Jupai Reports Third Quarter 2016 Results

SHANGHAI, Nov 15, 2016 /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 quarter and nine months ended September 30, 2016.

Effective July 1, 2016, Jupai changed its reporting currency from the U.S. dollars to Renminbi. The aligning of the reporting currency with the underlying operations better reflects the Company's results of operations for each period, and reduces the impact that the increased volatility of the Renminbi to U.S. dollars exchange rate will have on the Company's reported operating results. In this announcement, the unaudited financial results for the quarter and nine months ended September 30, 2016, respectively, are stated in Renminbi. This release contains translations of certain Renminbi amounts into U.S. dollars for convenience. Prior period financial results have been recast into the new reporting currency.

THIRD QUARTER AND FIRST NINE MONTHS 2016 FINANCIAL HIGHLIGHTS

• Net revenues in the third quarter of 2016 were RMB320.5 million (US^[1]$48.1 million), a 64.0% increase from the corresponding period in 2015. For the first nine months of 2016, net revenues were RMB789.2 million (US$118.3 million), an increase of 105.9% from the same period in 2015.

• Income from operations in the third quarter of 2016 was RMB115.0 million (US$17.3 million), a 68.0% increase from the corresponding period in 2015. For the first nine months of 2016, income from operations was RMB200.7 million (US$30.1 million), an increase of 32.1% from the same period in 2015.
• Net income attributable to ordinary shareholders in the third quarter of 2016 was RMB78.8 million (US$11.8 million), a 64.0% increase from the corresponding period in 2015. For the first nine months of 2016, net income attributable to ordinary shareholders was RMB145.3 million (US$21.8 million), an increase of 26.4% from the same period in 2015.
• Non-GAAP^[2] net income attributable to ordinary shareholders in the third quarter of 2016 was RMB87.9 million (US$13.2 million), an 60.9% increase from the corresponding period in 2015. For the first nine months of 2016, non-GAAP net income attributable to ordinary shareholders was RMB171.3 million (US$25.7 million), an increase of 35.0% from the same period in 2015.

THIRD QUARTER AND FIRST NINE MONTHS 2016 OPERATIONAL UPDATES

• Total number of active clients^[3] during the third quarter of 2016 was 3,351.
• The aggregate value of wealth management products distributed by the Company during the third quarter of 2016 was RMB11,823 million (US$1,773 million), a 48.8% increase from the corresponding period in 2015. For the first nine months of 2016, the aggregate value of wealth management products distributed by the Company was RMB30,813 million (US$4,621 million), a 62.7% increase from the corresponding period in 2015.

• Jupai's coverage network as of September 30, 2016 included 65 client centers covering 40 cities, up from 47 client centers covering 26 cities, as of September 30, 2015.
• Total assets under management^[4] as of September 30, 2016 were RMB29,356 million (US$4,402 million), a 13.6% increase from June 30, 2016 and a 204.8% increase from September 30, 2015.

"Jupai continued to grow rapidly in the third quarter of 2016 with net income rising 64% year-over-year," said Mr. Jianda Ni, Jupai's co-chairman of the board and chief executive officer. "The challenging macroeconomic environment has caused investors to become more risk averse, leading to higher demand for fixed-income products. However, traditional fixed-income products, such as conventional wealth management products issued by commercial banks and cash management products from online financial institutions, have experienced declining returns due to interest rate cuts by China's central bank. Leveraging our relationship with our major shareholder, E-House, a top real estate service company in China, and CRIC, the owner of an advanced real estate information database and analysis system in China, Jupai is able to identify high-quality underlying real estate assets with attractive risk-return profiles. This provides us with a competitive advantage over our peers, and helped us to increase the aggregate value of fixed income products distributed by Jupai to a record high of RMB 9.7 billion in the third quarter. We will remain focused on providing the best possible products to our clients while maintaining strict risk controls, in order to establish Jupai as the top wealth and asset management brand for high-net-worth individuals in China."

Mr. Tianxiang Hu, Jupai's co-chairman and executive chairman of the board added, "Jupai's asset management business delivered robust results in the third quarter of 2016, with total assets under management growing significantly from RMB 9.6 billion as of September 30, 2015, to RMB 29.4 billion as of September 30, 2016. We will continue to diversify our product offerings to better meet clients' evolving wealth management and asset allocation needs and to drive Jupai's long term, sustainable growth."

Ms. Min Liu, Jupai's chief financial officer, said, "Jupai maintained solid growth momentum in the first nine months of 2016. Our proactive sales and marketing strategies drove impressive top-line growth, and helped to strengthen the Jupai brand and increase our market share. Our net margin recovered consecutively in the second and the third quarters of 2016. As we continue to optimize our revenue structure, expand our business scale and increase operating efficiency, we remain optimistic about Jupai's bottom line outlook for 2016."

THIRD QUARTER AND FIRST NINE MONTHS 2016 FINANCIAL RESULTS

Net Revenues

Net revenues for the third quarter of 2016 were RMB320.5 million (US$48.1 million), a 64.0% increase from the corresponding period in 2015, primarily due to increases in recurring management fees and other service fees. Net revenues were RMB789.2 million (US$118.3 million) for the first nine months of 2016, an increase of 105.9% from the same period in 2015.

• Net revenues from one-time commissions for the third quarter of 2016 were RMB144.0 million (US$21.6 million), a 31.5% increase from the corresponding period in 2015, primarily as a result of an increase in the aggregate value of wealth management products distributed by the company. For the first nine months of 2016, net revenues from one-time commissions were RMB447.9 million (US$67.2 million), an increase of 95.3% from the same period in 2015.
• Net revenues from recurring management fees for the third quarter of 2016 were RMB88.9 million (US$13.3 million), a 192.3% increase from the corresponding period in 2015, primarily attributable to an increase in the value of assets under our management. The Company recognized RMB6.6 million (US$1.0 million) and nil carried interest in the third quarter of 2016 and 2015, respectively. For the first nine months of 2016, net revenues from recurring management fees were RMB187.5 million (US$28.1 million), a 167.2% increase from the same period in 2015. RMB11.6 million (US$1.7 million) and RMB16.2 million carried interest was recognized as part of Jupai's recurring management fees for the first nine months of 2016 and the same period in 2015, respectively.
• Net revenues from recurring service fees for the third quarter of 2016 were RMB31.1 million (US$4.7 million), a 43.9% decrease from the corresponding period in 2015, primarily as the Company recognized RMB40.3 million in variable performance fees in the third quarter of 2015, compared to RMB5.7 million (US$0.9 million) in the third quarter of 2016. For the first nine months of 2016, net revenues from recurring service fees were RMB97.3 million (US$14.6 million), a 16.0% increase from the same period in 2015. The Company recognized RMB13.4 million (US$2.0 million) and RMB57.5 million variable performance fees for the first nine months of 2016 and the same period in 2015, respectively.
• Net revenues from other service fees for the third quarter of 2016 were RMB56.5 million (US$8.5 million), which mainly include sub-advisory fees collected from other asset management company. The Company recognized these revenues for the first time in the third quarter of 2016.

Operating Costs and Expenses

Operating costs and expenses for the third quarter of 2016 were RMB205.4 million (US$30.8 million), an increase of 61.9% from the corresponding period in 2015. For the first nine months of 2016, operating costs and expenses were RMB588.5 million (US$88.2 million), an increase of 154.2% from the same period in 2015.

• Cost of revenues for the third quarter of 2016 was RMB120.3 million (US$18.0 million), a 39.2% increase from the corresponding period in 2015, primarily due to concurrent increases in the number of wealth management advisors and client managers and the average compensation. For the first nine months of 2016, cost of revenues was RMB331.1 million (US$49.7 million), an increase of 136.4% from the same period in 2015.
• Selling expenses for the third quarter of 2016 were RMB68.2 million (US$10.2 million), a 191.3% increase from the corresponding period in 2015, primarily due to increases in marketing, advertising and brand promotion expenses, including an expenditure covering an education program run by The Wharton School of the University of Pennsylvania to provide our professional teams and high-net-worth clients with the latest investment knowledge and training. For the first nine months of 2016, selling expenses were RMB172.6 million (US$25.9 million), an increase of 257.8% from the same period in 2015.
• G&A expenses for the third quarter of 2016 were RMB35.7 million (US$5.3 million), a 23.0% increase from the corresponding period in 2015, mainly due to increases in both the numbers of managerial and administrative personnel and compensation paid to them as well as increases in rental and office supply expenses. For the first nine months of 2016, G&A expenses were RMB106.8 million (US$16.0 million), an increase of 83.1% from the same period in 2015.
• Other operating income (government subsidies) received by the Company in the third quarter of 2016 was RMB18.8 million (US$2.8 million), a 57.6% increase from the corresponding period in 2015. For the first nine months of 2016, other operating income was RMB22.0 million (US$3.3 million), an increase of 44.9% from the same period in 2015.

Operating margin for the third quarter of 2016 was 35.9%, compared to 34.9% for the corresponding period in 2015. For the first nine months of 2016, operating margin was 25.4%, compared to 39.6% for the same period in 2015.

Income tax expenses for the third quarter of 2016 were RMB32.4 million (US$4.9 million), a 62.5% increase from the corresponding period in 2015. The increase was primarily due to an increase in taxable income. For the first nine months of 2016, income tax expenses were RMB56.7 million (US$8.5 million), an increase of 24.5% from the same period in 2015.

Net Income

• Net Income

- Net income attributable to ordinary shareholders for the third quarter of 2016 was RMB78.8 million (US$11.8 million), a 64.0% increase from the corresponding period in 2015. For the first nine months of 2016, net income attributable to ordinary shareholders was RMB145.3 million (US$21.8 million), an increase of 26.4% from the same period in 2015.

- Net margin attributable to ordinary shareholders for the third quarter of 2016 was 24.6%, as compared to 24.4% for the corresponding period in 2015. For the first nine months of 2016, net margin attributable to ordinary shareholders was 18.4%, compared to 30.0% for the same period in 2015.

- Net income attributable to ordinary shareholders per basic and diluted ADS for the third quarter of 2016 was RMB2.45 (US$0.37) and RMB2.36 (US$0.35), respectively, as compared to RMB1.75 and RMB1.67, respectively, for the corresponding period in 2015. For the first nine months of 2016, net income attributable to ordinary shareholders per basic and diluted ADS was RMB4.53 (US$0.68) and RMB4.35 (US$0.65), respectively, as compared to RMB5.18 and RMB4.91, respectively, for the same period in 2015.

• Non-GAAP Net Income

- Non-GAAP net income attributable to ordinary shareholders for the third quarter of 2016 was RMB87.9 million (US$13.2 million), a 60.9% increase from the corresponding period in 2015. For the first nine months of 2016, non-GAAP net income attributable to ordinary shareholders was RMB171.3 million (US$25.7 million), a 35.0% increase from the same period in 2015.

- Non-GAAP net margin attributable to ordinary shareholders for the third quarter of 2016 was 27.4%, as compared to 27.7% for the corresponding period in 2015. For the first nine months of 2016, non-GAAP net margin attributable to ordinary shareholders was 21.7%, as compared to 33.1% for the same period in 2015.

- Non-GAAP net income attributable to ordinary shareholders per diluted ADS for the third quarter of 2016 was RMB2.63 (US$0.39), as compared to RMB2.05 for the corresponding period in 2015. For the first nine months of 2016, non-GAAP net income attributable to ordinary shareholders per diluted ADS was RMB5.12 (US$0.77), as compared to RMB7.85 for the same period in 2015.

Balance Sheet and Cash Flow

As of September 30, 2016, the Company had RMB952.2 million (US$142.8 million) in cash and cash equivalents, compared to RMB795.5 million as of December 31, 2015.

Net cash provided by operating activities during the third quarter of 2016 was RMB50.9 million (US$7.6 million). For the first nine months of 2016, net cash provided by operating activities was RMB42.1 million (US$6.3 million).

Net cash used in investing activities during the third quarter of 2016 was RMB12.2 million (US$1.8 million). For the first nine months of 2016, net cash used in investing activities was RMB26.4 million (US$4.0 million).

Net cash provided by financing activities during the third quarter of 2016 was RMB0.7 million (US$0.1 million). For the first nine months of 2016, net cash provided by financing activities was RMB141.0 million (US$21.1 million).

BUSINESS OUTLOOK

The Company estimates that its net revenues for the fourth quarter of 2016 will be in the range of RMB233 million (US$35 million) to RMB253 million (US$38 million), an increase of 9.9% to 19.3% compared to the same period in 2015. 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 November 15, 2016 at 7 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.

A replay of the conference call may be accessed by phone at the following numbers until November 22, 2016:

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

DISCUSSION OF NON-GAAP FINANCIAL MEASURES

In addition to disclosing financial results prepared in accordance with U.S. GAAP, the Company's earnings release contains non-GAAP financial measures that exclude the effects of all forms of share-based compensation and amortization of intangible assets related to acquisition. The reconciliation of these non-GAAP financial measures to the nearest GAAP measures as set forth in the table captioned "Reconciliation of GAAP to Non-GAAP Results" below.

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 measure 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 non-GAAP net income results reflecting adjustments to exclude the impacts of share-based compensation and amortization of intangible assets related to acquisition to supplement U.S. GAAP financial data. As such, the Company believes that the presentation of the non-GAAP net income attributable to ordinary shareholders, non-GAAP net income attributable to ordinary shares per diluted ADS and non-GAAP net margin attributable to ordinary shareholders provides important supplemental information to investors regarding financial and business trends relating to the Company's financial condition and results of operations in a manner consistent with that used by management. Pursuant to U.S. GAAP, the Company recognized significant amounts of expenses for the restricted shares and share options, and amortization of intangible assets related to acquisition in the periods presented. The Company utilized the non-GAAP financial results to make financial results comparable period to period and to better understand its historical business operations.

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

Harry He
Director of Investor Relations
Jupai Holdings Limited
Phone: +86 (21) 6026 9129
Email: ir@jpinvestment.cn

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

-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --

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