Hello, thank you for standing by for Energy Monster's 2021 second 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 would now like to turn the meeting over to your host for today's conference call, Director of Investor Relations, Hansen Shi. Please go ahead.
Thank you. Welcome to our 2021 second quarter earnings conference call. Joining me on the call today are Mars Cai, Energy Monster's Chairman and CEO, and Maria Xin, Chief Financial Officer. For today's agenda, management team will discuss business updates, operation highli ghts, and financial performance for the second quarter of 2021. Before we continue, I refer you to our safe harbor statement in the earnings press release, which applies to this call, as we will be making forward-looking statements. 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. Please note that unless otherwise stated, all figures mentioned during this call are in RMB. I would now like to turn the call over to our Chairman and CEO, Mars Cai, for the business and operation highlights.
Thank you, Hansen. Good day, everyone. Welcome to our 2021 second quarter earnings call. We are so pleased to announce the solid second quarter results, with revenue growing to 52.9% year-over-year, which is above the upper end of our previous guidance range. During the second quarter, the outperformance of certain regions, such as Eastern China and the rapid expansion of our POI coverage, positively contributed to our growth, while the impact of COVID weighed down our growth for other regions. Despite facing these external factors, we are committed to remaining focused on our long-term strategies of providing best-in-class services and value proposition to our users, location partners, and network partners.
The scale of our mobile device charging service network also expanded quickly during the quarter, with POIs growing 55,000 to reach 771,000, and number of power banks in circulation growing by 390,000 to reach 6 million by the end of the second quarter. As a result of continued POI and power bank expansion, we were able to reinforce our leadership and grow our market share to 35.2% within the mobile device charging service industry during the first half of 2021. We continue to see multiple drivers propelling forward the fast-growing mobile device charging service industry. First, industry penetration rates of potential POIs remains low. Opportunities in terms of increasing penetration across different types of POIs for both existing higher and lower tier cities continue to be a core driver. Second, there continues to be large number of counties that are unpenetrated for mobile device charging service.
During the quarter, we newly add up 29 new counties, extending our coverage to over 1,600 counties or county level cities as of the end of quarter, out of the 2,846 total in China. This means there continues to be significant opportunities in expanding to uncovered regions across China. Lastly, our service bring convenience to our users across China by relieving their low battery anxiety. Compared to other services, mobile device charging service has high purchase frequency and user stickiness. During the second quarter, we acquired more than 19 million newly registered users, reaching to approximately 255 million cumulative registered users of the end of second quarter, reflecting that there continues to be increasing demand for the service, and that there are still large number of users who are in need, but have yet to try our service.
In the future, as the size of our network continues to grow through increased penetration, we, as number one player in the industry, is poised to better capture the benefits of network effect in attracting more users. Now, despite our growth, we continue to experience headwinds from outbreaks of COVID. In the second quarter, outbreaks in Southern China, and especially within the Guangdong province, resulted in a significant revenue drop upwards to a 70%-80% decline in the impacted regions due to restrictions that required the closing of certain stores and resulted in decreased foot traffic. We estimate that total impact of outbreak in Southern China resulted in a RMB 20 million-RMB 30 million decline in revenue during the second quarter. The Guangdong COVID outbreak was eventually controlled, Our revenue has made a strong recovery starting late July.
We may continue to experience headwinds from COVID outbreaks. Based on the historical numbers, we expect the impact to be short-term in nature. To reduce the impact of the COVID outbreaks on our operations, we implemented measures to increase our recovery speed from external events such as COVID, by focusing on reallocating our cabinets from less utilized POIs to mid to higher tier POIs or chain stores in good quality. In the future, we will continue leveraging our operational expertise to reduce the impact of external events on our operations and to execute measures that will help us increase our market share during these events. Let me walk you through our core strategies in strengthening our competitive advantages, expanding coverage, and exploring new initiatives for the quarter. Efficiency has always been the hallmark of Energy Monster that differentiated us from our peers within the industry.
Last year, the competitive landscape changed significantly due to the initial impact of COVID. The fast-growing mobile device charging service industry also attracted the interest of major companies. We, meanwhile, continued to focus on our core operating principles of efficient growth and more aggressively competing for mid to higher tier POIs. Our ability to more accurately access the revenue potential of POIs, offering correct revenue-sharing policies that results in positive economics for the company, managing our vast on-the-ground business development team and making sure that they abide to the company's operating principles, and affecting the correct economic incentives for these business development personnel that correctly align their interests with the company's are some of our core competitive advantages. This is why we were able to achieve industry-leading unique economic profile after COVID last year, while our competitors were primarily all loss-making.
This difference in unique economics profile has allowed us to more quickly and aggressively develop our network effect. We continue to dynamically balance growth and operational efficiency. We remain committed to our principle of individually assessing each POI based on their economic profiles. Despite the shift in the competitive landscape in the recent years, we believe our competitive advantage in network effect and also operational efficiency are being strengthened as our market share continued to grow during the first half of 2021. Our best-in-class service for our users in the form of high-quality hardware and easy-to-use and return service, and a clear value proposition to our location partners in terms of swift responding to the business development team and customized cabinet and power banks are key differentiating advantages of Energy Monster.
Going forward, we will leverage this advantage to more efficiently expand into POIs, acquire new users, and to further differentiate ourselves from peers within the industry. Now, I would love to talk about our expanding coverage. The industry continued to be fast-growing. The POI coverage of the industry still remains low, with continued opportunities across the board in higher and lower-tier cities and POI types as well. For direct model, we expanded our business development team by 400 people during the quarter in anticipation of the market potential. Our business development team has actively expanded to obtain more mid to higher-tier POIs. On the KA front, we had great success in signing off new accounts during the quarter, like Ajisen Ramen, Week7, and UME.
Our ability to offer a comprehensive package and our ability to deliver high-quality service to KAs has allowed us to sign these accounts despite not offering the highest revenue-sharing policy. For our network partner model, although we are also leading within the industry through this model, we continue to identify and recruit high-quality network partners. We are able to continue attracting these partners due to our market-leading position as well as due to the full suite of support and training that we offer them when they work with us. The network campaign that we launched in the first quarter of 2021 that is tailored to help us acquire additional high-potential network partners to our network. This campaign gives us network partner more room to quickly reach scale and to see results earlier, which further aligns the interest between our network partners and us.
Our sustained investment and commitment to expanding our network partner model will allow us to better capture the growth of the industry by strengthening the coverage of lower-tier cities and solidifying our network partner model. As a result of our effort in both the direct and network partner models, we were able to quickly expand our POI and power bank counts during the quarter. This has helped us attract more customers to Energy Monster. We were able to acquire 19 million newly registered users during the quarter, reaching 255 million registered users in all. In the future, we believe the increase in our business development team and network partners, in conjunction with our industry-leading efficiency, will allow us to accelerate the benefits of our network effect advantage and to further differentiate Energy Monster within the mobile device charging service industry. Lastly, I would like to touch on our new initiatives.
We continue to be in the testing phase for our first consumer prod uct brand lineup and expect a full launch by end of this year, the peak season of [Fijo] . While leveraging Energy Monster's massive online and offline networks, consisting of over 250 million unique registered users and 771,000 POIs across all provinces of China, we can more quickly scale consumer products than traditional brands. On the other hand, we continue to explore other IoT and service industry that we leverage and extend our existing networks. Going forward, we believe that our current setup of network will give us a unique set of advantages in incubating new initiatives from Energy Monster. In conclusion, our core mobile device charging service continue to grow quickly on the back of our expanding network effect and the growth of industry.
Even though the competitive landscape has shifted during the last two years, we remain committed to doing the right thing, and that is to dynamically balance growth and operational efficiency based on market conditions. This difference in philosophy has differentiated us from our peers in the past, and will continue to do so in the future as we form stronger competitive advantage around our core business. Eventually, controls and our revenue have made a strong recovery. Sorry. Let's see. This is the strong recovery after the outbreak of Guangdong province of COVID. We look into the first quarter. We still continue to see headwinds that traditionally have been the peak quarter of the year. The recent COVID outbreak in Jiangsu province, as well as in a number of cities across the country, and weather-induced problems have all negatively impacted our first quarter performance.
Since the outbreak, we have seen a gradual recovery but have not yet returned to normalized activity levels. We also continue to see the recovery is set back by continual regional outbreaks across the country. Going forward, we may continue to face impacts from small-scale regional resurge nce of COVID in the future. We believe these are short-term impacts and will not impact our long-term competitive advantage in network effect and operational efficiency. Thank you. I will now turn the call over to Maria Xin, our CFO, for the financial highlights.
Thank you, Mars. Now let me walk you through the financial results in greater detail. For the second quarter of 2021, revenues were RMB 972.4 million, representing 52.9% year-over-year increase. Revenues from mobile device charging business were up 51.6% year-over-year to RMB 931.6 million and accounted for 95.8% of our total revenues for the quarter. The increase was primarily attributable to the increase in the number of POIs and available-for-use power banks. Revenues for power bank sales were up 83.2% year-over-year to RMB 31.6 million and accounted for 3.2% of our total revenues for the quarter.
The increase was primarily due to the increase in number of POIs, available-for-use power banks, and the customers that select to purchase the power banks. Other revenues were up 111.1% year-over-year to RMB 9.2 million and accounted for 0.9% of our total revenues. The increase was primarily attributable to the increase in users and advertisement efficiency.
Cost of revenues was up 44.8% year-over-year to RMB 138.7 million for the second quarter of 2021. The increase of cost of revenues was primarily due to the increase in the operational scale, resulting in increase in maintenance cost, disposal cost, and the logistic expenses. Gross profit was up 54.3% year-over-year to RMB 833.7 million for the second quarter of 2021. The increase was primarily due to the increase in revenues from mobile device charging business. Gross margin for the second quarter of 2021 reached 85.7%. Operating expense for the second quarter of 2021 was RMB 814.8 million, up 62.6% year-over-year. Excluding share-based compensation, non-GAAP operating expenses were RMB 805.9 million, representing a year-over-year increase of 63.1%. Research and development expenses for the second quarter of 2021 were RMB 20.5 million, up 25.3% year-over-year. The increase was primarily due to the increase in personnel-related expenses.
Sales and marketing expenses for the second quarter of 2021 were RMB 771 million, up 64.6% year-over-year. The increase was primarily due to the increase in incentive fees paid to the location partners and network partners from the increase in mobile device charging business revenues, and the increase in personnel-related expenses. General and administrative expenses were RMB 28.7 million in the second quarter of 2021, up 49.3% year-over-year. The increase was primarily due to the increase in personnel-related expenses. Income from operations was RMB 18.8 million, down 51.9% year-over-year. Operating margin for the second quarter of 2021 was 1.9%, compared to 6.2% in the same period last year. Net income was RMB 8.2 million in the second quarter of 2021, down 72.6% year-over-year. Net margin for the second quarter of 2021 was 0.8%.
Non-GAAP net income, which excludes share-based compensation expenses, was RMB 17.2 million in the second quarter of 2021, compared to a non-GAAP net income of RMB 38.8 million in the same period last year. As of June 30, 2021, the company had cash and cash equivalents, restrictive cash, and short-term investments of RMB 3.1 billion. Cash flow generated from operations for the second quarter of 2021 was RMB 74.8 million. Capital expenditure for the second quarter of this year was RMB 97.3 million. Energy Monster currently expects to generate RMB 900 million - RMB 930 million of revenues for the third quarter of 2021. Please note that this forecast reflects Energy Monster's current and preliminary view on the industry and its operations, which is subject to change, particularly as the potential impact of COVID on the economy in Chinese. Thank you for listening. We are now ready for your questions. Operator?
The question-and-answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, you will need to press star one on your telephone. By your question, press the pound key. Once again, to ask a question, it's star and the number one on your telephone keypad. Your first question comes from the line, Vicky Wei from Citi. Please ask your question.
Good evening, management. Thanks for taking my question. Would management share more insight on the guidance for the third quarter of 2021? Thank you.
Thanks for your questions. Let us give you a bit more insight on the guidance. Despite the impact of Guangdong COVID, our revenue was making a strong recovery during July. On a year-over-year basis, we see in early July, the revenue growth was on track for more than 20% year-on-year. However, since the Jiangsu COVID breakout, Nanjing, Zhengzhou, and Yangzhou in that kind of cities, overall revenue dropped more than 70% from the normalized level. Flash outbreak to the other cities such as Beijing, Shanghai, Chengdu, Shenzhen, have all resulted in the significant drops in revenue. For example, Shanghai, Beijing dropped more than 30% in the early August compared with the early July. However, we are confident that the impact from the COVID will be short-term impact in nature, and that our company's fundamentals are fully intact.
The user continues to have strong demand for our services, that we saw we acquire a lot of new users during the past quarter. Going forward, we will continue to be the long-term oriented to deliver value for our shareholders. In this quarter, the guidance is a bit lower that which impact by the COVID.
Thank you.
Thank you.
Your next question comes from the line of Lucy Li of Goldman Sachs. Please ask your question.
Thank you, management. My question was related to the first one. Can management share with us more details on the impact of COVID during the second quarter, and a possible impact going forward into the third quarter? How do you think of more frequent, I wouldn't say lockdowns, but local restrictions going forward?
Thank you. Mars speaking. To be honest, actually, even by end of May, I'm expecting that in this call, I'm so proud to announce a first RMB 1 billion revenue quarter. In June, actually, you can see that the COVID outbreak in Guangdong, which we just see in the field. During the second quarter, the outbreak of COVID in Southern China, mostly Guangdong, was significant. At its peak, impacted region experienced a 70%-80% week-over-week decline. Overall, the impact of the outbreak in Southern China resulted in approximately RMB 20 million- RMB 30 million in revenue drop. For the third quarter of 2021, the COVID outbreak in combination with weather-induced problems will negatively impact what has traditionally been the peak quarter of the year, as I mentioned.
Following the initial outbreak in Jiangsu, minor outbreaks across all places like Shanghai, even Shenzhen, are disrupting our recovery process towards normalized activity levels. Despite facing these external factors, we are committed to remaining focused on our long-term strategies of providing the best-in-class services and value proposition to our customers, location partners, users, and network partners. That's why we were able to increase our market share in the first half of 2021. I'm also pleased that even with the impact of COVID, we still hit the expectation of the top line of last quarter. Thank you.
Once again, if you wish to ask a question, please press star and the number one on your telephone keypad. Your next question comes from the line of Charlie Chen of China Renaissance. Please ask your question.
Thanks, management, for taking my question. I got one question regarding competitive landscape. Can you give us more color on the current competitive situation? Are we seeing an increase in revenue sharing percentage or a fixed entry fee amount? How has another major competitor's exit, which we heard from the news, which is Meituan, from the direct model impacted the market. Thank you.
Thank you for the question. Sure. We see that our peers shift away from the direct model and move towards the network partner model. Actually, it is a positive move for the market in long run, and will be healthy for the total industry. This will reduce the amount of aggressive business expansion with high revenue-sharing policies that some players actually doing. Because there continue to be large amount of potential within the industry and that we have industry-leading operational efficiency, we have increased the number of business development personnel in the quarter by over 400 people to better capture the market opportunity. Similarly, we have also rapidly increased our signings of KAs during the quarter by leveraging our large on-the-ground team and also our ability to provide comprehensive service to the KAs.
For our network partners, we launched a campaign that in the first quarter of 2021 to attract high-quality network partners with proven track record with us to more quickly increase their coverage in the lower tier cities. As a conclusion, on one side, we continue to do our best in terms of growth and efficiency for our direct sales model. On the other side, we keep doing better in terms of policy, also facilitate our network partners to become stronger players in the market to gain market share in lower tier cities. I would say that in long run, even in mid-term, the market will turn to be a more sustainable development, because some of the players are shifting their business models, which will lead to a less competitive environment for the industry. Thank you.
In terms of the revenue sharing percentage, the level increased a bit on a quarter-on-quarter basis due to the large impact of COVID on the second quarter. In the second quarter, the COVID impact around RMB 20 million-RMB 30 million in both the top line and the bottom line. For the network partners, as Mars just mentioned, the new campaign continues to help us to attract new network partners. During the past quarter, we acquired around 30 new network partners and delivered about 15,000 terminals to our new network partners. Revenue sharing under this new campaign with network partners has a higher revenue sharing percentage and have contributed to the increase in sales and marketing expenses. At the same time, we also increasing our investment in the new initiatives.
Our path on the consumer product and the launch of the Energy Monster's new online channel for the power bank have also contributed to the increase in the sales and the marketing expenses both.
Thank you.
Thank you for your question.
Your next question comes from the line of Lucy Li of Goldman Sachs. Please ask your question.
Hi. Thanks. I have a follow-up question. We've seen a lot of regulations coming out recently on various industries including, for example, internet companies, but also logistic transportation companies, including some of the pricing guidelines, and the thesis on the mutual prosperity or [Non-English content]. From our perspective, do we see any potential of regulators trying to limit our pricing level? If so, how would that impact our business or our revenue sharing scheme with either the POIs or the network partners?
Oh, thank you very much for the question. We have been keep a very close eyes on the regulation part, actually, since the very beginning of creating the company. At this time, we are not under direct regulation by a specific government entity outside of the standard ones. We are actively tracking all updates in regulation, and we are fully compliant to the regulations and requirements implemented by the government. So far, we don't see any potential that our operation will be influenced by certain potential regulations. Still, every day actually, we are ha ving this monitoring. Also we have quite a good relationship with the government in the district level, because we are one of their important startup. We are confident to have good management over this.
Once again, if you wish to ask a question, please press star and the number one on your telephone keypad. We are now approaching the end of the conference call. I will now turn the call over to Energy Monster 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 support, and we look forward to speaking with you in the coming months. Thank you.
This concludes today's conference call. Thank you for participating.