ATRenew Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew, Inc.' 's second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. We will be hosting a question-and-answer session after management's prepared remarks. 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 Investment Relations at the company. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to AT Renew's second quarter 2023 earnings conference call. Speaking first today is Kerry 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. The Q2 financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR website, ir.atrenew.com. There will also be a transcript following this call for your convenience. On today's agenda, Kerry will share his thoughts about our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will join the Q&A session. Please note that management are joining the call from different locations. We'll try to fix it if there is any connectivity issue. Let me cover safe harbor statements. Some of the information you'll hear during the discussion today will consist of forward-looking statements, and I refer you to our safe harbor statements in the earliest press release. Any forward-looking statements that management makes on this call are based on assumptions as of today, and that AT Renew does not take any obligations to upgrade our assumptions on these statements. Also, this call includes discussions of certain non-GAAP financial measures, please refer to our earnings press release, which contains a reconciliation of non-GAAP measures to GAAP measures. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB, and all comparisons are on a year-over-year basis. I'd now like to turn the call over to Kerry for business and strategy updates.

Hello everyone and welcome to ATRenews' second quarter 2023 earnings conference call. During the second quarter,

We made notable progress in terms of both revenue and profitability. Our total revenues reached 2,960 million RMB, representing a year-over-year increase of 38.1% and surpassing the high end of our guidance. As we navigated the post-pandemic era, our 1T recycling business rapidly rebounded, and our marketplaces saw a healthy recovery. demonstrating the resilience of the circular business model. In terms of profitability, the adjusted operating income increased to 52 million RMB and the adjusted operating margin further expanded to 1.8%. These improvements fully align with our aims of enhancing the second-hand industry's value chain and optimizing operational efficiencies.

Our strategic direction continues to maintain continuity and consistency. On the one hand, to achieve a steady growth of large-scale business. We continue to invest in the supply and demand channels, including the construction of stores and official websites, to enhance the user's experience of second-hand recycling, to catch the supply and demand of the first-hand goods, and to increase the market share rate of recycling. We also continue to strengthen strategic cooperation with Jindong Electronics, including Apple and other mainstream brands, to improve the experience of rescue and recovery in the retail scene for our partners.

our strategic direction remains consistent. On the one hand, we aim to achieve steady growth in consumer electronics businesses. Among them, the escalating 1P recycling channels, including AHS recycle stores and the official website, provide a better user experience, ensure first-hand sources of supply, and acquire more market share. We also continue to strengthen cooperation with e-commerce pioneers like JD.com and leading brands such as Apple, to advance their trading service experience in retail scenarios. On the other hand, we seek to unleash the potential through continuous innovations. On recycling over time, we have successfully improved user experience and store service capabilities of recycling luxury goods and continue to strengthen the brand awareness of AHS Recycle. On user traffic, we have achieved some progress recently. Through high-frequency household use recycling services in communities, we guide users to AHS Recycle app, WeChat mini programs, and encourage more customers to visit our physical stores to sell more high-residual value products.

下面我们将对公司的主营业务增长的驱动力,主营业务的运营效率提升,以及创新的业务,这三个方面进行进一步的解读。 Next.

I will share more color from three aspects. First, key growth drivers of the core business. Second, operational efficiency improvements. And third, updates on our innovative businesses.

增长的驱动力方面,EP的制营收入同比增长42.2%是26.37亿元人民币。 In terms of growth drivers, 1P product revenue grew rapidly by 42.2% year-over-year to reach 206, sorry, excuse me,

2637 million RMB in the second quarter. This increase was primarily driven by the continuing upsurge in the trend for selling old for new and buying pre-owned products, even when consumption growth flattened. Another factor was the scaling sales of our refurbished products. 具体来看,首先从回收端看,

In the second quarter of this year, Zhiyin and Jindong channels have achieved a recovery rate of recovery. We continue to increase the acceptance rate of consumers and the satisfaction of recovery services through 1,944 stores across the country. Zhiyin business through one of the 1,162 standard stores, through the standard control of the store terminal, lock the supply of high-quality goods. In addition, The order source of Jindong also recovered quickly. One-stop change business achieved 116.9% of revenue growth in Q2. In addition to Apple products, some Android-type rescue changes have also received the welcome of Jindong users. Secondly, from the sales point of view, after the negative impact of the epidemic, the vitality and health of the trading of the core business of the platform, In terms of the sale of 2C, we built a free brand change machine business based on the electronic products released in April 2022. This quarter, through the recovery of the product, the sales income of the 2C sale after the return return has reached RMB1.7 billion, which increases by 22% compared to the first quarter. While achieving rapid growth, it satisfies the purchase needs of more C-end users for high-quality second-hand products.

Specifically on the recycling front, we saw significant year-on-year improvements in both storefront and JD recycling channels. We utilized our extensive network of 1,944 offline stores nationwide to further develop consumer outreach and effectively improve user satisfaction with price quotations and services, of which the 1,162 stand-up stores play a key role in obtaining more supplies of quality devices. In addition, recycling orders from JD channels recovered quickly as one-stop trading business saw 116.9% year-on-year revenue growth in the second quarter. In addition to Apple products, some Android models were also popular with JD customers. On the selling front, Having successfully navigated the challenges posed by the pandemic, merchant users' transaction activities kept healthy. As for first-party retail distribution, we started the compliance refurbishment business and the RERU refurb brand following the release of relevant regulatory guidance in April 2022. Revenue from retailing RERU refurb devices totaled 170 million RMB in the second quarter, representing a noticeable increase of 22% sequentially, further fulfilling consumers' need for premium second-hand devices.

The service revenue has also recovered in the second quarter, with a 12.1% to 3.27 billion yuan increase. The comprehensive fee rate of the platform has also increased by 83 points to 5.37%. In the background of our resource-oriented EP business, the platform business has still achieved healthy development. Among them, the platform of Pajitang has been promoting market coverage and downfall in the second quarter, digging into more local market buyers and sellers channels, and from the platform's trading rules to optimize the trading process and time, improving the connectivity of buyer and seller transactions and the currency-based ability of platform services. In terms of PaiPai, The platform of HAWP is under the guidance of low-cost new products in the Jindong region. It maintains a steady and continuous growth in terms of scale and profit. We encourage more new business owners to join and provide better operating environment and supply chain support. In the next half year, we will continue to upgrade the B2C business model, and develop the vending business model. The trust of the store users and the operating capacity of the online retail stores will reduce the threshold of the purchase and participation of the business owners.

Our platform service revenues rebounded at 12.1% year-on-year to 327 million RMB in the second quarter. The overall take rate jumped 83 basis points to 5.37%. The platform business has achieved healthy growth even as our strategic focus shifted towards first-party businesses. TJD Marketplace advanced its market penetration efforts during the second quarter. This involves exploring more local buyers and seller channels and optimizing online transaction scheduling. As a result, we enhanced user stickiness and monetization capability. In terms of high-end marketplace, its pop business fostered concurrent expansion in both scale and profitability under JD's low-price strategy. We continue to provide premium supply chain support to more small business owners. diversifying businesses and product categories. In the second half of 2023, we will upgrade the B2C business model and carry out a new business based on the trust of users and the operation capacity of large stores. While lowering the participation threshold for merchants to supply goods, we will ensure product quality and buyer's experience through warehousing quality inspection.

In terms of the improvement of operating efficiency, based on a more complete industrial chain of two-handed 3C and the improvement of automated drive operating efficiency, we continued to achieve the improvement of the return rate in the second quarter. In the second quarter, the remittance fee adjusted is 8.8%, which is a decrease of 3.7%. Among them, the cost of the warehouse in the operating center was reduced by 12% in the same year, and the cost of logistics was reduced by 17% in the same year. The saving of operating center fees is due to the scale operation of two large automation operating centers in Huadong and Huanan, which has led to an increase in the efficiency of self-sufficiency. At the same time, due to the further reduction of the self-sufficiency rate in self-sufficiency, and the optimization adjustment of the small and medium-sized networks, the overall cost has been reduced. The saving of logistics costs is due to two aspects. On the one hand, we deepened the cooperation with Jindong logistics to combine the characteristics of second-hand goods and transactions, and to promote the exchange of logistics modes to effectively save the logistics costs of exports and exports. On the other hand, through the investment in the public chain algorithm strategy, we can better use the optimization of the public chain tasks using the existing multiple operating centers, and the best storage location and logistics delivery plan that can best match, to support the operation decision in terms of data and reduce the cost of logistics.

As for operational efficiency improvement, we widened our operating margin on a more comprehensive supply chain and more advanced automated operational efficiency. During the second quarter, non-GAAP fulfillment expenses as a percentage of total revenues was 8.8%, down 3.7 percentage points compared with the same period of 2022. To break it down, operation center-related expenses and logistics expenses decreased by 12% and 17% year-on-year, respectively. The costs saved in operation centers were attributable to, one, scale effects and reduced inspection errors following the use of our automated facilities in South China and Eastern China. And two, the optimization of the operation station network and related expenses. In addition, we credit the savings in logistics-related expenses in two factors. For one, it's the deepened relationship with JD Logistics. Shipping out solutions were better tailor-made for pre-owned goods transactions. The other is with our supply chain algorithms to better match orders with our regional operation center's capacity, warehousing allocation, and logistics solutions. This eases our operational decision-making and overall logistics expenses.

In addition to the steady growth of main business, we also continue to increase growth momentum through innovative business. On June 30th this year, we officially registered Apple's online official website and offline official flagship store system in China to become Apple's second ATI service provider in the domestic market. We provide supply chain support for its底折幻星 and年年幻星. Users submit their products through Apple's official website. One more thing.

In addition to the organic growth of our core businesses, we are cultivating external growth engines through innovations. On June 30th, we officially integrated into Apple China's online and offline retail system, becoming the second Apple trading service provider in the mainland China market. We provide supply chain support for Apple trading and iPhone upgrade program. Users can place ATI service orders via Apple.cn or visit any of the 45 flagship stores. A selection of used devices will be transferred to AHS according to allocation mechanisms and recycling prices. Upon receipt, AHS conducts data erasure and quality inspections. We have completed system deployment and accumulated some experience through testing, and we expect more progress when the new iPhone lineup debuts.

In terms of recycling in multi-products, the exchange rate of multi-products in the second quarter is not more than 200 million yuan for photography and photography equipment. Among them, the exchange rate of luxury goods recycling has increased by 60% and the exchange rate of gold recycling has increased by nearly 100%, which is a rapid improvement. We continue to improve the service capability of stores to build new second-hand recycling special stores in first and second-tier cities, provide competitive prices, and shorten the waiting time of consumers with luxury products. For a large number of existing second-hand repair stores, we provide standardized multi-spec repair services through system support. In the second quarter, we have 231 second-hand repair stores that have achieved multi-spec repair business support. In terms of brand, In terms of the new category recycling, GMV and service capability continue to scale.

During the quarter, GMV excluding photography and video equipment rapidly exceeded 200 million RMB. Among these, luxury goods and gold resulting transaction volumes increased by 60% and nearly 100% compared with the first quarter respectively. We also polished our store service capabilities. These include opening new AHS iconic stores in first and second tier cities with competitive pricing quotations on-site luxury goods quality inspection and shortened waiting period for customers. For a larger number of existing AHS stores, we provide standardized multi-category recycling services supported by IT systems. In the second quarter, 231 AHS stores fulfilled multi-category recycling orders. On branding, we made additional investments in our main brand, AHS Recycle. and advocated the new model of circular consumption with wider participation of consumer brands. AHS Recycle has cooperated with brands such as Cotton Times, Capital Land, Winderland, Fresh Hippo, and Tencent Charity, etc. We will attach great importance to synergies with consumer brands to form the recycling mentality.

Finally, I would like to add some ESG movements. Mr. Wan Wu published the ESG report of the year 2022 on June 20, revealing the three effective highlights of the environment, social governance, and management. In terms of the environment, we continue to disclose the strength of greenhouse gas emissions. The greenhouse gas emissions that have been eliminated by the unit economy for three consecutive years have decreased. In terms of social values, we strengthen the quality management system and the report includes Finally, some updates on our ESG efforts. On June 20th, we released our 2022 ESG report

Particularly noteworthy is our commitment to disclosing greenhouse gas emissions for three consecutive years. During the three-year period, we continuously downsized greenhouse gas emission intensity. On the social front, we have enhanced our quality control system, obtaining ISO 9001 certification during the reporting period. We provided training to 10,000 merchants, strengthening value co-creation along the industry chain. In terms of governance, the board structure of the company has been further diversified, and we have made advances in internal controls and risk management to realize robust operations in the long run. Now, I'd like to turn the call over to our CFO Rex for financial updates.

Hello, everyone. We're pleased to report another profitable quarter. as we generated a new record of Nungap operating income on revenues that beat the top end of our guidance. One of the key drivers of our continued profitability was our use of industry-leading AI and big data algorithms to enhance our quality inspection systems, which continuously optimized our fulfillment costs. The Nungap fulfilled gross margin was 12.7%. It continued to recover from a low point in the first quarter of 2022. Now let's take a detailed look at the financials. Please note that all amounts are in IMB and all comparisons are on a year-over-year basis unless otherwise stated. In the second quarter, total revenues increased by 38.1% to $2,963.7 million, mainly driven by grossing net product revenues. Net product revenues increased by 42.2% to $2,636.7 million. while net service revenues was 327 million, representing an increase of 12.1%. Growth in net product revenues was primarily driven by an increase in the sales of pre-owned consumer electronics, including the sales of RMB 191 million refurbished devices. So increasing service revenues was primarily due to the revitalizing finish of our marketplaces from the COVID-19 pandemic. and an increase in the overall commission rate, which grew to 5.37% from 4.54%. Next, we'll turn to our operating expenses to provide greater clarity on the trends in our actual operating-based expenses. We will also discuss our non-GAAP operating expenses, which better reflect how the management views our results of operations. The new considerations of GAAP and non-GAAP results are available in our earnings release. and the corresponding form 6K finished with the SEC. Merchandise costs increased by 40.6% to $2,325.8 million. The increase was in line with the growth in product sales revenues. Growth margin at the group level was 21.5% in the second quarter. Growth margin for our one business was 11.8%. Fulfillment expenses decreased by 2.3% to $268.8 million. excluding share-based compensation expenses, which we will refer to as SPC from here. Nangap fulfillment expenses decreased by 2.2% to $261.8 million. Under the Nangap measures, the decrease was primarily due to the decrease in logistic expenses and operation center-related expenses, as we kept optimizing our store and operation station networks, but it was partially offset by an increase in personnel costs as our recycling activities developed compared with the same period of 2022. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.8% from 12.5% in the same period last year. Selling and marketing expenses increased by 14.3% to $335.3 million, excluding SBC expenses and amortization of intangible assets. Then gap selling and marketing expenses increased by 28% to $253.6 million. The increase was primarily due to, first, an increase in advertising expenses and promotional campaign related expenses. Second, an increase in commission expenses in relation to channel service fees. And third, an increase in office and the traveling related expenses. Then gap selling and marketing expenses as a percentage of total revenues decreased to 8.6% from 9.2% in the same period last year. G&A expenses increased by 27.2% to $57.5 million, excluding SBC expenses. Nangarpa G&A expenses increased by 37.5% to $39.6 million, primarily due to first an increase in expected credit loss relating to credit risk. Second, an increase in professional service and consulting fees. The increase was partially offset by a decrease in personnel costs. Non-GAAP GMA expenses as a percentage of total revenues was 1.3%, the same as that of YAGO. Technology and content expenses decreased by 24.6% to 45 million, excluding SBC expenses. and amortization of intangible assets, Nungap technology and content expenses decreased by 26.8% to 38.8 million. This was partially due to the decrease in technological personnel costs and technology expenses in relation to platforms as the company's platform matured. Nungap technology and content expenses as a percentage of total revenues decreased to 1.3% from 2.5% in the same period last year. As a result, our non-GAAP operating income was $52 million in the second quarter of 2023. Non-GAAP operating profit margin was 1.8%, marking a new record high. The non-GAAP operating margin was negative 2% in the same period last year. As of June 30, 2023, cash and cash equivalents, restricted cash, short-term investments, and funds receivable from third-party payment service providers totaled $2.5 billion. Our sufficient cash-on-hand safeguards are sustainable growth outlook. During the second quarter of 2023, we repurchased 2.3 million ADSS in the open market for a total cash consideration of $6.4 million. As of June 30, 2023, we had repurchased a total of 12.3 million ADSS for approximately $44.4 million in our share repurchase program. Now, turning to Outlook, for the third quarter of 2023, the company currently expects its total revenues to be between RMB 3,150 million and RMB 3,250 million. This forecast already reflects our 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.

Yes. Thank you. At this time, we will begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. 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 a question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone on the call. At this time, we will pause momentarily to assemble the roster. And the first question comes from Waiting Time with Goldman Sachs.

Hi, management. Thank you, management. Regarding the recent launch of iHuiShou service which supports Apple's official retail channels in China, Can the management team provide an overview of the background of their service support and the outlook for growth and profit of this business stream in 2023? Thank you.

Thank you for the question. We are pleased to announce that we have become Apple's second official trading partner in mainland China, providing recycling supply chain services to Apple China's official website

and 45 flagship stores. Our vision is closely aligned with Apple's. We both share a focus on enhancing product and service accessibility, prioritizing user privacy and data security in recycling, delivering unparalleled user experience, and reducing the cost of decision-making as well as the economic cost of upgrading devices.

As for the specific business process, users can receive orders online through Apple's official website in China, receive them by mail, or directly take the old machine to Apple's offline official flagship store. The Apple Store staff will use the special equipment to scan the code, quickly verify, and receive refunds, and delete equipment information. In addition, some of the models will be unified and handed over to FSO for the back-end privacy, cleanliness, protection, and second-hand analysis, which will become our storage, and then complete sales. This business will be run in EP mode, because we don't need to put in advertising customers or have independent door-to-door costs, so the cost structure of this recovery is simpler.

Specifically, Apple has two alternative processes for recycling in its official retail channels in China. Users can submit recycling orders via Apple.cn and send in used devices. They can also visit Apple stores, flagship stores in person, where Apple staff use specialized devices to scan, verify, erase data, and pay on-site. Certain models are then handed over to us. as our inventories for back-end privacy erasure and standardized quality checks before the end distribution. This business is carried out under a 1P model. Since we don't need to advertise to acquire customers, and there is no store expense on our end, the cost structure is more simple.

We expect that in the third quarter, there will still be a need for improvement in technical polishing and service capabilities. We expect to escalate our tech and service capacity

in the third quarter and the recycling volume to increase following the arrival of the new iPhone lineup in September and during its major shipment in the fourth quarter. With operations and margins stabilizing next year, we anticipate an annual recycling volume of 1 to 1.5 billion RMB from this new channel based on historical market data.

In addition to the new E5, we have also recently acquired Apple's support machine and sales branch. The cooperation progress of these two Apple devices will increase Mr. Wanwu's ability to acquire high-quality goods. In the core scene, the main user service also represents the supply chain ability of the international first-tier brand to Mr. Wanwu. The recognition of privacy security protection and the company's ability to regulate rules is an important milestone for Mr. Wanwu's cooperation with brand manufacturers.

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

Thank you. And the next question comes from Joyce Chu with Bank of America.

Hello, Mr. Guan. Thank you very much. This is my question. My question is about our supply chain capacity. We have seen that the company has been focusing on supply chain capacity in the past few seasons. In this season's business, repair and refurbishment has a very obvious positive contribution to the company's GDP. Can you tell us about the joint refurbishment business that we have started? We have seen the company actually enhancing its refreshment for a couple of quarters in a row. In the performance of the second quarter, we have seen this business has made a quite positive contribution to the company's 1P growth profit. Could the management team help provide more insights into the this, like, new business and help us to understand its growth potential. Like, for example, like, you know, what percentage of, like, you know, revenue it can contribute to our 1P business. Thanks.

We have integrated the mature transformation standards and transformation capabilities of the operating centers in Huanan, Dongguan, and Changzhou, Wuhan, Chengdu, and Tianjin into four operating centers. The political ability of the supply chain covers the main market in the country. We have also increased the performance and performance improvement services of more products, including tablets, laptops, computers, smartphones, headphones, and other products, which meet the needs of C-end users and platform merchants for high-quality second-hand electronic products.

Since the launch in April last year, our RERU-referred labeled products have continuously improved our industry value chain. During the second quarter, we replicated the capabilities from Dongguan Operations Center in South China to Changzhou, Wuhan, Chengdu, and Tianjin Operations Centers, with value-added capacity covering major regional markets. We also reconditioned broader product categories, including tablets, laptops, smartwatches, earphones, etc., meeting the demand for high-quality products from both consumers and merchants.

In the second quarter, the sales revenue of Huanxinji exceeded RMB1.9 billion, and the sales revenue of a batch of products reached 7.2% and increased by 1.6%, and increased by 4.5%. We believe that with more self-serve recycling products, and then sell them after the operation center is restored. This can not only improve the quality of the product, but also increase the proportion of high-quality goods, and also promote the avoidance of the industrial chain.

During the second quarter, total sales of refurbished products exceeded 190 million RMB, accounting for 7.2% of 1P product revenues. This percentage increased by 1.6% quarter-on-quarter and 4.5% year-over-year. We believe that more of our 1P source products can go through our own facilities for reconditioning, becoming quality products while bringing greater value to the industrial chain.

At the end of July this year, we also signed the authorization of Huawei's official maintenance and continued to strengthen cooperation with brand manufacturers. In the future, we will continue to strengthen We obtained official maintenance authorization from Huawei at the end of July, further enhancing our cooperation with brand manufacturers. Looking forward,

We will continue to strengthen value-added services with closer collaboration with phone brands and industry associations to promote the compliance and healthy development of the industrial chain. In the long run, we believe that the proportion of private label RERU-referred in 1P product revenue can be increased to 30% and even more.

Thank you.

Thank you.

Thank you.

Thank you. And once again, please press star, then 1 if you would like to ask a question. And the next question comes from Jiaxing Cheng with BITG. Please go ahead. Your line is live.

Hello, can you hear me?

Yes, we can hear you.

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

Okay, thank you for the question. I will take this. Our net gap OPC margin was 1.8% in the second quarter, surpassing the 1.5 for the target we discussed earlier. This was due to our effective execution towards improving WebG gross margin and operational efficiency. and improve the 1P gross margin was mainly attributable to really refurbished products whose gross margin exceeds set of regular 1P2C products by 5% base points. We anticipate the total sales of really refurbished products at 700 million RMB, adding up 1P gross margin gradually in 2023. We credit improvements in operational efficiency to smart storage management and automated testing technologies. We optimized all the allocation to operation centers with the help of big data algorithms and condensed the number of small city-level operation stations. As a result, the service fees, logistic expenses, and the packaging fees were cut down. As we upgrade our automated inspection system to Matrix 3, our losses related to inspection mistakes decreased significantly. logistics expenses, packaging fees, and the return loss decreased by 17.6 million RMB compared to the same period in 2022, downsizing our Nangap fulfillment expenses as a percentage of total revenues by 3.7 percentage points. Overall, we expect our Nangap operating margin for this year to be exceed 1.5%, and we aim to achieve a betterment of 1% point every year. On LearningMix, we have been shifting our focus and strategic resources towards first-party businesses since the second half of 2022 to achieve more controllable operations facing complex environments. We aim at catering to diversified user needs, enhancing the recycling experiences, and enriching our quality product listing. This transition has led to a downsized learning mix for market-based service revenues. However, our platform business continues to exhibit healthy growth for this year. We expect that our platform's overall tick rate will exceed 5%. Following the strategic adjustments for pipeline consignment businesses, we are now experiencing renewed momentum in the growth of service revenue. In the second half of this year, We anticipate that the WEMC product sales revenue will continue to dominate our revenue structure, maintaining a year-over-year growth rate of over 30%. Thank you.

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

Thank you all. Thank you all again for joining us. A replay of today's call will be available on our website shortly, followed by a transcript when ready. If you have any additional questions, please feel free to email us at ir.atrenew.com. Have a good day.