Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to ATRenew’s Incorporated Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will be hosting a question-and-answer session after management's prepared remarks. Please note today's event is being recorded. I would now like to turn the call over to our first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations of the Company. Please go ahead, sir.

Thank you Chuck. Hello everyone, and welcome to ATRenew's Second Quarter 2024 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'll open the call to questions from the analysts. The second quarter 2024 financial results were released earlier today. The earnings release and the 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 will hear during this conversation 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 today 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 would now like to turn the call over to Kerry for business and strategy updates.

[Foreign Language] Hello, everyone and welcome to ATRenew's second quarter 2024 earnings conference call. We are pleased to share our achievements this quarter and the strategies we’ve implemented in the evolving landscape, where the circular economy has been driving consumer behavior. [Foreign Language] In the second quarter, we achieved solid growth, especially at the recycling end and in value-for-money retail business even though consumers are more prudent with spending. To boost domestic consumption, the government has taken actions to encourage large-scale trading of consumer goods. As a result, more products have entered the pre-owned market through e-commerce platforms and physical retailers. In the near-term, we have already witnessed a significant increase in recycling volumes in cities like Shenzhen. More importantly, we believe such policies and support will have a long lasting impact by raising awareness of sustainable consumption and the resulting of second-hand goods. Such support provides greater certainty to our sustained growth outlook. [Foreign Language] Looking specifically at our business performance in the second quarter, our total revenue reached RMB3.78 billion, up 27.4% year-over-year, exceeding the high end of our guidance. Product revenue was RMB3.4 billion up 29% year-over-year, serving as the main growth driver. Notably, order volume related to our core self-operated consumer electronics recycling business grew 27.8% while order volume of the overall self-operated business that included low ASP business grew 38.9% year-over-year, leading in the second-hand industry. [Foreign Language] Among primary recycling scenarios, trade-ins have become an increasingly mainstream way to shop. We collaborated with JD.com on their old iPhone Apple product for new Apple products initiative, which received widespread praise from users. In May, the recycling value of used products traded in through JD.com, grew 97.6% year-over-year. During the June 18th shopping festival the trading volume of used consumer electronic products from JD.com increased by…

Okay. Hello, everyone. We are pleased to report another profitable quarter under non-GAAP measures, on revenues that once again exceeded the top end of our guidance. Before taking a detailed look at the financials, please note that all figures are in RMB and all comparisons are on a year-over-year basis unless otherwise stated. In the second quarter, total revenues increased by 27.4% to RMB3,776.7 million, primarily driven by the strong growth in net product revenues. Net product revenues increased by 29% to RMB3,401.8 million, while net service revenues increased by 14.6% to RMB374.9 million. Gross and net product revenues was primarily driven by an increase in the sales of pre-owned consumer electronics, both throughout the Company's online and offline channels. The increase in service revenues was primarily due to an increase in the service revenue generated from PJT Marketplace and the multi-category recycling business. The overall gross transaction value of marketplaces increased consistently with service revenues and the take rate of our marketplaces was 5.28% in second quarter of 2024. About RMB30 million were directly attributable to our multi-category recycling business, with an average service take rate of 3%. Multi-category recycling business accounted for 8% of total service revenues in the second quarter of 2024, while the figure was 1% in the same period of 2023. Now let's discuss our operating expenses to provide greater clarity on the trend 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 reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6-K furnished with US SEC. Merchandise costs increased by 28.6% to RMB2,990.6 million, in line with the growth in product revenues. Gross margin as a group level of 20.8% [ph]…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. And at this time we'll pause momentarily to assemble our roster. And the first question will come from Joyce Ju with Bank of America. Please go ahead.

[Foreign Language] I'll translate myself. This is Joanna on behalf of Joyce from Bank of America. Thank you for taking my question and congrats on a solid result this quarter. We see there are recent domestic policies that have increased support for large-scale consumer goods trade-ins, such as the subsidies announced by the National Development and Reform Commission in July. How do these policies impact your business? Thank you.

[Foreign Language] Thank you for the question. Since the State Council released its action plan for large-scale consumer goods trade-ins in March, we observed both central and local policy support, mainly focusing on computers, cars, and home appliances. In July, the NDRC and Ministry of Finance issued measures to further support these trade-ins, we've seen more cities implementing specific subsidies for electronic products, including home appliances and computers. ATRenew and JD.com have collaborated to meet users' trade-in needs, securing more high-quality first-hand recycling products. [Foreign Language] Currently, phone-specific subsidies are being implemented at the local level. For instance, in Shenzhen's July trade-in subsidy program, we processed used consumer electronics products from JD's trade-in orders. The number of successful recycling transactions increased 2.5 times compared with the number in June, even though June was a peak month considering the grand promotion season, reflecting the popularity of such an initiative. In the second half of the year, we expect more cities to introduce similar subsidies, further promoting the effective recycling of items, electronic products within the circular economy. [Foreign Language] However, we primarily view these policy subsidies as catalysts for enhancing users' recycling awareness. Some studies suggest this round of subsidy may last longer than previous programs like home appliances going to the countryside. Therefore, we aim to seize these opportunities to strengthen the recycling system, enhance AHS recycled brand recognition, and guide users towards trade-in. We anticipate that as national and local subsidy policies are introduced, user acceptance increases and our fulfillment capabilities strengthen. These factors will collectively promote further penetration of this unique service model in the circular economy. [Foreign Language] Thank you for the question.

The next question will come from Xiaoxin Chen with CICC. Please go ahead.

[Foreign Language] Congratulations on the solid results and I have two questions. The first one is about the top one. What are the contributions of the compliance refurbishment business and your Apple trade-in business? And the second one is, could you please elaborate on how you improve the non-GAAP operating margin? Thank you.

Okay, thank you. I will take your question. In terms of the compliance refurbishment, we saw a 50% year-over-year increase in the second quarter, reaching RMB300 million in product revenue. In the first half of this year, we continued to enhance our selection of self-recycled goods, swiftly identifying suitable forms for refurbishment and improving efficiency across our value chain. Currently, we have achieved 95% comparison coverage in the mobile phone category, laying a solid foundation for future replication to other categories. At the same time, we have enhanced our repair coverage and capabilities and processing capabilities for different phone conditions. Additionally, we have bolstered our sales capabilities for 1P goods, opening up channels for both retail and business buyers, better connecting the end-to-end industry chain. Regarding Apple's official trade-in service, we have successfully optimized our gross margin as planned, achieving a positive gross margin in the second quarter. Although the overall gross margin for our Apple business in the same quarter was already low single digits. We observed significant improvements in the gross margin for goods received during the second quarter. We will continue to refine this business in second half of this year, aiming to provide an excellent trade-in experience for Apple's official users while maintaining steady profitability. In the first half of this year, in addition to our consumer and trade-in service, we also enhanced our service to Apple's corporate offerings. Based on Apple's orders from a number of Fortune 500 corporates, we expect to recover used devices from these corporate clients in next one to three years. Through such a program, we can access the corporate service market while addressing the needs of leading international and domestic corporates when disposing of used workplace iPhones and MacBooks of their employees. In terms of profitability we reported a consecutive quarter with positive non-GAAP operating profit. In the second quarter, non-GAAP operating profit was RMB94 million. Non-GAAP operating margin was 2.5% during the promotional season of e-commerce platforms, compared with 0.8% in the second quarter of 2023. Such improved operating efficiency was a testament to the economy of scale back by our end-to-end supply chain. As mentioned earlier, in the second quarter of 2024, non-GAAP fulfillment expenses increased by 22.9% and non-GAAP sales and marketing expenses increased by 11.7%. Both grow slower than our top-line, label costs in relation to fulfillment as a percentage of total revenues decreased by 0.2% compared with the second quarter of 2023, although promotion fees related to the brand promotion of AHS cycle increased, but the commission fees and promotion fees of PJT Marketplace and Paipai, in relation to sales and marketing as a percentage of total revenues dropped. The above are the main reasons behind the improved margin. Thanks.

Thank you.

The next question will come from Michael Kim with Zacks Research. Please go ahead.

Great. Good morning or good evening everyone. Thanks for taking my questions. First, just curious how the gross margins for the recycling of luxury goods compared to consumer electronics and then assuming the mix continues to shift in favor of luxury items, just wondering how that might impact overall gross margins. And then I do have a second question.

Okay, so for your first question, currently approximately 90% of our total revenues comes from the product sales related to recycling, quality inspection, refurbishment and the resale of pre-owned products. The remaining 10% of our total revenues come from service revenues generated by our platform. Revenue is equivalent to the gross profit for this segment in our finance statements. Of this service revenues, 8% is attributable to our multi-category recycling business operated under the platform model. But in terms of the operating profit margin, the luxury goods products will be similar to our electronic products. So when we examine the recycling business of high-value goods, including luxury items, we categorized some as a part of our multi-category business alongside other consumer electronic categories. This indicates that the multi-category recycling business currently has a limited impact on our overall gross margin. However, we believe that by expanding the scope and accessibility of our multi-category recycling services we can positively influence our overall gross profit mix and margins, as well as operating profit margin. Thanks.

Thanks. Got it. Makes sense. Appreciate that. And then second, just given the strength of your balance sheet and your asset-light business model, just curious to hear your updated thinking on the capital management front. I know you talked about the Board recently upsizing and extending the share repurchase authorization, but just wondering how you might be thinking about potentially instituting a dividend down the road and/or capitalizing on potential M&A opportunities? Thanks.

Okay, thank you. In terms of our shareholder returns, we will maintain regular and open communication with the board and the market to explore the feasibility of share buyback and dividend plans and our current plan to use most of our current year profit for share repurchase in current year. So considering the current capital market environment and the Company's stage of development, we will adopt a prudent approach to capital utilization and we do not have any M&A plan now. Thank you.

Great. Thanks for taking my questions.

This will conclude our question-and-answer session. I would like to hand the conference back over to management for any closing remarks. Please go ahead.

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

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