Good day, and welcome to the Noah Fourth Quarter and Full Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. 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 a touch-tone phone. 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 Melo Xi, Senior Director. Please go ahead.

Thank you, operator. Good morning, and welcome to Noah's fourth quarter and full year 2024 earnings conference call. Joining me today on the call are Ms. Jingbo Wang, our Co-Founder and Chair Lady, Mr. Zander Yin, our Co-Founder, Director, and CEO, and Mr. Grant Pan, our CFO. Mr. Yin will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. We will all be available to take your questions in a Q&A session that follows. Starting this quarter, we will begin disclosing net revenues for each domestic and overseas business unit to better reflect the organizational restructuring we have undergone and provide a clearer understanding of the financial performance and strategic progress each unit has made. Domestically, we have broken down revenue into domestic public securities under Noah Upright, domestic asset management under Gopher Asset Management, and domestic insurance brokerage under Glory. Overseas businesses have been broken down into overseas wealth management under our private wealth and overseas asset management under Olive Asset Management, and overseas insurance and comprehensive services under Glory Family Heritage. In addition, please note that the discussion today will contain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward-looking statements except as required under applicable law. With that, I would like to pass the call over to Mr. Yin.

Good morning to everyone joining us today. During today's call, I will provide a summary of overall market conditions and our results for 2024 before diving into strategies and performance of each overseas and domestic business unit. I will then outline our priorities and outlook for 2025. 2024 was a year of both challenges and opportunities. The challenges arose from subdued client sentiments due to macroeconomic conditions. This, however, created an opportunity to implement necessary organizational restructuring at a time when associated opportunity costs were relatively low in the challenging environment. Throughout the year, we made significant progress in restructuring our domestic sales team to fully comply with the evolving regulatory requirements. As a result, sales teams from Noah Upright, Gopher Asset Management, and Glory have now been separated into independent and licensed business units, creating a seamless end-to-end business model. Overseas, we are also continuing to recruit and expand our team of relationship managers in Hong Kong and Singapore, as well as the anticipated hiring in the United States and other locations. We also launched a commission-only agent model for our insurance businesses and began building this team from the ground up. By the end of 2024, these initiatives have already begun to yield promising results. Despite the challenging year, we remain confident in the resilience of our business model and the robust margin from the strong cash flow it generates. While our overseas expansion efforts are still in their early stages and will take time to scale significantly, I can already sense a momentum and excitement reminiscent of founding Noah twenty years ago. This time, however, we are pursuing growth on two fronts: mainland China and international markets. Our ability to manage risk effectively while serving clients globally will position us well for future growth. Full-year net revenues…

AUM. The Glory Family Heritage pinching the We launched a new internationally focused brand in 2024. Our wealth management asset Olive Asset Management, and Glory Family Heritage. We also established an office in Japan and initiated pilot programs in Canada and Southeast Asia to better serve Mandarin-speaking communities in this market. Net revenues from overseas in 2024 were RMB 1.3 billion, accounting for 48% of total net revenues, up from 44% last year. Its proportion in the group's newly generated business rose from 86% last year to 89% this year. Overseas investment products performed particularly well, with transaction value of overseas primary and private secondary products, excluding cash management products, growing 45% and 22% respectively, year over year. Arc Wealth Management will use Hong Kong, Singapore, and the United States as its three primary booking centers to serve existing clients and engage with new ones in markets such as Southeast Asia, Japan, and Canada. Net revenues from overseas wealth management through Arc for 2024 were RMB 675 million. As of the end of the fourth quarter, we had 138 overseas relationship managers, up 55.1% from last year. Overseas AUA, including externally managed products, reached USD 8.7 billion, a year-over-year increase of 4.6%. Our wealth management had over 17,600 registered clients worldwide in the fourth quarter, an increase of 18.3% year on year. Among them, the number of accounts opened in Hong Kong reached 17,360, a year-on-year increase of 17.1%, while the number of accounts opened in Singapore reached 789, a year-on-year increase of 111%. For the full year, the number of active overseas clients reached 5,544, a year-on-year increase of 15.8%, with overseas production value hitting USD 4.3 billion, a year-on-year increase of 29.8%. In addition to continuously improving the functionality and user experience of our Hong Kong online wealth…

Thank you, Melo, and thank you, Zander, and greetings to everyone joining us today. Throughout 2024, the sluggish macroeconomic environment, increasingly stringent regulatory requirements, and shifting client preferences created significant headwinds for the wealth management industry. This challenging environment impacted our financial results during the year, with both full-year revenue and net income falling from last year. But while these challenges continue to impact short-term performance, as Zander mentioned, our business remains profitable and continues to generate solid cash flows. This presented opportunities for undertaking our organizational restructuring domestically and investing in overseas expansion to reposition ourselves for long-term sustainable growth while market sentiment could subdue. Building out new sales teams and infrastructure domestically and overseas is an expensive process, so it will take time to ramp up before it begins to meaningfully improve our performance. While we expect near-term pressure, our business will remain foundational changes. Position us for sustainable growth. It's already beginning to yield results for financials in 2024, reflecting the progress we have made expanding our portfolio of overseas alternative investment products. Additionally, we were ideally positioned to capitalize on the strong recovery of domestic capital markets starting in late September, which drove strong demand for RMB-denominated secondary products and partially offset the decline in revenue from private equity products. Let's get into the details of financials. Total net revenue was RMB 652 million during this quarter, down 18.5% year over year and 4.6% sequentially. Total net revenues for the year were RMB 22.6 billion, down 21.1% year over year. Notably, overseas net revenue reached RMB 1.3 billion in 2024, accounting for 48.1% of total net revenues, up from 43.5% last year. By region, domestic net revenues during the fourth quarter increased 18% sequentially to RMB 362 million, driven primarily by more than a 200% surge…

The transaction values of USD-denominated products reached USD 4.3 billion, up nearly 30% year over year, and accounting for 48.8% of total transaction value in 2024, compared to only 32.1% last year. Benefiting from the enhanced competitiveness of our overseas alternative investment product portfolio, USD private equity products totaled USD 663 million, up 44.9% year over year, and USD private secondary accounts, excluding cash management products, totaled USD 236 million, up 22.1% year over year. By the end of this year, USD-denominated AUM grew by 15.1% year over year to USD 5.8 billion, with USD-denominated AUA increasing by 4.6% year over year to USD 8.7 billion, reflecting our ability to capture a larger share of clients' USD wallets for investment products. Moving on to the income statement, we implemented rigorous cost control measures in 2024, driving down operating costs and expenses by 10.5% from last year. Specifically, full-year compensation and benefits decreased by 7.4%, reflecting improved employee efficiency. Selling expenses fell by over 40%, and general administrative expenses remained stable. Even during the fourth quarter's peak marketing season, we maintained a disciplined approach to expenses. Total operating costs and expenses for the quarter were RMB 514 million, a decrease of 11.1% year over year, and an increase of 16.1% sequentially due to seasonality. In line with revenue trends, operating profit declined in 2024, with a full-year operating profit margin increasing to 24.4%, partly due to reduced government subsidy. Net income for the year was affected by certain nonrecurring factors, including an increased effective tax rate of 31.5% in 2024. Additionally, due to our GP share of investments in the products we manage, a loss of RMB 112 million was incurred in equity and affiliates during the year. Taking these factors into account, our non-GAAP net income was RMB 132 million…

Then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Charlotte Liu with UBS. Please go ahead.

Hello, this is Helen from UBS. Since the beginning of this year, what has been the demand for investment products among high-leverage points? Which type of products has been more popular? What's our CRO's current investment strategy? And which types of products are being promoted? In the past three quarters, the sales of insurance products have declined year on year. Will this trend continue into 2025? In the future, which products will be the main source of revenue growth in terms of one-time commissions? My second question is about overseas business growth. Overseas revenue has been increasing quarter by quarter. It was just mentioned in the meeting that the United States is being used as a booking center. Can you provide information on our business development in the United States? Currently, which countries or regions are the main sources of overseas revenue growth? My last question, in this quarter, we have seen a sizable settlement reversal and contingent litigation reversal. Can you give us more color on that? Thank you.

Okay. Thank you, Helen. So I'll do a translation of my response. As mentioned, we published our newest edition of our CIO report in the first quarter of the year. The overall logic behind our house view is that we think the global market will remain very volatile due to various uncertainties. Our suggestion to our clients is to seek relatively certain investment products within these uncertainties. We also stress that global asset allocation is very important. In terms of client sentiment and demand, we saw the trend since the fourth quarter and also extending into the first quarter of this year that the investment sentiment and demand among Chinese high-net-worth clients have been rebounding. This is due to two main factors. First, the subdued investment sentiment since the COVID situation in China has reached a relatively bottom point before the fourth quarter last year. In the past few years, our clients and also Chinese high-net-worth clients did not engage in a lot of investment activities, but now we are seeing their confidence starting to pick up. Secondly, the market performance, whether it's the A-share, the H-share, Hong Kong stocks, or even US stocks, has been rebounding. So a lot of clients have come back to the investment demand. In terms of what types of products our clients currently prefer, liquidity is a major consideration among our clients. A lot of the popular market securities, hedge fund products, themselves are NAV-based and liquid. Some semi-liquid primary market products, such as private credits and infrastructure, are also very popular among our clients. Our concern or target is to enhance our product shelf to meet our client's demand while suggesting our clients engage in a global asset allocation strategy. In 2025, with advancements in the artificial intelligence industry, whether it's primary market or public securities, anything related to AI is also a very important investment theme for clients.

Thank you, Zander. The first response is related to insurance products. The insurance market, especially in Hong Kong, is still highly competitive because there are operations that are not compliant with regulatory requirements, including commission kickbacks. We never did anything like that. We stick to compliance and regulatory requirements, and we never kick back any commissions to clients. The difference between Noah and other insurance brokerage firms is that we provide our clients with overall asset allocation advisory, and insurance is part of that advisory or solution where we suggest our clients use insurance as a tool to protect the safety net of the overall portfolio. The clients we serve and the average ticket size of insurance is higher than the peers or other brokerage shops in the market. As Zander mentioned in the previous earnings call, the overall insurance premium increased by 30% this year. The decline group is still quite different from the market competition. Looking ahead to 2025, we think there will still be competition in the market. To counter that, we have worked with insurance firms or product providers to come up with discounted plans for our clients. This is on the product side rather than kicking back commissions. During the past year, we have seen the Hong Kong government coming out with many new requirements to counter noncompliance operations in the market, which is beneficial to compliance firms like Noah. The challenge is that a lot of the onshore wealth management platforms collapsed, and after they collapsed, a lot of the employees or their relationship managers turned themselves to do overseas insurance, so the labor supply in the market is increasing. Our overall strategy for 2025 is to use asset allocation overall advisory with multi-strategy and provide better value to our clients. We are working with insurance firms to increase our competitiveness in the insurance product segment. Helen also asked about our operations in the US. The US is a very important market and a planned booking center for our business. In 2024, our majority of focus in the US has been on the product side. We have four different teams in the US, and three of them are focusing on either investment or product selection. We are happy that recently and in the near future, we will be welcoming some top-tier talents joining us who have worked in top-tier hedge funds or fund managers previously. We think this will increase our competitiveness and effectiveness in terms of product selection and GP and fund manager coverage. We think that even though we are competitive in terms of our product selection and product shelf, to keep up the competitiveness, we need to continue to cover and work with the GPs, especially in the local markets in the US.

Regarding the US market, we are now constructing in four locations. We used to have two investment teams, one in Silicon Valley focusing on tech-oriented VC funds and another real estate team in New York. We are in the process of acquiring advisory capabilities that will allow us to have a third booking center in addition to Hong Kong and Singapore in the US market. We have built an OPM, which is the product selection center in Colorado, and have local cooperation with some local banking partners and another location in Irvine, Los Angeles, mainly serving our clients on the US insurance side and hosting various client activities. The new revenue from two additional locations is slowly coming into shape, but the capability of adding another booking center in North America, especially to serve Chinese immigrants in both the US and Canada, will give us a lot of advantages, especially competing with other Chinese background firms. Regarding the quarter four one-off reversal from accruals, it is a one-off event. The final outcome of a pending case was more optimistic or preferable for us.

Thank you. During 2024, especially in the first three quarters, the overall sentiment among Chinese investors in terms of investment reached a bottom. We have seen a rebounding trend since 2025. For example, we hosted a public market summit in Hangzhou, China, this month, and we had over 1,000 of our clients attending this summit. The feedback we got was that clients are now having more interest in listening to what the managers have to say, and they feel the urgency to act on investment. This is also the case in overseas markets, whether it's Hong Kong, Singapore, or Japan. We are seeing that Mandarin-speaking or Chinese clients are actively on the move, whether it's businesses going overseas or global investments or overseas investment opportunities. In terms of our CIO view, we think this is the moment for Chinese clients to adjust their strategic asset allocation, not only on the tactical side but within the strategic asset allocation side. This is also what we are doing to guide our clients to make changes in their asset allocation strategy. In the Hong Kong insurance market, the competition is not in a healthy state. On the product side, the expected rate of return of the insurance product used to be ordinarily high, and we are seeing that the Hong Kong government is now stepping in to make adjustments to the expected rate of return or investment return on these products. In the competition side, there are quite a lot of so-called family offices or multifamily offices that are not really operating like family offices. Their clients' feedback is that they don't feel like they are served well. Our strategy for Noah is to serve large clients and use global asset allocation strategy to serve larger clients. In terms of insurance, we are trying to learn and adjust to different markets. That's why we are engaging the new commission-only agent space to acquire new clients, similar to what some other firms are doing. For our in-house relationship managers, insurance acts as a tool to help our clients secure their safety net in their portfolio asset allocation.

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

Thank you for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan. I have two questions. My first question is regarding the first quarter top trend. Can you give us an update on the first quarter trend in terms of client sentiment and the wealth management product sales in the first quarter? With the completion of our domestic strategic transformation and some improvement in domestic investment sentiment since late 2024, how should we expect our 2025 revenue trend? Can we expect the revenue to see a stabilization target category or some recovery in 2025? My second question is regarding the overseas RM. We noticed that the number of overseas relationship managers has declined by 5% sequentially in the fourth quarter and fell short of the previous target of 200 for 2024. I wish to understand more about the reason behind this relationship management adjustment in the fourth quarter last year and what will be our overseas RM headcount outlook for 2025. I also wish to understand our overall headcount outlook for 2025. Thank you.

Thank you, Peter, for your question. On the first question related to investment sentiment right now and the outlook for the financials in 2025, the overall trend, as we previously mentioned, is that we see clients' investment sentiments have been rebounding significantly. We saw the trend starting since last year's year-end flagship Black Card and Diamond Card client summit, which was the largest in terms of scale in our history in terms of client coverage and the number of clients attended. We hosted these summits in key major cities in China, as well as five sessions in Hong Kong alone. The feedback we got from clients was that it's very rare to have these large-scale and high-quality events for individual investors or high-net-worth investors because, on one hand, a lot of Chinese wealth management firms have exited this market, and some foreign firms are less motivated to host these events given the market condition. The clients who attended our summits tell us that the quality of the content and the scale is probably the best in the industry. We did a data summary that over 90% of our diamond card and black card clients are overall profitable. This is also our most important client base and a reflection of the quality of asset allocation advice that we continue to provide to our core clients. Chair Lady also mentioned that this month, we hosted a public security summit in Hangzhou, which has been quite a hot city considering all the technological investments, for example, Deep Search, which is also based in Hangzhou. We hosted two days with over 1,000 clients attending. We saw that the clients are very active and keen to learn and listen to what the managers have to say, and they think that the investment market in China…

Thank you, Chair Lady. One more point is that, as we mentioned, we've broken down our sales team into different business and licensed segments. On our client perspective, they also need time to get used to it because previously, they used to deal with maybe one RM who takes care of all their needs. But right now, each client needs to deal with sales personnel from different business units, which in the long term will be beneficial because of the different expertise every RM specializes in. But it does take more time for our clients to get used to. That's also a near-term challenge for us. Peter, I hope that answers your question.

This concludes our question and answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.

Thank you. Thank you so much.

Bye.