Niu Technologies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 20, 2023

There are 4 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call.

Operator

If you have any objections, you may disconnect at this time. Now, I would like to turn the call over to Ms. Kishuo Li, Investor Relations Manager of NIM Technologies. Ms. Li, please go ahead.

Speaker 1

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies' results for the Q3 2023. The earnings press release, Corporate presentation and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from the company's IR side as well, and a replay of the call will be available soon.

Speaker 1

Please note, today's discussion will contain forward looking statements made under the Safe Harbor provision of the U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involves risks, uncertainties, assumptions and other factors. The company's actual results may be materially different from those expressed today.

Speaker 1

Further information regarding the risk factors is included in the company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward looking statements, except as required by law. Our earnings press release and this call include discussion of certain non GAAP financial measures. The press release contains 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, Doctor.

Speaker 1

Yan Li and CFO, Ms. Priyong Zhou. Now let me turn the call over to CEO, Yan.

Speaker 2

Thank you, everyone, for joining us on the call today. In Q3 2023, our total sales volume was 265,923 units with a year over year decrease of 71%. Specifically, sales volume in the China market had a year over year drop of 12% to 230,445 units The sales volume in the overseas market experienced a year over year of 38% decrease to 35,468 units. Total revenue in Q3, 2023 was RMB927 million, decrease of 19% year over year. In the China market during Q3, we encountered setbacks due to a sluggish consumption in top tier cities, resulted in a slowdown in sales for our product.

Speaker 2

To address this challenge in Q3, we expand our product portfolio with a diversifying functionality to address the wider customer needs. And with the diversified product portfolio, we plan to expand our retail coverage for greater market reach in Q4, 2023 and beyond. In the overseas electric tooling market, we have experienced a year over year decline of 62% influenced by a combination of challenging factors. The decline in the electric tooler market in our key market, Germany and Netherlands, has impacted our business. Additionally, we have also faced Temporarily disruption in the key European markets due to operational difficulty faced by our distribution partner, which has further affected our sales performance in this period.

Speaker 2

In response to those challenges we have encountered, we have implemented 2 strategic adjustments, Expanding the product portfolio to expand our addressable market and operational adjustment to result of temporary disruption, We introduced key electric motorcycle and off road motorcycle product to the European North American market to expand our addressable market beyond the electric moped. For the South Central Asia market, we have officially introduced the battery swapping solutions with compatible swap batteries and mopeds. Operationally, we're also working with our distribution partner and retail partners closely to revamp the retail operations in the key markets. The overseas micro mobility market has seen a year over year decrease of 37% in sales. This downturn is primarily attributed to Selling order delays in Q3.

Speaker 2

Despite the decline in the selling volume, we recorded highest number of kick scooter activation in this quarter. The number of activation in Q3 show a significant year over year increase of 80%. This increase in product activation can be largely attributed to our comprehensive product portfolio and expansion of our sales network, both online, offline in the key market channels. In addition, during Q3, we launched an innovative KQI air tick scooter for presales, which has been well received in the market. We're continuously working on expanding our sales channel penetration, aiming to reach a broader customer base and reinforce our market presence.

Speaker 2

We expect to get back to the growth track in the coming quarters in time for the holiday season. Now let me delve into the China market in detail. In this quarter, we Continue to build our product portfolio with a diverse design style and functionality to address the wider customer needs. We introduced Q2 2023, the MQL, emerged as successful addition of our product lineup. It is a product that inherits the design from our all Classic M Series along with the significant upgrade in design performance, it has not only contributed positively to our sales volume, but also plays In Q3, we also successfully introduced the Falcon series as new style with the launch of F400T and F200, Complemented the previous introduce of XPAC 100 in Q2, collectively the entire Falcon series accounted for more than 50% of our total sales in this The Funko series represent our attempt to create another flagship design, which has proven popularity we plan to roll out more products in the newly introduced series in the coming quarters.

Speaker 2

The F400T was introduced in August this year as a remarkable addition to our Falcon Series product lineup. This electric bicycle drove inspiration from fighter jets and seamlessly incorporated new essential smart functionalities with a maximum range of 90 kilometers. The F400 design has captured significant attention since its launch. Notably, it took center stage at China Toys, the country's largest gaming garnered millions of views across all platforms. Another product added this series in Q3 was F200.

Speaker 2

It is released as a high powered commuter scooters with a sports car inspired frame. It has a max range up to 70 kilometers and equipped with new smart system. The F200 was also launched with a collaboration with the globally renowned IP Kukmen. Our sales performance during the recent Double 11 underscore the popularity of those recently launched products. In the 1st 24 hours of promotion period alone, the Pre order sales revenue surpassed the sum of the entire period last year, showcasing the robust demand for our offerings.

Speaker 2

Several of our key products prominent positions on the best selling list of major platforms, including Tmall and jd.com. Specifically, the latest iteration of our claims SQI Electric Bicycles has gained significant traction during the Double 11 Shopping Festival emerging as the number one top selling straddle electric bicycles in RMB9000 price range above on tmallandjd.com. Together, our UQI plus F200 and also SQI has claimed top spots ranking within the top 3 best selling product in the electric bicycle categories on Tmall. This highlights a strong customer preference across our diverse We have we remain highly engaged in events and cross brand Collaborations to enhance our brand exposures. In September, we established presence on the G Fusion Gaming Fest 2023, where we brought our F400 to the gaming enthusiast.

Speaker 2

We recently forged our official partnership with JD Gaming, one of the China's top Esports teams and the finalists in the League of Legends OR 2023. Those engagements underscore our commitment to establish A strong brand presence and the forging connections with diverse audience even in the face of temporary market challenges, we're confident that those initiatives will contribute significantly to our brand exposures and long term growth prospects. Now turning into international electric Mobile market. We faced the challenge in this quarter with the year over year decline in the electric mopeds sales accounts for 62%. Several factors converged across this downturn, including the decline of electric moped market in the key European countries like Germany and Netherlands and the temporary operation disruption due to issue encountered by our distributor partner in Europe.

Speaker 2

While we acknowledge those challenges, we're actively engaged in addressing them, We gained the traction in this market. First, we expand our product portfolio beyond electric mopeds, widening our addressable markets. We have unveiled several key products ready for Q4 2023 and 2024 at ECCMA in November. One key product that we reviewed was XQI electric dirt bike. It is designed with a futuristic look with a handful of choice aluminum frame colors integrated with new signature halo light.

Speaker 2

We have reviewed the QI3 product during the ECMA in Milan, Italy in November and also brought it to the Electrify Expo launch event in Austin, United States. The XQI3 marked our expansion into the 3rd bike categories and the new XQI3 has attracted tremendous amount of attention Within only weeks since its debut, the XQI has won the 2023 Gold Winner of the New York Product Design Awards. We anticipate making the XQI3 model available to the North American and the European market in Q1 2024 and we're confident that will bring up the sales and therefore uplift the new Another product we launched for Europe is RQI new high performance urban quad electric motorcycles. It is designed to deliver accelerating CD ride with features like dual removable batteries and ABS, with a top speed of 110 kilometer per hour and 0 to 50 kilometer power Acceleration time just under the 2.9 seconds. The RQI's targeted riders for exciting acceleration experience.

Speaker 2

The motorcycle is equipped with the integrated traction control system built in from rear cameras and the impact detection system making it sophisticated and it's also a safe riding option. It also comes with new core smart features. The RQI expect to be available from Q1 2020 During Ecomo, we also brought the award winning XQI to the international market, a futuristic That earns the 2023 Red Dot Best Out Best Out of Best Design Award. The bike features the die cast unibody frame with 0 to 1000 joint, Now in addition to those electric motorcycle products, we officially launched the new swap battery swapping solutions compatible with newly launched S600E mopeds. The swapping technology enables riders to swap others quickly, reducing downtime and increase the convenience.

Speaker 2

During ECMA, We have presented the new soft cabinets that technical solution provider collaborating with partners in Europe, Southeast Asia and South America to deploy the battery swapping cabinets aiming to enter with respective local markets. The recent X1 events presented us an opportunity not only to unveil our latest product, but also engaging in meaningful conversations with our key distribution and retail partners. We're actively working with our distribution partner to quickly resolve temporary operation disruptions and get back on the growth trajectory. Now talking about the overseas micro mobility market, the micro mobility market 37% year over year decrease in sales in Q3. As mentioned earlier, the primary contributing factor is due to a selling order delay in Q3, While the sellout or activation volume has increased by 80% year over year, driven by a diverse product portfolio and an expanding sales network.

Speaker 2

During this quarter, we took a significant step in expanding our product portfolio by unveiling one of our Standout kick scooter product, the KQI Air and Air X series at the IFA event in Berlin, Germany. One of the standout features of KQI Air is the construction The main body predominantly crafted from lightweight carbon fiber, resulting in an incredible low weight of 11.7 kilos. The weight reduction does not compromise performance. The KQI Air delivered impressive capabilities, including top speed of 32 kilometer per hour and a max range of 50 Kilometers. It also incorporates dual action brake caliper to ensure its short braking distance for added safety.

Speaker 2

Moreover, the KQI Air embraces smart connectivity and enabling functions like NFC and Bluetooth unlocking, customizable charging Capacity settings, speed adjustment and also the regenerative braking strength. Notably, the KClare was awarded the Best of EFA 2023 by GACMAH, a highly regarded tech channel. The Quk Air has MSRP of $1400 for the standard Version 1799 for the Kika Air X full carbon fiber version. We launched the presale campaign on September and we expect to deliver the Kika Air to our customer in The launch of KQA Air marks our consistent effort in product innovation and we have more product in the rollout pipeline for next quarter to further complete our product offerings. Meanwhile, we're also leveraging The traction that we gather from our key scooter product to expand our sales network coverage.

Speaker 2

Currently, we have our new products sold in over 1500 offline Stores in the United States and Europe in major retailers like Best Buy and MediaMark. Together with the product portfolio enhancement, the sales network Now as we look forward, we remain a cautious outlook for Q4 this year as some of the operational adjustment in both the China and also the overseas electric mobile market We'll take time to be fully implemented to drive the midterm growth. We're nonetheless confident to regain growth in 2024 after a temporary adjustment period this year. In the China market, the 4th quarter traditionally experienced a low market demand. We're using this time to continue to enhance our product And build momentum for store expansions.

Speaker 2

In terms of product portfolio, the Softfin series is a testimony of a successful product portfolio expansion. We're also focused on expanding our retail stores this quarter. With those, we believe we're well positioned to get the effect on the high growth track in 2020 Now for the international electric tooling market, the additional new products off road and also the motorcycle Product and also the swapping solutions are well positioned us for growth in the key European, United States and the Southeast Asia market next year. We're also actively implementing the operational adjustments to better deliver those products to our key markets through the key channels. But we expect those adjustments will take time and hence we remain cautious outlook for the Q4 2023.

Speaker 2

Last but not least, for our international micro mobility market, we're pleased to report a sustained and robust growth trajectory. This growth is fueled by 2 key pillars: The completion of our product portfolio expansion of sales network, our product lineup has not only boosted sales volume, but also significantly elevated The presence of new brands within this market segment. The recent addition of the KQI Air represents just one of the many exciting products yet to come. The expanding product portfolio has driven the development of our sales channels with remarkable growth observed in our expanded retail network. We're confident in our ability for sustaining high growth in Q4 and beyond.

Speaker 2

Now, I'll turn the call over to our CFO, Fian.

Speaker 3

Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and comparisons you need, And we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial results, I'm Referring the Q3 figures unless I say otherwise and all monetary figures are in RMB if not specified. As Yan just mentioned, during the Q3, we sold a total of 266,000 units and 230 1,000 were sold in China, while the rest was sold overseas. And the total revenue for the 3rd quarter amounted to $927,000,000 a decrease of $226,000,000 compared to the same period of last year.

Speaker 3

And China market revenue was RMB785 1,000,000, accounting for 85% of the total revenue. Of this, the China scooter revenues were RMB 711,000,000, a year over year decrease of 17%. And this decrease was mainly due to the lower sales volume of our premium series and partially offset by the higher sales volume and revenue from our mass premium series. And the China scooter ASP was RMB3085, a year over year decrease of 5.5 And this decline in ASP was mainly due to the product mix change, which I just mentioned. And the overseas market revenue were $142,000,000 accounted for 15% of the total revenue.

Speaker 3

And overseas scooter revenue including the e motorcycle small pads, kick scooters and e bikes amounted to $122,000,000 compared to $195,000,000 in the same period of last year. And this decrease was mainly due to the Combined in the sales of e motorcycle and mopeds. The micro mobility revenue were around 109,000,000 up 20% quarter over quarter. And the overseas scooter ASP increased from RMB3.86 to RMB3430 year over year and mainly due to our premium model K3 MAX sales volume increase from 3,200 units to 7,100 units year over year. And the revenue from accessories, Spare parts and services amounted to $94,000,000 a 5% decrease compared to the same period of last year.

Speaker 3

And this decline was mainly driven by the lower sales of battery packs overseas as we mentioned in the previous quarters. And the gross margin decreased by 0.7 ppt year over year to 21.4 percent. And of this, 0.6 ppt of this decline was driven by the lower sales volume from the overseas Yimuru Cycle and Yimo Pass and the remaining 0.1 ppt due to the change to the product mix domestically. And our 3rd quarter OpEx amounted to $289,000,000 an increase of $25,000,000 compared to the same period of last year. And this increase was mainly due to a $88,000,000 increase in provisions for credit losses in this quarter.

Speaker 3

Excluding the impact of the credit losses in each period, the OpEx decreased 25% year over year. As percentage of revenue also decreased by 1.4 ppt from 22.3 last year to 21% this year. For the details, I will explain in a moment. Selling and marketing expenses were $123,000,000 as a percentage of revenue was 13.2%. It is a year over year decrease of RMB48 1,000,000 and RMB1.6 ppt lower than last year, primarily due to a reduction in advertising and promotion activities.

Speaker 3

R and D expenses amounted to 39,000,000 representing a $11,000,000 decrease year over year, primarily due to a decrease in share based compensation and staff costs and also the design and system development professional fees. G and A expenses were RMB127 representing a $83,000,000 increase year over year and this is due to the increase in provision for credit losses of 88 $1,000,000 Excluding this credit losses, the G and A expenses decreased by 13% compared to the same period of last year. Since our international operation has expanded, We have seen a corresponding increase in the extent of our account receivables, which forms the basis of computing the bad debt provisions. As we mentioned in the previous quarters, the European consumer sentiment remains cautious, leading our distributors to ask for pending payment terms due to the weak retail sales. In the meantime, one of our key motorcycle and small pads Distributors in the European market announced on September 6 this year that it's going into a core supervised construction process due to the intense economic pressures.

Speaker 3

Consequently, this quarter, we took a provision of RMB54 1,000,000 representing a full amount of receivable owned by this distributor. Despite the prudent raising provisions for credit losses on the overdue payments, we retain a positive outlook on the future receivable collections given our other partners' robust financial standing and their continuous ongoing payments. To conclude, excluding the prudent provision for private losses, our cost controls have driven an overall decrease in expenses And made us more efficient, linear and flexible to negative to today's to navigate today's volatile and weak macro economy and emerged stronger when condition eventually improved. In the 3rd quarter, our net loss was Nearly $80,000,000 under the GAAP measurement, compared to a net profit of $3,000,000 for the same period of last year. And turning to our balance sheet and cash flow.

Speaker 3

We ended our quarter with nearly RMB1.4 billion in cash, Restricted cash, term deposits and short term investments. The operating cash flow was RMB229 1,000,000 compared to RMB415 1,000,000 in the same period of last year and RMB270 1,000,000 last quarter. And our CapEx for the 3rd quarter amounted to $26,000,000 and has remained stable for the past 4 5 quarters. And now let's turn to guidance. We expect the 4th quarter revenue to be in the range of RMB490 1,000,000 to RMB612 1,000,000, representing a year over year decrease from 20% to flat.

Speaker 3

And please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectations, which is subject to change due to the uncertainty relating to various factors. And with that, we'll now open the call for any

Operator

There will be a short silence while questions are being collected. There are no questions at this time. I would like to hand the call back to management for closing remarks.

Speaker 2

Thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and look forward to reporting to you again next

Operator

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

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Key Takeaways

  • In Q3 the company sold 265,923 units, a 71% year-over-year drop, generating RMB 927 million in revenue (down 19%), with China sales down 12% and overseas sales down 38%.
  • Niu faced sluggish consumption in China’s top-tier cities and operational disruptions with its European distributor, leading to a cautious Q4 revenue outlook of RMB 490 million to RMB 612 million (–20% to flat YoY).
  • To broaden its market, Niu expanded its product lineup—introducing the MQL, Falcon series (F400T/F200), Funko series, off-road motorcycles, and a battery-swapping solution—aimed at diversifying customer offerings and retail coverage.
  • In micro-mobility, despite a 37% sales decline, kick scooter activations surged 80% YoY, bolstered by the presale success of the carbon-fiber KQi Air and expansion into over 1,500 offline stores globally.
  • Gross margin dipped to 21.4%, and while operating expenses fell excluding an RMB 88 million credit-loss provision, the company posted a GAAP net loss of RMB 80 million versus a prior-year profit.
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Earnings Conference Call
Niu Technologies Q3 2023
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