NAAS

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, the company's Investor Relations Director. Thank you, and please go ahead.

Thank you, operator. Hello, everyone, and welcome to NaaS third quarter 2024 earnings conference call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Kathy Wang Yang, our Chief Executive Officer, and Mr. Steven Sim, our Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our business highlights and Mr. Sim will discuss our operating results and go through our financial highlights. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call [includes] (ph) discussions of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to our CEO, Ms. Kathy Wang Yang. Kathy, please go ahead.

[Foreign Language] [Interpreted] Hello, everyone. I'm NaaS' CEO, Kathy Wang Yang. Today, I'm excited to share our performance highlights for the third quarter of 2024 and take this opportunity to update our investors on our business progress. [Foreign Language] [Interpreted] First, I'd like to announce a significant milestone. After achieving operational breakeven in June during the second quarter, we delivered a positive non-IFRS net profit for the first time in a single quarter through strategic iteration, cost reduction and efficiency gains and technological advancement. In the third quarter, our non-IFRS net profit reached RMB20.6 million. [Foreign Language] [Interpreted] Our core charging services business reported revenues of RMB42.37 million in the third quarter, a year-over-year increase of 36%. By strategically concentrating on high-growth, high-margin core charging services, our overall gross margin has improved for four consecutive quarters, reaching an all-time high of 57% in the third quarter. This move is clearly producing positive outcomes. [Foreign Language] [Interpreted] This quarter, we accelerated our strategic shift towards the core charging services business. This strategy is centered on fully leveraging our technological capabilities and analytical insights to meet the market's demand for AI-driven and digitalized charging resource allocation. Furthermore, by concentrating on our core business, we are unlocking greater profit potential, laying a more sustainable growth foundation for the company. [Foreign Language] [Interpreted] We've also significantly reduced operating costs. For instance, selling and marketing expenses as a percentage of revenue decreased to 67% in the third quarter of 2024 from 160% in the third quarter of 2023, substantially improving our operational efficiency. Meanwhile, the number of users transacting through the NaaS platform grew by 30% year-over-year this quarter, with user activity hitting a record high. These achievements have directly enhanced the company's profitability. [Foreign Language] [Interpreted] China's new energy vehicle market continues to grow rapidly. According to the China Association of Automobile Manufacturers, September 2024 saw record-breaking monthly production in sales of new energy vehicles, with domestic sales increasing by 45.5% year-over-year and the EV market share in new car sales continuing to surpass 50%. [Foreign Language] [Interpreted] Amid this robust growth environment, our priorities for the fourth quarter of 2024 and full year 2025 will center on profitability, scale and technology. We will continue to strategically focus on the interconnectivity charging services, leverage technology and innovation to support growth on both the supply and demand side [Technical Difficulty] and our scale to strengthen our industry position and enhance profitability by capitalizing on economies of scale. [Foreign Language] [Interpreted] Next, please welcome our newly appointed CFO, Steven Sim, who will provide a detailed overview of our strategic progress along with our operational and financial performance. We're excited to have Steven join NaaS. Born and raised in Singapore and with over 20 years of experience in domestic and international capital markets and a background in big four accounting firms and US-listed companies, he brings deep practical experience in corporate [Technical Difficulty] strategic expansion and financial management. We trust his extensive expertise will empower our business and create more value for our shareholders. Steven, over to you.

Thank you, Kathy, for the warm welcome. Hello, everyone, and thank you for joining us. I'm Steven Sim, the new Chief Financial Officer of NaaS. I'm delighted to join the team at such a pivotal time for our company and to review the substantial progress we've made for this quarter. We are intensifying our focus on core charging services, leveraging AI to optimize supply and demand connectivity. This shift, coupled with phasing out low-margin Energy Solutions, has improved profitability, with record high gross margins and our first positive quarterly non-IFRS net income. For details about the non-IFRS measures and reconciliation with IFRS measures, please refer to our press release. Our NEF platform enhances efficiency for charge point operators and show promising monetization potential through collaborations like the Zhejiang Government Project. We are strengthening our EV charging ecosystem with key partnerships, including FAW-Volkswagen and IM Motors, and expanding our network of charge point operators and chargers. Notably, our October partnership in Fujian adds 100 stations and 1,600 chargers, enhancing connectivity and convenience. Our AI-driven NEF system optimizes charging operations and unlock customer site benefits like subsidy allocations and better user experiences. Early success includes the Zhejiang platform, demonstrating NEF's value in boosting efficiency and monetization. On ESG, our sustainability remains central to NaaS. Our 2023 ESG report highlights efforts to expand green energy access and partnerships with initiatives like the Carbon Inclusive City Cooperation Alliance and China ESG Alliance, reinforcing our leadership in sustainable development. Through focused strategy, ecosystem growth and innovation, NaaS is positioned for long-term success and value creation. Next, for our financial highlights. In Q3, we reached a major milestone by achieving our first-ever positive quarterly non-IFRS net income of RMB20.6 million, following our non-IFRS breakeven in June. For details about our non-IFRS measures and reconciliation with IFRS measures, please refer to our press release. This accomplishment reflects the strength of our strategic direction and operational execution. Charging Services revenue surged by 36% year-over-year reaching RMB42.4 million this quarter, a testament to the efficiency -- a testament to the efficacy of our strategic focus on high-margin core offerings. This is due to our continuous expansion in both supply and demand side, along with our technology development to keep improving efficiency. Energy Solutions revenue was RMB0.56 million, driven by our strategic shift to focus on high-margin platform business. The company exited Energy Solutions businesses through various ways. For example, we announced to sell Sinopower to our parent company, NewLink, in August 2024. Again, as mentioned earlier, we have been deliberately transitioning away from lower-margin, capital-intensive Energy Solutions projects to concentrate on our core charging services business, which offer higher growth potential and profitability. As a result, there was a substantial improvement in our gross profit margin, which reached a historical high of 57%, up from 29% in the same period last year. Cost efficiency remains central to our strategy for sustainable growth. In Q3 2024, we achieved significant reductions in operating expenses with sales expenses decreasing by 81% year-over-year, marking the fourth consecutive quarter of substantial declines. The substantial reduction in sales expenses was primarily driven by our improving sales strategies, operating efficiency and customer subsidy schemes. As a result, despite these reductions, we maintained strong customer engagement with transaction users through the company's platform increasing by 34% year-over-year and user activity reaching record high. These results demonstrate that our disciplined cost management effectively supports engagement and market expansion without compromising performance. Our focus on scaling high-margin charging services supported by a 49% year-over-year increase in connected chargers and AI-powered tool like the NEF system, which optimizes charger placement, utilization and dynamic pricing. These advancements are driving both profitability and efficiency as we expand. This quarter, we reduced sales expenses by 41.7% quarter-over-quarter and administrative expenses by 15.5% quarter-over-quarter, while transaction users grew by 34% year-over-year. These results demonstrate the effectiveness of our disciplined cost controls in supporting growth without compromising engagement. Looking ahead, our asset-light model enables us to scale efficiently while improving gross margins and delivering sustainable value for shareholders. By focusing on high-growth opportunities and leveraging technology, we are well positioned to maintain this momentum in the coming quarters. This concludes our prepared remarks for today. We are now ready to take questions. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ting Song with Goldman Sachs. Please go ahead.

Thanks for taking my questions. Congratulations on the positive profitability this quarter. I would like to explore the progress you have made on gross profit and margin improvement in third quarter this year. Could you elaborate more on how you are able to make it and what we could expect in the future? This is my first question. And for the second one, I would like to ask for the improving operational efficiency this year, which is important to the company as you mentioned before, I would like to know more about your operational expenses trend and how you could significantly narrow your operational loss this quarter? Thank you.

Thank you, Ting. Let me take your question. This is Steven. For the first question on the positive profitability and the progress on the gross profit and margin improvement, in Q3 2024, we achieved a gross profit increase of 19%, reaching RMB25.1 million from RMB21.1 million in Q2 quarter-on-quarter. This substantial growth in gross profit illustrates our success in executing strategy, focusing on high-margin revenue stream and cost control, leveraging on our advantage of our platform increasing scale. Our gross margin also reached a historical high, and this was an improvement from 38% in Q2 to 57% in Q3. This substantial improvement underscores the effectiveness of our strategy and also focusing on our core business and not diluting our focus on the non-core capital expenditure-heavy business. Our margin growth is also as a result of optimization and enhanced operational efficiency across departments. As we went through our departmental reviews and overall operating efficiency, we continue to do so on an ongoing basis, and this efficiency will further enhance our margin performance to allow us to deliver continuous and improved profitability. On a moving-forward basis, I think in our prepared remarks, we did mention that the goal is to deepen these efficiencies and to keep gross margin strong. It is a challenge as well as, at the same time for us as we reach the scale with the continuous growth in the number of EVs on the road, I think we are confident about continued improvements in the upcoming quarters. Thank you. I think on the second question, you mentioned on operating efficiency also, and I mentioned in my previous answer some aspects already. And I guess on the operating expense trend, let me just elaborate more. We -- as I mentioned in my previous answer, we implemented a series of aggressive cost control measures to the extent possible without sacrificing growth across all operational areas, and this resulted in notable reductions in expenses and operational losses. And selling expenses saw a major cut, decreasing from RMB50.9 million in Q2 to RMB29.7 million in Q3, again reflecting our efforts to streamline company resources and focus on cost effective projects. And this is via optimizing customer subsidy policies and improving the sales team efficiencies. Administrative expenses, on R&D basis, that was 15% reduction from Q2 to Q3, and this was reduced by RMB8.9 million. And again, on a going-forward basis, as we scale, we should see more operating leverage and our fixed costs should cover higher scale and more growth without increasing the fixed cost percentage in tandem. And overall, this effort accumulated in the 44% reduction in operational loss compared with the last quarter. And total operating losses decreased by RMB39 million from Q2. This reduction has been possible due to our proactive approach and also identifying certain cost savings opportunity and scaling down non-essential projects, maximizing efficiency of our resource. We have continued to do so to the best of our abilities and to really tap into the market potential, but at the same time, come up with a more focused, streamlined approach to the business. Thank you.

The next question comes from [Amber Yu] (ph) with Jefferies. Please go ahead.

Thanks for taking my questions, and congrats on your outstanding results. I have two questions. It seems your revenue composition is shifting rapidly and the margins are improving due to your strategic focus on your core charging service. Could you please talk about the background and why you made that decision and how has it been impacting the company's operations and financials? And my second question is, competition is tough in any market, and it seems NaaS has done so well. What competitive advantage does NaaS plan to leverage to maintain its leadership in a market like this? Thanks.

Thank you, Amber. On your first question on the revenue composition and the focus on our core business, I think from day one, NaaS' strategy has to be -- has been building a key platform business linking our customers to the various charging services. And going back to this core business, it's nothing new, except that it realigns our thinking in what the long-term value in the business will be. Therefore, our strategic focus is really a key initiative in our ongoing efforts to achieve not just profitability, but also to go back to what we do best in increasing the value of the platform. And unlike the Energy Solutions business, which we previously mentioned in the past quarters, that requires heavy investments and deep knowledge on operations, focusing on long-term lower-margin business. And we are retreating from that because we believe that business doesn't give our shareholders the best value. So, we are returning to a higher-margin asset-light business, allowing us to scale efficiently. This shift has already shown significant impact on our financials, with the company gross profit margins reaching a record high of 57%. Additionally, by simplifying our business lines and focusing on core services, we are able to better allocate resource to areas that drive growth in our users and on our costs and also delivering better services to help our charging partners find more and better customers and deliver higher margins for them. So, this in turn will allow us to return more value to the platform and in turn to our users. That's the answer to the first question. On the second question on competition, I would say that we've done very well in a very competitively tough market. And I think that the whole point of really growing a platform business is to essentially focus on delivering values, as I mentioned in my last answer, to various stakeholders in the platform. And to do so, we have a few distinct advantages. We have a key advantage through our advanced AI-powered analytics, which essentially takes in all our user behavior data, and these analytics provide real-time insights that enable operators to optimize operations dynamically and helping users locate chargers instantly at an optimized price. These tools enhance charging efficiency, boost station utilization and profitability and ensure seamless experience for both operators and users. Secondly, our strong partnership with the ecosystem players, including OEM, charging operators and energy companies, give us extensive market reach. As we grow in scale, these collaborations will allow us to expand infrastructure efficiently while fostering user loyalty and retention. Lastly, our asset-light platform enables scalable growth with our heavy capital investments, and this helped us maintain a streamlined cost structure and profitability. I think this combination of tech, strategic partnership and cost efficient growth will enable NaaS to remain a leader in the evolving EV market, which allows us [be ready] (ph) to meet future competitive challenges. Thank you.

The next question comes from [James Zhou] (ph) with UBS. Please go ahead.

Thanks for taking my questions. First of all, very happy to see NaaS has finally seen some positive non-IFRS net profit for the first time in this quarter. And moving forward, can we expect sustainable profitability in the long run? And my second question is regarding -- if we take a closer look at the further metrics influencing NaaS' financials, for example, what are the key trends in user subsidies and how have they been impacting the company's overall profitability?

Thank you, James. First question on the profit and on the, I guess, what our expectation is moving forward, again, this quarter marked a significant milestone for us with quarterly non-IFRS net profit turning positive for the first time for the whole quarter, reaching RMB20.6 million in Q3 compared to negative RMB39.9 million in Q2 and negative RMB174 million in Q3 last year. So, on all aspects, quarter-on-quarter, year-on-year, it's a significant improvement. Obviously, we want to continue to drive the momentum to continue our profitability and to make sure it's both sustainable and to really leverage on our scaling and also our cost efficiency effect. I think the key drivers will be a continued healthy growth in the charging services business with gross margin reaching a record 57%. I think we will want to try to maintain those margins and growth, finding the right balance to grow the business on an overall basis. And similarly on the operating leverage, our operating expense has fell by 70% year-on-year. And this is streamlined by operations and also tax efficiencies. Again, we want to focus on that without sacrificing growth and user experience and our services to our partners. Looking ahead, I think we are confident in sustaining this positive trend by expanding the high-margin services. And we will leverage on our AI-driven efficiency as our core advantage and we will continue to scale our platform. With 39% year-on-year increase in connected charges and 34% year-on-year growth in transaction users, I think we are well positioned to deliver long-term value and maintain profitability. I think on the second question, the question has to do with trends in user subsidies and how they've been impacting the company's overall profitability, without a doubt, our users are NaaS' main focus. Without creating the right value to our users, we cannot continue to grow and we cannot continue to give excellent value both to them and our charging station partners. The competitive landscape of the EV charging platform market has been relatively stable since 2023, which means that the companies do not need intensive customer subsidy to grab more market. I think there's been more focused on deepening relationship with our users, creating better value, improving user experience via our app, helping them find charging stations faster, delivering better costs, offering more transparent user experience, for example, helping users have an overview of when the charging cost is on a daily basis, split into different timing. For example, it's obviously cheaper to charge at night at the lower electricity price. So, I think anecdotally, these are various things that we do well and will continue to improve on a going-forward basis to retain and grow our users. With that being said, the company initiated a gradual reduction in user subsidies because we believe that users, other than looking at subsidies in itself [Technical Difficulty] also experience. Since the beginning of 2024, we have reduced and we have seen a significant positive impact on our net and gross take rates, both of which reached historically high. By decreasing reliance on subsidies, we are fostering a more sustainable revenue model that does not incentivize relying on incentive to drive growth. I think this focus also allows us to allocate resource more effectively, focusing on higher-return areas rather than subsidized growth, and which in turn supports our long-term profitability growth and allow us to [Technical Difficulty] a deeper network to benefit our users more. I think continuously optimizing customer subsidy scheme will streamline our revenue generation process. Instead of using subsidies as a primary driver, we are seeing stronger organic growth. This is driven by user acquisition channels and partnership. This move also strengthened our market position by making offerings more attractive based on inherent value rather than discount-driven strategies. I think another key fact that we should keep in mind is that with the reduction in customer subsidies, newly registered users and transaction users through the company's platform also has been growing. So, it's not been impacted too much. Overall, it aligns with our vision of becoming a profitable leader in the EV charging space with a more sustainable revenue model that can adapt and grow with market demand. Thank you.

The next question comes from Ethan Zhang with Nomura. Please go ahead.

Thank you, management, for taking my question. So, first, congratulations for your results. And we saw NaaS has achieved a significant increase in the charger connections, which is, I believe, higher than the industry average growth rate. So, my question is, what do you think -- how do you attribute this fast growth to and how is NaaS positioning yourself as a leader in China's expanding EV charging network? Thank you.

Thank you, Ethan. I think this is a really good supply side question. The 39% year-on-year increase in charger connection also reflects our strategic focus on the supply side infrastructure. And this is again to meet the growing demand for new charging with substantial growth in the number of EVs on the road and on new EVs, new car sales being 50% EVs. This growth can be attributed to a combination of factors. In our case, it's through technological innovation. Again, going back to our AI-powered big data analysis, the NaaS Energy Fintech system, which we call NEF, have optimized station operations and site selection. And this helps our partners ensure that we place charges in the most high-demand area. This strategic partnership is helping us forging this alliance with regional and national partners. And we've been able to expand our network quickly and efficiently as we scale. On the operating efficiency, the improvement in predictive maintenance and dynamic pricing have made our network more attractive to charging operators, and this is driving growth across the board. I think our rapid expansion make NaaS a continuing leader in China's EV charging market. We continue to grow a strong and connected network of charging stations, and we are not just adding more chargers, but making sure that easy to access and efficient for EV drivers across the country. With smart site placement, advanced AI technology and strong partnership, we are creating a better, more reliable charging experience for users. This is our continuing commitment to simple fundamentals that positions NaaS for the long-term success as the global EV market continue to grow. Thank you.

The next question comes from [Zhe Zhao] (ph) with Tianfeng Securities. Please go ahead.

Hi. Thanks for taking my question. I read that NaaS' recent partnership in Fujian Province has expanded the company's presence in key cities. How does this regional expansion contribute to NaaS' long-term strategy? And how is the company's AI-powered technology enhancing the user experience and operational efficiency for regional charging operators? Thank you.

Thank you, Zhe Zhao. So, the partnership in Fujian Province significantly strengthens NaaS' regional presence, particularly in key cities like Xiamen and Fuzhou. And this extends our coverage to smaller cities like Ningde and Putian. This expansion is a crucial part of our long-term strategy to create highly interconnected EV charging network across China for our users, both large and small. Specifically with the collaboration in Fujian, we've integrated over 100 charging station and 1,600 -- over 1,600 DC fast chargers into our network. This really improve our general accessibility for consumers. And we are also successfully working with the government at a local and national level to increase both China and the world's progress towards a green future. Our AI-powered NEF system again plays a central role in this asset, enhancing the user experience by providing real-time charging station availability, predictive maintenance and optimized site selection. For regional charging operators, this technology boosts profitability through dynamic pricing based on real-time demand in electricity supply, as I mentioned earlier, which creates key user experience for our -- key friendly experience for our users. This ensures both operational efficiency and financial sustainability. Thank you.

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact us. Thank you.

This concludes the conference call. You may now disconnect your line. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS Second Quarter and First Half 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, Company's Investor Relations Director. Thank you, and please go ahead.

Thank you, operator, and hello, everyone, and welcome to NaaS second quarter and first half 2024 earnings conference call. The Company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Kathy Wang Yang, our Chief Executive Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights. Mr. Wu will discuss our operating results and go through our financial highlights. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussions of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to our CEO, Ms. Kathy Wang Yang. Kathy, please go ahead.

[Foreign Language] Hello, everyone. I'm NaaS' CEO, Kathy Wang. It's my pleasure to share NaaS' highlights and strategic progress for the second quarter and the first half of 2024. We are pleased to announce that for the month of June 2024, we achieved our first positive average month profit. Our goal is to carry the profitability into the third and fourth quarters of 2024. In the part to this method, we have concentrated on strengthening our core business and reducing costs, significantly enhancing our competitive edge. Moreover, through strategic staff optimization and improvement in management efficiency. We have refined our financial performance, setting the stage for ongoing profit growth. We are focused on specialized autonomous charging solutions for [indiscernible] vehicle scenarios and consistently expanding our ecosystem with automotive manufacturer partners. China stands on the brink of a revolution in autonomous driving, which will lead to a year of autonomous charging solutions. Since as early as 2017, we have been exploring one-stop energy solutions for autonomous road transport. To keep pace with this market change, we have proactively led the groundwork with extensive collaborations with leading automotive brands. Beyond our recent strategic partnership with JI YUE, we have also so strong alliance with major automotive industry players, including Geely, Hyundai, ZEEKR, Aito, Great Wall Motors, GAC Energy, and Deep Blue Automotive. These extensive strategic collaborations provide us with a solid foundation of technological expertise and diverse monetization opportunities. They help us gradually realize our vision of enhancing the energy efficiency of transportation. Now I will turn the call over to Alex, our President and CFO, for a closer look at our operating and financial performance. Thank you.

Thank you, Kathy. Hello, everyone, and thank you for joining us today. I'm excited to discuss the substantial progress we made this quarter. Let's look at the business update first. We have been aggressively developing AI and related digital technologies to better embrace the unmanned driving and autonomous charging solution trends. Our enhanced deep learning, V2X and 3D vision technologies are set to drive revolutionary changes in our approach to vehicle charging in driverless scenarios. With that being said, in the second quarter, we made significant strides in the smart charging area, ensuring that NaaS leads in the commercial adoption of these cutting-edge technologies. For instance, since initial launch last year, we upgraded our autonomous charging robots with sophisticated path-finding, vehicle control, and obstacle avoidance features. These robots can now manage complex charging operations with little to no human intervention, ensuring a safe and more streamlined charging experience. Furthermore, building on our expertise in AI and digital analytics, the NAAS Energy Fintech, or NEF platform, is now driving the transformation of the charging station construction sector towards a smarter billion-dollar market. Our NEF system uses advanced AI algorithm for comprehensive intelligence in serving charge point operators, or CPOs, throughout the life cycle of charging stations. In the early stages, particularly in charging station site selection, NEF helps calculate potential investment returns by analyzing critical regional traffic flow and charging demand data. Furthermore, after charging stations start to operate, we are responsible for their online operations as well, leveraging our integrated digitalization expertise. As Kathy mentioned previously, we formed a partnership with a leading new energy company to supply them with a comprehensive slate of charging station services through our NEF platform. This collaboration not only boosted our revenue from charging power sales, but also brought us a share of the related charging transactions. Additionally, it has enhanced NaaS brand visibility through our joint site operations. During the second quarter, we successfully launched nearly 50 chargers with this partnership and are on track to bring nearly 1,000 additional chargers online by the third quarter. Encouraged by this success, we are exploring the replication of this model in other regions with a similar initiative already underway in Changsha. As we keep advancing our AI and digital analytics capabilities in autonomous charging solutions and NEF, our extensive network of automotive manufacturer partners is vital in this progress. This ensures our capacity to deliver AI-powered services on a wider scale. We now cover a majority of China's mainstream automotive manufacturers with high-quality AI-powered charging services through the various collaborations Kathy outlined. As of June 30, 2024, we have launched services for 56 top brands supporting 165 new energy vehicle models. We added 66 new models in the second quarter alone, achieving a record high for a single quarter in terms of new model launches. Our extensive and growing network of automotive manufacturing partners continue to reach our ecosystem and broaden our market reach. Now let's move on to our financials for the second quarter of 2024. We significantly boosted operational and management efficiency this quarter, which substantially improved our financial performance. Notably, our net loss margin reached its lowest historical level this quarter. We are also excited to announce another milestone. In June 2024, our monthly non-IFRS net profit turned positive for the first time, thanks to our disciplined approach to expanding revenue and reducing costs. I'll walk you through some of the key drivers behind this quarter's success. Our revenue increased by 89% year-over-year to RMB91.7 million this quarter, propelled by robust growth across all three of our business segments. Specifically, our core charging services continued to flourish, contributing RMB44.8 million to this quarter's revenue, up 73% compared to the same period last year. This substantial growth not only underscores the resilience and viability of our profitable business model, but also highlights our outstanding execution in enhancing our charging services. In addition to strengthening our core business, we made significant strides in diversifying our revenue streams this quarter, thanks to our agile strategy and effective positioning in emerging markets. Revenues from energy solutions and new initiatives, each soared by over 100%. Specifically, revenue from energy solutions increased by 105% year-over-year to RMB44 million, and revenue from new initiatives increased by 139% year-over-year to RMB2.9 million. Alongside our impressive revenue growth, our gross profit grew 59% year-over-year to RMB30.5 million in the second quarter of 2024. This growth was primarily fueled by the robust performance of our high-margin charging services. Notably, the gross margin for our charging services reached its highest level over the past four quarters, highlighting the significant economics of scale we are realizing as our business continues to expand. Furthermore, we drove improvements in our operational performance this quarter, leveraging our expanding market presence and enhanced network capabilities. The proportion of orders with positive NCR surged to 70% in the second quarter of 2024. Cost structure optimization and operational efficiency are a critical part of our strategy to sustainably expand our business scale. In the second quarter of 2024, we reduced our operating expenses to record lows relative to our revenue, strengthening our financial foundation as we continue to grow. In summary, this quarter's performance stands as a testament to the effectiveness of our long-term development strategy and our excellent operational and financial management. The substantial reduction in our net loss margins and the non-IFRS net profit in June are clear indicators of our ability to not only enhance profitability, but also sustainably manage our growth. As we move forward, we will remain dedicated to financial discipline, innovation, and progress, to deliver enduring value to all our stakeholders. Thank you for your continued trust and support. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Ting Song with Goldman Sachs. Please go ahead.

Hi. Thank you for taking my question. I have two. The first is how are you able to meaningfully elevate your margin level and how do you expect a quarterly net profit breakeven going ahead? And my second question is, as NaaS continues to enjoy the fast revenue growth and scale up, can you share more color on your revenue drivers in the next two years? Thank you.

Thank you. To your first question regarding the margin improvement, we reached a milestone of single-month non-IFRS net profit breakeven in June and a positive operational cash flow in second quarter 2024. We have made a lot of efforts to optimize our business operations in order to achieve these milestones. Our revenue is one of the major contributor to our net profit margin improvement in second quarter 2024. With the fast EV penetration in China, we have enjoyed the increase of both EV drivers and the EV charge point operators on our platform. Our second quarter 2024 revenue maintained its growth momentum and increased 89% year-over-year, with both business lines growing at a healthy rate. If you look at the gross profit, as we adopt a platform business model, the profit margin improved as we scale up. The gross profit margin in second quarter 2024 increased 8 percentage points quarter-over-quarter to 33%, while the absolute amount of gross profit increased 59% to RMB30.5 million in the second quarter. The major contributor is our charging service business, while our energy solutions business has a relatively stable gross profit margin. As we grow in size, we believe we still have upside of our gross profit margin in its improvement. If you look at the expense, we have made significant progress as well. Our total non-IFRS operating expense as a percentage of revenue decreased to 90%, which is the first time it is below 100% since we got listed. It is not only due to our operating leverage that we receive from our revenue scale up, but it's also to our tightened expense control. Especially, we cut our sales and marketing expense by more than half year-over-year, while maintaining our revenue growth at a very fast pace. The improvement of our financial numbers, I think, is largely the result of our optimized operations. To give you some evidence from operation level, our profitable order is now 70% of our total number of orders. In comparison for second quarter 2023, that same percentage is only 41%. Our gross take rate, or GTR, has also reached all-time high level due to the increased acquisition of so-called long-tail CPOs. And our net take rate has been maintained at a very healthy level throughout second quarter 2024. We are also seeing an increasing number of drivers to subscribe our VIP services and the increasing number of OEMs to work with us. So to answer your first question in terms of margin, after we allocate our resources and energy in the right direction, we have been seeing very positive indicators in the past quarter from financial metrics and from the business performance. This is certainly very encouraging milestone for us, and we will continue to work on our business operation and on efficiency. So to your second question regarding growth, which is another very good question, let's look at the numbers first, right? In general, our revenue in second quarter 2024 maintained a strong growth momentum, and we've seen an 89% year-over-year revenue growth. If we look at different segments, both major segments of our revenue enjoyed a very healthy growth. Our charging services are seeing a 73% increase year-over-year due to our increasing coverage on both the supply side and demand side of the charging network. We have processed 50 million transactions in the passing quarter, and 70% of those transactions are profitable. On the energy solutions business, as we keep improving our AI capabilities in site selection, EPC and state operations, we gain more trust from the CPOs that we work with, where we can constantly get more projects and hardware orders from them, which result in a 105% growth year-over-year on energy solutions. I would like to emphasize the role of AI capabilities in driving our business growth. As we build AI models from millions of the transactions that we processed, we are able to empower our charge point operator partners to enjoy better operational outcomes. For example, we are able to recommend potential locations with better business opportunities to the operator for the deployment for new charging stations. With that capability, the CPOs will choose us as a one-stop solution provider, and we can potentially monetize our AI capabilities through hardware sales and software subscription fees. For example, we are collaborating with one of the largest CPOs in Central China and will help them deploy 1,000 chargers in the third quarter. To sum up, with the fast penetration of EV in China, we are enjoying the fast growth of EV charging demand. Meanwhile, we are maintaining our leadership in the market with our AI capabilities. We have started to monetize those AI capabilities, and we'll continue to explore more business opportunities as we grow. Thank you.

The next question comes from James Zou with UBS. Please go ahead.

Thanks for taking my question. I have one question. As we were through the improving financial numbers, can you share with us more details on the operating metrics, such as the gross take rate and net take rate? Thanks.

Great. Thanks, James, for the question. The main reason that we were able to achieve margin improvement and non-IFRS net profit breakeven in June was because of our continuous effort in enhancing operating metrics of the business. So if you look at GTR, for example, our GTR has reached an all-time high. The reasons are twofold. First, our algorithm continued to bring traffic to our CPOs on the platform, which helps CPOs enjoy better operational outcome and therefore, allow us to get a better commission rate. And number two we see more long-tail CPOs joining our platform where we're able to have a better bargaining power. So that's for GTR. For the NTR, net take rate, we continue to drive the NTR to a higher level, where we are improving our sales and marketing efficiency with our advanced algorithm to acquire and retain users. For example, our net addition of VIP members increased close to 30% quarter-over-quarter in the second quarter of 2024. As a result, our profitable orders increased to 70% of all number of orders. So in conclusion, we will continue to improve our operating metrics through the iterations of our algorithm and AI capabilities, and we strive to make a more sustainable and profitable business model. Thank you.

The next question is from Ethan Zhang with Nomura. Please go ahead.

Thanks, Management. So recently, RoboTaxi has become very popular in China. So my question is, how do you see your position in the new autonomous driving area? Thank you.

Thanks, Ethan. That's a very good question. We have been looking at this trend for a while. RoboTaxi, as most of the models that we've seen, they're actually electric vehicles, or EVs. So these vehicles need to be – need some sort of charging infrastructure to operate. Given our extensive partnership with OEMs, we have closer access to the smart EV operating system, and we will put ourselves into a very good position to best utilize that operating system. Particularly, our AI algorithm could potentially help RoboTaxi to optimize its charging operation with our large charging network. And we could help RoboTaxi owners to find the optimal locations to establish their EV charging infrastructure. More importantly, our autonomous charging robot, which we initially reviewed last year and has been improving ever since, has all the core technologies to facilitate the autonomous charging actions, such as deep learning, V2X, 3D vision and other intelligent technologies. When we initially deploy the autonomous charging robots, we always have the RoboTaxi in mind, we always had the autonomous driving in mind. We think in the future where there is no drivers, there wouldn't be any need for human involved charging. So the charging robot is specifically designed for that purpose. As the autonomous driving continues to unfold, we believe we are at the front seat to empower the charging infrastructure and software to adapt to the new era. Thank you.

Thank you.

[Operator Instructions] The next question is from Zoe Feng with Tianfeng Securities. Please go ahead.

Thank you for taking my question. I know that you have been partnering up with a lot of EV makers. Could you share more updates on the latest development and how could such benefits benefit us? Thank you.

Thank you, Zoe. In Q2, we have further improved our partnership with our OEM partners. Specifically, with – in Q2, we partnered with JI YUE to embed our platform into EV and provide charging services to JI YUE drivers, to better enhance our capabilities and create a wholesome charging ecosystem. By the end of Q2, we have established a partnership with most of the major OEMs and built our services in more than 150 EV models. Our continued collaborations with EV OEMs help us in a number of ways. First, we obviously make revenue from those collaborations and partnerships. NaaS can get a onetime system setup revenue and ongoing subscription fees when users charge using our platform within the OEM. And second, and probably more importantly, is we are creating more brand awareness and technology collaboration through these partnerships. And that, in turn, help us to acquire new customers and build our technological leadership in the whole ecosystem. Meanwhile, we collaborated with China Automotive Technology and Research Center to release the China Electric Vehicle Charging and Battery Swap Industry Development Report. This collaboration with government-sponsored research institutes and various stakeholders in the charging industry could help us to maintain a leadership role in making technological advancement and setting industry standards. Moreover, we are highly engaged in the initiatives from the government to make a carbon-neutral society. For example, we partnered with Harbin's first carbon inclusive service platform, which could benefit millions of EV drivers. Our charging infrastructure, monitor and service platform for Zhejiang has also recently been deployed, which could help local government and power grid to better service its millions of EV drivers. So the conclusion is in this fast-growing EV charging industry, we want to build a stronger partnership with all stakeholders in the industry and leverage these partnerships to create a better user experience for the EV drivers. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to the company for closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us. Thank you.

This concludes this conference call. You may disconnect your lines. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS First Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, Director of Investor Relations. Thank you, and please go ahead.

Thank you, operator. Hello, everyone, and welcome to NaaS First Quarter 2024 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer; Ms. Vivian Wu Ye, our Chief Strategy Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights. Ms. Wu will discuss our operating results, and Mr. Wu will go through our financial highlights. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussions of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to our CEO, Ms. Cathy Wang Yang. Cathy, please go ahead.

Hello, everyone. I'm NaaS CEO, Cathy Wang Yang. It's my pleasure to share NaaS' first quarter 2024 earnings results with you and discuss our recent developments. 2024 is off to a great start, shows significant growth across our business. In the first quarter, we achieved revenue of RMB 96.24 million, a 156% increase year-over-year. Our gross margin [ ascended ] by 8.4 percentage points year-over-year to 25%. These financial achievements reflect our strong operational execution and the power of our strategic steps, making significant progress as we transform our business into one with lucrative and diversified revenue streams across our comprehensive energy solution offerings. Our fundamental capabilities in mobile connectivity have laid a solid foundation for our overall competitiveness. Enhancement in scale and operational efficiency have enabled us to achieve positive gains at both the GTR and NTR numbers. Simultaneously, we have actively importing charging power operators with our ecosystem and continuously delivering innovation and energy solutions. This dual engine approach not only drives revenue diversification but also strengthens our position in the broader comprehensive energy market. While we have maintained steady revenue growth, we have also focused on optimizing our cost structure. The cost reduction and efficiency strides we have made are translating direct to our bottom line, and we are on stride to turn our single month EBIT positive by the end of this year. In summary, the first quarter of 2024 has signed a strong foundation for the rest of the year. With our robust financial performance, strategic investment in mobility, connectivity and continued improvements in operating efficiency, we are well positioned for sustained growth and long-term value creation. We have established a unique dual engine model in charging services in battery chain, comprising both charging services and energy solutions. Thank you for your continued support and trust in NaaS. We look forward to continue our journey of innovation and leadership in the new energy sector. Now I will turn things over to Ms. Wu, our CFO, for a closer look at our operating results.

Thanks, Cathy, and hello, everyone. I'd like to start by highlighting our recent developments. Firstly, our photovoltaic operations in Hong Kong continued to drive revenue growth, and we expanded our market share in the region. This growth stems from increasing demand as well as our ability to capitalize on emerging market opportunities. Starting in April, we began piloting our EV services in Hong Kong, leveraging our established capabilities in the EPC and local community resources of the PV business. We're now offering EPC services for private charging piles in residential areas along with selling and installing our company-certified European standard chargers, effectively reproposing our existing capabilities. And in March 2024, we established a significant partnership with Chaoran New Energy Technology, one of the largest CPO in the Central China region. In this collaboration, we'll provide comprehensive services, including site selection, hardware supply and asset operation. The successful signing and execution of these projects are crucial for our company for several reasons. Firstly, this initiative marks the large-scale application of our AI analytics model in business operations, where we provide site selection services to help operators secure optimal locations. Secondly, we'll facilitate the sale of charging piles and integrate these operations with our online systems to enhance the compatibility between our hardware and software. Thirdly, by leveraging the synergy between our online and offline activities, we can thereby enhance the efficiency of site operations. This approach not only ensures cost recovery for operators but also enables us to share in additional revenue. We also continued to focus intensely on technological development and have joined the Open Invention Network, OIN, the largest patent non-aggression community aimed at protecting open source. As of March 31, 2024, NaaS has filed over 250 patent applications across more than 10 countries and regions, including the United States, the United Kingdom, Norway, Japan, Thailand, Brazil and Australia. Our active participation in OIN highlights our dedication to leverage an open source technology to enhance our charging infrastructure networks. This move is a critical part of our strategy to boost our intellectual property and R&D capabilities, which is crucial for refining our AI models and analytical capacity. In conclusion, our initiatives in Hong Kong, strategic partnerships and focus on technology and IP demonstrate our proactive approach to growth and innovation. And these efforts ensure that NaaS remains at the forefront of the new energy sector, driving the development of advanced, sustainable energy solutions. And with that, I'll give the floor to our CFO, Alex, for a deeper dive into our financials.

Thanks, Vivian. I'll start with a review of our results for the first quarter of 2024. In the first quarter, revenue increased by a remarkable 166% year-over-year, reaching RMB 96.2 million. This growth was primarily fueled by our evolving mobility connectivity business and expanded diversified revenue streams. Additionally, our revenue from our energy solutions business increased by 334% year-over-year to RMB 47.2 million, owing largely to our sustained efforts in delivering comprehensive energy solutions, including renewable energy generation, energy management and storage solutions. Our sustained revenue growth underscores the strength and viability of our business model and the increasing demand for our services. In the first quarter of 2024, we considerably advanced our operations. Specifically, the charging volumes through NaaS' network increased 19% year-over-year to 1,216 gigawatt hours. The gross transaction value increased 17% to RMB 1.2 billion, and the number of orders surged by 13% to 50.4 million. These metrics highlight our central role in expanding the new energy ecosystem while bolstering our revenues. Alongside our revenue growth, our strategic focus on cost control optimization boosted our gross profit in the first quarter, which increased 4x year-over-year to RMB 24.3 million. Our gross margin also improved to 25.3%, up by 8.4 percentage points year-over-year, reflecting our enhanced operational efficiency and the positive impact of our strategic pricing initiatives. We also made considerable progress in refining our online operational efficiency, which we can see in our improved gross and net take rates. Our ongoing efforts increased our GTR and turned our NTR positive beginning in January for a record-high NTR witnessed in April. These achievements emphasize our leadership in operational excellence and customer engagement. We remain committed to improving our cost controls while maintaining steady revenue growth, continuously reducing losses. This quarter, we successfully decreased our operating expenses as a percentage of revenue to 224%, marking a decrease of 107 percentage points year-over-year and 421 percentage points sequentially. Our disciplined approach to expanding revenue and strategic cost reductions set us firmly on path to reach our goal of positive EBIT by the end of 2024. The reduction in labor costs and incentives, coupled with increased transaction volumes that offer operating leverage, has enabled us to effectively continue reducing costs. With this powerful combination, we are actively narrowing our losses and advancing our financial sustainability goals. In conclusion, this quarter has marked a significant milestone in our journey towards becoming a global leader in new energy asset management. With strong revenue growth, improved profitability and strategic cost reductions, we are well positioned to continue our sustained growth in the new energy sector. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

[Operator Instructions] Your first question comes from [ Zoe Fang ].

Could you share some color on the gross profit margin on different business lines and their trends?

Sure. This is Alex. Let me answer this question. So from a gross profit perspective, overall, we have achieved an encouraging gross profit margin improvement in first quarter 2024 with an 8.4 point year-over-year increase to 25%, right? This is the most important thing. Now if you look at the major segments of business that we have, for connectivity business, as our NTR continues to improve, as we explained before, the cost and expenses are mainly in the human capital invested to build the digital infrastructure, and these costs are relatively fixed. So once we have the revenue scale of connectivity business, we expect margin on the business to improve meaningfully. And by the way, this -- since the way that we recognize our revenue in this business has been pretty conservative and consistent, we are actually having a pretty good gross margin on our connectivity business already. For energy solutions business, due to its project-based nature, we normally can achieve somewhere between 10% to 20% margin on average. But it's important to mention that our Sinopower solar business has achieved a pretty remarkable 30% to 40% gross margin in Hong Kong and overseas market. Finally, for the fuel station operations business, we're still at a pretty early stage where we're improving our digital analytics capability and inject those capabilities into the operation itself to improve the margin. I think a medium-term objective for margin for that particular business will be somewhere between 15% to 20%.

Your next question comes from [ Amber Ge ] with Jefferies.

This is [ Amber Ge ] from Jefferies. I'll have 2 questions. First will be, with regards to the EV charging market, can you share more color on the market trends? With the EV penetration path to 50% in the new car sales, how is the sentiment in EV charging station investment? And what's your strategy to capture this fast-growing market? And the second would be, your sales and marketing expenses have been significantly reduced quarter-over-quarter. So how are you able to achieve that? Can we expect the continued improvement in S&M efficiency?

Thank you, Kelly (sic) [ Amber ]. This is Vivian, and I'm going to answer the first question. And yes, as you rightly pointed out that we can see from the faster ramp-up on EV sales and the EV penetration is increasing, and particularly in private family cars and lower-tier cities. And this trend undoubtedly, we believe, that will increase the demand for public charging. And also, we think that the transformation process from the ICE to EV is only 6%, which means that only 6% of the vehicle are converted from ICE to EV at this moment. So we believe that the whole EV markets still have a huge state for development. So for NaaS, in the near future, we unlock huge business opportunities for sure. And from the supply side, we also noticed that the EV charging operation business is highly localized, which means that different EV charging station may have totally different customer base and totally different traffic pattern and cost structures. So the above differences lead to totally different return on investment profiles. So in some cases, the payback period of an EV charging station may be as short as 1.5 to 2 years. While in other cases, it can be as long as 10 to 15 years. So -- and suddenly, we see much more participation from the private capital than SOE. SOE is owning on a small fraction of the EV charging station comparing to the half of the market share in gas station site. So the increased participation from the private capital means that the operation of EV charging station is more market-oriented and multilayered collaboration with us. Finally, the EV charging station market is becoming -- we think is more and more fragmented according to the third-party data. The top 5 operators market share has dropped from like 87% in 2018 to around 16% in 2023. So the more fragmented upstream markets, the more value that we can provide. Then with above trends, we adopted our ABC strategies to capture the market opportunities. The first letter, A, stands for analytic capabilities in that we leverage AI-based digital technology to drive insight and enable us -- enable use cases like the real-time dynamic pricing. And the B refers to our BD team, along with quantity of the CPOs. Charging is -- as we know, charging is a localized business and requires knowledge of local markets. We know that the market -- we know the market well, and we are equipped with nearly 2,000 CPOs in China and a ground team of more than 150 people, which enable us to engage the local business across different regions in China. And finally, the C goes to the connectivity. We've connected to our market-leading number of EV charging stations and EV drivers in China. As we continue to expand this network, a comprehensive offering of services could bring to the EV drivers and the station owners. So therefore, we believe that based on the above capabilities, we can seize the market opportunities well and continue to expand our market share.

Sorry, we still have the second half of the question. So the second half of the question is related to the sales and marketing cost, right? As a platform company, the sales and marketing expenses are mainly invested in acquiring new customers and retaining existing customers. Typically, you will see those costs are pretty high in the early stages of the company, but they tend to go down as the company grow into a bigger scale. In the new customer acquisition side, we've built a much leading ecosystem that includes a big network of EV charging stations across China. We've honored with 80% of the EV OEMs. And we've worked together with all the major map providers and/or major online providers. With this ecosystem, the synergies from our parent company and market-leading branding help us acquire 70% of our new users in an organic manner. For customer retention, our continued iteration and improvement in AI-based algorithm and models help us to make smarter decisions in giving user subsidies, which then translates to a better return on investment in our sales and marketing dollars and lower reliance from user subsidies in retaining existing customers. And finally, we are also expanding our business lines, especially in the [ 2B ] space, that leverage more of our analytical capabilities that doesn't require a large number of sales and marketing costs. These elements all adding together, I think you're going to be continuing to see a lower percentage of sales and marketing cost in the coming quarters.

Your next question comes from [ Khin Song ] with Goldman Sachs.

Can you discuss the pricing trend in the charging services market for both short-term and long-term perspective?

I think it's a very big question, and I'm very happy to answer it. And here are some of my observations. Firstly, for short term, we are seeing a generally stable market prices for the EV charging. But over the past several months, our gross take rate has been consistently improving, which means that we are providing more value to the market. And for the long term, we believe that the price for the EV charging still has plenty of upside for following reasons. First, I think that EV has only 10% to 20% of the cost per mileage of the equivalent ICE cars. Thus, even if the charging price is doubled, the attractiveness of EV is still there. And secondly, the EV penetration in private family car is increasing at a fast pace and drivers are getting more used to charge their cars at public charging station. So thus, users are getting less and less price-sensitive, we think. And lastly, comparing to the developed markets where the charging price can be like EUR 1 or $1 per kilowatt hours, the charging price in China still has a very large upside. Even comparing to the industrial and household electricity consumption, the transportation energy consumption has more flexibility to even out to the peak and valley stage of the electricity consumption. So we believe that the policymakers could leverage these features to give more pricing freedom to the market participants. And about on my thoughts on pricing trends, and simply put that is I believe there is still a lot of room for the charging prices to increase.

Your next question comes from [ James Yu ] with UBS.

Your management, I have one question. You have highlighted the progress in your patent and intellectual property in the earnings release. What will be your R&D focus in the next 1 to 2 years? And how that could translate to your business growth and efficiency improvement?

Yes. Definitely, R&D will be the cornerstone of our business development. And our digital analytics capabilities will be the key enabler for our business monetization. And the truth is we have more than 100 employees in our data engineering team and online operation team, which are -- this is our key R&D forces to develop our digital energy asset operation, tours and models. Our R&D team has developed a variety of AI models that can be applied to different business segments and also under different business scenarios. For example, our AI location [ sutrestion ] model can help energy asset investors to find the most appropriate locations to set up the new charging stations. And similarly, our AI dynamic pricing model could also optimize the charging pricing based on the real-time traffic data in order to maximize the efficiency of the charging station. And with this digital analytic models could enable us to expand our business and monetize through the different business frontiers. For example, with our AI location [ sutrestion ] model, we are able to capture the fast EV charging infrastructure build-out trains with digitally enabling solutions with hardware sales and EPCs. And additionally, with our AI dynamic pricing model, we're expanding our fuel station operation business with higher level of confidence where we can capture the upside of the improved operational efficiency of the charging station. Thus, we will continue to drive our business expansion and efficiency, increased with our R&D efforts. And I also firmly believe that the R&D, especially in the in-depth R&D of AI plus energy sector, is one of NaaS' very important competitive advantages.

Your next question comes from Ethan Zhang with Nomura.

So I have 2 questions. First is regarding the take rates. So we have noticed some positive trends regarding your Q1 net take rates and gross take rates. So how can we expect these take rates to perform in the second quarter as well as the rest of this year? And my second question is regarding the synergies of your business with your parent group. So how we should see this contribution from your Newlink parent, NewLink Group, to drive your business in this year?

Ethan, I will answer your first question, and Vivian will answer your second question. For GTR and NTR, the take rate since September 2023, the company has put a lot of focus in improving NTR, and we've managed to improve the NTR consecutively while expanding our GTR. As we disclosed in our earnings report, both GTR and NTR has reached historical peak since our listing in April. So there are a couple of things that we've done in that space. For GTR, as we're expanding our CPO or operator network and increasing our user base, we have the advantage to negotiate a higher GTR with the operators. As we disclosed in the earnings report, our GTR has increased to record high. We believe the supply side market is getting more and more fragmented and localized. And value that we can bring to the operators from an operation traffic acquisition perspective is getting higher and higher. And therefore, we believe that we have space to further improve our bargaining power and therefore, the GTR. On the net take rate side, we're able to achieve a positive NTR since the beginning of 2024, and now the NTR level has been extended to a new high. The achievement are mainly derived from the improved capability to optimize user subsidies. For example, we have deployed a membership loyalty program that can meet more specific demands from different types of users. We have also leveraged our AI technology to further improve operation efficiency of the operators on our platform by optimizing the real-time dynamic charging pricing. Experience from our current company Newlink, gas filling mobile app, is that the NTR can reach somewhere between 2% to 3% in a mature gas fueling industry. That is the benchmark that can be considered. And for the next quarters to come, I think we will continue to be working on both the GTR and NTR and can potentially bring even higher NTR as months to come.

Ethan, I'll answer the second question. And firstly, I want to emphasize that our parent company, NewLink Group, has already reached net profit breakeven, if excluding NaaS. So I think this is very significant for the whole company. And we think the following aspects could also help NaaS to achieve our business goals. Firstly, as I mentioned, the rest of the business segments of NewLink Group as a whole has reached a net profit breakeven, which means NaaS could have more financial resources to support the business development. And secondly, since NewLink Group's online fueling platform has much larger traffic flow, so when the user on our parent group's platform needs to switch from ICE cars to EV and we could enjoy organic traffic conversion. And as a matter of fact, 70% of our new users are acquired without marketing incentives, and a large portion of this organic traffic is actually from our parent group's conversion. So these synergies in the energy transition process between oil and electricity is huge. And then, last but not least, the business models of our other business line in our parent group, NewLink, are quite similar to NaaS. So therefore, we could have more cost control capabilities in team sharing and rental sharing. So this will also be a great help in accelerating the profitability of NaaS. And we're also very excited to continue to see more synergies in the future.

May I have a follow-up? So I think you had mentioned that you will reach breakeven by the end of this year. So can we assume that we are still on this target unchanged to reach this profit breakeven? And also, could you like give us more colors on this cost reduction methods that can help to achieve this goal?

That's a very good follow-up question. We are confident that the objective that we'll achieve monthly EBIT breakeven by end of the year, we're confident we're on the right track to deliver that very important result. As we have published in our Q1 result, we have reduced our expense ratio quite significantly. I believe in Q2 numbers, we'll be able to further reduce the expense ratio, and we should be able to deliver a pretty linear path to EBIT breakeven by end of the year. Now if I elaborate a little bit on that point, historically, part of our loss was due to subsidies that we gave to charging users in the early stage of the charging service business. Since January 2024, we have managed to maintain our net take rate as positive, hence, at the transaction level become profitable. So that is for our connectivity business. Our energy solutions business, meanwhile, will continue to contribute more gross profit as it scales up and maintain a stable gross profit margin. I gave an example in some of my early answers that, for example, our solar business can contribute somewhere between 30% to 40% of gross profit margin. Now if you look at the overhead expense, these expenses are stable and very well controlled. As a matter of fact, in Q1, we managed to reduce the cost in absolute terms, and we're getting more and more disciplined in expenses and improving our efficiencies in daily operation. So if you add this all together, as a result, with the gross profit from our business lines growing, with our operating leverage improving and with a stable or even reduced overhead, we should be able to hit our EBIT breakeven target by end of the year.

As there are no further questions now, I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact us. Thanks.

This concludes the conference call for today. You may disconnect your lines. Thank you.

Ladies and gentlemen, thank you for standing by. Welcome to NaaS Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Mr. John Wang, Director of Investor Relations. Thank you, please go ahead.

Thank you, operator, and hello everyone. And welcome to NaaS fourth quarter and fiscal year 2023 earnings conference call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer; Ms. Wu Ye [ph], our Chief Strategy Officer, and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights. Ms. Wu will discuss our operating results and Mr. Wu will go through our financial highlights. Before we continue, I refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussions of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I will now turn the call over to our CEO, Ms. Cathy Wang Yang. Kathy, please go ahead.

Hello, everyone. I'm NaaS’ CEO, Cathy Wang. It's my pleasure to share NaaS’ fourth quarter and the full year 2023 earnings results with all of you and to discuss our recent developments. In 2023, both our business skill and revenue saw substantial growth. A host of strategic initiatives diversified our income structure, promoting sustainable revenue growth and improving profitability. Total revenue for the full year reached RMB320 million, a year-over-year increase of 245%, while gross profit increased 14 times to RMB89 million. Our full year gross profit margin extended from 6.6% to 27.7% year-over-year and non-IFRS net margin narrowed by 162% year-over-year. On the operations front, we steadily expanded our charging network. Our full year charging volume reached nearly 5,000 gigawatt hours, an 81% year-over-year increase, while the total number of new energy vehicles in China increased by 55.8% during the same period. Meanwhile, we strive to improve profitability, our Mobility Connectivity Services, net take rate, has risen for five consecutive months since September 2023, turning positive in January 2024 and continues to expand in February. While maintaining our strong market position in charging services, we also explored new business models to further diversify our income streams. Revenues from energy solutions reached RMB187 million for the full year 2023, accounting for over 58% of total revenues. This segment growth reflects our progress in shifting from an energy service provider to a comprehensive energy solution provider. Going forward, we will continue to lead the charging services market while exploring new paths to income diversification. The strong foundation we built in 2023 will empower us to consistently improve revenue and profitability, propelling the company's steady development. Now I will turn things over to Ms. Ye Wu, our newly appointed CSO, for a closer look at our operating results.

Thanks Cathy and hello everyone. I'd like to start with a brief overview of how we are leveraging AI in our business. Our AI-powered analytic capabilities are the core advantage driving our profitability. On the supply side, we depend on AI to optimize network performance, predict maintenance needs and reduce operational costs. On the client side, AI analysis helps us understand usage patterns and efficiently deploy resources. Through refined operations and strategic pricing adjustments, we have achieved a healthy balance between growth and profitability. This AI-driven approach has propelled our growth, expanded our market share and solidified our position as an innovator in the new energy sector. As our CEO mentioned, we are fast becoming a global provider of comprehensive energy solutions, leveraging our advantage in digital technology, artificial intelligence and various other areas. We empower the development of the entire new energy industry chain. Our power spans a diverse range of new energy-related services, such as AI-based site selection and asset assessment for charging operators and intelligent operation and maintenance services for charging stations. We can also act as a virtual power plant for grid aggregation. Furthermore, we offer AI-driven risk control models for funders and financial institutions to accelerate asset-side development, thereby propelling the expansion of the entire industry chain. In short, we can address the full spectrum of new energy scenarios with tailored, proven, effective solutions. In addition to cultivating broad in-house capabilities, we have constantly expanded our partnership to quickly diversify and optimize our income structure. In early 2024, we announced a collaboration with Foshan Chengcheng City Construction Group to advance regional new energy infrastructure construction. We have also partnered with China Construction Third Engineering Bureau in the fields of new energy and new infrastructure to jointly promote charging network development. Furthermore, in February, we won the Zhejiang Energy Bureau's Governance and Supervision Service Platform construction Project, becoming a provincial government supplier in Zhejiang province and contributing our expertise to the construction of charging infrastructure. This marked another significant milestone for NaaS in Zhejiang's new energy sector, following a successful solar panel energy storage, charging, and battery swapping integrated construction project in Anji. Also, in terms of automaker partnership, we cooperated with Great Wall Motors, GAC Energy, and Deepal Automotive to expand the new energy vehicle charging services network, enhance user experience, and broaden user acquisition channels. Before I hand it over to our CFO, let me share an update on our ESG efforts. NaaS is deeply committed to ESG, with the overarching goal of enhancing global transportation, energy efficiency, and sustainability. This month, we were invited to participate in the 6th United Nations Environment Assembly, where we shared energy innovations combining green and digital elements. Our solutions stand as a powerful demonstration of China's commitment to global transportation, energy transformation, and environmental governance. In addition, we recently received a climate change B-level rating certification from the Global Environmental Information Research Center, surpassing the global average C-level rating. As always, we remain dedicated to the field of green development and global carbon neutrality. With that, I'll give the floor to our CFO, Alex for a deeper dive into our financials.

Thanks, Vivian. I'll start with a review of our results for the fourth quarter of 2023. In the fourth quarter, we increased our total revenues by a substantial 119% year-over-year, to RMB64.4 million. This robust growth mainly stems from our mobility connectivity business, which has consistently recorded month-over-month upticks in profitable orders since September 2023, both in terms of their proportion of the total charging volume and total gross transactions. This impressive growth is predominantly the result of our sophisticated data-driven pricing strategy. Additionally, our energy solutions business revenue increased 144% year-over-year, largely due to our ongoing delivery of comprehensive energy solutions, including renewable energy generation, energy management, and storage solutions. Looking at the full year, 2023 was a record-breaking year for NaaS, with all-time high performances in each of our core financial metrics. We drove transformative growth and evolved strategically, solidifying our position as a leader in the energy digitalization sector. As Cathy mentioned, for the full year, our annual revenue grew by an astounding 245%, year-over-year, to an all-time high of RMB320.1 million. Our tremendous growth reflects scalability of our business model and the increasing demand for our services. We made significant advancements across three key metrics. The charging volume through NaaS network, which increased by 81% to 4,968 gigawatt-hours. The gross transaction volume, which rose by 64%, to RMB4.7 billion. And the numbers of orders, which surged by 75%, to RMB213.8 million, equivalent to 6.8 orders transacted through NaaS network per second. Each of these metrics highlights our central role in driving the expansion of the industry's new energy ecosystem and contributes directly to our revenue growth. Our primary focus has been on refining our operational efficiency across our core business segments, setting clear and ambitious goals for H1. In this way, we increased our three-year gross profit 14-fold from RMB6.2 million in 2022 to RMB88.8 million in 2023. This also drove our gross margin up from 6.6% in 2022 to 27.7% in 2023. Moreover, our non-IFRS net profit margin narrowed by 162%. The improvement in our margin was mainly due to the increased profitability in our charging services, where we're gaining more operating leverage with fixed costs accounting for a smaller portion of our growing revenue base. Positive momentum in our gross and net take rate shows that we're advancing with greater operational efficiency. Our net take rate turned positive for the first time in January 2024 with a positive NTR of 0.75% in February, marking the sixth consecutive month of NTR growth since September 2023. Similarly, we've seen a consistent upward trend in our gross take rate, which improved to 13.02% in February, underscoring our operations-improving fundamentals. With a notable 65% year-over-year increase in transaction volume in the fourth quarter, the progress has climbed in both NTR and GTR further underscores the effectiveness of our refined operational strategy and demonstrates our strong customer-sickness. Our strategic focus remains on high-quality growth and improving profitability as we forge ahead under this approach. Our initiatives to enhance operational efficiency and streamline processes are yielding tangible results, placing us on a strong trajectory to reach monthly break-even at the average level by the end of 2024. In summary, NaaS is firmly on the path toward global leadership in new energy asset management. Our journey is marked by both strong revenue growth and enhanced operational efficiency, driving our sustained growth and advancement in the new energy domain. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Kelly Zou from Jefferies. Please go ahead.

Thanks, management, for the presentation. This is Kelly Zou from Jefferies. I have two questions today. Firstly, I would like to ask about what your strategic focus in 2024. And second is about the margin outlook. So basically, what is your view on your Chinese service business margin expansion sustainability in the next two to three years and the key drivers of the market expansion if you can share with me today? Thanks.

Thanks, Kelly. I'd be happy to answer your first question. And firstly, in 2024, we will prioritize margin improvements and aim to achieve profit for a season while preserving our leading position in our platform and network. We're confident in our ability to deliver this result and remain committed to our long-term strategy. And from a perspective of margin enhancement, historically, the majority of our laws have been attributed to the use of subsidies in our earliest stage to charging service business. We are encouraged to see NTR turn positive in 2024. Meanwhile, our overhead expenses remain relatively constant. So consequently, we are on track to achieve profitability by the end of 2024. And secondly, on the market expansion side, we have maintained a robust growth trajectory across all of our major metrics. Our expansive ground force of over 100 personnel is repeatedly deployed throughout China to engage with all CPOs. Furthermore, an impressive 70% of our users are organically acquired, highlighting our strength in branding and user acquisition channels. Moreover, once we successfully bring together users and CPOs on our platform, we build out our digital analytic capabilities to empower the charging station stakeholders in expanding their infrastructure and enhancing their operational efficiency. As you can see in our fast-growing charging service and energy system business, we will continue to leverage our technological strengths to monetize through our diverse business channels. In conclusion, NaaS is dedicated to improving the stability and efficiency of the global energy transportation network. With our strong technological capabilities, we are becoming a leading energy asset operator and contribute our effort in the grand paradigm shift of the energy transition. And next, I believe Alex is going to answer your first and second question.

Yeah, Kelly, let me answer your question regarding growth and margin. From growth perspective, first, let's look at markets. We're at the very early stage of EV penetration in China with only 5% of the vehicles on the road that are EV. Third-party report suggests that charging volume will grow at a CAGR of about 50% in the next seven to eight years, which means the market will grow 16 times by 2030. And public charging, as we both know, will continue to dominate as it's more efficient and requires less infrastructure investment than private charging in China. NaaS in this very promising market is holding a leading position. And we have some unique capabilities which will sustain both our growth and our margin improvement. Number one is the analytics capabilities in that we leverage the AI-based digital technology to drive insights and enable use cases like real-time dynamic pricing. We also have a very strong local BD team with more than 100 people in cities. These are the people that understand the local charging market the best, and they have what we called hands-on approach of all the major cities in China in terms of charging. We also connect to a large number of CPOs. By 2023 year-end, we connect to more than 4,000 CPOs, and we connect to more than 5 million users. As we continue to expand this network, a holistic offering of services can bring EV drivers and station owners together. So with the hyper-growing underlying market, a leading position in this market, and key capabilities that are unique and difficult to replicate, I have great confidence that our growth will be sustained. Same thing can be said for the margin. The connectivity business, the largest part of our business, is currently enjoying a gross profit margin north of 80%, which is super high. Our NTR, as we mentioned in our early release, has been lifted in five consecutive months, along with an expanded NTR. Given the steady growth and controlled overhead, our gross profit will likely gradually cover expenses and margin. That explains why we set the priorities to improve margin and reach EBIT breakeven, echoed to what Vivian just mentioned. Thank you, Kelly.

Thanks, Alex and Vivian.

Thank you for the questions. Our next question comes from the line of [Indiscernible] from Goldman Sachs. Please go ahead.

Thanks for taking my question. So I have two questions. The first is, you just mentioned the company will reach net profit breakeven this year by the year end. Could you share more details on how you will control the overall cost and improve the profitability from the bottom line perspective? So my second question is about the user growth. Given you have reduced the subsidies a lot this year, so can you share more color on how you are able to achieve online user acquisition and GMV growth? Thank you.

Great. Thanks, Kim. Your first question regarding breakeven, we are confident on the goal. The goal is that we will achieve monthly EBIT breakeven by the end of this year, 2024. There are a couple of drivers for the breakeven. Number one, historically, part of our loss was due to subsidies to charging users, especially in the early stage of the charging service business. Since January 2024, we have managed to maintain our NTR as positive. Hence, our transaction level become profitable. I'm confident that we will be able to manage this NTR level for the rest of 2024. Meanwhile, energy solution business, continue to contribute gross profit and more gross profit as the business scale up and maintain a stable gross profit margin. Besides, the overhead from our back end, are quite stable and well controlled. So if you put these things together, as a result, with gross profit from our existing business lines scale up and a stable overhead, and with a clear sign of profitability for our main charging service business. Our margin will continue to improve and we'll be able to reach monthly EBIT breakeven by the end of 2024. So, for your second question, Kim, regarding the online user acquisition and GMV growth, how can we sustain that with reduced user subsidies? I have a couple of things to say. Well, let's start. I would like to probably take a step back and look at the market again. China is a very big country with a lot of cities in different tiers. And EV charging service, as we both know, is a localized market. So each city is different. Our experience is that the more balanced of the local supply and demand, the higher the profitability of the whole value chain in the charging space. The natural increase of EV ownership and traffic will gradually yield a higher profitability for both CPOs and for us and further reduce the need and of course, to acquire users through subsidies. So that's a view from the market. Secondly, the view for our operation. We have been making efforts to leverage our market know-how to acquire and maintain users more efficiently. I'll give you a couple of examples. For example, we have deployed a multi-tier membership system that can meet more specified needs for different types of users, such as taxi drivers, private car owners, commercial vehicle drivers, and so on. We also have leveraged our AI technology to further improve our efficiency of the CPOs in our platform by optimizing the real-time charging price for those operators. Our effort is recognized by our fast-improving operating numbers even when we are reducing user subsidies. For example, we achieved a 114% year-over-year growth in charging service revenue, 55% year-over-year growth in charging volume, 48% year-over-year growth in transaction orders, and 47% growth in GMV. These fast-growing numbers suggest a strong user stickiness in the charging business. The third thing I want to say is the ecosystem. It's worth to mention that 68% of our NaaS users overlap with the existing users on our parent company, Newlink Group's gas-fueling app. The synergy between our parent group and NaaS serves as one big advantage for us. So in summary, with the three points that I just mentioned, including market, including operation efficiency, including ecosystem, as an early mover in the charging industry, I believe that with all these points, we will be able to achieve online user acquisition and GMV growth while we reduce our subsidies. Thank you.

Thank you for the questions. One moment for the next questions. Next question comes from the line of Wei Xiong from UBS. Please go ahead. Wei Xiong, your line is open. Please unmute locally.

Good morning. Thanks for taking my question. You mentioned that NaaS has signed a partnership agreement with EV OEMs such as China’s, Deepal, GAC, and Great Wall. What would you see the benefit in such partnership and how will you monetize on these partnerships? Thanks.

Thank you. That's a very good question. Currently, we have established a strong partnership with over 80% of EV OEMs in China, enabling us to provide exceptional user services for their EVs, including NIO, Li Auto, XPeng, ARCFOX, AITO, Deepal, GAC, Great Wall, et cetera. The collaboration between us and OEMs is extensive and diverse. Certainly, we assist OEMs in integrating the EV charging services into their infotainment systems. Additionally, we provide OEMs with the support they need to develop their own branded EV charging mobile application. And furthermore, many EV chargers owned by OEMs are connected to our platform and enjoying the traffic from our user support. Lastly, through our collaboration with overseas CPOs, we are facilitating OEMs' expansion into the European and Southeast Asian markets. So this partnership gives us many advantages in the EV charging markets. Firstly, new EV drivers are important for our user acquisition. As we build up a partnership with these EV OEMs, the new EV owners will automatically become our users and will have a strong stigma to use the underlying EV charging services that we provide. And secondly, the traffic and charging behavior information could enrich and optimize our digital analytic models, thereby assisting our valued OEM partners in delivering superior service to their EV customers. And we can always leverage the experience in this partnership to improve our own energy asset operation models and monetize through our existing channels, such as energy solution business and charging service business. Ultimately, in the era of intelligent transportation, we're confident that we will be able to offer a more comprehensive service and enable the efficient delivery of smart energy in the new world of autonomous driving. Thank you.

Thank you for the questions. One moment for the next question. Our next question comes from the line of Eugene Hsiao from Macquarie Capital. Please go ahead.

Hi, thank you for taking my question. Can you provide any update on the current competition for EV charging? More specifically, are you seeing any lower level of end-user incentives being used in the market? Thanks.

Thanks, Eugene. Thanks for the question. I would like to answer this question in a couple of different angles just to help people get a holistic view of the market. Because I think sometimes there are different views and sometimes there are myths that people see in the market. First, just let's look at, I mentioned that market is a localized market in my previous answers. I would like to probably elaborate that point a little bit more. Let's look at the first batch of cities where we now achieved positive NTR. The first city that we achieved positive NTR in whole China is in Shanghai. So obviously, this is a developed Tier 1 city. What we've seen generally as a trend is that later in those economically advanced regions, such as coastal area, we have gradually turning our NTR to positive. So overall, as the EV penetration continues to increase, we will achieve a higher NTR over the larger markets in China. So we've already witnessed this generally as a trend. So that's from a localized market perspective. From a supply side, what we've noticed is that the number of CPOs is increasing very, very quickly, which suggests the market is getting very much fragmented and scattered. Our system indicates that by year-end 2023, we are connected to 4,270 CPOs, which is a 170% year-over-year increase. So that's 4,000 plus operators across China. So that indicates the supply side is getting more scattered. The other, the third indication or data point that I can give is there is obviously a difference between a hyper-growth market and a developed market. If we take Europe as an example, as a developed market, the service fee for EV charging can reach somewhere between €0.60 to €1 per kilowatt hour, and people take that as normal. So seeing from that aspect, I think China is still in a fast-growing hyper-growth phase. Once the market becomes more mature, there is a very good opportunity that a higher profitability can be achieved across the market value chain. So these are the three angles that I can provide just to help understand the market a little bit better. Thank you.

Thank you for the questions. Our next question will come from the line of Yiran Liu from HSBC. Please go ahead.

Thanks for the opportunity. As Vivian just mentioned, the NaaS would like to be a global provider. May I ask what is your overseas expansion plan? So some details will be very helpful. Thank you.

Thank you, Yiran, for the question. And firstly, I would like to say certainly China being the largest and fastest-growing market for EV charging remains our top priority in our business expansion plan. And given the fast penetration of the EV, the high density of EV traffic and the popularity of public EV charging user behavior, independent research predicts a 16-fold increase in charging volume between 2023 and 2030. This implies that our underlying market is growing at approximately 50% CAGR over the next seven years. So we are confident that this change will continue to favor other business growth and expansion efforts. But in the meantime, we believe our core technological capabilities can be transferable to other markets. Our digital analytics platform is managing one of the largest networks of EV charging stations and one of the largest EV driver user pools globally. The algorithm derived from our platform will be a valuable asset for us to enter into the new markets. So as we move forward with our global expansion, we're actively engaging different stakeholders in overseas markets. And I'm excited to share three key aspects with you. And first, we are collaborating with leading Chinese EV OEMs to penetrate into European and Southeast Asian markets and help them to provide charging services and networks in overseas markets. We are also collaborating with overseas CPOs to provide charging services to the EV drivers in global markets. And furthermore, we are integrating these capabilities into our advanced infotainment system. And secondly, we're also helping the [indiscernible] and developed countries to upgrade their energy infrastructure system with our mature energy solutions, such as solar panel, energy storage, and chargers. Lastly, in January, our NaaS-branded DC and AC chargers have opt-in to CE-certified in European markets. Our cutting-edge hardware technology opens up new opportunities for us to expand into markets where EV infrastructure is the key focus for future investments. So in summary, we are laying a solid foundation to expand in overseas markets, and we firmly believe that our unique technological strengths will bring benefits to both our partners and ourselves in the global markets. Thank you.

Thank you for the question. The next question comes from Ethan Zhang from Nomura. Please go ahead.

Okay, thanks, management for taking my question. So my question is regarding the energy solution business. I noticed there were some fluctuations for the energy solution revenue in Q3 and Q4, and I wonder if you could give us more visibility into the portraiture of this business. Thank you.

Thanks for the question. Our energy solution business is mainly a project-based business. It has a seasonality, which usually is low in winter and spring, especially around immediately before Chinese New Year, and will peak in summer and fall. So the seasonality is a natural one, and I think it applies to pretty much all the major project-based business. With the seasonality considered, though, on a year-over-year basis, we have achieved a significant 2.4 times year-over-year growth in energy solution business. We believe our core capability lies in the digital analytics capability, which is unique and difficult to replicate. With more partnerships being formed, the core capabilities are gradually recognized by our partners and by industry. With some of the major projects we win, such as the one in Hubei, clients are impressed with how accurate we can forecast the traffic and pricing of a station that is yet to be built. With the traffic and pricing of a station determined by our AI technology, we are able to tell the client that a certain yield can be expected from a particular station even before it's been built. That is something that is of very high value for potential investors. In 2023, we're also ramping up our service capabilities from end-to-end. Now we have energy solutions covering the full life cycle, from advisory to planning, hardware, procurement, EPC, maintenance, solar, and energy storage. And we are capable to provide full services for the new energy asset owners along the industrial value chain. So to recap, energy solution is a vital pillar of our growth. I see it also as a tool where we can monetize our connectivity ecosystem and analytical capabilities. Thanks a lot.

Thank you for the questions. Our next question comes from the line of Zoey [Indiscernible]. Please go ahead.

Thanks for taking my questions. And congratulations on the positive NTR and improving GTR that you achieved in the past few months. How can we expect the NTR and GTR to perform in Q1 and the rest of 2024? Thanks.

Okay, thanks, Zoey, for your question. You're right. Since September 2023, we have been able to improve our NTR consecutively while we're also expanding our GTR. As we disclosed in our earnings report, both GTR and NTR reached historical highs since our listing. Let me talk about this separately. So for GTR, as we are expanding our operator network and increasing our user base, we have the advantage to negotiate a higher GTR with operators. We believe we can bargain more as the market is growing. Also, since we see the market become more scattered, as I explained before, we also think in the mid to long -- sorry, that the mid to long-tail CPOs have a stronger reliance on the traffic provided by us and further improve our bargaining power. So that's for GTR. For net take rate, we are able to achieve a positive net take rate since the beginning of 2024. This achievement is mainly driven from the improved capability to optimize user subsidies. For example, we have deployed a membership system that could meet demands from different type of users. We have also leveraged our AI technology to optimize the real-time charging pricing for our operators. So we're basically doing, giving the subsidy in a smarter way. Hence, we can be more targeted to use our subsidies and hence increase the net take rate while we reduce our subsidies. If I give another benchmark, the experience from our parent company, Newlinks gas-fueling mobile app, which is called [Indiscernible], is that its NTR has reached between 1.5% to 2% in the gas-fueling industry. I think that can be used as a benchmark when we consider the EV charging space in the long run. Thank you.

Thank you. That concludes the Q&A session. Now I'd like to turn the call back over to the company for closing remarks.

Thank you once again for joining us today. If you have further questions, please feel free to contact us. Thanks.

This concludes this conference call. You may now disconnect your line. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS Third Quarter 2023 Earnings Conference Call. [Operator Instructions]. I must advise you that this conference is being recorded. I'd now like to turn the conference over to your first speaker today, Ms. Cynthia Tan, Senior IR Director. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to NaaS Third Quarter 2023 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights. And Mr. Wu will discuss our operating and financial results. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to today's call on forward-looking statements. Also, please note that this call includes discussion of certain non-IFRS financial measures, please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most [indiscernible] . Finally, please note that unless otherwise stated, [indiscernible] RMB terms. I will now turn the call over to our CEO, Ms. Cathy Wang Yang. Cathy, please go ahead.

Hello, everyone. I'm not CEO, Kathy Wang Yang. It's my pleasure to share NaaS third quarter 2023 earnings results with all of you to discuss and discuss our recent development. In the third quarter of 2023, our total revenues increased by 536% year-over-year to reach and RMB 171 million. Our non-IFRS net margin attributable to ordinary shareholders narrowed by 256 percentage points compared with the same quarter last year, the total charge volume transacted through our network during the quarter increased by year-over-year. Reaching 1,383 gigawatt hours. This accounted for 21.8% of all charging volume completed through public chargers in China during the same period. Since the beginning of 2023, NaaS has undergone a fundamental shift in its revenue structure. In the second quarter of 2023, the proportion of off-line and innovation service revenue exceeded 50% for the first time, reaching 53.4% in the third quarter. Revenue from EPC Energy storage and other solutions accounted for 81% of the total revenues. We affirm our full year 2023 revenue guidance to be between RMB 500 million to RMB 600 million. And we expect our full year 2024 revenue to be between RMB 2 billion to RMB 3 billion, a growth of 4 to 5x. NaaS is transforming from a new energy service company into a new energy . In the third quarter, NaaS stands at RMB 204 million energy storage order. In addition, we won the bid for MG Green and low-carbon supply chain construction project, creating the global EV storage, charging swapping benchmarking project for the highway trucks. NaaS International business is forging at height, contributing 32.7% of our total energies in the third culture. In October, NaaS become one of the first batch of strategic [indiscernible] of the Hong Kong SAR office for attracting strategic enterprises. On September 22, sustainable which assigned NaaS the highest ESG entity score in China. 22nd in Asia and 50 worldwide. On October 23, NaaS joined United Nation's Global Compact organization, we embrace open source technology, open data access and an open ecosystem. This commitment to openings pays the way for our global initiative towards carbon neutrality. We look forward to join hands with our partners. To advance our vision of empowering the world with with Green Energy. Now I will turn our call to Alex, our President for a closer look at our operating and financial performance. Thank you.

Thank you, Cathy. Hello, everyone, and thank you for joining our call today. As Cathy mentioned, we delivered an excellent performance across our key operating and financial metrics in the third quarter. Our top line growth was exceptional. And we remain the industry leader in China's growing charging services market. Simultaneously, we're expanding from a singular mobility connectivity business to a model that also monetize our digital analytic capabilities. We're doing this by achieving a rapid expansion of our charging station operation and energy storage businesses, which will allow us to reach our goal of becoming a leading integrated new energy asset operation and management service provider in China and abroad. In line with our business expansion, we introduced a new revenue reporting structure in the third quarter. Income from mobility, connectivity and self-operated charging stations has been consolidated under charging services revenue. Income from our integrated charging infrastructure, PV and energy storage now falls under Energy Solutions revenue, while income from our third revenue stream, electricity procurement services and other services has been remained new initiatives revenue. To assist with comparison, we have adjusted historical periods accordingly. We think these three revenue categories better describe our extended new energy asset ecosystem and more clearly reflect the direction of our business. For more information, please feel free to refer to our earnings release issued earlier today. We can see our business transition taking shape in our stellar third quarter growth, and we're pleased to be able to show a more visible profitability trajectory. Our total revenues reached an all-time high in the third quarter of RMB 170.9 million. The bulk of this rapid growth came from our Energy Solutions revenue. Which increased by 6x quarter-over-quarter, accounting for 81% of our total revenue in the third quarter. The substantial growth is mainly attributable to the ongoing delivery of energy solution projects, to provide renewable energy generation, energy management and storage solutions. On a year-over-year basis, our financial efficiency has significantly improved in the third quarter. Gross margin increased to 27% from 6% year-over-year and the gross profit increased by 28-fold year-over-year as we started to reap benefits from our expanded know-how and capabilities in delivering and executing energy solution projects. Total operating expenses decreased to RMB 285.3 million in the third quarter from RMB 359.1 million in the last quarter. We are beginning to recognize advantages from economies of scale, enabling us to gain significant operating leverage. During the third quarter, we substantially improved our operating spend as a percentage of revenue. Our sales and marketing expense ratio dropped sharply to 94% from 252% in the third quarter of 2022. And 177% in the second quarter of 2023. As the percentage of revenues, administrative expenses ratio declined substantially year-over-year to 63% from 95% in the second quarter of 2022. Research and development ratio also declined to 10% of our total revenues compared with 28% in the same period last year. Our net loss attributable to ordinary shareholders was RMB 366.9 million for the third quarter of 2023 compared with a loss of RMB 109.1 million for the same period of 2022. While our non-IFRS net loss was RMB 175.7 million for the third quarter compared with RMB 96.5 million for the same period of 2022. Net margin improved from negative 406% to negative 214%, whereas non-IFRS net margin improved from negative 359% to negative 103%. As we diligently manage our operating costs and work to narrow our losses, we're looking towards our long-term prospects. Our explanation of growth has come from our initiatives, both locally and internationally as we gain traction across our expanding business. Our network continues to experience high growth in China. And total charging volume increased by 66% year-over-year in the third quarter, reaching 1,383 gigawatt hours. The total number of orders rose by 58% year-over-year to nearly RMB 59.2 million. Furthermore, in terms of our assets under operation, we continue to carefully select high-quality charging stations to add to our portfolio. We are also making excellent headway with our energy storage initiatives, propelling the growth and the maturation of PV storage charging station development. By the end of the third quarter, we had already launched 43 integrated charging stations with energy storage, covering cities including Hangzhou, Guangzhou, Chongqin, Wuhan, and Tanja. On the other hand, our timely execution of the leading MG, PV storage charging sporting project, entailing the installation of , a 4,200 kilowatt distributed PV system, 36 energy storage and charging capital and 2 leading domestic heavy truck battery working stations. This will showcase our integrity solution, coupled with the timely execution that continues to win us new business. On the international front, our recent acquisition of [indiscernible] Power to broaden our reach in Hong Kong is already bearing fruit. Total international revenue for the third quarter accounted for more than 32% of our total revenues. Compared with 22% in Q2, demonstrating our rapid progress and the strength of our acquisition strategy. As our business [indiscernible], we are attracting strong support that bolsters our momentum. We can see this in our alliances with OSS, ZSY and China Construction Bank. For example, CCB will provide us with integrated financial service support encompassing overseas M&A, liquidity loans, project loans, inclusive loans, and financing for global renewable energy asset investment in charging stations, energy storage PV, among others. This will empower us to extend our global presence in the new energy sector. Thereby fostering green, low carbon and sustainable development in energy industry. This recognition from our strategic partners is helping us advance the new energy sector and its underlying infrastructure as we work to expand our presence in the new energy globally. I'm also pleased to provide an update on our recent financial activities in July and September 2023, we issued USD 30 million and USD 40 million convertible notes to LMR partners. As of today, USD 33 million has been converted into ADS. Highlighting our upward momentum. The remaining principal amount of the notes totaling USD 37 million. We appreciate the trust of LMR Partners which further fuels our commitment to continued growth and success. Looking ahead, we are on track to deliver our previously announced full year revenue guidance of between RMB 500 million and RMB 600 million, which is a 5 to 6x increase from 2022. With our added visibility and new growth, we would also like to introduce our guidance for 2024. We currently expect full year 2024 revenues to be between RMB 2 billion and RMB 3 billion. In summary, we're making considerable progress in establishing NaaS as a leading global provider of new energy asset operations and management services. We are broadening our One-stop charging services, advancing integrated energy systems and leveraging our strategic acquisitions to increase our global footprint. On top of our robust top line growth driven by both Charging Service and Energy Solutions. We also continue to drive a more favorable revenue mix with more high margin business. Our operating margins are also improving rapidly, benefiting from economies of scale and optimized operating costs. Our margin expansion is a testament to our commitment to both financial efficiency and that we are achieving sustainable growth in the right way. As we continue to grow our business both in China and abroad, we remain dedicated to provide sustainable new energy solutions while exploring new opportunities for growth that drive the industry forward. This concludes our prepared remarks for today. Operator, we are now ready to take questions.

[Operator Instructions]. Our first question comes from Kelly Zoot Jefferies.

Firstly, congratulations on about your strong third quarter results. I have two questions. Firstly is about the revenue guidance you just mentioned to us about the revenue [indiscernible] ? So can you share more color about the growth driver of your Energy Solutions business in China and also overseas market. [indiscernible]? And the second question is about the margin outlook. So can you share more color on your margin improvement? So basically helping us to know how to forecast the margin trend of your Energy Solutions business going forward?

Okay. Thank you, Kelly. Those are two very good questions. For your first question regarding Energy Solutions business and its growth drivers, let's look at what it's doing right now. So we have seen significant contribution from Energy Solutions in out of the Q3 revenues, the Energy Solutions has contributed RMB 139 million, which is a year-over-year 500% growth. If we look at the drivers, there are basically 3 segments that we're looking at in that business. Number one is what we call the EPC. The EPC driver is effectively we have the data advantage. We have the industry know-how, and we have a very strong customer base that will give us the capability to build the complex projects. And that will also give us the capability that we can give to our customers that we can pick the right spot to build those charging stations. Number 2 is the Energy Storage. For Energy Storage revenue driver, they are sort of twofold. The first one is we know that this year, we have the 380 contracted stations that we want to build the energy storage solutions. In Q3, so far, we've delivered 43 out of the 380. So the lion's share of the contracted stations that are yet to be delivered should be delivered in Q4 this year. If we look at the medium term that we picked 1,880 stations. Out of the 73,000 stations that we've connected to. This 1,880 stations are good candidates for us to build the Energy Storage Solutions, Inc. So we've already picked those stations. We already know where they are. The next step that we need to do in the midterm is to get those stations constructed and built that sorry, to get this Energy Storage Solutions build. So that's for energy storage. For overseas, I think it's quite easy to see that the overseas revenue has already contributed 32% of our overall revenue in Q3 this year, and we expect the overseas revenue to be about 40% of our 2024 revenue. If you look at the short-term drivers, we know that in [indiscernible] , for example, we have a RMB 70 million backlog that has already been secured and committed. We just need to get them delivered in Q4. We also know that it is, is very quickly expanding into EV charging. We have won 3 out of 5 contracts under EHSS, which is the government-sponsored EV charging project. We can also see clear synergy coming from NaaS after the acquisition of . We can see the financial support. We can see the EV know-how that has now been integrated into Hong Kong . So I think in overall, we can see clear growth momentum and very clear growth drivers for the Energy Solutions business. For your second question regarding margin, you're absolutely right. We have witnessed good margin trend in this quarter. In Q3 2023, we're basically driving the margin improvement through 2 major levers. The first one is revenue mix. Second one is operating leverage. In revenue mix in 2023, Q3, 81% revenue is from Energy Solutions with profitable margin. Energy Storage business, if you take that as an example, enjoys EBITDA margin of between 10% to 15%. The same EBITDA margin applies to Center Power business. So as we get more business in those lines, we tend to have higher margin, right? The second thing is on operating leverage. Our total operating expense ratio has declined significantly from 385% in Q3 2022, to 170% in Q3 2023. So if you mix those two together, we think we will generally be seeing better margin going forward. And we'll be seeing improving profitability in the next couple of quarters.

Your next question comes from Yizhen Du from CICC.

First of all congratulations on excellent performance in the third quarter. And I have two questions this time. The first one is that you just shared us with the 2024 revenue guidance. which shows a significant increase compared to this year's guidance. So could you explain how NaaS will achieved such rapid growth in 2024? This is the first question. And the second one is about the overseas business. We all know that previously acquired [indiscernible] and, so what is the recent progress of the overseas business? And how would you predict the revenue contribution of overseas charging pile, [indiscernible] sales in 2023 and 2024. This is my two questions. Thank you.

Okay. Thank you, Yizhen. These are good questions. So the first question is about 2024 revenue guidance. I just would like to take a step back and look at the very to set the stage, right? So based on CIC report, for example, the public charging in China is expected to grow 20 times by 2030 and the public charging volume will be growing 25x by 2030, and we clearly still see EV coming into the market at a rapid speed. If you look at NaaS, NaaS is China's largest EV charging network. It has 73,000 charging stations covered, which is about 50% market share, has 768,000 charges connected, which is 42% market share and has charged 1,383 gigawatt hour of electricity in 1 quarter, which is about 21.8% market share. And if you look at the capability, this is a company that has analytic capability as a very strong big growing customer base and user traffic. And we are working very hard to move to the asset operation business, which is effectively a way to monetize our data analytics customer base, traffic and also the very well-connected customer. Customer base in China to run our assets more efficiently. Right? So that is to say the same. Now if you look at different segments, if you look at the charging station operation, for example, that I've already mentioned the largest EV charging network I've already mentioned our analytics and Chinese station base and also a professional operating team. Our objective is to see significantly increase the chargers under the management by end of 2023 and in 2024 to a number that is much bigger than what we have today. This these charges under management will be picked from our extensive network. The charges will be picked from the 768,000 that we're currently connected to. And we are well on track to reach the chargers under the management grow because we have a number of projects that's currently undergoing. For Energy Storage, as I mentioned before briefly, in Q3, until Q3, we've only delivered 43 out of the 380 contracted stations that we've designed. In the medium term, for example, in 2024, we plan to deliver about 1,500 stations with Energy Storage Solutions. As I mentioned before, these are the stations that we are very, very carefully picked from the 70,000 stations that we're currently connecting to through our data advantage. We screened, for example, device with the the biggest peak and value price differences. And we also selected those lines that have peak electricity situation rate. So these are the stations that we are very confident that once you put Energy Storage Solution need, you can make money, right? So what we plan to do in 2024 is to deliver the rest 1,500 stations that we've already picked. The next segment is about overseas. I mentioned before that we've already seen 32% revenue contribution by [indiscernible]. We aim to increase that to about 40% with and with other assets or other businesses that we acquired. I've already mentioned the the very clear traction of Center Power in our previous question, so I will not repeat myself. For those segments, if you look at macro, which is a very much favorable macro, and if you look at those 3 segments, we have clear growth drivers. So I think we're confident that we can get the guidance that we provided. The next question, Yizhen, which is about overseas expansion. So I think I sort of mentioned that in my previous question. But I would like to probably highlight a little bit about Hong Kong Center power. As I said before, we acquired the company. It has been growing very well and it is very much profitable. We are already seeing, which is 2, 3 months after the acquisition, we are already seeing a very strong EBITDA margin contribution from the company. The EBITDA margin can reach 15% for the ones that we're doing. So I think for overseas expansion, what we're doing currently is really a replication of what was done with Hong Kong Center Power which is to choose the right asset to buy it at the right price and also most importantly, to integrate it with our overall business and provide synergy and capabilities as much as we can.

Your next question comes from Zoe Feng at TF Securities.

Hello. This is Zoe from [indiscernible]. Your Q3 financial results was very impressive. But based on your current results, you still need to achieve a significant revenue growth in Q4. Can you share more color on how to achieve that? That was my first question. And second question is, you previously disclosed a major contract in the Energy Storage business. Can you share some updates on the progress of that contract.

Great. Thank you, Zoe. So first question is about the Q4. So just to recap, we've delivered significant revenue growth, the Q3 revenue is RMB 171 million, as you have seen, which is a year-over-year growth of more than 500%. But most importantly, within that RMB 171 million we see September single month revenue exceeding RMB 100 million. So I believe that is a major step-up in our growth trajectory. And I believe we'll be able to stay in that revenue magnitude, if you like, for the rest of Q4. If we break that into business, I would just probably repeat some of the things I said before, but I think those are useful. In Energy Storage, we still have well more than 300 contracts, stations to be delivered that we plan to deliver in Q4. With solar power, we have a clear backlog in hand, I say backlog, I mean those are the projects that have already been committed. Some of them we've already started construction, we just haven't finished yet, right? And we also, as I said before, winning 3 out of 5 projects or contracts that we have under EHSS. EHSS is a project that we know is a project that we know very well, and we can deliver fairly quickly within 1 or 2 months. And in the EPC business, we have disclosed before that we won a RMB 67 million, OneStop PV storage project in [indiscernible] . Delivered a part of that, but there is part of that, that will be delivered in Q4. And we're working closely in the PV place. We're working closely with some of the the other sort of domestic local governments that want to build those high-tech charging stations. So we may have more good news to come in that space. For the the Chinese station operation business, we, what I can review is out of the 13 charging stations in Tooting, Hubei, Zuzanna and [indiscernible] which is a fairly distributed sample that we picked. We've achieved 10% charging on improvement after our operation. So I think that has proved that we have the capability that is, that is driven from our data capabilities, our analytics capabilities and our operating team know-how we proved through this pilot. So what we aim to do is to increase the number of stations under management starting from Q4 this year. But definitely going into 2024. So to recap, I think back to your question, I think in every single segment, we have clear sort of drivers that we already have in hand that is within our control that will continue in Q4 this year. Now for energy storage, I just want to give some more details so that people can understand what have we got. So when we say we signed the RMB 200 million worth of contract, that is a contract to build energy storage solutions in 380 charging stations with 580 storage facilities of 580 boxes with a total capacity of 130-megawatt hour and with 224-kilowatt hour per storage box, right? So that's the sort of overview of the contract. As I said before, we saw delivered, sorry, by end of September, we've delivered 43 out of 380 stations and the team in our energy storage department is working very hard and not to deliver the rest of the contracted stations. I believe within this year, they will be able to deliver most of the stations, and using the same methodology with gone through the 73,000 stations are reconnected. If I can review a little bit more about of our methodology, within that 73,000 stations, we use our model, our data-driven model to sort of filter through. Out of the 73,000 stations, we've identified about 13,000 stations from cities with peak and value price difference exceeding which is the rule of thumb of sort of the commercial feasibility to the energy storage. Then we further identified 1,880 stations with peak electricity saturation exceeding 80%. So the easy way to understand those are the stations that have people coming during the peak hour. You don't want to pick the stations and build the energy storage when nobody comes at peak hour. So we've identified those stations basically commercially excellent stages that we expect to make good money when those energy storage solutions are to be built. So with those 1,880 stations, we basically covered the next 12 to 18 months of pipeline. And those are the stations that we have connected to, and we have some level of control, right? So that has helped us to give the confidence that we have a clear pipeline to deliver for 2024.

Your next question comes from Alice Mara at UBS.

Thank you for the opportunity for asking this question. My question is actually about your classification like the revenue. Can we understand that actually the the online business in the past classification is very much similar to the current charging service revenue, except that we have another kind of business model like card full station operation model. And my next question is, can you like further elaborate more on the full station operation model, like what is the business model is? And how could it bring impact on your revenue and margin going forward?

Thank you, Alex. This is an excellent question because this is an important business model for us. So to, the easy way to understand the operating, operation business model, is that we basically operate these stations more efficiently than the current asset owner. So if you separate the layers, there is the layer that for asset owners, those are the people that have invested in assets and their own assets. And there is a another layer on top, which are the asset operators. These are the people like us that don't own assets, but we have capabilities, unique capabilities that we can operate the assets in a more efficient manner. And for us, in this, in the charging business, the operation has a lot to do to, with digital capabilities with analytics and most importantly, with pricing. So what we have is we have the largest charging network. We have covered the most number of charges and we've charged a large number of, a large percentage of the market, public charging market share with the data that we could collect from these chargers and charging stations. We could derive the best sort of running model for a particular charging station, right? And we could get the right pricing for a charging station for a charger at a particular hour of a particular day. So that helps us to drive for the higher efficiency of those charging stations, and that has been improved by the pilot project that I just mentioned. Out of the 13 piloted stations in 7 different provinces. We've managed to achieve a 10% charging volume improvement after our team take over the operation. So that is achieved basically by having the analytic capability right, and the ability to understand the seasonality to understand our by our charging volume change, the demand change and to basically forecast, forecast and predict what's going to happen from a charging demand perspective. As I said, we've already proved the capabilities through the [indiscernible] projects. Now if we look at the potential there is obviously huge potential. We cover 73,000 charging stations. These are all candidates that we could pick that to run the operation. And what we do is we will just go through our data model and our analytical tool to find out the ones that have the highest potential for efficiency improvement. And we will try to get this operating rights, if you like, from the asset owners, right, so that we can improve the efficiency and we can obviously generate revenue and make money. And I think the final thing to think about this is, I mentioned 73,000 China stations, right? But that is not a fixed number. That number is growing very rapidly. As the macro market is growing. The number of public charge in China is expected to grow 20x by 2030. So we're talking about not just with the screening and going through the funnel that has 73,000 stations to custom. We're also talking about underlying macro market that is growing very rapidly at the same time. So I believe if you put those two things together, this is a very unique opportunity to combine the macro growth and our unique capability, which we've accumulated over the past couple of years.

Your next question comes from Chile New at Casa Securities.

Hello. Can you hear me?

Yes please?

Okay. I'm the analyst of the [indiscernible]. My question is about NaaS as a long partnership with China Construction Bank. Can you elaborate on how the partnership could support your business?

Thank you for your question. That's once again, a very good question. As a context, NaaS and it's parent company [indiscernible] group, have entered into a partnership with China Construction Bank, one of the biggest banks in China. To provide a credit line up to RMB 2.5 billion for [indiscernible] . And this is not really the end of the credit line, and we're talking about a collaboration on the same time. I believe the partnership with China Construction Bank could with our financial position in this fast-growing phase is growing very, very fast. So to get financial support and especially the financial support from one of the biggest banks in China definitely helps. It also helps to accelerate the energy transition and new energy adoption in our value chain. So as you know, energy transition is a is a policy that is very well taken and the Chinese government. So this partnership with China Construction Bank definitely helps to drive the speed of production, and finally, I think this is a mutually beneficial partnership to empower more business primarily in our ecosystem. We firmly believe win win situation, I think in the energy space, as we are facing this very unique opportunities that probably happens like in the life time. We want to ensure that all the partners that we work with in this ecosystem can get some benefit from us we want to be the ecosystem integrator to help everyone to get some benefit, right? So to work with CCB, that enable us to to have this capability to get more business partners into the system. So this is, so we are all very excited about this partnership with China Construction Bank. And we all feel very proud that we have support from CCB.

That concludes our question-and-answer session. I'd like to turn the call back to the company for closing remarks. Thank you.

Thank you all for joining our call today. Please feel free to contact us if you have any further questions. Good night, and Goodbye.

Thank you. That concludes today's conference call. You may now disconnect your lines. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS Second Quarter and First Half 2023 Earnings Conference Call. At this time all participants are in listen-only mode. I must advice you that this conference is being recorded. I would now like to turn the conference over to your speaker today, Ms. Cynthia Tan, Senior IR Director. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to NaaS Second Quarter and First Half 2023 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang Yang, our Chief Executive Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlights, and Mr. Wu will discuss our operating and financial results. Before we continue, I refer you to our Safe Harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussion of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB terms. I will now turn the call over to our CEO, Ms. Cathy Wang Yang. Cathy, please go ahead.

Okay. Hello, everyone. I'm a NaaS CEO, Cathy Wang. It's my pleasure to share our second quarter 2023 earnings results with our view and to discuss our recent development. In the second quarter of 2023, we continued to deliver solid operating and financial performance with revenue margin leverage and a significant loss reduction. Such our continued network expansion, still in client base of station owners across various stage of charging station construction, operation and upgrades as well as improving operating efficiency. Our strategic partnerships also continued to deepen and expand. With leading enterprises, such as Hyundai Motor Group, PICC Real Estate Investment and CR Capital MGMT attracted to our innovative solutions and one-stop services. We are expected about collaborating with these partners to further propel development of EV charging industry. This year, new energy storage facilities experienced broad-based exponential growth. According to the NEA, newly commissioned installations in the first half of this year alone exceeded the past 10-year total installation to reach 8.63 gigawatts, seeking capacity in operation to 17.7 gigawatt hours. China's energy storage demand is also growing rapidly. It's expected to exceed 17 gigawatt hours by 2025 with the market size reaching over RMB100 billion. In September 2023, we signed a RMB204 million energy storage order in cooperation with several companies providing over 380 and charging stations with energy storage equipment and comprehensive solutions with in energy storage capability of over 130-megawatt hours in total. This initiative shows our strength and innovation in station integrated energy storage technology, making a crucial step forward in our integrated photovoltaic storage charging contracts. This order further booted our confidence to deliver our full year revenue guidance. Furthermore, our total fund raising year-to-date to $91 million, significantly enhancing our financial strength and fulfilling our growth initiatives. Internationally, we are actually accelerating our global expansion into, we acquired 89.99% stake in Sinopower, a leading rooftop solar energy developer in Hong Kong on August ‘22. We also entered into a definite agreement to acquire Charge Amps, a leading European provider of EV charging service solutions, capitalizing on the strong market presence and channel capability as well our extended product and service portfolio and financial strength, we will further strengthen the standing of Sinopower and Charge Amps in their respective regions, while promoting the global exploration of our product and service offerings. Looking ahead, we will elaborate the supporting policies worldwide and increasing market demand actively exploring the integrated development of charging stations, the new energy system and smart IoT devices while elevating both user experience and service quality, aiming for a 10% market share in the global new energy asset operation and management services market in long term. Now I will turn the call over to Alex, our President and CFO, for a closer look at our operating and financial performance. Thank you.

Thank you, Cathy. Hello, everyone, and thank you for joining our call today. In the second quarter of 2023, we delivered solid operating and financial performances. By offering diversified service offerings while leveraging the industry-leading scale of our charging network, we continued to solidify our leadership in the charging services industry. We have also made significant progress in our transformation journey towards becoming an integrated new energy services provider, highlighted by our achievements in energy storage, among others. In the second quarter, we more than doubled our revenue year-over-year while achieving a significant loss reduction. Specifically, our revenues grew 121% year-over-year to reach RMB48.6 million, driven by our ongoing network expansion and our growing station owner client base across the construction, operating and upgrade stages for charging stations. Our gross margin reached 39%, representing a notable increase of 22 percentage points quarter-over-quarter. This improvement highlights our unwavering commitment to innovative business practices that drive favorable revenue mix changes. Additionally, we reduced our net loss by 94% year-over-year to RMB334.7 million. Our net loss margin narrowed by 385% quarter-over-quarter. And our operating loss margin narrowed by 373% quarter-over-quarter, benefiting from greater economies of scale. Our network experienced significant growth during the quarter with total charging volume increasing by 112% year-over-year reaching 1,228 gigawatt hours. This accounted for 21.7% of all charging volume completed through public chargers in China in the same period. Moreover, the gross transaction value conducted through our network rose to RMB1.2 billion, reflecting a 109% year-over-year increase. Simultaneously, our total number of orders rose by 110% to 53.8 million from 25.6 million in the second quarter of 2022. In the second quarter, revenues from off-line EV charging solutions increased by 153% year-over-year, accounting for a higher share of total revenues compared with the first quarter. The robust growth of our revenues from off-line EV charging solutions was mainly driven by the increasing number of clients attracted to our full suite one-stop EV charging solutions that cover end-to-end station construction, operation and upgrades. On August 28, we celebrated the commencement of operations of the first integrated energy port in [indiscernible] province, for which we were deeply involved in construction. Working closely with the Energy Group [ph], we offer vehicle owners straightforward, efficient and environmentally friendly one-stop energy services. In addition, we signed strategic collaboration agreements with Hyundai Motor Group China Limited, PICC Real Estate Investment and China Resources Capital Management to further expand our partnership roster. With Hyundai, we are enhancing charging infrastructure and mobility connectivity tailored for their PE models. With PICC, we're building a top-notch new energy charging service system, incorporating integrated infrastructure, co-branded stations, online connectivity and comprehensive insurance services. With China Resources Capital Management, we're working on integrated energy port construction, innovative secularization of new energy assets and everything from incubating and investing into operating digital and intelligent applications within the realm of new energy, together promoting green and low-carbon energy development. In addition, we're excited to have received a RMB204 million energy storage order to be executed in the upcoming few months, signifying a solid step forward in propelling the integrated PV, storage, charging station development and further boosting our confidence in achieving our full year revenue target of RMB500 million to RMB600 million. We will outfit over 380 charging stations with 580 integrated cabinets and matching comprehensive energy storage management systems, complemented by intelligent self-production services and supervisory and development services. The benefits of energy storage is threefold. First, there has been a lack of effective means to take advantage of the peak value price spreads and ensure operations during power outrages. With energy storage integration, charging stations can earn incremental revenues from on off-peak price differentials while maintaining uninterrupted operations. Second, to accommodate high-power fast charging the conventional approach involves costly grid upgrades to increase base load, which can be effectively replaced with a much more cost-effective energy storage solutions. Third, energy storage can also ensure power grid safety. In cases of fast charging, charging power in the local grid could exceed 1 million watts, potentially causing multiple points in the grid to collapse. Energy storage provides an effective solution to address the challenges of managing peak loads. Moving to our capital market and levers. I'd like to take a moment to highlight some accomplishments that have bolstered our financial strength. [Technical Difficulty].

Ladies and gentlemen, this is the conference operator, we have temporarily lost connection with the speaker line. Please hold and the conference will begin momentarily. Please go ahead, Alex.

Sorry, I just got disconnected. Let me continue. Now let's delve into our global expansion strategy. Our agreement to acquire Charge Amps in August marked an important milestone in our globalization levers. We are pleased to welcome the Charge Amps brand and team to our NaaS platform. As a pioneer in integrated EV charging solutions industry, specializing in home, work and destination AC charging solutions, Sweden-based Charge Amps has a strong reputation throughout Europe. For over a decade, Charge Amps' broad portfolio of intelligent, sustainable, user-friendly and particularly pleasing product offerings has been satisfying customers as proven by its 22% local market share with an established international footprint in 13 markets. Charge Amps' commitment to sustainability is manifested throughout its entire production chain and reflected by participation in the UN Global Compact. There are significant synergies between NaaS and Charge Amps. First, Charge Amps can leverage NaaS' relationship network to expand its sales channels. While NaaS can utilize Charge Amps' existing channels to launch affordable AC, DC and household storage products to enrich its product portfolio. In addition, we can reduce Charge Amps' cost of revenue and improve its margins through our advantages in the domestic supply chain and procurement as well as resource consolidation. Furthermore, as Cathy mentioned, we acquired 89.99% of Sinopower stake in June, another critical component of our expanding global layout. Sinopower is Hong Kong's largest one-stop solar panel service provider, posing a significant 35% market share in rooftop solar PV development in Hong Kong. Through the Sinopower acquisition, we entered the distributed solar power market in Hong Kong, which broadened our boundaries from charging services to upstream power plant services, opening a new chapter for energy asset management. We are working on integrating the technology products capital and markets of both parties. With Charge Amps and Sinopower as our home bases for the European and Southeast Asian markets, we will accelerate the global expansion of our services while integrating PV and energy storage products in charging solutions and other facilities to drive innovation and sustainability in the new energy industry. Moving to our second quarter financial results. Our total revenues reached RMB48.6 million in the second quarter, up 121% year-over-year. The rapid increase was mainly the result of the increased network order volumes and additional capabilities in our EPC business established and acquired through the first half of 2023. Our total operating costs were RMB388.6 million in the second quarter, decreasing by 82% year-over-year. This was primarily due to our significant business expansion. Our net loss attributable to ordinary shareholders was RMB334.7 million for the second quarter of 2023 compared with a loss of RMB302.2 [ph] million for the same period of 2022. Based on our current and preliminary view of our business situation and market conditions, which are subject to change, we are reaffirming our guidance that full year 2023 revenues will be in the range of RMB500 million to RMB600 million, increasing by 5 to 6 times from 2022. To summarize, through expanding our one-stop charging solutions, advancing integrated energy systems and strategic acquisitions, we are well on our way to becoming a leading global new energy asset operation and management service provider. As we move forward, we remain committed to providing sustainable new energy solutions while continuously exploring new avenues for expansion and propelling the industry's ongoing evolution. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

[Operator Instructions] Your first question comes from Kelly Zhao [ph] with Jefferies. Please go ahead.

Can you hear me? Yes, firstly, congratulations about the second quarter result. I have two questions. Firstly, is can you please discuss the progress of the -- your Sinopower acquisition, how about the integration after the acquisition closed in June and share more color about the progress of this project? And secondly, the question is can you please talk more about the strategic partnership you recently developed? And how does this fit in with your long-term strategic growth of your business?

Got it. Thank you. So two questions, one is about Sinopower integration. The other one is about the strategic partnership, right? So let me address one by one. So for Sinopower, I'm currently very excited. Now we finished the acquisition of Sinopower in Hong Kong in June. Since then, Sinopower has strategically leveraged NaaS' strength to strengthen its presence in both EV and PV and have made significant progress in both of those two areas. On the PV side, Sinopower completed a 2.6 milliwatts rooftop solar project in Hong Kong, which is expected to generate 31 million kilowatt hours annually. It has also secured contracts for 9 NaaS projects. Sinopower has over 50 projects under construction currently, totaling 10.2 million watts in capacity. On the EV side, Sinopower has qualified as a contractor for the Hong Kong government-sponsored EV charging at home subsidy scheme or EHSS, currently advancing over 40 EHSS projects aiming to cover around 6,100 parking slots upon completion. In addition to that, Sinopower has also integrated into the mass ecosystem, expanding its business both in Mainland China and in Southeast Asia. Sinopower are actively involved in the PV project in MG County, which is currently under construction and the industrial and commercial PV project in Vietnam. So I'm very excited about this acquisition. I think the integration is well underway. And as I mentioned before, Sinopower now has a very, very healthy pipeline of projects that it will deliver over the coming months and will generate healthy revenue and EBITDA for the whole group. That's my answer for the first question. The second question regarding the partnership. We are very excited with these new three new partnerships. There are three partnerships that we achieved in the quarter. The first one is with Hyundai where we aim to face our charging infrastructure and mobility services tailored for Hyundai's EV models. Partnership with PICC, which is one of the biggest insurance companies in China, we will work towards building a top-notch new energy charging service system, including integrated infrastructure and co-branded stations and also insurance services. With China Resource Capital Management, which is an investment fund that's backed by China Resource, we will incubate and invest in to operate new energy infrastructure projects and also looking at a potential to securitize new energy assets. We'll be able to leverage our industry expertise and China Resources' capital markets capabilities. These partnerships, if you put them together, right, you can see we are working with one major OEM, one insurance company and one major commercial real estate developer and investor. These are the three pillars that we have -- all have in mind as the important partners we need to work with in the new energy ecosystem. And we will continue to build more partnerships in these spaces and build a strong ecosystem that we can work in. Thank you.

[Operator Instructions] Your next question comes from Will Leo with Tian [ph]. Please go ahead.

Hi this is Will. Congratulations for a great performance in second quarter and first half 2023. I have two questions. First, can you discuss more details on the acquisition of Charge Amps and your strategy in Europe market? My second question is about energy storage. Can you share more color on your energy storage in the charging station business? These are my questions. Thank you very much.

Thank you. Thanks for asking these questions. So the first question is to do with the Charge Amps acquisition that I will now elaborate on our strategy on Charge Amps acquisition. The second question is to do with energy storage, right? Okay. So let me address your first question first. The acquisition of Charge Amps is a strategic step that we take in Europe. Europe is the world's second largest in energy market -- in the energy vehicle market with currently 8.1 million EV in 2023. The projection is by 2025 there will be 16 million EVs in Europe and by 2030, there will be 55 million EV in Europe. And from a penetration perspective, the penetration rate in the EU countries, the European Union countries, has reached 53% in 2023, which forecasts to 80% by 2030. As a comparison to that, the on the spot China EV penetration rate is about 36% in 2023. The two countries that have highest EV penetration rate, both in North Europe with Norway now the highest at over 80% and Sweden just closely following with somewhere between 65% to 70%. So we are acquiring a brand that is in a very well-developed market, in a fast-growing market. And Charge Amps has a decade of experience in creating some of the best quality and best design products in the charging industry. It holds a very strong market position in Sweden and has established its presence in certain new countries. For the acquisition, our objective is to have access to this leading brand and also have access to the sales channels and AC products. The growth channels in Europe is something that we are particularly exciting to have access to because those channels will enable us to launch new products through. We currently have plans to launch products like DC charging products like energy storage products and PV products through the same channels. We have created a strategic approach for our European market entry. We've also created a very clear integration plan for this acquisition. We have completed a 180-day plan for the integration to happen. And we will have a small team of what we call the chief transformation office to be present in Sweden to help Charge Amps to be integrated into the NaaS system. We're very excited that there are a lot of opportunities that we can potentially take from this acquisition. The first step we take is we will establish our presence with Charge Amps' leading brands and sales channels, as I mentioned before. And second step is we will integrate energy service products and PV products and aiming to offer a comprehensive, integrated solution in Europe. And our last step is we want to be facilitating energy transactions at household level, which means we will be grouping households together and engaging in potential energy trading and the power grid. So these are the three steps, and we are now very happy that we finished our first step and we'll continue our development and growth in work through organic growth and through acquisition to achieve our strategic goals. That's now the answer to your first question. The second question regarding energy storage for our charging stations. Energy storage for charging stations is a very interesting and market. First of all, the market is very big. Today, there are about 140,000 public charging stations in China. We are connected to about 55,000 of them. Of which, we've identified over 13,000 stations that are in cities where the peak value power prices can generate enough commercial benefit for the energy storage to be commercially favorable. If we can capture this, there is a lot of opportunities that we can take. We just announced that we're going to roll 580 of energy storage solutions in 380 stations with a total of 130 million hours of energy storage capacity. That's an aggregate contract value of over RMB200 million. With support of the government policies and a growing number of targets and charging stations, we expect by 2024, 5,000 China stations would be suitable for energy storage, up from 1,818 to-date. This would potentially translate to a RMB2 billion to RMB3 billion worth of opportunity in CapEx that we can potentially take. I've just talked about the three models of long energy storage solutions are important in the charging context. We can further enhance these systems with our vast analytics and intelligent technology capabilities, and we aim to become one of the largest asset operators of energy storage network for charging stations. Thank you.

Thank you. As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Thank you all for joining us today. If you have any further questions, please always feel free to contact us. Good night.

This concludes the conference call. You may now all disconnect your lines. Thank you.

Ladies and gentlemen, thank you for standing by, and welcome to the NaaS First Quarter 2023 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Cynthia Tan, Senior IR Director. Thank you, and please go ahead.

Thank you, operator. Hello, everyone, and welcome to NaaS First Quarter 2023 Earnings Conference Call. The company's results were issued earlier today and are posted online. Joining me on the call today are Ms. Cathy Wang, our Chief Executive Officer; and Mr. Alex Wu, our President and Chief Financial Officer. For today's agenda, Ms. Wang will provide an overview of our recent performance and highlight and Mr. Wu will discuss our operating and financial results. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make forward-looking statements. Also, please note that this call includes discussion of certain non-IFRS financial measures. Please refer to our earnings release, which contains a reconciliation of non-IFRS measures to the most comparable IFRS measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB terms. I will now turn the call over to our CEO, Ms. Cathy Wang Yang. Cathy, please go ahead.

Hello, everyone. I'm NaaS CEO, Cathy Wang. It's my pleasure to share NaaS' first quarter 2023 earnings results with all of you and to discuss our recent development. We just celebrated the 1-year anniversary of NaaS going public. First and the foremost, I'd like to express my heartfelt gratitude to the entire team of NaaS. The hard work and dedication of our team members combined with our significant first-mover advantage empower us to lead the EV charging solar industry, both domestically and globally and procure the world transition from faster fields to electricity. Next, I'd like to take this opportunity to briefly review the development of our industry and the strategies we have started fastly executed and will continue to pursue. The worldwide consensus and energy transformation is undeniable. With our primary energy service, transitioning from faster sales to clean energy, new energy technologies focused on clean and efficient solutions have become key drivers of the ongoing technological and industrial revolutions guided by dispute carbon goals announced in 2020. China has made remarkable progress in the -- transforming its energy supply into a diversified and integrated clean energy system. According to IEA report in 2022, almost 30% of global emissions reductions came from the electrification of passenger cars in China. According to CIC, China's AUA installed base will grow from 30.1 million in 2022 to 145 million by 2030. And the total public charging capacity will increase from 30.7 billion kilowatt hour to 337.9 -- sorry, 337.8 billion kilowatt hour, growing by 11x and 25x with tactility. Even more exactly as the installed base of smart electric vehicles, smart homes and intermittent renewable energy growth, the power grade is becoming increasingly decentralized with driving digitalization, distributed sources of energy, coupled with big data analysis and AI technology are catalyzing the change from the conventional unidirectional flow of energy in the power grid to our directional, creating tremendous opportunities for integration. Meanwhile, the rapid development of new energy sources also present higher requirements for the stability, consumption capacity and scheduling capacities of the power system. We are fortunate to be a part of this rapid field and lead its development. On June 13, we launched our virtual power plant platform. This platform seamlessly integrates lots of charging stations, chargers and millions of EV users nationwide into the power system by leveraging its connectivity and aggregation capabilities while acting as our dispatch hub. The virtual power plant platform enables efficient matching of power supply and demand, fetching a more sustainable IoT ecosystem for new energy. Furthermore, we continue to invest in research and in development to enhance our digital operational capabilities, our NaaS Research Institute team has developed the digital energy asset management system teams, using adaptation models and deep learning AI algorithms team enables load forecasting and operational strategy, optimization, photovoltaic power, energy storage facilities and charging stations, improving our operations and maximizing revenue. Currently, the NaaS Research Institute team has submitted over 20 patent applications for this system. We expect to deploy teams in our operations in the second half of 2023. Recently, we have also signed an agreement to acquire over 89% stake in Sinopower, a leading solar energy project developer in Hong Kong, making our strategic entry into Hong Kong's distributed solar energy sector. According to a report by the electrical and he mechanical services department is actively to that China -- Hong Kong estate and commercial industrial rooftop solar energy market will expand to 875 megawatts by 2026, indicating what's the market potential. Additionally, with the rapid development of EV in Hong Kong, there will be a sustainable increase in demand for charter operation services. This acquisition also holds significant importance for our global business expansion, as while facilitates our transformation towards integrated new energy service provider, opening up broader avenues for our growth. Lastly, I'm glad to share our successful completion of an important HPO transaction on May 31, 2023. This transaction garnered significant interest from notable investors, including Dr. Adrian Cheng, the Executive Vice Chairman of New World Development Company Limited and Hong Kong listed CST Group. We are pleased to have their support and trust, which further relegates our leading position and our promising future in the new energy charging service sector. Looking forward, we will remain focused on expanding our charging network, refining our one-stop solutions and broadening our customer base through win-win relationships. We will also continue to innovating and driving mass adoption of sustainable business models through digitalized and intelligent solutions. We firmly believe that these strategies will keep us at the forefront of our thriving industry and help us create a lasting value for our customer and partners. Now I will turn the call over to Alex our President and CFO for a closer look at our operating and financial performance. Thank you.

Thank you, Cathy. Hello, everyone, and thank you for joining our call today. In the first quarter of 2023, we delivered solid performance amid a rapidly evolving business environment and solidified our leadership in the third-party charging service market. In the first quarter, our revenues saw a 2.5-fold growth year-over-year to reach RMB 36.2 million driven by our progress in expanding our network and optimizing our user experience across the construction, operating and upgrade stages for charging station owners. The total charging volume transacted through our network during the quarter increased by 112% year-over-year, reaching 1,023 gigawatt hour. This accounted for 21% of all charging volume completed through public chargers in China during the same period. Additionally, the gross transaction value transacted through our network amounted to RMB 990.5 million in the first quarter of 2023, representing an increase of 107% year-over-year. At the same time, our total number of orders surged by 110% from 21.2 million in the first quarter of 2022 to 44.4 million. Notably, in the first quarter, revenues from online EV charging solutions increased by 145% year-over-year, outpacing the total charging volume growth and GTV growth over the same period. Benefiting from greater operating leverage, our net loss margin in the first quarter declined by 383 percentage points year-over-year. While expanding our charging network, we're committed to providing a full suite of one-stop EV charging solutions,for station owners to address their key pain points and at the same time, enhancing our customer stickiness and create additional revenue streams. As of May 31, 2023, we have provided operational maintenance services for over 20,000 parking slots across 3,000 charging stations in 300 cities. We have launched multiple charging products, specifically designed for Europe market, to complement our one-stop charging solution. These include our AC Wallbox for EV charging at home and DC charging products for fast charging, both posting high-quality, high-cost internet, innovative features, meets the required safety benefit. Let me now move to our advancements in technological infrastructure. These advancements provide insight to our strategy and operations, thus, promotes a more efficient digitalized and integrated energy system. First, we developed an AI-driven Digital Energy Asset Management System, or DEAMS. It leverages charging order, traffic, economic data and ongoing as well as our large model capabilities to predict station operating conditions, charging efficiency and resource productivity for specific sites and forecast load on the power grid. With this system, we will be able to enhance our mobility and activity services for station owners in customer acquisition and operational processes. It also allows us to augment our charging station construction services, operation services and maintenance services with one-click evaluation for station owners. It provides a visualized site-specific cost and return forecast for stations in different regions across China, thereby serving to enhance operations and investment returns for station owners while driving the efficiency improvement of the overall charging market. In addition, DEAMS can support a broad array of energy assets other than China stations. It takes the scheduling optimization of PV energy storage facilities and charging stations based on cost-benefit analysis into consideration. It factors in additional income streams such as revenue from peak shaving and benefiting, ultimately improving their overall efficiency and profitability when investment decisions are being made. As Cathy mentioned, we look forward to deploying DEAMS in the second half of the year and creating incremental value and opportunities for new energy asset. Another breakthrough was the virtual power plant platform we launched on June 13, which will be a hub for efficient coordination of power generation, the grid and electricity users with charging stations at the center of using scenarios and benchmark for the large-scale implementation of virtual power plant. This platform efficiently aggregate distributed energy resources, such as EV charging stations, energy storage facilities and distributed PV through the cloud, forming manageable units with flexible management of these resources and intelligence scheduling and control. It actively participates in electricity market transactions and the response to great scheduling needs, addressing electricity supply and demand fluctuations. Through our virtual power plant platform, we also effectively promote the orderly charging of EV, enhance clean energy consumption and contribute to reducing energy intensity and energy costs. Furthermore, we will leverage the virtual power plant platform to gradually build integrated charging stations with PV, energy storage, charging and energy asset services. To round off our efforts to transform into an integrated new energy service provider, we recently entered into a definitive agreement to acquire a stake of over 89% in Sinopower HK, a leading rooftop solar energy developer in Hong Kong. Out of the 60 megawatts installed solar capacity in Hong Kong, 25 megawatts have been built by Sinopower, with a reputable client base, including Hong Kong Jockey Club and the Hong Kong Exchange. It has sourced and exceeded more than 600 projects since 2018, leveraging strength in project sourcing, patented solar energy-related technologies and a partnerships with key industry stakeholders. Sinopower is a strong strategic state for us. Through this transaction, we will enter the distributed solar PV sector in Hong Kong. We established a strong integration with Sinopower in areas such as technology, product, capital end markets and significantly enhanced the execution and returns of solar projects. Separately, becoming part of our platform will help accelerate Sinopower's venture into EV charging business. By leveraging this integration, we aim to expand our capabilities, renewable energy and EV charging solutions globally. This deal is expected to close in June 2023, subject to customary closing conditions. Next, I will go over some of our financial results for the first quarter of 2023. In keeping with our protocol, I will address our financial highlights here, and I encourage you to refer to our earnings press release posted online for additional details. Our total revenues reached RMB 36.2 million in the first quarter, up 150% year-over-year. The rapid increase was mainly the result of increases in platform order volumes and continued improvement in our operations. Our total operating costs were RMB 149.8 million in the first quarter, rising by 37%. This was primarily due to our significant business expansion. Our net loss for the first quarter of 2023 was RMB 109.7 million as compared with a net loss of RMB 99.3 million for the same period of 2022. Based on the company's current and preliminary view of our business situation and market conditions, which are subject to change, we are reaffirming our guidance that full year 2023 revenues will be in the range of RMB 500 million and RMB 600 million, increasing by 5 to 6x from 2022. To summarize, in the first quarter, we continued to cement our leadership position in the EV charging network, while innovating and making technological enhancements. Going forward, we will further expand our competitive position in the third-party charging services market while strengthening our virtual power plant platform and nurturing a clean, efficient and low carbon power system as we leverage the rising trend of new energy and EV adoption. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you.

[Operator Instructions] Your first question comes from Megan Chen with Macquarie.

We have 2 questions. The first question is that would you kindly elaborate a little bit more on the acquisition of Sinopower, especially for the synergies with our current business as well as current mainland market? And also like in the future, what are the other acquisition directions that you're looking at?

Thank you, Megan. This is a great question. Sinopower is a leading rooftop solar PV development in Hong Kong. As I mentioned before, it has a superstrong 32% market share in that particular market, and we believe it's a clear leader in that space. We can obviously work with Sinopower to further strengthen its capability in that space that can be underpinned by the policy of Hong Kong to strengthen the PV solar panel industry. Separately, we will also work with Sinopower to expand its capability globally. As we shared in our previous earnings calls, NaaS has planned to expand in 3 major markets, including Europe, Middle East and Southeast Asia. We believe Sinopower's capability can be expanded and replicated in other markets. So once we finish the closing of the transaction, we work very closely with the founder and management of Sinopower to leverage that capability. And finally, from a charging perspective, which is the core capability of NaaS, we're also working with Sinopower to build and expand that capability in Hong Kong, especially with the charging solutions in leading estate. Sinopower has proved that it has the capability to work with the asset owners to build solar solutions. We will work with Sinopower to expand those capabilities into charging solutions in the United States. So we're very excited with this acquisition, and we look forward to work with the Sinopower management team.

Your next question comes from Yizhen Du with CICC.

Yizhen Du from CICC. First of all, congratulations for our great performance in the first quarter. And I have 2 questions about our business. First line is about the online charging service. So what do you think of the future change of charging services? Do you think the charging services will continue to replace? This is the first question. And second one is about our energy storage business. As we all know, last launched service of energy storage products within just share with us your focus for energy storage business. This is my 2 questions.

Thank you, Yizhen. Thanks for your questions. Let me answer those one by one. So from a charging service perspective, obviously, I don't have the crystal ball in terms of giving the forecast for future service change. I think what we've seen now is there has been a sort of diversed trend of service fee. We have seen, for example, nationwide, the average service fee per kilowatt hour that's has been hovering around $0.40 to $0.50 per kilowatt hour, right? But if you sort of look closer, there would be quite a lot of diversity in terms of the service fee. For example, in some stations, in Beijing and Shanghai, the service fee per kilowatt hour could reach $0.80 during the busy hour. So what I believe is ultimately, the service fee is a result of demand and supply. I think with the adoption of EV with the penetration rate in some of the key cities like Shenzhen, Shanghai, it is loss of 50%. We will see more EVs on the street. So there will demand of the charging solutions, right? So I think eventually, we will see the charging service fee going higher. And that trend may need a couple of years to be implemented. That's the answer for your first question. For energy storage, I think we are very, very excited about the future of energy storage, especially the energy storage in charging stations, right? So if we take a step back and look at the overall market or overall industry, the charging -- the EV charging volume only accounted for less than 1% of the overall power grid output in 2022, but it is expected in about 10 years, the charging for EV will be accounting for 5% to 10% of the overall power grid output. That would impose significant pressure on the grid itself. We can see this trend. And obviously, the grid can see this trend as well. So from a government policy perspective and from an energy system design perspective, I think there has been a clear encouragement -- policy encouragement in place to encourage people to build charging station -- sorry, energy storage solutions in charging stations. And this works very well with our power rezonvirtual power solutions that connect effectively all this IoT devices, including charging power, energy storage solutions and to a degree, PV solutions together to form an intelligent energy management system. What we've seen is in provinces like Zhejiang, Jiangsu, Guangdong, where there's more developed promises. We can see the price gap between peak in valley reached more than $0.70 per kilowatt hour. And I think with the price of the battery sale going down and with the trend of a big price gap between the peak and valley in those progresses, we will see a more sort of a commercial stronger case for energy storage solutions in charging stations. And we are working on those solutions already. Hopefully, we'll be able to give you some highlights and good news in our next earnings call.

Your next question comes from Megan Feng with Tianping.

Thank you for your team presentation. I missed the projected time line of your virtual power plant platform and the automatic EV charging robots. And how are they going to impact the company's financials?

Okay. Okay. So for VPP solution, we've already launched the VPP solution on June 13, 2023. We are currently leveraging data from EV energy storage and charging station in our energy base to provide input to our virtual pumps and train its algorithm. As for automatic charging robots, we launched the prototype in April, and we have used the prototype to attend its business, especially in, for example, EVIS in Abu Dhabi and power to drive in Munis. What we plan to do with the charging robot is we plan to launch a commercial charging robot in energy close to our customer base before Q4. Our team is working on that. There are a couple of work streams we're trying to be working on to be able to see the first commercial product launched. I hope we can invite you to see the near charging robots in commercial capacity before Q4. Both services from a revenue perspective, I think the charging robot is probably still 1 or 2 years away. But for the virtual power plant, we are already doing, for example, electricity trading and electricity procurement projects. And these projects can be further impacted by the virtual power plant capabilities. So for virtual power plant, if you see -- for example, our revenue streams, we have a revenue stream that is dedicated to innovative solutions. So the revenue from the virtual power plant will get into that particular stream. So you can keep an eye on that.

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

Thank you, everyone, for participating tonight. And if you have any further questions, please, please feel free to just contact us. Thank you.

This concludes this conference call. You may now disconnect your line. Thank you.