Julong Holding Ltd (JLHL) 2025 Q2 法說會逐字稿

Hello, ladies and gentlemen. Thank you for standing by for Julong's first half of fiscal year 2025 earnings conference call. (Operator Instructions)

Today's conference call is being recorded. I will now turn the call over to your host from Julong, Annie Tien, IR Manager for the company. Please go ahead, Annie.

Thank you very much. Hello, everyone, and welcome to Julong's earnings conference call for the first half of fiscal year 2025. The company's financial and operational results were released earlier today and are available online by visiting the IR section of our website at ir.julongzx.com.

Please note that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve in higher risks and uncertainties. As such, the company's results may materially differ from today's views. Further information regarding this and other risks and uncertainties is included in the company's prospectus and that the public filings is filed with the US SEC. The company does not assume any obligation to upgrade any forward-looking statements except as required under applicable law.

Participants on this call will include our Founder, Chairman and Chief Executive Officer, Mr. Jiaqi Hu, who will provide a company overview and update on our strategic initiatives with highlights from the period. Our Chief Financial Officer, Ms. Airu Chen will then provide details on the company's financial results for the period. We will then open the call for questions.

I will now turn the call over to Julong's Chief Executive Officer, Mr. Jiaqi Hu. Please go ahead, sir.

(interpreted) Hello, everyone. Welcome to Julong's first earnings call. Thank you for joining us today.

Julong listed on Nasdaq on June 26, 2025, marking a major milestone in the group's journey. Our successful IPO stands as a testament to the group's enduring strength and trusted reputation built over the years, and more importantly, paved the way for our rapid high quality future development.

As a leading provider of intelligent integrated solutions in China, our business serves a diverse nationwide customer base, sending public utilities, commercial properties, and multi-family residential properties operating at scale. Over the years, we have established a trusted reputation by ensuring the successful and on-time execution of complex projects through initiatives like deliveries before deadline and our customer first approach.

We have gradually developed three key business lines engineering solutions for intelligent projects, operation and maintenance of intelligent projects, and sales of intelligence systems, equipment and materials. With the pioneering spirit, we aspire to lead China's intelligent, integrated solutions industry, exceeding customers' expectations, embracing innovation, and investing in technology to define the industry's future.

In the first half of fiscal year 2025, we achieved a robust, high-quality growth in both revenue and profitability amid a surge in global demand for intelligent building solutions, harnessing our dual strength of tech-powered execution prowess, and strong credibility reinforced by our IPO. I am especially proud of our team's consistently exceptional execution in an ever-changing operating environment.

Our business model's resilience and breadth of our diversified solutions empower us to adaptively navigate today's macroeconomic conditions while laying a solid foundation for long-term sustainable growth. Let me walk you through our business performance and strategic initiatives and share how Julong is sitting in this window of industry opportunity to create long-term value.

We released our first earnings report since our IPO earlier today. For the six months ending March 31, 2025, defined as the first half of fiscal year 2025, the company achieved a total revenue of over RMB100 million, up 10% year over year, driven primarily by structural optimization across our business lines. Let's take a closer look at each segment.

First, our engineering solutions for intelligent projects, the core of our operations and the contributor of over 90% of revenue delivered 13.4% year-over-year revenue growth in the first half of fiscal year 2025. This was mainly driven by our enhanced ability to scale and replicate projects more effectively reflected by two key metrics.

First, our new contracts signed and under execution increased significantly from 82 for the same period of last year to 144 this year, up 76% year over year. Second, boosted by a higher proportion of high value-added customized solutions, our average contract value increased year over year, underscoring broad market recognition of our ability to command a technology premium.

Our intelligence security project at a major international airport in Beijing and our system operation and upgrade project across 460 branches of a leading commercial bank in Southwest China are two prime examples. In both cases, we not only achieved technology premiums, but also delivered the benefits of long-term service.

Next, let me turn to our operation and maintenance of intelligent project segment. In the first half of fiscal year 2025, we strategically integrated maintenance services with new projects. Well, this costs some short-term revenue fluctuation for the segment. It has effectively strengthened the customer retention and overall life cycle value. We expect the operation and maintenance business to remain a reliable source of cash flow over the next three years.

Finally, for the sales of intelligent system equipment and materials, we strategically integrated equipment sales deeply into our overall engineering solutions. This adjustment allowed us to avoid competing on low margin standalone equipment, boosting overall project margins and customer retention.

Next, let me share an update on project signing and implementation. In terms of new projects, we signed 144 new engineer solutions contracts and began execution during the first half of fiscal year 2025. In addition, during the first half of fiscal year 2025, we signed 25 new engineering solutions contracts that have not yet commenced with total contract amount of RMB17.7 million, representing a healthy order backlog that will propel future revenue growth. Regarding project delivery, we continue to ensure high-quality execution thanks to our outstanding operational capabilities.

Meanwhile, we constantly enhance our credentials and brand reputation, deepening our differentiated competitive modes. Julong holds Class I licenses, electronic and intelligent engineer professional contracting in fire protection engineering professional contracting, and in security system design, construction and maintenance. Those top tier qualifications combined with our IPO-backed credibility form a unique and hard to replicate advantage that will truly differentiate us from our domestic peers, serving as a key competitive barrier as we potentially expand into overseas markets.

On the technology front, we have consistently invested in R&D for intelligent security, fire protection, IOT, and emergency command systems. As of March 31, 2025, the company had obtained a total of 23 patents and 28 software copyrights. In terms of brand building and market development, our Nasdaq listing has greatly elevated our brand visibility, creating a solid foundation of trust for future global partnerships.

Strategically, we are actively capitalizing on the opportunities unleashed by China's tech power to go global trend with a long-term goal of establishing our brand as a global benchmark intelligent engineering, expanding into overseas markets in phases, while consistently strengthening our core domestic operations. At the same time, we will continue to drive innovation and upgrade our business model, fostering an open and collaborative ecosystem.

In summary, we proved the resilience of our core strengths in the first half of fiscal year 2025, highlighted by 10% revenue growth and 30.2% net income growth. The global boom in intelligent buildings presents an opportunity for us to evolve from a China leading into a global benchmark. Moving forward, our strategy remains an anchor in tech-driven execution as our foundation now with IPO backed credibility as our shield, capturing high margin returns while enhancing service for our domestic customer base to maintain stable cash flows.

With that, I will turn the call over to our CFO, Ms. Airu Chen, who will discuss our key financial results. Please go ahead.

(interpreted) Thank you. Now I'd like to discuss our financial results for the first half of fiscal year 2025. Please note all amounts are in RMB unless otherwise stated.

We recorded strong financial results in the first half of fiscal year 2025 with significant year-over-year increases in revenue and profitability. Total revenue grew by 10% year over year, mainly driven by the 13.4% year-over-year revenue increase from our core engineering solutions for intelligent project business. Our growth profit rose 15.6% year over year, and growth margin improved 0.8 percentage points as we continue to reduce human resource costs through personnel structure and project management optimizations.

We also enhance our revenue mix and overall business structure by prioritizing high margin software and services. Notably, operating income and net income increased by 30% and 30.2% year over year respectively, outpacing revenue growth, demonstrating that our shift from scale expansion to quality growth has begun to deliver the benefits of scale and the operating leverage.

Looking at our financial results for the first half of fiscal year 2025 in more detail. Our total revenues increased by 10% to RMB102 million from RMB92.8 million in the same period the last fiscal year, primarily attributable to an increase in the number of intelligent projects for which we provided engineering solutions and an increase in the average service fee for engineering solutions for intelligent projects.

Revenues from engineering solutions for intelligent projects increased by 13.4% to RMB97.9 million from RMB86.3 million in the same period the last fiscal year. Revenues from operation and maintenance of intelligent projects were RMB4.3 million compared with RMB4.9 million in the same period the last fiscal year, a decrease of RMB0.6 million year over year. Revenues from sales of intelligent system equipment and materials were RMB10,000 compared with RMB1.67 million in the same period the last fiscal year, a decrease of RMB1.66 million year over year.

Cost of revenues increased by 9% to RMB85.5 million from RMB78.4 million in the same period last fiscal year. Gross profit increased by 15.6% to RMB16.7 million from RMB14.5 million in the same period the last fiscal year. Growth margin increased to 16.4% from 15.6% in the same period the last fiscal year, primarily due to the growing benefits of scale as revenues increased.

Operating expenses decreased by 22.1% to RMB3.1 million from RMB4.0 million in the same period the last fiscal year, primarily due to our continuous efforts to reduce costs and improve efficiency. Operating income increased by 30% to RMB13.6 million from RMB10.5 million in the same period the last fiscal year. Net income increased by 30.2% to RMB11.6 million from RMB8.9 million in the same period the last the fiscal year. Basic and diluted net income per share increased to RMB0.58 from RMB0.44 per share in the same period last fiscal year.

Moving to our balance sheet as of March 31, 2025, we had cash and cash equivalents and a restricted cash of RMB21.4 million compared with RMB20.8 million as of September 30, 2024. Our cash and cash equivalents and the restricted cash primarily consists of cash and time deposits with terms of three months or less.

To sum up, we were pleased to deliver a strong financial performance in our first earnings report as a public company. We remain confident that our solid financial position and growing competitiveness will empower us to deliver long-term value to our shareholders.

Okay, this concludes our prepared remarks today. We will now open the call to questions. Operator, please go ahead.

(Operator Instructions)

There seems to be no questions. I will now hand the call back to management for closing remarks.

Thank you once again for joining us today. If you have further questions, feel free to contact Julong Investor Relations through the contact information provided on our website.

This concludes this conference call. You may now disconnect your line. Thank you.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.