Q2 2021 Smart Share Global Ltd Earnings Call
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Today's conference call is due to begin shortly until such time. Your line will remain on music hold lease continue to standby. We thank you for your patience.
Once again today's conference call is due to begin shortly until such time your line will remain on music hold.
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Hello, and thank you for standing by for Energy Monster is 2021 second quarter earnings Conference call.
This time, all participants are in a listen only mode.
After managements prepared remarks, there will be a question and answer session.
Today's conference is being recorded if you have any objections you may disconnect at this time I would now.
I would like to turn the meeting over to your host for today's conference call Director of Investor Relations Hansen should please go ahead.
Thank you welcome to our 2021 second quarter earnings Conference call. Joining me on the call today are Marc Hi, Energy Monster, Chairman and CEO and Maria Shields, Chief Financial Officer for today's agenda management team will discuss business updates operation highlights.
Financial performance for the second quarter of 2021.
Before we continue I refer you to our safe Harbor statement in the earnings press release, which apply to this call as we will be making forward looking statements. Also this call includes discussion of certain non-GAAP financial measures.
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.
RMB.
I'd now like to turn the call over to our chairman and CEO Martin tied for the business and operational highlights.
Thank you have a good day, everyone and welcome to our 2021 second quarter earnings call.
We are pleased to announce the solid second quarter results with revenue growing to 52, 9% year over year, which is above the upper end of our previous guidance range.
During the second quarter, the outperformance of certain regions, such as eastern China, and the rapid expansion of our <unk> coverage positively contributed to our growth.
While the impact of Covid weighed down our growth for other regions.
Despite facing these external factors we are committed to remaining focused on our long term strategies of providing best in class services and the value proposition to our users location partners and network partners.
The scale of our mobile device charging service network also expanded quickly during the quarter with <unk> growing 55000 to reach 771000.
And number of power banks in circulation growing by 390000 to reach 6 million by the end of the second quarter.
As a result of continued <unk> and powertrain expansion.
To reinforce our leadership and grow our market share to 35, 2% within the mobile device charging service industry. During the first half of 2021.
We continue to see multiple drivers propelling forward the fast growing mobile device charging service industry.
First in.
Industry penetration rates of potential P wise remains no opt.
Opportunities in terms of increasing penetration across different types of P lives for both existing higher and lower tier cities continue to be core driver.
Second.
There continues to be large number of countries that are underpenetrated for mobile device charging studies.
During the quarter, we newly added 29 new counties.
Is it extending our coverage to over 1600 countries all country level cities as of the end of quarter out of the 2846 total in China.
This means there continues to be significant opportunities in.
And expanding to uncovered regions across China.
Luckily our service bring convenience to our users across China by relieving their low battery anxiety.
Compared to other mobile device travel service.
High purchase frequency and user stickiness.
During the second quarter.
More than 19 million newly registered users reached.
Approximately 255 million cumulative registered users of.
The end of second quarter.
Reflecting that there continues to be increasing demand for the service.
And that there are still a large number of users who are in need but have to get to trial.
In the future.
As the size of our network continues to grow through increased penetration.
We ask number one player in the industry is poised.
To better capture the benefit of network effect and attracting more users.
Now despite our growth we continue to experience headwinds from outbreaks of Covid.
In the second quarter outbreaks in southern China, and especially within the Guangdong Province resulted in a significant revenue drop upward to 870 to 80 per cent decline in.
The impacted regions due to restrictions that's required the closing of certain stores and it resulted in decrease food traffic.
We estimate that total impact of outbreak in southern China resulted in a 22.13 million RMB decline in revenue during the second quarter.
The Guangdong Covid outbreak with eventually control and our revenue have made a strong recovery starting in late July.
When we continue to experience headwinds from Covid outbreaks, but based on the historical numbers we.
Expect the impact to be short term in nature.
To reduce the impact of the Covid outbreaks.
Operations, we implemented measures to increase our recovery speed from external events, such as COVID-19 by focusing on reallocating our cabinets from less utilized.
To meet to higher tier P life.
Our chain stores.
Quality.
In the future, we will continue leveraging our operational expertise to reduce the impact of external events on our operations and execute measures that will help us increase our market share during these events.
Now, let me walk you through our core strategies in strengthening our competitive advantages extending coverage and exploring new initiatives for the quarter.
Efficiency has always been the hallmark of energy monster that differentiated us from our peers within the industry.
Last year the <unk>.
<unk> landscape changed significantly due to the initial impact of Covid.
The fast growing mobile device charging service industry also attracted the interest of major companies.
We Meanwhile, continue to focus on our core operating principles of efficient growth and more aggressively competing for mid to higher tier.
Our ability to more accurately assess the revenue potential.
Offering correct revenue sharing policies that result in positive economics for the company.
Managing our vast underground business development team and making sure that they bought to the Companys operating principles.
Affecting the economic incentives for these business development personnel.
That correctly align their interest with the company.
Some of our core competitive advantage.
This is why we were able to achieve industry, leading unit economics profile optical but last year, while our competitors were.
Primarily all lossmaking.
This difference in unique profile has allowed us to more quickly and aggressively develop our network effect.
We continue to dynamically balanced growth and operational efficiency.
We remain committed to our principle of individually accessing each.
Based on the economic profile.
But the shift in the competitive landscape in the reason yes.
We believe our competitive advantage in network effect and also operational efficiency are being strengthened.
Our market share continued to grow during the first half of 2021.
Our best in class service for our users in the form of high quality hardware and easy to use and return to service and a clear value proposition to our location partners.
In terms of shift responding to.
To the business development team and customized cabinet and power a key differentiating advantages of monster.
Going forward, we will leverage this advantage to more efficiently expand into acquiring new users and to further differentiate ourselves from peers within the industry.
Now I would love to talk about spending coverage.
The industry continued to be a fast growing.
The PR coverage of the industry still remain low with continued opportunity across the board in higher and lower tier cities.
PMI types as well.
For direct.
We expanded our business development team by 400 people during the quarter.
In anticipation of the market potential.
Our business development team.
Actively expanded top 10 more mid to higher tier.
On the K fault.
Have great success in signing up new accounts during the quarter.
Like Jason Robyn.
<unk> seven and <unk>.
Our ability to offer a comprehensive package and our ability to deliver high quality service to case has allowed us to sign these accounts despite not offering the highest revenue sharing policy.
For our network partner model, although we are also leading within the industry through this model we can.
Continue to identify and recruit high quality network partners.
We are able to continue attracting these partners doing our market leading position as well as due to the full suite of support and training that we offer them when they work with us.
The network campaign that we launched in the fourth quarter of 2021 that is tailored to help acquire additional high potential network partners to our network.
This campaign gives us network partner more room to quickly reach scale and to see results earlier, which further aligns the interest between our network partners.
Our sustained investment and commitment to expanding our network partner model will allow us to.
Capture the growth of the industry by strengthening the coverage of lower tier cities and solidifying our network partner model.
As a result of our effort in both the direct and network partner models.
Able to quickly expand LPWAN Powerpoint comps during the quarter.
This has helped us attract more customers and it amongst us.
We were able to acquire 19 million newly registered users during the quarter, reaching $2.55 million registered users in all.
In the future we believe the increase in our business development team and network partners.
In conjunction with our industry leading efficiency.
Will allow us to accelerate the benefits of our network effect advantage and to further differentiate and amongst within the mobile device charging so this industry.
Luckily.
I'd like to touch on our new initiatives.
We continue to be in the testing phase for our first consumer product line.
A lineup.
And expect a full launch by end of this year the peak season of FICO.
By leveraging energy Monster massive online and offline network consisting of over 250 million unique users and a 771 key wise across all provinces of China, we can more quickly scale consumer products than traditional brands.
On the other hand, we continue to explore other Iot and service industry that we leverage and extend our existing networks.
Going forward, we believe that our current setup of network will give us a unique set of advantages in incubating new initiatives from energy amongst us.
So in conclusion our.
Our core mobile device charging service.
To grow quickly on the back of our expanding network effect and a growth industry.
Even though the competitive landscape has shifted during the last two years, we remain committed to doing the right thing and that is to dynamically balanced growth and operational efficiency based on market conditions.
This difference in philosophy has differentiated us from our peers in the past.
We'll continue to do so in the future as well.
We formed a stronger competitive advantage.
Paul.
Eventually controls and our revenue has made a strong recovery.
Yeah.
Yes.
So let's.
Let's see this is a strong recovery after the outbreak of Guangdong province of Covid.
We look into the first quarter.
Are you continuing to see headwinds that will impact that traditionally has been the peak quarter of the year.
The reason the reason COVID-19 outbreak in Jiangsu Province.
Well, it's a number of cities across the country and weather induced problems have all negatively impacted our third quarter performance.
Since the outbreak we have seen a gradual recovery.
And but have not yet returned to normalized activity levels.
We also continue to see the recovery, except backed by continual original outbreaks across the country.
Going forward, we may continue to face impacts from small scale original resurgence of COVID-19 in the future.
We believe these are short term impacts and will not impact our long term competitive advantage a network effect and operational efficiency.
Thank you I will now turn the call over to my Rehashing, our CFO for the financial highlights.
Thank you Mark.
Now, let me walk you through the financial results in greater detail.
For the second quarter of 2021 revenue.
Great and $72 four maybe.
<unk> 52, 9% year over year increased revenue from mobile device charging business or 51, 6% year over year to 931.6 million and accounted for 95, 8% of our total revenue for the quarter.
The increase was primarily attributable to the increase in the number of POF and available for use pop out.
Revenue for power Bank, South well 83, 2% year over year to 31, SEC, many and accounting for three 2% of our total revenue for the quarter.
The increase was primarily due to.
The increased number of appeal.
Available for you as part of banks and the customers that select a punch has the pop back.
Other revenue well.
Hundred and 11, 1% year over year to $9 to me and our comdata for their appointed that percent of our total revenue.
The increase was primarily attributable to the increase in users and advertisement efficiency.
Cost of revenue or 44, 8% year over year to $138.7 billion for the second quarter of 2021, the increase of cost of revenues was primarily due to the increase in the operational scale, resulting in increase in maintenance cost is postal cost.
And the logistic expenses.
Gross profit as well off with 34, 3% year over year to $833.7 million.
For the second quarter of 2021, the increase was primarily due to the increase in revenue from mobile device charging business go.
Gross margin for the second quarter of 2021.
Reached.
85, 7%.
Operating expense for the second quarter of 2021, $814.8 million up 52, 6% year over year.
Excluding share based compensation non-GAAP operating expenses were $805.9 million, representing a year over year increase of <unk>.
<unk> $3.1 million.
The P three one percentage.
Great.
<unk> development expenses for the second quarter of 2021.
25 million up $25 three year over year. The increase was primarily due to the increase in personnel related expenses.
And the marketing expenses for the second quarter of 2021 was $717.1 million.
64, 6% year over year, the increase was primarily due to the increase in incentive fees paid to the location Patronize and network partners.
From the increase in mobile device charging business revenue.
The increase in personnel related expenses.
General and administrative expenses were $28 seven meaning in the second quarter of 2021.
49, three percentage year over year, the increase was primarily due to the increase in personnel related expenses.
Income from operations was $18.8 million down 31, 9% year on year operating margin for the second quarter of 2021 was one 9% compared to six 2% in the same period last year.
Net income was $8 two many in the second quarter of 2021 down 72, 6% year on year.
Net margin for the second quarter of 2021 of them was 0.8%.
Non-GAAP net income, which excludes share based compensation expenses.
17 point to many in the second quarter of 2021 compared to a non-GAAP net income of $38 eight meaning in the same period last year.
As of June 32021, the company had cash and cash equivalents restricted cash and stock term investments of $3.1 billion.
Cash flow generated from operations for the second quarter of 2021 was $74.8 million.
Capital expenditure for the second quarter of this year was $97.3 million.
Sure.
Energy Master are currently expected to generate 900 million to $913 million of revenue for the third quarter of 2021.
It's not that this forecast reflect energy Master plan and the play may reveal of the industry and its operations.
Is subject to change.
He clearly as the potential impact of COVID-19.
Economy in China.
Thank you for listening we are now ready for your questions operator.
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 you will need to press star one on your telephone.
But your question press the pound key.
Once again to ask a question at Star and the number one on your telephone keypad.
Your first question comes from the line Vicki away from Citi. Please ask your question.
Good evening management, Thanks for taking my questions.
So with management share more insight on the guidance for the first quarter of 2021. Thank you.
Thanks for your questions. So let us give you a bit more insight on the guidance. Despite the impact of Guangdong call. It our revenue, we're making a strong recurring during July.
Ear to ear basis, we see in early July the revenue growth was on track for more than 20% year on year. So high bar since the downhole Covid broke out so Nanjing Zhengzhou and Yanzhou.
And they're kind of cities all revenue dropped more than 70%.
From the normalized level, so flat operates to the other cities such as Beijing, Shanghai told auction.
Have all resulted in the significant drop in revenue for example, Shanghai Beijing dropped more than 30% in the arm.
August comparable lease the Rd dry power. However, we are confident that the impact from the COVID-19 there'll be some impact in nature and that our company's fundamental are fully intact. So and the user continues to have strong demand for our services that we saw.
We acquired a lot of new users during the past quarter. So going forward, we will continue to be the long term oriented to D. R.
Our shareholders so in this.
Quarter guidance is a bit lower which impacted by the COVID-19.
Thank you.
Thank you. Your next question comes from the line of Lucy Li of Goldman Sachs. Please ask your question.
Thank you management. So my question is related to the first one can management share with us more details on the impacts COVID-19 during the second quarter and the possible impact going forward into the quarter and how do you think of some.
Like more frequent.
I wouldn't say lockdown spot local restrictions.
<unk> going forward.
Thank you Martin speaking.
To be honest actually even by end of May.
Im expecting that in this call I am so proud to announce a first 1 billion RMB revenue quarter.
In July in June actually you can see that the COVID-19 outbreak in Guangdong, which we just.
See in the field.
During the second quarter.
The outbreak of Covid in southern China, mostly Guangdong.
What's significant.
At its peak.
Impacted the region experienced a 70% to 80% of week over week declines.
Although the impact of the outbreak in southern China resulted in Mexicali 20 to 30 million RMB in revenue.
Drop.
So for.
For the third quarter of 2021, the COVID-19 outbreak in combination with weather.
Use the province will negatively impact.
It has traditionally has been the peak quarter of the year as I mentioned.
We follow.
Following the initial outbreak in Jiangsu minor breaks across the play all places like Shanghai Shenzhen.
Disrupting our recovery process towards normalized activity levels.
Despite facing these external factors.
We are committed to remain.
Remaining focused on our long term strategies of providing the best in class services.
<unk> value proposition to our customers location partners users and network partners.
That's why we were able to increase our market share.
In the first half of 2021.
So I'm also pleased that even with the impact of Covid, we skew.
Hit.
Patient of the topline of last quarter.
So thank you.
Okay.
Once again, if you wish to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of Charlie Chen of China Renaissance. Please ask your question.
Thanks management for taking my question I got one.
One question regarding competitive landscape. So can you give us more color on the current competitive situation are we seeing an increase in your revenue sharing percentage or a fixed interest fee amount and how has another major competitors exits, which we've heard from the news which has made one.
From the direct model impacted the market. Thank you.
Thank you for the question.
Sure, we see that our peers shift away from the direct model and move towards the next partner model.
Actually it is a positive move for the market.
In long run.
And will be healthy for the total industry.
This will reduce the amount of aggressive business expansion with higher revenue sharing policies that some.
Players actually is doing.
And because there continues to be large amount of potential within the industry and that we have industry, leading operational efficiency. We have increased the number of business development personnel in the quarter by over 400 people to better capture.
The market opportunity.
Similarly, we have also rapidly increase our signings of K ace during the quarter by leveraging our large.
On the ground team and also our ability to provide comprehensive service to the case.
Lastly for our network partners, we launched a campaign in the first quarter of 2021 to attract high quality network partners with proven track record with us.
Two more quickly increase their coverage in the lower tier cities.
So as a conclusion on one side.
We continue to do our best in terms of growth and efficiencies for our direct sales model on the other side, we keep doing better in terms of policy also facilitate our network partners to become stronger players in the market to gain market share in lower tier cities.
I would say that in long run in the mid.
Midterm the market, we are tend to be a more sustainable development.
Development because.
Some of the players are shifting their business models, which will lead to a less competitive environment for the industry. Thank you.
In terms of the revenue sharing percentage.
But the level of increase a bit on a quarter on quarter basis due to the large impact of COVID-19 on the second quarter. So in the second quarter as Covid impact around the 20 to 30 million RMB in both the topline and bottom line.
So for the network partners as Mark just mentioned so the compare the new campaign continues to help us to attract new customers.
Network partners during the past quarter.
Wired around 13, New network partners and <unk> are about 15000 cabinets to our new network partners.
Revenue sharing and there is a new compounds with network partners has a higher revenue 70 percentage and have contributed to the increase in sales and marketing expenses.
At the same time, we are also increasing our investment in the new initiatives. So our path on the consumer products and the launch of the energy master's New online channel for the par Bank have also contributed to the increase in our south and.
Marketing expenses both.
Sure.
Yes.
Thank you.
Thank you for your patience.
Yes.
Your next question comes from the line of Lucy Li with Goldman Sachs. Please ask your question.
Hi, Thanks, I have a follow up question. So we've seen a lot of regulations coming out recently on various industries, including so.
For example in Internet companies, but also I'd like to stick them. Okay. Thank you.
As a company.
<unk> some of the pricing guidelines.
And that's the thesis on the mutual prosperity hopefully so do we felt from our perspective do we see regulation.
Potential of regulators.
Turning to a limit.
Pricing level and that is so how would that impact the business or our revenue sharing scheme with a partner with all of you know the appeal is on the network.
Well. Thank you very much for the question we have been keep a very close eyes on the regulation part actually since the very beginning of creating the company. So at this time, we are not under direct regulation by specific government.
Entity outside of the standard ones. So we are actively tracking or updates in regulation.
And we are fully complying to the regulation and requirements implemented by the government.
So far we don't see.
And the potential that our operation will be influenced by certain potential regulation. So.
But do we everyday actually.
We are having this.
Monetary and also we have.
Quite a good relationship with the government in the district level.
Because we are when not.
Important startup.
So we are confident to have a good management over this.
Okay.
Yes.
Once again, if you wish to ask a question. Please press star and the number one on your telephone keypad.
Yeah.
We are now approaching the end of the conference call I will now turn the call over to energy Monster.
For closing remarks.
Once again, thank you for joining us today. Please don't.
Is it to contact us if you have any further questions. Thank you all for you.
Support and we look forward to speaking with you in the coming months. Thank you.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Hello, and thank you for standing by for Energy Monsters, 2021 second quarter earnings Conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session.
Today's conference is being recorded if you have any objections you may disconnect at this time.
Now I'd like to turn the meeting over to your host for today's conference call Director of Investor Relations Hanjin ships. Please go ahead.
Thank you welcome to our 2021 second quarter earnings Conference call. Joining me on the call today are Marc Hi, Energy Monster, as chairman and CEO and Maria Shields, Chief Financial Officer for today's agenda management team will discuss business updates operation highlights.
Financial performance for the second quarter of 2021.
Before we continue I refer you to our Safe Harbor statement in the earnings press release, which are twice this call as we will be making forward looking statements. Also this call includes discussion of certain non-GAAP financial measures.
Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated all figures mentioned during this call.
R&D.
I'd now like to turn the call over to our chairman and CEO Martin side for the business and operational highlights.
Thank you Hans and good day, everyone and welcome to our 2021 second quarter earnings call.
We are so pleased to announce the solid second quarter results with revenue growing to 52, 9% year over year.
Which is above the upper end of our previous guidance range.
During the second quarter, the outperformance of certain regions, such as eastern China, and the rapid expansion of our coverage positively contributed to our growth while the impact of Covid weighed down our growth for other regions.
Despite facing these external factors we are committed to remaining focused on our long term strategy of providing best in class service and a value proposition to our users location partners and network partners.
The scale of our mobile device charging service network also expanded quickly during the quarter with <unk> growing 55000 to reach 771000.
And number of power banks in circulation growing by 390002 reached 6 million by the end of the second quarter.
As a result of continued <unk> and power bank expansion.
Able to reinforce our leadership and grow our market share to 35, 2% within the mobile device charging service industry. During the first half of 2021.
We continue to see multiple drivers.
Palling forward, the fast growing mobile device charging service industry.
First <unk>.
Industry penetration rates of potential P lives remains no opt.
Opportunities in terms of increasing penetration across different types of P lives for both existing higher and lower tier cities continue to be core driver.
Second.
There continues to be large number of countries that are underpenetrated for mobile device charging systems.
During the quarter, we newly add up 29, new countries.
Extending our coverage to over 1600 countries or country level cities as of the end of quarter out of the 2846 total in China.
This means there continues to be significant opportunities in.
And expanding to uncovered regions across China.
Luckily our service bring convenience to our users across China by relieving their low battery anxiety.
Compared to other mobile device charging service.
High purchase frequency and user stickiness.
During the second quarter, we acquired more than 19 million newly registered users reaching to absorb.
Approximately 255 million cumulative registered users.
At the end of second quarter.
Reflecting that.
There continues to be increasing demand for the service.
There are still a large number of users who are in need but have to get to trial.
In the future.
As the size of our network continues to grow through increased penetration.
We have number one player in the industry is poised.
To better capture the benefit of network effect.
<unk> more users.
Now despite our growth we continue to experience headwinds from outbreaks of Covid.
In the second quarter outbreaks in southern China, and especially within the Guangdong Province resulted in a significant revenue drop of course to a 70 to 80 per cent decline in the impacted regions due to restrictions that's required the closing of certain store and it resulted in.
Kris food traffic.
We estimate that total impact of outbreak in southern China resulted in a 22.13 million RMB declined in revenue during the second quarter.
The Guangdong Covid outbreak with eventually control and our revenue have made a strong recovery starting in late July.
When we continue to experience headwinds from Covid outbreaks.
But based on the historical numbers, we expect the impact to be short term in nature.
To reduce the impact of the Covid outbreaks of our operations, we implemented measures to increase our recovery speed from external events, such as COVID-19 by focusing on reallocating our cabinets from less utilized.
To meet to higher tier.
Or chain stores.
Good quality.
In the future, we will continue leveraging our operational expertise to reduce the impact of external events on our operations and execute measures that will help us increase our market share during these events.
Now, let me walk you through our core strategies in strengthening our competitive advantages extending coverage and exploring new initiatives for the quarter.
Efficiency has always been the hallmark of antigen monster that differentiated us from our peers within the industry.
Last year, the competitive landscape changed significantly due to the initial impact of Covid.
The fast growing mobile device charging service industry also attracted the interest of major companies.
We Meanwhile, continue to focus on our core operating principles of efficient growth and more aggressively competing for mid to higher tier <unk>.
Our ability to more accurately assess the revenue potential.
Offering correct revenue sharing policies that result in positive economics for the company.
Managing our vast underground business development team and making sure that they bought to the company's operating principles.
Affecting the economic incentives for these business development personnel.
Ah correctly align their interests with our companies.
Some of our core competitive advantage.
This is why we were able to achieve industry leading.
Unit economic profile optical but last year, while our competitors were.
Primarily all lossmaking.
This difference in unique profile has allowed us to more quickly and aggressively develop our network effect.
We continue to dynamically balanced growth and operational efficiency.
We remain committed to our principle of individually assessing each.
Based on the economic profile.
But the shift in the competitive landscape in the reason yes.
We believe our competitive advantage in network effect and also operational efficiency are being strengthened.
Our market share continued to grow during the first half of 2021.
Our best in class service for our users in the form of high quality hardware and easy to use and return to service and a clear value proposition to our location partners.
In terms of shift responding to.
To the business development team and customized cabinet and power being a key differentiating advantages of monster.
Going forward, we will leverage this advantage to more efficiently expand into Hawaii acquire.
Acquire new users and to further differentiate ourselves from peers within the industry.
Now I would love to talk about out spending coverage.
The industry continued to be a fast growing.
The PR coverage of the industry still remain low with continued opportunity across the board.
In higher and lower tier cities and appeal I types as well.
For Dara.
We expanded our business development team by 400 people during the quarter.
Anticipation of the market potential.
Our business development team.
Actively expanded top 10 more mid to higher tier P life.
On the K fault, we have great success in signing up new accounts during the quarter.
Like our cheeseman Robyn.
Week, seven and are you in.
Our ability to offer a comprehensive package and ability to deliver high quality service to K H.
Allowed us to sign these accounts, despite not offering the highest revenue sharing policy.
For our network partner model.
Although we are also leading within the industry through this model, we continue to identify and recruit high quality network partners.
We are able to continue attracting these partners doing our market leading position as well as due to the full suite of support and training that we offer them when they work with us.
Network campaign that we launched in the fourth quarter of 2021 that is tailored to help.
Additional high potential network partners to our network.
This campaign gives us network partner more room to quickly reach scale and to see results earlier, which further aligns the interest between our network partners and us.
Our sustained investment and commitment to expanding our network partner model will allow us to capture the growth of the industry are strengthening the coverage lower tier cities and solidifying our network partner model.
As a result of our effort in both the direct and network partner model, we were able to quickly expand L. P. One power bank comp during the quarter.
This has helped us attract more customers and amongst them.
We were able to acquire 19 million newly registered users during the quarter, reaching 255 million registered users.
In the future we believe the increase in our business development team and network partners.
Conjunction with our industry leading efficiency.
Allow us to accelerate the benefits of our network effect advantage and to further differentiate and amongst within the mobile device charging so this industry.
Lastly, I'd like to touch on our new initiatives.
We continue to be in the testing phase for our first consumer product brand lineup.
And expect a full launch by end of this year the peak season of by Joe.
By leveraging energy Monster massive online and offline network consisting of over 250 million unique users and a 771000 P wise across all provinces of China, we can more quickly scale consumer products than traditional brands.
On the other hand, we continue to explore other Iot and service industry that we leverage and extend our existing networks.
Going forward, we believe that our current setup of network will give us a unique set of advantages in incubating new initiatives from energy amongst us.
So in conclusion our.
Our core mobile device charging service.
Turning to grow quickly on the back of our expanding network effect and a growth industry.
Even though the competitive landscape has shifted during the last two years, we remain committed to doing the right thing and that is to dynamically balanced growth and operational efficiency based on market conditions.
This difference in philosophy has differentiated us from our peers in the past.
We'll continue to do so in the future.
We formed a stronger competitive advantage around I'll call it.
Eventually controls and our revenue has made a strong recovery.
Yeah.
So.
Let's see this is a strong recovery after the outbreak of Guangdong province of Covid.
We're looking to the third quarter.
You continue to see headwinds that will impact that traditionally has been the peak quarter of the year.
The reason the reason COVID-19 outbreak in Jiangsu Province.
Well, it's in a number of cities across the country and weather induced problems have all negatively impacted our third quarter performance.
Since the outbreak we have seen a gradual recovery.
And but have not yet returned to normalized activity levels.
We also continue to see the recovery the setback by continual original outbreaks across the country.
Going forward when they continue to face impacts from small scale original resurgence of COVID-19 in the future.
We believe these are short term impacts and will not impact our long term competitive advantage a network effect and operational efficiency.
Thank you I'll now turn the call over to Maria Shields, our CFO for the financial highlights.
Thank you Omar.
Now, let me walk you through the financial results in greater detail.
For the second quarter of 2021 revenue.
Great and $72 four maybe representing 52, 9% year over year increase revenue from mobile device charging business or 51, 6% year over year to 931.6 million and accounted for 95, 8% of our total revenue.
For the quarter.
The increase was primarily attributable to the increase in the number of P O I's and available for use pop out.
Revenue for power banks out well up 83, 2% year over year to 31, SEC, many and accounting for three 2% of our total revenue for the quarter.
The increase was primarily due to the due to the increased number of appeal.
Available for youth part of banks and the customers. That's the lag to punch has the pop back.
Other revenue was up 111, 1% year over year to $9.2 million and our comdata for their appointed that percent of our total revenue.
The increase was primarily attributable to the increase in users and advertisement efficiency.
Cost of revenue or 44, 8% year over year to $138 seven beginning with the second quarter of 2021. The increase of cost of revenues was primarily due to the increase in the operational scale, resulting in increase in maintenance cost is postal Cup.
And the logistic expenses.
Gross profit opportunity for one 3% year over year to 833 points better than many.
The second quarter of 2021, the increase was primarily due to the increase in revenue from mobile device charging business goals.
Gross margin for the second quarter of 2021 was reached.
85, 7%.
Yes.
Operating expense for the second quarter of 2021, $814.8 million up the Patriot plants, 8% year over year.
Excluding share based compensation non-GAAP operating expenses were $805.9 million, representing a year over year increase of 63.
$3.1 million.
63, one percentage.
Great.
Development expenses for the second quarter of 2021, well 'twenty.
$20.5 million up 25, three year over year. The increase was primarily due to the increase in personnel related expenses.
And the marketing expenses for the second quarter of 2021 was 717.1 million.
Up 54, 6% year over year. The increase was primarily due to the increase in incentive fees paid to the location partners and network partners.
From the increase in mobile device charging business revenue.
The increase in personnel related expenses.
General and administrative expenses were 28.7 million in the second quarter of 2021.
49, three percentage year over year, the increase was primarily due to the increase in personnel related expenses.
Income from operations was $18.8 million down 51, 9% year on year operating margin for the second quarter of 2021 was one 9% compared to six 2% in the same period last year.
Net income was $8.2 million in the second quarter of 2000, and touch one down 72, 6% year on year.
Neither margin for the second quarter of 2021 of them was 0.8%.
Non-GAAP net income, which excludes share based compensation expenses.
$17 to many in the second quarter of 2021 compared to a non-GAAP net income of $38 eight meaning in the same period last year.
As of June 32021, the company had cash and cash equivalents restricted cash and short term investments of $3.1 billion.
Cash flow generated from operations for the second quarter of 2021 was $74.8 million.
Capital expenditure for the second quarter of this year.
$97.3 million.
Energy Master are currently expected to generate 900 million to 913 million of revenue for the third quarter of 2021. Please note that this forecast reflect energy Master plan and the play may reveal.
<unk> and its operations, which is subject to change.
Particularly as the potential impact of COVID-19 on the <unk>.
Economy in China.
Thank you for listening we are now ready for your questions operator.
Yeah.
The question and answer session of this conference call will start in a moment.
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Once again to ask a question at Star and the number one on your telephone keypad.
Your first question comes from the line Vicki away from Citi. Please ask your question.
Good evening management, Thanks for taking my question.
So with management share more insight on the guidance for the first quarter of 2021. Thank you.
Thanks for your questions. So let us give you a bit more is that together despite the impact of Guangdong call. It our revenue, we're making a strong recurring during July.
Ear to ear basis, we see in early July the revenue growth was on track for more than 20% year on year. So high bar since the downslope Covid broke out so Nanjing Zhengzhou and Yanzhou.
In depth kind of cities all revenue dropped more than 70%.
From the normalized level, so flat operator to the other cities such as Beijing, Shanghai told auction does have all resulting in the significant drop in revenue for example, Shanghai Beijing dropped more than 30%.
Oh got come how these the Rd dry.
However, we are confident that as the impact from the COVID-19. It there'll be some impact in nature and that our company's fundamental are fully intact. So and the user continues to have strong demand for our services that we saw we acquire a lot of new users during the past.
Quarter, so going forward, we will continue to be the low comp oriented to video our value for our shareholders. So in this.
Quarter guidance is a bit lower which impacted by the COVID-19.
Thank you.
Thank you. Your next question comes from the line of Lucy Li of Goldman Sachs. Please ask your question.
Alright. Thank you management. So my question is related to the first one can.
Can management share with us more details on the impacts COVID-19 during the second quarter and a possible impact going forward into the quarter and how do you think of some.
I like more frequent.
I wouldn't say lockdowns by.
Local restrictions going forward.
Thank you Mark speaking to.
To be honest actually even by end of May.
I'm expecting that in this call I am so proud to announce a first 1 billion RMB revenue quarter.
But.
In June actually you can see that the COVID-19 outbreak in Guangdong, which we just.
See in the field.
So during the second quarter.
Break of Covid in southern China, mostly Guangdong.
Whats significant at its peak.
Impacted region experienced a 70% to 80% of week over week declines.
Overall, the impact of the outbreak in southern China resulted in Mexicali 20 to 30 million RMB in revenue.
Rob.
So for.
For the third quarter of 2021, the Covid outbreak in combination with weather in <unk>.
<unk> province will negatively impact.
<unk> has traditionally has been the peak quarter of the year as I mentioned.
We follow.
Following the initial outbreak in Jiangsu minor breaks across the play or places like Shanghai Shenzhen.
Disrupting our recovery process towards normalized activity levels.
Despite facing these external factors.
We are committed to remain.
Remaining focused on our long term strategies of providing the best in class services.
<unk> value proposition to our customers location partners users and network partners.
That's why we were able to increase our market share.
In the first half of 2021.
So I'm also pleased that even with the impact of Covid, we skew.
Hit.
<unk> of the topline of last quarter.
So thank you.
Once again, if you wish to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of Charlie Chen of China Renaissance. Please ask your question.
Thanks management for taking my question I've got.
One question regarding competitive landscape, so I can't even give us more color on the current competitive situation are we seeing an increase in revenue sharing percentage or a fixed entry fee amount and how has another major competitors exits, which we heard from the news which has made one.
From the direct model impacted the market. Thank you.
Thank you for the question.
Sure, we see that our peers shift away from the direct model and move towards the next partner model.
Actually it is a positive move for the market.
In long run.
And will be healthy for the total industry.
This will reduce the amount of aggressive business expansion with higher revenue sharing policies that some.
Players actually is doing.
And because there continues to be large amount of potential within the industry and that we have industry, leading operational efficiency. We have increased the number of business development personnel in the quarter by over 400 people to better capture.
The market opportunity.
Similarly, we have also rapidly increase our signings of K ace during the quarter by leveraging our large.
On the ground team and also our ability to provide comprehensive service to the case.
Luckily for our network partners, we launched a campaign in the first quarter of 2021 to attract high quality network partners with proven track record with us to more quickly increase their coverage in the lower tier cities.
So as a conclusion on one side.
We continue to do our best in terms of growth and efficiency for our direct sales model on the other side, we keep doing better in terms of policy also facilitate our network partners to become stronger players in the market to gain market share in lower tier cities.
I would say that.
In long run.
Midterm the market, we are tend to be a more sustainable development.
Development because.
Some of the players are shifting their business models, which will lead to a less competitive environment for the industry. Thank you.
In terms of the revenue sharing percentage.
The allowance increased a bit on a quarter on quarter basis. So due to the large impact of COVID-19 on the second quarter. So in the second quarter Covid impact around the 20 to 30 million RMB in both the topline and bottom line.
So for the Nashville partners as Marc mentioned, so the compare the new campaign continues to help us to attract new cartoon.
Network partners during the past quarter lease.
Acquired.
Around the 30, New network partners and <unk> are about 15000 cabinets to our new network partners.
Revenue sharing and there is a new campaign, we've never Patronised has a higher revenue.
Percentage and have contributed to the increase in sales and marketing expenses.
At the same time, we also increased our investment in the new initiatives, so our past and our consumer products and the launch of the energy master's New online channel for the par Bank have also contributed to the increase in sales and.
Marketing expenses both.
Sure.
Yes.
Thank you.
Thank you for your reaction.
Yes.
Your next question comes from the line of Lucy Li of Goldman Sachs. Please ask your question.
Hi, Thanks, I have a follow up question. So we've seen a lot of regulations coming out recently on various industries, including for.
For example in Internet companies, but also I'd like to stick.
As a company.
<unk> some of the pricing guidelines.
And that's the thesis on the mutual prosperity hopefully so do we so from our perspective, we see regulator.
Potential of regulators.
Turning to a limit.
Pricing level.
And that is so how would that impact all the best.
And as all of our revenue sharing scheme with a partner with our either the appeal is or the network partners.
You very much for the question, we have been keep a very close eyes on the regulation part.
Actually since the very beginning of creating the company. So at this time, we are not under direct regulation.
Specific government.
Entity outside of the standard ones. So we are actively tracking all updates in regulation.
And we are fully complying to the regulations and requirements implemented by the government.
So far we don't see.
Any potential that our operation will be influenced by certain potential regulation, so, but still we everyday actually.
We are having this.
Monetary and also we have.
Quite a good relationship with the government in the district level because.
Because we are windows.
Important startup. So we are confident to have a good management over this.
Yeah.
Yes.
Yeah.
Once again, if you wish to ask a question. Please press star and the number one on your telephone keypad.
Yeah.
We are now approaching the end of the conference call I will now turn the call over to energy Monster C. S.
<unk> for closing remarks.
Once again, thank you for joining us today. Please don't.
To contact Us if you have any further questions. Thank you all for you.
Support and we look forward to speaking with you in the coming months. Thank you.
Okay.
This concludes today's conference call. Thank you for participating you may now disconnect.