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spk03: Good day and thank you for standing by. Welcome to New Technologies' fourth quarter 2021 earnings release conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. And now I'd like to turn the conference over to Ms. Irina Chen from New Technologies IR team. Thank you. Please go ahead.
spk02: Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new technologies results for the quarter 2021. The earnings press release, corporate presentation, and the financial spreadsheets have been posted on New's investor relations website. This call is being webcast from company's IR website as well, and a replay of the call will be available soon. Please note, today's discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions, and other factors. The company's actual results may be materially different from those Further information regarding the risk factors is included in the company's public findings with the Securities and Exchange Commission. The company does not have any obligation to update any forward-looking statements except as required by law. Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and the CFO, Ms. Fionn Chow. Now, let me turn the call over to Yan.
spk05: Thanks, Irina. And thanks, everyone, for joining us on the call today. So in the fourth quarter, we have seen a strong growth of both the China and overseas markets. Our total sales volume reached more than 238,000 vehicles, a 58.3% year-over-year increase. The sales volume in the China market alone was up 49.2% year-over-year, reaching 205,000 vehicles. The sales volume in the international market reached nearly 33,000 vehicles, including over 18,000 units of mopeds, a 40% year-over-year increase, and nearly 15,000 kick scooters, a significant breakthrough in the micromobility market. Now, with the strong performance in the fourth quarter, we have wrapped up our 2021 as a milestone sales year. We're proud to announce that our global sales volume surpassed 1 million vehicles. This represented an increase of 72.5% compared to last year. The sales volume in the China market was more than 988,000 units, nearly breaking 1 million units, a 72.7% year-over-year increase, where the volume in the international market was just shy of 50,000 units, including nearly 35,000 units of mopeds, a 16% year-over-year increase, and additional 15,000 kick scooters. This is a milestone for us as a product company and a global brand. From a product company standpoint, despite all the global supply chain issues and the COVID-19 situation, we grew our volume by 72% while also expanding into new product categories. From a brand perspective, We're now the leading urban mobility company in more than 50 countries around the world, with 4,000-plus retail and online shops. The strong growth in 2021 is a testament to the successful implementation of our 2.0 growth strategy, which is leveraging our design technology to create electric urban mobility solutions suitable for rural regions and market segments. and in return making you a global urban mobility brand. Now for last year, we focused in five key markets and advanced our product portfolio in those. The China electric bicycle market and the electric motorcycle market, the international electric motorcycle market, the kick scooter market, and also the e-bike market for micro mobility. In 2021, we launched a total of five new products to the China electric bicycle market, the M2S, the upgraded U, and the F2, F0, and C0 of the Gola series, priced between RMB 3,099 to 7,999. Those five new products have been a hit in each of their respective target markets, accounting for 27% of our 2021 sales. Those five products enjoyed a handful upgrade to the smart connectivity and the battery management system that combined with the new China national standard for electric bicycles. This allowed our customers to enjoy a more connected and smarter experience while benefiting from an enhanced battery performance, providing extended ride range from 40 kilometers to 80 kilometers on a single charge, meeting multiple consumer segments' mobility needs. This has been a key for us to tap into an even larger total addressable market in China. Now for the electric motorcycle market in China, we have expanded upon the upgraded Gowa G3 and Gowa S4. The upgraded G3 now has a range of over 100 kilometers on a single charge. It has been well received by the market and accounted for close to 6% of our 2021 sales in just a few months a year. For Europe and America's motorcycle market, we introduced three new products. Our first EVO product, the MGT EVO, the most powerful electric 125cc, shipped in 2021. The RQI electric quad motorcycle and our first 150cc hybrid moped YQI both shipped in 2022. Those three products represented our expansion into performance moped and motorcycles. All of those products reached top speed over 100 kilometers per hour and each has an exciting of 0 to 60 kilometer per hour track time, even outstripping its gasoline-powered rivals. Those products offering effectively triple our addressable motorcycle market overseas, expanding from 50cc equivalent to up to 125cc equivalent. In December alone, right after the NTT will be ready for ship, we have ship.
spk03: Ladies and gentlemen, your speaker is currently experiencing some technical difficulties with the line. Please stand by while we address the situation. Please continue, speakers.
spk05: Oh, hi. Sorry, our signal just, our phone got a break up. So basically, let me just quickly talk about Now, the new electric motorcycle offerings were enabled by our continued investment in R&D, such as the upgraded powertrain system to increase the top speed up to 160 km power, the upgraded battery system to increase dry range by 30% plus, and the smart 2.0 features to add additional technology flash in the traditional motorcycle market. Now, as we mentioned during the last earning call, besides the scooter and motorcycle products, we have entered the micro mobility market with two new categories, the kick scooter and the e-bikes. In 2021, we introduced the two new kick scooters, the KQi3 and KQi2, a robust line of kick scooter product with price starting from $549 to $899 US dollars. Those products are pursued by their respective targets market, and we ship more than 15,000 units between September to December 2021. The release of those models is only the beginning, and we have a handful of new models to launch in 2022 to meet the budget demands of a wide range of customers who are looking for affordable solutions for their urban commute. Now for the e-bike market, we launched the BQI that has a stylish urban minimalist design and is capable of extended ride range of 100 kilometers thanks to its two removable batteries. The BQI will start from $1,500, making it the most powerful and affordable commuter e-bike to hit the market in 2022. We expect to launch more e-bike products to enhance our offerings across the European and American markets before the end of 2022. Supported by the new product and the new category launched in the previous three quarters in 2021, we accelerated our sales network expansion in the fourth quarter in 2021. In Q4, we launched 422 new branded flagship stores across China, bringing our total store count to 3,108 stores by the end of 2021. For the entire year, we added nearly 1,500 more stores, doubling our total store count in China. In addition, we have expanded to 40 new cities, reaching a total coverage of nearly 240 cities in 2021. Those together with the wide range of product offerings drove our growth in 2021 and also serve as a strong base for 2022. For international market in 2021, we have increased our market coverage to 50 countries with total 174 flagship and premium stores across the globe to form a dense sales network and bring better products and services to our customers. This is in addition to our more than 1,000 motorcycle and e-mobility dealers across five continents. Now, in addition to our offline store growth and thanks to the launch of our micro-mobility product, we successfully opened a new range of retail channels that previously were not ideal for our electric moped scooters, including not only the big box retail and electronic chains like Best Buy and Media Mart, but also online platforms like Amazon. Those new channels will accelerate our sales while simultaneously expanding our brand recognition. Now, in order to support and enhance the new 2.0 strategy for product store expansion, we have also expanded our branding and marketing activities to penetrate even deeper into the new markets. For China markets, we'll successfully wrap the entire 2021 with a brand promotion station to feel a bit proud or a bit new in the year of odds. Starting back in February 2021, we kicked off the Chinese New Year by launching the Year of New nationwide campaign, which generated more than 400 million views across multiple social platforms. In October, we reached an important milestone becoming the first electric two-wheeler brand to have our customers record a 10 billion kilometer riding distance. To celebrate such an event, we launched our 10 Billion Kilometer Feel Proud campaign which went on to have an incredible reach, accumulating more than 1.4 billion views online and offline around the world for the entire Q4. More importantly, it helped to convey our brand value to our fans, riders, and future customers. The message is positioned new not just as an electric scooter company, but more importantly, as a lifestyle brand. In the international market, we also continue to deepen our efforts In Q4, specifically, we up our social media effort with close to 1 million interactions across Instagram, Facebook, and YouTube. We also attended ECMA in Milan, Italy in November 2021, and the CES in Las Vegas in the United States in January 2022, launched five new products, received 10 million-plus impressions, with more than 100 articles published. This branding and marketing effort have significantly increased our brand awareness. Our recent survey in China has shown that we are ranked top three in brand awareness, significantly higher than our market share position, which is currently at number 10. As we wrap up 2021, our most successful year so far, we feel very optimistic for 2022. For our addressable market in China, the continued implementation of China National Standard for Electric Bicycle is helping to push the two-wheeler owners to convert to lithium battery-powered electric bicycles even faster than the original projections. As a leader in the China smart lithium two-wheeler industry, we are all ahead of our competitors and lead this technology transformation. We continue to push our R&D and will roll out five new models and handle all existing product upgrades. with the majority of those products that build from April to September in 2022 this year. In addition, we also observed a fast growth in the light of electric motorcycle market, fueled by our enhanced drive range battery and powertrain solutions. We'll do our five new models in this sector, with the first model, Global C3, priced from 3,899 to 5,499 RMB, rolled out in March, and the rest are from April to September. Those new models will drive the main growth in the hot season in Q2 and Q3. Now for the overseas market, advancement in battery technology and powertrain technology last year has enabled the transformation from petrol to electric motorcycle for the mass commute market, i.e. the 125cc category. Our market leading advances, coupled with our mature smart connectivity features has allowed us to stand out as a leader in all of the 50-plus markets we have penetrated so far. For example, we rank at number one in electric moped in Europe. And as we expand our product range beyond the lower-powered 50cc category into the 125cc categories, we instantly grow our total addressable market by 3x. Our upgrade NGT, our newly rolled out MGT EVO, the RQI and the YQI will be the main feature product for this year. And we have additional two products in development. Now, at the same time, the COVID-19 pandemic has accelerated the use and ownership of micro-mobility e-bikes and kick scooters for short trips in communities around the globe. And especially in those markets where new has been established and the trusted brands 2016. Our first batch of kick scooter products, the K3 and K2, have been a hit last year, and our BQI e-bikes to be shipped in early Q2 2022 have also received very positive attention. And we are developing five new products in those categories in 2022 to see the market growth across all segments and take advantage of our 1,000-plus point of sales across Europe and America. Now, supported by the suitable products and tech offerings, our sales network expansion will also continue to be accelerated. We plan to add additional more than 1,000 new branded stores in 2022. Starting Q4 last year and continuing Q1 2022, we have observed the raw material price continue to increase. For example, with the lithium battery cost increased by 10% to 20%. we increased our product price by average 5% in March 2022 this year to cope with the raw material price increase. Together with our R&D effort on cost reduction, we will maintain a healthy growth margin with this 5% price increase. For the international product, we also plan to increase price in April. So all those price increases, the full impact on our growth margin will be fully reflected in Q2 this year. Now, with all those efforts underway, we're very optimistic with this year's growth, targeting an annual sales volume between 1.5 to 1.7 million vehicles for the entire year of 2022. Now, I'll turn the call over to Fiyan to discuss our financial results. Fiyan.
spk01: Thank you, Yan. And hello, everyone. Our first release contains all the figures and comparisons you need. And we have also uploaded Excel format figures to our IR website for your easy reference. And I said review our financial performance. And we are referring to the fourth quarter figures, unless I say otherwise. And that all mandatory figures are R&B unless otherwise noted. I'll quickly go through the sales volume, which Dr. Li just mentioned. And our quarter four sales volume reached 238,000 units representing a 58.3% year-over-year growth, and China sales volume increased by 49%, primarily driven by the new product launches in the past three quarters. And international business performed extremely well in quarter four, and over 18,000 e-scooters and nearly 15,000 kick scooters delivered in quarter four. And international sales volume exceeds our initial expectation. And the main reason causes is the ease of the international shipping gradually. With regards to the product mix, in China market, the proportion of NMU series rebounded from 24% to 47%. And correspondingly, Gova products accounted for the rest of 53%. Out of the 53% of global products, 24% was from the entry-level models G0, F0, and C0, and the remaining 29% was from other global models with higher retail prices. The overall product mix for China market improved this quarter since the premium models, here I am referring to both NMU series and all non-zero global models. took a heavier proportion of 76% compared to 58% in quarter three. And for international markets, we achieved around 33,000 deliveries in quarter four, with e-motorcycles and e-mopeds accounting for 55% of them, and kick scooters accounting for 45%. Total revenues in quarter four were $980,000 86 million, exceeding top-line guidance provided in the third quarter, and up by 46.7% year-over-year. This growth was attributable to increased sales volume across our domestic and international segments, particularly an increase of 156% for international deliveries I mentioned before. And revenue for international e-motorcycles and e-mopeds rebounded after quarter three 2021, rose by 2.7 times to 156 million, 35% up year over year. And revenue from kick scooters soured by over 29 times compared to quarter three 2021. and revenue from China e-scooter sales remained strong and increased by 48% year over year. The accessory spare parts and services revenue also increased by more than 20% year over year, though partially offset by 7.3% decrease in overall revenue per scooters. For the year ended December 31st, 2021, our total revenue increased 51.6% to 3.7 billion, as compared to 2.4 billion in 2020. Now let's look at our ASP. The overall ASP in Q4 declined by 7.3% year-over-year, but improved by 34% quarter-over-quarter. In China market, the e-scooter's ASP remains almost the same compared to Q4 2020. with a slight decrease by 0.9% from 3,355 to 3,326, while improved 21% significantly quarter-over-quarter.
spk06: And e-scooters ASP from international markets decreased 36% year-over-year from 8,979
spk01: to 5,749. And the key reason for the decline was the change in the product mix. Nearly 15,000 units sold of the kick scooters affected our international ASP to a large extent, whose sales price is lower than the e-motorcycles and e-mopeds price. And if we take out the impact of kick scooters The international ASP decrease was only around 3% year-over-year, and in terms of numbers, 8,678. So in total, the ASP of e-scooters was only 4.6% decrease. And the ASP of accessories, spare parts, and services was 479 per scooter, decreasing by 24% year-over-year. mainly because of acceleration in the expansion of sales volume. The gross margin in quarter four was 22.6%, 2.6 percentage points lower than the same period last year, while 2.6 percentage points higher than last quarter. And the decrease year over year was the consequence of higher raw material cost and change in product mix, And the raw material costs remain at the elevated level in the fourth quarter. And we were still experiencing additional inflation in the international shipping. And the cost inflation has reduced our margin by around 1.9 percentage points, while product mix enlarged this impact by 0.7 percentage points. To combat the cost inflation, we increased domestic scooter retail price from March 2022 and international scooters retail price from April 2022. And we continue to aggressively manage all aspects of our cost structure, including the advanced technology to the product body and the purchase agreement to secure sustainable suppliers of the key components parts and other cost saving initiatives. Our total operating expenses, excluding share-based compensation, were $176.2 million, increased by $66.5 million, or 60.6% year over year. And the increase was caused by $17.3 million higher branding and advertisement in sales and marketing expenses. and $13.2 million higher depreciation expenses of the new store openings, and $9.7 million higher staff costs. Expressed as percentage of revenue, our operating expenses exclude share-based compensation with 17.9%, 1.6 percentage points higher than quarter four last year, mainly caused by the retail retail sales network expansion, and branding and marketing activities. And we believe there was no better time for retail sales network expansion and brand marketing than now to gain more ground, extending the fast-growing lithium-ion battery power to wither market segments. And a series of marketing activities were launched in fourth quarter as ramping up the branding like national wild campaign, 10 billion kilometers of riding, as Dr. Li just mentioned, and city promotions, which were targeted to those cities forced to implement the new national standards in 2022. I would also like to add that although our operating expenses as percentage of revenue in quarter four increased 1.6 percentage points, Our annual non-GAAP operating expenses as percentage of revenue maintained the same level as last year at 15.2%. Furthermore, our annual GAAP operating expenses as percentage of revenue decreased from 16.8% to 16.4%, and we are in a good position to leverage our brand awareness retail sales network expansion, and our total operating expenses at a healthy level. Our gap net income was 47.6 million, and net margin was 4.8%. The adjusted net income was 60.2 million, and the adjusted net margin was 6.1%, 4.1 percentage points lower year over year. As mentioned above, these were briefly due to 2.6 percentage point gross margin decline and 1.6 percentage point operating expenses increase. And for the year ended December 31st, 2021, our net income was 225.8 million and adjusted net income was 273 million. And our net margin was 6.1%, decreased slightly by 0.8 percentage point. And our adjusted net margin was 7.4%, decreased by 1.1 percentage point. And the decrease mainly came from the decline in the gross margin. Turning to our balance sheet and cash flow, we ended the quarter with RMB 1.1 billion in cash. term deposits, and short-term investments, excluding the restricted cash. And our operating cash outflow was $340 million, mainly due to the reduction in payable of $214 million and increase in receivables as a result of seasonality. On the full year basis, our operating cash flow was positive $334 million. Our quarter four cap tax was around $63 million, mostly related to capacity expansion of $27 million and new storage buildings of $36 million. And now let's turn to guidance. We expect the fourth quarter revenue to be in the range of $647 million to $712 million, an increase of 20% to 30% year over year. And with that, now let's open the call for the question that you may have for us. Operator, please go ahead.
spk03: Thank you. As a reminder, if you wish to ask a question, please press star 1 on your telephone and light for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we compile the question and answer roster. So once again, a star 1 for questions. Our first question comes from the line of Ben Wang from Credit Suisse. Please ask your question.
spk04: Thank you, management. I actually got two questions. Number one is about can you share about the first two months sales performance because we're already in the beginning of March. What's the growth and roughly volume? And second is that about the full year volume, can you have a roughly breakdown how much came from M, M, and Gova? Thank you.
spk01: Okay, I'll answer this question. For the first two months in this year, we already got the sales order around above 100,000 in total, including domestic and international sales orders. And the sales volume we delivered in the first two quarters is 78,000, including the kick scooters. around 12,000, and the other are the e-motorcycles and e-mopads globally, including domestic and international markets. And for the guidance in 2022, we expected around 1.3 to 1.4 sales units in the China market. And we expected around 200,000 to 300,000 units in the international market. And as to the product mix, we expected the NMU compared to the Gova series is around three versus seven. And within the Gova series, Actually, we expected the majority of the GOVA series are the GOVA premium products other than the entry-level one. Hope I addressed the questions for you.
spk04: Thank you. Great. Thank you.
spk03: Thank you. Our next question comes from Jane Chang from CICC. Please ask a question. Hi, hello, Ian. Hello, thanks for your detailed illustration for the results. So I have major two questions. The first is about a further question about the product structure. So we can see that the proportion of COVID-0 series in last year fluctuated greatly, so from 20% to 40%. And you just mentioned you're maybe satisfying your product structure. We expect this year we can see that customers are still very price sensitive. So if we want to achieve a stable, relatively high proportion of mid- to high-end products, how we can achieve a much stronger product differentiation for our maybe higher-priced products. This is my first question. And second is about the expense. We can see that SG and A expense reached a quarter high in the fourth quarter. Looking at the ratios, selling expense ratio increased a lot. Mainly comes from increasing advertising and promotion expense and also the increase in the monetization of star expansion. So how can we expect overall expense ratio or the amount this year, and can it reflect a stronger scale effect? That means whether we can see the expense ratio to go down this year. This is my two questions. Thank you.
spk05: Yeah, so both are great questions, so let me address the first one, and then I'll let Fiyang to talk about the expense part. So I think the great observation on the zero series for the entry level. So in the last year, 2021, we do see the fluctuation because we announced the F0. We rolled out a C0 product. So it's actually coupled with the new product rollout of the zero series, along with some of the promotions. So looking at 2022, so far we have only one zero entry product to be rolled out. That was the B0. which is actually effective around end of March. Then the rest of global products more on the 2 series, the B2, also on the 6 series, which is not showing there, the G6, and also the C3 and the C6. So most are more towards the high end and the entry level. Keep in mind that a lot of those entry level models, they're priced low because they have a relatively shorter dry range. So actually from users' perspective, it's actually the users prefer what we call the mid-price level. It's basically somewhere around 4,000 RMB, but it gives a good dry range. For example, our G3C actually represents alone, it rolled out last year for about, actually on sale for about four months, actually already represents 6% of sales. And that product has a drive range of 100 kilometers. So, you know, I just want to make a point that we don't really, it's not like, hey, the cheaper the better. It's actually you always have to look at the price versus the drive range. I think this year the focus on the Goldwater product is more on the extended drive range product. And also, I think this year we have about three or four new models for the NMU series to be rolled out for China that will help to continue to drive the increase for the higher, basically our premium, premium brand. So I'll let Sian to talk about this.
spk01: Okay, regarding to the sales and marketing expenses in quarter four, and actually, you know, I already explained the nature of those sales and marketing expenses. The majority part are the branding and marketing activities, and the rest are the depreciation and monetization expenses related to the new stores opening. And if you look at the absolute figure, it's around $100 million. sales and marketing expenses in quarter four, almost one-third of the total whole year's sales and marketing expenses. Actually, this course by the new source opening during the whole year end, you will see the full effect in the quarter four because we opened more than 15,000 new source this year, almost double compared to the year end in 2020. And that is the main reason. And actually, regarding to the operating expenses ratio, especially the sales expenses ratio for this year, since we already got the scale of economy in the G&A and almost in the R&D, considering the different new models we are about to deliver, for the next two to three years. Actually, we think, you know, the R&D expenses and G&A expenses as percentage of revenue will lower around 0.2 percentage point. And for the selling and marketing expenses, we will remain to 8% to 9%. as percentage of revenue for this year. So in total, we may remain the operating expenses ratio around 15% to 16% for this year, because we are still in the process of growing the China sales marketing channel for the offline sales volume this year. And as new as always, we are the premium brand in China and in the international markets. We will take this window to improve the brand awareness globally, but we may keep the expenses at a healthy level.
spk03: Okay, got it. Very clear. That's all my question, yeah.
spk01: Okay, thank you.
spk03: Thank you. Our next question comes from Wei Shen from UBS. Please ask your question.
spk06: Hi, Lian. Hi, Fionn. My question is about the gross margin. We understand that the lithium battery price has been running in recent weeks. I'm wondering what's your strategy towards it? Will you for the increase the mix of the lead-acid battery in 2022. And I also understand that you have raised price by maybe 200. Will it cover the battery cost and will you consider another round of price hike? Thanks.
spk05: Yes, so I think let me address that. So we actually are seeing, last quarter we see the lithium battery price increase a bit, but then actually really starting January this year, we started lithium battery to really shoot up. So we have seen some cases, the NCM battery price increased by almost like 20%, and also the LFP battery price also increased by 15%. So keep in mind the battery cost is roughly about... you know, about 30% of our revenue to that extent. So now we increase our price by 5%, but really in order to still maintain the same margin, we have also done some cost reductions in terms of the chassis to able to manage to maintain the same healthy margin at the same time, not increase the price too much. So I think that's one. We actually look at the market. In front of the market, we have observed that our competitors, so in the industry, people increase the lithium scooters or moped price by up to from anywhere between 8% to 10%. Actually, even significantly higher than what we have done. That means, one, we do have additional room to increase the price if we have to. to really to observe the future value price increases. And the second, we're also exploring and looking at some of the, for the electric bicycle solutions, it's difficult to do the light asset, but also for the light electric motorcycle solutions in China, in some of the tier two and tier three cities. We also look at the graphite, what we call the graphite lead-acid battery solutions as a viable solution for those light motorcycles. And so we will have a few products in that range to really come back with the lithium battery increases, price increases.
spk06: Can I confirm with you that... as you raised price by 200, which only covered the price hike today from the end of 2021 till now. But the growth margin will remain if other items are flat. The growth margin in the first quarter will be at a similar level of the fourth quarter of last year, which is still... lower than the third quarter?
spk05: So I think the growth margin question is also related to the product mix as well. So let's say if you keep the same product mix, it's similar. It actually has the growth margin has also slightly increased. So let me put it this way. The growth margin post price increase versus the growth margin before the price increase, the growth margin actually will improve by almost one percentage point if we keep the product mix same. The product mix, mainly I talk about the international sales versus China sales, also kick scooter sales versus all this stuff. But I think we talk about for the entire year, we're still very optimistic that we're able to get to, on average, get a gross margin somewhere around 22%.
spk03: Okay, thank you. Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press dial 1 on your telephone keypad. Once again, if you wish to ask a question, please press Stop 1 on your telephone keypad. All right, there are no further questions. I'll turn the call back to the management team for closing remarks.
spk05: Thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Back to you, operator.
spk03: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
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