Smart Share Global Limited

Hello, and thank you for standing by for Energy Monster's 2023 first quarter earnings conference call. At this time, all participants are in a listen-only mode. 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, Director of Investor Relations, Hanson Shi. Please go ahead.

Thank you. Welcome to our 2023 first quarter earnings conference call. Joining me on the call today are Mark Tsai, EnergyMonster's chairman and chief executive officer, and Maria Jin, chief financial officer. For today's agenda, management will discuss business updates, operation highlights, and financial performance for the first quarter of 2023. Before we continue, I refer you to our safe harbor statement, the earnings press release, which applies to this call, as we will make 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 conference call are in RMB. I would now like to turn the call over to our Chairman and Chief Executive Officer, Mark Tsai, for the business and operation highlights.

Thank you, Hanson. Good day, everyone. Welcome to our 2023 first quarter earnings call. We are delighted to announce a strong 2023 first quarter result with both revenues and possibilities making strong recoveries, both on a year-over-year and a quarter-over-quarter basis. Revenues increased 11.6% year-over-year as the challenges that impact the mobile device charging service industry in the past few years subsides. The rapid recovery of the food traffic is clear throughout the first quarter. In the months of January, February, and March of 2023, our mobile device charging service GMB increased by 3%, 14%, and 34%, respectively. driven by the sequential recovery in revenue per power bank. By March, we believe that the vast majority of the impact from COVID on offline food traffic has recovered, making the official turning point as we head back to normalization. In the first quarter of this year, mobile device charging service, GMB, increased by 16% year over year. and 35% quarter-over-quarter. These recovery towards normalization are significant and stem from drivers across the board. Recovery can be seen across all city tiers and all POI types during the first quarter. First-tier cities saw a year-over-year growth in GMB of 24%, while all the rest of other city tiers, 15%. In terms of POI types, GMV of retail locations, restaurants, and transportation hubs increased by 25%, 19%, and 44% year over year, respectively. This robust growth across the board reflects the recovery in the industry, driven by the restoration of food traffic as well as our team's dedication to excellence in increasing Energy Monsters coverage. As the impact of pandemic decreases, our profitability has also made a significant recovery. The recovery in revenue allows us to reach a scale that can better cover fixed costs. Our non-GAAP net profit for the quarter was $17.1 million. which is the first time we have reached probability since the third quarter of 2021. This is a significant improvement compared to a loss of the same period last year of nearly $90 million and $327.2 million last quarter. We believe that as offline food traffic continues to rebound, our revenue will continue to normalize as efficiency of our cabinets and power bank increases. Our profitability will in turn also gradually return to normal levels. We believe that this positive trend in the recovery of our profitability will continue to make shape going into the rest of 2023. We are also pleased to report that we continue to maintain a strong cash flow with operating cash flow being positive at $238.6 million for the first quarter of 2023. We are able to continue to grow our cash and cash equivalent balances. The strength in our balance sheet provides us with financial stability necessary to capture the growth of the industry, as well as opportunistically expanding to new initiatives that can leverage EnergyMonster's advantages of operational and technological expertise. Our financial strength coming out of the challenges in the past few years is also a testament to our team's strategic planning and disciplined execution. During the quarter, we remain committed to expanding our coverage and improving efficiency to drive growth and achieve our strategic goals Both of these initiatives are fundamental aspects of our core belief in effective growth, which balances speed with quality. For our network partner model, we will leverage our brand and partner-oriented values to attract high-quality network partners and provide the necessary tools and support to unlock their growth potential. For our direct model, Our ability to acquire and provide high quality service tailored to KAs differentiates EnergyMonster within the industry. We also continue to optimize our resources and streamline our operations to position ourselves to lead the industry in terms of efficiency. Now, let me walk you through our key initiatives in coverage, expansion, and efficiency improvements in greater details. First is our continuous efforts in expanding our coverage so that more users can access our mobile device charging service. We are proud to announce that the number of POIs has exceeded 1 million for the very first time. This is a significant milestone that reflects our ability to continue expanding the base of our operation. Compared to the end of 2020 and 2021, our POI increased by 51% and 18% respectively. In addition to the number of the POIs, we are also expanding the area where our service is available. During the first quarter of this year, we added 31 new counties, bringing the total number of counties and county-level regions to over 1,900. At the same time, we are also increasing the diversification of our POI mix and addition to the increase in areas. New locations such as those in office buildings, medical facilities, and public spaces further cement our network coverage, allowing us to attract more new users and improving the experience of existing ones. This expansion of coverage is a reflection of our commitment to providing convenient and accessible charging solutions to our users regardless of their location. Our user base continues to grow as well in accordance with the increase in our POI coverage. During the first quarter, we added 13.5 million in cumulative registered users, bringing the total cumulative registered users to 347.2 million. as of the end of the first quarter. The 16% year-over-year increase in cumulative registered users continues to clearly indicate that the demand for our service has not yet been fully met. New POIs continue to attract new users that were previously unable to access our service. We believe that as we continue to expand our POI network coverage in more areas and location types, Our reputation as the number one mobile device charging service provider will allow us to effectively increase our user base and better meet the demand of users for our service. In the first quarter of this year, we made an adjustment of our PYs under direct model as the offline food traffic in China continues to normalize. Going forward, our direct model BD personnel we have put more emphasis on expanding into high traffic locations that meet our standards. For national and regional KAs, our KA and business development team continues to sign new brands with higher levels of efficiency compared to industry peers that solely leverage the network partner model. As a result, we continue to sign large number of POIs that belongs to chain stores operating in China during the first quarter of this year. The acquisition of national and regional KAs continue to be an advantage for the company. Now for the network partner model, it continues to be the core driver of growth in POI count during the quarter. During the first quarter of 2023, we had 7,700 active network partners This is an increase of 1,100 compared to the previous quarter and 6,600 compared to the same period last year. Our network partner team continues to train our partners by providing the know-hows and data needed to successfully run their operation. Looking forward, the combination of continuously acquiring new network partners alongside with unlocking the growth of existing ones, will serve as the core drivers of growth under the network partner model. Overall, our POI composition and scale has changed when compared to the end of 2019. Our POIs are more diversified and expansive as ever, as our service is available to more users across more regions and location types We remain committed to providing our users with the best possible experience, meaning that our service has to be more readily available in more locations. That's why we will continue expanding our coverage. With the support of our ever-growing network partners, our coverage will become even more diversified in the future. Our direct model team continues to play a key role in placing our cabinet into high traffic and high yielding locations. The improvements in our POI composition and scale is the result of our team's effort to adapt to the changes in the market. We believe our team's dedication will enable us to further expand our coverage and our market share. Efficiency is the other critical aspect of our business. and we are proud to report that we have made significant progress in this area. We are happy to announce that we have once again regained our profitability for the first time since the third quarter of 2021, while a significant part was due to the increase in revenue efficiency of our cabinets and power banks. As a result of normalization of offline traffic, which helped us reach a scale that can better cover our fixed costs and expenses. The initiatives we have taken last year to reduce cost, improve efficiency are also bearing fruit. We have taken steps to reduce fixed costs, optimizing our contract structure to ensure that we are operating as efficiently as possible during the pandemic. As a result, The number of entry fee type contracts decreased by more than 60% in the first quarter when compared to the same period last year, with entry fee contracts accounting for 15% of incentive fees for location partners, down from 24% in the same period last year. Pure revenue sharing contracts account for over 60% of total direct model contracts. in the first quarter, up from about 40% in the same period last year. The cost of our cabinets that we launched into production last year is also starting to help the reduction in depreciation. That's how we are able to achieve a decline in cost of revenues, while our revenues have a significant recovery in the first quarter. On the operational side, the efficiencies of our BD personnel also continue to make progress. The number of POIs managed per BD personnel continues to improve. In the first quarter, the ratio reached about 160, increasing from about 140 the same period last year. The efficiency of our network partner team is similarly reaching higher levels of efficiency. We are also investing in the future by designing a new generation of cabinets to continuously improve our competitiveness. Our system and risk control systems are being upgraded, ensuring that we are at the forefront of technological innovation, able to provide our users with the best possible experience. As the number of network partners increases, We continue to improve their efficiency and corresponding risk control measures to provide long-term efficiency. We believe that these investments in the future will enable us to maintain our competitive advantage and continue driving growth and profitability in the years to come. We are proud of the progress we have made improving efficiency, reducing cost, and investing in the future. We remain committed to maximizing efficiency and driving sustainable growth and profitability while also providing our users with the best possible experience. As we look ahead to the rest of this year, we are optimistic about the future and confident in our ability to continue driving growth and profitability. The first quarter of 2023 marked the beginning of the recovery in offline food traffic. We have delivered a strong recovery trend in terms of financial, both in terms of revenue growth and profitability, even during the recovery phase. The first quarter's recovery trend will continue as we head back towards full normalization during the second quarter. In April, mobile device charging service GMV increased by 64% year-over-year. and the number is 39% in May. During the Labor Day holiday, we set a new historical high with daily GMB averaging 18 million during the five days and peaking at 21 million on May the 1st. We are optimistic about the overall recovery during the second quarter of this year. In conclusion, We are very proud of the progress we have made in driving growth and profitability, and we are optimistic about the future as well. We were able to achieve significant recovery in terms of revenue and profits during the first quarter. The second one looks even more promising. We believe that our team's dedication to our company's value and management team's vision on the industry has allowed us to navigate our out of last year's challenge more efficient than ever. We are also pleased to see that EnergyMonster's market share has reached new heights as of the end of 2022 based on third party reports and continue to lead the industry in terms of market share. We have been cementing our position in China's mobile device charging service industry in the past years and will continue to do so going forward. Looking ahead to the second quarter and going into the future, our two main priorities continue to be expanding our network coverage and improving our efficiency. Through a combination of network partners and direct models, we are confident that we can continue to expand our market share, given our advantage in economies of scale The benefits of our network effect in helping us more efficiently acquire new users and POIs give us a competitive edge over our peers. The execution of our strategies in coverage expansion and efficiency improvement in combination with our strong balance sheet position to best capture the mobile device charging service industry. Thank you very much. I'll now turn the call over to Maria Xin, our Chief Financial Officer, for the financial highlights.