Q1 2024 NaaS Technology Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Naas First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode.
Ladies and gentlemen, thank you for standing by and welcome to the NAS first quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in listen only mode.
Operator: I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, Director of Investor Relations. Thank you, and please go ahead.
Must advise you that this conference is being recorded I would now like to turn the conference over to your first speaker today, Mr. John Wang Director of Investor Relations. Thank you and please go ahead.
John Wang: Thank you, operator. Hello, everyone, and welcome to MaaS's first quarter 2024 earnings conference. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer; Ms. Vivienne Wu Ye, our Chief Strategy Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights, Ms. Wu will discuss our operating results, and Mr. Wu will go through our financial highlights.
Thank you operator, Hello, everyone and welcome to <unk> first quarter 2024 earnings Conference call.
The company's results were issued earlier today and are posted online.
John Wang: Joining me on the call today are Ms. Cathy long down our Chief Executive Officer, Ms. Vivian Liu our.
John Wang: Our chief strategy Officer, and Mr. Alex <unk>, our president and Chief Financial Officer.
Alex: For today's agenda, Mr. Wang will provide an overview of our recent performance and highlights.
Yiran Liu: MS <unk>, who will discuss our operating results and Mr. Liu will go through our financial highlights.
John Wang: Before we continue, I refer you to our Safe Harbor Statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussions of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measure. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to our CEO, Ms. Kathy Wang Yang. Kathy, please go ahead. Hello everyone.
Yiran Liu: Before we continue I refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make forward looking statements.
Yiran Liu: Also please note that this call includes discussions of certain non I F. R. S financial measures. Please refer to our earnings release, which contains a reconciliation of now I F. R. S measures to the most comparable I FRS measures.
Yiran Liu: Finally, please note that unless otherwise stated all figures mentioned during this conference call are in RMB.
Wang Yang: Hello, everyone. I'm Naas CEO, Cathy Wang Yang. It's my pleasure to share Naas' first quarter 2024 earnings results with you and discuss our recent development. 2024 is off to a great start, showing significant growth across our business. In the first quarter, we achieved revenue of RMB 96.24 million, a 156% increase over the year.
Yiran Liu: I will now turn the call over to our CEO Ms. Kathy Wong Yao Kathy. Please go ahead.
Speaker Change: Hello, everyone I'm not the C O Cathy long now it's my pleasure to Sharon that's what's called 224 earnings results with you and discuss our recent developments.
Wang Yang: Our growth margin expanded by 8.4 percentage points year over year to 25%. These financial achievements reflect our strong operational execution and the power of our strategic steps making significant progress as we transform our business into one with lucrative and diversified revenue streams across our comprehensive energy solution offerings. Our fundamental capabilities in mobile connectivity have laid a solid foundation for our overall competitiveness; enhancement in skill and operational efficiency have enabled us to achieve positive gains at both the GTR and NTR levels.
Speaker Change: They tend to fall is off to a great start show significant growth across our business and the foot culture right like channel revenue of all M. B notes. It says point tend to fall meeting.
Speaker Change: 166% increase year over yet I will go to margin is patented by H pond, just small puts and takes you're part yeah, Oh, yeah, two contexts biocryst edge its.
Speaker Change: These financial achievements reflect our strong operational execution and the power of I'll, let Scott take that.
Speaker Change: Making significant progress.
Speaker Change: They trust our business into one waste language you added that would decide to revenue its Jim.
Scott: Of course, our combo comprehensive solution offerings.
Scott: Our fundamental capabilities in mobile connects to watching how laid a solid foundation for our Oh It all come patch. It you are not.
Scott: In Hoffman is scale and operational efficiency, how in April off to achieve positive again, I suppose the G T R and NCR language.
Wang Yang: Simultaneously, we have actively empowered charging pile operators with our ecosystem and continuously delivered innovation and energy solutions. This dual engine approach not only drives revenue diversification but also strengthens our position in the broader comprehensive energy market. While we have mentioned steady revenue growth, we have also focused on optimizing our cost structure. The cost reduction and efficiency strides we have made are translating directly to our bottom line, and we are on track to turn our single month EBITDA positive by the end of this year.
Same tendency, where how actually empowering charging pile operators with our ecosystem and are continuously allowing innovation on the energy solution.
Scott: It's still an approach now to old age outs revenue diversification, but also stretches our position in the browser a comprehensive energy market.
Scott: While Wilhelm Manchester I did revenue grows.
Scott: Well also focus on optimizing our cost structure.
Scott: The cost reduction and efficiencies to drive through warehouse made are translating directly to our bottom line and we all strive to chin our single months I've made it part of the two by the end of this year.
Wang Yang: In summary, the first quarter of 2024 has set a strong foundation for the rest of the year, with our robot financial performance, Strategic Advancement in Mobility Connectivity, and Continued Improvement in Operating Efficiency. We are well positioned for sustained growth and long-term value creation. We have established a unique dual engine model in the charging service industry chain, comprising both charging services and energy solutions. Thank you for your continued support and trust in Naas. We look forward to continuing our journey of innovation and leadership in the new energy sector. Now I will turn things over to Ms. Wu, our CSO, for a closer look at our operating results.
Scott: In summary, the first culture of change I tend to fall hydroxide, a strong foundation for the rush to after yet.
Scott: With our robust financial performance so judge Jake.
Scott: What's meant immortality connects to what she and the continued improvements in operating efficiency we.
Scott: We are well positioned for sustained growth and long term value creation.
Jake: Well, how I've published a unique deal and your model and the charging still is in that chain.
Jake: Comprising both charge and so it says on the on the solutions.
Speaker Change: Thank you for your continued just to coach and trusting us well.
Speaker Change: We look forward to continue our journey of innovation and the leadership and the new on the job sector.
MS. Ooh: Now I will turn things over to MS. Ooh, Our C. S O for a closer look at our operating results.
MS. Ooh: Yeah.
MS. Ooh: Yes.
MS. Ooh: Okay.
Vivienne Wu: Thanks Cathy and hello everyone. I'd like to start by highlighting our recent developments. Firstly, our photovoltaic operation in Hong Kong continues to drive revenue growth, and we have expanded our market share in the region. This growth stems from increasing demand as well as our ability to capitalize on emerging market opportunities.
Ooh: Thanks, Kathy and Hello, everyone I'd like to start by highlighting our recent developments.
Speaker Change: Our Solta Lojack operations, a Hong Kong P. G that you drive revenue growth and we expanded our market share in the region. These gross savings from increasing demand as well as our ability to capitalize on emerging market opportunity.
Vivienne Wu: Starting in April, we began piloting our EV services in Hong Kong, leveraging our established capabilities in the EPC and local community resources of the PV business. We're now offering EPC services for private charging piles in residential areas, along with selling and installing our company-certified European standard charges, effectively repurposing our existing capability. And in March 2024, we established a significant partnership with Jiu Ren New Energy Technology, one of the largest CPOs in the Central China region.
Speaker Change: Starting in April we began piloting our E. D. So this is in Hong Kong, leveraging our established capabilities E. J E T C and local community resources of the PV business. We're now offering E. D. C studies, each store private charging piles in residential areas along.
Speaker Change: With Sony and installing our company certified European standards charges, effectively we proposing our existing capabilities and.
Speaker Change: In March 'twenty 'twenty four we established a significant partnership with Joe when you add the technology one of the largest C. P O in the Central China region.
Vivienne Wu: In this collaboration, we provide comprehensive services, including site selection, hardware supply, and asset operation. The successful signing and execution of these projects are crucial for our company for several reasons. Firstly, this initiative marks the largest-scale application of our AI analytics model in business operations, where we provide site selection services to help operators secure optimal locations. Secondly, we facilitate the sale of charging piles and integrate these operations with our online systems to enhance the compatibility between our hardware and software.
Speaker Change: In this collaboration will provide comprehensive strategy, including site selection hardware supply and assets operation.
Speaker Change: Successful shiny and execution of these projects are crucial for our company for several reasons, especially this initial teeth marks the largest scale application of AI and electric Moto E dishes operations.
Speaker Change: Well, we provide site selection strategies to help operators to optimal locations.
Speaker Change: With the city type of charging piles and integrate these operations with our own life systems to enhance compatibility between hardware and software.
Vivienne Wu: Thirdly, by leveraging the synergy between our online and offline activities, we can thereby enhance the efficiency of site operations. This approach not only ensures cost recovery for operators but also enables us to share in additional revenue. We have also continued to focus intensely on technological development and have joined the Open Invention Network, OIM, the largest patent non-aggression community aimed at protecting open source. As of March 31, 2024, Naas has filed over 250 patent applications across more than 10 countries and regions, including the United States, the United Kingdom, Norway, Japan, Thailand, Brazil, and Australia.
Speaker Change: Suddenly the leveraging the synergy between our online and offline activities, we can thereby enhance the efficiency of site equation.
Speaker Change: This approach not only in shoes, Costa recovery ultra wages, but also enables us to shell in additional revenue.
Speaker Change: We also continued to focus intensely on technological developments and have joined the open innovation network O I N largest a pattern non equation community and are protecting.
Speaker Change: Protecting open source.
Speaker Change: As of March 31st 2020, full NAS was filed over 250 patent applications across more than 10 countries and regions, including the United States, The United Kingdom, Norway, Japan, Thailand, Brazil, and Australia.
Vivienne Wu: Our active participation in OIN highlights our dedication to leveraging open source technology to enhance our charging infrastructure network. This move is a critical part of our strategy to boost our intellectual property and R&D capabilities, which is crucial for refining our AI models and analytical capacity. In conclusion, our initiatives in Hong Kong, strategic partnerships, and focus on technology and IP demonstrate our proactive approach to growth and innovation. And these efforts ensure that NASC remains at the forefront of the new energy sector, driving the development of advanced sustainable energy solutions. And with that, I'll give the floor to our CFO, Alex, for a deeper dive into our financials.
Speaker Change: Our active participation in O I and highlights our dedication to leveraging open source technology to enhance our charging infrastructure networks.
Speaker Change: This move is a critical part of our strategy to boost our intellectual patchy and R&D capability, which is crucial for refining our AI models and on electrical capacity.
Speaker Change: In conclusion, our niche achieved in Hong Kong strategic partnerships I'm focused on technology, and IP demonstrate our proactive approach to growth and innovation.
Speaker Change: And this asset and shoot that NAS remains after the school from after you allergy sector driving the development of advanced sustainable energy solutions.
Speaker Change: And with that I'll give the floor to our CFO, Alex for a deeper dive into our financials.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Alex Wu: Thanks, Vivienne. I'll start with a review of our results for the first quarter of 2024. In the first quarter, revenue increased by a remarkable 166% year over year, reaching RMB 96.2 million. This growth was primarily fueled by our evolving mobility connectivity business and expanded diversified revenue stream. Additionally, our revenue from our energy solutions business increased by 334% year over year to RMB 47.2 million, owing largely to our sustained efforts in delivering comprehensive energy solutions, including renewable energy generation, energy management, and storage solutions.
Alex: Thanks, Steve and I'll start with a review of our results for the first quarter of 2024.
Alex: In the first quarter revenue increased by a remarkable 166% year over year, reaching RMB $96 2 million.
Alex: This growth was primarily fueled by our evolving mobility connectivity business and expanded diversified revenue streams.
Ali our revenue from our energy solutions business increased by 374% year over year to RMB $47 2 million.
Alex: In largely to our sustained efforts.
Alex: In delivering comprehensive energy solutions, including renewable energy generation energy management and storage solutions.
Alex Wu: Our sustained revenue growth underscores the strength and viability of our business model and the increasing demand for our services. In the first quarter of 2024, we considerably advanced our operation. Specifically, the charging volumes through the Naas network increased 19% year-over-year to 1,216 gigawatt hours.
Alex: Our sustained revenue growth underscores the strength and the viability of our business model and the increasing demand for our services.
Alex: In the first quarter of 2020 full we considerably advanced all operations.
Alex: Specifically, the charging volumes through <unk> network increased 19% year over year to 1216 gigawatt hours.
Alex Wu: The gross transaction value increased 17% to RMB 1.2 billion, and the number of orders surged by 13% to 50.4 million. These metrics highlight our central role in expanding the new energy ecosystem while bolstering our revenue. Alongside our revenue growth, our strategic focus on cost control optimization boosted our gross profit in the first quarter, which increased four times year over year to RMB 24.3 million. Our gross margin also improved to 25.3%, up by 8.4 percentage points year over year, reflecting our enhanced operational efficiency and the positive impact of our strategic pricing initiative.
The gross transaction value increased 17% to RMB, one 2 billion.
Alex: And the number of orders surged by 13% to $50 4 million.
Alex: These metrics highlight our central row, you're expanding the new energy ecosystem.
Alex: While bolstering our revenues.
Alex: Along side, our revenue growth, our strategic focus on cost control optimization boosted our gross profit in the first quarter.
Alex: Which increased four times year over year to RMB $24 3 million.
Alex: Our gross margin also improved to 25, 3% up by 8.4 percentage points.
Alex: Year over year.
Alex: Reflecting our enhanced operational efficiency and the positive impact of our strategic pricing initiatives.
Alex Wu: We also made considerable progress in refining our online operational efficiency, which we can see in our improved growth and net take rate. Our ongoing efforts increased our GTR and turned our NTR positive beginning in January, for a record high NTR witnessed in April. These achievements emphasize our leadership in operational excellence and customer engagement. We remain committed to improving our cost controls while maintaining steady revenue growth and continuously reducing loss. This quarter, we successfully decreased our operating expenses as a percentage of revenue to 224%, marking a decrease of 107 percentage points year-over-year and 421 percentage points sequentially.
Alex: We also made considerable progress in refining our own line of operational efficiency.
Alex: Which we can see our improved draws and next takeaways.
Alex: Our ongoing efforts increased our GTR and turned our NTR cognitive beginning in January.
Alex: For a record high NTR witnessed in April.
Alex: These achievements I emphasize our leadership you know operationally.
Speaker Change: Excellent and customer engagement.
Speaker Change: We remain committed to improving our cost controls, while maintaining steady revenue grows continuously reducing losses.
This quarter, we successfully decreased our operating expenses as a percentage of revenue to 224%.
Speaker Change: Marking a decrease of 107 percentage points year over year, and 421 percentage points sequentially.
Alex Wu: Our disciplined approach to expanding revenue and strategic cost reductions set us firmly on the path to reach our goal of positive EBIT by the end of 2024. Reductions in labor costs and incentives, coupled with increased transaction volumes that offer operating leverage, have enabled us to effectively continue reducing costs. With this powerful combination, we are actively narrowing our losses and advancing our financial sustainability goals. In conclusion, this quarter has marked a significant milestone in our journey toward becoming a global leader in new energy asset management.
Speaker Change: Our disciplined approach to expanding revenue and strategic cost reductions set us firmly on pace to reach our goal of positive EBITDA by the end of 2024.
Speaker Change: The reduction in labor costs and incentives.
Speaker Change: Coupled with increased transaction volumes that all for operating leverage has enabled us to effectively continue reducing costs.
Speaker Change: With this powerful combination we are actively narrowing our losses and advancing our all financial sustainability goals.
Speaker Change: In conclusion this quarter has marked a significant milestone in our journey towards becoming a global leader in new energy asset management.
Alex Wu: With strong revenue growth, improved profitability, and strategic cost reductions, we are well positioned to continue our sustained growth in the new energy sector. This concludes our prepared remarks for today. Operator, we're now ready to take questions. Thank you.
Speaker Change: With strong revenue growth improved profitability and the street did your cost reductions we are well positioned to continue our sustained growth in the new energy sector.
Speaker Change: This concludes our prepared remarks for today.
Speaker Change: Operator, we're now ready to take questions. Thank you.
Operator: Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you are on a speakerphone, please pick up the handset to ask your question. For the benefit of all participants on today's call, if you wish to ask your question to Management in Chinese, please immediately repeat your question in English.
Speaker Change: Thank you if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two if you're on a speakerphone. Please pick up the handset to ask a question for.
Speaker Change: For the benefit of all participants on today's call. If you wish to ask a question to management in Chinese. Please immediately repeat your question in English.
Operator: We will just pause for a moment to allow questioners to enter the queue. Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your first question comes from Zofang.
Speaker Change: We will just pause for a minute to allow questions to enter the queue.
Speaker Change: Once again, if you wish to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Your first question comes from sort of thing.
Speaker Change: Hi, Thank you for sharing your impressive results with that could you share some color on the gross profit margin on the Japan business lines in there Ken Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Ken: Sure Sean.
Alex Wu: Sure, sure. This is Alex. Let me answer this question.
Ken: This is Alex let me answer this question.
Alex: So from a gross profit perspective overall, we have achieved a encouraging gross profit margin improvement in first quarter 2024, with a eight point points year over year increase to 25%.
Alex Wu: So from a gross profit perspective, overall, we have achieved an encouraging gross profit margin improvement in the first quarter of 2024, with an 8 point year over year increase to 25%. Right, this is the most important thing. Now, if you look at the major segment of business that we have for the connectivity business, as our NTR continues to improve, as we explained before, the cost and expenses are mainly in the human capital invested to build the digital infrastructure, and these costs are relatively fixed.
Speaker Change: This is the most important thing now you feel attached.
Speaker Change: <unk> segment of business that we have a full connectivity business as our NTR continues to improve as we explained before the cost and expenses are mainly in the human capital invested to build the digital infrastructure.
Speaker Change: And these costs are relatively fixed.
Alex Wu: So once we have the revenue scale of the connectivity business, we expect margin on the business to improve meaningfully. And by the way, this, you know, since the way that we recognize our revenue in this business has been pretty conservative and consistent, we are actually having a pretty good gross margin on our connectivity business already. For energy solution businesses, due to its project-based nature, we normally can achieve somewhere between 10% to 20% margin on average.
Once we have the revenue scale of connectivity business, we expect to margin on the business to improve meaningfully and by the way. These are the things the way that we recognize our revenue in this business has been pretty.
Speaker Change: Conservative and consistent we were actually having a pretty good gross margin on our connectivity connectivity business already.
Speaker Change: Solar energy solution business.
Speaker Change: It's a project based in nature, when normally can achieve somewhere between a 110% to 20% margin on average.
Alex Wu: But it's important to mention that our Sino Power solar business has achieved a pretty remarkable 30 to 40 percent gross margin in Hong Kong and overseas markets. Finally, for the full station operation business, we're still at a pretty early stage, where we're improving our digital analytics capability and putting those capabilities into the operation itself to improve the margin. I think the immediate term objective for margin for that particular business will be somewhere between 15 to 20%.
Speaker Change: But it's important to mention that our Sino power solar business has achieved a preaching remarkable 30% to 40% gross margin.
Speaker Change: In Hong Kong in Oversea market.
Speaker Change: Finally for the full station operation business, we're still at a pretty early stage, where we're improving our digital analytics capability and inject those capability into the operation itself to improve the margin.
Speaker Change: I think our medium term objectives.
Speaker Change: Objective four for margin for that particular business will be somewhere between 15% to 90%.
Speaker Change: Thank you.
Vivienne Wu: Your next question comes from Amber Yeh with Jeffrey.
Speaker Change: Your next question comes from Andrew Yang with Jefferies.
Wang Yang: Hi, This is <unk> from Jefferies.
Vivienne Wu: Hi, this is Amber Yeh from Jeffreys. I have two questions. First, will be... With regard to the EV charging market, can you share more color on the market trend with EV penetration past 50% in new car sales? How is the sentiment for EV charging station investment, and what's your strategy to capture the fast-growing market? And the second would be, your sales and marketing expenses have been significantly reduced quarter over quarter, so how are you able to achieve that? Can we expect continued improvement in S&M efficiency?
Wang Yang: Two questions first of all week.
Wang Yang: With regards to the EV charging market share more color on the market trend with EV penetration pacifistic Celgene Nino caused Belgium colleagues.
Wang Yang: <unk> EV charging station, that's nae and what's your strategy to capture the fastest growing market in the second would be yourselves and marketing expenses have been significantly reduced quarter over quarter. So how are you able to achieve that can we expect a continued improvement in asset S. N M.
Wang Yang: Efficiency.
Vivienne Wu: Thank you, Kelly. This is Vivienne, and I'm going to answer the first question. And yes, as you rightly pointed out, we can see from the faster run-back on EV sales, and EV penetration is increasing, particularly in private family cars and lower-tier cities. And this trend, undoubtedly, I would believe, will increase the demand for public charging. And also, we think that the transformation process from ICE to EV is only 6%, which means that only 6% of the vehicles are converted from ICE to EV at this time.
Fees: Thank you Kelly this is fees and and I'm going to answer the first question.
Speaker Change: Yes, you are right to point it out to that we can see from the faster ramp up on E V South and D. E. D penetration is increasing and particularly in private family cars and lower tier cities and is trained on me I would lead that will increase the demand for.
Speaker Change: The public charging.
Speaker Change: And also we think that to the transformation process from the I C. E to E V is oney and fix the songs, which means that only 6% of the DHL all converted from IC to EV at this moment. So we believe that the whole EV market do you have a huge stifle development so for NAS.
Vivienne Wu: So we believe that the whole EV market still has a huge space for development. So for Naas, in the near future, we'll unlock huge business opportunities, for sure. And from the supply side, we also noticed that the EV charging operation business is highly localized, which means that different EV charging stations may have totally different customer bases. Thus, the above differences lead to totally different returns on investment profiles. For example, in some cases, the payback period of an EV charging station may be as short as 1.5 to 2 years, while in other cases, it can be as long as 10 to 15 years.
In the near future, we unlocked a huge mistakes of junior cheese for sure.
Speaker Change: From supply side, we we also noticed that the EV charging operation business, he's highly localized which means that defense EV charging station they have totally different customer base and totally different traffic pattern and kosta structures.
So.
Bob difference athletes two totally different return on investment profiles. So in some cases, the payback periods of a EV charging station may be as short as one five to two years, while in other cases, it can be as long as 10 to 15 years, so and suddenly we see.
Vivienne Wu: So certainly, we see much more participation from private capital than the SOEs. SOEs only own a small fraction of the EV charging stations, compared to half of the market share in gas station sites. So the increased participation from private capital means that the operation of the EV charging station is more market-oriented and multi-layered collaboration with us. Finally, the EV charging station market is becoming, we think it's, more and more fragmented.
Speaker Change: Much more participation from the private capital done.
Speaker Change: Yeah. So it's only on a small fraction of the EV charging station comparing to the half off the market share in gas station site. So to increased participation from the private capital being stopped the operation of EV charging station is more market oriented and multilayered.
Speaker Change: That ratio with us.
Speaker Change: Finally, the EV charging station market is becoming a we think it's more and more effect meant it. According to the third party data the top five operators market share has dropped from like 87% in 2018, two ironic around 60 in 2020.
Vivienne Wu: According to third-party data, the top five operators' market share dropped from 87% in 2018 to around 16 in 2023. So the more fragmented upstream markets, the more value that we can provide. Then, with the above trends, we adopted our ABC strategies to capture the market opportunities. The first A stands for analytic capabilities, in that we leverage AI-based digital technology to drive insights and enable use cases like real-time dynamic pricing. And the B refers to our BV team, along with the quantity of the CPOs.
Speaker Change: Right. So the more fragmented upstream markets the more value that we can provide.
Speaker Change: With our bulk trains we adopted our a b C strategies to capture market opportunities divested to AE stands for analytic capabilities aim that we leverage AI based digital technology to drive insights and enable us to enable use cases like.
Speaker Change: The real time dynamic pricing and the B refers to our BD team along with quantity off the C. P. O's charging a sound as we know charging is a localized business and require knowledge of local market window that the markets are we know the market well and we are at.
Vivienne Wu: Charging, as we know, charging is a localized business and requires knowledge of the local market. We know the market well, and we are equipped with nearly 2,000 CPOs in China and a grand team of more than 150 people, which enable us to engage the local business across different regions in China. And finally, the C goes to connectivity. We've connected to a market-leading number of EV charging stations and EV drivers in China.
Speaker Change: With nearly 2000 C. P. I was in China, and a gram the team of more than 150 people.
Speaker Change: Which enable us to engage the local business across different regions in China, and finally to see he goes to the connectivity with connected to our market leading number of the EV charging stations and D V drivers in China as.
Vivienne Wu: As we continue to expand this network, a comprehensive offering of services could bring benefits to the EV drivers and the station owners. Therefore, we believe that based on the above capabilities, we can seize the market opportunities well and continue to expand our market share. Thanks.
Speaker Change: As we continue to expand at least not to watch a comprehensive offering upside if it could bring to the EV drivers and the station honest. So therefore, we believe that based on about our capabilities, we can seize the market opportunity as well and continue to expand our market share.
Thanks.
Speaker Change: Yeah.
Alex Wu: Sorry, I know we still have the second half of the question. So the second half of the question is related to sales and marketing costs, right? As a platform company, the sales and marketing expenses are mainly invested in acquiring new customers and retaining existing customers. Typically, you will see those costs are pretty high in the early stages of the company, but they tend to go down as the company grows to a bigger scale.
Speaker Change: Your next question.
Speaker Change: Sorry, I I know, we still have the second half of your question. So the second half of the question is related to the sales and marketing cost right.
Speaker Change: As a platform company are the sales and marketing expenses, mainly invested in acquiring new customers and retaining existing customers. Typically you would see those cost are.
Speaker Change: That's pretty high in the early stages of the company, but they tend to go down as the company grow into a into into into a bigger.
Speaker Change: The scale.
Alex Wu: On the new customer acquisition side, we've built a market-leading ecosystem that includes a big network of EV charging stations across China. We've partnered with 80% of the EV OEMs, and we've worked together with all the major map providers and all the major online... With this ecosystem, the synergies from our parent company and the market-leading branding help us acquire 70% of our new users in an organic manner. For customer retention, our continued iteration and improvement in AI-based algorithms and models help us to make smarter decisions about giving user subsidies, which then translates to a better return on investment in our sales and marketing dollars and a lower reliance on user subsidies in retaining existing customers.
Speaker Change: In the new customer acquisition side.
Speaker Change: We built a market leading ecosystem now include a big network of EV charging stations across China.
Speaker Change: We've partnered with 80% of the E V O N E.
Speaker Change: And we've worked together with all the major map providers and all major online ashwin.
Speaker Change: Oh yeah.
Speaker Change: Russia with wellness ecosystem.
Speaker Change: Synergies from our parent company and the market, leading branding help us acquire 70% of our new use users in an organic manner.
Speaker Change: For customer retention or continued deterioration and improvement in AI based algorithm and models help us to make smarter decisions in giving users subsidies, which then translates to a better return on your investment in our sales and marketing dollars and a lower reliance.
Speaker Change: From user subsidies and retaining existing customers.
Alex Wu: And finally, we are also expanding our business lines, especially in the 2B space, that leverage more of our analytical capabilities, doesn't require a large number of sales and marketing costs. All these elements together, I think you're going to be continuing to see a lower percentage of sales and marketing costs in the coming quarters. Thank you. Transcribed by https://otter.ai. Your next question comes from King Song with Goldman Sachs.
Speaker Change: And finally, we are also expanding our business lines, especially.
Speaker Change: Especially in the <unk> space that leverage more of our analytical capabilities.
Speaker Change: Got it.
Speaker Change: It doesn't require a large number of sales and the marketing cost.
Speaker Change: These.
Speaker Change: Elements or adding together I think we're going to be could you you're going to be continued to see a lower percentage of sales and marketing cost.
Speaker Change: In the coming quarters.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Your next question comes from Kingsong with Goldman Sachs. Hi, thanks for taking
King Song: Your next question comes from King song with Goldman Sachs.
King Song: Hi, Thanks for taking my question.
King Song: Can you discuss the pricing trend in the college and so as this market for both short term and long term perspective.
King Song: Yeah.
King Song: Okay.
Vivienne Wu: I think it's a very big question, and I'm very happy to answer it. Here are some of my observations. Firstly, in the short term, we are seeing generally stable market prices for EV charging. But over the past several months, our growth take rate has been consistently improving, which means that we are providing more value to the market. And for the long term, we believe that the price for EV charging still has plenty of upsides for the following reasons.
King Song: I think as a very big question and I'm very happy to answer it and here are some of my observations.
King Song: Especially for short term, we are seeing a generally stable market prices for the EV charging but over the past several months our gross take rate has been consistently improving which means that we are providing more value to the market and for the long term with.
King Song: Leave that to the price for the EV charging still has plenty of upsize for following Liz's first I think that E. V has only 10% to 20% of the cost to put millage off the mileage off the equivalent I see cars, thus, even if the charging price stop.
Vivienne Wu: First, I think that EV has only 10 to 20 percent of the cost per mileage of the equivalent ICE car. Thus, even if the charging price is doubled, the attractiveness of EV is still there. And secondly, the EV penetration in private family cars is increasing at a fast pace, and drivers are getting more used to charging their cars at public charging stations. Thus, users are getting less and less price sensitive, we think.
The attractiveness of E V is still there and secondly to EV penetration in private family car is increasing at a fast pace and drivers are getting more used to charge their cars at public charging station. So that's a users are getting less and less twice.
King Song: Sensitive we think.
Vivienne Wu: And lastly, compared to developed markets, where the charging price can be like 1 euro or 1 dollar per kilowatt hour, the charging price in China still has a very large upside. Even compared to industrial and household electricity consumption, transportation energy consumption has more flexibility to even out to the peak and valid stage of electricity consumption.
King Song: Lastly, compelling to the developed markets well to charging price can be like one euro or one dollar per kilowatt hours the charging twice in China still has a very large upsides.
King Song: Even comparing to the industrial and household electricity consumption transportation energy consumption has more flexibility to you even after the peak in Nevada stage of the electricity consumption.
Vivienne Wu: So we believe that policymakers could leverage these features to give more pricing freedom to market participants. And above are my thoughts on pricing trends. And simply put, that is, I believe there is still a lot of room for charging prices to increase. Thank you. Your next question comes from Jane Zhu with UBS.
King Song: So we believe that the policymakers could leverage these features to get more pricing in Sweden to the market, but pizza pies and above all my thoughts on pricing twice and simply put to that is I believe there is still a lot of room for the charging prices to increase.
Vivienne Wu: Thank you.
King Song: <unk>.
King Song: Okay.
King Song: Your next question comes from James <unk> with UBS.
James: But our management.
James: I have one question.
James: We did see progress in your patents and intellectual property in the earnings for a day one.
James: What will be your R&D focus in the next one to two years and how that could translate to your business growth and efficiency improvements.
James: Yeah.
Vivienne Wu: Yes, definitely. R&D will be the cornerstone of our business development. And our digital analytic capabilities will be the key enabler for our business monetization. And the truth is, we have more than 100 employees in our data engineering team and online operation team, which are our key R&D forces to develop our digital energy asset operation tools and models. Our R&D team has developed a variety of AI models that can be applied to different business segments and also to different business scenarios.
James: Yes.
Speaker Change: Definitely R&D you will be the cornerstone of our business development and our digital analytics capabilities will be the key enabler for our business monetization and the truth is we have more than 100 employees in our data engineering teams and.
Speaker Change: Oli operation tool, which are this is our key R&D for this to develop our digital allergy asset operation tours and models.
Our R&D team has developed a variety of AI models that can be.
Speaker Change: Eh apply to a different business segments and also under different scenarios. For example, our AI locations. The truss tomato can help allergy assets investors do you find the most appropriate locations to setup, the new charging stations and similarly, our AI.
Vivienne Wu: For example, our AI location subtraction model can help energy asset investors to find the most appropriate locations to set up new charging stations. And similarly, our AI dynamic pricing model could also optimize charging prices based on real-time traffic data in order to maximize the efficiency of the charging station. And with this digital analytic models, we could enable us to expand our business and monetize through the different business frontiers. For example, with our AI location suggestion model, we are able to capture the fast EV charging infrastructure build-out trains with digitally enabling solutions with hardware cells and EPC.
Speaker Change: Pricing model could also optimized the charging pricing based on the real time traffic data in order to maximize the efficiency of the charging station.
Speaker Change: And with this stitch tow analytic models could enable us to expand our business and to monetize so the defense base. They spawn tiers for example, with our AI locations dress Tomorrow I, we are able to capture the faster EV charging infrastructure build out to change with <unk>.
Speaker Change: <unk> totally enabling solutions with hardware, south and EPC and additionally, with our AI dynamic pricing model, while expanding our full station operation business with higher level of confidence, where we can capture the upside of the improved operational efficiency of the <unk>.
Vivienne Wu: And additionally, with our AI dynamic pricing model, we're expanding our full station operation business with a higher level of confidence where we can capture the upside of the improved operational efficiency of the charging station. Thus, we will continue to drive our business expansion and efficiency through our R&D efforts. And I also firmly believe that R&D, especially in-depth R&D of AI plus the energy sector, is one of Naas' very important competitive advantages. Thank you.
Speaker Change: Charging station.
Speaker Change: Thus, we will continue to drive our business expansion and efficiency increased with our R&D efforts.
Speaker Change: And I also firmly believe that the R&D, especially aimed in taps R&D of AI plus allergy sector is one of mass is very important competitive advantages.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: Your next question comes from Ethan Zhang with Nomura.
Speaker Change: Your next question comes from Ethan Zhang with Nomura.
Operator: Thanks, management, for taking my question. I have two questions.
Ethan Zhang: Thanks management for taking my questions. So I have two questions.
Alex Wu: First, it's regarding take rates. We have noted some positive trends regarding your Q1 net take rates and gross take rates. So how can we expect these take rates to perform in the second quarter as well as the rest of this year? And my second question is regarding the synergies of your business with your parent group. So how should we see this contribution from your NewLink parent group to drive a business this year? Thank you.
Ethan Zhang: For with regarding to our take rates so.
Ethan Zhang: We have noted some positive trends regarding go Q1, our net take rate and of course takeaways. So how can we expect this to close to perform in the second quarter as far as the rest of this year and my second question is regarding the synergies.
Ethan Zhang: All of your business with your parent groups or how we should see this contribution of from your audio link apparel Coke, New Orleans group to drive our business.
Speaker Change: This year. Thank you.
Alex Wu: Great. Thanks, Yizhen.
Speaker Change: Alright, Thanks, Ethan I'll answer your first question and maybe I will answer your second question for GTR and N. G. R. A take rate things September 2023.
Alex Wu: I will answer your first question, and Vivienne will answer your second question. For GTR and NTR, the take rate, since September 2023, the company has put a lot of focus on improving NTR, and we've managed to improve NTR consecutively while expanding our GTR. As disclosed in our earlier report, both GTR and NTR have reached historical highs since our listing in April. So there are a couple of things that we've done in that space.
Speaker Change: The company has put a lot of focus in improving our <unk>.
Speaker Change: And we've managed to improve the NCR consecutively, while expanding our GTR as.
Speaker Change: As we disclosed in our annual report both TCR and NCR has reached historical peak.
Speaker Change: Lifting in April.
Ethan Zhang: So there are a couple of things that we've done in that space for GTR gradually expanding our CPO or operator network and increasing our user base, we have the advantage to negotiate a height or GTR, which the operators as.
Alex Wu: For GTR, as we expand our CPO or operator network and increase our user base, we have the advantage of negotiating a higher GTR with the operators. As we disclosed in the earnings report, our GTR has increased to a record high. We believe the supply side market is getting more and more fragmented and localized.
Ethan Zhang: As we disclosed in the annual report Oh Gee share has increased to a record high we believe the supply side market is getting more and more fragmented and localized and values that we can bring to the operators.
Alex Wu: And the value that we can bring to the operators from an operation traffic acquisition perspective is getting higher and higher. And therefore, we believe that we have space to further improve our bargaining power and, therefore, the GTR. On the net take rate side, we've been able to achieve a positive NCR since the beginning of 2024, and now the NTR level has been extended to a new high. The achievements are mainly derived from the improved capability to optimize user subsidy.
Ethan Zhang: From an operation traffic acquisition perspective is getting higher and higher.
Ethan Zhang: And therefore.
Ethan Zhang: We believe that we have space to further improve our bargaining power and therefore the GTR.
Ethan Zhang: On the net take rate side, we're able to achieve a positive NCR things at the beginning of 2024.
Ethan Zhang: And now to ensure our level has been extended to a new high.
Ethan Zhang: The achievement of mainly derived from the improved capability to optimize use of subsidies.
Alex Wu: For example, we have deployed a membership loyalty program that can meet more specific demands from different types of users. We have also leveraged our AI technology to further improve the operation efficiency of the operators on our platform by optimizing the real-time dynamic charging pricing. Experience from our parent company NewLynx gas fueling mobile app is that the NTR can reach somewhere between 2% to 3% in a mature gas fueling industry. That is the benchmark that can be considered. And for the next quarters to come, I think we will continue to be working on both the GTR and NTR, and we can potentially bring even higher NTRs in the months to come. Thank you.
Ethan Zhang: For example, we have deployed a membership loyalty program that can meet more specific demands from different types of users.
Ethan Zhang: We have also leveraged our AI technology to further improve operating efficiency of the operators on our platform by optimizing the real time dynamic charging pricing.
Ethan Zhang: The experience from our parent company new links gas fueling mobile up is that the MTR can reach somewhere between 2% to 3% being a mature gas fuelling industry.
Ethan Zhang: That is a benchmark that can be considered.
Ethan Zhang: And for the next quarters to come I think we will continue to be working on both of the GTR and NTR and can potentially bring.
Ethan Zhang: Even higher NTR as miles to come thank you.
Ethan Zhang: Yeah.
Speaker Change: I guess I'm going to answer the second question and just firstly I want to emphasize that our parent company New linked group has already reached net profit breakeven excluding no. So I think and this is is very significant for the whole company and we think the fall in.
Vivienne Wu: Yes, I'm going to answer the second question. And firstly, I want to emphasize that our parent company, NewLink Group, has already reached net profit breakeven, if not excluding Naas. So I think this is very significant for the whole company, and we think the following aspects could also help Naas to achieve its business goals. Thirdly, as I mentioned, the rest of the business segments of NewLink Group as a whole have reached a net profit breakeven, which means Naas could have more financial resources to support business development.
Speaker Change: S backs could also help not to achieve our business goes, especially as I mentioned, the the rest of the business segments, often you link group as a whole has reached a net profit breakeven, which means not cool have more financial resources to support the business development and <unk>.
Vivienne Wu: And secondly, since NewLink Group's online fueling platform has a much larger traffic flow, when a user on our parent group's platform needs to switch from ICE cars to EV, we could enjoy an organic traffic conversion. And as a matter of fact, 70% of our new users are acquired without marketing incentives. And a large portion of this organic traffic is actually from our parent group's conversion. So these synergies in the energy transition process between oil and electricity are huge.
Speaker Change: Secondly, things new link group's online sealing platform has much larger traffic flow. So when they use their on our parent groups platform needs to switch from I see your cars to EV and we could enjoying organic traffic conversion and as a matter of fact, 70% of our.
Speaker Change: New users are a quiet without marketing incentives and a large portion of base organic traffic is actually from our patent group's conversion. So these synergies in the energy transition process between oil and electricity is huge and then.
Speaker Change: Last but not least the business models of our other business lie in our parent group New link are quite similar to not so therefore, we could have more cost control capabilities in teams sharing and rental showing so this will also be a great.
Vivienne Wu: And last but not least, the business models of our other business lines in our parent group, NewLink, are quite similar to Naas. Therefore, we could have more cost control capabilities in team sharing and rental sharing. So this will also be a great help in accelerating the profitability of Naas. And we're also very excited to continue to see more synergies in the future. Thank you.
Get help in accelerating the profitability of nice and we're also very excited to see it continue to see more synergies in the future. Thank you.
Operator: Thank you. May I have a follow-up? So I think you have mentioned that you will reach break-even by the end of this year. So can we assume that this target is unchanged to reach this profit break-even? And also, could you give us more details on this cost reduction method that can help to achieve this goal? Thank you.
Speaker Change: Yeah.
Speaker Change: I'm thinking that I have a follow up so.
Speaker Change: You have mentioned that you will reach breakeven by.
Speaker Change: By the end of this year, so calories assumes that we're still a target.
Speaker Change: Target unchanged to reach the appropriate breakeven and most and also could you like give us more colors. All this cost.
Speaker Change: Cost reduction methods that can help to achieve this cool. Thank you.
Alex Wu: Thanks, Yizhen. That's a very good follow-up question. We are confident that the objective that will achieve monthly EBITS breakeven by the end of the year, and we're confident we're on the right track to deliver that very important result. As we have published in our Q1 results, we have reduced our expense ratio quite significantly. I believe in the Q2 numbers, we'll be able to further reduce the expense ratio, and we should be able to deliver a pretty linear path to a bit of breakeven by the end of the year. Now, if I elaborate a little bit on that point.
Speaker Change: Thanks, Jason that's a very good question, we are confident that the objective now.
Speaker Change: Ooh achieved monthly EBITDA breakeven by the end of the year. We're confident we're on the right track to deliver that very important result.
Speaker Change: As we have published in our Q1 result, we have reduced our expense ratio quite significantly.
Speaker Change: I believe in Q2 numbers will be able to further reduce the expense ratio.
Speaker Change: And we should be able to deliver a pretty linear path to a.
Speaker Change: Breakeven by end of the year.
Speaker Change: Now if I elaborate a little bit on that point.
Alex Wu: Historically, part of our loss was due to subsidies that we gave to charging users in the early stage of the charging service business. Since January 2024, we have managed to maintain our net take rate as positive, hence at the transaction level, become profitable. So that is for our connectivity business. Our energy solution business, meanwhile, will continue to contribute more gross profit as it scales up and maintains a stable gross profit margin.
Speaker Change: Historically part of our loss was due to subsidies now we gave two charging users.
Speaker Change: The early stage of the charging service business.
Speaker Change: Since January 2020, full we have managed to maintain our net take rate.
Speaker Change: Positive hence.
Speaker Change: Transaction level become profitable.
Speaker Change: So that is for all connectivity business.
Speaker Change: Our energy solution business. Meanwhile, we will continue to contribute more gross profit as it scales up and to maintain a stable gross profit margin.
Alex Wu: I gave an example in some of my early answers that, for example, our solar business can contribute somewhere between 30 to 40% of gross profit margin. Now if you look at the overhead expense, these expenses are stable and very well controlled. As a matter of fact, in Q1, we've managed to reduce the cost in absolute terms. And we're getting more and more disciplined in expenses and improving our efficiencies in daily operations.
Speaker Change: I gave a a examples in some of my early answers that for example, our solar business can contribute somewhere between 30% to 40% of gross profit margin.
Speaker Change: Now if you look at the overhead expense these expenses are stable and very well controlled.
Speaker Change: As a matter of fact in Q1.
Speaker Change: We've managed to reduce the cost in absolute terms, and we're getting more and more disciplined in expenses and improving our efficiencies in daily operation.
Alex Wu: So if you add this all together, as a result, with the gross profit from our business lines growing, with our operating leverage improving, and with a stable or even reduced overhead, we should be able to hit our EBIT breakeven target by the end of the year. Thank you. As there are no further questions...
Speaker Change: So if you add this altogether as.
The result was the gross profit from all of our business lines growing we are with our operating leverage improving.
Speaker Change: And with a stable or even reduced overhead.
Speaker Change: We shouldn't be able to hit our EBITDA breakeven target by the end of the year.
Speaker Change: Thank you.
Speaker Change: Yeah.
Operator: As there are no further questions now, I'd like to turn the call back over to the company for closing remarks. Thank you once again for joining us today. If you have any further questions, please feel free to contact me. This concludes the conference call for today. You may disconnect your line. Thank you.
Speaker Change: As there are no further questions now I'd like to turn the call back over to the company for closing remarks.
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Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Thank you once again.
Speaker Change: For joining us today.
Speaker Change: If you have any further.
Speaker Change: Further questions. Please.
Please feel free to contact us.
Speaker Change: Thanks. This concludes the conference call for today you may disconnect. Your line. Thank you.
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