This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk09: 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.
spk05: 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.
spk08: 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.
spk01: Thank you, Mark. Now let me walk you through the first quarter 2023 financial results in greater detail. For the first quarter of 2023, revenues were $822.8 million, representing a 11.6% year-over-year increase. Revenues from mobile device charging business were up 10.7% to 796.5 million and accounted for 96.6% of our total revenues for the quarter. The increase was primarily due to the general recovery in offline food traffic in China during the quarter. Revenues from power bank sales were up 43.7% year-on-year to 18.6 million and accounted for 2.3% of our total revenues for the quarter. The increase was primarily due to the general recovery in offline food traffic in China during the quarter. Other revenues were up 52.8% year-on-year to 9.8 million and accounted for 1.2% of our total revenues. The increase was primarily attributable to the increase in advertisement efficiency and new business initiatives. Cost of revenue was down 0.1% year-to-year to $127.4 million for the fourth quarter of 2023. The decrease was primarily due to the decrease in maintenance costs and disposal costs. which was partially offset by the increase in depreciation and the cost of power banks sold. Growth profit was up 14.1% year-over-year to $695.4 million for the first quarter of 2023. Operating expenses for the first quarter of 2023 were $711.2 million, up 0.3% year-over-year. Excluding share-based compensation, non-GAAP operating expenses were $704.9 million, representing a year-over-year increase of 0.4%. Research and development expenses for the first quarter of 2023 were $21.4 million, down 20.8% year-over-year, The increase was primarily due to the decrease in personnel-related expenses. Sales and marketing expenses for the first quarter of 2023 were $665.3 million, up 0.8% year-on-year. The increase was primarily due to the increase in incentive fees paid to network partners, which was partially offset by the decrease in entry fees and incentive fees paid to the location partners and the personnel-related expenses. General and administrative expenses were $26.8 million in the first quarter of 2023, down 2.2% year-on-year. The decrease was primarily due to the general increase in efficiency of our operation. Loss from operation were $15.8 million and operating margin for the first quarter of 2023 were negative 1.9% compared to negative 13.5% in the same period last year. Net income was $10.8 million in the first quarter of 2023 compared to net loss of 96.4 million in the same period last year. Net margin for the first quarter of 2023 was 1.3% compared to a net margin of negative 13.1% in the same period last year. Non-GAAP net income, which includes share-based compensation expenses, was 17.1 million in the first quarter of 2023 compared to a non-GAAP net loss of $89.7 million in the same period last year. As of March 31, 2023, the company had cash and the cash equivalent restricted cash and short-term investments of $3.1 billion. Cash flow generated from operations for the first quarter of 2023 was 238.6 million. Capital expenditure for the first quarter of 2023 was 170.3 million. Thank you for your listening. We are now ready for your questions. Operator?
spk09: The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Vicky Wei with Citi. Please go ahead.
spk02: Good evening, Madison. Thanks for taking my question. So I have one small question. So given the current positive recovery trend that you have seen, would you please provide some color about the outlook for the second quarter and for the whole year, for example, in terms of revenue and margin profile? Thank you.
spk01: Thanks for your questions. The first quarter's recovery trend will continue as we head back towards normalization during the second quarter of 2023. In April, mobile device charging service GMV increased by 64% year-on-year and 39% in May. We are also able to reach new historical highs during the Labor Day Festival in early May. That's why we are optimistic about the overall recovery during the second quarter of 2023, given the current trend. In terms of our net margins, we have regained probability this quarter. We are confident that going forward, we will be profitable for the full year 2023 based on the current trend. Thanks.
spk09: Thank you. Your next question comes from Violet Yi with China Renaissance. Please go ahead.
spk10: Hi, management. Thanks for taking my question and congratulations on the recovery for the quarter. So I have a question on the POI count for the quarter. It seems like the overall growth in POI is lower than previous quarter. Can management share the exact reason for the lower than usual growth? and possibly provide any guidance on POI target by the end of the year? Thanks.
spk08: Thank you for your question. It's a very good one. Actually, this quarter is a bit special because it is the first quarter coming out of the COVID control. Because of the lower than usual food traffic in China in the past years, a number of locations under the direct model were unable to meet the revenue standards of our operations. before COVID. That's why in the first quarter of this year, we made an adjustment of our POIs under the direct model as the offline food traffic in China continues to normalize. We actually removed approximately 100,000 POIs under the direct model that are considered in our system to be underperforming during the normal food traffic levels. This move has lowered the number of POIs under the direct model as of the end of the first quarter of this year. However, we believe that this adjustment is really needed as we fully emerge from the impact of COVID and position ourselves for the future. As for the POI targets for the end of the year, we do not offer any specific guidance on the POI. given that our approach to POIs is market-driven, meaning that we expand into POIs only if they fit the standards of the company. On the other side, I will see something very positive. Even with the lower than usual growth of POIs, we see the demand of users is strong. We have 1 million POIs and also we acquired about 13.5 million accumulated users, registered users for the first quarter. That brings number up to 347.2 million as of the end of the first quarter. So we see that this adjustment of the POI will make the direct model more healthy And also, given the POI location expansion, we see more users are coming to the services, which also shows a very strong recovery of the demand in the market.
spk07: Thank you very much for the question.
spk09: Thank you. Your next question comes from Victor Tang with Goldman Sachs. Please go ahead.
spk06: Thank you, management. Can management provide a bit more insight on the competitive landscape in light of the recovery in the industry? Are we seeing more competition? I also have a quick question on the POI for network partner model. Is there any growing trends of network partner model contributing going forward? Thank you.
spk08: Thanks a lot for the great question. From our perspective, the competition is actually a lot less intense in the first quarter, even after the general recovery. This is a bit counter-intuitive, but the general landscape of the industry has changed a lot in the past few years. Let's see, before COVID, a number of our peers in the industry and energy monster relied heavily on the direct model. Competition tends to be higher where all of the players within the industry are expanding using the direct model. However, during the COVID, most of our competitors shift almost completely to network and partner model while we maintained our strong direct model capabilities. The current industry landscape is a lot different because of the general shift towards the network partner because network partners are profit driven. That's why we are not seeing an uptick in incentive fees. for the new signings in the first quarter. So I see the competitive landscape is not as strong as usual before COVID. As for a question on the network partner model, our network partner model continues to be the main driver of the growth of the POI count during the first quarter, mainly because of the increase in network partners count in the past year. Because of this significant increase, one of our main goals this quarter and this year actually is to work alongside our network partners to operationally support them so that they are able to grow alongside us. At the same time, we expect the number of POIs operated under the network partner model to continuously grow. But the increase in percentage of POI managed under the network partner model this quarter is mainly because of the adjustment in our direct model POI portfolio. Going forward, we will continue leveraging our both models to expand our network coverage and further increase our market share within the industry. Thanks a lot.
spk09: We are now approaching the end of the conference call. I will now turn the call over to Energy Monster's CFO, Maria Shin, for closing remarks.
spk01: Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support and we look forward to speaking with you in the coming months. Thank you.
spk09: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. Thank you. Thank you. you Bye. Thank you. 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.
spk05: 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.
spk08: 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 the 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'll 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.
spk01: Thank you, Mark. Now let me walk you through the first quarter 2023 financial results in greater detail. For the first quarter of 2023, revenues were $822.8 million, representing a 11.6% year-over-year increase. Revenues from mobile device charging business were up 10.7% to 796.5 million and accounted for 96.6% of our total revenues for the quarter. The increase was primarily due to the general recovery in offline food traffic in China during the quarter. Revenues from power bank sales were up 43.7% year-on-year to 18.6 million and accounted for 2.3% of our total revenues for the quarter. The increase was primarily due to the general recovery in offline food traffic in China during the quarter. Other revenues were up 52.8% year-on-year to 9.8 million and accounted for 1.2% of our total revenues. The increase was primarily attributable to the increase in advertisement efficiency and the new business initiatives. Cost of revenue was down 0.1% year-to-year to $127.4 million for the fourth quarter of 2023. The decrease was primarily due to the decrease in maintenance costs and the disposal costs. which was partially offset by the increase in depreciation and the cost of power banks sold. Growth profit was up 14.1% year-over-year to $695.4 million for the first quarter of 2023. Operating expenses for the first quarter of 2023 were $711.2 million, up 0.3% year-over-year. Excluding share-based compensation, non-GAAP operating expenses were $704.9 million, representing a year-over-year increase of 0.4%. Research and development expenses for the first quarter of 2023 were $21.4 million, down 20.8% year-over-year, The increase was primarily due to the decrease in personnel-related expenses. Sales and marketing expenses for the first quarter of 2023 were $665.3 million, up 0.8% year-on-year. The increase was primarily due to the increase in incentive fees paid to network partners, which was partially offset by the decrease in entry fees and incentive fees paid to the location partners and the personnel-related expenses. General and administrative expenses were $26.8 million in the first quarter of 2023, down 2.2% year-on-year. The decrease was primarily due to the general increase in efficiency of our operation. Loss from operation were $15.8 million and operating margin for the first quarter of 2023 were negative 1.9% compared to negative 13.5% in the same period last year. Net income was $10.8 million in the first quarter of 2023 compared to net loss of 96.4 million in the same period last year. Net margin for the first quarter of 2023 was 1.3% compared to a net margin of negative 13.1% in the same period last year. Non-GAAP net income, which includes share-based compensation expenses, was 17.1 million in the first quarter of 2023 compared to a non-GAAP net loss of $89.7 million in the same period last year. As of March 31, 2023, the company had cash and the cash equivalent restricted cash and short-term investments of $3.1 billion. Cash flow generated from operations for the first quarter of 2023 was 238.6 million. Capital expenditure for the first quarter of 2023 was 170.3 million. Thank you for your listening. We are now ready for your questions. Operator?
spk09: The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Vicky Wei with Citi. Please go ahead.
spk02: Good evening, Madison. Thanks for taking my question. So I have one small question. So given the current positive recovery trend that you have seen, would you please provide some color about the outlook for the second quarter and for the whole year, for example, in terms of revenue and margin profile? Thank you.
spk01: Thanks for your questions. The first quarter's recovery trend will continue as we head back towards normalization during the second quarter of 2023. In April, mobile device charging service GMV increased by 64% year-on-year and 39% in May. We are also able to reach new historical highs during the Labor Day Festival in early May. That's why we are optimistic about the overall recovery during the second quarter of 2023, given the current trend. In terms of our net margins, we have regained probability this quarter. We are confident that going forward, we will be profitable for the full year, 2023, based on the current trend. Thanks.
spk09: Thank you. Your next question comes from Violet Yi with China Renaissance. Please go ahead.
spk10: Hi, management. Thanks for taking my question and congratulations on the recovery for the quarter. So I have a question on the POI count for the quarter. It seems like the overall growth in POI is lower than previous quarter. Can management share the exact reason for the lower than usual growth? and possibly provide any guidance on POI targets by the end of the year? Thanks.
spk08: Thank you for your question. It's a very good one. Actually, this quarter is a bit special because it is the first quarter coming out of the COVID control. Because of the lower than usual food traffic in China in the past years, a number of locations under the direct model were unable to meet the revenue standards of our operation. before COVID. That's why in the first quarter of this year, we made an adjustment of our POIs under the direct model as the offline food traffic in China continues to normalize. We actually removed approximately 100,000 POIs under the direct model that are considered in our system to be underperforming during the normal food traffic levels. This move has lowered the number of POIs under the direct model as of the end of the first quarter of this year. However, we believe that this adjustment is really needed as we fully emerge from the impact of COVID and position ourselves for the future. As for the POI targets for the end of the year, we do not offer any specific guidance on the POI. given that our approach to POIs is market-driven, meaning that we expand into POIs only if they fit the standards of the company. On the other side, I will see something very positive. Even with the lower than usual growth of POIs, we see the demand of users is strong. We have 1 million POIs and also we acquired about 13.5 million accumulated users, registered users for the first quarter. That brings number up to 347.2 million as of the end of the first quarter. So we see that this adjustment of the POI will make the direct model more healthy And also, given the POI location expansion, we see more users are coming to the services, which also shows a very strong recovery of the demand in the market.
spk07: Thank you very much for the question.
spk09: Thank you. Your next question comes from Victor Tang with Goldman Sachs. Please go ahead.
spk06: Thank you, management. Can management provide a bit more insight on the competitive landscape in light of the recovery in the industry? Are we seeing more competition? I also have a quick question on the POI for network partner model. Is there any growing trends of network partner model contributing going forward? Thank you.
spk08: Thanks a lot for the great question. From our perspective, the competition is actually a lot less intense in the first quarter, even after the general recovery. This is a bit counter-intuitive, but the general landscape of the industry has changed a lot in the past few years. Let's see, before COVID, a number of our peers in the industry and Energy Monster relied heavily on the direct model. Competition tends to be higher where all of the players within the industry are expanding using the direct model. However, during the COVID, most of our competitors shift almost completely to network and partner model while we maintained our strong direct model capabilities. The current industry landscape is a lot different because of the general shift towards the network partner because network partners are profit driven. That's why we are not seeing an uptick in incentive fees. for the new signings in the first quarter. So I see the competitive landscape is not as strong as usual before COVID. As for a question on the network partner model, our network partner model continues to be the main driver of the growth of the POI count during the first quarter, mainly because of the increase in network partners count in the past year. Because of this significant increase, one of our main goals this quarter and this year actually is to work alongside our network partners to operationally support them so that they are able to grow alongside us. At the same time, we expect the number of POIs operated under the network partner model to continuously grow. But the increase in percentage of POI managed under the network partner model this quarter is mainly because of the adjustment in our direct model POI portfolio. Going forward, we will continue leveraging our both models to expand our network coverage and further increase our market share within the industry. Thanks a lot.
spk09: We are now approaching the end of the conference call. I will now turn the call over to Energy Monster's CFO, Maria Shin, for closing remarks.
spk01: Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support and we look forward to speaking with you in the coming months. Thank you.
spk09: Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.
Disclaimer