NaaS Technology Inc. Q3 FY2023 earnings call

• In the third quarter, total revenues grew by 536% year-over-year to RMB 171 million. The proportion of off-line and innovation service revenue exceeded 50% in Q3, reaching 53.4%. • Affirmed the full year 2023 revenue guidance between RMB 500 million and RMB 600 million, and expected full year 2024 revenue to be between RMB 2 billion and RMB 3 billion (a growth of 4 to 5 times). • There was a RMB 204 million energy storage order in the third quarter, and won the bid for the MG Green and low-carbon supply chain construction project. • International business contributed 32.7% of total revenues in the third quarter, joined the Hong Kong SAR office strategic enterprises list, obtained the highest ESG entity score in China (22nd in Asia, 50th worldwide), and joined the UN Global Compact organization.

In the third quarter of 2023, total revenues increased by 536% year-over-year to reach RMB 171 million. Revenue from EPC Energy storage and other solutions accounted for 81% of the total revenues. NaaS International business contributed 32.7% of the total revenues in the third quarter.

• Affirmed the full year 2023 revenue guidance is between RMB 500 million and RMB 600 million. • Expected full year 2024 revenue to be between RMB 2 billion and RMB 3 billion.

Q: Firstly, congratulations on your strong third quarter results. I have two questions. Firstly, about the revenue guidance, can you share more about the growth drivers of the Energy Solutions business in China and overseas markets? And the second question is about the margin outlook, can you share more about margin improvement?

A: Okay. Thank you, Kelly. For the first question about the growth drivers of the Energy Solutions business, Energy Solutions contributed RMB 139 million in Q3 revenues, a year-over-year growth of 500%. The drivers include EPC (data advantage, industry know-how, strong customer base), Energy Storage (380 contracted stations, 43 delivered in Q3, planning to deliver 1,500 more in 2024), and overseas (overseas revenue contributed 32% in Q3, aiming to increase to 40% in 2024). For the margin outlook, margin improvement is driven by revenue mix (81% revenue from Energy Solutions with profitable margin) and operating leverage (total operating expense ratio declined from 385% in Q3 2022 to 170% in Q3 2023).

Q: First of all, congratulations on the excellent performance in the third quarter. I have two questions. The first is about the 2024 revenue guidance with significant growth compared to this year's, can you explain how NaaS will achieve such rapid growth in 2024? The second is about overseas business, can you predict the revenue contribution of overseas charging piles and related sales in 2023 and 2024?

A: Okay. Thank you, Yizhen. For the 2024 revenue growth, NaaS is China's largest EV charging network with 73,000 charging stations covered, aiming to significantly increase chargers under management. For Energy Storage, plan to deliver about 1,500 stations with energy storage solutions in 2024. For overseas, aim to increase international revenue contribution to about 40%, with Hong Kong Center Power showing strong EBITDA margin contribution 2-3 months after acquisition.

Q: Hello. Your Q3 financial results are very impressive, but you still need to achieve significant revenue growth in Q4. Can you share more about how to achieve that? Also, can you share updates on the progress of the major Energy Storage contract?

A: Great. Thank you, Zoe. For Q4, Q3 revenue is RMB 171 million, with September single-month revenue exceeding RMB 100 million. In Energy Storage, still have over 300 stations to deliver in Q4, won 3 out of 5 contracts under EHSS, and have a RMB 67 million OneStop PV storage project with parts to be delivered in Q4. Also, achieved a 10% charging volume improvement in piloted stations through analytic capability.

Q: Thank you for the opportunity to ask this question. My question is about your revenue classification. Can we understand that the previous online business is similar to current charging service revenue, and can you elaborate more on the full station operation model and its impact on revenue and margin?

A: Thank you. The full station operation model means operating stations more efficiently than asset owners. NaaS has the largest charging network, uses analytics and pricing to improve station efficiency. Piloted stations saw a 10% charging volume improvement. There is huge potential as the number of public charges in China is expected to grow rapidly.

Q: Hello. Can you hear me? My question is about NaaS's long partnership with China Construction Bank. Can you elaborate on how the partnership can support the business?

A: Thank you for your question. NaaS and its parent company have a partnership with China Construction Bank, which provides a credit line up to RMB 2.5 billion. This supports financial growth, accelerates energy transition, and is a mutually beneficial partnership to empower more business in the ecosystem, enabling more business partners to join the system.