Niu Technologies

Good day and thank you for standing by. Welcome to New Technologies' first quarter 2022 earnings release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will 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 hand the conference over to Ms. Wendy Zhao from New Technologies IR team. Thank you. Please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss New Technologies results for the first quarter 2022. The earnings press release, corporate presentation, and financial spreadsheets have been posted on New's investor relations website. This call is being webcast from company's IR website, 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 U.S. Private Securities Dedication 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 expressed today. Further information regarding the risk factors is included in the company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statement, 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 the reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and CFO, Ms. Bian Zhou. Now let me turn the call over to Yan.

All right. Thank you, everyone, for joining us on the call today. In Q1 2022, we witnessed the growth in both the China and overseas markets. Total sales volume was up 9.4% year-over-year. The China market has a volatile quarter, mainly caused by the COVID outbreak and the city lockdown that lasted over a month in Shanghai and the surrounding Yangtze Delta region. We had a strong opening in China with sales volume growth of 91.6% year-over-year in January and February. However, in March, our China sales performance was adversely affected by the COVID outbreak due to the retail lockdowns, as well as the manufacturing and the logistic disruption for nearly two weeks. And we experienced a 24.1% decline year-over-year in March. Despite the decline in March, we still had a moderate positive growth of 3.0% year-over-year in China market in Q1 due to the strong performance in the first two months of Now turn to the international market. We are seeing a solid growth in the overseas market despite the manufacturing disruptions. Total sales volume outside China reached 14.7K, marked 193.7% year-over-year growth in Q1. The solid growth was the result of our expansion of a new product category sold in Europe and North America. We newly launched kick scooters were tested to be a success in the two markets mentioned above. In this quarter, we sold nearly a 5,000 electric moped and almost 10,000 kick scooters. The strong sales performance in the new kick scooter product category confirmed our effort in developing a diversified product tailored to different markets is paid off. We have built the infrastructure to support the design, development, and marketing of broader product offerings. Augmented by our wide market reach in the geographic locations around the world, we aim to provide urban mobility solutions to the global market. Now, going into details on the expansion of our product portfolios in Q1 2022, we focused mainly on the growing of the Goa product lines to complete the Goa product offerings in China. In Q1, we introduced the Goa G6, the light motorcycles, Goa C3 designed specifically for female users, and the Goa B0 entry-level electric bicycle targeting the mass market. In Q2, we are shifting the focus of product portfolio expansions of our product performance improvements and the two redefined classics bring back the improved versions of some of our top selling models of MS and U Plus series. Being the leader of the smart two wheelers, we continue to improve smart functionalities across our product portfolio. So allow me to go into detail one by one. First, we saw sharp growth in the light electric motorcycle market as our Gowa G3 being well received by the market once released last year. To capture this growth, we released Gowa G6 at the end of March. The G6 is designed with upgraded battery capacity, and it has a range of over 100 kilometers on single charge, priced at RMB $3,999 to $4,399 as the main offerings. Another trend we didn't want to miss is the growing market of the female electric moped and electric bicycle users. We're well aware of the demand and the purchasing power behind this previously neglected market segment of the female scooter users. We launched the Gola C0 earlier last year as an entry-level product specifically for female users. Now this year, we launched the Gola C3 in March as a mid-end model priced at 4,000 RMB+. It comes in multiple pastel colors, and it is designed with a special double C headlight that really makes the design stand out. On the performance side, the Gowa C3 also has a drive range of maximum 100 kilometers. The biggest highlight of the Gowa C3 is the improvement of user experience. It is equipped with smart lock and dynamic mode to assist writing uphill, making the writing experience easy and enjoyable. The stylish design and user-centric writing experience created a unique selling proposition in the market. Besides the two new mid-end Gowa products, We also released Goa B-Series, which is another addition to the Goa product line that continues Goa's original design with creative color combos for the entry riders. We introduced B-Zero product at the entry level, priced from $2499 RMB, and with more mid-end Goa B-Series models to come later this year. Now, with the comprehensive model of Goa B-Series, we believe we had a solid product range coverage in the mid-end China electric bicycle and electric motorcycle markets. priced from $2499 to $7,299 RMB. The newly released of two main Goa products, G6, G3, and entry-level Goa B0, were well received by the market, accounting for almost 18% of sales since the first month of the rollout. This, again, demonstrated our ability to create an attractive and comprehensive product in the mid-end market segment. Coming into Q2, we're releasing some of the upgrade version of the new electric bicycle products such as MS and U-Class with a 20% performance improvement. Also, we're bringing back our NIU's classic electric motorcycles of M1 and M-Plus refined with new features such as longer drive range and upgrade smart functions. We're excited about the growth driven by the performance improvement product in the NIU series in the coming quarters. Now for the international market, we continue the effort in product development in the newly entered micro-mobility categories. The KQi3 Max is our most powerful and fastest kick scooter with a maximum speed of 32 km per hour and a longer drive range that can go up to 65 km. We plan to release this strong upgrade model in Q2 this year. Also, the BQi C3 Pro e-bike is designed with a stylish and practical lightweight frame. together with pedal assist and throttle control make it easier and comfortable as a city commute bike. Both products were exhibited during the CES in Q1 in Las Vegas and as well received by the audiences. And lastly, we continue to improve the smart functionalities across our product portfolios. The newly launched models for both the Gola and the new series are equipped with our new smart functions such as the upgraded app with GPS, the anti-theft remote tracking, scooter diagnostic features, and also the Bluetooth and NST lock system, as well as the smart seat storage lock. Those intelligent features aim to make the riding experience smart and easy for our users. Those new product offerings and functional upgrades not only help to drive sales growth, but also help us to improve the growth margin. We all know that the sharp rise in the raw material price, especially the 40% plus price hike in the lithium-ion battery cost, has put a tremendous pressure on our gross margin, giving the lithium-ion battery a countable 35% to 40% of our bottom cost. This was the main cost for our gross margin drop in Q1, and the impact would be even bigger in Q2 since some of the raw material price increases are fully recognized in Q2. Now, by launching new products and integrating new features to improve the performance of our existing products, we increase the perceived value of our users and are able to sell the product at a premium price in order to close the gap in gross margin caused by the rising materials. Now, as we grow our product portfolios, we also expand our sales network in Q1 2022. We opened about 140 new branded stores in China, totaling to 3,248 stores across China. In the international market, we also broadened our sales channels with new partnerships. Previously, with the electric motorcycles, we mainly have our overseas branded premium stores and independent motorcycle dealers selling electric motorcycles. Now, with the freshly launched category of kick scooters and to be launched e-bikes, we opened up to work with electronics and general retail stores as well as online like Amazon and also Shopify website. We plan to keep growing the network as we grow product offerings and penetrate into a broader market. Our brand image is always a real fuel behind the long-term growth. As we expand into new product category internationally, we continue to build our brand image as a global leader of urban mobility. In Q1, we actively actively participated in exhibitions worldwide, showing case of product live this year for the global market. We participated in the Consumer Electronics Show in Las Vegas, the Viva Los Motos Show in Madrid, Spain, and E-Tech Show in Bologna, Italy. In some of the exhibitions and conferences, Niu was the only two-wheeler vehicle brand invited, and our new products review gained exposures and recognition in the industry. Now, as a promoter of sustainable living for all, we are also dedicated to provide our customers with more environmentally friendly, smart urban vehicles to make a positive impact on the environment. We're spreading the idea of sustainable living throughout not just our products, but also our daily operations. Last year, we celebrated our 10 billion kilometer drive distance event, calculating carbon emission reduction of 2.5 billion kilograms if those distances were traveled with petrol. During this quarter, we launched a program called Renew, a global sustainable initiative designed to renew our planet as part of our Earth Day campaign. We optimized the global Earth Day cleanup that was designed to breath life into our urban environment that galvanized new users into actions across four continents. We have new clubs rally to cleanup traps in public areas on the beach of Bali, the street of Antwerp, and even around the Asian remains of Guatemala. In China, we also have users to share their stories to leave greener with new. The user-generated content gained over 66 million views and almost 150,000 interactions of comments and likes across all social media platforms. Sustainable living has been a core value to us since day one, and I'm proud to see our brand making a positive impact on the journey of sustainability with our users. In China, as we expand to cover a more broad range of consumers, both demographically and geographically, we continue to spread value behind our brand with a variety of campaigns. We carried on our successful campaign slogan, Feel Proud of Yourself. In this quarter, we collaborated with China's top comedy group on a nationwide TV show and gained over 2.9 billion viewership. Also, from March to April, we implemented a queue of marketing on Douyin. platform with 15 technology and lifestyle influencers with larger fund base to create a high-quality content showing case of scooters. The short videos on Douyin gained a total of 100 million views and 4 million interaction likes and comments. We further organized various user activities across China as a participation, for example, participation in Guangzhou Comic Con with user modified new bikes, gaining about 1.7 million views on social media. Also, various new friends events such as one in Chengdu hosting a new concert with well-recognized singers. Now to conclude Q1 2022, despite the headwinds caused by the COVID-19 and raw material price increase, we were resilient in our business operations. Both the China and overseas markets have positive responses to our expanded product categories and upgrade models, and we plan to keep broadening our product portfolio and already have a few products in line for production and market entrance for the coming quarters. On branding and marketing our operations, we actively promote our brand as a global leader in urban mobility industry. Brand awareness and recognition from market we operate in create a long-term fuel for our company's growth. Now looking forward to Q2 2022, it is no doubt a very challenging period for us, given uncertainty caused by the resurgence of COVID-19 in China. As of May 2022, quite some major cities have been in full or partial lockdowns, which adversely affect the consumer spending in all categories, with no exception to the demand of two-wheeler vehicles during the lockdown period. We are particularly impacted as our sales are highly concentrated in the top-tier cities where the COVID restraints are more rigid. In addition, we continue to experience supply chain disruptions that some of the key suppliers are in Shanghai vicinity. The slowdown in manufacturing and logistics has affected our market performance globally. While the market demand in China faces uncertainty in Q2, our diversified growth strategy put in place since last year has shined some lights. The newly launched category of kick scooters has been ground in Europe and North American market. Our kick scooter ranked as Amazon best sellers of electric scooter category for two weeks in a row in May. The to-be-launched electric bike products will further strengthen our position as an urban mobility brand. The rising sales in our international market will help us to weather through the temporary downturns in the China market. Now, we're also confident in our rebound in the sales in China post-COVID-19 situation, as the same trend observed in 2020. Now, in the cities that have been hit by COVID, even though the sales are being hit temporarily, Now traveling with personal scooters appear to be recommended sometimes even as the only form of transportation in cities. For many, riding a scooter is safer and easier transportation method and is even recommended method by local community officials. So expect to see a need for electric scooter and bicycle rising with the COVID easing in the coming quarters. So although Q2 will be a challenging quarter for us, now with our new product offering pipeline for both the China market and the international market, we're still optimistic for the entire year of 2022. Now I'll turn the call over to Fiyang, our CFO, to go through the financial results.