Zhibao Technology Inc (ZBAO) 2025 Q2 法說會逐字稿

Good morning, and welcome to the Zhibao Technology first-half fiscal year 2025 financial results conference call for the period ended December 31, 2024.

Your hosts this morning are Founder, Chairman, Chief Executive Officer, Mr. Mitchell Ma; Chief Financial Officer Mr. Yuanwen Xia; and Investor Relations Manager, Mr. Daniel Tao.

At the request of the company, today's call is being recorded and will be available for replay on the Investor Relations section of the company's corporate website ir.zhibao-tech.com. You may access the teleconference replay of this call approximately three hours after the conference call end time by dialing 1-844-512-2921 or 1-412-317-6671, referencing access ID 137-52-933. (Operator Instructions)

At this point I would like to turn the call over to Scott Powell, President of Skyline Corporate Communications Group.

Thank you, operator,; and thanks, everyone, for joining us on this call.

Before we begin, I'd like to read you our forward-looking statements provision. During today's conference call, company representatives may make forward-looking statements. Any statements made in this presentation about future operating results or other future events are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Please know that actual results achieved by the company may differ materially from such forward-looking statements. A discussion of factors that could cause such differences appears in the Risk Factors sections of the company's 6-K.

And now, Zhibao Technologies' Founder, Chairman, and Chief Executive Officer, Mr. Botao Ma, will present an analysis of the company's performance during the first six months of fiscal year 2025 and then provide some outlook for the second half of 2025. Mitchell, please go ahead.

Thank you, Scott. For the first six months of fiscal 2024, Zhibao made a substantial progress in its strategy to grow revenues, diversify the revenue base, increase gross profit, manage expenses, and enhance strategic partnership relationships. We had a 74% increase in revenues in the first half. And to maintain this momentum, we've projected revenue growth of over 70% for the full fiscal year 2025.

Through the first six months of the fiscal year, there were several developments that have assisted in our performance and have helped build the foundation for growth over the coming months. We announced the launch of the ZBOT, an advanced artificial intelligence AI agent designed to empower Zhibao's sales staff with enhanced efficiency.

The launch of ZBOT marks a major step in Zhibao's commitment to leveraging cutting-edge technology to optimize sales operations and to improve the overall customer experience. ZBOT now serves as an AI agent for Zhibao's sales teams, assisting employees in identifying target customers, providing tailored solutions, and coordinating project implementation.

By automating routine tasks, ZBOT enables sales representatives to dedicate more time to engaging potential clients and cultivating meaningful relationships with clients, ultimately leading to great cross-selling and upselling opportunities.

Our Sunshine Insurance Brokers subsidiary secured a significant contract to provide brokerage services for Huiminbao Inclusive Medical Insurance in outside Yunnan. We also expanded our footprint in natural gas insurance markets through a new partnership with YipinSmart, a subsidiary of China Gas.

Further, we made a strategic expansion through the Chong Bao Bao platform into the pet insurance market and reached a strategic investment cooperation with sport covers to jointly create a new business model of digital sports and insurance brokerage.

To further diversify our learning pool, we won a contract to provide Hui Jia Bao, an inclusive homeowners' insurance products in Nanjing, China, and partnered with PICC Property & Casualty Company Limited and Munich Re, Beijing, to launch a new generation of medical insurance products in China.

Lastly, we entered into a securities purchase agreement with an institutional investor to provide loans in aggregate principal amount of up to USD8 million under three trenches. As of December 31, 2024, we received gross proceeds of USD2.5 million under first tranche.

We achieved tremendous revenue growth of 74% in the first six months of the fiscal year, which demonstrates that we can successfully execute on our strategic plan.

Over the last few months, we have focused on expanding our reach in the industry through several strategic partnerships and agreements that have had a great impact on our growth and the diversification of our revenue and cash flow streams.

Overall, the financial position of our business remains strong as we have seen an acceleration in the expansion in our home market, indicating a growing acceptance of our 2B2C business model and a broader acceptance of our digital brokerage platform and the digital insurance solutions.

As of December 31, 2024, our business grew the number of B Channels we work with from approximately 1,500 in the same period of 2023 to over 2,000. B Channels are distributed amongst diverse market segments and is a key components to growing our to 2B2C embedded digital interest model.

Additionally, as of December 31, 2024, we reached and served in excess of 20 million customer users, which we expect will continue to drive revenue in the coming years.

For the rest of fiscal year 2025, we plan on driving the organic growth of our company through continued investments in our sales force and technology platform. With this strategy, we look to work towards achieving continued growth at the levels seen over the six month period ended December 31, 2024.

We project a revenue growth of over 70% for the full fiscal year 2025. As we continue to make progress in our growth strategy and improve our ability to gain high returns from our investments, we believe that we can build on the momentum of our growth and the business and the financial performance in the second half of this current fiscal year.

Our management team remains committed to maximizing shareholder value through a combination of strategic acquisitions, growth initiatives, diversifying the company's revenue base, forming long-term partnerships, and the conquests that drive attractive top and bottom line results and investing in opportunities that provide strong returns and dependable cash flow streams.

Now I will pass the call over to Mr. Yuanwen Xia to review the financial results for the first six months of fiscal year 2025.

Thank you, Mitchell. In the next few moments, I will take some time to review and give some commentary around our financial performance for the first half of fiscal year 2025.

Total revenues in the six months ended December 31, 2024, were approximately RMB146.4 million, or $20.1 million, compared with approximately RMB84.3 million in the same period of 2023, an increase of approximately RMB62.1 million or 73.7%, primarily due to an increase of approximately RMB69.6 million in insurance brokerage service fees, partially offset by a decrease of approximately RMB7.5 million in managing general underwriting services.

The increase in insurance brokerage service fees was due to securing new customers in the six months ended in December 31, 2024, while the decrease in MGU service fees was due to the closure of business by a reinsurance partner in the high-end medical sector in the year of 2023.

Cost of revenues for the six months ended December 31, 2024, increased to approximately RMB103.8 million, or $14.2 million, from approximately RMB54.2 million in the same period of 2023, an increase of approximately RMB49.6 million, which was in line with increase in revenues.

Selling and marketing expenses for the six months ended December 31, 2024, decreased to approximately RMB18.6 million, or $2.5 million, from approximately RMB21 million in the same period of 2023. The decrease was primarily attributable to decreased expenditures incurred in advertising and promotional campaigns for our digital insurance solutions as we are establishing our reputation among customers and reducing our spending on advertising and promotional campaigns.

General and administrative expenses for the six months ended December 31, 2024, increased to approximately RMB14.2 million, or $1.9 million, from approximately RMB10.1 million in the same period of 2023, an increase of approximately RMB4.1 million.

The increase of general and administrative expenses was primarily due to an increase in professional service expenses after our listing on Nasdaq. The ratio of general and administrative expenses to revenue decreased to 9.8% from 12.1% in the same period of 2023.

Research and development expenses for the six months ended December 31, 2024, decreased to approximately RMB5.9 million, or $0.8 million, from approximately RMB7.3 million in the same period of 2023, a decrease of approximately RMB1.4 million, which was mainly due to a decrease in head counts of personnel in our research and development department.

As a result of foregoing, income from operations for the six months ended December 31, 2024, was approximately RMB3.8 million, or $0.5 million, from loss from operations of approximately RMB8.4 million in the same period of 2023.

Net loss for the six months ended December 31, 2024, was approximately RMB1.5 million, or $0.2 million, compared to net loss of RMB8.5 million in the same period of 2023. Non-GAAP adjusted net income for the six months ended December 31, 2024, was approximately RMB5 million, or $0.7 million.

Non-GAAP adjusted net income excludes the impact of gain from early termination of leases, loss from settlement of convertible notes, and changes in fair value of derivative liabilities. Basic and diluted net loss per share in the six months ended December 31, 2024, were RMB0.05, or loss of $0.01; and RMB0.05, or loss of $0.01, respectively.

As of December 31, 2024, the company had a cash and cash equivalents of approximately RMB28.1 million, or $3.9 million, compared to approximately RMB2.4 million as of June 30, 2024.

Now, I would like to hand the call back to Mitchell.

Thank you. Operator, we are ready to open the line for questions.

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions)

Hunter Diamond, Diamond Equity Research.

Congratulations on the results. So my question relates to the natural gas insurance segment. So over the next 12 to 24 months, can you discuss a little what you see is the growth for that; the scaling; and where you see, beyond the current 18 city footprint, the business going?

Yeah. Let me answer this question. This is a very promising business. We just won the first of this type of business. China Gas is a national gas company, and they have lots of branch companies all over the country. So we pretty sure we're going to do more business with this company with their branches. And also, we are going to provide service to other gas companies by utilizing our gas business solutions.

Great. And then the second question was on the pet insurance market. Can you talk about maybe just what you can say on the growth metrics or the revenue targets you're looking for at that new segment?

Actually, we have just started this business. But as you can imagine, there's more young people who are now having their pets, and they really care about their pets, the health, the liability that they could have by having the pets. So for this year, the revenue is around RMB5 million, but we expect certainly that this revenue will grow close to 100% every year or even more in the coming years.

(Operator Instructions) Bob Unnold, Woodland Growth.

I would like to just hear a little more about the -- how you're using the AI, your AI, for prospecting for new B channels, I believe it, is what you said.

Yeah. The first AI agent we have created is for our sales team. Of course, our plan is to develop more AI agents for our other business solutions. And we have a new team to set up to best use the AI technology, and we hope we will be the first to use AI agent in insurance brokerage industry in China. And there's a very bright future for the application of AI agent in all aspects of our business.

Thank you. We have no further questions. At this time, I would like to turn the floor back over to management for closing comments.

Yeah. Thank you for joining the call, and we hope we can share more stories, more good news, with our investors and potential investors in the near future. Thank you very much for joining.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.