ATRenew Q1 2025 Earnings Call Transcript

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May 20, 2025
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Operator

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to AT Renu Inc. First Quarter twenty twenty five 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.

Operator

Please note today's event is being recorded. I will now turn the call over to the first speaker today, Mr. Jeremy Ji, Director of Corporate Development and Investor Relations of the company. Please go ahead, sir.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

Thank you. Hello, everyone, and welcome to ATRenew's first quarter twenty twenty five 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 will open the call to questions from analysts. The first quarter twenty twenty five financial results were released earlier today.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

The earnings press release and investor slides accompanying this call are now available at our IR website, ir.aturenew.com. There will also be a transcript following this call for your convenience. For today's agenda, Kevin 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 participate during the Q and A session. Please note that please note our Safe Harbor statements.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

Some of the information you'll hear during our discussions 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 ATRenew does not take any obligation to upgrade our assumptions on these statements. Although this call includes discussions of certain non GAAP financial measures, please refer to our earnings press release, which contains a reconciliation of non GAAP measures to GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB and all comparisons are on a year over year basis. I'd now like to turn the call over to Carrie for business and strategy updates.

Moderator

Hello, everyone, and thank you for joining ATRenew's first quarter twenty twenty five earnings conference call. We are excited to share the updates of our performance and business developments and to address your questions about the company's recent progress. Firstly, in terms of operating results, total net revenues for the first quarter once again exceeded the high end of our guidance range, increasing 27.5% year over year to RMB4653.5 million. On the profitability side, our non GAAP operating income increased by 39.5% year over year to over million. Non GAAP operating margin reached 2.4% indicating healthy progress compared to the first quarter of last year.

Moderator

The strong and stable growth of total revenue was primarily driven by the accelerated growth of our 1P business. We continue to invest in our 1P business and recycling fulfillment capabilities, enhance supply access and strengthen AHS recycle brand recognition among consumers to further improve the penetration of our 1P2C retail sales in our sales mix. Let me provide more color for the three key drivers of the 1P business. Firstly, in the first quarter, 1P business revenue grew by 28.8% year over year. Excluding the high base impact from Apple's official trading program and overseas business as mentioned during the fourth quarter earnings call, product revenue in the first quarter increased by over 50% year over year, exceeding our expectations.

Moderator

In terms of trends, supported by the national subsidies for smartphones and digital products, as well as increased demand for user upgrades in the scenario of our strategic partner JD.com platform, our C2B consumer electronics recycling value grew by over 50% year over year. We are committed to advancing strategies on direct engagement with consumers at the front of recycling and retailing. On the capability side, we continue to enhance offline fulfillment capabilities, achieving a net addition of four fifty eight AHS stores year on year by the March 2025 and broadening our door to door fulfillment coverage with more prompt service. The effort improved multiple metrics indicating C2B recycling customer satisfaction and ensures a high quality experience for trading users via national subsidies. In terms of our strategic partnership with JD.com, we've strengthened the long term growth development supply chain, delivering best in class user experience and efficient fulfillment.

Moderator

By optimizing the trading process, we've reduced barriers to national subsidies, enabling customers to trade in used devices for new ones in a better and cheaper way. This not only stimulates demand, but also improves supplies of high quality pre owned consumer electronics to boost recycling penetration. As a result, the growth of the trade in segment continues to outpace. Looking ahead, we will continue to enhance our trade in supply chain and services to expand our market share in the pre owned consumer electronics industry. At the same time, we have strengthened AHS Recycle's brand presence through new media channels with creative marketing and influencer partnerships, encouraging users to experience AHS Recycle's wide range of recycling services and accelerating the growth of our recycling channels.

Moderator

We have launched the Revive Environmental Protection Initiative under the AHS Recycle brand and fully integrated it with our existing initiatives. This encourages more consumer brands to collaborate with us, enhancing user recognition of AHS Recycle's value proposition and increasing engagement with our services. In April, while celebrating the Earth Day, we collaborated with 12 leading domestic consumer brands to promote initiatives focused on recycling and the circular economy through joint campaigns across online and offline channels. By continuously leveraging our mature end to end supply chain, we enhanced our direct to consumer retail operations under the 1P business. In the first quarter, 1P2C revenue grew by 73.5% year over year.

Moderator

Retail revenue accounted for 33% of 1P revenue, representing an upward trend. Backed by our refurbishment capabilities, we've seen the pilot program of on demand refurbishment effectively leverage retail capabilities, creating strong synergies with our in house compliant refurbishment operations. This approach allows us to offer competitively priced quality assured 1P refurbished products to users across PaiPai, AHS Election and other retail partner channels. As a result, GMV has shown a healthy upward trend quarter over quarter. Additionally, the retail capability of AHS Recycle's official store network continues to expand, with revenue growing by over 160 year over year.

Moderator

This amplified our product accessibility to consumers. Looking specifically at the Apple official trading business. As mentioned in previous earnings calls, revenue declined year over year in the first quarter due to the high base driven by early stage pricing strategies. However, benefiting from our management capability and operational efficiencies, the margin in this segment improved significantly. For overseas revenues, as we adjusted our business scale, there was a notable improvement in margin as well.

Moderator

Regarding our marketplace businesses, we've seen a marked rise in trade in service acceptance among both online and offline users, alongside positive shift in merchant demand. In response, we have enhanced our B2B, B2C and multi category recycling services to deliver best in class user experience, thereby boosting user loyalty. We've strengthened our industry capabilities as fundamental infrastructure and enhanced services for merchants. As of the end of the first quarter, the number of registered merchants in PJT exceeded 1,000,000 with a double digit year over year increase in active trading merchants. The proportion of higher fee OPT services, I.

Moderator

E. Shipping quality inspection services grew, raising PJT Marketplaces take rate for secondhand consumer electronic transactions by 24 basis points. This reflects PJT's growing nationwide prominence as an essential infrastructure within the industry and as a leading exchange for second hand electronic products. PGT is pioneering the innovation of second hand sales models by expanding diverse online and offline sales channels for merchants. In March, we launched our first offline flagship store in Shenzhen, Huaqiangbei, driving transparency in the pre owned consumer electronics industry.

Moderator

The 1,200 square meter store displays nearly 10,000 secondhand phones that have undergone professional inspection. The flagship store operates under a warehouse to retail model, seamlessly integrating storage and sales functions. By offering all in one browse inspect purchase experience, it significantly reduces the traditional three to five days of restocking cycle, helping merchants reduce inventory costs and minimize logistics delays. On-site procurement also reduces after sales disputes. We will continue to empower more industry merchants, open up our local and national merchant resources to enrich the offline product selection.

Moderator

In addition, we recently began piloting compact authentication warehouses within our self operated city to streamline the quality inspection process for merchants. These compact warehouses located closer to major trading hubs allow us to operate at lower costs while offering more convenient and accessible services to merchants. At the same time, we are exploring collaborations with influencers on live streaming platforms. We opened our 1P and 3P inventory and supply chain on the TJT marketplace to those influencers, which enables them to help users find high quality and cost effective devices, creating the specialty buyer model and enhancing the service loop between PJT and consumers. Moving forward, we will open up more platform capabilities to merchants to boost quality product sales and promote distribution capabilities and compliance growth of pre owned consumer electronics across regional centers.

Moderator

As part of the ongoing transformation of the PiPai consignment business, we are focused on better serving small merchants in the second hand industry. This includes expanding merchants to increase the variety and volume of available products, strengthening back end systems to improve greater accuracy in pricing and overall merchant experience, while driving higher product turnover. In terms of scale, sales across all categories in the PiPai consignment business grew by 2.2 times year over year in the first quarter. Looking ahead, we plan to further integrate consignment products into more of our self operated distribution channels, providing small and medium sized merchants with broader access to retail opportunities. Throughout the development of multi category recycling services, both gross transaction value and revenue nearly tripled year over year in the first quarter.

Moderator

Gold recycling saw faster growth, while the recycling service fee for luxury goods increased slightly. As a result of these combined factors, the overall multi cap recycling take rate remained stable year over year. In terms of user experience, we have continued to optimize our SOPs and internal capabilities across multiple areas, including pre recycling consultation, pricing and delivery. As a result, overall customer satisfaction and user experience have improved meaningfully. In summary, our core businesses achieved faster than expected growth in the first quarter of this year.

Moderator

We seized growth opportunities arising from national subsidies by providing best in class trade in experience. As we enter the second quarter, we are confident in further strengthening our fulfillment capabilities and brand influence. This will enhance users' awareness of trade in and recycling, enabling us to seize the industry growth opportunities. In the long run, as user recognition of recycling and secondhand products continues to rise, the industry is on a positive growth trajectory. With our long term and steadfast scenarios plus supply chain strategy, we are committed to obtain more user mindshare, enhancing user experience, ensuring the efficient circulation of secondhand products and creating greater value.

Moderator

Now, I'd like to turn the call over to CFO, Rex, for financial updates. Hello, everyone. We are pleased to report strong financial performance in the first quarter of twenty twenty five, driven by the national subsidy policies, our enhanced fulfillment capabilities and expanded retail network. Total revenue in the first quarter once again exceeded the high end of our guidance, increasing by 27.5% to over RMB4650 million and adjusted operating income increased by 39.5% to over RMB110 million. 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.

Moderator

In the first quarter, the growth of total revenues was primarily driven by sustained growth in our net product revenues. Net product revenues increased by 28.8% to RMB4260 million, primarily due to an increase in the sales of free on consumer electronics through our online channels. The increase was primarily due to an increase in the service revenue generated from multi category recycling business and PJT marketplace. The growth in service revenue went along with the upward trend in our marketplace's overall gross transaction value, delivering an overall marketplace take rate of 5.25% in the first quarter of twenty twenty five.

Moderator

During the quarter, our multi category recycling business contributed over RMB15 million of revenue, accounting for 13.3% of service revenues. The percentage significantly increased from 5.6% in the same period of 2024. 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 management views our results of operations. The reconciliations of GAAP and non GAAP results are available in our earnings release and the corresponding Form six ks furnished with the U.

Moderator

S. SEC. Merchandise cost increased by 22.7% to million, in line with the growth of product revenue product sales. Gross profit margin for our 1P business was 15.2% compared with 10.9% in the same period last year. The improvement of gross margin in our 1P business was primarily due to our C2B recycling supply chain capabilities, compliant refurbishment capabilities and diversified retail channels.

Moderator

In addition, we optimized the business strategy of Apple's official trade in program. Despite a decrease in business scale from the high base in the first quarter of twenty twenty four, the gross margin in the first quarter of twenty twenty five achieved a significant turnaround from losses compared to the same period last year. Fulfillment expenses increased by 38.1 to RMB430 million. Non GAAP fulfillment expenses increased by 40.2% to RMB430 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 2024 and an increase in operation related expenses as we expanded our store network and operation center capacity in the first quarter of twenty twenty five.

Moderator

Non GAAP fulfillment expenses as a percentage of total revenues increased to 9.1% from 8.3%. Selling and marketing expenses increased by 30.4% to RMB420 million. Non GAAP selling and marketing expenses increased by 72.8% to RMB390 million. The increase was 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 to 8.3% from 6.1%.

Moderator

General and administrative expenses decreased by 14.1% to RMB63 million. Non GAAP G and A expenses increased by 2.2% to RMB59 million, primarily due to an increase in personnel costs. Non GAAP G and A expenses as a percentage of total revenues decreased to 1.3% from 1.6%. Technology and content expenses increased by 9.6% to RMB55 million. Non GAAP technology and content expenses increased by 16.5% to RMB53 million.

Moderator

The increase was primarily due to an increase in personnel costs. Non GAAP technology and content expenses as a percentage of total revenues decreased to 1.1% from 1.2. As a result, our non GAAP operating income was million in the first quarter of twenty twenty five, representing an increase of 39.5% year over year. Non GAAP operating profit margin was 2.4% compared to 2.2% in the first quarter of twenty twenty four. During the first quarter of twenty twenty five, we repurchased a total of approximately 400,000.0 ADSs for approximately US1.2 million dollars under our current share repurchase program, which authorizes us to repurchase up to US50 million dollars worth of our shares, including ADSs, through 06/27/2025.

Moderator

As of 03/31/2025, we had repurchased a total of approximately 10,700,000.0 ADSs for approximately US27.1 million dollars under this share repurchase program. As of 03/31/2025, cash and cash equivalents, restricted cash, short term investment and funds receivable from third party payment service providers totaled RMB2.78 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns. Now turning to business outlook. For the second quarter of twenty twenty five, we anticipate total revenues to be between million and RMB4801 million, representing a year over year increase of 24.7% to 27.4%.

Moderator

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.

Operator

We will now begin the question and answer session. And your first question comes from Joyce Ju with Bank of America. Please go ahead.

Joyce Ju
Joyce Ju
Analyst at Bank of America

Thanks management for taking my questions and congrats for achieving a strong quarter. My first question is on the national subsidy. Effective has the national subsidy been in promoting recycling and trading programs? Do you see sustained growth momentum in your secondhand recycling and resale business as a result? Secondly, in the first quarter, we see that both revenue and non GAAP operating margins showed strong performance.

Joyce Ju
Joyce Ju
Analyst at Bank of America

Could you please help to explain the increase in the non GAAP fulfillment margin and self marketing margin? Is there any adjustment to this year's total revenue and margin target?

Moderator

Thank you for the questions. I will take the first and Rex will take the second. Regarding your first question, according to industry research, the shipment of new smartphones in the domestic market increased by 9% year over year in the first quarter, marking positive growth for the fifth consecutive quarter. Meanwhile, new consumer electronic sales on our partner platform JD.com had strong growth momentum. The subsidies for trade in programs combined with our strong positioning in key recycling channels have jointly driven the accelerated growth of our 1P business.

Moderator

We have previously shared a view that the national subsidies will definitely boost the mobile phone recycling business. That's why industry leading brand awareness, fulfillment capabilities and unique advantages in essential application scenarios in recycling, Ahrefs Recycle is well positioned to benefit from the increasing adoption of recycling in mainstream channels. Currently, the national subsidy cap for mobile phone trade ins is RMB500. However, our average recycling price in 1P business is approximately This creates a stronger incentive for users to not only take up the national subsidy, but also leverage the trade in service as of AHS recycle. Looking ahead to the medium to long term, we remain confident in China's strong and consistent commitment to stimulating consumption.

Moderator

In our total transaction volume for pre owned consumer electronics, mobile phones are the largest category, accounting for approximately 70%. The average replacement cycle for phones is about two years, and there are approximately 300,000,000 new phones and tens of millions of new laptops and digital devices being shipped annually in China. Currently, the penetration rate for recycling and trade in program remains in single digits. But in the long run, we believe there is potential for domestic penetration to raise to over 20%. The main brands and e commerce platforms we've collaborated with are participating in national subsidy programs with more flexible pricing strategies.

Moderator

Therefore, during the June eighteen Shopping Festival this year, we expect to maintain business growth through trade in services and are committed to strengthening our delivery capabilities to better serve users in recycling and trade in. Regarding the second question, the year on year improvement of non GAAP operating profit margin in the first quarter was mainly due to our pricing strategy and balanced control of the overall expense ratio. As Carrie noted, in the first quarter of twenty twenty four, Apple's official training program and our overseas business reported high revenue and losses. However, in the first quarter of twenty twenty five, as we optimized business and pricing strategies, the profit margin of the two businesses has significantly improved. Meanwhile, by leveraging our supply chain strengths, the proportion of 1P2C retail revenue increased by 8% year over year.

Moderator

During the same period, as our 1P business expanded rapidly, we strategically focused on self operated stores and increased staff fulfillment and operation functions. Thus, the non GAAP fulfillment expense ratio rose by 0.9% year over year. The non GAAP selling expenses ratio have increased by 2.2%, mainly due to higher promotion and advertising expenses. With rising business demand, we increased coupon related promotion expenses this quarter. Meanwhile, to raise brand awareness, we made investments aligned with business growth, such as in new media platform of Ahrefs' recycled brand.

Moderator

Additionally, in strengthening recycling and trade in collaboration with JD.com, channel commissions rose as expected. Benefiting from our refined management of general and administrative expenses, as well as technology and content expenses, both non GAAP expenses ratios decreased in the first quarter. As a result, the non GAAP operating profit margin for the first quarter increased by 0.2% year over year. Looking at the full year of 2025, we remain committed to our goal of accelerating total revenue growth. We will continue to strengthen our fulfillment capacity and brand influence to support growth in trade in volumes driven by national subsidy programs and maintain competitive pricing strategy.

Moderator

In the future, we aim to gradually improve our non GAAP operating profit margin reflecting our effective operating leverage.

Operator

And your next question comes from Zhao Wan with CICC. Please go ahead.

Analyst

Thank you for taking my question. As you mentioned earlier, your goal is to accelerate store openings this year with target of a net add of 800 HS recycled stores. Can you share details on the progress of store opening in the first quarter? Thank you.

Moderator

As of 03/31/2025, there were a total of eighteen eighty six AHS recycled stores nationwide, nationwide, including nine seventeen self operated stores and nine sixty nine joint operated stores. The total number of stores has increased by a net of four fifty eight compared to the same period last year. Compared to the end of twenty twenty four, in certain areas of three high tier cities, we transitioned some of our joint operated stores to a self operated model to effectively handle the incremental trading volumes from national subsidies and improve user satisfaction. This change allows us to leverage the more efficient self management self managed operational capabilities to quickly boost the recycling performance of these stores. Over the same period, our two door fulfillment team expanded by three sixty people year over year to 1,000 people, strengthening our fulfillment capabilities in more markets.

Moderator

We are increasing the proportion of face to face services by extending both in store and two door services. In our NPS service, users are much more satisfied with these two face to face offline service featuring instant confirmation than with logistics based pickup. We will continue to enhance our offline fulfillment capabilities to provide a best in class trading experience. Thank you for the question.

Operator

Your next question comes from Michael Kim with Zacks Small Cap Research. Please go ahead.

Michael Kim
Senior Analyst at Zack Small Cap Research

Great. Good morning and good evening, everyone. Just one question from me. Just in terms of your initiatives to enhance the AHS recycle brand, can you discuss how much traction you've seen as a result of your increased focus on marketing and advertising? And then just related to that, how should we be thinking about incremental expenses or customer acquisition costs as you continue to prioritize improving brand awareness and loyalty? Thanks.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

Okay. Thank you for your question.

Moderator

AHS Recycle has solidified its position as the leading brand in recycling by providing best in class fulfillment services. We believe that high quality services and proactive response to user feedback are the cornerstones of brand reputation. Given the current low penetration rate of recycling services, we have strategically employed well planned new media campaigns to promote our services and enhance brand awareness. On the one hand, we introduced engaging content showcasing our recycling services, emphasizing AHS Recycle's competitive pricing, security and convenience. On the other hand, by leveraging geo targeting, we guide users to nearby AHS recycled stores, driving orders through our mini program, official website and AHS Reef stores.

Moderator

Furthermore, we enhanced the new media presence of our joint operated stores by co creating content that resonates with local users, thereby attracting more customers to the stores. As a result, in the first quarter, the product revenue from AHS Mini Program and official websites grew faster than our overall 1P business. The national subsidy has also played a role in increasing user awareness and adoption of our services. Looking ahead, we will continue to strengthen the AHS Recycle brand and refine our industry leading recycling service offerings to capture greater market share and reinforce user perception.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

Okay. Thank you.

Operator

As there are no further questions at this time, I'd like to turn the conference back to management for closing remarks.

Jeremy Ji
Jeremy Ji
Director of Corporate Development & Investor Relations at ATRenew

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 email us at iragrenew dot com. Have a good day.

Operator

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

Executives
    • Jeremy Ji
      Jeremy Ji
      Director of Corporate Development & Investor Relations
Analysts
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Key Takeaways

  • ATRenew delivered 27.5% year-over-year revenue growth to RMB 4.65 billion in Q1 2025, with non-GAAP operating income up 39.5% and a margin of 2.4%, beating the high end of guidance.
  • The 1P business grew 28.8% y/y, with product revenue ex-high base rising over 50%, driven by national smartphone subsidies and enhanced trade-in capabilities via the JD.com partnership.
  • Offline and fulfillment capabilities were expanded with a net addition of 458 AHS Recycle stores and a 360-person increase in the door-to-door team, improving C2B recycling penetration and customer satisfaction.
  • Retail sales of refurbished products (1P2C) surged 73.5% y/y to represent 33% of 1P revenue, backed by on-demand refurbishment pilots and rising GMV across PaiPai, AHS Auction and other channels.
  • Marketplace operations advanced as PJT registered over 1 million merchants with a higher take rate, PiPai consignment sales jumped 2.2× y/y, and new flagship stores and compact authentication warehouses improved merchant services.
AI Generated. May Contain Errors.
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