Highest Performances Holdings Inc. Announces Unaudited Financial Results for the First Half of the Fiscal Year 2024
Highest Performances Holdings (NASDAQ: HPH) reported a 48% revenue decrease to RMB35.6 million (US$5.0 million) for the first half of fiscal 2024, compared to RMB68.4 million in the same period in 2023.
The net loss increased by 5.7% to RMB33.3 million (US$4.7 million). Revenue from wealth management services fell by 43.4%, driven by a decline in both publicly and privately raised fund products.
Despite reduced revenues, HPH achieved significant growth in its institutional business, with transaction value and balances rising by 129% and 456%, respectively. The company also cut management and sales expenses by 40.7%.
The acquisition of Fanhua at the end of December 2023 significantly altered HPH's financial position, though its profits are not included in this period's results.
Looking forward, HPH aims to leverage strategic partnerships for global expansion and digital transformation to drive sustainable growth.
- Institutional business transaction value grew by 129% to RMB4.8 billion.
- Outstanding balance in the institutional sector increased by 456% to RMB2.9 billion.
- Management and sales expenses reduced by 40.7%.
- Significant strategic partnerships formed, including with Singapore White Group for global expansion.
- Completion of a share exchange transaction, acquiring a controlling interest in Fanhua.
- Net revenues decreased by 48% to RMB35.6 million.
- Net loss increased by 5.7% to RMB33.3 million.
- Revenue from wealth management services decreased by 43.4%.
- Revenue from asset management services fell by 59.2%.
- Sundry loss of RMB1.1 million compared to previous income of RMB0.7 million.
- Income tax expense of RMB7.9 million due to allowance of deferred tax assets.
Insights
Highest Performances Holdings Inc. has reported a 48% decrease in net revenues for the first half of fiscal year 2024 compared to the same period in 2023. The company generated RMB35.6 million (US$5.0 million) in net revenues, down from RMB68.4 million in the previous year. Net loss has also increased by 5.7% to RMB33.3 million (US$4.7 million), with a basic and diluted loss per ADS of RMB0.526 (US$0.074).
This considerable decline in revenues alongside increasing net loss raises significant concerns about the company's operational efficiency and financial health. The main drivers include a decline in investor confidence due to market volatility, impacting revenues from both publicly and privately raised fund products. Additionally, asset management services and other services saw significant revenue reductions of 59.2% and 65.2%, respectively.
On a positive note, the company's acquisition of Fanhua may provide some long-term strategic benefits, including an expanded market presence and additional cash resources. However, the financial results for the reported period do not yet include any contributions from Fanhua, making it difficult to assess the immediate impact of this acquisition. Investors should monitor future reports for tangible benefits from this acquisition and any synergies it may bring.
Overall, the company's significant reduction in revenues and increased net loss suggest potential risks for investors, particularly in the short term. The long-term benefits of strategic acquisitions and partnerships will take time to materialize and may not immediately offset current financial challenges.
While there are evident declines in key financial metrics, it's important to consider the broader economic environment and the company's strategic moves. The company’s efforts to establish a 'leading global intelligent financial services platform' through the acquisition of Fanhua and its partnership with White Group suggest a proactive stance towards market expansion and diversification.
Market conditions have been challenging, particularly in the Chinese financial sector, where investor sentiment has been affected by economic uncertainties and regulatory changes. These broader factors have likely contributed to the reduced revenues from wealth management and asset management services, as well as a decline in investor risk appetite.
The company's strategic initiatives, including cost-saving measures and optimization of product offerings, indicate a resilience and adaptability which could potentially stabilize the business in the long run. However, the success of these measures will depend on their effective implementation and the ability to capitalize on synergies from recent acquisitions and partnerships.
For retail investors, it is critical to consider the potential long-term benefits of these strategic moves against the immediate financial setbacks. The ongoing integration with Fanhua and collaboration with White Group could position the company favorably for future growth, but this will require a period of adjustment and is dependent on market recovery.
GUANGZHOU, China, May 30, 2024 (GLOBE NEWSWIRE) -- Highest Performances Holdings Inc. (NASDAQ: HPH) (“HPH” or the “Company”), today announced its unaudited financial results for the first half of its fiscal year 2024 from July 1, 2023 to December 31, 2023 (the “reporting period”).
FINANCIAL HIGHLIGHTS FOR THE FIRST HALF OF THE FISCAL YEAR 2024
- Net revenues decreased by
48.0% to RMB35.6 million (US$5.0 million ) from RMB68.4 million for the same period of the fiscal year 2023; and - Net loss was RMB33.3 million (US
$4.7 million ) and net loss attributable to HPH’s shareholders was RMB33.3 million (US$4.7 million ), while HPH recognized net loss and net loss attributable to HPH’s shareholders of RMB31.5 million for the same period of the fiscal year 2023.
Mr. Yinan Hu, Chief Executive Officer of HPH, commented,
“In the first half of the fiscal year 2024, despite economic downturn and market uncertainties, we made positive progress in both retail and institutional fronts.
“In the retail sector, we remained committed to long-term strategies and suitability principles. Our focus on enhancing product screening and marketing service capabilities, coupled with measures like refining product offerings, establishing a multi-account system, and optimizing system support, resulted in an improved experience for both customers and financial advisors. This concerted effort ensured the stabilization of our customer base and business volume despite market fluctuations. Meanwhile, our institutional business saw significant breakthroughs. Our one-stop trading platform gained considerable traction among institutional clients. Additionally, we successfully leveraged external channel resources and forged long-term strategic partnerships with multiple major banks and insurance companies. Consequently, the transaction value of publicly raised fund by institutional clients and outstanding balance grew by
“At the strategic level, we responded to market dynamics with initiatives aligned with our long-term vision to ensure steady growth in the increasingly complex and dynamic environment. We have successfully completed a share exchange transaction with certain shareholders of Fanhua Inc. ("Fanhua"), acquiring a controlling equity interest in Fanhua at the end of December 2023. Through deep integration with Fanhua, we aim to jointly establish a "leading global intelligent financial services platform," further expanding our market presence in the financial services sector. In February 2024, the Company entered into a framework agreement with Singapore White Group Pte. Ltd. (“White Group”), aiming to leverage White Group’s strengths in capital raising and mergers and acquisitions in the international market to accelerate our intelligent development and global expansion. Through this partnership, we seek to break through development barriers and initiate a new phase of strong growth. Currently, we are in close collaboration with White Group and its partners regarding the implementation of various investment projects.
“Looking ahead to the second half of the fiscal year 2024, amidst the challenges posed by the current economic environment, we will maintain a resilient stance in adapting to market dynamics while unwaveringly executing our strategic plans. By fostering synergy with Fanhua, expanding our wealth management offerings, and advancing our institutional business, we aim to deliver superior and more diverse financial services to our clients. Simultaneously, we will persist in driving digital transformation and intelligent development to enhance service experiences, thereby achieving sustainable growth and long-term development for the Company.”
FINANCIAL RESULTS FOR THE FIRST HALF OF THE FISCAL YEAR 2024
The Company obtained control of the Fanhua at the end of December 2023 upon the completion of the transfer of shares according to the written share exchange agreement and when effective control being operationally obtained. The Company started to consolidate Fanhua’ s financial statement since December 31, 2023. The financial results for the first half of the fiscal year 2024 do not include any profits of Fanhua. The financial positions as of December 31, 2023 changed significantly mainly due to the acquisition of Fanhua, which also included preliminary purchase price allocation results.
Net revenues
Net revenues for the first half of the fiscal year 2024 were RMB35.6 million (US
- Net revenues generated from our wealth management services for the first half of the fiscal year 2024 were RMB30.3 million (US
$4.3 million ), representing a43.4% decrease from RMB53.5 million for the same period of the fiscal year 2023. In particular,
- Net revenues generated from the distribution of publicly raised fund products for the first half of the fiscal year 2024 were RMB24.6 million (US
$3.5 million ), representing a31.2% decrease from RMB35.8 million for the same period of the fiscal year 2023. The decrease is mainly due to the A-share market experiencing a phase of decline, resulting in a conservative sentiment among investors. The decrease in investor risk appetite has led to a lack of confidence in the market and investment products, negatively impacting the transaction value of publicly raised fund products and leading to a decrease in commission income; and - Net revenues generated from the distribution of privately raised fund products for the first half of the fiscal year 2024 were RMB5.7 million (US
$0.8 million ), representing a67.8% decrease from RMB17.8 million for the same period of the fiscal year 2023. The decrease was primarily because investors were influenced by market volatility and heightened uncertainty about the future so that they adopted a more cautious stance towards riskier products such as private equity funds, or decided to redeem early. Consequently, during the reporting period, both the transaction value and outstanding daily balance of our privately raised fund products decreased, resulting in a decline in commission income (including management fees); and (ii) performance-based fees of RMB0.5 million recognized in the first half of the fiscal year 2024, as compared to RMB1.8 million in the first half of the fiscal year 2023, representing a69.1% decrease.
- Net revenues generated from the distribution of publicly raised fund products for the first half of the fiscal year 2024 were RMB24.6 million (US
- Net revenues generated from our asset management services for the first half of the fiscal year 2024 were RMB0.5 million (US
$67,000) , representing a59.2% decrease from RMB1.2 million for the same period of the fiscal year 2023. The decrease was primarily due to the reduction in the size of the our actively managed fund of funds. - Net revenues generated from our other services for the first half of the fiscal year 2024 were RMB4.8 million (US
$0.7 million ), representing a65.2% decrease from RMB13.7 million for the same period of the fiscal year 2023. The decrease was primarily due to the decline in revenues from insurance consulting services and the consulting services related to trust and family wealth inheritance provided to clients.
Operating costs and expenses
Operating costs and expenses for the first half of the fiscal year 2024 were RMB63.0 million (US
- Cost of sales for the first half of the fiscal year 2024 were RMB8.4 million (US
$1.2 million ), representing a42.7% decrease from RMB14.6 million for the same period of the fiscal year 2023, which was primarily a combined effect of an decrease in commission expenses as a result of the decrease in the distribution of public raised fund products and privately raised fund products, and a decrease in commission expenses as a result of the decrease from revenues from insurance consulting services and the consulting services related to trust and family wealth inheritance provided to clients; - Selling expenses for the first half of the fiscal year 2024 were RMB11.0 million (US
$1.5 million ), representing a73.9% decrease from RMB42.1 million for the same period of the fiscal year 2023. This decrease was primarily due to (i) a reduction of labor costs caused by staff optimization; and (ii) a decrease in rental expenses as a result of the fact that we further focused on our advantageous areas and cutting unnecessary branch offices; and - General and administrative expenses for the first half of the fiscal year 2024 were RMB43.6 million (US
$6.1 million ), representing a12.6% decrease from RMB50.0 million for the same period of the fiscal year 2023, primarily due to (i) decrease in labor cost related to the optimization of our admin workforce; (ii) decrease in rental expense; and (iii) partially offset by an increase in expense related to the merger and acquisition transaction.
Investment (loss) income
Investment income for the first half of the fiscal year 2024 was RMB68,000 (US
Interest Income
Interest income for the first half of the fiscal year 2024 was RMB3.1 million (US
Sundry Income (loss)
Sundry loss for the first half of the fiscal year 2024 was RMB1.1 million (US
Income Tax Expense/Benefit
We recognized income tax expense of RMB7.9 million (US
Net Loss
We recognized a net loss of RMB33.3 million (US
Basic and Diluted Loss per ADS
Basic and diluted loss per ADS for the first half of the fiscal year 2024 was RMB0.526 (US
Cash and Cash Equivalents
As of December 31, 2023, we had cash and cash equivalents of RMB593.0 million (US
CONFERENCE CALL
Senior management of the Company will host a bilingual conference call in English and Chinese to discuss the Company’s unaudited financial results and business development for the first half of its fiscal year 2024 ended December 31, 2023.
Details for the conference call are as follows:
| Date/Time: | Thursday, May 30, 2024 at 9:00 PM U.S. Eastern Time | |
| (Friday, May 31, 2024 at 9:00 AM Beijing/Hong Kong Time) | ||
| Conference Title: Highest Performances Holdings Inc. Six Months Ended December 31, 2023 Earnings Call | ||
Please pre-register online in advance to join the conference call by navigating to the link provided below and dial in 15 minutes before the call is scheduled to begin. Conference call details will be provided upon registration.
Conference call pre-registration link: https://register.vevent.com/register/BI26600e8c5be14456b9d59621ba7f1a62.
Additionally, a live and archived webcast of the conference call will be available at HPH’s investor relations website: https://ir.puyiwm.com/news-events/events.
FOREIGN CURRENCY TRANSLATION
In this announcement, the unaudited financial results for the first half of the fiscal year 2024 are stated in RMB. This announcement contains currency conversions of certain RMB amounts into US$ at specified rates solely for the convenience of the reader. Unless otherwise indicated, all translations from RMB to US$ are made at a rate of RMB7.0999 to US
SAFE HARBOR STATEMENT
This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When HPH uses words such as “may”, “will”, “intend”, “should”, “believe”, “expect”, “anticipate”, “project”, “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from HPH’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: HPH’s ability to obtain proceeds from the Agreement; HPH’s goals and strategies; HPH’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the third-party wealth management industry in China; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets HPH serves and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by HPH with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in HPH’s filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. HPH undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
| Highest Performances Holdings Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands) | |||||||||||
| June 30, 2023 | December 31, 2023 | ||||||||||
| RMB’000 | RMB’000 | USD’000 | |||||||||
| ASSETS: | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | 164,470 | 593,039 | 83,528 | ||||||||
| Accounts receivable, net | 37,601 | 652,084 | 91,844 | ||||||||
| Short-term investments | - | 968,423 | 136,400 | ||||||||
| Other receivables | 23,143 | 198,640 | 27,978 | ||||||||
| Other current assets | 12,781 | 179,675 | 25,307 | ||||||||
| Total current assets | 237,995 | 2,591,861 | 365,057 | ||||||||
| Property and equipment, net | 1,566 | 92,579 | 13,039 | ||||||||
| Intangible assets, net | 1,791 | 470,056 | 66,206 | ||||||||
| Deferred tax assets, net | 16,552 | 47,585 | 6,702 | ||||||||
| Right-of-use assets | 13,607 | 148,022 | 20,848 | ||||||||
| Accounts receivable, net - non current | - | 711,424 | 100,202 | ||||||||
| Goodwill | - | 669,518 | 94,300 | ||||||||
| Other non-current assets | 22 | 244,166 | 34,390 | ||||||||
| Total assets | 271,533 | 4,975,211 | 700,744 | ||||||||
| LIABILITIES AND EQUITY: | |||||||||||
| LIABILITIES: | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | 6,292 | 410,424 | 57,807 | ||||||||
| Accrued payroll | 7,665 | 106,367 | 14,981 | ||||||||
| Lease liabilities, current | 4,793 | 61,614 | 8,678 | ||||||||
| Income taxes payable | 1,757 | 100,260 | 14,121 | ||||||||
| Short-term loan | - | 164,300 | 23,141 | ||||||||
| Other current liabilities | 10,559 | 201,412 | 28,369 | ||||||||
| Total current liabilities | 31,066 | 1,044,377 | 147,097 | ||||||||
| Other tax liabilities | 13,760 | 48,128 | 6,779 | ||||||||
| Accounts payable - non-current | - | 401,385 | 56,534 | ||||||||
| Other non-current liabilities | - | 33,374 | 4,701 | ||||||||
| Deferred income tax liabilities | - | 251,805 | 35,466 | ||||||||
| Non-current operating lease liabilities | 9,673 | 78,527 | 11,060 | ||||||||
| Total liabilities | 54,499 | 1,857,596 | 261,637 | ||||||||
| Commitments and contingencies | |||||||||||
| EQUITY: | |||||||||||
| Ordinary shares | 600 | 2,617 | 369 | ||||||||
| Treasury stock | - | (29 | ) | (4 | ) | ||||||
| Additional paid-in capital | 224,694 | 1,551,910 | 218,582 | ||||||||
| Statutory reserves | 23,071 | 23,064 | 3,248 | ||||||||
| Retained earnings1 | (31,498 | ) | (64,836 | ) | (9,132 | ) | |||||
| Accumulated other comprehensive income | 167 | 255 | 36 | ||||||||
| Total shareholders’ equity | 217,034 | 1,512,981 | 213,099 | ||||||||
| Non-controlling interests | - | 1,604,634 | 226,008 | ||||||||
| Total equity | 217,034 | 3,117,615 | 439,107 | ||||||||
| Total liabilities and equity | 271,533 | 4,975,211 | 700,744 | ||||||||
_______________
1 In June 2016, FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions, and reasonable and supportable forecasts in order to record credit losses in a timelier manner. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. The Company adopted the ASU No. 2016-13 in the first half of FY2024 on a modified-retrospective basis, the cumulative-effect adjustment reduce opening retained earnings balance by approximately RMB93,000 in the statement of financial position as of July 1, 2023.
| Highest Performances Holdings Inc. Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except for percentages) | |||||||||||||||
| Six months ended December 31, | |||||||||||||||
| 2022 | 2023 | ||||||||||||||
| RMB’000 | RMB’000 | USD’000 | Change (%) | ||||||||||||
| Net Revenues: | |||||||||||||||
| Wealth management | 53,546 | 30,328 | 4,272 | (43.4 | )% | ||||||||||
| Asset management | 1,161 | 474 | 67 | (59.2 | )% | ||||||||||
| Other services | 13,722 | 4,775 | 672 | (65.2 | )% | ||||||||||
| Total net revenues | 68,429 | 35,577 | 5,011 | (48.0 | )% | ||||||||||
| Operating costs and expenses: | |||||||||||||||
| Cost of sales | (14,601 | ) | (8,368 | ) | (1,179 | ) | (42.7 | )% | |||||||
| Selling expenses | (42,135 | ) | (10,991 | ) | (1,548 | ) | (73.9 | )% | |||||||
| General and administrative expenses | (49,952 | ) | (43,638 | ) | (6,146 | ) | (12.6 | )% | |||||||
| Total operating costs and expenses | (106,688 | ) | (62,997 | ) | (8,873 | ) | (41.0 | )% | |||||||
| Loss from operations | (38,259 | ) | (27,420 | ) | (3,862 | ) | (28.3 | )% | |||||||
| Other income: | |||||||||||||||
| Interest income | 4,579 | 3,125 | 440 | (31.8 | )% | ||||||||||
| Investment (loss) income | (176 | ) | 68 | 10 | N/A | ||||||||||
| Sundry income (loss) | 723 | (1,080 | ) | (152 | ) | N/A | |||||||||
| Loss before income taxes | (33,133 | ) | (25,307 | ) | (3,564 | ) | (23.6 | )% | |||||||
| Income tax benefit/(expense) | 1,679 | (7,945 | ) | (1,119 | ) | N/A | |||||||||
| Net loss | (31,454 | ) | (33,252 | ) | (4,683 | ) | 5.7 | % | |||||||
| Highest Performances Holdings Inc. Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss (Continued) (In thousands, except for shares, income per share, income per ADS) | |||||||||||
| Six months ended December 31, | |||||||||||
| 2022 | 2023 | ||||||||||
| RMB’000 | RMB’000 | USD’000 | |||||||||
| Net loss per share: | |||||||||||
| Basic and diluted | (0.348 | ) | (0.350 | ) | (0.049 | ) | |||||
| Net loss per ADS: | |||||||||||
| Basic and diluted | (0.522 | ) | (0.526 | ) | (0.074 | ) | |||||
| Weighted average number of shares used in computation: | |||||||||||
| Basic and diluted | 90,472,014 | 94,885,079 | 94,885,079 | ||||||||
| Net loss | (31,454 | ) | (33,252 | ) | (4,683 | ) | |||||
| Other comprehensive income (loss) | 351 | 88 | 12 | ||||||||
| Total Comprehensive loss | (31,103 | ) | (33,164 | ) | (4,671 | ) | |||||
FAQ
What were HPH's net revenues for the first half of fiscal 2024?
By how much did HPH's net loss increase in fiscal 2024?
How much did HPH's management and sales expenses decrease?
What was the growth in transaction value and outstanding balance in HPH's institutional business?
What was the revenue decrease in HPH's wealth management services?
Did HPH form any significant partnerships recently?
How did the acquisition of Fanhua affect HPH's financial position?
