Q1 2023 ATRenew Inc. Earnings Call
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Good morning and good evening ladies and gentlemen. Thank you for standing by and welcome to AT Renew Inc's first quarter 2023 earnings conference call.
At this time, all participants are in a listen-only mode.
We will be hosting a question and answer session after management's prepared remarks.
Please note today's event is being recorded.
I will now turn the call over to the first speaker today, Mr. Jeremy Gee, Director of Corporate Development and Investor Relations of the company. Please go ahead, sir.
Thank you. Thank you. Hello everyone and welcome to AT&T Greenew's first quarter 2020 learning conference call.
Speaking first today is Kerry Chen, our founder, chairman, and CEO . And he will be following direction on the CFO . After that, we'll open the call to questions from analysts.
If financial results were released earlier today, the earnings release and the investors' life accompanying this call are available at our IR website, ir.acu.edu.com.
There will also be a transcript for this call for your convenience in English and Chinese.
For today's agenda, Karen Wilk will share her thoughts of the cultural performance and the business strategy, followed by Rex, who will address the financial highlights.
Both Carrie and Rex will join the Q&A session.
Let me cover the safe harbor statements. Some of the information we will hear during our discussion today will consist of forward-looking statements. I refer you to our safe harbor statements in the earlier press release.
Any forward-looking statements that management makes on this call are based on assumptions as of today. And that's it hearing you that don't take any applications to upgrade our assumptions on these statements.
Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earlier release, which contains a reconfiguration of non-GAAP measures to GAAP measures.
Finally, please note that, unlike otherwise David, all figures mentioned during this conference
by ERD and all comparisons are in real-video images.
I would now like to turn the call over to Kerry for business and strategy updates.
Hello everyone and welcome to AT&T Renew's first quarter 2023 earnings conference call.
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The rapid recovery of offline retail and logistics led to a resurgence in consumer recycling and consumption demand. As a result, our year-over-year revenue growth rebounded to 30.2% and we achieved total revenues of $2,872 million, exceeding the high end of our guidance.
Meanwhile, our non-get-over-income reached a new record of over 44 million, representing an adjusted operating margin of 1.5%. Our first quarter growth demand profits both exceeded expectations in what is surely an off-season for the second-hand industry.
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I'd like to share with you three main drivers which contributed to our top line growth rebound. The first is the growth momentum of one business which geared us again. The recovery of face-to-face recycling fulfillment at our stores, the strength and brand awareness of the AHS to recycle brand and an increase in compliance refurbishment products.
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If we zoom in a bit, we encountered a tailwind on the sourcing end which was generated by the rebound of consumer activity after the reopening. Our e-commerce partners such as JD.com have increased their consumer subsidies while brand manufacturers including Apple have offered discounts and promotions on specific models.
To add more color, Apple products account for 45% of our total businesses and 60% of our 1P business. Out of the popularity and resilience that Apple products have, our core recycling business remains stable and has been relatively less prone to the headwind of decreasing news device shipments.
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We also consolidated our own operational capabilities, especially on the sourcing front.
We strengthen our competitive mode in offline recycling via 1,935 physical stores across 269 cities nationwide, enhance the brand awareness of AHS Recycle and locking more high quality supplies from consumers.
According to a recent survey, the net promoter score of our offline store recycling services has steadily increased. We continue to identify suitable locations for new stores and we aim to make our directly operated stores the benchmark for customer service in popular cities.
Meanwhile, we have further expanded fulfillment coverage by empowering more franchisees. As a result, we have seen a rapid increase in 1P recycling transactions in the first quarter of 2023. So auto volume increased by 13% sequentially and 42% year-on-year. Overall, 1P product revenue increased by...
34.9% to $2,575 million and continues to be our core main organic growth forever.
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and further consolidated the service capability for our RERU refurbished business.
In the first quarter, overall sales of refurbished devices increased to 145 million, of which two consumer sales increased to 140 million. Lastly, the overall gross margin of refurbished devices was 25%.
In addition, we duplicated such capabilities in our East China Operation Center to supplement our capacity in South China. This upgrade was undertaken in tandem with an expansion of our refurbished product categories. We expect that this increase in total production capacity will allow us to satisfy the majority of user demands.
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Turning to our platform business, service revenue in the first quarter was nearly 300 million, which was basically flat compared to the same period last year. However, take rate increased from 4.15% to 5.46%. We have adopted a mixed approach to the platform businesses based on each service's monetization rate.
On the one hand, we have increased take rates for key services like quality inspection, logistics, and warehousing. On the other hand, we have reduced both our investments into the fair stock business and merchant rebates for businesses with low monetization rates.
Our primary focus is serving high quality, high stake in its merchant users, while facilitating high quality transactions.
The number of registered users of PGT Marketplace or B2B business now exceeds 447,000, while our core business take rate has increased by 1.8% on a yearly basis.
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For Kaipai, the business business offering, we have further strengthened our platform governance. This is seen in improved product quality control for pop products and the timeliness of services.
We collaborate with well-known instruction institutions for weekly spot checks, spot check coverage of consumer products doubled. Ship-out efficiency was improved, for example, the late ship-out rate in the first quarter has decreased by 7% secunditally.
This will ensure stable growth in both the quantity and the quality for our part business.
Furthermore, since we have built up capacity for compliance refurbishment, we provide consumers with highly satisfying shopping and after-sales service experiences. As a result, retail distribution as a percentage of core wanted business increased by 91 year over year to 22.2%.
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The second growth contributor is the escalating new category recycling business. As of March 31st, we've averaged over 100 core AHS stores to successfully fulfill new category recycling orders without extra investment. These stores are mainly located in Shanghai, Beijing, Guangzhou, Guangzhou, and Chongqing.
and we continue to improve our product mix, covering luxury goods, gold, prestigious liquor, etc. When meeting consumers demand for cash back. As our fulfillment network expands, we expect to further leverage the high quality and accurate traffic from JD.com, thus amplifying our online to offline capabilities.
We also amplified AHS Recycled Grand Inters with safe, fairly priced and hassle-free offerings. As a result, multiple new categories made delightful progress. For example, mostly GME for non-electronics new categories recycling had surpassed 70 million RMB.
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The first driver is continued improvement in operational efficiency, mainly attributable to automated quality inspection technology upgrades. NAMGAT fulfillment expenses as a percentage of total net revenue decreased by 3.7 percentage points year on year to 9.1% in the first quarter.
We are proud of our operation centers. They deliver best-in-class operational efficiency and empower hundreds of thousands of merchants with standardized operational and transactional capabilities.
The automated operation centers in South China and East China are equipped with our industry-leading systems. Its automated inspection lines incorporate AI and big data algorithms for inspection training, which achieve precise detection and labeling of scratches and dents, as well as identifying dissemblements and part replacements.
All of these are factored into product grading and pricing results. Our unmanned production lines avoid the majority of errors associated with manual operations, helping us reduce personnel training costs and losses related to manual inspection and disassembly. Training has improved our efficiency in processing man-centered products.
and ultimately reduces transaction disputes and losses from returns. Going forward, we believe that the application and continued development of automation technology, AI and big data will further optimize our cost structure.
Beyond this improvement, we have also made steady progress in reducing our selling and marketing costs.
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We have had a good start to 2023, in large part thanks to our stable foundations of electronic recycling and re-commercialization businesses, middle office operations and backend cost controls. The continued development of the circular economy has also served as a tailwind for our business.
During the second quarter, we anticipate June 18th promotions once again stimulating consumers' demand for recycling and trading services. In particular, we are working diligently in preparation for a project kickoff in the second half.
providing unique trading solutions through in-depth collaboration with the leading international brands. And this will potentially become a key growth driver in the second half.
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As the circular economy evolved, we continued to amplify our industry influence by educating consumers and lodging industry standards. During World Earth Day on April 22, we launched the Cosmic Restructing Alliance initiative, partnering with several leading consumer brands to promote green recycling and the circular use of consumer products.
The initiative transcends our brand's assets and expands our product offerings by advocating for the reflecting of idle daily necessities, bags, watches, among others that still retain some value.
On World Intellectual Property Day on April 26, we joined forces with the Shenzhen Electronics Industry Association to explore industry development and to celebrate the anniversary of the Combined Refurbishment Guidelines publication. As a corporate representative, we participated in the formulation and implementation of multiple standards.
Furthermore, we regard the protection of both intellectual property and the utilized as our responsibility.
We are committed to working towards the standardized development of compliant refurbishment in the electronics industry. At the same time, we strive to enable the utilization of a wider range of query-only electronics.
With that, I will hand the call over to Rex, our CFO , to go over the financials.
Hello everyone. Web Q2 reports another perfect report. As a total net revenue, it's the top end of our guidance and we may get operating income reached on a new report. I will start by sharing some of our financial highlights before we go into a more detailed look. As members, please note that all amounts are in R&D and our comparisons are...
on a year-over-year basis unless otherwise stated. In the first quarter, total revenues increased by 30.2% to 2,871.8 million. This was primarily due to the continued growth contribution of our OMP product source revenues, which increased by 34.9% to 2,575.2 million in terms of profitability.
We had another product and making quarter, with an impact of operating income of 40.4 million. This was primarily attributable to skill effects, powered by automation inspection upgrades, and improved quarter efficiency in sales and marketing.
Now let's take a detailed look at the financials. In the first quarter, total revenues increased by 30.2% to $2,871.8 million. Net product revenues increased by 34.9% to some 575.2 million while net service revenues were 296.6 million, slightly decreased by 7.3%.
grossing net profit revenues will be partnered with driven by increasing the sales of pronged consumer electronics both throughout online and offline channels. In terms of source revenue, the PJT marketplace generated a more compared with the same period last year. This will primarily due to this lesson.
Consumpting is of pipe-hide, marketplace as we pivoted its stretch, stretch, stretch focus, which was partially offset by increasing the service revenue generated from PTT marketplace. Next, continuing to our operating expenses to provide greater clarity on the trends in our operating place to actually expenditures.
We will also discuss our NEMCAP operating experiences, which better reflect how the management views our results of operations. The reconstitutions of NEMCAP and NEMCAP results are available in our earnings release and the corresponding form 6K, finished with the SEC. Merchandise costs were 250-250, 2.1 million.
The presenting increase of 37.7, 3%, this was in line with the grosses in product sales. So gross margin at the group level was 21.6% in the first quarter. Gross margin for our 1Pb miss was 12.5%,
Fulfillment expenses decreased by 10.1% to 266.4 million, excluding share-based compensation expenses, which we will refer to as SPC from here on. And the gap for fulfillment expenses decreased by 7.3% to 260.9 million.
Under the GAAP measures , the decrease was primarily due to first, a decrease in operation center related expenses as we optimized our store and operation station networks and second, a decrease in logistic expenses as Kyrie presented earlier. Our quality inspection process has integrated industry-giving AI and data.
Algorithms, minimizing the special errors in the losses from the tense.
Almen gap fulfillment expensive as a percentage of loans was 9.1% compared with 12.8% in a same share at last year.
Setting in the market expensive decreased by 2.9% to 2.99% in the mid-excluding SBC expenses, and a mobilization of intent devices and further costs.
The software for the acquisition, Alden and Gap selling and market expenses were 216.7 million, which go at a slower pace at a 4.9% lower year. So increase was primary due to the increase in market expenses, and the office of the related expenses, mainly composed of travel expenses.
the strategic expenses were 76.4 million compared to 45 million in the same show in the last year, excluding a species expenses, the GNA expenses were 57.4 million compared to 28.4 million. So increased the GNA expenses was primary due to an increased
professional services and the consulting fees. And then Gapatina expenses is a percentage of total revenues or 2% compared with one month's streak sent in September of the last year. Technology and the content expenses decreased by 105.4.
1.4 million, excluding SPC expenses and monetization of intender assets, and the further cost the resulting from acquisition cement gap technology and content expenses decreased by 26.3% to 42.3 million.
The decrease will primarily due to the changes in technology to call personnel costs related to platforms as our platform is much easier. Then get a technology and content expenses as a percentage of total revenues decrease to 1.5% from 2.6% compared with the same share that last year.
In other results, I will then get an operating income of 44.4 million in the first quarter of 2020 stream. Then the gap operating margin of 1.5% compared with the 7.2% in the same share of the last year. It is not much 31st of 2020 stream. Cashier and that cash irreverence, short-term investments and the financial available from sort of pocket payment service providers.
Total of 2.5 billion. How sufficient cash on hand to save goods are sustainable goals or to look. As I recap, on December 9th, 2022, we announced an extension of our existing worth $100 million U.S. dollar share to purchase a program for another 12 months shared with the starting from December 28th.
2022 based on amendments to our components in our sorry fundamentals and gross momentum. During the first quarter of 2010 Street, we purchased over 1.4 million ADS in the over-mapetix for total cash consideration of 4.1 million US dollars. And of March 31st, 1023, we have a repurchased a total of 10 million ADS for approximately 38 million US dollars under our shared purchase.
program. Now turning to outlook, for the second quarter of 2023, we currently expect the total revenues to be between RMB 2,850 million and RMB 2,950 million due to the similarity of our opinions.
As China's economy continues to normalize and the impact of COVID-19 fades, we expect that our sourcing and procurement functions will recover in tandem. We will continue to improve our cost efficiency, leverage our automated inspection facilities to further realize scale effects and accurately capture the cycling and shopping scenarios.
We expect to further improve our NGAP operating margins in the coming years. This forecast already reflects our current and preliminary views on the market and operational conditions which are suggested to change. This concludes our 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 telephone keypad.
If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2.
When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call.
Once again, it is Star and then one, to ask a question.
My first question is that during the first quarter we have seen very promising growth in the business, accelerating from the previous quarter. So can you share a little bit more about the outlook for this year in terms of the economy, economy in China, as well as consumption of the electronic products? My second question is on the progress of the multi-category recycling services. Do you see any categories that are showing potential for scaling up our contribution to the revenue and profitability in the future? Thank you. Okay. Thank you, Joyce. Thank you. Thank you, Joyce.
I will answer this question. The first question is, we see that since the Spring Festival this year, offline face-to-face contact consumption has recovered rapidly, including business, food, and daily life services. We see that the number of customers and transactions in the Asian stores and the number of Asian stores across the country has quickly decreased. The return on investment of 1B has increased by 42%. .
Although the consumption of sold goods is still on the way to recovery, we expect that through the large-scale activities of e-commerce in the second quarter, we will focus on returning to the consumers who are still concerned about the participation, so that the majority of users can experience a cost-effective and participatory way of renewing, and continue to improve the user's cycle consumer awareness.
On a broader foundation for recycled member supply, the automated operating capability with integration with fast feedback, are with strong holding capacity. This allows the end users to select more locations and white ?able products which are adjustable, and the other means for efficient inventory of products. This helping design is a solution to embrace a wide range of applications in e-commerce.
Consumers still long for good life and high-quality products. Therefore, the demand for recycling and second-hand electronics is still huge. We are also working with manufacturers to create a seamless experience for consumers and to provide a stable supply chain.
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trust and other local services. In language with this trend, our AHS stores have experience of significant surge in business volumes, while the number of one-piece source products has grown by 42% in the year.
While durable goods consumption recovery is still on its way, we expect to see sustained trading service demands written by the major promotions held by E-commerce funders during the second quarter. By offering the option to upgrade devices in a cost-effective and eco-friendly way, our trading service provides better to consumers who purchase new devices. It also serves to raise consumer awareness of circular consumption.
In addition to higher forcing volumes, we are refining our automation capabilities and in key working compliance with service services to expand our inventory of high quality pre-owned electronics. This improvement will provide consumers with a wider area of premium choices, with these that consumers will always strive for better life and better products.
to 37.5% while maintaining our annual target for non-GAAP for pre-dean profit.
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I'll answer the second question regarding the new category. We kicked off the reflection category expansion in the second quarter of 2022, starting with high value bags and watches. Currently, the category has already established scale in terms of trading volume. Gold is another category that has achieved this level of development. In order to reduce the current trend towards extent-based consumer products, the Charter Index was raised to 6.2 percent in this period.
The development of these two categories is highly correlated with user trust in the AHRAS recycle accumulated over the years. As of the end of March, all 100 AHR stores have fulfilled that recycling orders. Among them, the POP 30 stores have an additional average monthly GME of 500,000 RMB. Recently, the monthly GME of monthly category recycling has exceeded 70 million RMB.
excluding camera equipment to recycling, which is already on scale.
The current clear trend is that the second-hand luxury goods, including the Hong Kong and Taiwan Exchanges, have a relatively sufficient space for monetary development. The space for sufficient profit is also the basis for our partnership to achieve mutual win-win. We will continue to improve the service experience.
In terms of operations, we have been leveraging our own storefront fulfillment capabilities. While collaborating with merchant partners on quality inspection and distribution at the VATCAM, it's clear that the transaction of used electrical including VATCAM watches has controllable costs that we invested.
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Our multi-catware recycling business is built on the foundation of user trust in us and their AHS recycle brand. We expect more users to become familiar with recycling and repeatedly return to our stores. Multi-catware recycling is an extension of the capabilities we have used in our consumer election sector.
and it represents our path for creating long-term value. Thank you for the question. Our next question today will come from waiting tank of Goldman Sachs. Please go ahead.
Thank you, Guan Yi-chuan. This is my question. I will give you a question. I have a question for you. I will give you a question. Guan Yi-chuan, what is the purpose of the financial service of our company? And how do we manage the financial service of our company? Thank you, Manning Chuan. I will translate for myself. What kind of strategic targets we have for our repair businesses and what...
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In 2023, our goal is to form a regional capacity coverage that extends from the south to the east and the east to the south, and further expand the capacity to other operating centers. In the field of mobile phones, tablet computers, smart watches, laptops, digital products, etc.
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and the further improvement of the manufacturing capacity. We expect to complete more than 160,000 machines in the first half of this year.
Thank you for the question. In the first quarter, compliant refurbished devices retailing increased for a full consecutive quarter and the corresponding ASB stabilized at 2,600 RMB. We anticipate that the growth margin of the refurbished device retail business will remain stable.
While its scale and its contribution to our one-t business will gradually increase, we believe that this will allow us to further close the value chain of the industry obtain more profits based on the existing one-t sources and strengthen competitive edges. By 2023, we aim to extend the coverage of our resurbishment operations to more regions.
At the same time, we will steadily improve overall position and enhance our brand focus to catch great.
During the first quarter, the scale of our refurbished production remained at around 70,000 units. As we accumulate our refurbishment and supply chain capabilities for more product categories, we expect to add value to at least 160,000 units in the first half of 2023.
Our next question today will come from judging 10 of CICC. Please go ahead.
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Thank you, management. I will translate myself. What are the reasons for an improved adjusted op margin? Do you have any plan to increase sales and marketing sense for a new category recycling business? And what's the outlook for the adjusted op margin for the whole year?
Okay, thank you for your question. I will take the question. So under the NGET measures, we will approach time and we will go through operating profit this quarter. NGET of operating margin increased to 1.5% from 0.2% in the same quarter last year. This will remain due to the optimization of cost efficiency.
of the fulfillment expenses worldwide improved automation, capabilities and the standard expenses I would further implement cause the country measures. In the first quarter, the Fulfillian Expenses were 261 million, accounting for 9.1% of total revenue. So the Fulfillian Expenses decreased by 20.6% year-on-year.
The most evident reason is the spirit back up our automated facilities mentioned back area. The two operating centers in Dunquan and the Townsville handle over 40% of the total orders processed and nationwide, will first quarter. Therefore, automation has a significant impact on the reduction of overall performance costs. At the same time, automation technology also brings about improvements.
accuracy of quality inspection and reduces to the temperature of goods and the associated losses. In addition, we have optimized the department and operational efficiency of situational operations stations. We started to take full control over operation stations in the sub-quarter of 222 and optimize the network, therefore saving packaging and the logistics due to distributed experiments.
So then kept setting and the marketing expenses were 217 million. Then kept setting and the marketing expenses as a percentage of total revenues were 7.5 cent down all point 9 cent points year-round year. This will primary due to a decrease of 33.7 million in marketing expenses for proper marketplace since we straight to the early downside as a consignment genius.
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Sellers are corresponding fee increase of 10 million on being this quarter. We will maintain our proper investments in your categories and brand-of-breeding.
Working in the 240th of 2020, we expect to continue improvements in court efficiencies. At the same time, we will further...
and provides a positive impact on automation and repair and tool automated work operations in every year. And for sales and marketing, we keep our improvements spending pattern for mature building uses and selectively investing new step-strip initiatives. So we will, we expect our open market, open margin, to be increased.
at our housing place. So you're broke. Same for our question. As there are no further questions at this time, I'd like to hand the conference back to management for closing remarks.
Thank you. Thank you all again for joining us. And the client-based call will be available on our website, Shulti. All by transcript, we ready. If you have any additional questions, please feel free to email us at iratheqvd.com. Have a nice day.