NOAH Holdings (NOAH) Q2 2026 earnings call transcript

I would now like to turn the conference over to Doreen Chu 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. Sander Yin, co-founder, director, and CEO, Mr. Graham Pang, CFO, and Mr. Jason Wu, Deputy CFO. Mr. Yim will begin with an overview of our recent business highlights, followed by Mr. Pang, 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, and 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 outlighted in our public filing 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.

The first time we have seen the NOAH HOLDINGS FACILITY, the first time we have seen the NOAH HOLDINGS FACILITY. The second year we are looking at the three clear facts. The first thing is that it is that it is the same in the US$10 million. The second thing is that it is the same in the US$10 million. The second thing is that it is the same in the US$10 million. The number of the global investment is still changing. Thank you. The NOAH's meaning is not only to increase the效率 and increase the value of the market, but it is in the beginning of our previous organization, customers' service and the global development.

Next, I will share the four four main points from the財務, and the major work of the North, and the next year's important work. Good morning everyone. Thank you for joining NOAH HOLDINGS' second quarter's 2026 earnings call. As we enter 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 spaced out in an ordinary manner, while our new operating model is not only being validated, but it's also beginning to generate I will now turn the call over to management for the next year.

Second, performance-based income reached RMB 238 million in the third half of the year, demonstrating how the growth for 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 denominator AUM increased by 11.7%. More importantly, our overseas RM headcount declined by 36.2% year-over-year, while overseas asset 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.

Thank you. Thank you. I will now turn the call over to management for a second. The final step is to pay for the final step. In the second quarter, we generated net revenue of 620 million人民币, operating in the second quarter. The net income was 216 million RMB, up 34% year-over-year, with an operating margin of 34.8%. Non-GAAP net income adjustable to NOAH was 238 million RMB, 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 flexed 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 372 million RMB, 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 have 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 the first 6% year over year in the third 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 the international business separately in more detail later. On the other hand, revenues associated with our investment capabilities are increasingly being realized.

Net performance-based income, or what we call CERI, which the 238 million RMB in the first half, up 364% year-over-year. Distribution income from investment products increased 13.4%. Investment income was 39.79 million RMB compared with a loss in the same 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 discipline cost management and organizational streaming. 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.

Thank you. In order to maintain the year-to-year-old, the overall experience of the year-to-year-old is a healthy period of 30% in the year. In the year-to-year-old, the year-to-year-old and the year-to-year-old will be a change in the year-to-year-old.

Our view of the earnings structure is clear. During the transformation period, carry realization and course discipline provides 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 the 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. Thank you. The third section is the third section of the private sector. On the other hand, AI data science can be seen in a further further change. At the exact same time, we have more than ourselves.

We have more than these financial models to be made by the end of the project. We are joining for GDM. To the key to national knowledge, we know the need of data and human resources to explore what we do and the cost of them. And the insurance and the financial risk toward where the stock market is. At the customer's office, the AI will help us solve another important issue. It is not only to choose the product, but also to choose the customer. In the correct time, the customer will be able to compare the correct product to the customer. The customer will be able to understand the knowledge and the understanding of the customer. The data will be able to increase the customer.

The customer will be able to increase the customer. Thank you. We will continue to give you a chance to show you. Our front 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 two layers into more concentrated sources of potential return and carry. Together, these three layers from the foundation of our continuously evolving product portfolio. Funds established in different ventages are at different stages of their life cycles. As earlier funds progressively enter the harvesting periods, they create a foundation for recurrent carry, realization rather than dependence 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 our set 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 looked through nearly 60 underlying funds and used 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 product, 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 query. This is the long-term file we are working to Our Hong Kong platform has historically distributed accumulated US dollar 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. On the other hand, the meeting will be $40.5 billion, and the revenue of the NOAH HOLDINGS. The total revenue of the NOAH HOLDINGS is 24.5 billion. The total revenue is 24.5 million. The total revenue of the NOAH HOLDINGS is 8.4% and is 41%. The total revenue of NOAH HOLDINGS is 41.7% and is 41.7% to the NOAH HOLDINGS. GOOSEY FUTURE In terms of transaction values, total fundraising reached RMB 40.5 billion in the first half, up to 22.4% year over year. U. S. dollar denominated product fundraising reached U. S. dollar 2.45 billion, up 8.4% year-over-year, accounting for 41% of the total.

As of end June 30, Group AUM returned to its sequential growth and reached renminbi $140.9 billion. U. S. dollar denominator AUA reached the U. S. dollar $6.5 billion, up 11.7% year-over-year, while U. S. dollar denominator AUA reached the U. S. dollar $9.78 billion, up 7.5%. Our balance sheet remains strong. As of June 30th, we held approximately RMB's $5 billion in cash, cash equivalents and short-term investments, with zero interest-bearing debts. We also made important progress this quarter in resolving the legacy campaign matter. During the first half, we completed the insurance 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 recognize a partial reversal during the second quarter. The uncertainty associated with this legacy matter has now been meaningfully reduced.

On the second half, the I will now turn the call over to management for the next two weeks In the market we don need to look at simple and simple and simple and simple We have a long investment and long investment The government has a long investment The Chinese insurance company has a long-term investment. The traditional traditional low-file use of the U. S. and the U. S. I will now turn the call over to management for a long-term care. 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 UPRITE wasted RMB $8.27 billion in the first half and generated net revenues of RMB $414 million, a 59.8% year-over-year. For UPRITE, our operating philosophy is becoming increasingly simple. The most important measure of success is whether our clients make profit. 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 CTAs. 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. Gova generated net revenues of RMB $341 million in the third The main thing is that we have brought this flat year over year.

Our mainland China insurance business generated net revenues of renminbi 3.382 million in the first half. We have proactively reduced and gradually exit the traditional high-commissioned protection product model, shifting instead to a comprehensive services such as family succession and in-heritage 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 as the allocation of capabilities, and use AI to improve client engagement and service efficiency. The third is American. The American is funded by the ASE. The American has found out a few years. Thank you.

The other day, the current market has not changed. The current market has not changed. The new technology has changed its speed. The new technology has changed its speed. This is the same for the past few weeks. The market has changed its speed with the market. The second week has changed its speed. Let's get started on the WM. We will now turn the call over to management for the NOAH HOLDINGS. An incredible experience, and many information on our site are living in the data of my own company. This means that the national and national and international security of all of its customers range is difficult, especially in the海外. 而AI财富管理部尝试重新拆解这个过程,由AI和集中化的财富管理团队承担大量高频标准化可数字化的客户经营与日常的服务,由持牌的专业团队完成需要判断合规和专业责任的关键环节,再通过生态合作伙伴不断地扩大客户的来源。 Let me first review the numbers for our international business.

Net revenues from the international segment were renminbi's $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 two sectors, revenue from U. S. dollar denominated investment products were broadly flat year over year, while our client base and asset continued 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 at 1,791, up 8.9%. Active overseas clients reached at 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 or assets. The legacy engines are simply being faced 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 hat count 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 two 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 three 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 plus ecosystem expansion. After the second quarter, we are beginning to see the second front office engine, the AI Wealth Management Department, The AI Wealth Management Department moves 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 will highly depend on that individual area. This makes traditional work management industry inherently difficult to scale.

The AI work management department sits to redesign this process. AI and a centralized work 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 To work and institutionalize the productivity model.

The NOAH HOLDINGS The NOAH HOLDINGS is a huge number of people who have been in the US. 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 US$100 million to more than US$400 million by the second quarter. And the business achieved monthly profitability in July. What's even more important is how their growth was achieved. Today, 92% of clients are covered by our AI-enabled service model for day-to-day engagement. For our licensed professionals remain responsible for regulated 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, country built at 42% of our new AUM. Singapore raised US$158 million in the first half, up 126% year over year. And this growth was achieved without relying on a large expansion in RM headcounts. For us, the significance of these numbers goes well beyond the growth of the Singapore business itself. For the first time, they demonstrated that NOAH may be able to gradually shift work management from a growth model highly depending on recruiting more RMs towards a model driven by an AI platform, licensed professional plus ecosystem partners.

If this model continues to be validated, it has the potential to change our unique economics, management span, 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. Thank you. The internet is a huge number of people. AI 财富管理部改变的正是这个全球化的成本结构。过去很多因为客户密度不够而无法规模化经济的经济覆盖的市场,未来都有可能通过 AI 财富管理部加当地的持牌团队和生态伙伴的方式进入。 所以我们说,我们常常说 AI 让诺亚服务全球华人这件事情,第一次真正具备规模化的可能性。 Looking at our international business by segment, ARC wealth generated net revenues of RMB 193 million in the first half, including RMB 88.65 million in the second quarter. All of asset management generated net revenues of RMB 198 million in the first half. U. S. dollar denominated private equity fundraising reached the U. S. dollar 410 million, up 13.4% year over year.

U. S. dollar denominator structure product and hedge fund fundraising reached the U. S. dollar 590 million of 33.2%. GORI 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 network families around the world. The assets, families, residency, education, and next generation planning are becoming increasingly global.

Historically, serving these clients stimulationally across Hong Kong, Singapore, Japan, Canada, Australia, the UK, Europe, and the United States would have required a large local RM and operating organization in every market. That make 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 network families around the world at scale.

Thank you. We will now turn the call over to Japan, and plan to go to Canada, Australia, England and Australia. We will not simply adapt to traditional financial management companies' financial management system. Our basic framework will be the central AI management management system and the international management team, and the international management team, and the international management team. AI is a big part of the platform. In the last quarter, we introduced the three front office engines that are beginning to shape a new operating model. AI Empowerless RM, the AI Wealth Management Department, and AI Plus Ecosystem Extension. 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 its first operating proof point.

Our priority for the second half is to move from one proof point towards a system that can be replicated across markets. We will focus on four 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. We plan to gradually expand into Canada, Australia, the UK, 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, license the professionals, provide professional judgment, and compliant delivery. Ecosystem partners allow us to reach more clients with a lower fixed-cost base. If this model can be replicated successfully, we believe it could meaningfully improve the future unit economics of our international business. Thank you.

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 robo-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 client 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, certification and reinvestment rates will be improved.

Reinvestment drives AUM growth, and when high-quality assets ultimately realize their value, they generate carry. This file has already begun to turn. In the second half, we intend to further deepen the data foundation and improve the efficiency of this system.

The National Association has created a collaboration with the national association, to increase the客户 and the cash flow of the payday, and to be able to pay for the company. This is the partnership with the company from 2024 to 2020. The company will continue to support the international association of the national association, and to support the international association of the national association. The technicality of the NOAH HOLDINGS is a key to the public and the public and the public and the public. Why are these key things important? If the AI-to-apps are in the future, the AI-to-apps will be the key to the public. The financial and financial and financial and financial and financial and financial and financial and financial and financial.

The first-time AI-to-time and the second-time platform must be happening. The global advertising will be a real-time market. 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, multi-currency 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 operate scalability across our licensed entities in Hong Kong, Singapore, the United States, and Japan.

The relevant services are provided only to non-Mingland Chinese residents, clients who map applicable law regulatory requirements. Why does this infrastructure matter? Because if the AI World 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. From office AI transformation, a back-end performization must happen together for global expansion to generate true economies of scale.

We will now turn the call over to management for the next year. Last but not least, build a global ecosystem partner network powered by AI. Our enterprise-focused platform has now accumulated more than US$30 million in AUM. Our business partner program has been a long-term service. The AI 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 plus ecosystem expansion. Connect with the AI Wealth Management Department. In the future, an ecosystem partner should not lead to rebuild an entire infrastructure We're converting products, research, technology, accounts, operations, and compliance. Once NOAH has built this infrastructure, our partners can leverage these capabilities within their appropriate 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 toward, expanding our service reach through platform capabilities rather than expanding our organizational footprint through technicals.

Thank you. We will now turn the call over to management for a new company. We will now turn the call over to management for the NOAH HOLDINGS This is our understanding of AI-sistered company's real change. NOAH HOLDINGS from a traditional financial financial company It is a way to make a global platform for AI-sistered family and to help the world-to-be-sistered family. This road is not a easy way to go. But from this period of time, we are not just a dream. 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 company has been a business model. 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, improved positivity, a working Singapore proof point, and a model that is beginning to demonstrate replicability. Most importantly, the implementation of the AI Wealth Management Department AIM 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-never families across different markets through a combination of an AI-powered platform plus licensed professional and global financial infrastructures and ecosystem partner network. If this model continues to be validated, NOAH's future growth will become progressively less dependent on how many people we add 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-network 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 the repurposed all across markets.

Wealth management is a lifelong 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 you, Xander. And good day to everyone joining us. As Xander laid out in great detail, just 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 headcounts streamlined about 17%. For the first half, costs were down 11.6% on flat growth in revenue. Delivering the same revenue from a materially smaller cost base is what produced margin and efficiency. Importantly, this is increasingly about more than simply reducing overheads. It reflects a linear operating model enabled by AI and process redesign. As our CEO discussed, US dollar EOM grew 11.7% year over year, even as overseas IM headcount declined 36.2%. This is early financial evidence that we're beginning to support a larger asset base with a more efficient organization. Cary or performance based income was RMB 138 million in the quarter and RMB 238 million in the first half.

Cary is not a one off event in our model. We have recognized performance income in every year we have reported, and it grew 78% in 2025. In Hong Kong alone, we have distributed US$158 million of carry-to-date. Supporting the story is a US 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. Next, 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. One-time commission was 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 runoff.

A moment more on Kerry, because it's often read as a windfall. It's not. The reason is structure. Let me explain why it recurs. First, our investment work is institutionalized across 67 private equity funds built over more than a decade. We've looked through holdings across more than 50 sub-funds. Our multiple funds have invested across various vintages since early financing rounds of notable holdings such as ByteDance and Entropic. When realization of Cary 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, Cary is realized is driven and will not be smooth or linear from period to period and should not be annualized of any single quarter. Accrued amounts move with valuations in both directions. We do not accrue, carry, or forecast carry. We record it on cash basis. We do not budget on peak carry, and one-off scans do not enter our fixed cost base.

Turning to the drivers, transaction values of distribution were RMB $17.2 billion in a 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 a quarter. Two things drove the sequential decline. The first quarter was an exceptionally strong RMB fundraising quarter, and we advise 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 U. S. dollar $6.5 billion, up 11.7% year over year.

AUA reached U. S. $9.8 billion, up 7.5%. International registered clients were up 11% year over year. That is the clearest evidence our mixes moving forward investment-related business. More importantly, this asset growth was achieved when overseas IM headcount declined 36.2% year over year. We view this as early decoupling between asset growth and IM 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 Xander 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 the efficiency work we have discussed for several quarters with AI process redesign allowing for smaller organizations to carry the same service coverage. As Andrew 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 are dropped year-over-year by 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 US$100 million to more than US$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 RM headcount and fixed costs. On the non-personnel 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 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 is down 8.7%, tracking lower quarterly net revenues. For the first half, operating profit reached R&B 452 million of 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 came attributable to shareholders with 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 non-cash 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 non-cash items, there is a broader point, product access and distribution, commoditizing. What's durable in this business is the ability to make clients' money and to be paid only when they do.

That is how we're built. We'll co-invest alongside with our funds and clients. Care pays only after they make a profit and fees persist only if they stay. Our investment portfolio and carry are two We have two views of the same capability. On the legacy canvassing matter, we made real progress this quarter. We accelerated the related share insurance where it removes a significant piece of uncertainty, and we launched a new settlement plan for the remaining colonists. Settlements are concluding on average below our current provisional level Contention liabilities will RMB million June 30 down from RMB 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 4.3 times.

Shareholders' equity was R&B 9.8 billion. We're trading at roughly half of both value, a valuation that fails to reflect our true interest value of underlying earnings capabilities, as demonstrated by a second quarter annualized non-GAAP return of 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 bringing 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 US dollar 34 million. These capital development 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 three 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 Xander just pointed out. U. S. dollar yield continued to grow, increased 11.7% year over year when the overseas IAM headcount dropped. Singapore has provided the first meaningful proof point that an AI in NOAH wealth management model can support asset growth without professional adding on the IAM headcounts. Secondly, what will need to work?

Core commissions and management fees both fell. Overall side 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 an unbroken annual track Thank you for your continued trust for time and partnership. We're now happy to take your questions.

Hi, Dorin 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 Kevin from Citibank. And he's asking, on contingent litigation expenses and the related liabilities, we noticed there was a reversal of contingent litigation expenses in seventh quarter. Can management give more color on the recent development on the litigation, and can we expect more reversal in the next few quarters? Thank you.

Okay, I will take that question. So as the CEO just mentioned, in the second quarter we introduced a new settlement plan relating to chemistry. So as of today, more than 80% of our affected clients have 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 rehearsal 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 that's anyone using the phone to score in, if that's any questions?

We will now turn the call over to management for a company. I will now turn the call over to management for a better and better. We also have a lot of data analysis. We can see if the customer has increased the amount of data. The customer has increased the amount of data. This is the customer's number of data. The customer has been very large. You can see that AI's company is a customer's company. The customer has been in the company's company. This is the customer's company. The customer has increased the amount of data. For example, you have some people who have a career in the company or a休眠. And we're going to conduct the AI-time management company, and we're going to encourage the customer to help.

We're going to talk about a AI-time management company, but we're going to take care of the customers. We're going to take care of 500 customers, and these customers are our old customers, but because of the customer, it's gone. Now it's been taken to the customer with someone who flew back to the end of the year, but it's been taken to the customer. The third is the environment for the environment. The world is in Japan. We can find out those who are more than independent financial advisors or RA in the United States. So they can be placed on our platform and help us to turn the customer. It's a little like EEM's model. This is our result.

Because these customers are their customers. And some of them are a company. And they have a customer.

Let me do the translation. Thanks, Peter, for the questions. So what Chely 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 three 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 world management department, and also we've been having this platform called AI plus ecosystem expansion. So, to give you some examples, say in Singapore, we have only six people, but we have 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 More than just numbers of clients versus how many RMs can cover. And also our experience with the AI plus ecosystem platform, which is we've been able to cooperate with expertise from different industries, which they may have clients that have management needs, but they don't have the license. And cooperating with us, we provide feed to them, and then at the same time they can better I will now turn the call over to management for the client. So it's no longer just a very traditional way to look at the management business under this model.

Yes. Goods, he may have asked about the change in the process of the change. What do you think will need to be more detailed? 3-5 years. I think it's not like this. We were in the Singaporean in the last year. We thought that the year after the year, we had a big change in the year. I will now turn the call over to management for the NOAH HOLDINGS. We will now turn the call over to management for the NOAH HOLDINGS. We will now turn the call over to management for the NOAH HOLDINGS. I think it's a big difference. I think it's a big difference. It's a big difference. I think it's a big difference. It's a big difference in AI.

And we're very confident to be able to help them. I will add a little bit to the question. The Singapore model is in Hong Kong. Hong Kong in the past, it was in the first year's development of the past. The past, the past, the past, the past. But the result was very important. And now, Hong Kong is also in the past. The AI-based model is in the AI-based model to connect the already open market. Thank you. AI powered platform, licensed professionals, ecosystem partners, we are three. I think this is together. We are more common.

Let me do a brief translation. So Peter, it's probably not about three or five years, because under the AI Earth, changes could be very fast. Take Singapore as an example. We've only started the business in September last year with only AUM of around 86 million, but now it's already over 400 million with those AUM with a really high margin, high quality AUMs. So what we've been trying to emphasize here is that under the AI-enabled company, we are no longer the transitional model. So it's not about hiring more RM, and hopefully the RM can get clients ultimately about AUM. And with that, also explain we've been trying to expand our global footprint.

And in Sanders' speech we've already mentioned, we are now replicating the AI model from Singapore to Hong Kong. And we will further expand the offices into different cities as well. But at the same time, the calls will be under control, and it's no longer the traditional way of management companies model. And that we believe that it's going to have a drastic change in a relatively a lot shorter time compared to being the old model, where we've tried it in Hong Kong when we first came here. But it doesn't seem to be a very successful experience. And that's why in Singapore, we found the path to success, and we are going to repeat that in different cities as well.

Thank you.

So we have another question here, and which is about the – sorry, it's the second question. It's from Ms. Wang, and she's asking, would you be able to tell us more on the different expectations for the current fiscal year and the periods ahead? Following the presentation on the AI development strategy, may we ask for your view on the anticipated efforts, effects on both revenue and profitability in the medium to long term?

I think we have basically answered the second part of the questions about how AI development is going to help the revenue and profitability in the future. So I will let management to address about our dividend policies.

關於我們的那個派市的情況,公司能給一個簡單的介紹嗎? 潘總。 So, as we have just mentioned, you know, for the past three, four years since 2022, we have We have accumulated given out about 2.2 billion RMB. You know, given out the strong position in balance sheet and also highly managed liquidity, we expect to continually to distribute, you know, obviously a significant portion of the income to our shareholders to maintain high return. Obviously, we have not been decided on exactly the portion or ratio of the future dividend, but we believe they remain consistent on the asset allocation and also shareholder return policy to our shareholders. And secondly, we believe that, you know, as Chair Lady and also CU has mentioned, that when AI and CARE continue to push, hopefully, our profitability and earning power and upgrade the business model, we'll be able to sustain at least a comparable level of shareholder returns in the future.

Dorian? Yes, thank you, Grant.

We still have a...

Can I check if there's any questions from the phone?

If that's the case, I think we will wrap up the presentations today, and thank you, everyone, for joining us this morning. And I understand that there may be further questions. Please contact the IR team at your convenience time, and I look forward to talk to you in more details in the near future. Thank you very much.

Thank you.