ATRenew Sets New Quarterly Revenue Record as Refurbishing and Diversification Efforts Pay Off

ATRenew, the operator of China’s top consumer electronics transactions and services platform, on Wednesday set a new quarterly revenue record as it upped the ante in refurbishing gadgets while branching out into the recycling of other items.

The US-listed company reported non-GAAP operating earnings of 51.98 million yuan ($7.14 million) for the second quarter, the highest quarterly figure on record, according to its financial disclosure. It raked in 2.96 billion yuan in income during the quarter, up 38.1 percent from a year earlier, topping the top end of its guidance.

This marked the fourth consecutive quarter of profitability on a non-GAAP basis that excludes spending on employee share incentives, the amortization of intangible assets and deferred costs from acquisitions.

Noteworthily, the company’s non-GAAP operating profit margin swung to 1.8 percent in the second quarter from -2 percent during the same period last year, also a record high.

The readings draw a stark comparison to a shrinking smartphone market amid the economy’s tortuous post-COVID recovery. China’s smartphone shipments totaled roughly 65.7 million in the second quarter, down 2.1 percent year-on-year, showed data from market research firm IDC.

Behind the quarterly records was ATRenew’s ramped-up push for refurbishing gadgets in compliance with regulatory requirements, which arguably helps in improving its profit margins.

The platform operator has begun offering revamped devices in accordance with a 2022 interim guidance from the local people’s procuratorate in Shenzhen on IPR and criminal compliance for refurbished electronics.

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ATRenew has swiftly enabled a scalable line of business. Its refurbishing capabilities that initially came on stream in its Dongguan operation center in south China became available later on in the other four major operation centers (Changzhou, Wuhan, Chengdu and Tianjin) across the country. Such offerings apparently appeal to consumers seeking affordable yet quality pre-owned products as the adoption of a more sustainable lifestyle prevails.

For the second quarter, ATRenew posted 170 million yuan in revenue from retailing self-operated gadgets that have been compliantly refurbished, a 22 percent jump from the previous quarter, according to the company.

Considering the “compliant refurbishing business” as contributing to the company’s enhanced role in the industry value chain, Chen Chen, chief financial officer of ATRenew, disclosed that this line of business improved the overall gross profitability of self-operated offerings by 1 percentage point on a yearly basis.

Sales of its self-operated items generated 2.64 billion yuan over the second quarter, up 42.2 percent from the year before, per the quarterly disclosure.

The recycling giant has also moved from focusing on electronics to catering to consumers’ needs for diversification. Its mammoth network of brick-and-mortar outlets has paved the way for its foray into recycling photographic equipment, suitcases, bags and other luggage, wristwatches, gold, well-known liquors, shoes and apparel, among others.

ATRenew has rejigged a selection of its physical outlets, mostly in metropolises such as Shanghai, Beijing, Guangzhou, Hangzhou and Chongqing, in line with the diversification push.

By the end of the second quarter, the multi-category recycling business had been up and running in 231 outlets, doubling the number from the previous quarter. ATRenew’s retail presence reached 269 cities with 1,944 outlets as of the end of June.

The diversification turns out to have buffed up the platform operator in financial terms, with its luxuries recycling turnover soaring 60 percent on a quarterly basis while that of gold recycling almost doubling in the second quarter. The recycling of non-electronic items, excluding photographic equipment, added up to over 200 million in the April-June period.

With a flexible business strategy in progress, the 12-year-old recycling giant has shrugged off competition from upstart rivals. ATRenew has built a hefty offline footprint, adding to its online expertise.

The recycling of pre-owned and idle goods, especially electronics, would be better done at offline sites where the quality of recycled products could be adequately assessed. Nonetheless, a readily available brick-and-mortal presence could be too costly to maintain a recycling business, thereby rendering the retail network ATRenew’s economic moat.

It took ATRenew about a decade to carve out its path to ubiquitous presence since it opened the first store in 2013. The platform operator has also enhanced the operational efficiency, making its retail network economically viable.

Its fulfillment costs as a percentage of operating income by non-GAAP metrics fell to 8.8 percent in the second quarter from 9.1 percent in the prior quarter, per ATRenew’s disclosure. Fulfillment expenses comprise mainly the operating costs of offline retailing and the costs of warehousing and external logistics.

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According to Chen, its CFO, ATRenew’s adjusted fulfillment expenditure ratio slid 3.7 percentage points in the second quarter from the year before, thanks to “automation technology renovation and big data algorithms that strengthened our efficiency in quality inspection and logistics.”

In a sign of recycling muscles, ATRenew joined hands with Apple China in June, becoming the second certified platform in the Chinese mainland market after IFengPai for trading in Apple gadgets for cash that can be used either in-store or online.

IFengPai, a subsidiary of Apple supplier Foxconn, was the first authorized provider for Apple’s recycling program in the mainland dating back to 2015.

Known as the first environmental, social and governance (ESG)-related overseas-listed mainland firm, ATRenew also stood out as a viable contributor to China’s green transition.

Throughout 2022, the company’s greenhouse gas emission density, as measured in carbon dioxide equivalents (CO2e), hit 0.3 tons of CO₂ equivalent per million yuan, a decline of 18.9 percent from 2021and the third year in a row with decreased carbon emissions, according to its annual ESG report.

Also, the company recycled and oversaw the green disposal of 270,000 outdated or dilapidated electronic devices last year, reducing about 43.2 tons of electronic waste.