Niu Technologies Q1 2024 Earnings Call Transcript

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May 20, 2024

There are 5 speakers on the call.

Operator

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the New Technologies First Quarter 2024 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 will turn the call over to Ms. Crystal Lee, Investor Relations Manager of New Technologies. Ms. Li, please go ahead.

Speaker 1

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss New Technologies results for the Q1 2024. The earnings press release, corporate presentation and financial spreadsheet has been posted on our Investor Relations website. This call is being webcast from the company's IR site 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 provisions of the U. S. Private Securities Litigation Reform Act of 1995. Forward looking statements involve risks, uncertainties, assumptions and other factors. The company's actual results will be materially different from those expressed today.

Speaker 1

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

Speaker 1

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

Speaker 2

Thank you, Crystal, and hello, everyone. Thank you for joining us today. In the Q1 of 2024, our total sales volume was 129,000 units, reflecting a year over year increase of 37%. Notably, our sales volume in the China market saw uplift of 31% to 110,000 units, while our overseas market experienced a fast growth of 48% to 19,000 units. Total revenue of Q1 was RMB 504.7 million, marking a 21% year over year increase.

Speaker 2

Q1 2024 was a pivotal quarter to realign our long term growth trajectory. In the China market, we continue to refine our product strategy, concentrating on the premium segments. We bolstered our competitive product portfolio by enhancing our classic series and broaden its appeal to encompass a more diverse range of vertical user groups. A key highlight of this quarter was the successful launch of NXP model. The NXP series characterized by its innovative design and advanced technology was met with substantial market approval.

Speaker 2

It contributes 25% of our total sales revenue in China market this quarter, underscoring the efficacy of a strategic focus. Encouraged by the success, we're committed to persisting with this approach and excited about several upcoming product launches scheduled for Q2. The overseas market has met our expectation for regaining growth. In the micro mobility sector, we have focused on expanding our sales channels to establish a strong foundation for product driven growth for the rest of the year. We have increased our retail presence by partnering with leading retailers such as Best Buy and Media Mart, thereby expanding our physical footprint over 1200 locations worldwide.

Speaker 2

For our overseas e moped and e motorcycles, we have concentrated on exploring direct sales business models in key markets in Europe and United States. We believe those strategic efforts are setting a stage for substantial growth in the coming quarters. Now let's take a closer look at the China market. We have laid out our product development, conducted market activities and expanded sales channels in Q1, all in alignment with our core strategy for this year. Our goal is to build a urban mobility brand focused on the premium market segment with diversified user needs.

Speaker 2

At our product launch event in February, we debuted the NX series. This series continues to define our 1st legendary scooter, the M1, but elevates with the futuristic elements like magnetic transparent panels, aerodynamic lines and the enhanced version of signature halo light. The NXP, the most premium scooter in this lineup, was the most advanced technology to date. The market received the NXP series exceptionally well, marking our initial venture into targeting young demographics with scooter products. To further expand our product line up targeting the Gen Z demographics, we have introduced the N Play and the U Max into the market.

Speaker 2

The N Play was officially launched in March at a starting price of RMB 4,399 quickly becoming a competitive product among the young university students. Building on the momentum from NXT and PLAY, we're launching another product, the U Max completing our offering for the young consumers. The U Max is specifically designed for young riders in Tier 1 to Tier 3 cities, a turn to lifestyle trends. It features a large form factor that enhance both visual appeals and the rider comfort, ideally for dynamic urban environment. Performance wise, the Umax offer maximum range of 160 kilometers on a single charge and includes the boost pump drive mode for rapid acceleration.

Speaker 2

For safety and enjoyable rides, incorporate TCS ensuring a secure and adaptable experience across various urban terrains. Now with the newest addition, our full range of product targeting the trendy young riders is now ready for the upcoming peak quarters. Another target group who aim to expand with our unique position of products is a female electric scooter riders. Earlier this year, we released our 1st female focused scooter, the upgraded U1E. The U1E features new color scheme, ergonomic improvement in handles and seat positions, easy to use smart functionalities and option to include baby seat among its accessories, launched at the beginning of March just in time for the International Women's Day campaign.

Speaker 2

This model accounted for 12% of total sales volume for the entire quarter despite being on the market for only 1 month. Ready on the momentum for the U1E, we are continuing expanding our female focused scooters, the latest addition to our classic M Series product line is the MS scooter tailored to meet the unique needs of female consumers in the premium market segments. The MS scooter showcase the classic and the minimalist aesthetics with color schemes in beige white and mint green, creating an elegant and clean style that distinguish itself from other scooters in the market. This scooter is also engineered specifically to cater the distinct needs and preference of female riders, such as the traction control system to ensure that a smooth riding experience, a dual tube frame system for enhanced stability and both front and rear disc brakes offering an advanced level of safety. We also expect to introduce another product specifically tailored for female users in the coming days, the O Series.

Speaker 2

The O Series combine aesthetic design and unique ergonomics to address special needs of female scooter riders. We plan to release the O Series on July 1 through a live stream with top influencers and I look forward to sharing more details after the launch. Now with the introduction of MS and O Series, we'll soon complete our product line targeting the premium female user segment of the market. As I mentioned in my previous earnings call, building on our product portfolio to target various premium segments is a core component of our business strategy this year. I'm pleased to share that we have already received some initial positive feedback with the strategy in place.

Speaker 2

Now, with our product strategy in focus, we have been actively engaging continuous marketing and branding campaigns to reinforce our brand identity. Recently, we rolled a dynamic marketing campaign and broadcast a mix of videos across iconic landmarks in 6 major cities significantly enhance our brand high end positioning and robust capabilities. The campaign prominently featured NXT, our cutting edge flagship product, establishing as an ideal vehicle for stylish urban commuters. The NXT is designed to resonate with the new generations of trendsetters. The video showcasing key urban centers like Beijing, Shanghai and Guangzhou has captured the public attention a massive total of nearly 100,000,000 views.

Speaker 2

Our branding effort also center around the newly introduced product lines targeting a specific user demographics. At the beginning of the year, we announced our collaboration with JD Gaming, a top performing Esports team. As their official electric vehicle partner, we collaborate ranges from brand activities to product launch, aiming to making a significant impact on the Generation Z demographic, which align with our product focus. To further bring up our product presence among the young users, we have initiative to collaborate with top gaming peripherals brand Razer. Last year, we released the co branded new Cross Razer SQI limited edition.

Speaker 2

And this year, we're taking the partnership 1 step forward to collaborate as Razor's brand ambassador. In May, Niu joined Razor to host gaming events in various universities by presenting a Razor Niu co branded scooters. So far, the event has covered numerous universities with 2,000 events attendees. In addition, during the period, we have generated widespread content on social media for more than 2,000,000 views. We plan to carry out a series of student events throughout 2024 with 100 plus universities to host the event.

Speaker 2

Now to engage a female demographic effectively, we have launched a series of online campaign specifically tailored to introduce scooter design for female users. In Q1, with our upgraded E1E scooters through a live stream campaign led by a prominent influencer, gathered a significant traction that position us as the top brand in the mobility category during the campaign period. Now throughout the launch of the flagship product, we continue our online campaign effort. We collaborate with over 70 KOLs in the industry and created approximately 200 pieces of high quality content, which generate 80,000,000 views across various platforms. Now let me turn into the overseas market.

Speaker 2

This quarter, we have witnessed a year over year growth of 48%, driven by the micro mobility sector with year over year growth of 63%. The growth in the micro mobility sector is combined results of product offering expansions and the sales channel lineup. On the product portfolio front, with the introduction of a KQO Air, a full carbon fiber lightweight performance kick scooter in last year September, we now have a comprehensive product lineup. To further complete our product offerings in Q1, we launched the KQI 300 series, which is the enhanced upgrade of the popular KQI 3 series, designed for all urban terrain use. The series featured a dual tube hydraulic suspension for better handling on uneven surfaces, promising up to 60 kilometer range per charge.

Speaker 2

Starting at $6.99 the KQI300 series was met with great popularity upon its pre order period. The QQI300 will be officially made available in Q2 this year and we believe it will lift the sales volume in the coming months. Now with our comprehensive product line up, we've made a significant progress in entering retail channels since the second half of last year, laying out a solid foundation for the growth. In the United States market, we're well positioned in 800 plus Best Buy stores and are advancing our effort to enter additional retailer like the Lowe's, Home Depot, Walmart, Target and Costco. In Europe, our product is placed in over 400 Media Mart stores in Germany, over 100 Blanche stores in France and over 100 Media Mart and the core English stores in Spain.

Speaker 2

We're working closely with our retail partners on marketing campaigns to boost sales, which proven effectively during the Q1. During a pilot promotion with our German retailers, we witnessed our year over year growth of over 300% in scooter activation numbers in Germany. To further expand our retail partnership, we are actively moving forward with the new retail dealers such as Decathlon in France, Media World in Italy and others. Through our retail network expansion effort, we'll aim to double retail footprint selling micro mobility product by end of 2024. Now the electric 2 wheeler sector in Q1 is marked by a significant transition in both our product portfolio and operating models across core business market in the U.

Speaker 2

S. And Europe. Last quarter, we introduced the MGT 100, RTI and XQI models, all of which has garnered a considerable attention and a strategic fill the gap in the market, offering a comprehensive coverage from 50 cc to 125 cc electric 2 wheelers. The XQI recently received a prestige RedDoll award in April this year, joining a few other new legendary products that have received this owner. Although product encountered a temporary logistic delays, we anticipate they will be fully distributed in the targeted market by Q2 2024, aligning perfectly with the peak sales season.

Speaker 2

And during this quarter, we have made significant adjustment to our business operations in overseas. In several key markets alongside our existing distributors, we're establishing local entities and operation team to manage the direct distribution to dealers. We believe those direct distribution to dealer model allow us to invest more heavily in local branding and marketing efforts, establish a strong customer relationship and increase our adaptability to local market fluctuations. While those operation changes require time to fully implement and direct to dealer model has tend the sales and revenue recognition period, we're confident this strategy not only deepen our roots in those local market, but also drive substantial long term growth. Aligned with our updated product offerings and expansion of sales network, our branding effort in Q1 has been actively pursued internationally.

Speaker 2

We focused on both enhancing our with our sales network, including the distributors and dealers by sharing our plan for the upcoming quarters. To build and fortify our brand presence in Q1, we actively participate in major industry events such as an I'm Expo in Las Vegas, Motor Raiders in Dortmund, Germany and the Salon Deuteru in Lyon, France. Those events significantly amplify our brand visibility. Furthermore, we hosted a series of new connect events aiming at local media, distributor, retailers to showcase and introduce our 2024 product lineup. In Q1, we successfully carried out those events in France and Italy, bringing together over 50 partners to provide commercial and technical information on our new products and test drive our new products.

Speaker 2

Notably, the local media partners, including CleanRight and more have published very positive reviews of product. We plan to continue the new Connect series throughout the year in various locations, demonstrating our commitment to build long term relationship with our partners in the core regions. Now as we conclude in Q1, we anticipate a continued growth in Q2. For China market, the growth is driven primarily by introduction of new product and channel improvements. We have already witnessed the great popularity of nVAC series launch in Q1, while waiting time to finish release of premium product line MSN O Series in the coming weeks.

Speaker 2

Furthermore, our comprehensive approach to expand channel through both the physical stores and online platforms ensures that we are broadening our market footprint while meeting the diverse needs of our customer base. We actively expand our sales channels to improve offline coverage in all tier cities to support our products. And with additional new stores, the key focus for 2024 remains the improvement of same store sales by leveraging a combination of online to offline traffic. In Q1, we conducted over 6,000 livestream sessions on platforms such as Douyin, Timo, JD dotcom and Xiaohongshu. Notably, the newly entered Douyin live stream platform has positioned us as top 3 brands in this category, indicating a successful online to offline conversion model that we plan to scale up further.

Speaker 2

In Q2, we have series of product launch event planned to utilize the online live stream sales network, which will be our channel focus for the coming quarters. As we enter the peak sales season with campaigns such as 618 online shopping festival, we aim to drive further same store growth. With the product portfolio enhancement and sales expansion, we believe we are well positioned in China market for the rest of the year. However, we also observed a macro sluggish market trend in Q2 and that we remain cautious about potential growth in our China market in Q2. For the overseas market, we maintain positive outlook.

Speaker 2

In the micro mobility segment, we anticipate 2x growth throughout the year supported by our comprehensive product portfolio and established sales network. The introduction of KQI300 series promise to lift sales volume in the coming months. Our significant progress in unturned retailer channels has laid out a solid foundation for growth in 2024. We're advancing our effort in entering additional retailers in this key market. Now in the overseas motorcycle market with adjustment in product offerings, operation strategy, we're confident to regain growth by Q2.

Speaker 2

The recent introduction of the new product gathered a considerable attention that strategically fueled the market gaps. We anticipate the distribution of the new product in the target market by Q2, aligned with the peak sales season. Additionally, the establishment of a local entity's operation team to manage direct to dealer distribution will allow us to invest more highly in local branding and marketing effort. We're now working with over 100 dealers in our direct sales network and we plan to continue to grow those numbers throughout the year. So in summary, I'll strictly focus on product innovation, targeted market campaign and robust channel expansion, both domestically and international position us well for the continued growth.

Speaker 2

We're confident in our ability to improve sales and achieve our business objective in the upcoming quarters. Now I will turn over the call to our CFO, Dianzuo, to talk about financials.

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 Web site for your easy reference. As I review our financial results, I'm referring to the Q1 figures unless I say otherwise, and all monetary figures are in R and D if not specified. As Yan just mentioned, our total sales volume for the first quarter was 129,000 units, up 37% compared to the same period of last year and 110,000 units were sold in China while the remaining 19,000 were sold overseas and over 50% of our sales volume in China was contributed by the new product launched this quarter. And the total revenue for the first quarter amounted to RMB505 1,000,000, an increase of RMB87 1,000,000 or 21 percent compared to the same period of last year.

Speaker 3

In China, revenues were RMB445 1,000,000, accounting for 88 percent of the total revenue. Of this, the scooter revenue was RMB393 1,000,000, a year over year increase of 28.8 percent. And this increase was mainly due to the increase in the sales volume and partially offset by a decrease in revenues per scooter. The China scooter ASP was RMB3568, a year over year decrease of 4.7%, while a quarter over quarter increase of 11% compared to last quarter. And the year over year decline in ASP was mainly due to a change in product mix within the premium series.

Speaker 3

Last Q1, our revolutionary high end electronic bicycle, the S series debuted in the market with a retail price range of RMB8999 to RMB9199 and contributed 6% of the sales. While this quarter, we introduced our flagship product NXP with a wider retail price range from RMB6 1,299 to RMB7,999 12,499, all above contributed 26% of this quarter's sales. And overseas revenue was $60,000,000 accounting for 12% of the total revenue. The scooter revenue including eMocycles, eMopeds, kick scooters and e bikes amounted to RMB49,000,000 compared to RMB53,000,000 in the same period of last year. The decrease was mainly due to the decline in the sales of electronic motorcycles and mopeds and partially offset by the increased sales of KickScooter.

Speaker 3

The micro mobility revenue was around 43,000,000 up 10% year over year. The overseas scooter ASP decreased from RMB4,138 to RMB2,577. The year over year as the sales of the kick scooter with the lower ASP increased, like our entry level K1 and Ku series. However, compared to the Q4 2023, the ASP increased 18% quarter over quarter. The revenue from accessories, spare parts and services amounted to RMB 63,000,000, a 7% increase compared to the same period of last year due to the increase of spare parts sales in China market.

Speaker 3

And the gross margin for the Q1 was 18.9%, 2.8 ppt lower than the same period of last year and 0.1 ppt lower than the previous quarters. This decline was mainly due to an increase in the proportion of kick scooter sales overseas, along with the lower margin for e scooters in China. In China, we changed our product mix to focus more on the widened price range of the premium market, as I mentioned earlier. And additionally, we allocated part of the gross margin to our distribution channels, which further reduced the company's overall gross margin. And talking about operating expenses, the 1st quarter OpEx was 165,000,000 representing a 4.6% increase compared to the same period of last year.

Speaker 3

Selling and marketing expenses were $105,000,000 up $33,000,000 year over year, primarily due to our overseas business expansion, which resulted in a higher after sales services and rental expenses, as well as the higher advertising and promotion expenses international market. Research and development expenses amounted to RMB29 1,000,000 down RMB6 1,000,000 year over year, mainly due to a $5,000,000 decrease of share based compensation in staff cost. G and A expenses were RMB31 1,000,000 down RMB20 1,000,000 year over year, mainly due to a decrease in the bad debt provision of RMB20 1,000,000. In the Q1, we had a net loss of RMB55 1,000,000 with a nice loss margin of 10.9% under the GAAP accounting, compared to a net loss of $60,000,000 for the same period of last year. And the adjusted net loss was 49,000,000 dollars And turning to our balance sheet and cash flow, we ended the quarter with 1192,000,000 versus RMB860 1,000,000 last year in cash, restricted cash, term deposits and short term investments.

Speaker 3

Our operating cash inflow amounted to $34,000,000 and we expect the operating cash flow to remain healthy afterwards as the payment terms to our suppliers exceed our invoicing payment terms. CapEx for the Q1 amounted to 21,000,000 dollars reflecting an increase of $5,000,000 compared to the same period of last year and this can be attributed primarily to an increase in the opening of new stores in China. And now let's turn to the guidance. We expected the 2nd quarter revenue to be in the range of $912,000,000 to $955,000,000 an increase of 10% to 20% 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 related to various factors.

Speaker 3

And with that, we have now opened the call for any questions that you may have for us. Operator, please go ahead.

Operator

Thank you. Our first question comes from the line of Yatin Chen from CICC. Please go ahead. Your line is open. The line of Yatin Chen is now open.

Operator

Please go ahead with your question.

Speaker 4

Sorry, I muted. So my first question is about the gross margin. We have seen that the structure of the products improved quarter on quarter because the proportion of premium products improved quarter on quarter, but the gross margin didn't improve a lot quarter on quarter. Could you please explain the reason?

Speaker 3

This is Fiong. Regarding to the gross margin compared to the last quarter, actually there is a major difference if we see the quarter over quarter differences that we changed our sales policy that we sharing more gross margin with our distributors to regain the Chinese market and also reinforce their belief in the news product. While in the meantime, we also changed the partnership or the way that we used to cooperate with our distributors that we are responsible for all the marketing and the promotion expenses related with the retail from the retail side. This year since we are sharing more gross margin with our distributors, we are going to reduce the marketing expenses and subsidies to the retail channel to maintain a healthy contributing margin or the operating margin before the tax. This is the common practice with our competitors.

Speaker 3

And also, we think it's a good time to reinforce our sales channel with our improved all the new products in the appropriate distribution channel. So this is the main differences if we see the gross margin quarter over quarter change. And with the gross margin, our year over year change, just as I just explained, on top of the sales policy change in China, the main reason is that the proportion of kid's cooler sales overseas contribution is more than last year.

Speaker 4

Thank you. And my first question is about the period expenses, because the selling expenses in Q1 is still high. So will we see the downward trend of the selling expenses ratio in quarter 2, 3 and 4. So will you give us guidance about the selling expense ratio?

Speaker 3

Okay. Regarding to the selling and marketing expenses, actually when we separate by segments, the S and M expenses in the domestic market as a percentage of revenue has been reduced by this quarter by around 2% to 3% 2% to 3% ppt as percentage of revenue. While in the meantime, the international the selling and marketing expenses in the international market is still at the high level. Just as I just explained that we keep going to invest in their brand recognition, the channel building in the overseas market. And that's why those kind of expenses is as percentage of revenue or as per scooters expenses, it's kind of like FX expenses.

Speaker 3

It cannot be it cannot change to the various parts since the sales volume in the international market is still at a relatively lower level. And we expected those kind of expenses to be changed at the various expenses Once our sales volume could be reached to above 3 100,000 to around 500,000 and then those kind of expenses could be much lower per scooters. And this is the main reason why the selling and marketing expenses still at this higher level. We hope we expected this year's selling and marketing expenses as a percentage of revenue will become lower quarter over quarter. And up to now, we see that it's still on the track.

Speaker 3

So next quarter, when we release our financial figures, the overall selling and marketing expenses as percentage of revenue will be reduced compared to this quarter.

Speaker 4

Understand. Thank you very much. And my third question is about the retail stores. In 2023, we have seen that the decrease of retail stores in China. So we have seen that our sales volume start to grow again.

Speaker 4

So do you have plans in 2024 about the retail stores in China? Will we increase the volume of retail stores in China in this year?

Speaker 2

Yes. I think that's right. So we're looking at expand number of stores. So if you look at Q1 this year, so we actually in Q1 this year, we have the numbers the store comps actually have increased less than 100, about 20 or 30 number of stores. That's because many stores are actually in construction and haven't really finished the construction.

Speaker 2

So we're looking at basically adding a few 100 stores in Q2. And in Q3 and Q4, it depends. I think Q3 is usually a peak season where the store adds will be actually less, but the Q4 will continue to expand stores.

Speaker 4

Understand. Thank you very much. And my last question is about our sales volume target in 2024 because in the 2023 and core, we gave the guidance about the sales volume in 2024, which means we were a target to sell more than 1,000,000 units in 2024. So will we keep the target as present or lower down or improve?

Speaker 2

I think at this point, we still keep the target. And so basically, we're still looking for 1,000,000 plus units, including China and also including China and overseas altogether.

Speaker 4

Okay. So do you see so will we see that the growth more from China market or from overseas market? Because

Speaker 2

I think in terms of gross percentage, I think that will actually come more from the overseas market, because overseas market start with a lower base. Last year, the overseas market is roughly about 100,000 units, right? So in tomorrow, gross percentage, I would expect you actually will see more from the overseas market. But in terms of the volume, absolute volume number growth, you will see more from the China side.

Speaker 4

Okay. Thank you. Understand. Thank you for your time. That's all my questions.

Operator

Thank you. There are no further questions at this time. So I'll hand the call back to CEO, Doctor. Yan Li for closing remarks.

Speaker 2

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

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Key Takeaways

  • In Q1, total sales volumes rose 37% year-over-year to 129,000 units, driving a 21% increase in revenue to RMB 504.7 million, with China up 31% (110,000 units) and overseas up 48% (19,000 units).
  • The premium-focused China strategy delivered strong results, led by the launch of the NXP model, which accounted for 25% of China sales revenue and bolstered the product line targeting young and female riders.
  • Overseas growth accelerated through expansion of retail channels—partnering with Best Buy, Media Mart and others to reach over 1,200 global locations—and shifting to direct-to-dealer distribution in key US and European markets.
  • Gross margin declined to 18.9% due to a higher mix of lower-margin kick scooters overseas and increased distributor incentives, while Q1 net loss narrowed to RMB 55 million and cash rose to RMB 1.19 billion.
  • The company reaffirmed its 2024 target of over 1 million units sold and issued Q2 revenue guidance of RMB 912–955 million, projecting 10–20% year-over-year growth as new products and channel expansions take effect.
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