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…

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,…

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.