Please note, this event is being recorded. I would now like to turn the conference over to Doreen Chiu, Investor Relations. Please go ahead.
Thank you and welcome and good morning everyone to Noah's first quarter of 2026 earnings conference call. Joining me on the call today are Miss Wang Jingbo, the Co-Founder and Chairlady. Mr. Zander Yin, the Co-Founder, Director and CEO, and also Mr. Grant Pan, the 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. They will all be available to take your questions in the Q&A section that follows. Please note that the discussion today will contain forward-looking statements that are subject to risks and uncertainties that may cause actual results that vary 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. I would like to pass the call over to Mr. Yin. Please go ahead.
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Investors and analysts, thank you for joining Noah Holdings first quarter 2026 earnings conference call. As we start 2026, the pace of Noah's transformation has become clearer than ever before. In the first quarter, we observed three increasingly visible trends. First, our profitability structure continues to improve, with operating margin reaching one of the highest quarterly levels in recent years. Second, our domestic business is regaining momentum in core investment and asset allocation, with both active clients and transaction value achieving double-digit growth. Third, our overseas business continues to advance in line with our strategy of proactively adjusting our revenue mix, while a new operating model driven by globalization and AI gradually takes shape. Before going into a more detailed review, I would like to share two milestones in our global footprint that we recently achieved.
Our Japan office officially commenced operations on May 4th, and our U.S. broker-dealer license has completed the final approval process with key team members set to officially join in June. These two developments mean that our network is entering a new phase, moving from license deployment to operational execution. Next, I would like to share our progress from four perspectives: financial performance, domestic business, overseas business, and AI strategy.
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Quarter, we recorded net revenues of RMB 626 million, up 1.8% year-over-year, down 14.7% quarter-over-quarter. The sequential decline was mainly due to a further decrease in contribution from the insurance business, as well as a seasonal decrease in performance fee income from overseas private equity products following concentrated year-end recognitions. On the profit side, benefiting from our disciplined execution in cost control, organizational streamlining, and expense management, operating profit reached RMB 236 million, up 27.1% year-over-year. Operating margin was 37.8%, marking one of the highest quarterly levels in recent years.
Non-GAAP net income was RMB 134 million. It is important to note that this quarter's strong margin performance benefited from continued optimization in our business mix and further release of additional organizational efficiency. We expect full-year operating margin to remain in a healthy range above 30%, although quarter-to-quarter fluctuations are natural due to product mix and expense timing. This quarter also marked our 62nd consecutive quarter of Non-GAAP profitability since listing. This is the discipline we have maintained across multiple market cycles.
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Quarter, our active clients reached 10,742, up 21.8% year-over-year. Transaction value reached RMB 23.3 billion, compared with RMB 16.1 billion in the same period last year. In our domestic business, transaction value of RMB-denominated mutual fund products reached RMB 9.9 billion, up 131% year-over-year, while transaction value from RMB-denominated private secondary products reached RMB 5.3 billion, up 61% year-over-year. Noah Upright recorded net revenues of RMB 208 million, up 63% year-over-year, mainly driven by a doubling in public fund transaction volume as a result of structural opportunities in the A-share market, together with a rapid recovery in RMB-denominated private secondary fundraising. This series of changes shows that when we refocus our resources on products and investment capabilities with genuine long-term value, the operating performance of our domestic business improves structurally. At the same time, we have become even clearer about the strategic direction of our domestic business going forward.
For our domestic business, we will continue to focus on the secondary market and building our asset allocation capabilities, with key priorities including public mutual funds, private secondary market products, AI-driven client operations, and Noah Upright's fund distribution platform capabilities. We will continue to drive the enhancement of our operations in these areas. We believe the domestic wealth management industry is gradually moving away from the past stage, which was driven by real estate and non-standardized products, and returning to a true long-term era centered on investment, research, and asset allocation.
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As of March 31st, overseas registered clients reached 20,373, up 11.9% year-over-year. Overseas AUA was $9.6 billion, up approximately 5.9% year-over-year. Transaction value of U.S. dollar-denominated products was $1.15 billion for the quarter, broadly flat year-over-year. Our overseas client base and AUA continue to grow steadily, and the pace of our revenue mix adjustment is consistent with the view we shared during our third quarter earnings call last year. Over the past few years, we have continued to build our presence across key regions serving global Chinese clients, including Hong Kong, Singapore, Japan, Canada, Europe, Australia, and the United States. What we are seeing more clearly is that global Chinese clients are entering a new stage. Their assets, families, identities, education, and next generation planning are becoming increasingly globalized.
In the past, serving global Chinese families across multiple jurisdictions, languages, and generations was a business that relied heavily on individual experience and was extremely difficult to scale or replicate. For the first time, AI makes it possible for this kind of service to be globally coordinated in a systematized, platformized, and scalable framework. This is why we believe one of our most important long-term positions is not only to be a wealth management institution, but also becoming a global wealth management platform serving Chinese high-net-worth families around the world.
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Over the past two decades, the logic to drive growth in the wealth management industry was clear but linear. One more relationship manager meant more revenue. One more client relationship meant more assets. This logic worked well in the past, but it also meant that the industry's expansion was structurally constrained by labor costs and overall management of the organization. Our view is that AI is fundamentally changing this equation. It is not simply adding another efficiency tool. It is redefining the front office structure of the wealth management industry. In the past, wealth management was primarily driven by a single RM model. Today, we are gradually forming a new model driven by the collaboration of three front office engines. First, AI enhanced relationship managers. RMs remain the most important long-term driver of strong client relationships. AI is significantly enhancing their ability to cover clients.
In the future, RMs will focus more on deep client engagement rather than repetitive process work. Second, AI wealth management department. This is a new type of front office team that we are actively building. The AI wealth management department does not rely on traditional headcount expansion. Instead, it uses AI to drive client operations, content services, allocation support, and global collaboration, enabling a lighter organizational structure to serve broader client needs. Singapore is the first fully developed testing ground for this model. Over the past quarter, AUA in Singapore grew by approximately 192% year-over-year, and revenue generation per capita reached 8.5 x. This is the first validation that without materially expanding the number of relationship managers, AI can elevate individual service capacity, breadth of coverage, and professionalism of asset allocation by an order of magnitude. Third, AI plus ecosystem expansion.
We believe the future of wealth management will not belong only to the internal RM systems of large institutions. More and more independent financial advisors, family offices and external professional firms need a platform that can provide a global asset supply chain, an AI workbench, a compliance foundation, global execution capabilities and brand credibility. We are gradually building this ecosystem. We believe these three engines will together form our growth drivers going forward, and the future competitive landscape of the wealth management industry will no longer be defined simply by who has more RMs, but by who has stronger AI capabilities, who has a more complete global compliance network, who has deeper customer context data, and who has more replicable platform based service capabilities. This is our most important strategic vision for 2025- 2026.
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Based on this strategic vision, we have made substantive progress at three levels. First level, enhancing organizational efficiency. Last year, while maintaining stable net revenues, our total headcount declined by approximately 11% compared with 2024. In the first quarter of this year, headcount further declined by approximately 3% quarter-over-quarter. Behind this is the gradual embedding of AI into key areas such as client interaction, content generation, and operational processes, enabling the same revenue scale to be supported by a more streamlined organization. This is the first direct evidence of returns on our AI investments. Second level, productization of operating capabilities. Our AI RM platform officially went live in the third quarter of last year. It covers client research, generation of allocation recommendations, service record keeping and content output, and is being integrated in parallel across our four booking centers. AI is no longer just a back office tool.
It is becoming a collaborative partner for our RMs. Third level reconstruction of the operating model itself. AI is not a PowerPoint concept for our organization. It has already become a new operating system that can generate real business results and has the potential to be replicated globally. Supporting these AI capabilities is the global platform foundation we have already built. Our three global platforms ARK, Olive and Glory, support client and account execution, asset management and insurance, trust and inheritance services, and our four booking centers in Shanghai, Hong Kong, Singapore and the United States together form our compliance and execution infrastructure. Going forward, our long-term AI build out will continue to advance across four dimensions, clients, relationship managers, products, and governance.
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Remainder of 2026, our work will continue to focus on the three priority areas clearly set out by our chairlady in her 2025 letter to shareholders. First, expanding our overseas client base. Second, further growing our global asset allocation capabilities. Third, continue to optimize the revenue structure of Olive, our asset management business. Lastly, deepen AI applications in our core operating processes and gradually expand global collaboration capabilities within a compliant framework. As of March 31st, we held RMB 5.13 billion in cash equivalents, and short-term investments, maintained a healthy balance sheet with zero interest-bearing debt. The board announced a dividend proposal for approval at our shareholders meeting, including a special dividend that brings the total payout to 100% of full-year 2025 non-GAAP net income. Subject to approval at the June 11th meeting, the plan will be implemented.
This would extend our shareholder return framework for a third consecutive year based on 100% of non-GAAP net income. We will continue to invest in globalization and building AI capabilities while maintaining financial discipline. We are still in the midst of our transformation. The short-term pressure points are visible, but the logic of our long-term operating model is becoming clearer than ever before. The first quarter is not the destination. It is more like a starting point where our new operating model is beginning to be validated. We are evolving from a traditional wealth management institution into an AI-driven global platform serving Chinese families around the world. This process will not happen overnight, but our direction is becoming increasingly clear. Thank you. I will now hand the time over to CFO, Grant, to review our financial performance in greater detail.
Thank you, Zander, and good day to everyone joining us. The first quarter of 2026 marked a solid start to the year and continued progress on transition toward a more investment-led and quality-driven global wealth management platform. I would like to highlight three key messages. First, while total revenue remained stable, the quality of our revenue mix improved meaningfully, driven by strong growth in investment-related fundraising fees and performance-based income. Second, disciplined cost management and structural efficiency initiatives delivered substantial operating leverage. Operating profit increased significantly and operating margin expanded further. Third, reported net income was affected by non-operational volatility. This mainly reflected mark-to-market accounting adjustments on a specific listed investment recorded under income from equity and affiliates. Excluding that specific mark-to-market impact, non-GAAP net income would have reached RMB 216 million, up 28% year-over-year.
For the first quarter, total net revenue was RMB 626 million, up 1.8% year-over-year. This stability was achieved despite a deliberate 49.9% reduction in insurance-related revenue as we continued to optimize our business mix. One-time commissions were RMB 113 million, up 5.9% quarter-over-quarter. Within this, commissions from newly raised investment products increased to RMB 53 million, up 46.1% year-over-year and 41.6% quarter-over-quarter. Recurring management fees were RMB 379 million, down 3.4% year-over-year and 2.5% quarter-over-quarter. Performance-based income reached RMB 100 million, up 253% year-over-year, primarily driven by strong realization from RMB-denominated private secondary products. Overall, the quarter further demonstrates our continued shift toward a higher quality investment-led revenue structure. Our lean operating model continues to deliver measurable financial results, with AI increasingly serving as the structural driver of efficiency.
Total operating costs and expenses declined to RMB 389 million, down 9.2% year-over-year and 18.1% quarter-over-quarter. As of the end of the quarter, group headcount was 1,726, down 10.4%, leading personnel costs to decline 12.2% year-over-year to RMB 267 million. This reflects productivity gains rather than business contraction. Our AI strategy focuses on improving output per capita and operational efficiency. AI-driven tools now support client engagement, automated reporting, suitability processes, and routine workflows that previously required manual intervention. This enables us to scale global operations when maintaining disciplined cost control and service quality. SG&A were RMB 103 million, down 10.8% year-over-year, and 35.1% quarter-over-quarter. Total operating cost expenses were RMB 389 million, down 18.1% compared to last quarter. As a result, operating profit increased to RMB 236 million, up 27.1% year-over-year.
Operating margin therefore expanded to 37.8%, compared with 30.3% in the first quarter of last year. Excluding government subsidies, operating profit was RMB 236 million, up 33.7%. These results highlight the scalability of our platform and financial benefits of our structure optimization. Below the operating line, investment interest and other income totaled RMB 19 million. Interest income remained RMB 32 million. Investment income was RMB -2 million. Foreign exchange loss was RMB 6 million, and contingent expenses was RMB 3 million. Share of losses from equity and affiliates was RMB 65 million. As a result, Non-GAAP net income attributable to Noah was RMB 134 million, with a margin of 21.4%. Total transaction values reached RMB 23.3 billion, up 44.8% year-over-year and 37.5% quarter-over-quarter.
U.S. dollar denominated private secondary products reached $293 million, up 161% year-over-year, when RMB denominated private secondary products reached RMB 5.3 billion, up 61% year-over-year. This fund raising momentum directly supported the growth in investment related commissions and reinforced our strategy. As of the end of the quarter, Group AUM was RMB 140.2 billion, and AUA was RMB 233.5 billion. Total AUM and AUA at the group level declined, yet our U.S. dollar denominated base continued to grow. Overseas AUM reached U.S.$6.2 billion, up 5%, and overseas AUA reached $9.6 billion, up almost 6% year-over-year. Total Diamond and Black Card clients reached 9,029. Overseas Diamond and Black Card clients reached 1,781, up 3.8% quarter-over-quarter, reflecting continued traction in overseas markets. Our balance sheet remains strong and highly liquid.
As of the end of the quarter, cash and cash equivalents were RMB 4.3 billion and short-term investments were RMB 834 million. Total assets were RMB 11.6 billion, and total liabilities were RMB 1.7 billion. Our asset liability ratio remained low at 14.5%, and our current ratio was 4.8 x, providing ample flexibility for growth and shareholder returns. We believe our current market valuation does not fully reflect the strength of our balance sheet, the resilience of core earnings, and the scalability of our operating model. With shareholders' equity of about RMB 9.9 billion, the company is trading at roughly 0.5 x book value, when delivering an annualized return on equity of approximately 5.4%. In our view, this does not adequately reflect our intrinsic value and long-term earnings potential.
Since the beginning of 2020, we have repurchased 2 million ADS for approximately $20 million, representing about 2.7% of outstanding shares. Since launching the program shareholder return in 2024, we have cumulatively repurchased 3 million ADS for $35 million. We have declared to distribute 100% of our non-GAAP net income as dividends for the third consecutive year. These actions reflect management's confidence in the company's intrinsic value and our commitment to enhancing long-term shareholder returns. In summary, the first quarter reflects disciplined execution of our strategic transition. Revenue quality improved, operating leverage strengthened, and AI-driven productivity gains continued to enhance structural efficiency. While reported earnings were influenced by non-operational volatility, the underlying trajectory of our core business continues to improve.
With a fortress balance sheet, a leaner and more scalable operating platform, and continued capital returns through share repurchases, we believe the company remains fundamentally undervalued relative to its intrinsic strength and long-term earnings potential. We remain fully committed to disciplined execution, prudent capital allocation, and sustainable long-term value creation. Thank you, everyone. We'll now open the floor for questions.
Thank you, Grant. Thank you, Mr. Yin, for the presentation. Operator, please open the floor for questions.
Thank you. We will now begin the question and answer session. To ask a question, please press star then one on your telephone keypad. If you are using a speakerphone, please pick up the 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. Your first question today comes from Calvin Leung from Citi. Please go ahead.
[Non-English content]. I'll quickly translate my question. Thanks for taking this. This is Calvin Leung from Citi. Last Friday, China tightened the regulations on cross-border brokerage businesses. What is management's view on the evolving regulatory landscape on this front, and what is the potential impact to Noah's domestic market business? Considering a few offshore brokers were fined by regulators regarding their unauthorized brokerage businesses, what is management's take on the compliance risk in domestic market going forward? Thank you.
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Let me do the translation. The CEO confirmed that the company has paid attention to this news. We have to emphasize that this is not exactly a news happening, but more like a reinforcement of an existing rule that has been introduced to the market a couple of years ago. We would like to emphasize that the company has been always compliant to legal requirement under different jurisdictions, and particularly for the overseas accounts that have been opened, it's all under the compliant requirement. Under say, for example, in Hong Kong, would be all the KYC requirements and all that. Also about the money transfer into this investment account is from legitimate financial institute operator and under HKMA regulation. That all the money transferred in the investment account is from those validated financial institutions.
Having said that, the security business, the revenue contribution to the company is rather small. All in all, we don't see much impact to Noah for our business model. We must once again say that all of our operations under different jurisdictions have been always compliant to the legal requirements.
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The Chairlady further supplemented on the answers. The company's been paying huge attention to these newly executed rules and situation. We've immediately reviewed our internal procedure according to the SFC requirements.
We are very comfortable to say that we are fully comply with the legal requirement, and that is not only in Hong Kong but across Singapore, USA, all of our booking centers. Slightly different from these securities online platform, what we serve is the global Chinese high-net-worth. As a slightly different from the business model, and having said that, security business is only contributing less than 1% to our total revenue. We further emphasize again, all the money transfer to the investment account are from overseas banks, none, zero of the money transferred into the investment account is from China Bank. She's slightly optimistic that maybe this could be a chance for Noah, because we have been always compliant to regulations.
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iARK, which is our app for security trading in the company, and all the operational system and also the technical supporting systems are all placed in overseas market and overseas like in Hong Kong. Also for iARK, we have zero employees that basically refers to iARK in the domestic market. Again, we are fully compliant to the requirement of SFC and CSRC.
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Further, the company is already reviewing the referral requirement for the business from domestic to overseas according to the legal requirement. Calvin, I hope that answers your question.
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Thank you. Your next question come from Peter Zhang from JP Morgan. Please go ahead.
[Non-English content]. Thanks for giving me the opportunity to ask this question. This is Peter Zhang from JPMorgan. I have two questions. First is I will notice that wealth management product transaction volume has pick up sequentially in first quarter, which is a really good trend. We are wondering what's the operating trend in second quarter? Do we see continual strong investment sentiment in our clients? How's the clients demand for domestic and overseas investment products? Secondly, my question is on the cost side. We have a really good cost control in first quarter. I'm wondering whether management can share what's the full-year guidance for our head count growth and operating expense trend. Thank you.
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Yes. Thank you CEO. Back to Peter's question, appreciate for what is asked. We will want to answer the question divided into two parts, which is the domestic market and also the overseas market. We must admit that for investment sentiment, a lot of time is affected by the entire market situation.
That's why we've been seeing that in 2025 and 2026 until now, the investment sentiment has been a lot improved compared to two years ago. However, what we've been really doing is not just getting business according to the market situation. What we've been doing is really trying to promote the idea that we've been helping clients to do the wealth management, which is to diversify their assets into different classes and different products so that they can have a better portfolio. That we have been seeing the progress in the domestic market. For overseas market, one of the things about being a wealth management company is the ability to getting the good product. According to the CIO report and also in the current market condition, AI has been a very important idea for investment idea.
That's why we have different product that is AI related from infrastructure to AI company. That we've been doing that and also again, promote the same idea of helping clients to do their wealth allocation for a better portfolio. That we believe that with all this good quality product on hand, we should see a better sales allocations as a result. We must also emphasize that in terms of the selling abilities that now we've been using AI to support the company or the RM to do the clients risk analysis. We've been promoting products according to the client's needs that is more specific instead of doing the mass promotion like in the past, which again, we believe that we should enhance the efficiency of our selling and ultimately the selling results for the company.
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When we reveal history of Noah, we've been talking about to protect our clients asset before growing in 2022. In 2023, it's about all this pricing entity in China that is going overseas market. Since last year we talked about AI, and for this year we emphasized in AI infrastructure product. What we've been demonstrating here is we are a real wealth management company. What we are doing is about how to make sure our clients asset can be well protected and ultimately have growth. Different from a lot of our friendly, not exactly competitors, but our peers, then I would say we always reveal how much profit our clients make every year. That has been a very key KPI for the staff here.
In a simple way saying that the company couldn't control a lot of things like the market cap or if the size of the company can grow drastically. However, if we look at what we've been doing with our clients, when we look at with the profitability for over 62 conservative quarters, when we have been looking at all these right decisions in the past, in history, we are confident that we've been able to keep up with the company and ultimately we'll be seen by the market.
I'll take Peter's second question. We actually don't have a set agenda or set target for frontline teams, obviously, although we see a declining number of items, but that's really driven by performance. As you could see, we're still achieving a much higher fundraising volume because of the higher quality and higher efficiency. We don't expect to have, I would say, intentional shrinking of the frontline team. We want to make sure, obviously they're fully occupied and able to generate enough volume as CEO and Chairlady just mentioned, there might be opportunity given the current policy situation. At the same time, obviously, we are targeting mid-back office efficiency, especially with the tool of AI.
We believe that many positions in the past that basically being performed by pure labor or pure hands are now being at least consolidated or merged into fewer positions. That actually leads to a significant, I would say, optimization in mid-back office structure. In the meantime, I think from the standpoint of whole year, although we don't expect to see huge expansion or growth in headcounts, we are going to see some key fulfillment in key markets worldwide, although just a couple of people. Obviously, we'll continue to invest in AI and technology. Peter.
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Okay.
Thank you. Once again, if you would like to ask a question, please press star then one and wait for your name to be announced. Your next question comes from Yiming Tang from CICC. Please go ahead.
[Non-English content]. I will translate my questions. This is Yiming from CICC. I have two questions. First is transaction value, active client numbers and RM numbers for overseas business declined. Could you please talk about the reasons? You mentioned overseas business has moved from a license setup to formal operation. What's the growth outlook for this segment going forward? My second question is about AI. The AI wealth management department in Singapore has delivered much stronger revenue generation and client service efficiency. Could you please talk about how AI helps RM develop their business? Thank you.
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About your question about overseas business performance, we do see that a sequential drop in first quarter. However, when we look at the year-on-year, we still see a growth as reflected that we believe that is a normal performance across different quarters, various changes. About how AI has been enhancing our RMs. I guess we've been slightly touch base on the current way of doing business. We are now trying to be more focused and more accurate in picking products to certain clients. We've been able to distinguish a higher level of clients, so that we can be more efficient in terms of suggesting products to our clients and allocate the resources that we have on hand.
Also we have introduced Noah rewarding system since late last year, and that is more like a rewarding system we've been providing certain rewards to our clients. That again, would be focused on higher quality clients. That as a whole means that our selling methodology could be a better allocator in terms of our resources.
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As you may aware, we've been basically fully licensed in Hong Kong, and in Singapore we have different types of license under the regulatory of MAS, and we're currently applying for the asset management license as well. Back to your question about the U.S. markets booking center license. Again, it's one of the important steps that to complete the development of we are having a very important strategic booking centers for the company. After the license being granted, we are now working on the details of really applying business in that market. That we believe is going to be a very important strategic move for the company.
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The Chairlady is now doing a public, not announcement, but suggestion to our analysts. When you are doing the analysis of the company, maybe no longer we should use the RM as the indicator, or number of RMs as the indicator. The company needs business size in the future. What we've been trying to suggest that because of the enhancement of AI, all the human RMs have been supported in the first hand. Secondly, we have built up the AI plus wealth management department. As in the CEO's presentation, we've talked about how this AI plus wealth management has been able to do or to support, to take care of our clients, without enhancing more human resources on that. Also what we've been further development is the AI plus ecosystem.
That is more like a referral business to cooperate with different types of professional individuals in the market. That should help us to get clients under the AI plus wealth management system. Using Singapore as an example, yes, Singapore is not an easy market. It's small but competitive, and it's really difficult to hire the right RM. The cost will be very high. That's why we've been using AI as a testament when we started in this market. We have found out that we have been getting very good results from that market, that as mentioned, we have 191% growth in AUA in the first quarter. That's why we've been going forward to try to apply the same system into different overseas markets as well. Ultimately, we would like to apply that in the domestic markets too.
Some limitation of the historical structure and also because of the different AI systems, that may be slower. We should expect that the AI application to different overseas markets should be bringing results to the company in the near future.
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Is there any more questions?
Thank you. There are no further questions at this time. This concludes our question and answer session. I would now like to turn the conference back over for any closing remarks.
Thank you. Thank you everyone for joining us today, and please feel free to reach out the IR team for any further questions. Thank you very much.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.