Noah Holdings Limited Announces Unaudited Financial Results for the First Quarter of 2019

SHANGHAI, May 16, 2019 /PRNewswire/ -- Noah Holdings Limited ("Noah" or the "Company") (NYSE: NOAH), a leading wealth and asset management service provider in China with a focus on high net worth individuals, today announced its unaudited financial results for the first quarter of 2019.

FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS

• Net revenues for the first quarter of 2019 were RMB889.9 million (US$132.6 million), a 7.1% increase from the corresponding period in 2018.

• Income from operations for the first quarter of 2019 was RMB302.5 million (US$45.1 million), a 10.2% increase from the corresponding period in 2018.

• Net income attributable to Noah shareholders for the first quarter of 2019 was RMB284.6 million (US$42.4 million), a 6.0% increase from the corresponding period in 2018.
• Non-GAAP^[1] net income attributable to Noah shareholders for the first quarter of 2019 was RMB304.6 million (US$45.4 million), a 19.9% increase from the corresponding period in 2018.

FIRST QUARTER 2019 OPERATIONAL UPDATES

Wealth Management Business

The Company's wealth management business offers financial products and provides value-added services to high net worth clients in China and overseas. Noah primarily distributes credit, private equity, public securities and insurance products denominated in RMB and other currencies.

• Total number of registered clients as of March 31, 2019 was 274,893, a 39.6% increase from March 31, 2018.
• Total number of active clients^[2] during the first quarter of 2019 was 8,117, a 49.0% increase from the first quarter of 2018.
• Aggregate value of financial products distributed during the first quarter of 2019 was RMB28.0 billion (US$4.2 billion), a 0.8% increase from the first quarter of 2018.

• Average transaction value per active client^[5] for the first quarter of 2019 was RMB3.5 million (US$0.5 million), a 32.3% decrease from the corresponding period in 2018.
• Coverage network in mainland China included 313 service centers covering 83 cities as of March 31, 2019, up from 263 service centers covering 81 cities as of March 31, 2018 and unchanged from December 31, 2018.
• Number of relationship managers was 1,496 as of March 31, 2019, a 7.9% increase from March 31, 2018, but a 5.5% decrease from December 31, 2018.

Asset Management Business

The Company's asset management business, Gopher Asset Management, is a leading alternative multi-asset manager in China also with international offices in Hong Kong and the United States. Gopher Asset Management develops and manages private equity, real estate, public securities, credit and multi-strategy investments denominated in Renminbi and other currencies. 

• Total assets under management as of March 31, 2019 were RMB171.1 billion (US$25.5 billion), a 1.1% increase from December 31, 2018 and a 9.1% increase from March 31, 2018.

Lending and Other Businesses

The Company's lending services business utilizes an advanced risk-management system to assess and facilitate short-term loans to high quality borrowers, often secured with collateral. The total amount of loans originated during the first quarter of 2019 was RMB2.5 billion, as compared with RMB2.1 billion for the corresponding period of 2018, representing an increase of 17.2%. Other businesses include an online financial advisory platform and payment technology services.

Mr. Yi Zhao, Group President of Noah, said, "We have been focusing on the enhancement of operating efficiency, and successfully delivered another quarter of solid financial results, especially reflected in the improvement of operating margin. We have noticed that after the recent market challenges, high net worth clients have become increasingly rational and sophisticated, and their investment appetite has been gradually recovering, which provides us with enhanced business growth opportunities."

FIRST QUARTER 2019 FINANCIAL RESULTS

Net Revenues

Net revenues for the first quarter of 2019 were RMB889.9 million (US$132.6 million), a 7.1% increase from the corresponding period in 2018, primarily driven by increased recurring service fees and other service fees, partially offset by a decrease of performance-based income.

- Wealth Management Business

• Net revenues from one-time commissions for the first quarter of 2019 were RMB322.7 million (US$48.1 million), a 2.1% increase from the corresponding period in 2018, generally in line with the total amount of transaction value.
• Net revenues from recurring service fees for the first quarter of 2019 were RMB256.2 million (US$38.2 million), a 5.4% increase from the corresponding period in 2018. The increase was primarily due to the cumulative effect of financial products with recurring service fees previously distributed.
• Net revenues from performance-based income for the first quarter of 2019 were RMB1.2 million (US$0.2 million), compared with RMB20.0 million in the corresponding period of 2018. The decrease was primarily due to less performance-based income realized from public securities.
• Net revenues from other service fees for the first quarter of 2019 were RMB43.3 million (US$6.4 million), compared with RMB14.9 million in the corresponding period in 2018, primarily due to the growth of the various value-added services Noah offers to its high net worth clients.

- Asset Management Business

• Net revenues from recurring service fees for the first quarter of 2019 were RMB162.7 million (US$24.2 million), a 6.4% increase from the corresponding period in 2018. The increase was primarily due to the increase in assets under management.
• Net revenues from performance-based income for the first quarter of 2019 were RMB3.6 million (US$0.5 million), compared with RMB39.4 million in the corresponding period of 2018. The decrease was primarily due to less performance-based income realized from public securities.

- Lending and Other Businesses

• Net revenues for the first quarter of 2019 were RMB98.6 million (US$14.7 million), a 132.6% increase from the corresponding period in 2018. The increase was primarily due to the growth of loan origination and service fee income generated from loans originated in the previous periods.

Operating Costs and Expenses

Operating costs and expenses for the first quarter of 2019 were RMB587.4 million (US$87.5 million), a 5.6% increase from the corresponding period in 2018. Operating costs and expenses primarily consisted of compensation and benefits of RMB404.3 million (US$60.2 million), selling expenses of RMB90.5 million (US$13.5 million), general and administrative expenses of RMB58.6 million (US$8.7 million) and other operating expenses of RMB50.8 million (US$7.6 million).

• Operating costs and expenses for the wealth management business for the first quarter of 2019 were RMB433.9 million (US$64.7 million), a 5.8% increase from the corresponding period in 2018, primarily due to an increase in compensation and benefits partially offset by a decrease in marketing expenses.
• Operating costs and expenses for the asset management business for the first quarter of 2019 were RMB100.1 million (US$14.9 million), a 17.9% increase from the corresponding period in 2018, primarily due to an increase in compensation and benefits.
• Operating costs and expenses for lending and other businesses for the first quarter of 2019 were RMB53.4 million (US$8.0 million), a 12.9% decrease from the corresponding period in 2018, primarily due to a decrease in compensation and benefits as employees under non-lending businesses were restructured during the quarter.

Operating Margin

Operating margin for the first quarter of 2019 was 34.0%, an increase from 33.0% for the corresponding period in 2018.

• Operating margin for the wealth management business for the first quarter of 2019 was 30.8%, compared with 31.0% for the corresponding period in 2018.
• Operating margin for the asset management business for the first quarter of 2019 was 39.1%, compared with 56.3% for the corresponding period in 2018.
• Income from operation for the lending and other businesses for the first quarter of 2019 was RMB45.2 million (US$6.7 million), compared with an operating loss of RMB18.9 million for the corresponding period in 2018.

Investment Income

Investment income for the first quarter of 2019 was RMB25.7 million (US$3.8 million), compared with RMB42.1 million for the corresponding period in 2018. The decrease was primarily related to the fluctuation of fair value of equity securities, which contributed RMB8.7 million (US$1.3 million) of investment income in the first quarter of 2019, as compared to RMB34.8 million investment income in the corresponding period of 2018.

Income Tax Expenses

Income tax expenses for the first quarter of 2019 were RMB79.5 million (US$11.8 million), a 7.9% increase from the corresponding period in 2018. The increase was primarily due to higher taxable income. 

Net Income

- Net Income

• Net income for the first quarter of 2019 was RMB287.6 million (US$42.9 million), a 10.3% increase from the corresponding period in 2018.
• Net margin for the first quarter of 2019 was 32.3%, up from 31.4% for the corresponding period in 2018.
• Net income attributable to Noah shareholders for the first quarter of 2019 was RMB284.6 million (US$42.4 million), a 6.0% increase from the corresponding period in 2018.
• Net income attributable to Noah shareholders per basic and diluted ADS for the first quarter of 2019 was RMB4.70 (US$0.70) and RMB4.57 (US$0.68), respectively, compared with RMB4.70 and RMB4.44 respectively, for the corresponding period in 2018.

- Non-GAAP Net Income Attributable to Noah Shareholders

• Non-GAAP net income attributable to Noah shareholders for the first quarter of 2019 was RMB304.6 million (US$45.4 million), a 19.9% increase from the corresponding period in 2018.
• Non-GAAP net margin attributable to Noah shareholders for the first quarter of 2019 was 34.2%, up from 30.6% for the corresponding period in 2018.
• Non-GAAP net income attributable to Noah shareholders per diluted ADS for the first quarter of 2019 was RMB4.90 (US$0.73), up from RMB4.21 for the corresponding period in 2018.

Balance Sheet and Cash Flow

As of March 31, 2019, the Company had RMB2,869.6 million (US$427.6 million) in cash and cash equivalents, compared with RMB2,704.1 million as of December 31, 2018 and RMB2,151.4 million as of March 31, 2018.

Net cash inflow from the Company's operating activities during the first quarter of 2019 was RMB152.7 million (US$22.8 million), driven by profit earned from normal business operations and partially offset by working capital change.

Net cash outflow from the Company's investing activities during the first quarter of 2019 was RMB67.5 million (US$10.1 million), primarily due to the increase in property and equipment and various investments and partially offset by proceeds from sales of loans.

Net cash inflow from the Company's financing activities was RMB88.6 million (US$13.2 million) in the first quarter of 2019, primarily due to the capital contribution by non-controlling shareholders of a consolidated subsidiary.

2019 FORECAST

The Company estimates that non-GAAP net income attributable to Noah shareholders for the full year 2019 will be in the range of RMB1.13 billion to RMB1.18 billion, an increase of 11.9% to 16.8% compared with the full year 2018. This estimate reflects management's current business outlook and is subject to change.

CONFERENCE CALL

Senior management will host a combined English and Chinese language conference call to discuss the Company's first quarter 2019 unaudited financial results and recent business activities.

The conference call may be accessed with the following details:

Participants will need to dial in 10-15 minutes early and use this Entry Number in order to join the conference.

A telephone replay will be available starting one hour after the end of the conference call until May 23, 2019 at +1-877-344-7529 (US Toll Free) or +1-412-317-0088 (International Toll). The replay access code is 10131248.

A live and archived webcast of the conference call will be available at Noah's investor relations website under the News & Events section at ir.noahgroup.com.

DISCUSSION OF RECENTLY ADOPTED ACCOUNTING STANDARD AND NON-GAAP MEASURES       

In the first quarter of 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification.

In addition to disclosing financial results prepared in accordance with U.S. GAAP, the Company's earnings release contains non-GAAP financial measures excluding the effects of all forms of share-based compensation, fair value changes of equity investments (unrealized), adjustment for sale of equity securities and net of tax impact, if any. See "Reconciliation of GAAP to Non-GAAP Results" at the end of this press release.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with U.S. GAAP. The financial results reported in accordance with U.S. GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies.

When evaluating the Company's operating performance in the periods presented, management reviewed the foregoing non-GAAP net income attributable to Noah shareholders and per diluted ADS and non-GAAP net margin attributable to Noah shareholders to supplement U.S. GAAP financial data. As such, the Company's management believes that the presentation of the non-GAAP financial measures provides important supplemental information to investors regarding financial and business trends relating to its results of operations in a manner consistent with that used by management.  

ABOUT NOAH HOLDINGS LIMITED

Noah Holdings Limited (NYSE: NOAH) is a leading wealth and asset management service provider in China with a focus on high net worth individuals. In the first quarter of 2019, Noah distributed RMB28.0 billion (US$4.2 billion) of financial products. Through Gopher Asset Management, Noah had assets under management of RMB171.1 billion (US$25.5 billion) as of March 31, 2019.

Noah's wealth management business primarily distributes credit, private equity, public securities and insurance products denominated in RMB and other currencies. Noah delivers customized financial solutions to clients through a network of 1,496 relationship managers across 313 service centers in 83 cities in mainland China, and serves the international investment needs of its clients through offices in Hong Kong, Taiwan, United States, Canada, Australia and Singapore. The Company's wealth management business had 274,893 registered clients as of March 31, 2019. As a leading alternative multi-asset manager in China, Gopher Asset Management manages private equity, real estate, public securities, credit and multi-strategy investments denominated in Renminbi and other currencies. The Company also provides lending services and other services including an online financial advisory platform and payment technology services.

For more information, please visit Noah at ir.noahgroup.com.

FOREIGN CURRENCY TRANSLATION

In this announcement, the unaudited financial results for the first quarter of 2019 ended March 31, 2019 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 noted, all translations from RMB to US$ are made at a rate of RMB6.7112 to US$1.00, the effective noon buying rate for March 29, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board.

SAFE HARBOR STATEMENT

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Among other things, the outlook for 2019 and quotations from management in this announcement, as well as Noah's strategic and operational plans, contain forward-looking statements. Noah may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Noah's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause Noah's actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: its goals and strategies; its future business development, financial condition and results of operations; the expected growth of the wealth management and asset management market in China and internationally; its expectations regarding demand for and market acceptance of the products it distributes; its expectations regarding keeping and strengthening its relationships with key clients; relevant government policies and regulations relating to its industries; its ability to attract and retain qualified employees; its ability to stay abreast of market trends and technological advances; its plans to invest in research and development to enhance its product choices and service offerings; competition in its industries in China and internationally; general economic and business conditions in China; and its ability to effectively protect its intellectual property rights and not to infringe on the intellectual property rights of others. Further information regarding these and other risks is included in Noah's filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 20-F. All information provided in this press release and in the attachments is as of the date of this press release, and Noah does not undertake any obligation to update any such information, including forward-looking statements, as a result of new information, future events or otherwise, except as required under the applicable law.

-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --

SOURCE Noah Holdings Limited

Related Links

http://ir.noahgroup.com

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