Michael Kim

Michael Kim asked about the uptake of enhanced services across ATRenew's marketplace businesses, how a more favorable mix might impact take rates, and the recent trend in the mix of multi-category transactions.

Answer

Kerry Chen, Founder, Chairman, and CEO, explained that the PJC marketplace take rate remained stable over 6%, with slight Q3 variations due to merchant service policy adjustments and new transaction models. The PaiPai marketplace's consignment model showed initial success, driving its take rate into the high single-digit range (9%), with room for further optimization. Regarding multi-category services, Kerry Chen noted that gold recycling, a significant portion of current transaction volume, operates with a low single-digit take rate, while the second-hand luxury category's service take rate continues to exceed 10%. Future category expansion will prioritize high-value categories with greater service value and potential for higher take rates.

Michael Kim questioned the uptake of enhanced services in ATRenew's marketplace businesses, the potential impact of a favorable mix on take rates, and recent trends in multi-category transaction mix.

Answer

CEO Kerry Chen explained that the PJC marketplace take rate remained stable above 6%, with minor Q3 fluctuations due to merchant service policy adjustments and Douyin expansion. He highlighted the PaiPai marketplace's consignment model, which achieved a high single-digit take rate of 9% with further optimization potential. For multi-category services, Mr. Chen noted gold recycling's low single-digit take rate versus second-hand luxury exceeding 10%, indicating a future focus on high-value categories for higher take rates.

Michael Kim of Zacks Small Cap Research asked about supply-side trends in trade-in activity, particularly through JD.com and offline stores, focusing on volumes and product mix. He also sought an update on the impact of government subsidies and the current stage of subsidy-driven growth.

Answer

Management confirmed that smartphones remain the strongest C2B recycling category, with the JD.com partnership showing robust growth. They noted that national subsidies drove impressive double-digit growth in C2B recycling. The company also leverages brand-funded incentives for devices not eligible for national subsidies. They believe trade-ins are becoming mainstream and plan to continue expanding recycling scenarios and strengthening fulfillment capabilities.

Michael Kim from Zacks Small-Cap Research questioned the traction gained from recent initiatives to enhance the AHS Recycle brand. He also asked about the expected trend for incremental expenses or customer acquisition costs associated with these marketing efforts.

Answer

Founder, Chairman & CEO Kerry Chen stated that brand building is centered on providing best-in-class service. He detailed a new media strategy involving engaging content and geo-targeting to drive traffic to stores and online platforms, which resulted in faster growth for the AHS Mini Program and official website compared to the overall 1P business. He affirmed that the company will continue to invest in strengthening the brand to capture market share and enhance user perception.

Michael Kim requested an update on the company's capital management priorities, specifically how it balances reinvesting for growth against returning capital to shareholders through stock buybacks.

Answer

CFO Chen Chen explained that the primary goal for 2025 is reaccelerating growth, necessitating OpEx reinvestments in front-end services and brand building. He noted that emerging businesses are now profitable and require no new investment, and no significant CapEx is planned. The company will maintain a balanced approach, continuing its share repurchase program while using cash to seize industry opportunities and maximize long-term shareholder returns.

Michael Kim of Zacks Small-Cap Research asked for insights on market trends for pre-owned smartphones, focusing on transaction volumes and the tailwinds on both supply and demand sides.

Answer

Xuefeng Chen Kerry, Founder, Chairman & CEO, responded that on the supply side, cross-category trading and compliant refurbishment capabilities are key drivers. He noted that the coverage rate of compliant refurbishment has grown from single digits to meaningful double digits. On the demand side, he pointed to strong growth in direct-to-consumer (1P2C) sales, which grew 120% year-over-year, indicating that cost-effective purchasing options are gaining acceptance among consumers.

Michael Kim with Zacks Small Cap Research inquired about Beneficient's strategic vision and priorities under the new interim CEO, specifically regarding re-accelerating origination volumes and the potential impact of market volatility and management transition on customer allocation decisions. He also asked for an update on the timing for naming a permanent CEO and opportunities to rationalize the cost base, particularly corporate and other expenses.

Answer

Interim CEO James Silk outlined a strategic shift towards an incremental approach focusing on high-net-worth and ultra-high-net-worth transactions in the $5 million-$25 million range, moving away from larger foundational deals. He acknowledged the market's desire for stabilization, which the company is actively addressing, and stated that the board is evaluating the permanent CEO position as they transition from stabilization to optimization. CFO Greg Ezell noted that while cost rationalization is ongoing, future reductions in corporate and other expenses would be more modest and incremental compared to recent drastic changes.

Michael Kim of Cantor Fitzgerald inquired about the significance of the recently announced public stockholder enhancement transaction in reaccelerating ExchangeTrust activity and asked for color on the loan portfolio's underlying movements, including unrealized marks, deal flow, and distributions.

Answer

CEO and Chairman Brad Heppner explained that the capital stack enhancements provide a tangible book value that is attractive to counterparties and should accelerate closings once formally approved. CFO Gregory Ezell added that the loan portfolio was sequentially flat, with unrealized gains of 6-7% offset by distributions. Brad Heppner further noted that they are enthusiastic about the potential for more M&A and IPOs to drive future gains and realization events.

Michael Kim of Imperial Capital, LLC inquired about demand trends and loan originations following the launch of the MAPS pricing system, updates on new business initiatives like alternative securities lending, and the potential impact of the new political administration on capital needs and liquidity.

Answer

CEO Brad Heppner explained that demand for liquidity remains strong and the MAPS system is expected to significantly reduce transaction times to as little as 15 days. He noted that while Q2 closings were limited pending a share authorization, the marketing pipeline is showing 'encouraging green shoots.' Heppner also detailed plans to launch a lending platform in the first half of 2025 and expressed optimism that a new, more business-friendly economic environment will ultimately drive near-term demand for Beneficient's liquidity solutions.

Michael Kim inquired about the performance trajectory of High Tide's newer Canna Cabana stores, specifically if they are achieving faster sales ramp-up and payback periods compared to prior cycles, driven by brand strength and strategic location choices. He also sought additional details on broader European expansion opportunities beyond Germany.

Answer

Raj Grover, Founder, CEO & President of High Tide, confirmed that new Canna Cabana stores are ramping up nicely and faster than anticipated, attributing this to strong brand recognition and strategic high-quality locations. Regarding European expansion, Mr. Grover stated that while immediate focus is on Remexian integration, High Tide continues to monitor other EU countries and plans to enter them when compelling commercial opportunities arise, emphasizing a 'walk before we run' approach.

Michael Kim inquired about the performance of High Tide's newer stores, specifically their ramp-up speed and payback periods, given the company's scale and focus on high-traffic locations. He also sought additional insights into European opportunities beyond Germany, particularly regarding potential similar investments or partnerships.

Answer

Raj Grover (President, CEO, High Tide) expressed that new stores are ramping up faster than anticipated due to the strong Canna Cabana brand and strategic high-quality locations. He confirmed global ambitions for other EU markets but emphasized the immediate focus on excelling with Remexian in Germany, with plans to monitor and enter other countries when compelling commercial opportunities arise.

Michael Kim from Zacks Small Cap Research asked about the performance of High Tide's newer stores, specifically regarding the ramp-up of sales and payback periods, and whether they are getting up to speed quicker due to the company's scale, brand, and focus on high-traffic locations. He also sought incremental color on opportunities across Europe, particularly the potential for similar investments or partnerships beyond the Remexian integration.

Answer

Raj Grover, President and CEO of High Tide, expressed pleasant surprise that new stores are ramping up faster than anticipated, attributing this to the powerful Canna Cabana brand and strategic high-quality locations. He noted that customers are increasingly seeking 'Canna Cabana near me.' Regarding Europe, Grover stated that while global ambitions exist, the immediate focus is on excelling with Remexian integration. However, High Tide continues to monitor other EU countries for compelling commercial opportunities for future entry.

Michael Kim of Zacks Small Cap Research asked about future growth opportunities in specialized medical practices and inquired about the M&A environment, including competition and funding capacity for potential acquisitions.

Answer

Co-CEO Stephen Snyder responded that growth opportunities lie in upselling the existing client base and expanding into new markets like critical access hospitals. Regarding M&A, Snyder described an active environment with normalized valuations, noting CareCloud is well-positioned to fund accretive tuck-in acquisitions through internal cash flow and its undrawn credit facility. He cited the recent RevenueMed deal as a prime example of their disciplined, synergistic M&A strategy.

Michael Kim from Zacks Small Cap Research asked about CareCloud's capital allocation priorities between internal reinvestment and M&A, and also inquired about specific areas for further cost efficiencies driven by AI and technology.

Answer

Co-CEO Stephen Snyder described a balanced capital allocation approach, prioritizing reinvestment in the AI Center of Excellence while actively pursuing disciplined, tuck-in acquisitions. He explained that future efficiencies will be driven by AI, which is already automating core RCM functions like denial management and payment forecasting, leveraging the company's vast transaction data for a competitive advantage.

Michael Kim inquired about the strategic vision for the newly acquired pop toy company, LETZVAN, asking how QuantaSing plans to leverage its marketing expertise for growth and requesting details on LETZVAN's current sales mix by product, IP, channel, and geography.

Answer

Founder, Chairman & CEO Peng Li outlined a five-pillar strategy for LETZVAN, focusing on IP incubation, product innovation, influence expansion, supply chain optimization, and an omni-channel growth strategy. CFO & Director Dong Xie added that the immediate focus is on two to three core IPs, expanding through retail partnerships and direct channels, with Mainland China as the primary market while initiating expansion into Southeast Asia.

Michael Kim of JPMorgan Chase & Co. asked about the current contribution of the 'silver demographic' to the user base and the specific strategies to accelerate sales to this group. He also inquired about the outlook for maintaining profitability, specifically the adjusted net margin, during the company's ongoing business transition.

Answer

CEO Peng Li detailed a multi-pronged strategy for the growing 'silver economy' sector, including tailored health courses, related wellness products, specialized study tours, and community engagement to drive sales. CFO Dong Xie addressed profitability, acknowledging that short-term investments might cause margin volatility but expressed confidence that a disciplined cost approach, operational efficiency, and business diversification would support long-term margin stability as new segments mature.

Michael Kim of Cantor Fitzgerald asked about the impact of China's macroeconomic environment on the business and the expected evolution of the customer acquisition cost (CAC) to lifetime value (LTV) ratio during the strategic pivot to the silver economy.

Answer

CEO Peng Li stated that government support for the 'silver economy' creates a positive tailwind, as seniors have stable consumption patterns that can weather macro shifts. CFO Dong Xie added that they expect a favorable LTV to CAC ratio, driven by leveraging their existing user base for new private label products, which reduces acquisition costs and increases potential for repeat purchases.

Michael Kim, filling in for Tom Kerr, asked if any European markets besides Germany were showing promise for the CytoSorb device and requested an update on other products in development beyond CytoSorb and DrugSorb ATR.

Answer

CEO Dr. Phillip Chan stated that the company is making good progress in the 'Big 5' European markets, including the U.K., Italy, and Spain/Portugal, through a mix of direct sales and distributor partnerships. Regarding the product pipeline, Dr. Chan emphasized that the company is 'uniquely and singularly focused' on getting DrugSorb ATR to the finish line, and while other technologies like HemoDefend-BGA exist, the current priority is DrugSorb ATR.

Michael Kim of Zacks Small-Cap Research asked how the incremental $75-$100 million in cost savings from pausing PRAME and CD70 development would affect the company's profitability timeline. He also inquired about synergies from the TECELRA experience that could accelerate the lete-cel launch and approval.

Answer

Executive Gavin Hilary Wood stated the savings will help accelerate the path to profitability, though it is one of several factors. Executive Dennis Williams noted that learnings from the TECELRA BLA are being applied to lete-cel, which is eligible for an 8-month priority review. Executive Cintia Piccina added that commercial synergies are significant, with an established testing paradigm, ATC network, and a commercial team with 100% customer overlap.

Michael Kim asked for the underlying drivers of the $400 million peak sales forecast, which he calculated as a 50-55% penetration rate. He also asked if the expense guidance includes funding from Galapagos and for an update on the partnered trial timeline.

Answer

Executive Cintia Piccina explained the peak sales forecast is based on patient eligibility from biomarker expression, access rates, and manufacturing success rates seen in trials. CEO Adrian Rawcliffe clarified the expense guidance does not include offsetting income from partnerships like Galapagos and reiterated the partnered trial will start 'as soon as humanly possible' with no new timeline.