Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s Third 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 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 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 will open the call to questions from the analysts. The third 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. Please pay attention to the safe harbor statements. Some of the information you'll 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 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 2024 earnings conference call. We are pleased to share our performance highlights, our latest practices in promoting consumer goods trade-ins, and our strategic insights on the pre-owned industry. [Foreign Language] [Interpreted] Our total revenue for the third quarter reached RMB4.05 billion, achieving year-over-year growth of 24.4%, which is in line with our forecast. To dive deeper, product revenue grew by 25.6% year-over-year. Breakdown by sources, our core recycling business revenue in Mainland China increased by over 30% year-over-year, significantly outpacing the growth of the overall second-hand consumer electronics recycling and transaction market in China. [Foreign Language] [Interpreted] As consumer spending slows down, we keep our pace to open new physical stores to meet the growing demand for the recycling of idle goods. At the end of the third quarter this year, we had a total of 1,637 AHS stores nationwide. Physical stores, as our primary consumer touchpoints to collect pre-owned products, remain the most crucial channel for building user trust and securing first-hand sources of supply. We will continue to enhance our AHS stores' service capabilities and user experience to reinforce the top-of-mind brand awareness of AHS Recycle. As a result, we anticipate accelerating our store opening in the next two to three years. [Foreign Language] [Interpreted] Regarding the trend of our recycling business, we shared interim data during our second-quarter earnings call that highlighted the growing mainstream adoption of trade-in services among users. Although smartphones and other consumer electronics have not yet been provided with direct trade-in subsidies, we observed strong demand for trade-in services. In the third quarter, the value of goods collected through JD.com, via regular recycling and trade-in services, increased by over 40% year-over-year. Of which, trade-in services doubled year-over-year. It is worth mentioning that…

[Foreign Language] [Interpreted] Hello, everyone. We are pleased to report another profitable quarter under non-GAAP measures, and a first quarterly operating profit milestone under GAAP measures on strong year-on-year growth of total revenues. Before taking a detailed look at the financials, please note that all amounts are in RMB and all comparisons are on a year-over-year basis unless otherwise stated. [Foreign Language] [Interpreted] In the third quarter, total revenues increased by 24.4% to RMB4,051 million, primarily driven by ongoing solid growth in net product revenues. Net product revenues increased by 25.6% to RMB3,672 million, primarily driven by increased sales of pre-owned consumer electronics through our online and offline channels. [Foreign Language] [Interpreted] Net service revenues were RMB379 million, representing an increase of 13.9%. The increase was primarily due to an increase in service revenue generated from PJT Marketplace and the multi-category recycling business. The growth in service revenues went along with the upward trend in the overall gross transaction value of our marketplaces, delivering an overall marketplace take rate of 5.34% in the third quarter of 2024. During the quarter, multi-category recycling businesses contributed over RMB30 million to service revenues, delivering a healthy improvement in take rate. Our multi-category recycling business attributed to close to 9% of service revenues in the third quarter of 2024, compared with 1.7% in the same period of 2023. [Foreign Language] [Interpreted] Now, let's discuss 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 reconciliations of GAAP and non-GAAP measures -- results are available in our earnings release and the corresponding Form 6-K furnished with the U.S. SEC. [Foreign Language] [Interpreted] Merchandise costs increased by 24.2% to RMB3,243 million, in…

We will now begin the question-and-answer session. [Operator Instructions] The first question today will be from Joyce Ju with Bank of America. Please go ahead.

[Foreign Language] Could management help elaborate a bit on how trade-in subsidies are driving your business growth? Specifically, how do you quantify incremental business from trade-ins, and what are your expectations for trade-in business in the fourth quarter of 2024 and also the year after? Thank you.

[Foreign Language] [Interpreted] Thank you for your question. We've been working closely with JD.com as a first mover in supporting the national consumer goods trade-in program. In the third quarter, our recycling and trade-in business through JD.com increased by over 40%, with the trade-in business doubled. This momentum continued during the Singles Day Grand Promotion, where trade-in recycling value increased by 246% year-over-year. There were three factors. First, convenient trade-in options were offered with joint efforts by JD and AHS Recycle. Second, many phone brands launched new products ahead of the grand promotion coupled with trade-in subsidies. Third, consumers prefer trade-in services over regular recycling services. Although smartphones have not yet enjoyed direct subsidies from the current nationwide trade-in stimulation scheme, our partnership with JD on cross-category trade-ins is thriving, thanks to our industry-leading second-hand supply chain capabilities. Users are actively exchanging their used smartphones and small appliances for discounts on new home appliances. For instance, there were 100,000 orders where users traded in their used phones when purchasing new home appliances during the grand promotion. [Foreign Language] [Interpreted] We believe that the adoption of trade-ins is still in its early stages. Alongside platforms and brands, we need to continue educating users to help more consumers experience this cost-effective purchasing approach. For instance, we expect that through JD Electronics, there is nearly 60 million units of smartphones distributed through the channel annually, and with the advancement of our collaboration, we expect the penetration rate of this scenario has substantial growth potential. As the Ministry of Finance advances its social and economic development objectives and fiscal policies, we look forward to progress on their goal to enhance the support for large-scale equipment upgrades and to expand the variety and scale of consumer goods trade-ins program. We believe that in the evolution of consumer behavior, trade-ins are destined to become mainstream. We remain committed to strengthening our second-hand supply chain capabilities, providing efficient infrastructure support for the industry, and fostering improvements in consumer sentiment. As the next steps, we continue optimizing price inquiry services, order placement, quality inspection and fulfillment experience, uplifting the proportion of face-to-face fulfillment orders, ultimately bringing our services to the next level. [Foreign Language] [Interpreted] Thank you for the question.

The next question comes from Wan Jiao with CICC. Please go ahead.

[Foreign Language] Thank you for taking my question. Could you provide more color on the progress of your multi-category recycling business? This business segment has shown strength this year. What's the profit contribution? And how do you plan to further grow this emerging segment? Thank you.

[Foreign Language] [Interpreted] Thanks for the question. Our multi-category recycling business is built on the AHS Recycle brand and rapidly developed by leveraging the existing AHS stores. It operates as an asset-light platform business model. To meet users' growing demand, we offer recycling services for luxury goods, gold, jewelry, premium liquor, and other high-value items. In the third quarter, the recycling value of multicategory recycling business increased by 270% year-over-year, generating over 30 million in service revenue, which was recognized as gross profit. After deducting store-end and fulfillment costs, 46% was converted to store-level operating profit. This has further enhanced the competitive strength of our stores. [Foreign Language] [Interpreted] Breaking down by category, gold and luxury goods remain core segments, accounting for 77% and 18% of the multiple-category business, respectively. In terms of revenue contribution, the two categories had similar levels. Users have embraced our multi-category recycling services due to the convenient and premium service, competitive pricing, and transparent service take rate. With the huge existing domestic pre-owned luxury market size and gold recycling market size reaching hundreds of millions, we possess the service capabilities and pricing advantages needed to thrive in this massive market, making the long-term potential for our multi-category recycling business promising. [Foreign Language] [Interpreted] Of our 769 self-operated AHS stores, 587 now offer multi-category recycling services with more services to add on down the road, gradually covering mainstream users in first and second-tier cities. In extended lower-tier cities, we are exploring opportunities to integrate the services with joint-operated stores. As we continue to expand the AHS store network, we are confident in our ability to meet the recycling needs of more users. [Foreign Language] [Interpreted] Thank you.

The next question comes from Michael Kim with Zacks Small-Cap Research. Please go ahead.

Great. Good morning or good evening, everyone. Maybe just to follow-up on some of your earlier comments. Just curious to get your thoughts on what you're seeing in the market for pre-owned smartphones in terms of transaction volumes. It would seem like there are tailwinds on both the supply side, with the ongoing growth in shipments of new smartphones in China, as well as on the demand side, with rising demand for used phones just given the somewhat challenging macroeconomic backdrop. So just curious to get your thoughts there.

[Foreign Language] [Interpreted] Thank you for the question. First, on the supply side. Under the national trade-in initiative, although our main category of mobile phones has not yet directly benefited from the subsidy policies, our cross-category trade-in capabilities have enabled us to better capture consumer-end recycling sources. [Foreign Language] [Interpreted] As mentioned in previous earnings calls, we have industry-leading supply chain capabilities, including our self-developed compliant refurbishment processes that enhance pre-owned product quality and boost sales. This year, the coverage rate of compliant refurbishment in our 1P business has grown from single digits to meaningful double digits preliminarily. We are more effective at identifying products suitable for reconditioning, which has resulted in sustained revenue growth from refurbished products on both a quarterly and annual basis. On one hand, through our PJT marketplace, we are meeting the needs of more retailers. On the other hand, we leverage our self-operated AHS Select retail channels to directly serve consumers seeking quality-assured pre-owned smartphones. [Foreign Language] [Interpreted] On retail distribution, our 1P-to-consumer revenue grew by 120% year-over-year. Within this segment, revenue from AHS offline stores and official websites increased by over 300% year-on-year. We believe that cost-effective purchasing options are gaining increasing acceptance, especially from prudent consumers in the mass market. We continue our efforts to advance our retail brands, channels, and capabilities. Okay. Thank you.

Great. Thanks for taking my question.

This concludes the question-and-answer session. I'd 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 IR website shortly, followed by a transcript when ready. If you have any additional questions, please feel free to reach 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.