Smart Share Global Limited

Hello, and thank you for standing by for Energy Monster's 2021 Second Quarter Earnings Conference Call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Hanson Hsu. Please go ahead.

Thank you. Welcome to our 2021 second quarter earnings conference call. Joining me on the call today are Mars Tsai, Energy Monsters Chairman and CEO, and Maria Xin, Chief Financial Officer. For today's agenda, Managed Team will discuss business updates, operation highlights, and financial performance for the second quarter of 2021. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call, as we will be making forward-looking statements. Also, this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this call are in RMB. I would now like to turn the call over to our chairman and CEO, Mark Tai, for the business and operation highlights.

Thank you, Hanson. Good day, everyone. Welcome to our 2021 second quarter earnings call. We are so pleased to announce the solid second quarter results with revenue growing 52.9% year over year, which is above the upper end of our previous guidance range. During the second quarter, the outperformance of certain regions such as Eastern China and the rapid expansion of our POI coverage positively contributed to our growth, while the impact of COVID weighed down our growth for other regions. Despite facing these external factors, we are committed to remaining focused on our long-term strategies of providing best-in-class services and a value proposition to our users location partners, and network partners. The scale of our mobile device charging service network also expanded quickly during the quarter, with POIs growing 55,000 to reach 771,000, and number of power banks in circulation growing by 390,000 to reach 6 million by the end of the second quarter. As a result of continued POI and power bank expansion, we were able to reinforce our leadership and blow our market share to 35.2% within the mobile device charging service industry during the first half of 2021. We continue to see multiple drivers propelling forward the fast-growing mobile device charging service industry. industry penetration rate of potential POIs remains low. Opportunities in terms of increasing penetration across different types of POIs for both existing higher and lower tier cities continue to be core drivers. Second, there continues to be large number of counties that are unpenetrated for mobile device charging service. During the quarter, we newly add up 29 new counties, extending our coverage to over 1,600 counties or county-level cities as of the end of quarter out of the 2,846 total in China. This means there continues to be significant opportunities in expanding to uncovered regions across China. Lastly, our service bring convenience to our users across China by relieving their low battery anxiety. Compared to other services, mobile device charging service has high purchase frequency and user thickness. During the second quarter, we acquired more than 19 million newly registered users, reaching to approximately 255 million cumulative registered users. of the end of the second quarter, reflecting that there continues to be increasing demand for the service and that there are still a large number of users who are in need but have yet to try our service. In the future, as the size of our network continues to grow through increased penetration, we as number one player in the industry is poised to better capture the benefits of network effect in attracting more users. Now, despite our growth, we continue to experience headwinds from outbreaks of COVID. In the second quarter, outbreaks in southern China and especially within the Guangdong province resulted in a significant revenue drop, upwards to a 70% to 80% decline in the impacted regions due to restrictions that required the closing of certain stores and it resulted in decreased food traffic. We estimate that total impact of outbreak in southern China resulted in a 20 to 30 million RMB decline in revenue during the second quarter. The Guangdong COVID outbreak was eventually controlled and our revenue has made a strong recovery starting late July. We may continue to experience headwinds from COVID outbreaks, but based on the historical numbers, we expect the impact to be short-term in nature. To reduce the impact of the COVID outbreaks on our operations, we implemented measures to increase our recovery speed from external events such as COVID by focusing on reallocating our cabinets from less utilized POIs to mid to higher tier POIs. or chain stores in good quality. In the future, we will continue leveraging our operational expertise to reduce the impact of external events on our operations and execute measures that will help us increase our market share during these events. Now, let me walk you through our core strategies in strengthening our competitive advantages, expanding coverage, and exploring new initiatives for the quarter. efficiency has always been the hallmark of EnergyMonster that differentiated us from our peers within the industry. Last year, the competitive landscape changed significantly due to the initial impact of COVID. The fast-growing mobile device charging service industry also attracted the interest of major companies. We meanwhile continue to focus on our core operating principles of efficient growth, and more aggressively competing for mid- to higher-tier POIs. Our ability to more accurately assess the revenue potential of POIs, offering correct revenue-sharing policies that result in positive economics for the company, managing our vast underground business development team, and making sure that we abide to the company's operating principles. and setting the correct economic incentives for these business development personnel that correctly align their interests with the company's are some of our core competitive advantages. This is why we were able to achieve industry-unique economic profile after COVID last year, while our competitors were primarily all loss-making. This difference in unique economic profile has allowed us to more quickly and aggressively develop our network effect. We continue to dynamically balance growth and operational efficiency. We remain committed to our principle of individually accessing each POI based on their economic profiles. Despite the shift in the competitive landscape in the recent years, We believe our competitive advantage in network effect and also operational efficiency are being strengthened as our market share continues to grow during the first half of 2021. Our best-in-class service for our users in the form of high-quality hardware, an easy-to-use and return service, and a clear value proposition to our location partners in terms of shift responding to the business development team and customized cabinet and power banks are key differentiating advantages of EnergyMonster. Going forward, we will leverage these advantages to more efficiently expand into POIs, acquire new users, and to further differentiate ourselves from peers within the industry. Now, I would love to talk about our expanding coverage. The industry continues to be fast growing, The POI coverage of the industry still remain low with continued opportunities across the board in higher and lower tier cities and POI types as well. For direct, we expanded our business development team by 400 people during the quarter in anticipation of the market potential. Our business development team has actively expanded to obtain more mid- to higher-tier POIs. On the KA front, we had great success in signing off new accounts during the quarter, like Adjison Ramen, Sweet7, and UME. Our ability to offer a comprehensive package and our ability to deliver high-quality service to KAs has allowed us to sign these accounts despite not offering the highest revenue sharing policy. For our network partner model, although we are also leading within the industry through this model, we continue to identify and recruit high-quality network partners. We are able to continue attracting these partners during our market leading position as well as due to the full suite of support and training that we offer them when they work with us. The network campaign that we launched in the first quarter of 2021 that is tailored to help us acquire additional high potential network partners to our network. This campaign gives us network partner more room to quickly reach scale and to see results earlier which further aligns interest between our network partners and us. Our sustained investment and commitment to expanding our network partner model will allow us to better capture the growth of the industry by strengthening the coverage of lower tier cities and solidifying our network partner model. As a result of our effort in both the direct and network partner models, we were able to quickly expand our PY and power bank counts during the quarter. This has helped us attract more customers to EnergyMonster. We were able to acquire 19 million newly registered users during the quarter, reaching 255 million registered users in all. In the future, we believe the increase in our business development team and network partners in conjunction with our industry-leading efficiency will allow us to accelerate the benefits of our network effect advantage. and to further differentiate EnergyMonster within the mobile device charging service industry. Lastly, I would like to touch up on our new initiatives. We continue to be in the testing phase for our first consumer product brand lineup and expect a full launch by end of this year, the peak season of FIJO. While leveraging EnergyMonster's massive online and offline networks, consisting of over 250 million unique users and 771,000 POIs across all province of China. We can more quickly scale consumer products than traditional brands. On the other hand, we continue to explore other IoT and service industry that we leverage and extend our existing networks. Going forward, we believe that our current setup of network will give us a unique set of advantages in incubating new initiatives from EnergyMonster. So in conclusion, our core mobile device charging service continues to grow quickly on the back of our expanding network effect and the growth of the industry. Even though the competitive landscape has shifted during the last two years, we remain committed to doing the right thing, and that is to dynamically balance growth and operational efficiency based on market conditions. This difference in philosophy has differentiated us from our peers in the past and will continue to do so in the future as we form stronger competitive advantage around our core business. Eventually, controls and our revenue have made a strong recovery So let's see, this is a strong recovery after the outbreak of Guangdong province of COVID. We look into the third quarter. We still continue to see headwinds that traditionally have been the peak quarter of the year. The recent COVID outbreak in Jiangsu province, as well as in a number of cities across the country, and weather-induced problems have all negatively impacted our third quarter performance. Since the outbreak, we have seen a gradual recovery, but have not yet returned to normalized activity levels. We also continue to see the recovery is set back by continual regional outbreaks across the country. Going forward, we may continue to face impacts from small-scale regional resurgence of COVID in the future, but we believe these are short-term impacts. and will not impact our long-term competitive advantage in network effect and operational efficiency. Thank you. I will now turn the call over to Maria Xin, our CFO, for the financial highlights.