Noah Holdings Ltd. Sponsored ADR Class A Stock

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.

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[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.

[Foreign Language]

[Interpreted] Let me do a brief translation. So here it's probably not the best 5 years because under the AI changes could be very fast, which take Singapore as an example, we've only started the business in September last year with only AUM of around RMB 86 million, but now it's already over RMB 400 million with those AUM with a really high margin, high-quality AUM.

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 explained, we've been trying to expand our global footprint. And in Zander's 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 cost will be under control and it's no longer the traditional way of wealth management company model. And that we believe that it's going to have a drastic change in a relatively shorter time compared to be in the old model, where we've tried in Hong Kong when we first came here. But it doesn't -- I mean, it doesn't seem to be a very successful experience. And that's why in Singapore, we done the path to success, and we are going to repeat that in a lot of different cities as well.

And I'm showing no further audio questions at this time. So I'll hand the call back over to the company.

Thank you. So we have another question here and which is about the -- sorry, the second question here. It's from Ms. Wang. And she's asking, would you be able to tell us more on the dividend expectation 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 assets effects on both revenue and profitability in the medium to long term?

I think we have basically answered the second part of the question about how AI development is going to help the revenue and profitability in the future. So I would like management to address about our dividend policy.

[Foreign Language]

So as we have mentioned, for the past 3, 4 years since 2022, we have cumulatively given out about RMB 2.2 billion. Given the strong position in balance sheet and also highly managed liquidity, we expect to continually to distribute obviously, a significant portion of the income to our shareholders to maintain high return. But obviously, we have not been decided on exactly the portion or ratio of the future dividend, but we believe we remain consistent on the asset allocation and also shareholder return policy to our shareholders. And secondly, we believe that as Chairlady and also CEO has mentioned, that when AI and carry 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. Doreen?

Yes. Thank you, Grant. We still have a -- can I check if there's any questions from the phone?

There are no further phone questions at this time.

If that's the case, I think we will wrap up the presentation today, and thank you, everyone, for joining us this morning. And I understand that there may still 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. This does conclude our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day. and welcome to the Noah Holdings Limited First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Doreen Chiu, Investor Relations. Please go ahead.

Thank you, and welcome, and good morning, everyone, to Noah's First Quarter of 2026 Earnings Conference Call. Joining me on the call today are Ms. Wang Jingbo, the Co-Founder and Chairlady. Mr. Zander Yin, the Co-Founder, Director and CEO; and also Mr. Grant Pan, the CFO.

Mr. Yin will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will all be available to take your questions in the Q&A sessions that follows.

And please note that the discussion today will contain forward-looking statements that are subject to risks and uncertainties. That may cause actual results that vary materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC and the Hong Kong Stock Exchange, Noah does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

With that, I would like to pass the call over to Mr. Yin. Please go ahead.

[Interpreted]

Investors and analysts and thank you for joining Noah Holdings First Quarter 2026 Earnings Conference Call. As we start 2026, the pace of Noah's transformation has become clearer than ever before. In the first quarter, we observed 3 increasingly visible trends. First, our profitability structure continues to improve, with operating margin reaching one of the highest quarterly levels in recent years. Second, our domestic business is regaining momentum in core investment and asset allocation with both active clients and transaction value achieving double-digit growth.

Third, our overseas business continues to advance in line with our strategy of proactively adjusting our revenue mix, while a new operating model-driven by globalization and AI gradually take shape.

Before going into a more detailed review, I would like to share 2 milestones in our global footprint that we recently achieved. Our Japan office officially commenced operations on May 4, and our U.S. broker-dealer license has completed the final approval process with key team members set to officially join in June. These 2 developments mean that our network is entering a new phase, moving from license deployment to operational execution.

Next, I would like to share our progress from 4 perspectives: financial performance, domestic business, overseas business and AI strategy.

We recorded net revenues of RMB 626 million, up 1.8% year-over-year and down 14.7% quarter-over-quarter. The sequential decline was mainly due to a further decrease in contribution from the insurance business as well as a seasonal decrease in performance fee income from overseas private equity products following concentrated year-end recognition. However, on the profit side, benefiting from our disciplined execution in cost control, organizational streamlining and expense management.

Operating profit reached RMB 236 million, up 27.1% year-over-year. Operating margin was 37.8%, marking one of the highest quarterly levels in recent years.

Non-GAAP net income was RMB 134 million. It is important to note that this quarter's strong margin performance benefited from continued optimization in our business mix and further release of additional organizational efficiency.

We expect full year operating margin to remain in a healthy range above 30%, although quarter-to-quarter fluctuations are natural due to product mix and expense timing, this quarter also marked our 62nd consecutive quarter of non-GAAP profitability since listing. This is the discipline we have maintained across multiple market cycles.

Quarter, our active clients reached 10,742, up 21.8% year-over-year. Transaction value reached RMB 23.3 billion compared with RMB 16.1 billion in the same period last year.

In our domestic business, transaction value of RMB-denominated mutual fund products reached RMB 9.9 billion, up 131% year-over-year while transaction value from RMB-denominated private secondary products reached RMB 5.3 billion, up 61% year-over-year.

Noah Upright recorded net revenues of RMB 208 million, up 63% year-over-year, mainly driven by a doubling in public fund transaction volume as a result of structural opportunities in the A share market together with a rapid recovery in RMB-denominated private secondary fundraising. This series of changes shows that when we refocus our resources on products and investment capabilities with genuine long-term value, the operating performance of our domestic business improved structurally. At the same time, we have become even clearer about the strategic direction of our domestic business going forward.

For our domestic business, we will continue to focus on the secondary market and building asset allocation capabilities with key priorities, including public mutual funds, private secondary market products, AI-driven client operations and Noah Upright Fund Distribution platform capabilities.

We will continue to drive the enhancement of our operations in these areas. We believe the domestic wealth management industry is gradually moving away from the past stage, which was driven by real estate and nonstandardized products and returning to a true long-term era centered on investment research and asset allocation.

As of March 31, overseas registered clients reached 20,373, up 11.9% year-over-year. Overseas AUA was USD 9.6 billion, up approximately 5.9% year-over-year. Transaction value of U.S. dollar-denominated products was USD 1.15 billion for the quarter, broadly flat year-over-year. Our overseas client base and AUA continue to grow steadily and the pace of our revenue mix adjustment is consistent with the view we shared during our third quarter earnings call last year.

Over the past few years, we have continued to build our presence across key regions, serving global Chinese clients, including Hong Kong, Singapore, Japan, Canada, Europe, Australia and the United States. What we are seeing more clearly is that global Chinese clients are entering a new stage. Their assets, families, identities, education and next-generation planning are becoming increasingly globalized.

In the past, serving global Chinese families across multiple jurisdictions, languages and generations was a business that relied heavily on individual experience and was extremely difficult to scale or replicate. For the first time, AI makes it possible for this kind of service to be globally coordinated in a systematized, platformized and scalable framework. This is why we believe one of our most important long-term positions is not only to be a wealth management institution but also becoming a global wealth management platform, serving Chinese high net worth families around the world.

Over the past 2 decades, the logic to drive growth in the wealth management industry was clear but linear. One more relationship manager meant more revenue. One more client relationship meant more assets. This logic worked well in the past, but it also meant that the industry's expansion was structurally constrained by labor costs and overall management of the organization.

Our view is that AI is fundamentally changing this equation. It is not simply adding another efficiency tool. It is redefining the front office structure of the wealth management industry. In the past, wealth management was primarily driven by a single RM model. Today, we are gradually forming a new model, driven by the collaboration of 3 front office engines.

First, AI-enhanced relationship managers. RMs remain the most important long-term driver of strong client relationships, but AI is significantly enhancing their ability to cover clients. In the future, RMs focus more on deep client engagement rather than repetitive process work.

Second, AI wealth management department. This is a new type of front office team that we are actively building. The AI wealth management department does not rely on traditional headcount expansion. Instead, it uses AI to drive client operations, content services, allocation support and global collaboration, enabling a lighter organizational structure to serve broader client needs.

Singapore is the first fully developed testing ground for this model. Over the past quarter, AUA in Singapore grew by approximately 192% year-over-year and revenue generation per capita reached 8.5x. This is the first validation that without materially expanding the number of relationship managers, AI can elevate individual service capacity, breadth of coverage and professionalism of asset allocation by an order of magnitude.

Third, AI plus Ecosystem expansion. We believe the future of wealth management will not belong only to the internal RM systems of large institutions. More and more independent financial advisers, family offices and external professional firms need a platform that can provide a global asset supply chain, an AI workbench, a compliance foundation, global execution capabilities and brand credibility. We are gradually building this ecosystem. We believe these 3 engines will together form our growth drivers going forward. And the future competitive landscape of the wealth management industry will no longer be defined simply by who has more RMs but by who has stronger AI capabilities, who has a more complete global compliance network, who has deeper customer context data and who has more replicable platform-based service capabilities. This is our most important strategic vision for 2025 to 2026.

Based on this strategic vision, we have made substantive progress at 3 levels. First level, enhancing organizational efficiency. Last year, while maintaining stable net revenues, our total headcount declined by approximately 11% compared with 2024. In the first quarter of this year, headcount further declined by approximately 3% quarter-over-quarter. Behind this is the gradual embedding of AI into key areas such as client interaction, content generation and operational processes, enabling the same revenue scale to be supported by a more streamlined organization. This is the first direct evidence of returns on our AI investments.

Second level, productization of operating capabilities. Our AI RM platform officially went live in the third quarter of last year. It covers client research, generation of allocation recommendations, service recordkeeping and content output and is being integrated in parallel across our 4 booking centers. AI is no longer just a back-office tool. It is becoming a collaborative partner for our RMs.

Third level, reconstruction of the operating model itself. AI is not a PowerPoint concept for our organization. It has already become a new operating system that can generate real business results and has the potential to be replicated globally. Supporting these AI capabilities is the global platform foundation we have already built, our 3 global platforms, ARK, Olive and Glory, support client and account execution, asset management and insurance, trust and inheritance services. And our 4 booking centers in Shanghai, Hong Kong, Singapore and the United States, together form our compliance and execution infrastructure. Going forward, our long-term AI build-out will continue to advance across 4 dimensions: clients, relationship managers, products and governance.

Remainder of 2026, our work will continue to focus on the 3 priority areas, clearly set out by our Chairlady in her 2025 letter to shareholders. First, expanding our overseas client base; second, further growing our global asset allocation capabilities; third, continue to optimize the revenue structure of Olive, our asset management business; and lastly, deepen AI applications in our core operating processes and gradually expand global collaboration capabilities within a compliant framework.

As of March 31, we held RMB 5.13 billion in cash, cash equivalents and short-term investment maintained a healthy balance sheet with 0 interest-bearing debt. The Board announced a dividend proposal for approval at our shareholders meeting, including a special dividend that brings the total payout to 100% of full year 2025 non-GAAP net income. Subject to approval at the June 11 meeting, the plan will be implemented. This would extend our shareholder return framework for a third consecutive year based on 100% of non-GAAP net income.

We will continue to invest in globalization and building AI capabilities while maintaining financial discipline. We're still in the midst of our transformation. The short-term pressure points are visible, but the logic of our long-term operating model is becoming clearer than ever before.

The first quarter is not the destination. It is more like a starting point where our new operating model is beginning to be validated. We are evolving from a traditional wealth management institution into an AI-driven global platform serving Chinese families around the world. This process will not happen overnight, but our direction is becoming increasingly clear.

Thank you. I will now hand the time over to CFO, Grant to review our financial performance in greater detail.

Thank you, Zander, and good day to everyone joining us. The first quarter of 2026 marked a solid start to the year and continued progress on transition toward a more investment led and quality-driven global wealth management platform.

I would like to highlight 3 key messages. First, while total revenue remained stable, the quality of revenue mix improved meaningfully driven by strong growth in investment-related fundraising fees and performance-based income. Second, disciplined cost management and structural efficiency initiatives delivered substantial operating leverage. Operating profit increased significantly and operating margin expanded further.

Third, reported net income was affected by nonoperational volatility. This mainly reflected mark-to-market accounting adjustments on a specific listed investments recorded under income from equity affiliates, excluding that specific mark-to-market impact, non-GAAP net income would have reached RMB 216 million, up 28% year-over-year.

For the first quarter, total net revenue was RMB 626 million, up 1.8% year-over-year. This stability was achieved despite a deliberate 49.9% reduction in insurance-related revenue as we continued to optimize our business mix.

Onetime commissions were RMB 113 million, up 5.9% quarter-over-quarter. Within this, commissions from newly raised investment products increased to RMB 53 million, up 46.1% year-over-year and 41.6% quarter-over-quarter.

Recurring management fees were RMB 379 million, down 3.4% year-over-year and 2.5% quarter-over-quarter.

Performance-based income reached RMB 100 million, up 253% year-over-year, primarily driven by strong realization from RMB-denominated private secondary products. Overall, the quarter further demonstrates our continued shift towards a higher quality investment-led revenue structure.

Our lean operating model continues to deliver measurable financial results with AI increasingly serving as a structural driver of efficiency. Total operating costs and expenses declined to RMB 389 million, down 9.2% year-over-year and 18.1% quarter-over-quarter.

As of the end of the quarter, group headcount was 1,726, down 10.4%, leading personnel costs to decline 12.2% year-over-year to RMB 267 million. This reflects productivity gains rather than business contraction.

Our AI strategy focuses on improving output per capita and operational efficiency. AI-driven tools now support client engagement, automated reporting suitability processes and routine workflows that previously required manual intervention. This enables us to scale global operations when maintaining disciplined cost control and service quality.

SG&A were RMB 103 million, down 10.8% year-over-year and 35.1% quarter-over-quarter. Total operating cost and expenses were RMB 389 million, down 18.1% compared to last quarter. As a result, operating profit increased to RMB 236 million, up 27.1% year-over-year. Operating margin, therefore, expanded to 37.8% compared with 30.3% in the first quarter of last year. Excluding government subsidies, operating profit was RMB 236 million, up 33.7%. These results highlight the stability of our platform and financial benefits of our structure optimization.

Below the operating line, investment, interest and other income totaled RMB 19 million. Interest income remained RMB 32 million. Investment income was negative RMB 2 million.

Foreign exchange loss was RMB 6 million, and contingent expenses was RMB 3 million. Share of losses from equity affiliates was RMB 65 million. As a result, non-GAAP net income attributable to Noah was RMB 134 million with a margin of 21.4%.

Total transaction values reached RMB 23.3 billion, up 44.8% year-over-year and 37.5% quarter-over-quarter. U.S. dollar-denominated private secondary products reached USD 293 million, up 161% year-over-year when RMB-denominated private secondary products reached RMB 5.3 billion, up 61% year-over-year. This fundraising momentum directly supported the growth in investment-related commissions and reinforce our strategy.

As of the end of the quarter, group AUM was RMB 140.2 billion and AUA was RMB 233.5 billion. Total AUM and AUA at the group level declined, yet our U.S. dollar-denominated base continued to grow. Overseas AUM reached USD 6.2 billion, up 5%, and overseas AUA reached USD 9.6 billion, up almost 6% year-over-year.

Total Diamond and Black Card clients reached 9,029. Overseas, Diamond and Black Card clients reached 1,781, up 3.8% quarter-over-quarter, reflecting continued traction in overseas markets.

Our balance sheet remains strong and highly liquid. As of the end of the quarter, cash and cash equivalents were RMB 4.3 billion and short-term investments were RMB 834 million. Total assets were RMB 11.6 billion and total liabilities were RMB 1.7 billion.

Our asset liability ratio remained low at 14.5%, and our current ratio was 4.8x, providing ample flexibility for growth and shareholder returns. We believe our current market valuation does not fully reflect the strength of our balance sheet, the resilience of core earnings and the scalability of our operating model.

With shareholders' equity of about RMB 9.9 billion, the company is trading at roughly 0.5x book value when delivering an annualized return on equity of approximately 5.4%. In our view, this does not adequately reflect an intrinsic value of long-term earnings potential.

And since the beginning of 2020, we have repurchased 2 million ADS for approximately USD 20 million, representing about 2.7% of outstanding shares. And since launching the program, shareholder return in 2024, we have cumulatively repurchased 3 million ADS or USD 35 million, plus we have declared to distribute 100% of our non-GAAP net income as dividends for the third consecutive year. These actions reflect management's confidence in the company's intrinsic value and our commitment to enhancing long-term shareholder returns.

So in summary, the first quarter reflects disciplined execution of our strategic transition. Revenue quality improved, operating leverage strengthened and AI-driven productivity gains continue to enhance structural efficiency. When reported earnings were influenced by nonoperational volatility, the underlying trajectory of our core business continues to improve. With the fortress balance sheet, a leaner and more scalable operating platform and continued capital returns through share repurchases, we believe the company remains fundamentally undervalued relative to its intrinsic strength and long-term earnings potential.

So we remain fully committed to disciplined execution, prudent capital allocation and sustainable long-term value creation. Thank you, everyone. And we'll now open the floor for questions.

Thank you, Mr. Grant, and thank you, Mr. Yin, for the presentation. And operator, please open the floor for questions.

[Operator Instructions] Your first question today comes from Calvin Leung from Citi.

[Foreign Language] Let me quickly translate my question. and this is Calvin Leung from Citi. Last Friday, China tightened the regulations on cross-border brokerage businesses. What is the management's view on the evolving regulatory landscape on this front? And what is the potential impact to Noah's domestic market business?

Considering a few offshore brokers who are signed by regulations regarding the unauthorized brokerage businesses what is management's take on the compliance risk and domestic market going forward?

[Foreign Language]

[Interpreted] Let me do the translation. The CEO -- we confirmed that the company has paid attention to this news. However, we have to emphasize that this is not exactly a new happening, but more like a reinforcement of an existing rules that has been introduced to the market a couple of years ago. However, we would like to emphasize that the company has been always complied to legal requirement under different jurisdictions. And particularly for the overseas account that have been opened is all under the complied requirement under, say, for example, in Hong Kong would be all the KYC requirement and all that.

And also, about the money transfer into this investment account is from legitimate financial institute operate or under HKMA's regulation, that all the money transferred in the investment account is from those validated financial institution. But having said that the security business, the revenue contribution to the company is rather small. So all in all, we don't see any impact or basically with no much impact to Noah for our business model. And we must once again think that all of our operations under different jurisdiction has been always complied to the legal requirement.

[Foreign Language]

[Interpreted] The Chairlady further supplements on the answers. The company has been paying huge attention to this newly executed rules and situation. And we've been immediately reviewed our internal procedure according to the SFC requirement. And we are very comfortable to say that we are fully complied with the legal requirements. And that is not only in Hong Kong but across Singapore, U.S.A., all of our booking centers.

So different from -- or slightly different from these securities online platform, what we serve is the global Chinese high net worth. So it's a slightly different from the business model and having said that security business is only contributing less than 1% to our total revenue. And we further emphasize, again, all the money transferred to the investment account are from overseas banks, none, zero of the money transferred into the investment account is from China Bank. So she's slightly optimistic that maybe this could be a chance for Noah because we have been always compliant to regulations.

[Foreign Language]

[Interpreted] So iARK, which is our app for security trading in the company. And all the operational system and also the technical supporting systems are all placed in overseas market and overseas like in Hong Kong. So -- and also for iARK, we have 0 employees that basically refers to iARK in the domestic market. So again, we are fully compliant to the requirement of SFC and CSRC.

[Foreign Language]

[Interpreted] And further, the company is already reviewing the referral requirement for the business from domestic to overseas according to the legal requirement. Calvin, I hope that answer your question.

Your next question comes from Peter Zhang from JPMorgan.

[Foreign Language] This is Peter Zhang from JPMorgan. And I have 2 questions. First is, we noticed wealth management product transaction volume has picked up sequentially in the first quarter, which is a really good trend. We are wondering what's the operating trend in second quarter? Do we see continued strong investment sentiment in our clients? And how is the client demand for domestic and overseas products, investment products?

Secondly, my question is on the cost side. We have a really good cost control in first quarter. I'm wondering whether management can share what's the full year guidance for our headcount growth and operating expense trend.

[Foreign Language] Doreen?

[Interpreted] Yes. Thank you, CEO. So back to Peter's question, appreciate for what you've asked, so what we will want to answer the question divided into 2 parts, which is the domestic market and also the overseas market. We must admit that for investment sentiment, a lot of time is affected by the entire market situation. And that's why we've been seeing that in 2025 and 2026 until now, the investment sentiment has been a lot improved compared to 2 years ago.

However, what we've been really doing is not just, I mean, getting business according to the market situation. So what we've been doing is really try to promote the idea that we've been helping clients to do the wealth management, which is to diverse their assets into different classes and different products so that they can have a better portfolio. And then we have been seeing the progress in the domestic market.

And for overseas market, one of the things about being a wealth management company is the ability to getting the good products. And according to the CIO report and also in the market -- I mean in the current market condition, AI has been a very important idea for investment ideas. And that's why we have different products that is AI-related from infrastructure to AI company.

And that, we've been doing that and also, again, promote the same idea of helping clients to do their wealth allocation for a better portfolio. And that we believe that with all this good quality product on hand, we should see a better sales allocation as a result.

And we must also emphasize that in terms of the selling abilities that now we've been using AI to support company or the RM to do the clients' risk analysis. So we've been promoting products according to the clients' needs that is more specified in some of -- during the March promotion like in the past, which, again, we believe that we should enhance the efficiency of our selling and ultimately, the selling results for the company.

[Foreign Language]

[Interpreted] So we -- when we review history of Noah, we've been talking about to protect our client assets before growing in 2022. And in 2023, it's about all the price entity in China that is growing overseas market. And since last year, we talked about AI. And for this year, we emphasized in the AI infrastructure product.

What we've been demonstrating here is we are a real wealth management company. So what we are doing is about how to make sure our clients' asset can be well protected and ultimately have growth. And I mean, different from a lot of our friendly -- not exactly competitors but our peers, then I would say we always review how much profit our clients made every year. And that has been a very key KPI for our -- for the staff here.

And so I mean, in a simple way of saying that the company couldn't control a lot of things like the market cap or if the size of the company can grow drastically. However, if we look at what we've been doing with our clients, when we look at with the profitability for over 62 consecutive quarters, when we've been looking at all the right decisions in the past, in history, we are confident that we've been able to keep up with the company and ultimately will be seen by the market.

So I'll take Peter's second question. We actually don't have a set agenda or set target for frontline teams, obviously, although we see a declining of number of RMs, but that's really driven by performance. So as you could see, we're still achieving much higher fundraising volume because of the higher quality and high efficiency. So we don't expect to have, I would say, intentional shrinking of the frontline team, we want to make sure, obviously, they're fully occupied and able to generate enough volume as CEO and Chairlady just mentioned, there might be opportunity given the current policy situation.

At the same time, obviously, we are targeting mid-back office efficiency, especially with the tool of AI. We believe that many positions in the past that basically being performed by pure labor, pure hands are now being at least consolidated or merged into fewer positions. So that actually leads to a significant, I would say, optimization in mid-back office structure.

But in the meantime, I think from the standpoint of whole year, although we don't expect to see a huge expansion of growth in headcounts, we are going to see some key fulfillment in key markets worldwide, although just a couple of people. And obviously, we'll continue to invest in AI and technology. Peter?

[Operator Instructions] Your next question comes from [indiscernible] from CICC.

[Foreign Language]

I will translate my questions. This is [indiscernible] from CICC. I have 2 questions. First is a transaction value active client numbers and RM numbers for overseas business declined, could you please talk about the reasons? You mentioned overseas business has moved from a licensed setup to formal operations. What's the growth outlook for this segment going forward?

And my second question is about AI. The AI wealth management department in Singapore has delivered much stronger revenue generation and client service efficiency. Could you please talk about how AI help RM develop their business?

[Foreign Language]

[Interpreted] So about your question about overseas business performance. We do see that a sequential drop in first quarter. However, when we look at the year-on-year, we still see a growth as reflected that. We believe that is a normal performance across different quarters various changes. And about how AI has been enhancing our RMs. So I guess, we've been slightly touch based on the current way of doing business.

We are now trying to be more focused and more accurate in picking products to certain clients. So we've been able to distinguish a high level of clients so that will be more efficient in terms of suggesting products to our clients and allocate the resources that we have on hand.

And also, we have introduced [indiscernible] rewarding system since late last year. And that is more like a reward system we've been providing certain rewards to our clients. That, again, we focus on high-quality clients and that as a whole means that our selling methodology could be better allocated in terms of our resources.

As you may aware, we've been basically through the license in Hong Kong. And in Singapore, we have different types of license under the regulatory of MAS, and we're currently applying for asset management license as well.

So back to your question about the U.S. market, booking center license, and again, it's one of the important steps to complete the development of we are having a very important strategic booking centers for the company. And after the license being granted, we are now working on the details of reapplying business in that market, and that we believe is going to be a very important strategic move for the company.

[Foreign Language]

[Interpreted] The Chairlady now doing a public -- not announcement, but suggestion to all our analysis, when you are doing the analysis of the company, may be no longer we should use the RM as the indicator or number of RMs as the indicator. The company needs business size in the future. But what we've been trying to suggest that because of the enhancement of AI, so all the human RMs been supported in the first hand. And secondly, we have built up the AI + Wealth Management department.

As in the CEO's presentation, we've talked about how this AI plus Wealth Management been able to do or to support -- to take care of our clients, but without enhancing more human resources on that. And also, what we've been further development is AI plus Ecosystem, that is more like a referral business to cooperate with different types of professional individuals in the market. That should help us to get clients under the AI plus Wealth Management system.

So as using Singapore as an example, yes, Singapore is not an easy market. It's small but competitive. And it's really difficult to hire the right RM. The cost will be very high. And that's why we've been using AI as a testament when we started in this market. And we have found out that we have been getting very good results from that market. And that as mentioned, we have a 191% growth in AUA in first quarter. And that's why we've been going forward to try to apply the same system into different overseas markets as well.

I mean, ultimately, we would like to apply that in the domestic market, too. However, some limitation of the historical structure and also because of the different AI system, that may be slower. However, we should expect that the AI application to different overseas market should be bringing results to the company in the near future.

Is there any more questions?

Thank you. There are no further questions at this time. This concludes our question-and-answer session. I would now like to turn the conference back over for any closing remarks.

Thank you. Thank you, everyone, for joining us today, and please feel free to reach out the IR team for any further questions. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and welcome to the Noah Holdings Limited Fourth Quarter and Full Year 2025 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 ]. Please go ahead.

Thank you, Rocco, and good morning, and welcome to Noah Holdings Fourth Quarter Full Year 2025 Earnings Conference Call. Joining me on the call today are Ms. [ Nora Wung ] Co-Founder and Chair lady; Mr. Zander Yin, the Co-Founder, Director and CEO; and Mr. Qing Pan, the CFO Mr. Yin will begin with an overview of our recent business highlights and strategic developments, followed by Mr. Pan, who will review our financial and operational results. After management's prepared remarks, we will open the call for questions. .

Before we begin, please note that today's discussion will contain forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed in such statements. Potential risks and uncertainties include but are not limited to those described in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong store Exchange. Nor undertakes no obligation to update any forward-looking statements, except as required by law.

Without further ado, I would now turn the call over to Mr. Yin. Please go ahead. Thank you.

[Interpreted] Good day to everyone, and thank you for joining us today. 2026 marks the 21st year since Noah was established. In a market environment defined by continuous evolution and restructuring, our strategic direction has never been clear. We remain firmly focused on serving global Chinese high net worth and ultra-high net worth clients operating through licensed local entities to provide compliance, long-term wealth management services across multiple jurisdictions.

More importantly, we are completing a critical transformation evolving from a wealth management institution primarily driven by product sales into a comprehensive platform centered on asset allocation, global structuring and AI systems. In 2025, this transformation began to yield tangible operating results. This is not a temporary business adjustments but the fundamental reconstruction of our operating model.

For Noah 2025 represents an important milestone. Looking at our full year results adheres [indiscernible] quality of our profitability is improving at a faster pace than the stabilization of our revenue structure. For the full year, net revenues were RMB 2.6 billion, broadly flat year-over-year. However, operating profit was RMB 777 million revenue, up 22.5% year-over-year with operating margin improving to 29.8% and non-GAAP net income increasing 11.2% year-over-year to RMB 612 million.

Excluding the impact of nonoperating items, adjusted non-GAAP net income was approximately RMB 753 million. What matters most at this stage is not the absolute scale of our profitability but the improving underlying structure. This profit growth was not driven by one-off factors, but by optimized cost structure, enhanced operating efficiency and the ongoing shift in revenue mix towards estimate related businesses. This reflects how our profitability is shifting from cyclical volatility towards structural stability. This is a qualitative change, not only quantitative growth.

From a business perspective, while our domestic and overseas business segments are moving at different paces, they are fully in the same direction. Investment capabilities are becoming the primary growth engine. Net revenues from our overseas wealth management business were RMB 550 million in 2025 and down 18.8% year-over-year, mainly due to a decline in share of products distribution revenue. However, overseas AUM grew to USD 9.5 billion, up 8.6% year-over-year.

Notably, transaction value of U.S. dollar-denominated private secondary products tripled over year to USD 950 million. The number of overseas registered clients approach 20,000 of 13.2% year-over-year, of which active client exceeded 6,200 up 12.4% year-over-year. Net revenues from Olive, the overseas asset management business RMB 550 million for the full year, up 26.3% year-over-year, mainly driven by higher management fees resulting from AUM growth.

Overseas AUM reached USD 6.1 billion up nearly 4% year-over-year, accounted for 30% of total AUM. Net revenues from Glory Family Heritage, our integrated services business were RMB 180 million for the full year, up 28.8% year-over-year. Despite a highly competitive market environment, we achieved breakthroughs in sales for new channels.

Domestically, the sales recovery in the Asia market helped improve our performance. RMD-denominated private secondary products maintained gross momentum from the second quarter onwards which helped partially offset the impact of turning management fees from maturing RMB-denominated private equity products. Noah Upright, our domestic public securities business recorded net revenue of RMB 570 million in 2025, up 15.9% year-over-year with transaction value for RMB-denominated private secondary products reaching RMB 11.2 billion, a 107.2% year-over-year.

Gopher, our domestic asset management business recorded net revenues of RMB 690 million for the full year down 10.3% year-over-year, mainly due to lower management fees resulting from sharing RMB-dominated private equity products. In the primary market, Gopher completed RMB 5 billion of private equity asset exits and distribution in 2025.

Glory, our domestic insurance business recorded net revenues of RMB 19 million for the full year, down 56.5% year-over-year. The decline in revenue was expected and aligned with our ongoing strategic transformation. Overall, our performance clearly shows a business shifting towards investment and asset allocation capabilities. It is this long-term vision that has systematically rebuilt our overall structure over the past few years.

What we have accomplished is not simply business of expansion, but a fundamental reconstruction of our operating model. Today, we are building a global wealth management operational system composed of 3 core platforms, all operating under a unified management framework. Ark served as the client onboarding and execution platform, with licenses in Hong Kong, Singapore and the United States, it operates compliantly within local regulatory framework. Ark is responsible for account management. trade execution, product distribution and AI wealth advisory services, providing clients globally with a consistent, seamless and compliant experience. .

Olive served as our investment and asset management platform across Hong Kong, the United States, Singapore, Japan and Canada. It has the capabilities source global assets, establish and manage funds across multiple jurisdictions and execute long-term asset allocation strategy. It is a key foundational piece for our long-term value creation and revenue stability. Glory served as our asset structuring and risk management platform covering major markets, including China, Hong Kong, Singapore and the United States.

It offers insurance, trust and identity planning services that deliver risk isolation and asset protection through structuring solutions and supports the long-term transfer them well.

Supporting these through core platform is our [indiscernible] compliance architecture anchored by our 4 major booking centers. Shanghai firm as a effective client onboarding hub for RMB asset allocation, Noah upright fund distribution and Gopher for asset management.

Hong Kong functions as the cross-border connector for securities and insurance serving as the bridge between China and global markets. Singapore is our center for overseas asset allocation and family structuring and our primary pilot regions for AI wealth management. The United States serves as a key hub for BCP and capital markets activity. In particular, our investment capabilities in the technology sector are an important contributor to future revenue growth and innovation.

I want to emphasize that all booking centers are independently operated by locally licensed entities and conduct business within their respective regulatory framework, cross-regional collaboration is primarily limited to research and information support with no direct cost jurisdiction business activities. This strict compliance foundry is the institutional foundation for our steady growth.

The gradual [indiscernible] Headcount declined by 11% year-over-year, while revenue remained stable, reflecting improved operational efficiencies. Over the long term, AI brings much more an improved operational efficiency, it is also reconstructing how we operate by embedding AI into key areas such as client engagement, content generation and operational processes, we have established a machine collaborative operational-driven model in certain regions.

This reflects our transition away from headcount expansion to systems that drive both scale and service quality.

Looking ahead to 2026, we will remain prudent but highly focused on our clear strategic direction, while revenue is to fluctuating to structural adjustments, the proportion of investment-related income is expected to rise as profit margins remain stable or improving gradually. And furthermore, our AI capabilities will evolve beyond system efficiency gains and scale into broader operational validation.

We are still in the midst of our transformation, but the logic behind our long-term operational model is stronger than ever. At its core, this transformation is not about changing product form or expanding services. It's about fundamentally reconstructing what drives our growth. Historically, our industry has relied heavily on the individual capability of relationship managers.

Today, we are building a human machine collaborative operational-driven model centered on asset allocation, where nor relationship managers and our global platform and refine their capabilities. 2025 marks the starting point of this model, and where we gradually reflect in our operating results. The transformation is ongoing, but our strategic direction is firmly set. We will continue to execute the long-term strategy prudent and compliantly.

Thank you. I will now hand the time over to CFO, Pan to review our financial performance in more detail.

Thank you, Zander. And good morning, everyone, for the comprehensive strategic overview and good day to everyone who joined us today. I would like to focus on 2 key financial messages. First 2025 delivered strong operating profit growth and structural margin expansion, driven by a clear shift in our revenue mix. Investment-related income increased significantly during the year, while we deliberately reduced our reliance on insurance-related revenue.

This reflects our continued transition towards a more investment-led business model. with improving earnings quality and great margin resilience. Second, the board has approved our dividend proposal, including a special dividend, bringing total payout to 100% on of full year non-GAAP net income for the third consecutive year. This reinforces the consistency and visibility of our shareholder return policy.

Together, these developments underscore our transition towards a more investment-driven, globally diversified and resilient operating model. For the full year 2025, net revenue was RMB 2.6 billion, broadly stable year-over-year. Operating profit increased to RMB 777 million, representing growth of 22.5%. Operating margin expanded to 29.8% compared with 24.4% in the prior year.

Non-GAAP net income reached RMB 612 million up 11.2% year-over-year. This improvement was primarily driven by structural cost optimization and enhanced operating efficiency rather than short-term factors. In the fourth quarter, revenue was RMB 733 million, up 12.5% year-over-year. Operating profit reached RMB 258 million representing a significant increase of 87.3% and operating margin expanded further to 35.2%. This reflects strong operating leverage as performance-based income starting to materialize, supported by a more scalable and disciplined operating structure.

During the year, we continued to optimize our revenue structure. Investment products commissions increased by 79.7% year-over-year and performance-based income rose by 78%. At the same time, overseas revenue contribution increased to 49% of total net revenue. This shift towards investment-driven and globally diversified revenue streams has enhanced earnings quality and supported structural margin expansion.

To provide a clearer view of our core performances, I would like to address 2 nonoperational items that affected our reported fourth quarter GAAP results. First, under income from equity in affiliates, we recorded a loss of approximately RMB 120 million. This was primarily driven by mark-to-market accounting adjustments related to share price volatility of a specific listed investment.

It's important to emphasize that this represents accounting reflection of market movements and not impact our core wealth management operations. Second, regarding the legacy camps in credit fund arrangements, several cases reached procedural milestones this quarter as certain clients opted for arbitration. In line with our prudent financial policy, we recognize contingent expenses of approximately RMB 50 million.

Total provisions now stand at RMB 505 million representing about 63% of the unsettled principle. Based on current benchmarks and the progress of these cases, we believe the existing provision level is appropriate and covers a substantial portion of the potential exposure. Based on the information currently available, we do not anticipate significant additional provisions. If we exclude these to nonoperational items, adjusted full year non-GAAP net income would have been approximately RMB 753 million, which we believe more accurately reflect our underlying operational efficiencies.

In terms of balance sheet, as of December 31, 2025, cash and short-term investments totaled RMB 5.0 billion. The asset liability ratio stood at 15% and the company carries 0, no interest-bearing debt. Our current ratio was 4.5x. This debt restructure provides strong financial flexibility and reinforce the resilience of balance sheet. From a financial perspective, our AI strategy is centered on productivity enhancement rather than heavy capital expense. We are already seeing measurable results in our cost structure.

In 2025, total head count decreased by 11% year-over-year when net revenue remained stable at RMB 2.6 billion. This indicates a meaningful increase in output per capita. AI-driven tools now support a substantial portion of client engagement, automated reporting and routine workflow tasks that previously required a lot of manual intervention.

In our view, AI functions and structural efficiency multiplier. It enables us to scale global operations while maintaining disciplined cost control and consistent service quality. As of year-end, shareholders' equity stood at about RMB 9.9 billion. At our current market capitalization, the company is trading at roughly 0.57x book value with operating return on equity close to 8%.

When market valuation may fluctuate, our focus remains on building long-term intrinsic value through disciplined execution and continued global expansion. Our strong cash position and operating cash flow provide both confidence and flexibility to deliver attractive and sustainable shareholder returns across market cycles. Driven by a solid performance and healthy liquidity position, the Board has approved a total dividend of RMB 612 million, equal to 100% of 2025 non-GAAP net income. This consists of 50% regular dividend and a 50% special dividend.

Subject to shareholder approval at the 2026 AGM, this will mark our third consecutive year of full payout. At current market prices, the implied dividend yield is approximately 11%, including the RMB 50 million in share repurchase completed in 2025, total cash return yield reached approximately 12%. This payout is fully supported by our core operations and strong balance sheet. It represents approximately about 80% of operating profit and is covered multiple times by RMB 5.0 billion in cash and short-term investments.

In short, we're rewarding shareholders for their trust while maintaining a fortress balance sheet that supports our continued global growth. In summary, revenue remained resilient throughout the year as we executed a deliberate shift towards more investment-driven income stream. At the same time, operating profit delivered strong double-digit growth, supported by structural margin expansion and continued improvements in efficiency.

Our AI initiatives are now translating into tangible productivity gains, strengthening our operating leverage and scalability. In our industry-leading capital return policy highlighted by 100% payout and the introduction of special dividends also reflects both operational strength and confidence in the sustainability of model. So with these foundations firmly in place, Noah has emerged leaner, more efficient and structurally stronger. We remain fully committed to disciplined execution and the creation of sustainable long-term shareholder value.

Thank you. And we will now open the floor for questions.

[Operator Instructions] Today's first question comes from Helen Li at UBS.

[Interpreted] I have 2 questions. The first question is on private credit. How much in third-party private credit product has Noah distributed today? Have you seen any client redemption in this area? How do you assess the overall risk profile of this product? One area of concern in the private credit market has been potential disruptions from AI given that a meaningful portion of the underlying portfolio companies are software firm.

Noah maintain their investment team in Silicon Valley, how much direct investments or co-investments does Noah currently have in our private credit space. What percentage of the underlying assets are software companies and what percentage of those could potentially be vulnerable to AI disrupt -- human disruptions and how do you view the risk segment?

My second question is on transaction value and onetime commission. In the fourth quarter, onetime commission declined sharply year-on-year. Looking more closely at transaction value, both domestic and overseas insurance products sales weaken significantly, how do you see the run rate trend heading into '26? Amidst the recent capital market pullback, how has client element towards investment products involve our clients adopting the risk of [indiscernible] and redoing their allocation to investment products and finally, what's the current health in terms of the investment strategy for the reminder of this year.

[Foreign Language]

[Interpreted] Let me do the translation here. First of all, we must emphasize that the company doesn't run any asset that is related to the product that Helen just mentioned. So what we've been doing at Silicon Valley is mainly invested with or partner with some key major name that's their PE product or in some [indiscernible]. And that's why we don't see a much impact of our business because when we review the AUA here, those assets are only representing a low single-digit amount of our AUA.

The company has been have a concern on the related asset class at a very early stage. That's why we have been advising our clients to have a property position in a very early stage.

And regarding the second question on our commission. So because we must emphasize that being in the wealth management business, we are not a single product sales written business, but we've been trying to provide a safe and structural services for our clients. So yes, we do see the drop in insurance sales that we also believe because a lot of our existing clients, they have already had enough coverage from insurance products. .

And that's why when we've been reviewing our business in under Glory, what we've been emphasizing that we are providing a global solution to our clients, but not just selling single insurance products. And regarding the investment incentive among our clients, we don't see any drop in demand. We understand that that's reaching the market. However, we actually see clients, they have a very high interest in investing in the wealth, particularly in AI-related products. So we will still keep an eye on that and do the right advice to the client.

[Foreign Language]

[Interpreted] Thank you, Chairlady. So what we wanted to emphasize that is that Noah, the company has established for many years, and we have substantial experience in handling different types of economic. So for the recent situation, we were talking about this PE risk in those alternative investment play related to social media assets. we can use an example from [indiscernible] product. We look at it as -- I mean, under all the normal criteria is the return should be 5%, now it's over 93%, which is we have seen this situation in China, in Mainland than before, where -- that's why we've been taking early position to advise our clients.

Depends on the risk appetite, whether they would prefer to have more midterm risk appetite? Or they are more risk reserve, now we've been taking advice in the earlier stage. So since the beginning of this month, we've been -- we are advising our RMs to talk to different clients, depends on their asset allocation. and also the risk appetite. And we believe that our clients experience is still a very prudent situation, and we don't see any effect client at the moment.

And as we mentioned about our experiences within the Mainland market, we also one of our advantage or strength is that we know Chinese high net worths and these families charateristic and what they are wanted to and how they would like to treat the investment portfolio. And that's why we've been strictly choosing or strictly been allocating which PE we should go to. And that's why from the very beginning, the company has been providing rather more suitable to what our clients need when selling these type of products. .

And regarding your second question about our sales and insurance products, I think we do admit that in the past, the company is a more product-driven selling company, which when the investment product is very welcoming all the insurance product is very welcoming, then it becomes the key driver of the company's growth.

However, what we want to emphasize is today, we have formed our global freelance systems. as what CEO mentioned in his speech, that we have [indiscernible]. We are forming this platform, the ecosystem, being a wealth management company that we are providing total solutions. So now it's not about what to sell, but about how to help our clients to do the wealth management.

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

Our next question today comes from Calvin Leon with Citi.

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

[Foreign Language]

[Interpreted] Let me do a translation here. So we must emphasize that we invest AI not because this is pop again, that is the trend currently. But it's really about how it's been able to enhance the efficiency of the company. So in the past, with our analysts when they review our business model, they may use a method to count how many RMs we hire and then just do a multiple and believe that, that is a growth engine.

However, under the AI enhanced system. We believe that the -- right now, it's not about how many people we hire, take Singapore offices, for example, we've been adopting this AI method for 9 months now. What we see is our human resources dropped, but at the same time, AUM has increased by 3x in the past 9 months. It's about efficiency. It's about quality that we've been able to deliver to our clients.

And apart from that, with the AI in mind, we may also able to further develop our business by reaching to the AM on the multifamily office business so that we've been able to provide a system to work with this independent third-party channel, just like what we've done with under Glory with high different commission-based broker to do the insurance business since the second quarter last year.

And to answer your question, maybe currently, it's not about if we've been able to use a financial indicator to show the efficiency or a really quantitative return from using AI. However, we believe that the one key factor, you can look at is how many clients we've been able to cover. The company has a record of over 400,000 client on our report. We may not have been able to cover all of the past. But with the help of AI, that has enhanced our efficiency.

We believe that this is a very good opportunity that we've been able to talk to all our potential clients or who should be our clients on our list again. And -- but we must emphasize, company is still very cautious about client's privacy. So when doing investment planning suggestions, we would be rather more prudent because we don't want to have any kinds of privacy issues being concerned to the company.

So at the moment, we will say it's more about efficiency, but I would say the company with the not chuckout internally all the clients -- all our employees can use and also the AIRM, that is the translator for our CEO just now. that are providing -- already providing service to internally and externally to clients that we are already seeing the efficiency that AI has been bringing to the company.

And what we've been now promoting is a program called RM 100, which -- what would about this program is that, we asked or to hand take around 100 clients, they would like us to serve intensively. And for the rest of the clients supposingly on the book, then they have to hand it out to our AI wealth management department, which the core belief behind this is that we hope that through the support of AI, we can enhance quality and which the RMs when they have handpicked their client, they can better serve his own clientele.

And that ultimately is about the income can be increased and ultimately, that drives our profits in the future. So -- and to your question about buyback and dividend and shareholder return. because we have confidence in driving our future growth. And also, we know the financial industry go well and we also know how to best allocate our resources. And that's why the company believes that we have a very high confidence in continuing to return our -- or to reward our shareholders.

I just want to add to the information that we actually have, since the repurchase program, we have repurchased about 4.3% of the total shares outstanding. And obviously, we have been very disciplined in terms of execution of dividend policy. I believe that with adding this year's dividend to the accumulated dividend out, the number is already across the RMB 2 billion threshold.

So that's actually a very impressive return. I guess not just in Chinese ADS, but probably on many of the listed companies. So we are actually giving out about $1.32 per ADS this year. So that's something, as Chairlady just mentioned, that we're pretty confident that we'll be able to generate the same level of cash flow and continue to reward our shareholders.

And our next question comes from Peter Zhang with JPMorgan.

[Interpreted] Thanks for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan. I have 2 questions. First is, we noticed that the fourth quarter revenue was mainly supported by the strong performance fee we wish to understand what's the drivers behind and consist revenue segment to be sustainable into 2026. .

Secondly, given which management can help you describe what's the quality take operating trend for Noah, including client activity, client investor behavior, wealth management sales -- product sales volume as well as revenue trend. In addition, the market has been quite volatile for first quarter, we wish to understand whether this has any implication on your exiting affiliate income items.

[Foreign Language]

[Interpreted] Let me do a simple translation first. Honestly, it's hard to precisely predict the trend in the future. However, we must emphasize that it's about the structure. We've been focusing in investing with PD in previous years and believe that with this structure, we've been promoting investment products, this should bring carry to the company in the future for long-term growth.

And for your second question regarding equity in philipines, yes, we do still see some pressure during Q1. However, we must emphasize that this is only a nonoperational impact. So it shouldn't be really affecting the cash flow or our operation. And for Q1 operation, if Pan would like to.

Sure. I just want to add a little bit more on the carry. I think Peter particularly mentioned about the Q4 carry income, 2/3 of the carry actually came from an exit from U.S. dollar-denominated funds in Silicon Valley. And the rest actually came from the domestic products, from the RMB private hedge fund. So I guess that's a pretty balanced return.

But obviously, as Zander just mentioned, it's quite difficult to forecast a particular timing of carry, but we are seeing that the AUM accumulated rather good opportunities for continuous return performance fees, hopefully. And yes, I think for the first quarter, obviously, you cannot share too much information about the first quarter actual operations.

But we're seeing, I guess, at least the stabilization of client sentiment toward investments, and two is, obviously in terms of the tension, I guess, especially MidEast, people are a little bit more risk-averse, and they tend to actually put items or investments in more liquidity position and a more diversified portfolio. And that's exactly our point of view that we'll try to make, drive client diversify across asset classes and also regions.

And our next question comes from Yumin Tang with CICC.

[Interpreted] My first question is that we noticed a meaningful expansion in operating margins. Current management provide some color on what at the notable increase in our operating margin and moving forward, how do you view our capacity to mention back to cost structure and my second question, what were the primary drivers behind the significant widening of investment losses from equity in affiliates in the fourth quarter?

So yes, I want to just give a highlight on the operational margin. Obviously, one is as a result of continuing optimization in terms of cost of, obviously, human resources related in terms of salary and bonuses, especially in mid-back office streamlining, as we just discussed the utilization of AI as well as the continuing streamlining processes. So as a result of the reduction of headcounts the total actual cost related to staffing decreased about 10% with the help of obviously, carry income, we're seeing a pretty healthy margin.

And 30% is actually the operational margin we always try to aim for. So that will continue to be reflected in our strategy in 2026. And also in terms of your question on the affiliated equity performance. We're obviously seeing a lot of pressure in the fourth quarter, but hopefully, it will be able to stabilize in the first quarter.

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

Thank you. And thank you everyone for joining us today. And if you have further questions about the company, please feel pleased to reach out to the IR team and have a good day, everyone.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, afternoon and evening, and welcome to the Noah Holdings Limited Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Doreen Chiu, company's Investor Relations. Please go ahead.

Thank you, Jason. Good morning, afternoon and evening to everyone, and welcome to Noah's Third Quarter of 2025 Earnings Conference Call. Joining me today are Ms. Wang Jingbo, our Co-Founder and Chairlady; Mr. Zander Yin, Co-Founder, Director and CEO; and Mr. Grant Pan, the CFO. Mr. Yin will begin with an overview of our recent business highlights, followed by Mr. Pan, who will discuss our financial and operational results. They will all be available to take your questions in the Q&A session 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 differ materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC and the Hong Kong Stock Exchange, nor does not undertake any obligation to update any forward-looking statements, except as required under applicable law. With that, I would like to pass the call over to Mr. Yin.

Thanks Doreen. [Interpreted] Good morning to everyone, and thank you for joining us today. During the quarter, we are seeing 3 very clear trends emerge. First, despite ongoing revenue pressure, our profitability and margins improved significantly with non-GAAP net income increasing by over 50% year-on-year. Second, investment products have seen accelerated growth and are accounting for a larger share of new revenue. And lastly, key initiatives, including the establishment of 4 overseas booking centers and the rollout of AI-related projects have transitioned from planning to actual implementation. These 3 trends give us greater confidence that our transformation strategy is making solid progress.

Financially, net revenues for the third quarter reached RMB 633 million, down slightly year-on-year, but up sequentially, marking the second consecutive quarter of sequential growth. The year-on-year revenue decline was mainly due to continued softness in both domestic and overseas insurance businesses, in line with our expectations that 2025 to 2026 would be a period of revenue mix adjustment. Notably, our revenue mix continues to improve significantly, driven by growing investment products revenues, which accounted for approximately 28% during the quarter compared to 18% a year ago, a clear improvement compared to the same period last year and something we will continue to focus on going forward. As a result, our bottom line delivered a solid performance with non-GAAP net income for the third quarter up more than 50% year-on-year to RMB 229 million. This brings non-GAAP net income for the first 3 quarters of 2025 to RMB 587 million, a clear reflection of the results our prudent investment strategy and cost controls are delivering.

Performance of our overseas and domestic operations are each following distinct trends. For overseas operations, it has maintained a pattern of strong investment product growth and soft insurance product distribution. Net revenues from our overseas wealth management business were RMB 146 million in the third quarter, a year-on-year decrease of 22.7% due primarily to a decline in revenue contribution from the distribution of insurance products. Sequentially, however, revenues were up 13%. By the end of third quarter, overseas AUA reached USD 9.3 billion, up 6.8% year-on-year. Notably, transaction value of U.S. dollar private secondary products in the first 3 quarters increased nearly 2.5x year-on-year to USD 688 million. Net revenues from Olive, the overseas asset management were RMB 118 million in the third quarter, up 8.6% sequentially, driven primarily by growth in AUM and recurring service fees. By the end of third quarter, overseas AUM was USD 5.9 billion, up 5.3% year-on-year. Net revenues from Glory Family Heritage, which provides overseas insurance and comprehensive services were RMB 47 million in the third quarter, up 19.8% year-on-year. While investment services remain our core focus, we shall continue to serve clients with insurance products through our capital-light commission-only broker model.

On the domestic side, we are seeing strong momentum in the secondary market, a continued focus on exits in the primary market and the insurance segment entering an adjustment phase. For Noah Upright, our domestic public securities business continued to benefit from a rebound in the Asia market. Transaction value for RMB-denominated private secondary products in the first 3 quarters grew 206% year-on-year to RMB 8.97 billion. Net revenues from domestic public securities for the third quarter were RMB 116 million, up 8.7% year-on-year and underscoring the strategic direction we are headed in with growing AUA and expanding investment capabilities. Net revenues from domestic asset management, Gopher, were RMB 189 million in the third quarter, up 4.9% year-on-year as it maintained stable profitability and continues to facilitate exits from existing assets. Net revenues from domestic insurance business, Glory, were RMB 5 million in the third quarter, down 44.8% year-on-year.

The pace of the fall in net revenues was in line with our planned pace of consolidation and transformation to domestic insurance business. Overall, the rebalancing of our overseas and domestic operations is making solid progress with investment product growth increasingly acting as a new growth driver.

In the third quarter, we continue to make solid progress in our overseas expansion with the establishment of 4 booking centers, which form the foundation of our global operational system. In the United States, we officially obtained a U.S. broker-dealer license and will continue to steadily build our business there in accordance with local regulatory requirements. In Singapore, we continue to strengthen our capabilities and build out our team. While in Hong Kong and Shanghai, we continue to serve as a core hub for operations, compliance and support systems. Our global operations framework is gradually improving, providing an important foundation for future cross-regional client services and asset allocation.

AI is a disruptive force in wealth management industry with immense future potential and serves as our second strategic growth driver for the future. Over the past few months, we have begun implementing our AI RM + AI operations system plan. Initial pilots were launched during the quarter to improve client outreach, content generation and back-end operations as well as cross-departmental collaboration in Singapore specifically. In the latest update to our app, we officially launched our AI RM, Noah, providing clients with deeper engagement and interaction. I want to emphasize, however, AI is not simply a PPT concept for us. It is an institutionalized operational capability. We will continue to develop AI capabilities across the entire value chain in a steady and pragmatic manner.

Looking ahead, we remain firmly committed to advancing our 3 core strategies: First, strengthening our core capabilities in investment product selection, fundraising and co-investment to increase the proportion of investment products in our revenue mix, drive product innovation and create a differentiated competitive advantage. Second, establishing AI as our second strategic growth driver by strengthening the development and deployment of AI tools across relationship management operations and investment research to firmly embed it into our organizational DNA and operational system. And lastly, leveraging our full emphasis booking centers as a foundation for a globally coordinated service platform that delivers a consistent wealth management experience to global Chinese clients. At the same time, we will continue to maintain prudent operations and drive quality growth striving to improve shareholder returns by improving capital efficiency, optimizing cost structure and strengthening cashflow. We'll continuously enhance our competitiveness in market share in the global Chinese wealth management market. Thank you.

Now I'll hand over to our CFO, Grant, to provide a detailed overview of the group's financial performance.

Thank you, Zander, for the comprehensive strategy and market overview and warm greetings to everyone joining us today. For those of you that in the United States, happy Thanksgiving and holiday season. I also want to make an introduction of the AI RM, Noah actually did the English translation just now, if you have noticed. I'm very pleased to share Noah's financial performance for the third quarter of 2025 and resource allocation priorities from a financial perspective.

During this quarter, we delivered solid profitability supported by prudent investment decisions and disciplined cost management. Non-GAAP net income reached RMB 229 million, up 52.2% year-over-year and 21.2% sequentially with a margin of 36.2%. The first 9 months of 2025, non-GAAP net income totaled RMB 587 million, a 40.5% increase from the same period last year. This was achieved despite a 7.4% year-over-year decline in total net revenues for the quarter as we continue to optimize our revenue structure. Total revenue for the third quarter was RMB 633 million, reflecting a year-over-year decline primarily driven by lower insurance income amid intensified competition in both domestic and overseas insurance markets. Yet it still recorded modest sequential improvement overall, marking our second consecutive quarter of growth. Total transaction value remained high at RMB 17 billion, maintaining the same elevated level as the previous quarter and rising 19.1% year-over-year. RMB-denominated products increased 28.7% year-over-year, while U.S. dollar-denominated products grew 9.6% year-over-year.

The strength in investment-led transactions helped offset softness in insurance and domestic management fees, which continue to weigh on overall revenue. Onetime commissions related to investment products grew 85.5% year-over-year, supported by stronger client sentiment, expanded range of quality global investment solutions offered to our clients. Overseas net revenues for third quarter remained robust at RMB 311 million, contributing 49.1% of total net revenues. By revenue type, onetime commissions were RMB 159 million, up 2.2% sequentially. For the first 3 quarters, the transaction value of RMB private secondary products, which surged 26% to RMB 9 billion and U.S. dollar private secondary products, excluding cash management, climbed 244% to USD 688 million.

Recurring service fees exceeded expectations, rising 4.7% year-over-year and 3.6% sequentially to RMB 421 million. The increase was supported by higher overseas product management fee contributions and some extensions of domestic fee funds. When domestic exit activities were slower than expected, we do not view this as a structural issue. We acknowledge and recurring income may face some pressure in the near-term. We're proactively managing our portfolio and strengthening overseas product fee contributions to mitigate the impact. Performance-based income remained stable from last quarter, stood at RMB 22 million. Our overall operating expenses declined 1.6% sequentially to RMB 461 million. For the first 3 quarters, it has dropped 6.5% year-over-year, reflecting improved efficiency across the organization. This discipline enabled us to expand our operating margin to 27.6% for the first 9 months from 25.5% a year ago, with operating profit reaching RMB 519 million, up 4.6% year-over-year.

In the third quarter alone, operating profit was RMB 172 million with a 27.2% margin. Non-GAAP net income rose to RMB 229 million, up 52.2% year-over-year and 21.2% sequentially, reflecting continuing operational strength and solid investment performance. That said, we may encounter a moderation in the fourth quarter as market conditions evolve. As of September 30, 2025, total assets under management, AUM, stood at RMB 143.5 billion. U.S. dollar-denominated AUM grew 5.3% year-over-year and 2.6% sequentially to USD 5.9 billion, while U.S. dollar-denominated assets under advisory, the AUA, increased 6.8% year-over-year and 2.0% sequentially to USD 9.3 billion. This ongoing expansion in overseas assets highlights Noah's success in capturing offshore investment demand and strengthening our international footprint.

Our overseas client base continued to grow. with registered clients up 13.1% year-over-year and active clients reaching 3,561 by the end of the third quarter. The number of newly acquired golden clients defined as professional investors has reached to over 1,000 by the end of the third quarter, reflecting our ability to attract and retain high-quality clientele. Our balance sheet remains strong and debt-free. As of September 30, 2025, cash and short-term investment totaled RMB 5.0 billion, even after a dividend payout of RMB 550 million. With 0 interest-bearing liabilities, we remain significant liquidity and flexibility to support global growth and technology investments.

In closing, even under softer revenue conditions, our disciplined operating model and prudent investment approach delivered solid profitability and margin expansion. With a strong balance sheet, growing global presence and ongoing digital transformation and AI application, we remain confident in Noah's ability to deliver sustainable growth and create long-term value for all stakeholders. Thank you for your trust and continued support, and we'll now open the floor for questions.

[Operator Instructions] The first question comes from Helen Li with UBS.

Can you hear me?

Yes. Please go ahead. Helen, we lost you.

The next question comes from Peter Zhang with JPMorgan.

[Foreign Language] Congratulations on the very strong results. I have 2 questions. First is management gave very clear guidance on strategy on AI on increasing the investment product proportion and on the booking center. And I have 2 follow-up questions. First is, can we understand what will be the potential financial impact from these strategies? For example, with the adoption of AI, will we see any cost saving on the operating expense side? Or will we see any improving in revenue? And regarding the booking center, particularly on the U.S. booking center, will we see very strong upfront investment into the 2026 where we fully launch this business? And the second follow-up question is we also wish to understand from the investor perspective, is there any metrics we can track on Noah's progress in this strategy in the coming 1 or 2 years? And my second question is on the overseas relationship manager and the domestic coverage city. I observed that overseas relationship manager headcount has dropped in third quarter, while the domestic coverage city has increased in third quarter. And the trend is a bit different from the trend we have been observing in the I think past 2 years. We wish to understand what's the rationale behind? Is there any major change in our company strategy? Or this is just due to some market or the RM headcount fine-tuning?

Thank you Peter, and thanks for actually asking a pretty comprehensive question. So, I'll try to take the first question and Zander will supplement on the second one. So, for the first question, especially on the 3 significant measurements, especially for the strategy of optimizing revenue structure. I think a couple of things that investors could track or pay attention to is one is the weight of revenue that's coming from investment-related products. We do believe that both revenue and top line will continue to grow. But at the same time, the structure that comes from investment-related products, given the actually expansion on product shelf and how the recovery of sentiment relating to investing from our clients, we believe that, that's one of the things, obviously, we could track. Secondly, obviously, we want to see a meaningful accumulation on investment-related AUM and AUA as well.

Secondly, to your question, I believe our Chairlady, Noah, could also add on is the AI investment. It's not a small optimization or extracurricular activity in terms of AI investments. We're actually looking to innovate the business model on top of the traditional offline or physical RM team, if you will, by actually adding 2 teams. One is the AI RM that will continue to activate the existing client group to activate sort of the nonactive clients or new clients. We believe that AI actually provide a more structural method and a more tailor-made capability to active the new client leads. And secondly, we're actually trying to see if we could -- as Noah actually do have pretty established infrastructure in terms of systematic infrastructure as well as the capability offering various products, we want to see if we could use with the help of AI to consolidate or aggregate some of the EAM services that seems to be pretty mature in overseas market. So basically, in short, we're trying to see if the AI capabilities that we continue to invest in will increase the capability on several fronts. One is obviously client acquisition, new client acquisition; and 2 is to upgrade the business model in the future. So, we have been doing that, especially the design organization structure this year, and we'll have a strategic investment in AI starting from 2026.

To your question on the booking center, yes, we will have a little bit of infrastructure construction, obviously, in the U.S. booking center, but we already had presence in the U.S. market for the past few years. So many of the teams are actually already out there. Obviously, we'll be adding some of the mid-back-office capability for the broker-dealer business. But from the budget standpoint, it's actually not going to be a very significant addition in terms of operating expenses, but basically the necessary infrastructure for the year of 2026. Okay. So, Peter, that's the first question.

[Foreign Language]

[Interpreted] [Let me do a quick translation first.] So, CEO just mentioned for the 3 strategies is actually very correlated because the key thing is trying to do is to drive the company as an AUM-driven company. So, during these structural changes, and we've been trying to more -- because in the past few years, the clients are more conservative in terms of investment. But the recent year, we have seen that there has been changed and clients have been more active in the investment now. So that's why we believe that AUM-driven structure in terms of our revenue is the key engine for the company growth in the near future. And when we're talking about AUM-driven revenue growth, that is why we needed to think about the AI development and also the different booking centers that we've been having in globally. Because for AI investment that it can help to enhance our business efficiency and also it provide a better experience to our clients and which we believe that it can further reinforce our momentum. In terms of giving clients a better service and our sales performance. And also, for broking center, basically, it's the same idea. We've been trying our clients to plan as well because we have seen more global demand in terms of the investment need. And that's why we needed to build up the platform and provide these infrastructures to our clients. And also, yes, it may have a little impact unavoidably. But that we believe that with our strong balance sheet, we've been able to keep a very prudent investment team, but at the same time, been able to support our development.

[Foreign Language]

[Interpreted] To your second question, Peter, CEO emphasized that we didn't change any of our focus on developing our overseas market. When you have seen that they dropped the number of our overseas RM, I would also say that it's more like an active adjustment internally instead of other reasons. It's because to have the right RM is actually -- require a lot of investment and time. And I mean we will need to have the right RM. And that's the reason why we've started to invest in our AI development and try to introduce the AI RM concept. Now that you've just met. It's actually one of the AI RM that we are having. And because when we look at the efficiencies, they can actually cover the number of clients will be a lot more, and that is what our CEO mentioned, the capacity that AI RM could have compared to any human beings. And also, you may have seen the number of cities in domestic market we cover seems to have increased. But again, that's not exactly the same types of office that we've been having in some of the major cities. Those increases are mainly just that the cut will call it more like a clubhouse. It's more for client relationship and for our elite clients better experience with us. So, we wanted to emphasize that our focus on developing overseas market remains the same.

Can you hear me? [Foreign Language]

[Interpreted] [Yes. Let me do a very quick translation.] So, what Chairlady has mentioned, we've been started to invest in different types of AI or investment-related fund since 2016, and we've been staying very close to a lot of top-tier high-tech company. And why we bring this up is because we've been trying to demonstrate where do all this knowledge about AI and technology we've been adopting. And for example, investors or analysts could been seeing that we've been launching all these type of infrastructure fund in our -- under our brand as well. So, we've been trying to demonstrate that we have a very deep knowledge about AI. And that we believe that's going to have a very structural changes to the wealth management industry. In the past, it's more like RM-driven, human-driven model, but we believe that going forward, it's more like an operational driven model.

What is the operational driven model, we believe this depends on -- I mean, it depends on development of AI, which is, for example, we can have an AI wealth management team, it could have people still to do the data analysis and some people may hold license. But at the end of the day, it's about AI. They've been able to help and enhance human beings' knowledge about different investment products and their client needs. And so that they can come up and they can cover a lot more clients per person unlike in the past. And that's what we call this operational driven. And also, when we are developing the overseas market, what we've seen is it's hard to rely on human being at the sense that because the cost could be high and also the loyalty, or the stability may not be as high or not be that high. And that's why the company believe that using operational-driven wealth management system is a more efficient way of running this business. And that's not only happening in Noah, we believe that it's going to be very -- it's going to be a new development in the entire industry in the coming 3 to 5 years' time. But that we've been trying to take advantage, or we've been trying to take step ahead of the industry so that the company can be ahead of the industry to adopt this operations-driven model.

And to supplement this also, we've been introducing the EAM or what we call IAS system in the U.S.A. And also, we've been hiring this commission-based agency during our insurance products. That said, overall, we are talking about -- from the company's point of view, it's about building the global platform, the infrastructure for all these operational-driven models being able to deliver good results for the company.

[Foreign Language]

[Interpreted] So as a conclusion, we believe that with AI, so currently, what we are having is that all of our RM, they have their own AI assistant. And we believe that, that can enhance the capacity to like become -- one people become 3 RMs. And more importantly, it is about the new business unit or business line that we've been setting up. So, another one will be AI wealth management that we mentioned previously, which is within the AI wealth management team, they've been able to give better experience to the new clients and also, they've been able to help to take into our client base and try to reconnect with those clients may not be very active in the past few years. And another business that we've been trying to -- or we have been developing is also this AI ecosystem team, which is they've been focusing to serve the EAM business that we've been mentioned and also this commission-based agency that will be supplement the company's development.

[Operator Instructions] Our next question comes from Calvin Wang with Citi.

[Foreign Language] Congrats on the solid premium in third quarter. And I have a question on investment product sales, which sustained a robust growth in the quarter. What measures have Noah taken specifically? And looking into the fourth quarter, what is our strategy in investment product sales across domestic and overseas markets? Are there any products that would be our key focus this year?

[Foreign Language]

[Interpreted] You may be aware that in this company, we have this CIO report, which has been issued every half year. And during the recent publish, we talked about the 3 types of products that we believe that should be paying more attention to. So, for the first time is some fund or investment that has been able to fight inflation, which would be more traditional types of funds, including those property fund or maybe gold or material-related types of funds. And secondly would be more technology related, which is using technology to fight inflation. For example, this AI that would been mentioned, not only for the companies adopting of the using, but also related type of investment as well. And the third one would be some newly developed business is more like the crypto that we've been paying -- or we've been advising our clients to pay more attention to. And I mean, as Chairlady mentioned, luckily, we've been connecting with the U.S. product market since 2016, and we have developed a team there to sourcing different types of funds or investment products for our clients. And that's why we've been able to been enhancing our product share in the past few years. And that's why starting from the last few years, you may have been able to see reflecting on our financial performance. Instead of just PE fund being able to sell to clients, we have seen a very substantial improvement in selling hedge funds. That is the secondary market types of fund that we've been able to sell to our -- to our clients.

And also, about the renminbi market, we may have to say that, yes, because of the performance of our Asia market, we have seen a lot of interest in our clients for the renminbi-related products. However, the company still keep a very rather prudent and conservative belief towards the renminbi type of product. We still believe that our strength or our focus is more on overseas investment products is more particularly these technology-related type -- AI-related type products.

[Foreign Language]

[Foreign Language]

[Interpreted] [Thank you, Chairlady.] So, what in mentioned, timing to CEO's answer is we probably shouldn't just look at a particular type of products when we've been doing -- answering this question. It's more about the company's position. It's also about our own DNA, which is that we've been able to serve all the global Chinese. We understand them, and we know how to give them better services. And also, it's about the infrastructure that we have, the broking centers globally and also the different business units, for example, Ark in Hong Kong, in Singapore, they've been able to provide services for opening accounts, buying equities, buying bond-related products. And also, we have Olive, our asset management that's been strong traditionally in PE funds, and we're now introducing hedge fund. And also, our brand Glory, we've been able to provide trust services or even insurance advice and family planning. So, it's about the infrastructure that we've been having and means that we've been always able to meet our clients' needs. So, for example, that's why what we've been keep on saying, we wanted to be an AUM-driven revenue model. That's also why we've been starting to build up the commission-based insurance agency team because we've been trying to lower the running cost, but at the same time, still provide comprehensive services. to meet our clients' needs. And I guess that's our advantage of the company. So, it's not about picking what products to be sold to the clients, but we've been able to provide whatever our client needs and meet the demand.

[Foreign Language]

[Interpreted] So, Chairlady, this also explained the strategy. So since starting this year, I mean, for -- we wanted to focus on the Chinese high net worth. So, it's not no longer competing by providing what type of products, but about we've been able to provide the services. So, she emphasized again about the RM team that we've been building, the group booking center we've been able to have globally so that we've been able to provide services across different time zones and across different geographical restrictions. And also, when we've been serving the high net worth, one thing is different. They no longer just related to one geographical places. They've been speaking different languages. And when we've been entering different markets, we also face the difficulties of regulatory requirement. And that is one of the lowest competitive edge because if any wealth management company with a smaller scale, that may be a very difficult thing to override. And that's why we've been in the right size to be able to set up our global infrastructure platform, being able to cooperate with local EAM IAF team so that we've been able to provide global to any potential high net worth clients that we've been able to reach.

[Foreign Language]

[Interpreted] I guess Chairlady wanted to further share her confidence -- I guess she's very excited and everyone can sense that. We've been able to find the right strategy going forward to develop this company. So again, she emphasizes about the global platform. It's about the different business units that we have already developed and invest in the previous years. And it's also about the new development like ecosystem and AI RM. Together, we've been able to serve globally and meet all the clients, all the particularly Chinese high net worth needs in this global market. So, she's very confident and has a very high hope about this development strategy for the company.

And the next question comes from Jin Jiang Yan with CICC.

[Foreign Language] My first question is about the investment income and income from equity affiliates. I see that both these items have significant meaningful contribution to the growth of net profit. And I would like to -- could you please share the reasons behind and the trends in the fourth quarter? And the second question is about the active clients. I see that the active clients increased both double digits Y-o-Y and Q-o-Q. Could you please share what you have observed from the clients' behavior, the impact on the financial statement and the trend in the fourth quarter?

[Foreign Language]

[Interpreted] So, about the investment gain that we've been having. So, one of the major reason is due to the previous investment the company is having, particularly being the GP for some of its PE funds, and we've been seeing some exit in the recent years during the good market. And also, we can have a valuation gain for some of the investment as well. And in terms of active clients, we've been able to have the better result because we've been now more focusing on investment products and which for investment product and life insurance clients may have repeat buying with us that we've been able to enhance or have or maintain a rather stronger relationship with them. And that CEO emphasis why that's the reason why we would like to be more focused as an AUM-driven company.

[Foreign Language]

[Interpreted] So, Chairlady further explained that, that is because one of the -- I mean, the investment gain that we've been able to have is because the right decision that we have made in the past. So being invested in different types of these PE fund or also even listed in the U.S.A. We may have some hurdles in the previous year, but that we've been seeing good results. For example, this investment income, that is one of the example showing that the company has been able to make right decisions in the previous years. And that's also the reason explained why. I mean, when we have good result investment, that is an attraction point to our clients that made them more willing to invest with us.

And the next question comes from Helen Li with UBS.

[Foreign Language] I have a follow-up question regarding AI application. How will AI support client acquisition in the overseas market? Given the recent decline in overseas relationship managers, does this suggest a strategic shift towards serving existing clients' overseas investment needs rather than focusing on expanding local client acquisition? And is the reduction in headcount primarily affecting mid- to back-office RM? Or does it also affect client-facing front office RM? Do you still plan to expand the client-facing front office RM team? Previously, the target was to grow the overseas RM team to 300 in the medium-term. With the adoption of AI, has there been any change to this medium-term target?

[Foreign Language]

[Interpreted] So, to answer your question, the Chairlady is just joking about that we want to -- we don't want to share the secret of how we've been able to get clients, but that's more like a joke because I mean, ultimately, it's about how many clients that we have already been served. We have already served more than 400,000 clients over the last 22 years. And also, with all these different types of PE fund that we have invested, we have mapped a lot of potential high net worth or going to be high net worth or have become high net worth individuals by their business development. So that the company is very confident that we have already had the database. But that in the past, one of the difficulty is that we have the capability or we are capable to serve these types of clients in a good way. But that with the AI assistance, we believe that we've been able to deliver better services and better solutions to all our clients. And that's why with this kind base that we already have, we've been able to give the right service to them with the assistance of AI.

So, she also provided one example. We have this client in Singapore. We met him and he became a client. He invests with us only top 5 days. And that is impossible in the past. It may take more than 2 months in the past. But now with the assistance of AI, that is providing solutions, explanation and different types of understanding. And that's the reason why it has enhanced the company's efficiency in getting potential clients.

[Foreign Language]

[Interpreted] The CEO just explained how AI is affecting the company. We believe that everyone is talking about AI, every company wants to use AI. But it's about if they have the basic to be able to really adopt AI. That is -- because using AI and using AI efficiently is 2 different topics that we've been talking about. And why Noah been able to have in this competition is because we have adopted digitalization. I mean, in the earlier stage, we have developed the right system. We internally have all these data analysis, or system buildup, even the OA structure and all that. And because of that, we've been able to adopt AI in a faster pace compared to some of our peers. And also, when Helen is asking how AI has been able to help the company, CEO's answer was, yes, we have already seen some benefits being arise using AI, but that AI's adoption could be out of our imagination. So, the benefit that we've been experiencing could be a lot more in the future.

This concludes our question-and-answer session. I would like to turn the conference back over to Dorien Chu for any closing remarks.

Yes. Thank you. And thank you very much for joining us today. And if anyone has any further questions, please contact IR team as usual. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good day, and welcome to Noah Holdings Second Quarter and Half Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to [ Doreen Chew ], Senior IR Director. Please go ahead.

Thank you. Good morning and good afternoon, and welcome to Noah's Second Quarter and Half Year 2025 Earnings Conference Call. Joining me today, we have Ms. Wang Jingbo, the Co-Founder and Chair Lady; Mr. Zander Yin, Co-Founder, Director and CEO; and also Mr. Grant Pan, 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 differ materially from those in our forward-looking statements. Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC and the Hong Kong Stock Exchange. Noah does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

With that, I would now like to pass the call over to Zander. Mr. Yin, please go ahead.

Okay. Good morning to everyone, and thank you for joining Noah's second quarter 2025 earnings conference call. [Foreign Language]

[Interpreted] In the second quarter of 2025, global financial markets experienced significant volatility with the Trump administration's tariff policies and geopolitical risks moving from background noise to center stage, leveraging the forward-looking insights from Noah's CIO report for the first half of the year, our clients achieved strong investment returns with over 95% of our black card clients realizing cumulative gains by the end of the quarter. After several years of developing and expanding our overseas business, we have established a comprehensive robust product matrix, including VC and PE funds, private credit funds, infrastructure funds, hedge funds, global mutual funds, Hong Kong and U.S. equity structured products and wealth inheritance solutions such as insurance, trust and residency planning.

These diverse offerings have all been fully integrated, providing clients with one allocation capabilities and investment expertise needed to solidify their asset base and enhance wealth resilience amid uncertainty. We are pleased to report that a strong operational and financial performance during the second quarter. Net revenues reached RMB 630 million, with income from operations increasing by 20.2% year-over-year and non-GAAP net income surged 78.2% year-over-year and 12% sequentially to RMB 189 million. Net revenues for the first half of 2025 were RMB 1.2 billion, generating non-GAAP net income of RMB 358 million. Our revenue mix continues to improve, driven by growing investment product revenue. Specifically, onetime commissions from investment products have reached their highest point in recent years, making up over 30% of onetime commissions revenue.

[Foreign Language]

[Interpreted] Domestically, our strategy remains focused on enhancing relationship manager incentives, reactivating dormant clients and acquiring new clients. Overseas, we continue to expand our relationship manager teams and grow our local client base. In the first half, we added 627 new qualified investors as clients. We continue to make progress in optimizing our internal organization with each business unit building an end-to-end process that spends from product development to sales. In addition, we are driving cross-selling activities through enhanced client service and increasing overall client activity and engagement. We remain committed to investing in our platform and capabilities, leveraging AI to empower relationship managers and clients while boosting client participation. Concurrently, we are advancing the development of our booking centers and digital platforms to enhance cross-border synergies for client outreach, product integration, digital infrastructure and risk controls, laying a solid foundation for sustainable growth -- future growth. I will now dive into the performance and operations of each business unit.

Net revenues from overseas reached RMB 297 million in the second quarter, accounting for 47.1% of total net revenue with net revenues from overseas investment products continuing to generate solid growth. Our team of overseas relationship managers expanded to 152 by the end of the quarter, a year-on-year increase of 34.5%. The ongoing enhancement to our capacities and deepening expertise drove strong investment returns for clients during the quarter, supporting solid growth in both overseas transaction value and net revenues.

[Foreign Language]

[Interpreted] Net revenues from overseas wealth management were RMB 129 million during the quarter, down 14.1% year-on-year due primarily to our ongoing strategic focus on investment products, which resulted in a decline in revenue contribution from the distribution of insurance products. Overseas AUA grew 6.6% year-over-year to USD 9.1 billion and now accounts for 27.6% of total AUA, primarily driven by increase in distribution of private equity funds. Transaction value of U.S. dollar-denominated private market products in the first half of the year increased by 70.3% compared to the same period last year, reaching USD 765 million. Within U.S. dollar private secondary products, transaction value of hedge funds and structured products more than doubled year-on-year to USD 424 million.

We continue to expand and deepen our relationship with reputable products and investment partners globally and have now become rapidly one of the top 3 distribution channels in Asia for flagship products from leading GPs such as Aris and Hamilton Lane. As for the second quarter, the number of registered overseas clients now exceed 18,900, a year-on-year increase of 13%, with the number of active clients now over 3,600, a year-on-year increase of 12.5%.

[Foreign Language]

[Interpreted] Net revenues from overseas asset management during the second quarter were RMB 108 million, up 11.5% year-over-year, driven primarily by growth in AUM and recurring service fees. Overseas AUM was USD 5.8 billion, up 7.4% year-over-year and accounting for 28.5% of total AUM. Net revenues from overseas insurance and comprehensive services during the quarter were RMB 59 million, an increase of 91% year-over-year. The Hong Kong insurance market remains highly competitive. However, our quoted big clients' large policies strategy and cost-effective customized products for major clients is delivering strong results in this environment with average overseas insurance policy size continuing to increase. Additionally, [ Gopher's ] team of commission-only brokers and external channels has already generated over RMB 20 million in revenue, injecting such vitality into new client acquisition.

[Foreign Language]

[Interpreted] Net revenues from Mainland China during the quarter were RMB 333 million, a year-on-year decrease of 1.3%, but a sequential increase of 7.3%. The recovery in the Asia market this year has driven a substantial improvement in the performance of our domestic business. Renminbi-denominated private secondary products continued to gain strong growth momentum in the second quarter, which partially offset a decline in recurring service fees from existing Renminbi private equity products. Notably, the rebound in the Asia market increased investor confidence in the secondary market and is fueling growth in our domestic public securities business. Net revenues from domestic public securities during the quarter were RMB 132 million, a year-over-year increase of 12.8%.

Transaction value of Renminbi-denominated secondary products continued their strong momentum with transaction value for private secondary products in the first half of the year, reaching RMB 6.1 billion, a significant year-over-year increase of 185.3%. The rebound in the Asian market provides a favorable environment for Renminbi-denominated secondary products, enabling us to achieve continued breakthroughs in this business. Net revenues from domestic asset management during the quarter were RMB 177 million, down 10.6%. This was due to lower recurring service fee from existing Renminbi-denominated private equity products. In the primary market, Gopher focuses on facilitating exits and distribution of assets managed by the funds where it recorded RMB 800 million in exits related to private equity products. Net revenues from domestic insurance during the quarter were RMB 716 million, a year-over-year decrease of 38.7%. This was a result of our strategic decision to reduce the promotion of domestic insurance products.

[Foreign Language]

[Interpreted] Looking ahead to the second half of the year, we will focus our efforts on the following 3 strategic priorities. First, we will concentrate on high net worth clients and actively expand our customer base. We are proactively entering mature financial markets such as the United States, Canada and Japan to serve global Chinese clients. In these established markets, we will adopt a business partner cooperation model to attract more talent and broaden our client base. Our positioning is clear to be a wealth management platform dedicated to serving global Chinese high net worth investors.

Second, we will continue to enrich our global product offerings across various categories to meet the diverse needs of our clients. Our robust product portfolio enables us to provide more competitive investment solutions. In the primary market, we will expand our ecosystem partnership to develop customized investment solutions and exclusive opportunities. In the secondary market, leveraging our global investment research capabilities, we will carefully select high-quality strategies from top-tier managers to enhance our ability to deliver robust asset allocation solutions. We will also actively explore new opportunities in digital assets, pushing the boundaries of wealth and asset management to provide clients with a more comprehensive and cutting-edge investment experience.

Today, we are also pleased to announce that we have selected Coinbase Asset Management as a strategic partner to establish our [ list of stablecoin ] yield fund. We shall expand our digital asset-related product lines and collaborate with licensed compliant institutions to capture opportunities in this rapidly growing emerging asset class. This initiative aims to open new growth engines for our clients, global asset allocation strategies with future expansion opportunities in compliance digital asset fund management. Third, we remain committed to enhancing operational efficiency while pursuing growth. We continue to integrate AI across our operations to empower relationship managers, clients and middle and back office staff. These initiatives have significantly improved the client experience and reduced operational costs. Amid the vast opportunities presented by the global expansion of Chinese enterprise, we aspire to have Noah's Ark present wherever there are Chinese clients around the world.

[Foreign Language]

[Interpreted] I will now pass over to our CFO, Grant, to go over our financials in more detail. Thank you all.

So warm greetings to everyone joining us today. I'm very excited to announce our financial performance in the second quarter of 2025 that reflects steady progress and resilience across our operations. Supported by revenue growth, disciplined cost management and investment income, we achieved non-GAAP net profit of RMB 189 million. This represented 78.2% year-over-year growth and a 12% sequential increase. For the first half of 2025, non-GAAP net income totaled RMB 358 million, a 33.9% year-over-year increase. More importantly, management is very encouraged by the structural improvements in our operations this quarter. We achieved substantial growth in revenues related to investment products with a 92% year-over-year increase and a 30.6% sequential rise in that category, driven by clients more uplifting investment sentiment, it also attributed to wider selection of quality investment solutions that we provided to our clients, both onshore and offshore.

In terms of transaction values, RMB-denominated products recorded a 35.0% year-over-year growth and 8.3% sequential increase, while USD-denominated products grew 5.2% year-over-year and 3.8% sequentially. As a result, our total transaction values reached RMB 17 billion, reflecting a 17.7% year-over-year increase and a 5.4% sequential rise. For the first half, commissions from investment products grew by 95.9% year-over-year with transaction values for RMB-denominated private secondary products stood out, growing by 185.3% year-over-year to RMB 6.1 billion. Similarly, U.S. dollar private secondary products, excluding cash management products, grew by impressive 282.20% year-over-year to USD 424 million despite volatility in U.S. equity markets. So in this context, onetime commissions contributed RMB 155 million in the second quarter, marking a 14% year-over-year increase. Recurring service fees and performance-based income remained steady at RMB 406 million and RMB 23 million, respectively.

Total net revenue reached RMB 630 million for the quarter, reflecting a 2.2% year-over-year increase and a 2.4% sequential growth. Breaking revenue down by region, overseas net revenues continues to drive growth, recorded RMB 601 million in the first half of 2025. Not only did it account for 48.3% of total net revenues in the first half of the year, but over 85% of newly generated revenue that was originated from offshore products. In the meantime, we continue to stay conscious of costs and expenses. Total operating costs and expenses for the first half were RMB 897 million, down 11.2% year-over-year.

Key reductions were achieved in managing a more optimal headcount structure while maintaining investments in growth area. Total OpEx, excluding total compensation and benefits declined by 9.3% year-over-year. This efficiency enabled us to achieve an operating profit of RMB 347 million for the first half, up 35.8% year-over-year with an operating profit margin of 27.9% compared to 20.2% in the same period last year. For the second quarter, operating profit were RMB 161 million with operating margin of 25.6%. Net income for the first half was RMB 322 million, representing a 39.4% year-over-year increase despite the booking of about RMB 40 million in withholding taxes related to dividends distributed during this period.

As of June 30, 2025, total AUM stood at RMB 145.1 billion, reflecting some pressure from redemptions of RMB-denominated products. However, U.S. dollar-denominated AUM grew by 7.4% year-over-year to USD 5.8 billion, while U.S. dollar-denominated AUA increased by 6.6% year-over-year to USD 9.1 billion, demonstrating our ability to continue to capture share of clients U.S. dollar investment allocations. At the end of the second quarter, our overseas new client base continued to grow with a number of overseas registered clients increasing by 13% year-over-year and 4.2% sequentially.

The total number of overseas Diamond and Black Card clients now exceeds 1,640. Overseas active clients reached 3,650, up 12.5% year-over-year and 7.9% sequentially. Notably, we saw meaningful growth in our new golden clients that is qualified investors or qualified professional investors by definition, increased by 627% within the first 6 months of this year. Although it takes time for brand-new clients to mature into the core client group, namely Black and Diamond clients, we're very confident that with a continuous global expanding mindset, the company is steadily gaining new market share worldwide. Our balance sheet remains sound. As of June 30, 2025, combined cash and short-term investments totaled RMB 5.4 billion, and we continue to carry 0 interest-bearing liabilities.

Additionally, net investment gains for the quarter exceeded RMB 60 million, reflecting the realization of potentials from our past strategic investments. In closing, the second quarter of 2025 represents a meaningful step forward for our business in the right direction, marking an important milestone of restructuring efforts and confirming the positive impact. Enhancing shareholder returns remains our priority, and I'm pleased to share that we have returned over RMB 1.8 billion cumulatively to shareholders through dividend payments, share buybacks for the past 3 years. And the Board and management is committed to disciplined capital distributions to our shareholders in the long run. Moreover, with a book value per ADR of USD 18.35 per share, we believe that the current share price still remain undervalued, offering shareholders an attractive opportunity. Looking ahead, we remain focused on enhancing shareholder value, driving sustainable growth and achieving long-term success.

Thank you, shareholders, for your trust and support. We'll now open the floor for questions.

[Operator Instructions] Our first question today will come from Helen Li of UBS.

[Interpreted] Let me translate my question. This is Helen from UBS. I've got 2 questions. The first is, could you please provide more details on the private credit digital yield fund, including the strategic considerations behind this move, the management fee structure and client interest in such products? Additionally, are there any other plans in the cryptocurrency field besides the stablecoin yield fund? My second question is, what was the CIO house view regarding client asset allocation? How would you describe the current client investment appetite, particularly the demand for offshore products compared to onshore products? Do you anticipate a strong growth momentum in investment product distribution to continue into the third and fourth quarters?

[Foreign Language]

[Interpreted] Sure. Thank you, Zander. So this is -- it's the first cooperation in the market to launch this stablecoin yield fund. And as we mentioned in our CIO report, indeed from last year to this year, in our CIO report, we have been emphasizing the importance to -- for our clients to distribute their assets in stablecoin, this new asset class for 2 years now. And that's why we have been proud to announce that we've been partnered with Coinbase to launch our first fund. And having said that, we still emphasize that the prudency that we needed to maintain being a wealth management company. And that's why the partner we choose at this time is Coinbase.

And then in terms of the -- in terms of the fee structure, we would just say it's the same as any other investment products we have been distributing to our clients. That's not much special between the different types of products.

[Foreign Language]

[Interpreted] Regarding your questions about the investment products that clients may have high interest. So what we seen -- we have seen in the first 2 quarters this year, we saw that clients are having more interest in deploying the asset and wealth into investment products. The reason behind that, we believe that in the previous years during the 2020 to 2022 because of the geopolitical situation and other noises in the market, investors become more cautious, but that they are also learning as well. So after a few years of learning and adapting to the current environment, we believe that clients are now more confident and clear about what they should buy and they still need to deploy the asset because after all, wealth management should be a long-term planning instead of just a very defensive investment or very short-term investment.

So when client incentive is going upward, domestically, mainly it's driven also by the Asian market. But being a very prudent organization, we have been also observing the secondary markets in China if it's overhit in the moment because of it has been driven by money flows obviously. And then, however, overseas, we've seen more options. And particularly, we have seen the opportunity among the overseas Chinese because they got wealth in the overseas market, but they may not get as good service as they could have in the domestic market. And particularly, they may lack of information in different investment products.

So what Noah has been doing, we partner with all these prominent GPs globally and that we've been trying to provide more information to our clients when they are trying to deploy their asset. And as we've emphasized in our CIO report is always about the balance between growth, return and risk. And we will always follow our principle as list out in CIO report. That is the investment triangle that we try to use the different assets to balance risk and return. And particularly the new [ theme ] that we have introduced this round in CIO report is a deflation caused by technology. And that we believe that that's the major reason why we have been advising our clients to invest in AI or Coinbase related investment products.

[Foreign Language]

[Interpreted] So from our Chair Lady, she emphasized that Coinbase in this world, we must emphasize that the risk could still be very high. And that's why being a responsible wealth management company, we've been emphasizing in compliance while we are looking at innovation. So this round, we've chosen -- we've chosen the partner, which have been widely agreed on their compliance standard. And as mentioned in CIO report, we have been suggesting our clients to invest around 1% to 5% of their asset -- total assets to be in the Coinbase related products.

And most importantly, we believe that Noah could be the bridge -- to be the bridge to provide compliance products in this area. And last but not least, not only this one product that we launched that I just mentioned, going forward, we will continue to study and going to launch more related products depends on our clients' needs. We believe that by time, they will learn more about this asset class, and they should have more demand in this area.

Helen, do we answer your question, Helen?

[Foreign Language]

[Foreign Language] Next question, please.

Our next question today will come from Peter Zhao of JPMorgan.

[Interpreted] This is Peter from JPMorgan. I have 2 questions. First is we wish to understand what's the third quarter operating trend for Noah. We have seen there's a strong pickup in domestic investment sentiment lately. We wish to understand what Noah has observed about the investment sentiment on your platform and the wealth management product transaction volume trend in third quarter quarter-to-date and how does this compared to second quarter?

My second question is about the overseas expansion. We noticed that management has mentioned the plan to expand into the U.S., Canada and Japan. We wish to understand how is the progress so far and what to expect in second half of this year and next year? And when do you expect this new market can meaningfully contribute to your client growth and revenues? And we also wish to understand how this overseas expansion plan will have impact on our operating expense trend going forward.

[Foreign Language]

[Interpreted] So Peter, regarding your question about the investment sentiment looking forward to the third quarter. And yes, we have to say that during different client -- different events that we've been organizing when we met with clients, we have seen strong interest from them. And unlike in the previous period, they would be more prudent and prefer lower risk return or lower risk products. We have seen that because of the Asian market and also because of the U.S. interest rate environment, they are now showing more interest in investing in different types of investment products.

And also, when we talk to clients, one of the reflection that we've been collecting is that we've been able to provide more and more diversified products with different GPs. And that's because we have set up the product center in the U.S.A. and that we've been able to contact and have connection with more reputable GPs from broadly. And that's why we've been able to provide a better product matrix to our clients. However, we must emphasize that being a wealth management company or what the core of wealth management should be long-term return. So it's not about any short-term environment changes or client feeling about the market or any sentiment-driven investment. So internally, we emphasize on long-term return instead of just selling products according to market sentiment.

[Foreign Language]

[Interpreted] So about our global strategy and as mentioned by Chair Lady, we have been developing our overseas market over the last 3 years. And what has been achieved must be the product matrix and being a wealth management company, this is one of the very important criteria that we have already achieved. So next step, we would say it's more about branding. When we talk about branding, it's we -- what we've seen is that we serve Chinese globally. But then currently, we don't see much of other organizations being able to serve Chinese across different legal jurisdictions. And that we believe is going to be our very committed target going forward.

And in terms of the strategic planning, so in -- we have 3 booking centers in the U.S., Hong Kong and Singapore. And also for the non-booking centers such as Japan, Canada that we have already mentioned previously, it's going to be the asset management for the clients using the Olive [ line ]. So we believe that Noah's strength is we have trust of course with our clients. And with this trust, we have seen that some of our clients from domestic markets are already moving to overseas market, and that should be our strong client base when we're developing our overseas market.

Okay. So I'll take the third question on OpEx, Peter. So we basically have reached a stage of rather comfortable structure in terms of frontline and mid-back office. I think we're pretty much after a couple of years transaction, a transition period, we're actually pretty comfortable with the mix of frontline and mid-back office. Secondly, also the balance between fixed salary and also variable costs, both onshore and offshore, we probably are looking to maintain that structure. But obviously, not excluding some short-term spikes when we -- as Chair Lady and CEO, Zander mentioned, with international expansion, we'll probably get new talents in new markets or new business segments. But I think overall, the big picture, comp and benefits-wise, we're pretty comfortable.

In terms of selling and marketing expenses, obviously, we have seasonality. We typically are a little bit slower after Spring Festival than summer vacation. But we have traditionally busier schedules coming up in the third quarter, obviously, towards the end of the year as well. But I think on the annual basis, I'm also pretty comfortable in terms of maintaining a similar range of operating margin. Peter, does that answer your question?

That's very clear.

[Operator Instructions] The next question will come from [ Xian Chon Zhang ] of CICC.

[Interpreted] I'll translate my questions. I have 2 questions. The first one is other operating expenses decreased over 80% year-over-year and income from equity in affiliates increases to over RMB 47 million. These changes affect the net income. Could you please explain the reasons behind and future change? The second question is the cash balance remains high at RMB 3.8 billion. So do you have any dividend plan?

Sure, Ms. Xian. I'll take the question for the 2 fluctuations. So basically, the overall impact, especially the RMB 47 million actually comes from some of the strategic investment portions that we have as the co-GP investment in the past. So some of the companies actually became successful listed. So the total market value in the fund actually has a markup. So that quarter, actually, we have a pretty positive impact. Hopefully, it doesn't reflect in the future. But it seems that from the company's current performance, we're optimistic that we'll maintain a rather strong performance and obviously feed back to our balance sheet and P&L.

In terms of dividend scheme, I think the only thing I can say on behalf of management and Board, as we have mentioned in the earnings release that we're very committed to returning some of the, obviously, operational results to our shareholders, and we have cumulatively distributed a rather large amount, I think probably ranking very, very high in Chinese ADR companies that cumulatively RMB 1.8 billion to our shareholders and obviously, another full payout of 2024's net profit.

So I believe that in 2025, obviously, I can't say this prematurely, but we're pretty confident that we probably will be returning or distributing our profit operational results to our shareholders on a very similar scale this year, at least in the foreseeable future.

At this time, we will conclude our question-and-answer session, and I'd like to turn the conference back over to management for any closing remarks.

Okay. Zander, anything to add?

[Foreign Language]

Okay. We thank you very much -- [Foreign Language] Zander. Thank you very much, everybody, and hope to hear from you in the subsequent calls. Thanks.

Thanks, everyone. And please feel free to contact IR team if you have any further questions, and we will be conducting [ NDR this ] few weeks. So feel free to reach out if you wanted to talk to any of us. Thank you very much for today.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect your lines.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call].