NEWS WRAP: ATRenew on track to recirculate 32 million electronic devices this year

By Doug Young

Recycling specialist ATRenew Inc. (RERE.US) is on track to recycle and facilitate the recirculation of about 32 million electronic devices this year, nearly half of which will pass through its two recycling supercenters, a company spokesperson said on Wednesday, as it also seeks to leverage its name to diversify into other recycling areas.

Some 40% of the millions of consumer electronics the company has handled this year, many of those iPhones, will circulate through the company’s two largest recycling centers in the cities of Dongguan in Southern China, and Changzhou in Eastern China, the company told Bamboo Works. ATRenew operates a national network of recycling centers where phones and other electronics are tested and sorted, anchored by the two major automation centers, five scaled operation facilities and 15 smaller service centers.

The 32 million electronics the company will recirculate this year is roughly comparable to its volumes in 2021 and 2022.

Shanghai-based ATRenew began as a smartphone recycling specialist, but over the last two years has begun leveraging its AHS Recycle consumer-facing brand to move into other areas like second-hand luxury goods, photography equipment, gold and even vintage liquors.

It also expects to boost its core smartphone recycling business over the next few years through a new partnership with Apple (AAPL.US) launched in the middle of this year. The company logged 30 million yuan ($4.2 million) in additional sales from the program in the third quarter, and expected the partnership could eventually yield up to 1.5 billion yuan in additional sales.

ATRenew is also taking steps to boost its efficiency through steps like doing more recycling at the city level, working more directly with buyers and sellers to cut out costly middlemen, and also by automating more of its processes. It is also trying to do more smartphone refurbishing, which typically carries higher margins than simply buying phones and then reselling them in the same condition, and also allows more recycled devices to be upgraded for sale at higher prices.

The company hopes those efforts will boost its revenue growth, and also lift it to its first-ever net profits. With consumers now more budget conscious, ATRenew hopes to expand its product and service offerings by recycling products from different categories using channels like JD.com, one of its recycling partners.

ATRenew’s revenue rose 32% in the first nine months of the year, while its net loss narrowed by about half to 159 million yuan. Reflecting its improving efficiencies, its non-GAAP fulfillment expenses fell to 8.7% of total revenue in the third quarter from 10.7% a year earlier. The company is profitable on a non-GAAP basis, which exclude costs related to employee stock compensation, amortization, and reported third-quarter net income of 47.6 million yuan on that basis.

While ATRevew’s revenue continues to hit new highs as it edges closer to net profitability, 2023 is shaping up as a year the company might prefer to recycle in terms of its stock. Its shares have lost about 40% of their value this year as investors shun China stocks in general over concerns about the country’s slowing economy. And at a current price-to-sales ratio of just 0.25, the stock looks like the kind of bargain that attracts many of the company’s customers to its recycled phones.