ATRenew Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to AT Renew, Inc. Third Quarter 2024 Earnings Conference Call. At this time, all purchase events 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. Hello, everyone, and welcome to AT Renew's third quarter 2024 earnings conference call. Speaking first today is Kerry Chen, our founder, chairman, and CEO, and he'll be followed by Rex Chen for CFO. After that, we'll open the call to the questions from analysts. The third quarter 2024 financial results were released earlier today. The earnings price 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. For today's agenda, Kerry will share his thoughts of 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 pay attention to the safe harbor statements. 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 AT Renew does not take any obligations to upgrade our assumptions on these statements. Also, this call includes discussions on certain non-GAAP financial measures. Please refer to our earnings price 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 Perry for business and strategy updates.

Hello, everyone, and welcome to ATU Renews' third quarter 2024 earnings conference call. We are pleased to share our performance highlights, our latest practices in promoting consumer goods trade-ins, and our strategic insights on the pre-owned industry.

Our total revenue for the third quarter reached 4.05 billion, achieving year-over-year growth of 24.4%, which is in line with our focus.

To dive deeper, product revenue grew by 25.6% year-over-year. Breakdown by sources, our core recycling business revenue in mainland China increased by over 30% year-over-year, significantly outpacing the growth of the overall second-hand consumer electronics recycling and transaction market in China.

By the end of the third quarter of 2024, we will be operating 1,637 love recovery stores nationwide. The main delivery scene of the store as a recovery point is to improve the trust and acquisition of first-hand recovery supplies for users. To do this, we will continue to improve the service capability and user experience of love recovery stores, and lock in new users of love recovery as the first recovery brand.

As consumer spending slows down, we keep our pace to open new physical stores to meet growing demand for the resulting of idle goods. At the end of the third quarter this year, we had a total of 1,637 AHS stores nationwide. Physical stores as our primary consumer touchpoint to collect pre-owned products. remain the most crucial channel for building user trust and securing first-hand sources of supply. We will continue to enhance our AHS store's service capabilities and user experience to reinforce the top-of-mind brand awareness of AHS Recycle. As a result, we anticipate accelerating our store opening in the next two to three years.

On the trend of recovery, we shared in the last quarter's press conference The recovery rate has increased by 40%. The recovery rate has increased by 30%. It is worth mentioning that in recent years, Double 11 has invested in user experience and delivery through joint Jindong communication. We have created the fastest increase in records in recent years. Double 11, the recovery of Jindong channels throughout the week, the total performance increased by 77% at the same level. Among them, you are delighted to receive more and more users' love. The performance increased by 246% at the same level. the growth of the same ratio on Jindong has also reached 71%. These will be reflected in our performance performance in the fourth quarter. Under the consumer-oriented policy of national large-scale consumer products, we fully play the long-term supply of supply chain ability advantage, and the comprehensive ability from recycling, self-sufficiency, to sales construction and construction with Jindong, provide the best consumer-oriented service experience for users.

Regarding the trend of our recycling business, we shared interim data during our second quarter earnings call that highlighted the growing mainstream adoption of trading services among users. Although smartphones and other consumer electronics have not yet been provided with direct trading subsidies, we observed strong demand for trading services. In the third quarter, the value of goods collected through JD.com via regular recycling and trading services increased by over 40% year-over-year, of which trading services doubled year-over-year. It is worth mentioning that in recent single-state grant promotion, we worked closely with JD Electronics Business Group by co-investing in user experience and order fulfillment capabilities. We have achieved the fastest growth rate in recent years. During the grant promotion, the total value of products recycled via JD.com increased by 77% year-over-year. Trading solutions became even more popular, generating a year-over-year increase of 246% in value of products collected. On the sales front, 1P retail revenue generated from JD.com increased by 71% year-over-year. These highlights will be reflected in our fourth quarter earnings. Against the backdrop of China's national consumption stimulus and trading subsidies, we fully utilized our established supply chain capabilities and end-to-end fulfillment capabilities covering recycling, inspection, and distribution co-built with JD.com, relentlessly advancing our educating trading user experience. Additionally, in the third quarter, our Apple official trading program also achieved healthy growth with a steady improvement in gross profit margin sequentially,

The multi-storey recycling business is based on the scene of love recycling stores. The model is clear, the experience is good, and the performance growth is bright. In this quarter, the number of multi-storey recycling stores has increased by more than 270%, and the service income has increased by more than 400%. As of the end of September, 587 love recycling stores nationwide are equipped with the ability to recycle multi-storey products. In our category expansion efforts,

The transaction value of goods and the multi-category recycling business increased by 270% year-over-year. This asset-like platform business, providing innovative user experience, is rooted in our existing stores. In the third quarter, service revenue generated from this segment grew by 400% year-over-year. As of the end of September, 587 NHS stores nationwide offered multi-category recycling services. The asset-like multi-category recycling business also serves as a key driver for obtaining higher service frequency and store visits per user, acquiring cross-selling. It also contributes incremental profit to existing stores and strengthens the competitive position of our stores.

At the small-scale end, users' acceptance of second-hand products is increasing. Our selection of 2C retail rely on the supply chain of self-sufficiency and self-sufficiency. In the scene of the Jindong Pai Pai online, in the scene of the online store and online store sales, to meet the needs of more users for the second-hand mobile phone electronic products with high cost. In the third quarter, our selection of second-hand products in the Jindong Pai Pai channel, the online store self-sufficiency channel, On the selling end, our direct-to-consumer sales have been particularly strong as consumers are more open to pre-owned products.

Leveraging our proprietary supply chain capabilities, our effective consumer engagement channels like PaiPaiOnJD.com, AHS Recycle official websites and physical stores meet growing user demand for value-driven pre-owned electronic products. In the third quarter, 1P2C product revenue through PaiPaiOnJD.com, AHS Recycle official websites and stores as well as new media retail channels grew by 87.4%, 301.3%, and 114.6% year-over-year, respectively. In terms of platform service revenue, the three seasons achieved a 13.9% net growth, accounting for a total revenue of 9.4%.

Regarding service revenue, which accounted for 9.4% of total revenues,

It increased by 13.9% year-over-year in the third quarter on an aggregated take rate of 5.34%. Take rate of core PJT marketplace business had a 0.5% uplift compared to the same period of 2023. Take rate of PiPi Pop business adjusted down slightly, while PiPi piloted for its direct retail functions and upgraded its confinement offering.

This quarter, the group achieved a non-GAAP operating profit of 1.04 billion yuan. The non-GAAP operating profit rate reached 2.6%, and the first GAAP-level operating profit transfer reached 24.9 million yuan. As for our scale image, CFO Rex will share it later.

On the profitability front, we achieved a non-GAAP operating income of $104 million this quarter, with a non-GAAP operating margin of 2.6%, and are recording our first GAAP operating income of $24.9 million. This achievement is closely tied to our economies of scale, which our cell phone racks will elaborate on later.

Next, I would like to share my understanding of the second-hand industry growth and trend. In terms of industry growth, based on IBC's report on the second-hand mobile phone industry and platform transaction data analysis, the second-hand mobile phone consumer electronics industry in China is developing at about 10% growth rate. Our first specific judgment is that the growth rate of old and new phones has exceeded the market share, which is more popular by domestic users. It is driving the development of the second-hand industry. The second judgment is that in the period of slowdown in consumption,

We have observed referencing IDC market insights that China's second-hand consumer electronics industry is growing by roughly 10% year-over-year. We believe, firstly, Trading becomes a trendy option among users, thus outpacing and driving the growth of the industry. Secondly, as consumer spending slows down, the demand for the disposal of pre-owned products and value-for-money quality-assured pre-owned smartphones continues to grow.

As you can see, second-hand recycling and trading is a market in the growth stage. Second-hand mobile phones are the basic market for group business. What we need to insist on for a long time is the core advantages of HANSHI's long-term supply chain and the trust of users in the retail brand. High-efficiency service users and get more first-hand retail goods. At the same time, the goods on the C-end and B-end will achieve a high-efficiency flow of goods. Through the free supply chain ability, do a good job of reconciling the industrial chain, realizing that more products can be sold in 2C, making it bigger. to release the value of scale effect and industry chain. At the same time, we also believe that in the large market of second-hand consumption, whether it is mobile phone, 3G, consumer electronics products, or gold jewelry, sachets, watches, wine, shoes, etc., they all have unique user needs and scale trading value. Second-hand recycling will continue to innovate, using experience as the core, serving individual users, recycling and second-hand trading needs for mobile phone numbers and more product types.

As many of you have experienced, the secondhand market is in its growth stage. For our core secondhand consumer electronics business, which is our business foundation, our long-term strategy focuses on strengthening our scenario plus supply chain advantages and consumer trust in the AHS Recycle brand, efficiently serving users while securing more first-hand sources of supply. By integrating supplies from consumers and businesses, Leveraging our supply chain capabilities for compliance refurbishment and increasing retail sales to consumers, we are achieving effective economies of scale and unleashing the value of the industry. We believe that within this massive secondhand market, whether consumer electronics or gold and accessories, bags and watches, vintage liquor or trendy footwear, there are unique trading characteristics and substantial market value. We will relentlessly focus on innovation user experience-centric, and expand our offerings to cover more services and product categories.

On the brand, we believe that user value creation will gradually expand its influence on new media platforms such as Douyin and KuaiShou, and continue to educate and strengthen the brand mentality of the first-hand brand of Ai Hu Xiu.

As we remain steadfast in creating user value, we are committed to building AHS Recycle into a top-of-mind brand in the long run. We continue educating consumers of the AHS Recycle brand via progressive brand exposure on new media platforms such as Douyin and Kuaishou.

Looking at longer term development,

We are committed to doubling the growth rate of the industry by further acquiring user mindshare, serving their needs for competitive recycling and trading experiences, and solidifying our industry-leading position in the full spectrum of recycling, transaction, and retailing services.

In addition, in terms of ESG, since this year, Air Huizhou has launched new anti-sale activities with many well-known consumer brands, such as strategic cooperation with Olea Group. with the new version of the new version of the new version of the new version of the new version of the new version

This year, on the front of ESG, AHS Recycle has initiated the Revive the Hangxinsheng campaign in collaboration with leading consumer brands. We established a group-wide strategic partnership with L'Oréal Group, encouraging consumers to responsibly dispose of empty cosmetic containers in exchange for physical gifts of L'Oréal brands. In addition to user attraction and repeated use of our services, This initiative encourages broader consumer brands' participation in eco-friendly recycling while raising awareness about environmental protection. Now, I'd like to turn the call over to our CFO Rex for financial updates.

Hello, everyone. I am very happy to be able to communicate with you about the third quarter of the Group. This quarter, the total income of the Group has maintained a positive growth, and again achieved the Gap business theory, and also achieved the Gap business theory under Gap Coaching to reach a new bottom line. Before reading the financial data, please note that unless I prove that all the money is in RMB units and all the real data is in the same place,

Hello, everyone. We are pleased to report another profitable quarter under non-GAAP measures and the first quarterly operating profit milestone under GAAP measures on strong year-over-year growth of total revenues. Before taking a detailed look at the financials, please note that all amounts are in RMB and all comparisons are on a year-over-year basis unless otherwise stated.

In the third quarter, total revenues increased by 24.4% to $4,051 million, primarily driven by ongoing solid growth in net product revenues.

Net product revenues increased by 25.6% to 3,672 million, primarily driven by increased sales of pre-owned consumer electronics through our online and offline channels.

The service income is 3.79 billion yuan, with a growth of 13.9%. This is mainly due to the increase in service income due to the recovery of multiple services in the platform platform and platform mode. Our platform service income is a growth in the scale of transactions and a synchronized growth. The overall revenue rate of the three-level platform is 5.3%. The service income is more than 30 million yuan, which comes from the rapid development of multiple recovery services. The average cost of recycling in multiple products has been increased. Our multi-product recycling business has contributed nearly 9% of the service revenue in three seasons, and the same period in 2023 was 1.7%.

Net service revenues were 379 million, representing an increase of 13.9%. The increase was primarily due to an increase in service revenue generated from PJT marketplace and the multi-category recycling business. The growth in service revenues went along with the upward trend in the overall growth transaction value of our marketplaces, delivering an overall marketplace take rate of 5.34% in the third quarter of 2024. During the quarter, multi-category recycling business contributed over $30 million to service revenues, delivering a healthy improvement in take rate. Our multi-category recycling business attributed to close to 9% of service revenues in the third quarter of 2024, compared with 1.7% in the same period of 2023.

Now let's discuss our operating expenses. To provide greater clarity on the trends in our actual operating base expenses,

We will also discuss our non-GAAP operating expenses, which better reflect how management views our results of operations. The reconciliations of GAAP and non-GAAP measures results are available in our earnings release and the corresponding form 6K furnished with the US SEC.

The increase in the cost of goods by 24.2% is 32.13 billion yuan, which is the same as the growth of product sales. Merchandise costs increased by 24.2% to $3,243 million, in line with the growth in product sales. Growth margin at the group level was 20% in the third quarter, compared with 19.8% in the same period last year.

Gross profit margin for our one-pay business was 11.7%, compared with 10.7% in the same period last year.

On the one hand, the increase in revenue and transaction volume has led to an increase in human resources and logistics costs. On the other hand, due to the company's third quarter of the year in 2024, the online online network has grown in proportion to the relevant contract fees. The contract fee rate for NGAP has dropped from 18.7% in the same period last year to 8.5%.

Fulfillment expenses increased by 20.7% to $347 million, excluding share-based compensation expenses, which we will refer to as SPC from here on. Non-GAAP fulfillment expenses increased by 21.9% to $344 million. Under the non-GAAP measures, the increase was primarily due to, first, an increase in personnel costs and logistics expenses, as we conducted more recycling and transaction activities compared with the same period of 2023. And second, an increase in operation facility-related expenses as we expanded our store networks in the third quarter of 2024. Non-gap fulfillment expenses as a percentage of total revenues decreased to 8.5% from 8.7%. 销售费增加5.3%是3.15亿元,

In addition to SBC and InsoCo, the cost of non-exploited assets and land will increase by 12.7% to 2.57 billion yuan. The main reason is the increase in the cost of advertising and promotion activities. The loss of the cost of sales from the same period last year dropped by 6.3%.

Selling and marketing expenses increased by 5.3% to $350 million, excluding SBC expenses and amortization of intangible assets and deferred costs resulting from assets and business acquisitions. Non-GAAP selling and marketing expenses increased by 12.7% to $257 million, primarily due to an increase in advertising expenses and promotional campaign-related expenses. Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 6.3% from 7%. General and administrative expenses decreased by 0.7% to 69.3 million. Excluding SBC expenses, land-gap G&A expenses increased by 9.5% to 55.4 million, primarily due to increases in personnel costs and office-related expenses. Land-gap G&A expenses as a percentage of total revenues decreased to 1.4% from 1.6%.

Technology and content expenses increased by 35.5%

to $53.4 million, excluding SBC expenses and amortization of intangible assets and deferred costs resulting from assets and business acquisitions. Nangat technology and content expenses increased by 47.2% to $49.6 million. The increase was primarily due to an increase in personnel costs in connection with the ongoing maintenance of our operation centers and systems. Non-GAAP technology and content expenses as a percentage of total revenues increased to 1.2% from 1%. 利润层面,2020年第三季度的能干净利润。

As a result, our non-GAAP operating income was 104 million in the third quarter of 2024, representing a substantial increase of 40.9% year-on-year.

Non-GAAP operating profit margin was 2.6% compared to 2.3% in the third quarter of 2023. In addition to non-GAAP operating income, we are delighted to report our first quarterly operating income and the GAAP measures at $24.9 million. This reflected our milestone of digesting the majority of the impacts from the amortization we have been reporting.

In terms of shareholding repayment, we continue to promote repurchase. The current repurchase plan allows us to use as much as $50 million to repurchase before June 27, 2025. In the third quarter of 2020, we used $1,210 million to repurchase nearly 4.9 million shares of ADS. By the 30th of June, 2020, we have repurchased about 8.2 million shares of ADS.

In terms of our ongoing share buyback plan, under which we are authorized to repurchase up to $50 million of our ADSs through June 27, 2025, we have returned approximately $20.1 million to our shareholders for a total of 8.2 million ADSs as of September 30, 2024. In the third quarter of 2024, we used $12.1 million to repurchase approximately 4.9 million ADSs.

As of September 30, 2020, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash, cash,

As of September 30, 2024, cash and cash equivalents restricted cash, short-term investment, and funds receivable from third-party payment service providers totaled $2.4 billion. As we collected more pre-owned products when flagship smartphone models were released in September and October and obtained more products in preparation for the grant promotion during the fourth quarter, and repurchased our ADSs in the open market, total cash balance dropped compared with the end of the second quarter. Even though our cash position remains strong, safeguarding of sustainable growth obstacles.

Now turning to the business outlook. For the fourth quarter of 2024, we anticipate total revenues to be between RMB 4,740 million and RMB 4,840 million, representing an increase of 22.4% to 24.9% year-over-year.

Please note that this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change.

This concludes our prepared remarks.

Operator, we are now ready to take questions.

We will now 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. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. 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. At this time, we will pause momentarily to assemble our roster. The first question today will be from Joyce Zhu with Bank of America. Please go ahead.

我们可以怎么判断四季度还有2025年以旧换新给我们带来的业绩增长的这个潜力? 然后我大概翻译一下我的问题。 Could management help you elaborate a bit on how trading subsidies are driving your business growth? Specifically, how do you quantify the incremental business from trade-ins? and what are the expectations for trading business in the fourth quarter of 2024 and also the year after? Thank you.

First of all, we are closely cooperating with Jindong in the landing process of large-scale consumer goods resale in the country. The leading industry supports resale across the country. Through the recovery of the Jindong channel and the recovery rate of the rescue 환星 business, the recovery rate has increased by more than 40%. The recovery rate of the rescue 환星 has achieved a three-fold increase of more than 100%. The growth of the rescue 환星 continues during the double 11. The recovery rate has increased by more than 246%. The rapid growth of the Jindong rescue 환星 is mainly due to the following. Dingdong and AppSource jointly provided users with a smooth recovery and sales channel, and made joint investments during Double 11. Added the influence of mobile phone brands releasing new products before Double 11, and the importance of brand recovery improvement. Users' habits have also changed from a regular recovery order in Dingdong to a recovery order directly. Although so far, mobile phones have not yet enjoyed the direct supply of new mobile phones from all over the country, but thanks to our leading second-hand supply chain capacity and the cross-products supply capacity jointly built with Jindong, the business of using old mobile phones, 3C, and small home appliances to buy new home appliances this year can be popularized. During the Double 11, there were 100,000 orders of new home appliances purchased by users using old mobile phones.

Thank you for your question. We've been working closely with JD.com as a first mover in supporting the National Consumer Group's trade-in program. In the third quarter, our recycling and trading business through JD.com increased by over 40%, with the trading business doubled. This momentum continued during the single-state grant promotion, where trade-in recycling value increased by 246% year-over-year. There were three factors. First, convenient trading options were offered with joint efforts by JD and AHS Recycle. Second, many phone brands launched new products ahead of the grand promotion, coupled with trading subsidies. Third, consumers prefer trading services over regular recycling services. Although smartphones have not yet enjoyed direct subsidies from the current nationwide trading stimulation scheme, our partnership with JD on cross-category trading is thriving, Thanks to our industry-leading second-hand supply chain capabilities, users are actively exchanging their used smartphones and small appliances for discounts on new home appliances. For instance, there were 100,000 orders where users traded in their used phones when purchasing new home appliances during the grant promotion.

Let more consumers experience a cost-effective way of consumption. For example, we expect Jindong Telecom to sell more than 60 million mobile phones a year. As the platform cooperates, it can be improved. We continue to improve in the Jindong scene. You can see that the penetration rate is still huge. As the national economic development goal and financial policy gradually fade. We look forward to the future. increase the support of large-scale equipment updates, and expand the range and scale of consumer goods for resale. We believe that in the consumer behavior change of users, resale has the necessity to become a mainstream consumption method. We are firmly committed to the ability of the second-hand supply chain to provide efficient infrastructure support for the industry, We believe that the adoption of trading is still in its early stages. Alongside platforms and brands,

we need to continue educating users to help more consumers experience this cost-effective purchasing approach. For instance, we expect that through JD Electronics, there is nearly 60 million units of smartphones distributed through this channel annually. And with the advancement of our collaboration, we expect the penetration rate of this scenario has substantial growth rates. As the Ministry of Finance advances its social and economic development objectives and fiscal policies, we look forward to progress on their goal to enhance the support for large-scale equipment upgrades and to extend the variety and scale of consumer goods trading programs. We believe that in the evolution of consumer behavior, trading is destined to become mainstream we remain committed to strengthening our second-hand supply chain capabilities, providing efficient infrastructure support for the industry, and fostering improvements in consumer sentiment. As the next step, we continue optimizing private inquiry services, order placement, quality inspection fulfillment experience, uplifting the proportion of face-to-face fulfillment orders, ultimately bringing our services to the next level.

Thank you.

Thank you for the question.

谢谢。 The next question comes from Wang Zhao with CICC. Please go ahead.

Thank you for taking my question. Could you please provide more color on the progress of your multi-category recycling business? This business segment has shown strength this year. What's the profit contribution and how do you plan to further grow this emerging segment? Thank you.

Thank you for your question. The multi-segment recovery business is based on the long-term collection of second-hand recovery brands and the rapid development of second-hand recovery stores. This is a platform service business with a clear asset. In the face of the rapid growth of user demand, we have developed a product recovery service that has trading value such as jewelry, gold, jewelry, and wine. The recovery rate of the multi-segment recovery in the third quarter has increased by more than 270%, creating more than 30 million yuan in service income and profit. Thanks for the question.

Our multi-category recycling business is built on the AHS Recycle brand and rapidly developed by leveraging the existing AHS stores. It operates as an asset-light platform business model. To meet users' growing demand, we offer recycling services for luxury goods with gold, jewelry, premium liquor, and other high-value items. In the third quarter, the recycling value of multicultural recycling business increased by 270% year-over-year, generating over $30 million in service revenue, which was recognized as gross profit. After deducting store ends and fulfillment costs, 46% was converted to store-level operating profit. This has further enhanced the competitive strength of our store.

According to the category, gold and second-hand collectibles are the core categories of multi-classes. The scale ratio is 77% and 18% respectively. But in terms of service income contribution, the two categories are basically the same. Due to the experience of recycling service convenience, the price is competitive, the price is transparent, and the multi-class recycling service of second-hand recycling is loved by users. Breaking down by category, gold and luxury goods remain core segments, accounting for 77% and 18% of the multi-category business respectively.

In terms of revenue contribution, the two categories have similar levels. Users have embraced our multi-category recycling services due to the convenient and premium services, competitive pricing, and transparent service take rate. With the huge existing domestic prey on luxury market size and gold recycling market size reaching hundreds of millions, we process the service capabilities and pricing advantages needed to thrive in this massive market. making the long-term potential for our multi-category recycling business promising.

We are adding multi-spec recycling services to our second-hand recycling gates. Out of the 769 second-hand recycling gates, 587 of them have already achieved initial multi-spec recycling service coverage. In the future, we will add more multi-spec recycling services to our second-hand recycling gates to fully cover the high-quality user groups in the first and second-tier cities. For 769 self-operated AHS stores, 587 now automatic hardware recycling services with more services to add on down the road, gradually covering mainstream users in first and second tier cities.

In extended lower tier cities, we are exploring opportunities to integrate the services with joint operated stores. As we continue to expand AA transit store networks, we are confident in our ability to meet the reflecting needs of more users. Thank you.

The next question comes from Michael Kim with Zach Small Cap Research. Please go ahead.

Great. Good morning or good evening, everyone. Maybe just to follow up on some of your earlier comments, just curious to get your thoughts on what you're seeing in the market for pre-owned smartphones in terms of transaction volumes. It would seem like there are tailwinds on both the supply side with ongoing growth in shipments of new smartphones in China as well as on the demand side with Rising demand for used phones just given the somewhat challenging macro backdrop. So just curious to get your thoughts there.

Thank you very much for the question. Let me first answer the question of the recent exchange rate of second-hand mobile phones. First of all, from the point of view of supply, in the country's large-scale transition to the new background, although our main product-based mobile phones

Thank you for the question. First, on the supply side, under the National Trading Initiative, although our main category of mobile phones has not yet directly benefited from the subsidy policies, our cross-category trading capabilities have enabled us to better capture consumer and recycling sources.

As we have communicated in the teleconference, we have the ability to lead the supply chain in the industry, including the ability of our built-in harmonious refurbishment and preparation, which helps us achieve the improvement and sales of products. Since this year, the harmonious refurbishment coverage rate of our main revenue recovery goods has been gradually increased from the number of each position to the number of three positions that are meaningful. More effectively lock the products suitable for refurbishment and preparation, harmonious refurbishment As mentioned in previous earnings calls,

We have industry-leading supply chain capabilities, including our self-developed compliant refurbishment processes that enhance pre-owned product quality and boost sales. This year, the coverage rate of compliant refurbishment in our 1P business has grown from single digits to meaningful double digits primarily. We are more effective at identifying products suitable for reconditioning, which has resulted in sustained revenue growth from refurbished products on both a quarterly and annually basis. On one hand, through our PJT marketplace, we are meeting the needs of more retailers. On the other hand, we leverage our self-operated AHS Elect retail channels to directly serve consumers seeking quality-assured pre-owned smartphones.

From our company's selection of sales channels, In this quarter, the sales revenue of selected companies achieved 120% of the same growth. Among them, the sales revenue of second-hand stores and official networks has increased by more than three times. We believe that under the trend of slow consumption, especially in the lower-level people's market, the cost-effective second-hand mobile electronics will have a very large growth space. We will also focus on the second-hand mobile electronics

On retail distribution, our 1B2 consumer revenue grew by 120% year-over-year. Within this segment, revenue from AHS offline stores and official websites increased by over 300% year-over-year. We believe that cost-effective purchasing options are gaining increasing acceptance, especially from prudent consumers in the mass market. We continue our efforts to advance our retail brand's channel and capabilities.

Thank you. Great. Thanks for taking my question.

This concludes the question and answer session. I would like to turn the conference back over to management for any closing remarks.

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

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.