Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the ATRenew Incorporated Fourth Quarter Full Year 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’d now like to 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 fourth quarter and full year 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. The financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR website. 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 statements. 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 statements 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.

[Foreign Language] [Interpreted] Hello, everyone, and welcome to ATRenew's fourth quarter and full year 2022 earnings conference call. COVID infections surged rapidly, especially in December, following the easing of pandemic controls. This posed a severe challenge to us in Beijing and Shanghai, et cetera., which contributed a significant proportion of our business. At the same time, production shortfalls meant that the profit models of the iPhone 14 lineup were in short supply, negatively affecting our trading business. To meet these challenges, we put every effort into maintaining store operating hours and ensuring the supply of 1P cell-sourced products. Thanks to our team's efforts, we met our goals for revenue and profit during the quarter. Starting with revenues. During the fourth quarter, our revenue reached a new record high of RMB2.98 billion, representing a year-over-year growth of 22.4% and arriving in the middle of our guidance range. In 2022, our total revenue reached RMB9.87 billion, increasing by 26.9% year-on-year. This was mainly driven by our focus on 1P business, which grew by 30.4% during 2022. Facing slower consumption growth and the resurgence of COVID in 2022, we were more prudent in opening new stores and kept a strengthening product sourcing capabilities by improving store management. In addition, implementing our city level service integration strategy laid the foundation for the healthy growth of 1P business. The integration of foreign client sourcing capabilities of three business lines facilities efficient sourcing and transaction flow. Even in the fourth quarter, despite facing severe pandemic-related challenges, we grew the penetration rate of major cities in which we already operate at scale, such as Hangzhou, Nanjing, Suzhou and Xi'an (ph). Regarding marketplaces, we have pivoted from our IPO euro strategy of scale first to efficiency first with steady growth. Driven by enhanced supply chain capabilities, the overall…

Hello, everyone. We are pleased to report that our fourth quarter revenue was in line with our guidance, even though COVID-related challenges continue to impact operating environment. In the face of these headwinds, we leveraged our strong supply chain capabilities to maintain a stable product supply and further certified the healthy growth of our MP businesses. 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 22.4% year-over-year to RMB2,981.2 million, mainly driven by growth in net product revenues in terms of profitability. We had another profit-making quarter with non-GAAP operating income of RMB34.6 million. This was primarily attributable to improved cost efficiencies in logistics and main parts that resulted from scale effects powered by automation inspection upgrade. This was also attributable to improved cost efficiencies and optimize promotional and advertising strategies for our marketplaces. Facing the changes brought by pandemic, we made some short-term operational adjustments that resulted in a temporary decrease in our fulfillment costs this quarter. We leveraged the sources of supply of industry partners to ensure ample quality product listings. Although the gross margin of [indiscernible], we didn't have to invest heavily into inspection and grading. This was considered as a trade-off. During 2022, our cost strategies and the tactical flexibility safeguarded us from market volatilities. And we are pleased to report non-GAAP operating breakeven milestone as well as RMB881 million positive cash flow from operating activities in 2022. In the future, we expect the adverse impact of COVID-19 variants to fit away and our sourcing as well as fulfillment functions to recover. We will continue to improve our cost efficiency,…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ronald Keung from Goldman Sachs. Please go ahead.

[Foreign Language] [Interpreted] Thank you, management. And I want to ask about two questions about growth. One is for the overall industry, how we're seeing the long-term industry and growth opportunity, particularly after the COVID impact for this year, should we expect an acceleration in growth? And second is about your category expansion, could you share a bit more on how this is progressing in your expanding categories? Thank you.

[Foreign Language] [Interpreted] Thank you for the question. In our view, the supply-driven industry remains unchanged and sourcing if of vital importance. Many users are unfamiliar with recycling services or may not have had satisfying recycling experiences with good pricing yet. Our growth strategy for recycling and trading is to cover more efficient conversion scenarios. On one hand, we have continued developing our AHS offline sources, which are the foundation for our business. We opened new stores and cities at suitable pace, while enhancing user experience at existing stores. We have also been expanding the category coverage of our recycling business. As a result, we have grown user awareness of our recycling services and generated more repurchases. Our strategy has improved efficiency in both store forms and back-end quality inspection centers. On the other hand, we have developed new recycling scenarios that have provided significant contributions to our business growth. We continue to enhance our collaborations with industry-leading e-commerce players and top consumer electronics brands. Through these collaborations, we provide recycling and trading services in scenarios where user traffic is highly concentrated on new product purchases. We believe there is still great potential for us to further penetrate China's market. In terms of growth trajectory, we observed several changes prior to and after the spring festival as pandemic restrictions were lifted and the economy began to revitalize. First of all, more consumers were willing to go out and visit our stores in shopping malls to sell their idle goods with residual value. We continued our uninterrupted services during the holiday and to meet the rebounding demand. During the seven day holiday, restructuring volume had a significant year-over-year increase. Second, we believe high quality products at low prices is a natural and reasonable pursuit of consumers. Consumer spending is still cautiously…

The next question comes from Joyce Ju from Bank of America. Please go ahead.

[Foreign Language] [Interpreted] I will translate my question. Actually, we have seen this quarter and even for the full year, the company actually achieved a non-GAAP profitability, which is pretty remarkable compared to last year's loss. So I just want to understand, like, how management is looking at in the future, what's the key source of our process and how should we look at our profitability sustainability? Thanks.

Thanks, Joyce. I will take this question. So during the second half of 2022, we have adjusted our revenue mix and profit strategy by prioritizing the high quality controllable GMV business. We also pivoted from consignment business to 1P2C retailing by leveraging our compliant refurbishing capabilities. This is expected to generate scale on 1P2C sales and the gross profit in the long run. In addition, we optimized our sales and marketing spending in the marketplaces and improved fulfillment suspending efficiency as we further advanced our automated expansion capabilities. As a result, we successfully realized our profit targets in 2022. In our last earnings call, we experienced details of the compliant refurbishment policy and the logic of the overall refurbishment business. By polishing device screens and replacing batteries and screens with certified third-party parts and components, we improved the functionality of pre-owned products. We also inform customers how we have refurbished devices of a seven day free return and one-year quality warranties. During the fourth quarter, we elevated the overall capabilities of our South China operation center's team and production capabilities increased as planned. As a result, total sales of [indiscernible] and refurbished phones surpassed 220 million user in the second half of 2022. Meanwhile, we further improved the supply for our self-operated business by simplifying the screen process and more precisely locating devices suitable for compliant refurbishment. So ASP for 1P2C products increased to RMB2,700. By enhancing our operating efficiency and product quality, we further expanded our operating margin. Looking ahead to this year, we're going to implement the same improvements at our East China and North China operation centers. We expect to complete our supply chain upgrades for tablets as we test our new categories for our recycling business. Our goal is to provide retail users with more cost-efficient, high quality products. In the full year of 2023, we expect our compliant refurbishment business to generate revenues of RMB600 million with an additional margin of 5%. We encourage you to focus more on our non-GAAP operating margin. In the fourth quarter, we realized RMB34.6 million in non-GAAP operating profit and achieved non-GAAP operating profit for the full year. This is mainly due to our long-term investment and the large-scale implementation of automated quality inspection, stocking and pricing technology. As a result, fulfillment efficiency have improved significantly. We also adjusted our strategy for our operating stations, reducing costs that have arisen from fragmented dispatching and logistics. As a result, our non-GAAP fulfillment expenses as a percentage of revenue decreased from 13.7% in 2020 to 12.9% in 2021 and further dropped to 10.9% in 2022. We also remain prudent in our marketing efforts by refining our operations, we strive to achieve greater organic growth for each of our business lines. Thank you.

Our next question comes from Fay Lin from China Renaissance. Please go ahead.

[Foreign Language] [Interpreted] Thanks, Management for taking my question. We noticed that non-GAAP sales and marketing expense as a percentage of revenue was lower to 7.5% in the fourth quarter. So just wondering, can management elaborate more on the measures taken to improve efficiency behind? Thanks.

Thank you. In the last year, we have been prudent with our selling and marketing expenses and the related personnel costs. Apart from the marketing budget used to develop consumer mindshare of AHS Recycle, our assessment for each business line prioritized ROI. For PJT Marketplace, we optimized its frontline marketing team. For Paipai Marketplace, we prioritized profitability and we're more focused on its brand image and reputation. We also reduced the subsidies provided on jd.com and our investments in user traffic of new channels. In the fourth quarter, excluding SBC expenses and amortization of and impairment loss of internal assets, non-GAAP selling and marketing expenses were RMB222 million, that accounted for 7.5% of total revenue, down by 3.9 percentage points from 11.2% in the same period of 2021. We believe that the GAAP measures refer a better future of our expenses. Thank you.

[Operator Instructions] As there are no further questions at this time, I'd like to hand the conference back to our management for closing remarks.

Thank you. Thank you all again for joining us. A replay of today's call will be available on our IR website, followed by a transcript were ready. If you have any additional questions, please feel free to e-mail us at ir@atrenew.com. Have a good day.

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