ATRenew's Q3 report: Achieved GAAP profitability for the first time, the goal is still the stars and the sea.

For nine consecutive quarters, the company has achieved a 20% revenue growth rate, and this quarter marks the first time it has turned a profit under GAAP standards, proving a simple truth: a good business model and strong user engagement can create fundamental expectation gaps.

Summary

1. This quarter, AtRenew's profitability has been comprehensively optimized. The company achieved an operating profit of 24.89 million yuan and a net profit of 17.88 million yuan, marking full profitability under GAAP standards for a single quarter. Non-GAAP operating profit, non-GAAP net profit, non-GAAP net profit margin, etc., all saw significant growth. The company has now developed a sustainable and healthy cash-generating capability.

2. In terms of stock price, the company has achieved over 45% growth this year, with a post-earnings surge of more than 14%. However, its stock price has not yet surpassed the peak reached last month. Currently, the capital market has not fully priced in the company's achieved profitability, let alone its future growth and operational expectations. It can be said that the company still has significant room for imagination.

3. The second-hand recycling and trading market is in a growth phase, with trade-in growth rates exceeding the broader market. This is a more popular recycling method among domestic users, driving the development of the second-hand industry. At the same time, amid cautious consumption trends, user demand for recycling idle items and purchasing high-quality second-hand phones will continue to grow. Under such consumption trends, the growth momentum AtRenew has established is difficult to reverse.

As a company we have been tracking long-term, AtRenew's latest financial report demonstrates the high growth potential of its business model and its unexpectedly strong profitability. It’s worth emphasizing that it’s very rare for a Chinese concept stock to possess both of these attributes simultaneously.

In the third quarter of this year, AtRenew's total revenue reached 4.05 billion yuan, a year-on-year increase of 24.4%. In terms of revenue composition, 1P (self-operated) product revenue reached 3.67 billion yuan, up 25.6% year-on-year, continuing to be the engine of revenue growth. 3P (platform) service revenue was 380 million yuan, up 13.9% year-on-year. Since the third quarter of 2022, AtRenew has achieved over 20% growth for nine consecutive quarters.

According to the company’s management during the earnings call, based on IDC’s second-hand mobile phone industry report and platform transaction data analysis, China’s second-hand consumer electronics industry is growing at a rate of around 10%. Second-hand mobile phones and 3C products are the foundation of the group’s business, requiring continuous efforts to strengthen the core advantages of "scenario + supply chain" and user trust in the AiHuiShou brand. Through its proprietary supply chain capabilities, the company aims to enhance compliant industrial chain refurbishment and value addition, further unleashing economies of scale and industrial chain value.

Additionally, the company’s management expects total revenue for the fourth quarter to range between 4.74 billion yuan and 4.84 billion yuan, corresponding to a year-on-year growth of 22.4% to 24.9%. This means the company will maintain over 20% year-on-year growth for ten consecutive quarters, clearly demonstrating the certainty of its business model and market positioning.

In terms of profitability, AtRenew achieved an operating profit of 24.89 million yuan and a net profit of 17.88 million yuan this quarter, marking full profitability under GAAP standards for a single quarter. Non-GAAP operating profit exceeded 100 million yuan, up 40.9% year-on-year, reaching a record high. The non-GAAP operating profit margin increased from 2.3% in the same period last year to 2.6%, marking nine consecutive quarters of profitability.

In terms of non-GAAP net profit, the single-quarter non-GAAP net profit was 90.06 million yuan, a significant year-on-year increase of 89.3%. The non-GAAP net profit margin rose from 1.5% in the same period last year to 2.2%. Overall, AtRenew’s profitability is improving comprehensively, which is quite rare for a company still maintaining over 20% high revenue growth.

In terms of cash, as of the end of the third quarter of 2024, AtRenew’s cash and cash equivalents, restricted funds, short-term investments, and third-party payment platform account balances totaled 2.35 billion yuan, indicating a high overall safety margin. In summary, this quarterly report demonstrates the company’s income certainty, profitability, and cash reserves.

In terms of business, two aspects stood out this quarter: multi-category recycling and AiHuiShou’s premium second-hand business. According to the company’s earnings call, multi-category recycling volume increased by over 270% year-on-year in the third quarter, driving service revenue growth of over 400% and generating over 30 million yuan in service revenue. After deducting store and fulfillment expenses, 46% was converted into store contribution profit.

From the perspective of store operations, multi-category recycling has significantly enhanced the company’s competitiveness and moat. In the broader second-hand consumer market, whether it’s mobile phones, 3C consumer electronics, or items like gold jewelry, luxury bags, watches, premium liquor, and trendy sneakers, there is unique user demand and scalable transaction value. As of the end of September, 587 AiHuiShou stores nationwide have been equipped with multi-category recycling capabilities, and this capability will continue to expand.

In terms of premium second-hand products, in the third quarter, the total revenue from self-operated, strictly selected B2C retail businesses—including online platforms like JD Paipai and AiHuiShou’s official website, as well as offline AiHuiShou stores—reached 970 million yuan, a year-on-year increase of over 120%. Specifically, retail revenue from AiHuiShou stores and the official website grew threefold year-on-year, while sales of strictly selected second-hand products on JD Paipai and new media retail channels increased by 87.4% and 114.6% year-on-year, respectively.

Behind the revenue growth is AiHuiShou’s continuous efforts in large-scale refurbishment capabilities in recent years. This year, the compliance refurbishment coverage rate of the company’s main recycling sources has increased from single digits to double digits, with compliant refurbished product revenue maintaining positive sequential and year-on-year growth. As consumption trends shift toward cost-effectiveness, user demand for second-hand mobile phone products will continue to expand.

Finally, let’s talk about the company’s share repurchase situation. As an important reference for Chinese concept stocks, AtRenew repurchased nearly 4.9 million ADSs for $ATRenew(RERE.US)