AiHuiShou International Co Ltd - ADR Stock

Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note today's event is being recorded. I will now turn the call over to the first speaker today, [ Ms. Jenny Jin ], Head of Investor Relations. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to ATRenew Second Quarter 2026 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 the analysts.

The second quarter 2026 financial results were released earlier today. The earnings press release and investor slides accompanying this call are now 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 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 will hear during our discussion today will consist of forward-looking statements, and I refer you to our safe harbor statement 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 the 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.

[Foreign Language]

[Interpreted] Hello, everyone, and thank you for joining ATRenew's Second Quarter 2026 Earnings Conference Call. We are pleased to review our operating results for the quarter and share our views on industry trends and our strategy.

[Foreign Language]

[Interpreted] In the second quarter, total net revenues exceeded the high end of our guidance, increasing 32.4% year-over-year to RMB 6.61 billion, our continued focus on 1P has strengthened our end-to-end capabilities and have driven rapid growth in product revenue, up 35.9% year-over-year to RMB 6.9 billion, non-GAAP operating profit grew 70.1% year-over-year to RMB 210 million, while non-GAAP operating profit margin expanded by 69 basis points year-over-year to 3.16%.

[Foreign Language]

[Interpreted] First of all, I'd like to share four key external shifts and trends. The first dynamic is the year-over-year decline in new device sales. The intuitive thinking is that this could drive our recycling business. But compared intuitively, when new devices are selling well, recycling and trade-in programs are just supplementary value-added services and are not a top priority.

Conversely, when new device sales soften, trade-in programs become the most critical and effective promotional tool, major manufacturers and platforms place greater emphasis on and allocate more resources to trade-in initiatives. We have seen this clearly in our business trends over the past few years.

[Foreign Language]

[Interpreted] Second is macroeconomic headwinds in consumption and significant growth in demand for high-quality, affordable preowned smartphones and other secondhand products. This is clearly reflected in the sustained robust growth of our curated B2C business.

[Foreign Language] The third shift is increasingly strengthened regulation, including taxation and device refurbishment. AHS has always been committed to compliant operations while tighter regulations disproportionately impact fragmented small-scale and noncompliant operators, they benefit from our business, they benefit our 1P business.

[Foreign Language]

[Interpreted] The fourth shift is the accelerating trend of exporting domestic for own devices. As the penetration rate of trading and reception programs continues to rise in China, Domestic supply is expanding rapidly. China has shifted from a net importer to a net exporter of preowned smartphones, establishing a clear industry trend where high-end models are sold domestically while mid- to high-end and low-end modules are exported. With that, let us now move to our business update.

[Foreign Language]

[Interpreted] In recent years, we have firmly prioritized 1P business because trust and efficiency are credible in the secondhand consumer electronics industry. Our 1P model starts with potent supply from C2B channels, we add depth to the value chain through compliant refurbishment, strengthen B2C retail for premium curated products and leverage B2C retail pricing capabilities to offer better pricing and user experience on the restructuring side. Together, those efforts enhance our end-to-end capabilities across the value chain.

[Foreign Language]

[Interpreted] On recycling, we capitalized on opportunities as brand e-commerce player, e-commerce platforms and offline retailers prioritize and invest in trading programs. Leveraging AHS recycles increasingly extensive fulfillment network to enhance the user experience. Trade-in and recycling demand was drawn during the June 18 [indiscernible] festival. In response, we expanded our nationwide to door fulfillment team, including flexible capacity to nearly 3,000 by the end of June, up sharply from the end of March.

Together with our 2,117 AHS stores, this gave us strong advantages in sourcing and customer service over industry peers. During the major promotional period from May 13 through June 18. The restructuring value of mobile phones and consumer electronics at AHS recycle increased 57% year-over-year. both door and in-store recessing orders grew 45% year-over-year. while face-to-face orders accounted for 80% of recycling orders across all channels. multiple user experience metrics also continued to improve.

[Foreign Language]

[Interpreted] Our compliance refurbishment business also continues to accelerate. Revenue from 1P refurbished products increased 87.8% year-over-year with higher new device prices, stable pre-owned market sentiments and more refined pricing strategies and operations 1P-C retail revenue grew 92.4% year-over-year in the second quarter. As a percentage of product revenue, 1P-C retail revenue increased 3.6 percentage points sequentially to 48.8% and allowing us to meet user demand better for curative or on phones, computers, smart devices and other products.

[Foreign Language]

[Interpreted] Turning to our 3P businesses. Service revenue decreased 4.2% year-over-year in the second quarter. Within 3P business, we maintained our industry-leading position in B2B, while B2C 3P services faced pressure from merchant activity. In [ multicat reflecting ], we navigated the headwinds from gold price fluctuations and continue to focus on more refined operations.

[Foreign Language]

[Interpreted] Specifically PJT marketplace continue to expand into fragmented markets, reaching more small-sized merchants, mom-and-pop shops and specialty buyers. By the end of June, total registered merchants on the platform exceeded RMB 2.27 million.

For sellers, we offer free shipping on the first three orders and align inspection standards upfront lowering selling costs and barriers to trial and error for new small-sized merchants.

For buyers, we launched the PJT themed campaign in Douyin and other platforms, video views grew sharply, driving rapid growth in our specialty buyer model. Together with 1P minimum quantity ordering, this initiative made it easier for small merchants to start buying on a platform. after their first transaction, buyers gradually become more engaged on the platform through repeat purchases, very key membership and participation in the like new device marketplace, showing consistent improvement in transactions in it.

Throughout this process of user expansion and support, PJT's 3P warehouse inspection penetration rate reached 84.4% this quarter. up around 11.5% year-over-year, delivering rapid scale expansion with solid growth in service revenue.

[Foreign Language]

[Interpreted] For pipeline, platform service revenue decreased year-over-year in the second quarter, mainly due to subsidies provided to pulp merchants to boost activity during the promotional campaign, our strategic reduction of service fees.

Meanwhile, we continue to refine the consignment model by introducing warehousing capabilities for third-party merchants, improving price competitiveness and sales and sell-through and optimizing financial economic [ pipeline ] consignment business grew 22.4% sequentially.

[Foreign Language]

[Interpreted] In [ multicat ] recycling services, service revenue maintained a year-over-year growth of over 30%. Gold prices were volatile and trended lower in the second quarter. We also chose to give more back to users. Together, these factors led to a 35% year-over-year decline in Gold service revenue.

During the quarter, we upgraded a select number of AHS stores to luxury stores with improvements to store design and functional areas. Together with more refined here, pricing and enhanced hedge-specific service capabilities, Luxury resecting service revenue grew 77.3% year-over-year.

Building on those positive results and experience. We plan to open more same [ multicat ] resource this year, including luxury theme stores and sports theme stores. This will give more users a better and more engaging experience when they're recycling and buying pre-owned products.

[Foreign Language]

[Interpreted] Our long-term strategy has remained focused and consistent. Here, we would like to reiterate our three straight stage development strategy.

Stage 1, we continue to solidify the healthy growth of our core secondhand consumer electronics business. In 2026, the smartphone and consumer electronics market has faced substantial price hikes across the upstream supply chain brand manufacturers are actively adjusting their product portfolios and placing greater emphasis on trade-in programs.

At the same time, e-commerce platforms are also introducing subsidy programs to support device upgrades. Against this backdrop, we have captured this opportunity through our 1P model. Leveraging our front and fulfillment capabilities and targeted trading scenarios, we drove flat growth in our core secondhand consumer electronics business.

At the same time, we are strengthening merchant capabilities with a decentralized strategy to penetrate fragmented markets while leveraging AI-powered automated inspection to reinforce the infrastructure we have built for the industry.

[Foreign Language]

[Interpreted] Stage 2, we are strengthening AHS Recycle position as China's leading recycling brand. In the pre-owned industry, word-of-mouth brand names remain scarce. We continue to make prudent investments in building the AHS Recycle brand. As it new marks its 15th anniversary, we invited [ Lu ] to serve as the test recycled global brand ambassador. Through his useful energetic, stylish and environmentally conscious image, we encourage users to embrace a simpler lifestyle and choose high-quality pre-owned products.

This initiative has generated broad positive feedback and engagement from users. From secondhand consumer electronics reacting to multicategories acting further into consumer retail, we aim to leverage the recycle brand name to provide users with the resulting and purchasing experiences.

[Foreign Language]

[Interpreted] Stage 3. We continue to advance breakthroughs in our overseas strategy. Over the past year, our overseas export business has grown rapidly. In June this year, we hit a milestone with HKD 120 million in monthly sales. Building on our solid progress. On July 28, we held our overseas strategy launch event in Hong Kong and updated our global expansion strategy.

[Foreign Language]

[Interpreted] First, we see a huge pre-owned phone market globally with the scale of USD 100 billion in Hong Kong, Dubai and Miami [ AHS ] Hub. As China is changing from a consumer to a supplier of pre-owned phones globally, we see a chance to build an international B2B marketplace leveraging PJT's success domestically.

As such, we launched [ PhoneSquare ]. It relies on two core strengthens of our growing NPS for supply and automated quality inspection technology. We will follow our domestic experience and gradually expand from 1P to 3P supply while establishing global standards. We will also optimize cost and efficiency through automated quality inspections. And improved transaction transparency, building a more efficient B2B marketplace and traditional trading platform, aiming to give pre-owned goods a second life globally.

While exports are growing for us. Fourth were to need time to improve, and we appreciate your patience and support. We also launched our overseas consumer brands [indiscernible] RERE, that is we value what you own renew the way you choose. We will cautiously explore the 2C business model through refuting kiosks and physical stores with a small amount of investment. We will share more updates on our overseas business as of corporate.

[Foreign Language]

[Interpreted] Looking at 2026 as a whole, we will continue to enhance supply sourcing, customer or merchant services and operating efficiency. We look forward to giving you the better experience, more choices and more value in pre-owned transactions.

[Foreign Language]

[Interpreted] Now I'd like to turn the call over to our CFO, Rex for financial updates.

[Foreign Language]

[Interpreted] Good day, everyone. I'm pleased to share our outstanding financial performance for the second quarter of 2026. Both revenues and profits reached record high. During the quarter, the ongoing rollout of China trade-in programs for consumer electronics together with the June 18 shopping festival, further boosted consumer demand for device upgrades and expanded the supply of first-hand devices available for recycling. We actively captured these market opportunities continue to support recycling and trade-in scenarios and fully leverage the synergies between our supply chain and retail capabilities. As a result, we sustained solid growth momentum over the quarter.

[Foreign Language]

[Interpreted] In the second quarter, total revenue exceeded the high end of our guidance, increasing by 32.4% year-over-year to RMB 6.61 billion, while non-GAAP operating income surged by 70.1% to over RMB 200 million.

[Foreign Language]

[Interpreted] Before we review the financials in detail, please note that all figures are in RMB and all comparisons are on a year-over-year basis unless otherwise stated.

[Foreign Language]

[Interpreted] In the second quarter, total revenue growth was primarily driven by continued growth in net product revenue Net product revenues increased by 35.9% to RMB 6.19 billion, largely attributable to the growth in online sales of pre-owned consumer electronics.

[Foreign Language]

[Interpreted] Net service revenues were RMB 410 million in the second quarter, representing a decrease of 4.2%. The decrease was primarily due to the discretionary discounts on service fees provided to merchants during the extended June 18 grand promotion event period.

[Foreign Language]

[Interpreted] Now let's discuss operating expenses to provide greater clarity on the trends of our actual operating base expenses, we will mainly discuss our non-GAAP operating expenses, which better reflect how management views our operating results. The reconciliations of GAAP to non-GAAP results are available in our earnings release and the refining Form 6-K furnished with the U.S. SEC.

[Foreign Language]

[Interpreted] Merchandise costs increased by 31.9% to RMB 5.22 billion, in line with the growth in product sales. Gross profit margin for our 1P business was 15.7% compared with 13.2% in the same period last year. The gross margin improvement in our 1P business. This was primarily driven by high efficiency C2B recycling scenarios, compliant with refurbishment capabilities incorporating in our supply chains and an increasingly diversified retail channel mix. This allowed us to increase the proportion of higher-margin retail sales with 1P-C revenue accounting for 48.8% of product revenue in the second quarter of 2026, up from 34.4% in the same period last year.

[Foreign Language]

[Interpreted] Fulfillment expenses increased by 31.1% to RMB 540 million, non-GAAP fulfillment expenses increased by 30.5% to RMB 530 million. Under the non-GAAP measures, it increase was primarily driven by higher personnel costs resulting from the growth of our business compared to the same period in 2025 as well as higher logistics expenses in line with the increased product sales.

Additionally, operating center-related expenses rose along with the increasing volumes of recycling and transactions. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.1% from 8.2%.

[Foreign Language]

[Interpreted] Selling and marketing expenses increased by 24.8% to RMB 510 million. Non-GAAP selling and marketing expenses increased by 29.9% to RMB 500 million primarily driven by an increase in commission expenses in relation to channel service fees. Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 7.6% from 7.8%.

[Foreign Language]

[Interpreted] General and administrative expenses increased by 23.5% to RMB 95.7 million. Non-GAAP G&A expenses also increased by 13.6% to RMB 85.3 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 1.5%.

[Foreign Language]

[Interpreted] Research and development expenses increased by 23.5% to RMB 77.2 million. Net debt R&D expenses increased by 24.2% to RMB 72.3 million probably due to an increase in personnel costs. Non-GAAP R&D expenses as a percentage of total revenues decreased to 1.1% from 1.2%.

[Foreign Language]

[Interpreted] As a result, our non-GAAP operating income exceeded RMB 200 million in the second quarter of 2026 compared to non-GAAP opening income of RMB 120 million in the second quarter of 2025. representing an increase of 70.1% year-over-year increase. Non-GAAP operating profit margin was 3.1% for the quarter, compared to 2.4% in the second quarter of 2025, representing an increase of 69 basis points.

[Foreign Language]

[Interpreted] As of June 30, 2026, cash and cash equivalents, restricted cash, short-term investments and funds receivable from third-party payment service provider totaled RMB 2.16 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns.

[Foreign Language]

[Interpreted] During the second quarter of 2026, we repurchased a total of approximately 1 million ADS for approximately USD 4.2 million. On June 30, 2025, the Board has authorized a share repurchase program under which the company may repurchase up to USD 50 million of our shares over 12 months. The Board has authorized the extension of this share repurchase program for 12 months from June 30, 2026, with key terms unchanged. As of 2026, we repurchased approximately USD 14.8 million under this program.

[Foreign Language]

[Interpreted] Now turning to the business outlook. For the third quarter of 2026, we anticipate total revenue to be between RMB 6.34 billion to RMB 6.44 billion representing an increase of 23.1% to 25% year-over-year to 25.1% year-over-year. Please note that this focus may only reflect our current and preliminary views on the market and optional operational conditions, which are subject to change.

[Foreign Language]

[Interpreted] this concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions] The first question today comes from Mandy Liu with UBS.

[Foreign Language]

[Interpreted] My question is that as the launch of Apple's iPhone 18 is around the corner, how would you expect the impact towards our financial performance ahead Also, is there any updates on your full year revenue and margin guidance?

[Foreign Language]

[Interpreted] Here, I'd like to reiterate a counterintuitive view. When new devices are same, resecting and trade-in programs are just supplementary value-added services when new devices sell soften, trading programs become the most critical and effective promotional tool. Major manufacturers and platform places greater emphasis on and allocate more resources to trade-in. This year, against new device sales headwinds, e-commerce platforms, brand manufacturers and reducers have all increased their investments in trade-in scenarios, making C2B resulting for print on consumer electronics more efficient.

With strong sourcing channels and convenient reflecting fulfillment we have built an industry-leading supply base and further strengthen our supply-side advantage in the print owned value chain.

[Foreign Language]

[Interpreted] For the third quarter guidance, we take into account this year's major flagship smartphone launches take the iPhone 18 lineup as an example, current market expectations are that Apple may introduce more premium models and some standard modules could shift to next spring.

This could extend iPhone 18's volume treatment cycle into the fourth quarter and the first quarter of next year. We monitor this closely. Our third quarter guidance has already factored in the potential impact.

[Foreign Language]

[Interpreted] Should new device prices rise due to higher upstream memory costs, trade-in and recycling could be more valuable for users and prices for high-quality pre-owned products will have room for upside. The second quarter already saw a year-over-year increase in the average order volume of our 1P business.

[Foreign Language]

[Interpreted] On profitability, we continue to make disciplined investments in fulfillment capabilities and consumer brand marketing in the second quarter, benefiting from economies of scale and more refined operations, we delivered the expected year-over-year improvement in non-GAAP operating profit margin. Overall, we expect to maintain strong growth in both revenue and profit this year.

The next question comes from Wan Jiao with CICC.

[Foreign Language]

[Interpreted] Could you please elaborate on the reasons for the decline in service revenue and share our outlook?

[Foreign Language]

[Interpreted] Strategically, our 1P model will pay an increasing in vital role in the pre-owned smartphones, consumer electronics category. First, it ensures the premium transaction experience for end users and strengthens brand awareness. In addition, the industry's inevitable shift towards greater compliance will further support the development of our 1P business.

[Foreign Language]

[Interpreted] In the second quarter, net service revenue decreased by 4.2% year-over-year, mainly due to two factors. First, we increased subsidies for merchants, including logistic fees, incentives for new users as PJT marketplace expanded into more fragmented markets. Second, during the promotional campaign, we provided discounts or waivers on service fees to pipeline of merchants to boost their transactions.

[Foreign Language]

[Interpreted] Looking ahead, we expect that PJT continues to penetrate lower tier markets. more small-sized merchants will gain easier access to the national pre-owned trade-in market. By leveraging our quality inspection technology, platform services and differentiated membership programs. We expect both PJT for operational efficiency and grow its platform service revenue in line with the healthy expansion of China's renowned consumer electronics and smartphone industry.

[Foreign Language]

[Interpreted] For our pipeline B2C business, we are shifting towards 1P purity retail and 3-tier consignment models, which will affect revenue in the short term. Under the 1P model, we are co-building capabilities with [ JD.com ] to meet consumer demand for curated pre-owned products, helping users upgrade their devices with high-quality affordable auctions.

Under the consignment model, Paipai is continuously form ways to support small merchants. We are expanding merchant recruitment boosting merchant vitality and providing robust support for their store operations, traffic management and after services.

[Foreign Language]

[Interpreted] In our multicategory recycling services, we are launching refined operations to reinforce consumer mind share of the AHS through theme stores and differentiated user experiences. We are confident to continue growing faster than broader industry.

The next question comes from Brian Lantier with Zacks Small Cap Research.

Congratulations on navigating what's turned into a challenging year for the smartphone market. I wonder if you could talk a little bit about your development plans and your performance goals for the international business?

[Foreign Language]

[Interpreted] The main part of our overseas strategy is B2B, which is complemented by our 2C business. B2B remains the core revenue contributor, accounting for around 90% of our overseas revenue. Our goal is to build [ PhoneSquare ] into a global version of PJT marketplace in 3 years. We will expand our supply and buyers' network, bring our automation technologies overseas and improve our open platform.

We already have a mature B2B system in Hong Kong, covering inspection operations and sales. We plan to start building new regional capabilities in Dubai and in the second half of this year. [ PhoneSquare ] is now officially available in Hong Kong app stores. And we plan to gradually expand into Middle Eastern markets like Dubai and than Southeast Asian markets like Malaysia.

We continue to optimize [ PhoneSquare ] functionality and user experience and expect to launch the next phase of our user growth initiatives soon.

[Foreign Language]

[Interpreted] In addition, we are cautiously exploring overseas two securities under the RERE brand. Whether through RERE kiosk already deployed in Europe for our first RERE store in Hong Kong -- recently opened in Hong Kong. Our overseas 2C business is still at an early stage of exploration, we will share further updates as we make progress.

The next question comes from Rafael Tse with DBS.

[Foreign Language]

[Interpreted] One question from my side. So the group's number of stores declined quarter-over-quarter in the second quarter of 2026, while the number of in-stall business increased significantly. How can we estimate or forecast the change in store numbers for this year?

[Foreign Language]

[Interpreted] To begin with, I'd like to note that AHS has seen a solid capabilities in innovation and pacing for store operations. There are two factors to consider in making phased store count adjustments.

First is the need to solidify our operations after rapid expansion. Accordingly, we have repositioned some poorly located stores and closed some underperforming ones. This is standard business practice. Secondly, we are preparing and accumulating experience for our new store strategy. Our luxury themes and sports theme force have already seen good data validation.

Moving forward, we will adopt a tiered store strategy, upgrading select locations into specialized categories in stores. You will soon see us rolling out more of these same stores across different categories.

I also want to emphasize that our budget to build store-based fulfillment capabilities remains disciplined with low incremental investment, we're strengthening these capabilities by reallocating resources within our existing budget.

[Foreign Language]

[Interpreted] Environmental Recycling and Trade-in Services has been strong this year. We expanded our 2-door team to meet higher fulfillment demand in top-tier cities. During the June 18 shopping festival, we use flexible workforce solutions to quickly expand the team to nearly 3,000 people. After the peak period, the 2-door capacity adjusted back down, helping us control front-end orating expenses.

[Foreign Language]

[Interpreted] We will continue to strengthen our in-store and to door fulfillment capabilities to provide users with a trusted and convenient experience. Thank you.

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

Thank you again for joining us. A replay of today's call will be available on our IR website shortly. Followed by transcript when ready. If you have any additional questions, please feel free to email us [email protected]. Have a good day. Thank you.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s First Quarter 2026 Earnings Conference Call. Please note, today's event is being recorded. I will now turn the call over to the first speaker today, Ms. Jesse Jin, Head of Investor Relations. Please go ahead, ma'am.

[Interpreted]

Thank you. Hello, everyone, and welcome to ATRenew's First Quarter 2026 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 the analysts. The first quarter 2026 financial results were released earlier today. The earnings press release and investor slides accompanying this call are now 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 participate during the Q&A session. Please note our safe harbor statement. Some of the information you will hear during our discussion today will consist of forward-looking statements, and I refer to you our safe harbor statement in the earnings press release. Any forward-looking statements that management makes on this call are based on assumptions as of today, and thatiQRenew 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. Now I'd like to turn the call over to Kerry for business and strategy updates.

[Interpreted].

Hello, everyone, and thank you for joining Rene's First Quarter 2026 Earnings Conference Call. We are pleased to review our operating results and share our latest perspective regarding capability building in the second-time industry this year.

At the beginning of the year, we maintained an interrupted services during the Chinese New Year holiday, achieving a strong start and delivering accelerated overall growth in the first quarter. Total net revenues reached RMB 6.6 billion, representing an accelerated growth rate of 32.4%. This momentum was primarily driven by net Broadcast revenue, which surged 34.4% year-over-year, while 3G service revenue maintained a healthy 10.4% year-over-year growth rate. Profitability also improved -- non-GAAP operating profit grew 7.2% year-over-year to RMB 190 million, while the non-GAAP operating profit margin expanded by 69 basis points to 3.1%.

Amid overall revenue and scale expansion, we continue to advance our IP-centric strategy, strengthening our core foundation in the resulting and trading of secondhand consumer electronics to drive greater value for retail users we optimized our 12C ratio by securing first-hand supply sources and enhancing compliant refurbishment.

On the supply side, we capitalize on industry trends by prioritizing trading scenarios that deliver superior user experiences while shifting more fulfillment to offline wire 2-door services.

In 2026, the government maintained strong support for trading and further along fiscal and financial coordination. Against this backdrop, AHS recycle continues to work closely with JD.com to create industry-leading trading solutions. Providing a seamless one-stop trading experience at highly competitive prices to meet diverse consumer needs. As a result, within the JD sourcing channel, trading orders outpaced overall growth with volume share further expanding year-over-year to about 70%.

Throughout reflecting fulfillment process, we actively guide users towards face-to-face transactions in offline setting. In the first quarter, we expanded beyond our network of 2,156 stores across major cities and scaled up our door-to-door service team to 2,248 professionals. Bringing our services directly to user store sets. This strategy has lifted our face-to-face fulfillment ratio to 80%, fostering deep connection and truck through AHS recycled fulfillment capabilities and brand presence.

Looking ahead to peak seasons like major promotional campaigns and flagship device launches, -- we will further implement flexible workforce solutions to income face-to-face fulfillment time lines and user experience even during the busiest time.

During the first quarter, we leveraged our proprietary compliant refurbishment business to add depth to our supply chain with compliant refurbished product revenue increasing 76.1% year-over-year. Our on-demand refurbishment model was a standout performer, growing by roughly 180% in revenues.

Our compliant refurbishment capabilities allowed us to provide more quality secondhand devices directly to consumers. In terms of retail channels, we expanded across pipeline selection on our official website and new media channels, which drove nearly 150% year-over-year growth in 1 B2C retail revenue from refurbished devices.

March marked a significant breakthrough with monthly retail sales of compliant refurbished products topping RMB 200 million -- as a result, 1 B2C accounted for 45.1% of our product revenue in the first quarter of 2026, rising 12.1 percentage points from year-on-year and 3.5% -- excuse me, 3.4 percentage points from 41.7% quarter-over-quarter. This strategic pivot towards direct-to-consumer sales allows us to align our recycling prices of real-time retail trends, ensuring we offer better recycling prices. maintain a strong price advantage and create greater value for end users.

Regarding high-quality products from order generation, specifically minus 3 and minus 4 models, we targeted differentiated demand for device generations in the international markets to drive compliant exports. This strategy allows us to steadily expand our global scale and unlock an additional over 4% gross profit margin.

Turning to our 3G business. PJT Marketplace also delivered healthy and rapid growth in both scale and revenue, further reinforcing its position as industry infrastructure. As we onboarded more new users, we offer free shipping on the first 3 orders to those new users on PJT Marketplace.

We are also replicating the operational capabilities PJT Marketplace has built in serving large clients and expanding them to small- and medium-sized merchants. By streamlining platform processes, we have lowered the barrier to using platform and improved both transaction petitioned and convenience, enabling small- and medium-sized merchants to sell their products at better prices.

Long [indiscernible] marketplace robust supply chain capabilities as the industry's leading B2B platform, we deliver high-quality supplies to those merchants while reaching fragmented markets through the user base -- by the end of the first quarter, the number of total registered merchants on PJT Marketplace nearly doubled year-over-year to almost $2 million.

Notely, the number of registered contracted buyers surged by over 120% as an inflator small and micro buyers seeking high-quality value-for-money products came up to the platform. This validates the effective implementation of our PJT Marketplace supply chain strategy to penetrate fragmented markets.

3P business model, pipeline continues to shift towards the consignment model under this model, the pipeline team provides merchants with standardized operational services, making the pre-owned retail easier for them to manage. Since the second quarter of last year, pipeline consignment has continued to provide merchants with broader access to curated retail channels.

In the first quarter, the consignment business maintained a rapid double-digit growth helping bring own retail merchants move closer to consumers.

Multi-category, resulting sustained rapid growth in the first quarter with overall restructuring GMV up 81.5% year-over-year, Among them, gold recycling GMV grew 83.3% and secondhand luxury reflecting GMV grew 58.8%, both showing solid growth momentum.

By the end of March, we launched multi-category recycling services across 966 at stores, adding nearly 300 stores compared to the end of March last year. Looking ahead, we expect to roll out this capacity to more self-operated AHS stores through the rest of the year while also working with more franchisees to build some restructuring service capabilities.

Alongside the growth of our multicustomer business, we are also upgrading the locations and layout of our stores, creating a better fulfillment experience and conveying greater brand value to both new and existing users.

In summary, the overall 3G service take rate was 4.92% in the first quarter, in line with our expectations.

These results validated the effectiveness of the 3-stage development strategy we previously shared. Based on 2026 market dynamics, let me revisit the long-term nature of our strategy. Stage 1, we continue to solidify the healthy growth of our core secondhand consumer electronics business. In our category assessment within the secondhand industry, we identified secondhand customer electronics as a category with both scale and enormous room for further penetration.

As national trading policies from a consumption and industry upgrades -- we are actively positioning ourselves in recycling and trading scenarios. -- strengthening the brand recognition of agnecycle to serve broader user replacement and upgrade needs enabling more electronic products to achieve a second life cycle and creating greater value for society.

Throughout this process, we are set firstly building our 1P business capabilities increasing our use of AI tools, optimizing pricing experiences and end user services and supply chain efficiency while expanding our industry value chain through compliant refurbishment and creating more value to retail users through a higher portion of retail sales.

Stage 2, we are strengthening AHS recycled position as China's leading recycling brand -- we believe that in the secondhand service industry, pricing trust and convenience are the 3 core pillars that define the long-term user experience and the industry's long-term development part, brand equity hold enduring value, young trade in scenario, we maintain independent and prudent brand investments in agents recycle across [indiscernible] combined with the revised initiative, Asias Recycle has partnered with an increasing number of consumer brands to penetrate more mainstream commercial districts from local communities to shopping districts from campuses to workplaces.

By securing these unique scenarios and locations, AHS recycle encourages more younger users to participate in retesting and green consumption.

Stage 3, we continue to advance breakthroughs in our overseas strategy. The B2B business in overseas market represents a business model we are familiar with. By accumulating reputation and capabilities of export of China store supplies. We continue to explore a global version of PJT Marketplace and product development while systematically building capabilities to directly serve end consumers.

Now let me share a few thoughts on the 2026 market environment. Industry data shows that new device shipments in China have dipped slightly this year by about 4%. However, if we look at the rent mix, Apple and Huawei remain mainstream brands in the print on market. both grew against a broader trend in the new device market, supported by their supply chain capabilities and pricing advantages. This has validated the 3 opportunities we previously identified.

First, pricing trends in the print owned market remained value stable and resilient, laying a solid foundation for the long-term healthy development for the industry. Second, Apple products, which are closely tied to our core business drivers, have demonstrated market share advantages. Third, brand and platforms continue to place greater emphasis on trading forward. their increased investment here supports our efficiency of acquiring first-hand recycling supply.

Taking this together, we expect to deliver robust and rapid growth this year by leveraging our efficient automated quality inspection technology and value-added supply chain capabilities, we will further unlock economies of net scale.

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

[Interpreted].

Good day, everyone. I'm pleased to share our financial performance for the first quarter of 2026. Our revenues grew rapidly and profits reached a record high. As China's circle economy continues to advance and trade-in programs for consumer electronics remain ongoing, we sustained strong growth momentum in the first quarter.

During the quarter, we leveraged our direct-to-customer respecting scenarios and face-to-face fulfillment capabilities, enhance our supply chain and retail capabilities and further strengthen our user mind share of the trans recycled brand.

In the first quarter, total revenue exceeded the high end of our guidance, increasing by 32.4% to RMB 6.16 billion, while non-GAAP operating income surged by 70.2% to over RMB 190 million.

Before we review the financials in detail, please note that all figures are in RMB and all comparisons are on a year-over-year basis unless otherwise stated.

In the first quarter, total revenue growth was primarily driven by continued growth in net product revenue. Net product revenues increased by 34.4% to RMB 5.73 billion, largely attributable to the growth in online sales of freight on consumer electronics.

Net service revenues were $430 million in the first quarter, representing an increase of 10.4%. The increase was largely driven by PJT Marketplace and market cap recycling business. The overall take rate of our market sales was 4.92% for the first quarter of 2026. During the quarter, our multicat recycling business contributed over RMB 83 million revenue, accounting for 19.3% for service revenues.

Now let's discuss operating expenses. To provide greater clarity on the trends of our actual operating base expenses, we will mainly discuss our non-GAAP operating expenses, which better reflect how management views our operating results. The reconciliations of GAAP to non-GAAP results are available in our earnings release and the corresponding Form 6-K furnished with the U.S. SEC.

Merchandise costs increased by 33.2% to CNY 4.82 billion, in line with the growth in product sales. Gross profit margin for our 1P business was 15.9%, and compared with 15.2% in the same period last year. The gross margin improvement in our 1P business, this was primarily driven by high efficiency C2B recycling scenarios compliant refurbishment capabilities incorporated in our supply chain and an increasingly diversified retail channel mix.

This allowed us to increase the proportion of higher-margin retail sales with 1 PTC revenue accounting for 45.1% of product revenue in the first quarter of 2026, up from 33% in the same period last year.

Fulfillment expenses increased by 22.5% to RMB 520 million. Non-GAAP fulfillment expenses increased by 20.7% to RMB 520 million. Under the non-GAAP measures -- the increase was mainly driven by higher personnel costs, driven by the growth of our business compared to the same period in 2025.

Additionally, operating center-related expenses rose along with the increasing volumes of right reflecting and transactions. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.5% from 9.1%.

Selling and marketing expenses increased by 17.9% to $490 million. Non-GAAP selling and marketing expenses increased by 27% to RMB 490 million, primarily driven by an increase in commission expenses in relation to channel service fees. Non-GAAP selling and marketing expenses as a percentage of total revenues decreased to 8% from 8.3%.

General and administrative expenses increased by 25.9% to $79.8 million. Non-GAAP G&A expenses also increased by 33% to RMB 79 million primarily due to an increase in personnel costs. Non-GAAP G&A expenses as a percentage of total revenues remained flat year-over-year at 1.3%.

Research and development expenses increased by 33.5% to $73.4 million. Non-GAAP R&D expenses increased by 36.4% to $72.3 million, primarily due to an increase in personnel costs. Non-GAAP R&D expenses as a percentage of total revenues increased to 1.2% from 1.1%.

As a result, our non-GAAP operating income exceeded $190 million in the first quarter of 2026 compared to non-GAAP operating income of $110 million in the first quarter of 2025 representing an increase of 7.2% year-over-year. Non-GAAP operating profit margin was 3.1% for the quarter compared to 2.4% in the first quarter of 2025, representing an increase of 69 basis points.

As of March 31, 2026, cash and cash equivalents, restricted cash, short-term investments and funds receivable from third-party payment service providers totaled RMB 1.72 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns.

During the first quarter of 2026, we repurchased a total of approximately 0.5 million ADS for approximately USD 2.7 million. On June 30, 2025, the Board has authorized a share repurchase program under which the company may repurchase up to USD 50 million of our shares over 12 months.

As of March 30, 2026, we repurchased approximately USD 11 million under this program. Today, the Board has authorized the extension of the existing share repurchase program for 12 months from June 30, 2026, with key terms and change.

Now turning to the business outlook. For the second quarter of 2026, we anticipate total revenues to be between RMB 6,240 million to RMB 634 million, representing an increase of 25% to 27% 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 it.

This concludes our prepared remarks. Operator, we are now ready to take questions.

[Operator Instructions]. The first question today comes from Rafael Fe with DBS.

[Interpreted].

Congratulations for the brilliant first quarter results. Does management have any updated guidance on revenue and profit growth for the full year of 2026?

Thank you for the question. We continue to actively pursue our full year operating targets. From a strategic perspective, we will continue to prioritize our 1P business, which spends the end-to-end value chain and enables us to deliver a better user experience and create greater value.

In terms of scale growth, we've seen the government's continued promotion of consumer electronics trading program. The expansion of eligible categories and meaningful subsidy support, together with dedicated investments by brand manufacturers and platforms, including JD.com in training scenarios, these factors allow us to capitalize on this momentum and secure more first-hand supply efficiently and at lower cost.

They also reduced our reliance on traffic-driven marketing and performance advertising for high-value low-frequency consumer electronics categories.

For our international business, we are advancing a steady pace. In the first quarter, overseas revenue grew rapidly year-over-year. This was largely driven by our solid domestic inventory base, based as our combined export supply chain capabilities gradually strengthen. Meanwhile, we are exploring opportunities to bring more of the capabilities we have built in China to overseas market.

This includes resulting fulfillment platform capabilities and as for opportunities of automation technologies and among others, we will also remain disciplined in our international expansion investments while actively acquiring new AI technologies to accelerate business from the incubation stage towards rapid growth.

As a forecast, we look forward to update you with more development from the overseas bases during the next earnings conference call.

Regarding efficiency improvement, flexible fulfillment capabilities in our 1P scenarios as well as interworking AI across automated inspection, R&D and operations will be key priorities as we strengthen our 1-gig model.

In terms of AI-enabled productivity, we actively encourage AI learning and knowledge sharing across the organization. We have already made progress in areas such as in-store compliance audits and risk control reflecting pricing algorithm optimization and quoting efficiency.

Going forward, we will gradually expand these applications laying the groundwork for long-term organizational efficiency gains and improved profitability.

Taken together, we expect to scale in 2026 at a pace faster than what we expected internally at the beginning of the year. We also expect to achieve meaningful margin improvement.

The next question comes from Juan Zhao with CICC.

[Interpreted].

Congratulations for the strong results. I have 1 question. Could you please give us more color about your plan for store expansion and coal fulfillment capacity increase?

[Interpreted].

Thank you for the question. During the first quarter, we reviewed our nationwide store network based on factors such as location quality and traffic performance. We optimized our store footprint by phasing out certain underperforming stores while further improving the efficiency of our high-quality stores, so they can better and more efficiently capture online traffic.

We also maintain focus on for quality -- by expanding service categories, we continue to increase the proportion of stores capable of providing multi-category segment services. By the end of the first quarter, 841 of our 965 self-operated AHS stores have enabled market category service capabilities alongside more user-friendly store layout and upgraded in-store experiences.

Further strengthening AHS recycled brand image and fulfillment experience. We have our AHS velocity and store openings it follows a leap frog patent, opening new stores, solidifying our performance and then further ramping up for openings. We will continue to follow this rhythm. Based on our past experience, looking at the long-term goal of reaching 5,000 stores in China remains unchanged.

At the same time, we added nearly 500 2-door service team nationwide year-over-year -- this helped increase the proportion of face-to-face fulfillment in key service scenarios, including JVs trading services, expand fulfillment coverage improved service, speed and further reinforce our industry-leading fulfillment experience.

In addition, we are also building our flexible workforce capacity liver in peak seasons such as major promotional campaigns and flagship device launches, we can quickly activate additional 2 door capacity to ensure fulfillment experience and quality while meeting face-to-face demand.

The next question comes from Brian Lanter with Zach Small Cap.

And I'll add my congratulations on the strong performance this quarter. I was wondering if you could provide some insight into the growth of inventory in the first quarter. Specifically, is the inventory build mostly due to anticipated demand growth or changes in the product mix? And how should we think about normalized inventory going forward?

Thank you for the question. Our Recycling & Trading business continued to gain user recognition, especially during the trading scenarios. As we build stronger user mind share, we are also enhancing the customer experience by offering more attractive pricing against the backdrop of the rising offering cost for new devices, especially memory price hikes secondhand market prices have remained relatively stable compared to past cycles, and we have seen -- we have even seen price increases in some products -- as a result, we are not in a hurry to reprice our high cost inventory for faster turnover.

And part of it will be sold in the second quarter as inventory will normalize -- in addition, the increase in inventory is consistent with our strategy of strengthening 1P2Cusales. On average, inventory turnover days for 1 P2C retail are longer than those of falses. Therefore, as our revenue mix continues to shift towards 1 B2C inventory turnover days may increase to some extent. That said, as PJT marketplace remains as an important piece of industry infrastructure.

It supports our strong pricing capabilities. Therefore, the increase in inventory is not expected to have significant impact on turnover in our core businesses. Thank you for the question.

This concludes our question-and-answer session. I'd like to turn the conference back over to management for closing remarks.

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 e-mail us at [email protected]. Have a good day.

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

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to ATRenew Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I will now turn the call over to the first speaker today, Ms. Jeremy Ji, Head of Investor Relations. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to ATRenew's Fourth Quarter and Full Year 2025 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 the analysts. The fourth quarter and full year 2025 financial results were released earlier today. The earnings press release and investor slides accompanying this call are now 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 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 statement. Some of the information you will hear during the discussion today will consist of forward-looking statements, and I refer you to our safe harbor statement 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 update our assumptions on these statements.

Also, the 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.

[Interpreted] Hello, everyone, and thank you for joining Renewed Fourth Quarter and Full Year 2025 Earnings Conference Call. We are pleased to review our rapidly improving quarterly operating results and share our outlook for 2016 in alignment with our long-term development strategy. I would like to begin by expressing my gratitude to our team for their hard work and dedication throughout 2025. By fastly strengthening our core capabilities and enhancing the user experience, we successfully seized upon the growing domestic demand for secondhand consumer electronics resecting and trading services. delivering robust growth across the company.

In the fourth quarter, we once again achieved strong growth in both revenue and profit. Total net revenues reached CNY 6.25 billion, representing a 29% year-over-year growth. Non-GAAP operating profit reached RMB 180 million, up 38.1% year-over-year. For the full year 2025, Total net revenues grew 28.9% year-over-year to RMB 21.05 billion, while non-GAAP operating profit reached RMB 560 million, up 35.5% year-over-year. Both revenue and profit exceeded the expectations we set internally at the beginning of the year.

Looking closer at our fourth quarter performance, -- we continue to prioritize our 1Q strategy, which drove a robust 30.7% growth in net product revenue by coordinating with major flagship device launches and the e-commerce promotional campaigns. We effectively carried out recycling and trading programs. Throughout this period, we further strengthened our off-line presence and fulfillment capabilities. expanding our face-to-face reach through a network of 2,195 AHS stores and a team of 2,154 2-door service members. Notably, the proportion of offline fulfillment for JD.com's trading program increased compared to the first half of the year.

Together with JD.com, we made joint efforts across multiple dimensions including restructuring prices, negotiated rates and fulfillment timeliness. Those efforts continue to define the industry best-in-class trading practices and rainfall consumer mind share. Furthermore, our store fulfillment to minus improved during both peak and off-peak periods, while customer satisfaction metrics, including compliance rates were further optimized.

Leveraging our enhanced front-end supply access, we further utilized our default client chain capabilities to deliver a broader range of compliant refurbishment products to our retail users. This led to a [ 90.8% ] year-over-year search in compliant refurbishment product revenue in the fourth quarter. Notably, our on-demand refurbishment strategy contributed to 32% of refurbishment revenue for phones, expanding our revenue virtual inventory, our retail virtual inventory and offering a diverse area of product options for our on-demand customers. Driven by our retail first strategy, 1 P2C retail revenue increased by 88% year-over-year, and its share of total product revenues rose 12.7 percentage points year-over-year. to a record high of 41.7%.

This milestone further validates the ability of our end-to-end circular ecosystem to efficiently source from and resell back to consumers at scale. Moving forward, we will leverage the pricing capabilities developed through 1 P2C retail to optimize pricing strategies at the resulting end, creating a more effective dynamic pricing mechanism and in turn, driving growth of our recycling business.

As discussed in previous quarters, our overseas business primarily operates under 1P business model, allowing us to broaden our 4 channels and connect firsthand supplies with higher-priced global demand. Our self-operated export channels continue to mature steadily, delivering sequential growth for 4 consecutive quarters in 2025, with peak monthly revenue recently reaching RMB 50 million. We have adopted an integrated inventory system for all China for supplies. This allows products to undergo a single inspection before being listed and sold across export markets. The continued online transformation of our overseas business has significantly improved inventory management and operational efficiency, establishing a solid foundation for further platformization.

Meanwhile, compliance remains central to our approach. We have been invited to participate in developing cross-border centers for secondhand goods and policy consultations in multiple regions. Our adherence to standardize operations paired with increased efficiency in our cooperations with regulation authorities, such as customs ensures a controllable export process time line and continuously optimizes overseas restocking efficiency and capital utilization.

Regarding our platform business, service revenue increased by 8.8% year-over-year in the fourth quarter with an overall take rate of 4.79%, in line with expectations. PGT Marketplace maintained a solid pace of growth while Pipa enhanced the retail experience for merchants during the strategic shift towards a consignment model, our multi-category recycling services once again achieved impressive growth in both scale and revenue.

In B2B, PJT Marketplace continues to strengthen merchant services and economic benefits and build innovative capabilities, staying firmly on course with its strategic road map with take rate unchanged compared with the third quarter. First of all, as the largest B2B marketplace in the industry, PJT ensures sales efficiency for merchants. Our guaranteed self-service incentivized merchants to actively lease products, driving the platform's warehousing infection penetration rate to 81%, up 2 percentage points quarter-over-quarter.

Additionally, we launched 9 front-end inspection nodes in key communication markets to provide local merchants with easier access to presale support and align inspection standards face-to-face for higher efficiency. We also observed a key trend. PJT value-for-money reputation is gaining traction in many lower-tier markets, especially among college students, fueling strong organic growth. Increasingly, individuals are buying secondhand phone featuring cost optimize performance on the platform, either directly or through dedicated purchasing agents.

Thanks to the surge in retail and demand, as of the end of 2025, the total number of registered users on PJT Marketplace exceeded 1.66 million, growing at scale, both year-over-year and quarter-over-quarter.

In terms of our B2C marketplace business, the pulp model faced challenges in 2025. Fortunately, we proactively deployed consignment capabilities to help small- and medium-sized merchants reach consumers directly with convenient and easy-to-use capabilities. Under this model, the pipeline team provides merchants with end-to-end support including customer service, quality inspection, store operations, traffic management and after-sale services, standardizing the nontender point on business. The simplified operations for secondhand sellers increases the online supply of Fan goods and make it easier for users to discover high-quality items.

In the fourth quarter, GMV from consignment increased by 253% year-over-year, accounting for 24% of the total GMV of pipeline marketplace business, a notable increase in proportion.

In driving innovation, our multi-category business, which has been internally incubated since 2022, continues to exceed expectations. In the fourth quarter, user enthusiasm for multi-category recycling search, driving overall recycling GMV up by 125.7% year-over-year with accelerated growth across all categories. Among them, gold recycling GMV rose by 136.3% year-over-year, benefiting from transparent pricing and convenience service accessibility. Through the optimization of tiered fee structures, the take rate of gold recycling achieved a modest sequential improvement. In addition, recycling services for second-hand luxury products continued with robust growth in the fourth quarter. thanks to its unique business model and improving resulting experiences, its take rate expanded by 1.2 percentage points quarter-over-quarter, mainly due to increasing demand in the peak season and our improved pricing strategy.

As we move into 2026, we are seeing meaningful changes in the external market environment. Recently, the continued rise in memory prices is directly pushing up new device prices. And this trend is creating new opportunities for the print owned industry. We see this playing out in 3 ways. First, pre-owned product prices are rising alongside new devices, keeping overall market pricing firm and healthy, which supports the long-term development of the industry. Second, member price increases actually were more in favor of Apple's market share and Apple products are the core drivers of our business.

Third, trading penetration still has significant room to grow. New device prices going up and national subsidies in place, manufacturers and e-commerce players will place even greater emphasizes on trade-in programs and continue to increase their investment. Taking all of this together, our view is that the 2026 market environment is net positive for the preowned industry and support continued steady and healthy industry development.

With 2026 underway, we have clear expectations for our full year growth guided by a renewed 3-stage development strategy we are carrying forward. Stage 1, we will continue to solidify the healthy growth of our core secondhand consumer electronics business against the backdrop of extended government subsidies, rising prices for new devices and a thriving healthy secondhand market, we remain undoing in our commitment to optimizing the user experience in reflecting fulfillment and delivery. We will leverage our integrated sources of supply, further strengthen our underlying pricing capabilities together with our compliant refurbishment capabilities to drive more retail sales, we aim to achieve a higher proportion of direct engagement with consumers at the front of recycling and retailing, forming a closed loop value chain and creating a self-reinforcing flywheel effect.

Furthermore, we will continue to invest in AI-driven pricing, operations and quality inspection to further reduce costs and in tariff efficiency, pursuing accelerated growth externally while driving for lower cost and higher efficiency internally is the core driver of our secondhand consumer electronics business.

Stage 2, we will continue to strengthen AHS recycled position as China's leading recycling brand. Over the past 2 years, we have rapidly built strong new media brand marketing capabilities and cultivated the AHS recycled brand on 2 user engagement platforms, on [indiscernible]. Through these efforts, we have strengthened brand awareness for bring on consumer electronics among a broader consumer base. and our luxury goods recycling identity resonated with users who prioritize quality lifestyle. While brand marketing remains a strategically important investment in the early stage of secondhand industry development, we will remain prudent with brand marketing investments and progress at our own pace. Given that reownconsumer electronics and other high-value categories remain relatively low frequency businesses.

At the same time, we will drive penetration of the AHS recycled brand into communities nationwide through Lori, the ecosystem extension of AHS recycle, leveraging more than 50,000 Lori resulting to across communities, we expanded partnerships with 245 consumer brands to co-establish a collaborative ecosystem and jointly pioneer green consumption. Labrie is not only a critical and unique community infrastructure Furthermore, by leveraging our user operations and strategies tailored for high-frequency community scenarios, we are confident that it will increasingly become a key growth driver for our core business.

Stage 3, we will leverage our accumulated strength in China to achieve strategic breakthroughs in international markets. This builds on the deep industry experience along with strong standardization, automation and platform capabilities we have built over the past 15 years in China. Starting from our export business and the capabilities we've built along the way. we expect to improve our overseas platform capabilities to enhance industry efficiency and unlock new avenues for future growth.

Furthermore, building on our experience with resulting, we are actively working with partners to develop localized recycling solutions overseas, bringing the technology and supply chain capabilities we have built at home to global markets. We look forward to bringing more news to you.

In conclusion, we remain confident in healthy development of the ping on industry and the continued growth of our business in 2026. Now I'd like to turn the call to our CFO, Rex, for financial updates.

[Interpreted] Good day, everyone. I'm pleased to report our fourth quarter and full year results of 2025, marked by both revenue and profits reaching record high. Over the past year, we effectively leveraged strategic opportunities arising from China's trade-in programs and industry dynamics. By consistently enhancing fulfillment capabilities, we deliver best-in-class trading experiences while solidifying our brand presence as China's leading recycling brand, further reinforcing our market leadership.

In the fourth quarter, our total revenue exceeded the high end of our guidance, increasing by 29% to RMB 6.25 billion, while non-GAAP operating income surged by 38.1% to over RMB 180 million. For the full year, revenue grew by 28.9% to RMB 21.05 billion, while non-GAAP operating income rose by 35.5% to nearly RMB 560 million. These results underscore our robust fulfillment capabilities on the restructuring side and the growing influence of our brand, which have been pivotal amid the rapid development of China's circular economy.

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 fourth quarter, our total revenue growth was primarily driven by continued net product revenue growth. Net product revenues increased by 30.7% to CNY 5.83 billion largely attributable to the growth in online sales of Frigon Consumer Electronics. Net product revenue for the full year reached CNY 19.38 billion, representing a year-over-year increase of 30.6%.

Net service revenues were CNY 420 million in the fourth quarter, representing an increase of 8.8%. The increase was largely driven by PJT Marketplace and the multi-category recycling business. The overall take rate of our marketplace was 4.79% for the fourth quarter of 2025. During the quarter, our multi-category recycling business contributed nearly CNY 80 million of revenue, accounting for 18.8% of service revenues. Net service revenue for the full year reached CNY 1.67 billion, representing an increase of 12.4%. Our multi-category second business contributed CNY 250 million representing an increase of 93.4% year-over-year. This accounted for 14.9% of total service revenues in 2025 compared to 8.6% in 2024.

Now let's discuss our operating expenses to provide greater clarity on the trends of our actual operating base expenses. We will mainly discuss our non-GAAP opening expenses, which better reflect how management views our operating results. The reconciliations of GAAP to non-GAAP measures are available in our earnings release and the corresponding Form 6-K furnished with the U.S. SEC.

In the fourth quarter of 2025, merchandise costs increased by 28.9% to CNY 5.03 billion, in line with the growth in product sales. Gross profit margin for our 1P business was 13.7% compared with 12.5% in the same period last year. The gross margin improvement in our 1P business was primarily driven by high efficiency C2B recycling scenarios compliant refurbishment capabilities incorporated in our supply chain and an increasingly diversified retail channel mix. .

This allowed us to increase the proportion of higher-margin retail sales with 1 P2C revenue accounting for 41.7% of product revenue in the fourth quarter of 2025, up from 29% in the same period of last year. 1 P2C revenue accounts for 36.8% of product revenue in the full year of 25%, up from 27.2% in 2024. Merchandise costs for the full year increased by 27.6% to INR 16.7 billion with a 1P gross margin of 13.8% compared to 11.8% in 2024.

In the fourth quarter of 2025, fulfillment expenses increased by 21.7% to CNY 480 million. Non-GAAP fulfillment expenses increased by 22.4% to CNY 480 million. Under these non-GAAP measures, the increase was mainly driven by higher personnel and logistics expenses, reflecting a greater volume of recycling and transaction activities compared to the same period in 2024. Additionally, operation-related costs rose as we expanded our store network and enhanced operation center capacity in the fourth quarter of 2025. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 7.7% from 8.1%. Non-GAAP procurement expenses for the full year increased by 28.3% to CNY 1.75 billion while the non-GAAP fulfillment expenses as a percentage of total revenues remained stable at 8.3%.

In the fourth quarter of 2025, selling and marketing expenses increased by 23.3% to CNY 460 million. Non-GAAP selling and marketing expenses increased by 44.1% to CNY 460 million. The increase was primarily driven by an increase in commission expenses associated with channel service fees. As a result, our non-GAAP selling and marketing expenses as a percentage of total revenues increased to 7.4% from 6.6%. Non-GAAP selling and marketing expenses for the full year increased by 47.3% to CNY 1.6 billion while non-GAAP selling and marketing expenses as a percentage of total revenues increased to 7.6% from 6.6%.

In the fourth quarter of 2025, general and administrative expenses increased by 34.1% to CNY 60 million. Non-GAAP G&A expenses also decreased by 25.6% to CNY 57.6 million, primarily due to a decrease in personnel costs. Non-GAAP G&A expenses as a percentage of total revenue decreased to 0.9% from 1.6%. Non-GAAP G&A expenses increased by 4.1% to CNY 260 million, while non-GAAP G&A expenses as a percentage of total revenues decreased to 1.2% from 1.5% in 2025.

In the fourth quarter of 2025, research and development expenses increased by 9.8% to CNY 62.6 million. Non-GAAP R&D expenses increased by 14% to CNY 60.3 million. The increase was primarily driven by elevated personnel expenses. Non-GAAP R&D expenses as a percentage of total revenues decreased to 1% from 1.1%. Non-GAAP R&D expenses for the full year increased by 21.4% to CNY 230 million, while non-GAAP R&D expenses as a percentage of total revenue decreased to 1.1% from 1.2%.

As a result, our non-GAAP operating income exceeded CNY 180 million in the fourth quarter of 2025 compared to non-GAAP operating income of CNY 130 million in the fourth quarter of 2024, representing an increase of 38.1%. Non-GAAP operating profit margin was 2.9% for the quarter compared to 2.7% in the fourth quarter of 2024, representing an increase of 19 basis points. Our non-GAAP operating income for the full year was nearly CNY 560 million compared to non-GAAP operating income of CNY 410 million for the full year of 2024, representing an increase of 35.5%. Non-GAAP operating profit margin was 2.6% in 2025 compared to 2.5% in 2024, representing an increase of 13 basis points.

During the fourth quarter of 2025, we repurchased a total of approximately 1.3 million ADS for approximately USD 5.8 million Today, along with our earnings release, we announced the fiscal year 2025 cash dividend in the amount of USD 0.1 per ADS. The total amount is expected to be approximately USD 23.5 million.

Now turning to the business outlook. For the first quarter of 2026, we anticipate total revenue to be between RMB 5,860 million and RMB 5,960 million, representing an increase of 25.9% to 28.1% 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.

[Operator Instructions] The first question today comes from Juan Jao with CICC. Please go ahead.

Congratulations for the strong quarter. I have 1 question. During the recent 2 sessions, the government confirmed the steel national subsidy for consumer trading programs. However, storage prices have been risen for several quarters. And in March, we will see manufacturers with new devices prices. How do you view the impact on the preowned consumer electronics industry this year? And will you revise your 2026 guidance.

[Interpreted] I'd like to take the first question. For 2026, the government has extended trading subsidies for mobile phones, tablets and smart washers, smart glasses have now also been added to the list. In 2025, the trading subsidy has been applied to the new device sales, which were priced under RMB 6,000, which we were not eligible to compensate this kind of national subsidy. However, as we were able to capture the upgrade of the need from consumer trading process that we will benefit from the similar process in 2026. For our plan on consumer electronics businesses, our role hasn't been changed. We help users monetize their old devices and we make trading hassle free.

To be clear, we are not in -- but with that said, the broader policy -- with the broader policy push, including measures in insurance subsidies which retail users continue to strengthen public awareness of tradings that awareness drives momentum that works directly in our favor.

In 2025, driven by large-scale AI deployment and applications, the industry began to see memory shortages and significant price increases, putting component cost pressure on new device manufacturers, particularly in smartphone. In 2026, as warmer prices rose more rapidly, Android manufacturers had to raise new device prices, while Apple Cap is pricing relatively stable. This widening gap has reinforced Apple's position in the print on market and we have seen the share of Apple products in our business in place on a sequential basis.

More broadly, rising new device prices created both opportunities and challenges. On the one hand, trading are likely to become a higher priority for e-commerce platforms and manufacturers. Certain trading scenarios can be combined with national subsidies and by offering more competitive recycling prices, we can serve more users trading needs and drive rapid growth in supply sourcing. On the other hand, competitive pricing and high-quality user experiences have become even more crucial as more consumers adopt the print on alternatives.

On pricing, we remain committed to our retail first strategy, maintaining our target of retail revenue at 50% of our 1P business. We are exploring using to see curative sales prices as a benchmark to set more competitive trading presses. On experience, our user experience committee established last year will continue to run frequent and reviews across key satisfactory metrics, ensuring we remain responsive to user feedback and act on it quickly. Looking ahead to the full year, we expect the growth of our total net revenue to continue outpacing the double-digit growth of the broader industry. Continued scale expansion and disciplined cost control positions us to return margins to an upward trajectory. .

Next question comes from Rafael [indiscernible] with DBS.

May I ask management modest store opening targets in 2026?

[Interpreted] Looking back at 2025, we recognized early that national subsidies would accelerate going on the industry growth. So we invested decisively in offline fulfillment, expanding our store network and scaling up our 2-door service team.

In 2025, we had a net addition of 451 standard stores. Going forward, our priority remains the expansion of our standard stores with consumer electronics as the core. We will also increase the proportion of multi-category recycling services for high-value products across our stores, which will drive higher per store profit contribution. In lower tier cities, we will continue to grow through local franchisee partners and city partners to jointly develop the pre-owned market allowing us to extend our store coverage in an asset-light way.

On stores, we also push a nationwide to door service team. Daily order generating head count grew by over 1,000, effectively extending our store network with a flexible workforce. This on-demand capacity allowed us to quickly fill the fulfillment gap when trading volumes surged with both our store network and to door team working together, our face-to-face trading fulfillment ratio exceeded 70% and user experience continued to improve.

For 2026, we will follow the same approach. We will enhance store quality in high-tier cities, expand our store footprint in lower tier days and subtly adjust our 2-door service team to match seasonal demand. Our AHS store serves not only as fulfillment locations but also as important touch points for our brands. Our store network and online traffic need to grow in tandem and reinforce each other. Over the medium to long term, our target of 5,000 stores remains unchanged, but we will adjust the pace of store openings as needed based on online traffic growth and our broader brand strategy. .

The next question comes from Brian Lanter with Zacks Small Cap Research.

More color on the long-term margin improvement trajectory.

[Interpreted] The preowned consumer electronics industry has stable fundamentals and a well-established brand landscape, rising new device prices reinforce our commitment to the 1P retail strategy. And we expect both recycling and retail prices to trend upward. Meanwhile, as higher-margin retail product revenue represents a growing share of our mix, we anticipate gradual 1P gross margin expansion as well.

Over the long term, what matters to us is the improvement in our non-GAAP operating margin driven by economies of scale. This plays out in several areas. One comes from our automated quality inspection technology, which can reduce quality inspection costs for order by approximately 30% compared to manual inspections. We continue to refine our automation road map and are getting these capabilities at our Dongguan and Changzhou operation centers to drive efficiency gains. We are also beginning to deploy automated logistics infrastructure or smaller scale. Together, these efforts are expected to improve our non-GAAP fulfillment expense ratio.

On the selling and marketing side, the industry is still at an early stage. We do not need to -- so we do need to increase our pricing attractiveness with sales vouchers. Over the medium to long term, we plan to maintain disciplined spending in brand marketing to solidify recycled as a top brand for recycling services in consumers' minds. As the industry matures and brand trust events, we see a clear opportunity to improve our selling and marketing expense ratio. Thank you for the question.

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

[Interpreted] 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 getting ready. If you have any additional questions, feel free to e-mail us at [email protected]. Have a great day.

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

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the ATRenew Inc.'s Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

Please note today's call is being recorded. I would now like to turn the conference over to your first speaker today, Mr. Jeremy Ji, Head of Corporate Development. Please go ahead, sir.

Thank you. Hello, everyone, and welcome to ATRenew's Third Quarter 2025 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 the analysts.

The third quarter 2025 financial results were released earlier today. The earnings press release and the investor slides accompanying this call are now 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 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'll 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 obligation 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 that are 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.

[Interpreted] Hello, everyone, and thank you for joining ATRenew's Third Quarter 2025 Earnings Conference Call. We are pleased to update you on our strengthened operating results, share the progress of our 3-stage development strategy and address key topics of interest.

In the third quarter, we once again achieved new breakthroughs across multiple operational metrics. Total net revenue reached a new record high of RMB 5.15 billion, representing 27.1% year-over-year growth. Our 1P product revenue sustained strong growth momentum, rising 28.7% year-over-year to RMB 4.73 billion, while 3P platform service revenue increased 11.6% year-over-year to RMB 420 million, demonstrating continued healthy growth.

Non-GAAP operating profit reached a record high of RMB 140 million, up 34.9% year-over-year with our non-GAAP operating profit margin achieving 2.7%, demonstrating steady improvement both year-over-year and quarter-over-quarter.

During each third quarter, we strategically prepared for the mid- to late September launch of flagship devices from leading manufacturers while building operational capacity to support the uptick in new device shipments throughout October, providing users with better restocking and trade-in experiences.

Looking closer to our third quarter performance. Within our 1P business, we have successfully expanded our product acquisition through trade-in programs and our AHS Recycle brand. We have effectively leveraged our proprietary combined refurbishment capabilities to deliver premium curated products to consumers through retail channels, including AHS Recycle and Paipai. This strategy delivered impressive results with compliance refurbished product revenue surging 102% year-over-year in the third quarter. While [indiscernible] sustaining robust growth of over 70% year-over-year, and the [ 1P 2C ] proportion expanding to 36.4%. We believe that strengthening our retail capabilities will enhance our pricing power in the recycling end and effectively strengthen end-to-end value throughout the industry's supply chain.

On the supply side, we focused on building stronger customer awareness and recognition from the AHS Recycle brand. Orders through the AHS official website maintained a solid 30% growth, while JD.com's trade-in program continues to be a preferred choice for users looking to recycle and upgrade their devices.

We also significantly expanded our offline fulfillment capabilities, building customer trust through personalized face-to-face services that offer both convenient and competitive pricing.

Our AHS store network grew to 2,195 locations from both self-operated and joint operated shops, supplemented by our workforce of 1,962 team members who either provide full time or part-time [indiscernible] service. This comprehensive approach ensures that recycling and trade-in services are easily accessible to customers.

In top-tier cities, we are positioning AHS Recycle as China's leading recycle brand, promoting AHS Recycle services through our self-operated stores. We've expanded our asset life platform to include high value categories like luxury goods, gold and premium liquor, creating more user value while improving store unit economics. In mid- to lower-tier cities, we partner with local merchants who understand their markets, helping them evolve from single-store franchisees into city partners with multiple AHS stores. We support these partners with standardized quality inspection and pricing tools, official traffic and social media guidance to build local customer bases. This collaboration drives mutual success. Stronger store performance enables franchisees to expand locally and scale their businesses, creating a slight [indiscernible] effect that benefits everyone.

Our commitment to win-win collaboration with merchants is evident in the performance of our platform business. In the third quarter, service revenue maintained strong double-digit growth with an overall take rate of 4.89%, breaking this down from 3 key platform segments.

First, in B2B, PJT Marketplace continues to provide an inclusive trade-in environment for small and medium-sized merchants. By the end of the quarter, the number of contracted merchants on the platform quickly surpassed 1.37 million. This was driven by 2 factors. On one hand, the number of sellers representing product supplies continue to grow rapidly, thanks to PJT Marketplace's strong infrastructure and merchant service capabilities. On the other hand, with the record onboarding of small sized -- medium merchants such as those leveraging the specialty buyer model of [indiscernible], we accelerated supply chain enhancement for these merchants.

To ensure a positive for experience during this expansion, we temporarily allow more flexible post-sale rights and made a strategic adjustment to PJT Marketplace take rate. We remain confident in PJT Marketplace's long-term monetization potential, not only because of its maturing industry infrastructure, but also because of its flexibility to innovate, expand user reach, optimize services and create more value over time.

Second, in B2C, Paipai's user service and monetization capabilities achieved another year-over-year improvement. While maintaining [indiscernible] open platform functionality, we further strengthen consignment services for small and mid-sized merchants. Under this model, merchants no longer need to worry about product management, store operations, traffic or aftersales as Paipai provides standardized end-to-end operational solutions.

In the third quarter, GMV for consignment grew 180% year-over-year and take rate continued to trend upward in the high single-digit range, reflecting strong merchant recognition of our service value.

Third, our asset-light platform for multicategory recycling services sustained rapid growth with transaction volume increasing by 95% year-over-year and user experience continues to improve. As of September, 878 self-operated stores and 131 franchisee locations had activated multicategory capabilities, expanding geographic coverage. Newly enabled stores typically stabilize performance within 2 to 3 months. After allocating front end and fulfillment costs, multicategory services delivered an average monthly contribution profit of RMB 7,000 per store, optimizing the unit economics of AHS stores. This model supports customer acquisition, repeated orders and the disciplined rollout of additional high-quality stores.

We continue our strategic adoption of automation and AI technologies to drive excellence in operational experience. As our business scales, automated inspection systems at both the recycling and operational centers generate significant economies of scale and help optimize our fulfillment expense ratio. Beyond the AI-powered automation inspection capabilities for recycling of secondhand luxury goods discussed last quarter, we have also deployed AI applications in customer service, inquiry handling and training. This initiatives are enhancing the user experience and building robust capacity to handle peak demand periods such as major promotional events.

That concludes our review of third quarter operating results. Next, we'd like to take this opportunity to continue sharing our 3-stage development strategy for the next 2 to 3 years.

The first stage is to continue strengthening the core capabilities of the secondhand consumer electronics. ATRenew has already become China's largest platform for secondhand consumer electronic transactions and services. We have integrated the entire industry chain across C2B, B2B and B2C, creating industry-leading end-to-end capabilities and maximizing value for both users and the industry.

Going forward, we will reinforce this foundation in 4 ways. First, by enhancing scenario capabilities and deepening trade-in collaboration in new device sales channels with partners such as JD.com and Apple, enabling low-cost, high-efficiency access to first-hand supply.

Second, by strengthening fulfillment capabilities through our nationwide AHS store network and [ 2-door ] service teams to ensure a superior user experience.

Third, by enhancing the capabilities of retail stores through compliant refurbishment and high proportion of retail sales to achieve an end-to-end loop and improve supply chain value.

And fourth, by advancing technology capabilities, leveraging automation and AI technology to unlock scale efficiencies over the long term.

The second stage is to accelerate the growth of AHS Recycle as China's leading recycling brand. By combining our store-based fulfillment capabilities with an asset-light platform model for multi-category recycling, we aim to increase user engagement and frequency of service usage. At the same time, [indiscernible] the ecosystem extension of AHS Recycle is expanding into extensive community scenarios across major cities, and AHS Recycle brand will partner with more consumer brands to promote revived initiatives based on high-frequency scenarios using [ green ] incentives to encourage broader participation in recycling and the circular economy across China so that everyone can benefit from the sustainable consumption model we advocate.

With this, we strengthen consumer awareness of our recycling capabilities, improve our active user base of consumer electronics with high-frequency daily [ green ] disposal activities and promote a growth loop of green recycling and green consumption. We are dedicated to building differentiated competitive edges for AHS Recycle.

The third stage is to prepare for an international strategies that share China's green story globally. Over the past 15 years, we have built the expertise in standardization, automation and platform capabilities for secondhand consumer electronic products. The rapid increase in domestic recycling penetration is driving a growing flow of used smartphones to overseas markets, representing a clear trend.

On the one hand, we are actively engaging in the development of export centers and international mutual recognition for China market products. For instance, we participate in the expert committee for the cross-border [indiscernible] standard for secondhand goods, a joint initiative of the China Quality Certification Center and the International Organization for Standardization.

On the other hand, we are channeling high-quality China [ source ] devices of earlier generations into the international market. Hong Kong, among others, as a key global trade hub for used electronics facilitates this flow, allowing us to successfully address the demand abroad. Recently, the monthly export of China [ source ] devices has exceeded 10,000 units.

Looking forward, as domestic recycling penetration rates increase and standards become further clarified, we believe there will be more efforts. We also look forward to replicating our efficient platform capabilities abroad to create an international version of the PJT Marketplace, connecting global sources of preowned consumer electronics with global merchants.

Simultaneously, we will, at the appropriate time, integrate with the international layout of our strategic partners to provide solutions and jointly explore the broader retail opportunities in the global markets.

Looking forward to 2026, we remain confident in the healthy development of the secondhand industry and the strong growth trajectory of our company.

We are also proud to share an international recognition. This year, ATRenew is a finalist for the prestigious Earthshot Prize, a global environmental award founded by His Royal Highness Prince William. The price recognizes outstanding contributions across 5 categories aimed at repairing our planet. ATRenew was highly commended by the committee in the Build a Waste Free world category for its practices in advancing the circular economy through pre-owned product transactions and services.

Moving forward, we remain committed to our founding mission of to give a second life to [indiscernible] and we'll continue to contribute to the circular economy in China and globally.

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

[Interpreted] Hello, everyone. We are pleased to report outstanding financial performance in the third quarter of 2025. We continue to capture opportunities from targeted trade-in scenarios, in-house fulfillment and supply chain capabilities and the elevated AHS Recycle brand presence.

Total revenue in the third quarter was at the high end of our guidance, increasing by 27.1% to RMB 5,150 million. Adjusted operating income grew by 34.9% to over RMB 140 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 third quarter, total revenue growth was primarily driven by continued net product revenue growth. Net product revenues increased by 28.7% to 4,730 million, largely attributable to the growth in online sales of pre-owned consumer electronics.

Net service revenues were RMB 420 million in the third quarter, representing an increase of 11.6%. The increase was largely driven by pipeline marketplace and multicategory recycling business. The overall take rate of our marketplace was 4.89% for the third quarter of 2025. During the quarter, our multi-category recycling businesses contributed nearly RMB 53 million of revenue, accounting for 12.5% of service revenues.

Now let's discuss our operating expenses. To provide greater clarity on the trend in our actual operating base expenses, we will mainly discuss our non-GAAP operating expenses, which better reflects how management views our operating results. The reconciliations of GAAP and non-GAAP results are available in our earnings release and the corresponding Form 6-K furnished with the U.S. SEC.

Merchandise costs increased by 26.3% to RMB 4,090 million, in line with the growth in product sales. Gross profit margin for our 1P business was 13.4% compared with 11.7% in the same period last year. The gross margin improvement in our 1P business was primarily driven by high efficiency C2B recycling scenarios, compliant refurbishment capabilities incorporated in our supply chain and an increasingly diversified retail channel mix. This allowed us to increase the proportion of higher-margin retail sales with [ 1P 2C ] revenue accounting for 36.4% of product revenue in the third quarter of 2025, up from 26.4% in the same period last year. Meanwhile, our international business operational efficiency has improved with continued improvement in both scale and gross margins.

Fulfillment expenses increased by 25.9% to RMB 440 million. Non-GAAP fulfillment expenses increased by 25.6% to RMB 430 million. Under the non-GAAP measures, the increase was mainly driven by higher personnel and logistics expenses, reflecting a greater volume of recycling and transaction activities compared to the same period in 2024.

Additionally, operation-related costs grew as we expanded our store network in income operation center capacity in the third quarter of 2025. Non-GAAP fulfillment expenses as a percentage of total revenues decreased to 8.4% from 8.5%.

Selling and marketing expenses increased by 15.4% to RMB 360 million. Non-GAAP selling and marketing expenses increased by 40.6% to RMB 360 million. The increase was primarily driven by higher advertising and promotional campaign related spending as well as the increase in commission expenses associated with channel service fees. As a result, non-GAAP selling and marketing expenses as a percentage of total revenues increased to 7.0% from 6.3%.

General and administrative expenses increased by 6.9% to RMB 74.1 million. Non-GAAP G&A expenses also increased by 17.7% to RMB 65.2 million, primarily due to an increase in tax and surcharges as well as an increase in consultant fees. Non-GAAP G&A expenses as a percentage of total revenues decreased to 1.3% from 1.4%.

Technology and content expenses increased by 19.5% to RMB 63.8 million. Non-GAAP technology and content expenses increased by 23.2% to RMB 61.1 million as well. The increase was primarily driven by elevated personnel expenses. Non-GAAP technology and content expenses as a percentage of total revenue remained stable at 1.2%.

As a result, our non-GAAP operating income was over RMB 140 million in the third quarter of 2025 compared to non-GAAP operating income of RMB 100 million in the third quarter of 2024. Non-GAAP operating profit margin was 2.7% for this quarter compared to 2.6% in the third quarter of 2024, representing an increase of 16 basis points.

During the third quarter of 2025, we repurchased a total of approximately 0.5 million ADS for approximately USD 2.1 million. We will continue to evaluate our overall profitability and update the shareholder return programs at an appropriate time.

As of September 30, 2025, cash and cash equivalents, restricted cash, short-term investments and funds receivable from third-party payment service providers totaled RMB 2.54 billion. Our financial reserves are sufficient to support reinvestment in business development and shareholder returns.

Now turning to the business outlook. For the fourth quarter of 2025, we anticipate total revenue to be between RMB 6,080 million and RMB 6,180 million, representing a year-over-year increase of 25.4% to 27.4%. For the full year 2025, we estimate total revenues to be between RMB 20.87 billion and RMB 20.97 billion, representing a year-over-year increase of 27.8% to 28.5%.

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 Instructions] And the first question will come from [indiscernible] with CICC.

My first question is, we know that recently, we are having some changes to the national subsidy policies. Could you please share the impact on your business?

And the second one is, could you please give us more color about outlook for Q4 and next year?

[Interpreted] Thank you for your question. The first question is about national subsidy. That's a very good question. Let me address it by analyzing the growth drivers of our 1P business in the context of the national subsidy.

The national trade-in subsidy directly promote the sales of new devices. However, these subsidies are only applicable to new devices price under RMB 6,000. Therefore, a significant portion of consumers' purchasing premium models do not utilize these subsidies.

Given that our 1P business primarily focuses on premium brands, the proportion of trade-in orders utilizing national trade subsidies was actually quite limited this year. Nevertheless, the national subsidies have effectively stimulated upgrades within the preowned consumer electronics industry.

Benefiting from our mature trade-in supply chain this year, we collaborated with JD.com to create the best-in-class trade-in user experience. We also worked with brands like Apple, Huawei and Xiaomi, facilitating device upgrades for more users through trade in offsets. This approach combined with specific subsidies offered by e-commerce platforms and manufacturers in trade-in scenarios, helping users upgrade their devices at a lower cost effect -- at a lower cost.

We estimate that AHS Recycle achieved a trade-in penetration rate exceeding 10% on JD.com this year. The penetration rate is consistently increasing, driving precise conversions within JD's core consumer electronics business. Furthermore, we see significant potential for further growth in this penetration rate. As the retail prices of new devices from brand manufacturers continue to trend upwards, trade-in programs are gaining favor among users as a more cost-effective upgrade path.

Simultaneously, these programs help manufacturers protect the retail pricing of their new devices, creating a win-win situation. The scenario of new device retail presents an important source for us. We will continue to collaborate closely with our e-commerce and manufacturing partners to optimize the trade-in pricing algorithm, operational processes, supply chain and user experience, increasing the penetration rate of trade-in services over the long run.

Regarding the second question, we expect total revenue growth in the fourth quarter to be between 25.4% and 27.4%. The major electronics brand we serve have launched more attractive products this year and achieved considerable sales, stimulating stronger consumer demand for device upgrades.

Based on our fourth quarter outlook, we forecast total revenue for the full year 2025 to be between RMB 20.87 billion and RMB 20.97 billion, representing a year-over-year increase of 27.8% to 28.5%. This suggests a possibility for us to grow faster than our internal budget at the beginning of this year.

We anticipate accelerated revenue growth this year compared to last year, primarily driven by 3 factors. First, the national trade-in initiative has promoted e-commerce platform and brand manufacturers to actively build or enhance their trade-in service capabilities. We integrated trade in supply chain can -- our integrated trade-in supply chain can efficiently provide users with the best-in-class upgrade experience. Second, we are rapidly expanding our fulfillment network, having established a more granular presence in nearly 300 cities across China to ensure a superior user experience. Third, we are actively building the AHS Recycle brand, recognizing that brand influence delivers long-term value.

For 2026, we are actively preparing our internal annual budget. We expect to maintain a relatively rapid year-over-year growth rate driven by increased penetration of trade-in programs, enhanced brand power and fulfillment capabilities of AHS Recycle and the improvement in our overall supply chain efficiency. Thank you for the question.

Your next question will come from [ Wade Fady with DBS. ]

I will translate in English. Congratulations for the astonishing third quarter results. So 2 questions from my side. The first one is that, what is the store opening pace for the fourth quarter and for the next year for ATRenew.

[Interpreted] Thank you. I'll take the first question. For the full year 2025, we maintained our target of accelerating store openings. As shown in our store structure and capabilities, the number of self-operated AHS Recycle stores in Tier 1 and Tier 2 cities has grown steadily.

For self-operated stores, we prioritized quality development, focusing on delivering a superior user experience through enhanced fulfillment capabilities. Nearly 88% of these self-operated stores are now equipped with multi-category services. Regarding joint-operated standard stores, we actively collaborate with local market partners to build capabilities together.

Based on empowering them with our capabilities and traffic support, we work with city partners to serve local users and rapidly advance our store opening goals. In some franchise store scenarios, we are prudently exploring service capabilities for high-value categories with gold recycling already taking initial shape.

Moving forward, the pace of new store openings will be dynamically balanced with the expansion of our [ 2-door ] service teams to ensure the efficiency of both our physical locations and personnel.

So my second question is what are the plans and targets for multi-category business in the future?

[Interpreted] In terms of multi-category business, it has maintained a rapid development trajectory this year, benefiting from our [indiscernible] improvement in several metrics, including service coverage, baseline pricing capabilities for various categories and user experience. Our multi-category recycling business operates on an asset-light platform model, which is susceptible to policy changes and emphasizes compliant operations. It focuses on core user experience metrics such as transaction efficiency and pricing within the C2B model.

In the third quarter, against the backdrop of rapidly rising gold prices, we prioritized user transaction experience by reducing our take rate. This approach provided users with tangible value and benefits while also ensuring the rapid growth of our transaction volume.

Looking ahead, leveraging the strength of our AHS Recycle brand and our store network, we will prioritize developing high-value categories that are convenient for users to bring to our stores for transactions. We aim to integrate user demographic profiles, including age and gender to solidify the consumer mindset of AHS Recycle go-to-destination positioning.

Your next question will come from Michael Kim with Zacks Small-Cap Research.

Can you hear me?

Yes, we can hear you.

Yes. Okay. Curious to get your perspective on the uptake of enhanced services across your marketplace businesses and how maybe a more favorable mix might impact take rates? And then just related to that, how has the mix trended more recently as it relates to multi-category transactions?

[Interpreted] The take rate for PJT Marketplace remained stable at over 6%. The slight variation in the platform take rate in the third quarter was primarily due to phased adjustments in our merchant service policy where we allow buyers more flexible return and exchange options.

Simultaneously, PJT actively introduced innovative transaction model such as the specialty buyer model and expanded platform supply chain connectivity to Douyin. This provides more influencers and small business owners with access to industry supply sources, simplify secondhand transactions and offers consumers better products and greater value.

Within the Paipai Marketplace, the consignment model has shown initial success, driving its take rate into the high single-digit rent to 9%. There remains room for optimization in both the sales categories and take rate structure for consignment. The standardized model effectively addresses operational challenges for small merchants by offering a simpler [ door setup ] experience, higher transaction efficiency and better pricing and sales channels. As the consignment business scale, both the revenue structure and take rate of the pipeline marketplace have the potential for further optimization.

Regarding our multi-category services, a significant portion of current transaction volume comes from gold recycling, which is more standardized and operates with a low single-digit take rate. The service take rate for the secondhand luxury category continue to exceed 10%. For future category expansion, we will prioritize high-value categories that offer greater service value and potential for higher take rates.

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

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 the transcript when ready. If you have any additional questions, please feel free to e-mail us at [email protected]. Have a good day.

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