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Edited Transcript of YIN earnings conference call or presentation 2-Dec-19 1:00pm GMT

Q3 2019 Yintech Investment Holdings Ltd Earnings Call

Jan 14, 2020 (Thomson StreetEvents) -- Edited Transcript of Yintech Investment Holdings Ltd earnings conference call or presentation Monday, December 2, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Raphael Qian

Yintech Investment Holdings Limited - VP & CFO

* Wenbin Chen

Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO

* Yvonne Young

Yintech Investment Holdings Limited - IR Director

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Conference Call Participants

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* Hunter Louis Diamond

Diamond Equity Research LLC - CEO & Founder

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Presentation

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Operator [1]

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Hello, and welcome to the Q3 2019 Yintech Investment Holdings Limited Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Yvonne Young. Please go ahead, ma'am.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [2]

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Thank you, and welcome to Yintech's Third Quarter 2019 Earnings Conference Call. Our earnings release was released earlier today and is now available on our IR website.

On the call today from Yintech are Mr. Wenbin Chen, Chairman and CEO; and Mr. Raphael Qian, our CFO; and myself, the Investor Relations Director. Mr. Chen will review our business operations and company highlights, followed by Mr. Qian, who will go over the financials and guidance.

We will all be available to answer your questions during the Q&A session that follows. Questions can be asked in English or Chinese. If you ask your questions in Chinese, please translate into English yourself afterwards, or I may help to do the translation.

Before beginning, we would like to remind you that discussions during this call contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and factors that may cause the actual results to differ materially from those contained in any such statements. Further information regarding potential risks, uncertainties and factors is included in Yintech's filings with the U.S. Securities and Exchange Commission. Yintech does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

During this call, we will be referring to several non-GAAP financial measures as supplemental measures to review and assess our operating performance. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with the U.S. GAAP. For information about these non-GAAP measures and reconciliation to GAAP measures, please refer to our earnings press release.

I will now turn the call over to Mr. Wenbin Chen. Mr. Chen will give his remarks in Mandarin. I will translate for him. Mr. Chen, please.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [3]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [4]

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[Interpreted] Thank you, Yvonne, and hello, everyone. Thanks for joining today's call. We are pleased to see the strategy we adopted to leverage the synergies we have built among our 5 core product lines, continues to yield positive results. And the tactics we employ in managing our business and the business strategy, in particular, maintaining our structural flexibility in terms of personnel and resources deployment and organizational agility in accordance with market conditions and demand change from our clients approved to work perfectly well.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [5]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [6]

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[Interpreted] In the third quarter, we continued to capitalize on positive market dynamics, especially global trading to make the most for our clients and the company, has positioned us to drive strong business and financial growth.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [7]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [8]

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[Interpreted] We delivered the strongest quarterly results since our business transformation in the second quarter of 2017 in terms of both top line and bottom line growth. Our revenue reached a 2-year historical high of RMB 501.2 million, an increase of 87.2% year-over-year and 73.4% quarter-over-quarter mainly driven by strong demand for our core products. It's 5% higher than our adjusted high-end guidance of RMB 477 million. Revenues generated from net commissions and fees from our core business, interest income and other revenue reached RMB 418 million, up 90.6% year-over-year and 45.8% on a sequential basis, and it's 4.3% higher than our adjusted high-end guidance of RMB 416 million.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [9]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [10]

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[Interpreted] While sustaining our incremental growth on our core business, we continue to grow our assets, enhance our efficiency and ultimately drive our earnings per share growth as we work to create long-term shareholder value. To support this outcome, we actively deployed capital, we invested for organic growth across our product upgrade, recruiting and technology and returned capital to shareholders through share repurchases. In the third quarter, we delivered over RMB 100 million in net income, which was translated to diluted earnings per ADS of RMB 1.3, the first time of returning to profitability attributable to our core business growth since 2 years ago.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [11]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [12]

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[Interpreted] Now, I would like to elaborate in greater details of the progress we made in our core business, breaking down by business segments and provide updates on our technological advancements, product innovation and R&D progress as well as our organizational structure adjustment and how they support the needs of our evolving business initiative in the face of the new competition environment.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [13]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [14]

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[Interpreted] Firstly, our commodities services, as we expected in the second quarter's earnings call, since the beginning of the second quarter of this year, the spot gold price has continued to rise steadily. At the end of August, the price of Au (T+ D) reached RMB 369 per gram, an increase of over 30% from the low point in mid-April, the highest in nearly 7 years. Beginning in the second quarter, we anticipated that the current [runs] of [fore-market] in gold may continue in the short to medium term. As a result, the company has increased the market analysis of experts, consultants and investor education for gold products and has guided our clients to take advantage of the favorable market opportunity to obtain FX appreciation. Since the second quarter, our trading volume and customer equity have increased dramatically. And the trading activity of both -- from both new and existing clients has increased significantly, especially in the third quarter. The trading volume peaked in recent years. In the third quarter, we added nearly 4,000 new accounts, active accounts nearly doubled. Our total customer equity increased by 65% from the previous quarter.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [15]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [16]

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[Interpreted] Representing our customers, maximizing customer value and helping customers achieve better relative returns are always our strategic goals. To this end, we'll adjust the focus of our product line in a different time period, according to market conditions. And the result, our allocation will also be shifted accordingly. In the third quarter, the company's relatively stable development in the futures commodity business is also an important driving force for the company's overall business growth.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [17]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [18]

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[Interpreted] And next, let me introduce another major business segment of our company, the securities service business, which mainly includes securities advisory and investor education, overseas brokerage services and asset management business. In the third quarter, this business segment generated a total of JPY 134 million in revenue, a slight decrease from the previous quarter and an increase of nearly 60% from the same period last year.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [19]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [20]

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[Interpreted] In terms of securities, advisory and investor education, the scale of our customers has continued to grow rapidly with nearly 4,000 new clients added for the first time. So far, we have served more than 150,000 clients. At the same time, we'll continue to innovate our products, diversify our product portfolio and adding the 3 new quantitative mutual products in the third quarter. At the same time -- I'm sorry, let me start. In terms of asset, yes, we strive to -- at the same time, we continue to make breakthroughs and innovations in the formal product and provide fine and educational experience. We strive to teach professional investment knowledge in easy to understand beBit, an interesting language. One of our investment festivals, A-share, you are not marrying, achieved a fruitful result in the third quarter. The Shanghai division, the [onshore] which represented -- the Shanghai division are represented by the onshore won the national championship of the CCTV shareholders con finalists. We bought 2019 top 10 financial video live broadcasting regimen award. In August, she also won the 2019 [Watermelon Play] outstanding creator awarded by [Watermelon] Video. In the ongoing customer satisfaction survey conducted every quarter. In the third quarter, our license securities advisory company obtained 98.19% customer satisfaction, indicating that customers have fully recognized our services.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [21]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [22]

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[Interpreted] In terms of asset management business, CE fund has launched a total of 14 products, including 8 long-only equity products, 3 bond products, 2 quantitative mutual products, including a new mutual product added in the third quarter and 1 [gold] product. Our AUM exceeds RMB 1.45 billion. In terms of product revenue, it's always our goal to create absolute revenue for our clients.

In the third quarter, our performance continued to be recognized by the industry. We have obtained a total of 11 awards ranking from well-known security firms and financial media such as Guangzhou Galaxy Securities, Haitong Securities, Private Equity Ranking, SINA Finance, et cetera, such as the top 10 performance of 10, 1-0, private equity firms scaled between CNY 1 billion and CNY 2 billion in the first half of 2019. This is the industry's strong recognition of our professional strength. In the fourth quarter, we plan to launch new quantitative products and achieve substantial breakthroughs in institutional channel sales.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [23]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [24]

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[Interpreted] Next, I'd like to introduce our technology and R&D achievements.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [25]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [26]

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[Interpreted] In the third quarter, in order to cooperate with the transformation and innovation of the business, the technical team made 3 efforts in several aspects, such as talent onshore loans, product development, system construction and achieved significant returns. In terms of products, we, however, developed new products or upgrading existing products across our core product lines, including investor education, futures and [OTB] and overseas brokerage services based on the philosophy of better supporting for the business development in order to provide customers with more valuable services. At the same time, we have introduced the block-chain technology to Yintech, which is currently entering the project incubation stage. In terms of talent, onshore loans, we have introduced a large number of high-end talent to some well-known Internet companies such as Ali and Tencent, which helps us for the development for the next evolution of distributed legal office.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [27]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [28]

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[Interpreted] In terms of organizational structure, we have continued to adjust and optimize the personnel structure in accordance with the company's development strategy. While improving our financials in a dramatic way, we have maintained a scale of 3,000 staff. As a result, the company's operating efficiency and per capital output value have improved significantly. We increased the expansion of our technical talent and middle and back office staff, driving to better serve our clients. Thereby, we reduced the proportion of front-end sales staff, while the total clients remain the same. We believe that this has laid a good foundation for the company to achieve its growth goals in 2019 and beyond.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [29]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [30]

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[Interpreted] In addition to investing in business growth, we continue to return excess capital to shareholders in the third quarter. On May 31, 2019, the company announced a new round of stock repurchase plans and management plans to complete a CNY 20 million authorized repurchase plan within the next year. As of the end of the third quarter, we have purchased -- repurchased a total of 213,288, equivalent to USD 1 million.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [31]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [32]

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[Interpreted] Going forward, we will remain focused on combining our strategy and execution to better serve our clients. We believe our business and financial strength will position us well, and we look to continue to drive growth and to create long-term shareholder value.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [33]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [34]

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[Interpreted] With that, I will now hand the floor over to Mr. Qian, our CFO, to discuss our financial results for the third quarter and to provide guidance for the fourth quarter. Mr. Qian, please.

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Raphael Qian, Yintech Investment Holdings Limited - VP & CFO [35]

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Hello, everyone. I am glad to speak with you on today's call. We delivered another quarter of strong business and financial results. If excluding the investment gains and loss, which is more volatile with market dynamics, we did an apple-to-apple comparison with our core business on Y-o-Y and a Q-o-Q basis. We are very happy to report that we delivered the strongest quarterly results during the last 2 years. We grew assets and invested to drive growth while still delivering operating leverage. As a result, we are pleased with the performance, and we will continue to focus on executing our strategy.

Let's now review our Q3 business results in greater depth. We finished the quarter at RMB 501.2 million in total revenues, up 73.4% sequentially, driven by the strong demand on our commodities and securities services. If you look at simply the net commissions and fees generated by our 5 core product lines which were our primary focus, was RMB 458.7 million, which translates to an annualized growth rate of 120.5% and 48.4% from the previous quarter. This comprised 17.9% of commodities and 29.1% of the securities. Total customer trading volume was RMB 1,034 billion, up 154.9% year-over-year and 80.9% from the previous quarter. 98.4% of which was from commodities and the rest was from securities. Effective fee rate from commodities and overseas securities brokerage services for the quarter were 0.032% and 0.08%, respectively, within the reasonable range of movement if you compare Y-o-Y and Q-o-Q.

Now turning to our expenses. Our expenses are RMB 369.3 million, an increase of 22.2% year-over-year and 12.6% from the previous quarter. However, if you compare the growth of revenues from our core business, the advantage of scale was clear to see as we demonstrated a stronger growth in our total net commissions and fees, which increased 120.5% year-over-year and 48.4% quarter-over-quarter. In the third quarter, we continued to optimize our business and enhance our bottom line. Our ongoing focus on driving efficiency while managing our spending in a disciplined manner, enabled us to further improve ratio of expenses, drive operating leverage and ultimately, improve earnings. As a result, we are returning to profitability attributable to our core business growth.

Our net income attributable to Yintech for the quarter was RMB 98 million compared with net loss of RMB 36.6 million in the same quarter last year and a net loss of RMB 55 million in the previous quarter. Non-GAAP net income attributable to Yintech for the quarter was RMB 105.9 million compared with net loss of RMB 22.3 million in the same quarter last year and a net loss of RMB 42.1 million in the previous quarter.

Diluted earnings per ADS for the quarter was RMB 1.3 compared with diluted loss per ADS of RMB 0.52 in the same quarter last year and the diluted loss per ADS of RMB 0.76 in the previous quarter.

Non-GAAP diluted earnings per ADS for the quarter was RMB 1.40 compared with non-GAAP diluted loss per ADS of RMB 0.32 in the same quarter last year, and the non-GAAP diluted loss per ADS of RMB 0.58 in the previous quarter.

As of September 30, 2019, the company had RMB 2,024.5 million in cash and short-term investments compared with RMB 1,858.2 million as of June 30, 2019. Now please turn to Keith.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [36]

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Yes, Keith. I think we are ready for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question comes from Hunter Diamond from Diamond Equity Research.

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Hunter Louis Diamond, Diamond Equity Research LLC - CEO & Founder [2]

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Firstly, congratulations on the very strong results. The market seems to be liking it before the market opens in the U.S. You mentioned block-chain. I'm just wondering what sort of services are you looking to develop on the block-chain. I know it has numerous applications for investment firms. And also are you looking to develop cryptocurrency investment offerings, which I know are very popular in Asia, bitcoin, either purchasing directly or bitcoin futures?

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [3]

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Hunter, thank you for the questions. I think the first one is about the block-chain Mr. Chen introduced in his remarks. What about the second one?

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Hunter Louis Diamond, Diamond Equity Research LLC - CEO & Founder [4]

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So are you looking to develop or is the company thinking about developing bitcoin, either direct purchases or bitcoin futures as investment products? They're very common in the United States, bitcoin futures or bitcoin cryptocurrency purchasing for investors.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [5]

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Okay. I see. (foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [6]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [7]

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[Interpreted] Thank you for your questions. Let me address your -- the first one about the adoption of the block-chain in our products and services. Well, the major reason for us to adopt the block-chain is that we introduce it to the development and service of our entire product development lines to ensure that we are fully compliant with the regulatory requirements, which is very key for the financial service provider like us. As you know, that major of our business are licensed. That means that we are certified by the regulatory authorities for operating and then as well as for our clients, compliance is one of their major concerns from their standpoint as well. So by adopting the block-chain into our products, we are able to serve our clients in the entire served product cycle included from development to the back office service. And you will help us to comply with the authority on one end -- on one hand. On the other hand, you will keep the right -- the transactional record of our clients and make us more compliant and more trustful, attractable by our clients.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [8]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [9]

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(foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [10]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [11]

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[Interpreted] We will not consider providing the products and services to our clients for the visual points, visual point, which is not our consideration in the short or to the long run. Our focus will also -- will be on our existing 5 product lines, which is commodities and securities segments.

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Hunter Louis Diamond, Diamond Equity Research LLC - CEO & Founder [12]

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Got it. Perfect. No, it makes sense. In terms of -- my second question would just be, you mentioned the asset management has 14 products with 1 point -- almost CNY 1.5 billion in AUM. I know real estate products are very popular for wealth management, specifically with high net worth in China. What are the products that you got -- the company is looking to develop or other asset classes? I mean the 14 you have now, do you know sort of what are the areas the company is looking at? Is it more real estate or just long equity, other long equity products? And do you have any idea sort of how many product offerings the company is targeting for the next year?

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [13]

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Okay. Yes. Thank you for your question. Let me translate it for Mr. Chen first. (foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [14]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [15]

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[Interpreted] Thank you for your questions. Let me translate. First of all, we are very clear that we are not -- we will not invest in the real estate product in short to the long run. And we -- our primary focus will keep our existing products, including equities market, especially the long-only equities and the bond products as well as the quantitative mutual hedge products. These are our 3 major product lines, and we'll continue to focus on these areas in the short to the long anticipated future.

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Hunter Louis Diamond, Diamond Equity Research LLC - CEO & Founder [16]

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Great, perfect. And my last question is just more about the industry. I know customer trading volume went up 154% year-over-year, 80% from the previous quarter. I'm just wondering generally how management views the environment. I know it's been difficult for wealth management and some trading platforms with a lot of economic uncertainty. I'm just wondering, is management more optimistic, sort of, going into the next quarter and over the next year, just your general thoughts on the industry would be great.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [17]

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Okay. (foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [18]

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Okay. (foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [19]

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Okay. Let me translate.

[Interpreted] Well, that's a very good question. You have noticed that a very significant increase in trading volume in the third quarter, which is mainly contributed by the increase of our spot commodity trading. And well, we have seen that 2 reasons that drive the significant growth or progress in the third quarter. One is the -- as I mentioned in my remarks, the first one is the favorable market conditions, and we guided our clients to take favorable aftermarket conditions to make the most of benefits from this market. And the second one is the improvement of our team and also the overall capabilities, the enhancement of the team as a result of our years of focus on team building and our professional knowledge that we have development over the past few years. Well, even with that, we think that as the overall market conditions, both for securities and commodities as a total, doesn't change dramatically.

And as you -- you know that the security market is relatively flattish compared to the past -- compared to the last quarter, and we don't see any significant positive sign that the market will turn very positive in the third quarter and also in the coming maybe next quarter. Well, the commodity markets stay very bullish, as I said before. So if you put together of both the commodities and the securities markets together, as a whole, we doesn't see a dramatic favorable change or the market conditions are much favorable to us. So the major driver for the business growth in the third quarter was really the second one I just now mentioned, which is the overall enhancement of our capabilities and our professional activities. And we anticipated that in the next coming years, we'll continue to develop our abilities in this area. And we think that, that will continue to help us to drive growth -- greater growth in our business.

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Operator [20]

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And the next question comes from [Lewis Wang] with [Annunciation Research].

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Unidentified Analyst, [21]

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(foreign language) So congratulations. Very robust performance this quarter. And -- so I have 2 questions here. First one, it's about the guidance of fourth quarter. And so could you -- or could you give us some color on the -- how the change in the fourth quarter compared to the third quarter? And also -- or could you give some guidance into the first quarter of 2020.

(foreign language) So the second question is about how the management are planning to convert tradable accounts into the active accounts. And we see that those trading volume are growing in the third quarter, and we would like to know the reoccurrence or sustainability of the fourth quarter and the first quarter of the next year.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [22]

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(foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [23]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [24]

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Lewis, is that okay? Does it answer your question or -- and then I will translate.

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Unidentified Analyst, [25]

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Yes, I think so. And also -- or how about the first quarter of next year. (foreign language)

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [26]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [27]

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For the benefit of our English speakers and audience, I will translate the answer to the first question first.

[Interpreted] Well, we guided for -- well, our guidance for the fourth quarter of 2019 is CNY 400 million, right -- RMB 400 million to RMB 420 million, and we expect the investment loss will be between CNY 1 million to CNY 2 million...

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Raphael Qian, Yintech Investment Holdings Limited - VP & CFO [28]

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CNY 10 million to...

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [29]

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[Interpreted] CNY 10 million to CNY 20 million. Well, this guidance -- the reason for this guidance is that for the first one, because of the Golden Week in China, as you may know that, which is from October 1 to October 7, and the clients are not able to trade during this holidays, so -- which will directly affect our total revenues generated from net commissions and fees. And in terms of investment loss, for the fourth quarter, as you can see, that Asia market, and also as we just now mentioned, does not anticipated to turn very strong in the fourth quarter. So we expect a very flat investment gains and loss in the fourth quarter relatively to the third quarter. So -- well, that are the major reasons for a relatively soft fourth quarter guidance. And then about the first quarter of 2020 guidance for the revenues, well, what we can see at the moment is that we expect we will generate a very -- a stronger year of 2020 as compared to 2019, but it's very difficult to guide the Q1 revenue at this moment. Mainly because, same like Q3, we are facing the Chinese holidays, which is the Chinese New Year spring festival. So that will have a direct negative impact on our trading volumes. As a result, it will negative impact our revenues in the first quarter. And then Mr. Chen will answer the second question.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [30]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [31]

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[Interpreted] Okay. Well, the major reason to drive the strong demand of the gold -- spot gold trading is that the momentum of the -- and also the market is still [hesitant] of the spot gold market. So as you can see, that starting from the second quarter until the third quarter or even some period in the fourth quarter, the gold price remain high, even the historical high. And we see that investors, even some idle investors, they are activated for trading again, and this also attracted new investors to play the game. So these are the 2 major reasons that for us to book a very strong trading volume and then the revenues in the third quarter. And looking forward through the fourth quarter and 2020 and even beyond, we see that in the short term because of the spike in spot price and also the media exposure to this business, the investors are expected to continue to trade this product even though the gold price has maintained a relatively low level in the fourth quarter compared -- as compared to the third quarter. But investor is still hesitant in trading this product or activate it. So we expect this situation will maintain or will continue in the fourth quarter and will persist in the short period -- short to middle period. So we don't expect that have a very dramatic impact -- negative dramatic impact to our business in the short run. So this will still be a major contributor to our business.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [32]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [33]

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[Interpreted] Well, for the second point, I would like to stress that in the middle to the long run, we believe that the gold price will still maintain in a relatively good level because that the gold price has a negative correlation with the macro environment, which means that, well, as you can see that the global political and economic situation are still -- are full of uncertainties. And this will drive more people investing in the gold price products in order to maintain their asset appreciation. So we think that under the backdrop of this negative market environment, both politically and economically, and investors will invest this more in the gold price and driving the price higher. So we think that in summary, the volatility of the gold price in the short to the long run will help our business. We'll continue to take advantage from this overall positive long-term trend in the spot gold market.

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Unidentified Analyst, [34]

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(foreign language) So my last one is about fee income. So based on your business line, and you are mostly -- you have 2 parts. One is brokerage fee, another is management fee. So this 2 fees is different, and we would like to know how the management fee contributed from AUM to the whole -- to the total fee income.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [35]

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Okay. (foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [36]

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Okay. Well, let me translate.

[Interpreted] Well, in terms of our asset management business, while the fees coming -- generated from this business are mainly from 2 sources. The first one is that CE fund, our asset management company, manage our own cash. As you can see that we have a total of CNY 2 billion cash, including the short-term investment. A very big portion of that is managed by our own asset management. And this has the characteristics of low risk, and we are looking for the stable returns for this investment. So that has relatively much low risk and guaranteed return for the company for the long-term development. So that's why you see that in this quarter, that generated CNY 20 million revenues for us. And then the second portion is coming from the external investment, from the external investors. Well, these are in a very, very nascent stage. It's a quite new business. I would say it's in the incubation stage. They account for -- well, does not account for a very significant portion of our revenues, or you can just ignore its contribution at the moment because we started this business for just 1.5 years. So that takes a lot of effort for this business to take off and to contribute meaningfully to our top line and the bottom line. Well, so if you look at our business, we primarily focus on 5 product lines, including spot gold commodity services, futures commodities services, our securities advisory services and overseas brokerage services. So these 4 product lines will be the major contributor to our revenues at present and in the visible future.

So these are the second point I would like to clarify. And the third one I want to mention is that our growth plan for our asset management business. Well, in terms of our own investments, as I just now mentioned, we'll continue to look for the stable returns for this business at a low-risk level. So this will continue to be our strategy, and the CE fund will continue to manage a very important portion of our cash. We don't expect a big change to this strategy in the foreseeable future.

And then in terms of the second one, revenues from the external investors, I would like to share with you that my perspective in the future of China asset management industry, we believe that this has a very positive mid to long-term trends for the Chinese individual investors to have the professional fund manager to manage their investment, and this will be the trend we are anticipating to see. And we expect this business will experience high growth rate in the long-term trend. So that's why we invested in this business at early stage, and we expect we'll benefit from this positive market trend in the long run.

And then the third one is that we are also looking strategically on merger and acquisitions. So we are looking at the opportunity to acquire a company which have a third-party sales license. Well, as you know, that it's very difficult to obtain the license by ourselves and -- because of the high entry barrier. And so we are looking at potential -- potentially the acquisitions and to some companies who have already held the license. And we think that, as I just now mentioned, we believe that the shift of the Chinese investors from individual investors to professional institutional investors. And eventually, you will have a more -- a larger base of investors to invest in the asset management. Well, we lack of these capabilities, but with the license of the third-party sales, we are able to have a broader range of investors to invest in these areas, which also has a very positive prospect as we can anticipate.

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Operator [37]

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And the next question comes from [Jiang Zhang], a private investor.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [38]

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Okay. Go ahead. (foreign language)

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Unidentified Participant, [39]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [40]

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Well, the next -- let me translate into English for the benefit of our English-speaking audience.

[Interpreted] Well, the question is about our strategies for our focus for our 5 products into 2020. And which product lines, we think, are our primary focus. And how we deploy our resources according to this strategy in 2020.

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Wenbin Chen, Yintech Investment Holdings Limited - Co-Founder, Chairman & CEO [41]

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(foreign language)

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [42]

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[Interpreted] Well, as I introduced at the beginning of my remarks of this call is that one of the key abilities of our company and also our strategy is that it's not -- we are able to swiftly adjust our products -- our focus among the 5 product lines. Well, in 2019, we believe that we have developed these capabilities in the 5 product lines, and it has become quite a mature business as compared to 2017, which is still the beginning of we start up. This is the first point.

The second point is that we think in 2020, since we have obtained these capabilities in the 5 product lines and we have accumulated the knowledge, we predict that will enable us to take off in 2020 and maintain even greater growth in 2020. This was the second point.

The third one is that if you look at our per capita contribution, as I introduced in the third quarter, even though our business has increased significantly, our total employees does not increase at all, it still maintained the same level of the second quarter. And in 2020, even with the higher growth we anticipated, we expect that our total staff will still remain at the present level. So that means we will increase the per capita contribution from our employees.

And then, well, if you look at how we structure our product lines and how we manage this -- our focus from these 5 product lines, I'd like to share with you that maintaining the structural flexibility and agility is -- continue to be our primary focus. So we think that we are able to quickly adjust our focus among these 5 product lines when the opportunities comes. For 1 or 2 product lines, the same like in the third quarter. When we anticipated the gold price will maintain in the high level, we have deployed our resources and capacity into this product line. And the same will be in 2020. We will adjust according to the market dynamics and to take the most benefit from this positive market trend to help our customers to gain the greater returns from this positive market dynamics. We think that with -- over the past 2 years, we have obtained these capabilities and we'll continue to develop these capabilities. That will allow us to grab the higher growth opportunities in the coming years as we anticipate it.

Jiang, does that answer your question?

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Unidentified Participant, [43]

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Yes, that's very helpful. Yes.

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Operator [44]

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We do have a question from Vivian Zhang with Diamond Equity Research.

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Yvonne Young, Yintech Investment Holdings Limited - IR Director [45]

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Thank you, everyone. Thank you for joining today's conference call. And if you have any further questions or anyone who are not able to ask questions during this 1-hour time period, please feel free to reach out to me. I will be very happy to answer your concerns -- to answer your questions or address your concerns. Thank you. Operator, if no further questions, we may now disconnect.

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Operator [46]

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