Q3 2024 Noah Holdings Ltd Earnings Call
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Speaker Change: On the international asset management front, we launched our new asset management arm all of active management to provide clients with actively and externally managed overseas alternative investment product as long as the mutual fund product.
Speaker Change: During the third quarter transaction value of U S. Dollar private equity products reached U S dollar $152 million.
Speaker Change: <unk> increase of 46, 7% year on year.
Speaker Change: Transaction value of U S dollar private secondary products, including hedge funds structured product and term deposits reached USD $395 million.
Speaker Change: Excluding term deposit the transaction value of.
Speaker Change: Hedge funds and structural products reached U S dollar $93 million the highest since 2023 up 21, 5% year on year and 17, 1% sequentially as we continued to enhance our public product matrix.
Speaker Change: Probably market product matrix.
Speaker Change: As of the end of the quarter AUM for overseas products reached $5 6 billion.
Speaker Change: 16% year on year increase and accounting for 26, 3% of the total compared to 22, 8% during the same period last year.
Speaker Change: <unk> for overseas private equity and other primary market fund reached <unk> dollars, four 3, billion% to 19% year on year increase.
To provide comprehensive services for high net worth families overseas, we launched the Glory family Heritage brand, which offers identity planning Global insurance Trust services and other integrated solutions.
Segment generated total revenue of RMB $145 million in the third quarter, an increase of 42, 4% year on year and 44, 1% sequentially.
Speaker Change: Corey is actively exploring new business models as well.
Speaker Change: We are spending our team of license emission only agent and establishing new client referral model for external agency channels, where we have already made significant progress.
Speaker Change: We recruited over 30 commission only agents during the quarter with more than one third already contributing revenue rig.
Speaker Change: Regarding external agency channels, we have achieved a breakthrough from zero to one we.
Speaker Change: We are targeting three types of institutions with a range of value add services and professional capabilities or their clients, including cross industry and distribution professional service agencies and licensed financial institutions.
Speaker Change: To date, we have signed contracts with 19 external indices.
Speaker Change: We have already begun to contribute to revenue we.
We have also gained valuable insights from this model our focus on is its further development moving forward.
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Speaker Change: Domestically remain we remain committed to our refining operations approach.
Speaker Change: We are ensuring compliance to effectively reduce costs and are focused on selecting products that can safeguard clients' interests.
Speaker Change: <unk>, emphasizing investor education, and foster deep engagements with our clients.
Speaker Change: In the third quarter net revenues from mainland China and contributed RMB $312 million, a decrease of 32, 6% year on year and eight 8% sequentially.
Speaker Change: This was primarily due to limited new business activities and decreases in recurring service fees from RMB investment products and revenues from domestic insurance product.
Speaker Change: No no upright, which offers mutual funds and private secondary product generated total revenues of RMB $108 million in the third quarter, a decrease of 21, 7% year on year.
Speaker Change: During the third quarter the transaction value for RMB mutual funds reached RMB five two.
Speaker Change: <unk> 2 billion, a decrease of 60% year on year, but an increase of 4% sequentially transaction value.
Speaker Change: RMB, probably secondary product amounted to RMB $786 million, a decrease of 55% year on year and 35, 7% sequentially.
These changes were primarily due to adjustments in our product strategy.
Speaker Change: Gopher asset management achieved total revenue of 181 million in the third quarter, a decline of 17, 3% year on year.
Speaker Change: In the primary market corporate investment team continues to focus on exit for existing investments.
Speaker Change: Timing successfully achieved over RMB 6 billion in the primary market exited so far in 2024 strategically.
Speaker Change: Strategically we are enhancing daily supervision and management of our portfolio pump and project.
Speaker Change: Fuller and divert exit strategies, improving dividend payout from the underlying assets to improve DPI.
Speaker Change: Additionally, the investment team is proactively expanding the buyer's market pursuing exit opportunities through acquisition or secondary fund transaction.
Speaker Change: In the secondary market private secondary products managed by Goldberg.
Speaker Change: I'm, primarily focused on deploying RMB to invest in onshore cross border Etfs with the goal of capturing better returns from the global market.
Speaker Change: This product to generate a transaction value of nearly 100 million RMB during the quarter.
Total revenue from lower insurance brokerage onshore during the quarter was RMB 9 million a decline of 89, 9% year on year. The decrease was primarily due to adjustments made to the sales team and product selection strategy.
We're also establishing a commission only agent model in terms of product selection. The focus is on medical and retirement related services.
Speaker Change: With the new sales team structure, and new product mix, we expect this business to take a bit longer to ramp up.
Speaker Change: In summary through our strategy of refining into mass market, while expanding internationally, we're making significant progress.
Speaker Change: We established a global client service model, we're seeing significant demand our overseas services among overseas Mandarin speaking clients.
Speaker Change: Our new vision is to become the preferred wealth management platform for global mentoring speaking investors.
I'd now like to turn the call over to grant to go over financial results in more detail. Thank you.
Speaker Change: Thanks, Noah and thanks to the vendor.
Grant: Greetings to everyone joining us today.
Globally, the three major U S stock indices reached historical highs in 2024.
Grant: <unk> that comp is up 25% this year and 80% since the end of 2022.
Grant: Our clients have benefited from a forward looking global CIO House view, which began in recommending clients allocate funds to QD products, especially linked to U S equities in 2022.
Grant: We believe the overseas wealth management needs of our clients remain adequately addressed that.
Before we continue to actively expand our international businesses by increasing the number of local branches stress.
Strengthening our local relationship manager teams and enhancing our online services capabilities to improve the quality of offerings.
Grant: Now, let's get into the details of our financials.
Grant: I'm very pleased to report that our third quarter results, our regain positive trend.
Grant: Net revenue, reaching RMB $684 million.
Grant: While it is still weaker eight 8% compared to the same period last year. It does reflect an 11% increase sequentially comparing to last quarter, despite significant market pressures.
Grant: This increase is mainly driven by the growth of our oversea businesses.
Grant: Overseas net revenue in the third quarter.
RMB $377 million.
Grant: Our year over year increase of 28, 9%.
Grant: Accounting for 55, 1% of total revenue.
Grant: Specifically revenue from U S. Dollar nominated investment products reached RMB $191 million up 42, 5% year over year and 40% growth sequentially.
Grant: Revenue from overseas insurance products was RMB $145 million.
Grant: Up 42, 4% year over year, and 44 growth sequentially.
Grant: Revenue from U S dollar liquidity products increased significantly by 190% year over year and impressive growth from online wealth managed growth.
Grant: <unk> platform.
Grant: These figures underscore the strong performance of our overseas business this quarter.
By revenue type one time commissions increased significantly by 28, 5% quarter over quarter, primarily due to the recovery in oversea insurance.
Grant: Recurring service fees declined 13, 8% year over year and were relatively flat sequentially, mainly due to the aging of RMB denominated.
Grant: AUM.
In contrast revenue from overseas investment products continues to grow.
Grant: As we expand our international presence.
Performance based income was notably stronger this quarter, reaching RMB $61 million <unk> driven by the successful exits of certain U S. Dollar P product.
Grant: Our total transaction values in the third quarter was RMB 14 3 billion.
Grant: As of the end of this quarter U S. Dollar denominated transaction value increased 15, 8% year over year to U S dollar $1 1 billion.
Grant: As a proportion of total transactions.
Grant: Denominated products are growing and now accounts for 54, 6% of total transaction value.
Grant: Compared to a 31% during the same period last year.
As the expectations of the federal reserve rate of strengthen.
Grant: Have observed a continuous trend of clients shifting from liquidated products to investment opportunities.
In the third quarter the transaction value for U S. Dollar of alternative investment products, which includes private equity private securities and private credit products increased significantly by 36% year over year, and a six 1% sequential growth to U S. Dollar 200.
Grant: $45 million.
As a proportion of total transaction value and total U S dollar transaction values alternative investment products increased to 12% and 22% respectively.
Grant: We're pleased to see these products increasingly contribute to our ongoing management fee revenue.
Grant: At the end of the third quarter, our U S. Dollar AUM grew significantly by 16% year over year, and four 6% sequentially to U S. Dollar five 6 billion.
Grant: With the U S dollar denominated growing by five 7% year over year, and one 9% sequentially to U S. Dollar eight 7 billion.
Grant: This reflects our ability to capture a larger share of clients U S dollar wallets or investment products.
Grant: Moving on to the income statement, our ongoing cost control initiatives continue to yield positive results total operating cost and expenses for the quarter were RMB 443 million a decrease of 11, 6% year over year.
Grant: Eight 1% sequentially.
Grant: Compensation and benefits decreased by 22, 7% year over year as we further improve human capital efficiency by reducing overhead costs.
Grant: With the proportion of middle back office down now below 50% of the total head count.
Grant: Selling expenses and general and administrative expenses declined significantly by 26, 1% year over year.
Grant: Government subsidies, notably are expected to decrease this year with only RMB $37 million received year to date.
Grant: By the reduction in government subsidies operating profit for the quarter remained consistent when compared to the same period last year.
Grant: Notable sequential recovery of 80% to RMB 2000.
$241 million.
Grant: Our operating margin has come back to 35%.
Grant: We also note that net income this quarter was impacted by certain factors, including the decrease in interest income on the RMB 1 billion dividend payout from the substantial payout earlier this year with.
Grant: The decline in domestic interest rates and the reallocation of some cash to short term investments.
Grant: Additionally, the U S dollar depreciation against the RMB.
Grant: During the quarter led to a foreign exchange loss of RMB $44 million.
Obviously, the future appreciation of the U S dollar if any.
Grant: As expected to mitigate this impact.
Grant: Texas consensus were notably higher during the quarter.
Grant: Primarily attributable to the withholding taxes on dividends payout.
Grant: That being said our non-GAAP net income still increased.
Grant: On a sequential basis to RMB $150 million.
Grant: As of the end of the third quarter, our year to date net income reached RMB $418 million.
Speaker Change: In terms of clients Zander mentioned, we maintained a stable total of 9420 diamond and Black card clients at the end of this quarter.
Speaker Change: Meanwhile, our overseas client base continues to grow to show robust growth.
Speaker Change: With more than 17000 overseas registered clients up 29% year over year and 3% sequentially.
Speaker Change: The total number of overseas Diamond Blackrock clients rose to 1556.
Speaker Change: Overseas active clients also reached 3139.
Speaker Change: 37, 4% increase year over year.
Speaker Change: Turning to our balance sheet.
Speaker Change: While our cash and cash equivalents by the strict classification.
Speaker Change: Chris to RMB, three 4 billion this quarter due.
Speaker Change: Due to the RMB 1 billion dividend payout earlier this year.
Speaker Change: We maintain a robust liquidity position.
Taken into consideration and short term investments and long term investments.
Speaker Change: Some reclassification or total cash reserves totaled around RMB, four 8 billion essentially unchanged from the previous quarter. If we exclude the impact from RMB 1 billion dividend payout.
Speaker Change: Our current ratio has improved to four four times and a debt to asset ratio has dropped to 14, 9% with no interest bearing debt.
Speaker Change: At the end of August Walter announced a U S. Dollar 50 million share repurchase program and are pleased to see the subsequent rebound in our stock price.
Speaker Change: However, despite this rebound will still believe our stock remains undervalued.
Speaker Change: Isn't truly reflect the growth prospects.
Speaker Change: Robust balance sheet positions and cash reserves. It also fails to capture a special bond with Mandarin speaking in high net worth investors around the world.
Speaker Change: We plan to carry out the repurchase program at the appropriate times once the trading window opens.
Firming, our commitment to delivering value to our shareholders.
Speaker Change: In conclusion 2024 is a year of significant transformation for Noah.
Speaker Change: Aspect.
Speaker Change: We are actively deployed a more customer centric sales model and deepen our international expansion effort.
Speaker Change: Transformation is embedded in our corporate DNA and has been a key driver of our growth.
Speaker Change: Recognize this journey will be very challenging.
Speaker Change: And we're confident that these strategic initiatives are not just about weathering the storm there about unlocking new horizons.
Speaker Change: Long term development and growth.
Speaker Change: Once again, thank you all for your question of support.
Speaker Change: Now open the floor for questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question today comes from key Yao with Morgan Stanley. Please go ahead.
key Yao: Hi, Good morning, Thanks for taking my question Benjamin telephone problem momentarily.
key Yao: I got a question Yeah, you know obviously, we are observing quite some excitement.
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Speaker Change: So thank you Charles for the question so.
Speaker Change: With regard to the financial performances.
Speaker Change: See the major policy was rollout rollout at the end of the timber.
Speaker Change: Our third quarter National results were largely not.
Speaker Change: Impacted by the recent policy changes.
The rebound in the stock market.
In terms of client sentiment.
Speaker Change: Seeing more active.
Speaker Change: Activities include among our.
Speaker Change: Onshore arm.
Mainland China decline.
Speaker Change: Definitely.
Speaker Change: In the past we have seen.
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Towards Asia market was.
Speaker Change: No, we're very weak, but at least right now we're seeing a rebound in trading activities and interests.
Speaker Change: But from our house view.
Speaker Change: We perspective.
We still strongly believe.
Speaker Change: That to advice clients to use their R&D.
Speaker Change: Two is that in global beta return.
Which is still one of the most important.
Speaker Change: As allocation advice that we give to clients.
Speaker Change: Because we think that the policy still needs time to be implemented.
Speaker Change: The fundamentals are the economic fundamentals don't make me time to show whether.
Speaker Change: We'll be in booth.
Speaker Change: And.
Speaker Change: This world a wealth manager come.
Speaker Change: Company, we are not a trading driven strategies matter, we are more taking a long term asset allocation view, therefore, we haven't really changed our.
Speaker Change: Seattle, how to but that being said we're still.
Speaker Change: Enhanced our product shelf on the R&D side.
Speaker Change: No we're still advocating.
Speaker Change: To advice clients using to the island, Judy LTE products in mass globally.
Speaker Change: Definitely.
Speaker Change: Introduce some of the RMB.
Speaker Change: Exposure products as well recently.
Speaker Change: Okay.
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Speaker Change: Thank you.
Yeah.
Speaker Change: As a reminder, if you'd like to ask a question. Please press Star then one to enter the question queue.
Speaker Change: Your next question comes from Peter Chang with Jpmorgan. Please go ahead.
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Toshi: Thank you Toshi.
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Toshi: It's always a fine year.
Toshi: Since menswear for giving us this opportunity to ask the question.
John from Jpmorgan I have two question from my first.
Toshi: First question is we have been doing is refining domestic operation and expanding our international strategy and I think during the past few reporting quarter, our domestic revenue has been under pressure while.
Toshi: Osp's revenue have been improving.
Toshi: The total revenue will have improved.
Toshi: To improve sequentially in the third quarter I'm, just wondering kind of what it says that we have policies.
Cameron.
North lateral has been under pressure and going forward, our revenue trend can be stable to improving and.
Domestic and international what do you think will be the <unk>.
Toshi: Largest.
Toshi: Most important driver for our revenue outlook in the next say one year or so and then my second question is a follow up question on due to the earlier question Im just wondering how do we offset it helps any trend in customer behavior or activity like what products are clients.
Toshi: Mostly quit purchasing.
In fourth quarter. After this big stimulus in mainland China and.
Toshi: With sales improving client sentiment is that our the.
Revenue trend.
Toshi: In fourth quarter can be improved sequentially.
Toshi: From so called it I will stop here. Thank you.
Toshi: Okay.
Peter Zhang: Thank you Peter.
Speaker Change: I think it's probably a little bit, yes, or no to your question.
Speaker Change: Maybe it's a little bit too early to say that revenue.
Speaker Change: Our growth trend has come into a turning point as we know the market.
Speaker Change: Has been changing drastically, especially after the election.
Speaker Change: But I guess, it's safe to say the structure.
Speaker Change: Our growth probably has come in to say that.
Speaker Change: More resources and more.
Speaker Change: Expansion efforts are going into the international expansion. So in terms of accumulation of U S. Dollar denominated investment opportunities probably is going to be more dominant.
Speaker Change: In the future periods.
Speaker Change: Especially with the recurring management fees and carry structure.
Speaker Change: Both sides, probably would not stay the same or.
Speaker Change: Are identical to the last quarter, but obviously, we're hoping that we'll be able to accelerate the.
Speaker Change: The transformation, but at the same time also remain very patient so there wouldn't deviate.
Speaker Change: The overall strategy, so I'll, let Tom vendor takes the question about the.
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Speaker Change: You see a big had a beta anticipating now.
Speaker Change: <unk>, which is our highest return products and others highlighted Nevada.
Speaker Change: Tangela AI chips.
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Speaker Change:
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Speaker Change: We don't see a keyboard with Honda makeup yoda.
Speaker Change: One of the Eagle Ford.
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Speaker Change: What's wrong with it.
Speaker Change: Kansas element and shuttle.
There you go.
Speaker Change: How much of the EBIT charges myself and most of the budget.
Speaker Change: No. That's just to show you cope with the flu season.
Speaker Change: You mentioned, how do you know.
Speaker Change: Now with that said the device's development sort of IAC.
Speaker Change: Sure.
In Q4, this year that Kevin just on the social most of the disease that has a below normal accounts I would tell you that there's a lot.
Speaker Change: Yes.
Speaker Change: Is that within a few tenths of Makena you guys know that.
Speaker Change: Whether you're a.
Speaker Change: Company anymore.
Speaker Change: So the Hudson City doesn't go most of that is unlucky.
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Speaker Change: Whereas it should easily treated RCC I presume.
Speaker Change: Thank you.
Peter Zhang: Thank you Peter for the.
Peter Zhang: For the question so.
I think grant pretty much answered the first part of the question and regarding your second point of the question.
Peter Zhang: As a follow on to the first question. So I think our overall view is that it's still quite difficult too.
Speaker Change: C C.
Speaker Change: That business of the recent policies and also the continuation.
Speaker Change: Of this policy and to really make a decision on whether this is short term or midterm and long term.
Speaker Change: Julian.
Speaker Change: But we are seeing a trend among our clients our investors that they are they have been.
Speaker Change: Increasingly willing to communicate with us more.
So I think at this critical point.
Speaker Change: This time window, we have the privilege of see more opportunities to engage with clients on one on one meetings.
Speaker Change: Yeah.
Speaker Change: Providing more allocation of buys and inside and also too I guess to drive more client transaction and also help them to reshape their portfolio allocation.
Speaker Change: So we still.
Speaker Change: No.
Continuing to provide long term asset allocation advice.
Speaker Change: And basically in three very different perspective, so of course is to.
Speaker Change:
Speaker Change: To provide a safety net.
Speaker Change: In cruise.
Speaker Change: Different protection and inherent institute for our clients globally, and then secondly is the.
Speaker Change: We call it cash cash management, our cash flow portfolio that provide different liquidity.
And long term inflation protection.
Speaker Change: Investment tools and thirdly is to pursue growth strategy through.
Speaker Change: Sure.
Speaker Change: Private equity venture capital and also.
Speaker Change: AI related.
Speaker Change: <unk> opportunities.
Speaker Change: So so also in this process, we need our different business units to provide.
Speaker Change: On each of their featured.
Speaker Change: Product and services.
Speaker Change: And through a client centric mindset, but you know as we mentioned before this is a pretty much a new sale.
Speaker Change: Our new sales model and we're still under going are the transition period.
Speaker Change: It has been a few quarters, but we're still.
Speaker Change: Yeah.
Speaker Change: Trying to work out the best way to improve efficiency under this new model and we believe that as we.
Speaker Change: We gradually figure out.
Speaker Change: The new sales model.
Speaker Change: It would be reflected in our future financial performance.
Speaker Change: Peter.
Peter Zhang: Okay. Thank you that's incremental for the explanation.
Speaker Change: Really helpful.
Speaker Change: Thank you for the question too.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over for any closing remarks.
Speaker Change: Thank you all again for participating in our third quarter earnings call and just another.
Speaker Change: General reminder, that we will be hosting our annual corporate open day, Hong Kong on December six so please don't hesitate to register or <unk>.
Speaker Change: Contact our Investor Relations team for further details. Thank you again for those of you in the states happy Thanksgiving to you.
Speaker Change: Thanksgiving.
Okay.
Speaker Change: Alright Goodbye has now concluded.
Speaker Change: Thank you all for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].
Okay.