Noah Holdings Limited (“Noah” or the “Company”) (NYSE: NOAH),
the leading independent service provider focusing on distributing
wealth management products to the high net worth population in
China, today announced its unaudited financial results for the
third quarter ended September 30, 2010.
THIRD QUARTER 2010 FINANCIAL HIGHLIGHTS
- Net revenues were US$10.2 million,
representing an increase of 208.5% from US$3.3 million in the third
quarter of 2009.
- Income from operations was US$4.3
million, representing an increase of 592.0% from US$0.6 million in
the third quarter of 2009. Operating margin was 42.5%, as compared
to 19.0% in the third quarter of 2009.
- Net income attributable to Noah
shareholders was US$3.1 million, representing an increase of 521.8%
from US$0.5 million in the third quarter of 2009. Non-GAAP1 net
income attributable to Noah shareholders was US$3.4 million,
representing an increase of 185.5% from US$1.2 million in the third
quarter of 2009. Net margin was 30.8%, as compared to 15.3% in the
third quarter of 2009. Non-GAAP net margin was 33.1%, as compared
to 35.8% in the third quarter of 2009.
- Net income per basic and diluted ADS
was US$0.07, as compared to US$0.01 in the third quarter of 2009.
Non-GAAP net income per diluted ADS was US$0.08, as compared to
US$0.03 in the third quarter of 2009.
THIRD QUARTER 2010 OPERATIONAL HIGHLIGHTS
- As of September 30, 2010, the Company’s
total number of registered clients grew 62.5% year-over-year to
14,218, including 13,899 registered individual clients, 294
registered enterprise clients and 25 wholesale clients that have
entered into cooperation agreements with the Company.
- The Company had 566 active clients2
during the third quarter of 2010, representing a 15% increase from
492 during the third quarter of 2009.
- The aggregate value of wealth
management products distributed by the Company during the third
quarter of 2010 was RMB4.8 billion (approximately US$714.8
million), representing a 264.9% increase from the third quarter of
2009. Of such aggregate value, fixed income products accounted for
27.6%, private equity fund products accounted for 68.7%, and
securities investment funds and investment-linked insurance
products accounted for 3.7%.
- The average transaction value per
client3 increased 217.2% year-over-year to RMB8.5 million
(approximately US$1.3 million), as compared to RMB2.7 million
(approximately US$0.4 million) for the third quarter of 2009.
- As of September 30, 2010, Noah’s
coverage network included 28 branches, as compared to 15 branches
as of September 30, 2009. The number of relationship managers
increased to 308 as of September 30, 2010 from 210 as of September
30, 2009.
Ms. Jingbo Wang, Co-founder, Chairwoman of the board of
directors and Chief Executive Officer, commented, “We have achieved
a significant milestone in our company’s history by successfully
listing on the New York Stock Exchange last month. The listing is
of strategic importance as it has not only provided us with
financial resources for further expansions, but enhances our brand
equity among our clients and our product providers. We will
continue to focus on serving China’s high net worth population,
which we believe is experiencing rapid growth as a result of
China’s economic expansion.”
Mr. Tom Wu, Chief Financial Officer, added, “We are pleased with
our third quarter 2010 financial results, which demonstrated our
ability to execute our focused strategy and business plan. Our
strong revenue growth this quarter is a reflection of the strong
secular growth of China’s high net worth population, a still
under-served market, and Noah’s unique market positioning as the
leading independent service provider focusing on distributing
wealth management products to the high net worth population in
China.”
THIRD QUARTER 2010 FINANCIAL RESULTS
Net Revenues
Net revenues for the third quarter of 2010 were US$10.2 million,
representing an increase of 208.5% from US$3.3 million in the third
quarter of 2009. The year-over-year increase was attributable to an
increase of US$5.0 million in one-time commissions and an increase
of US$1.9 million in recurring service fees.
Net revenues from one-time commissions for the third quarter of
2010 were US$8.2 million, a year-over-year increase of 156.3% from
US$3.2 million in the third quarter of 2009. The year-over-year
increase was primarily driven by increases in the number of active
clients and the average transaction value per client.
Net revenues from recurring service fees for the third quarter
of 2010 were US$2.0 million, a year-over-year increase of 19 times
from US$0.1 million in the third quarter of 2009. The
year-over-year increase was mainly due to an increase in the
transaction value of private equity fund products distributed.
Operating Margin
The Company’s operating margin for the quarter was 42.5%,
compared to 19.0% in the third quarter of 2009. The year-over-year
improvement in operating margin was primarily due to an increase in
net revenues, and the lack of certain share-based compensation
expenses.
Operating cost and expenses, including cost of revenues, selling
expenses, general and administrative (G&A) expenses and other
operating income, were US$5.9 million, a year-over-year increase of
118.8% from US$2.7 million in the third quarter of 2009.
Cost of revenues was US$1.8 million, a year-over-year increase
of 221.4% from US$0.6 million in the third quarter of 2009. The
year-over-year rise in the cost of revenues was primarily due to an
increase in compensation expenses paid to relationship
managers.
Selling expenses were US$2.4 million, a year-over-year increase
of 124.3% from US$1.1 million in the third quarter of 2009. Selling
expenses as a percentage of net revenues were 23.6%, representing a
decrease from 32.4% in the third quarter of 2009. The
year-over-year rise in selling expenses was primarily due to an
increase of US$0.8 million in personnel expenses related to selling
efforts, an increase of US$0.3 million in rental expenses and an
increase of US$0.2 million in travel expenses as a result of the
Company’s network expansion.
G&A expenses were US$1.7 million, a year-over-year increase
of 51.8% from US$1.1 million in the third quarter of 2009. G&A
expenses as a percentage of net revenues were 16.4%, representing a
decrease from 33.4% in the third quarter of 2009. The
year-over-year rise in G&A expenses was primarily due to an
increase of US$0.5 million in employee compensation expenses
contributable to G&A expenses as a result of the expansion of
the Company.
Gain (Loss) on Change in Fair Value of Derivative
Liabilities
In the third quarter of 2010, the Company did not record a loss
on change in fair value of derivative liabilities as it did in the
corresponding period in 2009, as the redemption provisions of
series A preferred shares that had triggered the accounting
treatment of derivative liabilities were modified in June 2010. In
the corresponding period in 2009, such loss was recorded as US$0.4
million.
Income Tax Expenses
The Company recorded US$1.3 million of income tax expenses in
the third quarter of 2010, whereas it recorded US$0.2 million of
income tax benefit in the corresponding period in 2009. when
uncertain tax liabilities in the amount of US$0.8 million recorded
during the years ended December 31, 2007 and 2008 was
reversed.
Net Income
Net income attributable to Noah shareholders was US$3.1 million,
a year-over-year increase of 521.8% from US$0.5 million in the
third quarter of 2009. Net margin was 30.8%, as compared to 15.3%
in the third quarter of 2009.
Non-GAAP net income was US$3.4 million, a year-over-year
increase of 185.5% from US$1.2 million in the third quarter of
2009. Non-GAAP net margin was 33.1%, as compared to 35.8% in the
third quarter of 2009. The year-over-year decrease was primarily
due to the reversal in the third quarter of 2009 of previously
recorded US$0.8 million in uncertain tax liabilities, which boosted
the Non-GAAP net margin in that period.
Income per basic and diluted ADS was US$0.07, as compared to
US$0.01 in the third quarter of 2009. Non-GAAP income per diluted
ADS was US$0.08, as compared to US$0.03 in the third quarter of
2009.
Balance Sheet and Cash Flow
As of September 30, 2010, the Company had US$21.8 million in
cash and cash equivalents, an increase from US$17.1 million as of
June 30, 2010. In the third quarter of 2010, the Company generated
US$3.7 million from operating activities and US$1.1 million from
maturity of held-to-maturity investments, and used US$0.3 million
cash to acquire property and equipment.
The Company generated net proceeds of US$105.2 million as the
result of its New York Stock Exchange listing completed on November
10, 2010.
FISCAL YEAR 2010 FORECAST
The Company estimates that non-GAAP net income for fiscal year
2010 is expected to be in the range of US$12.8 million and US$13.2
million, representing a year-over-year increase in the range of
138.7% and 146.2%. This estimate reflects management’s current
business outlook and is subject to change.
CONFERENCE CALL
Senior management will host a conference call at 8:00 am
(Eastern) / 5:00 am (Pacific) / 9:00 pm (Beijing) on Thursday,
December 16, 2010 to discuss its third quarter 2010 financial
results and recent business activity. The conference call may be
accessed by calling the following numbers:
Toll Free Toll
• United States
+1-800-510-0219 +1-617-614-3451
• China
10-800-130-0399
o South China
China Telecom
10-800-120-2655/
10-800-152-1490
o North China
China Netcom
10-800-852-1490/
10-800-7122-655
• Hong Kong
800-96-3844
• United Kingdom
080-8234-7616 Participant Passcode "NOAH"
A telephone replay will be available shortly after the call
until December 23, 2010 at (US Toll Free) +1-888-286-8010 or (US
Toll) +1-617-801-6888. Passcode: 22746453.
A live webcast of the conference call and replay is available in
the investor relations section of the Company's website at:
http://ir.noahwm.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 loss or gain on change in fair
value of derivative liabilities. The non-GAAP financial measures
used by management and disclosed by the Company exclude the income
statement effects of all forms of share-based compensation and loss
or gain on change in fair value of derivative liabilities. The
reconciliation of these non-GAAP financial measures to the nearest
GAAP measures to is 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 change in fair value of derivative liabilities to
supplement U.S. GAAP financial data. As such, the Company believes
that the presentation of the non-GAAP operating margin, non-GAAP
net income(loss), and non-GAAP income(loss) per diluted ADS
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 of loss (gain) on change in fair value of derivative
liabilities in the periods presented. As the Company removed the
restrictions on such shares and revised the relevant provisions of
the Company’s series A preferred shares that triggered the
accounting treatment of derivative liabilities in June 2010, the
Company does not expect to incur similar expenses in the future. To
make financial results comparable period by period, the Company
utilized the non-GAAP financial results to better understand its
historical business operations.
ABOUT NOAH HOLDINGS LIMITED
Noah Holdings Limited is the leading service provider focusing
on distributing wealth management products to the high net worth
population in China. Noah distributes over-the-counter wealth
management products that are originated in China, including
primarily fixed income products, private equity funds and
securities investment funds. With over 300 relationship managers in
28 branch offices, Noah’s total coverage network encompasses
China’s most economically developed regions where the high net
worth population is concentrated. Through this extensive coverage
network, product sophistication, and client knowledge, the Company
caters to the wealth management needs of China’s high net worth
population. For more information please visit the Company’s website
at http://www.noahwm.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 outlook for the fiscal year 2010 and quotations
from management in this announcement, as well as Noah’s strategic
and operational plans, contain forward-looking statements. Noah 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 fourth parties. Statements that are not
historical facts, including statements about Noah’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: our goals and strategies; our future
business development, financial condition and results of
operations; the expected growth of the wealth management market in
China and internationally; our expectations regarding demand for
and market acceptance of the products we distribute; our
expectations regarding keeping and strengthening our relationships
with key clients; relevant government policies and regulations
relating to our industry; our ability to attract and retain quality
employees; our ability to stay abreast of market trends and
technological advances; our plans to invest in research and
development to enhance our product choices and service offerings;
competition in our industry in China and internationally; general
economic and business conditions in China; and our ability to
effectively protect our intellectual property rights and not
infringe on the intellectual property rights of others. Further
information regarding these and other risks is included in Noah’s
filings with the Securities and Exchange Commission, including its
registration statement on Form F-1, as amended. Noah does not
undertake any obligation to update any forward-looking statement as
a result of new information, future events or otherwise, except as
required under applicable law. All information provided in this
press release and in the attachments is as of December 15, 2010,
and Noah undertakes no duty to update such information, except as
required under applicable law.
Noah Holdings Limited Unaudited Condensed
Consolidated Balance Sheets (In U.S. dollars except for
share data) As of June 30, 2010
September 30,2010 $ $
Assets Current assets: Cash and
cash equivalents 17,052,110 21,759,650 Restricted cash - 74,615
Short-term investments 3,295,587 2,238,438
Accounts receivable, net of allowance for
doubtful accountsof nil at June 30,2010 and September 30, 2010,
respectively
237,225 1,788,187 Other current assets 906,591 1,263,575 Deferred
tax assets 61,080 61,899 Amounts due from related parties 800,028
1,952,418 Total current assets 22,352,621 29,138,782 - Investment
in affiliates 362,498 364,187 Property and equipment, net 713,687
1,100,880 Other non-current assets 330,980 237,239
Total
Assets 23,759,786 30,841,088
Liabilities, Mezzanine
Equity and Equity Current liabilities: Accrued payroll and
welfare expenses 1,997,027 2,745,176 Income tax payable 1,550,009
2,925,127 Other current liabilities 1,162,240 2,423,947 Deferred
tax liabilities 24,200 24,525 Total current liabilities 4,733,476
8,118,775 Uncertain tax position liabilities 1,229,968 1,276,450
Total Liabilities 5,963,444 9,395,225
Mezzanine
Equity Series A convertible redeemable preferred shares
4,478,190 4,478,190
Equity 13,318,152 16,967,673
Total
Liabilities, Mezzanine Equity and Equity 23,759,786 30,841,088
Noah Holdings Limited Unaudited Condensed
Consolidated Income Statements (In U.S. dollars, except for
share data and percentages) Three
months ended September 30, September 30, Change 2009
2010 Revenues: $ $ Third-party revenues 3,232,602 8,460,273
161.7% Related party revenues
282,634
2,312,775 718.3% Total revenues 3,515,236
10,773,048 206.5% Less: business taxes and related surcharges
(208,548) (571,566) 174.1%
Net revenues
3,306,688 10,201,482
208.5% Operating cost and expenses: Cost of revenues
(570,335) (1,833,302) 221.4% Selling expenses (1,072,003)
(2,404,734) 124.3% General and administrative expenses (1,105,040)
(1,677,255) 51.8% Other operating income
67,398
50,919 (24.5%) Total operating cost and
expenses
(2,679,980) (5,864,372)
118.8% Income from operations
626,708
4,337,110 592.0% Other income(expenses):
Interest income 14,327 36,307 153.4% Other expense (2,298) (17)
(99.3%) Investment income 112,582 56,548 (49.8 %) Loss on change in
fair value of derivative liabilities
(442,500)
- (100.0%) Total other income (expenses)
(317,889) 92,838 (129.2%)
Income before taxes 308,819 4,429,948 1334.5% Income tax expenses
195,953 (1,286,333) (756.4%) Loss from equity in affiliates
- (5,114) - Net income
attributable to Noah Shareholders 504,772 3,138,501 521.8% Deemed
dividend on Series A convertible redeemable preferred shares
52,022 - (100.0%) Net income
attributable to ordinary shareholders
452,750
3,138,501 593.2% Income per ADS,
basic 0.01 0.07 600.0% Income per ADS, diluted 0.01 0.07 600.0%
Margin analysis: Gross margin 82.8% 82.0% Operating margin 19.0%
42.5% Net margin 15.3% 30.8% Weighted average ADS equivalent: [1]
Basic 22,901,087 34,200,000 Diluted 33,704,032 35,159,704 ADS
equivalent outstanding at end of period 22,050,000 34,200,000
[1] Assumes all outstanding ordinary shares
are represented by ADSs. Each ordinary share represents two ADSs
Noah Holdings Limited
Unaudited Condensed Consolidated Income Statements (In
U.S. dollars, except for share data and percentages)
Nine months ended September 30,
September 30, Change 2009 2010 $ $ Revenues:
Third-party revenues 8,783,128 21,089,768 140.1% Related party
revenues 862,828 4,180,978 384.6% Total revenues 9,645,956
25,270,746 162.0% Less: business taxes and related surcharges
(529,569) (1,411,279) 166.5% Net revenues 9,116,387 23,859,467
161.7% Operating cost and expenses: Cost of revenues (1,544,842)
(4,009,796) 159.6% Selling expenses (2,039,793) (4,955,453) 142.9%
General and administrative expenses (3,172,518) (5,457,465) 72.0%
Other operating income 187,579 163,392 (12.9 %) Total operating
cost and expenses (6,569,574) (14,259,322) 117.1% Income from
operations 2,546,813 9,600,145 276.9% Other income(expenses):
Interest income 34,724 80,402 131.5% Other expense (11,899)
(24,399) 105.1% Investment income 126,201 215,348 70.6% Gain(loss)
on change in fair value of derivative liabilities (1,062,000)
354,000 (133.3%) Total other income (expenses) (912,974) 625,351
(168.5%) Income before taxes 1,633,839 10,225,496 525.9% Income tax
expenses (234,318) (2,930,331) 1150.6% Equity in loss (Earnings) of
affiliates - (12,430) - Net income attributable to Noah
Shareholders 1,399,521 7,282,735 420.4% Deemed dividend on
Series A convertible redeemable preferred shares 156,066 108,348
(30.6 %) Net income attributable to ordinary shareholders 1,243,455
7,174,387 477.0%
Income per ADS, basic 0.04 0.18 350.0% Income per ADS, diluted 0.02
0.15 650.0% Margin analysis: Gross margin 83.1% 83.2% Operating
margin 27.9% 40.2% Net margin 15.4% 30.5% Weighted average ADS
equivalent: [2] Basic 21,563,736 28,951,648 Diluted 33,540,786
34,806,952 [2] Assumes all outstanding
ordinary shares are represented by ADSs. Each ordinary share
represents two ADSs
Noah Holdings Limited
Supplemental Information (unaudited)
As of September 30, 2009 September 30, 2010
Change
Number of registered clients 8,751 14,218 62.5% Number of
relationship managers 210 308 46.7% Number of branch offices 15 28
86.7% Three months ended September 30, 2009 September
30, 2010 Change (in millions of RMB, except percentages)
Active clients 492 566 15.0% Transaction value: Fixed income
products 929 1,335 43.7% Private equity fund products 331 3,323
903.9% Securities investment funds and
investment-linked insurance products
66 181 174.2% Total transaction value 1,326 4,839
264.9% Average TV per client 2.70 8.55 217.2%
Noah
Holdings Limited Reconciliation of GAAP to Non-GAAP
Results (In U.S. dollars, except for share data and
percentages) (unaudited) Three
months ended September 30, September 30, 2009 2010 $ $
Net income attributable to Noah Shareholders 504,772
3,138,501 Adjustment for share-based compensation related to: Share
options 38,812 235,416 Restricted shares 195,750 - Adjustment for
loss on change in fair value of derivative liabilities
442,500 - Adjusted net income
attributable to Noah Shareholders (non-GAAP)* 1,181,834 3,373,917
Net income per ADS, diluted 0.01 0.07 Adjustment for
share-based compensation 0.01 0.01 Adjustment for loss(gain) on
change in fair value
0.01 - Adjusted net
income per ADS, diluted (non-GAAP)* 0.03 0.08 Net margin
15.3% 30.8% Adjustment for share-based compensation 7.1% 2.3%
Adjustment for loss(gain) on change in fair value 13.4% 0.0%
Adjusted net margin (non-GAAP)* 35.8% 33.1% *The non-GAAP
adjustments do not take into consideration the impact of taxes on
such adjustments.
1
Noah’s Non-GAAP financial measures are its
corresponding GAAP financial measures as adjusted by excluding the
effects of all forms of share-based compensation and gain (loss) on
change in fair value of derivative liabilities.
2
”Active clients” refers to those
registered clients who purchased wealth management products
distributed by Noah during any given period.
3
“Average transaction value per client”
refers to the average value of wealth management products
distributed by Noah that are purchased by active clients during a
given period.
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