ATRenew Inc (RERE) 2023 Q2 法說會逐字稿

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc. Second Quarter 2023 Earnings Conference Call. (Operator Instructions) 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 at the company. Please go ahead, sir.

早上好，晚上好，女士們先生們。感謝您的耐心等待，歡迎參加 ATRenew Inc. 2023 年第二季度收益電話會議。 （操作員說明）請注意，今天的活動正在錄製中。現在我將把電話轉給今天第一位發言者，該公司企業發展和投資者關係總監 Jeremy Ji 先生。請繼續，先生。

Thank you. Hello, everyone, and welcome to ATRenew's Second 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.

謝謝。大家好，歡迎參加 ATRenew 2023 年第二季度收益電話會議。今天首先發言的是我們的創始人、董事長兼首席執行官陳凱瑞 (Kerry Chen)，隨後是我們的首席財務官雷克斯·陳 (Rex Chen)。之後，我們將開放分析師提問電話。

The Q2 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.

第二季度財務業績於今天早些時候發布。本次電話會議附帶的收益發布和投資者幻燈片可在我們的投資者關係網站 ir.atrenew.com 上獲取。為了您的方便，本次通話後還會有一份文字記錄。

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 note that management are joining the call from different locations. We'll try to fix it if there is any connectivity issue.

在今天的議程中，克里將分享他對我們季度業績和業務戰略的看法，隨後雷克斯將討論財務亮點。克里和雷克斯都將參加問答環節。請注意，管理層正在從不同地點加入通話。如果存在任何連接問題，我們將嘗試修復它。

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.

讓我來介紹一下安全港聲明。您在今天的討論中將聽到的一些信息將包括前瞻性陳述，我建議您參閱收益新聞稿中的安全港聲明。管理層在本次電話會議中做出的任何前瞻性陳述均基於截至今天的假設，ATRenew 不承擔任何義務來升級我們對這些陳述的假設。此外，本次電話會議還討論了某些非公認會計準則財務措施。請參閱我們的收益新聞稿，其中包含非 GAAP 衡量標準與 GAAP 衡量標準的調節表。

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.

最後請注意，除非另有說明，本次電話會議中提到的所有數據均以人民幣為單位，所有比較均以同比為基礎。我現在想將電話轉給凱瑞，了解業務和戰略的最新情況。

[Interpreted] Hello, everyone, and welcome to ATRenew's Second Quarter 2023 Earnings Conference Call. During the second quarter, we made notable progress in terms of both revenue and profitability. Our total revenues reached RMB 2,960 million, representing a year-over-year increase of 38.1% and surpassing the high end of our guidance.

【解讀】大家好，歡迎參加ATRenew 2023年第二季度財報電話會議。第二季度，我們在收入和盈利能力方面都取得了顯著進步。總收入達到人民幣29.6億元，同比增長38.1%，超過指導上限。

As we navigated the post-pandemic era, our 1Q recycling business rapidly rebounded and our marketplaces for a healthy recovery, demonstrating the resilience of the circular business model. In terms of profitability, the adjusted operating income increased to RMB 52 million, and the adjusted operating margin further expanded to 1.8%. These improvements fully aligned with our aims of enhancing the secondhand industry's value chain and optimizing operational efficiencies.

隨著我們度過後疫情時代，我們的第一季度回收業務迅速反彈，市場也健康復蘇，展現了循環商業模式的彈性。盈利能力方面，調整後營業收入增至人民幣0.52億元，調整後營業利潤率進一步擴大至1.8%。這些改進完全符合我們增強二手行業價值鍊和優化運營效率的目標。

Our strategic direction remains consistent. On the one hand, we aim to achieve steady growth in core consumer electronics businesses. Among them, the escalating 1P recycling channels, including AHS recycled stores and official website provide a better user experience, ensure firsthand sources of supply and acquire more market share.

我們的戰略方向保持一致。一方面，我們的目標是實現核心消費電子業務的穩定增長。其中，不斷升級的1P回收渠道，包括AHS回收店和官網，提供更好的用戶體驗，保證一手貨源，獲得更多市場份額。

We also continue to strengthen cooperation with e-commerce pioneers like JD.com and leading brands such as Apple to advance their trading service experience in retail scenarios. On the other hand, we seek to unleash the potential through continuous innovations. On reflecting over time, we have successfully improved user experience and store service capabilities of recycling luxury goods and continue to strengthen the brand awareness of AHS recycle.

我們還持續加強與京東等電商先鋒以及蘋果等領先品牌的合作，提升其在零售場景的交易服務體驗。另一方面，我們尋求通過不斷創新來釋放潛力。經過時間的反思，我們成功提升了奢侈品回收的用戶體驗和門店服務能力，並不斷強化AHS回收的品牌知名度。

On user traffic, we have achieved some progress recently through high-frequency household goods recycling services in communities. We guide users through AHS recycle app, WeChat mini programs and encourage more customers to visit our physical stores to sell more high residual value products.

在用戶流量上，我們最近通過社區高頻次的生活用品回收服務取得了一些進展。我們通過AHS回收應用程序、微信小程序引導用戶，並鼓勵更多客戶光臨我們的實體店銷售更多高殘值產品。

Next, I will share more color from 3FX. First, key growth drivers of the core business; second, operational efficiency improvement; and third, updates on our innovative businesses.

接下來我會分享更多來自3FX的色彩。一是核心業務的主要增長動力；第二，運營效率提升；第三，我們創新業務的最新情況。

In terms of growth drivers, 1P product revenue grew rapidly by 42.2% year-over-year to reach RMB 2,637 million in the second quarter. This increase was primarily driven by the continuing up search in the trend for selling out for new and buying pre-owned products even when consumption growth flattened. Another factor was the scaling sales of our refurbished products.

從增長動力來看，第二季度1P產品收入同比快速增長42.2%至26.37億元。這一增長主要是由於即使在消費增長趨緩的情況下，銷售新產品和購買二手產品的趨勢仍在持續上升。另一個因素是我們翻新產品的銷售規模擴大。

Specifically on the recycling front, we saw a significant year-on-year improvements in both store forms and JD recycling channels. We utilized our extensive network of 1,944 off-line stores nationwide to further develop consumer outreach and effectively improve user satisfaction with price quotations and services, of which the 1,462 standard stores play a key role in obtaining more supplies of quality devices.

具體到回收方面，我們看到無論是門店形態還是京東回收渠道都同比有了顯著的改善。我們利用全國1,944家線下門店的廣泛網絡，進一步拓展消費者觸達，有效提升用戶對價格和服務的滿意度，其中1,462家標準門店對於獲取更多優質設備發揮了關鍵作用。

In addition, recycling orders from JD channels recovered quickly as one-stop trading business saw 116.9% year-on-year growth -- revenue growth in the second quarter. In addition to Apple products, some Android models were also popular with JD customers.

此外，京東渠道回收訂單快速恢復，一站式交易業務同比增長116.9%，二季度收入增長。除了蘋果產品外，部分安卓機型也受到京東消費者的青睞。

On the selling front, having successfully navigated the challenges posed by the pandemic, merchant users' transaction activities kept healthy. As for first-party retail distribution, we started the compliance refurbishment business and the RERE refurb brand following the release of relevant regulatory guidance in April 2022. Revenue from retaining RERE refurb devices totaled RMB 170 million in the second quarter, representing a notable increase of 22% sequentially. Further fulfilling consumers' need for premium secondhand devices.

銷售方面，商戶用戶成功應對疫情挑戰，交易活躍。第一方零售分銷方面，隨著2022年4月相關監管指引發布，我們啟動了合規翻新業務和RERE翻新品牌。第二季度保留RERE翻新設備的收入為人民幣1.7億元，同比大幅增長連續22 %。進一步滿足消費者對優質二手設備的需求。

Our platform service revenues rebounded at 12.1% year-on-year to RMB 327 million in the second quarter. The overall take rates jumped 83 basis points to 5.37%. The platform business has achieved healthy growth even as our strategic focus shifted towards first-party businesses. PJT marketplace along its market penetration efforts during the second quarter. This involves exploring more local buyers and seller channels and optimizing online transaction scheduling. As a result, we enhanced user stickiness and monetization capability.

第二季度我們的平台服務收入同比反彈12.1%至人民幣3.27億元。整體採用率躍升 83 個基點至 5.37%。在戰略重心轉向第一方業務的同時，平台業務也實現了健康增長。 PJT 市場在第二季度的市場滲透努力。這涉及探索更多本地買家和賣家渠道以及優化在線交易安排。由此，我們增強了用戶粘性和變現能力。

In terms of pipeline marketplace, its pop business fostered concurrent expansion in both scale and profitability and the JD flow price strategy. We continue to provide premium supply chain support to more small business owners, diversifying businesses and product categories.

在管道市場方面，其流行業務促進了規模和盈利能力的同步擴張以及京東流量價格策略。我們繼續為更多小企業主提供優質供應鏈支持，實現業務和產品類別多元化。

In the second half of 2023, we will upgrade the B2C business model and carry out a new business based on the trust of users and the operation capacity of large stores, while lowering the participation threshold for merchants to supply goods, we will ensure product quality and buyers' experience through warehousing quality inspection.

2023年下半年，我們將升級B2C商業模式，基於用戶的信任和大賣場的運營能力開展新業務，在降低商家供貨門檻的同時，保證產品質量通過倉儲質檢來了解買家的體驗。

As for operational efficiency improvement, we widened our operating margin on a more comprehensive supply chain and more advanced automated operational efficiency. During the second quarter, non-GAAP fulfillment expenses as a percentage of total revenues was 8.8%, down 3.7 percentage points compared with the same period of 2022. To break it down, operations center-related expenses and logistics expenses decreased by 12% and 17% year-on-year, respectively.

在運營效率提升方面，我們通過更全面的供應鍊和更先進的自動化運營效率擴大了運營利潤率。第二季度，非美國通用會計準則履約費用佔總收入的比例為8.8%，較2022年同期下降3.7個百分點。具體來看，運營中心相關費用和物流費用下降了12%，同比分別增長17% 。

The cost saved in operation centers were attributable to one scale effects and reduced inspection errors following the use of our automated facilities in South China and Eastern China; and two, the optimization of the operation station network and related expenses. In addition, we credited the savings in logistics related expenses in 2 factors: for one, it's the deepened relationship with JD Logistics, shipping out solutions for better tailor-made for pre-owned good transactions. The other is we leverage supply chain algorithms to better match orders with our regional operation centers capacity, warehousing allocation and logistics solutions. This eases our operational decision-making and the overall logistics expenses.

運營中心節省的成本歸因於我們在華南和華東地區使用自動化設施後的規模效應和檢查錯誤的減少；二是運營站網絡及相關費用的優化。此外，我們將物流相關費用的節省歸功於兩個因素：一是與京東物流的關係加深，為二手商品交易提供了更好的定制解決方案。另一個是我們利用供應鏈算法更好地將訂單與我們的區域運營中心的產能、倉儲分配和物流解決方案相匹配。這減輕了我們的運營決策和整體物流費用。

One more thing. In addition to the organic growth of our core businesses, we are cultivating external growth engines through innovations. On June 30, we officially integrated into Apple China's online and offline retail system, becoming the second Apple trading service provider in the Mainland China market. We provide supply chain support for IPO trading and iPhone upgrade program. Users can place ATI service orders via Apple Docs or any of the 45 flagship stores. A selection of used devices will be transferred to AHS according to allocation mechanisms and recycling prices. Upon receipt, AHS conducts data erasure and quality inspections. We have completed system deployment and accumulated some experience through testing, and we accept more progress when the new iPhone (inaudible).

還有一件事。除了核心業務的有機增長外，我們還通過創新培育外部增長引擎。 6月30日，正式融入蘋果中國線上線下零售體系，成為中國大陸市場第二家蘋果交易服務商。我們為IPO交易和iPhone升級計劃提供供應鏈支持。用戶可以通過 Apple Docs 或任意 45 家旗艦店下達 ATI 服務訂單。部分廢舊設備將根據分配機制和回收價格轉移至 AHS。收到後，AHS 會進行數據擦除和質量檢查。我們已經完成了系統部署，並通過測試積累了一些經驗，當新iPhone出現時我們接受更多的進展（聽不清）。

In terms of the new category recycling, GMV and service capability continue to scale. During the quarter, GMV excluding photography and video equipment, rapidly exceeded RMB 200 million. Among these, luxury goods and gold recycling transaction volumes increased by 60% and nearly 100% compared with this first quarter, respectively. We also polished our store service capabilities. These include opening new AHS iconic stores in first- and second-tier cities with competitive pricing quotations, on-site luxury goods quality inspection and shortened waiting period for customers. For a larger number of existing agent stores, we provide standardized multi-category recycling services supported by IT systems.

新品類回收方面，GMV和服務能力持續規模化。本季度，剔除攝影及視頻設備的GMV迅速突破2億元人民幣。其中，奢侈品和黃金回收交易量較一季度分別增長60%和近100%。我們還提升了門店服務能力。其中包括在一二線城市開設新的AHS標誌性商店，提供具有競爭力的報價、現場奢侈品質量檢查以及縮短顧客的等待時間。針對數量較多的現有代理店，我們提供IT系統支持的標準化多品類回收服務。

In the second quarter, 231 AHS stores fulfilled multi-category recycling orders. On branding, we made additional investments in our main brand, AHS recycle and advocated the new model of circular consumption with wider participation of consumer brands. AHS recycle has cooperated with brands such as Cotton Times, CapitaLand, Winter Line, Freshippo and Tencent Charity center. We will attach great importance to synergies with consumer brands to form the recycling mentality.

第二季度，231家AHS門店完成了多品類回收訂單。品牌方面，我們加大對主品牌AHS recycle的投入，倡導消費品牌更廣泛參與的循環消費新模式。 AHS回收已與棉花時代、凱德置地、冬線、盒馬鮮生、騰訊公益中心等品牌合作。我們將高度重視與消費品牌的協同效應，形成循環思維。

Finally, some updates on our ESG efforts. On June 20, we released our 2022 ESG report, particularly and else worthy is our commitment to disclosing greenhouse gas emissions for 3 consecutive years. During the 3-year period, we continuously downside greenhouse gas emission intensity. On the social front, we have enhanced our quality control system obtaining ISO 9001 certification during the reporting period. We provided training to 10,000 merchants, strengthening value corporation along the industry chain.

最後，介紹我們 ESG 工作的一些最新情況。 6月20日，我們發布了2022年ESG報告，特別值得一提的是我們連續3年披露溫室氣體排放量的承諾。三年來，我們不斷降低溫室氣體排放強度。在社會方面，我們加強了質量控制體系，於報告期內獲得了 ISO 9001 認證。培訓萬家商戶，強化產業鏈價值合作。

In terms of governance, the Board structure of the company has been further diversified and we have made losses in internal controls and risk management to realize robust operations in the long run.

治理方面，公司董事會架構進一步多元化，在內控和風險管理上扭虧為盈，實現了長期穩健經營。

Now I'd like to turn the call over to our CFO, Rex for financial updates.

現在我想將電話轉給我們的首席財務官雷克斯，了解最新的財務情況。

Hello, everyone. We are pleased to report another profitable quarter. As we generated a new record on GAAP operating income on revenues that be the top end of our guidance. One of the key drivers of our continued profitability was our use of inter-leading AI and big data algorithms to enhance our quality inspection systems, which continuously optimized our fulfillment costs.

大家好。我們很高興地報告又一個盈利季度。我們創造了 GAAP 營業收入的新記錄，這是我們指導的最高收入。我們持續盈利的關鍵驅動力之一是我們使用國際領先的人工智能和大數據算法來增強我們的質量檢測系統，從而不斷優化我們的履行成本。

The non-GAAP for filed gross margin was 12.7%. It continued to recover from a low point in the fourth quarter of 2022.

按非公認會計準則計算的毛利率為 12.7%。繼續從2022年第四季度的低點回升。

Now let's take a detailed look at the financials. Please note, as such, all amounts are in RMB and our comparisons on a year-over-year basis, unless otherwise stated.

現在讓我們詳細看看財務狀況。請注意，除非另有說明，所有金額均以人民幣為單位，並且我們的比較是按年計算的。

In the second quarter, total revenues increased by 38.1% to RMB 2963.7 million, driven by growth in net product revenues. Net product revenues increased by 42.2% to RMB 2636.7 million while net service revenues was RMB 327 million, representing an increase of 12.1%.

在淨產品收入增長的推動下，第二季度總收入增長38.1%至人民幣29.637億元。產品淨收入增長42.2%至人民幣26.367億元，服務淨收入為人民幣3.27億元，增長12.1%。

Growth in net product revenues was primarily driven by an increase in the sales of prolonged consumer electronics, including the sales of RMB 191 million refurbished devices. The increase in service revenues was primarily due to the revitalizing business of our marketplaces from the COVID-19 pandemics and an increase in the overall commission rate, which grow to 5.37% from 4.54%. Next turning to our operating expenses to provide greater clarity on the trends in our actual operating base expenses. We will also discuss our non-GAAP operating expenses, which better affect how the management is our results of operations. The reconciliations of GAAP and non-GAAP results are available in our earnings release and is corresponding Form 6-K furnished with the SEC.

產品淨收入的增長主要是由於長年消費電子產品銷量的增長所推動，其中包括人民幣1.91億元的翻新設備銷量。服務收入的增長主要是由於我們的市場業務因 COVID-19 大流行而復蘇，以及整體佣金率的增加（從 4.54% 增長至 5.37%）。接下來轉向我們的運營支出，以更清楚地了解我們實際運營基本支出的趨勢。我們還將討論我們的非公認會計原則運營費用，這更好地影響管理層對我們運營業績的影響。 GAAP 和非 GAAP 業績的對賬可在我們的收益報告中找到，並且是向 SEC 提供的相應表格 6-K。

Merchandise costs increased by 40.6% to RMB 2325.8 million. The increase was in line with the growth in product sales revenues. Gross margin at the group level was 21.5% in the second quarter. Gross margin for our 1P business was 11.8%. Fulfillment expenses decreased by 2.3% to RMB 268.8 million. Excluding share-based compensation expenses, which we will refer to as SBC from here. Non-GAAP fulfillment expenses decreased by 2.2% to RMB 261.8 million. Under the non-GAAP measures, the decrease was primarily due to the decrease in logistics expenses and operations center-related expenses as we kept optimizing our store and operating station networks, but was partially offset by an increase in personnel costs as our cycling activities developed compared with the same period of 2022.

商品成本增加40.6%至人民幣23.258億元。這一增長與產品銷售收入的增長一致。第二季度集團毛利率為21.5%。我們 1P 業務的毛利率為 11.8%。履行費用下降 2.3% 至人民幣 2.688 億元。不包括基於股份的補償費用，我們在此將其稱為 SBC。非公認會計準則履行費用下降 2.2% 至人民幣 2.618 億元。根據非公認會計準則衡量標準，這一下降主要是由於我們不斷優化門店和運營站網絡，導致物流費用和運營中心相關費用減少，但部分被自行車活動發展帶來的人員成本增加所抵消與2022年同期相比。

Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.8% from 12.5% in the same period last year. Selling and marketing expenses increased by 14.3% to RMB 335.3 million, excluding SBC expenses and amortization of intangible assets. Non-GAAP selling and marketing expenses increased by (inaudible) RMB 253.6 million. The increase was primarily due to first, an increase in advertising expenses and the promotional campaign related expenses; second, an increase in commission expenses in relation to channel service fees. And third, an increase in office and traveling related expenses.

非 GAAP 履行費用佔總收入的百分比從去年同期的 12.5% 下降至 8.8%。銷售及營銷費用增加14.3%至人民幣3.353億元，不包括SBC費用和無形資產攤銷。非 GAAP 銷售和營銷費用增加（聽不清）人民幣 2.536 億元。增加的主要原因是：第一，廣告費用和促銷活動相關費用增加；二是與渠道服務費相關的佣金支出增加。第三，辦公和差旅相關費用增加。

Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 8.6% from 9.2% in the same period the last year. G&A expenses increased by 27.2% to RMB 57.5 million, excluding SBC expenses, non-GAAP G&A expenses increased by 37.5% to RMB 39.6 million, primarily due to, first, an increase in expected credit loss relating to credit risk segment and increasing professional services and consulting fees. The increase was partially offset by a decrease in personnel costs.

非 GAAP 銷售和營銷費用佔總收入的百分比從去年同期的 9.2% 下降至 8.6%。 G&A 費用增長 27.2% 至人民幣 5,750 萬元，不包括 SBC 費用，非 GAAP G&A 費用增長 37.5% 至人民幣 3,960 萬元，主要由於，一是與信用風險板塊相關的預期信用損失增加以及專業服務增加和諮詢費。這一增長被人事成本的下降部分抵消。

Non-GAAP G&A expenses as a percentage of total revenues was 1.3%, the same as a year ago. Technology and content expenses decreased by 24.6% to RMB 45 million, excluding SBC expenses, and amortization of intangible assets, non-GAAP technology and content expenses decreased by 26.8% to RMB 38.8 million. This was partially due to the decrease in technological personnel costs and technology expenses in relation to platforms as the company's platform matured, non-GAAP technology and content expenses as a percentage of total revenues decreased to 1.3% from 2.5% in the same period last year. As a result, our non-GAAP operating income was RMB 52 million in the second quarter of 2023.

非 GAAP G&A 費用佔總收入的百分比為 1.3%，與去年同期相同。技術和內容費用下降 24.6% 至人民幣 4500 萬元，不包括 SBC 費用以及無形資產攤銷、非 GAAP 技術和內容費用下降 26.8% 至人民幣 3880 萬元。部分原因是隨著公司平台的成熟，與平台相關的技術人員成本和技術費用下降，非公認會計準則技術和內容費用佔總收入的比例從去年同期的2.5%下降至1.3% 。因此，2023 年第二季度我們的非 GAAP 營業收入為 5200 萬元人民幣。

Non-GAAP operating profit margin was 1.8%, marketing a new record high. So non-GAAP operating margin was negative 2% in the same period last year. As of June 30, 2023, cash and cash equivalents, restricted cash, short-term investments and funds receivable from third-party payment service providers totaled RMB 2.5 billion.

Non-GAAP營業利潤率為1.8%，創歷史新高。因此，去年同期的非 GAAP 營業利潤率為負 2%。截至2023年6月30日，現金及現金等價物、限制性現金、短期投資以及應收第三方支付服務提供商資金合計人民幣25億元。

Our sufficient cash on hand, safeguard a sustainable growth outlook. During the second quarter of 2023, we repurchased 2.3 million ADSs in the over market for a total cash consideration of USD 6.4 million. As of June 30, 2023, we had repurchased a total of 12.3 million ADSs for approximately USD 44.4 million in our share repurchase program.

我們手頭充足的現金，保障可持續增長前景。 2023年第二季度，我們在場外市場回購了230萬股美國存託憑證，總現金對價為640萬美元。截至 2023 年 6 月 30 日，我們已在股票回購計劃中以約 4440 萬美元回購了總計 1230 萬股美國存託股。

Now turning to outlook. For the third quarter of 2023, the company currently expects its total revenues to be between RMB 3150 million and RMB 3250 million. This forecast already reflects our current and preliminary views on the market and operational conditions, which are subject to change. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

現在轉向展望。 2023年第三季度，公司目前預計總收入在31.5億元人民幣至32.5億元人民幣之間。這一預測已經反映了我們對市場和運營狀況的當前和初步看法，這些看法可能會發生變化。我們今天準備好的發言到此結束。接線員，我們現在準備好回答問題。

(Operator Instructions) And the first question comes from Weiting Tang with Goldman Sachs.

（操作員說明）第一個問題來自高盛的唐偉廷。

[Interpreted] Thank you management regarding the recent launch of (inaudible) service, which supports to Apple's official retail channels in China. Can the management team provide an overview of the background of the service support and the outlook for growth and profit of this business stream in 2023?

[解讀] 感謝管理層最近推出了（聽不清）服務，該服務支持蘋果在中國的官方零售渠道。管理團隊能否概述一下服務支持的背景以及2023年該業務的增長和利潤前景？

[Interpreted] Thank you for the question. We are pleased to announce that we have become Apple's second official trading partner in Mainland China, providing recycling supply chain services to Apple China's official website and 45 flagship stores. Our vision is closely aligned with Apple's. We both share a focus on enhancing products and service accessibility, prioritizing user privacy and data security in recycling, delivering unparalleled user experience and reducing the cost of decision-making as well as the economic cost of operating devices.

[解釋]謝謝你的提問。我們很高興地宣布，我們成為蘋果在中國大陸的第二家官方貿易合作夥伴，為蘋果中國官網和45家旗艦店提供回收供應鏈服務。我們的願景與蘋果的願景緊密一致。我們都致力於增強產品和服務的可及性，在回收過程中優先考慮用戶隱私和數據安全，提供無與倫比的用戶體驗，並降低決策成本以及運營設備的經濟成本。

Specifically, Apple has 2 alternative processes for recycling in its official retail channels in China. Users can submit recycling orders for Apple Docs and sending its devices. They can also visit Apple stores, flagship stores in person, where Apple staff use specialized devices to scan, verify, erase data and pay on-site. Certain models are then handed over to us as our inventories for back-end privacy eraser and standardized quality checks before the end distribution. This business is carried out in the 1P model since we don't need to advertise to acquire customers and there is no store expense on our end. The cost structure is more simple.

具體來說，蘋果在中國的官方零售渠道有兩種替代回收流程。用戶可以提交 Apple Docs 的回收訂單並發送其設備。他們還可以親自參觀蘋果專賣店、旗艦店，蘋果工作人員使用專門的設備進行現場掃描、驗證、擦除數據和支付。然後，某些型號將移交給我們作為後端隱私擦除器的庫存，並在最終分發之前進行標準化質量檢查。這個業務是1P模式開展的，因為我們不需要做廣告獲客，也沒有店面費用。成本結構更加簡單。

We expect to escalate our tax and service capacity in the third quarter and the recycling volume to increase following the arrival of the new iPhone lineup in September and during its major shipments in the fourth quarter. With operations and margins stabilizing next year, we anticipate an annual reflecting volume of RMB 1 billion to RMB 1.5 billion from this new channel based on historical market data.

我們預計將在第三季度提高我們的稅收和服務能力，並在 9 月份新 iPhone 系列上市後以及第四季度主要出貨期間增加回收量。隨著明年運營和利潤率趨於穩定，根據歷史市場數據，我們預計這一新渠道的年度反映額將達到人民幣 10 億元至人民幣 15 億元。

In addition to the trading support license, we've recently been authorized to bid for and distribute Apples as its phones. These 2 collaborations with Apple can further enhance our access to high-quality supplies and allow us to service mainstream customers in key scenarios. These are also recognitions of our supply chain capabilities, privacy protection, compliance and corporate governance. The breakthrough in collaboration with iPhone or phone manufacturers, signify a major milestone apart from our strategic partnership with e-commerce players.

除了交易支持許可證外，我們最近還被授權競標和分銷蘋果手機。與蘋果的這兩次合作可以進一步增強我們對優質供應的獲取，使我們能夠在關鍵場景下服務主流客戶。這也是對我們供應鏈能力、隱私保護、合規和公司治理的認可。與iPhone或手機製造商合作的突破，是我們與電商戰略合作夥伴關係之外的又一個重要里程碑。

And the next question comes from Joyce Ju with Bank of America.

下一個問題來自美國銀行的 Joyce Ju。

[Interpreted] We have seen the company actually enhancing its (inaudible) for a couple of quarters in a row in the performance of the second quarter we have seen this business has made a quite positive contribution to the company's 1P gross profit. To the moment, the management team help provide more insight into the -- this like new business can help us to understand its growth potential, like, for example, like what percentage of like revenue that can contribute to our 1P business.

[解讀]我們看到公司實際上在第二季度的業績中連續幾個季度提高了（聽不清）我們看到這項業務對公司的1P毛利潤做出了相當積極的貢獻。目前，管理團隊幫助提供更多的洞察——新業務可以幫助我們了解其增長潛力，例如，類似收入的百分比可以為我們的 1P 業務做出貢獻。

[Interpreted] Since the launch in April last year, our RERE refurb labeled products have continuously improved our industry value chain. During the second quarter, we replicated the capabilities from Dongguan Operations Center in South China to Changzhou, Wuhan, Chengdu and Tianjin operation centers with value-added capacity covering major regional markets. We also recondition broader product categories, including tablets, laptops, smart watches, earphones, et cetera, meeting the demand for high-quality products from both consumers and merchants.

【解讀】自去年4月推出以來，我們的RERE翻新標籤產品不斷完善我們的行業價值鏈。第二季度，我們將華南東莞運營中心的能力複製到常州、武漢、成都、天津運營中心，增值能力覆蓋主要區域市場。我們還翻新更廣泛的產品類別，包括平板電腦、筆記本電腦、智能手錶、耳機等，滿足消費者和商家對高品質產品的需求。

During the second quarter, total sales of refurbished products exceeded RMB 190 million, accounting for 7.2% of 1P product revenues. This percentage increased by 1.6% quarter-on-quarter and 4.5% year-over-year. We believe that more of our 1P source products can go through our own facilities for reconditioning, the common quality products while bringing greater value to the industrial chain.

第二季度，翻新產品總銷售額超過1.9億元人民幣，佔1P產品收入的7.2%。這一比例環比增長 1.6%，同比增長 4.5%。我們相信，更多的1P源頭產品可以通過我們自己的設備進行翻新，成為共同優質的產品，同時為產業鏈帶來更大的價值。

We obtained official maintenance authorization from Huawei at the end of July, further enhancing our cooperation with brand manufacturers. Looking forward, we will continue to strengthen value-added services with closer collaboration with phone brands and industrial associations to promote the compliance and healthy development of the industrial chain.

7月底獲得華為官方維修授權，進一步加強與品牌廠商的合作。未來，我們將繼續加強增值服務，與手機品牌、行業協會密切合作，促進產業鏈合規健康發展。

In the long run, we believe that the proportion of private label RERE refurb in 1P product revenue can be increased to 30% and even more.

長期來看，我們認為自有品牌RERE翻新在1P產品收入中的佔比可以提升至30%甚至更多。

(Operator Instructions) And the next question comes from (inaudible).

（操作員說明）下一個問題來自（聽不清）。

Please go ahead, your line is live.

請繼續，您的線路已上線。

[Interpreted] Thank management for the sharing and congratulations on a strong quarter. Could you provide more color and breakdown regarding your profit realization and profit outlook? And how will your revenue mix evolve in the future?

[解讀] 感謝管理層的分享並祝賀季度表現強勁。您能否提供有關您的利潤實現和利潤前景的更多信息和詳細信息？您的收入組合未來將如何發展？

Okay. Thank you for the question. I will take you through this. Our non-GAAP OP margin was 1.8% in the second quarter, surpassing the 1.5% a year target, we discussed earlier. This was due to our effective execution towards improving gross margin and operational efficiency and improved 1P gross margin was mainly attributable to RERE refurbed products whose gross margin exceeds set of regular 1P B2C products by 5% basis points. We anticipate the total sales of RERE refurbed products at RMB 700 million adding our 1P gross margin gradually in 2023. Credit improvements in operational efficiencies to smart storage management and automated testing technologies.

好的。感謝你的提問。我會帶你經歷這個。我們第二季度的非 GAAP 運營利潤率為 1.8%，超過了我們之前討論過的 1.5% 的年度目標。這是由於我們在提高毛利率和運營效率方面的有效執行，而 1P 毛利率的提高主要歸功於 RERE 翻新產品，其毛利率超過常規 1P B2C 產品 5% 個基點。我們預計 2023 年 RERE 翻新產品的總銷售額將達到人民幣 7 億元，毛利率將逐步增加到 1P。運營效率的提高歸功於智能存儲管理和自動化測試技術。

We optimize order allocation to operation centers with the help of the data algorithms and condense the number of small city level operation stations. As a result, the service fees, logistic expenses and packaging fees were cut down as we upgrade our automated inspection system to measure our losses related to inspection decreased significantly.

我們藉助數據算法優化運營中心訂單分配，壓縮小城市級運營站數量。因此，隨著我們升級自動化檢測系統以衡量與檢測相關的損失，服務費、物流費用和包裝費都減少了。

Service fees, logistics expenses, packaging fees and return loss decreased by RMB 17.6 million compared to the same period in 2022, downsizing our non-GAAP fulfillment expenses as a percentage of total revenues by 3.7 percentage points.

服務費、物流費用、包裝費和退貨損失較 2022 年同期減少 1,760 萬元人民幣，使我們的非 GAAP 履行費用佔總收入的比例下降 3.7 個百分點。

Overall, we expect our non-GAAP operating margin for this year to be exceed 1.5% and we aim to achieve a basement of 1 percentage point every year. On revenue mix, we have been shifting our focus in the strategic resources towards first-party businesses since the second half of 2022 to achieve more consumable operations facing complex environment. We aim at catering to diversified user needs, enhancing the recycling experiences and enriching our quality pre-owned product listing. This transition has like to downsize the revenue mix for marketplace service revenues. However, our platform business continues to exhibit healthy growth for this year.

總體而言，我們預計今年的非 GAAP 運營利潤率將超過 1.5%，並且我們的目標是每年實現 1 個百分點的基礎。在收入結構上，我們從2022年下半年開始將戰略資源的重點轉向第一方業務，以在復雜的環境下實現更多的消費品業務。我們的目標是滿足多元化的用戶需求，增強回收體驗並豐富我們的優質二手產品清單。這種轉變可能會縮小市場服務收入的收入組合。然而，我們的平台業務今年繼續呈現健康增長。

We expect that our platforms (inaudible) exceed 5% following the strategic adjustments of our pipeline consignment businesses, we are now experiencing renewed momentum in the growth of service revenue in the second half of this year. We anticipate that 1P product sales revenue will continue to dominate our revenue structure, maintaining a year-over-year growth rate of over 30%.

我們預計，隨著管道寄售業務的戰略調整，我們的平台（聽不清）將超過5%，今年下半年我們的服務收入增長出現新動能。我們預計1P產品銷售收入將繼續在我們的收入結構中佔據主導地位，同比保持30%以上的增速。

Thank you and there are no further questions at this time. I would like to hand the conference back over to management for any closing comments.

謝謝您，目前沒有其他問題。我想將會議交還給管理層以徵求結束意見。

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

再次感謝大家加入我們。我們的網站很快就會提供今天電話會議的重播，隨後將準備好文字記錄。如果您還有任何其他問題，請隨時給我們發送電子郵件：ir.atrenew.com。祝你有美好的一天。

Thank you.

謝謝。

Thank you.

謝謝。