NaaS Technology Inc. Q4 FY2023 earnings call

• CEO Cathy Wang Yang noted 2023 saw substantial growth in both business scale and revenue, with total revenue up 245% YOY to RMB320 million, gross profit up 14 times to RMB89 million, and gross profit margin improving. Charging volume was up 81% YOY to nearly 5,000 gigawatt hours. Mobility Connectivity Services net take rate turned positive in Jan 2024 and continued to expand in Feb.
• CSO Wu Ye discussed leveraging AI in business, using it for supply side optimization and client side understanding of usage patterns. Also mentioned expanding partnerships, like with Foshan Chengcheng City Construction Group, China Construction Third Engineering Bureau, and winning projects in Zhejiang, and collaborating with automakers like Great Wall Motors, GAC Energy, etc. Also shared ESG efforts.
• CFO Alex Wu reviewed fourth quarter 2023 revenue up 119% YOY to RMB64.4 million, full year 2023 revenue up 245% YOY to RMB320.1 million. Charging volume up 81% YOY, gross transaction volume up 64% YOY, number of orders up 75% YOY. Gross margin improved from 6.6% in 2022 to 27.7% in 2023. Net take rate turned positive in Jan 2024 and continued to grow, with gross take rate improving in Feb.

Total revenue for the full year 2023 reached RMB320 million, a year-over-year increase of 245%. Energy solutions revenue for the full year 2023 was RMB187 million, accounting for over 58% of total revenues. Full year charging volume reached nearly 5,000 gigawatt hours, an 81% year-over-year increase. The full year gross profit increased 14 times to RMB89 million, and the full year gross profit margin extended from 6.6% to 27.7% year-over-year.

• Aim to achieve monthly break-even at the average level by the end of 2024. - Prioritize margin improvements and aim to achieve profit for a season while preserving leading position in platform and network. - Confident in ability to deliver profitability by end of 2024 due to factors like positive NTR, stable overhead expenses, and growth in connectivity business with high gross profit margin.

• Seasonality in energy solution business, which is low in winter and spring around Chinese New Year. - Market competition in EV charging, with fragmented supply side as number of CPOs increases rapidly.

Q: What is your strategic focus in 2024 and margin outlook?

A: In 2024, prioritize margin improvements and aim to achieve profit for a season while preserving leading position. Margin enhancement due to positive NTR and stable overhead. Market expansion with robust growth metrics, strong BD team, and digital analytic capabilities. Connectivity business has high gross profit margin north of 80%.

Q: Could you share more details on how to control overall cost and improve profitability to reach net profit breakeven this year? And on user growth with reduced subsidies?

A: For breakeven, positive NTR since Jan 2024, stable overhead, and growth in energy solution business. For user growth, market natural increase of EV ownership, efficient operation with multi-tier membership system and AI technology, and ecosystem synergy with parent company's gas-fueling app.

Q: Benefit and monetization of partnerships with EV OEMs?

A: Partnerships with over 80% of EV OEMs in China. Assist OEMs in integrating charging services into infotainment systems, developing branded apps, connecting chargers to platform, and facilitating OEMs' expansion into overseas markets. Monetize through existing channels like energy solution and charging service business.

Q: Update on current competition for EV charging and end-user incentives?

A: Market is localized, with positive NTR in developed regions like Shanghai. Supply side fragmented with increasing CPOs. Europe as developed market has higher service fees. China's market still in hyper-growth phase with EV penetration increasing.

Q: Overseas expansion plan?

A: Collaborate with Chinese EV OEMs to penetrate European and Southeast Asian markets, collaborate with overseas CPOs, integrate capabilities into infotainment system. Help upgrade energy infrastructure in developed countries with energy solutions. NaaS-branded chargers CE-certified in European markets.

Q: Visibility into energy solution business with fluctuations in Q3 and Q4?

A: Energy solution business is project-based with seasonality, low in winter/spring, peak in summer/fall. Achieved 2.4 times YOY growth. Core capability in digital analytics, providing full life cycle energy solutions from advisory to maintenance.

Q: Expectation for NTR and GTR in Q1 and rest of 2024?

A: GTR expected to continue improving with expanding operator network and user base. NTR improved by smarter subsidy use, targeting subsidies more effectively. Can use parent company's gas-fueling app NTR as benchmark in long run.