Q3 2020 Noah Holdings Ltd Earnings Call
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Good day and welcome to the Noah Holdings Ltd third quarter 2020 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero after todays presentation and there'll be an opportunity to ask questions. Please note that this event is being recorded.
I would now like to turn the conference over to Jingbo. Wang. Please go ahead Sir.
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And then he tried the is a new beginning after 30 years of development Shanghai has developed into and international financial Centre specializes in renminbi oriented asset and location heavenly and more than 50% of the renminbi assets held by the overseas market entities, a here, making the city and a paid any of the.
The allocation this.
This year Twentytwenty also mcnellis, 15th year of inception, and Noah Holdings tense listing anniversary and the New York Stock Exchange Noah was founded in Shanghai, where steel headquartered here. We're grateful for this great cities development and it's of course for us as a from he has been five quotas sales the camping.
And last year and the other transformative shift from single counterparty proud and credit products and to standardize the products, we think of a team for the efforts and the market for the support today I feel all of that to report of a satisfactory achievements and the so called to share shareholders and analysts both.
Gross transaction value of a standardized the products and the number of active clients reached a record of high clients confidence I wish the old and team a rail is good it is evident that our strategic transformation has reached a successful milestone.
I would like to first briefly on the other holdings O. The performance in the quarter of 2020, the development of of a major business segments. The gross targets as well as investments strategy, then I will like to share my opinions on macro and a record luxury landscapes.
And grant will present, the financial results for the third quarter, followed by a q. and they session.
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Starting from the for the quarter of 2019, Noah assays, the offering of non standardized the single counterparty private credit products.
Accelerated the redemption of the product and transformed into a full scale public securities products. After five quarters of transformation and with a strong support of other clients and the continuous efforts of our team transaction value for the quarter a range the renminbi $28.8 billion up a 158.3%.
Yes, and yes, and 34.2% a quarter on quarter, marking one of the highest quarters for a transaction value in the past of 15 years, a mall, which the transaction value of standardize the product range. The renminbi $20.8 billion this quarter of 18% year on year and up 16% of quarter on quarter a history.
Total high the transaction value of onshore and offshore mutual funds reached the running of $14.1 billion up to a low up 206.3% of year on year and up 18.6% quarter on quarter. We have established a close partnerships with 18 out of the 20 mutual funds in China.
For secondary market equity funds, we raised the gym and 6.3 billion, which grew nearly tenfold the year on year and up 25, and 6% quarter on quarter. We also maintained our leading position in private equity products. This quarter with the transaction value of redeeming the $7.2 billion up 100 jet and seven.
On a 7% year on year and up 183.1% of quarter on quarter.
It is worth mentioning that both of us as a secondary fancy a response received commitments of and the 1.5 billion in the quarter and has become of a client for subsea products in terms of both scale and performance.
And as a quarter of Twentytwenty Noah achieved a net revenues of redeeming the 859 from 1 million up 14.9% quarter on quarter and achieved a non-GAAP net income attributable to shareholders of running the 301 million maintaining the recall high level of last quarter overseas revenue was a steep soft due to coal.
A 19, but was offset by the increased onshore revenue we're confident in meeting our full year non-GAAP net income guidance due to the impact from the pandemic. The net revenue of our overseas business has achieved the renminbi, a 158 million down 30.2% year on year and down 14.6% of quarter on quarter.
Accounting for 18.4 percentage of the group's total net revenue.
In the for the quarter of 2020, the number of active clients inclusive of mutual funds clients rose to 20509 of a 105.9% a year on year and up 39.5% a quarter on quarter, reflecting the wrist duration of client confidence specifically that was set.
18536, onshore and offshore active mutual funds clients up a 167.6% year on year and up 42.1% quarter on quarter. Moreover, as of the end of September Twentytwenty, the what 944 black card clients up 7.9% year on year and a.
4.9% quarter on quarter.
As of September Thirtyth, the turnover rate of a later relationship managers remained at the industry's lowest level of 2.3% in an effort to upgrade the model of relationship managers, serving clients. We have transformed the single relationship manager service model into a team work based on and try and go mode of ensuring that the.
As a dedicated team providing services to our diamond and Black card core clients continuously improving of a service quality and operational efficiency and the 2021 group strategy meeting held in October the company as a flow established a client centric gross strategy to further improve client service experience.
To better regions of a high net worth clients. We have also implemented a new talent strategy to continuously recruit and invest in new talent and relationships and.
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So as a management as of September 30, 20, Gophers, a and stood at Renminbi, a 155.7 billion driven by continued a voluntary early redemption of single counterparty credit and.
Down 11.8% year on year, and down 2.3% quarter on quarter, the share of PE and public securities funding total and increased by 10.3% and 1.6% year on year, respectively overseas and was around the 25.5 billion accounting for 16.4 percentage of the total.
And a slight increase from the previous quarter.
According to the new regulations on the issue from a distribution Gopher has started establishing a direct a GP sales system to provide support for the direct sales management of various fund managers goes the is expected to further expand its PE fault size in the future as the size of Gulf of false expire.
And we will continue to promote our economics at.
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I cannot logic coach collaborations with leading the BP partners the reform of the Chinese capital markets, including Cytec Innovation Board, a the stock market and the registration based IPO system will play a long term growth in improving the performance of leading primary market funds. Consequently benefiting.
Hi, and in addition to the continuous development of PE funds Gopher will also improve the R&D and investment research to circle around the purpose of creating value for all of the clients to expand the.
Funds is a key strategy to provide differentiated in the investment solutions for our high and ultra high net worth clients by focusing on generating absolute returns for them through multi strategy funds. The scale of gophers target rich and multi strategy funds increased of 571.4% of young year in 22.
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In terms of company management and Twentytwenty, we have initiated a comprehensive business transformation by Digitalizing, Noah a 15 year low industry knowledge and offline operations experience to improve the position and efficiency of our daily operations, we're committed to focusing on pay rise.
No your clients pay why a neo agents and K Y Pete no your products in order to digitally understand client needs identify the ability and type of relationship managers as well as label from product in order to accurately match industry Digitalizing.
Our compelling assets based on pay low CK, one a and Kyi peak is also a key focus for.
Twentytwenty is a turning point of the wealth management industry in China, China's wealth management industry has bid and farewell to the area based on the implicit guarantee the and entered into a new stage of standardized and a.
The phase as it has to the all round capabilities of financial institutions, we believe the and the new era of transparency and fair competition. The industry low developed faster after adjustments institutions that survive the transformation will catch a higher market share as a result, China's personal and half from savings have.
Okay, and then in the 100 trillion the overall and of private banks have has reached and I mean, the 14 trillion there and more than 800000 high net was private bank clients, yet 80% of the total investable assets still remain in the savings account or haven't been managed by wealth management This deep and.
A lot market competitive landscape is still a fragmented and we expect the market consolidation and the formation of major players in the industry to be completed around Twentytwenty, five Meanwhile, and industry.
And industry transformation will be preliminary completed through digitalization of operation capacities and industry research based investment capacities.
Noah is currently at a turning point a key turning point, we need to build a process oriented company with a clear organizational structure and methodology conduct the of this whole transformation to make information more accessible and transparent SK resi kyi, eight and chemotherapy to improve the called the of the services offered by relate.
And and manages the clients accuracy and efficiency are the two key words.
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Looking ahead to Twentytwenty, one we have proposed to achieve high quality growth in the future based on digitalization assets Challenge and goes and keep I mentioned, including high net worth the client base and transaction volume and revenue targets, we plan to invest at no less than 3% of the any of total net revenues in the R&D of cash.
Hi, and user interface and technology, respectively. As we celebrated of a 6.1 question anniversary and 10th listening and luxury on a New York stock Exchange on November 10th 2020, we raised the the staying the same one vision, one heart and one better and that was for from this more than a 100 court management and sales.
King Black card clients departed from junkie and part of the Gobi to walk along the road, let the legendary month of Shen zone of the ton dynasty head to head covered to rewind Noah's founding journey once more it's clear to us that this this is a journey of the exploration and refinements for the Braves.
It is also a tough growing and process in which both the team and individuals need to work hard and challenge ourselves Noah stuff and client spend two day walking 66 kilometers in the Gobi desert resembling Noah determination to start a new undertaking that journey represented one promising company with and.
This future, having United One group of Hot workers in order to pursue one new dream from one new beginning during the challenging journey to the go the desert and Liberty deeply on the store the spirit of Gobi, It did and where we came from or how strong we were but that we will all determined to a challenge everything and when victory and take action to go all out.
The and work hard and the weekend at a recap can meeting on a go the journey. The four founders of Noah myself injure, we're yen and Josh and Jane decided to let go of other titles as funders and reinvent ourselves collectively by being elected again today, we have also announced a share buyback plan a proof.
So by the board of directors based on our confidence in the company's development and long term value. We have been granted permission to install a two year maximum 100 million U.S. dollar share buyback plan, we sent the share holders for patients and support now the welcome of a CFO Graham pen to present, the third quarter financial results.
Thank you Charlie thank a filling in for translating.
Hello, everyone.
We're very excited the shell of the of the stall financial results from the third quarter plenty plenty.
Mark and low successful transformation, a rising from resumed client trust and confidence of the economic outlook.
We're also very happy to report other way ahead of schedule to deliver the full year non-GAAP net income guidance I missed the very volatile and challenging environment and this year.
Net revenues for the third quarter of 2020, you RMB 859 million of.
2% year over year, and 15% quarter over quarter.
Non-GAAP net income for the quarter was RMB 301 million, marking a total year to date non-GAAP net income of 2020 of RMB $864.2 million, achieving 96% of full year guidance by.
By revenue contribution we achieved a onetime commission revenue and the amount RMB 194.8 million compared with RMB 150 million in the same quarter last year.
Almost 30% and 53.5% quarter over quarter and.
Instead of doing this growth was achieved with very little contribution from overseas the insurance due to the call. The 19 situation, we're very happy to see the full recovery of the capability of providing the right products to our clients.
As mentioned by churn anyone what's really encouraging for us is to see the record number of active clients, reaching 20509 and this quarter.
And the <unk> hundred 5.9% year over year, and almost 40% quarter over quarter the.
The growth was fueled by increased activities in both the conventional product and mutual fund distributions.
Well the leave this indicates a restored client confidence and the signing of resumed a rapid business gross.
Total transaction value is the financial product would distribute a during this quarter was RMB 28.8 billion, an increase of 122% from a year ago, a mall, which RMB 20.8 billion and were public security products or standardize product.
Also a record high for this category sales listening.
After five quarters of transformation public security product is fully replaced non standardized single counterparty credit fund and became the number one and one time Commission contributor.
And the same time PE products no a specialty.
Hi, good distribution momentum and recorded the RMB $7.2 billion.
And with 7.7% increase supported by a leading GPS products as well as goals for his own PE Secondary fund the recorded RMB $1.5 billion of fund raising.
The recurring service fees and third quarter were RMB 560 million up 8% year over year, and 18% quarter over quarter contributing to a 65.2% total revenues the.
Growth of our accumulated distributed products as well as the high quality of our assets under management continued to provide a strong revenue steam streams.
Another key attribute of the growth was back ended management fees arising from accelerate the redemption of the credit products.
Total performance based income from the third quarter of 2020 was RMB 70.5 million compared to RMB $42.4 million for the same period last year of.
66% year over year. The main drivers for strong performance based income were part of the equity products as well as part of the security funds were placed for our clients demonstrating our increasing capabilities and product selection and also the investments.
Operating profit for this quarter was RMB three of $340.72 million up for 48.2% year over year, and 8.7 quarter over quarter operating margins stood at 40.4% even with decreased government subsidies.
Total compensation costs was down by a 0.2% year over year this quarter, but.
But of by 9.6% quarter over quarter due to relation manager of commissions arising from increased distribution volume as well as continued recruitment of senior executives and a relation managers.
By segment net revenues from the wealth management business were RMB 627.7 million of 15 point, 15.7% and 15.6% quarter over quarter.
Which contributed to over 73% of total net revenues.
And the net revenues from the asset management business amounted to RMB 222.4 million down 7.5% year over year, but up 22.4% quarter over quarter.
Our lending and other business continued to contract as we are now in the process of restructuring and that segment.
The form a digital and technology powered wealth management ecosystem with new channels, new platforms, and new products, including the mute.
Comprehensive services.
Noah digital intelligence and the backdrop of the.
Bobbing regulation as well as the industry digitalization.
On the balance sheet side as of September Thirtyth plenty plenty of the company had RMB 1.6 billion and cash and cash equivalents improved from RMB $4.2 billion in the last quarter. We continue to maintain very healthy financial position with no interest bearing debt on our books and a healthy cash.
Cash flow is also allows us to announce a two year of to us $100 million share buyback and today.
Which reflects our continued confidence in our business and channel as wealth management and as a management industry in the future.
And surely the mentioned, we just celebrated our 10th listing and mostly on New York Stock Exchange and we believe this quarters strong performance Mark just the beginning of the next exciting chapter for Noah.
Im very proud of debt is from we have demonstrated resilience when facing such a major strategy shift and a huge environment and pressure of 2020 by continuously delivering a strong financial results quarter by quarter.
A key metrics, including topline net revenues bottom line distribution values as well of the number of active clients look.
Looking ahead as the member of management team on top of the continuously managing healthy profit margin and cash flow Im also a dedicated to the investments in areas, where we can develop a strategic capabilities for the long term, especially in technology and enhancing client experience as well as a strategic investments, which you a head.
Our class centric digital acquisition of operations and the growth targets.
Now we open the floor of questions. Thank you.
We will now begin the question and answer the question to ask a question you may per store and then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
At the time, we'll pause momentarily to assemble a roster.
Correct.
Okay.
And our first question will come from even Wang with the L.A. Please.
Go ahead.
Thank you and.
The management and our cash two questions there's the.
And our full year guidance on the standard EBITDA for the full year target zone.
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Jason Thank you for the question.
Take the first question and Chairlady, Wang will address the second and.
For the first question I believe when we actually gave the full year and initiate guidance at the beginning of the year, obviously, the a outlook for a tiny tiny was quite uncertain.
And we believe that we made a.
I would say reasonable I wouldn't say, it's the overly conservative I believe and that's almost a pretty challenging and looking at hand, the a the road ahead of us the especially knowing that you know the the gate to Hong Kong wouldn't be open very soon so we'll be missing a pretty big chunk of revenue from the.
With the insurance.
So we don't believe that target with the two overly conservative and we you know the are likely to see a very strong financial performance and the third quarter, but.
Well remain low.
For the rest of the year a as.
As you know in the industry, we do experience from sort of a seasonality and the fourth quarter operating.
Holiday season, as well as you know the from the uses for institutions the.
The remaining maintained the same guidance, although we're very confident that we'll be able to at least debt to the very high end of that range.
Little bit a exceeding a.
That a particular guidance.
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Doing well in the mail claims from.
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Please on fuel and you know and and the G probe that wall has to be done the yes. The lead you Jim what the equal interest she turns and the sort of keeping you from being a what was that sort of the whose and you don't really go up to a degree you guys publishing way Mt. Logan JV, finishing with high whole a main guy has slowly and told the commodity you just.
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Oh, just the the thank you Bill will get a recent he and the going long till the GAAP.
You want and is a pretty to consider the GAAP Sinhala and.
And yeah definitely seems the way I am. She also the same cool a man enough of a door. So from a cohort the to the total of you are usually show and stay the course on behalf of time, but and this will and to the two would you book and Paul.
That's a quite comfortable moving from each and that they could do it and she's done a good faith and going on <unk>.
And Jonathan.
And this is.
Our next.
A question will come from Bethany.
Please go ahead.
Hi, Good morning management.
From.
Hi, Congratulations on a strong result, so I have a.
The question first the regarding the all Oh for a management the a.
We saw that the bank and we have seen picking up quite consistently in the past quarter and so late in the quarter.
By a coverage and it's about a 92 basis point a syndrome.
Okay, and media, but because of the driver behind and Oh by.
Whether the magnum the.
Oh, that's a sustainable a trend.
And second and also regarding goal first of all we know is that.
And for the public a cookie and the goal of a.
The ballpark seems a bit.
In the past few quarters and so just wondering what's the reason behind and and the outlook there and also if the management cash share a.
The overall goal.
When do you expect a.
A lot from the Rod maybe sometime next year.
And not leader from doing so any update on the cash.
The things that come from Penn from 12.
Okay, and a second so far thank you.
Thank you Stephanie let me translate the question first.
And what would you that you have got a phase on the go running away more of the high for the second quarter sales on my bed lumpy, a kind of problem and that English and basketball found the 10 judging from the answer to the shoe. The the tool what you would you do a true to the green lawn season.
And we'll back a year from a woman's and she has the met you about <unk>, so, yes, and the function of the child's and the chefs the dam, but we'll do the time to do with the 10. So your chefs day, which of course, you would you do go into a the true door, the the ones or Juicy and do a tender. The Ginny you unless you had a wore me out flow on price is how well the shipping and do a 10 days of the people close out the.
Mm to go would you the health of the fit canceling out of about you Ben the a good you towards the food channel Holly Hone the deal you called out when and when will the talk about the.
To the G. She has a fair number and we are you willing racing day Shellfishing Bear with me a always gone bad a sheet all volume and then go and that's a function of coins lab and does not see and that's our biggest from yes. The ginger. The total is anything that she will maintain kind of tick up and down the two deal about <unk>.
And I hope of Transactor sure.
Definitely a real question on a go from management's fee.
First of all of it keeps going up a one of the we actually having a.
The car layer on private equity, so a which actually comes in with a higher management fee and then.
And the credit products that have the you know a little a man.
The instrument the recurring management fees and two is the.
The increase this quarter actually still has a little to do a with a continued exit of some of the credit products that have a back and the management fees.
We expect that to at least the of increasing a in the P. products will continue to bring in a health management the flow and in terms of the camping update.
We have a you know as of the a.
A November 13 of the first pass day for the a settlement plan and we have two backstage.
As of the first assets day, a we have signed about too.
240 contracts a with our clients a one third are in terms of a number of people and the it's almost almost 30% as well for the total amount outstanding so its about 1 billion.
Dollar amount and about 240 and a.
The number of holders and.
And the second batch of comes along and.
And of the year, a which will be the end of the settlement plan, we expect that to be a probably going to be around the 50% to 60% of.
Total number of people ought to be conservative.
Oh, Okay, sorry carriage of terrified of 15.
Hi, good back a lot of controllable.
Total number of clients.
Usually and it also coincides with the amount so it's about a.
50% to 60% and 50% to 60% of the dollar value.
And so thats on the cause of the upside we are.
Being a little bit optimistic I think probably in the range of 70% to 80% we'll see.
<unk>.
Thank you.
Okay. Thanks, Stephanie.
This concludes our question and answer session I would like to turn the conference back over to Mr., a grant and for any closing remarks. Please go ahead.
Okay. So thank you and shareholders and analysts and very excited to be able to deliver the results for you and we'll have a and then obviously one of the one caused a afterwards, so we could probably talk a little bit the in more details so see and a bit.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Mm Hmm.
Mm.
HM.
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