ATRenew Inc. (RERE) Earnings

Management highlights

### Industry Trend Observations - Soft new device sales create opportunity: trade-in programs become a top priority promotional tool for manufacturers and platforms, driving increased resource allocation to recycling, which benefits AT Renew. - Macroeconomic consumption headwinds have boosted demand for high-quality, affordable pre-owned products, driving growth in curated B2C business. - Increasing industry regulation (taxation, refurbishment compliance) disproportionately harms small non-compliant operators, creating a tailwind for AT Renew's compliant 1P business. - China has shifted from a net importer to a net exporter of pre-owned smartphones, with accelerating export growth for domestic pre-owned devices, creating new expansion opportunities. ### Core 1P Business Strategy and Operations - The company prioritizes 1P business to deliver the trust and efficiency required for the pre-owned consumer electronics industry, building end-to-end value chain capabilities from C2B recycling supply through compliant refurbishment to B2C curated retail. - Recycling fulfillment: expanded nationwide on-door delivery team to nearly 3,000 people by end of Q2 (up sharply from end of Q1) to support strong demand during the June 18 Shopping Festival. During the promotional period (May 13 - June 18), mobile phone and consumer electronics recycling value grew 57% YoY, on-door and in-store recycling orders grew 45% YoY, and face-to-face orders accounted for 80% of all recycling orders, with improving user experience metrics. - 1P refurbishment and retail: captured demand from higher new device prices, driving strong growth in higher-margin 1P2C curated retail across phones, computers and smart devices. ### Platform Business Updates - TJT B2B marketplace: expanded into fragmented regional markets to reach small merchants and mom-and-pop shops. Total registered merchants exceeded 2.27 million by end of June, with reduced barriers for new sellers and targeted marketing driving strong buyer growth and improved transaction stickiness. - PiPi 3P B2C: adjusted business model to introduce 3P consignment with warehousing support, improving merchant price competitiveness and sell-through rates, with consignment sales growing 22.4% sequentially, with near-term service revenue impact from strategic fee reductions. ### Multi-Category Expansion - Upgraded existing AHS stores to luxury-themed locations, with luxury recycling revenue growing 77.3% YoY. Plans to open more themed stores (luxury, sports) this year to improve user engagement. ### Long-Term Three-Stage Development Strategy 1. Stage 1: Continue to drive healthy growth of the core pre-owned consumer electronics business, leveraging 1P capabilities to capture growing trade-in demand from brands and platforms, and expand into fragmented markets via AI-powered inspection infrastructure. 2. Stage 2: Strengthen AHS Recycle as China's leading national recycling brand, with ongoing marketing investments (including a new global brand ambassador for the company's 15th anniversary) to expand brand awareness into multi-category recycling and retail. 3. Stage 3: Advance overseas expansion to export China's circular economy model. Achieved a milestone of HK$120 million in monthly overseas sales in June 2026, and recently launched two new initiatives: the Foursquare overseas B2B trading platform (leveraging domestic PJT experience and automated inspection to build a more efficient global pre-owned trading marketplace) and the ArrayRay overseas consumer 2C brand (cautiously exploring the 2C market with small-scale investment in recycling kiosks and physical stores).

Guidance

- Q3 2026 total revenue guidance is set at 6.34 billion RMB to 6.44 billion RMB, representing 23.1% to 25.1% YoY growth, which already factors in potential impacts from the iPhone 18 launch cycle. - Management reaffirms expectations for full-year 2026 strong growth in both revenue and profit, with continued year-over-year improvement in non-GAAP operating margin driven by scale economies and refined operations, maintaining prior long-term targets with no downward revision. - The $50 million share repurchase program authorized in June 2025 has been extended for an additional 12 months starting June 30, 2026, with unchanged terms; approximately $14.8 million had been repurchased under the program as of June 30, 2026.

Segment performance

1. **Total Company**: Total net revenue grew 32.4% YoY to 6.61 billion RMB, exceeding the high end of prior guidance. Non-GAAP operating profit grew 70.1% YoY to 210 million RMB, with non-GAAP operating margin expanding 69bps to 3.1%. 2. **1P (First-Party) Product Segment**: Product revenue increased 35.9% YoY to 6.19 billion RMB, accounting for 93.6% of total revenue. 1P refurbished product revenue grew 87.8% YoY, and 1P2C curated retail revenue grew 92.4% YoY, representing 48.8% of total product revenue (up 3.6pp sequentially). 1P gross margin improved to 15.7% from 13.2% YoY. 3. **Service/Platform Segment**: Total service revenue decreased 4.2% YoY to 410 million RMB, accounting for 6.2% of total revenue. The decline was driven by strategic merchant subsidies and service fee discounts during promotional periods. TJT (B2B marketplace) 3P warehousing inspection penetration reached 84.4% (up 11.5pp YoY), with solid underlying service revenue growth. PiPi (3P B2C) consignment business grew 22.4% sequentially. 4. **Multi-Category Recycling**: Overall service revenue grew over 30% YoY. Gold service revenue declined 35% YoY due to volatile gold prices and user-facing pricing adjustments, while luxury recycling service revenue grew 77.3% YoY.

Risks & headwinds

- Softening new device sales could intuitively create headwinds for recycling volumes, though management notes the countervailing benefit of increased manufacturer and platform investment in trade-in programs, but uneven demand timing from potential iPhone 18 launch delays creates near-term uncertainty. - Volatile commodity (gold) pricing negatively impacts multi-category recycling gold service revenue in the short term. - Industry regulation increases compliance costs for the company, though it disproportionately harms smaller competitors. - Overseas expansion is at an early stage, with the new Foursquare platform requiring additional time for product development and market penetration, and there is no guarantee that the international business model will replicate domestic success.

Analyst Q&A

• Q: With the upcoming launch of the iPhone 18 series, what impact do you expect on near-term financial performance, and are there any updates to full-year guidance?

  A: Management reiterated that slower new device sales leads to greater industry investment in trade-in programs, which benefits AT Renew's recycling supply business. The potential staggered launch of iPhone 18 models (with some delayed to spring 2027) would extend the sales cycle into Q4 2026 and Q1 2027, and this potential impact is already factored into the Q3 guidance. Higher new device pricing also increases the value of trade-ins for users, creating upside for pre-owned pricing, and management maintains expectations for full-year 2026 revenue and profit growth, with on-target margin improvement from scale and operational efficiency. ---

• Q: What drove the year-over-year decline in Q2 service revenue, and what is your outlook for platform service revenue going forward?

  A: The 4.2% YoY decline was entirely driven by strategic choices: increased subsidies and logistics incentives for new small merchants on TJT marketplace, and promotional service fee discounts/waivers for PiPi 3P merchants during the June 18 promotion. Looking forward, as TJT continues to penetrate lower-tier fragmented markets, expanded access for small merchants and value-added platform services will drive service revenue growth in line with overall industry expansion. Short-term revenue adjustments for PiPi reflect an ongoing strategic shift to 1P curated retail and 3P consignment, which will support long-term healthier growth. ---

• Q: What are your development plans and performance goals for the international business?

  A: AT Renew's overseas strategy follows a two-path model: core B2B (which contributes ~90% of overseas revenue) supported by cautious 2C exploration. The three-year goal is to build the newly launched Foursquare platform into a global version of the domestic TJT marketplace, with operations already established in Hong Kong, and regional capability expansion launching in Dubai in H2 2026, followed by gradual expansion into Southeast Asia. The new ArrayRay overseas 2C brand is still at an early exploration stage, with small-scale pilots in Europe and Hong Kong, and updates will be shared as progress is made. ---

• Q: Why did store counts decline QoQ in Q2 even as in-store traffic grew, and what is your store count guidance for 2026?

  A: The decline reflects two intentional strategic adjustments: first, standard operational pruning of underperforming, poorly located stores after a period of rapid expansion to solidify operations; second, resource reallocation to upgrade existing stores into specialized category theme stores (luxury, sports), which have already validated strong performance. There is no incremental increase in capital budget for store network expansion; all upgrades and new theme stores are funded via reallocation of existing budget, alongside flexible scaling of on-door fulfillment teams to meet peak demand while controlling operating costs.