Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Incorporated Third 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'd now like to turn the call over to the first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations at the company. Please go ahead, sir.

Thank you, Jason. Hello, everyone, and welcome to ATRenew's third 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 third quarter 2023 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. 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'll hear during the 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 press 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 third quarter 2023 earnings conference call. During the third quarter, we once again exceeded expectations in terms of both revenue and profit. The flat growth in new product sales did not adversely impact our business. Importantly, secondhand industry continues to thrive with more people choosing to trade in and buy high-quality pre-owned products for new lifestyles. With efficient organization, a dedicated team and industry-leading automation technology capabilities, we are confident in offering in the new era as a leader in the secondhand industry. In the quarter, our total revenues reached RMB3.26 billion, representing a 28.4% year-over-year increase, surpassing our guidance. Total revenues for the first three quarters amounted to RMB9.1 billion, marking a 32% year-over-year increase and exceeding our initial expectations at the beginning of the year. During the festive fourth quarter, bolstered by JD.com's support and our inclusion in Apple's official trading program, the outlook for our overall revenue growth in 2023 is increasingly clear. During the quarter, adjusted operating income reached RMB73.8 million with an adjusted operating margin of 2.3%, setting a new record and further confirming our ability to improve operational efficiency through automation technology and economies of scale. The adjusted operating margin for nine months ended September 30 was 1.9% ahead of our schedule. Our quarterly results surpassed expectations. This was primarily attributable to the growing scale of the recycling and retail business, which consistently drives industry expansion. Within this context, the development of our 1P business remains our core strategic focus, serving as the primary driver of our growth. At the same time, enhancing the service capabilities of our 3P platform business to encourage long-term merchant engagement serves as important supplementary drivers. During the third quarter, our 1P business revenue grew by 31.4% year-over-year to RMB2.92…

Yes. Thank you. Hello, everyone. We are pleased to report another profitable quarter, as we achieved yet another new record in the GAAP operating income on revenues that exceeded the top end of our guidance. Before going into our financial details, please note that all amounts are in RMB and our comparisons are on a year-over-year basis, unless otherwise stated. In the third quarter, total revenues increased by 28.4% to RMB3,256.8 million, mainly driven by growth in net product revenues. Net product revenues increased by 31.4% to RMB2,924 million, while net service revenues increased by 7.3% to RMB332.8 million. Growth in net product revenues was primarily driven by an increase in sales of pre-owned to consumer electronics, both through the company's online and offline channels. Sales of 1P refurbished devices totaled RMB2 billion, more than doubled compared with the same period last year. The increase in service revenues was primarily due to the recovery of Paipai and the PJT marketplaces from COVID-19 pandemic influence during 2022 and an increase in the overall take rate, which grew to 5.4% from 4.45%. Turning to our operating expenses, to provide greater clarity on the trends in our actual operating-based expenses, we will also discuss our non-GAAP operating expenses, which better reflect how management views our results of operations. The recalculations of GAAP and non-GAAP results are available in our early release and the corresponding Form 6-K, finished with the SEC. Merchandise costs increased by 35.1% to RMB2,611 million. The increase was in line with the growth in product sales revenues. Gross margin at the group level was 19.8% in the third quarter. Gross margin for our 1P business was 10.7%. Fulfillment expenses increased by 3.8% to RMB287.7 million, excluding share-based compensation expenses, which we will refer to as SBC from here on. Non-GAAP…

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

[Foreign Language] [Interpreted] Thank you, management, for taking my question. I'm asking this question on behalf of our panelist, Ronald Kuhn. Can management share some color on its new single-state grant promotion performance? And what does management take on the outlook for 2024? Can management also provide an update on operations inclusion in Apple's official channel in Mainland China? And will the recent revival of Huawei's cell phone impact your recycling performance? Thank you, management.

[Foreign Language] [Interpreted] Throughout this year's Double Eleven, we observed a surge in user enthusiasm for recycling and trading. During the pre-sale period after grant promotion, the total value of C2B recycling orders increased significantly by 60% year-on-year. Both Shanghai and Beijing also reached the RMB100 million milestone in single-month transaction values in October. And our B2C sales on November the 11 across all channels totaled RMB160 million, representing an increase of 24% year-on-year. Our recycling business performance speaks volumes about user loyalty towards the AHS Recycle brand and the scoring of resilience and immense growth potential of our business model within the circular economy. As we approach the end of November, our guidance for total revenue in the fourth quarter of 2023 ranges from RMB3,730 million to RMB3,830 million, reflecting 25.1% to 28.5% year-over-year growth. Looking ahead to fiscal year 2024, we remain confident in the promising evolution trends of the circular economy and our business strategies. We are confident in executing our strategy to realize higher profitability from our compliant refurbished business. Our involvement in Apple's official recycling and trading programs, expansion of our multi-category recycling and the efficiency enhancement from automation technology. Apple remains a key brand for our pre-owned consumer electronics recycling business, accounting for 60% share of 1P recycling business revenues. iPhone sales in Mainland China continue to be robust, reflecting Apple's sustained popularity among consumers. The number of Apple products in circulation is huge, and the value retention rate is still industry-leading. There is room to further increase the penetration rate of trading services. Our services for Apple's official website and flagship stores in Mainland China began in the third quarter, generating RMB30 million in sales, despite limited new phone shipments and trading orders during the period. In the fourth quarter, we secured qualifications that allow us to recycle the two most recent generations of iPhones, which means we can have iPhone 13 lineups and 14 lineups for the new iPhone 15 lineups. This allows us to significantly scale up the amount of recycling mainstream products. Thank you for the question.

The next question comes from Xiaoxin Chen from CICC. Please go ahead.

[Foreign Language] [Interpreted] Thanks, management for taking my questions. Could management talk about the use of cash and how you are handling the shares repurchased? Thank you.

Thank you for the question. As of September 30, 2023, our total cash and cash recurrence, restricted cash, short-term investments and the funds receivable from third-party payment service providers summed to RMB2.3 billion to support our long-term strategic and business development. So first, for the main business of per-owned consumer electronics, we will continue to strengthen the control of the use of cash, improve the operating cash flow and increase the positive cash inflow from core mature business. Second, we will deploy cash in a disciplined manner into areas with long-term potential, especially multi-category business based on existing AHS Recycle stocks. We believe that the enhanced operational cash flow and the prudent capital expenditure will be conducive to the further strengthening of the company's competitive advantages and the long-term value to shareholders. We have been continuously repurchasing our shares since later 2021 through the share repurchase programs we adopted. Repurchased stocks are booked as charity stock, which are devoid of rights to dividends or voting. By the end of the third quarter of 2023, a total of $48.4 million had been spent through the share repurchase program since December 2021. We plan to continue to conduct stock repurchase in the foreseeable future. Thank you for your question.

There is one another question from Joyce Ju of Bank of America. But due to technological issues, I'll read out her question on behalf of her. [Foreign Language] [Interpreted] Congrats on another strong quarter. My first question is about margins. Can management share more color on gross profit margin and your non-GAAP op margin? What's the outlook for your margins? My second question is on refurbishment. Can management comment on the progress and expectations of the compliant refurbishment business? Thank you.

Okay. Thank you for the question. So in the third quarter of 2023, so overall gross profit margin was 19.8%, which was a year-over-year decline due to our strategic shift in revenue mix. Over the past five quarters, we have focused on bolstering our 1P businesses. And as such, the 3P service revenues, which involves several costs, contributed 10.2% to our total revenues, downsizing by 2% year-over-year. So taking a detailed view of the gross profit of the 1P business, the third quarter gross profit margin stood at 10.7%. This aligned with our expectations that 1P gross profit margin would counter to this quarter. There are two reasons behind this. First, during the new phone sales season in September, we proactively adjusted our sales price of refurbished devices in preparation for seasonal margin fluctuation. We also adjusted to finished product selling prices. Such adjustment aims to meet the demand of merchants by reducing their procurement costs and ensuring their profitability. Second, to supplement our supply, we procured secondhand devices from industry partners, resulting in a relatively lower gross margin for that supply. However, as our automation technology further improves our fulfillment efficiencies, along with optimized the selling and the marketing cost efficiency our fulfillment expenses ratio and the selling and the marketing expense ratio against the total revenues dropped to 8.7% and 7%, delivering non-GAAP op margin of 2.3%. Although 1P's gross margin decreased, we were able to provide consumers with more competitive recycling prices and a joyful experience. In the third quarter, our compliant refurbishment business generated RMB2 billion in revenue, reflecting notable user acceptance of pre-owned electronic devices, especially pre-owned Apple devices. Research suggests that an iPhone's lifespan can reach up to 8 years, with 50% of globally activated iPhones being pre-owned devices. Although, the domestic compliant refurbishment market is still in its early stages, our refurbishment business shows promising growth potential. We anticipate an improvement in overall adjusted operating margins attributable to the growth of refurbished business and Apple businesses. Thank you for the 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 a transcript when ready. If you have any additional questions, please feel free to e-mail us at ir.atrenew.com. Have a nice day.

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