Q1 2022 ATRenew Inc Earnings Call
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Yeah.
Good morning, and good evening, ladies and gentlemen, thank you for standing by and welcome to that Renews incorporated first quarter 2022 earnings conference call.
At this time, all participants are in listen only mode.
The whole thing the question I answered I shouldn't have to remain a bunch of prepared remarks. Please.
Please note that this event is being recorded.
I would like to turn the call over to the worst weeks of day.
Jeremy <unk> director of corporate development and Investor Relations of the company. Please go ahead Sir.
Thank you.
Hello, everyone and welcome to <unk> first quarter 2022 earnings conference call.
<unk> closed today, it's Kerr Chen our founder Chairman and CEO and he'll be followed by Rex Chen our CFO after that we'll open the call to questions from analysts.
Our first quarter 2022 actual results were released earlier today.
The earnings release and in Western slides accompanying this call are available on our IR website.
I'll talk a duck call.
You'll also be a transcript following this call for your convenience.
For today's agenda Cary will share his thoughts on our quarterly performance and business strategy.
Hello Barak.
Dress the financial highlights most carry and racks will join the Q&A session.
Please know that Shanghai is under lockdown.
Instruments joined today's conference call tape into lines in Shanghai.
I want to be excuse us if there is any connectivity issues during the call.
Some of the information who work here totally out of the discussion today will consist of forward looking statements.
Thank you to our Safe Harbor statement.
I think the press release.
Any forward looking statements that <unk> makes it on this call are based on assumptions as of today and that issue with you does not take any obligation to upgrade our assumptions on these statements.
Also this call includes discussions of certain non-GAAP financial measures. Please refer to our news 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.
RMB and all comparisons on a year over year basis.
I'd like to turn the call over to Kerry for business and strategy update.
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Yeah.
Hello, everyone and thank you for joining us our first quarter earnings conference call.
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In the first quarter, we realized record growth young I'm very challenging you heard off time go into highly attracted me as well on the chrome.
G M B for the first quarter increased by 51, 6% year over year to 9.38 eating RMB and the total revenue increased by 45, 7% year over year to 2.21 being a R E <unk>.
Exceeding our guidance.
In late March we faced headwinds after pandemic against this difficult backdrop and off season. After the spring Festival. We are delighted to announce that we have extended our path towards strong performance into this quarter to achieve non-GAAP operating profit. In addition, we recorded a positive cash flow from all trading.
Activity at 120 million RMB.
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As we navigate the pandemic challenges I would like to address two issues in todays earnings call first how do we respond to the transitory difficulties caused by the turn that second.
Second what is the outlook for consumer demand in the longer term and how can we see as opportunities in the post pandemic circular economy.
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On the first issue regarding the pandemic our reaction there are three characteristics of our basement. We tried throughout many of our audience today are familiar with.
Our online business constitutes a large truck washout of August .
Well it typically P. J T N type and market places are both online training platform and therefore experienced a limited impact from offline locked up.
H S recycle the old characterized by offline tour also received a large proportion of it on their phone line.
The first quarter has an example, 58 per cent off recycling Honduras were placed online through J D. H has recycled and mini program.
Mi hold a FERC order all are fulfilled through our offline through our country. The Ot at 14, 5% a total G&A in the first quarter.
Second our offline stores are located throughout China.
A result of our self operating at close to one of the operators stretchy extra stores have expand it throughout the country with locations in 214 cities nationwide.
Therefore temporary original Lockdowns will not cause operational interruptions on the group level.
Third all Krishna facilities are decentralized and function collaboratively in.
In addition, two hours extrusion operation centers, we have rolled out 116th operation stations throughout the country by the end of March 2022.
Nursing homes, as well, finishing off our business and allows us to secure a source its all supply and improves our ability to provide supply to merchant as convenient locations.
Our major operating centers and see the level of operation station function collaborative thing too short supply to leave more products and allocate infection with a high degree of efficiency and this helped us mitigate the impact of lockdown and logistics interruption at all our operations.
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The regional Lockdowns in Shanghai since mid March has dropped all of our business growth and its adverse impact extended into the second quarter in the near term when quantifying the impact we anticipate such hot Wayne to drag on 20% to 25% of our overall revenue in the second quarter.
Have are taking a holistic view.
And then it will not fundamentally in parallel.
As to the resilience of our business model as I mentioned earlier.
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Furthermore, we responded quickly to the COVID-19 resurgence or measures, including introducing a work from home policies for employees in Shanghai and leveraged a remote remote working tools to ensure connectivity. We also have budgeted for operating expenses through optimizing noncore business.
We donated approximately 1 million RMB into supporting our employees and local communities by providing daily necessities and Andy Colgate supply now.
How are we going to play on consumer electronics supply chain, we provide dedicated mobile devices for PCR testing registration to young school district in Shanghai.
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Instead of being tracked by the short term volatility caused by the pandemic, we take a long term view of looking into the post pandemic World. That's why I asked the evolving separately pardon me Amit economic cycles.
I believe is that the pandemic will eventually be brought under control. However, okay. We're spending is likely to grow at a slower pace for certain peer offhand.
So it leads to significant magadan consequences for many industry.
Based on the precedent.
Japan and Europe , the secondhand economy demonstrated resilience in the face of some functions and.
Of course that has the potential to flourish and meet economic headwind.
We perceive opportunities from two angles first I'll say worse demand for cashback tend to increase and their financial pressure and they are more likely to recycle idle devices with high residual values.
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As such we remain committed to four key business strategies to seize growth opportunities in the home and then.
First we will further implement or city level service integration strategy and expand in more cities to gain broader market coverage.
Mobile phone recycling as a local insurance and needs to be close to consumers.
Currently the penetration rate is still at a very low level and has large growth potential.
We believe that our refined strategy through driving service offerings locally and the performance or ABL system, well across each city will benefit to a girl recycling penetration rates and business scale.
It seems like Raleigh, among all of the 12 22 cities that implemented the city level.
I think the equation strategy in the first quarter 16 of them exceeded the average growth rate while the majority of these six density exceed it by 30%.
The city level steroids integration model also markedly improved new customer acquisition.
By the end of the first quarter of 2022 registered merchants on P. J T marketplace surpassed 300000, representing an increase of 39% year over year.
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Second we have implemented a tiered storage system to satisfy differentiated demand for recycling the offline store network off I'm quite sure is a good demonstration of online merge offline, while our core competencies.
As of the end of March we had 1446 offline form for class 240 cities in China among.
Among these offline car park.
Nike, Inc. Our self operated stores.
25, our franchise stores and 23, our retail selection storms.
All of those who adapt to rising consumer awareness of environmental protection on demand for cashback category, although in a telephone we are operating all of our tiered storage system.
Take stores in Beijing, and Shanghai, I'm, Sorry example.
Firstly, we offer in a large time off rudloff storms that efficiently recycled phones from neighboring communities.
Or selectively transform from regular stores too.
Connick stores located in newly developed Central business District.
Oh free multi catch where recycling services, such as my own luxury goods come right.
By implementing a shared storage system and expanding service offerings, we meet customers evolving demand for recycling improve store economic returns without too much extra budgeting create further growth opportunities in any way trying to elevate the brand equity off Hff's recycle.
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Third we will add more value to the industry chain of compliance guidelines follow electronics refurbishment market off other offering.
Yeah April 2022 the first good guidelines for refurbishing play only electronic devices in China wasn't outside of the box hockey where often Jack.
Mark's a leap forward for the industry bodies to ablation combined guideline that can lead to a healthier brown as industry participants are able to I thought to either officially launched or certified third party parts, Oh, that's dealing with that.
Furthermore.
We plan to roll all combined with our management and repair services at scale for their expanding our margin along the value chain.
We expect a larger propulsion after I pay for schools to enter all compliance refurbishment before we're telling directly to consumers using their white label because other companies are close to note from the supply side to the demand that.
The guidelines are expected to lead us to a more cross her social off the preowned electronics transaction and services industry wide participants inclusion.
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As of now we launched a scoring replacement service called the iPhone lineup in P. J P marketplace and carried out the maintenance service income go up Cushing Center since mid April the two week trial program for first 4000 phone each.
Spring and a gross profit of roughly 150 army.
Besides scoring replacement we also provided other services, including battery replacement extremity of restoration and recommendation, we anticipate conducting a complaint with the condition of all 14th.
Thanks.
We anticipate conducting I'll come client recommendation of all 16 to 17000 smartphones in the first half of 'twenty to 'twenty two.
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Okay.
Finally, we will accelerate the automation process to improve efficiency and manage costs.
We are delighted that our investment in.
The automated inspection system have seen has been proven once again, we are a pioneer in realizing our alcohol may think streamline process from scratch and dance detection.
Jerry Afghani XY components inspection tool Swain verification.
On our automated operation experience in Changzhou aren't on the quite operation Center is accelerating the initiation in passing off various automation modules.
Hudson automation operating system will be put into use instruments with the estimated automation processing improvement 60 per cent compared with charge offs.
We are a true believer in supply chain capability is the key we also firmly believe efficiency ones.
Which is driven by technology and scale effects.
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Okay.
To conclude my part we responded swiftly and if they should effectively to the COVID-19 outbreak in 'twenty 'twenty, even though only calling infection search today, we have more faith in navigating through the near term challenges and I'll step fostering our clear strategic roadmap.
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See you.
And more importantly, we firmly believe that circle economy in China is away from policy interruptions and this business when it goes into I think from rising trajectory is a sustainable business.
In the mid to long term, we are committed to the clear core strategies, mainly increased market penetration rate and maintained healthy growth through a city level service integration.
Some business go through tier store management and high value of recycling.
Across categories kept her more value through a complaint with the Richmond at scale and further improve operational efficiency by accelerating the application of automation technology.
As we implement these strategies effectively we surely will be able to unlock the next wave of growth.
So I mentioned goes to the CFO Rex sorry yourself, how would you can quote.
Yeah.
With that I will hand, the call over to our CFO Iraq to go over the financials.
Thanks, Kurt and Hello, everyone.
We're very pleased to report that all was quoted revenue exceeded our previous guidance despite the macroeconomic headwinds.
I'll start by sharing some financial highlights before we go into a more detailed look at the numbers Chris notes like all amounts are in RMB and all comparisons are year over year basis, unless otherwise stated.
The first quarter oftentimes too despite the fact that we're towards the end.
Do you see that we delivered 45, 7% of revenue groups to achieve total revenues of over $2 2 billion exceeding the high end of our previous guidance range provided.
Fourth quarter earnings Conference call total <unk> grew by 51, 6% to <unk> 4 billion driven by strong growth in both product sales Jim began the online marketplace, Jimmy which were 57, 1% and 15% respectively.
This quarter.
The Commission really talk also a coffee market crazy, it's worth 4.1%, it's a group level, they're relatively stable competitive we've got talks of the first quarter.
Gross margin at the group level was 25, 7% in the first quarter gross margin for our Wuxi opinion, 14.1%, yes.
In the first quarter, we mean corium optimized cost structure competitive with the same period last year.
Lehman got procurement to expenses, selling and marketing expenses general and administrative expenses as well as taking the origin and content expenses as such we are delighted to report an operating margin of seven 2% GAAP measures.
Now, let's take a detailed look at financials.
First quarter total revenue increased by 45, 7% to two seven to 206 5 million net product revenues increased by 45, 7% to one songs by 189 million, while not necessarily revenues increased by 46% to 219.
$7 6 million grossing net product revenues were driven by continued increases in the density of our stores I would reinforce the trading collaboration with JD com.
Greater consumer mindshare.
Thanks, Richard So close I'll get off to consume ourselves through pipeline marketplace.
Growth in service revenues was primarily driven by growing transaction volumes decrease.
I did the services from our marketplaces, especially sweet, especially when it didn't never cease on P. J T marketplace in the first quarter 2022 next.
Next to me to our operating expenses to provide greater clarity on what trends you know actual operating based expenses. We will also discuss I wouldn't have got operating measure she likes.
Expenses, which better reflects how the measurement abuse holders all softball questions. So Rick concession so Catherine.
So how are available.
Ladies and the corresponding form 6K furnished at SEC.
Operating costs and expenses increased by 44, 7% to Tucson is 352 points, probably meeting and GAAP operating expenses, which exclude share based compensation expenses amortization of intangible assets, resulting from business acquisitions increased by 43% to two solid 200 switching.
One 9 million.
<unk> costs increased by 49, 7% to one selling 614 million. This is in line with the growth of our Wuxi protest Soc revenues.
Corporate expenses increased approximately two 8% to $296 2 million, excluding share based compensation expenses, which we will refer to as SBC compute all mechanical fulfillment expenses increased by 26, 2% to $285 million.
And then they've got measures the increases were primarily due to cost increases in logistic expenses and of course, you center in itself all credit to the staff related expenses, which was in line with increasing sales are prone to consumer electronics and the additional 155, so called coach at the age of stores.
Compared with the first quarter 2021, and the second an increase in personnel costs in connection with a complex growing opinion.
An example of fulfillment expenses as a percentage of total revenues was 12.8.
8% consistent that we start to have a 10 31 and a decrease of one 9% from backlog to the first quarter 'twenty one.
Selling and marketing expenses increased device.
Eight 3% to 307.
One 8 million, excluding SBC expenses and amortization of intangible assets.
That's sitting in the marketing expenses increased by 41, 2% to $206 6 million Andrew Mcgough measures. The increase was primarily due to.
Increasing sales promotion and coupon expenses.
In connection with scrubber equipment, while we increase the gossiping to promoting pipeline for 45 million year over year for context, we started oh when pietersen opinions through part time.
Quarter of 2021 and.
We launched our investments in the following quarters.
And the second thing the gross up in the GAAP selling and marketing expenses will also due to an increase in personnel cost in connection with the Companys growing things.
Selling and marketing expenses as a percentage of total revenue was nine 4% slightly lower.
My questions sent in the first quarter, sometimes you win and lighter.
Traditionally a peak season in the first quarter, we stay with such expenditures and coupons on pipeline sales promotions and our commissions to JD com.
General and admin.
It is tricky expenses increased by 53, 1% to two or two five maybe excluding SBC expenses and then got the G&A expenses decreased by <unk> <unk>.
Makes sense to $28 4 million similar to of course cutoff point that'd be one the decrease in G&A expenses sugar and improved cost efficiency.
Middle and back offices.
Picking the origin of content the expenses increased by 14 four.
Simple truth, $63 5 million, excluding SBC expenses and amortization of intangible assets.
Technology and content expenses increased by six 5% to produce the same kind of cool.
And then they've got measures the increase was primarily due to the increasing operation center and automated inspection system.
Great related expenses in connection with the Companys growing things in R&D expenses related to innovation projects.
As a result operating income was nine.
$3 9 million in the first quarter of 'twenty two.
Operating margin was seven 2% compared with negative two 2% in the same period last year.
As of March.
So the first country to cash and cash equivalents short term investments and a phone to a silver from sort of pocket payment service providers totaled two four.
Period, we're stable and sufficient cash on hand.
To sustainable business operation.
We announced that 100 million in your sort of a share repurchase program on December 10th.
101 of them management's strong confidence in the company's solid fundamentals and a growing momentum is off a much. So because we have when we purchased <unk>.
$4 7 million ideas.
The market for a total cash consideration of ton of too many of your stores now.
Now turning to ultra for second quarter of 22. The company currently expects its total revenues to be between Tucson to many to Tucson 15 meeting the highly transmissible autochrome you pose.
Some parts of the operation of our stocks in our facilities as well as a transaction activities of merchants of your time, you're trying to assess this forecast older depressed.
The company's 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.
Okay.
Thank you.
Okay.
Well now begin the question and answer session when asking the questions. We thank your question in Chinese first.
Then repeat your question in English for the convenience of everyone in the call.
The first question comes from literally of Goldman Sachs. Please go ahead.
Yeah.
I see you're kind of going back so Jeremy sounds I'm glad he consistently satisfying to see that E. T. Setting a date I should say anything take all familiar with Halcyon. Michelle you should go in there and have you seen a band of money. Yeah. I was hoping to Ashish will come in that you should be on par no problem, then counting them attached to it and say Oh Gee do change their holding your share count is actually up.
Not the iron is hot on young state each he or she should be on the tissue now she said Oh, when I get to define new shack.
Thank you management for taking my question and congratulations on the solid once you lease out okay.
Can management share with us the Cobra impact on supply chain and consumer demand across business lines, especially in Shanghai, where the headquarter is located.
And what are the key assumptions behind our second quarter guidance. So looking forward what are what are our expectations on the second half of 2022 thank you.
Yeah.
Okay.
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During the quarter the impacts of the pandemic, we're limited to several provincial capital cities, including Xi'an Chengdu Chongqing in tier one cities, such as Shanghai, and Shenzhen with a stronger impact on offline recycling business. We consider this quarters result, I've only a cross sectional view.
If the pandemic overall influence on all of our business.
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I never thought into the culture.
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Each of us are better than the disposal that triangle.
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From the perspective of our fleet to be recycling business starting in late March National Lockdown with post short term challenges for our business in Shanghai.
Comply with the zero call. It policy all our Shanghai based employees started to work from home and all offline stores in Shanghai was temporarily closed.
Although all 1400 Amtrust stores are located throughout the country. The most productive ones are in the 600 self operating stores, mainly located in the first and second tier cities, where either attack stronger recycling awareness and the unit price is high.
They are negatively affected by the locked up we had 102 stores in Shanghai, Eighty-nine, Beijing and 56 in Xinjiang, respectively. At present Xinjiang has returned to normal.
Bold measures in Beijing, and Shanghai are still continuing on that is to say in the second quarter, we ask them to make that the operational one third of south all parties doors have been affected to varying degrees.
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Chuck.
So while our Hong Kong show Faith, She told appeal, you'll choose the Egypt, so geez wouldn't but can be subject to ONEOK.
Each of them appear to be so I forgot the corn belt southern Delaware.
So all our b to B, a platform business strict pandemic control policies disrupted all lines our actions with merchant.
Although our operating center city level, all Krishna stations are geographically dispersed and can support one another during lockdown, which reduced some pressure on fulfillment, we're still facing significant difficulties in terms of operations and expanding local merchant coverage.
Vision soft consumer demand for new homes also affected the volume off the file for divorce it forced by merchant, especially for the number of cell phone other shipped out during the first quarter.
Yeah.
So we do see though that even though you would cut shellfish Oh man. She told us that a chunk of time, so that would have to pay.
So I know you hit on it.
That woman kind of shellfish pricing shelving.
<unk> got a beat in terms of the future.
It's always hung till the Pogo a lot on growing it.
Great Mojado hopefully friendship he's a woman to see if what you sort of all you don't so too soon I'm sure there'll be so a delta of about 1000 units. So is it time to sit down and you didn't even that you'll walk.
Well to be to see retail defense, although we faced headwinds, including the decline in consumer spending and risk and logistics interruptions. We are optimistic about computer Murphy at Homegoods and products.
To clarify Marshall in shoppers is during a recession. We also feel confident that in the mid to long term compliance refurbishment at scale kind of increase the proportion of off two or three high power from our service offerings that are suitable for dark to theorize. How this helps to include more talk to the industrial chain and realize the optimization I'll.
Product quality as far as profit on value added services.
Well, maybe a combo quit for sometime and see well somehow jumbos only pushes that you can wait.
Wait for the Jumbo jets about sometimes sometimes somewhat tissue.
I kind of say, yeah, we're building, but until it does that that wasn't until he talks of it youll, Amit well Indian that'd be cool.
It will come from Kimberly you'd need to see so it seemed like you mentioned.
Thank you Susan.
We have also hopeful signs off on recovery. According to the Shanghai officials, starting doing first pandemic control will be downgraded to a real level and a variety of recovery off work and life is expected.
So we are still facing challenges in the near term we are very confident in our business model, the resilience and flexibility of our supply chain and additional margin improvement from confined to refurbishment.
Yeah.
Although she is here.
Yeah.
Okay.
Thank you the next question.
Comes from George Chu of Bank of America. Please go ahead.
Hum.
Oh, Okay, Yeah, I think okay, where do you like you said she was a what is that she Idaho Guangxi woman chipsets before it actually shouldn't watching that sounds very bad if she wasn't interested in watching that doing anything you got people associate did go down.
Oh don't tell me it turned out she equally like all things that didn't get much if it hadn't been sure Cornell couldn't do what Jose I'm definitely here that of the Alpine go back is great that you found out I can't imagine why he called me and he said and I think I'm sure.
Why did you have a problem with my begging grateful that the artisan people were trying to hit that on year operation, but beyond that I can't get drawn common household there should that union. They each one again, yeah, a Caribbean that'll get you to that agenda as long as an example.
I won't translate by myself.
I would like to ask them, what how how is the progress in the first quarter of all of the activity level.
That's integration as it was.
Hum Chicken focused offset company mentioned for this year, but we are facing a new macro picture in ancient which is seeing challenging economy and also the rest of all kind that make more legs.
We will let you know like if the management of volumes do you have any change or like I guess in terms of.
So that integration strategies or on the launch of that new cellphone.
Nationwide. Thanks, a lot.
Okay.
She's a dealer while minimum wage so this is bruce.
So call it a huge influence where the tenants out there that way.
So should I be shocked.
Well not quite it's been gone through its own.
Quantum but P. Shortly you'll watch engineer she also isn't as well known quick against the Chilean government.
Neither of them moved out yet.
Gyms that union so she had multiple wisdom.
Wisdom that moved up a bit.
Equivalent you don't find me in Oh, Okay, I will translate.
Thank you, we will be even more meticulous while assessing market conditions, considering lockdown restrictions are still in place in some parts of China. The impacts created by the pandemic. Our ongoing therefore, we will increase our whole kind of phone call Madison efficiency in Portland, and healthy cash flow this year and our goal to achieve.
A positive non-GAAP marketing operating income for this year remains.
Right.
So don't you don't permit woman Kenyan begin of course put that mobile will be up I see you're making Shanghai, so down about Oh standby government deal that took place in China.
Dozens of them and get them Quintiles fourth quarter until it. So it also is a coincidence yeah. So that so you can get a single go boy you. Subsequently so that'd be a good story and they did slow down but it didn't not only about search angle. What are you sort of gel from someone that tissue quota.
In terms of store network expansion.
We're targeting the same number opening 200 to 300 news the worst of all get here with a more disciplined approach while prioritizing the opening off jointly operate eight stores.
And they'll go faster weeks times, all off Brendan recycling network nationwide sharing profit, while handling risks and I went to local partners.
Tulsa sample Sundance Sundance Holdings, so that well Gee, if you don't go up it sounds like you think about a sundry shots unquote cool pool upon to real pizza awesome results.
She was on the centrally so I didn't hear the easy to follow them and she thought it.
So that probably sometime probably I'm not sure what happened.
Although hefei Clubbed me. So you have talked with them show US Gee you saw clean water source. So it doesn't appear to be the budget.
Switching gears a seller can be summed up she said Oh, yes, so sheila couldn't go though.
Go somebody switches that goes up so does want to see to be capital, you're putting yourself in that you're going to ask about the deal, but probably goes up so it's a woman who go totally what they thought well, yeah close them, but the Super Sundowner Belga uncertainty.
Yeah.
On the third party merchants and retail and we continue to acquire new local customer. So we're thinking level service integration.
The penetration rate of the secondhand market through the rollout of interested he before among.
Among the fixed incidents where growth exceeded the nationwide average we achieved high double digit year over year growth off our Pizza League club features which all well say crumbling and she got wrong.
Growth momentum was especially strong in Chicago, where we achieved about 120 year over year, while in Germany policy to be a business and almost 200% year over year growth in Germany from future visits at.
So our benchmark so implementing the city level service integration model in terms of sourcing for fly and penetrating the local market.
You shouldn't see the move up whether it be that wouldn't be a simple using pellets a lot younger boarded up on coke FEMSA Chi it well, but they sun's out that's without bodies within the food soldiers.
So shouldn't you be upon us against what she does want doctors to sell it but it's not enough.
All right.
Figure towards the Jim O'neil Sunday, Chug with about pet Oh Tee gentry, we couldn't do it at Vinci.
The pandemic remains a challenge for us in April the recurrent natural stricter controls in many regions across China, we faced interruptions in both connecting with merchants on providing platform services on that retail hot growth temporarily slow down in those pilot cities, while we saw.
And although volumes in DAU exceeded its demonstrated higher resilience compare it with the national average.
Yeah.
So it'll feel bump yet or not quite yet, but it causes a true sort of talking to the team, but again. It was just it was okay.
Selfish seems a chance it will yourself at the European to the subject you said the T. It opens a corridor that total sheets, which L. G.
She goes on Cotai.
Assortment of Changsha issues, so that you don't cause of that jump either so.
Don't quote the cycle, so to Tokyo shoot up.
We pay more attention to our own operating efficiency.
Sales and marketing expenses without further optimize our cost.
That all spending on short term promotion, we won't pay let to the longer term by further investing in building the brand equity of a transfer of title and with acquiring greater cooking more mindshare or by providing timely and quality services to our customers.
In addition, well do well in controlling all of our back office suite in particular General and administration expenses. We have kept these at a low level for four consecutive quarters by implementing a compact my organized structure for our mid and back offices.
I'm wondering do herself itunes all cohort C triangular symbol.
Oh, Yeah, Yeah, do the Tung Chung Ching and cut almost $10. So you've got to treat other highway payment to the awesome sounds either gioia corporate wishes him well below $10 million.
When the downturn Pogo Joseph was inside Genesis.
So hopefully you can tell us what you do a lot of time achievable Ah.
T cells, but it's also on the Sudan and Dolby.
Thoughts on the debt side of it.
Would you.
So don't forget ups wouldn't be that's how you bought sushi codell pseudo heart surgeon he's.
Uh huh.
Jude just quite frankly, but some sort of contract season right.
But literally.
Hello, I thought to ask Jim to fidelity.
Macro hot wings and consumption slowdown are challenging issues to almost every industry.
Long run what we see is a huge and underserved secondhand electronics transaction farmers market.
As we mentioned earlier, we believe our core strategies of expanding the city level science integration model to increase the penetration rate using onto your in store strategy to offer differentiated experiences continuing to improve cost efficiency by investing in automated quality inspection technologies and seizing their chance.
Two pockets from the open policy when window in the electronics refurbishment market.
Okay.
Thank you. Thank you.
I guess do you have a question. Please press Star then one.
The next question comes from Jim You got the I E.
You.
International.
Please go ahead.
Uh huh.
Quentin currently Mohan what should they go up without a John question Kim.
What are you going to sue and teacher sure, but that's your attention there for I don't know.
Hi, Rodrigo.
Sure.
Syngenta hold yourself.
Okay Dorothy.
Sounds good.
Yeah.
Oh, China Asia in the Peanuts sure sharing the management mentioned that the new recycling Pottsville metric.
Are there any specific business trends for sure with that.
Is it two months.
Okay. Thank you Jim.
So I will take this question.
Of course since then he shows of course, the guidelines for electronic products with brokerage instrument, which for the first time clarified the boundary of engaging and compliance refurbishments, including the social good semester P. Equal the purpose of repairs to restore the function and Dr. Terrorists official service also the pocket service with it.
Quotes assurances can be used such as batteries and the screens of sort of pocket brands personally that's what must be strictly clear when the cycling products should be clear that mark clearly market. This pre owned dog food to our BARDA confusion.
Of course, it warranted shouldn't be included traditionally sort of pattern to the Hubei, which meant that you had a menu hold backs.
Refurbishment was mishandled by merchants as there was no relevant regulations, which is what we're worried about the potential risks and I'll put it on a small scale. Meanwhile, mobile phone Brendan and Hershey with controller support recurring components since they do not turn the corner to use also the pocket components to support.
High quality crews suitable for two C suite in the market.
Sure.
As a leading high school children you have.
Louise Cordasco Cushings.
Cautiously to avoid setting risky products.
Since it has a little hesitation in Refurbishments, which has always lacked a second ago, that's reaching Crockett.
We could do with the Carbonite supported Furbishing okay.
Our industry and the company, while merchants conducted a patented schmidt with confidence, which will help with expenses of any scale recycling and our sales were also into.
Such a opportunity in the hill okay.
Where the here too.
Trying to repair a condition with a large scale and increase the pockets reasonably purpose.
This thing out.
Sure so precise and put us in sort of cost cuts will not repeat all the published elsewhere.
We only earned across pockets in certain cities contesting and understanding our value chain lector may tendency in our bedroom I Didnt ethics recently, we conducted a pilot project project, which you verified.
By changing the screening as a battery so gross profit per unit can be increased by 15%. Excluding the cost of the component on average are always happy to be setting price all with songs 600.
The components of the coefficient can be sold on the beach, a CPAP com at Tucson, but 100 RMB. After deducting the component of the cost is of course pockets of pegging it to increase by 300 to RMB above 50% after the ducting after deducting the labor cost in the tactical piece and that's perfect.
Margin per unit is up about 6%.
But of course, our catalogs and comparing to the position it's not because she centers were counted to obtain higher gross profit in the third.
Please go ahead guy such valuable industry, where standardized refurbishment, we aim to increase the proportion of our recycled products that are suitable to see retail doing so can help us to achieve a coastal group circular economy model in the next month.
We use the products.
And photos social form users habit barrage to frac sand.
Yes.
Contact center or suitable for direct to retail you know the password that but he was asking in the future.
Baidu is you're gonna Furbishing, that's a skill we can further increase the proportion of your sourcing products.
Physical could get routed to seek retail.
So I'll have to improve the gross profit on product sales, we have just begun to get even refurbishment and set up a lot of room for growth. We shall graduating explore such as selecting some types of products to sell overseas off a component to the fisherman syncrude.
Thank you. The next question is from Bonnie Lee.
Renaissance. Please go ahead.
I'm sorry.
We're still Huntington and autonomy.
So I think I said piece of work right now what it brings you shook when you're young Prince.
So she is doing nicely.
Gotcha, and she's going to get started on that.
So you can see that you only have 20 joint T cell.
So you can't really tragic electric chemical and food.
Yeah.
Yeah.
Right.
Yeah.
Yeah.
Thank you management for taking my questions. He starts.
Yeah.
Yeah.
With me.
That's very true.
And longer term and if so how are you planning to reduce speaking.
Here.
Yeah.
Okay.
What I'll tell you it went up and down.
Well, then conduct shouldn't use tinder and the easy to sell you a cheap and you talked about the tuple tore down the shuffle Iot young when you don't see anti Yentob.
I'm going to the Union budget that the Australians are your thoughts.
The well wishes on the mango GDP, so sundar Yoshi.
Okay.
I'll take this question in the first quarter, especially since March we've seen that Oems are facing greater downward pressure on new phone shipments and the replacement cycle is also extending from about a year to more than 20 mouth now, but we do have several advantages against downside risks.
Did it also sits on the Sunday couldn't yet nothing about.
Well, yeah, well wishes on the sitcom centrally dumpy yoga teaser wound yet.
Why didn't you thought that California did what young.
She has a huge hole ginger, well, Michelle which I'll probably go to something that you would.
Yeah.
The total addressable market off the secondhand consumer electronics is huge and now we only have obtained some of it not weird posed to further expand our penetration rate is high we believe that consumers demand for instant cash back and crisis as economic growth flattish and there are opportunities call converting.
Recycling water.
Yeah.
They are well.
And then to your food and Bev I could've been done well know quezada to leave Jixi Supreme go so cheap.
Yeah, All Union Kimco, the team's done talking about women don't at all what you said, which are you talking about the system.
Somebody should object, but can go about selecting called it shouldn't you talk a lot about Tennessee incident, well below where it was all about that somebody would be Jim it shouldn't get a true follow so it shouldn't be as to what you thought it was just a one time impact that theyre going to wash out well me and my uncle didn't go eat what you buy something you're going to jump right into it couldn't call it switched outsource.
Sure.
Secondly, the key brand we serve is still growing the main model, we recycle as Apple, which accounted for 45% of the total seats will be policy to be recycling transaction volume in 'twenty or 'twenty one.
Compared with other brands I'll call has maintained a higher growth rate of new device shipment. So our recycling fundamentally it's rather than to be stable. This year. The pressure on new phone shipments is mainly from domestic brands. In this case, we work closely with JD com to provide brands with trading solutions as a bathroom promo.
Measure.
The Sunday it well make that Tulsa would you talk a little bit. So you told you. So just the way it always will be a tangential.
Who shows up here is on cheese out E. G. Cheetah culture champion a result, well be getting way cut on total numbers, so totally out of certain basins that jelutong G suite.
Didn't you it can be lumpy.
Whose otology gene editing I hardly well Michelle with population.
I was hoping Pat hopefully, where there isn't a was it a chunk of them and did so hung I'll bet you Joseph GG.
A woman yielding negligible oops inquiry, so cool that suddenly got a corridor that pulled it.
She agenda getting didn't meet woman creep who would suggest.
With that she was so cheap.
Suddenly well they'll tell you well you don't want to go she has not changed.
Sure.
So James.
You didn't give a shout out to shop or cyclical or sort of what.
He does a womans own T 70 bump outs.
Sure.
Certainly we are also trying to deploy them want to catch where recycling beyond mobile phones, such as luxury goods camera equipment and other high value products to meet customer demand for recycling.
With me Ive got to carry out multi category recycling. The most important thing is our rent dropped and there are scenarios and quality inspection capability H.
Transfer cycle has a long term accumulation of brand recognition and we believe that multi category is an extension of our recycling, Brian and tourism.
So our national stores have set a good basis for fulfillment and we do not have to bartlesville xraying muffin into handled and managed Tracy a category.
In terms of quality inspection, we aim to achieve it through self suit or collaboration with specialty retailers.
As such we trust online quotation plus offline fulfillment makes a bad combination off recycling services.
Although new from shipment flatten we remain prudently optimistic about our business outlook.
Okay.
Okay.
Thank you.
Right.
Okay.
As there are no further questions at this time I'd like to hand, the conference back over to our management team for closing remarks.
Thank you. Thank you all again for joining us a replay.
Today's call will be available on our website shortly.
If you have any additional questions. Please feel free to email us at IR day to redo Darko. Thank you.
Thank you.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.