ATRenew Inc. (NYSE:RERE) Q3 2022 Earnings Call Transcript

Rex Chen: Okay, . Over to your second question related to the profitability. There are two main drivers for our mid-term to long-term profitability. First is the improvement in 1P gross margin, in particular, due to the contribution from our new business initiative compliant to refurbishment. Our 1P business was less impacted by pandemic control measures during the quarter as our operation of offline stores gradually resumed, we were able to meet consumers recycling demand and with stable pricing. In addition to a strategic shift from the consignment model we mentioned in the last quarter, has allowed us to transfer — provide high-quality 1P product sales. This will allow us to continue to improve the quality and the reputation of the preowned products that we commercialize.

Meanwhile, we are on track in developing compliant to refurbishing capabilities by replacing components in poor condition with certified third-party batteries and screens. We recondition these 1P products and better satisfy retail buyers needs as our lead refurbed business skills will improve our product mix, thus further widening our gross margin. Secondly, our operating efficiency has continued to improve during the third quarter. We realized our non-GAAP operating profit of RMB10.8 million. This was attributable to our optimization of fulfillment expenses and the selling expenses. So non-GAAP fulfillment expenses as a percentage of total net revenues decreased by 2.9 percentage points year-on-year to 10.7%. This was mainly due to the refinements made to the management’s structure in our offline stores and the implementation of a new system for operating .

As we above the mentioned refurbishment and further achieve cost efficiency improvements, we anticipate our top line to be between RMB2.93 billion to RMB3.73 billion in the fourth quarter. We would also anticipate our non-GAAP operating income in the fourth quarter and realizing a profitable year on a non-GAAP basis as we forecasted. Looking ahead, we expect our total revenues and profitability to further escalate in the coming quarters. Thank you.

Operator: As there are no further questions at this time, I would like to hand the conference back to our management team for closing remarks.

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

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