Q3 2022 ATRenew Inc Earnings Call
Good morning, and good evening, ladies and gentlemen, thank you for standing by and welcome to the a T renew incorporated third quarter 2022 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 would I will now turn the call over to the first speaker today, Mr. Jeremy G director of corporate development and Investor Relations of the company. Please go ahead Sir.
Thank you Hello, everyone and welcome to <unk> third quarter 2022 earnings conference call.
And for US today is Kevin Chen, our founder Chairman and CEO .
He'll be followed by Rex Chen our CFO after that we'll open the call to questions from analysts.
Our third quarter 2022 financial results were released earlier today the earnings release and in Western slides accompanying this call are available at our website.
If you were neutral com it'll also be a transcript following this call for your convenience.
For today's agenda Cary will share his thoughts about the quarterly performance and business strategy, followed by Rex will address the financial highlights those carry Iraq will join the Q&A session.
Let me cover the Safe Harbor statement some of the information you will hear during our discussion today will consist of forward looking statements and I refer you to our safe Harbor statements in the earnings press release.
Any forward looking statements that management makes on this call are based on assumptions as of today and that's H here with you does not take any obligation to upgrade all of the assumptions on these statements.
Also this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to get pictures.
Finally, please note that otherwise stated all figures mentioned during this conference call on RMB.
All comparisons are year over year basis.
I'd now like to turn the call virtual carry full business and strategy update.
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Hello, everyone and welcome to the HOA in your third quarter 2022 earnings conference call.
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Third quarter, we faced a challenging macro environment, and then that control measures remain strict and consumer demand for new phone plateaued responding to these challenges our teams proactively adjusted their operational strategies to meet consumer demand for convenient untrustworthy recycling services.
Without revenues reached the high end of the guidance range, we provided last quarter and we achieved a non-GAAP operating profit compares to a non-GAAP operating loss in the second quarter.
Like to take this opportunity to express my gratitude to our staff for their efforts and perseverance in the face of adversity.
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Let's start by taking a look at our revenues during the third quarter, we achieved growth in line with our expectations as our revenue increased 29, 2% year over year to two point 54 billion RMB revenues for our one campus that's rebounded significantly increasing by 33, 7% year over year.
This increase was driven by our steady progress in store openings and recycling operations increased revenue contribution from self operated you'll see retail products and stronger pricing power from big data analysis.
Couple of hours of service revenues as we put tighter control over our products that we're an authorized or in poor condition.
This helps the sustainable growth of our market places as a result, the overall.
Michelle right off our marketplaces, what 445% in the third quarter remained stable compared with the same period last year.
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Turning to efficiency during the quarter, we continued to increase our fulfillment efficiency by further improving our inspection process and continuing to reduce operating costs.
Our non-GAAP fulfillment expenses and selling and marketing expenses as percentages of total revenue declined to 10, 7% and nine 8% respectively.
This represents respective decreases of 290 basis points, and 63 basis points compared to the same period of last year.
These improvements reflect the effectiveness of our initiatives to continuously improve our cost structure.
Third quarter, we achieved a non-GAAP operating profit of $10 8 million RMB. This was in contrast to the loss making performance in the second quarter.
In a favorable market environment and facing virus with our monetization capability. Once again demonstrates the countercyclical nature of the circular economy.
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We also improved our inventory and cash flow management during the third quarter, we improved inventory management as our business, especially our one teaches the recycle and retail business with Howard from the adverse impact of the Covid research and the inventory turnover days were reduced to 26, marking our year on year.
Quarter over quarter improvement as at the end of the third quarter, our comprehensive cash reserves totaled $2 67 billion RMB, we obtained a cash inflow from operating activities of 101 million RMB during the third quarter, making a third consecutive quarter with positive operating cash flow.
With our balance of cash on hand, and continuous positive operating cash flow, we have sufficient resources to consolidate the main businesses and invest in the strategic development areas.
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Going forward, we keep our core strategic focus is clear and consistent well continue our commitment to the fourth focus is as we've discussed during the previous earnings conference calls.
First we will continue to promote our city level service integration model second we will continue to expand the service coverage and fulfillment capability literally off the multi category recycling offering sorry.
Third we will continue to come work more off or one P products supply to two consumer reach out through our value added capabilities, including refurbishment Luckily well further increase our operating efficiency by continuing to deploy automation technologies.
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Let's start by discussing the implementation of our city level service integration strategy, which will solidify the foundation of our business growth and further increase our penetration rate.
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During the third quarter, our city level service integration strategy continue to support a healthy growth of our core business of mobile phone and consumer electronics recycling by integrating our front end recycling capabilities between C to b and B to B offerings, we were able to better serve the highly localized marketing model also electronics.
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Complex span of control measures during the third quarter have affect at all our operations in cities that contributed a significant proportion of our business such as Shenzhen I'm trying to do however, we also saw a delightful rebound in January among 42 city clusters compared to the second quarter.
31 city clusters, Ashish G&A growth on a year over year basis, a greater number than last quarter.
In addition, 26 cities outpaced our national average and scale expansion on a yearly basis, while on a quarterly basis 20 city clusters outpaced the national average recycling penetration rate.
Of note, who joined lung phone the first two pilot cities, which we monitor through the north Georgia on cluster and North Hubei cluster, respectively are still reporting a healthy year on year growth rates and generally the number off recycling orders from our theater business increased nicely achieving bathroom year over year growth than the national average.
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On the recycling and we further deepened our strategic partnership with J D.
August we facilitated J D to upgrade is trading services to support cross category trading for cell phones computers digital devices and home appliances I'll start it off and upgrade users kind of also trade in a mix of up to six electronic products for new one J D becomes the first in the industry to support both cross category.
And multi device tradings, providing users with best in class experiences while promoting recycling.
This September we fully incorporated the trading function into the main JD app in preparation for the launch of though I felt a lot 14 lab users can enjoy the trading solution seamlessly on their product page and the foreign card or on the checkout page without time consuming and unstable pastry direction, not improving user experience when placing orders.
Leveraging <unk>, leading market share of home appliance sales and other categories in China. We aim to further promote trade and scenarios and provide more convenient trading options to consumers.
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Secondly, we will continue to amplify the brand value and service capabilities of our Iot show H S. Recycle brand. The Bowl office efforts is to expand recycling services, who will cover more high value categories.
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You might ask why won't recycle use non electronic products from consumers. We believe that age has recycle Appalachia is our unique and widely recognized brand in the recycling industry.
We have spent 11 years building a reputation for quality recycling service and gaining strong consumer awareness through our nationwide offline stores, what's more consumers. When you have many options to buy new products online and offline, but they don't have many go twice as for recycling Thursday when needed.
She has recycled has dedicated itself to being consumers go to brand for recycling electronic devices, and we aim to build our reputation for there as we embraced Marty catch where recycling going forward.
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You May wonder why we're capable of launching the smarty pants, where recycling business on one hand, we had 1800 air transport, which provide a reliable and convenient recycling destination from consumers manage and cheered store and fulfillment system. Since June we started implementing this tiered storage system by that.
A number of those located in original commercial centers as the core facilities and adding new categories services to those stores both located in local communities remain as consumer electronics turret stations.
Just core storefront, we off great branding and train our staff to accommodate both our core electronic recycling services and our new category initiative.
Having done so we began to offer recycling services corporate use products with high risk, there's real value such as luxury bags washes camera equipment God and windows wine on the other hand, we are capable of constructing inspection and distribution capabilities through collaborations with our partners we have established.
Our supply chain offering on smartphones and consumer electronics and now we're thinking it's going to be built or trying to operate their supply chains for new categories.
Luxury goods as an example, where it wants to be with a quality inspection and selling channels with M. S. T for gold and then that's why we introduced an open platform and selectively chose partners to ensure a reliable recycling twice for users.
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You May also wonder what is the differentiated experience that we could offer with module cashmere recycling why is quake online west coast based on structured data is there only need to Cynthia Creek and check on IHS recycle app through our product navigation. The traditional method requires users to take pictures by themselves for quality and spectators.
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Sirius is relative the Cougars, some time consuming and lack of standardization and another difference is that face to face transactions at physical stores I'm more convenient than traditional logistics and mailing methods, where users have a stronger sense of trials in psoriasis and the conversation conversion rates of high value products is higher.
A physical store, we reduce miscommunication off product conditions and pricing and consumers are protected from malicious arginine, which they might also encountered during online recycling.
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After months of operation our market cap to our recycling business generated an extra three three.
300000, RMB of transaction value and over 20000, RMB a profit per month for Asia. After 50 core age has soared.
Their satisfaction with the recycling experience and price quotation that has been improving.
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Our son of our users who so luxury goods came back to recycle their idle electronic devices in 30 days, 40% of those who so luxury goods have already self consumer electronics to IHS recycling in the past 12 months.
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The third strategic priority is to continue improving our value added refurbishment capabilities and further expand profit margin along the value chain.
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We continued our conversations regarding compliance and intellectual property rights protection with phone manufacturers and participated in our opinion our collection process before the people to procure to write offs and generally released guidance for compliant refurbishment in April .
The publication of the guidelines the previously unregulated electronics refurbishment industry began to standardize and thrive and came into our official regulation.
This development allowed us to upgrade the quality of supply both from one P. M from P. J T marketplace, and so aligned with our strategy to expand profit margin.
I'll start preliminary inspections on the print on mobile phones, we receive we leveraged technology to identify serious about devices for refurbishment then in compliance with regulation.
It was a fish or certified third party parts and components to repair the phones, including polishing and replacing screens and replacing batteries, we keep customers informed and provide warranties to boost consumer confidence.
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The production capacity is currently undergoing a rapid development center.
Since the second quarter, we have doubled the number of devices that are refurbished in compliance with regulations on margin compared with to be distribution.
Our operating margin contribution from value added refurbishment services. It's 4%. This is in line with our expectation.
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Going forward, we will continue to strengthen our coverage of the entire value chain. The operating margin could be further improved as we increase the efficiency in selecting suitable devices in 'twenty. Two 'twenty three we anticipate a larger service car ratio of more skus, all smartphone and including laptops and tablets into <unk>.
Our service scope, we also plan to expand refurbishment capacity from southern China to Eastern China. Our long term goal is to provide.
Stabilized high quality products directly to consumer well for clothing merchants' demand by providing them with diversified sources of supply and services well continues to develop there are you are you refer cleansing the brand and increase our profit space.
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For the fourth and final strategic focus we will continue to invest in technology to improve our automation capabilities and consequently, our overall operating efficiency since the beginning of this year, we devoted to the installation trial operation and adjustment of our second automated operation Center in China, which was.
Officially put in use and don't want it.
It has realized improvements in many aspects, including our sourcing efficiency inspection accuracy and infection efficiency, thanks to our innovative and digital rights management process and the use of ABB and men transport vehicles.
Especially in efficiency of our DIY automated operation Center is 15% higher than that of Changzhou.
We have implemented the next generation matrix 3.0, automated quality inspection system to further upgrade the precision of the lifestyle kitting capabilities and robot masters and capabilities, the accuracy and the efficiency of our quality inspection process, well further improved by 10% and 50% respectively compared to the previous journey.
<unk> the last year or two product return is expected to be reduced by 15% approximately based on these improvements to our automated quality inspection capabilities. The eight hour production capacity. After the automated operation Center exceeded 10000 units less having has the scale effect.
Our quality inspection operation and has reduced our cost of her format for order, which is necessary to consolidate our operational capabilities at a good level.
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Lastly, I want to provide an update on your Chi we received a low ESG risk rating from Morningstar sustained analytics in September this year, a testament to our ESG risk management capabilities in the online and direct marketing retail sector. This rating confirms our contributions to environmental protection carbon.
Imation disclosure sustainable product and service development data privacy and security tax compliance and other FX off responsible corporate governance. It also stands as a testament to our sustainable development capabilities.
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Congrats on the charges.
We believe that a company with strong ESG practices can contribute greater value to society and is less at risk from changes in policy and regulation.
Our responsible governance grants us more flexibility as we navigate our growing business through an uncertain macro environment I tried out that's carbon neutrality growth underway, so as carbon pitch and the circular economy begins its development in earnest. We are confident that we will create best in class recycling experiences for consumer.
And create long term value for society and for shareholders.
So I mean, it goes to the CFO Rex situations, how would you well with that I will hand, the call over to Iraq, our CFO to go over the financials.
Hello, everyone.
Can I ask you to reports of our sort of quarterly revenue.
That's the high end of our guidance, even though COVID-19 related challenges remained in the operating environment.
So these are the weeks, we leveraged our city level service integration contributor and maintained our prudent spending.
I will start by sharing some of our financial highlights before we go into a more detailed look at the numbers. Please note that all amounts are you RMB and all comparisons are year over year basis, unless otherwise stated.
Total net revenues increase the part of the nine 2% year on year to over 2.24 billion, mainly driven by the founding when she brought a sales revenue gross total <unk> grew by 14, 5% to 295 billion driven by growth in both products Soc Gen V and online marketplace Jimmy.
Please note.
So I think we will recast our reporting of Gen V. Starting from the fourth quarter of content to.
Jim has been a barometer to access our pure article finished expansion as we in kind of two rector scale expansion.
However, as we become more obsessed with providing our users with safe.
And the further cycling experience and of course, our short products will incrementally prioritize.
Over the course of our Wuxi opinions, which NV becomes less refractive off the bigger picture. We're also keen to maintain a healthy cash flow from operating activities and a positive operating margin as a part of our tactics will remove some call it related to merchants, who use us from our market places.
And the title our associates towards self sourced products, including when Peter C products at all.
Subtle refurbished which comprise.
In terms of profitability.
And as a profit making quota.
non-GAAP operating income of $10 8 million. This was primarily attributable to improved.
Cost efficiencies seen logistics and main pass onto resulted from security threats.
In the future will continue to improve cost efficiency, especially in fulfillment and the marketing.
By leveraging automated expression possibilities to further realize scale effects and accurately capture recycling in shopping scenarios.
So the quarter from the 22, who had a cup starting from operating activities of RMB 100 to one 3 million securing us so the consecutive quarter with positive operating cash flow.
Now, let's take a detailed look at the financials.
Third quarter total revenues increased 29, 2% to Tucson at 536 million net product revenues increased by 33, 7% to Tucson with $225 7 million.
Net service revenues increased by four 4% to $310 3 million.
<unk> net product revenues was primarily driven by an increase in sourcing volume and the corresponding so soft problem to consumer electronics sort of Piper marketplace.
J T marketplace and all of our channels.
So increasingly we see distribution of complying to refurbished devices also contributed to this growth in product revenues.
Grossing social revenues was primarily driven by increases in transaction volumes and improvements to the more time position capability, So Peter T market Chris.
So overall commission rate of our marketing process or for quanta.
5%, we further optimized operational attributes you are cutting down the base to merchants to use it as we'd be came more comfortable to change commission fees based on the established trusted and user stickiness.
So to neutral our operating expenses to provide the greater clarity on the trends in our actual protein based expenses. We will also discuss our non-GAAP operating expenses, which better reflects how the management view our results of operations reconciliations of GAAP and non-GAAP results.
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Merchandise costs increase the parts with its three 8% to us at $932 2 million. This was in line with the gross offers a lumpy part of social revenues gross margin at group level was punished reached one 8% and you saw the quarter gross margin for <unk> was so two 2%.
Fulfillment expenses increased to five 4% to 277 1 million.
Excluding share based compensation expenses, which we will refer to as SPC from Joe.
Fulfillment expenses increased by one 7% to 271 media and didn't have got measures.
The increase is primarily due to first an increase in personnel costs in connection with the Companys growing opinions and second an increase in technology expenses in relation to suffer gradov technologist, silver, which was partially offset by a decrease in your career center related expenses as a company optimized this is <unk>.
<unk> city level approaching stations sitting in capa fulfillment expenses as a percentage of total revenue reduced to 10, 7% from switching plus 6%.
The same periods last year.
Selling and marketing expenses increased by 14% to 348 million.
Excluding SBC.
Expenses and amortization of intangible assets, non-GAAP , selling and marketing expenses increased by 21, 4% to $214 7 million.
Under the non-GAAP measures. So the increases were primarily due to first the increase in personnel cost in connection with the Companys growing opinion.
Second an increase in marketing expenses.
Development, it's an in depth study on the marketing expenses as a percentage of total revenues decreased to nine 8% from 10, 5% mainstream share it lost a year.
G&A expenses increased by two 4% to 63 6 million.
Excluding SBC expenses.
G&A expenses increased by 76, 7% to $46 3 million, primarily due to first.
Increasing personnel costs in connection with the company's growing finished and our second an increase in professional service fees.
Gotcha G&A expenses as a percentage of total revenues slightly decreased to one 8% from one 3% compared with the same period last year.
And the origin and the content expenses decreased by two 2% to 50 on the 1 million, excluding SBC expenses and the amortization of intangible assets.
non-GAAP technology and content expenses decreased by 26% to $43 9 million and then they've got the measures to decrease was primarily due to the change in personnel cost in relation with the company's adjustment to expenses.
Research and development.
Technology and content expenses as a percentage of total revenues was one <unk>.
<unk> compared with 3% in the same period after you.
As a result, I wouldn't have got operating income was $10 8 million.
For the quarter of 22, non-GAAP operating margin was seven 4% compared with negative one 5% in the same period last year and there was again, we had a cash inflow from operating activities during this quarter, which totaled 102.
<unk> Street.
As of September searches plenty of time to cash in the Kashi equivalent short term investments in the front of the receivable from the part D payment service providers totaled two point to seventies.
Two 7 billion the sufficient cash on hand safeguards are sustainable growth offshore.
As a recap we announced our 100 million dollar share repurchase program on December 10 days.
Our cost management strong confidence in the Companys solid fundamentals and the growth momentum.
During the third quarter of sometimes too.
The repurchase.
5 million <unk> in the open market for total cash consideration of $1 5 million U S. Doris.
Now turning to outlook for the fourth quarter of 2022. So company currently expects total revenues to be between RMB, 2000, 130 million and RMB Street sounds certain media so highly transmissible.
Omnicom very marching post adverse impact on the operation of our stores and facilities as well as transaction activities of merchants in 2022, such this forecast reflects the companys current and the preliminary views on the market and operation conditions, which are subject to.
To change.
This concludes our prepared prepared remarks for today operator, we are now ready to take questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Brian Lee from Goldman Sachs. Please go ahead.
Anyhow.
You bet.
Yeah of course.
That then feed into that.
Is that why is that.
It seems like something that they can keep on following California.
California, Michigan.
Okay.
Oh Wow.
Thank you.
Oh contribution go from alcohol he said when he started.
So you shouldnt any alcohol.
Thank you Tom.
Oh, let me translate for myself.
Congratulations for another solid top line growth and my question is about the.
Each will grow strawberries and.
Under the Covid impact.
Yeah, that'd be fair consumption banking operations.
How should we look at the future of.
And also regarding the P. P. Valvoline, we see that there was some moderation in the growth rate in the future.
How much will <unk> contribute at lunch.
<unk> revenue how much of it.
<unk> contributed from the three parts.
So regarding the multi tenant we recycle.
How much contribution are all expecting.
Tom.
The categories outside.
I.
Okay. Thank you.
Okay.
Yes, you are.
Shelby that 10 million people.
Total he is on a kind of a woman. It sounds are you argue to them too.
So the issue from Cola, So you saw happen in them.
So you would say, let's go for mentoring young woman the Daniel Wolfe.
Playful has you talked quite a bit.
He said you know what the turns on total Richie chip.
She said she said months ago personal physician.
Didn't see the needle, which you go to the Cushing.
Okay. Thank you for the question. Let me answer first question first overall after being negatively affected by pandemic control measures and <unk> recycling business locations, such as Shanghai and Beijing in the second quarter, our recycling to save with our recycling business recovered to a normal growth track during the third quarter.
Notably our one P business grew beyond our expectations demonstrating the countercyclical nature of the circular economy, we are a part of.
Well, the EPA or whether it's a good question with what you're familiar so each in tune to the Franco Medina facility should assume serene.
Talking about the whole milk them too big of a hole.
Now youre going to you might have I mean, the woman's Argentinean Chrysler woman, that's telling me that they can pass on to prepare that to the people that made the deal will change illustration, you'll go though the EP the yoga sling.
In the T that took a somebody else so the junior and senior friends Hindrances in India.
Given the timing of.
We frankly see.
It sounds like that's about it.
So you put that no woman the yoga hoyos.
So he has all of them that's what it is so youll see them further.
Can do the math.
Hung is longevity on the whole year.
So you took opinions without Horner, Oh sort of subsidy 70, creating war <expletive> refunding the hotels eating so that'll help which is a woman they'll go to even put a public when you never you also.
Go to transact shanghainese umbrella, telling them that they can get.
I would just hope is Oklahoma border cause you all to the country chocolate you don't need attempting to do.
So it was a sudden people to walk them go on teeth oriented.
Total Coca Cola FEMSA going in Congo in gene therapy, and patchy and Tuesday meeting so that's good.
So with that I'll not talk a lot towards Hawaii, So could I get you to something that Ive got you'll do about cars I mean me so.
The recovery of wanted business growth rate is due to two factors first we essentially wisdom spend hours operating hours at our offline stores as pandemic control measures are lifted this grants us a more abundant supply of products.
In 'twenty or 'twenty, two we started shifting our strategic focus from a consignment model. So I wanted to see direct retaining model. This was that effort initiated following the launch of the first compliance guidance for intellectual property rights and the electronics refurbishment industry as published by the People's Procuratorate option during April this year.
Before the launch of this guidance, we did not have a sufficient supply of high quality pre owned product.
Our strategy was to prioritize marketplaces and help our merchant partners to sell their products since the launch of the guidance. We further leveraged our supply chain capabilities and started to refurbish very own electronics and sell their products directly to retail customers.
Additional profit margin over the value chain and also provides more supply of high quality better priced prion electronics to consumers during the third quarter, we utilized our refurbishments supply chain to distribute our you argue with our branded products to retail customers. Our success was demonstrated by over 19 million.
Andy himself and the asking rates to 2600 RMB.
Well you didn't have to deal with.
Pseudotsuga wouldn't either.
And then the pin pad a year, which shows the change in the total conjunctival jumped in a year, where you have to learn you'll dealing with hometown pet.
You don't put me in a moment that is and you don't change whether you do it.
Cohort two that would put our buildup sunjata she's on lapping that Suzanne Joe you'll change it.
So how about on the sungard.
I mean, it or don't that shut down we surgically moultrie joking hollander.
Somebody in.
Well, there's no way it can be lumpy due the EP the Hawaiian Telcom go I will tell you there's a whole can.
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Jim Collins 20 father.
Well, Michelle you can kind of pull herself is charged in the central Southern taught Angela she and she told me to the Schneider to the resorts Egypt entering year two of them parked on the ASO youll be industrial don't couldn't go to shelf is that when the EPA would attempt to conduct real trading ship to the change in tangible.
In terms of platform business, we adjusted our business strategy and focus on high quality and profitable growth on P. J D. Marketplace. We took the initiative to remove merchants with substandard supply and service quality. In addition, we provide it more protection for intellectual property and consumer rights on Pi Pi, we took there.
Initiatives to scale down third party consignment business and pursue its bath or quality control measures, we'd leave that to a higher proportion of lumpy yourself forest products and refurbished and sold to retail customers with quality assurance and maintenance services.
Smoke gave us strong pricing power or the consumer electronics battery was saying in addition to the strategic developments, we also optimized our operating efficiency.
<unk> with running our company purely as a platform what leave that prioritizing monthly business is more beneficial to the company's long term development facing challenges from the pandemic with surgeons and fellows consumption our truck towards E recycling services and quality are short for your own products are becoming increasingly popular among cooked.
Our business I'm, a lumpy business is demonstrating greater growth prospects and we believe the growth of one two business, it's worth investing for the long term.
So while many N G. When added summed up before me along nicely.
You know, we keep on patents, so <unk> resort, which I'll show you what goes on top.
For me and I'll answer your book and it was all year with that took a photo.
Susan.
It's useful and neither is the shelf as a ballpark was also children mental woman to you. So that you shouldn't Barbour Josh.
So you can put a TV show, but as you are talking that way so.
Sagittal Norwegians ISR I hope it will sit down with them and did so again I think it was looking at this.
You can get done during the year deal or was it just sounds like youre in soil.
Midtown at Mcgill otherwise it got even take out layers.
So you can figure out how do we do that you end up.
Woman.
Is that closer touch.
Touch on what Youre seeing in terms of the Jamaica forgot to the deep water.
Forgot Medina with <unk>.
I will suggest the wheel.
Our opinion.
On the ASO and yes, you want to go with two two times.
I'll touch on a can.
<unk> took a culture, where you don't have enough, but on the Australian let's go to teed up to go suitable to go.
So the <unk>, obviously, you want to add sizes have up with us for your computers, which are critical tissue.
Let's now turn to discuss our Fisher growth and why.
And this growth will come from the stable development of our core business of consumer electronics devices recycling himself and on the other hand, it will come from the new revenue stream of our multi category recycling business.
This effort is an extension of our service capabilities in no time in an attempt to cater to consumer demand for multi catch where recycling we applied adhered store operating systems to 1800 stores, rather than introducing multi category recycling services in these locations during the third quarter.
Piloted this service across 50 stores located in Shanghai and Beijing.
We generated an additional monthly jammie of three.
300000, RMB and a profit of 20000 RMB.
For each store.
During the fourth quarter, we will continue to ship their items.
During the fourth quarter, we will continue to refine our structured database in house user experience and including price inquiries and improve the conversion rate. We expect to have further breakthrough in terms of city coverage, extending our consumer ratio across over 160 coriaceous stores across.
China, and we aim to share more detail color about our multi category recycling business in the fourth quarter.
Okay.
Thank you for the question.
As a reminder, if you have a question. Please press Star then one and when asking a question. Please state. Your question in Chinese first then repeat your question in English for the convenience of everyone on the call.
Our next question comes from Joyce Ju from Bank of America. Please go ahead.
Hi, Thank you for taking my question would.
Sure.
Baghdad comment.
You can take that challenge.
Thank you Paul.
Just to keep on mute.
South East Etame <unk> well.
Yeah.
Oh, Yeah, Oh, yeah.
Uh huh.
Humphrey Lee who came back.
Hum.
You got me a margin.
Yeah, well I would translate myself. The first question is.
Could you please comment.
Recent construction momentum during double 11 shopping festival.
<unk> impact from the Covid.
Covid disruptions in China recently, and second question is about could you give us more color on the path to profitability and.
Medium to long term margin expectation.
Yeah.
Although she is here if you will oh, well our shelf without the move in 'twenty or municipal Rex with the Terrapin facility, while you saw either to go.
Gotcha.
So sometimes it goes it seems with the social partners.
For those of us with that.
So let's finish up with ownership so the simple answer would be I appreciate that.
She is also used for busy agenda jingle less than 10 million books quota like towards neutral since the Simpsons social friendly. So it's cultural ASO decency that took a friendly.
Jindal jockeying for both retailer caution you that you don't want to say one quarter.
It's a majority of origination assume so TSMC, so difficult to deal with them.
Bad for them.
Ah, Okay kind of tingling pins as Henry teach out there you don't get into the 20 <unk>.
That's the figure with Jetblue.
She moved up till now.
Well unless you want to know that you also cannot live without T. Boone chartering place autonomy to forget she's a woman to industrial TSMC.
This ability.
Thank you for the questions I'll take the first one and CFO rack. So I'll take the second this year at a single state run promotion showed moderate growth.
Promotions have now became regular and straightforward when preparing for this program promotion. We collaborated with JD is home appliances business unit to provide our trading services across more product categories users purchasing new home appliances on J D code trading there is consumer electronics to reduce the economic burden Jay.
He has been reporting steady growth in its core revenue stream from electronics and home appliances, leveraging jd's trafficking economic electronics and home appliances. We further diversified our trading scenarios. This kind of increase the penetration rate of our core mobile phone and consumer electronics recycling business.
So on the onion on the audience since either comes in here, but do you see U S. M C.
Somebody into the US marshals Jindal nature. Once you know youll who's who can be tuned on Taco lockup in December easily.
Well the jostling Chindamo 13 into each other sense either perhaps later he took a year ago.
Daniel Chan Chung C trends when you join the two of you.
Awesome.
Due to the strong Sienna songs languishing parking airplanes, you summed up the shelf is a quality issue to the fall in the bundle.
P J salvage on a go go much simply the shuttle shins without Huawei.
So why not how about you here will that change at all yeah. So she had not to go nuclear we usually comes with Liberty and told them to go up with him over the whole year and cool great friends in the whole U N G social sorry.
Cultural opinion for sure, but you should assume that the horse is you end up having to argue some months ago.
Literally.
During the first 28 hours when a single state run promotion kicked off at eight P. M. On October 31st the number of JD customers, who trade. It in there used to be like this for the new increased by 310% year on year.
Applying cross categories, bringing orders accounted for 20% of all the pay trading orders during the Grand promotion. This year, we further advanced our service capabilities to satisfy consumer demand for economic shopping options, that's mutually benefiting consumers and jd's new product sales.
In addition, excluding frontline personnel costs and platform expenses peptide selection realized an overall operating margin of 2% as we prioritized profit and supplement it wont be a refurbished products.
Got you and better for all of them it will move through the two loyalty Supreme.
Pingo Pinball example, Suzanne let me Jim deal it sounds as though she got to those sorts of impacts you've been to hold on to the other two in one shot pingo <unk>.
These systems are well known.
She says.
She's only been working better.
Trying to beat you up on the social Sudan, I've also sushi Little Jim G. You got a clean in Miami and shelf is three pronged pro Max the Golden tissues, and then Joseph Tung near the St. Joe well, Michelle Michelle She shows up in Waterloo Boy Food Channel you don't want it and as usual you'll want to ship on time or maybe it was you didn't talk a lot of food.
Because sometimes those homes at Tianjin yogurt punchy as usual.
The andaz tissue, so selfish actually nowhere nisha. She youll sharpie piece looking time upon generally youll see over the year will only go where you shop at our people and country should that be the ones you buy.
Congrats on a strong a cause that really he and she like.
But we shouldn't do that social.
In terms of brands, we support Apple has maintained its industry, leading market share, but other smartphone brands, where endo downward pressure up on retained its growth and new device shipments in the third quarter mobile phone mobile phones account for 70% of our total transaction value, whereas apples products account for 45 years.
<unk> of our overall transaction value.
Although the supply chain of the iPhone 14 lineup was under pressure recently consumer demand for pro and pro Max models, which remained strong we believe that Apple gradually resumes its production capacity trade and demand can rebound and we are confident that we will fulfill that demand with a better and more seamless service process.
Android models in the context of declining consumption consumers need a stronger incentive to shop for new products, we believe that our cost efficient trading solutions could be that incentive that manufacturers also finding collagen.
Okay, Cynthia just out to your second question related to the profitability.
So two main drivers for our mid term to long term profitability first as the improvements in <unk> gross margin in particular due to the contribution from our new business initiatives.
Comparing to refurbishment, our Wuxi business was less impacted by pandemic control measures during the quarter as our pushing of off price stores.
Graduated resumed we were able to meet the consumer sort of cycling demand into with stable pricing and tissue. Just show that you shipped from the consignment model, we mentioned to you that last quarter, because it allowed us to transfer parts high quality when she product sales. This will allow us to continue to improve the quality and the reputation of.
The Pearl in the progress that we.
Commercialize. Meanwhile, we are on track in developing comprise refurbishing capabilities.
Prior to pricing components in poor condition, we certified third party batteries and the scripts, we recondition sees wimpy progress and the better sit as far as retail parks needs as I've alluded reflect business skills will improve our product mix. So as to further widen our gross margin.
Secondly, our operating efficiency has continued to improve during the quarter.
We recognized a non-GAAP operating profit of $10 8 million RMB. This was attributable to our optimization of fulfillment expenses and <unk> expenses.
Fulfillment expenses as a percentage of total net revenues decreased.
And by two nine percentage points year on year to 10, 7%. This was mainly due to the refinements <unk> made to the amendment structure in your off price stores and Z implementation of a new system for pushing stations.
And we graduated rocks is up over the machine refurbishment opinions and further achieve cost efficiency improvements, we anticipate our top line to be between two partner right now to sweep it into St.
So 3 billion RMB in the fourth quarter.
We also anticipate our non-GAAP operating income in the fourth quarter and realizing a profitable year.
non-GAAP basis, as we forecast paid weeks.
We expect our total revenues and the profitability is to further.
Escalate in the coming quarters.
Yes.
Yeah.
Yeah.
As there are no further questions at this time I'd like to hand, the conference back to our management team for closing remarks.
Thank you. Thank you all again for joining US a replay of today's call will be available outwork. Besides shortly followed by a transcript. We're ready if you have any additional questions. Please feel free to directly email us at <unk>.
She renewed call have a good day.
The conference has now concluded thank you for attending today's presentation.
May now disconnect.
[music].
Yeah.
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