Q1 2022 Smart Share Global Ltd Earnings Call
[music].
Hello, and thank you for standing by for Energy Monsters, 2022 first 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.
I'd now like to turn the meeting over to your host for today's conference call Director of Investor Relations Henson. She's. Thank you. Please go ahead.
Thank you welcome to our 2022 first quarter earnings Conference call. Joining me on the call today are Marc Hi, Energy Monster, Chairman and Chief Executive Officer, and Maria Shields, Chief Financial Officer for today's agenda management will discuss business updates operation highlights and financial performance.
For the first quarter of 2022.
Before we continue I refer you to our Safe Harbor statement in the earnings press release, which apply 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'd now like to turn the call over to our chairman and Chief Executive Officer, Mark side for the business and operations.
Thank you Hans and good day, everyone welcome to our 2022 first quarter earnings call.
The first quarter of 2022 has been a challenging quarter for energy monster.
In light of the continuous outbreak of Covid in regions, such as Shenzhen, Beijing, Tianjin Hangzhou enhancement throughout the quarter.
Especially due to the significantly worse than expected outbreaks in Shanghai.
In mid March.
Radiate towards outreach and other regions.
For example, the operate in Tianjin in January resulted in a 67% decline in revenues within the city.
During the 15 days period after the initial case.
Does generate outbreak resulted in a 58% decline Shenzhen in March 51%.
<unk> March outbreak.
86%.
And an outbreak in Shanghai, starting mid March resulted in a 17% decline in March.
The frequency and size of the Covid outbreaks in the first quarter of 2022 is increasing compared to 2021.
These COVID-19 outbreaks resulted in a significant decline in offline foot traffic as.
People are more likely to stay at home.
Offline locations are forced closed due to lockdown measures.
The outbreaks are resulting in a general decline in offline user foot traffic across the board.
Negative impacting almost all brands with an offline presence.
These outbreaks continue to adversely affect the foot traffic to offline.
In both regions of the outbreak and surrounding regions as well.
Which in return results in lower foot traffic to <unk>, where our cabinets are placed.
During the first quarter of this year same store revenue decreased by approximately 35% year over year.
As a result of the general decrease of foot traffic.
Despite the impact we continue to stay long term oriented and focused on laying the ground work for expanding our market leadership.
We continue to make choice in expanding our <unk> network, which reached 851000 as of the end of the first quarter of 2022.
Increasing by over 20% year over year.
With the increase in coverage our service becomes available to more customers across China.
Cumulative.
Users reached.
$299 million as of the end of the first quarter.
Implying the acquisition of 12 million, new dressers registered users and increasing by over 25% year over year.
We also continue to reduce both fixed and a variable incentive fees to better mitigate against fluctuations in revenue, resulting from COVID-19 outbreaks, notably incentive fees as a percentage of revenue for.
For new signings continue to trend down in light of diminishing competition.
Lower incentive fees and decrease in usage of fixed incentive fees will eventually help us lower our blended incentive fee rates.
And decrease the impact of exterior events, such as Covid outbreaks on our operation.
Yeah.
While we continue to be impacted by Covid, we remain confident in the long term development of the market.
The general demand of our service remains unchanged as regions coming out of Covid impact quickly recover within one to two months after containment.
That's why we continue to uphold our long term perspective in terms of our core strategies during COVID-19.
We will continue increasing our <unk>.
Network coverage through both our direct and network partner models.
As well as launching innovative ways for the two models to work together to further expand our market presence.
We also continue to innovate to increase our market leading efficiency.
<unk> such as our power Bank optimization program and the launch of a new generation of cabinets will unlock our asset efficiency capabilities.
We are confident that our innovative initiatives will further help us both cement our competitive advantage and capture the growth of Chinas mobile device charging service industry.
Now, let me walk you through our core strategies and coverage and efficiency.
First is the coverage of our service.
We continue to expand the coverage of our service.
Through a combination of our direct operation and network partner models.
Our <unk> coverage and our user base continues to increase despite the headwinds set forth by Covid outbreaks.
In terms of direct operation model, our BD personnel continue to spearhead our coverage expansion, primarily a higher tier tier cities.
Doing COVID-19 the expansion rate of <unk> has significantly decreased compared to that of a normalized period.
The declining offline traffic to make a large number of potential <unk>.
And adequate for coverage in terms of our profitability requirement.
While this has resulted in a decrease in potential fit.
For our coverage during the period of Covid impact.
But it also resulted in a general reduction in incentive fee rates for new signings.
After the outbreak is contained the potential <unk> Paul is restored.
Offline traffic within the region is normalized.
Because our incentive system aligns the interest of our BD with that of the company.
We continue to maintain a healthy and efficient increase in py coverage, even during periods of COVID-19 outbreak.
On the other side of the coverage expansion is our network partner model through.
Through a series of marketing campaigns and implementation of the new channels for upon acquisition, such as telemarketing and online acquisition tailored to attract high quality network partners to energy Monster.
We continue to rapidly increase our network partner count.
As the end of the first quarter of 2022, we have a network of over 1003 hundred network partners spanning across China.
Our network partner count is up by over 180% year over year, and 30% quarter over quarter as we accelerate our pace for attracting high quality network partners.
These network partners generally have previous experience working with <unk> within a given region.
Such such such making them highly efficient partners for the expansion of our service network.
The number of operated.
Operated under the network partner model as a result increased from 38% as of the end of the fourth quarter last year to 38, 9% end of the first quarter. This year.
We also launched a series of innovative initiatives.
<unk> Leverages the advantage of direct operation and network partner models.
Initiatives, such as the opening of all region to both models.
And leveraging our direct operation team to attract new network partners allow us to extract higher level of synergies between the two core models.
Our direct operation model, which have extensive coverage across China.
Kent now leverage its presence to not only identifying new partners, but potential network partners as well.
At the same time, our network partners are able to work alongside our direct model in all regions to increase coverage.
In regions that were previously exclusive for direct model, allowing us to better leveraging our network partners unique advantage.
Because both our models hit the market in terms of market share.
We believe additional synergy between the two will help us to extend our market leadership more correctly more flexibly and more efficiently.
We also continue make strong progress expanding our K coverage.
Notably during the quarter, we signed major brands, such as Pizza hut banker more and shelf home car EV car.
Continuous expansion of K remains an important component of expansion of our coverage as <unk> generally have higher level of foot traffic.
While the impact of Covid.
It does so to a lesser extent compared to smaller brands.
This makes case strategically important as they are impacted less during the period of Covid and has higher levels of potential during the period of normalized foot traffic.
Our key priority is to target the top <unk> within <unk>.
<unk> segment, such as chain store shopping mall transportation hub in the movie theaters.
By utilizing a top down approach, we are able to make more efficiently onboard smaller brands given our experience working with the larger ways.
Our ability to customize our service.
Into the <unk> experience and to provide high quality support also.
As key Differentiators and it's amongst us value added to case when.
When compared to our peers.
Going forward, we believe we will be able to leverage our existing strengths in the KAR secondly to accelerate our penetration into all types of <unk> throughout China.
In terms of competitive environment throughout last year and this year, we are seeing a general decline in competition and the direct model as our peers within the industry continue to significantly scale down their direct operation personnel in combination with the Covid outbreak.
And it's more significant impact of our peers, we see a lighter competitive environment for <unk> across all segments and regions.
This decrease in new signing incentive fee rate and the reduction in usage of fixed incentive fees for new signings will help us better navigate to our sales during the period of Covid impact.
Next is our initiatives on the operational efficiency front.
Efficiency has always being accrued crucial part of energy amongst us operating philosophy, and a key differentiator that set us apart from our peers within the industry.
The cost of impact of Covid on our topline we have to continuously optimize our fixed cost and expenses.
Improved efficiency greatly helped us reduce the efficiency of these fixed costs and expenses, which in turn lowers the proportion of fixed costs and expenses as a percentage of revenue.
Although the efficiency of our direct operation and network partners team remains market leading.
We continue to identify ways to increase their efficiency through measures such as backend towards improvement and model innovation.
Our business development personnel as coverage of <unk> continue to increase as we implement measures to unlock the efficiency potential through better system.
<unk> improved our Sop in.
In the first quarter.
Our bd's coverage of <unk> per person has increased 33% year over year.
Making a significant increase in terms of efficiency.
The implementation of innovative models, such as the leveraging of our direct operation team to attract more network partners will further unlock our efficiency potential as our business development personnel can have more avenues to contribute growth.
We also continue to make strides improving our asset efficiency through our power Bank optimization program and the launch of our new generation of cabinets. This year.
We continue to implement our power optimization program during the quarter.
Which provide to us.
The most efficient amount of power bank that should be in that given cabinet based on our historical matrix.
Additionally, we are also in the final testing phase of our new generation of power Bank cabinets, featuring designed external form factors and internal layout.
While these new cabinets, where have similar durability and features.
We will have a significantly lower capex.
These new cabinets were also significantly enhance our ability to acquire more high quality network partners.
<unk> reduces the payback period for our partners and unlock their growth potential.
We believe our continuous pursuit of efficiency, both in terms of employee and asset will significantly distinguished energy amongst his position within the industry and unlock the value for all of our stakeholders in long run.
In conclusion, we continue to face challenges from Covid in the first quarter of 2022, and it will face even more challenges in the second quarter, given the larger scale outbreaks stemming from Shanghai and Beijing.
Starting mid March Shanghai foot traffic was nearly halted due.
Due to the city wide lockdown imposed by the government.
As a result from mid March to May our revenue in Shanghai decreased by an average of 93%.
Beijing is similar to a less extent.
From late April to make our revenue in Beijing decreases by an average of 74%.
While these outbreaks challenging they're short term in nature.
Starting in June the recovery trend has been cleared for example in Shanghai in the first week of June .
Average revenue recovered to 27% compared to the same period of last year compared to the 7% revenue from mid March to me.
Despite ongoing outbreaks in Beijing and other regions, we are seeing time off time.
Our service remains unchanged and the regions impacted outbreaks quickly recovered to normalized levels in due time.
Overall, COVID-19 outbreaks cannot and will not be predictable and.
And that's why we have to focus on the fundamentals of the company. So that we can navigate ourselves during the period of lower foot traffic and capture the growth of the industry during the period of normalized for traffic.
We will continue to expand our coverage from our direct network partner models.
Expanding our <unk> coverage across all cities.
<unk> types and brands.
We will also continue to introduce innovative ways for our direct operation and network partner model to leverage their respective advantage to achieve higher levels of synergy between the two models.
We will relentlessly pursue higher efficiency, both in terms of our employee and efforts.
Going forward, we believe our efforts and coverage expansion and efficiency improvement will serve strong competitive advantage that sets energy amongst apart from the industry peers and.
And allow us to effectively capture the long term secular growth of China's mobile device charging service industry.
Thank you very much I'll now turn the call over to Mike <unk>, Our Chief Financial Officer for the financial highlights.
Thank you Mark.
Now, let me walk you through the financial.
Results in greater detail.
For the first quarter of 2020 Q revenues.
$137 1 million representing.
13%.
Decreased revenues from mobile device charging business.
<unk> down <unk>.
1% to 717 client center level and accounted for 97, 4% of our total revenues for the quarter.
The decrease was primarily attributable to the impact of COVID-19 during the fourth quarter of 2022.
Revenue from power Bank, South was down eight 3% a year.
So the $12 9 million and accounted for one 8% of our total revenues for the quarter.
Growth was primarily attributable to the impact of COVID-19 in the first quarter of 2000 and taking too.
Other revenues were up 25, 5% a year to save 4 million and the comdata for they are applying to 9% of our total revenue.
The increase was primarily attributable to the increased users advertisement efficiency and the new business initiatives.
Cost of around Neil what ought to focus on year to 100 end of 'twenty, Kevin safe, mainly for the first quarter of 2022.
The increase of cost of revenue was primarily due to the increased operational scale readout.
Depreciation cost.
Gross profit was down 15, 6% year to $609 5 million for the fourth quarter of 2022. The decrease was primarily due to the decrease.
Primarily due to the decrease in revenues from mobile device targeting.
Operating expenses for the fourth quarter of 2022, or 700, or eight 8 million up one 5% a year excluding share based compensation non-GAAP operating expenses were $702 1 million representing a year.
The increase of one 7%.
Research and development expenses for the first quarter of 2022.
Seven one lending up 71, 2% year. The increase was primarily due to the increase in personnel related expenses.
Sales and marketing expenses for the first quarter of 2022.
659 point.
7 million down their appliance or 8% year over year. The decrease was primarily due to the.
Entry fees and incentive fees paid to the location patent notice.
J J.
<unk> expenses or $27 4 million in the first quarter of 2022 up 12, 1% year.
The increase was primarily due to the increase in professional service and office rental expenses.
Loss from operations or <unk>.
$99 3 million and operating margin for the first quarter of 2022 was negative 13, 5% compared to two 8% in the same period last year.
Net loss.
Thanks for many in the first quarter of 2017 to Martin for the first quarter of 2022 was negative 13, 1%.
non-GAAP net loss.
Excluding share based compensation expenses was $89 7 million in the fourth quarter of 2022 compared to non-GAAP net income of $23. Two many in the same period last year.
As of March 31, 2022, the company had a cash and cash equivalents.
The cash and the start time investment of $2 8 billion.
Cash flow generated from operations for the first quarter of 2022.
And $16 9 million.
Capital expenditures for the first quarter of this year $110 7 million.
And then the master currently packed to generate is the tender and the $60 billion to 690 million of revenues for the second quarter of 2022.
It's not that this forecast reflects energy loss.
And the preliminary avail.
The industry and its operations, which is subject to change.
Thank you for listening we are now ready for your questions operator.
Thank you the question and answer session of this conference call will start in a moment.
We will take one question at this time from each caller.
If you have more than one question. Please.
Please request to join the question queue again after your first question has been addressed.
To ask a question now please press star one on your telephone keypad.
To withdraw your request please press the pound key.
Once again Thats star one for questions.
Our first question comes from the line of Charlie Chen from China.
Renaissance. Please ask your question.
Hi, Thanks management for taking my questions I have a question regarding your business model.
Can management elaborate a bit more than that.
Jay you mentioned during your prepared remark between the direct and the network partner model.
Company have any preference between the two models during COVID-19 going forward. Thank you.
Thanks, Charlie.
I will take this question.
Our service network expansion has always been driven by both the direct and the natural partner models here.
Historically, our direct operation model generally folks.
Higher tier cities, while our network partner model.
The lower ones.
For our direct model.
We're not generate very decent.
Economy in the lower tier city.
We generally select only one model for each region or city based on the city tier.
In the past few quarters, we have also launched a number of test regions that wrong on both models.
The results are very encouraging utilizing both models have superior growth rate.
Our direct model team is able to penetrate into relatively larger.
While our network partners can leverage existing relationships to extend our <unk> net.
Network.
Combined these two models work in cohesion to help energy amongst to expand its coverage network, which in turn help us increase our market share.
Both of these successful tests in pilot regions.
We are having the thought.
To open all locations that we cover both models in order to leverage the advantage of both models across China.
We believe our network partners unique relationship with will help us further penetrate into existing regions and also help us move into New Orleans.
In addition to the adoption of the both models in all regions.
We have launched a new program that synergize, the two models by giving our direct operation team the ability to identify and attract network partners to our platform.
Our direct operation model, which spans across China can now leverage its presence to not only identify new <unk> partners, but also the potential network of partners.
Because both our models leads the market in terms of market share. We believe additional synergy between the two will help us more rapidly.
And more flexibility to extend our market leadership.
And at the same time more closely aligning the interest between our direct and export partner models. Thank.
Thank you for the question.
Thank you next question comes from Vicky Wei from Citigroup. Please ask your question.
Good evening management. Thanks for taking my question, So with management provide some color on the monthly performance in the second quarter and by merchant categories.
You will notice any of the Calgary chunk of different merchants.
Such as catering.
And at this box.
Sure. Thanks for your question.
The general environment has been challenging due to continuous impact of Covid on our operation both in the first and second quarter of 2022 ought to say that the second quarter.
So far by end of May is even worse compared to the first quarter.
Most notably the outbreak in Shanghai.
Because our headquarters in Shanghai.
In March starting in March was more significant than our previous expectation.
During the first quarter of 2022.
Install revenue decreased by approximately 35% year over year as a result of these outbreaks due to the general in decrease of foot traffic in the second quarter various clusters of Covid outbreaks, primarily originated from Shanghai outbreak has a significant impact.
Starting in mid March Shanghai switch traffic was nearly completely halted almost none due to the city wide lockdown imposed by the government.
Our revenue in Shanghai.
As mentioned decreased.
By 93%.
From mid March to the end of May.
In terms of the company overall GMB, we were down approximately 37% in April and the 29% in May as this was a general surge in Covid cases across China.
Starting in June the recovery trend has been clear.
Actually encouraging across all regions impacted by the Shanghai, let outbreak in the first seven days of June we see Shanghai average revenue recovered up to 27%.
Low as it is Steve.
Covering the revenue during the same period of time, if you compare.
Other regions that do not have active COVID-19 cases are recurring at a similar trend.
In terms of pure categories, the impact of Covid generally more negatively impacts tourist driven such as transportation hubs hospitality and tourist attractions entertainment revenues are frequently required to close due to the government regulation if COVID-19 is within the <unk>.
Region, So they are down year over year as well.
While the <unk> that I just mentioned typically.
Are more impacted by Covid outbreaks. The general recovery trend is small region driven as opposed to <unk>.
Regions.
Have enable to contain.
Great.
Cover across py types as locked down or quarantine restrictions are removed.
Going forward, we're confident that the impact of Covid will eventually diminish as containment is achieved in all regions. Thank.
Thank you.
Thank you. Our next question comes from Robert <unk> from Goldman Sachs. Please go ahead.
Thank you Hi, Morris.
So.
But can you give us more insight on the competitive environment in the first half of this year and how do we anticipate.
Incentive fee rate going forward into the second half. Thank you.
I will take your questions.
In terms of the competitive environment throughout 2021 and in 2022, we are seeing.
General decline in compensation and Theres that direct model as our peers in the industry continue to significantly scale down their direct operation personnel.
We currently operate the largest and most experienced team and a direct model in the industry.
This direct model team.
Is instrumental in helping us.
Achieve rapid market share increase.
The initial call it outbreak in first half of 2022.
With our industry peers scaling down with their direct operation team, even a long term focus and have maintained our dual motor team.
At similar scale anticipation.
Our rate of call it.
In terms of the incentive fee rate the decrease in Appalachia and has benefited us as our new signing generally have decreased incentive fee as a percentage of revenue compared to our blended rate.
This means that our incentive fee rate going down as a percentage of revenue also yeah.
<unk> doubled our usage of lateral.
Thank you. Please ask the new thing Ravi how fixed are your entry fee.
We don't provide together under our incentive fee rate for the future.
<unk> for the new thing and the decreased utilization.
Our fixed fees are positive for our financials going forward. Thank you for your collection.
Alright. Thank you we are now approaching the end of the conference call I will now turn the call over to energy months as CFO Maria Zhang for closing remarks.
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 <unk>.
Many of the path and we look forward to speaking with you in the coming Matt. Thank you.
Alright. Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.
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Yes.
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Okay.
Yeah.
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Hello, and thank you for standing by for Energy Monsters. Two tells them 22 first 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.
And I'd like to turn the meeting over to your host for today's conference co director of Investor Relations Hudson. She's. Thank you. Please go ahead.
Thank you welcome to our 2022 first quarter earnings Conference call.
With me on the call today are Marc Hi, Energy Monster, Chairman and Chief Executive Officer, and Maria Shields, Chief Financial Officer for today's agenda management will discuss business updates operation highlights and financial performance for the first quarter of 2022.
Before we continue I refer you to our Safe Harbor statement in the earnings press release, which apply 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'd now like to turn the call over to our chairman and Chief Executive Officer, Mark size for the business and operations.
Thank you Hans and good day, everyone welcome to our 2022 first quarter earnings call.
The first quarter of 2022 has been a challenging quarter for energy monster.
In light of the continuous outbreak of Covid in regions, such as Shenzhen, Beijing, Tianjin, Hangzhou and tungsten throughout the quarter and especially due to the significantly worse than expected outbreaks in Shanghai, starting mid March which radiated.
Towards outreach other regions for.
For example, the outbreak in Tianjin in January resulted in a 67% decline in revenues within the city.
During the 15 days period after the initial case.
Hmm does generate outbreak resulted in a 58% decline.
In March 51% chunk.
<unk> March outbreak.
86%.
And an outbreak in Shanghai, starting mid March resulted in a 17% decline in March.
The frequency and size of the Covid outbreaks in the first quarter of 2022 is increasing compared to 2021.
These COVID-19 outbreaks resulted in a significant decline in offline foot traffic.
People are more likely to stay at home.
And offline locations are forced closed due to lockdown measures.
The outbreaks are resulting in a general decline in offline user foot traffic across the board.
Active late impacting almost all brands with an offline presence.
These outbreaks continue to adversely affect the foot traffic to offline.
In both regions of the outbreak and the surrounding regions as well.
Which in return results in lower foot traffic too.
Where our cabinets are placed.
During the first quarter RPC.
Same store revenue decreased by approximately 35% year over year as a result of the general decrease of foot traffic.
Despite the impact we continue to stay long term oriented and focused on laying the ground work for expanding our market leadership.
We continue to make strides in expanding our <unk> network.
<unk> reached 851000 as of the end of the first quarter of 2022.
Increasing by over 20% year over year.
With the increase in coverage our service becomes available to more customers across China.
Accumulate.
Registered users reached.
$299 million as of the end of the first quarter in.
Implying the acquisition of 12 million, new registered users and increasing by over 25% year over year.
We also continue to reduce both fixed and a variable incentive fees to better mitigate against fluctuations in revenue, resulting from COVID-19 outbreaks, notably incentive fees as a percentage of revenue for.
For new signings continue to trend down in light of diminishing competition.
Lower incentive fees and decrease in usage of fixed incentive fees will eventually help us lower our blended incentive fee rates.
And decrease the impact of exterior events, such as Covid outbreaks on our operation.
Yes.
While we continue to be impacted by Covid, we remain confident in the long term development of the market.
The general demand of our service remains unchanged as regions coming out of Covid impact quickly recover within one to two months after containment.
That's why we continue to uphold our long term perspective in terms of our core strategies during COVID-19.
We will continue increasing our POI network coverage through both our direct and network partner models.
As well as launching innovative ways for the two models to work together to further expand our market presence.
We also continue to innovate to increase our market leading efficiency.
Programs, such as our power Bank optimization program and the launch of a new generation of cabinets will unlock our asset efficiency capabilities.
We are confident that our innovative initiatives will further help us both cement our competitive advantage and capture the growth of Chinas mobile device charging service industry.
Now, let me walk you through our core strategies and coverage and efficiency.
First is the coverage of our service.
We continue to expand the coverage of our service.
Through a combination of our direct operation and network partner models.
Our <unk> coverage and our user base continues to increase despite the headwinds set forth by Covid outbreaks.
In terms of direct operation model, our BD personnel continue to spearhead our coverage expansion, primarily a higher tier tier cities.
Doing COVID-19 the expansion rate of <unk> has significantly decreased compared to that of a normalized period.
The declining offline traffic to make a large number of potential <unk>.
And adequate for coverage in terms of our profitability requirement.
While this has resulted in a decrease in potential.
For our coverage during the period of <unk>.
Impact.
But it also resulted in a general reduction in incentive fee rates for new signings.
After the outbreak is contained the potential Paul is restored.
Offline traffic within the region is normalized.
Because our incentive system aligns the interest of our BD with that of the company.
We continue to maintain a healthy and efficient increase in coverage even during period of Covid outbreak.
On the other side of the coverage expansion is our network partner model.
Through a series of marketing campaigns and implementation of the new channels for upon acquisition, such as telemarketing and online acquisition tailored to attract high quality network partners to energy Monster.
We continue to rapidly increase our network partner count.
As the end of the first quarter of 2022, we have a network of over 1003 hundred network partners spanning across China.
Our network partner count is up by over 180% year over year, and 30% quarter over quarter as we accelerate our pace for attracting high quality network partners.
These network partners generally have previous experience working with <unk> within a given region set.
Such such such making them highly efficient partners for the expansion of our service network.
The number of operated under the network partner model as a result increased from 38% as of the end of the fourth quarter last year to 38, 9% as end of the first quarter. This year.
We also launched a series of innovative initiatives.
Leveraging the advantage of direct operation and network partner models.
Initiatives, such as the opening of all region to both models.
And leveraging our direct operation team to attract new network partners allow us to extract higher level of synergy between the two core models.
Our direct operation model, which have extensive coverage across China.
Kent now leverage its presence to not only identifying new partners, but potential network partners as well.
At the same time, our network partners are able to work alongside our direct model in all regions to increase coverage.
In regions that were previously exclusive direct model, allowing us to better leveraging our network partners unique advantage.
Across both our models the market in terms of market share.
We believe additional synergy between the two will help us to extend our market leadership more correctly more flexibly and more efficiently.
Yes.
We also continue make strong progress expanding our <unk> coverage.
Notably during the quarter, we signed major brands, such as Pizza hut banker more and shelf home car EV car.
Continuous expansion of K remains an important component of expansion of our coverage as <unk> generally have higher level of foot traffic.
While the impact of Covid.
It does so to a lesser extent compared to a smaller brands.
This makes case strategically important as they are impacted less during the period of Covid and has higher levels of potential during the period of normalized food traffic.
Our key priority is to target the top <unk> within <unk>.
<unk> segment, such as chain store shopping mall transportation hub in the movie theaters.
By utilizing a top down approach, we are able to make more efficiently onboard smaller brands given our experience working with the larger ways.
Our abilities to customize our service that <unk> into the <unk> experience and to provide high quality support also.
As key Differentiators.
It's amongst us value added two case when.
When compared to Lps.
Going forward, we believe we will be able to leverage our existing strengths in the KAR secondly to accelerate our penetration into all types of <unk> throughout China.
In terms of competitive environment throughout last year and this year, we are seeing a general decline in competition and the direct model as our peers within the industry continue to significantly scale down their direct operation personnel incumbent.
In combination with the Covid outbreaks and it's more significant impact of our peers, we see a lighter competitive environment for <unk> across all segments and regions.
This decrease in new signing incentive fee rate and the reduction in usage of fixed incentive fees for new signings will help us better navigate to ourselves during the period of Covid impact.
Next is our initiatives on the operational efficiency front.
Efficiency has always being accrued crucial part of vantage amongst us operating philosophy, and a key differentiator that set us apart from our peers within the industry.
Because of the impact of Covid on our top line, we have to continuously optimize our fixed cost and expenses.
Improved efficiency greatly helped us reduce the efficiency of these fixed costs and expenses.
Which in turn lowers the proportion of fixed costs and expenses as a percentage of revenue.
Although the efficiency of our direct operation and network partners team remains market leading.
We continue to identify ways to increase their efficiency through measures such as back end toward improvement and model innovation.
Our business development personnel as coverage of <unk> continue to increase as we implement measures to unlock the efficiency potential through better system and improved SLP.
In the first quarter.
Our bd's coverage of <unk> per person has increased 33% year over year.
Making a significant increase in terms of efficiency.
The implementation of innovative models, such as the leveraging of our direct operation team to attract more network partners will further unlock our efficiency potential as our business development personnel can have more avenues to contribute growth.
We also continue to make strides improving our asset efficiency through our power Bank optimization program and the launch of our new generation of cabinets. This year.
We continue to implement our power optimization program during the quarter.
Which provide to us.
The most efficient amount of power bank that should be in that given cabinet based on our historical matrix. Additionally.
Additionally, we are also in the final testing phase of our new generation of power Bank cabinets, featuring designed external form factors and internal layout.
While these new cabinets, where have similar durability and features.
<unk> has a significantly lower capex.
These new cabinets were also significantly enhance our ability to acquire more high quality network partners.
Reduces the payback period for our partners and unlock the growth potential.
We believe our continuous pursuit of efficiency, both in terms of employee and asset will significantly distinguished energy amongst his position within the industry and unlock the value for all of our stakeholders in long run.
In conclusion, we continue to face challenges from Covid in the first quarter of 2022, and it will face even more challenges in the second quarter, given the larger scale outbreaks stemming from Shanghai and Beijing.
Starting in mid March Shanghai's foot traffic was nearly halted.
Due to the city wide lockdown imposed by the government.
As a result from mid March to May our revenue in Shanghai decreased by an average of 93%.
<unk> is similar to a less extent.
From late April to make our revenue in Beijing decreases by an average of 74%.
While these outbreaks are challenging they're short term in nature.
Starting in June the recovery trend has been creating for example in Shanghai in the first week of June average revenue recovered to 27% compared to the same period of last year compared to the 7% revenue from mid March to me.
Despite ongoing outbreaks in Beijing and other regions, we have seen time after time.
Our service remains unchanged and the regions impacted outbreaks quickly recovered to normalized levels in due time.
Overall COVID-19 outbreaks cannot.
Not be predictable.
And that's why we have to focus on the fundamentals of the company. So that we can navigate ourselves during the period of lower foot traffic and capture the growth of industry during the period of normalized for traffic.
We will continue to expand our coverage from our direct network partner models.
Extending our <unk> coverage across all cities.
<unk> types and brands.
We will also continue to introduce innovative ways for our direct operation and network partner model to leverage their respective advantage to achieve higher levels of synergy between the two models.
We will relentlessly pursue higher efficiency, both in terms of our employee and assets.
Going forward, we believe our efforts and coverage expansion and efficiency improvement will serve strong competitive advantage that sets.
Energy amongst apart from the industry tears and.
And allow us to effectively capture the long term secular growth of China's mobile device charging service industry.
Thank you very much I'll now turn the call over to Mike <unk>, Our Chief Financial Officer for the financial highlights.
Thank you Maher.
Now, let me walk you through the financial.
Results in greater detail.
For the first quarter of 2020 Q revenue.
137, 1 million representing 13%.
Decreased revenues from mobile device charging business was down one.
1% to 717, <unk> seven nano and accounted for 97, 4% of our total revenue for the quarter.
The decrease was primarily attributable to the impact of COVID-19 during the fourth quarter of 2022.
Revenue from power Bank, South was down eight 3% a year.
So the $12 nine milling and accounted for one 8% of our total revenue for the quarter.
<unk> was primarily attributable to the impact of COVID-19 in the first quarter of 2000 and taking too.
Our revenues were up 25, 5% all year to save 4 million and the content for their applying to 9% of our total revenue.
The increase was primarily attributable to the increased users advertisement efficiency and the new business initiatives.
Cost of around <unk>, 4% year over year to 127 6 million for the first quarter of 2022.
The increase of cost of revenue was primarily due to the increase in operational scout readout.
In depreciation cost.
Gross profit was down 15, 6% year to $609 5 million for the fourth quarter of 2022. The decrease was primarily due to the.
Primarily due to the decrease in revenues from mobile device tagging.
Operating expenses for the fourth quarter of 2022, or 700, or eight 8 million up one 5% a year excluding share based compensation non-GAAP operating expenses were $702 1 million representing.
The increase of one 7%.
Research and development expenses for the first quarter of 2022.
Seven one learning up 31, 2% year. The increase was primarily due to the increase in personnel related expenses.
Sales and marketing expenses for the first quarter of 2022 or 659 point.
$7 million down their appliance or 8% year over year. The decrease was primarily due to the decrease in.
Entry fees and the incentive fees paid to the location pattern.
General and administrative expenses or $27 4 million in the first quarter of 2022 up two 1% year. The increase was primarily due to the increase in professional service and office rental expenses.
Loss from operations was $99 3 million and operating margin for the first quarter of 2022 was negative 13, 5% compared to two 8% in the same period last year.
Net loss was $98 for many in the first quarter of 2017 to margin for the fourth quarter of 2022 was negative $13 one.
Yes.
non-GAAP net loss.
Excluding share based compensation expenses.
$89 7 million in the fourth quarter of 2022 compared to non-GAAP net income.
23, <unk> to many in the same period last year.
As of March 31, 2022, the company had a cash and cash equivalents restricted cash and the stock term investments of $2 8 billion.
Cash flow generated from operations for the first quarter of 2022.
$160 9 million.
Capital expenditures for the first quarter of this year, well 100, pinpoint and $7 million.
And the demand currently expect to generate is the tender and the $60 billion to 690 million of revenues for the second quarter of 2022.
But it's not back at forecast reflects energy Laughter's current and the preliminary Vale.
The industry and its operations.
Is subject to change.
Thank you for listening we are now ready for your questions.
Peter.
Thank you the question and answer session of this conference call will start in a moment, we will take one question at this time from each caller.
If you have more than one question. Please.
Please request to join the question queue again after your first question has been addressed.
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Once again Thats star one for questions.
Our first question comes from the line of Charlie Chen from China.
Renaissance. Please ask your question.
Okay.
So management for taking my questions I have a question regarding your business model, So Ken management elaborate a bit more than that.
G that you mentioned during your prepared remarks between the direct and the network partner model.
Company have any preference between the two models during COVID-19 going forward. Thank you.
Thanks, Charlie.
I will take this question.
Our service network expansion has always been driven by both the direct and the network partner models here.
Historically, our direct operation model generally focus on the higher tier cities, while our network partner model.
The lower ones.
For our direct model.
We're not generate very decent economy in the lower tier city.
We generally select only one model for each region or city based on the city tier.
In the past few quarters, we have also launched a number of test regions that wrong on both models.
A very encouraging utilizing both models have superior growth rate.
Our direct model team is able to penetrate into relatively larger <unk>, while our network partners can leverage their existing relationships to extend our py.
Network.
Combined these two models work in cohesion to help energy amongst to expand its coverage network, which in turn help us increase our market share.
Of the successful tests in pilot regions.
We are having the thought to open all locations that we cover to both models in order to leverage the advantage of both models across China.
We believe our network partners unique relationship with will help us further penetrate into existing regions and also help us move into New Orleans.
In addition to the adoption of the both models in all regions. We have launched a new program that synergize. The two models by giving our direct operation team the ability to identify and attract network partners to our platform.
Our direct operation model, which spans across China.
Can now leverage its presence to not only identify new <unk> partners, but also the potential network partners.
Because both our modest leads the market in terms of market share.
We believe additional synergy between the two will help us more rapidly.
And more flexibility to extend our market leadership.
And at the same time more closely aligning the interest between our direct and export partner models. Thank.
Thank you for the question.
Thank you next question comes from Vicky Wei from Citigroup. Please ask your question.
Good evening management. Thanks for taking my question, So with management provide some color on the monthly performance in the second quarter and by merchant categories.
You will notice any of the covey chunk of different merchants.
Such as catering Sydney mode and other spots.
Yes.
Sure. Thanks for your question.
The general environment has been challenging due to continuous impact of Covid on our operation both in the first and second quarter of 2022 ought to say that the second quarter.
So far by end of May is even worse compared to the first quarter.
Most notably the outbreak in Shanghai.
Because our headquarters in Shanghai.
In a march starting in March was more significant than our previous expectation.
During the first quarter of 2022 same store revenue decreased by approximately 35% year over year as a result of these outbreaks due to the general in decrease of foot traffic in the second quarter various clusters of Covid outbreaks, primarily originated from Shanghai.
Highest outbreak has a significant impact.
Starting in mid March Shanghai foot traffic was nearly completely halted almost none due to the city wide lockdown imposed by the government.
Our revenue in Shanghai.
Just mentioned decreased.
By 93%.
From mid March to the end of May.
In terms of the company overall GMB, we were down approximately 37% in April and the 29% in May as this was a general surge in Covid cases across China.
Starting in June the recovery trend has been clear.
Actually encouraging across all regions impacted by the Shanghai, let I'll break in the first seven days of June we see Shanghai average revenue recovered up to 27%.
Low as it is Steve.
Covering the revenue during the same period of time, if we compare.
Other regions that do not have active COVID-19 cases are recurring at a similar trend.
In terms of pure categories, the impact of Covid generally more negatively impacts tourist driven such as transportation hubs hospitality and tourist attractions entertainment revenues are frequently required to close due to the government regulation if COVID-19 is within the region.
So they are down year over year as well.
While the <unk> that I just mentioned typically.
Are more impacted by Covid outbreaks, the general recovery trend, it's more region driven.
As opposed to <unk>.
Regions that's.
Have enabled to contain.
Rates recover across py types, as lockdown or quarantine restrictions are removed.
Going forward, we are confident that the impact of Covid will eventually diminish as containment is achieved in all regions. Thank.
Thank you.
Thank you. Our next question comes from Ronald Keung from Goldman Sachs. Please go ahead.
Thank you Hi, Morris Maria in Hudson.
But can you give us more insight on the competitive environment in the first half of this year and how do we anticipate.
Incentive fee rate going forward into the second half. Thank you.
Thanks.
To take your questions.
Terms of the competitive environment throughout 2021, and in 2022, <unk> seen a general decline in compensation and there is a direct model.
Our peers in the industry continue to significantly scale down their direct operation personnel.
We currently operate the largest and most experienced team and a direct model in the industry.
This direct model team.
Is instrumental in helping us.
Achieved a record market share increase.
And there the initial call it outbreak in first half of 2022.
With our industry peers scaling down with their direct operation team, we remain long term focus and have maintained our dual motor team at similar scale.
Station.
Calorie of call it.
In terms of our incentive fee rate the decrease in compensation and has benefited us as our new signing generally have.
Great. Thank you.
As a percentage of revenue compared to our blended rate.
This means that our incentive fee rate going down as a percentage of revenue also yeah more widely adopt mobile usage of level.
If any of these as a new thing Randy how fixed are your entry fee.
We don't provide together under the incentive fee rates for the future.
<unk> for the new thing and the decreased utilization.
Our fixed fees are positive for our financials going forward. Thank you for your collection.
Alright. Thank you we are now approaching the end of the conference call I will now turn the call over to energy months as CFO Maria Zhang.
<unk> remarks.
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 convenience the path and we look forward to speaking with you in the coming months. Thank you.
Alright. Thank you for your participation in today's conference. This concludes the presentation you may now disconnect good day.