Niu Technologies

Ladies and gentlemen, thank you for standing by, and welcome to New Technologies' third quarter 2024 earnings conference call. At this time, all participants are limited. Later, we will have a question and answer session, and instructions will follow at this time. As a reminder, we are recording the call. If you have any objections, you may disconnect at this time. Now, I'll turn the call over to Ms. Grace Lee, Investor Relations Manager of New Technologies. Ms. Lee, please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new technologies results for the third quarter 2024. The earnings press release, corporate presentation, and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from our company's IR center as well, and a replay of the call will be available soon. Please note, today's discussion will contain forward-looking statements made under the safe harbor provision of the US Private Security Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions, and other factors. The company's actual result may be materially different from those expressed today. Further information regarding to the risk factors is included in our company's public flow links 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 include a discussion of certain non-GAAP financial measures, and the press release contains the 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.

Thank you, Crystal. Hello, everyone. Thank you for joining us today. So Q3 2024 has marked a quarter that shows continuous growth. In this quarter, our total sales volume was 312,000 units with a year-over-year increase of 17.5%. Specifically, sales volume in the China market had a year-over-year increase of 12.4% to 259,000 units. And the sales volume in the overseas market experienced a significant year-over-year of 50% increase to 53,000 units. Total revenue in Q3 2024 was RMB 1.02 billion, increased by 10.5% year-over-year. So this quarter's performance highlights the effectiveness of our strategic focus on expanding the product offerings, expand the sales channels, and expand the market reach. We have achieved notable growth in both China and overseas market, reflecting the increased recognition and improved sales. So as we continue to build on these results, we remain committed to refine our strategy to meet ambitious targets and depth market demands. Now in China, strong feedback on the recent launch of the NMU series have reinforced our focus on enhancing the core product offerings. Since Q2 2024, the targeted marketing and store expansion increase of market presence positioned us well for the growth in Q3. However, the sales in Q3 did face headwinds due to a new standard on battery electric system safety, which put in effect at the end of October and the retailers were not allowed to sell electric bicycle products that were not compliant with the new standard. As a result, the sell-in orders from the factory to the distributors in September were significantly reduced, and the distributors are focused on clearing the existing channel inventories, which are typically 1 to 1.5 months. The execution of the policy also impacts our product mix as high-priced products were ordered less, which reflected a lower AST and lower margin quarter over quarter. The sales percentage with ASP over 6,000 RMB dropped by 8.1 percentage points in Q3 compared with Q2. Now, in the overseas market, the micro-mobility segment achieved significant growth, leveraged momentum from expanding the key sales network, and introduced new products tailored for the diverse networks. In the electric two-wheeler segment, we focused on direct distribution operations in priority market, laying a good foundation for operations and dealer development. Early sales and marketing events already show growth potential. So let me talk about China market in detail. Since this year we focused on rolling out key products with clear target consumer groups to drive hit growth. In the first two quarters this year we introduced the NXT to address the premium segment, the in-plane motorcycle, and the UMAX electric bicycle to address the Gen Z younger generation, and the UM1E for the female riders. In Q3, we continue to unveil two electric bicycles, the NT to address the Gen Z, and MT to address the female users. Together, those new product launches this year contribute to more than 50% of total units sold in 2024. To continue to address the premium users and Gen Z users in the motorcycle market, we released two more electric motorcycle lines recently, the Outmost Premium NX High Performance motorcycle and the Falcon Style Design FX motorcycle. The NX motorcycle is our most premium series with two models, NX Hyper and NX Ultra. As new most premium series, the NX lines combine powerful performance, advanced safety, and intelligent systems. The NX Hyper is a new flagship electric motorcycle designed for the performance enthusiasts and tailored for track racing. Powered by a 10 kilowatt motor with a peak output of 29 kilowatts, it reaches a top speed of 135 kilometers per hour. Its inverted titanium coated front force and adjustable nitrogen rear shocks provide exceptional stability and comfort in rugged terrain. With racing mode dynamics, a 42 degree lean angle, and two disc brakes with four piston calipers. It ensures precise control and maximum safety. Priced at near 30,000 RMB, the NX Hyper combined cutting-edge technology with wrist-ready agility. Now, the NX Ultra equipped with the robust 5-kilowatt motor at top speed of 100 kilometer per hour and offered a range up to 130 kilometers on a single charge. This caters both daily commute and weekend getaways. and the entry-level top speed motorcycles. The NX Ultra is priced at RMB 18,900. Now with the top performance of the NX series, we have gone extra mile to ensure rider safety. The NX motorcycle is the first electric two-wheeler in China to earn a five-star fire safety certification from the China Merchant Vehicle Research Institute. It passed rigorous tests for electric fire protection, impact resistance, and water immersion. This achievement highlights news dedication to advancing e-mobility safety standards. Now, since the NX Hyper and NX Ultra represent our highest performance releases, we celebrate their debut with the innovative Track Test Drive event in Beijing, drawing over 100 top media outlets and influencers. This event not only showcased exceptional performance of our product, but also significant boost of community engagement. With content around NX Track Test Drive event gathered, more than 52 million views across all platforms. The Double Eleven Shopping Festival was also a good first testament for our NX product in this market. During the online shopping sales, we achieved top ranking across major e-commerce platforms, with NX Hyper and NX Ultra standing as the best sellers in its own category. Now, during this quarter, we also introduced the FX series for the Gen Z consumers as the mass premium motorcycles for practical use. The FX series includes three models, all featuring the same sleek design. The FX series boasts the F-Line family aesthetics with eagle-eyed headlights, adding sophistication to the high-performance lineup. The pro version is equipped with 45 mAh batteries, the 1,500-watt motor, and top speed at 55 kilometers per hour, with the impressive drive range of 130 kilometers. Designed for urban commuting, the FX series combines powerful features with the advanced safety system, extended battery life, a smart integration via the OK Go mat for enhanced convenience control. The FX series is priced from 5,500 RMB and above. Now, as this product is designed for Gen Z users to connect more deeply with the e-gaming community and the younger audience, we launched this FX product along with a co-branding initiative with the popular game PUBG Mobile with 200 million plus users. We introduced the excited co-brand collaborations, the FX product series through a range of online, offline events, including doing product launch, campus event, e-gaming tournaments, and influencer promotions. Overall, the campaign achieved over 920 million views across social media, influencer engagement, and target medias. Now in terms of channel profitability and channel expansion, as we discussed earlier this year, Our first focus is on channel health, especially store profitability, with a goal to reversing the trend of store closures over the past two years and to prepare for future expansion. To achieve this, we concentrate on improving same-store sales by significantly enhancing our online to offline operations, driving sales leads from the online platform to our physical stores to increase food traffic. In addition to traditional platforms like JD and Tmall, we also increased our investment on Douyin, Kuaishou, Xiaohongshu, and Meituan. Online sales leads account for more than 50% of store sales for the first three quarters, marking a significant increase compared with less than 30% in the same period last year. We have also made a substantial investment in training our stores for Douyin and Xiaohongshu operations, including creating accounts for each store and providing livestream training to enable them to generate online leads. As a result, we achieved over 33,000 livestream sessions, generating 115 million RMB JNV in the first three quarters, with 18,000 live sessions in Q3. Now, with the launch of new product, improved store profitability will have successfully reversed the previous trend and began to expand our sales network. In Q3, despite being a traditional slow period for store openings, we were still able to add 240 new stores to expand our sales network. Now let me turn you to the overseas market. This quarter demonstrated strong growth and strategic advancements in our overseas market. In the micro-mobility segment, leveraging a strong product portfolio, we were able to expand more retailers and achieve over 50% year-over-year sales volume growth. Now for the electric two-wheeler market, we focused on direct sales operations in the key market and unveiled new products during our 10th anniversary at ECMA just in November. Those product launches, along with business development events and branding marketing activities, helped us to build a good solid foundation for strong growth. Now in terms of micro-mobility, since the beginning of this year, we have focused concentrated on retail channel expansion in the key market. In the U.S. market, we worked with Best Buy entering all 800 stores in North America. Additionally, we've been working with Walmart, Kohl's, Macy's, Target, and Home Depot. In Europe, in addition to the current retail network of MediaMarkt, we also entered one of the leading retail chains, UniEuro, in Italy, having our Kickstarter product placed in their 300 stores. Now, to further benefit from already established sales network, we have expanded our product product portfolio, we launched a KQi 100 series this quarter, featuring KQi 100S and 100P. This series brings a quality performance at an entry-level price starting at $299 and making affordable yet powerful toys for urban mobility. Features included due to hydraulic suspensions with 29 kilometer drive range and top speed up to 25 kilometer per hour. Now on the kick school side, the recent increase in the U.S. tariff on kick schoolers from 0% to 25% starting in June has temporarily eroded our margins, leaving a negative gross margin for products shipped to the United States in the Q3 and the part of Q4. To address this, we have initiated a process to start production of U.S. version in the Southeast Asia to address the tariff situation. However, due to the complexity of supply chain adjustment, We expect to see the first manufacturing product out of Southeast Asia to be shipped in early 2025. Now, for electric toolers, in the first three quarters, we focused on establishing direct distribution operations in key markets. By Q3 this year, we complete the first phase of operations set up in Europe. including the dealer network development, financing for dealers, logistics, after sales support, as well as the team setup. Now, we have operations covering Italy, Germany, France. Recently, we recruited over 100 dedicated dealers into our European sales network and plan to double this number by first half 2025. Now, with the operation setup in place, we introduced key electric motorcycle products at ECMA this year. In the motorcycle segment, we launched the NX series, the international version of our NX premium products, with price range from 3,000 euros and beyond. We also unveiled the SQI series, the international version of our S series, starting with SQI 500. It features the 5,000 watt motor, capable of speed up to 95 kilometer per hour, and a drive range of 91 kilometers. The advanced safety features, such as TBS brakes, and high-pressure monitoring enhance the rider confidence. Starting at around 3,000 euros, the SQi series offers a combination of eco-friendly, high-tech design, and robust performance. Additionally, we upgrade our SQi3 and offer a motorcycle equipped with an OTA update that boosts the power to 10.6 kilowatts, improves acceleration, and reaches a top speed of 800 kilometers per hour. Priced at $4,000, the XQi3 made a high-performance dirt bike more accessible. Our new product release has generally extended media and influencer coverage at ECMA. The leading industry outlets, such as Electric, Model News, Moto, Gazette have motorized coverage of ECMA launches days after events. And online channels were featured by QLs with millions of followers. And the contents about our new product driven a significant online engagement since its release. During Ekema, we also hosted our largest New Connect events, inviting around 200 partners, dealers, and distributors to join us in unveiling our new products. At this event, we'll also launch a dealer expansion project for 2025, targeting doubling the dealers by first half of 2025. Now we're towards the closing of the year, 2024. We have strategies planned for the last quarter of this year to build a solid foundation for 2025. We plan to run on growth momentum in the product development and sales expansion to drive the growth. In the China market, we'll well position this product portfolio that spans a wide range of market demands, from daily commuters, electric bicycles, to high-performance motorcycles, with price ranging from 3,000 RMB up to 30,000 RMB. Our product catering a diverse customer base, including young people with Generation Z, the female users, the daily commuters, and motorcycle enthusiasts. We plan to build our existing portfolio with the upgraded product and new designs that comply with China's new standards. Now, along with the improvement of our product portfolio, we have also strengthened our brand image as a premium brand. With the introduction of NX series, we have elevated the product performance to a new level. The premium NXT electric bicycle series, equipped with cutting edge smart technologies such as millimeter radar for collision detection, navigation projection systems, represented the most advanced smart electric bicycles in its class. And on the sales channel expansion front, we plan to accelerate store expansions in Q4 and Q1 2025. targeting over 1,000 stores to establish a solid foundation for growth in 2025. Additionally, our expansion effort will focus on Tier 3 cities and plus, where we have historically been underrepresented due to lack of the right product. Now, in the overseas market, the new strategy for 2025 focuses on driving robust growth across both micro-mobility and the electric tool market, For micro mobility, we plan to continue to expand our retail presence, supported by enhanced product line-up. Production in the Southeast Asia will also help to mitigate tariff challenges and accelerate growth in the US market. Now, in the electric toolware segment, we'll leverage the new product launches like the NX and FQI series to cater to urban commuters, with strong focus on direct sales in the coal market. Driven by this new product and the momentum in ECMA, we plan to significantly expand our dealer network in those key markets, laying a solid foundation for the growth in next year. Now with that, let me turn the call to Fia.