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spk02: Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Highway Holdings' first half of fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode. 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 today are the company's director and CEO, Madam Wang Dian, and CFO, Mr. Lawrence Loke. Madam Wang will review the company's performance for the first half of fiscal year 2023. Mr. Loke will translate for Madam Wang. Then Mr. Loke will discuss the financials. We will be hosting a question and answer session after the management's prepared remarks. 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. I'll now turn the call over to Director and CEO of Highwind Holdings, Madam Wang Dian. Madam Wang, please proceed.
spk01: Hello, investors and analysts. Mr. Lewei will introduce the financial data for this period.
spk03: Hello everyone and welcome to the Highwind 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. 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.
spk01: In the second half of 2022, China's COVID-19 lockdown and the U.S. Federal Reserve's continuous increase have brought many challenges to China's economy's flexibility and stability. This has also led to a deep adjustment of domestic financial assets as a whole. Although the COVID-19 pandemic has gradually become the past, it has also led to an improvement in China's domestic economy. However, it still takes more time to promote the investment sentiment of high-quality families and private enterprise customers. But we believe that as the economic data continues to improve and consumption warms up, the recovery of corporate production information and the revival of social financing, China's financial management market will truly welcome the great development of the post-pandemic era. At the same time, Haiyin has also adopted a series of feasible measures to adapt to market changes, including a defined wealth and health development strategy, adjust the structure of products, and increase the layout of overseas businesses, and strengthen risk management, etc. It can be said that it has also achieved steady and consistent high-quality performance development.
spk03: In the second half of 2022, China's COVID-19-related lockdowns and a series of interest rate hikes from the US Fed presented challenges for China's economic flexibility and stability, resulting in a deep correction in overall domestic financial asset valuation. 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. China's investment market is therefore waiting to see more solid evidence of improvements in economic data, including consumption, manufacturing confidence, and social financing. Taking into account these factors and in order to respond to market changes, At HiWin, we have implemented measures including proactive adjustment of our product matrix and client advice and reinforcement of our risk management. Thanks to these efforts, we have achieved steady, high-quality progress in our performance in this reporting period.
spk01: First of all, our financial management business is growing. In the past few seasons, Under the trend of a continuous rise in Chinese household savings, customers have achieved the same growth in sea silver transactions. In the first half of 2023, the new asset size of the wealth management block reached RMB401.1 billion, which increased by 6.9%. Of which, the size of the asset support product is 372.3 billion, which increased by 21.4%. The properties of asset support-based products have become customers' financial assets when the market fluctuates more in 2022. On the other hand, due to the increasing fluctuation of the 2G market in the second half of 2023, the valuation of private assets has also been greatly adjusted. We have also guided customers to make dynamic adjustments to asset configuration. First, on our wealth management segment, as China's household savings rate has continued to rise over the past few quarters,
spk03: HiWin has captured year-on-year growth in our transaction value. In the first half of fiscal year 2023, HiWin'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 up 21.4% year on year. 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. On the other hand, Transaction value for our hedge fund products have declined by 76.3% year-on-year to 710 million RMB. Transaction value for our private equity and venture capital products have declined by 42.4% year-on-year to 517 million RMB. 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, NAV.
spk01: The second piece is our asset management version, which has also achieved long-term progress. In the first half of 2023, the size of customer asset management increased by 114.3%, reaching RMB70.1 billion. This also shows that Hainan's investment management capabilities and customer service capabilities are constantly improving. Among Hainan International's EAM business, which is a full-fledged return investment business for ultra-high-end customers, has become the company's asset management flagship after three years of practice and growth. The size of AOM has surpassed 5.8 billion RMB. The EEM business combines the multi-dimensional functions of accounts, transactions, investment, and control. In Europe and the United States, it is already very mature. For example, the European EEM industry's AUM accounts for one-third of the wealth management industry's AUM. In Asia, this ratio is only 3% to 5%, which can be said to be a huge advantage. As the Asian market and Asian customers continue to mature, EM's smart drive, open platform, safe and flexible, and long-term year-round asset management model, the share price of the market will definitely increase rapidly. And this Hainin's priority advantage in the Asian EM market also relies on our customer base and a high-quality business team. We think it will be further stabilized and improved.
spk03: 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. Hywind'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, Hiren International's EAM external asset management service, i.e. 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 account execution investment management and custody into one holistic solution is a mainstream business model in the European and U.S. markets. 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. This does, however, imply that Asia still harbors great potential for the EAM industry. As the 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 rapid growth in market share, benefiting from our broad client base and our high quality client coverage and service team, Hywind's first-mover advantage in the Asian EAM market will be reinforced over time.
spk01: At the same time, Hywind International's opening fund business continues to develop steadily. At present, AUM has exceeded 7 billion RMB, creating steady and rich investment returns for customers, and becoming a connecting platform for Hywind and global top managers. It is also the second stage of Hywind's management business. In the future, we will also cultivate active management capabilities and index investment capabilities to enrich the choices of investors by opening up new investment areas for funds. Hainan International's influence in the industry and in the field of investment has also been further recognized recently. On February 20 this year, through the Hong Kong Limited Fund Association Council, Hainan International also recognized the vice president of the Hong Kong Limited Cooperation Fund Association, with Haicheng International, Puyin International, Chinese Ren Shou, Xinyin Investment, and other excellent investment institutions, and further promoted Hong Kong to become the registration center of the Global Private equity fund. In addition, under the commission of the Hong Kong Limited Partnership Fund Association, Haiyin will also lead the public relations of several key topics, such as the connection between the Hong Kong Limited Partnership Fund and the global family office industry, to connect with the global private banking industry, such as S-Bank Funds, and the expansion of withdrawal channels, as well as linking funds established in the Middle East, etc.
spk03: Highwind International's Cayman Funds also continued to develop steadily, offering clients attractive and stable returns across a variety of strategies, with AUM currently exceeding RMB 700 million. Our Cayman Funds segment has now become a platform for Hiwin 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. In the future, we will continue to expand our Cayman Funds franchise by nurturing in-house active management strategies as well as by building up index-based offerings. Highwind International's standing and achievements in the investment industry have also been further recognized recently. On February 20, 2023, the Council of the Hong Kong Limited Partnership Fund Association, HKLPFA, elected Highwind International as vice chair. As such, we began to work with regional institutions such as Haitong International, SBDB International, China Life Insurance, CNCB Investment and other members of the association to further promote the development of Hong Kong into a leading domicile for global alternatives managers. HKLPF-A has also assigned a series of strategic projects to Hywin as lead, including promoting the synergies between the HKLPF regime and the private banking and family office sectors, piloting secondary funds as additional exit vehicles for investors, and setting up beta funds in the Middle East to channel investor capital towards Asia, etc.
spk01: With our deep understanding of high-end customer service, Hainan's family office service is also constantly improving. On January 9th this year, Hainan's family office team hosted the 7th Asia-Pacific Financial Forum, which is a series of events hosted by the 2022 International Personal and Family Financial Commission. annual Chinese family office top 50 list. The forum was organized by the Financial Management Magazine and the Treasury. This award has also become the benchmark of the Asia-Pacific region's position as an excellent financial management institution. As an institution that develops family financial management business as early as possible in the industry, Haiyin not only continues to set up in the national scope, but also greatly develops overseas business with Hong Kong as a bridge. It has become one of the leading middle-income institutions in Hong Kong to open a family office business. It is also one of the leading institutions in the world to promote Hong Kong's special district government. At the same time, this year, Haiyin has also established a high-end customer service company, Heaven Club. around wealth management, family management, business management, and the field of service expansion to accompany customers and families throughout their lifetime to provide deep services including single-family, legal tax, and health management. Recently, Haven Club has also organized a number of ultra-high-end customers to visit Hong Kong, and to communicate and plan with world-class private management agencies, private banks, and trust agencies. Next, onto our family office services. Hyran's family office capabilities have also continued to develop as our services continue to diversify. On January 9,
spk03: 2023, Haiwen's family office team was included in the 7th Asia-Pacific Wealth Forum's list of top 50 family offices of the year in China at the 2022 International Private and Family Wealth Management Award Ceremony. The forum hosted by the Wealth Management Magazine and the think tank, Cai Ce, has made these awards a benchmark for excellence in wealth management in the Asia Pacific region. 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 the hub. As one of the first Chinese-funded institutions to offer family office services in Hong Kong, HiWin now sets an example promoted worldwide by the Hong Kong SAR government. In addition, this year, HiWin established the HiWin Club, which specializes in value-added services for ultra-high-network clients. The Highwind 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 operations, legal and tax planning, and health management. Recently, Highwind 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 trusts. In the first quarter of this year, Highwind Club's core team also put on road shows in Beijing, Shanghai, Shenzhen, and Chengdu in order to promote its vision and its resources and develop a network of high-end clients.
spk01: These are the results we achieved in terms of wealth management, asset management, and family office services. This is also a good example of Hainin's business resilience. Next, I will show Hainin from the perspective of customer management, talent team, business layout, and technology, and other aspects, in terms of improving customer year-on-year performance and operating quality. First of all, from the perspective of customer data, As of December 31, 2022, our total number of customers reached 14.6 million people, which increased by 8.7% in total. The active number of customers is close to 3.7 million people, which increased by 3.9% in total. Among them, the network payment rate of customers reached 80.5%. The average trading volume of private products reached 3.6 million yuan.
spk03: We have just discussed highlights in some of our key segments. Next, we will discuss highlights on operations. First, our client metrics. Client operations in the first half of fiscal year 2023 also continue to reflect our business development momentum. As of December 31st, 2022, 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. Repeat investment rate reached 80.5%. Average transaction value per private equity product transaction amounted to 3.6 million RMB.
spk01: The second point is that our financial team and business layout is also in good shape. The money is always in a dynamic structure. Until December 31, 2022, the total number of financiers was 1,738, which increased by 7.6% in total. The team of financiers of 11 branch companies of Haiyin Funds nationwide is also further expanding. The professional service capability is also upgrading again. We believe that 2023 will be the year of Haiyin's further opening of diversified products. In terms of the layout of the net point, as of December 31, 2022, we covered 88 key cities and 177 wealth centers. Although they are on par with the previous year, the layout is more focused on high-end customers such as the Long Triangle, Daban District, Huanbo Sea, and the Central and Western Departments. With the recent progress of Hong Kong Transparency and Hong Kong-Hong Kong-Australia Transparency, we believe that The creativity of the first half of the year and the level of integration will also be improved. Hainan will also use this as an opportunity to strengthen the link between the first half of the year and the second half of the year to seize the opportunity brought by regional development.
spk03: Some key highlights on our coverage network. Our relationship manager team expanded further during the first half fiscal year with the total number of relationship managers reaching 1,738 reflecting a year-on-year growth of 7.6%. Highlands Public Market Fund Distribution Division 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 in 2023 and further diversify our revenue growth. In terms of our distribution footprint as of December 31st, 2022, Highwind had 177 wealth centers covering 88 cities, same as 2021. Today, we have a solid presence across the Yangtze River Delta, the Greater Bay Area, the Bohai Rim, the Central and Western regions, and other regions with high concentrations of high-net-worth clients. 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. In this context, Taiwan is strengthening links with the Greater Bay Area to capture opportunities in this regional development.
spk01: Our technology upgrade strategy is also steadily advancing, continuously improving customer experience and managing efficiency. In terms of wealth, Hanyin uses mature cloud computing capabilities to move applications from local deployment to the cloud, and also realized a safer and more greener mixed cloud deployment. and provide higher-level financial services to customers. Our opportunity communication service platform was officially launched in 2022. Opportunity communication is a professional platform that provides fund transactions to institutional customers to help institutions realize the comprehensive onlineization of fund investment transactions and increase fund investment efficiency to control risk management. In addition, the long-term marketing system, YouPay통, was officially invested in and used in 2022. Next, our technology. Our technological upgrade strategy was designed to provide a better client experience and greater operational efficiency.
spk03: HiWin 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. Officially launched in 2022, our JiHuiTong InvestPath 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. Separately, You Pei Tong Allomaster, our scenario-based sales and marketing system, also officially went live in 2022. 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, all of which give Hywind the opportunity to provide more integrated one-stop wealth management services.
spk01: In the long-term growth of the wealth management industry and the process of serving customers, we have a more precise understanding of the needs of customers. In 2022, we have developed a two-wheeled development strategy for wealth plus health. We have advanced into the health industry and have also acquired a large number of health insurance companies, the International Medical Regulatory Center and Zhicheng He'ai Regulatory Center. On the basis of the core advantages of the existing institutions, we also integrate international first-class resources to create a new form of high-end health management in China. Through this technology, we have also built an AI health assessment system and management platform for the health management business, and refined management customer data. At the same time, combined with medical examination and health management, we have also implemented a dedicated health management plan for customers. Currently, the total number of Hainan Health customers has reached 28,763. In the first half of 2023, the health care business achieved a revenue of RMB12.44 million. The number of service personnel reached 4,936. The average customer base price is RMB2,520. The health care business also achieved RMB25.86 million. The number of service customers reached 1,178. Next is our highway health segment. Our longstanding relationship with many of our clients
spk03: gave us the opportunity to expand into health management services. In 2022, we officially announced our wealth plus health dual-platform strategy. Since then, Hyman Holdings entered the health management industry by acquiring Grand Doctor, Life Infinity, and Sincerity and Compassion Health Management Center. The strategic vision of Highwind Health is to create a new paradigm of high-end health management in China. Highwind Health is differentiated 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. Hyman Health has also developed an AI-based 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 higher-end solutions for clients. In the first half of fiscal 2023, Taiwan Health achieved revenue from physical examinations at 12.4 million RMB and revenue from health management at 25.8 million RMB. Total number of Taiwan Health clients reached 28,763 clients. Number of medical examination visits was 4,936. with an average visit price of 2,520 RMB, 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. Through Highwind Health, We believe we are creating a new competitive mode for ourselves while also earning the trust of our clients and their families by providing them with more comprehensive health safeguards.
spk01: Haiyin, while focusing on improving the operating capacity and efficiency, is more actively involved in the sustainable development of ESG, which is conducive to social justice and environmental protection. In December of last year, Haiyin issued its first corporate social responsibility report, and it supported the 2022 Year of Responsibility for ESG Award held by the well-known Chinese media, Peng Pai. This marks the company's values of pursuing and striving for long-term benefits for investors, customers, employees, industry partners, and society. While we are focused on growing our businesses and improving operational efficiency, HiWin also remains very strongly committed to sustainable ESG development, public welfare, and environmental protection.
spk03: In December last year, we released our first corporate social responsibility report, and Hybron 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, clients, employees, the industry, the public, and other stakeholders. 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. 海银在2022年的总体表现体现了公司的稳健和韧性,
spk01: With the release of the epidemic policy, the global market is also recovering. The Chinese financial management industry is also accompanying the warm-up of the Chinese economy to present greater vitality. In the future, we will continue to maintain a deep growth in financial business and focus, and on this basis, focus on high-quality customers' needs for health, actively opening up health businesses, helping customers realize double profits in wealth and health, and creating more investment returns for shareholders.
spk03: In conclusion, 2022 was a year of resilience and modest growth for Hiwin. As we look ahead into 2023, we believe there is a great opportunity for the wealth management industry to re-energize as China's economy as well as Chinese investor sentiment rebounds. Taking advantage of our leadership in wealth management, 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. Thank you, Madam Wang, and thank you for joining us today. 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. In the six months ended December 31, 2022, our total net revenues were $1.0 billion, up 17.6%. Looking at our revenue breakdown, Revenue for our wealth management segment was $970 million for the first half of fiscal year 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, 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 if 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. 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. 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 believe in our EAM business and our Cayman Funds business, we are a market leader in our industry. This is the first quarter where we consolidate Highwind Health's financials after we completed three acquisitions in 2022. Highwind Health segment revenue and net losses for the six months was $38.3 million and minus $24.2 million respectively. Last year, we were in the initial stage of integrating and transforming our health businesses. 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%. Compensation and benefits increased 16.6% to $576.2 million, which is in line with business volume growth Health-related cost was $26.2 million. Sales and marketing expenses increased 4.8% to $182.6 million, which is due to our good cost control measures. 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. 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%. Operating margin was 9.9%, flat year-on-year. 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 31st, 2022, we had $574.9 million in cash and cash equivalents and 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. 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 marks an exciting new entry into highway health for us. Thank you, everyone. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
spk02: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and write for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Peng Zhang from Nomura. Please ask your question, Peng.
spk05: Our first question comes from the line of Peng Zhang from Nomura. Please ask your question, Peng. 我现在把我的问题translate to English. Thanks, Madison, 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.
spk01: So we are also based on this kind of trend judgment and timely adjustment of the product structure. So we can see that last year and the second half of the year, we were very cautious about the selection of second-tier market products. So the strengthening and increasing are particularly inclined to the short-term and more certain products. So from the overall estimate, we are still steady and close. and did not weaken the entire target. Regarding the strategy of our recent products in 2023, we all think that the market is still warming up. Of course, this warm-up still needs to wait for more data to be verified to strengthen this confidence. So this year, we will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. We will pay more attention to the strategy of second-tier market products. In addition, in terms of overseas, the direction of the configuration, we will focus more on fixed income products this year, as well as overseas insurance and EM, these types of products. Because in this way, they can emphasize the separation of safety and risk. Okay, thank you.
spk03: Thank you, thank you, John. Let me translate for Madam Wang. So, yes, you're right in that you know, equity market volatility was quite high in, you know, 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 secondary market products or NAV-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 NAB-based products, secondary markets or secondary markets-linked products, for example, enhanced index funds or quant funds. And 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 drawdown as well as the product, the fund managers 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 market volatility, we may put high emphasis on private equity for example or or overseas or Hong Kong based insurance and of course our EAM and we will emphasize on risk diversification and risk management a product diversification and risk management with our clients as well Thank you Thank you
spk02: Our next question comes from the line of Ruoxiang Ye from ChinaCity. Please ask your question, Ruoxiang.
spk00: Hello, everyone. I'm Ruoxiang Ye from ChinaCity. First of all, congratulations on your excellent performance in 2022. And thank you for the opportunity to ask questions. I would like to ask about the total revenue of this company, which increased by 17.6%. Okay, in English. Thanks, management team. 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.
spk03: 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 some of the media pickup and, you know, I think some of the media headlines say our EPADS, right, earnings per ADS fell. you know and but you know 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 you know it's reported on a US dollar basis it fell you know but I think you know so I want to maybe handle this question on on you know with several points first of all our earnings was flat primarily because of the 24 million renminbi losses that we recorded from Highway 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 12.6% in this period, which was up 2.6% year on year. Due to the strong cost control and the scale back in sales and marketing during this period, as we went more digital during COVID and lockdowns, et cetera, we were actually able to realize cost savings and therefore an increase in our operating margin on the wealth management side. Now, on the highway health side of things, I would offer a couple points. One is, this is the first time ever we begin to consolidate the three acquisitions that we made in 2022 and the consolidation period of Life Infinity and sincerity and compassion actually only began in September. So that's one. So what we're reporting is not necessarily reflecting the entire happy year for some of these acquired businesses. The second point is we were still in an initial phase of integration Right. Post acquisition and transforming and 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, right, for a significant period. amount of the reporting period. So going forward in the next reporting period in 2023, right, you will see sort of a more true representation of what the happier results of hybrid health should be. And, you know, hope that answers your question on what's behind the 24 million renminbi losses from hybrid health.
spk02: Thank you. Our next question comes from the line of Sandy Mehta from Evaluate Research. Please ask your question, Sandy.
spk04: Yes, congratulations on the very strong results. Just to follow up on your previous comments on health care, when do you expect or what is the progression towards the health care 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.
spk03: Thank you, Sandy. Hi. Okay, so I will take this question as well. I think, you know, 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 – putting out a specific number 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 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, well, I think we are comfortable in saying that we could be narrowing losses on a per-clinic level, but I think it's perhaps early for us to say exactly when they will be break-even. And that's on the profitability. And then on the business growth side, I think what would be interesting in the next reporting period is it's likely to see a a very large increase in the high-end health revenue, because again, the reporting period in this reporting period is heavily distorted, because the clinics were closed, because the consolidation period was really only you know, three months, right, since September for, you know, life and sanity and sincerity and passion. So I think the growth, you know, we are quite confident, you know, there's a lot more we can do in the health side. And the one thing I really wanted to point out is the very significant synergies, right, that we believe there is between our wealth business and our health business. And ultimately, you know, I think health is a great, great client acquisition, right, business model for us as well. And, you know, on the medical examination side, you know, larger volume, larger amount of traffic. And then on the health management side, really deep down, you know, deep dive into, you know, client profiles and very high, you know, very, you know, personal high-end 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 health. And then, you know, and then we'll get to break even, you know, when we get to a critical volume in these businesses.
spk02: Great. 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.
spk03: 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.
spk02: Thank you. This concludes the conference call. You may now disconnect your line. Thank you.
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