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Operator: Good morning and good evening ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.’s first quarter 2025 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.

Jeremy Ji: Thank you. Hello everyone and welcome to ATRenew’s first quarter 2025 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 2025 financial results were released earlier today. The earnings press release and investor slides accompanying this call are now 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 on our quarterly performance and business strategy, followed by Rex who will address the financial highlights. Both Kerry and Rex will participate during the Q&A session.

Please note our Safe Harbor statements. Some of the information you will hear during our discussions 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 ATRenew does not take any obligation to update 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.

Now I’d like to turn the call over to Kerry for the business and strategy updates.

Kerry Chen: [Chinese spoken] [translated] Hello everyone and thank you for joining ATRenew’s first quarter 2025 earnings conference call. We are excited to share the updates of our performance and business development and to address your questions about the company’s recent progress. Firstly in terms of operating results, total net revenues for the first quarter once again exceeded the high end of our guidance range, including 27.5% year-over-year to RMB 4,653.5 million on the profitability guide. Our non-GAAP operating income increased by 39.5% year-over-year to over RMB 110 million. Non-GAAP operating margin reached 2.4%, indicating healthy progress compared to the first quarter of last year. The strong and stable growth of total revenue was primarily driven by the accelerated growth of our 1P business.

We continue to invest in our 1P business and recycling fulfillment capabilities, in-house supply access, and strengthen AHS Recycle brand recognition among consumers to further improve the penetration of our 1P2C retail sales in our sales mix. Let me provide more color for the three key drivers of the 1P business. Firstly, in the first quarter 1P business revenue grew by 28.8% year-over-year, excluding the high base impact from Apple’s official trade-in program and overseas business, as mentioned during the fourth quarter earnings call. Product revenue in the first quarter increased by over 50% year-over-year, exceeding our expectations. In terms of trends, supported by the national subsidies for smartphones and digital products, as well as increased demand for user upgrades in the scenario of our strategic partner, JD.com’s platform, our C2B consumer electronics recycling value grew by over 50% year-over-year.

We are committed to advancing strategies on direct engagement with consumers at the front of recycling and retailing. On the capability side, we continue to enhance offline fulfillment capabilities, achieving a net addition of 458 AHS stores year-on-year by the end of March 2025 and broadening our door-to-door fulfillment coverage with more prompt service. The effort improved multiple metrics, indicating C2B recycling customer satisfaction and ensures a high quality experience for trade-in users while on national subsidies. In terms of our strategic partnership with JD.com, we have strengthened the long term closed development supply chain, delivering best-in-class user experience and efficient fulfillment. By optimizing the trading process, we’ve reduced barriers to national subsidies, enabling customers to trade in used devices for new ones in a better and cheaper way.

This not only stimulates demand but also improves supply of high quality pre-owned consumer electronics to boost recycling penetration. As a result, the growth of the trade-in segment continues to outpace. Looking ahead, we will continue to enhance our trade-in supply chain and services to expand our market share in the pre-owned consumer electronics industry. At the same time, we have strengthened AHS Recycle’s brand presence through new media channels with creative marketing and influencer partnerships, encouraging users to experience AHS Recycle’s wide range of recycling services and accelerating the growth of our recycling channel. We have launched the revised environmental protection initiative [indiscernible] AHS Recycle brand and fully integrated it with our existing initiatives.

This encourages more consumer brands to collaborate with us, enhancing user recognition of AHS Recycle’s value proposition and increasing engagement with our services. In April while celebrating Earth Day, we collaborated with 12 leading domestic consumer brands to promote initiatives focused on recycling and the circular economy through joint campaigns across online and offline channels. By continuously leveraging our mature end-to-end supply chain, we enhanced our direct-to-consumer retail operations and the 1P business. In the first quarter, 1P2C revenue grew by 73.5% year-over-year. Retail revenue accounted for 33% of 1P revenue, representing an upward trend. Backed by our refurbishment capabilities, we have seen the pilot program of on-demand refurbishment effectively leverage retail capabilities, creating strong synergies with our in-house compliant refurbishment operations.

This approach allows us to offer competitively priced, quality assured 1P refurbished products to users across Paipai, AHS [indiscernible] and other retail partner channels. As a result, JMV has shown a healthy upward trend quarter-over-quarter. Additionally, the retail capability of AHS Recycle’s official store network continues to expand with revenue growing by over 160% year-over-year. This amplified our product accessibility to consumers. Looking specifically at the Apple official trade-in business, as mentioned in previous earnings calls, revenue declined year-over-year in the first quarter due to the high base driven by early stage pricing strategies; however, benefiting from our management capabilities and operational efficiencies, the margin in this segment improved significantly.

For overseas revenues as we adjusted our business scale, there was a notable improvement in margin as well. Regarding our marketplace businesses, we’ve seen a marked rise in trade-in and service acceptance among both online and offline users, alongside positive shifts in merchant demand. In response, we have enhanced our B2B, B2C and [indiscernible] services to deliver best-in-class user experience, thereby boosting user loyalty. We have strengthened our industry capabilities as [indiscernible] infrastructure and enhanced services for merchants. As of the end of the first quarter, the number of registered merchants in PJT exceeded one million with a double-digit year-over-year increase in active trade-in merchants. The proportion of higher fee OPT services, i.e. shipping quality inspection services grew, raising PJT Marketplace’s take rate for secondhand consumer electronics transactions by 24 basis points.

This reflects PJT’s growing nationwide prominence as an essential infrastructure within the industry and as a leading exchange for secondhand electronics products. PJT is pioneering the innovation of secondhand sales models by expanding diverse online and offline sales channels for merchants. In March, we launched our first offline flagship store in Shenzhen’s Huaqiangbei, driving transparency in the pre-owned consumer electronics industry. The 1,200 square meter store displays nearly 10,000 secondhand phones that have undergone professional inspection. The flagship store operates under a warehouse-to-retail model, seamlessly integrating storage and sales functions. By offering all-in-one browse [indiscernible] purchase experience, it significantly reduces the traditional three to five days of restocking cycles, helping merchants reduce inventory costs and minimize logistic delays.

Onsite procurement also reduces after-sales disputes. We will continue to empower more industry merchants, opening up our local and national merchant resources to enrich the offline product selection. In addition, we recently began piloting compact authentication warehouses within our self-operated facility to streamline the quality inspection process for merchants. These compact warehouses located closer to major trading hubs allow us to operate at lower cost while offering more convenient and accessible services to merchants. At the same time, we are exploring collaborations with influencers on live-streaming platforms. We opened our 1P and 3P inventory and supply chain under PJT Marketplace to those influencers, which enables them to help users find high quality and cost effective devices, creating the specialty buyer model and enhancing the service loop between PJT and consumers.

Moving forward, we will open up more platform capabilities to merchants to boost quality product sales and promote distribution capabilities and compliant growth of pre-owned consumer electronics across regional centers. As part of the ongoing transformation of the Paipai consignment business, we are focused on better serving small merchants in the secondhand industry. This includes expanding merchants to increase the variety and volume of available products, strengthening backend systems to include greater accuracy and pricing in the overall merchant experience while driving higher product turnover. In terms of scale, sales across all categories in the Paipai consignment business grew by 2.2 times year-over-year in the first quarter. Looking ahead, we plan to further integrate consignment products into more of our self-operated distribution channels, providing small and medium-sized merchants with broader access to retail opportunities.

Throughout the development of multi-category recycling services, both broad transaction value and revenue nearly tripled year-over-year in the first quarter. Gold recycling saw faster growth while the recycling service fee for luxury goods increased slightly. As a result of these competing factors, the overall multi-category recycling take rate remained stable year-over-year. In terms of user experience, we have continued to optimize our SOPs and internal capabilities across multiple areas, including pre-recycling consultation, pricing and delivery. As a result, overall customer satisfaction and user experience have improved meaningfully. In summary, our core businesses achieved faster than expected growth in the first quarter of this year.

We see growth opportunities arising from national subsidies by providing a best-in-class trade-in experience. As we enter the second quarter, we are confident in further strengthening our fulfillment capabilities and brand influence. This will enhance users’ awareness of trade-in and recycling, enabling us to seize the industry growth opportunities. In the long run as user recognition of recycling and secondhand products continues to rise, the industry is on a positive growth trajectory. With our long term and steadfast scenario plus supply chain strategy, we are committed to obtain growth, more user mind share, enhancing user experience ensuring the efficient circulation for secondhand products and creating greater value. Now I’d like to turn the call over to our CFO, Rex for a financial update.

Rex Chen: [Chinese spoken] [translated] Hello everyone. We are pleased to report strong financial performance in the first quarter of 2025, driven by the national subsidy policies, our enhanced fulfillment capabilities and expanded retail network. Total revenue in the first quarter once again exceeded the high end of our guidance, increasing by 27.5% to over RMB 4,650 million, and adjusted operating income increased by 39.5% to over RMB 110 million. 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. In the first quarter, the growth of total revenues was primarily driven by sustained growth in our net product revenues.

Net product revenues increased by 28.8% to RMB 4,260 million, primarily due to an increase in the sales of pre-owned consumer electronics through our online channels. Net service revenues were RMB 390 million, representing an increase of 14.2%. The increase was primarily due to an increase in the service revenue generated from multi-category recycling business and PJT Marketplace. The growth in service revenue went along with the upward trend in our marketplace’s overall gross transaction value, delivering an overall marketplace take rate of 5.25% in the first quarter of 2025. During the quarter, our multi-category recycling business contributed over RMB 50 million of revenue, accounting for 13.3% of service revenues. The percentage significantly increased from 5.6% in the same period of 2024.

Now let’s discuss our operating expenses. To provide greater clarity on trends in our actual operating base expenses, we will mainly 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 on our earnings release and the corresponding Form 6-K furnished with the U.S. SEC. Merchandise costs increased by 22.7% to RMB 3,620 million, in line with the growth of product sales. Gross profit margin for our 1P business was 15.2% compared with 10.9% in the same period last year. The improvement of gross margin in our 1P business was primarily due to our C2B recycling supply chain capabilities, compliant refurbishment capabilities, and diversified retail channels.

In addition, we optimized the business strategy of Apple’s official trade-in program. Despite a decrease in business scale from the high base in the first quarter of 2024, the gross margin in 2025 achieved a significant turnaround from losses compared to the same period last year. Fulfillment expenses increased by 38.1% to RMB 430 million. Non-GAAP fulfillment expenses increased by 40.2% to RMB 430 million. Under the non-GAAP measures, the increase was primarily due to an increase in personnel costs and logistics expenses as we conducted more recycling and transaction activities compared with the same period of 2024, and an increase in operations-related expenses as we expanded our store network and operations center capacity in the first quarter of 2025.

Non-GAAP fulfillment expenses as a percentage of total revenues increased to 9.1% from 8.3%. Selling and marketing expenses increased by 30.4% to RMB 420 million. Non-GAAP selling and marketing expenses increased by 72.8% to RMB 390 million. The increase was primarily due to an increase in advertising expenses and promotional campaign-related expenses, and an increase in commission expenses in relation to channel service fees. Non-GAAP selling and marketing expenses as a percentage of total revenues increased to 8.3% from 6.1%. General and administrative expenses decreased by 14.1% to RMB 63 million. Non-GAAP G&A expenses increased by 2.2% to RMB 59 million, primarily due to an increase in personnel costs. Non-GAAP G&A expenses as a percentage of total revenue decreased to 1.3% from 1.6%.

Technology and content expenses increased by 9.6% to RMB 55 million. Non-GAAP technology and content expenses increased by 16.5% to RMB 53 million. The increase was primarily due to an increase in personnel costs. Non-GAAP technology and content expenses as a percentage of total revenues decreased to 1.1% from 1.2%. As a result, our non-GAAP operating income was RMB 110 million in the first quarter of 2025, representing an increase of 39.5% year-over-year. Non-GAAP operating profit margin was 2.4% compared to 2.2% in the first quarter of 2024. During the first quarter of 2025, we repurchased a total of approximately 0.4 million ADS for approximately US $1.2 million, and our current share repurchase program authorizes us to repurchase up to US $50 million worth of our shares including ADS through June 27, 2025.

As of March 31, 2025, we had repurchased a total of approximately 10.7 million ADS for approximately US $27.1 million under this share repurchase program. As of March 31, 2025, cash and cash equivalents, restricted cash, short term investments and funds receivable from third party payment service providers totaled RMB 2.78 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns. Now turning to the business outlook for the second quarter of 2025, we anticipate total revenues to be between RMB 4,710 million and RMB 4,801 million, representing a year-over-year increase of 24.7% to 27.4%. Please note that this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks. Operator, we are now ready to take questions.

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

Joyce Ju: [Chinese spoken] Thanks management for taking my questions, and congrats for achieving a strong quarter. My first question is on the national subsidy. How effective has the national subsidy been in promoting recycling and trade-in programs? Do you see the same growth momentum in your second-hand recycling and resale business as a result? Secondly, in the first quarter we see that both revenue and non-GAAP operating margins drove strong performance. Could you please help to explain the increase in the non-GAAP fulfillment margin and self-marketing margins? Is there any adjustment to this year’s total revenue and margin targets? Thank you.

Kerry Chen: [translated] Thank you for the questions. I will take the first and Rex will take the second. Regarding your first question, according to industry research, the shipment of new smartphones in the domestic market increased by 9% year-over-year in the first quarter, marking positive growth for the fifth consecutive quarter. Meanwhile, new consumer electronics sales on our partner platform, JD.com, had strong growth momentum. The subsidies for trade-in programs combined with our strong positioning in key recycling channels has slightly driven the accelerated growth of our 1P business. We have previously shared the view that the national subsidies will definitely boost the mobile phone recycling business. That’s why in industry-leading brand awareness, fulfillment capabilities and unique advantages in essential application scenarios in recycling, AHS Recycle is well positioned to benefit from the increasing adoption of recycling in mainstream channels.

Currently, national subsidy caps for mobile phone trade-ins is RMB 500, however our average recycling price in 1P business is approximately RMB 1,500. This creates a stronger incentive for users to not only take up the national subsidy but also leverage the trade-in service offered at AHS Recycle. Looking ahead to the medium to long term, we remain confident in China’s strong and consistent commitment to stimulating consumption. In our total transaction volume for pre-owned consumer electronics, mobile phones are the largest category, accounting for approximately 70%. The average replacement cycle for phones is about two years, and there are approximately 300 million new phones and tens of millions of new laptops and digital devices being shipped annually in China.

Currently, the penetration rate for recycling and trade-in programs remains in single digits, but in the long run we believe there is potential for domestic penetration to rise to over 20%. The main brands and ecommerce platforms we’ve collaborated with are participating in national subsidy programs with more flexible pricing strategies, therefore during the June 18 shopping festival this year, we expect to maintain business growth through trade-in services and are committed to strengthening our delivery capabilities to better serve users in recycling and trade-in.

Rex Chen: [translated] Regarding the second question, the year-on-year improvement of non-GAAP operating profit margin in the first quarter was mainly due to our pricing strategy and balanced control of the overall expense ratio. As Kerry noted, in the first quarter of 2024, Apple’s official trade-in program and our [indiscernible] business reported high revenue and losses; however, in the first quarter of 2025 as we optimized business and pricing strategies, the profit margin of the two businesses has significantly improved. Meanwhile, by leveraging our supply chain strength, the proportion of 1P2C retail revenue increased by 8% year-over-year. During the same period as our 1P business expanded rapidly, we strategically focused on self-operated stores and increased staff in fulfilment and operations functions, thus the non-GAAP fulfillment expense ratio rose by 0.9% year-over-year.

The non-GAAP selling expenses ratio has increased by 2.2% mainly due to higher promotion and advertising expenses. With rising business demand, we increased coupon-related promotion expenses this quarter; meanwhile, to raise brand awareness, we made investments aligned with business growth such as a new media platform of the AHS Recycle brand. Additionally, in strengthening recycling and trade-in collaboration with JD.com, channel commissions rose as expected. Benefiting from our refined management of general and administrative expenses as well as technology and content expenses, both non-GAAP expense ratios decreased in the first quarter. As a result, the non-GAAP operating profit margin for the first quarter increased by 0.2% year-over-year.

Looking at the full year of 2025, we remain committed to our goal of accelerating total revenue growth. We will continue to strengthen our fulfillment capacity and brand influence to support growth in trade-in volumes driven by national subsidy programs and maintain competitive pricing strategies. In the future, we aim to gradually improve our non-GAAP operating profit margin, reflecting our effective operating leverage.

Operator: Your next question comes from Xiao Wan [ph] with CICC. Please go ahead.

Xiao Wan : [Chinese spoken] Thank you for taking my question. As you mentioned earlier, your goal is to accelerate store openings this year with [indiscernible] AHS Recycle stores. Can you share details on the progress of store openings in the first quarter? Thank you.

Kerry Chen: [translated] As of March 31, 2025, there were a total of 1,886 AHS Recycle stores nationwide, including 917 self-operated stores and 969 joint operated stores. The total number of stores has increased by a net of 458 compared to the same period last year. Compared to the end of 2024 in certain areas of three high tier cities, we transitioned some of our joint operated stores to a self-operated model to effectively handle the incremental trade-in volumes from national subsidies and improved user satisfaction. This change allows us to leverage the more efficient self-managed operational capabilities to quickly boost the recycling performance of these stores. Over the same period, our two door fulfillment team expanded by 360 people year-over-year to 1,000 people, strengthening our fulfillment capabilities in more markets.

We are increasing the proportion of face-to-face services by expanding both in-store and two door services. In our NPS service, users are much more satisfied with these two face-to-face offline services featuring instant confirmation than with logistics-based pick-up. We will continue to enhance our offline fulfilment capabilities to provide a best-in-class trade-in experience. Thank you for the question.

Operator: Your next question comes from Michael Kim with Zacks Small Cap Research. Please go ahead.

Michael Kim: Great. Good morning and good evening everyone. Just one question from me, just in terms of your initiatives to enhance the AHS Recycle brand. Can you discuss how much traction you’ve seen as a result of your increased focus on marketing and advertising, and then just related to that, how should we be thinking about incremental expenses or customer acquisition costs as you continue to prioritize improving brand awareness and loyalty? Thanks.

Kerry Chen: Okay, thank you for the question. [Chinese spoken] [translated] AHS Recycle has solidified its position as a leading brand in recycling by providing best-in-class fulfillment services. We believe that high quality services and proactive response to user feedback are the cornerstones of brand reputation. Given the current low penetration rate of recycling services, we have strategically employed well planned new media campaigns to promote our services and enhance brand awareness. On the one hand, we introduced engaging content showcasing our recycling services, emphasizing AHS Recycle’s competitive pricing, security and convenience. On the other hand, by leveraging geo-targeting, we guide users to nearby AHS Recycle stores, driving orders through our mini program, official website and AHS stores.

Furthermore, we enhanced the new media presence of our joint operated stores by co-creating content that resonates with local users, thereby attracting more customers to the stores. As a result, in the first quarter the product revenue from AHS mini programs and official websites grew faster than our overall 1P business. The national subsidy has also played a role in increasing user awareness and adoption of our services. Looking ahead, we will continue to strengthen the AHS Recycle brand and refine our industry-leading recycling service offerings to capture greater market share and reinforce user protection. Thank you.

Operator: As there are no further questions at this time, I’d like to turn the conference back to management for closing remarks.

Jeremy Ji: 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.

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