Niu Technologies

Today, ladies and gentlemen, thank you for standing by and welcome to the new technologies third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording Saturday call. If you have any objections, you may disconnect at this time. Now I would like to turn the call over to Ms. Crystal Li, Investor Relations Manager of New Technologies. Ms. Li, please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new technologies resolved for the third quarter 2023. The earnings press release, corporate presentation, and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from company's IR site as well, and the replay of the call will be available soon. Please note, today's discussion will contain forward-looking statements made under the safe harbor provision of the U.S. Private Security 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 expressed today. Further information regarding the risk factors is included in the company's public filing with the Security and Lease Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law. Our earnings press release and this call include discussion of certain non-GAAP financial measures. The press release contained 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 CFO, Ms. Fiyang Zhou. Now let me turn the call over to CEO Yan.

Thank you, everyone, for joining us on the call today. In Q3 2023, Our total sales volume was 265,923 units, with a year-over-year decrease of 71%. Specifically, sales volume in the China market had a year-over-year drop of 12% to 230,445 units, and the sales volume in the overseas market experienced a year-over-year of 38% decrease to 35,468 units. Total revenue in Q3 2023 was RMB 927 million, decrease of 19% year-over-year. In the China market, during Q3, we encountered setbacks due to sluggish consumption in top-tier cities, resulting in a slowdown in sales for our product. To address this challenge in Q3, we expanded our product portfolio with a diverse design and functionality to address the wider customer needs. And with the diversified product portfolio, we plan to expand our retail coverage for greater market reach in Q4 2023 and beyond. In the overseas electric two-wheeler market, we have experienced a year-on-year decline of 62%, influenced by a combination of challenging factors. The decline in the electric two-wheeler market in our key market, Germany and Netherlands, has impacted our business. Additionally, we have also faced a temporary disruption in the key European markets, due to operational difficulty faced by our distribution partner, which has further affected our sales performance in this period. In response to those challenges we have encountered, we have implemented two strategic adjustments, expanding the product portfolio to expand our addressable market and operational adjustment to resolve the temporary disruption. We introduced key electric motorcycle and off-road motorcycle products to the European and North American market to expand our addressable market beyond the electric moped. For the Southeast Asia market, we have officially introduced the battery swapping solutions with compatible swap batteries and mopeds. Operationally, we're also working with our distribution partner and retail partners closely to revamp the retail operations in the key markets. The overseas micro-mobility market has seen a year-to-year decrease of 37% in sales. This downturn is primarily attributed to the selling order delays in Q3. Despite the decline in the selling volume, we recorded the highest number of kick scooter activations in this quarter. The number of activations in Q3 show a significant year-on-year increase of 80%. This increase in product activation can be largely attributed to our comprehensive product portfolio and expansion of our sales network, both online and offline in the key market channels. In addition, during Q3, we launched an innovative KQi Air kick scooter for pre-sales. which has been well received in the market. We're continuously working on expanding our sales channel penetration, aiming to reach a broader customer base and reinforce our market presence. We expect to get back to the growth track in the coming quarters in time for the holiday season. Now let me delve into the China market in detail. In this quarter, we continue to build our product portfolio with a diverse design style and functionality to address wider customer needs. We introduced Q2 2023, the MQL, emerged as a successful addition of our product lineup. It is a product that inherits the design from our old-time classic M series, along with a significant upgrade in design performance. It has not only contributed positively to our sales volume, but also plays a significant role in enhancing our brand image. In Q3, we'll also successfully introduce the Falcon series as a new style with the launch of F400T and F200, complementing the previous introduced F100 in Q2. Collectively, the entire Falcon series accounted for more than 50% of our total sales in this quarter in Q3. The Falcon series represent our attempt to create another flagship design. With its proven popularity, we plan to roll out more product within the newly introduced series in the coming quarters. The F-400T was introduced in August this year as a remarkable addition to our Falcon series product lineup. This electric bicycle draws inspiration from fighter jets and seamlessly incorporated new essential smart functionalities with a maximum range of 90 kilometers. The F-400 design has captured significant attention since its launch. Notably, it took center stage at the China Joy, the country's largest gaming expo, garnered millions of views across all platforms. Another product added to this series, Skin Q3, was F200. It is released as a high-powered commuter scooter with a sports car-inspired frame. It has a max range up to 70 kilometers and is equipped with a new smart system. The F200 was also launched with a collaboration with a globally renowned IP, Cookeman. Our sales performance during the recent W11 shopping festival underscored the popularity of those recently launched products. In the first 24 hours of promotion period alone, the pre-order sales revenue surpassed the sum of the entire period last year, showcasing the robust demand for offerings. Several of our key products have secured prominent positions on the best-selling list of major platforms, including Tmall and JD.com. Specifically, the latest iteration of our acclaimed SQI electric bicycles has gained significant traction during the Double Eleven Shopping Festival, emerging as the number one top-selling straddle electric bicycles. in the RMB 9,000 price range above on Tmall and JD.com. Together, our UQI Plus, F200, and also SQI has claimed top spots ranking within the top three best-selling product in the electric bicycle categories on Tmall. This highlights a strong customer preference across our diverse product range. We remain highly engaged in events and cross-brand collaborations to enhance our brand exposures. In September, we established presence on the G-Fusion Game Fest 2023, where we brought our F400 to the gaming enthusiast. We recently forged an official partnership with JD Gaming, one of China's top esports teams, and a finalist in the League of Legends World 2023. Those engagements underscore our commitment to establish a strong brand presence and forge connections with diverse audiences, even in the face of temporary market challenges. We're confident that those initiatives will contribute significantly to our brand exposures and long-term growth prospects. Now turning into international electric moped market, we face the challenge in this quarter with the year-over-year decline in the electric moped sales accounts for 62%. Several factors created this downturn, including the decline of the electric moped market in the key European countries like Germany and Netherlands. and temporary operation disruption due to issues encountered by our distribution partner in Europe. While we acknowledge those challenges, we are actively engaged in addressing them to regain attractions in this market. First, we expanded our product portfolio beyond electric mopeds, widening our addressable markets. We have unveiled several key products ready for Q4 2023 and 2024 at ECMA in November. One key product that we reviewed was XQi3 electric dirt bike, It is designed with a futuristic look with a handful of choice aluminum frame colors integrated with new signature halo light. We have reviewed the XQi3 product during the ECMA in Milan, Italy in November, and also brought it to the Electrify Expo launch event in Austin, United States. The XQi3 mark of expansion into the dirt bike categories, and the new XQi3 has attracted tremendous amount of attention within the only week since its debut. The XQI has won the 2023 Gold Winner of the New York Product Design Awards. We anticipate making the XQI3 model available to the North American and European market in Q1 2024. And we're confident that it will bring up the sales and therefore uplift the news brand recognition. Another product we launched for Europe is the RQI News High Performance Urban Quad Electric Motorcycles. It is designed to deliver accelerating city ride with features like dual removable batteries and ABS, With a top speed of 110 km per hour and 0 to 50 km per hour acceleration time just under the 2.9 seconds, the RQi is targeted riders for exciting acceleration experience. The motorcycle is equipped with the integrated traction control system, built-in front and rear cameras, and an impact detection system, making it sophisticated and it's also a safe riding option. It also comes with the newest Core Smart features. The RQI is expected to be available from Q1 2024 in Europe. During ECOMO, we also brought the award-winning XQI to the international market. It features a futuristic design that earns the 2023 Red Dot Best of Best Design Award. The bike features a die-cast unibody frame with zero-soldering joint, ensuring seamless integration of form and functions. It offers easy handling, making it ideal for city commute. Now, in addition to those electric motorcycle products, we officially launched a new battery swapping solution compatible with the newly launched S600E moped. The swapping technology enables riders to swap batteries quickly, reducing downtime and increasing convenience. During ECMA, we have presented new swap cabinets that technical solutions provide, collaborating with partners in Europe, Southeast Asia, and South America to deploy the battery swapping cabinets aiming to enter the respective local markets. The recent ECMA events presented us an opportunity not only to unveil our latest product, but also engage in meaningful conversations with our key distribution and retail partners. We're actively working with our distribution partner to quickly resolve temporary operation disruptions and get back on the growth trajectory. Now talking about the overseas micro-mobility market, the micro-mobility market has reported a 37% year-to-year decrease in sales in Q3, As mentioned earlier, the primary contributing factor is due to a selling order delay in Q3, while the sell-off or activation volume has increased by 80% year-over-year, driven by a diverse product portfolio and an expanding sales network. During this quarter, we took a significant step in expanding our product portfolio by unveiling one of our standout kick scooter products, the KQi Air and AirX series, at an IFA event in Berlin, Germany. One of the standout features of a KQi-Air is the construction, with the main body predominantly crafted from lightweight carbon fiber, resulting in an incredible low weight of 11.7 kilos. The weight reduction does not compromise performance. The KQi-Air delivers impressive capabilities, including top speed of 32 kilometers per hour and a maximum range of 50 kilometers. It also incorporates dual action brake caliber to ensure a short braking distance for added safety. Moreover, the KQi-Air embraces smart connectivity and enabling functions like NFC and Bluetooth unlocking, customizable charging capacity settings, speed adjustment, and also the regenerative braking strength. Notably, the KQi-Air was awarded the Best of IFA 2023 by Gadgetmatch, a highly regarded tech channel. The KQi-Air has an MSRP of $1,400 for the standard version and $1,799 for the KQi-Air as full carbon fiber version. We launched the pre-sale campaign on September, and we expect to deliver the KQL Air to our customer in December this year, in time for the holiday season. The launch of KQL Air marks our consistent effort in product innovation, and we have more KickScooter products in the rollout pipeline from the next quarter to further complete our product offerings. Meanwhile, we're also leveraging the traction that we gather from our KickScooter product to expand our sales network coverage. Currently, we have our new products sold in over 1,500 offline stores in the United States and Europe in major retailers like Best Buy and Media Markt. Together with the product portfolio enhancement, the sales network expansion has laid a solid foundation for ramping up sales in the next few months throughout the holiday season. Now, as we look forward, we remain a cautious outlook for Q4 this year as some of the operational adjustment in both the China and also the overseas electric market will take time to be fully implemented to drive the midterm growth. We're nonetheless confident to regain growth in 2024 after a temporary adjustment period this year. In the China market, the fourth quarter traditionally experienced a low market demand. We're using this time to continue to enhance our product portfolio and build momentum for store expansion. In terms of product portfolios, the swapping series is a testimony of a successful product portfolio expansion. We also focus on expanding our retail stores this quarter. With those, we believe we are well positioned to get back on the high-growth track in 2024. Now, for the international electric two-wheeler market, the additional new products, the off-road and also the motorcycle product, and also the swapping solutions are well positioned for growth in the key European, United States, and the Southeast Asian market next year. We're also actively implementing operational adjustments to better deliver those products to our key markets through the key channels. But we expect those adjustments will take time, and hence we remain cautious outlook for the Q4 2023. Last but not least, for our international micro mobility markets, we're pleased to report a sustained and robust growth trajectory. This growth is fueled by two key pillars. The completion of our product portfolio and expansion of sales network. Our product lineup has not only boosted sales volume, but also significantly elevated the presence of new brands within this market segment. The recent addition of the KQI Air represents just one of the many exciting products yet to come. The expanding product portfolio has driven the development of our sales channels with remarkable growth observed in our expanded retail network. We're confident in our ability for sustaining high growth in Q4 and beyond. Now I'll turn the call over to our CFO, Fiat.

Thank you, Yan. And hello, everyone. Please note that our press 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. As I review our financial results, I'm referring the third quarter figures unless I say otherwise. And all monetary figures are in RMB if not specified. As Yan just mentioned, during the third quarter we sold a total of 266,000 units and 230,000 were sold in China while the rest was sold overseas. And the total revenue for the third quarter amounted to $927 million, a decrease of $226 million compared to the same period of last year. And China market revenue was $785 million, accounting for 85% of the total revenue. Of this, the China scooter revenues were $711 million, a year-over-year decrease of 17%. And this decrease was mainly due to the lower sales volume of our premium series and partially offset by the higher sales volume and revenue from our mass premium series. And the China scooter ASP was RMB 3085, a year-over-year decrease of 5.5%. And this decline in ASP was mainly due to the product mix change, which I just mentioned. And the overseas market revenue were $142 million, accounted for 15% of the total revenue. And the overseas scooter revenue, including the e-motorcycles, mopeds, kick scooters, and e-bikes amounted to $122 million compared to $195 million in the same period of last year. And this decrease was mainly due to the decline in the sales of e-motorcycle and mopeds. The micro-mobility revenue were around $109 million, up 20% quarter over quarter. And the overseas scooter ESP increased from RMB 3,386 to RMB 3,430 year-over-year, and mainly due to our premium model K3 Max sales volume increase from 3.2 thousand units to 7.1 thousand units year-over-year. And the revenue from accessories, spare parts, and services amounted to $94 million. a 5% decrease compared to the same period of last year. And this decline was mainly driven by the lower sales of battery packs overseas, as we mentioned in the previous quarters. And the gross margin decreased by 0.7 ppt year-over-year to 21.4%. And of this, 0.6 ppt of this decline was driven by the lower sales volume from the overseas e-motorcycle and e-mopads. and the remaining 0.1 PPT due to the change to the product mix domestically. And our third quarter OPEX amounted to $289 million, an increase of $25 million compared to the same period of last year. And this increase was mainly due to a $88 million increase in provisions for credit losses in this quarter. Including the impact of the credit losses in each period, the OPEX decreased 25% year-over-year, as percentage of revenue also decreased by 1.4 ppt, from 22.3% last year to 21% this year. For the details, I will explain in a moment. Selling and marketing expenses were $123 million, as percentage of revenue was 13.2%. It is a year-over-year decrease of $48 million and 1.6 PVT lower than last year, primarily due to a reduction in advertising and promotion activities. R&D expenses amounted to $39 million, representing an $11 million decrease year-over-year, primarily due to a decrease in share risk compensation, and staff costs, and also the design and system development professional fees. G&A expenses were $127 million, representing a $83 million increase year over year. And this is due to the increase in provision for credit losses of $88 million. Excluding these credit losses, the G&A expenses decreased by 13% compared to the same period of last year. Since our international operation has expanded, we have seen a corresponding increase in the extent of our account receivables, which forms the basis of computing the bad debt provisions. As we mentioned in the previous quarters, the European consumer sentiment remains cautious, leading our distributors to ask for extended payment terms due to the weak retail sales. In the meantime, one of our key motorcycle and moped distributors in the European market announced on September 6 this year that it's going into a court-supervised construction process due to the intense economic pressures. Consequently, this quarter, we took a provision of RMB $54 million, representing a full amount of receivables owned by this distributor. And despite the prudent raising provisions for credit losses on the overdue payments, we retain a positive outlook on the future receivable collections, given our other partners' robust financial standing and their continuous ongoing payments. To conclude, excluding the prudent provision for credit losses, our cost controls have driven an overall decrease in expenses and made us more efficient, leaner, and flexible to navigate today's volatile and weak macro economy and emerge stronger when conditions eventually improve. In the third quarter, our net loss was nearly $80 million under the gap measurement compared to a net profit of $3 million for the same period of last year. And turning to our balance sheet and cash flow, we ended a quarter with nearly $1.4 billion in cash, restricted cash, term deposits, and short-term investments. The operating cash flow was $229 million compared to $450 million in the same period of last year and $270 million last quarter. And our capex for the third quarter amounted to $26 million and has remained stable for the past five quarters. And now let's turn to guidance. We expect the fourth quarter revenue to be in the range of RMB 490 million to 612 million, representing a year-over-year decrease from 20% to a flat. And please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectation, which is subject to change due to the uncertainty relating to various factors. And with that, we'll now open the call for any questions that you may have for us, operator. Please go ahead.

Thank you. Thank you. We will now begin the question and answer session. To ask a question, please press star 11 and wait for a name to be announced. If you'd like to cancel your request, please press star 11 again. There'll be a short silence while questions are being collected. As a reminder, if you'd like to ask question, please press star 11. There are no questions at this time. I would like to hand the call back to management for closing remarks.

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. Thank you.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.