Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to ATRenew Inc.’s First 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, Drew. Hello, everyone and welcome to ATRenew's first 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 analysts. The first quarter 2024 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 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 statement 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 discussion 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 first quarter 2024 earnings conference call. We are very pleased to share with you our recent developments, pivotal growth drivers and business strategies. Let's begin with some first quarter financial highlights. On the top line, our total revenues increased by 27.1% to RMB3.65 billion, the high-end of our guidance. Net product revenues from 1P business continue to be the primary growth driver, increasing by 28.5% year-over-year to RMB3.31 billion. Later on, I will elaborate on the growth drivers of our 1P business. Net service revenues were RMB341 million, marking year-over-year growth of 15.1% and continuing its double-digit growth. This was attributable to the growth of PJT and Paipai Marketplace, service revenues and multi-category restocking service revenues, which contribute to the company's growth and operating profits. In terms of profit, non-GAAP operating income for the first quarter was RMB80.2 million and our non-GAAP operating margin increased by 70 basis points year-over-year to 2.2%, representing meaningful improvements. Strategically, we remain committed to our core development principles, which focus on developing recycling scenarios and supply chain capabilities. On forcing-use products, we continue to leverage effective user conversion scenarios to secure first-hand high quality supplies through JD.com, Apple's official trading program, and our offline AHS Recycle stores. We acquire customers and build our brand through these scenarios. On the supply chain, we enhance operational efficiency through our next level automated quality inspection systems. With compliance refurbishment, we also improve product standardization and customer access to more ample choices of like new electronic products. Occupying these precise recycling scenarios fortifies the competitive edge of our 1P business. Firstly, JD.com continues to bring strong momentum to the growth of our product revenues. As JD pays greater attention to the second-hand use business, our recycling and trading business…

Okay. Hello, everyone. We are pleased to report another profitable quarter under non-GAAP measures on revenues that once again reached the top end of our guidance. Now, let's take 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. In the first quarter, total revenues increased by 27.1% to [Technical Difficulty], primarily driven by the strong growth in net product revenues. Net product revenues increased by 28.5% to RMB3,309.8 million, while net service revenues were RMB341.3 million, representing an increase of 15.1%. Growth in net product revenues was primarily driven by an increase in the recycling channel expansion and the sales of pre-owned consumer electronics through both online and offline channels, of which sales of 1P refurbished devices totaled RMB282.4 million, representing a year-on-year increase of 94.8%. The increase in service revenues was primarily due to an increase in service revenues generated from PJT Marketplace and our multi-category recycling businesses. The overall transaction value of marketplaces increased consistently with service revenues and the take rate of our marketplaces was 5.41% in the first quarter of 2024. 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. So reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form-6K furnished with the SEC. Merchandise costs increased by 30.9% to RMB2,947.8 million in line with the growth in product sales. Gross margin at the group level was 19.3% in the first quarter. Gross margin for our 1P business was 10.9%. Fulfillment expenses increased by 15.3% to RMB309.8 million, excluding share based compensation expenses, which we…

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

[Foreign Language] My first question is, we have seen this year the national and local governments have issued action plans to promote large scale replacement and trading of consumer products, which could potentially benefit growth of the AiHuiShou. Could management help us understand the potential impact on sales and revenue, especially some quantitative colors? Secondly, we note there are multiple growth drivers contributing to the company's 2024 revenue guidance. Could management walk us through the key drivers of the guidance? What's the growth assumptions behind each of the driver and such as AiHuiShou phone channel, JD.com and Apple, respectively. What it also what will be the growth outlook for the service revenue in 2024? Many thanks.

[Foreign Language] [Interpreted] Thank you for the question. We believe that our primary growth driver in 2024 will continue to be our self-operated business, which contributes approximately 90% of our total revenues. Domestically, we expect the annual growth rate of our core self-operated business to significantly outpace the broader consumer market in 2024. This is for a few reasons: First and foremost, our growth is fueled by our consumer trusted AHS stores, which are strategically located in malls within client commercial areas. We continue our growth with dozens of new self-operated store openings in 2024, while improving the services and output of our stores. Second, we are boosting our recycling penetration rate, which is currently in the low-single-digits through precise recycling scenarios integrated into new product sales on JD.com, supported by trading subsidies from the platform and brand. Third, by collaborating with a series of premium high frequency consumer brands, we bring more benefits to our users. We are upgrading the AHS Mini Program, which offers richer and more day-to-day scenarios for users to visit our stores and try our secondhand consumer electronics and multi-category recycling services. These scenarios consistently provide us with high quality product sources. In our collaboration with Apple's official trading program, we balanced the pricing mechanism and target models at the recycling end. In the full-year 2024, we anticipate the product revenue coming from Apple trading program to increase by approximately RMB1 billion. For our open platform business, we have enhanced the full service offerings for over 600,000 merchants, including professional business owners, electronic product franchisees and Mom-and-Pop Stores owners on PJT Marketplace. These enhancements include empowering our users with retail business solutions and ample sources of retail supply, which consolidates our 1P high quality secondhand products. By generating additional value for both merchants and the industry, we are driving healthy growth in service revenues. Thank you.

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

[Foreign Language] Let me translate myself. Congratulations for achieving solid growth for the Q1 results. I have three questions, the first question is what is the company's long-term profit goals and what's the path to achieve that? The second question is we saw some pressure on the overall gross profit margin and 1P gross profit margin? So how do you view the trend of the GP margin in the future? The third question is, what's your comment on the cash position? That's all my questions. Thank you.

So, [Indiscernible], I will take your questions. To answer your first question about gross profit and operating profit, first of all, we prioritized the variation of the non-GAAP operating profit margin, which has been improving over the past quarters. We are currently in the educational stage of consumer recycling [Technical Difficulty] at the recycling end are included in our merchandise costs, which affect the gross profit of our product revenues. But we will comprehensively balance our sales and marketing expenses in order to improve our operating profits. The promotion of 1P recycling affects our cost instead of expenses and its common characteristics of the second-hand recycling industry. Looking specifically at the first quarter, gross profit margin was 19.3%, an increase of 0.6% from the [fourth] (ph) quarter. [Technical Difficulty] gross profit margin was 10.9%, an increase of 0.3% from the fourth quarter. Excluding the negative impact of sales of overseas inventories, the gross profit margin of our core recycling business has increased steadily with a quarter-over-quarter increase of 1.6% in the medium to long-term, plus to improving our non-GAAP operating profit margin mainly comes from three aspects. First, compliance and refurbishment, we improved product standardization through our supply chain to gain more profits. So, gross profit margin of compliant refurbished products has remained stable above 20% for several consecutive quarters. Second, increased proportion of retail sales revenue as we have established end-to-end coverage. For online channels JD.com supports reasonable product standards, adjustments on Paipai and we [Technical Difficulty] more products with a broader price range to meet buyer's demand. For offline channels, retail sales through our stores rapidly increased by 21%, compared with the previous quarter, as more consumers from medium to low tier cities are happy to visit our stores, not only for recycling, but also for buying used…

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

Great. Good morning or good evening everyone. Thanks for taking my questions. First, just in terms of capital management, be curious if you could provide some perspective on CapEx needs going forward, particularly as it relates to -- plan to continue to upgrade your operation centers and open new offices? And then second, just kind of stepping back, what's the plan to increase shareholder return particularly as it relates to share repurchases? Thanks.

We invest in our operation capabilities instead of investing heavily into assets. So, our business is in a light asset model. Regarding our CapEx, we expect RMB100,000 per new store opening. For stores with more category recycling offerings, the CapEx per store will be a little bit higher. For joint operated stores, the CapEx are handled by our local partners. On the processing end, as part of our long-term development strategy, we continue to enhance the automated inspection and grading capabilities of our regional operation centers. The existing operation centers in Dongguan and Changzhou have incurred approximately RMB30 million each in CapEx for automation upgrades. Currently, these two operating centers support 40% of the quality inspection demand for second-hand consumer electronics nationwide. During daily operations, [Indiscernible] maintained flexibility in capacity utilization without operating at full capacity. Regarding corporate finance activities, in March, we announced a 12-month buyback plan to purchase up to $20 million of our ADSs for in consultation with our Board of Directors. In the long-run, we will also consider distributing dividends at the end of this year, depending on our profitability. We'll closely monitor efficient capital deployment into our operations and remain committed to developing our scenarios for our supply chain capabilities. We remain open to innovative investments that support our core business development and adhere to profit driven strategies as such deliver sustainable value to our shareholders and users. Thank you.

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 email us at ir.atrenew.com. Have a good day.

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