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Puyi Inc. Announces Unaudited Financial Results For the First Half of the Fiscal Year 2020

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GUANGZHOU, China, March 26, 2020 (GLOBE NEWSWIRE) -- Puyi Inc. (“Puyi”, “we” or the “Company”) (PUYI), a leading third-party wealth management service provider in China focusing on mass affluent and emerging middle class population, today announced its unaudited financial results for the first half of its fiscal year 2020 from July 1, 2019 to December 31, 2019.

FINANCIAL HIGHLIGHTS FOR THE FIRST HALF OF THE FISCAL YEAR 2020

  • Net revenues decreased by 49.8% to RMB62.4 million (US$9.0 million) from RMB124.3 million for the same period of the fiscal year 2019; and

  • Net loss was RMB22.6 million (US$3.2 million) and net loss attributable to Puyi’s shareholders was RMB22.0 million (US$3.2 million), while Puyi recognized net income of RMB45.6 million and net income attributable to Puyi's shareholders of RMB46.5 million for the same period of the fiscal year 2019.

Mr. Yong Ren, Chief Executive Officer of Puyi, commented,

“With the further implementation of the Guidelines on Standardizing Asset Management Businesses of Financial Institutions, or the 2018 Guidelines, the focus of wealth management market in China has fully turned into truly market-oriented wealth management products. To closely follow such industry trend, we have further optimized our product portfolio and market strategies. In particular, we have focused on distribution of fund products and ceased to offer exchange administered products since October 2019. For fund products, based on the anticipated development of macro-economy in China, and our understanding of changes in risk appetites of our clients, we have significantly downsized the distribution of privately raised funds that primarily invest in private companies. In the meanwhile, we have increased the distribution of privately raised funds that mainly invest in public traded stocks. However, as we are in the process of optimizing our product portfolio, the downsized scale outpaced the increased distribution amount of the privately raised funds for the first half of the fiscal year 2020, resulting in a short-term negative impact on our net revenues and profitability. In addition, we have further increased marketing and promotion activities for publicly raised fund products to further expand our client basis. Out of the total selling expenses, our marketing promotion expenses was RMB22.0 million (US$3.2 million) during the first half of the fiscal year 2020, and the aggregated number of clients purchasing publicly raised fund products increased from 75,000 as of June 30, 2019 to 184,000 as of December 31, 2019 with an average client acquisition cost at approximately RMB202 per client. Furthermore, we have invested extensive resources to improve our back-office professional capabilities, especially in the introduction of the key management members and professionals and the continuing upgrades of information technology platforms, therefore our general and administrative expenses increased by 18.3% for the first half of the fiscal year 2020 from the same period of the fiscal year 2019. We believe such investments are particularly critical for us to lay a solid foundation for our future development. As a result of foregoing measures, (i) our net revenues generated from distribution of publicly raised fund products were RMB13.0 million (US$1.9 million) for the first half of the fiscal year 2020, reflecting over an eight-fold increase from RMB1.4 million for the same period of the fiscal year 2019; (ii) the total transaction value of publicly raised fund products we distributed for the first half of the fiscal year 2020 was RMB2.2 billion (US$0.3 billion), representing a 100.0% increase from RMB1.1 billion for the same period of the fiscal year 2019; and (iii) the outstanding balance of publicly raised fund products distributed by us was RMB1.9 billion (US$0.3 billion) as of December 31, 2019, representing a 215.3% increase from RMB0.6 billion as of December 31, 2018.

For the second half of the fiscal year 2020, we will continue to focus on truly market-oriented wealth management products and further implement the strategies emphasizing client base expansion and information technology platform development, which are expected to continue to increase our selling expenses and general and administrative expenses in short term, but have tremendous potential in generating long-term and sustainable growth in our business and operation results in the view of our management.

The recent outbreak of novel coronavirus COVID-19 surfaced in Wuhan city in December 2019, has spread in and outside China. In order to prevent and control the outbreak of COVID-19, the local governments of various provinces and cities in which we operate have introduced and may continue to introduce a series of control measures, including but not limited to extending Chinese New Year Holidays, restrictions on office hours and on-site staffing of enterprises after reopening, traffic control and travel bans. The privately raised fund products, our largest product category, require the transactions to be completed offline. However, a majority of our branch offices delayed on-site work two to three weeks after the Chinese New Year Holidays, and certain of our branch offices have not resumed work to date and substantially all of our clients have adopted social-distancing measures to protect themselves and their families since the outbreak, therefore, the transaction value of privately raised fund products has significantly declined since the beginning of 2020, which would in turn materially and adversely affect our business operations and financial results in the fiscal year 2020. We expect that the net loss attributable to Puyi’s shareholders will be ranging from RMB60 million to RMB70 million for the second half of fiscal year 2020, and will be ranging from RMB80 million to RMB 90 million in the whole fiscal year 2020. Notably, as the COVID-19 outbreak may continue to evolve, it has the potential to impose impact on our business operations and financial results for a longer period if the situation deteriorates.

We have been closely monitoring the COVID-19 outbreak and fully observed the government’s requirements and guidelines on disease control. In the meanwhile, we have actively coped with the negative impact on our operations. We have deeply engaged in our online platforms and social e-commerce based sales model to distribute publicly raised fund products, offer comprehensive investor education and promote our products. In addition, to improve the efficiency of our distribution of privately raised fund products, we have endeavored to become one of the first movers that can provide customer services related to privately raised fund products online.

We believe the investment demand of the mass affluent and emerging middle class population in China for wealth preservation and appreciation remains strong. We have and would continue to commit our best efforts to respond to all the challenges including the recent COVID-19 outbreak and strive to create opportunities for business growth. In the long run, we are confident for our long-term strategies. ”

FINANCIAL RESULTS FOR THE FIRST HALF OF THE FISCAL YEAR 2020

Net revenues

Net revenues for the first half of the fiscal year 2020 were RMB62.4 million (US$9.0 million), representing a 49.8% decrease from RMB124.3 million for the same period of fiscal year 2019.

  • Net revenues generated from our wealth management services for the first half of the fiscal year 2020 were RMB57.7 million (US$8.3 million), representing a 50.2 % decrease from RMB115.9 million for the same period of fiscal year 2019. In particular,

    • Net revenues generated from distribution of privately raised fund products for the first half of the fiscal year 2020 were RMB32.0 million (US$4.6 million), representing a 66.2% decrease from RMB94.7 million for the same period of fiscal year 2019. The decrease was primarily due to (i) the decreased transaction value of privately raised fund products as we further optimized our product portfolio and significantly downsized the distribution of privately equity funds that invest in private companies; and (ii) the decrease in recognized performance-based fees to RMB4.6 million (US$0.7 million), from RMB40.0 million for the same period of the fiscal year 2019;

    • Net revenues generated from distribution of publicly raised fund products for the first half of the fiscal year 2020 were RMB13.0 million (US$1.9 million), representing a significant increase from RMB1.4 million for the same period of fiscal year 2019. The increase was primarily due to an increase in commissions generated from the distribution of publicly raised fund products (including packaged fund products1); and

    • Net revenues generated from the distribution of other financial products for the first half of the fiscal year 2020 were RMB12.7 million (US$1.8 million), representing a 35.8% decrease from RMB19.8 million for the same period of the fiscal year 2019. The decrease was primarily because we have focused on distribution of fund products and ceased to offer exchange administered products since October 2019.

  • Net revenues generated from our asset management services for the first half of the fiscal year 2020 were RMB4.6 million (US$0.7 million), representing a significant increase from RMB1.1 million for the same period of the fiscal year 2019. The increase was primarily due to (i) a recognition of RMB2.5 million carried interest generated by Rui Xuan Fund (睿选基金) under our management; and (ii) an increase in management fees as a result of the increase in the asset scale under our management.

  • Net revenues generated from our corporate finance services for the first half of the fiscal year 2020 were RMB6,000 (US$1,000), representing a significant decrease from RMB6.2 million for the same period of the fiscal year 2019. The decrease was because we further consolidated our resources to mainly focus on the development of wealth management services.

  • Net revenues generated from other services for the first half of the fiscal year 2020 were nil, compared to RMB1.1 million for the same period of fiscal year 2019, as we have ceased to offer factoring services to third parties.

Operating costs and expenses

Operating costs and expenses for the first half of the fiscal year 2020 were RMB98.0 million (US$14.1 million), representing a 36.3% increase from RMB71.9 million for the same period of the fiscal year 2019. In particular,

  • Cost of sales for the first half of the fiscal year 2020 were RMB18.9 million (US$2.7 million), representing a 45.0% increase from RMB13.0 million for the same period of the fiscal year 2019. The increase was primarily due to (i) a significant increase in the number of privately raised fund products distributed on a gross-commission basis under which we recognized the commissions paid to third parties including seed clients as cost of sales; and (ii) an increase in commission expenses as a result of the significant increase in the distribution of publicly raised fund products;

  • Selling expenses for the first half of the fiscal year 2020 were RMB49.2 million (US$7.1 million), representing a 46.6% increase from RMB33.6 million for the same period of the fiscal year 2019. This increase was due to (i) an increase in the number of investment advisors to support our marketing and sales promotion; and (ii) our increased marketing and sales promotion activities on publicly raised fund products; and

  • General and administrative expenses for the first half of the fiscal year 2020 were RMB29.9 million (US$4.3 million), representing a 18.3% increase from RMB25.3 million for the same period of the fiscal year 2019. The increase was primarily due to increases in the salary level and scale of administrative staff.

Investment Income

Our investment Income for the first half of the fiscal year 2020 was RMB345,000 (US$50,000), representing a 113.0% increase from RMB162,000 for the same period of the fiscal year 2019, which was mainly due to an increase in our purchases of wealth management products and an increase in investment returns from our purchased products.

Interest Income

Interest income for the first half of the fiscal year 2020 was RMB5.2 million (US$0.7 million), representing a 88.6% increase from RMB2.7 million for the same period of the fiscal year 2019, which was primarily due to an increase in our purchases of low risk financial products from financial institutions which are considered as cash equivalents.

Other Income

Other income for the first half of the fiscal year 2020 was RMB4.7 million (US$0.7 million), representing a significant increase from RMB0.3 million for the same period of fiscal year 2019, which was primarily due to government grants from the local government.

Income Tax Benefit (Expenses)

We recognized income tax benefit of RMB2.8 million (US$0.4 million) for the first half of the fiscal year 2020 due to deferred tax assets generated from net loss, while we incurred income tax expenses of RMB8.9 million for the same period of the fiscal year 2019.

Net Income (Loss)

We recognized net loss of RMB22.6 million (US$3.2 million) for first half of the fiscal year 2020, while we recognized net income of RMB45.6 million for the same period of the fiscal year 2019.

Net Income (Loss) Attributable to Puyi’s Shareholders

We recognized net loss attributable to Puyi’s shareholders of RMB22.0 million (US$3.2 million) for the first half of the fiscal year 2020, while we recognized net income of RMB46.5 million for the same period of the fiscal year 2019.

Basic and Diluted Income (Loss) per ADS

Basic and diluted loss per ADS for the first half of the fiscal year 2020 was RMB0.366 (US$0.053) and RMB0.366 (US$0.053), respectively. We recognized basis and diluted income per ADS of RMB0.845 and RMB0.845, respectively, for the same period of the fiscal year 2019.

Cash, Cash Equivalents and Restricted Cash

As of December 31, 2019, we had cash, cash equivalents and restricted cash of RMB353.5 million (US$50.8 million), decreased from RMB430.3 million as of June 30, 2019.

OPERATING DATA FOR THE FIRST HALF OF THE FISCAL YEAR 2020

Wealth Management Services

From the first half of the fiscal year 2019 to the same period of the fiscal year 2020, the total transaction value of publicly raised fund products increased by 100% from RMB1.1 billion to RMB2.2 billion (US$0.3 billion), and the number of clients purchasing our products increased by 141,704 from 20,984 to 162,688. During the first half of the fiscal year 2020, the number of new clients who made the first purchases of our products was approximately 110,000.

The outstanding balance of privately raised fund products was RMB6.8 billion (US$1.0 million) as of December 31, 2019, representing a 35.8% increase from RMB5.0 billion as of December 31, 2018.

Asset Management Services

For the first half of fiscal year 2020, the FOFs under our asset management services raised a gross additional capital of RMB222.6 million (US$32.0 million). As of December 31, 2019, we had assets under management (“AUM”) totaling RMB618.1 million (US$88.8 million), representing a 24.0% increase from RMB502.8 million as of June 30, 2019.

Supervision and Inspection

China Securities Regulatory Commission ( the “CSRC”) has continued to implement stringent supervision measures on wealth management industry. During the first half of fiscal year 2020, it conducted an on-site inspection of our Company, and our operations have been in compliance with the regulatory requirements.

CONFERENCE CALL

Senior management will host a combined English and Chinese language conference call to discuss the Company’s unaudited financial results and business development for the first half of the fiscal year 2020 ended December 31, 2019.

Details for the conference call are as follows:

Date/Time:

Thursday, March 26, 2020 at 9:00 PM U.S. Eastern Daylight Time

(Friday, March 27, 2020 at 9:00 AM Beijing/Hong Kong Time)

Conference Title: Puyi Inc. First Half of Fiscal year 2020 Earnings Call

Conference ID #:5249257

Due to the recent outbreak of a novel coronavirus named COVID-19, the conference call will be a Direct Event call, which requires online registration in advance. Please use the link http://apac.directeventreg.com/registration/event/5249257 to complete the online registration at least 15 minutes prior to the commencement of the conference call. You will receive a confirmation email containing the Direct Event Passcode, Registrant ID, list of dial in numbers and a brief description of how to join the call. Please call the dial in number associated with your location at least 15 minutes prior to the commencement of the conference call and follow the relevant instructions to enter the Direct Event Passcode and Registrant ID, then you will join the conference call.

Additionally, a live and archived webcast of the conference call will be available at Puyi’s investor relations website http://ir.puyiwm.com/news-events/events.

FOREIGN CURRENCY TRANSLATION

In this announcement, the unaudited financial results for the first half of fiscal year 2020 are stated in RMB. This announcement contains currency conversions of certain RMB amounts into US$ at specified rates solely for the convenience of the reader. Unless otherwise indicated, all translations from RMB to US$ are made at a rate of RMB6.9618 to US$1.00, the effective central parity rate for December 31, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board.

SAFE HARBOR STATEMENT

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the third-party wealth management industry in China; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the international markets the Company serves and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

_______________________________________
1
Packaged publicly raised fund products are similar to fund of funds (FoFs) by selecting different publicly raised funds and group into portfolios suitable for different risk appetites of target clients.

Puyi Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

As of

As of

June 30,

December 31,

December 31,

2019

2019

2019

RMB’000

RMB’000

USD’000

ASSETS:

Current assets:

Cash and cash equivalents

378,445

334,399

48,033

Restricted cash

51,823

19,099

2,743

Short term Investments

2,000

34,000

4,884

Accounts receivable, net

27,767

32,452

4,662

Due from related parties

590

590

85

Other receivables

6,499

4,729

679

Total current assets

467,124

425,269

61,086

Long-term investments

2,000

-

-

Property and equipment, net

4,026

4,022

578

Intangible assets, net

733

548

79

Long-term prepayments

393

393

56

Deferred tax assets

5,133

8,036

1,154

Right of use asset

-

23,879

3,430

Total assets

479,409

462,147

66,383

LIABILITIES AND EQUITY:

LIABILITIES:

Current liabilities:

Accounts payable

5,873

8,617

1,238

Investors’ deposit

51,823

19,099

2,743

Advance receipts

180

18

3

Other tax liabilities

9,300

9,300

1,336

Other payables and accrued expenses

8,657

27,360

3,930

Total current liabilities

75,833

64,394

9,250

Lease liabilities

-

16,538

2,376

Total liabilities

75,833

80,932

11,626

Commitments and contingencies

EQUITY:

Ordinary shares

600

600

86

Additional paid-in capital

224,702

224,702

32,276

Statutory reserves

19,824

20,306

2,917

Retained earnings

155,266

132,749

19,068

Other comprehensive income

11

238

34

Total Puyi Inc.’s equity

400,403

378,595

54,381

Non-controlling interests

3,173

2,620

376

Total equity

403,576

381,215

54,757

Total liabilities and equity

479,409

462,147

66,383


Puyi Inc.

Unaudited Condensed Consolidated Statements of

Operations and Comprehensive Income (Loss)

(In thousands, except for percentages)

Six months ended

December 31, 2018

December 31, 2019

December 31, 2019

RMB’000

RMB’000

USD’000

Change (%)

Net Revenues:

Wealth management 1

115,867

57,729

8,292

(50.2

%)

Asset management

1,055

4,625

664

338.4

%

Corporate finance 1

6,219

6

1

(99.9

%)

Other revenue

1,109

-

-

(100.0

%)

Total net revenues

124,250

62,360

8,957

(49.8

%)

Operating costs and expenses:

Cost of goods sold

(13,046

)

(18,915

)

(2,717

)

45.0

%

Selling expenses

(33,569

)

(49,205

)

(7,068

)

46.6

%

General and administrative expenses

(25,262

)

(29,874

)

(4,291

)

18.3

%

Total operating costs and expenses

(71,877

)

(97,994

)

(14,076

)

36.3

%

Income (loss) from operations

52,373

(35,634

)

(5,119

)

NA

Other income:

Interest income 1

2,749

5,184

745

88.6

%

Interest expenses

(1,048

)

-

-

(100.0

%)

Investment income 1

162

345

50

113.0

%

Other income

264

4,747

681

1,698.1

%

Income (loss) before taxes

54,500

(25,358

)

(3,643

)

NA

Income tax benefit (expense)

(8,913

)

2,771

398

NA

Net income (loss)

45,587

(22,587

)

(3,245

)

NA

Less: net loss attributable to non-controlling interests

(908

)

(552

)

(79

)

(39.2

%)

Net income (loss) attributable to Puyi Inc.’s shareholders

46,495

(22,035

)

(3,166

)

NA

_______________________________________
1
The Company has reclassified the comparative amount of net revenues of corporate finance and investment income in the unaudited condensed consolidated statements of income for the six months December 31, 2018 to conform to the current period’s presentation. The reclassification is related to recognition of certain net revenues under wealth management that were previously recorded under corporate finance, and recognition of certain other income under interest income that was previously recorded under investment income. The reclassification did not have an impact on the reported total net revenues, other income and net income (loss).


Puyi Inc.

Unaudited Condensed Consolidated Statements of

Operations and Comprehensive Income (Loss) (Continued)

(In thousands, except for shares, income per share, income per ADS)

Six months ended

December 31, 2018

December 31, 2019

December 31, 2019

RMB’000

RMB’000

USD’000

Net income (loss) per share:

Basic

0.563

(0.244

)

(0.035

)

Diluted

0.563

(0.244

)

(0.035

)

Net income (loss) per ADS:

Basic

0.845

(0.366

)

(0.053

)

Diluted

0.845

(0.366

)

(0.053

)

Weighted average shares used in calculating net income (loss) per share;

Basic

82,578,859

90,472,014

90,472,014

Diluted

82,578,859

90,472,014

90,472,014

Net income (loss)

45,587

(22,587

)

(3,244

)

Other comprehensive income

91

227

32

Comprehensive income (loss)

45,678

(22,360

)

(3,212

)

Less: Comprehensive loss attributable to the non-controlling interests

(908

)

(552

)

(79

)

Comprehensive income (loss) attributable to Puyi Inc.’s shareholders

46,586

(21,808

)

(3,133

)


Puyi Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Six months ended

December 31, 2018

December 31, 2019

December 31, 2019

RMB’000

RMB’000

USD’000

Net cash generated from (provided to) operating activities

46,257

(49,609

)

(7,126

)

Net cash generated from (provided to) investing activities

52,464

(28,912

)

(4,153

)

Net cash generated from financing activities

1,402

-

-

Net increase (decrease) in cash and cash equivalents, and restricted cash

100,123

(78,521

)

(11,279

)

Cash, cash equivalents and restricted cash at beginning of period

112,000

430,268

61,804

Effect of exchange rate changes on cash and cash equivalents

91

1,751

252

Cash, cash equivalents and restricted cash at end of period

212,214

353,498

50,777

Contacts:

Puyi Inc.
Jing He, GM of Financial Reporting Department
Email: ir@puyiwm.com
Tel: +86 20-28866499