Noah Holdings Limited (NOAH) Earnings Call Transcript & Summary

Good day, and welcome to the Noah Holdings Limited Second Quarter and Half Year 2026 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Doreen Chiu with Investor Relations. Please go ahead.

Thank you. Good morning, and good evening, everyone. Welcome to Noah's Second Quarter 2026 Earnings Conference Call. Joining me on the call today are Ms. Noah Wang, Co-Founder and Chair Lady; Mr. Zander Yin, Co-Founder, Director and CEO; Mr. Grant Pan, CFO; and Mr. Jason Wu, Deputy, 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 to vary materially from those in our forward-looking statements. Potential risks and uncertainties include, but 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 the applicable law. With that, I would like to pass the call over to Mr. Yin, CEO. Please go ahead.

[Interpreted] Good morning, everyone. Thank you for joining Noah Holdings Second Quarter 2026 Earnings Call. As we entered the second quarter, Noah's transformation reached a new stage. On our first quarter earnings call, we said that Q1 represented the beginning of the validation of Noah's new operating model. After the second quarter, I believe we can take that conclusion one step further. Revenues associated with our legacy model are being phased out in an ordinary manner, while our new operating model is not only being validated, but it's also beginning to generate revenue, asset growth and profit. Most importantly, our AI wealth management department, a new AI-enabled front office operating model we have been developing over the past year has now established its first meaningful proof points in Singapore. This quarter, we observed 3 developments that have become increasingly clear. First, Singapore has proved the first meaningful validation of our AI wealth management department model in approximately 10 months and the business achieved monthly profitability in July. Second, performance-based income reached RMB 238 million in the first half of the year, demonstrating how the growth investment capabilities we have built over many years are increasingly translating into earnings. Third, while our total employee headcount declined 17% year-over-year, U.S. dollar-denominated AUM increased by 11.7%. More importantly, our overseas RM headcount declined by 36.2% year-over-year, while overseas assets continued to grow. This suggests that we are beginning to decouple asset growth from RM headcount growth, a relationship that has historically been highly linear in traditional wealth management. This is also the most important message we would like to communicate to the market today. For Noah, AI is no longer simply about improving efficiency or reducing costs. It is beginning to change how we organize our front office, how we serve clients and how we expand globally. Today, I will discuss our financial performance, our Mainland China business, our international business and our key priorities for the second half of the year. In the second quarter, we generated net revenue of RMB 620 million. Operating income was RMB 216 million, up 34% year-over-year with an operating margin of 34.8%. Non-GAAP net income attributable to Noah was RMB 238 million, up 25.9% year-over-year and 77.8% quarter-over-quarter. For the first half of the year, net revenues were RMB 1.25 billion, broadly flat year-over-year. Operating income reached RMB 452 million, up 30.3% year-over-year with an operating margin of 36.3%, representing an improvement of 8.4 percentage points from the same period last year. Non-GAAP net income was RMB 372 million, up 3.9% year-over-year. This quarter also marked Noah's 63 consecutive quarter of non-GAAP profitability since our IPO. While total revenue remained broadly stable compared with last year, the composition of our revenue and our operating efficiency has changed meaningfully. I would like to explain this change clearly. On one hand, revenues associated with the legacy model are being phased out in an ordinary manner. Net distribution income declined 36% year-over-year in the first half, including a 53.8% decline in insurance-related products. This contraction reflects deliberate strategic choices we have made. I will discuss the Mainland China and international business separately in more details later. On the other hand, revenues associated with our investment capabilities are increasingly being realized. Net performance-based income or what we call carry reached RMB 238 million in the first half, up 364% year-over-year. Distribution income from investment products increased 13.4%. Investment income was RMB 39.79 million compared with a loss in the same period last year. At the same time, operating efficiency continued to improve. Operating costs and expenses declined 11.6% year-over-year in the first half, including a 12.7% reduction in personnel costs. These improvements reflect both disciplined cost management and organizational streamlining. But more importantly, we believe that they reflect a structural change in how Noah is beginning to operate. We are now increasingly operating with a leaner, more digitalized model that relies more on platform capabilities and less on simply adding headcount. This is one of the structural outcomes we are beginning to see after several quarters of sustained investment in AI. Our view of the earnings structure is clear. During the transformation period, carrier realization and cost discipline provide support for profitability. And for recurring revenues to return to sustainable growth, new growth engines must come online. The AI wealth management department is one of new growth engines we are now actively validating. This will be one of management's most important priorities in the second half of the year. We maintain the outlook we provide on our first quarter earnings call. We expect our full year operating margin to remain at a healthy level above 30%, while quarterly results may naturally fluctuate depending on product mix and the timing of expenses. Carry is not a onetime outcome driven by luck. It is the result of a long-term systematic investment capability that can continuously generate value across investment cycles. Our underlying model consists of 3 layers. The first layer is investing as an LP in leading global funds, which gives us exposure to the most advanced industry insights and investment opportunities. The second layer is using our fund of funds portfolio to broaden that information network and observe the collective investment decisions of leading global investment institutions. The third layer is co-investment and direct investment, where we convert the information advantage accumulated through the first 2 layers into more concentrated sources of potential return and carry. Together, these 3 layers from the foundation of our continuously evolving product portfolio. Funds established in different vintage are at different stages of their life cycles. As earlier funds progressively enter the harvesting period, they create the foundation for recurring carry. Realization rather than dependent on any single investment or exit. At the same time, AI and data capabilities are further strengthening this investment system. On the asset side, we positioned ourselves relatively early in several core segments of the global AI value chain, and many of these assets remain in the early to middle stages of value realization. We look through these 60 underlying funds and use institutionalized data system and cross-validation to understand what leading GPs are investing in together, where they are increasing their exposure and where capital and industry trends and converging. On the client side, AI is helping us address another equally important question. It is not only about selecting the right products, it is also about identifying the right client and matching the right product with the right client at the right time. Investment judgment, client understanding and asset allocation are increasingly being connected through data. The deeper the data becomes, the more precise our judgment can be. When clients achieve strong investment outcomes, the investment rates and AUM can increase, which in turn creates the potential for future carry. This is the long-term flywheel we are working to build. Our Hong Kong platform has historically distributed cumulative USD 158 million in carry already, demonstrating a track record of actual realization. Of course, alternative investments are inherently cynical and carry will fluctuate from year-to-year. We will not normalize or make linear assumptions around carry, and we will continue to provide updates each quarter. In terms of transaction values, total fundraising reached RMB 40.5 billion in the first half, up 22.4% year-over-year. U.S. dollar-denominated product fundraising reached USD 2.45 billion, up 8.4% year-over-year, accounting for 41% of the total. As of end June 30, group AUM returned to sequential growth and reached RMB 140.9 billion. U.S. dollar-denominated AUM reached USD 6.5 billion, up 11.7% year-over-year, while U.S. dollar-denominated AUA reached USD 9.78 billion, up 7.5%. Our balance sheet remains strong. As of June 30, we held approximately RMB 5 billion in cash, cash equivalents and short-term investments with 0 interest-bearing debt. We also made important progress this quarter in resolving the legacy Camsing matter. During the first half, we completed the issuance of shares to clients who had previously entered into the settlement agreement. In the second quarter, we introduced a new settlement proposal for clients who had not yet settled and the number of investors accepting the proposal continues to increase. Given the adequate proposition we made previously record, we recognized a partial reversal during the second quarter. The uncertainty associated with this legacy matter has now been meaningfully reduced. Our Mainland China business continued in the direction we established in the first quarter, returning to the fundamentals of investment and asset allocation with greater focus on standardized assets that offer sustainable long-term allocation value. In the second quarter, Mainland China generated net revenues of RMB 384 million. For the first half, net revenues totaled RMB 776 million, up approximately 20.7% year-over-year. Noah Upright raised RMB 8.27 billion in the first half and generated net revenues of RMB 414 million, up 59.8% year-over-year. For Upright, our operating philosophy is becoming increasingly simple. The most important measure of success is whether our clients make profits. We focus on client profitability, client retention and weighted investment returns. Our current product shelf is primarily focused on defensive strategies such as market neutral quantitative strategies and CPAs. In the current market environment, we are not pushing scale for the sake of scale. Instead, we are placing greater emphasis on asset quality, client investment outcomes and long-term trust. Noah generated net revenues of RMB 341 million in the first half, broadly flat year-over-year. Our Mainland China insurance business generated net revenues of RMB 382 million in the first half. We have proactively reduced and gradually exit the traditional high commission protection product model, shifting instead to a comprehensive services such as family succession and inheritage planning. This adjustment began before the relevant regulatory requirements and reflected our own long-term assessment of client value. The future positioning of our Mainland China business is becoming increasingly clear. We will focus on secondary market investments, serve clients through professional investments and asset allocation capabilities and use AI to improve client engagement and service efficiency. Let me first review the numbers for our international business. Net revenues from the International segment were RMB 469 million in the first half, accounting for 37.7% of group net revenues and declining 21.9% year-over-year. This decline needs to be understood in context. Nearly 90% of the decline came from the deliberate contraction of our insurance business and the exit from legacy referral channels. Excluding those 2 factors, revenue from U.S. dollar-denominated investment products were broadly flat year-over-year, while our client base and assets continue to grow. U.S. dollar-denominated AUM increased 11.7% year-over-year. As of end June, registered overseas clients reached 21,059, up 11% year-over-year. Overseas diamond and black card clients reached 1,791, up 8.9%. Active overseas clients reached 3,494 in the second quarter, up 8.5% sequentially. Our assessment of the current stage of our international business, therefore, remains unchanged. We are not losing clients on assets. The legacy engines are simply being phased out faster than the new engines are coming online. This is consistent with the revenue mix transition we have discussed with the market over the past several quarters. However, one development in the second quarter is particularly important. As of the end of the second quarter, overseas RM headcount was down 36.2% year-over-year, while U.S. dollar-denominated AUM increased by 11.7%. Under the traditional wealth management operating model, these 2 outcomes would rarely occur at the same time. Historically, the industry's growth formula has been straightforward, more RM leads to more clients. More clients lead to more AUM and more revenue. However, the past year, we have been working to change that equation. On our first quarter earnings call, we introduced the 3 front office engines that we believe will define Noah's future operating model. First, AI-empowered RMs; second, the AI wealth management department; and third, AI+ ecosystem expansion. After the second quarter, we are beginning to see the second front office engine, the AI wealth management department, move from an organizational concept into a real operating model. So what is the AI wealth management department. It is not simply about giving traditional RMs a few additional AI tools. At its core, it represents a new way of organizing the front office of a wealth management business. Historically, one client was typically associated with one RM. The client experience, product understanding, frequency of engagement and often a significant amount of client information were highly dependent on that individual RM. This makes traditional wealth management industry inherently difficult to scale. The AI wealth management department sits to redesign this process. AI and a centralized wealth management team handle a significant portion of high-frequency standardized and digitalized client engagement and daily services. Licensed professionals are responsible for the critical stages requiring judgment, compliance and professional accountability. Ecosystem partners then expand our client reach. Under this model, a client no longer belongs simply to an individual RM. The client is served by the combined capabilities of the entire Noah platform. This is where we believe AI can fundamentally change wealth management. It is not simply about helping one RM preparing materials faster. It is about giving wealth management the opportunity to move from an individual productivity model towards an institutionalized productivity model. Singapore is the first market where we have fully tested this model. From its launch in the fourth quarter of last year, Singapore AUM grew from less than USD 100 million to more than USD 400 million by the second quarter, and the business achieved monthly profitability in July. What's even more important is how the growth was achieved. Today, 92% of clients are covered by our AI-enabled service model for day-to-day engagement, while licensed professionals remain responsible for regulatory activities, professional judgment and compliant delivery. This allows our professionals to spend significantly less time on repetitive administrative work, information organization and standardized servicing and more time on the things that truly require human capability, understanding clients, building trust, identifying needs and communicating around important decisions. AI at the same time, external ecosystem partners contributed 42% of our new AUM. Singapore raised USD 158 million in the first half, up 126% year-over-year. And this growth was achieved without relying on a large expansion in RM headcount. For us, the significance of these numbers goes well beyond the growth of the Singapore business itself. For the first time, they demonstrate that Noah may be able to gradually shift wealth management from a growth model highly depending on recruiting more RMs toward a model driven by an AI platform, licensed professional plus ecosystem partners. This model continues to be validated, it has the potential to change our unit economics, management spend and ability to replicate our business globally. This is why we view the AI wealth management department as a potentially important new growth curve for Noah. Looking at our international business by segment. Wealth generated net revenues of RMB 193 million in the first half, including RMB 88.65 million in the second quarter. Olive Asset Management generated net revenues of RMB 198 million in the first half. U.S. dollar-denominated private equity fundraising reached USD 410 million, up 13.4% year-over-year. U.S. dollar-denominated structured products and hedge fund fundraising reached USD 590 million, up 33.2% Glory generated net revenues of RMB 78.24 million in the first half, while its independent broker network expanded to 238 professionals. Our international strategy has not changed. We remain focused on serving Chinese high net worth families around the world. Their assets, families, residency, education and next-generation planning are becoming increasingly global. Historically, serving these clients [ stimulatingly ] across Hong Kong, Singapore, Japan, Canada, Australia, the U.K., Europe and the United States would have required a large local RM and operating organization in every market that made economically efficient global coverage extremely difficult. Yet the AI wealth management department changes the core structure of globalization. Markets that previously could not be economically covered because of insufficient client density may increasingly become addressable through a combination of the AI wealth management department, local licensed professionals and ecosystem partners. This is why we often say AI is making it possible for the first time for Noah to serve Chinese high net worth families around the world at scale. Coming to the last part of this presentation will be the second half priorities from one proof point to a replicable system. In the first quarter, we introduced the 3 front office engines that are beginning to shape our new operating model, AI empowered RM, the AI wealth management department and AI plus ecosystem expansion. If the first quarter was about introducing and initially validating this model, then the most important progress in the second quarter was that the AI Wealth Management department produced is the first operating proof point. Our priority for the second half is to move from one proof point towards the system that can be replicated across markets. We will focus on 4 major areas. First, replicate the Singapore AI Wealth Management department model across more markets. The Singapore model has completed its first stage of validation from launch to AUM growth to monthly profitability. We are now working to replicate this model in Hong Kong and Japan with plans to gradually expand into Canada, Australia, the U.K. and Europe. We do not intend to replicate the traditional wealth management model of building a heavy physical footprint in every market. Our basic architecture will be centralized AI wealth management capabilities plus local licensed professionals plus local ecosystem partners. AI amplifies the service capability of the platform, licensed professionals provide professional judgment and compliant delivery. Ecosystem partners allows us to reach more clients with a lower fixed cost base. As this model can be replicated successfully, we believe it could meaningfully improve the future unit economics of our international business. Second, use AI to strengthen investment capabilities and the sustainable realization of carry. On the asset side, we look through [ Lily's 60 ] underlying funds and continuously analyze the common investment and follow-on investment decision of leading global GPs. On the client side, we use AI and data capabilities to improve the quality of product to client matching. This is not simply product recommendation. Our objective is to understand the clients' real needs, risk tolerance, existing asset allocation and historical investment behavior. And then we can identify the assets that are most appropriate for our clients. When clients achieve strong investment outcomes, satisfaction and reinvestment rates would be improved. Reinvestment drives AUM growth and when high-quality assets ultimately realize the value they generate carry. This flywheel has already begun to turn. In the second half, we intend to further deepen the data foundation and improve the efficiency of this further. Third, we will continue to strengthen our international operating infrastructure. During the quarter, the group continued to strengthen the operating infrastructure supporting our international business development. The group established a partnership with U.S. licensed banking institution, Column Bank or Column National Association to enhance account opening, multicurrency settlement and payment processing capabilities for our international clients. This partnership is part of the international middle and back-office infrastructure we have been building since 2024, and is designed to improve client service efficiency and offering scalabilities across our licensed entities in Hong Kong, Singapore, the United States and Japan. The relevant services are provided only to non-Mainland Chinese residents, clients who met applicable law regulatory requirements. Why does this infrastructure matter? Because if the AI wealth management department is ultimately going to scale across markets, AI in the front office is only one part of the equation. Account opening, transactions, payments, compliance and asset execution must also operate through an integrated and efficient infrastructure. Front office AI transformation and back-end platformization must happen together for global expansion to generate true economies of scale. Last but not least, build a global ecosystem partner network powered by AI. Our enterprise-focused platform has now accumulated more than USD 30 million in AUM. Our business partner program has been launched with the first group of partner institutions registered in Hong Kong and Singapore. All regulated activities are conducted by licensed professionals. We are beginning to see our front office engine, AI+ ecosystem expansion. Connect with the AI wealth management department. In the future, an ecosystem partner should not need to rebuild an entire infrastructure converting products, research, technology, accounts, operations and compliance once Noah has built this infrastructure. Our partners can leverage these capabilities within their property regulatory framework to better serve their own clients. We built the financial infrastructure once and the global network can reuse it rapidly. This is the model we are looking forward and we are working towards expanding our service reach through platform capabilities rather than expanding our organizational footprint through fixed cost. We remain in the middle of transformation. The near-term pressure points are transparent, and we will not avoid them. But compared with several quarters ago, our confidence in the future operating model is increasingly supported by real operating data. In the first quarter, the new operating model began to show initial signs of validation. By the second quarter, we are already seeing profitability, AUM growth, improve the positivity, a working Singapore proof point and a model that's beginning to demonstrate with capability. Most importantly, the implementation of the AI wealth management department has given us a much clearer view of something we believe is fundamental. AI is not simply helping Noah do what we already do faster and at a lower cost. It may allow us to do things that were not economically possible under the traditional wealth management model. Under the traditional model, global expansion meant continuously hiring more RMs, opening more offices and adding more fixed costs. Yet under the new model, we aim to serve Chinese high net worth families across different markets through a combination of an AI-powered platform plus licensed professional and global financial infrastructures and an ecosystem partner network. If this model continues to be validated, Noah's future growth will become progressively less dependent on how many people react and increasingly depend on, first, how many clients our platform can serve; second, how deeply our AI can understand those clients. Third, how much value our investment platform can create and how many professional partners our ecosystem can connect. This, in our view, is the fundamental transformation of a wealth management company in the AI earth. Noah is evolving from a traditional wealth management institution into an AI-driven global wealth management platform serving Chinese high net worth families around the world. This transformation will not happen overnight, but beginning this quarter, it is no longer simply efficient. It is becoming a real operating model which clients AUM revenue profitability and increasingly evidence of replicable across markets. Wealth management is a light down commitment. Thank you for your time, and I will now turn the call over to our CFO, Grant, who will walk you through our financial results in greater detail.

Thank you, Doreen, and thank, Zander, and good day to everyone joining us. As Zander laid out in great detail since now we're at the turning point of upgrading our business. Our second quarter was about the quality of our profitability rather than pure growth in revenue. Our operating profit was RMB 216 million in the second quarter, up 34% year-over-year with operating margin at 34.8%. Non-GAAP net income was RMB 238 million, up 25.9% year-over-year and 77.8% sequentially. For the first half of 2026, operating profit was RMB 452 million, up 30.3% with a record half year margin of 36.3%, this was also our third consecutive quarter of year-over-year operating profit growth. The cost optimization behind the margin expansion is structural rather than cyclical. Operating costs fell 13.7% year-over-year and total headcount streamlined about 17%. For the first half, costs were down 11.6% flat on flat growth in revenue. Delivering the same revenue from a materially smaller cost base is what produced the margin and efficiency. Importantly, this is increasingly about more than simply reducing overheads. It reflects a leaner operating model enabled by AI and process redesign. As our CEO discussed, U.S. dollar AUM grew 11.7% year-over-year, even as overseas RM headcount declined 36.2%. This is early financial evidence that we are beginning to support a larger asset base with a more efficient organization. Carry or performance-based income was RMB 138 million in the quarter and RMB 238 million in the first half. Carry is not a one-off event in our model. We have recognized perform income -- performance income in every year we have reported and it grew 78% in 2025. In Hong Kong alone, we have distributed USD 158 million of carry to date. Supporting the story is a U.S. dollar asset base that keeps growing. U.S. dollar AUM up 11.7% and U.S. dollar AUA up 7.5% year-over-year. Of course, it's challenging to forecast carry income because realization depends on market conditions, exit opportunities and the timing of underlying portfolio realizations. So with that, let me take you through the details. Net revenue. Second quarter net revenue was RMB 620 million, down 1.5% year-over-year and 0.9% sequentially. First half net revenue was RMB 1.25 billion, in line with last year. Onetime commissions were RMB 87 million, down 44.1% year-over-year. The decline is mainly attributed to insurance income, where commissions fell 58.2% year-over-year. This also reflects competition intensified in this market and our own decision to sort of walk away from business that does not meet our margin and suitability standards. Recurring management fees were RMB 360 million, down 10.8% year-over-year and 5% sequentially as legacy RMB private equity assets run off. A moment more on carry because it's often read as a windfall, it's not the reason is structured. Let me explain why it recurs. First, our investment work is institutionalized across 67 private equity funds built over more than a decade. We look through holdings across more than 50 subfunds. Our multiple funds have invested across various vintages since early financing rounds of notable holdings such as [ Five Dance ] and Anthropic. When realization of carry depends on the timing and form of exits, this diversified portfolio across vintages provides a broad underlying base from which future performance-based income may be realized over time. To caveat on that, carry is realized driven and will not be smooth or linear from period to period and should not be annualized off any single quarter. Accrued amounts move with valuations in both directions. We do not accrue carry or forecast carry. We recorded on a cash basis. We do not budget on peak carry and one-off gains do not enter our fixed cost base. Turning to the drivers. Transaction values of distribution were RMB 17.2 billion in the quarter, up 1.1% year-over-year and down 26.4% sequentially. First half volume was RMB 40.5 billion, up 22.4%. U.S. dollar products grew 8.3% year-over-year and were the engine in the quarter. Two things drove the sequential decline. The first quarter was an exceptionally strong RMB fundraising quarter and with buying clients in June to position ahead of the A share adjustment that did come in, in July. We track this line closely because volume drives commissions today and builds the asset base that pays management fees later. Our U.S. dollar asset base grew. U.S. dollar AUM reached USD 6.5 billion, up 11.7% year-over-year. AUA reached USD 9.8 billion, up 7.5%. International registered clients were up 11% year-over-year. That is the clearest evidence of mix is moving forward investment-related business. More importantly, this asset growth was achieved when overseas RM headcount declined 36.2% year-over-year. We view this as early decoupling between asset growth and RM headcount growth as an important indicator of the operating leverage we're seeking to build through AI-enabled servicing and our evolving front office model, as Zandra just laid out. As highlighted earlier, total operating costs and expense continues to drop. Looking at the breakdown, total compensation benefits for the second quarter fell 13.1% year-over-year to RMB 260 million. When for the first half, compensation was down 12.7% to RMB 527 million. This continues efficiency work we have discussed for several quarters with AI process redesign allowing for smaller organization to carry the same service coverage. As Zander discussed, the AI wealth management department represents a further evolution of this model using AI and centralized service capabilities for high frequency and standardized client engagement when licensed professionals remain responsible for regulated activities, professional judgment and compliant delivery. The early financial evidence is encouraging. Overseas AUM dropped year-over-year about 36% when U.S. dollar AUM increased 12%, 11.7%. In Singapore, when we're testing this model end-to-end, AUM has grown from less than USD 100 million to more than USD 400 million, and the business achieved monthly profitability in July. Obviously, it's still early, but if this model proves replicable, future asset growth can become progressively less dependent on proportional increases in our headcount and fixed costs. On the nonpersonnel side, second quarter selling expenses dropped 10% year-over-year, while for the first half, they were down 18.6% to RMB 92 million. Moving on to operating profit and non-GAAP net income. Operating profit for the second quarter was RMB 216 million, up 34% year-over-year, delivering an operating margin of 34.8%, up 9.2 percentage points from 25.6% a year ago. On a sequential basis, operating profit was down 8.7%, tracking lower quarterly net revenues. For the first half, operating profit reached RMB 452 million, up 30.3% year-over-year with a record margin of 36.3%. The key takeaway is conversion efficiency. Even on flat revenue, our cost discipline allowed a significantly higher portion of revenue to flow straight to operating income. On the bottom line, second quarter non-GAAP net income reached RMB 238 million, up about 26% year-over-year and 77.8% sequentially, with non-GAAP net margin expanding to 38.4%. For the first half, non-GAAP net income reached RMB 372 million, up about 4% year-over-year. On a GAAP basis, second quarter net income attributable to shareholders was RMB 232 million, up 30% year-over-year and 86.2% sequentially. Reconciliation items remain modest with share-based compensation falling 44% year-over-year to RMB 7.2 million in the quarter. Two noncash items below the operating line also contributed to that result, which might naturally raise questions. So I want to clarify here. Investment income was a positive RMB 42 million in the quarter against a loss of RMB 14 million a year ago, and RMB 40 million in the first half against a loss of RMB 8 million that lies our own portfolio at work. Income from equity and affiliates was a gain of RMB 55 million in the quarter after charge in the first quarter, leaving a loss of RMB 10 million for the half against a gain of RMB 36 million in the first half of the last year. While these are noncash items, there is a broader point, product access and distribution commoditizing, what's durable in this business and the ability to make clients money and to be paid only when we do. That is how we're built. We co-invest alongside with our funds and clients carry pays only after they make a profit and fees persist only if they stay. Our investment portfolio and carry are 2 views of the same capability. On the Legacy Camsing matter, we made real progress this quarter. We accelerated the related share issuance where removes a significant piece of uncertainty, and we launched a new settlement plan for the remaining clients. Settlements are concluding on average below our current provisional level. Contingent liabilities were RMB 455 million at June 30, down from RMB 505 million on March 31. Moving on to balance sheet and shareholders' return. We ended the quarter with RMB 5.0 billion in cash and short-term investments, no interest-bearing debt and the current ratio of 4.3x. Shareholders' equity was RMB 9.8 billion. We're trading at roughly half of book value, a valuation that fails to reflect our true intrinsic value of underlying earnings capabilities as demonstrated by our second quarter annualized non-GAAP return on equity of 9.7% and first half annualized ROE of 7.6%. To deliver sustainable returns, we completed our 2025 dividend distribution in July 2026, making our third consecutive year maintaining 100% net income payout ratio and bring accumulated dividends from 2022 to 2025 to roughly RMB 2.4 billion. In parallel, under our share repurchase program launched in 2024, cumulative execution reached over 3.2 million ADS shares for more than USD 34 million. These capital deployment actions highlight our commitment to enhancing shareholder value and our confidence in Noah's long-term earnings potential. To close, I want to leave you with 3 key takeaways. First, what changed? We demonstrated the upgraded earning power of our platform, delivering a 34% year-over-year increase in operating profit, mid-30s operating margins and third straight quarter of profit growth, driven by disciplined cost management and increasingly efficient operating model. We're also beginning to see early financial evidence of the new operating model, as Zander just pointed out, U.S. dollar AUM continued to grow, increased 11.7% year-over-year when overseas RM headcount dropped. Singapore has provided the first meaningful proof point that AI-enabled wealth management model can support asset growth without proportion of adding on the RM headcounts. Secondly, we will need to work, core commissions and management fees both fell. Overall client acquisition has year to return growth and regulatory headwinds heightened noticeably. Third, what underpins our foundation. Our international business continues to expand in both asset and client count. Our investment franchise maintains unbroken annual track record of generating carry, and our balance sheet remains debt-free with strong illiquidity, fully backing our high payout commitments. The financial objective behind transformation is straightforward to build business where AUM, clients and revenue can grow faster than fixed cost and headcount. So thank you for your continued trust for your time and partnership. We're now happy to take your questions.

Doreen here. Since we have the webcast, we received a few questions. Let me read through the first one and let management to do the answers. First question is from Calvin from Citibank. And he's asking on contingent litigation expenses and the related liabilities, we noticed there was a reversal of contingent -- reversal of contingent litigation expenses in second quarter. Can management give more color on the recent development on the litigation? And can we expect more reversal in the next few quarters?

I will take that question. So as the CEO just mentioned, in the second quarter, we introduced a new settlement plan relating to Camsing. So as of today, more than 80% of our affected clients has accepted the settlement plan. So our legacy risk exposure has declined substantially. So as we have made provisions in prior years for the litigation risk associated with all unsettled clients. So we are now making adjustments in the provision balance on a quarterly basis in line with actual settlement progress. Now we are continuing to engage with those remaining unsettled clients. But unfortunately, we cannot make any prediction on the future provision reversal because we are still tracking those settlement progress, and we will keep focusing on the core operating profit.

Thank you, Jason. And maybe we should open the line to see if there's anyone using the phone questions.

. [Operator Instructions] And our first question today comes from Peter Zhang at JPMorgan.

[Foreign Language] This is Peter Zhang from JPMorgan. Congratulations on the very strong second quarter results, and I have 2 questions. First is management mentioned that we are currently in a transition period and the AI strategy has gained very strong momentum. I wish to understand how long this transition period could take? And what metrics will you recommend investors to monitor to track the progress of this transition? And do we have any longer-term target for this AI strategy, say, any target in next 3 to 5 years? My second question is also on AI wealth management. I want to understand for the KPIs you give to your relationship managers, how is the new KPI under the new AI wealth management model look like and how this compared to the KPI in the old models? And how Noah is growing your client base under the new AI wealth management model? And can you also give any examples on how AI has improved our -- say, how AI has improved the productivity for the RMs. For example, the number of clients when RM can provide service to and the number of AUM when RM can serve.

[Foreign Language]

[Interpreted] Let me do the translation. Thanks, Peter, for the questions. So what was trying to explain that is what we've been elaborating the whole morning is the new system Noah is trying to build up, which no longer just rely on RMs and how many clients that one RM can serve. What we've been repetitively talking about is how we've been using 3 platforms, which is the AI-empowered RMs. I mean we still value humans and AI, yes, can be the tools to empower the performance. But at the same time, it's more about we have built up the AI wealth management department. And also, we've been having this platform called AI+ ecosystem expansion. So give you some examples is, say, in Singapore, with only 6 people, but we've been able to cover 500 clients, which in the past is basically impossible. But with the new system that the company is building, we found out that it has more than just efficiency and more than just numbers of clients versus how many RMs can cover. And also our experience with the AI+ ecosystem platform, which is we've been able to cooperate with expertise from different industries, which they may have clients that have wealth management needs, but they don't have the license. And cooperating with us, we provide fee to them. And then at the same time, they can better serve the client as well, and they can refer the clients to us for wealth management needs. So it's no longer just a very traditional ways to look at wealth management business under this model.