Wins Finance Holdings Inc. Reports Fiscal Year 2017 Financial Results

BEIJING and NEW YORK, Nov. 14, 2017 /PRNewswire/ -- Wins Finance Holdings Inc. ("Wins Finance" or the "Company") (NASDAQ: WINS), a diversified investment and asset management company that provides integrated financing solutions to small and medium enterprises ("SMEs") in China, today announced its financial results for the fiscal year ended June 30, 2017.

Fiscal Twelve Months Financial and Operational Highlights

• Gross revenue was $9.2 million for the twelve months ended June 30, 2017, compared to $9.8 million for the corresponding period ended June 30, 2016.
• Interest income on short-term investments was $13.8 million for the twelve months ended June 30, 2017, compared to $14.0 million for the corresponding period ended June 30, 2016.
• Net income attributable to Wins Finance was $20.3 million for the twelve months ended June 30, 2017, compared to $12.1 million for the corresponding period ended June 30, 2016.

"Our gross revenue decreased 6% for fiscal 2017 as compared to the fiscal 2016 as our financial guarantee business decreased by 54%, though this was offset by an 91% increase in our financial leasing business. However, our net income rose 68%, primarily due to the reversal of a provision on financial guarantee services and a decrease in non-interest expenses primarily attributable to the reversal of share-based compensation granted in fiscal 2016," said Renhui Mu, Chairman and Chief Executive Officer of Wins Finance.

"We anticipate that the slowdown of the Chinese economy will continue to negatively affect financial services businesses in China, and could substantially affect our financial guarantee business in the coming quarters. Further, our outstanding guarantee balance declined 22% year-over-year as fewer potential clients passed our risk control assessments."

"However, we experienced growth in our direct leasing business in fiscal year 2017 as we continue to see new opportunities in this sector and are exploring expansion into new verticals. Our direct finance lease interest income increased substantially during fiscal 2017 as we acquired new leasing contracts of approximately $35.6 million."

"In order to take advantage of strong growth in the direct leasing business, we are looking for opportunities and clients across China rather than limiting ourselves to specific regions. We are currently focused on the new energy, vehicles, education equipment and medical devices sectors as we have gained expertise in these areas. We also plan upon expanding our business development efforts to include new industry sectors to diversify both our business risk and broaden our income stream, and are currently evaluating new sectors that we believe offer significant growth opportunities," concluded Mr. Mu.

Twelve Months Ended June 30, 2017 Financial Results

Gross revenue

Gross revenue for Wins Finance for the twelve months ended June 30, 2017 was $9.2 million, which was comprised of $2.8 million of commissions and fees generated from its financial guarantee services, $6.0 million of direct financing lease interest income, and $0.4 million of financial advisory and lease agency income.

Commissions and fees from financial guarantee services decreased $3.4 million, or 54.2%, to $2.8 million for the twelve months ended June 30, 2017, compared to $6.2 million for the corresponding twelve months ended June 30, 2016. The decrease was primarily attributable to reduced lending activities due to the economic recession in Shanxi Province and the Company's increased scrutiny of potential clients as a result.

Direct financing lease interest income generated from payments under direct financing leases with customers increased by $2.9 million, or 91.1%, to $6.0 million for the twelve months ended June 30, 2017, compared to $3.2 million for the corresponding twelve months ended June 30, 2016. The increase was primarily attributable to new leasing contracts of approximately $35.6 million (principal and contractual interest) during fiscal year 2017. 

Financial advisory and lease agency income slightly decreased to $0.36 million for the twelve months ended June 30, 2017, compared to $0.40 million for the corresponding twelve months ended June 30, 2016.

Interest income on short-term investment

Interest income from short-term investments decreased by $0.2 million to $13.8 million for the twelve months ended June 30, 2017, compared to $14.0 million for the corresponding twelve months ended June 30, 2016. The decrease was primarily due to a decreased return on short-term investments in the local capital markets.

Non-interest expenses

Non-interest expenses were $1.2 million for the twelve months ended June 30, 2017, as compared to $6.6 million for the corresponding twelve months ended June 30, 2016. Share-based compensation charged as non-interest expenses in fiscal 2016 was $1.9 million, relating to the options granted to the Company's directors and executive officers. The Company recorded a negative amount of $1.5 million of share-based compensation for fiscal 2017, primarily resulting from the termination of the options granted in fiscal 2016 prior to vesting. In addition, salaries and employee surcharges decreased by $0.6 million primarily due to a reduction in headcount.

Income taxes

Income tax expense increased by $1.2 million to $2.0 million for the twelve months ended June 30, 2017, compared to $0.8 million for the corresponding twelve months ended June 30, 2016. The increase was attributable to the increase in taxable income, which mainly consisted of income before taxes excluding the interest on short-term investments that was tax-exempt. 

Net income

Net income increased by $8.2 million, or 67.9% to $20.3 million for the twelve months ended June 30, 2017, compared to $12.1 million for the corresponding twelve months ended June 30, 2016. 

Current Outlook

Management continues not to be confident that the Company's operating results will continue to improve in the foreseeable future in view of the slowdown of the Chinese economy, which directly effects China's financial sector. Therefore, the Company's business could be adversely affected, especially its financial guarantee services business. The Company's exposure to defaulted loans is expected to increase and counter guarantees or collateral provided may become insufficient to cover repayments. Management is undergoing a review of the risk controls for the Company's financial guarantee business and may take measures as appropriate including, but not limited to, restructuring or disposing of this business in order to minimize the risks of the Company's exposure.

We believe that the financial leasing business offers substantial growth opportunities as small and medium-sized enterprises (SMEs) have become an indispensable driver of promoting economic and employment growth and continue to contribute to China's economic transformation. Many SMEs need to upgrade their equipment and adopt new technologies but have limited access to the capital markets. We plan to expand through our existing business relationships through our "Industry Chain" network, whereby we identify well-qualified clients through past or existing clients as trusted members and core enterprises of industry chains within our network. Through our business connections, extensive due diligence, risk management and leasing structuring metrics, we believe that we have developed the expertise to compete in the sector and support the under-serviced market of SMEs in China.

We note that certain subsidiaries of the Company in China may be required from time to time to report information on operational and/or financial matters to relevant governmental regulatory bodies in China for statistical purposes. Such information may not be prepared in accordance with US GAAP and therefore not consistent with the information the Company reports in its filings with the SEC.

Other Significant Events

As previously reported, on August 2, 2017, Spectacular Bid Limited, a wholly owned subsidiary of Freeman FinTech Corporation Limited, a company listed on the Hong Kong Stock Exchange, has acquired approximately 67% of the Company's outstanding shares. As the Company also previously disclosed, at the closing, Haiming Guo, Guo Chen and Jinqxian Zhang resigned from the Board of Directors and Xiaofeng Zhong, Shihai Wang and Weiqi Chen were appointed to the Board of Directors.

On October 19, 2017, the Company received a letter from the Staff of the Listing Qualifications Department (the "Listing Qualifications Staff") of The Nasdaq Stock Market LLC ("Nasdaq") stating that the Listing Qualifications Staff has withdrawn its August 4, 2017 delisting determination letter. Accordingly, the Company's securities remain listed on Nasdaq. Notwithstanding the withdrawal of the August 4, 2017 delisting determination letter, the Company has been further advised by Nasdaq that the Company's securities will remain halted pending the receipt and review by Nasdaq of additional information from the Company.

As of November 13, 2017, there is one lawsuit pending in China against the Company, and Management believes that resolution of this matter will not result in any payment that, in the aggregate, would be material to the financial position or results of operations of the Company.  Two class action lawsuits have been filed in the United States against the Company. On June 19, 2017, the plaintiff in one of the class actions filed a notice of voluntary discontinuance.  The directors of the Company believe that the claims from the second class action proceeding are without merit and are vigorously defending this proceeding.

About Wins Finance

Wins Finance is a diversified investment and asset management company listed on NASDAQ. The Company is focused on identifying value accretive investment opportunities and assets in China and the United States that can be enhanced through the strategic involvement of Wins' established management team and its familiarity with the Chinese investment community to help generate long-term value for shareholders. Wins Finance is well positioned to leverage its expertise and existing operations in China to build a comprehensive platform for the provision of lending and other financing solutions to the under-served small and medium enterprise segment. For more information, please visit www.winsholdings.com.

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in 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" and similar statements. All statements other than statements of historical fact in this press release are forward-looking statements and involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements are based on management's current expectations, assumptions, estimates and projections about the Company and the industry in which the Company operates, but involve a number of unknown risks and uncertainties. Further information regarding these and other risks are described in the Company's Annual Report on Form 20-F for the year ended June 30, 2017 and in the Company's other filings with the U.S. Securities and Exchange Commission. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and actual results may differ materially from the anticipated results. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements.

Company Contacts:

Wins Finance Holdings Inc.
641 Lexington Ave, 29th FL
New York, NY 10022
Tel: 212-488-4974
E-mail: info@winsholdings.com 

NON-GAAP FINANCIAL MEASURES

The non-GAAP financial measures below are provided to enhance investors' overall understanding of the company current financial performance and prospects for the future. A limitation of using non-GAAP other operating expenses and net income, excluding share-based compensation expenses, is that these items have been and may continue to be a significant expense in the Company's business for the foreseeable future. In order to mitigate these limitation, the Company has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between GAAP financial measures that are most directly comparable to the non-GAAP financial measures the Company has presented.

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