ACROFAN

Noah Holdings Limited Announces Unaudited Preliminary Financial Results for the Fourth Quarter And Full Year 2018

Published : Wednesday, March 13, 2019, 6:00 am
ACROFAN=PRNewswire | mediainquiries@prnewswire.com | SNS

SHANGHAI, March 13, 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 global investment and asset allocation services for high net worth individuals and enterprises, today announced its unaudited preliminary[1] financial results for the fourth quarter of 2018 and the full year ended December 31, 2018.

FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS

  • Net revenues for the fourth quarter of 2018 were RMB822.1 million (US$119.6 million), a 13.8% increase from the corresponding period in 2017.

(RMB millions,

except percentages)

Q4 2017



Q4  2018



YoY Change

Wealth management

524.8



578.5



10.2%

Asset management

166.8



160.2



(3.9%)

Other financial services

30.5



83.4



173.1%

Total net revenues

722.1



822.1



13.8%

  • Income from operations for the fourth quarter of 2018 was RMB159.7 million (US$23.2 million), a 17.8% increase from the corresponding period in 2017.

(RMB millions,

except percentages)

Q4 2017



Q4 2018



YoY Change

Wealth management

79.7



118.4



48.6%

Asset management

76.9



41.3



(46.3%)

Other financial services

(20.9)



0.0



N.A.

Total income from operations

135.7



159.7



17.8%

  • Net income attributable to Noah shareholders for the fourth quarter of 2018 was RMB155.6 million (US$22.6 million), a 1.7% increase from the corresponding period in 2017.
  • Non-GAAP[2] net income attributable to Noah shareholders for the fourth quarter of 2018 was RMB223.2 million (US$32.5 million), a 29.2% increase from the corresponding period in 2017.

[1] As of the date of this press release, we are still in the process of reviewing the financial results of the funds of funds we manage and invest in as the general partner or manager.  Any changes in the fair value of those investments could affect the income from equity in affiliates, net income, net income attributable to Noah shareholders, income per ADS and the balance of investments in affiliates in our consolidated financial statements. While not included in the unaudited preliminary fourth quarter 2018 financial results in this press release, we will include any such fair value adjustments in the audited consolidated financial statements in our 2018 Form 20-F and will make a subsequent announcement when our review concludes, as appropriate.

[2] Noah's Non-GAAP financial measures are its corresponding GAAP financial measures excluding the effects of all forms of share-based compensation and fair value changes of equity securities (unrealized) and adjusting for sale of equity securities, net of relevant tax impact. See "Reconciliation of GAAP to Non-GAAP Results" at the end of this press release. 

FULL YEAR 2018 FINANCIAL HIGHLIGHTS

  • Net revenues in the full year 2018 were RMB3,289.6 million (US$478.5 million), a 16.4% increase from the full year 2017.

(RMB millions,

except percentages)

FY 2017



FY  2018



YoY Change

Wealth management

2,126.3



2,306.0



8.5%

Asset management

588.0



748.5



27.3%

Other financial services

112.6



235.1



108.8%

Total net revenues

2,826.9



3,289.6



16.4%

  • Income from operations in the full year 2018 was RMB926.5 million (US$134.8 million), a 19.2% increase from the full year 2017.

(RMB millions,

except percentages)

FY 2017



FY 2018



YoY Change

Wealth management

580.9



607.2



4.5%

Asset management

302.9



353.2



16.6%

Other financial services

(106.8)



(33.9)



68.3%

Total income from operations

777.0



926.5



19.2%

  • Net income attributable to Noah shareholders in the full year 2018 was RMB811.3 million (US$118.0 million), a 6.3% increase from the full year 2017.
  • Non-GAAP net income attributable to Noah shareholders in the full year 2018 was RMB1,010.8 million (US$147.0 million), a 20.7% increase from the full year 2017.

FOURTH QUARTER AND FULL YEAR 2018 OPERATIONAL UPDATES

Wealth Management Business

The Company's wealth management business offers financial products and provides comprehensive financial services to high net worth clients. Noah primarily distributes onshore and offshore fixed income, private equity, secondary market equity and insurance products.

  • Total number of registered clients as of December 31, 2018 was 260,285, a 39.3% increase from December 31, 2017.
  • Total number of active clients[3] during the fourth quarter of 2018 was 4,717, a 24.8% decrease from the fourth quarter of 2017, due to lower transaction value, especially that of secondary market equity products. Total number of active clients during the full year 2018 was 13,628, a 7.1% increase from the full year 2017.
  • Aggregate value of financial products distributed during the fourth quarter of 2018 was RMB25.2 billion (US$3.7 billion), a 10.7% decrease from the fourth quarter of 2017.

[3] "Active clients" for our wealth management business refers to registered clients who purchased financial products provided or distributed by Noah during a given period.

 

Product type

Three months ended December 31,


2017

2018


(RMB in billions, except percentages)

Fixed income

15.3

54.5%

20.2

80.3%

Private equity

7.4

26.1%

3.0

11.9%

Secondary market equity

5.4

19.2%

1.5

5.7%

Other products

0.1

0.2%

0.5

2.1%

All products

28.2

100.0%

25.2

100.0%

  • Aggregate value of financial products distributed during the full year 2018 was RMB110.0 billion (US$16.0 billion), a 6.3% decrease from the full year 2017.

Product type

Twelve months ended December 31,


2017

2018


(RMB in billions, except percentages)

Fixed income

71.7

61.1%

75.5

68.6%

Private equity

34.3

29.2%

18.9

17.1%

Secondary market equity

10.8

9.2%

13.6

12.4%

Other products

0.6

0.5%

2.0

1.9%

All products

117.4

100.0%

110.0

100.0%

  • Average transaction value per active client[4] for the fourth quarter of 2018 was RMB5.3 million (US$0.8 million), an 18.8% increase from the corresponding period in 2017. Average transaction value per active client for the full year 2018 was RMB8.1 million (US$1.2 million), a 12.5% decrease from the full year 2017.
  • Coverage network included 313 service centers covering 83 cities as of December 31, 2018, up from 287 service centers covering 83 cities as of September 30, 2018, and 237 service centers covering 79 cities as of December 31, 2017.
  • Number of relationship managers was 1,583 as of December 31, 2018, a 1.5% increase from September 30, 2018 and an 18.6% increase from December 31, 2017.

Asset Management Business

The Company's asset management business, Gopher Asset Management Co., Ltd. ("Gopher Asset Management" or "Gopher"), is a leading alternative asset manager in China. Gopher Asset Management develops and manages private equity, real estate, secondary market equity, credit and other investments denominated in Renminbi and other currencies. 

  • Total assets under management as of December 31, 2018 were RMB169.2 billion (US$24.6 billion), a 3.1% increase from September 30, 2018 and a 14.1% increase from December 31, 2017.

[4] "Average transaction value per active client" refers to the average value of financial products that were purchased by active clients during the period specified.

 

Investment type

As of September
30, 2018

Asset
Growth

Asset
Expiration/
Redemption

As of December
31, 2018


(RMB billions, except percentages)

Private equity

96.9

59.0%

3.4

0.1

100.2

59.2%

Credit

40.3

24.6%

4.5

5.4

39.4

23.3%

Real estate

16.6

10.1%

0.5

0.4

16.7

9.9%

Secondary market equity[5]

4.9

3.0%

1.4

0.1

6.2

3.6%

Other investments

5.4

3.3%

1.3

-

6.7

4.0%

All Investments

164.1

100.0%

11.1

6.0

169.2

100.0%









 

Investment type

As of December
31, 2017

Asset
Growth

Asset
Expiration/
Redemption

As of December
31, 2018


(RMB billions, except percentages)

Private equity

86.9

58.6%

15.7

2.4

100.2

59.2%

Credit

40.0

27.0%

27.4

28.0

39.4

23.3%

Real estate

11.6

7.8%

11.8

6.7

16.7

9.9%

Secondary market equity

6.2

4.2%

3.7

3.7

6.2

3.6%

Other investments

3.6

2.5%

3.2

0.1

6.7

4.0%

All Investments

148.3

100.0%

61.8

40.9

169.2

100.0%









 

[5] The asset expiration/redemption of secondary market equity investments also includes market appreciation or depreciation.

Other Financial Services Business

The Company's other financial services business includes its lending services, online wealth management and payment technology services.

Ms. Jingbo Wang, Chairlady and CEO of Noah, said, "We are pleased with our 2018 full year results, and we have met the guidance we provided to the market. We have been upgrading our business model over the past few years, which we believe will make us less sensitive to economic cycles and be able to maintain sustainable growth in both revenues and net income."

FOURTH QUARTER 2018 FINANCIAL RESULTS

Net Revenues

Net revenues for the fourth quarter of 2018 were RMB822.1 million (US$119.6 million), a 13.8% increase from the corresponding period in 2017, primarily driven by increased recurring service fees and other service fees.

  • Wealth Management Business
  • - Net revenues from one-time commissions for the fourth quarter of 2018 were RMB240.9 million (US$35.0 million), which was substantially the same as the corresponding period in 2017.

    - Net revenues from recurring service fees for the fourth quarter of 2018 were RMB297.9 million (US$43.3 million), a 17.8% increase from the corresponding period in 2017. 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 fourth quarter of 2018 were RMB0.1 million (US$21.2 thousand), compared with RMB10.6 million in the corresponding period of 2017. The decrease was primarily due to less performance-based income generated from secondary market equity products. 

- Net revenues from other service fees for the fourth quarter of 2018 were RMB39.6 million (US$5.8 million), a 95.5% increase from the corresponding period in 2017, primarily due to the growth of value-added financial services within the wealth management segment, such as investor education and trust services.

  • Asset Management Business

- Net revenues from recurring service fees for the fourth quarter of 2018 were RMB147.9 million (US$21.5 million), a 5.0% increase from the corresponding period in 2017. The increase was primarily due to the increase in assets under management.

- Net revenues from performance-based income for the fourth quarter of 2018 were RMB10.8 million (US$1.6 million), compared with RMB19.1 million in the corresponding period of 2017, primarily due to a decrease in performance-based income from secondary market equity products.

  • Other Financial Service Business

 - Net revenues for the fourth quarter of 2018 were RMB83.4 million (US$12.1 million), a 173.1% increase from the corresponding period in 2017. The increase was primarily due to the growth of the Company's lending business.

Operating costs and expenses

Operating costs and expenses for the fourth quarter of 2018 were RMB662.4 million (US$96.3 million), a 12.9% increase from the corresponding period in 2017. Operating costs and expenses primarily consisted of compensation and benefits of RMB428.1 million (US$62.3 million), selling expenses of RMB104.8 million (US$15.2 million), general and administrative expenses of RMB94.9 million (US$13.8 million) and other operating expenses of RMB51.7 million (US$7.5 million).

  • Operating costs and expenses for the wealth management business for the fourth quarter of 2018 were RMB460.1 million (US$66.9 million), a 3.4% increase from the corresponding period in 2017, primarily due to an increase in compensation and benefits and partially offset by a decrease in selling expense.
  • Operating costs and expenses for the asset management business for the fourth quarter of 2018 were RMB118.9 million (US$17.3 million), a 32.2% increase from the corresponding period in 2017, primarily due to an increase in compensation and benefits as well as selling expenses for this business.
  • Operating costs and expenses for the other financial services business for the fourth quarter of 2018 were RMB83.4 million (US$12.1 million), a 62.2% increase from the corresponding period in 2017 due to the expansion of the Company's lending business.

Operating Margin

Operating margin for the fourth quarter of 2018 was 19.4%, an increase from 18.8% for the corresponding period in 2017. The increase was mainly due to improved cost control.

  • Operating margin for the wealth management business for the fourth quarter of 2018 was 20.5%, compared with 15.2% for the corresponding period in 2017.
  • Operating margin for the asset management business for the fourth quarter of 2018 was 25.8%, compared with 46.1% for the corresponding period in 2017.
  • Income from operations for the other financial services business for the fourth quarter of 2018 was break-even, improving from a loss of RMB20.9 million for the corresponding period in 2017.

Investment Income

Investment income for the fourth quarter of 2018 was RMB6.5 million (US$1.0 million), compared with RMB35.0 million in the corresponding period in 2017. The decrease was primarily due to changes in fair value of the Company's investments in equity securities. See "Discussion of Recently Adopted Accounting Standard and Non-GAAP Financial Measures" below for more details.  

Income Tax Expenses

Income tax expenses for the fourth quarter of 2018 were RMB29.2 million (US$4.2 million), a 16.8% decrease from the corresponding period in 2017. The decrease was primarily due to a lower effective tax rate. 

Income from Equity in Affiliates

Income from equity in affiliates for the fourth quarter of 2018 was RMB2.5 million (US$0.4 million), compared with RMB17.4 million in the corresponding period in 2017. We are still reviewing the financial results of the funds of funds we manage and invest in as the general partner. Any potential changes in fair value of those investments could affect the income from equity in affiliates.

Net Income

  • Net Income
  • - Net income for the fourth quarter of 2018 was RMB151.4 million (US$22.0 million), a 3.5% decrease from the corresponding period in 2017.

    - Net margin for the fourth quarter of 2018 was 18.4%, down from 21.7% for the corresponding period in 2017.

    - Net income attributable to Noah shareholders for the fourth quarter of 2018 was RMB155.6 million (US$22.6 million), a 1.7% increase from the corresponding period in 2017.

    - Net margin attributable to Noah shareholders for the fourth quarter of 2018 was 18.9%, down from 21.2% for the corresponding period in 2017.

- Net income attributable to Noah shareholders per basic and diluted ADS for the fourth quarter of 2018 was RMB2.61 (US$0.38) and RMB2.54 (US$0.37), respectively, down from RMB2.69 and RMB2.60 respectively, for the corresponding period in 2017.

  • Non-GAAP Net Income Attributable to Noah Shareholders
  • - Non-GAAP net income attributable to Noah shareholders for the fourth quarter of 2018 was RMB223.2 million (US$32.5 million), a 29.2% increase from the corresponding period in 2017.

    - Non-GAAP net margin attributable to Noah shareholders for the fourth quarter of 2018 was 27.1%, up from 23.9% for the corresponding period in 2017.

- Non-GAAP net income attributable to Noah shareholders per diluted ADS for the fourth quarter of 2018 was RMB3.64 (US$0.53), up from RMB2.92 for the corresponding period in 2017.

FULL YEAR 2018 FINANCIAL RESULTS

Net Revenues

Net revenues for the full year 2018 were RMB3,289.6 million (US$478.5 million), a 16.4% increase from the full year 2017, primarily due to increases in recurring service fees and other service fees. 

  • Wealth Management Business
  • - Net revenues from one-time commissions for 2018 were RMB1,018.9 million (US$148.2 million), a 6.7% decrease from 2017, primarily due to a decline in the transaction value of financial products purchased by active clients.

    - Net revenues from recurring service fees for 2018 were RMB1,130.0 million (US$164.4 million), a 29.6% increase from 2017. The increase was primarily due to the cumulative effect of financial products with recurring service fees previously distributed by the Company.

    - Net revenues from performance-based income for 2018 were RMB44.1 million (US$6.4 million), a 52.3% decrease from 2017, primarily due to a decrease in performance-based income from private equity products.

- Net revenues from other service fees for 2018 were RMB113.0 million (US$16.4 million), representing a 61.6% increase from 2017, primarily due to the growth of value-added financial services within the wealth management segment.

  • Asset Management Business
  • - Net revenues from recurring service fees for 2018 were RMB637.8 million (US$92.8 million), a 20.9% increase from 2017. The increase was primarily due to the increase in assets under management by the Company.

- Net revenues from performance-based income for 2018 were RMB98.9 million (US$14.4 million), a 107.5% increase from the year 2017, primarily due to an increase in performance-based income from real estate and secondary market equity funds.

  • Other Financial Services Business

- Net revenues for the full year 2018 were RMB235.1 million (US$34.2 million), a 108.8% increase from 2017. The increase was primarily due to the growth of the Company's lending services business.

Operating costs and expenses

Operating costs and expenses for the full year 2018 were RMB2,363.1 million (US$343.7 million), a 15.3% increase from the full year 2017. Operating costs and expenses for the full year 2018 primarily consisted of compensation and benefits of RMB1,564.2 million (US$227.5 million), selling expenses of RMB412.7 million (US$60.0 million), general and administrative expenses of RMB279.4 million (US$40.6 million) and other operating expenses of RMB169.4 million (US$24.6 million).

  • Operating costs and expenses for the wealth management business for 2018 were RMB1,698.8 million (US$247.1 million), a 9.9% increase from 2017, primarily due to an increase in compensation and benefits as well as selling expenses.
  • Operating costs and expenses for the asset management business for 2018 were RMB395.3 million (US$57.5 million), a 38.6% increase from 2017, primarily due to an increase in compensation and benefits and a decrease in government subsidies.
  • Operating costs and expenses for the other financial services business for 2018 were RMB268.9 million (US$39.1 million), a 22.6% increase from 2017 due to the expansion of the Company's lending business.

Operating Margin

Operating margin for the full year 2018 was 28.2%, compared to 27.5% for the full year 2017, mainly due to increased operating efficiency and reduced losses for the other financial services business.

  • Operating margin for the wealth management business for 2018 was 26.3%, compared to 27.3% for 2017.
  • Operating margin for the asset management business for 2018 was 47.2%, compared to 51.5% for 2017.
  • Operating loss for other financial services business for 2018 was RMB33.9 million (US$4.9 million), compared to a loss of RMB106.8 million for 2017.

Investment Income

Investment income for the full year 2018 was RMB48.6 million (US$7.0 million), a 27.8% decrease from the corresponding period in 2017. The decrease was primarily due to changes in fair value of equity securities. See "Discussion of Recently Adopted Accounting Standard and Non-GAAP Financial Measures" below for more details.

Income Tax Expenses

Income tax expenses for the full year 2018 were RMB222.3 million (US$32.3 million), an 11.7% increase from the full year 2017, primarily due to an increase in taxable income offset in part by a lower effective tax rate.

Net Income

  • Net Income
  • - Net income for the full year 2018 was RMB803.7 million (US$116.9 million), a 5.5% increase from the full year 2017.

    - Net margin for the full year 2018 was 24.4%, compared to 27.0% for the full year 2017.

    - Net income attributable to Noah shareholders for the full year 2018 was RMB811.3 million (US$118.0 million), a 6.3% increase from the full year 2017.

    - Net margin attributable to Noah shareholders for the full year 2018 was 24.7%, down from 27.0% for the corresponding period in 2017.

- Net income attributable to Noah shareholders per basic and diluted ADS for the full year 2018 was RMB13.85 (US$2.01) and RMB13.33 (US$1.94), respectively, as compared to RMB13.49 and RMB12.95, respectively, for the full year 2017.

  • Non-GAAP Net Income Attributable to Noah Shareholders
  • - Non-GAAP net income attributable to Noah shareholders for the full year 2018 was RMB1,010.8 million (US$147.0 million), a 20.7% increase from the full year 2017.

    - Non-GAAP net margin attributable to Noah shareholders for the full year 2018 was 30.7%, compared to 29.6% for the full year 2017.

- Non-GAAP net income attributable to Noah shareholders per diluted ADS for the full year 2018 was RMB16.58 (US$2.41), compared to RMB14.18 for the full year 2017.

Balance Sheet and Cash Flow

As of December 31, 2018, the Company had RMB2,706.6 million (US$393.7 million) in cash and cash equivalents, compared with RMB2,360.1 million as of September 30, 2018 and RMB1,906.8 million as of December 31, 2017.

Net cash inflow from the Company's operating activities during the fourth quarter of 2018 was RMB511.3 million (US$74.4 million). Net cash inflow from the Company's operating activities during the full year 2018 was RMB1,029.4 million (US$149.7 million), compared to RMB628.4 million during the full year 2017, driven by profit earned from business operations and enhanced collection of factoring receivables.

Net cash outflow from the Company's investing activities during the fourth quarter of 2018 was RMB188.4 million (US$27.4 million). Net cash outflow from the Company's investing activities during the full year 2018 was RMB395.7 million (US$57.5 million), compared to RMB833.9 million during the full year 2017. In 2018, this primarily consisted of net cash outflow for purchasing various investments and properties and equipment in the amount of RMB544.8 million, partially offset by cash inflow from net of loan disbursement of RMB149.1 million.  

Net cash inflow from the Company's financing activities was RMB7.5 million (US$1.1 million) in the fourth quarter of 2018. Net cash inflow from the Company's financing activities during the full year 2018 was RMB109.8 million (US$16.0 million), compared to RMB791.8 million cash outflow during the full year 2017. The cash inflow for 2018 was mainly due to the proceeds related to share-based compensation and contribution of non-controlling interest.

Note to Financial Information

As of the date of this press release, we are still in the process of reviewing the financial results of the funds of funds we manage and invest in as the general partner or manager.  Any changes in the fair value of those investments could affect the income from equity in affiliates, net income, net income attributable to Noah shareholders, income per ADS and the balance of investments in affiliates in our consolidated financial statements. While not included in the unaudited preliminary fourth quarter 2018 financial results in this press release, we will include any such fair value adjustments in the audited consolidated financial statements in our 2018 Form 20-F and will make a subsequent announcement when our review conclude, as appropriate.

OTHER COMPANY DEVELOPMENTS

The Company also announced today that Mr. Yi Zhao has been appointed as Group President, succeeding Mr. Kenny Lam who has decided to depart Noah for new professional pursuits.

Mr. Zhao has more than twenty years of experience in the financial industry. He has been leadi

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