Noah Holdings - Q4 2025

Transcript

Operator (participant)

Please note today's event is being recorded. I would now like to turn the conference over to Doreen Chew. Please go ahead.

Doreen Chew (Senior Investor Relations Director)

Thank you Roco, and good morning, welcome to Noah Holdings' fourth quarter and full year 2025 earnings conference call. Joining me on the call today are Ms. Norah Wang, Co-founder and Chairlady, Mr. Zander Yin, the Co-founder, Director and CEO, and Mr. Grant Pan, the CFO. Mr. Yin will begin with an overview of our recent business highlights and strategic development, followed by Mr. Pan, who will review our financial and operational results.

After management's prepared remarks, we will open the call for questions. Before we begin, please note that today's discussion will contain forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed in such statements. Potential risks and uncertainties include, but are not limited to, those described in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Noah undertakes no obligation to update any forward-looking statements, except as required by law. Without further ado, I would now turn the call over to Mr. Yin. Please go ahead. Thank you.

Zander Yin (Co-founder, Director, and CEO)

Thank you. [Non-english content]

Speaker 9

Good day everyone and thank you for joining us today. 2026 marks the 21st year since Noah was established. In a market environment defined by continuous evolution and restructuring, our strategic direction has never been clearer. We remain firmly focused on serving global Chinese high net worth and ultra high net worth clients, operating through licensed local entities to provide compliant long term wealth management services across multiple jurisdictions. More importantly, we are completing a critical transformation evolving from a wealth management institution primarily driven by product sales into a comprehensive platform centered on asset allocation, global structuring and AI systems. In 2025, this transformation began to yield tangible operating results. This is not merely a temporary business adjustment, but a fundamental reconstruction of our operating model.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

For Noah, 2025 represents an important milestone. Looking at our full-year results, a clear theme have emerged. The quality of our profitability is improving at a faster pace than the stabilization of our revenue structure. For the full year, net revenues were RMB 2.6 billion, broadly flat year-over-year. However, operating profit was RMB 777 million, up 22.5% year-over-year, with operating margin improving to 29.8% and non-GAAP net income increasing 11.2% year-over-year to RMB 612 million. Excluding the impact of non-operating items, adjusted non-GAAP net income was approximately RMB 753 million.

What matters most at this stage is not the absolute scale of our profitability, but the improving underlying structure. This profit growth was not driven by one-off factors, but by optimized cost structures, enhanced operating efficiency and the ongoing shift in revenue mix toward investment-related businesses. This reflects how our profitability is shifting from cyclical volatility towards structural stability. This is a qualitative change, not simply quantitative growth.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

What we have accomplished is not simply business expansion, but a fundamental reconstruction of our operating model. Today, we are building a global wealth management operational system composed of three core platforms, all operating under a unified management framework. ARK serves as the client onboarding and execution platform with licenses in Hong Kong, Singapore, and the United States. It operates compliantly within local regulatory frameworks. ARK is responsible for account management, trade execution, product distribution, and AI wealth advisory services, providing clients globally with a consistent, seamless, and compliant experience. Olive serves as our investment and asset management platform across Hong Kong, the United States, Singapore, Japan, and Canada. It has the capabilities to source global assets, establish and manage funds across multiple jurisdictions, and execute long-term asset allocation strategies. It is a key foundational piece for our long-term value creation and revenue stability.

Doreen Chew (Senior Investor Relations Director)

Glory serves as our asset structuring and risk management platform, covering major markets including China, Hong Kong, Singapore, and the United States. It offers insurance, trust, and identity planning services that deliver risk isolation and asset protection through structuring solutions, and supports the long-term transfer of family wealth.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

Supporting these three core platforms is our cross-jurisdiction compliance architecture, anchored by our four major booking centers. Shanghai serves as the domestic client onboarding hub for RMB asset allocation, Noah Upright Fund Distribution, and Gopher Asset Management. Hong Kong functions as the cross-border connector for securities and insurance, serving as the bridge between China and global markets. Singapore is our center for overseas asset allocation and family structuring, and our primary pilot region for AI wealth management. The United States serves as a key hub for our VCs, PE, and capital markets activities. In particular, our investment capabilities in the technology sector are an important contributor to future revenue growth and innovation. I want to emphasize that all booking centers are independently operated by locally-licensed entities and conduct business within their respective regulatory frameworks.

Doreen Chew (Senior Investor Relations Director)

Cross-regional collaboration is primarily limited to research and information support, with no direct cross-jurisdiction business activities. This strict compliance boundary is the institutional foundation for our steady growth.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

To gradually become more visible in our operating result. [inaudible] Headcount declined by 11% year-over-year while revenue remained stable, reflecting improving operational efficiencies. Over the long term, AI brings much more than improved operational efficiency. It is also reconstructing how we operate. By embedding AI into key areas such as client engagement, content generation, and operational processes, we have established a new [human]-machine collaborative operational-driven model in certain regions. This reflects our transition away from headcount expansion to systems that drive both scale and service quality.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

Looking ahead to 2026, we will remain free but highly focused on our clear strategic direction. While revenue may still fluctuate due to structural adjustment, the proportion of investment-related income is expected to rise if cost margins remain stable or improving gradually. Furthermore, our AI capabilities will evolve beyond [cyclical] efficiency gains and scale into broader operational validation. We are still in the midst of our transformation, but the logic behind our long-term operational model is stronger than ever. At its core, this transformation is not about changing product form or expanding services. It's about fundamentally reconstructing what drives our growth. Historically, our industry has relied heavily on the individual capabilities of relationship managers.

Today, we are building a human-machine collaborative operational-driven model centered on asset allocation, where AI empowers relationship managers and our global platform amplifying their capabilities. 2025 marks the starting point of this model, while [inaudible] gradually reflect in our offering results. The transformation is ongoing, but our strategic direction is firmly set. We will continue to execute this long-term strategy prudently and compliantly. Thank you.I will now hand this time over to CFO, Grant, to review our financial performance in more detail.

Grant Pan (CFO)

Thank you, Zander. Good morning, everyone, for the comprehensive strategic overview, and good day to everyone joining us today. I'd like to focus on two key financial messages. First, 2025 delivered strong operating profit growth and structural margin expansion driven by a clear shift in our revenue mix. Investment-related income increased significantly during the year, while we deliberately reduced our reliance on insurance-related revenue. This reflects our continued transition toward a more investment-led business model with improving earnings quality and great margin resilience.

Second, the board has approved our dividend proposal, including a special dividend, bringing total payout to 100% of full year non-GAAP net income for the third consecutive year. This reinforces the consistency and visibility of our shareholder return policy. Together, these developments underscore our transition toward a more investment-driven, globally-diversified, and resilient operating model. For the full year 2025, net revenue was RMB 2.6 billion, broadly stable year-over-year. Operating profit increased to RMB 777 million, representing growth of 22.5%. Operating margin expanded to 29.8% compared with 24.4% in the prior year. Non-GAAP net income reached RMB 612 million, up 11.2% year-over-year. This improvement was primarily driven by structural cost optimization and enhanced operating efficiency rather than short term factors. In the fourth quarter, revenue was RMB 733 million, up 12.5% year-over-year.

Operating profit reached RMB 258 million, representing a significant increase of 87.3%, and operating margin expanded further to 35.2%. This reflects strong operating leverage as performance-based income starting to materialize, supported by a more scalable and disciplined operating structure. During the year, we continue to optimize our revenue structure. Investment product commissions increased by 79.7% year-over-year, and performance-based income rose by 78%. At the same time, overseas revenue contribution increased to 49% of total net revenue. This shift toward investment-driven and globally-diversified revenue streams has enhanced earnings quality and supported structural margin expansion. To provide a clearer view of our core performance, I would like to address two non operational items that affected our reported fourth quarter GAAP results.

First, under income from equity in affiliates, we recorded a loss of approximately RMB 120 million. This was primarily driven by mark-to-market accounting adjustments related to share price volatility of a specific-listed investment. It's important to emphasize that this represents accounting reflection of market movements and does not impact our core wealth management operations. Second, regarding the legacy Camsing Credit Fund arrangements, several cases reached procedural milestones this quarter as certain clients opted for arbitration. In line with our prudent financial policy, we recognize contingent expenses of approximately RMB 50 million. Total provisions now stand at RMB 505 million, representing about 63% of the unsettled principal. Based on current benchmarks and the progress of these cases, we believe the existing provision level is appropriate and covers a substantial portion of the potential exposure. Based on the information currently available, we do not anticipate significant additional provisions.

If we exclude these two non-operational items, adjusted full-year non-GAAP net income would have been approximately RMB 753 million, which we believe more accurately reflects our underlying operational efficiency. In terms of balance sheet, as of December 31, 2025, cash and short-term investments totaled RMB 5.0 billion. The asset-liability ratio stood at 15% and the company carries zero, no interest-bearing debt. Our current ratio was 4.5x. This debt-free structure provides strong financial flexibility and reinforces the resilience of balance sheet. From a financial perspective, our AI strategy is centered on productivity enhancement rather than heavy capital expenditure. We are already seeing measurable results in our cost structure. In 2025, total headcount decreased by 11% year-over-year, when net revenue remained stable at RMB 2.6 billion.

This indicates a meaningful increase in output per capita. AI-driven tools now support a substantial portion of client engagement, automated reporting and routine workflow tasks that previously required a lot of manual intervention. In our view, AI functions as structural efficiency multiplier. It enables us to scale global operations while maintaining disciplined cost control and consistent service quality. As of year-end, shareholders' equity stood at about RMB 9.9 billion. At our current market capitalization, the company is trading at roughly 0.57x book value, with operating return on equity close to 8%. When market valuation may fluctuate, our focus remains on building long-term intrinsic value through disciplined execution and continued global expansion. Our strong cash position and operating cash flow provide both confidence and flexibility to deliver attractive and sustainable shareholder returns across market cycles.

Driven by a solid performance and healthy liquidity position, the board has approved a total dividend of RMB 612 million, equal to 100% of 2025 non-GAAP net income. This consists of 50% regular dividend and a 50% special dividend. Subject to shareholder approval at the 2026 AGM, this will mark our third consecutive year of full payout. At current market prices, the implied dividend yield is approximately 11%, including the RMB 50 million in share repurchase completed in 2025, total cash return yield reaches approximately 12%. This payout is fully supported by our core operations and strong balance sheet. It represents approximately about 80% of operating profit and is covered multiple times by RMB 5.0 billion in cash and short-term investments.

In short, we're rewarding shareholders for their trust while maintaining a fortress balance sheet that supports our continued global growth. In summary, revenue remained resilient throughout the year as we executed a deliberate shift towards more investment-driven income streams. At the same time, operating profit delivered strong double-digit growth, supported by structural margin expansion and continued improvements in efficiency. Our AI initiatives are now translating into tangible productivity gains, strengthening our operating leverage and scalability. Our industry-leading capital return policy, highlighted by a 100% payout and the introduction of special dividend, also reflects both operational strength and confidence in the sustainability of our model. With these foundations firmly in place, Noah has emerged leaner, more efficient and structurally stronger. We remain fully committed to disciplined execution and the creation of sustainable long-term shareholder value. Thank you, and we will now open the floor for questions.

Operator (participant)

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Once again, that's star then one if you have a question. Today's first question comes from Helen Li at UBS. Please go ahead.

Helen Li (Associate Director)

[Non-english content]

Speaker 9

I have two questions. The first question is on private credit. How much in third-party private credit product has Noah distributed today? Have you seen any client redemption in this area? How do you assess the overall risk profile of this product? One area of concern in the private credit market has been potential disruption from AI, given that a meaningful portion of the underlying portfolio companies are software firms. Noah maintains an investment team in Silicon Valley. As a [GP], how much direct investment or co-investment does Noah currently have in the private credit space? What percentage of the underlying assets are software companies, and what percentage of those could potentially be vulnerable to AI-driven disruptions? How do you view the risk in this segment?

My second question is on transaction value and one-time commission. In the fourth quarter, one-time commissions declined sharply year-over-year. Looking more closely at transaction value, both domestic and overseas insurance product sales weakened significantly. How do you see the runway trend heading into 2026? Amid the recent capital market pullback, how has client sentiment towards investment products evolved? Are clients adopting a risk-off stance and reducing their allocation to investment products? Finally, what's the current house view in terms of the investment strategy for the remainder of this year? Thank you.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

Let me do the translation here. First of all, we must emphasize that the company doesn't run any or only own any assets that is related to the product that Helen just mentioned. What we've been doing at Silicon Valley is mainly invested with or partner with some key major name that's their PE product or in some VC firms. That's why we don't see much impact of our business, because when we review the AUA here, those assets are only representing a low single-digit amount of our AUA. The company has been, have a concern on the related asset class at a very early stage. That's why we have been advising our clients to have a proper position in a very early stage.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

Regarding the second question on our commission. Because we must emphasize that being in the wealth management business, we are not a single-product sales-driven business. We've been trying to provide a safe and structured services for our clients. Yes, we do see the drop in insurance sales, but we also believe that because a lot of our existing clients, they have already had enough coverage from insurance products. That's why when we've been reviewing our business under [inaudible] what we've been emphasizing that we are provinding a global solution to our clients but not just serving single insurance products. Regarding the investment incentives among our clients, we don't see any drop in demand. We understand that that's the risk in the market.

However, we actually see clients still have a very high interest in investing their wealth, particularly in AI-related products. We will still keep an eye on that and do the right advice to the clients.

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Speaker 9

Thank you, Chairlady. What we wanted to emphasize that is, Noah as a company has established for many years, and we have substantial experience in handling different types of economic cycles. For the reason situation where we're talking about this PE risks that in all this alternative investment products related to social media assets. We can use an example from Blackstone and [the various the] product.

We look at it as— I mean, under all the normal criteria, the return should be 5%, but now it's over 9.3%, which we have seen this situation in China, in mainland China before, where that's why we've been taking early positions to advise our clients depends on their risk appetite, whether they would prefer to have a more medium-term risk appetite or they are more risk averse. Now, we've been giving advice in an earlier stage. Since the beginning of this month, we've been advising our RMs to talk to different clients depends on their asset allocations and also their risk appetite. We believe that our clients' experience is still a very prudent situation, and we don't see any such panic selling at the moment.

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Speaker 9

As we mentioned about our experiences within the mainland market, we also one of our advantage or strength is that we know Chinese high net worth and these families characteristic, and what they are vulnerable to and how they would like to treat their investments portfolio. That's why we've been strictly choosing or strictly been allocating which PE we should go to. That's why from the very beginning the company's been providing a rather more suitable to what our clients need when selling these types of products.

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Speaker 9

Regarding your second question about our sales in insurance products, I think we do admit that in the past the company is a more product-driven selling company, which when the investment product is very welcoming or the insurance product is very welcoming, then it becomes the key drive of the company's growth. However, what we want to emphasize is today we have formed our global three-layer system, as what CEO mentioned in his speech that we have ARK, Olive and Glory, we are forming this platform, the ecosystem being a wealth management company that we are providing total solutions.

Now it's not about what to sell, but about how to help our clients to do the wealth management. We are now providing plans. For example, if they have enough protection from insurance product, then what we may do is more about could be the estate planning, could be providing trust services. It's about wealth management being as a whole. And with the support of AI, we firmly believe that we now have a very firm structure and is more enabled to perform better being a wealth management company, which that's why a simple answer is hard to just direct answer say whether what insurance product will be a lead or not, it is not the focus anymore.

Operator (participant)

Thank you. Our next question today comes from Calvin Leung with Citi. Please go ahead.

Calvin Leung (Equity Research Analyst of China Banks, Brokers, and Fintech)

[Non-english content]

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Calvin Leung (Equity Research Analyst of China Banks, Brokers, and Fintech)

[Non-english content]

Speaker 9

Thanks for taking my questions and this is Calvin from Citi. My first question is about AI. Can management share a strategy and investment on AI going forward, and how would this be reflected in Noah's operating or financial metrics? And my second question is on shareholder return. Noah maintained a high payout ratio in 2025. And looking ahead, what is the plan and considerations on payout ratio and share buyback? Thanks.

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Speaker 9

Let me do a translation here. We must emphasize that we embrace AI not because this is the propaganda that is the trend currently, but it's really about how it's been able to enhance the efficiency of the company. In the past with our analysts, when they review our business model, they may use a method to count how many RMs we hire and then just do a multiple and believe that is a growth engine. However, under the AI enhances system, we believe that right now is not about how many people we hire.

Take Singapore office, for example. We've been adopting this AI method for nine months now, and what we see is that our human resources have dropped, but at the same time, AUM has increased by three times in the past nine months. It's about efficiency, it's about quality that we've been able to deliver to our clients. Apart from that, with the AI in mind, we may also be able to further develop our business by reaching to the EAM on the multi-family office business so that we enable to provide a system to work with this independent third party channel. Just like what we've done under Glory. We've hired different commission-based broker to do the insurance business since second quarter last year.

To answer your question, maybe currently it's not about if we've been able to use a financial indicator to show the efficiency or a really quantitative return from using AI. However, we believe that one key factor you can look at is how many clients we've been able to cover. The company has a record of over 400,000 clients on our record. We may not have been able to cover all of them in the past, but with the help of AI, that has enhanced our efficiency. We believe that this is a very good opportunity that we've been able to talk to all our potential clients or who should be our clients on our list again.

We must emphasize the company is still very cautious about our clients' privacy. So when doing investment planning suggestions, we would be rather more prudent, because we don't want to have any kinds of privacy issues being a concern to the company. At the moment we will say it's more about efficiency. I would say the company with the [NoahChat] that internally all the clients— all our employees can use. Also the AI RMs that is the translator for the CEO just now that providing, already providing service internally and externally to clients that we have already seen the efficiency that AI's been bringing to the company.

Norah Wang (Co-founder and Chairlady)

[Non-english content]

Speaker 9

What we've been promoting now is a program called RM 100, which is what this program is about, is that we ask our RMs to hand-pick around 100 clients they would like us to serve intensively. For the rest of the clients supposedly on their book, then they have to hand it over to our AI wealth management department, which is the core belief behind it. We hope that through the support of AI, we can enhance quality, and with which the RMs when they have hand-picked their clients, they can better serve his own clientele. That ultimately is about their income can be increased and ultimately that drives our profit in the future.

To your question about buyback and dividend shareholder return, because we have confidence in driving our future growth, and also we know the financial industry very well, and we also know how to best allocate our resources. That's why the company believes that we have a very high confidence in continuing to return, or to reward our shareholders.

Grant Pan (CFO)

I just want to add a piece of information that we actually have. Since the repurchase program, we have repurchased about 4.3% of the total shares outstanding. Obviously we have been very disciplined in terms of execution of dividend policy. I believe that with adding this year's dividend to the accumulated dividend overall the numbers already crossed the RMB 2 billion threshold, so that's actually a very impressive return, I guess, not just in Chinese ADR, but probably on many of the listed companies. We're actually giving out about $1.32 per ADS this year. That's something, you know, as Chairlady just mentioned that we're pretty confident that we'll be able to generate the same level of cash flow and continue to reward our shareholders.

Peter Zhang (Captial Management and Retail Credit Risk Analyst)

[Non-english content]

Operator (participant)

Thank you. Our next question today comes from Peter Zhang with JPMorgan. Please go ahead.

Peter Zhang (Captial Management and Retail Credit Risk Analyst)

[Non-english content]

Thanks for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan. I have two questions. First is we notice that the fourth quarter revenue was mainly supported by the strong performance fee. We wish to understand what's the drivers behind and can this revenue segment be sustainable into 2027. Secondly, which management can help to describe what's the quantitative operating trend for Noah, including client activity, client investment behavior, wealth management sales, product sales volume as well as revenue trend. In addition, the market has been quite volatile in first quarter. We wish to understand whether this has any implication on your equity in affiliate income items. Thank you.

Zander Yin (Co-founder, Director, and CEO)

[Non-english content]

Speaker 9

Let me do simple translation first. Honestly, it's hard to precisely predict the trend in the future. However, we must emphasize that it's about the structural. We've been focusing in investing VC and PE in previous years and believe that with this structure, we've been promoting investment products. This should bring, carry to the company in the future for long-term growth. For your second question regarding equity in affiliates. Yes, we do feel some pressure during Q1. However, we must emphasize that this is only a non-operational impact. It shouldn't be really affecting the cash flow or our operation. For Q1 operation, if Grant would like to...

Grant Pan (CFO)

Sure. Yeah, I just wanna add a little bit more on the carry. I think Peter particularly mentioned about the Q4 carry income. 2/3 of the carry actually came from an exit from the US dollar-denominated fund in Silicon Valley. The rest actually came from the domestic products from the RMB private hedge fund. I guess that's a pretty balanced return. Obviously, as Zander mentioned, it's quite difficult to forecast particular timing of carry. We're seeing that you know the AUM accumulated rather good opportunities for continuous return performance fees, hopefully.

I think for the first quarter, you know, obviously cannot share too much information about the first quarter actual operations, but we're seeing, I guess at least the stabilization of client sentiment towards investment. Two is obviously in terms of the tension, I guess especially in Middle East, people are a little bit more risk-averse, and they tend to actually put items or investments in more liquidity position and more diversified portfolio. That's exactly our point of view that we're trying to market to our clients, diversify across asset classes and also region. Peter, did we get your-

Peter Zhang (Captial Management and Retail Credit Risk Analyst)

Thank you. This is very helpful.

Grant Pan (CFO)

Thank you.

Operator (participant)

Thank you. Our next question comes from [Yuming Tang] with CICC. Please go ahead.

Speaker 8

[Non-english content]

Speaker 9

My first question is that we noticed a meaningful expansion in operating margins. Could management provide some color on why you have the notable increase in your operating margin? Moving forward, how do you view our capacity to maintain effective cost control? My second question, what are the primary drivers behind the significant widening of investment losses from equity in affiliates in the fourth quarter? Thank you.

Grant Pan (CFO)

Yeah, I want to just give a little highlight on the operational margin. Obviously, one is as a result of continuing optimization in terms of cost of you know, obviously human resources related in terms of salary and bonuses, especially in mid back office streamlining as we just discussed. The utilization of AI and as well as the continuing streamlining processes. As a result of the reduction of headcounts, you know, the total actual costs related to staffing decreased about 10%, with the help of, you know, obviously, carry income, we're seeing a pretty healthy margin. 30% is actually the operational margin we always try to aim for. That will continue to be reflected in our strategy in 2026.

In terms of your question on the affiliated equity performances, where you know, obviously seeing a lot of pressure in the fourth quarter, but hopefully it will be able to stabilize in the first quarter.

Operator (participant)

Thank you. That concludes our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks.

Doreen Chew (Senior Investor Relations Director)

Thank you. Thank you for everyone for joining us today. If you have further questions about the company, please feel free to reach out to the IR team here. Have a good day everyone.

Grant Pan (CFO)

Thank you.

Operator (participant)

Thank you. That concludes today's conference call, and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.