Noah Q1 2025 Earnings Call Transcript

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May 28, 2025
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Operator

Please note this event is being recorded. I would now like to turn the conference over to Drorim, IR.

Operator

Please go ahead.

Executive

Thank you, Tim. Good morning and welcome to Noah's twenty twenty five first quarter earnings call. Joining me today, we have Ms. Huang Xingbo, Co Founder and Chairlady Mr. Sander Yin, Co

Operator

Ladies and gentlemen, it appears we've lost connection with our speaker line. Please wait while we reconnect. Thank you for your patience. You may begin the presentation.

Executive

Thank you. Sorry for the technical interruption. Today's call will be divided into three parts. Mr. Yin will begin with an overview of our business highlights, followed by Mr.

Executive

Peng, who will discuss our financial performance. After the two presentations, there will be a Q and A session. In addition, please note that the discussion today will contain forward looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward looking statements. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. NOR does not undertake any obligation to update any forward looking statements except as required under applicable law.

Executive

Without further ado, I shall pass the call to our CEO, Mr. Yin. Let me do the translation. Good morning, everyone. Today, I will share a summary of overall market conditions and our results for first quarter twenty twenty five.

Executive

Then I will walk you through our overseas and domestic performance and strategy, followed by our insights and outlook for the rest of the year. Our Q1 CIO report predicted that an increased likelihood of further market volatility this year. With a higher frequency of such fluctuations, the main factors influencing this include the uncertainty that Trump's return to the presidency is having on global trade and geopolitics, the lack of coordination among major global economies on monetary policies and the increasingly fierce competition and downstream application of AI. With this in mind, our advice to clients is to adopt the following four approaches to their asset allocation. Firstly, maintain disciplined asset allocation and prioritize geographic diversification.

Executive

Secondly, remember investing is not the same as managing wealth. Wealth management aims for the best overall results. Thirdly, wealth managers need to build robust portfolios to manage and preserve wealth. And lastly, take decisive action and adjust asset allocation when needed. Despite the tough global economy, we have a solid quarter.

Executive

Non GAAP net income in the first quarter was RMB169 million, up 4.7% from the same period last year and 27.4% sequentially. This was due to operating costs and expenses dropped by 18.8% from last year. On the revenue side, transaction value for our renminbi denominated private secondary products grew a remarkable 2.6 times from last year. Revenue contribution from these products increased 9.4%. Transaction value for overseas private investment products also increased 27.7%, with revenue contributing growing 20.3.

Executive

Revenue from overseas insurance products fell 22.8% from last year. This result in total net revenue in Q1 falling 5.4% from the same period last year. I'll now dive into the performance and operations of each business unit. For our overseas performance, net revenues were RMB304 million in Q1, up 5% from last quarter and flat from the same period last year. It made up 49.5% of the group's total revenue.

Executive

Revenue from overseas investment products grew 20.3% from last year, while revenue from overseas insurance products fell 22.8%. We now have 131 overseas relationship managers, up 44% from last year. We plan to grow the team and further expand market in Singapore and Southeast Asia. We saw also build up our sales team in countries with high network Chinese like The U. S, Japan and Canada.

Executive

Overseas AUA, AUM and recurring service fees continue to grow. Our overseas commissions only insurance agent team have already recruited 75 agents in third quarter, whom have already generated about RMB10 million in revenue as well. We aim to expand this team to 150 agents by end of this year, where they will be a new growth driver for our overseas insurance business. Net revenues from overseas wealth management were RMB162 million in Q1, down 9.2%. This was due to strong competition in Hong Kong.

Executive

Overseas AUA reached US9.05 billion dollars up 8.7% due to growth in private equity products. This made up 28% of total AUA, up from 24% last year. We made good progress in getting new overseas clients. As of end March, we had over 18,200 registered overseas clients, up 15.8%, with over 3,300 active overseas clients, up 23.3% compared to the same period last year. Net revenues from overseas asset management in Q1 were RMB112 million, up 22.3% from last year.

Executive

This was mainly due to growth in AUM and recurring service fees. Overseas AUM was billion, up 14.2%. This makes up 29% of total AUM, up from 24% during the same period last year. AUM for overseas private market products was US4.6 billion dollars up 16.4%. It made up 78% of overseas AUM.

Executive

Our private market products are growing. They include private credit funds, infrastructure funds, hedge funds and structural products. We have a strong team of over 50 people in our U. S. Product center for overseas product selection and investment.

Executive

Net revenues from overseas insurance were RMB30 million, down 17.8%. This is due to lower distribution of overseas insurance products. The Hong Kong insurance market is very competitive. It has many new insurance agents and some who are not compliant. We focus on large client compliance and policy safety.

Executive

This helped raise average first year premiums in Hong Kong and Singapore. We are also creating new marketing models. Our goal is to grow the team of commission only agents to 150 people by the end of twenty twenty five. This will help us to get new clients. Net revenues from Mainland China were RMB310 million, down 9.4%.

Executive

This was due to lower recurring service fees from private equity products and distributions of domestic insurance products. However, renminbi denominated private secondary products continue to grow. Transition value and revenue from these products increased significantly. Noah, Upright, Gopher and Glory are independent now and can use their own strategies. Net revenues from domestic public securities were RMB127 million, up 7.1%.

Executive

Transaction value of renminbi denominated private secondary products in Q1 was RMB2.3 billion, up 2.6 times. Transaction value of renminbi denominated mutual funds was RMB4.3 billion, down 51.4%. Noah Upright currently has branches in 10 cities, plus we have been using online marketing and online services to improve operational efficiency. Net revenues from domestic asset management in Q1 were RMB 100,000,000, down 14.3%. This was due to lower recurring service fees from existing renminbi denominated private market products.

Executive

In the primary market, growth was focused on managing exits and distribution of existing assets. In Q1, it records RMB1.3 billion exit from private equity market. Private equity market asset AUM was RMB97.3 billion. It made up 91.3% of domestic AUM. In the public market, Goldfarb focuses on greater returns from global markets.

Executive

We are doing this through forcefully generated ETFs. This drove transaction value in Q1 to a new height of RMB140 million. Net revenues from domestic insurance in Q1 were RMB6.4 million, down 55.6%. This was due to lower distribution of domestic insurance products. We are adjusting product mix and focusing on more medical and elderly care insurance products.

Executive

We are also restructuring sales and building a commission on the agent team. Our priorities for 2025 will be firstly, balancing quality and quantity while expanding into new markets with full compliance secondly, growing our overseas teams of relationship managers to speed up local client onboarding thirdly, investing in technologies such as AI to improve online services thirdly, on product side, we shall commit to grow insurance sales by building a new team of commission only agents to compete better. On the other side, company will also offer a wider range of products such as trust, relocation and cross border solutions to enhance our client services. Last but not least, strengthen research, product teams and product mix. Market volatility will stay high in 2025.

Executive

Wealth management is more important than ANPA, which has become high net worth clients' essential needs. We therefore would advise our wealth management talent to number one, keep expanding overseas investment channels two, hold assets that fight against inflation Three, monitor geopolitical risk policy. And lastly, stay flexible in capital and ready to act quickly. To conclude, the biggest mistake a wealth manager can commit today is thinking past experiences can guide future decisions. I will now pass over to Brent to go over our financials in more details.

Executive

Thank you.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Thank you, Zander, and greetings to everyone joining us today. I'd like to begin my sharing with an overview of our recent share price performances. Management is fully aware that our stock has been trading with an upward pressure for the past few quarters and only around 0.5 times PB and under cash value. Our cash reserves alone represents US11.4 dollars per ADS exceeding our current stock price and our PE ratio is only around nine times, well below industry average of 12 to 16 times. While continuing to focus on regaining the growth after transformation of the wealth management organization, we have also in the past few quarters introduced several initiatives to enhance shareholder returns, including the US50 million dollars share buyback program announced in August.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

As of today, we have already repurchased over 1,300,000.0 ADSs, equivalent to over 2% of total issued shares. Furthermore, as part of our commitment to prioritizing shareholder interests and delivering sustained returns, we plan to distribute annual and special dividends totaling RMB550 million in July subject to AGM approval. This amount represents 100% of our non GAAP net income for 2024 and offers a dividend yield of 12% based on current share price, which is much higher than the 7% to 9% average dividend yield range among leading international financial institutions. Notably, this makes the second consecutive year that the company would distribute 100% of its net income. Since 2022, '3 years in aggregate, we have distributed a total of RMB1.8 billion dividends to our investors, roughly equal to 40% of current market cap.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

The continuous sharing of high dividend payout is expected to be sustainable based on our estimated future operations and our strong balance sheet position. By the end of quarter one, cash, cash equivalents had increased to RMB4.1 billion with short term investments of RMB1.3 billion, which has been highly liquidy and has fewer than three months of maturity on average. Our current ratio improved to 4.8 times, while the debt to asset ratio remained stable at 14.5% with no interest bearing debt. Although we have set up our global expansions recently with the new opening of our Tokyo office, revisiting the reopening of Canadian markets and Australian markets, we also want to reassure the investors that our organic expansion are CapEx light in nature. Of course, we understand that investors are also eager to see the signs of our growth.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

There's no denying that the transitioning of our business model has been challenging for 2024, particularly given the uncertainties in the global investment market, which have affected our financial performance. But besides balance sheet performance, more importantly, starting in Q1, we're seeing things that are on the right track. The significant progress in building our teams and infrastructure in a more cost effective transformation strategy ensures that our business remain profitable with operating profit and non GAAP net income both growing on a sequential and year on year basis. While we're not yet at the finish line, these strategic initiatives are steadily laying the groundwork for improved performance and future growth opportunity. Let's now dive into the details of our financials.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

First of all, the bottom line as we continue to implement rigorous cost control measures during the quarter, the total operating costs and expenses coming in at million, a decrease of 18.8% year over year and 16.7% sequentially. Specifically, with our great effort in simplifying our back office structure, compensation benefits decreased by 21.8% year over year and 14.1% sequentially. Selling expenses fell by 18.1 year over year and 35.3% sequentially and G and A expenses also falling both year over year and sequentially. Operating profit surged by 53.1% year over year at 35.2% sequentially to RMB186 million in the first quarter, with the operating profit margin up to 30.3% from 21% in the previous quarter. Non GAAP net income was million for the first quarter, an increase of 4.7% year over year and 27.4% sequentially.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Despite strong performances and especially in the U. S. Dollar investment products, as Dennis mentioned earlier, we have to see that domestic market is relatively operating weaker and also some of the slowdown in interest revenue causing our net revenues to million during the first quarter, slightly down 5.4% year over year and 5.7% sequentially. But notably, overseas net revenues accounting for almost half of total revenues were up from 44.5% in the previous quarter. By region, net revenue from overseas were RMB304 million in the first quarter, a slight drop year over year of 0.8%, yet an increase of 5% sequentially, driven by a modest improvement in insurance sales.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Domestic net revenues during the first quarter decreased by 9.4% year over year and 14.3% sequentially to RMB310 million, largely dragged by the sluggish performance insurance under the low interest environment and decrease in management fee revenue from domestic private equity products. By revenue type, during the quarter, one time commissions decreased by 15% year over year, but increased by 17% sequentially, primarily driven by overseas insurance sales rebounded comparing to last quarter. Recurring service fees decreased by 5.3% year over year and 5.8% sequentially due to reduction in domestic revenue from RMB private equity products, which also affected performance based income in a decrease of 42.1% sequentially, but did increase by 98.4% year over year driven by significant increase in overseas asset management as the overseas business become increasingly established and mature. When it comes to total transaction volume, total transaction values in the first quarter were RMB16.1 billion, down 14.7% year over year and 0.9% sequentially. Transaction value of domestic private secondary products was RMB3.3 billion during the quarter.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

That sees a significant increase of 257% year over year and 34.6% sequentially. Transaction value of RMB denominated products in the first quarter declined. Our average transaction value of U. S. Dollar denominated products reached US1.1 dollars up 15% sequentially, but down 4.6% year over year and accounting for 50% of total transaction volume compared to only 43% in the previous quarter.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Benefiting from the enhanced competitiveness of our overseas alternative investment product portfolio, U. S. Dollar private equity products totaled US201 million dollars up 7.9% year over year and 17% sequentially. And USD private secondary products excluding cash management products, totaled US112 million dollars up 187.8 percent year over year and 211.8% sequentially. During the first quarter, U.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

S. Dollar denominated AUM grew by 14.2% year over year and 0.8% sequentially to US5.9 dollars with US dollar denominated AUA increased by 8.7 year over year and 3.6% sequentially to US9.1 billion dollars reflecting our ability to capture our larger share of clients' U. S. Dollar wallets or investment products. At the end of the first quarter, our client base remained stable in terms of core clients' diamond and black card clients with 9,330.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

The overseas client has continued to grow to over 18,200 overseas registered clients, an increase of 15.8% year over year and 3.1% sequentially. The total number of overseas diamond and black card clients now exceeds 1,600. To sum up, we must admit that under the current global dynamics with the potential tariff war and the low interest rate environment in Mainland China, it weakens the investors' investment sentiment, which may be the biggest hurdle to the industry's revenue growth. However, with a developed business structure and a more mature overseas team, we're still confident that company is well positioned ourselves for future growth. Thank you all again for your trust and support.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

With that, I will now open the call to your questions.

Operator

We will now begin the question and answer session. The first question today comes from Helen Li with UBS. Please go ahead.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Thank you for your first question. That's actually related to recent news of some of the probably domestic high net worth clients receiving notices from tax bureaus about their overseas taxation information. So I'll try to take the first half of the question and Zander and Nora will jump in for anything that I probably missed. Yes, we were seeing many or hearing many of our clients or their friends receiving calls from tax bureaus. But the information about gathering high net worth actually all the Chinese tax residents taxation on overseas income has been implemented a few years ago.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

But obviously, I think the Bureau probably now has more collected information that they'll be able to actually reach out to these individuals. Obviously, I think it's probably the law is always there as some of the tax professionals, clients to be aware of, but the actual enforcement this information or self filing is probably something to our clients. I don't think it necessarily affect their sentiment in terms of future investments in overseas products especially. But obviously, I think they are more aware or curious about future tax planning, if you will, how to increase the efficiency in terms of investment. That's something new, probably some new subject for this generation of high net worth individuals who are probably more used filing for tax and gains on their domestic and operating operational high income.

Executive

Okay. We'll do a quick translation on here. What Cindy just added, it's a challenge, but it's also opportunity to know regarding our high net worth clients getting phone calls from the tax bureau. The reason behind that is because if you look at what we've been doing for our clients, the wealth management, the asset management and then certainly heritage business, all of us are trying to provide solutions to our clients, so how to protect their wealth. And also, when they are receiving the phone call from tax bureau and they need to solve that issue, they will need to build a closer relationship with our relationship managers, because we'll walk into their wealth as a whole to plan for them for future.

Executive

And that means we can have a better access to clients' wealth and knowing better about their whole planning. So yes, in short term, that may be a challenge because it affects the investment sentiment. However, in the long run, we still believe that it can bring opportunities to the company.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Okay. Second question, Helen, I'll do a quick translation for you as well. Helen actually asked about we have improved efficiency or reduction on G and A and selling expenses in this quarter. And she's actually wondering how much of that has to do with probably lower activity of marketing events as well as the reduction of probably back office headcounts. So Helane, I just wanted to clarify that some of the expense reduction does come from improvement in efficiency, especially in mid back office headcounts probably optimized around 25% compared to the same period last year as the continued effort to improve the efficiency and structure of mid back office to the front office is now showing effect.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

We're also seeing a reduction in selling expenses, but that's partly attributed to probably fewer marketing activities this quarter in the first quarter. We don't think that's necessarily sustainable and that's rather not a direction we're trying to control as long as we are holding this against more efficiently. So we're seeing more marketing events coming up in the second quarter, but we're obviously still trying to keep that under reasonable range and also the effectiveness of marketing activities. Alan, does that answer your question?

Executive

Yes. Crystal clear. Thank you.

Qing Pan
Qing Pan
Group Chief Financial Officer at Noah Holdings

Thank you.

Operator

The next question comes from Peter Zhang with JPMorgan. Please go ahead.

Peter Zhang
Peter Zhang
Analyst at JP Morgan

Congratulations on the first quarter results and thanks for giving me the opportunity to ask question. I have two questions. First is for the recent market volatility. We noticed that there is increasing market volatility in April and we are wondering what's the client's behavior in terms of investment sentiment and their purchase on the growth and product. In addition, some of Noah's clients are business owners.

Peter Zhang
Peter Zhang
Analyst at JP Morgan

We are wondering whether any of their business is affected by the recent tariff introduction and how their investment sentiment changed. My second question is about the overseas business. Commencement gave us some guidance on what will be the key driver for your overseas business year 2025? And on the insurance front, we are wondering whether see any sign of improvement in overseas insurance in second quarter. Thank you.

Executive

We're not committed to tariff war to create an impact to our clients. When we talk to our different types of clients, the impact could be slightly different. So yes, lot of our clients are entrepreneur and their business may be related to trade. However, when we talk to merchants like eWu, the loan manufacturing product, those types of companies, Yes, they do we do see some suspension in orders from overseas or we do see some worries about the orders from this product as well. However, the merchants themselves are very pretty confident in their own products and they believe that the China production is very competitive in this way and could maintain a high margin.

Executive

And that's why the impact of those in manufacturing also declined to us to be quite in a short term instead of long run impact. But then for some more like more the small products, they are really I think bigger types of manufacturers, they may have big concern about their future growth. So we believe that our clients these days are getting more and more used to the concept that they need to have their assets go through the drill project drill project distribution. And they also are planning for their own business to grow overseas as well. And under these two beliefs, we believe that our clients are getting more mature and that the true impact should be rather limited.

Executive

And in terms of the product side, we have seen that investors are getting more concerned about liquidity. So what does that mean? It means when they are picking the investment product, the product tends to be could be structural products like FBM or some product that is non standard as well as liquidity. That means they can have a chance to do the redemption over a different period of time. So we tend to see that this type of product can be more popular among our investors.

Executive

And on the other hand, it's about the trend of AI development. And we have only seen that any investment product that could help with AI idea behind could be rather popular among our investors as well. On the insurance side, as I mentioned some times already, the hot food market is very challenging and very competitive. So what I've been doing is back to basics, is to serve our clients. What we do is we partner with insurance company and tailor made products for our clients.

Executive

And for those with high premium, we provide the count on a legit basis. That and we received good results on that, which is the premium we received for clients for the first year has been increased essentially from in the past around 100,000 to currently around 190,000. So we've seen that this is a great opportunity for the company too because when we look at the Chinese clients, most of them, it's been quite insufficient about getting enough of pro type in their wealth. So we believe that we should keep on building the relationship and selling these insurance products to our clients. For overseas investment, that is another part of the profit that we think clients have great interest.

Executive

Because in the past, U. S. Rates stayed quite high and keeping effective phasing is already a good return for our clients. However, under the current interest rate cut cycle, we have seen the clients moving their interest rates into some investment products. So we believe that we are going to see some product diversification in the near future.

Executive

Operator, can you check if there is any more questions from our audience? Otherwise, we'll close the call now.

Operator

You.

Operator

Remarks.

Operator

The call has now

Executives
    • Qing Pan
      Qing Pan
      Group Chief Financial Officer
Analysts
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Key Takeaways

  • Non-GAAP net income in Q1 was RMB169 million, up 4.7% year-over-year and 27.4% sequentially, driven by an 18.8% reduction in operating costs and expenses.
  • Total net revenue fell 5.4% year-over-year as recurring service fees from domestic private equity products and insurance distributions declined.
  • Overseas business generated RMB304 million in net revenues (flat YoY, +5% QoQ), with overseas private investment product revenue up 20.3% and overseas relationship managers rising 44% to 131.
  • Domestic private secondary products saw transaction value surge 2.6 times year-over-year, lifting their revenue contribution by 9.4%.
  • Shareholder returns include RMB4.1 billion in cash reserves, a US$50 million share buyback (over 2% of shares), and a proposed RMB550 million dividend (100% of 2024 non-GAAP net income) for a 12% yield.
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Earnings Conference Call
Noah Q1 2025
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