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energy monster(EM) - 2021 Q4 - Annual Report
2022-04-26 16:00
PART I [Item 3. Key Information](index=7&type=section&id=Item%203.%20Key%20Information) The company's VIE structure, associated risks, and key financial data from 2019-2021 are presented, highlighting revenue growth alongside a recent net loss - Smart Share Global Limited is a Cayman Islands holding company that controls its Chinese operations through PRC subsidiaries and contractual arrangements with a Variable Interest Entity (VIE), Shanghai Zhixiang[14](index=14&type=chunk) - The company faces significant risks related to its China operations, including regulatory oversight, cybersecurity, data privacy, and potential delisting under the **Holding Foreign Companies Accountable Act (HFCAA)** due to PCAOB inspection limitations[16](index=16&type=chunk)[17](index=17&type=chunk) - For 2019, 2020, and 2021, revenues contributed by the VIE were **0.18%, 0.34%, and 0.46%** of total revenues, respectively, with third-party revenues from the VIE reaching **RMB16.4 million** in 2021[14](index=14&type=chunk) [Selected Consolidated Financial Data](index=12&type=section&id=A.%20%5BReserved%5D) Selected Consolidated Statement of Operations Data (in thousands RMB) | Indicator | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Total revenues** | 2,022,310 | 2,809,359 | 3,585,391 | | **Income/(loss) from operations** | 232,061 | 131,832 | (108,999) | | **Net income/(loss)** | 166,606 | 75,427 | (124,615) | Selected Consolidated Balance Sheet Data (in thousands RMB) | Indicator | As of Dec 31, 2020 | As of Dec 31, 2021 | | :--- | :--- | :--- | | **Total current assets** | 1,745,816 | 3,247,732 | | **Total assets** | 2,785,635 | 4,397,981 | | **Total current liabilities** | 854,833 | 1,028,365 | | **Total liabilities** | 1,087,021 | 1,165,957 | | **Total shareholders' (deficit)/equity** | (3,439,260) | 3,232,024 | Selected Consolidated Cash Flow Data (in thousands RMB) | Indicator | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Net cash generated from operating activities** | 444,040 | 536,118 | 226,778 | | **Net cash used in investing activities** | (868,296) | (261,487) | (1,714,287) | | **Net cash generated from financing activities** | 579,668 | 654,571 | 1,563,397 | [Risk Factors](index=21&type=section&id=D.%20Risk%20Factors) - The company's business is significantly affected by the **COVID-19 pandemic**, which has reduced user traffic and negatively impacted revenue and expansion efforts[51](index=51&type=chunk)[53](index=53&type=chunk) - The company operates in a **highly competitive mobile device charging industry**, which could lead to pricing pressure and a potential loss of market share[55](index=55&type=chunk) - The company's ADSs face a **significant delisting risk** and will be prohibited from trading in the U.S. in 2024 if the PCAOB cannot inspect its China-based auditor for three consecutive years[47](index=47&type=chunk)[122](index=122&type=chunk) - A **dual-class voting structure** gives founders control of **62.0% of the aggregate voting power** as of March 31, 2022, limiting the influence of other shareholders[142](index=142&type=chunk) [Item 4. Information on the Company](index=73&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's history, business model, operational network, and the organizational structure governing its Variable Interest Entity (VIE) [History and Development of the Company](index=73&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) - The company was founded in 2017 with the establishment of Shanghai Zhixiang Technology Co, Ltd, and the holding company was incorporated in the Cayman Islands[169](index=169&type=chunk) - The company listed its American Depositary Shares (ADSs) on the **Nasdaq Global Select Market** under the symbol "EM" in April 2021[169](index=169&type=chunk) [Business Overview](index=74&type=section&id=B.%20Business%20Overview) - The company is a consumer tech firm providing mobile device charging services via an extensive network of power banks located at Points of Interest (POIs)[171](index=171&type=chunk) Key Operational Metrics | Metric | As of Dec 31, 2019 | As of Dec 31, 2020 | As of Dec 31, 2021 | | :--- | :--- | :--- | :--- | | **Cumulative Registered Users** | 149.1 million | 219.4 million | 286.9 million | | **Number of POIs** | ~588,000 | ~664,000 | >845,000 | | **Power Banks in Circulation** | 4.5 million | 5.4 million | 5.7 million | - The company operates through a **direct operation model** for larger urban areas and a **network partner model** to expand into smaller cities[180](index=180&type=chunk) - Proprietary technology, including a hardware management system for its **5.7 million power banks** and an AI-enabled business intelligence system, is used to optimize operations[171](index=171&type=chunk)[197](index=197&type=chunk) [Organizational Structure](index=102&type=section&id=C.%20Organizational%20Structure) - To comply with PRC restrictions on foreign ownership, the company conducts certain business through a **Variable Interest Entity (VIE)**, Shanghai Zhixiang, controlled via contractual arrangements[278](index=278&type=chunk) - Control over the VIE is established through key contractual agreements, including Proxy Agreements, an Equity Interest Pledge Agreement, and an Exclusive Business Cooperation Agreement[279](index=279&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) [Operating and Financial Review and Prospects](index=105&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) Financial performance analysis shows 27.6% revenue growth in 2021 but a shift to a net loss due to higher expenses and COVID-19 impacts [Operating Results](index=105&type=section&id=A.%20Operating%20Results) Year-over-Year Financial Performance (in millions RMB) | Metric | 2020 | 2021 | % Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | 2,809.4 | 3,585.4 | 27.6% | | *Mobile device charging business* | 2,711.5 | 3,455.8 | 27.4% | | **Cost of Revenues** | 430.8 | 557.2 | 29.3% | | **Sales and Marketing Expenses** | 2,121.0 | 2,951.0 | 39.1% | | **Income/(Loss) from Operations** | 131.8 | (109.0) | N/A | | **Net Income/(Loss)** | 75.4 | (124.6) | N/A | - The increase in 2021 revenue was primarily driven by recovery from COVID-19 and an increase in the number of POIs from **over 664,000 to over 845,000**[314](index=314&type=chunk) - Sales and marketing expenses **rose 39.1% in 2021**, mainly due to a 34.0% increase in incentive fees paid to partners as business expanded[315](index=315&type=chunk) - The company incurred a **net loss of RMB124.6 million in 2021**, compared to a net income of RMB75.4 million in 2020, attributed to the impact of regional COVID-19 outbreaks[317](index=317&type=chunk) [Liquidity and Capital Resources](index=114&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) Summary of Cash Flows (in thousands RMB) | Cash Flow Activity | 2020 | 2021 | | :--- | :--- | :--- | | **Net cash generated from operating activities** | 536,118 | 226,778 | | **Net cash used in investing activities** | (261,487) | (1,714,287) | | **Net cash generated from financing activities** | 654,571 | 1,563,397 | - The company raised approximately **US$136.0 million in net proceeds** from its initial public offering in March 2021[323](index=323&type=chunk) - As of December 31, 2021, cash and cash equivalents were **RMB 1,296.9 million (US$203.5 million)**, and short-term investments were RMB 1,418.7 million (US$222.6 million)[323](index=323&type=chunk) - Material cash requirements as of December 31, 2021, include **RMB 29.0 million in operating lease commitments** and **RMB 80.1 million in equipment purchase obligations**[333](index=333&type=chunk) [Directors, Senior Management and Employees](index=119&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) Details on leadership, compensation, board structure, and workforce are provided, highlighting the founders' significant voting control via a dual-class share system - As of December 31, 2021, the company had **5,094 employees**, with 4,310 designated as business development personnel[361](index=361&type=chunk)[362](index=362&type=chunk) - For the year ended December 31, 2021, the company paid an aggregate of **RMB 9.4 million (US$1.5 million)** in cash to its executive officers[347](index=347&type=chunk) - The company has a dual-class share structure where founders, through their holdings of all Class B shares, controlled **63.7% of the total voting power** as of March 31, 2022[365](index=365&type=chunk) - The company adopted the 2021 Share Incentive Plan, with options for **4,636,358 Class A ordinary shares** and **9,266,459 restricted share units** outstanding as of March 31, 2022[350](index=350&type=chunk)[351](index=351&type=chunk) [Major Shareholders and Related Party Transactions](index=128&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) The company's major shareholders are outlined alongside significant related party transactions, including equipment purchases and historical lease agreements - The company granted registration rights to certain shareholders under its shareholders' agreement, though special rights **terminated upon the IPO in April 2021**[371](index=371&type=chunk) - Significant related party transactions include power bank and cabinet purchases from ZMI (Hong Kong) International Company Limited, with amounts due totaling **RMB 23.3 million** as of December 31, 2021[374](index=374&type=chunk) - In May 2020, the company entered a one-year capital lease agreement for cabinets with shareholder People Better Limited for a selling price of **RMB 50.0 million**[374](index=374&type=chunk) [Financial Information](index=130&type=section&id=Item%208.%20Financial%20Information) This section includes the company's consolidated financial statements, confirms no material legal proceedings, and outlines its dividend retention policy - The company is **not currently a party to any material legal proceedings** that would be expected to have a significant adverse effect on its business[377](index=377&type=chunk) - The company has **no present plan to pay cash dividends** and intends to retain future earnings to operate and expand its business[378](index=378&type=chunk) [Additional Information](index=131&type=section&id=Item%2010.%20Additional%20Information) Corporate governance details, including the dual-class share structure, and material tax considerations for investors in various jurisdictions are described - The company's shares are divided into Class A (one vote per share) and **Class B (ten votes per share)**, concentrating voting power with Class B shareholders[385](index=385&type=chunk) - The Cayman Islands, the company's jurisdiction of incorporation, **does not levy taxes on profits, income, gains, or appreciation**, and there is no withholding tax on dividends[405](index=405&type=chunk) - The company does not believe it was a **Passive Foreign Investment Company (PFIC)** for the 2021 taxable year but notes that this status is determined annually[414](index=414&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=146&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's exposure to credit, foreign exchange, and interest rate risks is detailed, noting the absence of derivative hedging instruments - The company's primary market risks are **credit risk, foreign exchange risk, and interest rate risk**[424](index=424&type=chunk)[425](index=425&type=chunk)[426](index=426&type=chunk) - The company is exposed to foreign exchange risk as its business is denominated in RMB while its ADSs are traded in U.S. dollars; a **1% change in the USD/RMB exchange rate** would have impacted 2021 profit by approximately RMB 15.1 million[425](index=425&type=chunk) - The company has **not used any derivative financial instruments** to manage its interest rate or foreign exchange risk exposure[425](index=425&type=chunk)[426](index=426&type=chunk) PART II [Modifications to the Rights of Security Holders and Use of Proceeds](index=148&type=section&id=Item%2014.%20Modifications%20to%20the%20Rights%20of%20Security%20Holders%20and%20Use%20of%20Proceeds) The use of US$136.0 million in net proceeds from the March 2021 IPO is detailed, with funds allocated to business and workforce expansion - The company raised approximately **US$136.0 million in net proceeds** from its IPO, which was declared effective on March 31, 2021[432](index=432&type=chunk) - From the IPO date to December 31, 2021, the company used approximately **US$100 million** of the net proceeds for business expansion (US$30M), workforce expansion (US$20M), and capital expenditure (US$50M)[432](index=432&type=chunk) [Controls and Procedures](index=148&type=section&id=Item%2015.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of year-end 2021 due to material weaknesses in financial reporting expertise and procedures - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were **not effective** due to material weaknesses in internal control[433](index=433&type=chunk) - Two material weaknesses were identified: (i) a **lack of sufficient accounting personnel with U.S. GAAP expertise** and (ii) a lack of formal period-end financial closing policies[437](index=437&type=chunk) - Remediation measures have been adopted but were **not fully implemented** as of December 31, 2021[437](index=437&type=chunk) [Corporate Governance and Other Matters](index=149&type=section&id=Item%2016.%20Corporate%20Governance%20and%20Other%20Matters) This section covers corporate governance topics including the audit committee expert, accountant fees, and a US$50 million share repurchase program - The board of directors has identified **Onward Choi**, an independent director, as the audit committee financial expert[438](index=438&type=chunk) Principal Accountant Fees (in thousands RMB) | Fee Category | 2020 | 2021 | | :--- | :--- | :--- | | **Audit fees** | 4,000 | 4,500 | - In September 2021, the company authorized a share repurchase program for up to **US$50 million** of its shares, with approximately **US$47.0 million** remaining available as of March 31, 2022[443](index=443&type=chunk)[445](index=445&type=chunk) PART III [Financial Statements](index=152&type=section&id=Item%2018.%20Financial%20Statements) The company's audited consolidated financial statements for fiscal years 2019-2021, prepared under U.S. GAAP, are presented with the auditor's report - The consolidated financial statements were audited by **PricewaterhouseCoopers Zhong Tian LLP**, which has served as the company's auditor since 2020[459](index=459&type=chunk) Consolidated Balance Sheet Summary (in thousands RMB) | Account | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | **Cash and cash equivalents** | 1,252,493 | 1,296,924 | | **Total Assets** | 2,785,635 | 4,397,981 | | **Total Liabilities** | 1,087,021 | 1,165,957 | | **Total Mezzanine Equity** | 5,137,874 | — | | **Total Shareholders' (Deficit)/Equity** | (3,439,260) | 3,232,024 | Consolidated Statement of Comprehensive Income/(Loss) Summary (in thousands RMB) | Account | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | **Total Revenues** | 2,022,310 | 2,809,359 | 3,585,391 | | **Income/(loss) from operations** | 232,061 | 131,832 | (108,999) | | **Net income/(loss)** | 166,606 | 75,427 | (124,615) | | **Net loss attributable to ordinary shareholders** | (264,451) | (3,130,897) | (4,958,370) |
energy monster(EM) - 2021 Q4 - Earnings Call Transcript
2022-03-11 15:25
Financial Data and Key Metrics Changes - For Q4 2021, revenues reached RMB836.2 million, a 9.7% year-over-year decrease, primarily due to COVID-19 impacts [25][26] - Revenues from mobile device charging business decreased by 9% to RMB812.1 million, accounting for 97.1% of total revenues [25] - Gross profit for Q4 2021 was RMB682.1 million, down 16.4% year-over-year, with an operating loss of RMB69.4 million and an operating margin of negative 8.3% [26][28] - For the full year 2021, total revenues were RMB3.6 billion, a 27.6% year-over-year increase, driven by recovery from COVID-19 in the first half of the year [29][31] Business Line Data and Key Metrics Changes - Revenues from power bank sales in Q4 2021 were down 25.7% year-over-year to RMB18.9 million, accounting for 2.3% of total revenues [25] - Other revenues decreased by 34.7% year-over-year to RMB5.2 million, primarily due to reduced user traffic from COVID-19 [25] - For the full year 2021, revenues from power bank sales increased by 32.6% to RMB102.9 million, accounting for 2.9% of total revenues [30] Market Data and Key Metrics Changes - The cumulative registered users reached 287 million by the end of Q4 2021, up 67.5 million year-over-year [11] - The company faced significant declines in offline user traffic, particularly in entertainment, hospitality, and transportation, with year-over-year declines of 24%, 25%, and 27% respectively [8] Company Strategy and Development Direction - The company aims to reduce fixed costs and expenses to mitigate revenue fluctuations due to COVID-19 [8][22] - Plans to roll out a new version of cabinets in mid-2022 to enhance asset efficiency and reduce costs [9][18] - The company is focusing on expanding its Point of Interest (POI) network, which reached 845,000 by the end of Q4 2021, up 181,000 year-over-year [11] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term demand for services despite short-term COVID impacts, emphasizing the need for operational efficiency [10][24] - The competitive landscape has eased, with many peers scaling down operations, presenting an opportunity for market share expansion [34][36] - Management is preparing for various COVID scenarios and is focused on expanding location networks and reducing fixed expenses [39] Other Important Information - The company reported a net loss of RMB68.5 million for Q4 2021, with a non-GAAP net loss of RMB61.3 million [28] - Cash flow generated from operations for Q4 2021 was RMB100 million, with capital expenditures of RMB116.5 million [28] Q&A Session Summary Question: Insights on the competitive landscape during tough macro conditions - Management noted a decline in competition as peers scale down direct operations, leading to decreased incentive fees for new signings [34][36] Question: Current COVID situation and its impact on strategy - Management is prepared for all COVID scenarios and plans to expand location networks while reducing fixed expenses [39] Question: Outlook for 2022 in terms of revenue and profitability - Management highlighted that COVID is the most significant factor affecting operations, making it difficult to provide guidance on revenue and profitability for 2022 [42][43]
energy monster(EM) - 2021 Q3 - Earnings Call Transcript
2021-11-30 17:34
Financial Data and Key Metrics Changes - For Q3 2021, revenues were RMB930 million, representing a 0.6% year-over-year increase [25] - Revenues from mobile device charging business were RMB895.4 million, accounting for 96.3% of total revenues [25] - Gross profit decreased by 2.3% year-over-year to RMB790.2 million due to increased cost of revenues [27] - Net loss for Q3 2021 was RMB79.4 million compared to a net income of RMB108.6 million in the same period last year [29] Business Line Data and Key Metrics Changes - Revenues from power bank sales increased by 14% year-over-year to RMB27.4 million [26] - Other revenues rose by 47.5% year-over-year to RMB7.2 million, attributed to improved user advertisement efficiency [26] - Cost of revenues increased by 20.6% year-over-year to RMB139.8 million, primarily due to operational scale growth [26] Market Data and Key Metrics Changes - GMV per power bank per day decreased by 15% due to lower usage rates from decreased foot traffic during COVID outbreaks [32] - During the golden week of October, average same location GMV was down approximately 25% year-over-year due to localized travel restrictions [32] Company Strategy and Development Direction - The company plans to optimize internal management and operational structures in preparation for recovery from COVID impacts [10] - Expansion of service network continued with 49,000 new location partners added, covering over 1,700 counties [11] - Focus on KA strategy to mitigate short-term COVID impacts and drive long-term growth [14] Management Comments on Operating Environment and Future Outlook - Management expressed confidence that offline foot traffic will normalize in the long run, despite current challenges from COVID outbreaks [32] - The company anticipates that its competitive advantage will strengthen as competition decreases during COVID [34] - Management expects to generate RMB800 million to RMB830 million in revenue for Q4 2021, reflecting ongoing challenges from COVID [30] Other Important Information - Cash and cash equivalents as of September 30, 2021, were RMB2.9 billion, with negative cash flow from operations of RMB93.7 million for Q3 2021 [29] - The company has implemented tighter budget controls and revised KPI metrics for business development personnel to adapt to market conditions [41] Q&A Session Summary Question: Impact of COVID-19 on Q4 metrics - Management noted that COVID outbreaks have led to significant drops in foot traffic and offline spending, affecting GMV [31][32] Question: Competitive landscape and revenue sharing trends - Management indicated that competition has decreased, allowing the company to leverage its scale and efficiency [34] Question: Decline in power bank count and expansion rate - Management explained the new power bank optimization program aims to match supply and demand more effectively, while expansion continues despite COVID impacts [37][38] Question: Measures to combat future COVID outbreaks - Management outlined four key initiatives, including attracting high-quality network partners and optimizing expenses to navigate COVID challenges [40][41]