Earnings call transcript Q2 2023

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Operator

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.

Second 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 management’s prepared remarks. is event today's note, being recorded. Please

ahead, now speaker today, will and Relations Please turn of the first the Investor go company. the to over at Mr. Development call Corporate I sir. Jeremy Director Ji,

Jeremy Ji

Thank XXXX Conference Quarter ATRenew's Earnings everyone, you. Call. and Hello, to Second welcome

Speaking first to we that, Founder, will the call Chen, Kerry from Chairman he analysts. and After CEO, today our followed be CFO. is questions will by our and Rex Chen, open

earnings will release results call this were released a The convenience. accompanying our earlier The transcript your investor QX this and today. are IR financial slides website, also following at available for ir.atrenew.com. call There be

agenda, join are joining and try if highlights. Please the today's our financial to management will followed the of note Kerry it any that will thoughts quarterly business connectivity Rex and locations. Q&A address For Both performance different We'll fix session. issue. is will share by Kerry the his strategy Rex, from call there who

the Let me safe cover statements. harbor

contains measures. measures. not refer our any Also, financial press upgrade of to and Some our on information statements on statements. that you that Any today makes our ATRenew does reconciliation consist statements refer on will Please are which and call in I the assumptions of to measures discussions release, non-GAAP during of forward-looking take discussion a assumptions you'll harbor non-GAAP earnings press certain as forward-looking statements management the these release. obligations the to based to this includes of earnings of this call safe today hear GAAP

in are a mentioned all during year-over-year that basis. note this RMBand conference stated, please Finally, are on call otherwise comparisons all figures unless

for strategy call to over I'd to the now business turn and Kerry updates. like

Kerry Chen

Language] [Foreign

to Hello, ATRenew's Earnings Quarter Call. Second everyone, XXXX Conference welcome and

Language] [Foreign

in progress revenue the profitability. of notable both quarter, made we and During terms second

and of high Our representing our year-over-year surpassing reached XX.X% total RMBX,XXX million, guidance. increase a of the revenues end

marketplaces our XQ recovery, the recycling for business era, resilience demonstrating and business circular we of rapidly rebounded the our post-pandemic the a navigated As healthy model.

million, increased expanded to income X.X%. In operational margin terms adjusted value RMBXX of the secondhand profitability, our operating aims adjusted the with efficiencies. operating and optimizing to fully chain and These align improvements of enhancing industry's the further

[Foreign Language]

consistent. remains direction strategic Our

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

retail pioneers and service We brands also trading continue e-commerce to advance such their with experience cooperation scenarios. in leading like JD.com Apple to strengthen as

seek On reflecting through user have unleash the hand, experience improved goods luxury strengthen awareness we potential AHS and brand the store continue recycle. to other we recycling of to capabilities the continuous over service On and of successfully innovations. time,

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

Language] [Foreign

more from share aspects. will I Next, color three

the drivers growth core business. of key First,

And on Second, our innovative operational improvement. efficiency updates businesses. third,

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the XP pre-owned upsurge for drivers, the for trend This million XX.X% in consumption the driven by grew product growth old of to revenue and RMBX,XXX continuing reach flattened. even second by terms In in rapidly new selling was buying growth when primarily year-over-year increase quarter. products

of scaling the sales was our products. factor refurbished Another

[Foreign Language]

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

in orders business addition, saw -- growth year-on-year XXX.X% trading the revenue one-stop In as growth recycling recovered quickly channels second from JD quarter.

models Android were some to customers. addition with also products, JD popular In Apple

On having merchant navigated transaction activities posed healthy. the challenges pandemic, the selling the front, users' kept successfully by

and Revenue brand quarter, RMBXXX refurbishment in retail refurb started compliance for the secondhand retaining RERE representing the devices fulfilling in we increase refurb consumers' XXXX. XX% from April second for following million distribution, RERE relevant need a the the As of totaled sequentially, devices. first-party business notable regulatory release guidance premium further of

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market optimizing businesses. Our more first-party business platform overall online jumped The the million its XX.X% exploring efforts This as our seller second channels has at even marketplace service buyers scheduling. quarter. revenues PJT achieved strategic transaction X.XX%. and the RMBXXX basis rebounded year-on-year during healthy penetration The focus to platform shifted involves second towards advanced XX local quarter. rates in points growth to take and

As we stickiness monetization and user enhanced a result, capability.

in In POP expansion both JD and business price scale its terms marketplace, strategy. the and of concurrent profitability fostered flow pipeline

We chain continue businesses support to small diversifying owners, to more premium business supply categories. product and provide

users stores. BXC and of the the capacity the the upgrade operation business of out In second new large half model we business based on will XXXX, and of a trust carry

for ensure to threshold goods, participation product we the inspection. lowering quality warehousing will merchants through experience buyers' and While supply quality

[Foreign Language]

on As supply operating widened a efficiency margin we chain for operational and comprehensive improvement, efficiency. more more our operational advanced automated

reduced XX% To fulfillment centers second our total center-related China. a expenses compared of year-on-year, break Eastern logistics operation percentage optimization to, it of non-GAAP expenses the points percentage scale expenses station were XX% revenues the period two, And errors inspection in expenses. cost with down X.X and network decreased China use facilities one, respectively. automated and same as and of and the down, operation effects in the the During was related by quarter, X.X%, saved XXXX. following and South The of attributable operations

savings in logistics two credited related In addition, expenses in factors. we the

better with deepened pre-owned shipping tailor-made for JD transactions. relationship For the good out one, solutions Logistics, it's for

leverage decision-making solutions. regional This expenses. algorithms supply capacity, chain better match other logistics is we logistics warehousing our our with the The centers orders allocation overall operational and eases and to operation

Language] [Foreign

One thing. more

XX, retail becoming service On officially second place via of into to conducts in addition the prices. or Apple flagship online to devices offline AHS provide provider innovations. we core Mainland upgrade ATI China chain businesses, receipt, service supply Upon Apple to growth for according recycling of organic integrated engines support trading erasure June In we the Users growth the AHS and external market. inspections. We allocation system, China's trading used selection cultivating through our of Docs program. transferred XX orders are iPhone A and mechanisms will the stores. data be and can Apple iPhone quality and any

and completed system we experience accumulated through the We more debut. have iPhone accept and learn-out testing, new when progress deployment some

[Foreign Language]

scale. the category of recycling, and new terms service continue to capability In GMV

photography by XXX% XX% goods volumes video this compared first recycling increased and transaction the and quarter, gold GMV rapidly million. with exceeded excluding equipment, nearly RMBXXX these, luxury During quarter, and respectively. Among

and polished second-tier with include capabilities. luxury store our also competitive in quality stores These We goods iconic quotations, inspection AHS on-site customers. shortened new cities service and waiting for opening pricing period first

supported existing stores, In AHS recycling number standardized orders. IT multi-category services by a For second provide of the quarter, XXX we agent multi-category larger systems. stores fulfilled recycling

we branding, such Winter main additional circular Tencent and participation recycle model in brands Charity investments AHS recycle CapitaLand, Freshippo new brands. cooperated Cotton of advocated our brand, and with consumption On has AHS as the made Times, wider of Line, consumer center. with

with synergies consumer great brands to recycling We will importance attach form mentality. the to

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ESG greenhouse gas we consecutive June ESG efforts. to noteworthy on for On XXXX Finally, some emissions three our our released years. disclosing XX, particularly report, is updates commitment our

greenhouse downside continuously we period, three-year gas emission the intensity. During

system quality the enhanced to industry certification provided strengthening XXXX front, reporting On We along chain. the value the have XX,XXX social our period. ISO we training control obtaining merchants, corporation during

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

[Foreign Language]

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

Rex Chen

Hello, everyone.

to quarter. profitable pleased another are report We

top that of on our As guidance. operating we the generated record GAAP end beat a new on income revenues

our which point of was industry-leading of the use XX.X%. AI algorithms non-GAAP quality and optimized fulfilled continuously in quarter margin costs. inspection fulfillment The our enhance recover continued the data low fourth a One of our of key gross systems, It continued XXXX. drivers was to our to from big profitability

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

by XX.X% XX.X%. revenues the total increased quarter, revenues an to while service net representing mainly revenues. by In in Net second by million million, driven growth million, of increase RMBXXXX.X RMBXXXX.X product RMBXXX product increased to was revenues XX.X% net

Growth electronics, including COVID-XX grew was X.XX% consumer of product primarily X.XX%. revenues commission sales the an was revenues the in and the the pandemics overall net from driven to prolonged refurbished which RMBXXX the in sales by devices. primarily to our increase million revitalizing an in marketplaces of increase service from rate, business of in due increase The

actual greater turning to clarity on the our base to expenses trends operating provide expenses. operating in our Next

The the SEC. available earnings GAAP reconciliations in Form which expenses, results operating non-GAAP the our our discuss non-GAAP also furnished results and operations. better management in how is will the with of and X-K are reflect release our corresponding We of

XX.X% The RMBXXX.X for increased second growth by decreased our Merchandise by expenses business to in million. the Gross the in line was the in margin sales XP XX.X%. to quarter. group at Gross revenues. costs level margin product was with Fulfillment X.X% increase million. RMBXXXX.X XX.X% was

Excluding share-based compensation expenses, as SBC refer here. from to which we will

our measures, optimizing decrease increase in was operating X.X% operations networks, by center-related an offset the but expenses recycling to developed our the with Under logistics as and by we million. Non-GAAP to expenses personnel store the activities was of fulfillment as same costs kept primarily non-GAAP RMBXXX.X XXXX. expenses decreased the due in and station decrease compared period partially

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

X.X% by same G&A revenues period in marketing Non-GAAP as from a the XX.X% RMBXX.X increased to year. and to the last of percentage million. X.X% selling total expenses decreased expenses

percentage expenses expenses, RMBXX.X as of year fees. SBC partially increase and due to professional by increased a relating credit second, XX.X% an increasing expenses revenues in ago. an services increase X.X%, Non-GAAP offset total a was primarily a loss consulting G&A expected was the same costs. The million, credit decrease to by to, personnel first, in as non-GAAP G&A Excluding risk,

content excluding expenses, the and content technology of to relation X.X% assets, and RMBXX expenses decreased to decreased to last as from expenses technological personnel non-GAAP year. costs technology period to and company's in the total a X.X% expenses platforms platform same revenues of to as was content and by SBC in and XX.X% million. due in Technology decrease intangible This non-GAAP XX.X% million, partially by technology expenses decreased amortization RMBXX.X matured, percentage the

income of As a operating XXXX. the in result, our second non-GAAP quarter RMBXX was million

operating X.X%, Non-GAAP margin new a profit was marketing high. record

X% So non-GAAP year. same margin the was operating in negative last period

XX, restricted XXXX, third-party cash billion. providers from equivalents, and As investments receivable of short-term cash, funds totaled cash June payment RMBX.X and service

a sufficient safeguards on outlook. Our sustainable cash hand growth

for XXXX, market million $X.X consideration During the ADSs in repurchased a of over second total the cash quarter X.X we million. of

June total XX.X As XXXX, under of $XX.X approximately had repurchase repurchased million a ADSs of we our XX, share million for program.

Now turning outlook. to

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

Operator

comes question first the Tang Goldman And Instructions] Weiting Sachs. from with [Operator

Weiting Tang

Language] [Foreign

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

Kerry Chen

Language] [Foreign

Thank you for the question.

providing to services that chain official pleased trade-in Apple website and official to become China, in recycling Mainland XX flagship China's stores. Apple's have are we We second partner supply announce

as on unparalleled security Our experience vision of cost delivering prioritizing user well of data economic a is products both and enhancing as the privacy We closely Apple's. devices. reducing decision-making and and operating with user the share and aligned cost recycling, accessibility, focus service

[Foreign Language]

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

Language] [Foreign

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

Language] [Foreign

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

[Foreign Language]

question. Thank the you for

Operator

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

Joyce Ju

[Foreign Language]

has We profit. a team its of business, to of enhancing for like, company's its quarter this for revenue have management more the business. understand provide company couple second help a gross potential, like the business percentage quite seen made we insight like the help can the in quarters contribution Thanks. a XP what to new -- us positive have seen performance like into XP the row refurbishment contribute Could the this actually that our to growth example, in of can

Kerry Chen

[Foreign Language]

our products continuously labeled have year, RERE value industry in refurb the Since chain. our improved April last launch

regional from the capabilities second Wuhan, Operations Changzhou, Center major Dongguan During markets. operation China to and Tianjin we replicated in with centers the quarter, capacity South Chengdu value-added covering

categories, high-quality tablets, recondition demand cetera, smart watches, merchants. from including for consumers et and both products also product We meeting laptops, broader earphones, the

Language] [Foreign

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

[Foreign Language]

maintenance from cooperation enhancing official further the with obtained of brand at authorization Huawei our manufacturers. July, end We

will believe RERE label with XP the of to to promote we continue healthy services forward, collaboration can associations the value-added of XX% more. and proportion and chain. In Looking long revenue brands strengthen even to run, increased industrial closer phone compliance the and industrial product we that development in with be private the refurb

[Foreign Language]

Thank you.

Operator

[Operator [indiscernible]. comes Instructions] And the next question from Please go ahead.

Your line is live.

Unidentified Analyst

Language] [Foreign

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

Rex Chen

take Okay. Thank will question. I through for the you you this.

products XP the whose gross margin earlier. Our non-GAAP in to to full-year refurbed due discussed the products improved operating we second at X.X% was margin execution Credit BXC and XP quarter, our X% adding margin our total anticipate automated regular surpassing to RERE the and refurbed improving technologies. RERE of was RMBXXX This efficiencies attributable gross by operational gross We XP million, efficiency operational effective XXXX. was sales of X.X% gross mainly products storage towards gradually in target, margin set smart management in and exceeds testing margin basis improvements points.

optimize stations. city data the to with condense small operation level operation help algorithms of the We and centers number the order of allocation

fees, our cut fees significantly. expenses related measure automated logistic service were the As losses decreased result, to as to our we down inspection upgrade a and system packaging inspection

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

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

continues However, growth this year. our business exhibit to healthy for platform

exceed growth maintaining We momentum the expect over experiencing half product second are of a growth now XX%. to adjustments strategic businesses, renewed will following of Thank revenue X% that our our the we We platforms pipeline XP you. rate of overall our the structure, in this of year. that revenue to year-over-year consignment in sales revenue dominate service anticipate continue

Operator

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

Jeremy Ji

again today's be our for website all of ready. a replay will us. on transcript you shortly, joining Thank available followed A by call

you If us feel please free at good to have questions, any a ir@atrenew.com. day. e-mail additional Have

Kerry Chen

you. Thank

ATRenew (RERE) 23 Aug 232023 Q2 Earnings call transcript