Thank you for standing by for Jupai's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note, today's conference call is being recorded. [Operator Instructions] I would now like to turn the meeting over to your host for today's conference, Mr. Eddie Guo. Jupai's IR Director. Please go ahead.

Hello, everyone, and welcome to Jupai's earnings conference call for the second quarter of 2021 and the 6 months ended June 30, 2021. Leading the call today is Mr. Jianda Ni, our Chairman and CEO, who will review the highlights for the second quarter of 2021 and the 6 months ended June 30, 2021. I will then discuss our financial results. We will then 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 discussion 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.

[Foreign Language]

[Interpreted] Thank you, Eddie, and welcome, everyone, to today's conference call.

[Foreign Language]

[Interpreted] In the second quarter of 2021, investment sentiment among high net worth individuals remained stable amidst improved market expectations. Jupai continued to adjust our business strategy and model to comply with market changes, developments within the wealth management industry as well as regulatory requirements. We saw improved business performance and operational capabilities with net revenues growing 14.3% quarter-on-quarter to RMB 95.66 million.

[Foreign Language]

[Interpreted] Jupai proposed a new goal of improving client experience at the beginning of 2021 and our continuous efforts have been recognized by the clients through pre-investment matching products, system upgrading and internal cooperation. The average transaction amount per customer was RMB 3.32 million, a year-on-year increase of 23.5% and a quarter-on-quarter increase of 8.1%. The customer repeat purchase rate was 92.4%.

[Foreign Language]

[Interpreted] In the second quarter, leveraging our advantages in sourcing products and experience in the wealth management industry, Jupai continue to further develop and strengthen real estate products and invest more in standardized products.

[Foreign Language]

[Interpreted] In terms of the secondary market products, Jupai focuses on the development of standardized products and continues to upgrade our product selection. The variable performance fees in the second quarter increased by 226% quarter-on-quarter to RMB 15 million, the second highest since listing, mainly due to the strong performance of standardized products in the secondary market.

[Foreign Language]

[Interpreted] Under the new regulatory framework promoting the sustainable development of our industry, we remain optimistic in Jupai and the long-term prospects of China's wealth management industry. We will continue striving to provide a diverse portfolio of high-quality products and services for China's high net worth individuals.

[Foreign Language]

[Interpreted] I will now turn the call over to Eddie to go through the financial results for the second quarter of 2021 and the 6 months ended June 30, 2021. Thank you.

Thank you, Jianda Ni. We are encouraged to see improved business performance and operational capabilities with net revenues growing 14.3% quarter-on-quarter to RMB 95.66 million the amount with per capita rising 4.4% quarter-on-quarter to RMB 9.66 million. For the second half of 2021, we will continue to improve our productivity while optimizing overall client experience.

Now I will walk you through our financial highlights for the second quarter of 2021 and 6 months ended June 30, 2021. Net revenues for the second quarter of 2021 were RMB 95.7 million, an 11.8% decrease from the corresponding period in June 2020, primarily due to decreases in onetime commissions and recurring management fees. Net revenues were RMB 179.3 million for the first half of 2021, a decrease of 12.5% from the same period in 2020.

Operating costs and expenses for the second quarter of 2021 were RMB 95.4 million, a decrease of 22% from the corresponding period in 2020. For the first half of 2021, operating costs and expenses were RMB 175.6 million, a decrease of 24.0% from the same period in 2020.

Operating margin for the second quarter of 2021 was 0.3% as compared to negative 12.8% for the corresponding period in 2020. For the first half of 2021, operating margin was 2.1% compared to negative 12.7% for the same period in 2020.

Net income attributable to ordinary shareholders for the second quarter of 2021 was RMB 2.0 million as compared to net loss attributable to ordinary shareholders of RMB 10.5 million from the corresponding period in 2020. For the first half of 2021, net income attributable to ordinary shareholders was RMB 5.9 million as compared to the net loss attributable to ordinary shareholders of RMB 30.4 million from the same period in 2020.

Net margin attributable to ordinary shareholders for the second quarter of 2021 was 2.1% as compared to negative 9.7% from the corresponding period in 2020. For the first half of 2021, net margin attributable to ordinary shareholders was 3.3%, compared to negative 14.8% for the same period in 2020.

Net income attributable to ordinary shareholders per basic and diluted ADS for the second quarter of 2021 was RMB 0.06 and RMB 0.06, respectively, as compared to net loss attributable to ordinary shareholders per basic and diluted ADS of RMB 0.31 and RMB 0.31, respectively, from the corresponding period in 2020. For the first half of 2021, net income attributable to ordinary shareholders per basic and diluted ADS was RMB 0.18 and RMB 0.18, respectively, as compared to net loss attributable to ordinary shareholders per basic and diluted ADS of RMB 0.91 and RMB 0.91, respectively, for the same period in 2020.

That concludes our prepared remarks. I will now turn the call back to the operator to begin the Q&A session. Operator?

[Operator Instructions]

The first question comes from the line of Yuhua Li from UBS.

This is Yuhua Li from UBS. I have two questions. The first one is in the second quarter, the aggregate value of Jupai's wealth management products distributed remained basically the same as previous quarter, and the net revenue increased quarter-on-quarter. Can management share with us what factors contribute to the performance? The second question is, can management share more on product performance in this quarter? And what are the future plans for the rest of 2021?

This is the operator. We've lost your speaker line connection. [Operator Instructions].

[Foreign Language]

[Interpreted] Thank you for your question, Yuhua. In the first half of 2021, China's overall economic development showed a steady trend of strengthening and improving despite a complex domestic and overseas environment. China's GDP for the second quarter of 2021 increased by 7.9% over the same period last year and the investment sentiment among high net worth individuals remained stable amidst improved market expectations.

[Foreign Language]

[Interpreted] During this quarter, Jupai continued to address our business strategy and model to comply with market changes, developments within the wealth management industry as well as regulatory requirements. We saw improved business performance and operational capabilities with net revenue growing 14.3% quarter-on-quarter to RMB 95.66 million. The non-GAAP adjusted net income attributable to ordinary shareholders was RMB 5.54 million. Jupai's aggregate value of wealth management products distributed increased slightly to RMB 1.89 billion compared to the first quarter of 2021. Onetime commissions increased 26.7% quarter-on-quarter to RMB 39.57 million, and recurring service fees increased 23.0% to RMB $33.99 million.

[Foreign Language]

[Interpreted] Jupai saw strong results in the second quarter as we launched a new incentive system and continue to build a team of elite financial advisers with the amount with per capita rising 4.4% to RMB 9.66 million, while further implementing cost control measures, our mid and back office continue to expand revenue sources and reduce expenditure. We have also achieved good results in recovery of accounts receivable and see improved cash flow through adjusting our business model and optimizing our organizational structure.

[Foreign Language]

[Interpreted] Jupai proposed a new goal of improving client experience at the beginning of 2021 and our continuous efforts for a pre-investment management process, system upgrades and internal cooperation have been recognized by clients. The average transaction amount per customer this quarter was RMB 3.32 million, a year-on-year increase of 23.5% and a quarter-on-quarter increase of 8.1%. The customer repeat purchase rate was 92.4%.

[Foreign Language]

[Interpreted] In terms of our Asset Transparent System strategy, Jupai will continue to implement our transparency initiative throughout the product life cycle consisting of researching leading funds, investment, management and withdrawal. We have invited hundreds of clients to participate in the project selection process and to conduct inspection activities. Jupai also focus on post-investment management to protect client interest, including providing updates on project programs and investment strategies with clients through post-investment meeting.

[Foreign Language]

[Interpreted] Due to the lawsuit between investors and Juzhou Asset Management, Shanghai Co., Limited and Jupai Holdings Limited regarding the Juzhou Intelligent Manufacturing 2018 Private Equity Investment Fund, the Shanghai Financial Court made a judgment during the second trial at the end of June 2021. Jupai will continue to seek traditional relief within the legal framework. The Chairman and management team remain confident in the company's development despite the recent media reports and the judgment will not effect Jupai's long-term strategic goal of asset transparency.

[Foreign Language]

[Interpreted] In the second quarter, leveraging our advantages in sourcing products and experience in the wealth managing industry, Jupai continue to further develop and strengthen real estate products and invest more in standardized products. In terms of secondary market products, Jupai focuses on the development of standardized products, further diversifying the strategies of secondary market products and basically completing our comprehensive whole product line to meet class asset allocation demand in a variety of market environments.

The variable performance fees in the second quarter increased by 223% quarter-on-quarter to RMB 15 million, the second highest since listing, mainly due to the strong performance of standardized products in the secondary market. In addition to PE products, Jupai also continue to improve the scale of our mutual fund and insurance product offering. In the second half of 2021, we will also provide better secondary market asset allocation products for investors through strengthening our secondary market research capabilities.

[Foreign Language]

[Interpreted] Leveraging our advantages in real estate products, Jupai continue to adjust our risk control measures in the second quarter. We cooperated with small- and medium-sized real estate enterprises that meet 3 red line standards. The real estate product leasing has not been affected by the macro policies for the industry. Jupai also actively carried out since real estate projects that focus on education, pension and ESG projects.

[Foreign Language]

[Interpreted] Jupai PE team continued to focus on investing in master funds with multiple underlying targets rather than investing in a single company. During this quarter, 10 listed issuers with underlying assets in Jupai's private equity fund. In the third quarter, we will continue to work with leading GPs focusing on medical, science and technology and consumption industry to explore better investment opportunities for investors.

[Foreign Language]

[Interpreted] China's wealth management industry has huge potential for further development in the new economic era. The quality of wealth management must be further improved to strengthen structural transformation of resident's wealth. This is a key driver of creating stable funds, supporting scientific and technology innovation and deepening the role of the capital market for the long term. Together with other wealth management institutions with their expertise and experience to serve investors, Jupai is confident and capable to participate in the long-term development of China's wealth management industry.

[Foreign Language]

[Interpreted] The long-term healthy and stable development of wealth management will benefit from improved regulatory measures, including strengthened information disclosure for the wealth management products and markets, the legalization of wealth management market and the development of an impacted supervision system. Jupai highly agrees with the direction of the regulators of supporting real private equity activities, cracking down on random private equity activities, resolutely eliminating fake private equity activities and promoting the structure of good market order and industry ecosystem.

The statements coming from the regulator directly address the crucial issues within the industry. The corresponding solutions and methods to lay the foundation for the high quality and the sustainable development of the industry are very clear. Jupai will continue to implement our Asset Transparent System strategy to create more value for underlying assets through recognizing and assessing the risks of underlying assets. We are committed to improving the quality of wealth management services as we work to create a new benchmark for value in our industry as we contribute to China's economic transformation by supporting the establishment of an open, fair and a just financial environment. Thank you, Yuhua.

[Operator Instructions] We are now approaching the end of the conference call. I will now turn the call over to Jupai's IR Director, Eddie Guo for closing remarks. Sir, please go ahead.

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

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