ATRenew Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 12, 2024

There are 6 speakers on the call.

Operator

Good morning and good evening. Ladies and gentlemen, thank you for standing by and welcome to AT Renew, Inc. 4th Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. We will be hosting a question and answer session after management's prepared remarks.

Operator

Please note, today's event is being recorded. I will now turn the call over to the first speaker today, Mr. Jeremy Gee, Director of Corporate Development and Investor Relations of the Company. Please go ahead, sir.

Speaker 1

Thank you. Hello, everyone, and welcome to AT Renew's 4th quarter full year 2023 earnings conference call. Speaking first today is Cary 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 analysts. The Q4 and full year 2023 financial results were released earlier today.

Speaker 1

The earnings release and investor slides accompanying this call are available at our IR website, ir. Atrenew.com. There will also be a transcript following this call for your convenience. For today's agenda, Cary will share his thoughts about our quarterly performance and business strategy, followed by Rex, who will address the financial highlights. Both Carrie and Rex will join the Q and A session.

Speaker 1

Let me cover the safe harbor statements. Some of the information you will hear during our discussion today will consist of forward looking statements, and I refer you to our Safe Harbor statements in the earnings press release. Any forward looking statements that management makes on this call are based on assumptions as of today and that AT and T does not take any obligation to upgrade our assumptions on these statements. Also, this call includes discussion of certain non GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non GAAP measures to GAAP measures.

Speaker 1

Finally, please note that, as I said, we have 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 Cary for business and strategy updates.

Speaker 2

Hello, everyone, and welcome to 8 gs Re News 4th quarter and full year 2023 earnings conference call. In 2023, ATReynew achieved record breaking revenues and profits with a continuously strengthened pre owned supply chain capability and ongoing increase in brand recognition. Our total revenues reached RMB13 1,000,000,000 representing a year over year increase of 31.4%, significantly outpacing the growth rate of the secondhand industry and consumer sector as a whole. I would like to express my gratitude to our colleagues on the front line and in all departments for their hard work. Our total transaction volume in 2023 was 32,300,000 units.

Speaker 2

We adhere to the strategy of prioritizing self operated business that provides better services and user experience. This focus has yielded significant results with our YP transaction volume increasing by 50% year over year in 2023. Regarding 3rd party platform businesses, adjusted our development strategy and made efforts to develop merchant ecosystem and service capabilities. The overall platform take rate increased by 92 basis points to 5.39% in 2023. The number of registered merchants on PJT Marketplace reached 596,000, a strong growth of 46 0.2% compared to the previous year, which laid solid foundations for future development.

Speaker 2

2023 was also a year of consolidation and efficiency. We further solidified our secondhand supply chain capabilities providing more valuable services on our platforms. At the same time, we were also more disciplined at the pace of our expansion and investments in new initiatives. At the profit level, we achieved a solid non GAAP operating profit of RMB252 1,000,000 with a non GAAP operating profit margin of 1.9%, exceeding our target for the year. Are firmly grounded in our strategic focus.

Speaker 2

Firstly, we appear to effective customer acquisition scenarios on the reception front secondly, strengthening robot supply chain capabilities as a foundation thirdly, driving efficiency improvement through technology and 4thly, being agile in seizing new traffic opportunities and capturing new customer demand. Now I will walk you through these 4 strategic perspectives. First, on the recycling front, we continue to successfully execute our customer acquisition strategy by leveraging our precise recycling scenario. By the end of 2023, we have presence in 2 68 cities in China, reaching consumers through 18 19 AHS stores offline. We have constantly enhanced our service accessibility in high quality business districts and communities.

Speaker 2

We further penetrated the market by combining offline stores with online platforms. Over the past year, consumer awareness and trust in our AHS recycled brand have steadily increased, especially in big cities where recycling rates are improving. By leveraging our physical stores, premium service reputation and retail partners, we precisely target user mainstream recycling scenarios. With competitive prices and higher efficiency, we obtained high quality sources group's supply chain capability in the main business lines. In June 2023, we were pleased to announce the official collaboration with Apple for its recycling and trading services in Mainland China.

Speaker 2

Our partnership is designed to meet user demand for convenient recycling and low cost upgrades to brand new iPhone products. This service is now available at the brand's official website and offline flagship stores. Mostly during the Q4, despite flat iPhone sales, this collaboration contributed RMB300 1,000,000 to our revenues. Additionally, in terms of e commerce partners, we have solidified our collaboration with JD's Mobile and Electronics Retail departments, offering 1 stop single device and multi device trading services. This caters to JD's vast user base who seek more cost effective shopping options and better recycling experiences when upgrading their gadgets.

Speaker 2

Overall, the gross recycling value of trading business on JD channels doubled in 2023. By expanding our multi category recycling efforts, we have further strengthened the appeal of our recycling scenarios for users. The updated slogan, recycling more for you, reflects our commitment to expanding into additional categories beyond our core focus on consumer electronics. We are dedicated to fulfilling the growing demand for recycling and cash for high value cash back for high value categories such as luxury goods, gold and vintage wines. Looking ahead, we aim to expand to lower value item recycling while promoting the recycle and reuse of more idle goods.

Speaker 2

Building multicastry recycling capabilities primarily involves primarily involves upgrading store experiences and IT systems while co establishing fulfillment capabilities with professional service providers. Our fulfillment strategies vary with the residual value of goods. With in store drop off and doorstep pickup options, users could circulate more used products with ease. By the end of 2023, we have introduced multi pet recycling services into 252 AHS stores. During the year, the GMV for non electronic products at the recycling front exceeded RMB1 1,000,000,000.

Speaker 2

At the same time, we bring AHS recycled brand closer to communities and users' daily lives. Our extended presence in communities and commercial areas coupled with an increasing density of multi category recycling stores encourages customers to reuse our services more often. Moving on to our supply chain processing capabilities. Our highly efficient supply chain management ensures recycled goods are inspected at a lower cost, while achieving accurate grading and pricing results. This allows a consistent and stable supply of goods.

Speaker 2

We have also improved our operation centers' shipping and resuming capacity and enhanced their space utilization efficiency. Furthermore, our main operation centers are equipped with compliant refurbishment capabilities. The annual revenue from our self operated compliant refurbishment business reached RMB810 1,000,000, accounting for 9.4% of the core 1Q recycling business segment revenue. Mostly in the Q4 of 2023, revenue from the refurbishment business increased by 41.5% compared with the previous year, while the gross profit margin was 1.6 percentage points higher. This is mainly attributable to our intelligent supply chain system, which enables more accurate identification of devices to go for refurbishment, resulting in a higher number of devices in various We actively participated in the formulation of industry standards while leveraging our supply chain advantages to drive industry prosperity.

Speaker 2

In 2023, as a major drop in party, ItyRenew played a key role in establishing the Electronic Product Refurbishment Industry Committee initiated by the Shenzhen Electronics Industry Association. We contributed to various group standards including general requirements for refurbishment, labeling and information disclosure, quality management and technical specifications. These standards serve as industry references for intellectual property protection, product data security quality, as well as user rights protection. On distribution, our advantages of an integrated B2C plus B2B platform were further magnified. In 2023, GMV of the core self operated retail business totaled RMB2.88 billion.

Speaker 2

Leveraging our supply chain strength, Hi Pie has strengthened its 1P2 consumer retail capabilities, meeting consumer demand for high quality pre owned products. To highlight, One Piece consumer combined refurbished product sales contributed RMB560 1,000,000 in revenue. In 2023, we introduced a new confinement model to address the challenges faced by secondhand industry merchants, difficulties in operating to consumer e commerce stores and the struggle of small businesses. Through PJT Marketplace, we effectively connect A Tai stores with small and medium sized merchants, thus removing barriers that previously hindered small merchants from integrating their supply into our platform. Merchants not only need to list their products and confirm pricing, while the platform takes care of the store operations, sales, customer services and after sales support.

Speaker 2

This initiative significantly lowers the entry barriers for B2C merchants, enriches the platform supply sources and ensures a seamless purchasing experience for users. GMV for the consignment business summed up RMB70 1,000,000 in 2023. In the Q4 of 2023, the overall business of PJD Marketplace rebounded, primarily due to a recovery in trading activities and the 35.3% year over year increase in the number of active merchant users. Additionally, we took the strategic decision restructure the low commission rate spare stock business and this reduced our cost and optimized overall take rate of B2B platform. As a result, in the Q4 of 2023 service revenues from PJT Marketplace increased by 14.9% year on year and the overall take rate rose by 69 basis points to 6.02%.

Speaker 2

On an annual basis, its overall take rate reached 6.17 percent, a significant improvement of 189 basis points compared to the 2022 level. We are proud of the proven business model of DJT Marketplace as it's an indispensable infrastructure of the industry. Looking ahead, we will further open up our supply chain advantages and become a high quality supplier for pre owned products in the industry. At the same time, we will provide models suitable for B2C retail and steady supply through online e commerce platform, live streaming channels as well as offline mobile phone retail networks and service stations. In an environment where consumers are more cautious with their expenses, itch renew aims to leverage its competitive pricing and quality assurance of pre owned products to foster mutual success with our partners.

Speaker 2

Thirdly, in terms of technology and efficiency, we continue to promote application of automation technology. Firstly, we have enhanced the accuracy of quality inspection. The automated quality inspection system represented by Matrix 3.0 has reduced losses caused by quality inspection errors by 19% throughout the year. Secondly, with our focus on OneP Business, we improved capacity utilization in our automated operation centers in South and East China. Thirdly, through optimizing supply chain management for receiving and delivering goods in different locations, we reduced logistics costs.

Speaker 2

As a result of these initiatives, our non GAAP fulfillment expense as a percentage of total revenue has continued its downward trend reaching 8 point 5% for the full year 2023, significantly down from 10.9% in 2022 and this underscores our dedication to achieving further cost reduction at scale. In the overseas market, we are delighted to see strong interest in our automated technology for Korean owned consumer electronics. Beyond the mainland China market, our quality inspection technology has been successfully deployed in Hong Kong and Japan. In November 2023 excuse me, in October 2023, we expanded our global footprint by collaborating with a European partner to bring our 1 stop recycling kiosk solution to Sweden. Our 1 stop solution effectively addresses the international demand for C2B recycling services.

Speaker 2

Moving forward, we remain committed to our growth trajectory and will continue to explore the global circulation of pre owned products. Looking ahead to the Q1 and the full year of 2024, we believe that AT Renew operates in a sustained circular economy that is impervious to economic fluctuations and technological changes. We identified several key trends in the sector. On the recycling front, we see a definite demand for convenient, high priced and trustworthy recycling services. On the purchasing end, we see a stronger demand for value for money goods from savage consumers.

Speaker 2

On the fulfillment end, we see an unchanging need from secondhand merchants for efficient and hassle free trading and logistics solutions. In late February this year, President Li emphasized the promotion of a new round of large scale equipment upgrading and consumer goods trading. As a leading company in this field, we are strategically positioned to capitalize on this upward trend and better facilitate JD and rat owners' trade in program. Once again, it demonstrates that recycling and trade in are encouraged by national policies as a long term stable industry with high certainty and low policy risks. Going forward, we will adhere to our long term core strategy and fortify our business foundations, while enhancing brand awareness for AHS Recycles.

Speaker 2

We aim to address users' fundamental pain points and collaborate with industry partners to explore the impact potential of high quality secondhand products. We will maintain patience in the long run while steadily releasing profits and achieving growth. Finally, I am delighted to announce an international accolades. In November 2023, ItyRenew was honored as highly commended by the judging panel at the Reuters Global Business Responsibility Awards in the circular transition category. This marks a milestone for ATRenew as it is the first time we have stood shoulder to shoulder with global multinational companies such as Oracle, Schneider Electric and PepsiCo.

Speaker 2

The recognition from Reuters and the expert panel is a testament to our innovation and our technological achievements. Moving forward, we will continue to deepen our commitment to the circular economy, driving sustainable industry development through technological innovation. Now, I'd like to turn the call over to our CFO, Rex, for financial updates.

Speaker 3

Okay. Hello, everyone. I'm pleased to report that 2023 was a year of significant achievements for our company. Both revenue and operating income saw better than expected results. Total net revenue increased by 31.4% to RMB13 1,000,000,000 and adjusted operating income of RMB2023 totaled RMB251.7 million, a remarkable 36.5 times the number of 2022.

Speaker 3

Cash inflow from operating activities was healthy, totaling RMB236 1,000,000. As Carrie said, 2023 was our year of consolidation and efficiency. Moving on to the Q4 of 2023, we are pleased to announce another profitable quarter as we recorded another new record non GAAP operating income on revenues that once again exceeded the top end of our guidance. Now, let's take a detailed look at the financials. Please note that all amounts are in RMB and our comparisons are on a year over year basis unless otherwise stated.

Speaker 3

In the Q4, total revenues increased by 29.9 percent to 3,800 and 73,600,000, driven by strong growth in net product revenues and a rebound in service revenues. Net product revenues increased by 31.1 percent to RMB3532.5 million, while net service revenue was 351,100,000, representing an increase of 19.7%. Gross in net product revenues was primarily driven by an increase in the sales of pre owned consumer electronics through both PJT and pipeline marketplaces, as well as offline channels, of which sales of 1P refurbished devices totaled 278,200,000, which increased by 41.5 percent sequentially. The increase in service revenues was primarily due to the recovery of Pipay and the PJT marketplaces with efficient online and offline customer acquisition and better execution. Overall take rate of our marketplaces went up 56 basis points from the Q4 of 2022 to 5.36% in the Q4 of 2023.

Speaker 3

Now, let's discuss our operating expenses. To provide greater clarity on trends in our actual operating base expenses, we will also discuss our non GAAP operating expenses, which better reflect how management views our results of operations. The reconciliations of GAAP and non GAAP results are available in our earnings release and the corresponding Form 6 ks furnished with the SEC. Merchandise costs increased by 32.9 percent to RMB 3,150,000,000. The increase was in line with the growth in product sales.

Speaker 3

Gross margin at the group level was 18.7% in the Q4. Gross margin for our 1P business was 10.6%. In the Q4, AHS Recycle provided its official trading services for Apple. With the release of the iPhone 15 services, we implemented a proactive approach to attract customers with aggressive pricing strategies, causing gross margin compression. We believe that as our market share within these channels grows, the gross profit will gradually return to normal levels.

Speaker 3

Fulfillment expenses increased by 9.5% to RMB 301.1 million. Excluding share based compensation expenses, which we will refer to as SBC from TRL, non GAAP fulfillment expenses increased by 14% to 200 and 95,600,000. Under non GAAP measures, the increase was primarily due to an increase in personnel and logistics costs as we conducted more recycling and transaction activities year on year. Non GAAP fulfillment expenses as a percentage of total revenues decreased to 7.6% from 8.7%. The overall decrease in the rate of fulfillment expenses reflects the impact of economies of scale and efficiency improvements through automated operations.

Speaker 3

Specifically, as the number of wimchi orders grow, the average fulfillment cost in the order was reduced. Selling and marketing expenses decreased by 46.6 percent to RMB317 1,000,000, Excluding SBC expenses and amortization and impairment loss of goodwill and intangible assets, non GAAP selling and marketing expenses increased by 11.0 percent to RMB246,600,000, primarily due to an increase in expenses related to marketing activities. Non GAAP selling and marketing expenses as a percentage of total revenues decreased to 6.4% from 7.5%. General and administrative expenses decreased by 18.8 percent to RMB62,200,000. Excluding SBC expenses, non GAAP G and A expenses decreased by 17.4 percent to RMB45.2 million, primarily due to a decrease in headquarter office expenses and fees related to professional services.

Speaker 3

Non GAAP G and A expenses as a percentage of total revenues decreased to 1.2% from 1.8%. Technology and content expenses increased by 17.1% to RMB 63,800,000. Excluding SBC expenses and amortization and impairment loss of goodwill and intangible assets, Non GAAP technology and content expenses increased by 50.6 percent to 58,300,000. The increase was primarily due to an increase in personnel costs in connection with the upgrades of the company's operation center and systems. Non GAAP technology and content expenses as a percentage of total revenues increased to 1.5% from 1.3%.

Speaker 3

As a result, our non GAAP operating income was RMB81,600,000 in the Q4 of 2023, representing a significant increase of 135 point 8% year on year. Non GAAP operating profit margin was 2.1% compared to 1.2% in 4Q 2022. To provide some content regarding our balance sheet, our inventories amounted to RMB1 1,000,000,000 at the end of the Q4 of 2023, representing a sequential increase of RMB344.8 million compared with the end of the Q3 of 2023. This increase was primarily due to a surge in recycling volume generated from Apple's official trading program. However, it had a limited impact on our operating cash flow since we have a payment term of 45 days and effectively manage relevant payables through bank guarantees.

Speaker 3

As of December 31, 2023, cash and cash equivalents, restricted cash, short term investments, and funds receivable from third party payment service providers totaled RMB 2,900,000,000. Our strong cash position safeguards a sustainable growth outlook. During the Q4 of 2023, we repurchased 4,500,000 ADSs in the open market for a total consideration of $8,100,000 By December 31, 23, we had repurchased a total of 18,400,000 ADSs for US56.5 million dollars under our share repurchase programs. Today, we are delighted to announce a new share buyback program that allows us to repurchase up to 20,000,000 dollars worth of our shares over the next 12 months based on our confidence in our value creation, business growth momentum and strong cash flow. Now, turning to the business outlook.

Speaker 3

For the Q1 of 2024, we anticipate total revenues to be between 3,000 550,000,000 and 3,650,000, representing an increase of 23.6% to 27.1% 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

The first question comes from Joyce Ju with Bank of America. Please go ahead.

Speaker 4

Thank you for taking my questions and congratulations on the very solid results this quarter. I would like to ask about your overall growth guidance for 2024. Additionally, I also want to have some colors on what is the growth target for the multi category recycling business? Thanks a lot.

Speaker 2

Thank you for your questions. During 2022 and 2023, we saw a shift in consumer behavior. Our users focused transition from consumption upgrades to an emphasis on value for money. During this transformation, we noticed a shift rise a fixed rise in user demand for trillions and reflecting in exchange for cash. As we mentioned, our 1Q revenue grew 34.4 percent year over year in 2023 with trade ins through JD more than doubling compared to the previous year.

Speaker 2

We will continue to drive the core growth flywheel of 1D Receptor Business and to expand our industry value chain through economy of scale. We aim to expand our operating profit margin further by bringing our operational efficiency to the next level. We are steadfast in investing in the brand of NHS Recycles to unleash growth of traffic and economy of scale further. In terms of our platform business, we strengthened the synergies between TJC Marketplace and Taipei Marketplaces and provided small merchants with upgraded consignment services. This helped us build up a more robust 2C supply and meant we could offer a more diverse selection of high quality secondhand products for our users.

Speaker 2

Looking ahead to 2024, we placed user experience as our top priority while providing the utmost support to recycling and trading offerings of jd.com and Apple's official trading program. We believe that the support from the central government for large scale trading policies on consumer goods will benefit our collaborations with JD and Brand Partners. Together we elevate consumer awareness of trading and cost weighted as a mainstream consumption choice. Because of this, we are confident in achieving a 30% year over year revenue growth for our 1P business. In 2023 GMV for our multicast growing second business surpassed RMB1 1,000,000.

Speaker 2

This business has grown rapidly in scale. We set a mild take rate for this business segment in 2023. We trust there is ample growth potential in the take rate. In 2024, our focus is enhancing user awareness of AHS Recycle as a leading national recycling brand. Our core strategy is still to build an even better user experience.

Speaker 2

To achieve this, we will provide more structured product data categories.

Operator

The next question comes from Jiang Zhen Chen with CICC. Please go ahead.

Speaker 5

Thanks for taking my questions and congratulations on good results. I have two questions. First, could you provide more color on the higher than expected profitability this year and what's your profitability target for 2024 and for the medium to long term? 2nd, in late 2023 and early 2024, the iPhone 15 series faced some challenges from Huawei. How does management view the challenging competitive landscape among the mobile phone manufacturers?

Speaker 5

And how did your Apple trading business perform in Q4 2023? And what are your scale and profit targets for 2024? Thank you.

Speaker 3

Okay. Thank you. So I will take your first question and Carrie, our CEO will take your second questions. Okay. So for your first question, in 2023, we once again achieved the breakthroughs in terms of cost efficiencies and other than capital measures, fulfillment, selling and marketing, G and A and administrative and technology and content expenses as a percentage of revenues were 8.5%, 7.3%, 1.5% and 1.3%, respectively.

Speaker 3

These figures correspond to a year over year decrease of 2.4%, 1.6%, 0.1% and 0.6%, respectively. In terms of fulfillment, we achieved a remarkable efficiency improvement. Our efficient system of regional operating centers and centralized self operated operation stations have further improved our inspection quality and cost controls. The scale effect created by the use of automation technology at operating centers has also had a positive impact. We are now seeing lower costs related to sorting, quality inspection and warehousing.

Speaker 3

When compared to our previous approach of using decentralized jointly operated stations, we have also leveraged big data to optimize small item delivery with low cost shipping. This has driven down shipping and receiving costs. Overall, our operating center expenses and the logistics costs decreased by 9% 8%, respectively, during 2023. This resulted in a non GAAP operating expense of RMB1.1 billion, a year over year increase of only 2%. Our total non GAAP selling and marketing expenses in 2023 were RMB940 1,000,000.

Speaker 3

This was a year over year increase of 7.8%, also a lot lower than our revenue growth rate over the same period. This was mainly driven by HR efficiency improvements from deploying advanced digital CRM tools of the B2B sales team. The result was a 19% cost reduction compared to the previous year. In 2023, non GAAP general and administrative expenses were RMB190 1,000,000, a year over year increase of 21.9%. This was mainly due to office rent and various other administrative costs, including employee, travel, training and benefits.

Speaker 3

All non GAAP technology and content expenses were RMB170 1,000,000 in 2023. Thanks to the gradual maturity of our platform's technology and the official launch of our South China Automation Operating Center, we did not see significant cost growth in this category. In addition, the cloud migration initiative we launched in 2022 was completed in 2023. This contributed to an overall decrease in technology and content expenses as a percentage of revenue, representing an improvement in scale effect. The breakdown above highlights the enhancements that led to the increase in our non GAAP operating profit in 2023.

Speaker 3

For path to profitability growth, our primary focus on our OMP gross margin and operating efficiency. Our long term goal is to improve our non GAAP operating profit margin by 1% every year. In terms of our OMP business, we prioritize our ability to control our first hand supply, while also enhancing user awareness of our C2B brand, Ahs Recycle. We saw the first hand supplies with competitive recycling prices. Meanwhile, we continue to unleash our self operated refurbishment businesses, while we diversify the standard of supply to pipeline.

Speaker 3

We expect a larger proportion of 2C sales as we seek a higher profit margin of 1P revenue. I'd also like to add more color on our collaboration with Apple. In the Q4, our Apple business achieved sales of RMB300 1,000,000. However, as this business is relatively new and is still being refined, as gross profit margins below an ideal level. Going forward, we plan to optimize our pricing mechanism to strike a balance between profitability and growth.

Speaker 3

In terms of operating efficiency, we are constantly optimizing our work cost to revenue ratios. Our automation capabilities will continue to improve our fulfillment efficiency. The inspection cost per device was diluted due to an increase in ASP. In terms of selling and marketing, we tried to maximize the effectiveness of our B2B sales team. At the same time, we plan to strategically leverage social media traffic to attract customers, The algorithms and location based service capabilities of short video platforms such as Douyin will help us target potential users with greater accuracy.

Speaker 3

This approach has added benefit to further strengthen our sourcing capabilities and the market position. We recognize that the key to building a successful secondhand business also lies in our ability to acquire suppliers through brand power. As such, our A. H. Recycled brand is pivotal for our long term development At this stage, we believe strategically allocating appropriate resources to social media traffic will solidify our long term competitive position in this dynamic market.

Speaker 3

Okay.

Speaker 2

I will answer the second question. We have systematically rolled out our recycling and trading services on Apple's official website and at 47 flagship stores. The service and pricing were highly commanded by users on social media spontaneously. In terms of scale, we secured a significant amount of first hand supply by leveraging the substantial volume of new iPhone shipments in the 4th quarter and by maintaining competitive recycling prices. The business contributed RMB300 1,000,000 in product sales revenue during the 4th quarter.

Speaker 2

This was a 9 fold increase compared to the 3rd quarter. Our reception volume is greater than our sales volume. This proves that user acceptance of Apple trading for new products is increasing and there is still much room for improvement in the penetration rate of trading products. We will maintain flexible adjustments to our pricing strategy based on market feedback to optimize our gross profit margin. Importantly, we do not handle front end fulfillment and marketing for the Apple business.

Speaker 2

As a result, even though this business segment has a narrow gross profit margin, it has the potential to contribute a relatively higher operating profit margin.

Operator

Due to the time limit on the call, I'd like to hand the conference back to management for closing remarks.

Speaker 1

Thank you. Thank you all again for joining us today. A replay of today's call will be available on our IR website shortly, followed by a transcript. If you have any additional questions, please feel free to e mail us at iratrenew.com. Have a nice day.

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