Release Date: August 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ATRenew Inc (RERE, Financial) reported a 27.4% year-over-year increase in total revenue, reaching RMB3.78 million.
- The company's core self-operated consumer electronics recycling business saw a 27.8% increase in order volume.
- Gross margin for the Apple trading business turned positive in the second quarter, contributing to an overall product revenue gross margin of 12.1%.
- The GMV of the multi-category recycling service business increased by nearly 400% year-over-year.
- ATRenew Inc (RERE) renewed its strategic agreement with JD.com, enhancing business collaboration in consumer electronics recycling and trade-ins.
Negative Points
- Gross margin at the group level slightly dropped to 20.8% due to an increased proportion of product revenue.
- Non-GAAP fulfillment expenses increased by 22.9% year-over-year, driven by higher personnel and operational costs.
- Selling and marketing expenses increased by 5.6%, with non-GAAP selling and marketing expenses rising by 11.7% due to higher advertising and promotional costs.
- General and administrative expenses increased by 26.1%, with non-GAAP G&A expenses rising by 41.9% due to higher personnel costs.
- Technology and content expenses increased by 10.6%, with non-GAAP technology and content expenses rising by 12.6% due to ongoing system upgrades.
Q & A Highlights
Q: How do recent domestic policies supporting large-scale consumer goods trading impact your business?
A: Kerry Chen, Founder, Chairman & CEO: The policies, including subsidies announced by the National Development and Reform Commission, have significantly boosted recycling volumes. For example, in Shanghai, the number of successful recycling transactions increased 2.5 times in July compared to June. We expect more cities to introduce similar subsidies, enhancing user awareness and promoting effective recycling.
Q: What are the contributions of the compliance refurbishment business and the Apple trading business to your top line?
A: Jeremy Ji, Director of Corporate Development, Investor Relations: The compliance refurbishment business saw a 50% year-over-year increase in the second quarter. The Apple trading business achieved a positive gross margin in the second quarter, with significant improvements in gross margin focus. We also enhanced our service to Apple's corporate offerings, expecting to recover used devices from corporate clients in the next one to three years.
Q: How do you improve your non-GAAP operating margin?
A: Jeremy Ji, Director of Corporate Development, Investor Relations: Improved operating efficiency is due to economies of scale backed by our end-to-end supply chain. Non-GAAP fulfillment expenses and GAAP sales and marketing expenses grew slower than our top line. Labor costs as a percentage of total revenues decreased, and promotion fees related to PJT Marketplace and Paipai also dropped.
Q: How do gross margins for the recycling of luxury goods compare to consumer electronics, and how might this impact overall gross margins?
A: Rex Chen, CFO: Approximately 90% of our total revenues come from product sales related to recycling and resale of consumer electronics. Luxury goods have a similar operating profit margin to consumer electronics. Expanding multi-category recycling services, including luxury items, can positively influence our overall gross profit mix and margins.
Q: What is your updated thinking on capital management, including potential dividends and M&A opportunities?
A: Rex Chen, CFO: We maintain regular communication with the Board and the market regarding share repurchase and dividend trends. Our current plan is to use most of our profit for share repurchase this year. Given the current capital market environment, we are adopting a prudent approach to capital utilization and do not have any M&A plans at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
