Q3 2024 NaaS Technology Inc Earnings Call
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the NAS third quarter 2024 earnings conference call.
Speaker Change: At this time, all participants are in listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, the company's Investor Relations Director. Thank you and please go ahead.
John Wang: Thank you, Operator. Hello, everyone, and welcome to NASS third quarter 2024 earnings conference call.
John Wang: Joining me on the call today are Ms. Kathy Wang Yang, our Chief Executive Officer, and Mr. Steven Sim, our Chief Financial Officer.
John Wang: For today's agenda, Ms. Wang will provide an overview of our business highlights and Mr. Sim will discuss our operating results and 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
John Wang: Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.
Speaker Change: Now turn the call over to our CEO, Ms. Kathy Wang Yang. Kathy, please go ahead.
First, I'd like to announce a significant milestone.
Speaker Change: After achieving operational break-even in June during the second quarter, we delivered a positive non-IFRS net profit for the first time in a single quarter through strategic iteration, cost reduction and efficiency gains, and technological advancement. In the third quarter, our non-IFRS net profit reached RMB20.6 million.
Speaker Change: The core charging service business of Energy Electricity has achieved a revenue of 42.37 million yuan this quarter.
Speaker Change: This strategy is centered on fully leveraging our technological capabilities and analytical insights to meet the market's demand for AI driven and digitalized charging resource allocation Furthermore by concentrating on our core business. We are unlocking greater profit potential laying a more sustainable growth foundation for the company
Speaker Change: On the one hand, e-commerce has significantly reduced operating costs. In 2024, the proportion of sales and revenue in the third quarter fell to 67%, and in 2023, the proportion should be 160%. At the same time, our operating efficiency has been further improved. Through the number of users of the NAS platform, the number of users has increased by 34% this quarter.
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Speaker Change: Unknown Executive, Alex Wu, Unknown Executive, Wang Yang, John Wang, Wang Yang, John Wang,
Speaker Change: with domestic sales increasing by 45.5% year-over-year and the EV market share in new car sales continuing to surpass 50%.
Speaker Change: We will continue to strategically focus on the interconnectivity charging services, leverage technology and innovation to support growth on both the supply and demand side.
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Speaker Change: Next, please welcome our newly appointed CFO, Stephen Sim, who will provide a detailed overview of our strategic progress, along with our operational and financial performance. We're excited to have Stephen join us. Born and raised in Singapore and with over 20 years of experience in domestic and international capital markets, and a background in Big Four accounting firms and US listed companies, he brings deep practical experience in corporate capital.
Speaker Change: Strategic Expansion and Financial Management. We trust his extensive expertise will empower our business and create more value for our shareholders. Stephen, over to you.
Speaker Change: Thank you for the warm welcome. Hello everyone and thank you for joining us. I'm Stephen Sin, the new Chief Financial Officer of NAS. I'm delighted to join the team at such a pivotal time for our company and to review the substantial progress we've made for this quarter.
Speaker Change: We are intensifying our focus on core charging services, leveraging AI to optimize supply and demand connectivity.
Speaker Change: This shift, coupled with phasing out low-margin energy solutions, has improved profitability, with record-high gross margins and our first positive quarterly non-IFRS net income.
Speaker Change: For details about the non-IFRS measures and reconciliation with IFRS measures, please refer to our press release.
Speaker Change: Our NET platform enhances efficiency for charge point operators and show promising monetization potential through collaborations like the Zhejiang Government Project.
Speaker Change: We are strengthening our EV charging ecosystem with key partnerships, including FAW Volkswagen and IM Motors, and expanding our network of charge point operators and chargers.
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Speaker Change: Our AI-driven nav system optimizes charging operations and unlocks customer side benefits like subsidy allocations and better user experiences.
Speaker Change: Early success includes the Zhejiang platform, demonstrating NAF's value in boosting efficiency and monetization.
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On ESG, our sustainability remains central to NAS.
Speaker Change: Our 2023 ESG report highlights efforts to expand green energy access and partnerships with initiatives like the Carbon Inclusive City Corporation Alliance and China ESG Alliance, reinforcing our leadership in sustainable development through focused strategy.
Speaker Change: Next for our financial highlights, in Q3, we reached a major milestone by achieving our first ever positive quarterly non-IFRS net income of 20.6 million RMB, following our non-IFRS break-even in June.
Speaker Change: For details about our non-IFRS measures and reconciliation with IFRS measures, please refer to our press release.
Speaker Change: This accomplishment reflects the strength of our strategic direction and operational execution.
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Speaker Change: Charging services revenue surged by 36% year-over-year, reaching 42.4 million RMB this quarter, a testament to the efficiency
Speaker Change: A testament to the efficacy of our strategic focus on high-margin core offerings. This is due to our continuous operation expansion in both supply and demand side, along with our technology development to keep improving efficiency.
Speaker Change: Energy solutions revenue was 0.56 million RMB driven by our strategic shift to focus on high-margin platform business.
Speaker Change: The company exited energy solution businesses through various ways. For example, we announced to sell CentalPower to our parent company NewLink in August 2024.
Speaker Change: which offer higher growth potential and profitability. As a result, there was a substantial improvement in our gross profit margin, which reached a historical high of 57% up from 29% in the same period last year.
Speaker Change: In Q3 2024, we achieved significant reductions in operating expenses, with sales expenses decreasing by 81% year-over-year, marking the fourth consecutive quarter of substantial declines.
Speaker Change: The substantial reduction in sales expenses was primarily driven by our improving sales strategies, operating efficiency, and customer subsidy schemes.
Speaker Change: As a result, despite these reductions, we maintain strong customer engagement with transaction users.
Speaker Change: through the company's platform increasing by 34% year over year, and user activity reaching records high. These results demonstrate that our disciplined cost management effectively supports engagement and market expansion without compromising performance.
Speaker Change: This quarter, we reduced sales expenses by 41.7% QOQ and administrative expenses by 15.5% QOQ.
while transaction users grew by 34% year-over-year.
Speaker Change: This result demonstrates the effectiveness of our disciplined cost controls in supporting growth without compromising engagement. Looking ahead, our asset-line model enables us to scale efficiently while improving gross margins and delivering sustainable value for shareholders.
Speaker Change: By focusing on high growth opportunities and leveraging technology, we are well positioned to maintain this momentum in the coming quarters.
Speaker Change: This concludes our prepared remarks for today. We are now ready to take questions. Thank you.
We will now begin the question and answer session.
To ask a question, you may press star, then 1.
Speaker Change: on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question,
for the benefit of all participants on today's call.
Speaker Change: If you wish to ask your question to management in Chinese.
Please immediately repeat your question in English.
Once again, it is star then one.
to ask a question.
At this time, we will pause momentarily.
[inaudible]
Speaker Change: The first question comes from Ting Song with Goldman Sachs. Please go ahead.
Speaker Change: Thanks for taking my question. Congratulations on the positive performance this quarter. I would like to explore the progress you have made on gross profit and margin improvement in the third quarter this year. Could you elaborate more on how you are able to make it and what we could expect in the future?
Speaker Change: This is my first question. And for the second one, I would like to ask, for the improving operational efficiency this year, which is important to the company, as you mentioned before, I would like to know, know more about your operational expenses trend and how you could significantly narrow your operational loss this quarter. Thank you.
Speaker Change: Thank you, Tim. Let me take your question. This is Steven.
Speaker Change: Our gross margin also reached a historical high, and this was an improvement from 38% in Q2 to 57% in Q3.
Speaker Change: This substantial improvement underscores the effectiveness of our strategy and also focusing on our core business and not diluting our focus on the non-core capital expenditure heavy business.
as we went through our departmental reviews.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: On a moving forward basis, I think in our prepared remarks, we did mention that the goal is to deepen these efficiencies and to keep cost margins strong.
It is a challenge as well as
Speaker Change: At the same time, for us, as we reach the scale with the continuous growth in the number of EVs on the road, I think we are confident about continual improvements in the upcoming quarters. Thank you.
Speaker Change: You mentioned on operating efficiency also and I mentioned in my previous answer
Some Aspects of Lady.
And I guess on the operating expense trend.
Speaker Change: Let me just elaborate more. As I mentioned in my previous answer, we implemented a series of aggressive cost control measures to the extent possible without sacrificing growth across all operational areas, and this resulted in notable reductions in expenses and operational losses.
Speaker Change: RMB 50.9 million in Q2 to 29.7 million in Q3. Again, reflecting our efforts to streamline company resources and focus on cost-effective projects.
Speaker Change: Administrative expenses on an R&D basis, there was a 15% reduction from Q2 to Q3.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: And overall, this effort accumulated in a 44% reduction in operational cost losses.
compared with the last quarter.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: We will continue to do so to the best of our abilities and to really tap into the market potential but at the same time come up with a more focused streamlined approach to the business. Thank you.
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The next question comes from Amber Yue with Jeffreys.
Please go ahead.
Speaker Change: Thanks for taking my questions and congrats on your outstanding results. I have two questions. It seems to your revenue composition is shifting rapidly and margin are improving due to your strategic focus on your core charging service. Could you please talk about the background and why you made that decision and how has it been impacting the company's operations and financials? And my second question is competition is tough in any market and it seems NAS has done so well. What competitive advantage does NAS plan to leverage to maintain its leadership in a market like this? Thanks.
Speaker Change: Thank you, Amber. On your first question on the revenue composition and the focus on our core business,
Speaker Change: I think from day one, NASA's strategy has been building a key platform business, linking our customers to the various charging services. And going back to this core business, it's nothing new, except that it realigns our thinking in what the long-term value in the business will be. Therefore, our strategic focus...
Speaker Change: And unlike the energy solutions business, which we previously mentioned in the past quarters.
Speaker Change: that requires heavy investments and deep knowledge on operations focusing on the long-term lower margin
Speaker Change: This shift has already shown significant impact on our financials, with the company gross profit margins reaching a record high of 57%. Additionally, by simplifying our business lines and focusing on core services.
Speaker Change: We are able to better allocate resource to areas that drive growth in our users and on our costs and also delivering better services to help our charging partners.
That's the answer to the first question.
on the second question on competition.
Speaker Change: I would say that we've done very well in a very competitively tough market. And I think the whole point of
various stakeholders in the platform.
and to do so, we have a few distinct advantages.
We have a key advantage through our advanced
Speaker Change: which essentially takes in all our user behavior data, and these analytics provide real time insight that can enable operators to optimize operations dynamically and helping users locate charges instantly at an optimized price.
Speaker Change: These tools enhance charging efficiency, boost station utilization and profitability, and ensure seamless experience for both operators and users.
Speaker Change: give us extensive market reach. As we grow in scale, these collaborations will allow us to expand infrastructure efficiently while fostering user loyalty and retention.
Speaker Change: I think this combination of tech, strategic partnership and cost-efficient growth will enable us to remain a leader in the evolving EV market, which allows us to meet future competitive challenges.
Thank you.
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Speaker Change: The next question comes from James Zhou with UBS. Please go ahead.
Thanks for taking my questions.
Speaker Change: First of all, very happy to see NASA finally see some positive non-IFS net profit for the fourth time in this quarter. And moving forward, can we expect sustainable profitability in the long run?
Speaker Change: And my second question is regarding, if we take a closer look at the broader metrics influencing massive functions, for example, what are the key trends in user subsidies and how have they been impacting the company's overall profitability?
Speaker Change: Thank you, James. First question on the profit and on the, I guess, what our expectation is moving forward. Again, this quarter,
Speaker Change: Mark a significant milestone for us, with quarterly non-IR virus net profit turning positive for the first time for the whole quarter, reaching 20.6 million RMB in Q3 compared to negative 39.9 million in Q2, and negative 174 million RMB in Q3 last year.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: with gross margin reaching a record 57%. I think we will want to try to maintain those margins.
Speaker Change: Again, we want to focus on that with our sacrificing growth and user experience and our services to our partners.
Speaker Change: Looking ahead, I think we are confident in sustaining this positive trend by expanding the high-margin services and we will leverage on our AI-driven efficiency as our core advantage and we will continue to scale our platform.
Speaker Change: With 49% year-on-year increase in connected charges and 34% year-on-year growth in transaction users, I think we are well positioned to deliver long-term value and maintain profitability.
Speaker Change: I think on the second question, the question is to do with
Speaker Change: Trans and user subsidies and how they've been impacting the company's overall profitability
Speaker Change: Without a doubt, our users are NASA's main focus. Without creating the right value to our users, we cannot continue to grow and we cannot continue to give excellent value both to them and our charging station partners.
Speaker Change: The competitive landscape of the EV charging platform market has been relatively stable since...
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Speaker Change: Which means that the companies do not need intensive customer subsidies to grab more market. I think there's been more focus on deepening
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Offering more transparent
user experience, for example, helping users, you know, have
Speaker Change: overview of when the charging cost is on a daily basis or split into different timing. For example, it's obviously cheaper to charge at night at the lower electricity price.
Speaker Change: So, I think, you know, anecdotally, these are various things that we do well and will continue to improve on a going forward basis to retain and grow our users.
Speaker Change: Since the beginning of 2024, we have reduced and we have seen a significant positive impact.
on our neck and groin pig weights.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: and which in turn supports our long-term profitability goals and allows us to...
will streamline our revenue generation process.
Speaker Change: Instead of using subsidies as a primary driver, we are seeing stronger organic growth. This is driven by user acquisition channels and partnerships. This move also strengthens our market position by making offerings more attractive based on inherent value rather than discount-driven strategies.
Nearly resisted users and transaction users through the company's platform.
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Speaker Change: The next question comes from Ethan Zhang with Nomura. Please go ahead.
Speaker Change: Thank you, management, for taking my question. So first, congratulations for your results. And we saw NASA has achieved a significant increase in the charger connections, which is, I believe, higher than the industry average growth rate. So my question is, what do you think, how do you attribute this fast growth to and how is NASA positioning yourself as a leader in China's expanding EV charging network? Thank you.
on the supply-side infrastructure.
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: Unknown Executive, Alex Wu, Wang Yang, John Wang, Yang Wang, Wang Yang, Wang Yang, Wang
Speaker Change: This strategic partnership is helping us forging this alliance with regional and national partners and we've been able to expand our network quickly and efficiently as we scale.
Speaker Change: On the operating efficiency, the improvement in predictive maintenance and dynamic pricing have made our network more attractive to charging operators, and this is driving growth across the board.
Speaker Change: and we are not just adding more chargers but making sure they are easy to access and efficient for EV drivers across the country.
Speaker Change: and others that positions last for the long term success as the global EV market continues to grow.
Thank you.
Speaker Change: The next the next question comes from Zhou Xiao with Tian Feng Securities. Please go ahead.
Hi, thanks for taking my question.
Speaker Change: I've read that NASA's recent partnership in Fujian Province has expanded the company's presence in key cities.
How does this regional expansion contribute to NASA's long-term strategy?
Speaker Change: And how is the company's AI-powered technology enhancing the user experience and operational efficiency?
for Regional Charging Operators. Thank you.
Speaker Change: Thank you, Dr. So the partnership in Fujian province significantly strengthens NASA's regional presence.
Speaker Change: particularly in key cities like Xiamen and Fuzhou. And this extends our coverage to smaller cities like Ningde and Putian. This expansion is a crucial part of our long-term strategy to create a highly interconnected EV charging network across China for all users, both large and small.
Speaker Change: Our AI-powered NAS system again plays a central role in this effort, enhancing the user experience by providing real-time charging station availability, predictive maintenance, and optimized site selection.
For regional charging operators, this technology boosts...
Speaker Change: As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.
Speaker Change: Thank you once again for joining us today. If you have further questions, please feel free to contact us. Thank you.
Speaker Change: This concludes the conference call. You may now disconnect your line. Thank you.