Niu Technologies

Good day, ladies and gentlemen. Thank you for standing by. Welcome to New Technologies' fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Ms. Crystal Lee, 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 results for the fourth quarter 2023. The earnings press release, corporate presentation, and financial spreadsheets has been posted on our investor relations website. This call is being webcast from our company's IR site as well. and the replays 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 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 feelings with the Securities and 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 included discussion of certain non-GAAP financial measures. The press release contained 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 CFO, Ms. Fiyang Zhou. Now, let me turn the call over to CEO Yan.

Thanks, Crystal, and hello, everyone. In the fourth quarter of 2023, our total sales volume was 137,000 units. Maintaining the same level one year ago with slight year-over-year drop of 0.6%. Specifically, sales volume in the China market dropped by 6.4% to 110,000 units, while sales in the overseas market had a significant increase of 33% to 27,000 units. Total revenue in Q4 was RMB 478.7 million, a decrease of 21%. Those results wrapped up the financial year of 2023. In 2023, the total sales volume was 710,900 units. Total revenue for the entire year was RMB 2.7 billion. Now, the year of 2023 presented significant challenges for new operations. The lingering effect of lithium battery price hike in 2022 continued to impact our sales in the first half of 2023. While the price of lithium battery returned to the normal levels in the second half of the year, Our business faced additional setbacks due to consumption upgrades or downgrades in the top tier cities in China. This trend, characterized by cautious spending behaviors among the premium market customers, resulted in a slowdown in sales. In the international electric two-wheeler market, we encountered challenges both externally and internally. The decline of electric moped market in the key European countries, such as Germany and the Netherlands, coupled with temporary operation disruptions due to issues faced by our distribution partners in Europe, further hindered our growth in 2023. Despite the high winds, our 2023 presented itself a year with opportunities to reflect and refocus our strategy. In the China market, our product strategy remains focused on the premium market segment, enhancing our product line by growing our classic series and also by successfully introduce a more sporty style Falcon series. One notable product released in 2023 is the MQL, the legacy return product updates our iconic M series with significant design performance improvements. In just seven months of launch, the MQL sales volume in 2023 represents 16% of China's total sales. The F-Vulcan series is also another popular series that we introduced in 2023 that quickly became a well-known style besides the classic Halo Lite series with the recent launch F400T, F200, F100 products. The new F series together represents nearly 35% of total China sales. So our dedication to craft a premium product is complemented by our unwavering commitment to build a premium brand. Throughout 2023, we remain deeply engaged in branding and marketing activities, leveraging various user events and cross-brand collaboration to strengthen our presence in China market. We actively participated in exhibitions and roadshows, collaborating with leading lifestyle brands such as the North Face Mountain Festival, SneakerCon, G-Fusion Game Fest, and the Designer Toy Expo. These events provided us with valuable opportunities to showcase our products and elevate our brand presence. Simultaneously, we maintained a robust online presence through a strategic communication and a marketing campaign, predominantly on short video platforms like Xiaohongshu and Douyin. Collaborating with over 600 KOLs and KOCs, our content generated over 250 million views, further solidifying our brand's digital footprint. Furthermore, 2023 saw us embark on an impactful cross-brand collaboration, such as our partnership with globally recognized IP Kumamon, resulting in the launch of new Cross Kumamon G100 scooters. Additionally, in Q4 2023, we established a significant official partnership with JD Gaming, a leading esports team in China and a finalist in the League of Legends World 2023. Moving forward, we'll continue to leverage our strategic collaboration and high-profile events to amplify our brand visibility and reinforce our position in the market. Now turning into the overseas market. In 2023, we encounter a mix of challenges and opportunities. Our electric two-wheeler sales experienced a significant decline of 70%. primarily contribute to the operation disruption faced by one of our key distributors. However, our micro mobility segment saw a modest increase of half a percent year-on-year. Despite the decline in the electric two-wheeler sector, we have initiated efforts to make operational adjustments to improve our performance since the second half of 2023. We continue to introduce new products in 2023 in the electric two-wheeler market. In the fourth quarter, we introduced the RQi, a high-performance urban quad electric motorcycle, to the European market. Its cutting-edge design, swift acceleration, and integrated smart features such as keyless lock and lock, GPS navigation, and OTA updates have been met with enthusiasm from the market. Alongside the RQi, we launched the XQi electric dirt bike. available in two variants, the XQI3 Street for urban riders and XQI3 Wild for off-road adventurers. The XQI quickly garnered acclaim, winning the 2023 Gold Winner of the New York Product Design Awards. Furthermore, 2023 marked the official launch of a new battery swapping solution compatible with our newly introduced F600E moped. This initiative aims to collaborate with partners across Southeast Asia, South America, and Europe to revolutionize the way riders engage with our product by offering quick, efficient battery swaps, thereby opening doors in the markets that we have previously yet to penetrate. We officially kick off the solution in Q4 2023 and expect to have battery swapping cabinets available by working closely with three to five operational partners by the end of the year 2024. In the micro mobility sector, we deliver sales volume slightly higher than the previous year with the increase of half percent. However, the total activation number in 2023 grew by 2x compared to 2022. In product strategy, we focused on rounding our product portfolio to cater a broader spectrum needs. We launched our premium KQi Air and KQi AirX models, constructed predominantly from lightweight carbon fiber for incredible low weight of under 12 kilograms. satisfies our range in micro-mobility categories. With the KQi-Air series, we now brought a comprehensive line-up that spans from high-end innovative design scooters in US$1,000 plus range to a high-performance scooter in the $800 to $900 range to accessible entry-level options in the $300 to $400 bracket. This diverse range lays a strong foundation for anticipated sales growth in 2024. The expanded sales channel of our micro mobility product also played a bigger role in the growth. In 2023, we transitioned from focusing on online sales throughout Amazon and Shopify to a combination of online and offline sales by working with official retail partners like Best Buy, Media Mart, Boulangerie, and more. Through those retail partners, we were able to place our products in more than 1,000 physical locations in the United States and Europe. Our active participation in global expos and roadshows, including the AIM Expo in Las Vegas, IFA in Berlin, and ECMA in Milan, and the Electric Expo in various countries, have significantly elevated news spread visibility. Moreover, our inclusion in popular media, such as the appearance in the movie Murder Mystery 2 and TV shows like Drew Barrymore Show and The Price is Right has pleasantly surpassed our expectations, further enhancing our brand's presence on the global stage. Now, as we move into 2024, our optimism for growth is brought by strategy adjustment laid out in 2023 across our operations. In China, our commitment remains strong towards the premium market segment, focusing on premium product development, targeting very specific consumer segments, channel expansion into Tier 2 and Tier 3 cities, and same-store sales growth via online and offline traffic optimization. In terms of product, back in 2022, we introduced our new classic UQi Plus model, an upgraded U series featuring improved light design, smart control, enhanced radar ergonomics. This model quickly captures market attention and contributes to near 14% of total sales in 2022. Similarly, the MQiL introduced in Q2 2023 as the enhancement of old-time popular M series presented itself as a classic return with a performance improvement. The MQL contributed to 16% of total 2023 China sales. Both models served a clear testimonial to the consumer's preference for a classic design combined with upgrade technology, both in powertrain and smart functionalities. Those design styles are deeply ingrained in the minds of Chinese consumers as premium high quality. The successful launch of the UQI-Plus in the U-Series and MQIL in the M-Series set a foundation for our new product. Now on February 29, 2024, we debuted our newly designed NX-Series, continuing the design style of our first legendary product, the N1, which laid the foundation for our company back in 2015. The N1 was our first electric moped in China and has sold over half a million units since its launch. It has not only become the legendary design for new, but also a classic example of a premium high-quality smart electric scooter in China. However, since 2019 with the introduction of new regulations on China electric bicycles, the N1 no longer met the updated standard and has to be sold as a motorcycle, leading to a decline in sales. Nonetheless, consumers have long been requesting an upgraded N1 that complies with both the regulations for electric bicycles and motorcycles. Now in 2024, we finally debuted the NX series, with the NX representing electric motorcycles and the NXT as the electric bicycle. Both models inherited the design style of the original N1, but refined and upgraded the modern look. The design stands out with a futuristic style incorporating magnetic transparent panels to showcase its front circuitry. The body is designed with sharp yet smooth aerodynamic lines. Additionally, we have upgraded halo light, a signature element shared across our most well-known scooters. In the NF series, the halo light is embedded in the front panel, adding another futuristic touch to the design. The NX and NXT are equipped with our most cutting-edge technology functions to date, making them the smartest electric scooters on the market. For driving safety, they are equipped with the full-function ABS and TCS. Additionally, they feature the BSC, the blind spot detection, and RCW, the rear cross-traffic warning, along with the automobile-grade dash cams in the front and the millimeter wave radar in the back. To further enhance the riding experience, they are outfitted with the interactive PFT display serving as a smart cockpit. This incorporates riding aid features such as keyless start, navigation, remote access, as well as interactive features including lap timing, riding routes, locks, and entertainment systems. Also, to seamlessly integrate with the user's smart device ecosystem, the update also incorporates new smart features like Map for Navigation that are compatible with Apple and the Huawei Harmony system. The integration of mobile features such as voice control, shortcut phone display, and device management, including Apple's Spun My features. Now as one of the highest performance electric motorcycle we ever released, the NX boosted maximum power 20,000 watts with top speed 135 km per hour and accelerates from 0 to 50 km per hour in just 2.45 seconds. The NX-T is available immediately since its launch with pricing from RMB 6,000 to 12,500 while the NX is available in May. The NXT were well received as evidenced by online pre-orders of NXT initially through live streaming of major platforms. With the initial two weeks launch, we secure more than 10,000 units in pre-orders, generating sales revenue exceeding 100 million RMB. This amount is 40% more than compared to our initial crowdfunding campaign for the release of first and one. Those pre-order results positioned us as top seller across all major e-commerce platforms during the period. Now with the successful launch of NX-NXT series targeting the premium motorcycle consumer segments and performance driven electric bicycle segments, we also plan to introduce several products to target diversified user group. For example, our recently upgraded U1 product launched just a few days ago, targeting female users with this new color scheme, ergonomic improvement in handle and seat positions, easy to use smart functionalities, and options to include baby seat and accessories. The key to our product strategy in 2024 is to build our product portfolio targeting the premium consumer segment with diversified needs. Now, supported with those new products, we also plan to restart channel expansion in Q2 2024, building up the channel coverage across Tier 1 to Tier 4 cities. We'll initially focus on the top 45 cities, which represent 80% of our sales. We plan to build sales in the lower tier cities as well. Now, with additional store counts, the key focus for 2024 remains the improvement of same-store sales. leveraging the combination of online and offline traffic. We initiated those efforts in the second half of 2023, conducting over 15,000 live stream sessions on Douyin and Xiaohongshu. We have recorded some successful cases of achieving a GMB of over 100,000 RMB in just one live stream session, indicating a successful online to offline conversion model we plan to further scale up. Starting Q1 2024, we have continued live stream initiatives in 30 key city markets, enabling those stores to sell directly through online live streaming on a daily basis. Additionally, we have planned to launch online sales campaigns and co-create over 10,000 widespread social media content. With those strategies in place, we anticipate improving our same-store sales by 10% to 20% in 2024, driving significant volume growth for the company and enhanced store profitability. Now with our product strategy and retail channel expansion in focus, we aim to further strengthen our brand through marketing and branding campaigns. A recent highlight was our collaborations with JD Gaming Team. Expanding our partnership form last year, we joined forces with JD Gaming Team as their official electric scooter partner. This collaboration extends from social media engagement to product launches and seeks to make a significant impact within the Generation Z demographics. The collaboration with JD Gaming marks the beginning of a serious partnership plan for 2024. We intend to continue our co-branding effort with several strong IPs targeting specific user groups and leveraging social media platforms. Now, in the overseas market, our comprehensive product portfolio, which includes the introduction of MGT-100, RQI, and XQI models in the fourth quarter of 2023, strategically bridge the gap between our product offering the high-performance electric motorcycle market demand. The MGT 100 priced at the Euro 5,000 together with NGT provides a comprehensive coverage from 50cc to 125cc electric moped. The RQI targets the electric motorcycle category offering a high-performance quad-motorcycle option with price starting at 8,000 euros. Additionally, the new dirt bike XQI marks our debut product in the off-road motorcycle sector. Priced at €6,000, the XQI model has garnered significant attention. Our active engagement industry events, such as AM Expo in Las Vegas, Moderator in Dortmund, Germany, has further amplified our brand visibility. At those expos, we brought our latest bikes, providing attendees including influential KOCs with the opportunity to test drive and review our product. The positive feedback and heightened interest from the diverse user group received at those events has been instrumental in solidifying our presence in the market. Most importantly, since the latter half of 2023, we have undertaken substantial adjustment in our business operations in the overseas electric two-wheeler sector. In some of our key markets, in addition to the existing distributors, We are established entities and the operation team for direct distribution of some of our products to retailers. We believe this direct distribution model will enable us to invest more in local branding and marketing, establish strong ties with customers, and make us more adaptable to local market changes. With those operation adjustments, they initially delay the revenue recognition until products actually reach to individual retailer dealers. They will help us create a strong foundation in each local market in the long run. With the comprehensive product portfolio and operational adjustment complete in Q1 2024, we are confident in kick-starting the growth beginning in the second quarter of this year. Now, in the overseas micro-mobility sector, we have established a solid foundation for growth in 2024 over the past two years. Although the book sales volume has remained relatively flat compared to 2023 to 2022, The actual seller volume to customers has doubled as suggested by the activation number increase, and the trend continues at a 2x rate. We believe that our effort in product portfolio building and the sales channel establishment has positioned us well for the further growth this year. On the product portfolio front, with the introduction of the KQi Air, a full carbon fiber lightweight high-performance kick scooter in September 2023, we now boost the comprehensive product lineup Additionally, January 2024 marked the launch of KQi 300 series, an enhancement of popular KQi 3 series designed for old-time use. This KQi 300 series features a dual-tube hydraulic suspension for better handling on an even surface, promising up to a 60-kilometer range per charge and starting at $700. We have several other product upgrade plans throughout the year of 2024. Now, with those products lined up, we made significant progress in entering retail channels in the second half of 2023, laying a solid foundation for growth in 2024. In the U.S. market, we are well positioned in over 800 Best Buy stores and advanced in our efforts entering retailers such as Walmart, Target, and Costco. In Europe, our products are displayed in over 400 Media Mart stores in Germany, over 200 Blanchet stores in France, and we are making progress in placing them nearly 100 core English stores in Spain. Additionally, we are moving forward with new retail partnership with Media World in Italy and retailers in Australia and others. By the end of 2024, we plan to double the number of point of sales of micro mobility products by expanding the retail sales network. So heading into 2024, we're optimistic about regaining growth. In the China market, the excitement surrounding our latest product release has been palpable. Leveraging the momentum gained from the newly released product, we have also a rollout schedule prepared for all the other products throughout the year, as well as the channel expansions. In the overseas motorcycle market, with the ready-to-shift product and the operational adjustment already in place in Q1, we're confident in the growth of 2024. However, those operational adjustments may temporarily result in declining sales in Q1, as the sales are actually booked differently due to the model change. For the micro mobility segment, we anticipate fast growth in Q1 as well as throughout the entire year, given that we have laid out a product portfolio and established both online and offline channels at the beginning of this year. Now, with those factors considered, we anticipate the sales volume in 2024 reaching 1 to 1.2 million units. Now I'll turn to Fiyang to discuss.

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 to the first quarter figures, unless I say otherwise. and all monetary figures are in RMB if not specified. As Yan mentioned, our total sales volume for the fourth quarter was 137,000 units, a decrease of 0.6% compared to the same period of last year. And specifically speaking, the China market sales volume was 110,000 units and overseas market was 27,000 units. And for the full year 2023, The total sales volume was 710,000 units, including 601,000 units in China and 109,000 units overseas. And the total revenue in the fourth quarter was RMB 479 million, down 22% compared to the same period of last year. To break down the scooter revenues by ranging, Revenue in China were at least $355 million, down 21%. This decline primarily contributed to a shift in product mix. As the Chinese economy was still in recovery, our premium series showed a slower recovery rate compared to the mass premium series. As a result, the ASP reached to RMB 32.16. a 15% lower on a year-over-year basis. However, the ASP in each category has increased. The premium ASP remained almost $5,000, and the mass premium ASP increased to nearly $3,000. The overseas scooter revenue, including heat scooters, E-mopeds, and E-motorcycles, was nearly $60 million. the blended scooter ASP decreased to 2,200, down 49% year-over-year. Despite the higher sales volume contribution of peak scooter with the lower ASP, the new launch to K1 and KU is contributing to 22% of the sales volume, which targeted towards the youth and the entry-level market and has lower retail prices. Accessories, spare parts, and services revenue were around $65 million due to the decrease in the overseas spare parts and services as we mentioned in the previous quarters. For the full year 2023, our total revenue decreased by 16% to around $2.7 billion, and China's scooter revenue as a whole saw a 15% year-over-year decline to around $2 billion. And the overseas scooter revenue decreased by 29% to RMB $349 million. The total overseas revenue, including scooters and non-scooters, contributed to 15% of the total revenue. And now let's look at the ASP in 2023. The overall scooter ASP was slightly decreased to $33.23, a 3% down year over year. While the domestic scooter ASP was 33.44, up 1%. And this minor growth was driven by the higher ASPs in both premium and mass premium series, despite a shift in the mass premium in overall product . And overseas blended scooter ASP was 3,200, 21% down as the proportion of kick scooters increased. and also combined with the decrease in the newly launched lower ASP kick scooters in Q4. The gross margin for the fourth quarter was 19%, 3.4 ppt lower than the same period of last year, and mainly due to the product mix change in the domestic market. While for the year end 2023, the gross margin was 21.5%, up from 21.1%. and representing a 0.4 PPT increase on an annual basis, and mainly due to a reduction in raw material costs, especially in domestic new product lines. And talking about operating expenses, the fourth quarter OPEX was $246 million, $50 million higher than the same period of last year, and mainly due to a lower revenue base. Selling and marketing expenses were $191 million, $84 million higher than the last year, and primarily resulting from our expansion into the overseas market, out of which $43 million was from the overseas micro-mobility holiday season promotion, and the other half stems from the rental expenses largely driven by the inventory buildup resulting from geopolitical conflicts and early stock taking for the expected peak season in 2024. Additionally, the current warehouses are incurring higher unit per area costs since the micro-mobility sector is still in the early operating stage and those expenses are expected to decrease in the subsequent quarters. R&D expenses were $36 million $5 million lower than the fourth quarter of 2022, and mainly due to the decrease in staff costs and share-based compensation of RMB $8 million, and partially offset by the increase in design and testing expenses on new model which have been and will be launched in 2024 of RMB $3 million. G&A expenses for RMB $19 million, $28 million lower on an annual basis mainly caused by the decrease in provision for credit office of RMB 22 million and the decrease in staff related costs of RMB 5 million. For the full year 2023, the OPEX was RMB 891 million, 15% higher than 2022, and the increase was mainly due to the provision for credit offices of RMB $114 million and the increased promotional activities and rental expenses in overseas markets of RMB $101 million, partially offset by a $45 million decrease in G&A and also $40 million decrease in domestic marketing and promotions. Despite prudently raising provisions for credit offices on overdue payments, We retain a positive outlook on future receivables collection, given our current partners' robust financial standing and their ongoing payments continuously. Exclude the non-cash expenses, such as the provisions for credit losses, depreciation and amortization, and share risk compensation. The OPEC increased 2% year over year. The non-GAAP OPEX was RMB 845 million. In the fourth quarter, we had a net loss of RMB 130 million and the non-GAAP net loss of RMB 122 million. On a full year basis, due to the factors including the lower than expected domestic sales and increasing overseas business expansion as mentioned above, We had a net loss of $272 million and non-GAAP net loss of $224 million. Turning to our balance sheet and cash flow, we ended the year with our $1,078 million in cash, restricted cash, term deposits, and short-term investments. On an annual basis, the operating cash flow was inflow $96 million. primarily because we made a net income after adjusting for non-cash items. And our Q4 CapEx was $22 million. For the full year, the CapEx was $79 million, $56 million lower than the last year, as we cautiously opened up stores in domestic markets. And now let's turn to guidance. We expect the first quarter revenue to be in the range of RMB $438 million, to $480 million, an increase of 5% to 15% year over year. And please be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectations, which is subjected to change due to uncertainties relating to various factors. And with that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Thank you. We will now begin the question and answer session. To ask the questions on the phone, please press star 11 and wait for your name to be announced.

One moment for the first question. Our first question comes from the live to Jun Li from Citix.

Please ask your question.

Good evening. I'm Zijun Li from CITIC. Thank you for your time. And I'd like to be more interested in the following questions. The first two are more about us, and the last two are more about our industry. The first one is this year's door expansion plan and strategies. It means would we like to restore the original channel or more to supplement the new thinking channel? And the second question is about how to evaluate Ninebot's aggressive sales target this year and whether it would squeeze our sales target. And the above two is about us. And I wonder if you'd like to solve this too, and then I'm going to the sector.

So I'll talk about first on the store openings. I think you actually mix up. Basically, I think we're still going to be focused on the top 45 cities at first, and with the option to expand into other cities as well. So notably in the past, if you look at, last couple of years, because the lithium price hike, we have lost roughly about 500 stores. So I think the expansion for including the store we have lost and reclaiming back, as well as opening new areas. So I think we have a clear location map on where to open stores and based on our new product portfolios. Now I think with the second question about competitors, I think overall if you look at our product offerings, so our current product offering is basically a price range anywhere between basically $3,500 RMB above. to up to 12,000 RMB. So you look at the entire market, the volume above 3,500 RMB, that volume is basically somewhere around 14 to 16 million units. So within that, let's call that our addressable market, 14 to 16 million units. And with that number, last year we only did, what, 600,000. So even with this year's forecast, I think the addressable market is still very significantly large than our volume target. So in the sense that I think we're less worried about the competitors, but I think we're more focused internally on how to getting the best product out there and how to expand the channels, expand the stores, so the consumers you know, some interesting consumers that actually have a location to acquire the product. I think that's sort of, hopefully that addresses your second question.

Go ahead. Quite clear. And I really hope that this year could be, we could see a robust in our market. And the next few questions about the sector. First one is the Nanjing fire has attracted the attention of the society to the batteries of the two wheelers. What is our view of the impact to this sector? And the second is our users are more concentrated in high-tier cities. as you just mentioned. And also our users' time of using our products is relatively long and has accumulated for a long time. So I'm very curious about whether we have ever done some analysis of our users' behavior on whether we can detect change in their consumption habits from this accumulated data, such as changes in the cycle of changing cars or batteries. Thank you. This is my two questions about sector.

Sure. I think, first of all, I'll address the issue with the fire accident. I think it's unfortunate. So I think what it really costs off for high-quality product. And I think that's so, you know, or, you know, in the case, what we observe in the market is many people who buy products either low quality or they buy product, then they buy the original scooters, but then they complement with a modified third-party lithium batteries. And usually those third-party lithium batteries are second-hand lithium batteries. It's poorly manufactured with low quality. I'm not sure with actually the cost of Nanjing Fire, Our experience back then, throughout the time, actually the modified lithium batteries, not original manufactured ones, are one of the main causes. So I think from our perspective, we have actually taken many preventive measures. For example, our scooters only work with our batteries, not working with the third-party second-hand batteries. And I think with this, I think it's basically a, it basically, you know, raise the bell saying, you know, it's, you know, it's, it's basically, I think it's basically people quite for, for, I think it is a high quality product with original parts are, are necessary, um, and to guarantee safety. Right. So I think that's actually pretty, you know, set advantage for us. Now, I think in terms of your second question about user behaviors, I think typically we observe that people tend to keep these scooters, I guess, for roughly about three to four years. I think three years is roughly sort of the usage cycle. I think for us, we're a bit too concentrated in the top tier cities. I think this year is actually what we're looking at is actually beyond, besides, you know, getting market share in the top tier cities, is actually expand our footprint and getting more store coverage as well as market shares in the tier two and tier three cities, you know, with basically with products that are suitable for those markets.

got it quite clear.

And thank you again for your time. And I sincerely hope that we could achieve the goals of this year and the new returns. Thank you.

Yeah, thanks.

Thank you for the questions. The next question comes from the line of Yating Chen from CICC. Please ask your question.

Hi, thank you for receiving my questions. My first question is about our sales volume target. As we can see, the target growth for 2024 is more optimistic than last year. And so I'd like to know, what is the target sales volume of kick scooters? And what is the sales target for two wheelers? especially for domestic and overseas market? This is my first question. Thank you.

No, I think for the kick scooters we're looking at, because in the past few years, even though the selling volume to our distributors remains roughly constant, but the sell-off, basically the sell-off to the consumer has been doubled. If I compare 2023 to 2022, So that's because the comprehensive product portfolio. Also, over the year, we're actually able to get to all these offline channels. So we expect the sell-out volume this year also double, which sort of implying the sell-in volume to the distributors actually double as well. So on the KinkSchooler, we're looking at somewhere anywhere between 200,000 to 250,000 units. I think that's on the peak schooler market. Then the rest is sort of the electric two-wheeler. Within the electric two-wheeler market volume, I think the majority of them are going to be in the China side, where the international electric two-wheelers and electric motorcycles, probably somewhere around 20,000 to 30,000 units, and the rest of it all China.

Thank you very much. And my second question is about our profit margin. Especially, I'd like to know our product strategy in 2024 to achieve our sales volume target. average selling price or profit margin will decline in 2024?

So I think basically, we look at, I guess this question sort of relates to our first product launch, the MXP in March. So that's actually more the premium or high end product for our case. The retail pricing is between 6,000 to 12,000 RMB. But then you look at another product we just launched. It's called U1E, basically upgrading U1, which a few days ago, that retail pricing is around 4,000 RMB. So if you look across the board, we expect our average ASP to roughly remain constant compared with last year. So I'll let Fionn to comment on the margin part.

Yeah, well, as Fionn just mentioned, even though that we upgraded our classic N-series and we're about to launch the new products in the following months with a better price versus the product, but the ASP will stay at a relatively flat level in the domestic product line. Well, in the overseas product line, since we have a high expectation on the e-motorcycle and moped recovery in the overseas market, those are almost three to four times higher than the kick scooter's ASP. So we will expect a slightly recovery from the overseas scooter's ASP in 2024. Altogether, we'll give us a blended scooter ASP almost at the same level in this year. Go back to the gross margin for the domestic scooters and the overseas scooters. We were expected a slightly gross margin increase to 1 point to 2 point PPP. 1 point to 2 point PPP altogether blended with the domestic and the overseas market. As you know, we have already made the cost efficiency, those operational activities in 2023. And with the scale of the sales volume increase, we may get the benefit from the gross margin. But we didn't expect a higher gross margin increase because we still consider to share the profit with our dealers and also the overseas market expansion with our partners. That's why we consider the gross margin altogether will only increase one to two points PPT for the whole year.

Thank you very much. And my last question is, I'd like to know, do you have any guidance for 2024 on the selling expense ratio? Or to say, will it grow or remain steady comparing with 2023?

Well, 2023 is a very special case since we are in the transition of the overseas expansion

and also the heart in the domestic market. That's why the expenses ratio is pretty high. But I think the benchmark for the expenses as percentage of revenue, we could use the benchmark in the second half of 2021, first half of 2022. We may, you know, we will try to bring back the expenses as percentage of revenue, go back to that level, which means at least we will maintain the expenses within 20% to 24% since it's a slightly large range. We are still in the transition for the overseas and the domestic market balance. But the first half of 2022 and second half of 2021 is a benchmark of the expenses ratio. So this is our target for 2024 expenses ratio.

Thank you very much. That's all my questions.

Thank you for the questions. Once again, to ask questions, please press star 11.

One moment for the next question.

We have a question from Michael Simmons from Global View SA. Please go ahead.

Yeah. Hello, Dr. Lee. Yeah, I'd just like to ask a question about the balance sheet in these sort of slightly tough trading conditions. You and your team have done a good job sort of maintaining a good cash level in the balance sheet. Can you just give us a feel for looking forward to this year, particularly looking As you've explained, you're going to be spending some money on your international expansion and also continuing to launch many new products. Can you just give some feel for what the balance sheet and the cash position is likely to look like going forwards, please?

Well, this is from you.

I think I just can give the trend of our balance sheet instead of the exact figures because we are still at the very beginning of 2024. As Yen just mentioned, except for the operating activities and strategies we introduced, On top of that, we may spend higher on the store opening in domestic markets. I think this is the big non-operating consumption in the domestic strategy. Well, in the overseas markets, we didn't expect any large impact. The only operational activities will happen in 2024 is how we launched our products in our strategic partner stores. So those are purely the operational activities. We reflected in the operational cash flow. So this is the cash flow part and the capex part. In the meantime, we didn't expect a huge increase in the receivables or the payables, since the business model is very straightforward. and we also didn't expect the higher increase in the inventory as well because you know right now we already have enough enough inventory for the big season sales in 2024 and after that we may remain a relatively secure level of the inventory, but will not reach to the higher one than 2023. So I think the business model doesn't change. The only thing is that if we want to expand the stores in domestic markets, it will bring up the capex. While the current production has already reached to 2 million production capacity, and we didn't expect as high as this level of sales volume, so we don't have any further demand on the expansion on our facilities.

Hope this will address your question. Thank you very much.

Thank you for the questions. With that, I would like to turn the call back to management for closing.

All right, thanks everyone for

for the participant in 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.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your line. you

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to New Technologies' fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Ms. Crystal Lee, 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' results for the fourth quarter 2023. The earnings press release, corporate presentation, and financial spreadsheet has been posted on our investor relations website. This call is being webcast from our company's IR site as well. and the replays 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 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 feelings with the Securities and 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 included discussion of certain non-GAAP financial measures. The press release contained 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. Fiyang Zhou. Now, let me turn the call over to CEO Yan.

Thanks, Crystal, and hello, everyone. In the fourth quarter of 2023, our total sales volume was 137,000 units. Maintaining the same level one year ago with slight year-over-year drop of 0.6%. Specifically, sales volume in the China market dropped by 6.4% to 110,000 units, while sales in the overseas market had a significant increase of 33% to 27,000 units. Total revenue in Q4 was RMB 478.7 million, a decrease of 21%. Those results wrapped up the financial year of 2023. In 2023, the total sales volume was 710,000 units. Total revenue for the entire year was RMB 2.7 billion. Now, the year of 2023 presented significant challenges for new operations. The lingering effect of lithium battery price hike in 2022 continued to impact our sales in the first half of 2023. While the price of lithium battery returned to the normal levels in the second half of the year, Our business faced additional setbacks due to consumption upgrades or downgrades in the top tier cities in China. This trend, characterized by cautious spending behaviors among the premium market customers, resulted in a slowdown in sales. Now, in the international electric two-wheeler market, we encounter challenges both externally and internally. The decline of electric moped market in the key European countries, such as Germany and coupled with temporary operation disruptions due to issues faced by our distribution partners in Europe, further hindered our growth in 2023. Despite the high winds, our 2023 presented itself a year with opportunities to reflect and refocus our strategy. In the China market, our product strategy remains focused on the premium market segment, enhancing our product line by growing our classic series and also by successfully introduce a more sporty style Falcon series. One notable product released in 2023 is the MQL, the legacy return product updates our iconic M series with significant design performance improvements. In just seven months of launch, the MQL sales volume in 2023 represents 16% of China's total sales. The F-Vulcan series is also another popular series that we introduced in 2023 that quickly became a well-known style besides the classic Halo Lite series with the recent launch F400T, F200, F100 products. The new F series together represents nearly 35% of total China sales. So our dedication to craft a premium product is complemented by our unwavering commitment to build a premium brand. Throughout 2023, we remain deeply engaged in branding and marketing activities, leveraging various user events and cross-brand collaboration to strengthen our presence in China market. We actively participated in exhibitions and roadshows, collaborating with leading lifestyle brands such as the North Face Mountain Festival, SneakerCon, G-Fusion Game Fest, and the Designer Toy Expo. This event provided us with valuable opportunities to showcase our products and elevate our brand presence. Simultaneously, we maintained a robust online presence through a strategic communication and a marketing campaign, predominantly on short video platforms like Xiaohongshu and Douyin. Collaborating with over 600 KOLs and KOCs, our content generated over 250 million views, further solidifying our brand's digital footprint. Furthermore, 2023 saw us embark on an impactful cross-brand collaboration, such as our partnership with globally recognized IP Kumamon, resulting in the launch of new Cross Kumamon G100 scooters. Additionally, in Q4 2023, we established a significant official partnership with JD Gaming, a leading esports team in China and a finalist in the League of Legends World 2023. Moving forward, we'll continue to leverage our strategic collaboration and high-profile events to amplify our brand visibility and reinforce our position in the market. Now turning into the overseas market. In 2023, we encountered a mix of challenges and opportunities. Our electric two-wheeler sales experienced a significant decline of 70%, primarily attribute to the operation disruption faced by one of our key distributors. However, our micro mobility segments saw a modest increase of half a percent year-on-year. Despite the decline in the electric two-wheeler sector, we have initiated efforts to make operational adjustments to improve our performance since the second half of 2023. We continue to introduce new products in 2023 in the electric two-wheeler market. In the fourth quarter, we introduced the RQi, a high-performance urban quad electric motorcycle, to the European market. Its cutting-edge design, swift acceleration, and integrated smart features, such as keyless lock and lock, GPS navigation, OTA update, have been met with enthusiasm from the market. Alongside the RQi, we launched the XQi electric dirt bike. available in two variants, the XQI3 Street for urban riders and XQI3 Wild for off-road adventurers. The XQI quickly garnered acclaim, winning the 2023 Gold Winner of the New York Product Design Awards. Furthermore, 2023 marked the official launch of our new battery swapping solutions compatible with our newly introduced F600E moped. This initiative aims to collaborate with partners across Southeast Asia, South America, and Europe to revolutionize the way riders engage with our product by offering quick, efficient battery swaps, thereby opening doors in the markets that we have previously yet to penetrate. We officially kick off the solution in Q4 2023 and expect to have battery swapping cabinets available by working closely with three to five operational partners by the end of the year 2024. In the micro mobility sector, we deliver sales volume slightly higher than the previous year with the increase of half percent. However, the total activation number in 2023 grew by 2x compared to 2022. In product strategy, we focused on rounding our product portfolio to cater a broader spectrum needs. We launched our premium KQi Air and the KQi AirX models, constructed predominantly from lightweight carbon fiber for incredible low weight of under 12 kilograms. satisfies our range in micro-mobility categories. With the K2R series, we now brought the comprehensive line-up that spans from high-end innovative design scooters in US dollars thousand-plus range to high-performance scooter in the $800 to $900 range to accessible entry-level options in the $300 to $400 bracket. This diverse range lays a strong foundation for anticipated sales growth in 2024. The expanded sales channel of our micro mobility product also played a big role in the growth. In 2023, we transitioned from focusing on online sales throughout Amazon and Shopify to a combination of online and offline sales by working with official retail partners like Best Buy, Media Mart, Boulangerie, and more. Through those retail partners, we were able to place our products in more than 1,000 physical locations in the United States and Europe. Our active participation in global expos and roadshows, including the A&M Expo in Las Vegas, IFA in Berlin, and ECMA in Milan, and the Electric Expo in various countries, have significantly elevated news brands' visibility. Moreover, our inclusion in popular media, such as the appearance in the movie Murder Mystery 2 and TV shows like Drew Barrymore Show and The Price is Right has pleasantly surpassed our expectations, further enhancing our brand's presence on the global stage. Now, as we move into 2024, our optimism for growth is brought by strategy adjustment laid out in 2023 across our operations. In China, our commitment remains strong towards the premium market segment, focusing on premium product development, targeting very specific consumer segments, channel expansion into Tier 2 and Tier 3 cities, and same-store sales growth via online and offline traffic optimization. In terms of product, back in 2022, we introduced our new classic UQi Plus model, an upgraded U series featuring improved light design, smart control, enhanced radar ergonomics. This model quickly captures market attention and contributes to near 14% of total sales in 2022. Similarly, the MQiL introduced in Q2 2023 as the enhancement of old-time popular M series presented itself as a classic return with a performance improvement. The MQL contributed to 16% of total 2023 China sales. Both models served a clear testimonial to the consumer's preference for a classic design combined with upgrade technology, both in powertrain and smart functionalities. Those design styles are deeply ingrained in the minds of Chinese consumers as premium high quality. The successful launch of the UQI class in the U-series and MQL in the M-series set a foundation for our new product. Now on February 29th, 2024, we debuted our newly designed NX series, continuing the design style of our first legendary product, the N1, which laid the foundation for our company back in 2015. The N1 was our first electric moped in China and has sold over half a million units since its launch. It has not only become the legendary design for new, but also a classic example of a premium high-quality smart electric scooter in China. However, since 2019 with the introduction of new regulations on China electric bicycles, the N1 no longer met the updated standard and has to be sold as a motorcycle, leading to a decline in sales. Nonetheless, consumers have long been requesting an upgraded N1 that complies with both the regulations for electric bicycles and motorcycles. Now in 2024, we finally debuted the NX series, with the NX representing electric motorcycles and the NXT as the electric bicycle. Both models inherit the design style of the original N1, but are refined and upgrade the modern look. The design stands out with a futuristic style incorporating magnetic transparent panels to showcase its front circuitry. The body is designed with sharp yet smooth aerodynamic lines. Additionally, we have upgraded halo light, a signature element shared across our most well-known scooters. In the NF series, the halo light is embedded in the front panel, adding another futuristic touch to the design. The NX and NXT are equipped with our most cutting-edge technology functions to date, making them the smartest electric scooters on the market. For driving safety, they are equipped with the full-function ABS and TCS. Additionally, they feature the BSC, the blind spot detection, and RCW, the rear cross-traffic warning, along with the automobile-grade dash cams in the front and the millimeter wave radar in the back. To further enhance the riding experience, they are outfitted with the interactive TFT display serving as a smart cockpit. This incorporates riding aid features such as keyless start, navigation, remote access, as well as interactive features including lap timing, riding routes, locks, and entertainment system. Also, to seamlessly integrate with the user's smart device ecosystem, the update also incorporates new smart features like smartphone navigation that are compatible with Apple and the Huawei Harmony system. The integration of mobile features such as voice control, shortcut home display, and device management, including Apple's Spun My features. Now as one of the highest performance electric motorcycle we ever released, the NX boosted maximum power 20,000 watts with top speed 135 km per hour and accelerates from 0 to 50 km per hour in just 2.45 seconds. The NX-T is available immediately since its launch with pricing from RMB 6,000 to 12,500 while the NX is available in May. The NXT were well received as evidenced by online pre-orders of NXT initially through live streaming of major platforms. With the initial two weeks launch, we secure more than 10,000 units in pre-orders, generating sales revenue exceeding 100 million RMB. This amount is 40% more than compared to our initial crowdfunding campaign for the release of first and one. Those pre-order results positioned us as top seller across all major e-commerce platforms during the period. Now with the successful launch of NX-NXT series targeting the premium motorcycle consumer segments and performance driven electric bicycle segments, we also plan to introduce several products to target diversified user group. For example, our recently upgraded U1 product launched just a few days ago, targeting female users with this new color scheme, ergonomic improvement in handle and seat positions, easy to use smart functionalities, and options to include baby seat and accessories. The key to our product strategy in 2024 is to build our product portfolio targeting the premium consumer segment with diversified needs. Now, supported with those new products, we also plan to restart channel expansion in Q2 2024, building up the channel coverage across Tier 1 to Tier 4 cities. We'll initially focus on the top 45 cities, which represent 80% of our sales. We plan to build sales from in the lower tier cities as well. Now, with additional store counts, the key focus for 2024 remains the improvement of same-store sales. leveraging the combination of online and offline traffic. We initiated those efforts in the second half of 2023, conducting over 15,000 live stream sessions on Douyin and Xiaomushu. We have recorded some successful cases of achieving a GMB of over 100,000 RMB in just one live stream session, indicating a successful online to offline conversion model we plan to further scale up. Starting Q1 2024, we have continued live stream initiatives in 30 key city markets, enabling those stores to sell directly through online live streaming on a daily basis. Additionally, we have planned to launch online sales campaigns and co-create over 10,000 widespread social media content. With those strategies in place, we anticipate improving our same-store sales by 10% to 20% in 2024, driving significant volume growth for the company and enhanced store profitability. Now with our product strategy and retail channel expansion in focus, we aim to further strengthen our brand through marketing and branding campaigns. A recent highlight was our collaborations with JD Gaming Team. Expanding our partnership form last year, we joined forces with JD Gaming Team as their official electric scooter partner. This collaboration extends from social media engagement to product launches and seeks to make a significant impact within the Generation Z demographics. The collaboration with JD Gaming marks the beginning of a serious partnership plan for 2024. We intend to continue our co-branding effort with several strong IPs targeting specific user groups and leveraging social media platforms. Now, in the overseas market, our comprehensive product portfolio, which includes the introduction of MGT-100, RQI, and XQI models in the fourth quarter of 2023, strategically bridge the gap between our product offerings and high-performance electric motorcycle market demand. The MGT-100 priced at the Euro 5,000, together with NGT, provides a comprehensive coverage from 50cc to 125cc electric moped. The RQI targets the electric motorcycle category, offering a high-performance quad-motorcycle option with price starting at 8,000 euros. Additionally, the new dirt bike XQI marks our debut product in the off-road motorcycle sector. Priced at €6,000, the XQI model has garnered significant attention. Our active engagement industry events, such as an expo in Las Vegas, moderator in Dortmund, Germany, has further amplified our brand visibility. At those expos, we brought our latest bikes, providing attendees, including influential KOCs with the opportunity to test drive and review our product. The positive feedback and heightened interest from the diverse user group received at those events has been instrumental in solidifying our presence in the market. Most importantly, since the latter half of 2023, we have undertaken substantial adjustment in our business operations in the overseas electric two-wheeler sector. In some of our key markets, in addition to the existing distributors, We are established entities and the operation team for direct distribution of some of our products to retailers. We believe this direct distribution model will enable us to invest more in local branding and marketing, establish strong ties with customers, and make us more adaptable to local market changes. With those operation adjustments, they initially delay the revenue recognition until products actually reach to individual retailer dealers. They will help us create a strong foundation in each local market in the long run. With the comprehensive product portfolio and operational adjustment complete in Q1 2024, we are confident in kick-starting the growth beginning in the second quarter of this year. Now, in the overseas micro-mobility sector, we have established a solid foundation for growth in 2024 over the past two years. Although the book sales volume has remained relatively flat compared 2023 to 2022, The actual seller volume to customers has doubled as suggested by the activation number increase, and the trend continues at a 2x rate. We believe that our effort in product portfolio building and the sales channel establishment has positioned us well for the further growth this year. On the product portfolio front, with the introduction of the KQi Air, a full carbon fiber lightweight high-performance kick scooter in September 2023, we now boost the comprehensive product lineup Additionally, January 2024 marked the launch of KQi 300 series, an enhancement of popular KQi 3 series designed for old-time use. This KQi 300 series features a dual-tube hydraulic suspension for better handling on an even surface, promising up to a 60-kilometer range per charge and starting at $700. We have several other product upgrade plans throughout the year of 2024. Now, with those products lined up, we made significant progress in entering retail channels in the second half of 2023, laying a solid foundation for growth in 2024. In the US market, while well positioned in over 800 Best Buy stores and advanced in our efforts entering retailers such as Walmart, Target, and Costco, in Europe, our products are displayed in over 400 medium-sized stores in Germany, over 200 Blanchet stores in France, and we are making progress in placing them nearly 100 core English stores in Spain. Additionally, we're moving forward with new retail partnership with MediaWare in Italy and retailers in Australia and others. By the end of 2024, we plan to double the number of point of sales of micro mobility products by expanding the retail sales network. So heading into 2024, we're optimistic about regaining growth. In the China market, the excitement surrounding our latest product release has been palpable. Leveraging the momentum gained from the newly released product, we have also a rollout schedule prepared for all the other products throughout the year, as well as the channel expansions. In the overseas motorcycle market, with the ready to ship product and the operational adjustment already in place in Q1, we're confident in the growth of 2024. However, those operational adjustments may temporarily result in declining sales in Q1, as the sales are actually booked differently due to the model change. For the micro mobility segment, we anticipate fast growth in Q1 as well as throughout the entire year, given that we have laid out a product portfolio and established both online and offline channels at the beginning of this year. Now, with those factors considered, we anticipate the sales volume in 2024 reaching 1 to 1.2 million units. Now, I'll turn to Fiyang to discuss.

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 to the first quarter figures, unless I say otherwise. and all monetary figures are in RMB if not specified. As Yan mentioned, our total sales volume for the fourth quarter was 137,000 units, a decrease of 0.6% compared to the same period of last year. And specifically speaking, the China market sales volume was 110,000 units and overseas market was 27,000 units. And for the full year 2023, The total sales volume was 710,000 units, including 601,000 units in China and 109,000 units overseas. And the total revenue in the fourth quarter was RMB 479 million, down 22% compared to the same period of last year. To break down the school revenues by aging, Revenue in China were at least $355 million, down 21%. This decline primarily contributed to a shift in product mix. As the Chinese economy was still in recovery, our premium series showed a slower recovery rate compared to the mass premium series. As a result, the ASP reached to RMB 32.16. a 15% lower on a year-over-year basis. However, the ASP in each category has increased. The premium ASP remained almost $5,000, and the mass premium ASP increased to nearly $3,000. The overseas scooter revenue, including kick scooters, E-mopeds, and E-motorcycles, was nearly $60 million. The blended scooter ASP decreased to 2,200, down 49% year-over-year. Despite the higher sales volume contribution of peak scooter with the lower ASP, the new launch to K1 and KU is contributing to 22% of the sales volume, which targeted towards the youth and the entry-level market and has lower retail prices. Accessories, spare parts, and services revenue were RMB 65 million due to the decrease in the overseas spare parts and services as we mentioned in the previous quarters. For the full year 2023, our total revenue decreased by 16% to RMB 2.7 billion, and China's scooter revenue as a whole saw a 15% year-over-year decline to RMB 2 billion. And the overseas scooter revenue decreased by 29% to RMB $349 million. The total overseas revenue, including scooters and non-scooters, contributed to 15% of the total revenue. And now let's look at the ASP in 2023. The overall scooter ASP was slightly decreased to $33.23, a 3% down year over year. While the domestic scooter ASP was 33.44, up 1%. And this minor growth was driven by the higher ASPs in both premium and mass premium series, despite a shift in the mass premium in overall product . And overseas blended scooter ASP was 3,200, 21% down as the proportion of kick scooters increased. and also combined with the decrease in the newly launched lower ASP kick scooters in Q4. The gross margin for the fourth quarter was 19%, 3.4 ppt lower than the same period of last year, and mainly due to the product mix change in the domestic market. While for the year-end 2023, the gross margin was 21.5%, up from 21.1%. and representing a 0.4 PPT increase on an annual basis, and mainly due to a reduction in raw material costs, especially in domestic new product lines. And talking about operating expenses, the fourth quarter OPEX was $246 million, $50 million higher than the same period of last year, and mainly due to a lower revenue base. Selling and marketing expenses were $191 million, $84 million higher than the last year, and primarily resulting from our expansion into the overseas markets, out of which $43 million was from the overseas micro-mobility holiday season promotions, and the other half stems from the rental expenses largely driven by the inventory build-up resulting from geopolitical conflicts and early stock taking for the expected peak season in 2024. Additionally, the current warehouses are incurring higher unit per area costs since the micro-mobility sector is still in the early operating stage and those expenses are expected to decrease in the subsequent quarters. R&D expenses were $36 million. $5 million lower than the fourth quarter of 2022, and mainly due to the decrease in staff costs and share-based compensation of RMB $8 million, and partially offset by the increase in design and testing expenses on new models, which have been and will be launched in 2024, of RMB $3 million. G&A expenses for RMB $19 million, $28 million lower on an annual basis, mainly caused by the decrease in provision for credit office of RMB 22 million and the decrease in staff related costs of RMB 5 million. For the full year 2023, the OPEX was RMB 891 million, 15% higher than 2022, and the increase was mainly due to the provision for credit offices of RMB $114 million and the increased promotional activities and rental expenses in overseas markets of RMB $101 million, partially offset by a $45 million decrease in G&A and also $40 million decrease in domestic marketing and promotions. Despite prudently raising provisions for credit offices on overdue payments, We retain a positive outlook on future receivables collection, given our current partners' robust financial standing and their ongoing payments continuously. Exclude the non-cash expenses, such as the provisions for credit losses, depreciation and amortization, and share risk compensation. The OPEC increased 2% year over year. The non-GAAP OPEX was RMB 845 million. In the fourth quarter, we had a net loss of RMB 130 million and the non-GAAP net loss of RMB 122 million. On a full year basis, due to the factors including the lower than expected domestic sales and increasing overseas business expansion as mentioned above, We had a net loss of $272 million and non-GAAP net loss of $224 million. Turning to our balance sheet and cash flow, we ended the year with only $1,078 million in cash, restricted cash, term deposits, and short-term investments. On an annual basis, the operating cash flow was inflow $96 million. primarily because we made a net income after adjusting for non-cash items. And our Q4 CapEx was $22 million. For the full year, the CapEx was $79 million, $56 million lower than the last year, as we cautiously opened up stores in domestic markets. And now let's turn to guidance. We expect the first quarter revenue to be in the range of R&D $438 million, to $480 million, an increase of 5% to 15% year over year. And please be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectations, which is subjected to change due to uncertainties relating to various factors. And with that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

Thank you. We will now begin the question and answer session. To ask the questions on the phone, please press star 1-1 and wait for your name to be announced. One moment for the first question. Our first question comes from the line of Zijun Li from Citix. Please ask your question.

Good evening. I'm Zijun Li from Citix. Thank you for your time. And I'd like to be more interested in the following questions. The first two are more about us and the last two are more about our industry. The first one is this year's store expansion plan and strategy. It means would we like to restore the original channel or more to supplement the new thinking channel. And the second question is about how to evaluate Ninebot's aggressive sales target this year and whether it would squeeze our sales target. And the above two is about us. And I wonder if we'd like to solve this too and then I'm going to the sector.

I'll talk about first on the store openings. I think you're actually a mix of... Basically, I think we're still going to be focused on the top 45 cities at first, and with the option to expand into other cities as well. Notably, in the past, if you look at the last couple of years, because of the lithium price hike, we have lost roughly about 500 stores. I think the expansion for including the store we have lost and reclaiming back, as well as opening new areas. I think we have a clear location map on where to open stores based on our new product portfolios. No, I think with the second question about competitors, I think overall, if you look at our product offerings, so our current product offering is basically a price range anywhere between basically 3,500 RMB above to up to 12,000 RMB. So you look at the entire market as a whole, the volume above 3,500 RMB, that volume is basically somewhere around 14 to 16 million units. So within that, let's call that our addressable market at 14 to 16 million units. And with that number, last year we only did, what, 600,000. So even with this year's forecast, I think the addressable market is still very significantly large. than our volume target. So in the sense that I think we're less worried about the competitors, but I think we're more focused internally on how to getting the best product out there and how to expand the channels, expand the stores, so the consumers, the interested consumers actually have a location to acquire the product. I think that sort of hopefully that addresses your second question.

quite clear and I really hope that this year we could see a robust in our market. The next few questions about the sector. First one is the Nanjing fire has attracted the attention of the society. to the batteries of the two wireless. What is our view of the impact to this sector? And the second is our users are more concentrated in high-tier cities, as you just mentioned. And also our users' time of using our products is relatively long and has accumulated for a long time. So I'm very curious about whether we have ever done some analysis of our users' behavior on whether we can detect change in their consumption habits from this accumulated data. such as changes in the cycle, changing costs, or batteries? Thank you. This is my two questions about sector.

Sure. I think, first of all, address the issue with the fire accident. I think it's unfortunate. So I think what it really costs off for high-quality product And I think that, so, you know, or, you know, in the case, what we observed in the market is many people who buy products, either low quality or they buy product, then, you know, they buy the original scooters, but then they complement with a modified third-party lithium batteries. And usually those third-party lithium batteries are second-hand lithium batteries, It's poorly manufactured with low quality. I'm not sure with actually the cost of Nanjing Fire, but our experience back then, throughout the time, actually the modified lithium batteries, not original manufactured ones, are one of the main causes. I think from our perspective, we have actually taken many preventive measures. For example, our scooters only work with our batteries. Not necessarily, not working with the third party second hand batteries. And I think with this, I think it's basically a, it basically, you know, raise the bell saying, you know, it's, you know, it's basically, I think it's basically people cry for, I think it's a high quality product with original parts are are necessary and to guarantee safety. So I think that's actually set an advantage for us. Now, I think in terms of your second question about user behaviors, I think typically we observe that people tend to keep these scooters. for roughly about three to four years. I think three years is roughly the usage cycle. I think for us, we're a bit too concentrated in the top tier cities. I think this year is actually what we're looking at is actually beyond, besides getting market share in the top tier cities, is actually expand our footprint and getting more store coverage, as well as market shares in the Tier 2 and Tier 3 cities, you know, with basically with products that are suitable for those markets.

Got it. Quite clear. And thank you again for your time, and I sincerely hope that we could achieve the goals of this year and the new returns. Thank you.

Yeah, thanks.

Thank you for the questions. The next question comes from the line of Yating Chen from CICC. Please ask your question.

Hi, thank you for receiving my question. My first question is about our sales volume target. As we can see, the target growth for 2024 is more optimistic than last year. And so I'd like to know, what is the target sales volume of kick scooters? And what is the sales target for two wheelers, especially for domestic and overseas market? This is my first question. Thank you.

I think for the kick scooters we're looking at, In the past few years, even though the selling volume to our distributors remains roughly constant, but the sell-out, basically, the sell-out to the consumer has been doubled if I compare 2023 to 2022. So that's because the comprehensive product portfolio. Also, over the year, we're actually able to get to all these offline channels. So we expect the sell-out volume this year also doubled, which sort of implying the sell-in volume to the distributors actually doubled as well. So on the peak schooler, we're looking at somewhere anywhere between 200,000 to 250,000 units. So I think that's on the peak schooler market. Then the rest is sort of the electric tool. And within the electric two-wheeler market volume, I think the majority of them are going to be in the China side, where the international electric two-wheelers and electric motorcycles, probably somewhere around 20,000 to 30,000 units, and the rest of it all China.

Thank you very much. And my second question is about our profit margin. Especially, I'd like to know our product strategy in 2024. To achieve our sales volume target, will the average selling price or profit margin decline in 2024? So I think, basically,

I guess this question sort of relates to our first product launch, the MXP in March. That's actually more the premium or high-end product for our case. The retail pricing is between 6,000 to 12,000 RMB. But then you look at another product which is launched, it's called U1E, basically upgraded few days ago, that retail pricing is around 4,000 RMB. So if you look across the board, we expect our average ASP to roughly remain constant compared with last year. So I'll let Piyangu comment on the margin part.

Even though that we upgraded our classic end series and we're about to launch the new products in the following months with a better price versus the product. But the ASP will stay at a relatively flat level in the domestic product line. Well, in the overseas product line, since we have a high expectation on the e-motorcycle and moped recovery in the overseas market, those are almost three to four times higher than the key schoolers' ASPs. We will expect a slightly recovery from the overseas scooter ESP in 2024. Altogether, we'll give us a blended scooter ESP almost at the same level in this year. Go back to the gross margin for the domestic scooters and the overseas scooters. We were expected a slightly gross margin increase to 1.2 point PPP. 1.2 point PPP altogether blended with the domestic and the overseas market. And we have already made the cost efficiency, those operational activities in 2023 And with the scale of the sales volume increase, we may get the benefit from the gross margin. But we didn't expect a higher gross margin increase because we still consider to share the profit with our dealers and also the overseas market expansion with our partners. That's why we considered the gross margin altogether will only increase one to two point PPG for the whole year.

Thank you very much. And my last question is I'd like to know, do you have any guidance for 2024 on the selling expense ratio? Or to say, will it grow or remain steady comparing with 2023?

Well, 2043 is a very special case since we are in the transition of the overseas expansion and also the heart in the domestic market. That's why the expenses ratio is pretty high. But I think the benchmark for the expenses as percentage of revenue we could use the benchmark in the second half of 2021, first half of 2022. We may, you know, we will try to bring back the expenses as percentage of revenue, go back to that level, which means at least we will have we will maintain the expenses within 20% to 24% since it's a slightly large range. We are still in the transition for the overseas and the domestic market balance. But the first half of 2022 and second half of 2021, is a benchmark of the expenses ratio. So this is our target for 2024 expenses ratio.

Thank you very much. That's all my questions.

Thank you for the questions. Once again, to ask questions, please press star 11. We have a question from Michael Simmons from Global View SA. Please go ahead.

Yeah. Hello, Dr. Lee. Yeah, I'd just like to ask a question about the balance sheet in these sort of slightly tough trading conditions. You and your team have done a good job sort of maintaining a good cash level in the balance sheet. Can you just give us a feel for looking forward to this year, particularly looking As you've explained, you're going to be spending some money on your international expansion and also continuing to launch many new products. Can you just give some feel for what the balance sheet and the cash position is likely to look like going forward, please?

Well, this is from you. I think I can give the trend of our balance sheet instead of the exact figures because we are still at the very beginning of 2024. As Yen just mentioned, except for the operating activities and strategies we introduced, On top of that, we may spend higher on the store opening in domestic markets. I think this is the big non-operating consumption in the domestic strategy. Well, in the overseas markets, we didn't expect any large impact. The only operational activities will happen in 2024 is how we launched our products in our strategic partner stores. So those are purely the operational activities. We reflected in the operational cash flow. So this is the cash flow part and the CAPAC part. In the meantime, we didn't expect the huge increase in the receivables or the payables, since the business model is very straightforward. and we also didn't expect the higher increase in the inventory as well because you know right now we already have enough enough inventory for the big season sales in 2024 and after that we may remain a relatively secure level of the inventory, but will not reach to the higher one than 2023. So I think the business model doesn't change. The only thing is that if we want to expand the stores in domestic markets, it will bring up the capex. While the current production has already reached to 2 million production capacity, and we didn't expect as high as this level of sales volume, so we don't have any further demand on the expansion on our facilities.

Hope this will address your question. Thank you very much.

Thank you for the questions. With that, I would like to turn the call back to management for closing.

All right. Thanks, everyone, for the participant in 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.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your line.