ATRenew Inc.

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to AT Renew, Inc.' 's first quarter 2026 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, Ms. Jessie Jin, Head of Investor Relations. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to HRE News first quarter 2026 earnings conference call. Speaking first today is Terry Chen, our founder, chairman, CEO, and he will be followed by Rex Chen, our CFO. After that, we will open the call to questions from the analysts. The first quarter 2026 Financial results were released earlier today. The earnings press release and investor slides accompanying this call are now 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 participate during the Q&A session. Please note our safe harbor statements. Some of the information you will hear during our discussion today will consist of forward-looking statements, and I refer to you 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 ATR&U 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 request 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. Now I'd like to turn the call over to Kerry for business and strategy updates.

Hello, investors and analysts. Welcome to the first quarter of the WFJF's first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of the first quarter of

Hello, everyone, and thank you for joining A3 News' first quarter of 2026 earnings conference call. We are pleased to review our operating results and share our latest perspectives regarding capability building in the second-hand industry this year.

今年年初,我们延续了春节过打羊的运营策略, 如期实现了业绩开门红, 于第一季度实现了整体业绩的加速增长。 Group total revenue of 61.6 billion yuan increased by 32.4%. Among them, the revenue of one batch of products increased by 34.4% as the main driving force. The growth of three batches of services increased by 10.4%, maintaining a healthy development rhythm. At the profit end, Nangap's net profit increased by 70.2% to 1.9 billion yuan. The net profit rate of Nungap has increased by 69 points to 3.1%.

At the beginning of the year, we maintained and interrupted services during the Chinese New Year holiday, achieving a strong start and delivering accelerated overall growth in the first quarter. Total net revenues reached RMB 6.16 billion, representing an accelerated growth rate of 32.4%. This momentum was primarily driven by 1T product revenue, which surged 34.4% year-over-year, while 3P service revenue maintained a healthy 10.4% year-over-year growth rate. Profitability also improved. Non-GAAP operating profit grew 70.2% year-over-year to R190 million, while the non-GAAP operating profit margin expanded by 69 basis points to 3.10%.

In the overall revenue and scale growth process, We firmly promote the strategy of EP as the core, and consolidate the business basic plate of second-hand mobile 3C recycling and trading. In the process of strengthening the value creation of medium-sized users, we have improved the production of 3C and further improved the ratio of EP to C.

Amid overall revenue and scale expansion, we continue to advance our 1P-centric strategy, strengthening our core foundation in the recycling and trading of second-hand consumer electronics. To drive greater value for retail users, we optimized our 1P2C ratio by securing first-hand supply sources and enhancing compliant refurbishment output.

We have grasped the current industry trend, priority development, and more users experience the advantage of the long-term happiness scene. More contracts will be handed over through online services. In 2026, the country continues to support long-term happiness and promotes financial and financial co-operation. In this context, App Store and JD.com continue to build the best long-term happiness consumption plan for consumers. With a better one-stop machine experience and a more comprehensive price advantage, it actually serves the consumer's diversified purchase needs. Therefore, the growth performance is faster with this new model in the capital expansion. The order volume has been increased by 70% compared to last year.

On the supply side, we capitalized on industry trends by prioritizing trading scenarios that deliver superior user experiences while shifting more fulfillment to offline via two-door services. In 2026, the government maintained strong support for trading and further advanced fiscal and financial coordination. Against this backdrop, AHS Recycle continues to work closely with JD.com to create industry-leading trading solutions, providing a seamless one-stop trading experience at highly competitive prices to meet diverse consumer needs. As a result, within the JD sourcing channel, trading orders outpaced overall growth, with volume share further expanding year-over-year to about 70%.

We continue to lead users to deliver face-to-face in offline scenarios. In addition to 2156 stores in 2156 major cities across the country, we have further expanded the team size of door-to-door delivery. 2248 professional door-to-door staff will bring delivery service to the user's face. The delivery ratio of face-to-face is 80%. With the ability and brand of AirHouse, Throughout the recycling fulfillment process, we actively guide users towards face-to-face transactions in offline settings.

In the first quarter, we expanded beyond our network of 2,156 stores across major cities and scaled up our door-to-door service team to 2,248 professionals, bringing our services directly to users' doorsteps. This strategy has lifted our face-to-face fulfillment ratio to 80%, fostering deep connection and trust through AHS Recycle's fulfillment capabilities and brand presence. Looking ahead to peak seasons like major promotional campaigns and flagship device launches, we will further implement flexible workforce solutions to enhance face-to-face fulfillment, timeliness, and user experience even during the busiest times.

In the first quarter of this year, we increased the thickness of the production chain through Zhiyun's integrated three-star business. The overall revenue of three-star products increased by 76.1%. The sales and repair business model revenue increased by 180% in the same ratio. Our regulatory translation capability has expanded more high-quality water-based products for 2C retail. In terms of retail channels, through synchronized distribution, open selection, second-hand collection, official website, new media, and three channels, the 2C sales and revenue of regulatory translation machines increased by nearly 150% in the same ratio. Among them, in March this year, In the first quarter of this year, the product revenue increased by 45.1% compared to 33% in the same period last year and 41.7% in the fourth quarter last year, respectively increasing by 12.1% and 3.4%. In the process of increasing the ratio of EP2C, we fully captured the price trend of QC0, and thus transmitted it to the recovery end, supporting us to provide better recovery price experience for users, form stronger price advantages, and create greater value for middle-end users.

During the first quarter, we leveraged our proprietary compliant refurbishment business to add depth to our supply chain, with compliant refurbished product revenue increasing 76.1% year-over-year. Our on-demand refurbishment model was a standout performer, growing by roughly 180% in revenues. Our compliant refurbishment capabilities allowed us to provide more quality secondhand devices directly to consumers. In terms of retail channels, we expanded across PiPi selection our official website and new media channels, which drove nearly 150% year-over-year growth in 1P2C retail revenue from refurbished devices. March marked a significant breakthrough with monthly retail sales of compliant refurbished products topping 200 million RMB. As a result, 1P2C accounted for 45.1% of our product revenue in the first quarter of 2026, rising 12.1 percentage points from 33% year-on-year and 3.4 percentage points from 41.7% quarter-over-quarter. This strategic pivot toward direct-to-consumer sales allows us to align our recycling prices with real-time retail trends ensuring we offer better resulting prices, maintain a strong price advantage, and create greater value for end-users.

For the N.3 and N.4 generation of high-quality products, in response to the international market's differentiated supply and demand for products, we have made regular exports and firmly expanded the business scale. These export products can also expand more than 4% of the profit margin.

Regarding high-quality products from older generations, specifically M-3 and M-4 models, we targeted differentiated demand for device generations in the international markets to drive compliant exports. This strategy allows us to steadily expand our global scale and unlock an additional over 4% growth profit margin.

In the 3PE5 model, Taijitang also maintains a healthy and fast scale and income growth, and continues to consolidate its positioning of industry infrastructure. During the process of promoting users, Taijitang platform provides the new registered signing business owners with the first three orders free of charge. At the same time, it will repeat the service of the large customers. By simplifying the standard, it will reduce the use threshold of the platform for small and medium-sized businesses, and improved the efficiency and convenience of education, allowing small and medium-sized businesses to sell their goods at a better price.

Turning to our 3T business, PJT Marketplace also delivered healthy and rapid growth in both scale and revenue, further reinforcing its position as industry infrastructure. As we onboarded more new users, we offered free shipping on the first three orders to those new users on PJT Marketplace. We are also replicating the operational capabilities PJT Marketplace has built in serving large clients and extending them to small and medium-sized merchants. By streamlining platform processes, we have lowered the barrier to using platform and improved both transaction efficiency and convenience, enabling small and medium-sized merchants to sell their products at better prices.

provide small and medium-sized merchants with high-quality goods, and distribute them through Tiktok. At the end of the first quarter, the total number of registered merchants on the platform was nearly 2 million, and the growth was nearly three times the same. Among them, the number of registered contract buyers quickly increased by more than 120%. In this process, we saw more and more small and medium-sized users with low cost-effectiveness escape on the platform. This also proved the effective landing of the Pai Chi Tang supply chain strategy.

Leveraging TJT Marketplace's robust supply chain capabilities as the industry's leading B2B platform, we deliver high-quality supplies to those merchants while reaching fragmented markets through Douyin's user base. By the end of the first quarter, the number of total registered merchants on TJT Marketplace nearly doubled year-over-year to almost 2 million. Notely, the number of registered contracted buyers surged by over 120% as an influx of small and micro buyers seeking high-quality value-for-money products came up to the platform. This validates the effective implementation of our PJC Marketplace supply chain strategy to penetrate fragmented markets.

In 3B mode, PiPi is cleaning up the market. PiPi provides a more standardized Another world 3D business model, PiPi continues to shift toward the consignment model,

Under this model, the PaiPai team provides merchants with standardized operational services, making the pre-owned retail easier for them to manage. Since the second quarter of last year, PaiPai Consignment has continued to provide merchants with broader access to curated retail channels. In the first quarter, the consignment business maintained a rapid double-digit growth, helping pre-owned retail merchants move closer to consumers.

high-speed performance growth, the overall recovery scale increased by 81.5%, the total gold trading scale increased by 83.3%, and the Australian trading scale increased by 58.8%, showing solid growth. As of the end of March this year, we have opened a multi-level recovery business in 966 second-hand recovery stores, which increased by nearly 300 at the end of March last year. We expect that within this year, we will open up a multi-level recovery capacity in more second-hand repair and repair stores, including cooperation with more carpenters to build service capabilities such as gold recovery, combined with multi-level business development. The location and space of second-hand repair stores are being upgraded, providing better delivery environments and brand value to new and old users.

Multi-category recycling sustained rapid growth in the first quarter, with overall recycling GMV up 81.5% year-over-year. Among them, gold recycling GMV grew 83.3% and second-hand luxury recycling GMV grew 58.8%, both showing solid growth momentum. By the end of March, we launched multicultural recycling services across 966 AHS stores, adding nearly 300 stores compared to the end of March last year. Looking ahead, we expect to roll out this capacity to more self-operated AHS stores through the rest of the year, while also working with more franchisees to build those recycling service capabilities. Alongside the growth of our multicultural business, We are also upgrading the locations and layouts of our stores, creating a better fulfillment experience and conveying greater brand value to both new and existing users. In summary, the overall 3P service take rate was 4.92% in the first quarter, in line with our expectations.

The above performance has proven the effectiveness of the three-level development strategy that we previously shared. Based on the market dynamics in 2026, we will resume the long-term strategy of the second-level strategy. The first-level strategy continues to promote the health growth of the second-hand mobile phone 3C business. In terms of the category of the second-hand industry, we have identified the second-hand mobile phone 3C category with the size and huge penetration space. In the process of national recovery, promotion of consumption, and industry improvement, we actively set up the recovery and recovery scene, and strengthen the brand new design of the second recovery to serve the wider range of users' delivery and upgrade needs, realize the second life cycle for more electronic products, and create more value for society. In the process, we firmly build a batch of capabilities, increase the use of AI tools, This results validated the effectiveness of the three-stage development strategy we previously shared.

Based on 2026 market dynamics, let me revisit the long-term nature of our strategy. Stage one, we continue to solidify the healthy growth of our core secondhand consumer electronics business. In our category assessment within the secondhand industry, we identified secondhand consumer electronics as a category with both scale and enormous room for further penetration. As national trading policies promote consumption industry upgrades, we are actively positioning ourselves in recycling and trading scenarios. strengthening the brand recognition of Ahrefs Recycle to serve broader user replacement and upgrade needs, enabling more electronic products to achieve a second life cycle, and creating greater value for society. Throughout this process, we are steadfastly building our 1P business capabilities increasing our use of AI tools, optimizing pricing experiences and end-user services, and supply chain efficiency, while expanding our industry value chain through compliant refreshment and creating more value to retail users through a higher portion of retail sales.

The second strategy is to continue to strengthen the positioning of second-hand domestic first-hand brands. We believe that in the second-hand service industry, price, trust, and convenience are long-term user experience triangles. In the long-term development path of the industry, the brand has a long-term value. In addition to changing the scene, we are also investing in the independent and efficient brand of the Aifu Zhou brand in Douyin and Xiaohongshu. Combined with the anti-corruption growth project, Aifu Zhou connects more and more consumer brands, from the community to the business circle, to the campus, to the workplace, and goes into more public consumer business circles, occupying unique scenes and geographical locations. and encourage more young users to participate in recycling and green consumption.

Stage 2, we are strengthening AHS Recycle's position as China's leading recycling brand. We believe that in the second-hand service industry, pricing, trust, and convenience are the three core pillars that define the long-term user experience. And in the industry's long-term development path, brand equity holds enduring value. Young trade-in scenarios, we maintain independent and prudent brand investments in AHS Recycle across Douyin and Xiaohongshu. Combined with the Revive initiative, AHS Recycle has partnered with an increasing number of consumer brands to penetrate more mainstream commercial districts, from local communities to shopping districts, from campuses to workplaces. By securing these unique scenarios and locations, Ahrefs Recycle encourages more younger users to participate in recycling and grain consumption.

第三級戰略,推進海外戰略的突破。 海外市場的B2B業務是一個我們熟悉的商業模式。 通過國行產品出口、外銷、積累口碑與能力。 Stage 3, we continue to advance breakthroughs in our overseas strategy.

The B2B business in overseas markets represents a business model we are familiar with. By accumulating reputation and capabilities of export of China source supplies, we continue to explore global version of TJP marketplace and product development while systematically building capabilities to directly serve end consumers.

According to industry data, the new machine export volume of the Chinese market has dropped by 4%. However, from the brand structure, the second-hand market has the mainstream of Apple and Huawei products. There has been a sharp increase in the new machine market. This is due to the higher supply chain capacity and pricing. For this reason, we have previously determined three opportunity directions to verify, and the first is the second-hand market. The price trend is overall stable and firm, and it is a foundation for long-term health development in the industry. Second, Apple products that are highly related to our business core are showing great advantages in terms of market scope. Third, brand manufacturers and platforms are still increasing their attention and investment in the exchange of new products.

Now, let me share a few thoughts on the 2026 market environment. Industry data shows that new device shipments in China have dipped slightly this year by about 4%. However, if we look at the brand mix, Apple and Huawei remain mainstream brands in the pre-owned market. Both grew against a broader trend in the new device market, supported by their supply chain capabilities and pricing advantages. This has validated the three opportunities we previously identified. First, pricing trends in the pre-owned market remain broadly stable and resilient, laying a solid foundation for the long-term healthy development for the industry. Second, Apple products, which are closely tied to our core business drivers, have demonstrated market share advantages. Third, brands and platforms continue to place greater emphasis on trading programs. Their increased investment here supports our efficiency in acquiring first-hand recycling supplies.

Taking these together,

We expect to deliver robust and rapid growth this year. By leveraging our efficient automated quality inspection technology and value-added supply chain capabilities, we will further unlock economies of scale. Now I'd like to turn the call over to our CFO Rex for financial updates.

The company's performance in the first quarter of 2026, our revenue grew rapidly, and the level of profit was also high. With the continuation of China's circular economy's continuous deepening and consumer electronics exchange policy, in the first quarter, we fully played the first-hand recovery over-the-counter scene and the advantage of face-to-face contract delivery capability, deepening supply chain and retail capability construction, and further strengthening the recovery of the brand new system, and continued a good growth trend.

Good day, everyone. I'm pleased to share our financial performance for the first quarter of 2026. Our revenues grew rapidly and profits reached record high. As China's circular economy continues to evolve and trade-in programs for consumer electronics remain ongoing, we sustained strong growth momentum in the first quarter. During the quarter, we leveraged our direct-to-customer resecting scenarios and face-to-face fulfillment capabilities, enhanced our supply chain and retail capabilities,

and further strengthen user mindshare of the AHS Recycle brand.

In the first quarter, total revenue exceeded the high end of our guidance, increasing by 32.4% to 6.16 billion RMB, while Nangat Operating Income surged by 70.2% to over 190 million RMB.

In the first quarter, total revenue exceeded the high end of our guidance, increasing by 32.4% to 6.16 billion RMB,

Before we review the financials in detail, please note that all figures are in RMB and all comparisons are on a year-over-year basis, unless otherwise stated.

In the first quarter, the growth of the group's total income continues to come from the increase in product income. Product income growth rose from 34.4% to 57.3%. This is mainly due to the growth of the company's online channel second-hand consumer electronics sales.

In the first quarter, total revenue growth was primarily driven by continued growth in net product revenue. Net product revenues increased by 34.4% to 5.73 billion, largely attributable to the growth in online sales of free-owned consumer electronics.

服务收入为4.3亿元,通力增长10.4%, 主要得益于拍机场业务以及平台模式开展多品类回收业务贡献的服务收入增长。 Net service revenues were 430 million in the first quarter, representing an increase of 10.4%.

The increase was largely driven by PJT marketplace and multi-category recycling business. The overall take rate of our market sales was 4.92% for the first quarter of 2026. During the quarter, our multicultural recycling business contributed over 83 million RMB in revenue, accounting for 19.3% of service revenues.

About the adjustment of GAF and NGAF time, please refer to our financial report and the 6K table of the U.S. Stock Exchange Commission.

Now let's discuss operating expenses. To provide greater clarity on the trends of our actual operating-based expenses, we will mainly discuss our non-GAAP operating expenses, which better reflect how management views our operating results. The reconciliations of GAAP to non-GAAP results are available in our earnings release and the corresponding Form 6K furnished with the US SEC.

商品成本增加33.2%至48.2億元, 與產品銷售增長一致。 The net profit of our EP business is 15.9%, while the net profit of the previous year was 15.2%. The improvement of the EP net profit is mainly due to our CQB recovery scene, the multi-layered selection of retail channels, and the advantage of diversified selection of retail channels, and the increase in the higher net profit of QC. In the first quarter, the net profit of EP QC is 45.1%, while the net profit of QC in the previous year was 33%.

Merchandise costs increased by 33.2% to $4.82 billion, in line with the growth in product sales. Growth profit margin for our 1P business was 15.9%, compared with 15.2% in the same period last year. The growth margin improvement in our 1P business, this was primarily driven by high efficiency C2P recycling scenarios, compliant refurbishment capabilities incorporated in our supply chain, and an increasingly diversified retail channel mix. This allowed us to increase the proportion of higher margin retail sales, with one P2C revenue accounting for 45.1% of product revenue in the first quarter of 2026, up from 33% in the same period last year.

One, compared to the same period in 2025, the increase in recovery and transaction volume led to an increase in human resources. Second, in 2026, the relevant costs of the operating center increased with the increase in recovery and transaction volume, and the rate of costs from 9.1% to 8.5% was reduced.

Fulfillment expenses increased by 22.5% to 520 million. Non-GAAP fulfillment expenses increased by 22.7% to 520 million. Under the non-GAAP measures, the increase was mainly driven by higher personnel costs. driven by the growth of our business compared to the same period in 2025. Additionally, operating center-related expenses rose along with the increasing volumes of write, reflecting, and transactions. Nangap fulfillment expenses as a percentage of total revenues decreased to 8.5% from 9.1%.

销售费用增加17.9%至4.9亿元 Nangap销售费用增加27%至4.9亿元 mainly due to the increase in commission fees related to channel service, the rate of sales of冷Gap fell from 8.3% to 8%.

Selling and marketing expenses increased by 17.9% to 490 million. Land gap selling and marketing expenses increased by 27% to 490 million, primarily driven by an increase in commission expenses in relation to channel service fees. Land gap selling and marketing expenses as a percentage of total revenues decreased to 8% from 8.3%.

管理費用增加25.9%是7980萬元, General and administrative expenses increased by 25.9% to 79.8 million.

Non-GAAP G&A expenses also increased by 33% to 79 million, primarily due to an increase in personnel costs.

Non-GAAP G&A expenses, as a percentage of total revenues, remained flat the over year at 1.3%.

Research and development expenses increased by 33.5% to $73.4 million. Non-GAAP R&D expenses increased by 36.4% to $72.3 million, primarily due to an increase in personnel costs. Non-GAAP R&D expenses as a percentage of total revenues increased to 1.2% from 1.1%. As a result, our land gap operating income exceeded $190 million in the first quarter of 2026, compared to land gap operating income of $110 million in the first quarter of 2025, representing an increase of $70.2 year-over-year.

NAMGAP operating profit margin was 3.1% for the quarter, compared to 2.4% in the first quarter of 2025, representing an increase of 69 basis points.

As of March 31st, 2026, cash and cash equivalents restricted cash, short-term investments, and funds receivable from third-party payment service providers, total 1.72 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns.

Today, under the approval of the Board of Directors, we have launched a 12-month recovery plan that can recover 50 million US dollars. As of March 31, we have recovered nearly 11 million US dollars under this plan. Today, under the approval of the Board of Directors, we will extend the recovery plan to a 12-month effective period. The total amount and terms remain unchanged.

During the first quarter of 2026, we repurchased a total of approximately 0.5 million ADSs for approximately 2.7 million US dollars. On June 30th, 2025, the board has authorized a share repurchase program under which the company may repurchase up to 50 million US dollars of our shares over 12 months. As of March 30th, 2026, we repurchased approximately 11 million US dollars under this program. Today, the board has authorized the extension of the existing share repurchase program for 12 months from June 30th, 2026 with key terms unchanged.

关于2026年第二几个之一, 我预计总收入将在62.4亿元至63.4亿元, 对同比增长15%到17%. Now turning to the business outlook.

For the second quarter of 2026, we anticipate total revenues to be between 6,240 million RMB to 6,340 million RMB, representing an increase of 25% to 27% year-over-year. Please note that this focus 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, 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 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. The first question today comes from Raphael Tsai with DBS. Please go ahead.

Hello, everyone in the management team, can you hear me? Yes, we can hear you. Okay. Mr. Kerry, Mr. Wes, everyone in the management team, good evening. I'm Raphael from DBS. Congratulations to the company for having a very good performance in the first quarter. I would like to ask the management team, is there any new guidance for the growth of revenue and profits for the whole year of 2026? I'll recap in English. Congratulations for the brilliant first quarter results. Does management have any updated guidance on revenue and profit growth for the full year of 2026?

Thank you. Thank you for the question.

We continue to actively pursue our full-year operating targets. From a strategic perspective, we will continue to prioritize our 1P business. which spans the end-to-end value chain and enables us to deliver a better user experience and create greater value.

In terms of the growth of performance, we have seen the country's promotion of consumer electronics, the promotion of consumer electronics, the promotion of consumer electronics, the promotion of consumer electronics, the promotion of consumer electronics, the promotion of consumer electronics, the promotion of consumer electronics, In terms of scale growth, we've seen the government's continued promotion of consumer electronics trading programs.

The expansion of eligible categories and meaningful subsidy and support together with dedicated investments by brand manufacturers and platforms including JD.com in trading scenarios. These factors allows us to capitalize on this momentum and secure more for firsthand supply efficiently and at lower cost. They also reduce our reliance on traffic-driven marketing and performance advertising for high value, low frequency consumer electronics categories.

In terms of international business, we maintain a rhythm of promotion. In the first quarter, overseas business revenue increased rapidly. This is mainly due to the resumption of export and supply chain capabilities. After gradual expansion, China firmly supports the growth of this business. At the same time, we will further explore the capabilities accumulated in China, including recovery and delivery, platform capabilities, automation technology, and other export opportunities. We will maintain internationalization For our international business, we are advancing at a steady pace.

In the first quarter, overseas revenue grew rapidly year over year. This was largely driven by our solid domestic inventory base as our confined export supply chain capabilities gradually strengthened. Meanwhile, we are exploring opportunities to bring more of the capabilities we have built in China to overseas markets. These include resecting fulfillment platform capabilities and export opportunities of automation technologies and among others. We will also remain disciplined in our international expansion investments while actively applying new AI technologies to accelerate business from the incubation stage towards rapid growth.

In this, we hope to update our overseas strategy in the next quarter.

As a forecast, we look forward to update you with more developments from the overseas business during the next earnings conference call.

效率提升方面, 自营场景中灵活的履约交付能力建设, 自动化质检, 研发与操盘等场景的AI技术应用, 都将是我们加强自营能力与提效的重要事项。 在AI提效领域, 我们积极鼓励组织内的 Regarding efficiency improvements, building flexible fulfillment capabilities in our 1P scenarios, as well as incorporating AI across automated quality inspection, R&D, and operations.

will be key priorities as we strengthen our 1P model. In terms of AI-enabled productivity, we actively encourage AI learning and knowledge sharing across the organization. We have already made progress in areas such as in-store compliance audits and risk control, resecting pricing algorithms, optimization, and coding efficiency. Going forward, we will gradually expand these applications, laying the groundwork for long-term organizational efficiency gains and improved profitability.

通常在2026年,我们有望实现比年初内部预期更快的规模增长,并取得有效的利润率的提升。

Taken together, we expect to scale in 2026 at a pace faster than what we expected internally at the beginning of the year. We also expect to achieve meaningful margin improvement. Thank you for the question.

The next question comes from Juan Zhao with CICC. Please go ahead.

Good evening, Director Guan. Thank you for accepting my question. Congratulations for the strong results. I have one question. Could you please give us more color about your plan for store extension and to door fulfillment capacity in 2026?

Thank you. During the first quarter, we reviewed all the stores, from location, traffic, etc., and evaluated some of the tail stores. At the same time, we also made our high-quality stores more efficient, more concentrated, and more efficient from the online traffic. We pay great attention to the quality of the stores, and in a way of expanding the category, we increased the proportion of stores that open multi-class recovery services. As of the end of the first quarter, out of 965 iResource operating stores, 841 stores have opened up their multi-series service capabilities, realizing a more user-friendly store image and space design, further enhancing the brand image and customer experience of iResource. The past years of iResource's opening experience is a jump-starting development. A new batch, a new batch, continue to be new. Thank you for the question.

During the first quarter, we reviewed our nationwide store network based on factors such as location quality and traffic performance. We optimized our store footprint by phasing out certain underperforming stores while further improving the efficiency of our high-quality stores so they can better and more efficiently capture online traffic. We also maintain focused on store quality. By expanding service categories, we continue to increase the proportion of stores capable of providing multi-category recycling services. By the end of the first quarter, 841 of our stores 965 self-operated AHS stores have enabled multi-category service capabilities, alongside more user-friendly store layouts and upgraded in-store experiences, further strengthening AHS Recycle's brand image and fulfillment experience. We have our AHS Velocity at store openings. It follows a leapfrog pattern, opening new stores, solidifying store performance, and then further ramping up store openings. We will continue to follow this rhythm based on our past experience. Looking at the long-term, our goal of reaching 5,000 stores in China remains unchanged.

同期的,我們全國上門團隊的交付人數同比增加近500人, 支持重點業務場景, 尤其是京東的面對面的比例, 京東已就換新的面對面比例進一步提升, 保證禮業交付的 At the same time, we added nearly 500 two-door service teams nationwide year-over-year.

This helps increase the proportion of face-to-face fulfillment in key service scenarios, including JD's trading services, extend fulfillment coverage, improve service speed, and further reinforce our industry-leading fulfillment experience. In addition, we are also building up flexible workforce capacity. During peak seasons, such as major promotional campaigns and flagship device launches, we can quickly activate additional two-door capacity to ensure fulfillment experience and quality while meeting face-to-face demand. Thank you for the question.

The next question comes from Brian Lantier with Zach Smallcap. Please go ahead.

Good evening, and I'll add my congratulations on the strong performance this quarter. I was wondering if you could provide some insight into the growth of inventory in the first quarter. Specifically, is the inventory build mostly due to anticipated demand growth or changes in the product mix, and how should we think about normalized inventory going forward?

I will answer this question first. The recovery and exchange of new content has received very high recognition from users. Therefore, in the process of training new users, we use a good price to reduce the price experience of users. In this quarter, the increase in stock will strengthen the business. The strategy of EPQC is the same. Because the stock of QC retail is short-term, it is more than QB for an average of two to three weeks. In the process of income structure cleaning up to EPQC, the short-term number of stock will grow steadily. . . . . So we expect that at the end of the second quarter, we will return to a relatively low level. Because in the second quarter of last year, the recovery can be replaced with a new demand.

Thank you for the question. Our recycling and trading business continues to gain user recognition, especially during the trading scenarios. As we build stronger user mindshare, we are also enhancing the customer experience by offering more attractive pricing against the backdrop of the rising upstream costs for new devices, especially memory price hikes. Secondhand market prices have remained relatively stable compared to past cycles, and we have even seen price increases in some products. As a result, we are not in a hurry to reprice our high-quality inventory for faster turnover, and part of it will be sold in the second quarter as inventory will normalize. In addition, the increase in inventory is consistent with our strategy of strengthening 1P2C sales. On average, inventory turnover days for 1P2C retail are longer than those of bulk sales. Therefore, as our revenue mix continues to shift towards 1P2C, inventory turnover days may increase to some extent. That said, as PJT marketplace remains an important piece of industry infrastructure, it supports our strong pricing capabilities. Therefore, the increase in inventory is not expected to have significant impact on turnover in our core businesses. Thank you for the question.

This concludes our question-and-answer session. I'd like to turn the conference back over to management for closing remarks.

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 email us at ir.patradio.com. Have a good day.

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