ATRenew RERE Q1 2025 Earnings Call Transcript

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DATE

Tuesday, May 20, 2025 at 8 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Kerry Chen

Chief Financial Officer — Rex Chen

Chief Strategy Officer — Jeremy Ji

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TAKEAWAYS

Total Net Revenue: Total net revenue was RMB 4,653.5 million in Q1 2025, up 27.5% year over year, exceeding the high end of guidance.

Non-GAAP Operating Income: Over RMB 110 million, increasing 39.5% year over year (non-GAAP).

Non-GAAP Operating Margin: Non-GAAP operating margin reached 2.4%, reflecting a year-over-year improvement from 2.2% in the first quarter of 2024.

1P Business Revenue: Increased 28.8% year over year, primarily fueled by demand for pre-owned consumer electronics and supported by national subsidies.

1P2C Retail Revenue: 1P2C revenue grew by 73.5% year over year, now representing 33% of total 1P revenue, indicating retail mix expansion.

Registered Merchants (PJT Marketplace): Exceeded one million as of quarter end, with a double-digit percentage year-over-year rise in active trading merchants.

Marketplace Take Rate: Increased by 24 basis points to 5.25%, reflecting growth in higher-fee OPT services.

Store Network Expansion: Net addition of 458 AHS Recycle stores year over year as of quarter end, totaling 1,886 stores at quarter end.

Service Revenue (Multi-Category Recycling): Contributed over RMB 50 million in the first quarter, 13.3% of service revenues, up from 5.6% in the same period of 2024.

Product Sales Gross Profit Margin (1P): Improved to 15.2% from 10.9% in the same period last year, primarily due to enhanced C2B supply chain and refurbishment performance.

Repurchase Program: 0.4 million ADSs bought for $1.2 million; cumulative repurchases of approximately 10.7 million ADSs for approximately $27.1 million as of March 31, 2025.

Cash and Equivalents (Including Restricted, Investments, Receivables): RMB 2.78 billion as of March 31, 2025, supporting reinvestment and shareholder returns.

Second Quarter Revenue Guidance: Forecast of RMB 4,710 million to RMB 4,801 million, implying 24.7%-27.4% year-over-year growth.

SUMMARY

ATRenew Inc. (NYSE:RERE) reported significant revenue and non-GAAP profitability gains, with the 1P2C retail segment and marketplace initiatives driving much of the expansion. Management credited accelerated national subsidy adoption, broader offline store rollouts, and improved merchant participation as catalysts for growth. The company outlined further investments in store networks, localized fulfillment, and technology, while reiterating its ongoing share repurchase activity and robust capital position.

Management emphasized that the proportion of mobile phones accounts for approximately 70% of pre-owned electronics volume, projecting long-term penetration growth from single digits to over 20% as recycling becomes more mainstream.

CEO Chen highlighted that the product revenue from AHS Mini and official website grew faster than the overall 1P business, attributing gains to enhanced digital marketing and increased user engagement.

Management said, In March, the company launched its first offline flagship store in Shenzhen, Wai Changbe, driving transparency in the pre-owned consumer electronics industry and establishing a model that integrates warehouse-to-retail for inventory and sales efficiency.

There was a structural shift to more self-operated stores in high-tier cities, increasing face-to-face and door-to-door fulfillment options, with the in-person customer experience registering higher user satisfaction compared to logistics pickup channels.

INDUSTRY GLOSSARY

1P Business: First-party business in which ATRenew acquires product inventory and sells directly to end-users through owned channels.

1P2C: Direct first-party-to-consumer retail model, denoting ATRenew's in-house retailing of refurbished electronics.

C2B: Consumer-to-business model in which individuals sell used electronics to ATRenew for resale or refurbishment.

PJT Marketplace: ATRenew's core online platform for trading and transaction services among merchants, often referenced as the “PJT” merchant marketplace.

OPT Services: Shipping quality inspection services offered within the PJT marketplace that command higher fee rates.

GMV: Gross merchandise value, representing the total transaction volume facilitated through the platform.

ADS: American Depositary Shares, representing equity ownership in ATRenew listed on the NYSE.

Full Conference Call Transcript

Kerry will share his thoughts on 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 hear during our discussions today will consist of forward-looking statements. 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 ATRenew does not take any obligations to update 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 Kerry for business and strategy updates. Hello, everyone, and thank you for joining ATRenew's first quarter 2025 earnings conference call.

Kerry Chen: 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 RMB 4,653.5 million. On the profitability side, our non-GAAP operating income increased by 39.5% year over year to over RMB 110 million. Non-GAAP operating margin reached 2.4%, indicating healthy progress compared to the first quarter of last year. 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 refracting 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.

In terms of trend, 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 458 stores year on year by the end of 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 have strengthened the long-term cost development supply chain, delivering best-in-class user experience and efficient fulfillment. 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. 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 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 the AHS Recycle's wide range of recycling services, and accelerating the growth of our recycling channels. We have launched the revised 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 Earth Day, we collaborated with twelve 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. 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 combined refurbishment operations. This approach allows us to offer competitively priced, quality-assured 1P refurbished products to users across Pie AHS selection 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. This amplified our product accessibility to consumers. Looking specifically at the Apple official trading business, as mentioned in previous earnings calls, revenues 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.

Regarding our marketplace businesses, we've seen a marked rise in trading service acceptance among both online and offline users, alongside a 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. As of the end of the first quarter, the number of registered merchants in PJT exceeded one million, with a double-digit year-over-year increase in active trading merchants. The proportion of higher fee OPT services, i.e., shipping quality inspection services, grew, raising PGT marketplace's 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 secondhand electronic products. PGT is pioneering the innovation of secondhand sales models by expanding diverse online and offline sales channels for merchants. In March, we launched our first offline flagship store in Shenzhen, Wai Changbe, driving transparency in the pre-owned consumer electronics industry. The 1,200 square meter store displays nearly 10,000 secondhand phones that have undergone professional impact. The flagship store operates under a warehouse-to-retail model, seamlessly integrating storage and sales functions. By offering an all-in-one browse-in-fact 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.

In addition, we recently began piloting compact authentication warehouses within our self-operated CT2 streamline the quality inspection process for merchants. These compact warehouses, located closer to major trading hubs, allow us to operate at lower cost 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 3D inventory and supply chain on the TJP 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 PGT and consumers.

Moving forward, we will open up more platform capabilities to merchants to boost quality product sales and promote distribution capabilities and compliant growth of pre-owned consumer electronics across regional centers. As part of the ongoing transformation of the Pie consignment business, we are focused on better serving small merchants in the secondhand 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 the overall merchant experience while driving higher product turnover. In terms of scale, sales across all categories in the Pie 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 broad transaction value and revenue nearly tripled year over year in the first quarter. Gold recycling saw slower growth, while the recycling service fee for luxury goods increased slightly. As a result of these combined factors, the overall multi-category 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-recording 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. We seized growth opportunities arising from national subsidies by providing a best-in-class trading 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 obtaining more user mindshare, enhancing user experience, ensuring the efficient circulation of secondhand products, and creating greater value.

Now I'd like to turn the call over to CFO, Rex Chen, for financial updates.

Rex Chen: Hello, everyone. We are pleased to report strong financial performance in the first quarter of 2025, driven by the national subsidiary qualities, 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 RMB 4,650 million, and adjusted operating income increased by 39.5% to over RMB 110 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. 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 RMB 4,260 million, primarily due to an increase in the sales of pre-owned consumer electronics through our online channels.

Net service revenues were RMB 390 million, representing an increase of 14.2%. 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 2025. During the quarter, our multi-category recycling business contributed over RMB 50 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 6-Ks furnished with the US SEC.

Merchandise costs increased by 22.7% to RMB 3,652 million, in line with the growth of product revenue. The 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. 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 2024, the gross margin in the first quarter of 2025 achieved a significant turnaround from losses compared to the same period last year.

Fulfillment expenses increased by 38.1% to RMB 430 million. Non-GAAP fulfillment expenses increased by 40.2% to RMB 430 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 2025. 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 RMB 420 million. Non-GAAP selling and marketing expenses increased 72.8% to RMB 390 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%. General and administrative expenses decreased by 14.1% to RMB 63 million. Non-GAAP G&A expenses increased by 2.2% to RMB 59 million, primarily due to an increase in personnel costs. Non-GAAP G&A expenses as a percentage of total revenues decreased to 1.3% from 1.6%. Technology and content expenses increased by 9.6% to RMB 55 million.

Non-GAAP technology and content expenses increased by 16.5% to RMB 53 million. 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 RMB 110 million in the first quarter of 2025, 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 2024.

During the first quarter of 2025, we repurchased a total of approximately 0.4 million ADSs for approximately $1.2 million under our current share repurchase program, which authorizes us to repurchase up to $50 million worth of our shares, including ADSs, through June 27, 2025. As of March 31, 2025, we had repurchased a total of approximately 10.7 million ADSs for approximately $27.1 million under the share repurchase program. As of March 31, 2025, cash and cash equivalents, restricted cash, short-term investment, and funds receivable from third-party payment service providers totaled RMB 2.78 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 2025, we anticipate total revenues to be between RMB 4,710 million and RMB 4,801 million, representing a year-over-year increase of 24.7% to 27.4%. 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: And your first question comes from Joyce Ju with Bank of America. Please go ahead.

Joyce Ju: Thanks, management, for taking my questions, and congrats for achieving a strong quarter. My first question is on the national subsidy. How effective has the national subsidy been in promoting recycling and trading programs? Do you see the same growth momentum in your secondhand recycling and resale businesses and results? Secondly, in the first quarter, we see that both revenue and non-GAAP operating margin showed strong performance. Can you please help me explain the increase in the non-GAAP fulfillment margin and sales marketing margin? Is there any adjustment to this year's total revenue and margin target? Thank you.

Kerry Chen: 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 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 subsidy for trading programs, combined with our strong positioning in key recycling channels, has jointly driven the accelerated growth of our 1P business. We have previously shared the view that the national subsidies will definitely boost the mobile phone restocking business.

With industry-leading brand awareness, fulfillment capabilities, and unique advantages in essential application scenarios in recycling, AHS Recycle is well-positioned to benefit from the increasing adoption of recycling in mainstream channels. Currently, the national subsidy for mobile phone trade-ins is RMB 500. However, our average recycling price in the 1P business is approximately RMB 1,500. This creates a stronger incentive for users to not only take up the national subsidy but also leverage the trade-in service of AHS Recycle. Looking ahead to the medium to long term, we remain confident in China's strong and consistent commitment to stimulating consumption. In our total 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 million 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 programs remains in single digits, but in the long run, we believe there is potential for domestic penetration to rise 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. Therefore, during the June 18 shopping festival this year, we expect to maintain business growth through trading services and are committed to strengthening our delivery capabilities to better serve users in recycling and trading.

Rex Chen: 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 Kerry noted, in the first quarter of 2024, Apple's official training program and our overseas business reported high revenue and losses. However, in the first quarter of 2025, as we optimized business and pricing strategies, the profit margin of the two businesses has significantly improved. Meanwhile, by leveraging our supply chain strength, the proportion of 1P2C retail revenue increased by 8% year over year. During the same period, our 1P business expanded rapidly, and we strategically focused on self-operated stores and increased staff in fulfillment and operation functions.

Thus, the non-GAAP fulfillment expense ratio rose by 0.9% year over year. The non-GAAP selling expenses ratio has 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 the new media platform of AHS Recycle brand. 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 a competitive pricing strategy. 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 Xiaoxin Chen with CICC. Please go ahead.

Xiaoxin Chen: Thank you for taking my question. As we mentioned earlier, your goal is to accelerate store openings this year with a target of a net add of 800 AHS Recycle stores. Can you share details on the progress of store openings in the first quarter of 2025?

Kerry Chen: As of March 31, 2025, there were a total of 1,886 AHS Recycle stores nationwide, including 917 self-operated stores and 969 joint-operated stores. The total number of stores has increased by a net of 458 compared to the same period last year. Compared to the end of 2024, 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-managed operational capabilities to quickly boost the recycling performance of these stores.

Over the same period, our door-to-door fulfillment team expanded by 360 people year over year to 1,000 people, strengthening our fulfillment capabilities in more markets. We are increasing the proportion of face-to-face services by expanding both in-store and door-to-door services. In our NPS service, users are much more satisfied with these two face-to-face offline services featuring instant confirmation than with logistics-based pickup. We will continue to enhance our offline fulfillment capabilities to provide the best-in-class 3D experience.

Operator: And your next question comes from Michael Kim with Zacks Small Cap Research. Please go ahead.

Michael Kim: 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 we continue to prioritize improving brand awareness and loyalty? Thanks.

Kerry Chen: Thank you for your question. AHS Recycle has solidified its position as a 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 Recycle stores, driving orders through our mini program, official website, and AHS stores.

Furthermore, we enhanced the new media presence of our joint operators' 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 and official website 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.

Operator: Back to management for closing remarks.

Jeremy Ji: Thank you. Thank you 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@atrenew.com. Have a good day.

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

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