Q2 2024 ATRenew Inc Earnings Call

Thomson Reuters StreetEvents08-21

Participants Rex Chen; CFO; ATRenew Inc Jiajing Chen; Analyst; CICC Michael Kim; Analyst; Zacks Investment Research Presentation Operator Good morning and good evening, ladies and gentlemen. Thank ...

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Thank ...</p>\n\n<a href=\"https://finance.yahoo.com/news/q2-2024-atrenew-inc-earnings-073018598.html\">Source Link</a>\n\n</div>\n","source":"yahoofinance","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Q2 2024 ATRenew Inc Earnings Call</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nQ2 2024 ATRenew Inc Earnings Call\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-21 15:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://finance.yahoo.com/news/q2-2024-atrenew-inc-earnings-073018598.html><strong>Thomson Reuters StreetEvents</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Participants\nRex Chen; CFO; ATRenew Inc\nJiajing Chen; Analyst; CICC\nMichael Kim; Analyst; Zacks Investment Research\nPresentation\nOperator\n Good morning and good evening, ladies and gentlemen. Thank ...</p>\n\n<a href=\"https://finance.yahoo.com/news/q2-2024-atrenew-inc-earnings-073018598.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"RERE","symbol_name":"万物新生","start_time":0,"source_url":"https://finance.yahoo.com/news/q2-2024-atrenew-inc-earnings-073018598.html","article_id":"2461381531","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2461381531","pubTimestamp":1724225418,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc. second-quarter 2024 earnings conference call.  Please note today's event is being recorded. I would now like to turn the call over to our first speaker today, Mr. Jeremy Ji, Director of Corporate Development, and Investor Relations of the company. Please go ahead, sir. Hello, everyone, and welcome to ATRenew second-quarter 2024 earnings conference call. We are pleased to share our achievements in this quarter and the strategies we have implemented in the evolving landscape where the circular economy has been driving consumer behavior. In the second quarter, we achieved solid growth, especially at the recycling and in value-for-money retail business, even though consumers are more prudent with spending. To boost domestic consumption the government has taken actions to encourage large scale trade-ins of consumer goods. As a result, more products have entered the pre-owned market th","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"RERE":"万物新生","AAPL":"苹果"},"translate_title":"2024年第二季度ATRenew Inc收益看涨期权","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"RERE":1,"AAPL":0.9},"content_text":"Participants\nRex Chen; CFO; ATRenew Inc\nJiajing Chen; Analyst; CICC\nMichael Kim; Analyst; Zacks Investment Research\nPresentation\nOperator\n Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc. second-quarter 2024 earnings conference call. (Operator Instructions) Please note today's event is being recorded. I would now like to turn the call over to our first speaker today, Mr. Jeremy Ji, Director of Corporate Development, and Investor Relations of the company. Please go ahead, sir.\n Thank you. Hello, everyone, and welcome to ATRenew second-quarter 2024 earnings conference call. Speaking first today is Kerry Chen, our Founder, Chairman, and CEO, and he'll be followed by Rex Chen, our CFO. After that, we'll open the call to questions from analysts. Second-quarter 2024 financial results were released earlier today. The earnings release and investor slides accompanying this call are available at our IR website: ir.atrenew.com. There will also be a transcript following this call for your convenience. For today's agenda, Kerry will share his thoughts of our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Kerry and Rex will join the Q&A session. Let me cover the Safe Harbor statements. Some of the information you will hear during our discussion today will consist of forward-looking statements, and I refer you to our Safe Harbor statements in the earnings press release. Any forward-looking statements that management makes on this call are based on assumptions as of today, and that ATRenew 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. I'd now like to turn the call over to Kerry for business and strategy updates.\n (Interpreted) Hello, everyone, and welcome to ATRenew second-quarter 2024 earnings conference call. We are pleased to share our achievements in this quarter and the strategies we have implemented in the evolving landscape where the circular economy has been driving consumer behavior. In the second quarter, we achieved solid growth, especially at the recycling and in value-for-money retail business, even though consumers are more prudent with spending. To boost domestic consumption the government has taken actions to encourage large scale trade-ins of consumer goods. As a result, more products have entered the pre-owned market through e-commerce platforms and physical retailers. In the near term, we have already witnessed a significant increase in recycling volumes in cities Shanghai. More importantly, would leave such policies and support will have a long-lasting impact by raising awareness of sustainable consumption and the restarting of secondhand goods. Such support provides greater certainty to our sustained growth outlook. Looking specifically at our business performance in the second quarter, our total revenue reached RMB3.78 million, up 27.4% year-over-year, exceeding the high end -- of our guidance. Product revenue was RMB3.4 million, up 29% year-over-year, serving as the main growth drivers. Notably, order volume related to our core self-operated consumer electronics recycling business grew 27.8%, while other off volume of the overall self-operated business that included low ASP business grew 38.9% year-over year, mainly in the second hand. Among primary recycling scenarios, trade-ins have become an increasingly mainstream way to shop. We collaborated with JD.com on their old iPhone product for new Apple product initiatives, which received widespread praise from users. In May, the recycling value of used products created in through JD.com grew 97.6% year-over-year. During the June 18 shopping festival, the trading volume of use the consumer electronic products from JD.com increased by 100% year-over-year. In our platform business revenue grew 14.6% year-over-year to RMB370 million. PJT and Paipai Marketplace maintain healthy, take rates with an increasing number of third party merchants, leveraging our inspection capabilities and adopting our consignment model. The GMV of our multi-category recycling service business increased by nearly 400% year-over-year, serving as the main driver of platform business growth and reflecting that in the current micro environment, an increasing number of users are willing to explore recycling services beyond consumer electronics categories. On the growth margin front, we successfully turned to a gross margin of the Apple trading business positive in the second quarter, raising the overall product revenue growth margin to 12.1%, an increase of 1.2 percentage-points from the first quarter of 2024. Gross margin at a group level slightly dropped to 20.8% as the proportion of product revenue increased by 1.1-percentage-points compared with the second quarter of 2023. Even though the economies of scale have also led to improved cost efficiency, the non-GAAP fulfillment expense as a percentage of total revenues decreased by 0.3 percentage-points year-over-year. While the non-GAAP selling and marketing expense as a percentage of revenue fell by 1.1-percentage-point year-over-year. This overall resulted in a 0.7-percentage-points improvement year-over-year in the non-GAAP operating profit margin, bringing it to 2.5% in the second quarter of 2024. The achievements we've discussed so far are rooted in our core strengths in recycling scenarios and supply chain capabilities. Going forward, we will continue to build on these strengths to drive further growth and success. On one hand, we have strengthened our service capabilities in our core business of consumer electronics, recycling and transaction services. In June, we renewed our strategic agreement to deepen our business collaboration with JD.com in areas such as consumer electronics, recycling, tradings and the retail of value for money secondhand products. This renewal also introduced new training methods for Apple products. We continue to meet the high standards and specific needs of JD's users through our industry-leading fulfillment and supply chain capabilities. Our trading business through JD has experienced a rapid growth. In the first half of the year, the recycling value of products traded in by JD users increased by over 50% year-over-year. Notably in June, the recycling value of product fulfilled by trading program surpassed that of regular recycling for the first time, establishing it as the leading recycling methods through JD. [Trillions] provide a better user experience than revenue recycling. Effectively capturing users' demand for upgraded devices and receiving growing acceptance and adoption by our users. Our Apple official trading business, we successfully turned the gross margin positive as anticipated in the second quarter. During these typically off-peak period, we achieved RMB116 million revenue. Specifically, we ensured a positive operating margin for this segment in the second quarter, while aiming at a long-term operating profit margin of 3% to 4%, expenses at the operating level are simple, and we expect Apple's official training business to bring more positive operating profit. We continue to build our offline fulfillment capabilities to strengthen our business model. As of the end of the second quarter, we operated 1,516 AHS insurance offline stores in 260 cities nationwide. With a net increase of 19 self-operated stores and 69 jointly operated stores in the quarter. Meet users' demand for multi-category recycling, we upgraded our store image for location of over 50 self-operated stores. Additionally, we have a nationwide doorstep service team of over 600 staff to address users' diverse fulfillment needs. Our service team maintains a consistent brand image and service standard. Offering face to face devices inspections and on the clock payments, which provides several advantages over traditional mail in recycling. In the second quarter, the doorstep recycling business sustain the same year-over-year growth rate as the overall C2B business. Our in-store and door step fulfillment options offer users flexible and convenient recycling choices. On the other hand, we are further enhancing our core capabilities in client shopping scenarios and supply chain management. These improvements aim to provide users with a wider selection of premium products while strengthening the brand recognition of Asia selection. We are witnessing a clear trend that consumers are increasingly looking for value for money, high quality pre-owned products. We offer a curated selection of premium secondhand products in our offline stores, allowing consumers to directly access the quality of certified pre-owned items that are 95% and 90% new stimulating their interest in trying and purchasing these products. By linking in-store inventory with our nationwide online inventory. We provide consumers with cost effective options for buying secondhand items. This capability has successfully gained the trust and recognition of our AHS selection brands. In the second quarter, product revenue from AHS selection or off-line stores and on our official website surpassed RMB210 million, marking an increase of 31% year-over-year. -- Existing marking an 31% increase from the previous quarter and an eight fold increase year-over-year. Product revenue brought by our PJT to see retail business increased by 125% year-over-year to RMB960 million. Retail channels, including the Paipai selection, AHS recycle websites and physical stores, in et cetera. During on our robust end-to-end supply chain capabilities from sourcing to processing to sales, we are exploring synergies with retail partners in addition to the established retail channels of Paipai AHS store and live streaming platforms. In June, our B2B transaction platform PJT Marketplace partnered with the e-commerce to empower more small and medium-sized businesses to thrive in the new retail landscape by leveraging PJT leading second hand, consumer electronics supply chain. Key elements of our collaboration include our operations center, which supports product quality inspections and PJT supplying secondhand consumer electronics to the e-commerce. Additionally, PJT has established a strategic partnership with [Ford on behalf] a leading retailer in mass market cities. Together, we are exploring opportunities for secondhand products through [point home] extensive offline store network. Initial sales pilot programs have already been launched recently. In closing, we would like to share our perspective on establishing our brand as the top of mind choice for consumers nationwide when it comes to recycling. Starting the last year, we have increased our marketing efforts to promote our upgraded services in recycling to raise the awareness of our brand and to improve public understanding of recycling trade-ins and circular consumption. We have distributed educational content about recycling and trade-ins on popular social media platforms, including [billion. So harmful waste in a] (spoken in foreign language) video platform, while partnering with key influencers to advertise our brand name. Moreover, we have collaborated with leading consumer brands to launch their revised financial initiatives. In the second quarter, we rolled out training programs in partnership with 20 brand owners championing the concept of sustainable circular consumption to name a few [in building out new Bilibili measure. And all the drugs] (spoken in foreign language) -- which wants to encourage more consumers to pick up a quest, return more used to boost and claimed the rewards. Given the clear shift in consumer behaviors, we believe it is crucial to proactively seize the opportunities presented by the circular economy. We will continue to invest in our brand. We aim to acquire greater mind share for our brands and services among consumers through strategic brand marketing, cross-brand partnerships and preventing our stores. As we enter the third quarter, we are preparing for the upcoming launch season for new cellphone models in September and October. We look forward to serving even more users by facilitating the recycling and transactions of their secondhand products through our enhanced service offerings. Now I'd like to turn the call over to our CFO, Rex for financial updates.\nRex Chen\n Hello, everyone. We are pleased to report another profitable quarter and GAAP measures. On revenues once again exceeded the top end of our guidance. Before taking a detailed look at the financials, Please note that all figures are in RMB and all comparisons are on a year-over-year basis unless otherwise stated. In the second quarter, total revenues increased by 27.4% to RMB3,776.7 million, primarily driven by the strong growth in net product revenues. Net product revenues increased by 29% to RMB3,401.8 million, while net service revenues increased by 14.6% to RMB374.9 million. Both in net product revenues was primary driven by an increase in sales of prolonged consumer electronics was -- companies online and offline channels. The increase in service revenues was primarily due to an increase in the service revenue generated from PJT Marketplace and the multi category for cycling finish. So overall, gross transaction value of Marketplace increased its consistency with service revenues and the take rate of our Marketplace was [5.28%] in second quarter of 2024. Above RMB30 million was directly attributable to our multi-category recycling business with an average AHS growth of 3%. Multi-category recycling business accounted for 8% of total service revenues in the second quarter of 2024, while the figure was a 1% in the same period of 2023. Now let's discuss our operating expenses. To provide greater clarity on the trends in our actual operating based expenses. We will also discuss our non-GAAP operating expenses, which better reflect how management views our results of operations. The reconciliations of GAAP and non-GAAP results are available in our earnings release and corresponding Form-6K furnished with the SEC. Merchandise costs increased by 28.6% to RMB2,990.06 million, in line with the growth in product revenues. Gross margins at group level at 20.8% in the second quarter. Product revenues, gross margin, which we also refer to as one key business gross margin was 12.1%. Fulfillment expenses increased by 22.1% to RMB328.3 million, excluding share-based compensation expenses, which we will refer to as SBC here on. In debt fulfillment expenses increased by 22.9% to RMB321.7 million and GAAP measures to increase was primarily due to; first, an increase in personnel costs. As the company conducted more recycling and transaction activities compared with the same period of time 2023. And secondly, increasing our operation center related expenses as the company expanded its store and operation station networks. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.5% from 8.8%. Selling and marketing expenses increased by 5.6% to RMB354 million, excluding SBC expenses and amortization of intangible assets and deferred costs resulting from assets and business acquisitions, non-GAAP selling and marketing expenses increased by 11.7% to RMB283.3 million, primarily due to an increase in advertising expenses and promotional campaign related expenses. Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 7.5% from 8.6%. General and administrative expenses increased by 26.1% to RMB72.5 million. Excluding SBC expenses, non-GAAP G&A expenses increased by 41.9% to RMB56.2 million, primarily due to an increase in personnel costs. Non-GAAP G&A expenses as a percentage of total revenues was a 1.5% compared to 1.3% in the same period of 2023. Technology and content expenses increased by 10.6% to RMB49.8 million, excluding SBC expenses and amortization of intangible assets and deferred cost resulting from assets and business acquisitions. Non-GAAP technology and content expenses increased by 12.6% to RMB43.7 million. So the increase was primarily due to a increase in personnel costs in connection with the ongoing upgrade of the company's operation center system. 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 RMB94.1 million meeting to second quarter of 2024, representing a significant increase of 81% year-on-year. Non-GAAP operating profit margin was 2.5% compared to 1.8% in the second quarter of 2023 and our ongoing share repurchase program, which our Board of Directors approved it as uplifting limits to purchase USD50 million through June 27, 2025. We have returned approximately USD8 million to our shareholders for a total number of RMB3.3 million [ADS] as of June 30, 2024 As of June 30, 2024, cash and cash equivalents, restricted cash, short-term investments and funds receivable from third partly payment service providers totaled RMB2.8 billion. Our strong cash position safeguards are sustainable growth outlook. Now turning to the business outlook. For the third quarter of 2024, we anticipate total revenues to be between RMB3,970 million and -- RMB4,070 million, representing an increase of 21.9% to 25% year-over-year. Please note that this forecast only reflects our current and preliminary views on the market and operational conditions, which are subject to change This concludes our prepared remarks. Operator, we are now ready to take questions.\nQuestion and Answer Session\nOperator\n Thank you. We will now begin the question and answer session. (Operator Instructions) Joyce Ju, Bank of America.\n (Interpreted) I'll translate myself. This is Julian, on behalf of Joyce from Bank of America. Thank you for taking my question and congrats on a solid result this quarter. We see the our recent domestic policies have increased support for large-scale consumer goods trading such as subsidies announced by the National Development and Reform Commission in July. How do these policies impact your business?\n Thank you for the questions. Since the State Council released his action plan for large-scale consumer goods trading in March, we observed both central and local policy support, mainly focusing on computers, cars and home appliances. In July, the NDRC and Ministry of Finance issued measures to further support these tradings, we've seen more cities implementing specific subsidies for electronic products, including home appliances and computers. You renew and JD.com have collaborated to meet users' trading in, securing more high quality first and recycling projects. Currently fund specific subsidies are being implemented at the local level. For instance, exchanges, Shanghai July trading subsidy program, we process used consumer electronics products from JD's trading orders. The number of successful recycling transactions increased 2.5 times compared with the number in June, even though June was the peak month considering the brand promotion season, reflecting the popularity of such an initiative. In the second half of the year, we expect more cities to introduce similar subsidies, further promoting the effective recycling of auto electronic products within the circular economy. However, we primarily view these policy subsidies as catalyst for enhancing users' recycling awareness. Some studies suggest this round of subsidy may last longer than previous programs like home appliances going into the country sites. Therefore, we aim to seize these opportunities to strengthen the recycling system [in-house, Asia's] recycle brand recognition and guide users towards trading. We anticipate that as national and local subsidy policies are introduced, user acceptance increases and our fulfillment capabilities strengthen. These factors will collectively promote further penetration of this unique service model in the circular economy.\nOperator\n Jiajing Chen, CICC.\nJiajing Chen\n (Interpreted) Congratulations on the solid results. And I have two questions. The first one is about the top line. What are the contributions on the compliance refurbishment business and your Apple trading business? And the second one, could you please elaborate on how you improve your non-GAAP operating margin?\n Okay, thank you. I will take your question. In terms of the component refurbishment, we saw a 50% year-over-year increase in the second quarter, which RMB9,300 million in product revenue in the first half of this year, we continued to enhance our selection of self-cycled goods. Swift, identifying suitable forms for the fulfillment and the improving efficiency across our value chain. Currently, we have achieved 95% comparison coverage in that mobile phone category, laying a solid foundation for future application to other categories. At the same time, we have enhanced our payer coverage and the capabilities and the processing capabilities for different conditions. Additionally, we have posted to our sales comparatives for 1P goods opening up channels for both retail and business buyers, better connecting [CM2] and industrial chain. Regarding edibles that holds official trading service, we have successfully optimized our gross margin has penned achieving a positive gross margin second quarter. Although the overall gross margin for our Apple business, the second quarter was already low single digits, we observed significant improvements in gross margin focus receiving during the second quarter. We will continue to define this finishing second half of this year, aiming to provide an excellent trading experience for Apple's official users while maintaining steady profitability. In the first half of this year, in addition to our work consumer end trading service, we also enhanced our service to Apple's corporate offerings. Based on Apple's orders from a number of Fortune 500 corporates. We expect to recover used devices from, -- corporates clients in next one to three years. So such a program we can access the corporate service market while addressing the needs of leading international and domestic coverage when you dispose of disposing of used to workplace iPhone, MacBooks of their employees. In terms of profitability, we reported in a -- consider Q2 quarter with positive net GAAP operating profit. In the second quarter net GAAP operating profit was RMB94 million. Non-GAAP operating margin was 2.5% during the promotional season of e-commerce platforms, comparative was 7.8% in the second quarter of 2023. Such improved operating efficiency was a testament to that economy of [scale backed] by our end-to-end supply chain. As I mentioned, earnings in the second quarter of 2024, non-GAAP fulfillment expenses increased by 22.9% and the GAAP sales and marketing expenses increased by 11.7%. Both grow slower than our top line. Labor costs in relation to fulfillment as a percentage of total revenues decreased by 0.2% compared with the second quarter of -- industry, although promotion fees related to the branded promotion of AHS cycle has increased, but the commission fees and the promotion fees of PJT Marketplace and Paipai in relation to sales and marketing as a percentage of total revenues dropped. So both are the main reasons behind the improvement in margin.\nOperator\n Michael Kim, Zacks Research.\nMichael Kim\n Good morning or good evening, everyone. Thanks for taking my questions. First, just curious how the gross margins for the recycling of luxury goods, compare to consumer electronics and then assuming the mix continues to shift in favor of luxury items. Just wondering how that might impact, overall gross margins. And then I do have a second question.\nRex Chen\n So for your first question, currently approximately 90% of our total revenues comes from product sales related to the cycling quality inspection and the -- resale of growing products. So the remaining 10% of our total revenues come from service revenues generated by our platform. Revenues, equivalent to the gross profit for this segment in our financial statements of this service revenues, 8% is attributable to our motor category for recycling [finish operated under the platform model]. But the in terms of the operating profit margin, so luxury goods products will be similar to our electronic products. So when we examine same as that of a cycling business of high value goods, including luxury items, we categorized some are part of our multi-category business alongside as and then consumer electronic categories. This indicates that the motor category, the Cycling business currently has a limited impact on our overall gross margin, however, we believe centered by expanding the scope and accessibility of our multi-category recycling services, we can positively influence our overall gross profit mix and the margins as well as the operating profit margin.\nMichael Kim\n It makes sense. Appreciate that. And then second, just given the strength of your balance sheet and your asset-light business model, just curious to hear your updated thinking on the capital management front. I know you talked about the Board recently upsizing and extending the share repurchase authorization. But just wondering how you might be thinking about potentially instituting a dividend down the road and or capitalizing on potential M&A opportunities? Thanks.\nRex Chen\n Okay. Thank you. In terms of the in terms of our shareholder returns were maintained regular and open communication with the Board and the market to explore sustainability of -- buyback and dividend trend and our current plan to use most of our current year profit for share repurchase in calendar year. So considering the current capital market environment and to accompany this stage of development, we will adopt a prudent approach to capital utilization and we do not have any M&A paying now.\nOperator\n This will conclude our question-and answer-session. I would like to hand the conference back over to management for any closing remarks. Please go ahead.\n Thank you. Thank you all again for joining us. So a replay of today's call will be available on our website shortly, followed by a transcript when ready. If you have any additional questions, please feel free to email us at ir@atrenew.com. Have a nice day. Thank you.\nOperator\n The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.\n Portions of this transcript that are marked (Interpreted) were spoken by an interpreter present on the live call. 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