Thank you for standing by for Jupai's Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Please note that today's conference call is being recorded. [Operator Instructions] I'd now like to turn the meeting over to your host for today's conference, Mr. Eddie Kuo [ph], Jupai's IR representative.

Hello, everyone, and welcome to Jupai's earnings conference call for the third quarter ended September 30, 2020. Leading the call today is Mr. Jianda Ni, our Chairman and CEO, who will review the highlights for the third quarter and the first nine months of 2020.I will then discuss our financial results. We will now open the call to questions. At which time, our CFO, Ms. Min Liu, will also be available. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to Mr. Jianda Ni, our Chairman and CEO and I will interpret his remarks for you.

Thank you, Eddie. And welcome, everyone, to today's conference call. Jupai's bottom line continued to improve in the third quarter with net loss attributable to ordinary shareholders declining by 93.8% compared with the same period last year and decreasing by 71.7% quarter-over-quarter. Our ongoing cost control measures and enhanced portfolio optimization will continue to support margin improvement going forward, even as investors maintain a cautious mood in the phase of the global COVID-19 pandemic. We are confident in the long-term prosperity of China's wealth management industry, and we will continue to execute our strategies for controlling costs, collecting high-quality products and enhancing our risk control system.

I will now turn the call over to Eddie to go through the financial results for the third quarter and the first nine months of 2020. Thank you.

Thank you, Ni-san. Our total operating costs and expenses in the third quarter declined by 54.9% compared with the same period last year, while cost of revenue decreased by 50.8%. This is mainly attributable to our continued efforts to control costs, which we expect will help to further improve our bottom line and enhanced operating efficiencies in the coming quarters. Now I will walk you through our financial highlights for the third quarter and the first nine months of 2020. Net revenue for the third quarter of 2020 were RMB85.1 million, a 53.2% decrease from the corresponding period in 2019, primarily due to decreases in one-time commissions and recurring management fees. Net revenues were RMB290.2 million for the first nine months of 2020, a decrease of 55.3% from the same period in 2019. Net revenues from one-time commissions for the third quarter of 2020 were RMB36.3 million, a 64.6% decrease from the corresponding period in 2019, primarily as a result of a decrease in the aggregate value of wealth management product distributed by the Company. For the first nine months of 2020, net revenues from one-time commissions were RMB123.6 million, a decrease of 50.1% from the same period in 2019. Net revenues from recurring management fees for the third quarter of 2020 were RMB22.4 million, a 55.3% decrease from the corresponding period in 2019, primarily due to the decrease in the value of assets under management. RMB6.3 million and RMB17.4 million carried interest was recognized as part of Jupai's recurring management fees in the third quarter of 2020 and 2019, respectively. For the first nine months of 2020, net revenues from recurring management fees were RMB80.4 million, a 74.1% decrease from the same period in 2019. RMB11.8 million and RMB156 million carried interest was recognized as part of Jupai's recurring management fees for the first nine months of 2020 and 2019, respectively. Net revenues from recurring service fees for the third quarter of 2020 were RMB26.4 million, a 9.9% decrease from the corresponding period in 2019, primarily because the Company provided ongoing services to fewer product suppliers. The Company recognized RMB5.3 million and RMB1.8 million variable performance fees in the third quarter of 2020 and 2019, respectively. For the first nine months of 2020, net revenues from recurring service fees were RMB86.2 million, an 11.6% increase from the same period in 2019. The Company recognized RMB7.3 million and RMB1.8 million variable performance fees for the first nine months of 2020 and 2019, respectively. Net revenues from other service fees for the third quarter of 2020 were nil, the same as the corresponding period in 2019. For the first nine months of 2020, net revenues from other service fees were nil, as compared to RMB13.9 million from the same period in 2019. Operating costs and expenses for the third quarter were RMB100.2 million, a decrease of 54.9% from the corresponding period in 2019. For the first nine months of 2020, operating costs and expenses were RMB331.2 million, a decrease of 56.2% from the same period in 2019. Operating margin for the third quarter of 2020 was minus 17.6% and as compared to minus 22.1% for the corresponding period in 2019. For the first nine months of 2020, operating margin was minus 14.2% compared to minus 16.5% for the same period in 2019. Net loss attributable to ordinary shareholders for third quarter of 2020 was RMB3 million, as compared to RMB47.9 million from the corresponding period in 2019. For the first nine months of 2020, net loss attributable to ordinary shareholders were RMB33.4 million as compared to RMB134.5 million from the same period in 2019. Net margin attributable to ordinary shareholders for third quarter of 2020 was minus 3.5% as compared to minus 26.3% from the corresponding period in 2019. For the first nine months of 2020, net margin attributable to ordinary shareholders was minus 11.5% compared to minus 20.7% for the same period in 2019. Net loss attributable to ordinary shareholders per basic and diluted American depositary share, ADS, for the third quarter of 2020 was RMB0.09 and RMB0.09, respectively, as compared to RMB1.42 and RMB1.42, respectively, from the corresponding period in 2019. For the first nine months of 2020, net loss attributable to ordinary shareholders per basic and diluted ADS was RMB1 and RMB1, respectively, as compared to RMB4 and RMB4, respectively, for the same period in 2019. Non-GAAP, net loss attributable to ordinary shareholders for the third quarter of 2020 was RMB2.7 million as compared to RMB45.5 million from the corresponding period in 2019. For the first nine months of 2020, non-GAAP, net loss attributable to ordinary shareholders was RMB30 million as compared to RMB126.8 million from the same period in 2019. Non-GAAP, net margin attributable to ordinary shareholders for third quarter of 2020 was minus 3.2% as compared to minus 25% from the corresponding period in 2019. For the first nine months of 2020, non-GAAP, net margin attributable to ordinary shareholders was minus 10.3% as compared to minus 19.5% for the same period in 2019. Non-GAAP net loss attributable to ordinary shareholders per diluted ADS for the third quarter of 2020 was RMB0.08 as compared to RMB1.35 from the corresponding period in 2019. For the first nine months of 2020, non-GAAP, net loss attributable to ordinary shareholders per diluted ADS was RMB0.90 as compared to RMB3.77 for the same period in 2019. We announced the up to $10 million shares repurchase plan in February 2020. And as part of the plan, we had repurchased 539,142 ADS at a total cost of $741,554 as of November 15, 2020, inclusive of transaction charges. Looking at our balance sheet and cash flow, as of September 30, 2020, the Company had RMB666 million in cash, cash equivalents and restricted cash as compared to RMB712.3 million as of December 31, 2019. Net cash provided by operating activities during the third quarter of 2020 was RMB17.4 million. For the first nine months of 2020, net cash provided by operating activities was RMB3.2 million. Net cash used in investing activities during the third quarter of 2020 was RMB25.2 million. For the first nine months of 2020, net cash used in investing activities was RMB42.4 million. Net cash used in financing activities during the third quarter of 2020 was nil. For the first nine months of 2020, net cash used in financing activities was RMB7.1 million. That concludes our prepared remarks. I will now turn the call back to the operator to begin the Q&A session. Operator.

Thank you. The question-and-answer session of this conference call will start in a moment. [Operator Instructions] Your first question comes from the line of Yuhua Li from UBS. Please ask your question.

Thank you for giving me this opportunity to ask question. This is Yuhua Li from UBS. I actually have two questions. The first is, in the third quarter, Jupai's bottom line have significantly improved and is moving towards breakeven. May I ask the management what the factors have contributed to Jupai's performance in the third quarter?

Thank you, Yuhua. I will translate your question to our CEO. Thanks.

Thanks for your questions. In the third quarter of 2020, we have seen further recovery in manufacturing and production, people livelihood and the overall economy. This comes at the government has applied highly effective coronavirus control measures while implementing incentive policies on multiple levels. China's GDP grew by 4.9% in the third quarter on a year-over-year basis, seeing positive growth for the past three quarters and seeing accelerating growth for third quarter. China's economic recovery appears increasingly solid. However, on a global scale, there are still uncertainties about the economic recovery, including a second wave of coronavirus in Europe and the continued tension between China and the U.S. Due to all the risk factors, high network individuals have remained cautious in their investment activity. For the quarter, Jupai's aggregate value of wealth management products distributed was approximately RMB1.96 billion, a slight increase when compared to the second quarter. In response to the change in market demand, Jupai upgraded its product selection in the third quarter, leveraging our advantages in-sourcing products and experience in the wealth management industry. More particularly, we increased our supply of standardized and secondary market products. Secondary market products as a proportion of the aggregate value of wealth management product distributed increased to 22.4% this quarter from 13.1% in the second quarter. In the third quarter, we were pleased to see our net loss attributable to ordinary shareholders decreased for the fifth consecutive quarter to RMB2.97 million, down 71.7% on a quarter-over-quarter basis, and 93.8% on a year-over-year basis, moving further to breakeven. As the pandemic continues to be effectively controlled domestically, we are confident that Jupai will continue to improve its bottom line in the coming quarters. Looking at the macroeconomic policies and the marketing environment, China's economy continues to recover with surging domestic investment and consumption. In the third quarter, the housing market continued to recover with transaction volume and housing prices grew steadily. Investment in real estate in the first three quarters increased 5.6% and compared with the same time last year, according to the National Statistics Bureau and the growth rate was 3.7 percentage points higher than the first half of the year. Meanwhile, regulators have launched policies including regulatory rules for developer financing to guide the healthy long-term development of the overall industry and to meet the long-term needs of people for a better life. In the third quarter, the positive changes in the market environment made it more convenient for equity investments to access through the multilevel capital market and bringing returns to investors. Jupai's invested enterprises have successfully listed on the stock market, China's share market, NASDAQ and the New York Stock Exchange. At the same time, Jupai has increased its secondary market products leveraging our in-depth understanding of the market and enterprises. Our secondary market products, not only have met the demand of investors, but also reflect Jupai's flexibility to adapt to market changes and our professional ability to select high-quality products for investors in different areas. Thank you, Yuhua.

It's very clear. And my second question is, what is your take on the development prospects of Jupai and the whole industry? And how will Jupai prepare for it?

Okay. Thank you, Yuhua. Looking into the fourth quarter, Jupai will continue to implement cost control measures to improve our operating efficiency, further optimize product selection and competitiveness and continuously improve our risk control capabilities. First, our cost control measures have been crucial to having us remain resilient against the pandemic over the past year, while driving our bottom line as the micro environment normalized in the third quarter. In our sales network, we continue to optimize our sales indebtedness in the third quarter and enhanced talent training and resource support for our advisers, while streamlining our personnel and sales network leading to increased aggregate wealth management product value distributed to advisers. In the future, we will continue to strengthen cost control measures and improve operating efficiencies. At the end of the third quarter, the total share count at Jupai will reduce to around 630 from 2,500 at the beginning of 2018, and we reduced the scale of our sales network to 35 outsets covering 23 cities from 72 offices covering 46 cities at the beginning of 2018. In terms of operational efficiency and technology investment in line with our commitment to improving customer experience, we increased investment in our IT system during the quarter, upgrading our custom app and our internal back office systems. Secondly, in terms of product offering, Jupai will continue to leverage our traditional advantages in the real estate industry including our long-term partnership with leading real estate companies to select high-quality products current. We have recently diversified our secondary market products and integrated more online and offline channels to better serve investors. We also expanded online sales channels driven by Internet technology. In terms of products, we believe real estate related assets are relatively safe compared with other options at a time when the economy continues to recover in line with E-House Capital part of Jupai's real estate equity investment business was officially established. E-House Capital corroborates with CRIC, a comprehensive real estate information service provider to focus on investment in the real estate industry with the goal to achieve win-win results for investors, investment programs and business partners. In terms of secondary market and private equity investments, we are actively expanding our equity market product portfolio. The proportion of the value of secondary market products distributed by Jupai over the total profit value distributed by the Company had increased significantly in the third quarter, which diversified investment channels for investors and received popularity in this market. Our PE team is focusing on three key industry clusters which are technology, health care and consumption to find high-quality products for investors through cooperation with top external PE teams. As of October 31, amount issuers listed on the STAR Market, 23 were underlying assets in Jupai's private equity funds and the IPO registration of additional feed enterprises of the STAR Market has been approved by China Securities Regulatory Commission, CSRC. These projects have brought solid returns to our clients. We will continue to improve Jupai's risk control capabilities and enhance information transparency. Last year, we launched initiatives to enhance our risk control system, partner selection methodology, the professional capabilities, our client managers and client risk management awareness. These initiatives have achieved strong results. This year, Jupai rolled out our online asset information transparency system and the digital smart management system to further improve internal transparency throughout the entire product cycle. In 2020, we have faced the challenges brought by the epidemic to Jupai and China's wealth management industry. Jupai has worked to realize its potential, actively adapt to market changes and continue to create stable, high-quality products for investors. Jupai has come a long way, and we are confident in the long-term development of the wealth management industry. We will continue to work hard to make Jupai 1 of the top wealth management and asset management brands for high net worth individuals in China. Thank you, Yuhua.

Thank you, Ladies and gentlemen. [Operator Instructions] I will now turn the call back to Jupai's IR's representative Eddie Kuo [ph] for closing remarks.

Okay. This concludes today's call. If you have any follow-up questions, please get in contact with us. Thank you.

Thank you for your participation in today's conference. You may disconnect now. Good day.