Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Smart Share Global Ltd (EM, Financial) returned to GAAP profitability with net income reaching RMB9 million in the second quarter.
- The company achieved its sixth consecutive quarter of non-GAAP profitability since early 2023.
- Expansion into third- and lower-tier cities continues to drive network growth, with POI count in these areas increasing by more than 20% year over year.
- The network partner model now operates 89.2% of POIs, up from 62% the previous year, showing successful transition and scalability.
- Other revenue outside of core business grew by over 400% year over year, indicating successful diversification and new growth avenues.
Negative Points
- Revenues for the second quarter of 2024 were RMB462.9 million, representing a 55.3% year-over-year decrease.
- Mobile device charging service GMV experienced a year-over-year decrease due to weaker consumption power.
- Revenue generated from the direct model decreased by 60.7% year over year due to a reduction in the number of POIs.
- Operating expenses for the second quarter were RMB249.3 million, down 29.5% year-over-year, but still significant.
- There is limited visibility for a rebound in the core business for the second half of 2024, with no definitive trend of recovery as of the end of the second quarter.
Q & A Highlights
Q: Would you please share a bit more color about the progress of the second half this year, both in terms of the power bank business and other initiatives? It seems like other revenue is growing quickly, but from a financial perspective, how should we think of margin outlook this year? Thank you.
A: (Mars Cai, CEO) The market in the second quarter was challenging with no definitive trend of rebound. There isn't much visibility for the second half of 2024 in terms of our core business. However, our other initiatives, particularly in renewable energy, are trending up and could be a long-term growth driver. We are focusing on strengthening operational scale and efficiency, expanding network partner coverage, and diversifying with renewable energy and international market plans. (Maria Xin, CFO) Other revenue, mainly from renewable energy initiatives, has been growing quickly and is already at a breakeven point. The industry standard for this model is around 8% to 10% gross margin and 3% to 5% net margins.
Q: It seems like we are executing the transition pretty quickly, so I just want to understand what would be the equilibrium for the direct and the partner model in the near future. And also, just a quick final question. How exactly do you work with KAs in the future if most of your regions are under the network partner model? Thank you.
A: (Mars Cai, CEO) The vast majority of our POIs and GMV will be from the network partner model, with an estimated balance of around 5% to 10% of GMV by the end of this year. The KA team works closely with the network partner team to expand key accounts. For new KAs, the KA team secures collaboration with major brands, and the network partner team finds suitable partners to work with the KA. Our service and maintenance commitments to KAs remain unchanged, ensuring continued onboarding of leading KAs in our network.
Q: Can you provide more details on the performance of different city tiers and how they are contributing to your overall growth?
A: (Mars Cai, CEO) Contribution from lower-tier cities continues to drive our network expansion, with POI count in third- and lower-tier cities increasing by more than 20% year over year. First-tier city POI count maintained a slight increase despite the reduction in our direct model. Diverse POI categories showed varying levels of performance, with restaurants, shopping, beauty, and transportation segments displaying resilience, while entertainment and hotel sectors experienced declines.
Q: What are the key initiatives in coverage and efficiency that you are focusing on?
A: (Mars Cai, CEO) Our commitment to expanding our POI network is driven by the potential in untapped regions and categories throughout China. We are taking a balanced approach, leveraging both the network partner model and direct model. The transition to the network partner model is being executed with precision, and by the end of the second quarter, 89.2% of our POIs were operated under this model. We also have over 12,000 network partners, allowing us to broaden our reach and attract new users.
Q: How are you optimizing low-efficiency and underperforming POIs under the direct model?
A: (Mars Cai, CEO) We are rigorously reviewing each POI's performance based on user traffic and other key metrics. By transitioning underperforming POIs to the network partner model, we can optimize our portfolio for maximum effectiveness and long-term profitability. Our direct model sales team continues to secure and extend partnerships with leading KA chains, boosting brand visibility and engagement in high-tier cities.
Q: Can you elaborate on your plans for international market expansion?
A: (Mars Cai, CEO) We have proactively begun exploring opportunities beyond China to diversify our operations. More countries are showing demand for our service and have suitable infrastructure for mobile device charging. Our experience and capabilities in China will extend into the international market, serving as a new driver of growth and geographical diversification.
Q: What are your strategies for innovation and operational efficiency?
A: (Mars Cai, CEO) We are committed to developing new series of cabinets and power banks with improved durability and user experience. This reduces maintenance requirements and increases efficiency. We are also optimizing our contract structures under the direct model and transitioning thousands of POIs to the network partner model, enhancing our financial health in the long run.
Q: How do you see the long-term prospects for consumer spending in China?
A: (Mars Cai, CEO) Although the second quarter and current trajectory of the third quarter show signs of weaker-than-expected consumption, we remain confident in the long-term recovery of consumer spending in China. We will continue to focus on strengthening our operational scale and efficiency, expanding network partner coverage, and optimizing POI quality to enhance margins.
Q: What are your financial highlights for the second quarter of 2024?
A: (Maria Xin, CFO) Revenues were RMB462.9 million, a 55.3% year-over-year decrease. Mobile device charging revenues were RMB410.6 million, accounting for 88.7% of total revenues. Other revenues grew by 453.7% year over year to RMB52.3 million. Gross profit was down 33.7% year-over-year to RMB243.3 million. Net income was RMB9.2 million, with a net margin of 2%. As of June 30, 2024, the company had cash and cash equivalents, restricted cash, and short-term investments of RMB3.2 billion.
Q: What are your plans for the remainder of 2024?
A: (Mars Cai, CEO) We will continue to emphasize the network partner model as the core driver for growth in China, while the direct model will focus on high-tier cities and major key accounts. We are also exploring international market opportunities and new initiatives in renewable energy. Our robust cash reserves and cash flow provide a solid foundation for driving continued growth and value creation for shareholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
