Jupai Reports Second Quarter 2015 Results

SHANGHAI, August 27, 2015 /PRNewswire/ -- Jupai Holdings Limited ("Jupai" or the "Company") (NYSE: JP), a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China, today announced its unaudited financial results for the fiscal quarter and six months ended June 30, 2015.

SECOND QUARTER AND FIRST HALF 2015 FINANCIAL HIGHLIGHTS

• Net revenues in the second quarter of 2015 were US$16.8 million, an 85.9% increase from the corresponding period in 2014. For the first half of 2015, net revenues were US$30.7 million, an increase of 79.3% from US$17.1 million for the same period in 2014.

• Income from operations in the second quarter of 2015 was US$7.2 million, a 40.5% increase from the corresponding period in 2014. For the first half of 2015, income from operations was US$13.6 million, an increase of 48.3% from US$9.2 million for the same period in 2014.
• Net income attributable to Jupai shareholders in the second quarter of 2015 was US$6.0 million, a 50.8% increase from the corresponding period in 2014.For the first half of 2015, net income attributable to Jupai shareholders was US$10.9 million, an increase of 50.6% from US$7.3 million for the same period in 2014.
• On a pro forma condensed basis, giving effect to Jupai's acquisition of Scepter Pacific Limited ("Scepter"), which operated the business of E-House Capital, as if it had been completed on January 1, 2015, total net revenues and net income attributable to Jupai shareholders would have been US$35.7 million and US$11.6 million, respectively, for the first six months of 2015, and US$20.5 million and US$6.6 million, respectively, for the second quarter of 2015. On a pro forma condensed basis, selling expenses would have additionally included amortization of intangible assets resulting from business acquisitions which amounted toUS$1.2 million for the first six months of 2015 and US$0.6 million for the second quarter of 2015.

SECOND QUARTER AND FIRST HALF 2015 OPERATIONAL UPDATES

• Total number of active clients[1] during the second quarter of 2015 was 2,250, a 236.8% increase from the corresponding period in 2014.

• Aggregate value of wealth management products distributed by the Company during the second quarter of 2015 was US$1,051 million, a 145.6% increase from the corresponding period in 2014.

• Jupai's coverage network as of June 30, 2015 included 42 client centers covering 23 cities, up from 32 and 21client centers covering 18 and 13 cities, respectively as of March 31, 2015 and June 30, 2014.
• Total assets under management[2] as of June 30, 2015 were US$840 million, a 618% increase from June 30, 2014 and a 100% increase from March 31, 2015.Pro forma amount of assets under management as of June 30, 2015 would be approximately US$1,243 million upon completion of the Company's acquisition of Scepter, representing an increase of US$403million.

"We are pleased to report strong results for the second quarter of 2015 with solid revenue and profit growth," said Mr. Jianda Ni, Jupai's co-chairman of the board and chief executive officer. "Jupai's successful IPO in July on the New York Stock Exchange is an important milestone that will enhance our brand image, deepen client trust and add to our strong cash balance and liquidity position. The acquisition of E-House Capital, the former asset management business unit of E-House (China) Holdings Limited (NYSE: EJ) , completed simultaneously with our IPO, substantially expands Jupai's asset management services and strengthens our direct investment capabilities in private equity products. We believe this acquisition lays a solid foundation for the future growth of our integrated wealth management advisory and asset management platform."

Mr. Ni continued, "The increased volatility in China's equity markets since June this year has been a wake-up call for Chinese investors, including high-net-worth individuals, who increasingly appreciate the value of professional wealth management advice. As a leader in China's wealth management services industry, Jupai is well-positioned to take advantage of this new trend. The aggregate value of wealth management products distributed by Jupai reached a historical peak in July. Looking to the second half of 2015, Jupai's leading real estate expertise and resources allow us to provide a wide range of high-quality real estate-related fixed income investment products which we are confident that China's high-net-worth investors will increasingly find attractive. While focusing on our core businesses, Jupai continues to explore new growth areas and we look forward to commencing our overseas business with the establishment of our Hong Kong subsidiary."

Mr. Tianxiang Hu, Juapi's co-chairman and executive chairman of the board commented, "In August 2015, Jupai entered China's growing Internet finance industry through our investment in "Jubaopen", a P2P Internet finance company that connects potential borrowers with investors through offline storefronts and its online asset allocation platform. We aim to take advantage of further opportunities to broaden our presence in this fast-growing sector while addressing the ever-evolving wealth management needs of our clients."

Ms. Min Liu, Jupai's chief financial officer, said, "In the second quarter, Jupai's business continued to develop rapidly with strong revenue and bottom-line growth year over year. Driven by the industry leading productivity of Jupai's wealth management advisors, we are pleased to see a healthy increase in both the number of active clients and investment value per client in the second quarter."

SECOND QUARTER AND FIRST HALF 2015 FINANCIAL RESULTS

Net Revenues

Net revenues for the second quarter of 2015 were US$16.8 million, an 85.9% increase from the corresponding period in 2014, primarily due to increases in recurring service fees and recurring management fees.Net revenues were US$30.7 million for the first half of 2015, an increase of 79.3% from US$17.1 million for the same period in 2014.

• Net revenues from one-time commissions for the second quarter of 2015 were US$9.6 million, a 10.2% increase from the corresponding period in 2014, primarily as a result of an increase in the number of active clients as the Company opened new client centers and expanded existing ones. For the first half of 2015, net revenues from one-time commissions were US$19.6 million, an increase of 17.9% from US$16.6 million for the same period in 2014.
• Net revenues from recurring management fees for the second quarter of 2015 were US$3.7 million, a significant increase from the corresponding period in 2014, primarily attributable to the increase in the amount of assets under management and the amount of carried interest the Company recognized in the three months ended June 30, 2015 as compared with the same period in 2014. Nil and US$1.3 million carried interest was recognized as part of Jupai's recurring management fees in the three months ended June 30, 2014 and 2015, respectively. For the first half of 2015, net revenues from recurring management fees were US$6.5 million, as compared to US$0.3 million for the same period in 2014. US$2.6 million and nil carried interest was recognized as part of Jupai's recurring management fees for the first half of 2015 and the same period in 2014, respectively.
• Net revenues from recurring service fees for the second quarter of 2015 were US$3.4 million, a significant increase from US$0.2 million for the corresponding period in 2014, primarily because the Company provided ongoing services to providers of more products and recognized variable performance fees in the three months ended June 30, 2015. The Company did not recognize variable performance fees in the same period in 2014.For the first half of 2015, net revenues from recurring service fees were US$4.6 million, a significant increase from US$0.3 million for the same period in 2014.

Operating costs and expenses

Operating costs and expenses for the second quarter of 2015 were US$9.6 million, a significant increase from US$3.9 million for the corresponding period in 2014.For the first half of 2015, operating costs and expenses were US$17.1 million, a significant increase from US$7.9 million for the same period in 2014.

• Cost of revenues for the second quarter of 2015 was US$5.2 million, a significant increase from US$2.4 million for the corresponding period of 2014, primarily due to a combination of an increase in the number of wealth management advisors and client managers and the average compensation paid to them. For the first half of 2015, cost of revenues was US$8.8 million, an increase of 101.5% from US$4.4 million for the same period in 2014.
• Selling expenses for the second quarter of 2015 were US$1.9 million, a 65.2% increase from the corresponding period in 2014, primarily due to increased marketing, advertising and brand promotion expenses. For the first half of 2015, selling expenses were US$4.1 million, an increase of 80.5% from US$2.2 million for the same period in 2014.
• G&A expenses for the second quarter of 2015 were US$2.9 million, an 88.7% increase from the corresponding period in 2014.This increase was primarily due to increased compensation paid to managerial and administrative personnel as well as increased rental and office supply expenses. For the first half of 2015, G&A expenses were US$4.8 million, an increase of 74.1% from US$2.8 million for the same period in 2014.
• Other operating income - Government subsidies. The Company received US$0.5 million in government subsidies in the second quarter of 2015, compared to US$1.2 million in the corresponding period in 2014, due to changes in government subsidy policies. For the first half of 2015, other operating income was US$0.5 million, a decrease of 61.9% from US$1.4 million for the same period in 2014.

Operating margin for the second quarter of 2015 was 42.9%, compared to 56.7% for the corresponding period in 2014. The decrease was mainly because of increased compensation costs and decreased government subsidies compared with the corresponding period in 2014.For the first half of 2015, operating margin was 44.4%, compared to 53.7% for the corresponding period in 2014.

Income tax expenses for the second quarter of 2015 were US$2.2 million, a 60.5% increase from the corresponding period in 2014. The increase was primarily due to an increase in taxable income. For the first half of 2015, income tax expenses were US$4.2 million, an increase of 67.0% from US$2.5 million for the same period in 2014.

Net income attributable to Jupai shareholders for the second quarter of 2015 was US$6.0 million, a 50.8% increase from the corresponding period in 2014. For the first half of 2015, net income attributable to Jupai shareholders was US$10.9 million, an increase of 50.6% from US$7.3 million for the same period in 2014.

Net margin for the second quarter of 2015 was 40.4%, as compared to 44.5% for the corresponding period in 2014. For the first half of 2015, net margin was 39.4%, compared to 42.6% for the corresponding period in 2014.

Net income per basic and diluted ADS for the second quarter of 2015 was US$0.31 and US$0.30, respectively, as compared to US$0.25 and US$0.24, respectively, for the corresponding period in 2014. For the first half of 2015, net income per basic and diluted ADS was US$0.56 and US$0.54, respectively, as compared to US$0.42 and US$0.44, respectively, for the same period in 2014.

Balance Sheet and Cash Flow

As of June 30, 2015, the Company had US$41.2 million in cash and cash equivalents, compared to US$31.6 million as of December 31, 2014.

Cash inflow from the Company's operating activities during the second quarter of 2015 was US$10.2 million.

Cash outflow from the Company's investing activities during the second quarter of 2015 was US$0.3 million.

There was no cash flow from the Company's financing activities in the second quarter of 2015.

Recent Developments

On July 16, 2015, Jupai listed its American depositary shares ("ADSs"), each representing six ordinary shares, on the NYSE in an initial public offering (the "IPO"). On August 18, 2015, the underwriters exercised their option to purchase an additional 595,000 ADSs. As a result, Jupai issued a total of 5,895,000 ADSs at US$10.00 per ADS in connection with its IPO and received net proceeds of approximately US$45.1 million, after deducting underwriting discounts and the estimated offering expenses. Upon the completion of the IPO, Jupai issued 32,481,552 new ordinary shares as consideration for the acquisition of Scepter.

Business Outlook

The Company estimates that its revenues for the third quarter of 2015 will be in the range of US$21 million to US$23 million, an increase of 105.9% to 125.5% compared to the same quarter in 2014. This forecast reflects the Company's current and preliminary view, which is subject to change.

CONFERENCE CALL

Jupai's management will host an earnings conference call on August 27, 2015 at 8 a.m. U.S. Eastern Time (8 p.m. Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is: 3635979

A replay of the conference call may be accessed by phone at the following numbers until, September 3, 2015:

Additionally, a live and archived webcast will be available at http://jupai.investorroom.com.

ABOUT JUPAI HOLDINGS LIMITED

Jupai Holdings Limited ("Jupai") (NYSE: JP) is a leading third-party wealth management service provider focusing on distributing wealth management products and providing quality product advisory services to high-net-worth individuals in China. Jupai's comprehensive and personalized client service and broad range of carefully selected third-party and self-developed products have made it a trusted brand among its clients. Jupai maintains extensive and targeted coverage of China's high-net-worth population.

For more information, please visit http://jupai.investorroom.com.

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 business outlook and quotations from management in this announcement, as well as Jupai's strategic and operational plans, contain forward-looking statements. Jupai 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 Jupai's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the goals and strategies of the Company and the Company's ability to manage its growth and implement its business strategies; future business development, financial condition and results of operations of the Company; condition of the wealth management market in China and internationally; the demand for and market acceptance of the products the Company distributes; the Company's ability to maintain and further grow its active high-net-worth client base and maintain or increase the amount of investment by clients; developments in relevant government policies and regulations relating to the Company's industry and the Company's ability to comply with those policies and regulations; the Company's ability to attract and retain quality employees; the Company's ability to adapt to potential uncertainties in China's real estate industry and stay abreast of market trends and technological advances; the results of the Company's investments in research and development to enhance its product choices and service offerings; general economic and business conditions in China; the result of the integration of E-House Capital into the Company; and the Company's ability to protect its reputation and enhance its brand recognition. Further information regarding these and other risks is included in Jupai's filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and Jupai 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 applicable law.

Contacts:

Jupai Holdings Limited

Michelle Yuan
Deputy CFO & Director of Investor Relations
Jupai Holdings Limited
Phone: +86 (21) 6859 5055
Email: michelle.yuan@jpinvestment.cn

Philip Lisio
The Foote Group
Phone: +86 (21) 6230 5097
Email: Jupai-IR@thefootegroup.com

-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --

JUPAI HOLDINGS LIMITED

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On April 3, 2015, the Company reached a definitive agreement (''Definitive Agreement'') with E-House Investment and Reckon Capital Limited to acquire Scepter upon closing of IPO.According to the Definitive Agreement, the Company will enter into final binding transaction documents to acquire all issued and outstanding ordinary shares of Scepter, with a consideration of newly issued ordinary shares of the Company, representing 20% of the total equity interests in the Company on a fully diluted basis (without giving effect to the shares issued in the IPO) after giving effect to (a) ordinary shares issued as consideration for the acquisition of Scepter, (b) ordinary shares issued for the conversion of Series A and Series B convertible redeemable preferred shares upon the IPO, and (c) any of the Company's ordinary shares issued upon exercise of options outstanding as of the closing of the IPO. The consummation of the IPO is a condition to the closing of the transaction with Scepter. The acquisition was completed upon the Company's IPO on July 16, 2015.

Upon closing of the acquisition transactions (the ''Closing''), the Company replaced all outstanding options and other equity incentives granted under the existing share incentive plan of Scepter with options to acquire the Company's ordinary shares with the terms and conditions to exercise unchanged. However, these options are not considered as the Company's options described in (c) above.

The accompanying unaudited pro forma condensed combined balance sheet combines the unaudited condensed consolidated balance sheets of the Company and of Scepter as of June 30, 2015, and gives effect to the following transactions as if such transactions occurred on June 30, 2015: (a) the acquisition of Scepter's equity interest by the Company, (b) the automatic conversion of all of the Company's convertible redeemable preferred shares (on a one-for-one basis) that are issued and outstanding into ordinary shares, and (c) the sale of ordinary shares in the form of ADSs by the Company in the IPO at an initial public offering price of US$ 10 per ADS, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, assuming the underwriters do not exercise the option to purchase additional ADSs.

The accompanying unaudited pro forma condensed combined statement of operations present the results of operations of the Company combined with the statement of operations of Scepter for the six months period ended June 30, 2015, giving effect to this acquisition as if it had occurred on January 1, 2015.

The unaudited pro forma condensed combined financial information is based on, and should be read in conjunction with, the respective historical consolidated financial statements and the notes thereto of the Company, and Scepter. The pro forma adjustments are preliminary and based on management's estimates.

The unaudited pro forma condensed combined balance sheet and statements of operations are not necessarily indicative of the financial position and operating results that would have been achieved had the transaction been in effect as of the dates indicated and should not be construed as being a representation of financial position or future operating results of the combined companies.

Notes to the Unaudited Pro Forma Condensed Combined Financial Information

1. Basis of Pro Forma Presentation

The Company believes that acquiring Scepter represents a significant business combination in accordance with Rule 3-05 of Regulation S-X. For purposes of the unaudited pro forma condensed combined consolidated financial statements presented herein, the Company has (i) assumed that the fair value of all assets and liabilities as of June 30, 2015 other than identifiable intangible assets and goodwill, will approximate the carrying value of those assets and liabilities as of the closing date of this offering, (ii) has performed a valuation of Scepter's identifiable intangible assets as of June 30, 2015 and assumed that such values will approximate the fair value of those assets as of the closing date of this offering, and (iii) has computed the value of goodwill based on a total purchase price computed using, among other things, an initial public offering price of US$10.00 per ADS, the initial public offering price, after deducting the assets and liabilities identified in (i) and (ii) above.

The total purchase price of US$55,096,232 consisted of the following:

Based on these assumptions, the purchase price has been allocated as follows:

2. Pro Forma Adjustments

The Company's unaudited pro forma condensed combined financial statements give effect to the following pro forma adjustments on the unaudited financial statements:

Note [A]: To record the fair value of intangible assets, and associated deferred tax liability, and the amount of goodwill recognized upon the acquisition of Scepter, as described in Note 1. The identified intangible asset (i.e. customer contracts) represents the investment management contracts and consultation contracts signed between Scepter and its clients. The intangible asset is amortized using a straight-line method during the weighted average contract term of the customer contracts.

Note [B]: To record the US$54,135,920 value of the 32,481,552 ordinary shares to be issued by the Company for the acquisition of Scepter. The number of ordinary shares to be issued is determined based on 20% of total number of ordinary shares outstanding on a fully diluted basis taking into consideration of the ordinary shares to be issued for the acquisition. The number of ordinary shares and options outstanding consisted of (1) 61,244,980 ordinary shares as of June 30, 2015, (2) ordinary shares issuable upon conversion of 4,216,867 series A convertible redeemable preferred shares and 51,673,360 series B convertible redeemable preferred shares on a 1:1 ratio, (3) 12,791,000 options granted by the Company outstanding as of June 30, 2015. For the new issuance, the par value of ordinary shares increased by US$16,241 based on a par value of US$0.0005 per share. The difference between the value of the shares over the par value of US$54,119,679 has been recorded as additional paid in capital.

Note [C]: To eliminate the historical retained earnings, ordinary shares, additional paid-in-capital and accumulated other comprehensive income of Scepter.

Note [D]: To record the amortization of identifiable intangible assets related to the acquisition of Scepter. The valuation of actual tangible and intangible assets to be acquired is subject to change based on a number of factors, including, among others, the changes to Scepter Pacific Limited's business and the ultimate value of the Company's shares issued in the transaction. As such, the amounts included herein and the estimated useful lives are subject to change.

Note [E]: To record Jupai Holdings Limited's income tax benefits related to the pro forma amortization of the intangible assets.

Note [F]: To reflect the issuance of 32,481,552 ordinary shares, based on the total number of ordinary shares and options outstanding as described in Note [B] above, to effect the closing of the transactions.

Note [G]: To record direct, incremental costs of the probable acquisition which are not yet reflected in the historical financial statements of US$85,200. These costs are not recurring and will not have continuing impact, and thus are not reflected in the condensed consolidated combined statements of operations.

Note [H]: To record an increase in additional paid-in-capital of US$978,258 representing the portion of Scepter's replaced stock options attributable to pre-acquisition services that constituted part of the purchase price. The valuation of replaced stock options is subject to change based on a number of factors, including, among others, the changes to Scepter's business. As such, the amounts included herein are subject to change.

Note [I]: To record an increase in share-based compensation expense of US$1,056,984for the six months period ended June 30, 2015, for the replacement awards allocated to post-acquisition services. The valuation of replaced stock options is subject to change based on a number of factors, including, among others, the changes to Scepter's business and the ultimate value of the Company's ordinary shares issued in the transaction. As such, the amounts included herein are subject to change.

Note [J]: To record the elimination of the investment in Shanghai Yiju Assets Management Co., Ltd. ("Yiju") accounted for using equity method of accounting by both the Company and Scepter, and to record the consolidation of Yiju. Yiju is an entity formed and jointly controlled by the Company and Scepter. Yiju will be wholly owned and consolidated by the Company upon the acquisition of Scepter.

Note [K]: To record the effects of the automatic conversion of all of convertible redeemable preferred shares (on a one-for-one basis) that are issued and outstanding into ordinary shares immediately upon completion of the offering.

Note [L]: To record the effects of the initial public offering at an initial public offering price of US$10.00 per ADS, after deducting the underwriting discounts and commissions and offering expenses payable by the Company, assuming the underwriters do not exercise the option to purchase additional ADSs.

3. Pro Forma Shares

The pro forma basic and diluted earnings per share are based on the weighted average number of shares of the Company's ordinary shares outstanding for the six months period ended June 30, 2015, plus the ordinary shares issued for the Scepter acquisition as shown in the following table:

Shares used in calculating basic earnings per share for the six months period ended June 30, 2015 on a pro forma basis:

Shares used in calculating diluted income per share for the six months period ended June 30, 2015 on a pro forma basis: