Puyi Inc (NASDAQ:PUYI)
Q4 2020 Earnings Call
Sep 29, 2020, 9:00 p.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Ladies and gentlemen, thank you for standing by and welcome to Puyi Inc.'s Fiscal Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the management's prepared remarks, there will be some time for a question-and-answer session. For your information, today's conference is being recorded. This conference call is also being broadcasted live over the Internet and will be available for replay purposes on the company's website.
I'd now like to hand the meeting over to your first speaker today, Ms. Jing He, who is General Manager of Financial Reporting Department. Thank you and please go ahead.
Jing He -- General Manager of Financial Reporting Department
Thanks operator. Good evening. Welcome to our earnings conference call for the fiscal year 2020. Our Annual Report on Form 20-F has been uploaded to US Security and Exchange Commission earlier today and is also available on our IR website.
Before we continue, please note that the discussion today will contain forward-looking statements under the Safe Harbor Provision of the United States Private Security Litigation Reform Act of 1995. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause our actual results to differ materially from those projected or anticipated. Such risks and uncertainties include, but not limited to those outlined in our filings with the SEC including our 20-F. We do not undertake any obligation to update this forward-looking information except as required under applicable law.
Joining us today are our Chief Executive Officer, Mr. Yong Ren and Chief Financial Officer, Mr. Anlin Hu. Mr. Yong will walk you through our business and financial condition of the fiscal year 2020 and he together with Mr. Hu will answer 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. Thank you for joining us today on the conference call for the fiscal year 2020. Here with me is our Chief Financial Officer, Mr. Anlin Hu. We will begin today's call with an overview of financial and operational results of the fiscal year 2020, then followed by a brief discussion of our business outlook of the fiscal year 2021. We will take your questions after the report.
[Foreign Speech] Firstly, let's take a look at our business development in fiscal year 2020. We are an innovated wealth management company with impact at our cost competitiveness as such. During the fiscal year 2020, we increased investment in upgrading our information technology platforms and achieved remarkable result, as illustrated along.
[Foreign Speech] We have cooperated with Hang Seng Electronics to create an independent business system, which will be operational by the end of 2020.
[Foreign Speech] We have strengthened the construction of online trading system and is expected that full scope of online transaction processing service for privately raised fund products will be launched by the end of 2020 which will greatly enhance the growth of our privately raised fund products sale.
[Foreign Speech] We have developed and will continue to optimize the I Financial Planner, an intelligent business platform, relying on our financial technology. I Financial Planner provides the clients with client data management, account transaction management and asset dynamic management service. At the same time, it provides one-stop business management tools such as investor preference analysis, asset allocation analysis, market information interpretation and financial product deconstruction. We have made full use of our accumulated big data with artificial intelligence technology to launch professional, individual and comprehensive family financial wealth management planning service, which enable us to assist our seed clients to meet their wealth management needs at different levels.
[Foreign Speech] We also upgraded our online investor education service. We set up Puyi Business School and Puyi Academy platforms to provide online streaming for seed clients and investors respectively. Both platforms are designed to cultivate investors' scientific thinking of logical asset allocation.
[Foreign Speech] For the construction of information technology platforms, our Puyi Fund has over 960,000 registered clients as of June 30, 2020. For the fiscal year 2020, the number of registered clients of Puyi Fund increased by 290,000 withstanding an increase of 169.2% compared to the number of newly registered clients of the fiscal year 2019. [Indecipherable] is becoming more and more popular young middle class population. We are also expanding our client base for online channels using public raised fund products as the client-specific entrance point.
[Foreign Speech] In addition to the buildup of online platforms, we are also optimizing our offline channels. During the fiscal year 2020, we classified our seed clients into different levels and strengthened their achievements and accelerated the professional development of our sales and service team. According to the criteria of performance, professional ability and lending rulings, we divided the original seed clients into free categories; seed clients, elite seed clients and independent financial advisors. We've provided different level of support to different level of seed clients. And more importantly, we provided different level of training to full support rationalization and professionalization of seed clients. We have set up a series of systematic professional training and procedures. We select and cultivate seed clients to become our exclusive independent financial advisors who have the professional ability to provide family asset allocation service. In addition to seed client channels, we are actively exploring new marketing channels. We have established and will continue to establish co-operative relationships with various management -- wealth management entities in the market.
[Foreign Speech] Recently, the wealth management industry becomes more and more standardized and mature. And as a result, the focus of wealth management market will return to standard market-oriented product. After the issuance of the 2018 asset management guideline, the CSRC issued the Measures for the Supervision and Administration of Public Offer Securities Investment Fund Distributors. Here in, after referred to as the Distribution Measures in August 2020 which will become effective on October 1st, 2020. Pursuant to the Distribution Measures, third-party fund distributors like us are defined as organizations that are specialized in distribution public raised fund and privately raised funds that invested in public securities which are both considered market-oriented products.
[Foreign Speech] Since the beginning of 2019, we have actively in-phrased the changes of the policy and market trends, optimizing our product structure and strategically shifting our focus to market-oriented products. On the one hand, we have devoted more resource to the promotion of public raised fund products and positioned the fund or fund type of package publicly raised fund products as our core products to expand our client base. On the other hand, since the first half of our fiscal year 2020, we completely ceased the distribution of low-standard products, downsized the distribution of privately raised fund products, private equity series and focused on the distribution of privately raised fund products, public security series particularly a Fund of Fund series.
[Foreign Speech] During the fiscal year 2020, our strategy for shifting to market our expanded product had achieved initial results and the proportion of our market-oriented products had increased significantly within the company's product offering structure. As typical with extented of market-oriented product, publicly raised funds are increasingly popular with emerging middle class investors due to the extremely low barrier, high transparency, convenience in trading and strong liquidity. For the fiscal year 2020, the transaction value of publicly raised fund products increased by 86% year-on-year, reaching RMB6.9 billion, USD1 billion and accounting for more than 80% of the total transaction value of the wealth management products when distributed. As such, the net revenue generated from publicly raised fund products increased by 432.7% year-on-year which in RMB48.9 million, USD6.9 million and accounting for 45.9% of the total net revenue from wealth management service. As of June 30, 2020, the outstanding balance of publicly raised fund products increased by 168.4% year-on-year which in RMB3.4 billion, USD0.5 billion. In summary, publicly raised fund products, particularly the Fund of Fund type of packaged publicly raised fund products have become our core products to expand client base and greatly supplemented the company's total net revenue.
[Foreign Speech] For distribution of privately raised fund products, we will have focus on the distribution of public security series products. For fiscal year 2020, the total transaction value of privately raised fund products was RMB1.1 billion, $0.2 billion among which public security series products accounted for RMB0.9 billion, USD0.1 billion and 80% of the total transaction value. Among public securities series, the transaction value of fund of fund type was RMB0.4 billion, USD39.7 million, accounting for 36.8% of the total transaction value of privately raised fund products.
[Foreign Speech] For the fiscal year 2020, we invested approximately RMB38.5 million, USD5.5 million in market promotion activity for public raised fund products. And accordingly, the aggregated number of clients of publicly raised fund products increased by more than 300%, reaching 300,000. The average client acquisition cost was approximately RMB170 per client. The substantial growth of the aggregated number of clients demonstrated that the packaged publicly raised fund products on the dollar-cost averaging basis provided by us are highly attractive to investors and then our market promotion strategy perspective. For the fiscal year 2020, the number of our clients on publicly raised fund products was 260,000, among which clients of Fund of Fund type packaged publicly raised fund products accounted for 250,000 and 96.7% of the total clients. As long as clients continue investing in our Fund of Fund type of package publicly raised fund products, the outstanding balance will continue to grow and [Indecipherable]. And as a result, the company's net revenue will achieve organic growth. At the same time, for our extensive operation of the large and loyal client base attracted by public raised fund products, we have expolored and will continue to explore mass affluent clients to be our potential, high net worth clients who may contribute to the sale of our privately raised fund products.
[Foreign Speech] In terms of public -- so in terms of products supply, we [Indecipherable] the buyer Investment consultants, focus on serving the emerging middle costs and mass affluent families in China, mid-packaged products as our core products and provide products at all risk levels to meet the multi-level and diversified needs of clients. As of June 30, 2020, we have launched five package publicly raised fund products, covering the risk level from moderate to aggressive. At the same time, we have also improved our privately raised fund product that is invested in public securities. As of June 30, 2020, we have launched a total of six Fund of Funds set invested in public securities.
[Foreign Speech] Expanding client base, layer management of clients and focus on packaged product are the three main strategies we settled and this strategy have been gradually verified.
[Foreign Speech] In terms of optimizing back office professional capabilities, we have higher number of experts and team. In the area of product and risk control, this express participation will greatly improve the Company's asset management ability, investment research ability and risk control ability.
[Foreign Speech] Next, we will briefly discuss our financial condition for the fiscal year 2020. For the fiscal year 2020, net revenues decreased year-on-year by 26.3% to RMB129.5 million, USD18.3 million. Now let's turn to each individual business lines.
[Foreign Speech] Firstly, our wealth management service. Net revenues generated from our wealth management service decreased year-on-year by 44.9% to RMB106.4 million, USD15.1 million in particular.
[Foreign Speech] Net revenues generated from distribution of public raised fund products including packaged fund products were RMB48.9 million USD6.9 million, withstanding of 432.7% increase from RMB9.2 million year-on-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. The [Indecipherable] of public raised fund products increased by 86% year-on-year from RMB3.7 billion for the year ended June 30, 2019 to RMB6.9 billion, USD1 billion for the year ended June 30, 2020.
[Foreign Speech] Net revenues generated from distribution of privately raised fund products were RMB44.5 million, USD6.3 million, representing a 70.2% decrease from RMB150 million year-on-year. The decrease was primarily due to one, the decreased transaction value of privately raised fund products, as we further optimize our product portfolio and significantly downsize the distribution of privately raised fund products, private equity series. Two, the outbreak of the COVID-19 which had a material adverse impact on our offline distribution of privately raised products and three, the decrease in recognized performance based fees to RMB6.8 million, USD1 million from RMB46.9 million for the year ended June 30, 2019.
[Foreign Speech] Net revenues generated from distribution of other financial products, mainly exchange administered products were RMB13.1 million, USD1.9 million withstanding a 61.8% decrease from RMB34.3 million year-on-year. This decrease was primarily due to the fact that we stick, which our focus to distribution of fund products and ceased to offer exchange administered products since October 2019.
[Foreign Speech] Next is our asset management services. Net revenues generated from asset management service were RMB23 million, USD3.3 million, withstanding of 704% increase from RMB2.8 million year-on-year. This increase was primarily due to first, an increase in management fee income and distribution income due to the significant increase in our AUM and second, an increase in performance based income allocated to us due to the positive performance of Hebi Fund of Fund series and Ruixuan Fund of Fund.
[Foreign Speech] Next, the last is our corporate finance service. Net revenues generated from corporate finance service was RMB6,000, USD1000. With this corporate finance service, primarily because we further consolidated our results to mainly focus on the development of wealth management service.
[Foreign Speech] And last but not least, let me elaborate on our strategy, planning and outlook for the fiscal year 2021. In terms of information technology, we will continue to strengthen the construction of FinTech, focusing on construction of independent business system, family asset allocation system, online trading system for privately raised fund products, I Financial Planner platform, an intelligent operation system.
[Foreign Speech] In terms of sales channel expansion, on the one hand, we will rigorously de-web online channel, focus on high financial investment demand and coordinate operation of online platforms such as Puyi Fund app and our official accounts on WeChat. We intend to improve the current activity and retention rate for operations of activities, content and clients. On the other hand, we will continue to split-up the transformation process of the clients to professional financial advisors and promote establishment of directly operated branches in central cities. The [Indecipherable] system covering the national central cities as market development and client service.
[Foreign Speech] In terms of middle and back office operation and management, we will optimize our ability to manage clients. With the support of information technology, we will [Indecipherable] a four-dimensional intelligent operations management system for the intelligent data, intelligent operation, intelligent business management and intelligent client service.
[Foreign Speech] In terms of market promotion, our strategy to increase marketing and promotion activities for packaged publicly raised fund products to further expand our client base has achieved remarkable results. In addition, the strategy to use packaged public raised fund products on dollar averaging basis as [Indecipherable] acquisition through has been proven to be effective. In the fiscal year 2021, we will continue to invest extensively in market promotion or pay more clients, increase outstanding balance of public raised fund products, which may lay a solid foundation for our long-term strategy.
[Foreign Speech] In terms of asset management and risk management, on the one hand, we will continue to improve our ability in research and risk management for introduction of the [Indecipherable]. And on the other hand, we will sell-out the process of research and risk management and establish a standardized and systematic research and risk management system.
[Foreign Speech] In terms of compliance, the OSG compliance management as the red line and lifeline for operation, particularly, we will carry our most strengthened sales to the ability of management, product introduction management, sales-personnel qualification management [Indecipherable] document management and company's hot data management in the fiscal year 2021.
[Foreign Speech] Since early 2020, the novel coronavirus surfaced in path of China. Motion and transaction of privately raised fund products are mainly conducted offline. The offline branch office staff like face to face communication opportunity with our clients. Due to the impact of the epidemic and as a result, the sales of privately raised fund products has been affected. In addition, this year sale has also been affected by our off product structure transformation to truly market-oriented product and with the substantial resource to market promotion activities or public raised fund products, our net revenue and net income declined compared to the previous year, but this results are under the control of the management.
[Foreign Speech] In the fiscal year 2020, product structure transformation strategy actively adopted by us has been achieved and extended resource invested in market promotion activities for publicly raised fund products also make great returns. With the strict control measures of the Chinese government, the epidemic situation has been effectively controlled and China's economy has returned to the normal track. The growing number of the emerging middle class and mass affluent families has restored confidence in China's overall economic recovery and their investment demand for wealth preservation and appreciation remains strong. In fiscal year 2021, we will continue the three cost strategies; expanding client base; [Indecipherable] management of clients and focus on packaged product. And with the effective implementation of the above measures the management is confident of the strong development of the company in the future.
Thank you all for listening. Now, we will open for questions. Operator?
Questions and Answers:
Thank you. Ladies and gentlemen, we will now begin your question-and-answer session. [Operator Instructions] Okay. I have no questions at this stage. I will hand back to Jing He.
Jing He -- General Manager of Financial Reporting Department
Okay, thank you. Seems like no question at this time and I have no closing comments. Thank you everyone for attending our fiscal year 2020 earnings call. If you have any further questions, please feel free to contact us. Thank you much. Operator?
[Operator Closing Remarks]
Duration: 44 minutes
Jing He -- General Manager of Financial Reporting Department
Ren Yong -- Chief Executive Officer