Smart Share Global Limited Q2 FY2023 earnings call

• POI Coverage Expansion: In Q2 2023, POI coverage increased by over 100,000, with a 10% quarter-over-quarter increase. 62% of POIs were under the network partner model by end of Q2, up from 53% in 2022 and 38% in 2021. Direct model POIs also saw an increase as offline traffic normalized.
• Efficiency Improvements: Operating profit turned positive in Q2 2023 (RMB14 million) vs. a loss of RMB191 million in Q2 2022. Fixed costs were reduced, and initiatives like redesigning cabinets and improving logistics contributed to efficiency.
• User Growth: 15.4 million new registered users were added, with total cumulative registered users at 362.5 million, up 17% year-over-year. Orders totaled over 170 million in Q2.

For the second quarter of 2023, total revenues were RMB1 billion, a 50% year-over-year increase. Mobile device charging revenue, making up 99.1% of total revenues, was RMB1 billion. Revenues from the direct model were RMB300.7 million, down 31.8% YOY, primarily due to a decrease in POIs operated directly. Revenues from the network partner model were RMB725.6 million, up 196.1% YOY, driven by cabinet and power bank sales under the new contractual arrangement. Other revenues were RMB9.4 million, up 107.8% YOY. Cost of revenues was RMB668.5 million, up 310.5% YOY. Gross profit was RMB367.2 million, down 30.4% YOY. Operating expenses were RMB353.6 million, down 50.8% YOY. Non-GAAP net income was RMB30 million, contrasting with a loss of RMB177 million in the same period last year.

The company remains optimistic about sustained growth and progressive recovery in profitability. The combination of coverage expansion and operational efficiency is expected to drive future growth. The positive trend in profitability is anticipated to continue into the rest of 2023.

Soft consumer spending in certain areas could marginally affect usage rates of power banks. However, the company is confident in covering more POIs that generate positive economics once consumption recovers.

Q: How much effect will the new revenue recognition method for the network model have on revenue going forward? Also, margin profile for cabinet sales?

A: Change in contractual arrangement leads to revenue recognized on net basis, reducing overall revenue size, but offset by cabinet and power bank sales. Cabinet and power bank pricing depends on market competition, core is coverage expansion and recurring revenues.

Q: Unit economics between the two models and ongoing trend of direct model locations?

A: Unit economics converging as foot traffic recovers. Direct model POIs increased due to traffic recovery, and will continue focusing on high-traffic locations.

Q: Impact of soft consumer spending on operations?

A: Softer spending leads to wider weekday-weekend foot traffic difference, marginally affects usage rates, but confident in recovery via coverage expansion.