Puyi Inc. (NASDAQ:PUYI) Q4 2022 Earnings Conference Call October 11, 2022 9:00 PM ET
Corporate Participants
Jing He – General Manager of Financial Reporting Department
Yong Ren – Chairman and Chief Executive Officer
Anlin Hu – Chief Financial Officer
Conference Call Participants
Operator
Ladies and gentlemen, welcome to Puyi Inc.’s Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, there will be a Q&A session. For your information, today’s conference call 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 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
Thank you, operator. Good evening everyone. Sorry for the delay. There was a small instance. Welcome to our earnings conference call for the fiscal year ended June 30, 2022.
Our annual report on Form 20-F has been uploaded to the website of U.S. Securities 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 made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. The accuracy of these statements may be impacted by a number of 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 and F-3. We do not undertake any obligation to update these forward-looking information, except as required under the applicable laws.
Joining us today are our Chairman of the Board and Chief Executive Officer, Mr. Yong Ren; and Chief Financial Officer, Mr. Anlin Hu. Mr. Ren will first walk you through our business and financial conditions of the fiscal year 2022. And he together with Mr. Hu will answer your questions after the prepared remarks.
Now, I will turn the call to Mr. Ren.
Yong Ren
[Foreign Language]
First, let’s take a look at operational results and business initiatives in the fiscal year 2022.
[Foreign Language]
Sorry there is an accident that the line of the CEO has been cut-off. I would let the CFO to continue. Mr. Hu?
Anlin Hu
[Foreign Language]
In the fiscal year [Technical Difficulty] in the report on the work of the government. The report stressed that we must climb the slope and overcome the obstacles which clearly show that determination and strength of China’s leaders to maintain a stable growth of economic. At the same time, the report clearly pointed out that the government should prioritize, [indiscernible] favorability right pursuing progress and should take initiatives which are beneficial to economic stability. Stable growth was also the guideline of us in the past fiscal year.
[Foreign Language]
Despite all these situations, our management insists on our strategy and vigorously undertook several initiatives to increase income and control costs in all aspect. In the fiscal year 2022, we recorded a total net revenue of RMB 188.7 million, U.S.$28.2 million, which did not deteriorate much as compared to the fiscal year 2021. In particular, the net revenues generated from privately raised fund products increased by 29%. And the net revenues generated from consulting and other service increased by 886.1%. While the net revenues generated from public raised fund products decreased by 14.5%.
[Foreign Language]
In the past fiscal year, we mainly focused on improving the quality of our [sale] [ph] organization, expanding the source of income and strictly controlling costs and expense. This led to the reduce loss in the second half of the past fiscal year by 14.4% period-on-period compared with the first half of the past fiscal year, reflecting the effectiveness of our management’s measures to increase income and cut costs. The details are as follows.
[Foreign Language]
First, we regarded the development of professionalized wealth management studio as the axis of our organizational development, and firmly implanted professional platforms plus elite entrepreneurship as our development strategy. In the fiscal year 2022, our management addressed our sale organization, according to the changes of the market, optimize and improve the per capita productivity of our in-house financial advisors, rigorously develop cooperation with wealth management studios, which may effectively reduce our costs. At the same time, we optimize the layout of our branch office and actively show some underperformed branch office since the launch of our wealth management studio model. We had established cooperation with 135 wealth management studios as of June 30, 2022.
[Foreign Language]
Second, we continuously share them the construction of our professional platforms, and rigorously promote our family office business. With the coming era of population aging and the entering of stabilization period of China’s economic development cycle, a large number of Chinese have [front-end] [ph] and high net worth families who have become rich after reform and open up continue to have a high demand for wealth [indiscernible] and inheritance.
We have started the construction of the family office business early, as of June 30, 2022, internally, we launched family office business operation system 1.0. This is an out online digital information platform for family office business, providing family office business operators with back office service, such as hire manager, maintenance and management, prior maintenance and management, [Technical Difficulty] management and [indiscernible] we have established cooperation with chartered companies, insurance companies and [Technical Difficulty] institution, tax firms, law firms, power service institution and et cetera.
We have basically completed the establishment and layout of professional service and operation systems for our front-end and high net worth families by offering a comprehensive set of service such as insurance premium trust or [Technical Difficulty], overseas educational service, tax service, legal service, medical care service and et cetera.
As of June 30 2022, we had a [indiscernible] on setting up 86 trust accounts with an aggregate value of their entrusted asset of RMB 1.0 billion. Benefiting from this, our consulting service revenue has greatly increased in the fiscal year 2022.
[Foreign Language]
First, we further enriched our product offering to keep up with clients evolving needs. In the past fiscal year, we continued to adhere to our strategy of standardized product transformation. For public raised fund product, we continue to focus on the existing public raised fund product portfolio strategy supplemented by the sale of high-quality single close-end public raised funds. We aimed to cultivate clients habit of maintaining products for a longer period of time to avoid short-term drastic market fluctuation and have clients investment experience, as well privately raised fund products. We offer both self-managed and external high profile private raised funds to ensure that we have two or more portfolio strategy of each time available.
We have also been striving to design develop and provide more products to our clients, in particular by providing more customized products and/or service to high net worth clients.
As of June 30, 2022, the number of our privately raised fund products has increased to 34.
[Foreign Language]
First, we continue to optimize our IT system to fully serve the development of all of our business lines. The establishment of a professional platform is inseparable from the support of scientific and technological force. In the past fiscal year, we carry out a front-end initiative on our IT system construction.
[Foreign Language]
First, we launched Institution Master System 1.0. Institution Master is a one-stop service solution for institutional investors to manage their OTC firm investments. Aiming to provide professional and convenient investment service to institutional clients. It provides more professional, efficient and intelligent trading experience for our leading intelligent trading system, extensive product portfolios and comprehensive investment research system. With this system, we provide institutional investors with customized fund trading solutions to better meet their needs.
[Foreign Language]
Second, we upgraded Puyi Business School to be a mobile application. This Puyi Business School is the family asset allocation advisory adaptation platform, aims to provide financial advisors with various of knowledge empowerment, capability empowerment and to empowerment, systematic financial knowledge costs, diversified practical experience sharing and put industry celebrity lectures, are the most distinctive section of Puyi Business School. Also with the cooperation of several education institutions, Puyi Business School provides large number of calls and practice on qualified certification tests.
[Foreign Language]
First, we have at the time, 20 asset management platform, asset allocation system to the [ifinancial] [ph] planner mobile application. Taking into consideration of the offline service scenario of financial advisors, and the diversified leads of family financial asset allocation. This new system with leading technology has decided to help financial advisors pinpoint highest needs and effectively track and manage clients through the one-stop comprehensive operation and the communication platform. The system integrates three core functions, one-stop business development platform, asset allocation intelligent investment advising function, and high-end SCRM system and provides financial advisors with full empowering service trading and growth, hire maintenance, team management and operation support.
[Foreign Language]
Fifth, we strictly control our operating costs and expenses and the result of the organizational optimization is significant. First, we optimize our employee structure with the per capita productivity index extraction, and mainly oriented to professional abilities and while in contribution. Second, we further reduced our administrative expenses and comprehensive control of costs benefiting from our string cost control, our result of operation was nearly the same with last year despite the influence of external environment to our total operating revenue.
[Foreign Language]
Sixth, we insist that financial industries should be good, responsible and warm. As we develop our business, we are always dedicated to our social responsibility. We donated components and prevention materials to [indiscernible] when it was under serious COVID-19 pandemic in September 2022. In the same month, earthquake hit Luding county of Sichuan Province, our employee representatives [Technical Difficulty] in the disaster relief activity held by Sichuan Red Cross.
[Foreign Language]
Next, we will briefly introduce our financial conditions for fiscal year 2022.
[Foreign Language]
In the past fiscal year, our net revenues decreased year-on-year by 1.3% from RMB 191.2 million to RMB 188.7 million, U.S.$28.2 million. Next turn to each of the individual business lines.
[Foreign Language]
The first business line, our wealth management service.
[Foreign Language]
Next, net revenues generated from our wealth management service decreased year-on-year by 2.9% from RMB 176.6 million to RMB 171.5 million, U.S.$25.6 million in particular.
[Foreign Language]
Net revenues generated from distribution of privately raised fund products increased year-on-year by 29%. From RMB 47.7 million to RMB 61.6 million, U.S.$9.2 million. Such increase was primarily due to the increase in commission income, including management fee of privately raised fund products, as well as the increasing performance-based fees.
[Foreign Language]
Net revenues generated from distribution of public raised fund products decreased year-on-year by 14.5% from RMB 128.5 million to RMB 109.9 million, U.S.$16.4 million such decrease was primarily due to a decrease in commission income including manual fee as a result of the decrease in the distribution and outstanding balance of transaction value of public raised fund products.
[Foreign Language]
The second piece in the line, our asset management service.
[Foreign Language]
Net revenues generated from asset management service for the past fiscal year was RMB 5.9 million, U.S.$0.9 million, with spending of 56.3% year-on-year decrease from RMB 13.5 million. This decrease was primarily due to a decrease of 69.2% in performance based carried interest income to RMB 2.4 million, U.S.$0.4 million, started by our actively managed force from RMB 7.8 million for the fiscal year ended June 30, 2021.
[Foreign Language]
And the last business line, our consulting and other service.
[Foreign Language]
Net revenues generated from consulting and other service were RMB 11.3 million, U.S.$1.7 million. We’re [extending] [ph] an increase by 186.1% year-on-year from RMB 1 million. Revenues generated from consulting primarily consists of first service fee from translating of insurance products for an insurance agents partner and service fee from providing comprehensive trust consulting service.
[Foreign Language]
And last not least, let’s elaborate on the strategic planning and outlook for the future of our company.
[Foreign Language]
In the fiscal year 2023, we insist on professional platform plus elite entrepreneurship as our long-term development strategy. The details are as follows;
[Foreign Language]
First of all, we’ll take per capita productivity as cost assessment indicators to further optimize our sale organization.
[Foreign Language]
First, we’ll optimize the process to attract wealth management studio to enter into cooperation with us. We expect to realize the stabilization, specialization and professionalization of engagement management with wealth management studios by extracting past experience and strike to engage more wealth management studios. So of today, we have established cooperation with more than 190 wealth management studios.
On the other hand, we will further empower our existed financial advisors and control their work-in-progress and eventually build up a complete financial advisors operation system to ensure that our operation and financial advisors could be implemented to achieve our goals.
[Foreign Language]
Second, we will strengthen the productivity of our financial advisors. Our financial advisors should achieve the professional transition from financial planner to professional personal banker and finally to family wealth inheritance manager and upgrade their service to provide asset management and wealth management service from simply selling products.
[Foreign Language]
Section, we will embrace the booming of wealth management industry and rigorously promote family office business. After a year of polish, we are able to serve our friends family office business, but there are still some gaps in operational efficiency and professional empowerment output from the company’s requirements. In the fiscal year 2023, we will improve in the following aspects.
[Foreign Language]
First, we developed and launched a 2.0 version of our family business operational system. The launch of our 1.0 version, preliminary solve the problem of the sharing of internal information and empowered financial advisors to manage their trust clients and trust business online, which we have seen an improvement in our operating efficiency. Our future 2.0 version will focus on the information communication between the financial advisors and clients and improve the information transaction efficiency among the front, middle and back office. We believe the 2.0 version will deliver a better experience to our financial advisors and the clients.
[Foreign Language]
Second, we will further increase the number of operation of cooperating tech companies and other service providers, and then at least our financial advisor and clients. At the same time, besides expanding sales channels by individual financial advisors. We will also rigorously expand our external cooperation channels with our trust consulting service as a vehicle.
[Foreign Language]
Lastly, we will comprehensively build a service system for a front-end high net worth family clients. At present, there is a strong demand for legal service, tax service, adaptation service and health care service. We will focus on creating a good service system. We will establish a trust account service expert group to focus on providing clients with full lifecycle of asset allocation and financial planning service for their entire family after the opening of their trust account. As such, our financial advisors will be professionally empowered and [indiscernible]. Our clients will have a better experience and with that win-win-win situation for financial advisors, clients and our company.
[Foreign Language]
First, we will develop our institutional clients, through the development of wealth management industry is always that more and more institutional clients are becoming investors of public raised fund products. According to public data, the transaction value contributed by institutional investors accounted for more than 47% of the market wide public raised funds scaled by the end of 2021. The types and numbers of public raise fund products are becoming expensive, and advantage of string regulation and information. transparency of public raised fund products with them become the most incompliance investment products and the most popular investment products to institutional investors.
In the future, we will provide our institutional investor [Technical Difficulty] trading functions, extensive product portfolios, and professional investment and research system while Institutional Master System product offering investment and research ability and offline service network.
[Foreign Language]
Fourth, we will strengthen our comprised construction and adhere to the compliance of the sale of privately raised fund products and license operations and sales.
[Foreign Language]
License companies, licensed personnel and product compliance have become the bottom-line requirements for financial industry under the current strong financial regulatory trend. In the fiscal year 2023, we will continue to strengthen the compliance — construction and the compliance and inspection of our branch office to ensure the safe and stable operation of our company
[Foreign Language]
For the sale of privately raised fund products, we will continue to ensure that it is in compliance to valuable regulations and laws. We will strengthen the compliance management in [Technical Difficulty] transmission of investment risks of the product to our company.
[Foreign Language]
Along with the increasingly strong demand for wealth management on inheritance service, and high-net worth family. A great era of wealth management industry is arising. We must grab the next big thing of this era and build an extraordinary platform so that our financial advisors could achieve deals growth and [indiscernible] on our term platform and create value for our clients, employees and shareholders.
That ends the prepared remarks and now we are open for the question. Operator please.
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions].
Unidentified Analyst
Jing He
Jing He
Since no questions at this time. And sorry for the small instance happened today. We will upload the full transcript on our website. Please go to our website for the full transcript later, if you’re interested. And we have no further comments. Thank you everyone for attending our fiscal year 2022 earnings call. If you have any further questions, please feel free to contact us. Thank you very much. Operator, please.
Operator
Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
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