Maase Inc. (MAAS) Q4 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, welcome to Puyi Incorporated Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be a question-and-answer 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.

Thank you, operator. Good evening. Welcome to our earnings conference call for the fiscal year ended June 30, 2021. 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. We do not undertake any obligation to update these forward-looking information, except as required under the applicable laws. Joining us today are our Chief Executive Officer, Mr. Yong Ren; and Chief Financial Officer, Mr. Anlin Hu. Mr. Ren will walk you through our business and financial conditions of the fiscal year 2021. And he, together with Mr. Hu, will answer your questions after the prepared remarks. Now, I will turn the call over to Mr. Ren.

[Foreign Language]

Good evening, everyone. Thank you for joining us today on the earnings conference call for the fiscal year ended June 30, 2021. Here with me is our Chief Financial Officer, Mr. Anlin Hu. We will begin today's call with an overview of our financial and operational results for fiscal year 2021, followed by a brief discussion for our business outlook for the fiscal year 2022. We will take your questions after the report.

[Foreign Language]

First, let's take a look at our business development in the fiscal year 2021. In the past fiscal year, in light of the continued spread of COVID-19 epidemic, we achieved significant business growth as our management worked diligently with all of our employees. Our total net revenue reached RMB191.2 million, US$29.6 million, representing an increase of 47.7% over last year. In particular, the income generated from public raised fund products hit a new record which grew from RMB48.8 million in the fiscal year 2020 to RMB128.5 million, US$19.9 million in the fiscal year 2021, representing a significant increase of 163.4%. In the past fiscal year, we mainly made the following progress.

[Foreign Language]

First, we focused on sales of standardized products and our business of public raised fund products continue to grow rapidly. The number of clients of our public raised fund products increased significantly by 68.5% from more than 260,000 as of June 30, 2020, to more than 442,000 as of June 30, 2021. The end aggregate transaction value of our public raised fund product increased significantly by 148.9% from approximately RMB6.9 billion in the year ended June 30, 2020, to approximately RMB17.1 billion, US$2.6 billion in the year ended June 30, 2021. In particular, more than 430,000 clients invested in public raised fund product portfolios, accounting for approximately 97.4% of the total number of clients of our public raised fund products. I think the line is breaking, let me repeat. In particular, more than 430,000 clients invested in public raised fund product portfolios. Accounting for approximately 97.4% of the total number of clients of our public raised fund products. Meanwhile, the transaction value of our public raised fund product portfolios reached approximately RMB11.9 billion, accounting for approximately 69.8% of the total transaction value of our public raised fund products. In addition to the public raised fund products, portfolios developed and managed by our in-house investment. The line is okay now. And reached -- in addition to the public raised fund product portfolios developed and managed by our in-house investment and research team, we started cooperating with top public raised fund managers in China, such as China Asset Management, Southern Asset Management and AEGON-INDUSTRIAL Fund industrial fund to develop, diversify and revolving portfolios of public raised fund products for us, leveraging their strong investment and research capabilities, all of the above-mentioned products received positive feedback from the market.

[Foreign Language]

Second, we accelerate the professionalism and specialization of our sales team and achieve our target in the construction progress of our branch office. The progress of enhancing our sales team mainly included the following two aspects; on one hand, in order to adapt to the transformation of the wealth management market to standardize product model, we have launched branch office in economically developed cities in China and recruited professional financial advisers having industrial resource and specialization in wealth management. This professional specialized team of financial advisers aim to provide competitive wealth management service of family financial assets, comprising mainly portfolios of funds and insurance recommendation. For the emerging middle class and affluent individuals and families, leveraging the strong support from our technology, operations and product investment and research team. By August 2021, we have established branch office in Guangzhou, Dongguan, Shenzhen and other cities and recruited a team of more than 200 professional in-house financial advisers.

[Foreign Language]

On the other hand, we continue to classify our seed clients into ordinary seed clients, elite seed clients and financial advisors which were under multilevel management and cooperation. A number of elite seed clients with high productivities and expertise stand out and has become a strong driving force for our professionalism process. Meanwhile, we have also started digital upgrade of our seed clients on social e-commerce platform to achieve more efficient multi-level marketing strategy, empowered by new media, such as mini program app, WeChat public account and WeChat reading account, we assisted our seed clients in launching digital and social online activities. So as to achieve a more comprehensive companionship for the client of our seed clients.

[Foreign Language]

First, we enhanced our capability of digital operations to achieve more comprehensive client service. In the past fiscal year, we have initiated a series of upgrades of information technology in structure, including the setup of big data analyst platform and smart operations platform, to equip ourselves if multi-dimension operating tools, such as automatic grouping of multilevel clients, attachment of different tags to different clients, big data collection and storage from multi platforms as well as visualized data charts. This upgraded operating tools can ensure more accurate and efficient communication between our clients and us which, in turn, increase our clients' level of satisfaction and the rate of client retention and conversion.

[Foreign Language]

Fourth, we continue to invest in the construction and upgrade of technology platforms to increase efficiency and reduce costs. The construction and upgrade of information technology infrastructure have been vital in increasing service -- increased service capability in financial industry. In the past fiscal year, we have implanted the following three initiatives for our information technology infrastructure.

[Foreign Language]

First, we have continued to optimize our core transaction system of public raised fund products which enable online transactions by clients and simplify repeat purchase and investments.

[Foreign Language]

Second, we launched a new comprehensive full cycle online transaction system for privately raised fund products in December 2020 which simplify our sales process and increased transaction efficiency of our privately raised fund products, thus reducing our operating courses.

[Foreign Language]

First, we continue to optimize the i Financial Planner app which is was embedded with professional solution models for family financial asset allocation, an allocation system for both financial advisors and seed clients. i Financial Planner focus on improving the level of activity and stickiness of our financial advisors and seed clients, achieving the multi-level operation and management of financial advisors and seed clients and empowering financial advisors and seed clients to provide our clients with scientific customized, family financial asset allocation service.

[Foreign Language]

Second, we will briefly discuss our financial condition for the fiscal year 2021. In the past fiscal year, net revenues increased year-on-year by 47.7% from RMB129.5 million to RMB191.2 million, US$29.6 million. Now, let's turn to each individual business line.

[Foreign Language]

First business line, our wealth management service. Net revenues generated from our wealth management service increased year-on-year by 65.9% from RMB106.4 million to RMB176.6 million, US$27.4 million. In particular, net revenues generated from distribution of public raised fund products increased year-on-year by 163.4% from RMB48.8 million to RMB128.5 million, US$19.9 million. Such increase was primarily due to an increase in commission income, including management fee as a result of the significant increase in the distribution and actual accumulated balance of the transaction value of public raised fund products.

[Foreign Language]

Net revenues generated from distribution of privately raised fund products increased year-on-year by 7.2% from RMB44.5 million to RMB47.7 million, US$7.4 million. The increase was primarily due to the increase in commission income, including management fee on privately raised fund products, partially offset by the decrease in performance-based fee.

[Foreign Language]

Net revenues generated from distribution of other financial products were RMB300,000, US$46,000, representing a 97.7% year-on-year decrease from RMB13.1 million. The decrease was primarily because we have focused on distribution of fund products and seeds to open new exchange administrate products since October 2019 and we received management fee in the past fiscal year from the existing products only.

[Foreign Language]

And second business line, our asset management service. Net revenues generated from asset management service for the past fiscal year were RMB13.5 million, US$2.1 million, representing a 41.5% year-on-year decrease from RMB23 million. This decrease was primarily due to a decrease in performance-based carry interest income. However, our AUM significantly increased to RMB1.1 billion, US$0.2 billion as of June 30, 2021, from RMB0.8 billion as of June 30, 2020. We are confident that the continued increase of AUM is expected to result in organic growth in our future income.

[Foreign Language]

And the last but not least, let's elaborate on our strategy, planning on outlook for the fiscal year 2022. As epidemic has been brought under control, China's economic has gradually returned to the state of stable growth. According to the government's common prosperity policy of increasing the income of low income groups and expanding middle-income groups in the 14th five-year plan from 2021 to 2025. The number of middle class and affluent individuals and family in China will increase with certainty. As the company focusing on providing wealth management service for emerging middle class and affluent population, we have met a historical period of development opportunities.

[Foreign Language]

In the next fiscal year, we will focus on sales organization, construction, products, technology operations and other aspects and constantly build and strengthen our competitiveness as follows.

[Foreign Language]

First, we will focus on the professionalism and specialization of our sales force. On one hand, to continue to construct our branch office. And on the other hand, to achieve professionalism of our seed clients. The construction of branch office is one of the key measures for us to promote the professionalism of our sales force. In the next fiscal year, our business focus is to continuously strengthen the professional capability of the established branch office to support the financial advisors and improve our overall operation and service capability. We will focus on the improvement of the delivery performance of our branch office and the level of professionalism of financial advisors instead of the number of branch offices and financial advisors. In the short term, the construction of branch office and financial advisors team will incur significant expenditures which will adversely affect the company's operating cash flow and profit. However, our management agrees that this initiative is one of the core strategies for the company to achieve transaction value of RMB100 billion in the future. And our management will implement this strategy firmly and effectively.

[Foreign Language]

For sales channels of seed clients, we will optimize the existing seed client team to achieve better compliance, efficiency and professionalism. On the one hand, we will gradually terminate our cooperation with seed with no productivity and weak service capability. On the other hand, we will select a group of capable and proactive elite seed clients from the existing seed clients to cultivate them into professional specialized financial advisors with the capability of financial asset allocation for enabling systems such as science and technology, investment and education, operation and training.

[Foreign Language]

Second, we will focus on digital transformation and continue to strengthen the construction of information technology and digital operating center. As of June 30, 2021, we had upgraded Puyi Fund app to 5.0 version and i Financial Planner app to 2.0 version. In the future, in addition to continuing to improve the above systems, we will focus on the construction of institutional business system, investment advisory business system and asset allocation consultation system. At the same time, we will start to use the existing technology operation capability to empower external partners and try to start software-as-a-service cooperation with external channels.

[Foreign Language]

In terms of digital construction, we will rely on the established digital operation center and leverage the digital intelligent operation system. On the one hand, to effectively empower financial adviser to gain insights into client needs and improve their professional capability to achieve more efficient client acquisition. And on the other hand, to analyze client behavior for big data analysis to more accurately respond to the individual needs of clients.

[Foreign Language]

First, we will focus on feature portfolio products to measure differentiated financial needs of middle class families and cooperate with top financial institution to strengthen our investment and research capability. Our core client base is emerging middle class and affluent population, whose financial risk appetite is relatively medium and low. In order to better match their risk appetite, we, as an independent buy side investment advisor [indiscernible] take product portfolios of public raised fund products and some of funds of privately raised fund products as our feature products. In terms of public raised fund products, after three years of polishing, our management team for public raised fund products has demonstrated strong professional investment in research capability for sound performance of our product portfolios. In the next fiscal year, we determine to focus on public raised fund product portfolios developed by our in-house team and supplement by external channels. In terms of privately raised fund products, we're determined to focus on the distribution of fund of funds developed by the leading fund managers such as CICC, Gojin [ph] and China Merchants. At the same time, we will continue to enhance our capability to achieve managing our existing privately raised fund of funds products and develop more Puyi feature privately raised fund of fund products.

[Foreign Language]

We will always be client-oriented, adhere to our mission of advance with financial advisors and become the wealth gatekeeper of middle class and affluent families in China and continue to create value for our clients, financial advisors and shareholders. This ends for the prepared remarks. Now we are open for questions. Operator, please.

Since no question at this time, there is something wrong with our lines today. We are very sorry for your inconvenience. We will upload the full transcript on our website. So if you're interested, please go to our website for the full transcripts. There is no other comments. Thank you, everyone, for attending our fiscal year 2021 earnings call. If you have any further questions, please feel free to contact us. Thank you very much. Operator?

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.