NaaS Technology Inc.

Ladies and gentlemen, thank you for standing by and welcome to the NAS First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Cynthia Tan, Senior IR Director. Thank you and please go ahead.

Thank you, operator. Hello, everyone, and welcome to NOAA's first quarter 2023 Earnings Conference Call. The committee's results were issued earlier today and are posted online. Joining me on the call today are Ms. Kathy Wong, our Chief Executive Officer, and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wong will provide an overview of our recent performance and highlight, and Mr. Wu will discuss our operating and financial results. Before we continue, I refer you to our safe harbor statement in the earnings test release, which applies to this call as we will make four looking statements. Also, please note that this call includes discussion of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, All figures mentioned during this conference call are in RMB terms. I'll now turn the call over to our CEO, Ms. Cathy Wang Yang. Cathy, please go ahead. Hello, everyone. I'm NUTS CEO, Cathy Wang. It's my pleasure to share NUTS Food Culture 2023 earnings results with all of you and to discuss our recent developments. We just celebrated the one year anniversary of NAS going public. First and foremost, I'd like to express my heartfelt gratitude to the entire team of NAS. The hard work and dedication of our team members combined with our significant first mover advantage empower us to lead the eWay charging service industry both domestically and globally, and propel the world's transition from fossil fuels to electricity. Next, I'd like to take this opportunity to briefly reveal the development of our industry and the strategies we have satisfactorily executed and will continue to pursue. the worldwide consensus on green energy transformation is undeniable. With our primary energy service transitioning from fossil fuels to clean energy, new energy technologies focused on clean and efficient solutions have become key drivers of the ongoing technological and industrial revolutions. Guided by these new carbon goals, announced in 2020, China has made remarkable progress in transforming its energy supply into a diversified and integrated clean energy system. According to an IEA report, in 2022, almost 30% of global emissions reductions came from the electrification of passenger cars in China. But according to CIC, China's anyway installed base will grow from 30.1 million in 2022 to 145 million by 2013. And the total public charging capacity will increase from 30.7 billion kilowatt-hours to 337.8 billion kilowatt-hours, growing by 11 times and 25 times with productivity. Even more excitingly, as an installed base of smart electric vehicles, smart homes, and intermittent renewable energy growth, the power grid is becoming increasingly decentralized with rising digitalization. Distributed sources of energy coupled with big data analysis and AI technology are catalyzing the change from the conventional unidirectional flow of energy in the power grid to biodirectional creating tremendous opportunities for integration. Meanwhile, the rapid development of new energy sources also presents higher requirements for the stability, consumption capacity, and the scheduling capacities of the power system. We are fortunate to be a part of this vibrant field and lead its development. And June 13, we launched our virtual power plant platform. This platform seamlessly integrates lots of charging stations, chargers, and millions of EV users nationwide into the power system by leveraging its connectivity and aggregation capabilities. While acting as a dispatch hub, the virtual power plant platform enables efficient matching of power supply and demand, fostering a more sustainable IoT ecosystem for new energy. Furthermore, we continue to invest in research and development to enhance our digital operational capabilities. our NASA Research Institute team has developed the Digital Energy Asset Management System, DIMMS. Using adaptation models and deep learning AI algorithms, DIMMS enables load forecasting and operational strategy optimization via photovoltaic power. energy storage facilities and charging stations, improving our operations and maximizing revenue. Currently, the NASA Research Institute team has submitted over 20 patent obligations for this system. When it's time to deploy DIMMs in our operations, in the second half of 2023. Recently, we have also signed an agreement to acquire an over 89% stake in Sina Power, a leading solar energy project developer in Hong Kong. Making our strategic entry into Hong Kong's distributed solar energy sector According to a report by the Electrical and Mechanical Services Department, it is established that Hong Kong's estate and commercial industrial rooftop solar energy market will expand to 875 megawatts by 2026, indicating vast market potential. Additionally, with the rapid development of EV in Hong Kong, there will be a substantial increase in demand for charger operation services. This acquisition also holds significant importance for our global business expansion, as well as facilitates our transformation towards an integrated new energy service provider. opening up broader avenues for our growth. Lastly, I'm glad to share our successful completion of an important SPO transaction on May 31, 2023. This transaction garnered significant interest from nowable investors, including Dr. Andrew Jones, the Executive Vice Chairman of New World Development Company Limited, and Hong Kong-listed CST Group. We are pleased to have their support and trust, which further validates our leading position and our promising future in the new energy charging service sector. Looking forward, we will remain focused on expanding our charging networks refining our one-stop solutions, and broadening our customer base through win-win relationships. We will also continue to innovate and drive mass adoption of sustainable business models through digitalized and intelligent solutions. We firmly believe that these strategies will keep us at the forefront of our thriving industry and help us create lasting value for our customers and partners. Now I will turn the call over to Alex, our president and CFO, for a closer look at our operating and financial performance. Thank you.

Thank you, Casey. Hello, everyone, and thank you for joining our call today. In the first quarter of 2023, we delivered solid performance amid a rapidly evolving business environment and solidified our leadership in the third-party charging service market. In the first quarter, our revenues saw a 2.5-fold growth year-over-year to reach RMB 36.2 million, driven by our progress in expanding our network and optimizing our user experience across the construction operating and upgrade stages for charging station owners. The total charging volume transacted through our network during the quarter increased by 112% year-over-year, reaching 1,023 GWh. This accounted for 21% of all charging volume completed through public chargers in China during the same period. The gross transaction value transacted through our network amounted to RMB 990.5 million in the first quarter of 2023, representing an increase of 107% year-over-year. At the same time, our total number of orders surged by 110%, from 21.2 million in the first quarter of 2022 to 44.4 million. Notably, in the first quarter, revenues from online EV charging solutions increased by 145% year over year, outpacing the total charging volume growth and GTV growth over the same period. Benefiting from greater operating leverage, our net loss margin in the first quarter declined by 383 percentage points year over year. While expanding our charging network, we're committed to providing a full suite of one-stop EV charging solutions for station owners to address their key pain points and, at the same time, enhancing our customer stickiness and create additional revenue streams. As of May 31, 2023, we have provided operational maintenance services for over 20,000 parking slots across 3,000 charging stations in 300 cities. We have launched multiple charging products specifically designed for Europe market to complement our one-stop charging solution. These include our AC wall box for EV charging at home and DC charging products for fast charging, both boosting high-quality, high-cost effectiveness innovative features, and meets the required safety standards. Let me now move to our advancements in technological infrastructure. These advancements provide insights to our strategy and operations, thus promote a more efficient, digitalized, and integrated energy system. First, we developed an AI-driven digital energy asset management system, or DEMES. It leverages charging order, traffic, economic data, and other points, as well as our large model capabilities to predict station operating conditions, charging efficiency, and resource productivity for specific sites and forecast the load on the power grid. With this system, we will be able to enhance our mobility connectivity services for station owners in customer acquisition and operational process It also allows us to augment our charging station construction services, operation services, and maintenance services with one-click evaluation for station owners. It provides a visualized, site-specific cost and return forecast for stations in different regions across China, thereby serving to enhance operations and investment returns for station owners while driving the efficiency improvement of the overall charging market. In addition, DIMMs can support a broad array of energy assets other than charging stations. It takes the scheduling optimization of PV energy storage facilities and charging stations based on cost-benefit analysis into consideration. It factors in additional income streams such as revenue from peak shaving and value fitting, ultimately improving their overall efficiency and profitability when investment decisions are being made. As Cassie mentioned, we look forward to deploying DIMMs in the second half of the year and creating incremental value and opportunities for new energy assets. Another breakthrough was the virtual power plant platform we launched on June 13th. which will be a hub for efficient coordination of power generation, the grid, and electricity users with charging stations at the center of using scenarios, and a benchmark for the large-scale implementation of virtual power plants. This platform efficiently aggregates distributed energy resources, such as EVs, charging stations, energy storage facilities, and distributed PV through the cloud, forming manageable units. With flexible management of these resources and intelligent scheduling and control, it actively participates in electricity market transactions and responds to grid scheduling needs, addressing electricity supply and demand fluctuations. Through our virtual power plant platform, we also effectively promote the orderly charging of EVs. enhance clean energy consumption, and contribute to reducing energy intensity and energy cost. Furthermore, we will leverage the virtual power plant platform to gradually build integrated charging stations with PV, energy storage, charging, and energy asset services. To round out our efforts to transform into an integrated new energy service provider, we recently entered into a definitive agreement to acquire a stake of over 89% in Sinopower HK, a leading rooftop solar energy developer in Hong Kong. Out of the 60 megawatts installed solar capacity in Hong Kong, 25 megawatts have been built by Sinopower with a reputable client base, including Hong Kong Jockey Club and Hong Kong Exchange. It has sourced and executed more than 600 projects since 2018, leveraging its strength in project sourcing, patented solar energy-related technologies, and partnership with key industry stakeholders. Banner Power is a strong strategic fit for us. Through this transaction, we will enter the distributed solar PV sector in Hong Kong, establish a strong integration with Sinopower in areas such as technology, product, capital, and market, and significantly enhance the execution and returns of solar projects. Separately, becoming part of our platform will help accelerate Sinopower's venture into EV charging business. By leveraging this integration, we aim to expand our capabilities in renewable energy and EV charging solutions globally. This deal is expected to close in June 2023, subject to customary closing conditions. Next, I will go over some of our financial results for the first quarter of 2023. In keeping with our protocols, I will address our financial highlights here and encourage you to refer to our earnings press release posted online for additional details. Our total revenues reached RMB 36.2 million in the first quarter, up 150% year-over-year. The rapid increase was mainly the result of increases in platform order volumes and a continued improvement in our operations. Our total operating costs were RMB 149.8 million in the first quarter rising by 37%. This was primarily due to our significant business expansion. Our net loss for the first quarter of 2023 was RMB 109.7 million as compared with a net loss of RMB 99.3 million for the same period of 2022. Based on the company's current and preliminary view of our business situation and market conditions, which are subject to change, we are reaffirming our guidance that full year 2023 revenues will be in the range of RMB 500 million and RMB 600 million, increasing by five to six times from 2022. To summarize, in the first quarter, We continue to cement our leadership position in the EV charging network while innovating and making technological advancements. Going forward, we will further expand our competitive position in the third-party charging services market while strengthening our virtual power plant platform and nurturing a clean, efficient, and low-carbon power system as we leverage the rising trend of new energy and EV adoption. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up your handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. Your first question comes from Megan Jin with Macquarie. Please go ahead.

Thanks very much for taking our questions. We have two questions. The first question is that would you kindly elaborate a little bit more on the acquisition of Santa Paula, especially for the synergies with our current business as well as current mainland markets? And also, in the future, what are the other acquisition directions that you're looking at? Thank you.

Thank you, Megan. This is a great question. Sinopower is a leading rooftop solar PV developer in Hong Kong. As I mentioned before, it has a super strong 32% market share in that particular market, and we believe it's a clear leader in that space. we can obviously work with Sinopower to further strengthen its capability in that space that can be underpinned by the policy of Hong Kong to strengthen the PV solar panel industry. Separately, we will also work with Sinopower to expand its capability globally As we shared in our previous earning course, NAS has planned to expand in three major markets, including Europe, Middle East, and Southeast Asia. We believe Sinopower's capability can be expanded and replicated in other markets. So once we finish the closing of the transaction, we work very closely with the founder and management of Sinopower to leverage that capability. And finally, from a charging perspective, which is the core capability of NAS, we're also working with SinoPower to build and expand that capability in Hong Kong, especially with the charging solutions in living estates. SinoPower has proved that it has the capability to work with the estate owners to build solar solutions We'll work with Sinopower to expand those capabilities into charging solutions in the United States. So we're very excited with this acquisition, and we look forward to work with the Sinopower management team.

Your next question comes from Yijun Du with CICC. Please go ahead.

Hi, this is Yijun from CICC. First of all, congratulations for our great performance in the first quarter. And I have two questions about our business. The first one is about the online charging service. So what do you think of the future change of charging service fees? Do you think the charging service fee will continue to decrease? This is the first question. And the second one is about our energy storage business. As we all know, NAS launched a series of energy storage products recently. So, would you share with us your focus for energy storage business? This is my two questions. Thank you.

Thank you, Yizhen. Thanks for your question. Let me answer this one by one. So, from a charging service perspective, obviously, I don't have the crystal ball in terms of giving the forecast for future charging service fee change. I think what we've seen now is there has been a diverse trend of service fee. We have seen, for example, nationwide, the average service fee per kilowatt hour has been hovering around 40 to 50 cents per kilowatt hour. But if you look closer, there would be quite a lot of that diversity in terms of the service fee. For example, in some stations in Beijing and Shanghai, the service fee per kilowatt hour could reach 80 cents during the busy hour. So what I believe is ultimately the service fee is a result of demand and supply. I think with the adoption of EV, with the penetration rate in some of the key cities like Shenzhen, Shanghai, hitting loss of 50%. We will see more EVs on the street, so they will demand the charging solutions. I think eventually we will see the charging service fee going higher. That trend may need a couple of years to be implemented. That's the answer for your first question. For energy storage, I think we are very, very excited about the future of energy storage, especially the energy storage in charging stations. If we take a step back and look at the overall market or overall industry, the EV charging volume only accounted for less than 1% of the overall power grid output in 2022. But it is expected in about 10 years, the charging for EV will be accounting for 5 to 10% of the overall power grid output. That would impose significant pressure on the grid itself. We can see this trend, and obviously the grid can see this trend as well. So, from a government policy perspective and from an energy system design perspective, I think there's been a clear policy encouragement in place to encourage people to build energy storage solutions in charging stations. And this works very well with our power, with our virtual power solutions that connect effectively all these IoT devices, including charging powers, energy storage solutions, and to a degree PV solutions together to form an intelligent energy management system. What we've seen is in provinces like Zhejiang, Jiangsu, Guangdong, those more developed provinces, we can see the price gap between peak and the valley. reach more than 70 cents per kilowatt hour. And I think with the price of the battery cell going down and with the trend of a big price gap between the peak and the valley in those provinces, we will see a more sort of a commercial, stronger case for energy storage solutions in charging stations. And we are working on those solutions already. Hopefully, we'll be able to give you some highlights and good news in our next earnings call.

Your next question comes from Mengguan Feng with Tian Feng. Please go ahead.

Hello, am I through? Hello? Yes, please go ahead. Oh, okay, great. Thank you for your team presentation. I will list the projected timeline of your virtual power plant platform and the automatic VB charging robots, and how are they going to impact the company's financials? Thank you.

Thank you, thank you. You're from , right?

Yeah.

Okay, okay, thank you. So for D2C solutions, we've already launched the VPP solution on June 13th, 2023. We are currently leveraging data from PV energy storage and charging station in our energy base to provide input to our virtual power plant and train its algorithm. As for automatic charging robots, we launched the prototype in April, and we have used the prototype to attend exhibitions, especially in, for example, EVIS in Abu Dhabi and Power to Drive in Munich. What we plan to do with the charging robot is we plan to launch a commercial charging robot in Anji, close to our base, before Q4. The team is working on that. There are a couple of work streams that we're working on to be able to see the first commercial product launched. I hope we can invite you to see the charging robot in the commercial capacity before Q4. Both services from a revenue perspective, I think the charging robot is probably still one or two years away. But for the virtual power plant, we are already doing, for example, electricity trading and electricity procurement projects. And these projects can be further enhanced by the virtual power plant capabilities. So for virtual power plant, if you see, for example, our revenue streams, we have a revenue stream that is dedicated to innovative solutions. So the revenue from the virtual power plant will get into that particular stream. So you can keep an eye on that. Thank you.

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Thank you, everyone, for participating tonight. And if you have any further questions, please feel free to contact us. Thank you.

This concludes this conference call. You may now disconnect your line. Thank you.