Noah Holdings Limited

Good day and welcome to the NOAA Holdings Third Quarter 2021 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 today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Grant Pan, Chief Financial Officer, please go ahead.

Thank you, operator. And for today's conference, I'll first introduce the quarterly financial results, and we'll hand back to Chairlady Wang, followed by a Q&A session. Good morning, everybody. Dear investors and analysts, I'm very happy to share with you the solid financial results for the third quarter of 2021, with continued growth achieved across revenues and client activities. we're excited to see continued growth in our black card and diamond card clients, demonstrating successful implementation and execution of the upgraded client servicing strategy, as well as record high recurring service fees, thanks to the improved asset mix we allocate for our clients. We're also very happy to report that we're ahead of the schedule to deliver the full-year non-GAAP net income guidance with RMB $1.1 billion, recorded in the first three quarters of 2021. Net revenues. In the third quarter was RMB 908.9 million, up 1.1% quarter-over-quarter and 5.8% year-over-year. One-time commissions were RMB 215.1 million, down 12.9% amid market turbulence, and increased prudence over policy outlook from the last quarter, but still up 10.4% year-over-year. Recurring service fees were RMB 566.9 million, a record high since listing, up 13.7% quarter-over-quarter and 1.2% year-over-year. The growth in recurring service fees was attributed to our growing asset under advisory, or AUA, performance-based income, was RMB 82.1 million, down 32.6% quarter over quarter, and up 16.5% year over year, mainly contributed by profitable exits from our overseas PE products. Income from operations were RMB 228.9 million, down 31.8% quarter over quarter, and 34.1% year over year, with an operating margin of 25.2%, The decline in operating margin was mainly due to increased efforts in talent acquisitions and retention, continued investment in IT infrastructure, increased marketing activities, including depreciation and amortization expenses related to our newly acquired headquarters, as well as the pre-planned execution of our yearly strategic investment budget. Non-GAAP net income for the quarter was RMB $284.2 million, and RMB 1.08 billion for the first three quarters, giving us confidence to meet RMB 1.2 to 1.3 billion full-year guidance. It's also very encouraging for us to see sustained momentum in client activities and growth in black card and diamond card clients. Despite the challenging market conditions, the number of active clients that transacted with us during this quarter was over 21,000, up 4.8% quarter-over-quarter and 3.7% year-over-year. The number of black card and diamond card clients also increased by 16% since the end of 2020. This growth also makes us the fastest in the industry in the acquisition of core clients compared to an industry average of close to 10%. The strong growth in black card and diamond card client group is a reflection of the successful execution of the Diamond Black program supported by our strategic investment budget, the implementation of NOAA Triangle Service Model, as well as the upgraded client acquisition strategy. Enlarging this client group, which contributed to around 80% of our AUA, will continue to be one of the key strategic focuses in the long run. Transaction values during the quarter was RMB 24.1 billion, down 3.7% quarter over quarter and 16.4% year over year, mainly due to the overall performance in the secondary markets and the seasonality nature of the primary market fundraising activities. Notably, the amount of private secondary products we placed for our clients was RMB 10.6 billion, up 36.8% quarter over quarter. and 22.6% year-over-year, as our clients seek long-duration products when facing market uncertainties, which demonstrates our clients' sophistication as a result of NOAA's continued investor education efforts. Our historical data also shows that our onshore private secondary market secondary product clients who subscribed exited for over three years tend to achieve higher returns in the double-digit range than those who exited earlier. When looking at year-to-date figure, transaction value during the first three quarters of 2021 was RMB 76.2 million, up 3.7% year-over-year. By segment, net revenues from the wealth management business was RMB 653.6 million, up 4.5% quarter-over-quarter and 4.1% year-over-year. which contributed to 72% of total net revenues. Now, revenues from the asset management business amounted to RMB 241.4 million, down 5.8% quarter-over, but up 8.5% year-over-year. Total AUM increased marginally from the previous quarter to RMB 156.1 billion as the growth on PUM was partially offset by redemptions of real estate-related investments After the continuous efforts in exiting real estate-related assets, we had exited a majority of our onshore real estate assets with only office properties located in Shanghai actively managed by our own operations team, and the U.S. rental apartment assets managed by our investment team based in New York. Net revenues derived from overseas business was RMB $250.4 million, up 10% quarter-over-quarter and 58.5% year-over-year, mainly contributed by carrying income realized by successful exits in the U.S. dollar investment products we place for our clients. We'll continue to strengthen our international platform to meet with the growing overseas asset allocation demands from our clients. On the balance sheet side, we're pleased to announce that our total assets have first-time exceeded RMB $10 billion mark for the first time marking another remarkable milestone in NOAA's 16-year history. We have a healthy cash balance of RMB $2.8 billion by the end of this quarter, as well as an improved debt-to-asset ratio of 22%, with no interest-bearing debt. Lastly, I would like to highlight our recent developments in ESG initiatives. Gophers investment professionals are working diligently to develop ESG-oriented fund products and we hope to launch these products by as early as next year. In conclusion, we have concluded the quarter with solid financial operating results despite the challenging capital market conditions, demonstrating the resilience in our business model. And we're determined to invest in key areas where we can strengthen our competitiveness through our strategic investment budget, both in the fourth quarter and going forward. And now let me pass the speech to Chair Lagan-Norumar.

Thank you, Panqing. First, I would like to talk about my views on Hongguan, and then I would like to report on the overall performance of Luoya in the third quarter of 2021, the development situation of several branches, and the change of Luoya's transformation from customer to center. Luoya's new positioning and future development strategy in the changing market environment. Okay, now I will start. In 2021, we felt more deeply that China's economy has turned from a high-speed growth stage to a high-quality development stage. China's economy has entered a new era of certainty. With the combination of constraints and incentives, China values the development of quantity, but more importantly, the problem of quality. In the rapid improvement of quality, we will achieve effective growth of quantity. China will achieve long-term economic development and transform into a high-income country. We will walk a path of strong and sustainable growth. We are still full of confidence in China's wealth management and asset management industry. Continuous economic growth is the core reason for the growth of the two industries. Although China's GDP growth is heading towards a more sustainable level of adjustment, it should be able to maintain a 4.5% annual growth before 2030, reaching a size of $29 trillion. China is heading towards a goal of a smooth sales of $20,000 per capita in 2030, which should be able to cross the threshold of high income. Although the growth of wealth and income is not linear, we believe that when China becomes a high-income country in 2022, the proportion of wealth and domestic production will enter a turning point. After that, the growth rate of Chinese family wealth will exceed that of domestic production. We believe that China's financial industry will go through a stage of rapid growth and rapid change. The wealth management and asset management industry will be able to fully utilize the opportunity. But like other As with all Chinese industries, the development path of wealth management and management will be different from that of the West, especially the United States. For example, China is very concerned about encouraging entrepreneurship and increasing the income of residents by building a new economic growth model. But this model is highly dependent on modern support, so it has created a lot of bottom-up assets as fixed income products. But these assets are not suitable for the wealth management industry. After two years of firm transformation, Loya has completed the non-standard asset clearing in the first half of 2021, and has established a foundation for our future health development. Today, we are able to stand on the turning point of industry history in a relatively calm way, and are deeply aware of the future development, the growth of quality, and the need to focus more on the wealth management and asset management industry. Loya has also moved from a company that drives product from the beginning of a business to a customer-centered company, Thank you, Grant. I will first talk about my view on the Microsoft situation and then report on the overall performance in the first week of 2021.