Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the ATRenew Inc.’s First Quarter 2023 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 first quarter 2023 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 ir.atrenew.com. There will also be a transcript following this call for your convenience in English and Chinese. For today's agenda, Kerry will share his thoughts of the quarterly performance and the 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 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] Hello, everyone, and welcome to ATRenew's first quarter 2023 earnings conference call. [Foreign Language] During the first quarter, the rapid recovery of offline retail and logistics led to a resurgence in consumer recycling and consumption demand. As a result, our year-over-year revenue growth rebounded to 30.2% and we achieved total revenues of 2,872 million, exceeding the high-end of our guidance. Meanwhile, our non-GAAP operating income reached a new record of over 44 million, [representing] [ph] an adjusted operating margin of 1.5%. Our first quarter revenue and profit, both exceeded expectations in what is purely an off-season for the second-hand industry. [Foreign Language] I like to share with you three main drivers, which contributed to our top line growth rebound. The first is the growth momentum of 1P business, which geared up again. The recovery of Phase 2 phase recycling fulfillment at our stores, the strengthened brand awareness of the AHS Recycle brand and an increase in combined refurbishment product sales to consumers, all contributed to the growth of product revenues. [Foreign Language] If we do mean a bit, we encountered a tailwind on the sourcing end, which was generated by the rebound of consumer activity after the reopening. Our e-commerce partners, such as JD.com have increased their consumer subsidies, while brand manufacturers, including Apple, have offered discounts and promotions on specific models. To add more color, Apple products account for 45% of our total businesses and 60% of our 1P business. Out of the popularity and resilience that Apple products have, all core recycling business remains stable and has been relatively less prone to the headwinds of decreasing new device shipments. [Foreign Language] While capitalizing on these recent favorable developments, we also consolidated our own operational capabilities, especially on the sourcing front. We strengthened our competitive mode in…

Hello, everyone. We are pleased to report another profitable quarter as the total net earnings is at the top end of our guidance. And the GAAP operating income reached our new record. 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. In the first quarter total revenues increased by 30.2% to 2,871.8 million. This was primarily due to the continued growth contribution of our [1Q] [ph] product sales revenues, which increased by 34.9% to 2,575.2 million. In terms of profitability, we had another profit making quarter with a non-GAAP operating income of 44.4 million. This was primarily attributable to scale effects powered by automation inspection upgrades and improved cost efficiencies in sales and marketing. Now, let's take a detailed look at the financials. In the first quarter total revenues increased by 30.2% to 2,871.8 million. Net product revenues increased by 34.9% to 2,575.2 million, while net service revenues were 296.6 million, slightly decreased by 0.3%. Growth in net product revenues was primarily driven by an increase in the sales of [prolonged consumer] [ph] electronics, both through our online and offline channels in terms of service revenue. The PJT marketplace generated more, compared with the same period last year. This was primarily due to the lessened consignment business of Paipai marketplace as we pivoted its strategic focus, which was partially offset by an increase in the service revenue generated from PJT marketplace. Next, turning to our operating expenses to provide greater clarity on the trends in our operating based actual expenditures, we will also discuss our GAAP operating expenses, which better affect how the management views our results of operation,…

Thank you. [Operator Instructions] Our first question today will come from Joyce Ju of Bank of America. Please go ahead.

[Foreign Language] I’ll translate myself. My first question is that, during the first quarter we have seen very promising growth in the business accelerating from the previous quarter. So can you share a little bit more about the outlook for this year in terms of the economy in China, as well as consumption of the electronics products? And my second question is on the progress of the multi-category recycling services. Do you see any categories that are showing potential for scaling, up our contribution for revenue and profitability in the future? Thank you.

[Foreign Language] Okay. Thank you for the question. I will take the first question. Since the reopening in the Chinese New Year, we have seen a rapid recovery offline, including in-person consumption at shopping malls, restaurants, and other local services. In-line with these trends, our AHS stores have experienced a significant surge in business volume, while the number of 1P store products has grown by 42% year-on-year. While durable goods consumption recovery is still on its way, we expect to see sustained trading service demand driven by the major promotions held by our e-commerce funders during the second quarter, by offering the option to upgrade devices in a cost-effective and eco-friendly way, our trading service provides value to consumers who purchase new devices. It also serves to raise consumer awareness of circular consumption. In addition to higher [forcing] [ph] volumes, we are refining our automation capabilities and into working compliant refurbishment services to expand our inventory of high-quality pre-owned electronics. This improvement will provide consumers with a wider area of premium choices. We believe that consumers will always strive for better life and better products. Therefore, the demand for recycling and reusing pre-owned electronics is always there, and we are committed to working with some brands for the betterment of trading experience and supply chain capabilities. In the second quarter, we expect to achieve year-over-year revenue growth of [32.8% to 37.5%] [ph], while maintaining our annual target for non-GAAP operating profit. [Foreign Language] I will answer the second question regarding the new headwinds. We kicked off the recycling category expansion in the second quarter of 2022, starting with high value bags and watches. Currently, the category has already established scale, in terms of trading volume. Gold is another category that has achieved this level of development. The development of these…

Our next question today will come from [indiscernible] from Goldman Sachs. Please go ahead.

[Foreign Language] Thank you management. I will translate for myself. What kind of strategic targets we have for our repair businesses? And what impact should we expect from – to our net profit from expanding our repair businesses? Thank you.

[Foreign Language] Thank you for the question. In the first quarter, compliant refurbished devices retailing increased for a fourth consecutive quarter and the corresponding ASP stabilized at RMB2,600. We anticipate that the gross margin of the refurbished device retail business will remain stable, while its scale and its contribution to our 1P business will gradually increase. We believe that this will allow us to further close the value chain of the industry, obtain more profit based on the existing 1P sources and strengthen competitive edges. By 2023, we aim to expand the coverage of our refurbishment operations to more regions, replicating the capabilities we have already established in East China and South China operation centers. In terms of product categories, we are going beyond mobile phones, while establishing refurbishment capabilities for tablets, smart watches, and laptops, et cetera. At the same time, we will steadily improve our operations and enhance our brand-focused category. During the first quarter, the scale of our refurbished production remained at around 70,000 units, as we accumulate our refurbishment and supply chain capabilities for more product categories. We expect to add value to at least 160,000 units in the first half of 2023. [Foreign Language] Thank you.

Our next question today will come from [Xiaoxin Chen] [ph] of CICC. Please go ahead.

[Foreign Language] Thank you management. I will translate myself. What are the reasons for an improved adjusted OP margin? And do you have any plan to increase sales and marketing sales for new category recycling business and what's the outlook for the adjusted OP margin for the whole year?

Okay. Thank you for your question. I will take that question. So, under the debt measures, we reported our new [indiscernible] operating profit this quarter. Net debt operating margin increased to 1.5% from 0.2% in the same quarter last year. This was mainly due to the optimization of cost efficiency of fulfillment expenses both by improved automation capabilities and selling expenses and will further impairment cost to control measures. In the first quarter, [Technical Difficulty] operating expenses were 261 million, accounting for 9.1% of total revenue. So, net debt-to-fulfillment expenses decreased by 20.6% year-on-year, the most evident reason is the [still effect] [ph] of our automated facilities mentioned by Kerry. The two operating centers [indiscernible] handled over 40% of the total orders processed nationwide in the first quarter. Therefore, automation has a significant impact on the reduction of overall fulfillment costs. At the same time, automation technology also brings about improvements in the accuracy of quality inspection and reduces return of goods and associated losses. In addition, we have optimized the deployment and operational efficiency of [city level] [ph] operations stations, we started to take full control over operating stations in the third quarter of 2022 and optimize the network, therefore, saving packaging and logistics fees due to distributed shipments. Selling and marketing expenses were 270 million. Non-GAAP selling and marketing expenses as a percentage of total revenues was 7.5%, [down 1.9%] [ph] year-on-year. This was primarily due to a decrease of 33.7 million in marketing expenses for marketplace since we stripped [indiscernible], downside the consignment business, and we are developing multi-category recycling, [sales corresponding] [ph] fee increase of RMB10 million in this quarter. We will maintain appropriate investment in new categories and [branded] [ph]. Looking into full-year of 2023, we expect to continue improvements in cost efficiencies. At the same time, we will further amplify the positive impact of automation as we plan to automate operation center every year. And for sales and marketing, we keep our proven spending pattern from our [indiscernible] and selectively investing in new strategic initiatives. So, we will – we expect our operating margin to be increased at a healthy pace. Thank you for your question.

As there are no further questions, at this time, I'd like to hand the conference back to 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 shortly, followed by transcript when ready. If you have any additional questions, please feel free to e-mail us at ir@atrenew.com. Have a nice day.

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