Hello, and thank you for standing by for Energy Monster’s 2022 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session. Today's conference is being recorded. If you have any objections you may disconnect at this time. I now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Hansen Shi. Thank you. Please go ahead.

Thank you. Welcome to our 2022 first quarter earnings conference call. Joining me today on the call are Mars Cai, Energy Monster’s Chairman and Chief Executive Officer; and Maria Xin, Chief Financial Officer. For today's agenda, management will discuss business updates, operation highlights, and financial performance for the first quarter of 2022. 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, this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. I would now like to turn the call over to our Chairman and Chief Executive Officer, Mars Cai for the business and operation [Technical Difficulty].

Thank you, Hansen. Good day everyone, welcome to our 2022 first quarter earnings call. The first quarter of 2022 has been a challenging quarter for Energy Monster. In light of the continuous outbreak of COVID in the regions such as Shenzhen, Beijing, Tianjin, Hangzhou and Changchun throughout the quarter, and especially due to the significantly worse than expected outbreaks in Shanghai, starting mid-March, which radiated towards our other regions. For example, the outbreak in Tianjin in January resulted in a 67% decline in revenues within the city. During the 15-days period after the initial case, Hangzhou's January outbreak resulted in a 58% decline; Shenzhen in March 51%; Changchun’s March outbreak 86%; and an outbreak in Shanghai starting mid-March resulted in a 70% decline in March. The frequency and size of the COVID outbreaks in the first quarter of 2022 is increasing compared to 2021. These COVID outbreaks resulted in a significant decline in offline food traffic as people are more likely to stay at home, and offline locations are [forced closed] [ph] due to lockdown measures. The outbreaks are resulting in a general decline in offline user food traffic across the board, negatively impacting almost all brands with an offline presence. These outbreaks continue to adversely affect the food traffic to offline POIs in both regions of the outbreak and surrounding regions as well, which in return results in lower food traffic to POIs where our cabinets are placed. During the first quarter of this year, same-store revenue decreased by approximately 35% year-over-year as a result of the general decrease of food traffic. Despite the impact, we continue to stay long-term oriented and focus on laying the groundwork for expanding our market leadership. We continue to make strides in expanding our POI network, which reached 851,000 as of the end…

Thank you, Mars. Now, let me walk you through the financial results in greater detail. For the first quarter of 2022, revenues were 737.1 million, representing a 13% year-over-year decrease. Revenues from mobile device charging business were down 12.1% to 717.7 million and accounted for 97.4% of our total revenues for the quarter. The decrease was primarily attributable to the impact of COVID-19 during the first quarter of 2022. Revenues from power bank sales were down 48.3% year-over-year to 12.9 million and accounted for 1.8% of our total revenues for the quarter. The decrease was primarily attributable to the impact of COVID-19 during the [first quarter of 2022] [ph]. Other revenues were up 25.5% year-over-year to 6.4 million and accounted for 0.9% of our total revenues. The increase was primarily attributable to the increase in users, advertisement efficiency, and the new business initiatives. Cost of revenue was up 2.4% year-over-year to 127.6 million for the first quarter of 2022. The increase of cost of revenues was primarily due to the increase in operational scale, resulting in increase in depreciation cost. Gross profit was down 15.6% year-over-year to 609.5 million for the first quarter of 2022. The decrease was primarily due to the decrease in revenues from mobile device charging business. Operating expenses for the first quarter of 2022 were 708.8 million, up 1.5% year-over-year. Excluding share-based compensation, non-GAAP operating expenses were 702.1 million, representing a year-over-year increase of 1.7%. Research and development expenses for the first quarter of 2022 were 27.1 million, up 31.2% year-over-year. The increase was primarily due to the increase in personnel related expenses. Sales and marketing expenses for the first quarter of 2022 were 659.7 million, down 0.3% year-over-year. The decrease was primarily due to the decrease in entry fees and the incentive fees paid to…

Thank you. [Operator Instructions] Our first question comes from the line of Charlie Chen from China Renaissance. Please ask your question.

Thanks management for taking my question. I have a question regarding your business model. So, can management elaborate a bit more on the synergy that you mentioned during your prepared remarks between the direct and the network partner models? Does the company have any preference between the two models during COVID or going forward? Thank you.

Thanks, Charlie. I will take this question. Our service network expansion has always been driven by both the direct and the network partner models. Historically, our direct operation model generally focused on the higher tier cities, while our network partner model focuses on the lower ones. For our direct model, who will not generate very decent economy in the lower tier city. We generally select only one model for each region or city, based on the city tier. In the past few quarters, we have also launched a number of test regions that run on both models. Results are very encouraging utilizing both models have superior growth rate. Our direct model team is able to penetrate into relatively larger POIs, while our network partners can leverage their existing relationships to expand our POI network. Combined, these two models work in cohesion to help Energy Monster expand its coverage network, which in turn help us increase our market share. Both of the successful tests in pilot regions, we are having the thought to open all locations that we cover to both models in order to leverage the advantage of both models across China. We believe our network partners’ unique relationship will help us further penetrate into existing regions and also help us move into newer ones. In addition to the adoption of the both models in all regions, we have launched a new program that synergized the two models by giving our direct operation team the ability to identify and attract network partners to our platform. Our direct operation model, which expands across China, can now leverage its presence to not only identify new POI partners, but also the potential network partners. Because both our models leads the market in terms of market share, we believe additional synergy between the two will help us more rapidly and more flexibly to extend our market leadership and at the same time more closely aligning the interest between our [direct and actual] [ph] partner models. Thank you for the question.

Thank you. Our next question comes from Vicky Wei from Citigroup. Please ask your question.

Good evening, management. Thanks for taking my question. So, will management provide some color on the monthly performance in the second quarter? And by merchants categories, does management notice any of the [coverage change] [ph] of different merchants, to say such as catering, cinemas, and other sports? Thank you.

Sure. Thanks for your question. The general environment has been challenging due to continuous impact of COVID on our operation both in first and second quarter of 2022. I have to say that the second quarter so far by end of May is even worse, compared to the first quarter. Most notably, the outbreak in Shanghai, because our headquarter is in Shanghai, in March – starting in March was more significant than our previous expectation. During the first quarter of 2022, same-store revenue decreased by approximately 35% year-over-year as a result of these outbreaks due to the general decrease of food traffic. In the second quarter, various clusters of COVID outbreaks, primarily originating from Shanghai's outbreak has a significant impact. Starting in mid-March, Shanghai's foot traffic was nearly completely halted, almost none, due to the citywide lockdown imposed by the government. Our revenue in Shanghai, as I just mentioned, decreased by 93% from mid-March to the end of May. In terms of the company overall GMV, we were down approximately 37% in April and the 29% in May as this was a general search in COVID cases across China. Starting in June, the recovery trend has been clear, actually encouraging across all regions impacted by the Shanghai-led outbreak. In the first seven days of June, we see Shanghai's average revenue recovered up to 27% low as it is still is recovering, the revenue [during the same period] [ph] of time if we compare. Other regions that do not have active COVID cases are recurring at a similar trend. In terms of POI categories, the impact of COVID generally more negatively impacts tourist driven such as transportation hubs hospitality and tourist attractions. Entertainment revenues are frequently required to close due to the government regulation, if COVID is within the region. So, they are down year-over-year. While the POIs, that I just mentioned, typically are more impacted by COVID outbreaks, the general recovery trend is more region driven as opposed to POI type driven. Regions that have been able to contain outbreaks recover across POI types as lockdown or quarantine restrictions are removed. Going forward, we are confident that the impact of COVID will eventually diminish as containment is achieved in all regions. Thank you.

Thank you. Our next question comes from Ronald Keung from Goldman Sachs. Please go ahead.

Thank you. Hi, Mars, Maria, and Hansen. I asked that, can you give us more insight on the competitive environment in the first half of this year? And how do we anticipate the incentive fee rate going forward into the second half? Thank you.

Thanks. I will take your questions. In terms of the competitive environment throughout 2021 and in 2022, we are seeing a general decline in competition and there is a direct model. As our peers within the industry continued to significantly scale down their direct operation personnel, we currently operate the largest and the most experienced team under the direct model within the industry. This direct model team was instrumental in helping us achieve a rapid market share increase under the initial COVID outbreak in first half of 2022. With our industry peers, scaling down their direct operation team, we remain long-term focused and have maintained our direct model team at a similar scale in anticipation of the recovery of COVID. In terms of the incentive fee rate, the decrease in competition have benefited us as a new signing generally have a decreased incentive fee as a percentage of revenue compared to our blended rate. This means that our incentive fees rates are going down as a percentage of revenue. Also, we are more widely adopting the usage of viable incentive fees as a new thing, [really have fixed entry fee] [ph]. Well, we [don’t] [ph] provide guidance on the incentive fee rate for the future, the current trend for the [indiscernible] and the decreased utilization fixed fees are positive for our financials going forward. Thank you for your questions.

Right. Thank you. We are now approaching the end of the conference call. I will now turn the call over to Energy Monster’s CFO, Maria Xin for closing remarks.

Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support and we look forward to speaking with you in the coming months. Thank you.

Great. Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.