Smart Share Global Limited

Hello, and thank you for standing by for Energy Monster's 2023 Third Quarter Earnings Conference Call. At this time, all participants are in 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 call, Director of Investor Relations, Hanson Shee.

Thank you. Welcome to our 2023 Third Quarter Earnings Conference Call. Joining me on the call today are Mars Tai, Energy Monsters Chairman and Chief Executive Officer, and Maria Xun, Chief Financial Officer. For today's agenda, management will discuss business updates, operation highlights, and financial performance for the third quarter of 2023. Before we continue, I refer you to our safe harbor statement in 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 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, Hans. Good day, everyone. Welcome to our 2023 third quarter earnings call. We're very pleased to announce that our operation continues to achieve new heights during the third quarter of 2023, with both mobile device charging service GMV and POI count both reaching historical high. Mobile device charging GMV increased by 18% year over year, as the progression towards normalization of offline food traffic continues its recovery trend. Performance in third quarter showcased a consistent monthly growth pattern. July marked a 16% year-over-year GND increase, followed by an 18% increase in August and a stronger 22% growth in September. The growth in GNV was particularly pronounced in higher tier cities with Shanghai, Xi'an, Chengdu, and Beijing, driving the recovery with impressive year-over-year growth of 65%, 55%, 32%, and 28% respectively. Growth in terms of POI types was all-encompassing as well with every type of POI growing year-over-year. transportation hub fueled by the surge in summer travel achieved a notable 62% year-over-year growth. Other POI types such as office buildings, family centers, banks, and government institutions exhibited robust growth with a year-over-year increase of 57%, 65%, 72%, and 75% respectively. The recovery in our GNV continues to be driven by the diversification of coverage, both in terms of city tier as well as POI types, which reiterates the adaptability of our services to diverse environments and general demand for our service across China. In terms of network expansion, we added nearly 80,000 new POIs during the third quarter of 2023, with restaurants, entertainment, and shopping hubs locations leading the growth. We were also able to onboard leading KAs in various industries as the benefit of our brand value and network effect of our operation continues to scale. This dynamic expansion reiterates our commitment to providing charging solutions across diverse locations so that more users in need of our service can more easily access our solutions. We are excited that the expansion of our network coverage is unlocking new opportunities to reach and serve a broader user base. Our accumulated registered user base expanded by 16.4 million during the third quarter. 379 million, making a 17% year-over-year increase. Mobile device charging orders increased by 9% year-over-year to over 176.5 million during the quarter, as both new and existing users continue to seek EnergyMonster for their everyday charging need. We are also continuously rebalancing our network coverage between our direct and network partner models during the third quarter. SPOIs under the network partner model and active network partner count both reached new highs. Not only were we able to effectively scale the network coverage of our operation during the third quarter, the probability of our operation is also making a recovery. Non-GAAP net income reached 55.2 million for the third quarter, increasing from 17.1 million in the first quarter and 30.1 million in the second quarter. The increasing trend is clear, and the recovery compared to the same period of last year is significant. Three consecutive quarters of profitability reflects our enduring commitment to operational efficiency despite the weaker than expected recovery of flying food traffic and consumption power. The increased scale coupled with an improvement to our profitability reflects that our commitment to our strategies in operational efficiency and the POI expansion is effective and continues to be a driver for growth and improved profitability. Now let me walk you through our key initiatives in coverage and efficiency in greater detail. First is our commitment to expanding our network where our service is available to over 2,000. The consistent growth in POI count and expansion of regional coverage indicate that there continues to untapped opportunity in the mobile device charging service market here in China. Our user acquisition efforts yielded a remarkable 16.4 million new users during the third quarter, representing a 17% year-over-year increase in terms of our cumulative registered users. The large user base is directly translating into record high number of unique users and mobile device charging orders, to more than 176 million orders for the quarter. The network effect of our operation continues to scale and become increasingly apparent. For users, they are able to see our cabinets throughout their day, cementing the Energy Monster brand as a reliable and expansive provider of mobile device charging service. During the quarter, we continue to roll out IP partnership with leading celebrities and brands for the promotion of tailored power banks, especially the one with Jay Chou's Fantasy World. This continues to be one of the differentiators that EnergyMonster excels at in terms of offering a different experience for our users. We are also seeing an increasing number of users directly opening up our mini program to find out service in their nearby locations as we solidify EnergyMonster as the go-to brand for mobile device charging service. We are also seeing a number of orders where users borrow power banks from one cabinet and returning it into another cabinet, continuously training up. suggesting that the users are more comfortable with taking the power bank with them to their next location, as there will likely be a place to return the power bank later in the day. The increased POI count will be the main driver of our ability to acquire new users across China, but at the same time, we will innovate on more ways to attract and remain more users to our service. As offline food traffic in our operation continues its recovery, we are also rebalancing the contribution by our two major models in terms of POI distribution. Our direct model team continue their strong performance in the third quarter. The network partner model under the direct model team continues to bring added layer of synergy between the two models together. This program leverages the coverage and manpower of our direct model to effectively expand our network partner model in larger cities, increasing the efficiency and coverage capabilities of each BD. Another benefit of this program is the strong execution capabilities of our direct model team can be extended for the promotion of our network partner model. allowing us to more quickly and effectively reach network partners. On the KA front, we continue to secure contracts with new chains, including supermarkets and large-scale amusement parks across China. Because our direct model team directly works with the KAs for the everyday operation of our cabinets and post-sales support, the support to our KA clients maintains its reputation as the best within the industry, given that most of our peers within the industry only has the network partner model. This is one of the key reasons why we're able to continue attracting top tier KAs within the industry, and through our service, consistently renew our contracts with them. This quarter, we adjusted our PY structure focusing on KAs and urban KAs to optimize our direct model portfolio. Going forward, our direct model will concentrate the advantage in terms of execution capabilities and ability to acquire KA accounts to focus primarily into high yielding locations in higher tier cities and KAs. Our network partner model, which continues to be the driver of our network expansion. We're primarily focused on expanding into lower-tier cities and to complement our direct model's coverage in higher-tier cities as well. During the quarter, the network partner model continues to play a pivotal role in the expansion of our POI coverage and now can constitute to approximately 65.5% of our POIs. The growth of our network partner model is driven by the combination of new network partners and the support of existing ones. In third quarter, we have over 10,000 active network partners, an increase of 1,100 from the previous quarter and 4,700 from the same period last year. Both our network partner team and our direct model program have contributed to the significant growth However, the rapid increase in network partner is only one part of the equation as we strive to continue providing our network partners with the know-how and data needed to successfully run their mobile device charging service operation. Looking forward, the combination of continuously acquiring new network partners alongside with unlocking the growth potential of the existing ones will serve as the core drivers of growth under the network partner model. Both our direct and network partner models serve as drivers of our expansion. Having the two models give us increased flexibility in terms of getting into new POI, both across different regions and POI types. In the future, we will balance the two models based on the advantage of each in order to more efficiently expand our coverage The models will fuel our expansion towards more regions and POI types, which in turn ultimately allow more users to access our product and service. The next one is efficiency. In the third quarter, our cost optimization strategies continue to bear fruit. The primary reason for the substantial reduction in sales and marketing expenses is due to the new contractual arrangement with network partners. However, the expense structure for the direct model is evolving accordingly. With pure revenue sharing, contracts comprising 85% of total signed contracts in the third quarter of this year, up from 79% in the same period last year. The reduction in fixed expenses has played a crucial role in the transition of our financials back to a positive profit. Specially, we further optimize our logistics and warehousing, reducing the warehousing expense as percentage of our revenue to reach better economics of scale for warehouse and logistic costs. We are also continually to introduce more ways to improve the quality of our cabinets and power banks by implementing improved quality assurance measures throughout both design and manufacturing processes to reduce repairment costs. These moves are all aligned with our commitment to cost efficiency and operational excellence. We also remain unswerving to being the leader in the market in terms of hardware capabilities and quality. We will be introducing newer versions of our power bank next year that features longer lifespan and increased quality too. Our investments in the next generation of hardware showcases our commitment to stay at the forefront of innovation. This not only enhances our competitive advantage but also contributes to the overall efficiency and reliability of our service, as well as improving the user experience. Also, the efficiency of our network partner team has scaled significantly in the past year. During the year, our network partner count increased by almost 90%, while our network partner team increased by only 11%. The increase in the number of network partner managed by each network partner personnel is unlocked throughout the software support as more and more tasks can be automated. As the trend towards network partner continue, we believe the operating leverage that can be achieved will be increasingly apparent. The shifting balance between the two models and the initiatives we have taken to improve operational efficiency all contribute to the improvements of our profitability during the quarter. Going forward, we remain committed to our strategy in improving operational efficiency as we continue to optimize our operating expenses and costs. Overall, third quarter was a peak season with mobile device charging service displaying strong growth and up training profitability. Operationally, our POI in terms of direct model and network partner model continue to rebalance based on their respective advantages. The direct model will more focus on high yield locations, while network partner will complement the coverage. The two models continue to differentiate ourselves from market peers as they all allow for increased flexibility and execution. Our roadmap for the fourth quarter underscores our commitment to expanding our coverage, namely through increasing network partner count and support, strengthening key account acquisition, and enhancing our POI composition. We will also continue to reduce fixed expenses and optimize variable expenses and costs, and drive the increase in efficiency of our teams by introducing more automated tools. These will all help us spearhead the standards of operating efficiency within the market. Looking ahead in the fourth quarter, the consumption power remains soft although there continue to be signs of recovery in progress. GMV increased by 30% year-over-year during October and 32% in the first three weeks of November. Despite these challenges, our unwavering commitment to our strategic pillars remains our guiding force. In conclusion, EnergyMonster stands at the cusp of sustained growth with our mobile device charging service continuously, reaching new operating milestones and general recovery and profitability in progress. Our strong cash position and robust cash flow serve as the back rock for driving the continuous growth and value for our stakeholders, and to optimistically explore new initiatives that may drive EnergyMonster to new heights. Thank you very much. I'll now turn the call over to Maria Xin, our Chief Financial Officer, for the financial highlights.