Jupai Reports Second Quarter 2020 Results

SHANGHAI, Aug. 7, 2020 /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 second quarter and six months ended June 30, 2020.

SECOND QUARTER AND FIRST HALF 2020 FINANCIAL HIGHLIGHTS

• Net revenues in the second quarter of 2020 were RMB108.4 million (US$^[1]15.3 million), a decrease of 41.7% from the corresponding period in 2019. For the first half of 2020, net revenues were RMB205.0 million (US$29.0 million), a decrease of 56.1% from the same period in 2019.

• Loss from operations in the second quarter of 2020 was RMB13.9 million (US$2.0 million), a decrease of 74.8% from the corresponding period in 2019. For the first half of 2020, loss from operations was RMB26.1 million (US$3.7 million), a decrease of 61.1% from the same period in 2019.
• Net loss attributable to ordinary shareholders in the second quarter of 2020 was RMB10.5 million (US$1.5 million), as compared to RMB61.0 million from the corresponding period in 2019. For the first half of 2020, net loss attributable to ordinary shareholders was RMB30.4 million (US$4.3 million), as compared to RMB86.6 million from the same period in 2019.
• Adjusted net loss attributable to ordinary shareholders (non-GAAP^[2]) in the second quarter of 2020 was RMB10.1 million (US$1.4 million), as compared to RMB58.6 million from the corresponding period in 2019. For the first half of 2020, non-GAAP net loss attributable to ordinary shareholders was RMB27.3 million (US$3.9 million), as compared to RMB81.3 million from the same period in 2019.

SECOND QUARTER AND FIRST HALF 2020 OPERATIONAL UPDATES 

• Total number of active clients^[3] during the second quarter of 2020 was 701, as compared to 1,039 active clients during the second quarter of 2019.
• The aggregate value of wealth management products distributed by the Company during the second quarter of 2020 was RMB1.9 billion (US$0.3 billion), a 24.3% decrease from the corresponding period in 2019. For the first half of 2020, the aggregate value of wealth management products distributed by the Company was RMB3.3 billion (US$0.5 billion), a 36.8% decrease from the corresponding period in 2019.

• Jupai's coverage network as of June 30, 2020 included 36 client centers covering 34 cities, as compared to 61 client centers covering 45 cities as of June 30, 2019.
• Total assets under management^[4] as of June 30, 2020 were RMB37.6 billion (US$5.3 billion), a 20.0% decrease from June 30, 2019.

"Jupai's bottom line improved sequentially in the second quarter, as our effective cost control measures helped to offset the market challenges created by ongoing investor caution during the economic recovery following the outbreak of COVID-19," said Mr. Jianda Ni, Jupai's chairman of the board and chief executive officer. "We remain confident in the long-term outlook for Jupai and China's wealth management industry and will continue to focus on controlling costs, providing high-quality products, and optimizing our risk control system."

Ms. Min Liu, Jupai's chief financial officer, said, "Our total operating cost and expenses in the second quarter declined by 49.2% compared with the same period last year while cost of revenues decreased by 42.7%. This is mainly attributable to our continuous efforts to control costs, which we expect will help to further improve our bottom-line and enhance operating efficiencies in the coming quarters."

SECOND QUARTER AND FIRST HALF 2020 FINANCIAL RESULTS

Net Revenues

Net revenues for the second quarter of 2020 were RMB108.4 million (US$15.3 million), a 41.7% decrease from the corresponding period in 2019, primarily due to decreases in one-time commissions and recurring management fees. Net revenues were RMB205.0 million (US$29.0 million) for the first half of 2020, a decrease of 56.1% from the same period in 2019.

• Net revenues from one-time commissions for the second quarter of 2020 were RMB47.8 million (US$6.8 million), a 44.8% decrease from the corresponding period in 2019, primarily as a result of a decrease in the aggregate value of wealth management products distributed by the Company. For the first half of 2020, net revenues from one-time commissions were RMB87.3 million (US$12.4 million), a decrease of 39.9% from the same period in 2019.
• Net revenues from recurring management fees for the second quarter of 2020 were RMB32.7 million (US$4.6 million), a 51.7% decrease from the corresponding period in 2019, primarily due to the decrease in the value of assets under management. RMB5.4 million (US$0.8 million) and RMB11.1 million carried interest was recognized as part of Jupai's recurring management fees in the second quarter of 2020 and 2019, respectively. For the first half of 2020, net revenues from recurring management fees were RMB58.0 million (US$8.2 million), a 77.7% decrease from the same period in 2019. RMB5.5 million (US$0.8 million) and RMB138.5 million carried interest was recognized as part of Jupai's recurring management fees for the first half of 2020 and 2019, respectively.
• Net revenues from recurring service fees for the second quarter of 2020 were RMB28.0 million (US$4.0 million), an 11.5% decrease from the corresponding period in 2019, primarily because the Company provided ongoing services to fewer product suppliers. The Company recognized RMB1.5 million (US$0.2 million) and nil variable performance fees in the second quarter of 2020 and 2019, respectively. For the first half of 2020, net revenues from recurring service fees were RMB59.8 million (US$8.5 million), a 24.8% increase from the same period in 2019. The Company recognized RMB2.0 million (US$0.3 million) and nil variable performance fees for the first half of 2020 and 2019, respectively.
• Net revenues from other service fees for the second quarter of 2020 were nil, the same as the corresponding period in 2019. For the first half of 2020, net revenues from other service fees were nil, as compared to RMB13.9 million from the same period in 2019.

Operating Costs and Expenses

Operating costs and expenses for the second quarter of 2020 were RMB122.4 million (US$17.3 million), a decrease of 49.2% from the corresponding period in 2019. For the first half of 2020, operating costs and expenses were RMB231.1 million (US$32.7 million), a decrease of 56.7% from the same period in 2019.

• Cost of revenues for the second quarter of 2020 was RMB62.1 million (US$8.8 million), a decrease of 42.7% from the corresponding period in 2019, primarily due to decreased compensation to wealth management advisors and client managers, as a result of the decrease in the aggregate value of wealth management products distributed by the Company and the cost control measures the Company adopted. For the first half of 2020, cost of revenues was RMB124.1 million (US$17.6 million), a decrease of 56.4% from the same period in 2019.
• Selling expenses for the second quarter of 2020 were RMB24.1 million (US$3.4 million), a decrease of 51.0% from the corresponding period in 2019, primarily due to the decrease in marketing and promotion expenses as a result of cost control and the decrease in revenues. For the first half of 2020, selling expenses were RMB44.0 million (US$6.2 million), a decrease of 57.4% from the same period in 2019.
• General and administrative expenses for the second quarter of 2020 were RMB42.7 million (US$6.0 million), a decrease of 52.0% from the corresponding period in 2019, mainly due to the cost control measures the Company adopted. For the first half of 2020, general and administrative expenses were RMB78.0 million (US$11.0 million), a decrease of 48.6% from the same period in 2019.
• Other operating income (government subsidies) received by the Company for the second quarter of 2020 was RMB6.6 million (US$0.9 million), an increase of 17.1% from the corresponding period in 2019. For the first half of 2020, other operating income were RMB15.1 million (US$2.1 million), an increase of 169.2% from the same period in 2019. Government subsidies were recorded when received, with their availability and amount dependent upon government policies.

Operating margin for the second quarter of 2020 was -12.8%, as compared to -29.7% for the corresponding period in 2019. For the first half of 2020, operating margin was -12.7%, compared to -14.3% for the same period in 2019.

Income tax benefits for the second quarter of 2020 were RMB1.4 million (US$0.2 million), as compared to income tax expenses of RMB7.6 million for the corresponding period in 2019, primarily due to taxable losses for the second quarter of 2020. For the first half of 2020, income tax expenses were RMB11.3 million (US$1.6 million), a decrease of 50.4% from the same period in 2019.

Net Loss

- Net Loss

• Net loss attributable to ordinary shareholders for the second quarter of 2020 was RMB10.5 million (US$1.5 million), as compared to RMB61.0 million from the corresponding period in 2019. For the first half of 2020, net loss attributable to ordinary shareholders was RMB30.4 million (US$4.3 million), as compared to RMB86.6 million from the same period in 2019.
• Net margin attributable to ordinary shareholders for the second quarter of 2020 was -9.7%, as compared to -32.8% from the corresponding period in 2019. For the first half of 2020, net margin attributable to ordinary shareholders was -14.8%, compared to -18.6% for the same period in 2019.
• Net loss attributable to ordinary shareholders per basic and diluted American depositary share ("ADS") for the second quarter of 2020 was RMB0.31 (US$0.04) and RMB0.31 (US$0.04), respectively, as compared to RMB1.82 and RMB1.82, respectively, from the corresponding period in 2019. For the first half of 2020, net loss attributable to ordinary shareholders per basic and diluted ADS was RMB0.91 (US$0.13) and RMB0.91 (US$0.13), respectively, as compared to RMB2.58 and RMB2.58, respectively, for the same period in 2019.

- Adjusted Net Loss (non-GAAP)

• Adjusted net loss attributable to ordinary shareholders (non-GAAP) for the second quarter of 2020 was RMB10.1 million (US$1.4 million), as compared to RMB58.6 million from the corresponding period in 2019. For the first half of 2020, non-GAAP net loss attributable to ordinary shareholders was RMB27.3 million (US$3.9 million), as compared to RMB81.3 million from the same period in 2019.
• Adjusted net margin attributable to ordinary shareholders (non-GAAP) for the second quarter of 2020 was -9.4%, as compared to -31.5% from the corresponding period in 2019. For the first half of 2020, non-GAAP net margin attributable to ordinary shareholders was -13.3%, as compared to -17.4% for the same period in 2019.
• Adjusted net loss attributable to ordinary shareholders per diluted ADS (non-GAAP) for the second quarter of 2020 was RMB0.30 (US$0.04), as compared to RMB1.74 from the corresponding period in 2019. For the first half of 2020, non-GAAP net loss attributable to ordinary shareholders per diluted ADS was RMB0.81 (US$0.11), as compared to RMB2.42 for the same period in 2019.

Repurchase of Shares

As of July 31, 2020, we had repurchased 320,351 ADSs as part of the share repurchase program of up to US$10 million announced in February 2020, at a total cost of US$348,423, inclusive of transaction charges.

Balance Sheet and Cash Flow

As of June 30, 2020, the Company had RMB708.6 million (US$100.3 million) in cash, cash equivalents and restricted cash, as compared to RMB712.3 million as of December 31, 2019.

Net cash provided by operating activities during the second quarter of 2020 was RMB41.8 million (US$5.9 million). For the first half of 2020, net cash provided by operating activities was RMB20.6 million (US$2.9 million).

Net cash used in investing activities during the second quarter of 2020 was RMB15.2 million (US$2.2 million). For the first half of 2020, net cash used in investing activities was RMB17.2 million (US$2.4 million).

Net cash used in financing activities during the second quarter of 2020 was nil. For the first half of 2020, net cash used in financing activities was RMB7.1 million (US$1.0 million).

CONFERENCE CALL

Jupai's management will host an earnings conference call on August 7, 2020 at 8:00 a.m. U.S. Eastern Time (8:00 p.m. Beijing/Hong Kong time).

Please register in advance for the conference call using the link provided below. Upon registering, you will be provided with a calendar invite with participant dial-in numbers, passcode, and a unique access pin by email. To join the conference, simply dial the number you receive after preregistering, enter the passcode followed by your pin, and you will join the conference instantly.

PRE-REGISTER LINK: http://apac.directeventreg.com/registration/event/1172631

A replay of the conference call may be accessed by phone at the following number until August 13, 2020:

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, share options and amortization of intangible assets related to acquisition. 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; 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 Investor Relations
Phone: +86 (21) 5226 5819
Email: ir@jpinvestment.cn

Philip Lisio
The Foote Group
Phone: +86 (10) 8429 9544
Email: Jupai-IR@thefootegroup.com

-- FINANCIAL AND OPERATIONAL TABLES FOLLOW --

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