space for China's wealth management industry. According to a data from McKinsey Consulting, China, as the second largest wealth management market in the world, is expected to break 3.3 billion RMB by 2025, and the demand for wealth management by high-quality people is also diversifying and professionalizing in the Japanese region. Hainikong Group, as a multi-type, multi-dimensional wealth management platform,
spk02: In 2021, the COVID pandemic was still raging across the world. However, China achieved earlier economic recovery thanks to its policies. China's strong growth momentum became an important backdrop for the wealth management industry. Based on statistics compiled by McKinsey, China is now the second largest wealth management market globally with household investable assets exceeding 330 trillion RMB by 2025. As a result, high net worth individuals in China expect an expanding range of sophisticated and professional services from their wealth managers. As HiWin's platform covers a full spectrum of asset classes and client services, Hiwin is well-positioned to capture the long-term wealth creation opportunities in China.
spk08: In the first half of 2012, the company introduced a diversified management strategy and handed out a solid answer sheet. In the first half of the year, the company's net income reached RMB 8.8 billion, which increased by 1.4% in total, showing a steady and good management resilience. In the first half of fiscal year 2022, we continued to benefit from diversification in our business mix, and we delivered resilient financial results.
spk02: In the first half, Hirin reported a net revenue of R881.3 million, increasing by 1.4% year-on-year, which demonstrates our institutional resilience in a challenging and volatile external environment. Operating costs and expenses were R792.9 million, increasing 4.5% year-on-year. This increase reflected Our continued investment in advisory capabilities and technology platform, which underpin our ambition to build a world-class investment advisory and asset management infrastructure. 截至2021年12月31日,我们的客户总数已经达到了13.5万人,同比增加了12.5%。
spk08: In the first half of 2022, our active number of customers exceeded 35,000, creating a new record, which increased by 22% in total. In the past 12 months, the rate of online payment of customers has reached 81.6%, which is a 6.3% increase in total, and it has remained at a higher level in the industry for many years. The continued increase in the size of customers and the improvement in activity have also reflected the company's outstanding high-quality asset selection capability We also gained customers' trust and affection. At the end of 2021, the company held a 16-year customer association in 16 cities in China, and also invited investment institutions with multiple heads. The leading team of Huitong Company shared with high-profile customers the opportunity of redlining the situation and judging the investment opportunities in various markets and assets. In the first half of 2022, we will also join the Rui Sheng Bank and the global financial management industry's top media, Wealthbrism Asia, to release a As of December 31st, 2021, our total clients reached 135,000, representing
spk02: a year-on-year growth of 12.5%. In the first half of fiscal 2022, the number of active clients increased 22% year-on-year to exceed 35.4 thousand, which is a new record high for us. Client repeat investment rate for the trailing 12 months was 81.6%, which was 6.3 percentage points higher than the same period in 2020. This is a key metric where Hiwin dominates the industry. This continued growth of our client base and the strong client activity levels underscored our product sourcing capabilities and asset allocation expertise. For the past 16 years, Hiwin has been a trusted partner for Chinese clients, helping them navigate through economic cycles and capture investment returns. Our insights into clients and foresight on the markets have cemented our position as a leading wealth manager trusted by Chinese clients. At the end of 2021, we held VIP client conferences in 16 cities in China to mark our 16th anniversary. Our in-house research team was joined by economists and strategists from leading financial institutions to analyze trends and help clients position for the coming year. And in March 2022, Hiwin will join hands with our partners, VP Bank and Wealth Breathing Asia, and jointly launch a report on the private market investment space in the Asia Pacific region. This report will shed light on the players in the private market space, including high-level clients, fund managers, portfolio companies, and financial intermediaries, and offer guidance to our clients on these exciting markets.
spk08: In the first half of 2021, the new asset allocation scale of our clients in the financial management section has reached RMB 3.75 billion, which is a 3.5% increase. For the vibration and adjustment of the real estate industry in the second half of 2021, our asset allocation system and the company's wind control system also play an effective role. The increase of long-term asset support products has decreased by 37.4% to 136.8 billion RMB at the same time. At the same time, the increase of short-term asset support products has increased by 60.2% to 169.4 billion RMB at the same time. With a preemptive asset allocation system and strong customer yearning, the company has also shown a strong and resilient business. It is worth mentioning that as an important product category of the company's diversification strategy, we have reached 29.7 billion RMB and 9.2 billion RMB respectively in private securities and private equity products. The same ratio has increased by 4.4% and 296%. Due to the shock of the A-currency market, the size of the new configuration of public funds this period is 27.4 billion RMB, which is the same ratio. Under the guidance of long-term investment concepts, customers are also more inclined to design long-term private products to achieve the investment return throughout the cycle. Since the launch of the product diversification strategy, the company has actively developed high-quality management resources. It has formed a category-completion product introduction and selection model around different courses and customers of different preferences. In the first half of 2022, our asset management business also performed brilliantly. Customer asset management has increased by 74.2%, reaching RMB 3.2 billion. This year, we will also vigorously develop family office business and continue to promote a global strategy. In the global scope, we will select partners with high-quality cooperation, and continuously expand the global energy treasury and project treasury of Haiyin Wealth.
spk02: In the first half of fiscal 2022, total client transaction value in our wealth management segment reached 37.5 billion RMB, increasing 3.5% year-on-year. In response to the changing environment in the real estate sector, our asset allocation methodology and institutional risk management proved to be effective. Transaction value from long-term asset-backed products declined by 37.4% year-on-year to 13.7 billion RMB, whereas the transaction value from short-term asset-backed products increased by 60.2% year-on-year to 16.9 billion RMB, which was a calibrated rotation in our clients' asset allocations. And as a result of our adaptive asset allocation and strong client stickiness, our business demonstrated resilience in this period. We also made progress on the diversification of revenue mix as the transaction values from hedge fund products and private equity products reached 2.97 billion renminbi and 919 million renminbi respectively, growing 440% and 296% year-on-year respectively. Meanwhile, as China's domestic A-share stock market faced volatilities in this period, the transaction value from mutual funds stayed largely flat at 2.7 billion RMB. Notably, we have been steering clients towards long-term investing principles and helping them allocate towards longer tenor private market products. An extended investment horizon can help clients capture strong returns across market cycles. Our product sourcing therefore continued to expand across asset classes and across strategies, which are the building blocks for constructing segmented and tailored portfolios for clients. In the first half of fiscal 2022, our asset management business continued to scale up with AUM growth of 74.2% year-on-year, reaching 3.3 billion RMB. In 2022, we will continue to build up our family office offerings, execute on our globalization strategy, and expand partnerships with international asset management partners In order to enrich our global solutions for clients.
spk08: In order to enrich our global solutions for clients. In order to enrich our global solutions for clients. The main wealth bags, such as the Long Triangle, the Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong Kong-Hong
spk02: By December 31, 2021, our distribution network has grown to 178 World Servicing Centers in 88 cities, including most of the top 50 cities in China ranked by economic output. Our nationwide presence covers all of China's major world clusters, namely the Yangtze River Delta, the Greater Bay Area, the Bohai Economic Rim, and Central and Western China, with penetration into lower tier cities where the local wealth pools are sizable. Going forward, HiWin will use the Bohai Economic Rim and the Greater Bay Area as our two regional hubs, together with our 18 strategic cities where we will focus on increasing our market share and building our brand power.
spk08: In terms of human resources, in the first half of 2022, we had a total of 1,643 financiers, which is the same as the basic food. However, the total output of the financiers reached 23,530,000 RMB, which increased by 7.5%. More importantly, the core of the financiers' team is highly stable. In the past 12 months, the departure rate has been less than 5%, which is the lowest level in the industry. Our talent base remained strong. In the first half of fiscal 2022, the total number of relationship managers were 1,643,
spk02: largely unchanged from the previous year. Productivity improved significantly as the average transaction value per relationship manager reached 23.5 million RMB, growing 7.5% year on year. The elite segments of our relationship managers continued to be highly stable, with a turnover rate of less than 5% for the previous 12 months, which beats our peers in this important metric. Meanwhile, we intensified efforts to nurture young talents with campus recruitment at leading universities in China. We believe a strong middle back office support system is also crucial to efficiency gains and advisory quality. So we continuously adopt best practices. In 2021, the PBOC, the People's Bank of China, published a code of best practices for the world management industry with clear guidance on professional standards. Our training, certification, and KPI regime have therefore incorporated this code from the PBOC. 科技赋能是公司数字化转型的重要引擎与战略目标。
spk08: In December 2021, we appointed Mr. Zhuhua as the chief technical officer of the company, to further accelerate and deepen the strategy of digitalization of Hainikong stock. Hainikong stock and IBM's collaboration to create the data platform, to accelerate the digitalization of customer service, the intelligentization of financial services, and the platformization of management operation. The customer side of the APP has also continuously improved the online service capability. optimized the user experience, and achieved a 40% increase in daily life of users. The decision-making system supported by理財師 also provided convenience tools for the professional and personalized services of理財師. The usage rate is close to 100%. In the process of business, the customized asset configuration has achieved 100% onlineization. Through 80% of business support, electronic signing, At the same time, it also improves the customer's convenience and experience.
spk02: Technology and digitization are crucial enablers in HiWin's strategic transformation. In December 2021, we appointed Mr. Zhu Hua as our Chief Technology Officer to accelerate our digital transformation. Our collaboration with IBM also continued to yield results as we digitized our client services, our relationship managers portals, and our operational processes. The HiWin mobile app, which is the client portal, also continued to improve in client experience and service capabilities. Data active users, the AU of the app, saw year-on-year growth of 40% in this period. Our proprietary decision-enabler system for relationship managers has achieved adoption rates of nearly 100% and is now supporting our staff across client acquisition, client servicing, and portfolio customization. Now 100% of our tailored asset allocation proposals are now constructed online and more than 80% of our businesses can now be digitally executed.
spk08: Haiyin Control Group is also actively setting up a health field to create wealth and new double health services for customers. Haiyin Control Group, based on the three-wheel drive of original wealth management, asset management, and Haiyin technology, is vigorously advancing a strategy of $200 million. That is, the development of $200 million, which is based on wealth management as the main body and asset management and health management as a joint development, and digital technology as a innovative engine. As the pioneer of the large health segment, At the end of 2021, Hainan Hong Kong has officially established the Hainan Global Great Health Investment Fund, not only to create investment values in health technology, life science, and other fields for customers, but also to plan to introduce the global advanced health technology and health service system into China for Chinese customers, especially high-end customers in Hainan, to create real wealth and health value.
spk02: We are also expanding and laying the foundation to expand into healthcare as wealth and health are two overarching goals for most high net worth families in China. Our vision is to leverage our core wealth management business while building out asset management and health management as two strategic levers to grow and monetize our high net worth client base. As an opening shot in our entry into healthcare, in late 2021, we launched the High Wind Global Healthcare Fund. The objective of this fund is twofold, investing into global opportunities in healthcare and life sciences on one hand, while potentially introducing selective global cutting-edge health management technologies and services for our high-net-worth clients in China on the other hand.
spk08: In 2021, we went from the diversification of asset configuration to the upgrade of the Taoyuan system, to the transformation of the financial system, and to the expansion of the Oceanic Control Group's customer ecosystem. It can be said that it is a multi-layered harvest. Of course, these results also show that we use market trends and customer needs as a guide to achieve strategic upgrades, the accuracy and dynamic improvement of the direction. In the future, we will continue to optimize the connotation of wealth management business, improve the scale of asset management business, strengthen the brand consistency of customers, cross-season consistency, and cross-market consistency. We will also continue to expand from the border, from cost control to efficiency, from technology to efficiency, and truly create sustainable value for customers and shareholders. Thank you.
spk02: Over the past year, we achieved significant results across multiple fronts, from diversification of revenue mix, to the upgrade of our research and advisory platform, to enhancing our talent management and performance delivery, to the expansion of the Highwind ecosystem into new domains. These achievements are rooted in our market leadership and our dedication to clients. our strategic direction is clear and we expect strong momentum to continue. Looking forward, we will continue to enrich our wealth management business, scale up our asset management franchise, remain the premier brand that high net worth clients in China trust to guide them across market cycles and across borders. We seek to unlock growth by expanding our boundaries, increase profitability from cost discipline, and drive efficiency through technology. Creating sustainable value for clients and for shareholders is always our first priority. Thank you all for your support. And with that, I would like to turn the call over to our CFO, Laurence Locke. Thank you, Madam Wang. Thank you all for joining us today. Please note that unless otherwise stated, all financial numbers presented today are in remit B, and comparisons are made on a year-on-year basis. During the first half of our fiscal 2022, ended December 31st, 2021, our total net revenues increased by 1.4% year-on-year to $881.3 million. Overall, we believe the stability in our top line in this period is a testament to Highwind's resilience despite ongoing uncertainties in the macroeconomic environment both in China as well as globally. Revenues from the wealth management segments were $855.4 million, remaining flat from the same period in fiscal 2021. Revenues from the asset management segments were $9.0 million, up 35.1% year on year. As we continue to strengthen our investment management capabilities and realize greater investment gains for our clients, We expect our asset management segment to continue delivering strong growth going forward. On the cost and expenses side, total operating costs and expenses for the reported six months were $792.9 million, up 4.5% year-on-year. Amongst that, compensation and benefits were $494.1 million, which was flat year-on-year and was in line with our distributed transaction value and the stability in our relationship manager team. Meanwhile, our SG&A expenses were $294.7 million, an 11.4% increase year-over-year as we further built out our technology and our talent platform while increasing our share-based compensation expenses. On the balance sheet side, as of December 31, 2021, our cash and cash equivalents increased by 9.6% to $481.5 million. Also, as a result of our continued optimization, our total account receivables was reduced to $561.1 million as of December 31, 2021. During this period, We also made an investment to purchase the office space of our headquarter in Shanghai, which we view as essential to the long-term development of our headquarter. We continue to maintain a healthy liquidity profile and financial position. Our liability to asset ratio further fell to 48% as of December 31, 2021, compared to 53% on June 30. Overall, We believe this reporting period, once again, demonstrated Piven's resilience in the midst of an uncertain economic environment where there was considerable capital markets volatility. It was reassuring, though, that during this half, our customers continued to show strong demand for our services, our advisory, and our investment products. We believe our ongoing strategy execution, including our product diversification strategy, our platform strategy, and our talent strategy, will help us in capturing the dynamic opportunities in China's fast-growing wealth management industry. Thank you, everyone. This concludes our prepared remarks for today. And operator, we are now ready to take questions.
spk07: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. When asking the question, please state your question in Chinese first, then immediately repeat your question in English for the convenience of everyone in the call. Your first question comes from the line of Jia Gingsun from Orient Securities. Please ask your question.
spk03: Hello, I'm Tao Shenyu from Orient Securities. 各位领导大家好,我是来 自东方正天的陶善宇。 In the first half of the fiscal year 2021, the performance of the fundraising and the top nine were almost the same as compared to the same period of the last year. So my question is, what are the drivers for the growth of the company in long term? Thank you.
spk08: This is mainly due to the fact that in the second half of 2021, due to the influence of this corresponding policy, there was also a change in the number of customer investment. So we also adjusted the structure of this asset configuration accordingly, increasing the asset configuration of private equity and second-tier market all-in-one products. In other words, as I mentioned in the report just now, our private equity and private equity products reached 29.7 billion RMB respectively. and 9.2 billion RMB, which is a significant increase of 4.4% and 2.96%. At the same time, we also added digital technology, investment in investment research and investment system construction to our assets. We also introduced a mature investment team. Then we are thinking about our transformation and adjustment in the future. I believe they will all bring greater value, especially as we gradually improve our diversified product configuration, the size of customer asset management will also continue to expand, and the company will also achieve repetitive income increases. And I believe this will also gradually form a bloodbath effect. In this way, it will also achieve the optimization of our revenue's stable growth and structure.
spk02: Let me translate this. So, first of all, in the first half of fiscal 2022, given that there was external market volatilities and changes in the regulatory environment, there were also changes in the client demand in the underlying asset classes or sector allocation. But what we saw was that client demand for asset allocation services as a whole continued to be very strong for us. So we acted ahead of the market and adjusted our asset allocation guidances that we gave to our clients. And that's one point. And then the other point that we wanted to make was in order to help our clients continuously capture returns from long-term asset allocation, regardless of market environment, what we also did was we further expanded our partnerships with leading fund managers in the industry in order to increase our equities products, long-term equities products, including our, especially our private equity products, as well as some some of our secondary market hedge fund products, which, as you saw just now, we presented, grew 440% and 296% respectively. And furthermore, our in-house asset management segment will also grow as we continue to strengthen our investment management and research capabilities and expand our asset management team. So we believe that all of these going forward will create long-term value over time, as there will be further diversification in our work management product offerings, as well as a growing scale of our client AUM, our client asset management. And we should therefore see our recurring revenues grow over time as well, which will have a positive snowball effect that will benefit both growth as well as revenue visibility. Operator, next question, please.
spk07: Sure. Your next question comes from the line of Peng Zhang from Nomura. Please ask your question.
spk06: I have a question. I have a question. I have a question. Thank you. Thank you for the question. So let me answer this one. Yeah, sorry, please. Okay, I'll proceed with English version. We noticed the operating margin declined year-on-year, with personal costs accounting for over 50% of the revenue. So what is the company's plan going forward to increase operating margin and profitability? So that's my question.
spk02: Yeah, thank you. Thank you very much for the question. So let me answer this one. So a couple points we can make here. Number one, first, let me emphasize that cost control and efficiency improvements continue to be a key priority for our senior management. That hasn't changed. That said, this year what we did was we strategically invested more in our people and our infrastructure in particular to strengthen our whole platform and our technology, which we believe will benefit our long-term profitability. As we accelerate our digitization strategy as we discussed just now, our relationship managers, we believe, will be increasingly empowered by technology to improve their client acquisition efficiency as well as improve the overall client experience from clients, which we also believe will help us obtain high productivity from the relationship managers over time. so that our future growth will come with lower marginal cost as well as higher profit margin. And then the last point we want to make is as our revenue mix will further diversify, as we talked about just now, and a greater portion of our revenue will be coming from longer tenor, longer duration products, we expect to grow our recurring revenues and our performance-based revenues. And higher recurring revenues in the long run should also benefit both our revenue visibility as well as our profit margin over time. Thank you. And next question, please.
spk07: Your next question comes from the line of Sandy Matza from Evaluate Research. Please ask your question.
spk01: Yes, good afternoon. How much were your results impacted by the volatility within the real estate investment products that's been happening in China? And is most of the client churn or reallocation or changes in investments with real estate, is that now behind you? Thank you.
spk02: Yeah, thank you. Thank you, Sandy. I'll answer this question as well. So I think you're right in pointing out that there was market volatility and changes in the environment, in the overall macroeconomic environment, and in particular relating to the real estate sector. So what we did in this period that was important was we had to act ahead of the market, basically. and, you know, basically adjusted our asset allocation strategy in response, right, to the changing environment. So what we talked about just now in the main part was that, you know, we felt that, you know, overall, our asset allocation methodology as well as our risk management methodology worked well in this period, right, as we guided our clients away from, you know, some of these underlying sector exposures, but directed them towards shorter duration and lower risk asset-backed products in this period. And so we saw this as effective. As to your question on whether the changes or the volatilities in the underlying fiscal market or the underlying sector is over, I think it is... perhaps premature for us to comment on that, right? But, you know, I think what's important for us is that we are offering, right, a full range of assets, right, products that our clients, right, can, you know, invest into in their portfolios and construct healthy and balanced portfolios that can capture returns in the longer run. Thank you. Next question, please.
spk07: Your next question comes from Jeff Wong from GAM Hong Kong. Please ask your question.
spk05: 管理层,你们好。 我是来自于GAM基金公司的Jeff。 我想问一下海银如何看待同业的竞争, 其中包括银行、券商还有其他独立的财富管理机构, 以及一些正在加入中国市场的一些海外财富管理机构的竞争。 谢谢。 Let me repeat my question in English. So this is Jeff Wong calling from GAM Investment. My question is, how do you see the competition coming from other competitors like banks, brokers, and other independent wealth managers, including those international players entering China? Thank you.
spk08: Hello. Currently, we believe that China's financial industry all exist in the form of division management and division supervision. In fact, the characteristics of each type of financial institution are very distinct and different. For example, as an independent financial management institution, we at least stand in the position of the buyer when making asset configuration for the client. We start from the customer's point of view and carry out the selection of assets. is for our high-tech customers to make all-round asset configuration. Especially for the current high-tech customers' people and families, their needs are not only satisfied with the increase and retention of wealth, but Haiyin, we always use customers as the center, we can surround our customers' whole life cycle to provide them from the founder to the successor, as well as the personalization and differentiation of services. Especially, we believe that H&E has been in the domestic market for 16 years. In fact, in these 16 years, we have gone through several rounds of economic cycle experience. Not only can we grasp the changes in the market, I think we also know and understand the needs of our customers better. And these, I think, are not the advantages of foreign institutions, especially in the short term. Okay, let me translate for Madam Wang. So our view on competition and the market is that, firstly, China's wealth management market is
spk02: both a massive TAM, both a massive total addressable market, as well as a fast-growing market. So our view is that China's wealth management market is not a one-size-fits-all industry, but it is comprised of many different client segments that should be served by many different tiers and types of financial institutions. So for independent wealth management players like Hiwin, really what the core value proposition that we can provide is that we can always start from our high-net-worth clients' perspectives, understand our clients, and provide tailored asset allocation services. So we do believe that high-net-worth clients and family offices clients in China do see the value that a long-term trusted advisor like Haiwen is able to provide. And then there are foreign institutions or private banks in China. They may be well-established in their service model, in their own right, but they may not be as deeply local as we are. For us, Haiwen, we've been in this business, in this wealth management business, for over 16 years. our clients' longstanding experience with us through the various macroeconomic and market cycles, plus our deep penetration into the various local markets in China, we believe will continue to serve as our competitive moat. Thank you. Next question, please.
spk07: There are no further questions at this time. I would like to hand the conference back to today's presenters. Please continue.
spk02: Okay, no further questions, and this will be the end of our call. Thank you very much, and we look forward to seeing and hearing from you guys on our next call. Thank you. Have a good day.
spk08: Thank you, everyone.
spk07: This concludes today's conference call. You may now disconnect your line. Thank you.
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