Mars Cai
Thank you, Hansen. Good day, ladies and gentlemen, welcome to our 2022 fourth quarter and full year earnings call. I would like to start-off with an overview of 2022. Last year and during the overall pandemic since 2020 the outbreaks of COVID had a significant impact on offline traffic causing a drastic reduction in number of people moving around the public spaces. It was a period of significant challenge for our industry and a number of other offline retail related industries as COVID resulted in implementation of measures that caused the reduced mobility of the population. With the mobility of offline food traffic being single largest factor determining the result of our operation, COVID has significantly impacted us both in terms of scale and profitability. In the fourth quarter of last year, the impact of COVID continues to affect our operations due to quarantine and lockdown measures which resulted in a decline of revenue per power bank as well. October and November several regions experienced notable COVID outbreaks including Beijing and Xi'an starting from early October, Tongxin from early November, Chengdu from mid-November and Changchun from late November resulting in week-over-week GMV declines of 44%, 34%, 61%, 27% and 34%, respectively. When compared to the week prior to the outbreak. Countermeasures against outbreaks directly impact the amount of food traffic passing our cabinets each day, reducing the revenue efficiency of our cabinets and power banks and increasing the closure rate of location partners. Although these outbreaks have been less severe than those experienced in Shanghai and Beijing during the second quarter of last year, the frequency of these outbreaks has increased throughout the fourth quarter continuing to weigh down our operational and financial performance. Shortly after the lifting of containment regulations in December, there was a massive surge in infections causing a significant amount of population to stay home and avoid public spaces. As a result, our mobile device charging service GMV in December, decreased by 34% nationwide. Despite these challenges, we remain committed to adapting our strategies and operations to overcome these obstacles and emerge stronger than ever before. During 2022, we remain resilient and committed to delivering values to our customers and partners. We transitioned our operations to better mitigate the impact of COVID notably by increasing the contribution of network partner model and decreasing the use of entry fee or upfront fees for new signings. Our revenues for the fourth quarter exceeded our guidance as the recovery from COVID was better than our previous expectations. In mid-December the COVID restricted policies were lifted. Despite a search in active COVID cases starting in mid-December, we have seen undeniable sign of recovery. Since the lifting of quarantine restrictions, we are excited to see that the offline economy and food traffic has started to take-off particularly starting February. Once the number of active infections peaked off, this trend is expected to continue unlocking the full recovery of offline food traffic and releasing the growth potential of industry here in China. While we are optimistic about the long-term outlook and general recovery of the industry, we remain vigilant and prepared to adapt to any challenges that may arise in the future. As we look back to 2022, it was also a year filled with milestones. We were able to continue attaining new achievements despite the impact from COVID. Our network has expanded significantly boosting an impressive 997,000 POI locations and 6.7 million power banks in circulation. Even though COVID has weighed down our ability to more quickly expand our coverage, we were still able to add 152,000 POIs and 1 million power banks in last year. Additionally, we are delighted to have reached 333.7 million cumulative registered users across 1,800 counties and country level regions as of the end of last year. Despite the challenges posted by pandemic, we were able to achieve these milestones through our team's adaptability, allowing us to emerge stronger than ever coming out of these three years. We have strategically positioned ourselves for continued success operationally even during the pandemic, ensuring that our services can meet the demand of our customers across China and positioning ourselves to capture the recovery and growth in the industry. During last year and throughout the pandemic, we were able to achieve two key objectives; effectively increasing our coverage and improving the efficiency of our operations by expanding our network coverage through a combination of direct and network partner models, we have been able to extend the Energy Monster network effect, which has made it more efficient for us to acquire users, location partners and network partners. At the same time, we have focused on improving our efficiency by reducing fixed incentive fee rates for new signings, lowering hardware CapEx per cabinet and increasing the efficiency of our employees. These efforts have allowed us to optimize our resources and streamline our operations, positioning us for long-term success. While the pandemic has undoubtedly been a significant challenge on our business, we remain confident in our ability to adapt and overcome any challenges. As we look ahead, we will continue to prioritize expanding our coverage and improve efficiency to drive growth and achieve our strategy. Now let me go through our core strategies during the fourth quarter in terms of expanding our coverage and increasing our efficiency. First is our coverage expansion strategy, where our users continue to be one of the focal points of strategy. Our cumulative registered user base grew from 286.9 million at the end of 2021 to 333.7 million by end of last year. Over the course of the year, we expanded our coverage by more than 100 new counties and country level districts, bringing our total coverage to 1,800 out of the 2,800 total here in China. Our mobile device charging service has become a necessity to users in China, fundamentally changing the way of life. To further improve the user experience, we continue to enhance our customer service during the course of 2022. We currently offer 24/7 support and a new feature on our mini program that allows customers to quickly receive automated feedback or support on common issues. Last year, the customer satisfaction rate reached about 90%. Our industry-leading customer service is one of the many ways we provide our customers with the ultimate experience, which help us further establish our brand reputation to more efficiently acquire new users and engage more of our existing users. In addition to providing the industry-leading experience, we also continue to expand the scale and reach of our service so that we can have the foundation to reach more customers. We have seen healthy growth, both in terms of our POI and power banks during this year, with POI and power bank both grew by 18%. We have worked to increase coverage in all regions during the highs and lows of the pandemic and as offline food traffic continued its recovery trend. Our POI network will continue to grow in additional locations, making our service available to a wider range of users. As our market-leading brand continues to develop and our service continue to expand, the network effect between our user base and POI will become increasingly apparent. Energy Monster's increase in POI coverage was primarily driven by our network partner model last year. POIs operated under the network partner model reached a historical high of 52.5% as of the end of fourth quarter compared to 47.4% last quarter and 38% during the same period in 2021. This growth is fueled by the increase in our network partner count and the growing synergy between our two models. We continue to acquire network partners at record speed with a number of active network partners growing by more than sevenfold during the fourth quarter of 2022 when compared to the same period in the previous year. To further expand our network coverage, we launched the network partner program for our BD under the direct model in April of last year, which has proven to be widely popular among our direct model BD. This program gives them an alternative avenue to effectively increase Energy Monster's coverage network, utilizing their extensive relationships with location partners and potential network partners. With the influx of new network partners, our collaboration after acquiring a new network partner becomes all more important. We have dedicated teams of operational specialists that closely monitor the performance of each network partner and provide post-engagement to some location and operational tools as well. Our focus on providing support for our network partners is the main differentiator for Energy Monster, helping them achieve industry-leading returns and allowing us to increase our market share in China's mobile device charging service industry. While our network partner model continues to drive our coverage expansion, our direct model also maintains its commitment to effective expansion. The impact of COVID has been challenging for our direct model, resulting in an increase in the closure rate location partners within the region of impact. This is due to the fact that higher tier cities, where our direct model tends to reside in, is usually impacted more frequently than small cities. As a result, the number of POIs under the direct model decreased to 47.5% as of the end of the fourth quarter. However, our direct model will focus more on higher-traffic locations, or KAs, and higher-tier cities in the future. We believe the ability for our direct model BD to utilize either the direct network partner model synergizes the two models and paves the way for Energy Monster to continue effectively and efficiently increasing its network coverage. Our two models have provided us with the flexibility we need to navigate through the challenging conditions and expand the coverage of our service. Our network effect continued to benefit from economies of scale, allowing us to more effectively attract users, location partners and network partners. We have also been innovating new synergies between the two models to promote collaboration and extract higher levels of operating efficiency. As we look ahead, we will continue to leverage the strength of both models to drive growth and innovation in the industry. Next is our initiatives in improving overall efficiency. Despite of the impact of COVID, we were able to maintain strong financial health in 2022 with our positive operating cash flow and a robust balance sheet. We achieved this by reducing the amount of fixed expenses and upfront fees across our operations, which natively weigh down our profitability during the pandemic. We also continue to find ways to improve the efficiency of our operation. Energy Monster has significantly reduced the fixed costs through the execution of our team, which actively pushed for variable incentive fees over fixed ones and due to the less competitive environment in the industry, which also contributed to the decrease of the use of fixed incentives. In addition to reducing fixed costs, we have also improved our business development efficiency. At the end of 2022, each BDs cover more than 160 POIs, representing a year-over-year increase of 35%. The introduction of our new network partner program under the direct model also increased the efficiency of both -- of each of our BD as they are now able to participate in acquiring of network partners. This allows us to flexibly leverage both the direct and network partner model to effectively increase our market share. As of the end of last year, a significant number of our BD have participated in this program under the direct model. This new model has proven to be innovative and effective in improving the efficiency of our BD team, enabling them to cover more POIs and expand our market presence. In the future, we will continue to launch new innovative campaigns and programs to increase synergy between the two models. Energy Monster has also introduced new hardware and software products to improve the overall efficiency of our operation. Our latest generation of cabinets feature redesigned bodies with a futuristic touch that visually differentiates our cabinets from those of our peers. The internals have been completely redesigned for easier assembly with upgraded functionality and capability and a significant reduction in CapEx per cabinet. Compared to the last generation, the newer ones featured a 40%-plus reduction in CapEx. During the fourth quarter, we continued to roll out the new generation of products to market and starting the design of our next-generation cabinets. The reduction in cost of our current generation of cabinet is significant and will increase the asset efficiency for both Energy Monster and our network partners. It will also help attract new network partners and expand the scale of existing ones, effectively increasing the rate of return on their investment. The ramp-up of production and the deployment of the latest generation of cabinet will increase Energy Monster's competitiveness and enhanced experience of millions of users and rely on our hardware for their everyday charging needs. In addition to the latest hardware products, Energy Monster has also introduced new software systems to better support our rapidly growing network partners. This system provides from -- with the data they need to successfully manage and grow their business. Our software system include advanced matrix, such as local heat maps and competitive landscape analysis, which enable our network partners to scale their operations to new heights. We have also improved on our existing risk management and network partner management system to better manage our operations and improve overall efficiency. The introduction of these software systems has been crucial in supporting the growth of our network partners, allowing them to effectively manage their POIs and teams and ultimately increasing the rate of return on investment. With our focus on providing operation consultation and tools for our network partners, we're confident that these software systems will help them achieve industry-leading returns and further expand our market share in China's mobile device charging service industry. Overall, the introduction of new hardware and software products has been a key strategy in improving the efficiency of our operations and better serving our partners. COVID's impact in the last few years has demanded Energy Monster to improve its industry-leading levels of efficiency to even higher level, even with the general easing of the quarantine and lockdown measures insight and the gradual recurrency to full normalization in progress, we believe efficiency was and always will be a part of our core competence. Overall, Energy Monster has made significant improvements in reducing fixed costs, improving BD efficiency and introducing new hardware and software products. These efforts have allowed us to better serve our customers and expand our market presence, positioning us for continued growth. Our pursuit of operational excellence will set us apart from our peers within the industry and unlock higher levels of return for our stakeholders and investors. In the year of 2022, it has presented our operation with challenges due to the impact of COVID outbreaks. Despite this, we remained resilient and committed to our customers and partners, delivering high-quality services throughout the pandemic. Our team's adaptability and dedication allow us to emerge stronger than ever coming out of these three years of pandemic. Due to the number of active COVID infection cases in the second half of December and going into January, the recovery has really taken off since February. The lifting of restrictions in China in mid-December marked a turning point for our industry, setting the stage for a strong recovery and growth in 2023. In the first three months of 2023, our service GMV increased by 3%, 14% and 34%, respectively, with revenue per power bank also increasing sequentially. Also looking into the second quarter of 2023, as of today, our month-to-date GMV increased by over 60% year-over-year. The recovery trend is clear cut and consistent. Given these trends, we are very excited about the opportunity and outlook for this industry this year. Over the past three years, we have done a number of key initiatives during the pandemic that will allow us to enter the recovery of the industry more competitive than ever. By continuing to expand our high quality and KA POIS through our direct model, proactively expanding our operations under the network partner model, reducing costs and increasing efficiency and maintaining a strong financial health. We have positioned ourselves to capture the recovery and the growth of the industry once the effect of the pandemic fully subsides. Looking forward, we are very excited about the opportunity and remain committed to delivering sustainable and long-term value to our stakeholders. We believe the strategies that we are able to implement during the pandemic will lay the ground for our growth in the future, allowing to further expand our market-leading position in China's mobile device charging service industry. Thank you very much. I will now turn the call over to Maria, our Chief Financial Officer, for the financial highlights.
