Rex Chen: Okay. Thank you for the question. So in the third quarter of 2023, so overall gross profit margin was 19.8%, which was a year-over-year decline due to our strategic shift in revenue mix. Over the past five quarters, we have focused on bolstering our 1P businesses. And as such, the 3P service revenues, which involves several costs, contributed 10.2% to our total revenues, downsizing by 2% year-over-year. So taking a detailed view of the gross profit of the 1P business, the third quarter gross profit margin stood at 10.7%. This aligned with our expectations that 1P gross profit margin would counter to this quarter. There are two reasons behind this. First, during the new phone sales season in September, we proactively adjusted our sales price of refurbished devices in preparation for seasonal margin fluctuation.
We also adjusted to finished product selling prices. Such adjustment aims to meet the demand of merchants by reducing their procurement costs and ensuring their profitability. Second, to supplement our supply, we procured secondhand devices from industry partners, resulting in a relatively lower gross margin for that supply. However, as our automation technology further improves our fulfillment efficiencies, along with optimized the selling and the marketing cost efficiency our fulfillment expenses ratio and the selling and the marketing expense ratio against the total revenues dropped to 8.7% and 7%, delivering non-GAAP op margin of 2.3%. Although 1P’s gross margin decreased, we were able to provide consumers with more competitive recycling prices and a joyful experience.
In the third quarter, our compliant refurbishment business generated RMB2 billion in revenue, reflecting notable user acceptance of pre-owned electronic devices, especially pre-owned Apple devices. Research suggests that an iPhone’s lifespan can reach up to 8 years, with 50% of globally activated iPhones being pre-owned devices. Although, the domestic compliant refurbishment market is still in its early stages, our refurbishment business shows promising growth potential. We anticipate an improvement in overall adjusted operating margins attributable to the growth of refurbished business and Apple businesses. Thank you for the question.
Operator: As there are no further questions at this time, I’d like to hand the conference back to management for closing remarks.
Jeremy Ji: Thank you. Thank you all again for joining us. A replay of today’s call will be available on our IR website shortly, followed by a transcript when ready. If you have any additional questions, please feel free to e-mail us at ir.atrenew.com. Have a nice day.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
