Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the ATRenew Incorporated Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be hosting a question-and-answer session after managements' prepared remarks. Please note today's event is being recorded. I will now turn the call over to the first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations of the Company. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to ATRenew's third quarter 2022 earnings conference call. Speaking first today is Kerry Chen, our Founder, Chairman and CEO; and he will be followed by Rex Chen, our CFO. After that, we will open the call to questions from analysts. Our third quarter 2022 financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR Web site, ir.atrenew.com. There will also be a transcript following this call for your convenience. For today's agenda, Kerry will share his thoughts of our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will join the Q&A session. Let me cover the Safe Harbor statement. Some of the information you will hear during our discussion today will consist of forward-looking statements and I refer you to our Safe Harbor statements in the earnings press release. Any forward-looking statement that management makes on this call are based on assumptions as of today and that ATRenew does not take any obligations to upgrade our assumptions on these 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 GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB and all comparisons are on a year-over-year basis. I'd now like to turn the call over to Kerry for business and strategy updates.

Hello, everyone, and welcome to ATRenew's third quarter 2022 earnings conference call. in the third quarter, we faced a challenging macro environment, and then the control measures remain strict and consumer demand for new phone [indiscernible]. Responding to these challenges, our teams proactively adjusted their operational strategies to meet consumer demand for convenient and trustworthy recycling services. As a result, revenues reached the high-end of the guidance range we provided last quarter and we achieved our non-GAAP operating profit compared to a non-GAAP operating loss in the second quarter. I'd like to take this opportunity to express my gratitude to our staff for their efforts and perseverance in the face of adversity. Let's start by taking a look at our revenues. During the third quarter, we achieved growth in line with our expectations as our revenue increased 29.2% year-over-year to RMB2.54 billion. Revenues for our 1P business rebounded significantly increasing by 33.7% year-over-year. This increase was driven by our steady progress in store openings and recycling operations, increased a revenue contribution from self-operated 2C retail products and stronger pricing power from big data analysis. The growth of service revenues flattened as we put tighter control over products that were in authorized or in poor condition. We believe this helps the sustainable growth of our marketplaces. As a result, the overall commission rate of our marketplaces with 4.45% in the third quarter, remaining stable compared with the same period last year. Turning to efficiency. During the quarter, we continue to increase our fulfillment efficiency by further improving our inspection process and continuing to reduce operating costs. Our non-GAAP fulfillment expenses, and selling and marketing expenses as percentages of total revenue declined to 10.7% and 9.8%, respectively. This represents respective decreases of 290 basis points and 63 basis points compared to the…

Hello, everyone. We are delighted to report that our third quarter revenue was at the high-end of our guidance. Even though COVID-related challenges remained in the operating environment. In the face of these headwinds, we leveraged our city-level service integration strategy and maintained our prudent spending. I will start by sharing some of our financial highlights. Before we go into a more detailed look at the numbers, please note that all amounts are in RMB and all comparisons are on a year-over-year basis, unless otherwise stated. Total net revenues increased by 29.2% year-on-year to over RMB2.34 billion, mainly driven by the rebounding 1P product sales revenue growth. Total GMV grew by 14.5% to RMB9.5 billion, driven by the growth in both product sales GMV and online marketplace GMV. Please note that we will retire the reporting of GMV starting from the fourth quarter of 2022. GMV has been a parameter to access our periodical business expansion as we inclined to [indiscernible] skill expansion. However, as we become more obsessed with providing our users with safe, convenient and fair recycling experience and quality assured products, we incrementally prioritized the solid growth of our 1P business where generally becomes less refractive of the bigger picture. We're also keen to maintain a healthy cash flow from operating activities and a positive operating margin. As a part of our tactics, we removed some [indiscernible] related merchant users from our marketplaces, and titled our resources towards self-sourced products, including 1P, 2C products [indiscernible] refurbished with compliance. In terms of profitability, we had another profit-making quarter with non-GAAP operating income of RMB10.8 million. This was primarily attributable to improved cost efficiencies in logistics and the main parts that have resulted from [indiscernible] effects. In the future, we will continue to improve cost efficiency, especially in fulfillment…

[Operator Instructions] Our first question comes from [indiscernible] from Goldman Sachs. Please go ahead.

Let me translate for myself. Congratulations for another solid top line growth. And my question is about the future growth driver and under the COVID impact together with the consumption down trading pressures, how should we look at the future growth drivers and also regarding the [indiscernible] revenue values, we see that there was some motivation in the growth phase. But in the future how much will be contributed from 1P revenues and how much will be contributed from the 3P part? And also, regarding the multi category recycle and how much contribution are we expecting from the categories outside the phone? Thank you.

Okay. Thank you for the questions. Let me answer first question first. Overall, after being negatively affected by pandemic control measures in core 1P recycling business locations, such as Shanghai and Beijing in the second quarter, our recycling business recovered to a normal growth track during the third quarter. Notably, our 1P business grew beyond our expectations, demonstrating the countercyclical nature of the circular economy were a part of. The recovery of 1P business growth rate is due to two factors. First, we essentially within standard operating hours at our offline stores as pandemic control measures are lifted. This grants us a more abundant supply of products. Second, in 2022, we started shifting our strategic focus from a consignment model to a 1P, 2C direct retailing model. This was an effort initiated following the launch of the first compliance guidance for intellectual property rights in the electronics refurbishment industry, as published by the People's Procuratorate [indiscernible] in April this year. Before the launch of this guidance, we did not have a sufficient supply of high-quality preowned products. As such, our strategy was to prioritize marketplaces and help our merchant partners to sell their products. Since the launch of the guidance, we further leveraged our supply chain capabilities and started to refurbish preowned electronics and sell these products directly to retail customers. This brings additional profit margin over the value chain and also provides more supply of high-quality better priced preowned electronics to consumers. During the third quarter, we utilized our refurbishment supply chain to distribute RERE refurbed branded products to retail customers. Our success was demonstrated by over RMB90 million in sales and the ASC [ph] increase to RMB2,600. In terms of platform business, we adjusted our business strategy and focus on high-quality and profitable growth. On PJT marketplace, we…

[Operator Instructions] Our next question comes from Joyce Ju from Bank of America. Please go ahead.

Hi. Thank you for taking my question. Now I will translate myself. The first question is, could you please comment the recent consumption momentum during Double 11 Shopping Festival and including impact from the COVID disruptions in China recently? And second question is about could you give us more color on the path to profitability and medium to long-term margin expectations?

Thank you for the questions. I'll take the first one and CFO Rex will take the second. This year the [indiscernible] promotion showed moderate growth. Promotions have now became regular and straightforward. When preparing for this grand promotion, we collaborated with JD's home appliances business unit to provide our trade-in services across more product categories. Users first using new home appliances on JD could trade-in [indiscernible] consumer electronics to reduce the economic burden. JD has been reporting steady growth in its core revenue stream from electronics and home appliances. Leveraging JD's traffic in electronics and home appliances, we further diversified our trade-in scenarios. This can increase the penetration rate of our [indiscernible] mobile phone and consumer electronics recycling business. During the first 28 hours when the Singles Day Grand Promotion kicked off at 8 pm on October 31, the number of JD customers who traded in their used devices for the new increased by 310% year-on-year. Home appliance cross category trade-in orders accounted for 20% of all the paid trade-in orders during the Grand Promotion. This year, we further advanced our service capabilities to satisfy consumer demand for economic shopping options. That’s mutually benefiting consumers and JD's new product sales. In addition, excluding frontline personnel costs and platform expenses, [indiscernible] realized an overall operating margin of 2% as we prioritized profit and supplemented 1P refurbished product. In terms of brands we support, Apple has maintained its industry-leading market share. When other smartphone brands were entered downward pressure, Apple retained its growth in new device shipments in the third quarter. Mobile phone -- mobile phones account for 70% of our total transaction value, whereas Apple's products account for 45% of our overall transaction value. Although the supply chain of the iPhone 14 line up was under pressure recently, consumer demand for Pro and Promax models remained strong. We believe that as Apple gradually resumed its production capacity, trade-in demand can rebound and we are confident that we will fulfill that demand with a better and more seamless service process. For Android for [indiscernible], in the context of declining consumption, consumers need a stronger incentive to shop for new products. We believe that our cost-efficient trade-in solutions could be that incentive that manufacturers also find encouraging.

Okay, [indiscernible]. Over to your second question related to the profitability. There are two main drivers for our mid-term to long-term profitability. First is the improvement in 1P gross margin, in particular, due to the contribution from our new business initiative compliant to refurbishment. Our 1P business was less impacted by pandemic control measures during the quarter as our operation of offline stores gradually resumed, we were able to meet consumers recycling demand and with stable pricing. In addition to a strategic shift from the consignment model we mentioned in the last quarter, has allowed us to transfer -- provide high-quality 1P product sales. This will allow us to continue to improve the quality and the reputation of the preowned products that we commercialize. Meanwhile, we are on track in developing compliant to refurbishing capabilities by replacing components in poor condition with certified third-party batteries and screens. We recondition these 1P products and better satisfy retail buyers needs as our lead [ph] refurbed business skills will improve our product mix, thus further widening our gross margin. Secondly, our operating efficiency has continued to improve during the third quarter. We realized our non-GAAP operating profit of RMB10.8 million. This was attributable to our optimization of fulfillment expenses and the selling expenses. So non-GAAP fulfillment expenses as a percentage of total net revenues decreased by 2.9 percentage points year-on-year to 10.7%. This was mainly due to the refinements made to the management's structure in our offline stores and the implementation of a new system for operating [indiscernible]. As we [indiscernible] above the mentioned refurbishment [indiscernible] and further achieve cost efficiency improvements, we anticipate our top line to be between RMB2.93 billion to RMB3.73 billion in the fourth quarter. We would also anticipate our non-GAAP operating income in the fourth quarter and realizing a profitable year on a non-GAAP basis as we forecasted. Looking ahead, we expect our total revenues and profitability to further escalate in the coming quarters. Thank you.

As there are no further questions at this time, I would like to hand the conference back to our management team for closing remarks.

Thank you. Thank you all again for joining us. A replay of today's call will be available on our Web site shortly, followed by a transcript when ready. If you have any additional questions, please feel free to directly email us at ir@atrenew.com. Have a good day.

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