ATRenew Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to AT Renew Inc's fourth quarter and full year 2024 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 to 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 ATR News fourth quarter and full year 2024 earnings conference call. Speaking first today is Kerry Chen, our founder, chairman, and CEO, and he will be followed by Rex Chen, our CFO. After that, we'll open the call to questions from analysts. The first quarter and full year 2024 financial results were released earlier today. The earnings press release and IR deck 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 Carrie and Rex will join the Q&A session. Please pay attention to the safe harbor statements. Some of the information you 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 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. And now I'd like to turn the call over to Kerry for business and strategy updates.

Hello, investors and analysts. Welcome to the 4th quarter of the G2 Group's 4th quarter. We are delighted to share with you the 4th quarter and the year-round performance of the Group, and update our strategic thinking about the second-hand industry and the development path of 2025.

Hello everyone and welcome to AT Renews' fourth quarter and full year 2024 earnings conference call. We are excited to share our business updates, our strategic insights into the pre-owned industry, and our development roadmap for 2025.

We have exceeded our expected revenue and profit targets in the fourth quarter and the entire year. Q4's total revenue exceeded the previously provided index high. with a growth of 25.2% to 48.5 billion yuan, with a total annual income of 163.3 billion yuan, with a growth of 25.9%. This has significantly exceeded the growth of the second-hand mobile phone 3C industry and the growth of the domestic consumer market. In terms of profits, the operating profits of Sikido and Nangap of the whole year are 1.3 billion yuan and 4.1 billion yuan. with a growth of 61% and 62.8%. In terms of profit, the non-GAAP operating profit of the fourth quarter is 2.7%, and the non-GAAP operating profit of the whole year has also reached the internal target of 2.5%. The total number of second-hand goods transactions of the whole year is more than 35.3 million orders, and health growth. We believe that First, I'm delighted to report that we realized total net revenues and profits ahead of targets for the fourth quarter and full year 2024.

Revenues for the fourth quarter exceeded the high end of our guidance, growing 25.2% year-over-year to 4.85 billion RMB. Full-year revenue reached $16.33 billion, representing a 25.9% year-over-year growth, significantly outpacing the growth rates of the pre-owned electronics industry as well as the national retail sales of consumer goods. On profitability, our NANGAP income from operations was $130 million in the fourth quarter and $410 million in the full year 2024, growing 61% and 62.8% year-over-year, respectively. In terms of margins, land gap operating margins, as we expected, were 2.7% in the fourth quarter and 2.5% in full year 2024. The total number of transactions grew healthily to over 35.3 million. With China's stronger support and subsidies backed by ultra-long special treasury bonds to large-scale renewal of equipment and trading of consumer goods in 2025, AHS Recycle stands at the forefront of a promising growth era.

To be specific, the product revenue of the fourth quarter increased by 26.6% in the same ratio. We focus on self-sufficiency recovery business, do a good user experience, and achieve more from the C-end user recovery to the C-end user sales of the industry chain. In terms of C-end recovery, we see that consumers' mood of change has improved. Second recovery, through long-term management of door-to-door high-quality scenarios, firmly grasp the acquisition of first-hand goods. At the same time, we and our strategic partner, Jindong, based on the industry-leading supply chain capability foundation, jointly upgrade delivery services. As a result, in the fourth quarter, we have received more than half of the recovery rate in the recovery recovery in the recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery recovery

Zooming in, product revenues for the fourth quarter grew by 26.6% year-over-year. We focused on growing our 1T business and further advancing our user experience. This allows us to enhance the end-to-end cycle of direct engagement with consumers at the front of recycling and retailing. On recycling from consumers, we sourced an increasing volume of first-hand supplies from individual users as their demand increased. AHS stores have been the quality scenarios for fulfillment. In the meantime, we collaborated with JD.com as we master industry-leading know-how and supply chain capabilities. Together, we introduced our next-level fulfillment services to users. In the fourth quarter, Trillium contributed over 50% of the total recycling value in our exclusive service for JD's recycling program, becoming a mainstream consumption solution for users. We attribute the results to our investment into trading offering four years ago, which has incrementally driven consumption growth.

In terms of C-DAN sales, Jindong PaiPai, AiHuiShou, MenDian and GuanWang, the B2C sales ability of the new media channels has achieved a breakthrough. We use the supply chain ability to integrate a batch of goods, improve the selection efficiency of B2C suppliers, and launch a sales-setting project. to increase the number of customers who can buy and sell at the C-end by three times. We have further improved our regulatory review process, ensuring that low-price goods continue to supply, and customers can rest assured. As a result, our B2C selective sales business has achieved a milestone of 5.5 billion RMB throughout the year. In the fourth quarter, the two C-end

Under direct sales to consumers, PiPi selection on JD.com, physical stores and online portals of AHS Recycle, and new media distribution channels all had breakthroughs. We leveraged our supply chain capabilities and established an integrated inventory system, advancing our efficiency in screening and picking retail products. we launched a pilot program of the on-demand refurbishment. It allows us to display multiple product options and conduct on-demand refurbishment only when a consumer has made an order. We also polish our refurbishment processes, ensuring ample supplies of value-for-money, quality-assured products to our consumers. To name a few results we made, the total GNV of our 1P2C sales reached a new milestone at 5.5 billion RMB in 2024. Retail revenue as a percentage of net product revenues was 29% in the fourth quarter, up by 8 percentage points year-on-year.

有货源还要有好的传播。 我们在2024年重点孵化了新媒体团队, 着手打造爱回收品类专家,自营严选好货的用户心智。 我们通过抖音、快手、小红书等新媒体平台增加曝光, We believe that in the second-hand recycling field, there is still a lack of high-quality brands like Ai Huishou. There is still room for brand new construction. 我们清晰地看到,以旧换新是一个增量市场,还有很多在京东和线下购买新机的用户从未体验过以旧换新服务。 We coupled marketing strategy and prioritized the development of our new media department in 2024.

This established a consumer mindshare that AHS Recycle is the expert in recycling numerous categories of products and offers valuable money quality products. We spent 100 million yuan on new media marketing to increase our brand exposure across Douyin, Kuaishou, and Xiaohongshu, and promoted our location-based in-store services with content developed in-house. This was a valuable approach to raise our brand and service awareness as trading subsidies were deployed. Once again, we want to emphasize that AHS Recycle is a unique brand name with a huge potential in the secondhand industry. Trillion has a clear growth outlook as the massive consumer growth is still new to this option.

多品類回收業務一方面附用了愛回收門店的基礎能力,提升了單店產出。 On the other hand, it contributes a significant amount of profit to the operating model of the door shop. In 2024, in terms of the ability construction of multiple products, we actively accelerate the price response, reduce the acceptance rate of customers in the door shop service market, and increase the recovery price. In the whole year, the turnover of multiple products in the recovery free environment has increased nearly three times, contributing 8.6% of the service income in 2024, and 2.3% in the same period in 2023. Second-hand recovery has established a standardization of various types such as second-hand mobile phones, 3D, second-hand luxury goods, gold, wine, shoes, and so on. Second-hand recovery not only recognizes the brand of second-hand mobile phones, but is also recognized by more consumers.

In terms of category expansion, we rapidly extended our multi-category recycling and services to 673 AHS stores in 2024. More consumers recognize that AHS Recycle serves diversified needs and categories. Multi-category recycling and services grew in our existing stores and basic fulfillment capabilities. This leveled up store performance and contributed incremental operating profits to store operations. As for the development of multicultural recycling services in 2024, we strengthened our pricing capabilities, reduced in-store service time, and improved price acceptance. In 2024, multicultural recycling services transaction volume increased nearly three-fold year-over-year, contributing 8.6% of total service revenue, up from 2.3% in 2023. We comprehensively enhanced AHS's standardized one-stop ability to serve users recycling various items, including consumer electronics, luxury goods, gold, premium liquor, shoes, and clothing. More consumers are now realizing that AHS Recycle offers more than just mobile phone and electronics recycling.

In terms of trading platform, Taiji Tang's platform service revenue in 2024 has been steadily increased. Tai Chi Tang is a second-hand mobile phone in China. The location of the 3G delivery center is further expanded. The number of registered businesses on the platform has exceeded 850,000. Tai Chi Tang is also supporting the local new media traffic at the seller's end. The buyer's end is divided into services and live delivery. Make innovations. Comprehensively improve the vitality of the business environment. Increase the amount of reserves for national stock in 2025. Set a good foundation. Tai Tai Pop business upgrades to the selling mode. Our marketplaces.

The service revenue of Paijitang saw a steady increase in 2024. The positioning of Paijitang as the source center of domestic secondhand smartphones and consumer electronics was further strengthened, with the number of registered merchant users on the platform exceeding 850,000. Paijitang also made innovations in local new media traffic support for sellers, tiered services for buyers and live streaming supply, which generally enhanced the vitality of the merchant ecosystem and laid a solid foundation for the business expansion in 2025, supported by a national subsidy. Taipei Pop's business was upgraded to the consignment model, which aggregated fragmented sources of supply and provided them with unified store operations, quality inspection, and after-sales customer service. This comprehensively reduced the cost for small and medium-sized business owners, who wish to expand their retail business on JD.com. The transaction value of HiPi Confirm and Business increased nearly six times year-on-year.

Looking back at 2024, we still have some business issues worth mentioning. First, Apple's annual revenue for its official new-to-be business is 10.5 billion yuan. While we are ensuring users' experience, we have achieved a better profit rate in the fourth quarter by optimizing the price and operation strategy. Second, in terms of overseas business, in the second half of 2014, we adjusted some of the loss-loss business lines. In terms of revenue, there was a gradual decline. We believe that second-hand mobile phones are still the world's most valuable product. Second-hand mobile phone exports and cross-regional circulation have a major opportunity. We will continue to explore innovation and update investors and analysts in the future at the right time.

Reviewing 2024, certain business segments were in a transition phase as we refined our strategy. Firstly, in our Apple official trading business, we adjusted pricing and operational strategy without jeopardizing user experience, realizing an improved profit margin in the fourth quarter. Segment revenue was 1.05 billion RMB in 2024. Secondly, in terms of our overseas businesses, we closed certain lock-making businesses resulting in a downside overseas product revenue. However, we believe that smartphones remain one of the most globally tradable and valuable categories in the pre-owned market. There is substantial opportunity in the export and cross-regional circulation of pre-owned smartphones, and we will approach this with innovative approaches. We will provide further updates at appropriate times.

Looking forward to 2025, our strategy is focused on three principles. Looking ahead to 2025, our strategy will focus on three commitments.

Commitment to experience-driven growth with further investment in retail business. Commitment to building the AHS recycle brand. Commitment to strengthening our fulfillment capabilities.

The first point is to focus on the strategy of investing and selling at the C-end. The company has upgraded the user experience drive mechanism, set up a group user experience committee, specializing in consulting and optimizing user experience. In terms of recovery prices, the ratio of face-to-face transactions, the timely rate of entry, the discount rate after inspection, and many other user experience indicators continue to improve and optimize.

First, we will concentrate resources on direct engagement with consumers at the front of resourcing and retailing. We have upgraded a user experience-driven mechanism and set up a group-level user experience committee dedicated to analyzing and optimizing user experience. Multiple user experience metrics, including recycling prices, the proportion of face-to-face transactions, two-door service punctuality, and post-inspection negotiation rates are steadily optimizing.

In the past four seasons, we have seen a rapid growth in the supply chain and platform promotion. This is due to the service capability and second-hand supply chain capabilities of our previous joint construction in Jindong. Both systems are cooperating and operating efficiently. More first-hand goods are received from C-end users. On January 20, 2025, the government officially announced that mobile phone, tablet, smart watch, bracelet, and other three types of digital products will be subsidized online and offline. For new machines that cost less than $6,000, 15% will be subsidized for the cost of $500. During the holiday season, our C2B recovery performance achieved more than 70% of the same growth, effectively serving the needs of national users.

Since the fourth quarter of 2024, driven by subsidy rollouts and the platform promotions, we have seen rapid growth in trading demand from users of JD.com. This is attributed to our joint efforts with JD.com in building a robust second-hand electronics trading service capability and supply chain, enabling seamless system integration and efficient operational collaboration. As a result, we have forced more first-hand supplies directly from individual users. On January 20, 2025, the national trading subsidy for mobile phones, tablets, and smartwatches were officially launched both online and offline, offering a 15% subsidy capped at 500 RMB for new devices priced below 6,000 RMB. During the Chinese New Year holiday, our C2C recycling business grew by over 70% year-on-year, effectively meeting the trading needs of users nationwide.

At the same time, we play a leading role in the supply chain of the leading industry, and carry out regular refurbishment and preparation. We have the authorization and refurbishment knowledge of well-known leading brand manufacturers. We can use brand accessories for value-added processing, and we have improved our self-serve selection and retail sales. Our self-serve selection and retail sales business accounts for one batch of business. Leveraging our industry-leading supply chain capabilities, we conduct compliant refurbishment,

With authorization from leading manufacturers, we use genuine parts for value-added processing, enhancing the availability for retail-ready products for our 1P business. 1P2C retail revenue as a percentage of total product revenues has steadily increased from 17% in the first quarter of 2023 to 29% in the fourth quarter of 2024. And our meet-to-long-term goal of this proportion is 50%. Additionally, by leveraging PiPi's consignment capabilities, we expect to double our offerings and consignment sales in 2025.

Secondly, we insist on investing in the construction of a second-hand app and a second-hand brand. In the second-hand recycling field, second-hand recycling is a rare and high-quality brand. Currently, there are still a lot of ordinary users who have not yet experienced recycling and resale service. There are a lot of third-party recycling stores in the industry. This is also a supplement to our precise e-commerce and brand scene. Second, we remain committed to building AHS Recycle App and this brand.

In the pre-owned recycling industry, AHS Recycle is a rare, high-quality brand. However, a significant portion of users have yet to experience recycling for trade-in services, and the industry remains fragmented with many third-party recycling and repair shops lacking brand recognition. This presents huge opportunities to improve both recycling penetration and brand consolidation. Building on our 2024 brand building efforts, We will actively explore new media capabilities to position AHS Recycle as the top brand for recycling services in China. We will leverage platforms like Douyin and Xiaohongshu for marketing, complementing our existing precise e-commerce and brand partner scenarios. Through production of new media content focused on recycling services, we aim to attract more users to AHS stores to experience our services. Additionally, multi-category recycling and eco-friendly initiatives like the Revive campaign will encourage users to explore the AHS Recycle app and mini program, showcasing our service capability.

第三点,坚持投入交付能力的建设。 我们在新媒体渠道对爱护收品牌的持续投入预计将会带动更多线上流量到店,支撑更多门店的扩张。 In the first and second-tier cities, the rapid growth of multi-product recovery businesses in the new product model that overlaps the first and second-tier cities has optimized the profit model of second-class recovery stores. It also supports the opening of more stores. In the mid- and low-tier cities, we support the local traffic construction of new media IP local traffic, improve local traffic, improve store management capabilities, and also support the opening of more joint stores. Third, we remain committed to enhancing our fulfillment capabilities.

Our continuous marketing efforts for the AH Recycle brand are expected to drive more online traffic to our physical stores, which drive our store openings. In first- and second-tier cities, the rapid growth of our asset-light multicultural recycling business has optimized the profitability model of our stores, supporting the opening of new stores. In lower-tier cities, we support partners in building local traffic through new media IPs. With greater local traffic, the operational capabilities of our franchisee will be enhanced, thus further converting to an extended franchisee network. In areas where in-store visits are less convenient, we are strengthening our two-door service capabilities to increase service density and meet users' demand for face-to-face transactions. Over the next three years, We aim to establish a nationwide network of 5,000 stores and a 5,000-member two-door service team, ensuring a robust fulfillment network to cater to diverse recycling and trade-in needs.

Based on the above three strategic focus points, we are confident in capturing the opportunity for supply and growth brought by the Ministry of State, to acquire more first-hand recovery goods with more extensive front-end delivery capabilities. and achieve more 2C sales through efficient supply chain capabilities.

Based on the three strategic focuses, we are confident in capturing an increase in growth opportunities on the supply side driven by national subsidies. By expanding our fulfillment capabilities, we will secure more first-hand sources of supply, utilize our supply chain capabilities to drive more retail.

We believe that

2025年对于二手行业和爱回收而言将是充满机会的一年。 We believe for the pre-owned industry and AHS recycle, 2025 is a year full of opportunities. 下面请CFO Rex解读一下财务情况。 Now I'd like to turn the call over to CFO Rex for financial updates.

各位投资人和分析师大家好,2024年我们取得了出色的业绩表现。 At the same time as developing core recovery business and innovation business, we achieved double growth in revenue and profitability. The total revenue of the whole year increased by 25.9% to 16.3 billion yuan. The business profit of the whole year increased by 62.8% to 4.1 billion yuan. This is the first time that we achieved business profit in the whole year under GAAP. This performance reflects the success we achieved in the construction, promotion and continuous development of the scale.

Hello, everyone. I am pleased to announce that we achieved strong financial performance in 2014, driving revenue and profitability growth as we developed our core recycling businesses and cultivated our innovative businesses. Total net revenues for the year increased by 25.9% to 16.3 billion RMB. Adjusted operating income grew significantly, rising 62.8% to 410 million RMB. and we are proud to have achieved our first GAAP operating income for the year as well. These results demonstrate our success in building out our economies of scale and delivering on our mission of driving sustainable development.

Before taking a detailed look at the financials of the fourth quarter of 2024,

Please note that all amounts are in RMB and all comparisons are on a year-over-year basis and not otherwise stated.

第四季度,集团总收入增长25.2%至48.49亿元,主要得益于产品收入持续稳健增长。 产品收入增长26.6%至44.6亿元,主要得益于公司回收规模的增长以及线上渠道二手消费电子产品销售的增长。

In the fourth quarter, total revenues increased by 25.2% to $4,849 million, primarily driven by ongoing growth in our net product revenues. Net product revenues increased by 26.6% to $4,461 million, primarily due to the growth in our reflecting scale and the sales offering on consumer electronics. through our online channels.

Net product revenue for the full year reached 14.84 billion, representing a year-on-year increase of 27.3%. Our platform service revenue has increased with the increase in trading size. The comprehensive fee rate of the fourth quarter is 5.36%. During the period, multi-segment recovery business contributed more than 40 million yuan of service revenue, exceeding 10% of the group's quarter service revenue. Compared with the 5.5% increase in the fourth quarter of 2023, the service revenue of the whole year is 14.8 billion yuan, including a growth of 13.5%. The comprehensive service fee rate is 5.35%, Net service revenues were $389 million in the fourth quarter, representing an increase of 10.7%.

The increase was primarily due to an increase in the service revenue generated from PJT marketplace and multi-category recycling businesses. The growth in service revenues went along with the upward trend in our marketplace's overall growth transaction value, delivering an overall marketplace take rate of 5.36% in the fourth quarter of 2024. During the quarter, our multi-category recycling business contributed over $14 million to service revenues, representing over 10% of service revenues, a significant increase from 5.5% in the same period of 2023. Net service revenue for the full year reached $1.48 billion, representing a 13.5% year-on-year increase with an overall tick rate of 5.35%, of which our multi-category recycling business contributed $130 million, representing a threefold increase year-on-year. This accounted for 8.6% of total service revenues in 2024, compared to 2.3% in 2023.

Now, let's discuss our operating expenses.

To provide greater clarity on the trends in our actual operating-based expenses, We will mainly discuss our non-GAAP operating expenses, which better reflect how measurement views our results of our operations. The reconfigurations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6K furnished with the US SEC.

In the fourth quarter, the product cost increased by 24% to 39.05 billion yuan, which is the same as the growth of product sales. Our EP business profit rate is 12.5%, . . . . .

In the fourth quarter of 2024, merchandise costs increased by 24% to 3,905 million, in line with the growth in product sales. Growth profit margin for our 1P business was 12.5%, showing a trend of stabilization and recovery. compared with 10.6% in the same period last year. The improvement of gross profit margin in 1P business was mainly driven by our end-to-end supply chain strength and refurbishment capabilities, contributing to higher margin D2C sales. We also optimized the performance of Apple's official trading program, driving both revenue growth and margin expansion in the fourth quarter. Merchandise costs for the full year increased by 26.6% to $13.09 billion, with a one-piece gross margin of 11.8%, compared to 11.3% in 2023.

第四季度,履约费用增长31.8%至3.97亿元, Nungap 履约费用增长32.7%至3.92亿元, Nungap 履约费用增长的主要原因有, 以下几点,一,与2023年同期相比, The increase in recovery and transaction volume has led to an increase in human resources and logistics costs. 2. Due to the expansion of the offline network and operating center production capacity and operating costs in the fourth quarter of 2024, the fee rate for LNGAP from 7.6% rose to 8.1%. The fee rate for LNGAP for the whole year was 13.6 billion yuan, which increased by 23.7%. The fee rate for LNGAP for the whole year was 8.3%, and the fee rate for LNGAP for the year was 8.5%.

In the fourth quarter of 2024, fulfillment expenses increased by 31.8% to 397 million. Non-GAAP fulfillment expenses increased by 32.7% to 392 million. Under the non-GAAP measures, the increase was primarily due to an increase in personnel costs and logistics expenses as we conducted more recycling and transaction activities compared with the same period of 2023. and an increase in operation-related expenses as we expanded our recycling fulfillment network and operation center capacity in the fourth quarter of 2024. Non-GAAP fulfillment expenses as a percentage of total revenues increased to 8.1% from 7.6%. Non-GAAP fulfillment expenses for the full year increased by 23.7% to $1.36 billion while the non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.3% from 8.5%.

第四季度,销售费用增加18.7%至3.76亿元, non-GAAP销售费用增加30%至3.21亿元, 主要原因为广告和促销活动相关的费用增加, 以及与渠道服务相关的佣金费用增加。 non-GAAP销售费用率从6.4%小幅上升至6.6%, In the fourth quarter of 2024, selling and marketing expenses increased by 18.7% to $376 million.

Non-GAAP selling and marketing expenses increased by 30% to $321 million. primarily due to an increase in advertising expenses and promotional campaign related expenses and an increase in commission expenses in relation to channel service fees. Non-GAAP selling and marketing expenses as a percentage of total revenues increased slightly to 6.6% from 6.4%. Non-GAAP selling and marketing expenses for the full year increased by 14.8% to $1.09 billion while non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 6.6% from 7.3%.

第四季度,管理费用增长46.5%至9100万元, non-GAAP管理费用增长71.1%至7700万元, 主要由于能源成本增加, non-GAAP管理费用率从1.2%上升至1.6%, 全年non-GAAP管理费用为2.5亿元。

In the fourth quarter of 2024, general and administrative expenses increased by 146.5% to 91 million. Non-GAAP G&A expenses increased by 71.1% to 77 million, primarily due to an increase in personnel costs. Non-GAAP G&A expenses as a percentage of total revenues increased to 1.6% from 1.2%. Non-GAAP G&A expenses increased by 28.2% to 250 million, while non-GAAP G&A expenses as a percentage of total revenues remained flat year-over-year at 1.5%.

第四季度,研发费用减少10.7%至5700万元, 冷盖研发费用减少9.3%至5290万元, In the fourth quarter of 2024, technology and content expenses decreased by 10.7% to 57 million.

Non-GAAP technology and content expenses decreased by 9.2% to 53 million. The decrease was primarily due to a decrease in personnel costs. Non-GAAP technology and content expenses as a percentage of total revenues decreased to 1.1% from 1.5%. Non-GAAP technology and content expenses for the full year increased by 10.7% to 190 million, while non-GAAP technology and content expenses as a percentage of total revenues decreased to 1.2% from 1.3%.

As a result, our non-GAAP operating income was 131 million in the fourth quarter of 2024.

representing an increase of 61% year-over-year. Non-GAAP operating profit margin was 2.7% compared to 2.1% in the fourth quarter of 2023. Our non-GAAP operating profit for the full year reached $410 million, increasing meaningfully by 62.8%. Non-GAAP operating profit margin in 2024 was 2.5% compared to 1.9% in 2023.

In terms of shareholder returns, we are continuing to promote rebates. The current rebate plan allows us to use no more than US$50 million in rebates before June 27, 2025. In the fourth quarter of 2024, we used US$5.8 million to rebate nearly 2.1 million shares of ADS. As of December 31, 2024, we have already returned US$25.9 million to shareholders in the form of a total rebate of about 10.3 million shares of ADS.

In terms of shareholder returns, we continue to push forward with repurchases, and our current repurchase program allows us to repurchase up to $50 million of our ADA assets through June 27, 2025. In the fourth quarter of 2024, we used $5.8 million to repurchase approximately 2.1 million ADA assets. As of December 31, 2024, We have returned 25.9 million US dollars to our shareholders for a total of 10.3 million ADSs.

As of December 31, 2024, cash and cash equivalent restricted cash

Short-term investments and funds receivable from third-party payment service providers totaled 2.9 billion. The company's financial reserves are sufficient to support reinvestment in business development and shareholder returns.

Regarding the first quarter of 2025, we expect that the total revenue will be between 45.5 billion and 46.5 billion yuan, corresponding to the growth of 24.6% to 27.4%. To sum up, In the first half of 2023, we launched Apple's official and new business and prioritized the scale of the business. In the first quarter of 2020, the business generated high-tech product revenue, and in the first quarter of 2025, the company adjusted the business strategy. The scale of the business is expected to decline, but the operating profit rate is positive. In addition, since 2020, we have made significant adjustments to some overseas losses. These two factors have been considered in the first quarter of 2025. Now turning to business outlook.

For the first quarter of 2025, we anticipate total revenues to be between 4,550 million RMB and 4,650 million RMB, representing a year-over-year increase of 24.6% to 27.4%. Notably, the first quarter of 2024 marked a high base of product revenue for Apple trading business. In the first quarter of this year, the company adjusted its operational strategy and estimated that the scale of this business would decrease, but the operating profit margin could turn positive. In addition, we downsized some overseas businesses with negative margins. These two factors have been taken into account in the outlook for the first quarter of 2025. 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.

Thank you. We will now begin the question and answer session. To ask a question, you may press star and then 1 on your telephone keypad. 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 and then 2. When asking the question, please state your question in Chinese first, then repeat your question in English for the convenience of everyone in the call. At this time, we will pause momentarily to assemble the roster. The first question that we have is from Joyce Ju of Bank of America. Please go ahead.

Good evening, Manager Ceng. Thank you for accepting my question. I have a question here. This year, we also saw that the National Revenue Department brought a pretty strong change of trend. I would like to know how the management plan will grasp the opportunity to develop in 2025. What should we do to lighten the stimulus factors brought by the National Revenue Department's mobile phone 3C? Can you provide us with some directional guidance for the overall increase in 2025? Then let me translate my question. Hi, management. Thank you for taking my question. Could you kindly share your plans to capture the growth opportunities in 2025 on the back of nationwide consumer electronics trading subsidies? May you help us quantify the add-ons from this year's subsidy? What's the outlook for growth of your top line like, you know, for this year? Thank you.

Thank you. I want to answer that. We believe that China's exchange of second-hand mobile electronic products and the service market still have a huge space for development. From the new machine market that is emerging in the industry, in 2024, the new machine sales market will warm up. In the whole year, China's smart mobile new machine export volume has increased by nearly 6% to 2.9 billion units, mainly due to the gradual release and consumption policy of the demand for new machines. Thank you for the question.

We believe China's pre-owned electronics market has significant untapped potential. Looking upstream, new smartphone shipments in China rebounded in 2024 by nearly 6% year-over-year to 290 million units. This was driven by a steady increase in replacement demand and supported consumption policies. Meanwhile, according to IDC research, China's pre-owned smartphone recycling and transaction industry has sustained a double-digit growth.

We believe that the national stock market is determined by the promotion of mobile phone recycling. Mobile phone recycling will use its unique position and leading recycling ability to seize the opportunity to achieve the improvement of recycling penetration in mainstream scenarios. The national trading subsidies are inevitably a growth engine for our recycling business.

By leveraging our unique industry position and front-end capabilities, we will strive to seize opportunities and increase our penetration rates in core scenarios. As China deploys national subsidies to mobile smartphones, tablets, and smartwatches in 2025, we witnessed a significant increase in C2B recycling volume in January and February, thanks to our front-end fulfillment, pricing, and system capabilities.

We will also use the ability to carry out the integration, and the high-efficiency cycle ability of TSMC as the core, promote more effective and profitable circulation of second-hand mobile 3C products. Through the sale ability of the online store and official website, it serves the needs of consumers across the country for the purchase of second-hand mobile. In terms of the ability to recycle, on the one hand, through multi-spec recycling services to increase user access, We aim to further deploy our combined refurbishment capabilities

and high turnover capabilities of PJT marketplace. This is to drive more efficient and profitable circulation of pre-owned consumer electronic products. Through AHS stores and official website, we are meeting the growing consumer demand for high-quality pre-owned products nationwide. On our recycling service capabilities, we expand our user range by offering a broader area of product service capabilities, in addition to more stores and larger two-door service teams. We deliver upward recycling results and take rates for product categories, while further establishing our product catalog and pricing capability. As a result, we aim at an accelerated growth of the top line in 2025.

具体看路径,为承接更广范围的已旧换新的业务量, 我们计划在2025年加速开店,加速建设上门团队。 The goal is to add 800 love recovery stores and 1,000 new staff members in a year. Basically, we want to achieve a face-to-face recovery network within the national scope. We want to further improve user experience and demand transformation. At the same time, we plan to increase the investment in love recovery brands. We will release more vivid love recovery brands and recovery service content for new media platforms such as Douyin and Xiaogongshu. to consolidate the user mindset of the national first recovery brand, to attract more users to the store or to order online. We believe that the second-hand industry is in a good trend in 2025. We should prepare for long-term business development through reasonable brand power and transaction power construction. In the long term, the group will benefit from the position and scale effect of the leading industry and gradually release business profits.

On tactics, we plan to speed up store openings and expanding our two-door service team by net adding 800 stores and 1,000 two-door stores in 2025. This advances our national face-to-face fulfillment network that will provide instant recycling and cashback services. We convert more customers with such a unique user experience. We will also boost brand investment by amplifying AHS's presence on new media platforms like Douyin and Xiaohongshu, Reinforcing AHS Recycle's position as the top of mind brand name for recycling services and attracting more users to our offline and online touch points. Given the bright growth outlook for the pre-owned market, we should value rational investment into brand awareness and fulfillment capabilities in preparation for long-term development. In the mid to long term, our industry leadership and economies of scale will gradually deliver sustained profitability. Thank you for the question.

The next question we have is from Jiao Wan of CICC. Please go ahead.

Hi. Good evening. Thank you for taking my questions. We know you have made great progress in reducing costs through automatic quality inspection and operations in recent years. Do you pay attention to recent AI models like DeepSeq and have a plan to optimize your business with AI? Thank you.

好,谢谢提问。 爱回收是一家场景驱动的产业互联网公司, 通过自营回收和平台业务实现规模效应, 提升运营的标准化程度, 积累了大量的内部的专有知识。 If you renew is a scenario-driven industry internet company,

It's achieved scale effects and enhanced the standardization of operations through its own recycling and platform businesses, accumulating enormous know-how. We have AI applications in some business scenarios. For example, in our automated quality inspection centers in Dongguan and Changzhou, we have extensively deployed AI image recognition to automatically determine the appearance and inspect main boards and components. Improving inspection accuracy, reducing cost of quality inspection, and reducing manual inspection errors.

At present, some of our business segments are still dependent on artificial intelligence. Through AI, the space to achieve efficiency improvement is very objective. We have been actively embracing the trend ahead since the fourth quarter of last year. Through some open source large-scale deployment applications, we have gradually realized some industry application innovations. For example, the improvement of the integration efficiency of the national gateways, the digital skills training of the number of employees in the operation center, the software development process of lower code in the headquarters office, and the cooperation efficiency among the teams in the internal knowledge library are also improved. This year, we will also improve the deployment of AI applications in more departments and more business segments, focusing on intelligent customer service, At present, some of our business procedures need human operation, and there is considerable room for efficiency improvement through AI.

Since the fourth quarter of last year, we have actively embraced a cutting-edge trend and achieved some initial industry application innovations through the deployment of some open-source large summary models. For example, the efficiency improvement of the compliance check of our store operations, digital operation trainings at operation centers, coding for back-office-related requirements, internal knowledge database, etc., This year we will further deploy AI applications in more departments and business scenarios, focusing on the development of AI plus circular economy innovative applications in the fields of intelligent customer service, intelligent quality inspection, and intelligent pricing to achieve cost reduction and efficiency improvement in more recycling scenarios and business processes, and bring more value to customers.

In addition, we expect AI will be more widely deployed on mobiles and PC terminals

leading to the renewal of AI hardware. Given we have focused on personal and household electronic products, we believe this presents a significant long-term business opportunity for us. Thank you. Thank you.

The next question we have is from Michael Kim of Zax Small Cap Research. Please go ahead.

Great. Good morning or good evening, everyone. Just one follow-up question for me. Can you just flesh out your updated thinking on capital management priorities, particularly as it relates to reinvesting for growth versus returning capital to shareholders via buybacks?

Thanks. Okay. I'll answer this question. As shared in the previous part, our second-hand recovery industry will continue to grow in the next three to five years. Therefore, we will reset the rapid growth track and set internal business goals for 2025. Therefore, we will strengthen the service capability of the front-end users and the new user construction of the recovery brand in two aspects. We will match the business scale and carry out some OPEX re-investments. In the past one to two years, we have focused on developing new business. I will address this question.

As mentioned earlier, we remain optimistic about the growth of the secondhand recycling industry over the next three to five years. Therefore, we have set real acceleration as our internal target for 2025. Consequently, we will make some OPEX reinvestments in line with the business scale to enhance the service capabilities on the front end for users, and to build a user perception of AHS Recycle's brand name. The emerging businesses that we have focused on developing over the past one to two years, such as Nauticat Recycling, Compliant Refurbishment, and Apple's official trading program, have already demonstrated healthy growth and profitability, and thus basically require no additional investment.

我们的业务整体上是一个重运营,轻资产的模型。 Our business model is generally asset-light but operational-intensive.

We will adopt a balanced approach when expanding our store network and fulfillment capabilities in 2025. The adjustment and upgrade of our South China operation center is complete, so there will not be too much additional capex in 2025. We aim to maintain a healthy non-gap operating profit margin to support business reinvestment and shareholder returns.

We are confident in our business outlook and will further execute on our current repurchase plan.

We will also balance the use of cash and invest more when industry opportunities grow. The ultimate goal is to increase long-term shareholder returns. The repurchase program is valid until the end of June 2025. We will continue to actively engage with our board of directors during the interim for extension.

Got it. Thanks for taking my 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. A replay of today's call will be available on our IR website shortly, followed by a transcript already. If you have any additional questions, please feel free to email us at ir.eaterynew.com. Have a good day.

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