Seeking Alpha • Jul 12
Smart Share Global Faces Revenue Drop On Rolling China Lockdowns
Smart Share Global went public in April 2021, raising approximately $150 million in a U.S. IPO.
The firm operates a network of mobile device charging stations and sells energy devices in China.
EM has recently produced declining revenue and worsening operating losses as a result of COVID-19 lockdowns in China.
Given continuing fears of more lockdowns and the firm's financial results, I'm on Hold for EM for the near term.
A Quick Take On Smart Share Global
Smart Share Global (EM) went public in April 2021, raising approximately $150 million in gross proceeds from an IPO that was priced at $8.50 per ADS.
The firm provides members with access to mobile device charging locations in China.
Given the firm's cash flow dynamics, contracting revenue, worsening operating losses and uncertain pandemic restriction effects, I'm on Hold for EM in the near term.
Smart Share Overview
Shanghai, China-based Smart Share was founded to develop a network of mobile charging spots for users in Mainland China.
Management is headed by Co-founder, Chairman and CEO, Mars Guangyuan Cai, who was previously General Manager at Uber Shanghai.
The company's power banks are generally placed in:
Entertainment centers
Restaurants
Shopping centers
Hotels
Transportation hubs
Public spaces
The firm operates a self-run network in larger cities via an in-house business development team as well as works through network partners in smaller cities.
According to an iResearch report commissioned by management, the firm was the largest mobile device charging service provider in China, in terms of gross 2020 revenue.
Smart Share's Market & Competition
According to a recent market research report by iResearch, the market for mobile device charging services was approximately $1.3 billion in 2020 and is expected to reach $15.4 billion by 2028.
This represents a forecast CAGR of 36.2% from 2020 to 2028.
The main drivers for this expected growth are continued growth in smartphone usage and dependence on mobile applications by consumers.
Also, the adoption of next-generation, 5G technologies will expand the use cases for mobile phones and is expected to increase usage further.
Major competitive or other industry participants by category include:
Internet companies
Payment service providers
Other financial tech companies
Smaller, local players
EM's Recent Financial Performance
Total revenue by quarter has been uneven but has trended lower in recent quarters:
5 Quarter Total Revenue (Seeking Alpha)
Gross profit by quarter has also trended lower as the chart shows below:
5 Quarter Gross Profit (Seeking Alpha)
Selling, G&A expenses as a percentage of total revenue by quarter have increased over the past 5 quarters, indicating the company has become less efficient at generating revenue:
5 Quarter Selling, G&A % Of Revenue (Seeking Alpha)
Operating income by quarter has swung well into loss territory over the past 3 quarters:
5 Quarter Operating Income (Seeking Alpha)
Earnings per share (Diluted) have also remained negative in the 5 quarters ended March 31, 2022:
5 Quarter Earnings Per Share (Seeking Alpha)
In the past 12 months, EM's stock price has dropped 78.2 percent vs. the U.S. S&P 500 Index's fall of around 12 percent, as the chart below indicates:
52 Week Stock Price (Seeking Alpha)
Valuation Metrics For Smart Share
Below is a table of relevant capitalization and valuation figures for the company:
Measure
Amount
Enterprise Value
-$106,620,000
Market Capitalization
$297,570,000
Price/Sales ((TTM))
0.54
Revenue Growth Rate ((TTM))
4.26%
Operating Cash Flow ((TTM))
$35,680,000
CapEx Ratio
0.48
Earnings Per Share (Fully Diluted)
-$21.30
(Source - Seeking Alpha)
Commentary On Smart Share
In its last earnings call (Source - Seeking Alpha), covering Q1 2022's results, management highlighted the firm's challenges due to a continuous outbreak of COVID-19 in regions that affected its network use.
This resulted in a reduction of same-store revenue of 35% year-over-year.
However, registered user numbers continued to grow, reaching 299 million by the end of the quarter, representing impressive growth of 25% year-over-year.