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Puyi Inc (NASDAQ:PUYI)
Q4 2019 Earnings Call
Mar 27, 2020, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to Puyi's Incorporated First Half of the fiscal year 2020 Earnings Conference Call. Thank you for joining us in [Indecipherable] time. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet, please visit Puyi's IR website at ir.puyiwm.com under the webcast into that section. [Operator Instructions]

I'd like to turn the meeting over to your first speaker today Ms. Jing He, Puyi's General Manager of Financial Reporting Department. Thank you. Please go ahead.

Jing He -- General Manager of Financial Reporting Department

Thanks, operator. Good evening, welcome to our first half of the fiscal year 2020 earnings conference call. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provision of the United Private Security Litigation Reform Act of 1995. The accuracy of this statement may be impacted by a number of business risk and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but not limited too those outlined in our filings with the SEC. We do not take any obligation to update this forward-looking information except as require under applicable law.

Joining us today are; our Chairman of the Board, Mr. Haifeng Yu; Chief Executive Officer, Mr. Yong Ren; and Chief Financial Officer, Mr. Anlin Hu. Mr. Ren will walk you through our financial results of our first half of fiscal year 2020 and he together with Mr. Yu; Mr. Hu will take your questions after the prepared remarks.

Now, I will turn the call over to Mr. Ren.

Ren Yong -- Chief executive officer

[Foreign Speech]

Good evening, everyone. Thank you for joining us today on today's conference call. Today is my first time hosting this conference call, I'm very grateful. And here with me, we have our Chairman of the Board, Mr. Haifeng Yu; and Chief Financial Officer, Mr. Anlin Hu.

First of all, we will begin today's call with overview of our first half of the fiscal year 2020's financial results, and our business development. And followed by a brief discussion of our business outlook for the full-year. We will have a Q&A section after this report.

[Foreign Speech]

Please note that, the amount below is in RMB unless otherwise specified. Firstly, we'll elaborate that the current wealth management market. With the full implementation of the 2018 guidelines, the focus of wealth management market in China has fully turning to standard market-oriented wealth management products and non-standard fixed income products gradually fade out of the market. At the same time, with the increase of the income of China's mass affluent and emerging middle class population, their demand for household asset allocation has become more urgent. To closely comply with this industry trend, we review the market situation and actively optimize our product portfolio and market strategies.

[Foreign Speech]

Secondly, as we review our business strategy. On the products, the price side we focus more on the distribution of standard market-oriented products. Firstly, we decided to take the form of thermal package publicly raised fund products as our core products to expand our client basis, and encourage clients to invest on a dollar-cost averaging basis, which is to encourage client to invest for long-term. Public fund product is a truly standard market-oriented product with no investment threshold and high liquidity, which is suitable for the mass affluent and emerging middle class population.

During the reporting period, the revenue generated from distribution of publicly raised fund products was RMB13 million, representing over 8 times increase year-over-year. The transaction value of publicly raised fund products was RMB2.2 billion, an increase of 100% year-over-year. As of December 31st 2019, the outstanding balance of publicly raised fund products was RMB1.9 billion, representing a 215.3% increase year-over-year.

We have successfully created the package for publicly raised fund product series, G-New [Phonetic] brand series. G-New can be literally translate as [Indecipherable]. Till now, we have launched G-New balance of which the funds focus on balanced funds. G-New all stocks of which the funds, primarily invested in domestic publicly traded stocks. And G-New Hong Kong stock of which the fund is primarily focus on investment in Hong Kong public traded.

During the reporting period, we launched a new no risk package publicly raised fund products, which primarily focus on debt instruments. In the future, we will further improve and enrich our products. According to the market situation and to build investment needs of different clients.

[Foreign Speech]

Second, for distribution of privately raised fund products. According to our [Indecipherable] and judgment of China's macroeconomic development. Now understanding of the investors [Phonetic] risk preference. If we increase the distribution of privately raised fund products that mainly in public traded fund stocks. Especially, we focus more on distribution of fund of funds under our management. During the reporting period all the fund of funds security series under our management had a good performance.

[Foreign Speech]

And last but not least since October 2019 based on our long-term strategy, which is focus on truly market-oriented wealth products. We actively cease to offer non-fund financial products.

[Foreign Speech]

Next in terms of our current market strategy, we increase result allocation, promotion activities and firmly see [Technical Issues] opportunity period to expand our client basis. During the first half of the fiscal year 2020, we invested approximately RMB22 million in marketing activities. Accordingly, the aggregated -- the number of clients purchasing public fund products increased from 75,000 as of June 30, 2019 to 184,000 as of December 31st 2019. And average client acquisition cost was around 200 per client. In the view of our management, it's worthy to spend such amount to expand client base, because the incremental value, the new client can contributed to us in the future is much higher, we believe that for the result allocation to market promotion activities, as well as the dedicated layer management of our public fund product clients. We can now only bring us continue and high growth from revenue of distribution of public funds. But also we can explore high value potential clients, who may contribute to the sale of our privately raised fund products.

[Foreign Speech]

In terms of improving back office professional capabilities, we further higher more key management members and professionals and upgrade our information technology platform. During the reporting period, we hire five experts in product [Indecipherable]. This express participation will play a direct role in optimizing our professional abilities. In terms of construction of information, technology platforms, we further strengthened our optimization of online platform for transactions of public fund products and provision of client service. And we launched research and development of online transaction system of private fund. With these measures, we can now only provide clients with better investment experience and service, but also further improve our operating efficiency and reduce our operating [Indecipherable].

[Foreign Speech]

But, first we will discuss our business in the first half of the fiscal year 2020. During this period, the net revenue generated were RMB62.4 million, $9 million.

[Foreign Speech]

Now, next turn to our wealth management service. Our largest wealth revenue source for the reporting period, net revenues generated from wealth management service were RMB57.7 million, $8.3 million. In particular for the first half of the fiscal year 2020, net revenues generated from distribution of publicly raised fund products were RMB13 million, $1.9 million, representing a significant increase from RMB1.4 million year-over-year. The increase was primarily due to an increase in commissions. As a result of the increase in transaction value of distribution of publicly raised fund products including the packaged fund products. The transaction value was RMB2.2 billion, increased 100% year-over-year.

[Foreign Speech]

For the first half of the fiscal year 2020, net revenues generated from distribution of privately raised fund products were RMB32 million, $4.6 million, representing a 66.2% [Phonetic] decrease from RMB94.7 million year-over-year. The decrease was primarily due to: first, we further optimize our product portfolio and increase the distribution of private equity funds that primarily invest in publicly traded stocks. Especially we've promoted the distribution of the security tighten of funds under our management. And second the decrease in recognized performance based fees.

[Foreign Speech]

In the last -- for the other financial products. Net revenues generated were RMB12.7 million, $1.8 million, representing a 35.8% decrease from RMB19.8 million year-over-year. The decrease was primarily because we ceased to offer non-financial products, since October 2019.

[Foreign Speech]

Next is our asset management service. For the reporting period net revenues generated were RMB4.6 million, $0.7 million, representing a 338.4% increase from RMB1.1 million year-over-year.

[Foreign Speech]

And for the same reporting period, we have devoted more resource to our wealth management service and cease to provide corporate finance service. And net revenue generated were only RMB6,000, $1,000.

[Foreign Speech]

The last but not least, we will elaborate our strategic planning and outlook for the full fiscal year 2020. In December 2019, an outbreak of Novel Coronavirus surpassing Wuhan City and has gradually spread in and outside China. It's hard to predict the duration and severity of the epidemic in Asia and the world. We believe that under the timely and effective control measures by the Chinese government, the epidemic was soon be controlled in China. However, we anticipate a recovery of China's economic will start at least after July 2020. The epidemic has a material impact on our business in the second half of the fiscal year 2020.

According to our analysts we expect that the net loss attributable to Puyi's shareholders will be ranging from RMB60 million to RMB70 million. And will be ranging from RMB80 million to RMB90 million in the full fiscal year 2020. For the second half of the fiscal year 2020, we will continue our product optimization strategy to focus on standard market-oriented products. In the meanwhile, we will continue to increase marketing and promotion activities, strengthen investor education, certified back office professional capabilities and increase resource allocation to expand our client base within the budget.

The number of mass affluent and emerging middle class population in China is very large and their investment demand were well preparation [Phonetic] and appreciation remains strong. We have and we'll continue to complete our past efforts to respond to all the challenges, including the reason COVID-19 outbreak. We see this epidemic as an opportunity for the company's transformation and development. We will strive to create opportunity for our business growth. We are confident in our long-term strategy and we believe in the Company's future. Thank you.

And that's all for the prepared remarks. Now, let's begin the Q&A section.

Questions and Answers:

Operator

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] There is no question at this point, please continue.

Jing He -- General Manager of Financial Reporting Department

Thank you, everybody for participating in today's conference call. If you had any further questions, please feel free to contact us. Thank you, operator.

Operator

[Operator Closing Remarks]

Duration: 24 minutes

Call participants:

Jing He -- General Manager of Financial Reporting Department

Ren Yong -- Chief executive officer

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