NIU Technologies

NASDAQ:NIU

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies Third Quarter 2023 Earnings Conference Call. Later, we will conduct a question-and-answer session. As a reminder, we are recording today's call.

[Operator Instructions]

Now I would like to turn the call over to Ms. [ Crystal Li ], Investor Relations Manager of Niu Technologies. Ms. [ Lee ], please go ahead.

[Unknown Executive]

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss new [ taxes ] results for the Third Quarter 2023. The earnings press release, corporate presentation and financial experience sheets have been posted on our Investor Relations website. This call is being webcast from company's IR side 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 U.S. Private Securities 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 those risk factors is included in the company's public [ filing in ] [indiscernible] and transmission.

The company does not assume any obligation to update any forward-looking statements, except as required by law. Our earnings press [Audio Gap]

.... in this call include a discussion of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to GAAP financial results. On the call with me today are our CEO, Dr. Yan Li; and CFO, Ms. Wenjuan Zhou. Now let me turn the call over to CEO, Yan.

[Yan Li, executive]

Thank you, everyone, for joining us on the call today. In Q3 2023 our total sales volume was 265,922 units with a year-over-year decrease of 71%. Specifically, sales volume in the China market had a year-over-year drop of 12% to 230,445 units and the sales volume in the overseas market experienced a year-over-year of 38% decrease to 35,468 units. Total revenue in Q3 2023 was RMB 927 million, a 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. To address this challenge in Q3, we expanded our product portfolio with a diverse design and functionality to address 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 2-wheeler market, we have experienced a year-over-year decline of 62%, influenced by a combination of challenging factors. The decline in the electric [ tool market ] in our key market, Germany and Netherlands has impacted our business. Additionally, we have also faced a temporary disruption in the key European markets due to operational difficulty faced by our distribution partner, which has further affected our sales performance in this period.

In response to those challenges we have encountered, we have implemented 2 strategic adjustments, expanding the product portfolio to expand our addressable market and operational adjustment to the result of temporary disruption. We introduced key electric motorcycle and [ auto ] motorcycle product to the European North American market to expand our addressable market beyond the electric moped.

For the Southeast Asia market, we have officially introduced a better swapping solutions comparable swap batteries and moped. Operationally, we're also working with our distribution partners 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 the selling order delays in Q3 despite the decline in the sell-in volume, we recorded the highest number of kick scooter activation in this quarter.

The number of activation in Q3 showed 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 and offline in the key market channels. In addition, during Q3, we launched an innovative [ KKR ART ] scooter for presales, which have been well received in the market. We're continuously working on expanding our sales channel penetration, aiming to reach a broader customer base and reinforce our market presence. We expect to get back to the growth track in the coming years 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 the diverse design by a functionality to address a wider customer needs. We introduced Q2 2023, the MQL emerged as a successful addition of our product lineup. It is a product that inherits the design from our all-time plastic M-Series along with the significant upgrading design performance. It has not only contributed positively to our sales volume, but also play a significant role in enhancing our brand image.

In Q3, we also successfully introduced the Falcon series [ as a new style with a long 400 T and ] F200, complementing the previously introduced F100 in Q2. Collectively, the entire [ cell can ] series accounted for more than 50% of our total sales in this quarter in Q3. The [ focus ] series represent our attempt to create another flagship design with this proven popularity. We plan to run more product within the newly introduced series in the coming quarters.

The F400T was introduced in August this year as a remarkable addition to our [ focuses ] product lineup. This electric bicycle draws inspiration from fighter jet and seamlessly incorporated new essential smart functionalities with the maximum range of 90 kilometers. The F400 has the design has captured significant attention since this launch. Notably, it took center stage at China to the country's largest gaming export garnered millions of [ us ] across all platforms.

Another product added this series [ Scent ] was F200 is released at the high-powered commuter scooters with the sports car inspires frame, it has a max range up to 70 kilometers an encrypted with new smart system. That F200 was also launched with a collaboration with a globally renewal [ IP coke ]. Our sales performance during the recent W11 shopping festival underscores the popularity of those recently launched products.

In the first 24 hours of promotion period alone, the preorder sales revenue surpassed sum of the entire period last year, showcasing the robust demand for our offerings. Several of our key products have secured prominent positions on the best-selling list of major platforms, including [ Tmall ] and JD.com. Specifically, the latest iteration of our claims electric bicycles has gained significant traction during the [ W11 ] shopping festival emerged as the #1 top-selling strategy electric bicycles in RMB 9,000 price range of a [ antimandJD.com ].

Together, our new [ SQi ] F200 and also SQi has claimed top spots ranking within the top 3 best-selling product in the electric bicycle category on [ Tmall ]. This highlights a strong customer preference across our diverse product range. We remain highly engaged in events and cross-brand collaborations to enhance our brand exposures. In September, we established a presence on the [ Fusion ] Games fest 2023 where we brought our F400 to the gaming in success.

We recently forged our official partnership with JD Gaming, 1 of the China's top eSports teams and the finalist in the League of Legend for 2023. Those engagements underscore our commitment to establish a strong brand presence and fortune connections with diverse audience in the face of temporary market challenges. We're confident that those initiatives will contribute significantly to our brand exposures and long-term growth prospects.

Now turning into international electric moped market. We faced the challenge in this quarter with a year-over-year decline in the electric mobile sales accounts for 62%. Several factors converge accreted this downturn, including the decline of electric moped market in the key European countries like Germany and Netherlands and the temporary operational disruption due to issue in [ counter bill distribution partner ] in Europe. But we acknowledge those challenges were actively engaged in addressing the regained traction in this market.

First, we expand our product portfolio beyond electric moped, widen our addressable markets. We have unveiled several key products ready for Q4 2023 and 2024 at ACMA in November. One key product that we review was SQi 3 electric dirt bike, it is designed with a futuristic look with a handful of choice aluminum frame colors integrate with new signature Halo like. We have reviewed the SQi 3 product during the ACMA in Milan, Italy in November and also brought it to the electrified export launch event in Austin, in the United States.

So SQi [ mark ] our expansion into the third bike categories and the new XVII has attracted tremendous amount of attention within the only weeks since debut. The SQi has won a 2023 gold winner of the New York product design awards. We anticipate making the SQi model available to the North America and European market in Q1 2024. And we're confident that will free up the sales and therefore, uplist the new spend recognition.

Another product we launched for Europe is [ RTI ] new high-performance urban cap electric motorcycles and is designed to deliver accelerating [ CVie ] features like do removal batteries and the top speed of 110-kilometer power and 250-kilometer power acceleration time just under the 2.9 seconds. The [ RQI ] targeted writers for exciting acceleration experience. The motorcycle is equipped with the integrated traction control system, building from rear cameras and impact detection system, making it sophisticated and it's also a safe writing option. It also comes with new core smart features.

The [ RQI ] expected to be available from Q1 2024 in Europe. During ACMA also brought award-winning SQi to the international market in future -- a futuristic design that earns a 2023 [ Red vessel Best Devon ] Awards. The bike features the [ die cast e-Body ] frame was [ 0,000 joint ] ensuring a seamless integration of [ formanfunctions ]. They offer easy handle making ideal for [ Citcommute ].

Now in addition to those electric motorcycle product, we actually launched the new swap battery swapping solutions compatible with the newly launched S 600 in moped. The swapping technology enables [ Ryder ] to swap others quickly reducing downtime and increase the convenience. During ACMA we have presented a new sub [ cabinets ] a technical solution provider, collaborating with partners in Europe, Southeast Asia and South America to deploy the battery swapping cabinets aiming to enter their respective local markets.

The recent ACMA events presented us an opportunity not only to unbuild our latest product, but also engage in meaningful conversations with our key distribution and retail partners. We're actively working with our decision partner to quickly resolve temporary operational disruptions and get back on the growth trajectory. Now talking about the overseas micromobility market.

The micro mobility market reported a 37% year-over-year decrease in sales in Q3. As mentioned earlier, the primary contributing factor is due to selling order delay in Q3 while the sell-out or activation volume has increased by 80% year-over-year, driven by a diverse product portfolio and expanding sales network.

During this quarter, we took a significant step in expanding our product portfolio by big 1 of our standout kick scooter product, the [ KIR and RX series ] at [ IFA ] event in Berlin, Germany. One of the standout features of [ Kari ] construction [ with the Manbody ] predominantly crafted from lightweight carbon fiber, resulting in an incredible low weight of 11.7 kilos.

The weight reduction does not compromise performance, the [ KI ] are delivered improved capabilities, including top speed of 32-kilometer power and a max range of 50 kilometers. It also incorporates 2 action brake caliber and ensure a short-breaking distance for added safety. Moreover, the [ KPI ] [ are ] embraces smart connectivity enabling functions like [ NFC ] and Bluetooth unlocking customized for charging capacity settings, speed adjustment and also the regenerative braking strength.

Notably, the [ KPI ] was awarded the Best of [ IFA ] 2023 by [ GageMatch ], a highly regarded tech channel. The [ Cooker Air ] has an MSRP of $1,400 for the standard version -- of $1799 for the [ Kipa ] carbon fiber version. We launched the presold campaign in September, and we expect to deliver the [ KKR ] are to our customer in December this year in time for the holiday season.

The [ long to Kia are ] marks our consistent effort in product innovation, and we have more peak scooter product in the our pipeline for the next quarter to further complete our product offerings. Meanwhile, we're also leveraging the traction that we gather from our [ Kixor ] product to expand our sales network coverage. Currently, we have our new products sold in over 1,500 offline stores in the United States and Europe in major retailers like Best Buy and Media Mark.

Together with the product portfolio enhancement, the sales network expansion has laid a solid foundation for ramping up sales in the next few months throughout the holiday season. Now as we look forward, we remain a cautious outlook for Q4 this year as some of the operational adjustments in both the China and also the overseas electric moped market will take time to be fully implemented to drive the midterm growth.

We're nonetheless confident to regain growth in 2024 after a temporary adjustment period this year. In the China market, the Fourth Quarter traditionally experienced a low market demand. We're using this time to continue to enhance our product portfolio and build momentum for store expansions. In terms of product portfolio, the [ song ] series is the testimony of successful product for [ tolexpansion ]. We're also focused on expanding our retail stores this quarter. With those, we believe we are well positioned to get back on a high-growth track in 2024.

Now for the international electric 2 wheel market, additional new products [ offload ] also the motorcycle product and also the swapping solutions that will position 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.

Last but not least, for our international micromobility market. We're pleased to report a sustained 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 significant the presence of new brands within this market segment. The recent addition of the [ KPA ] represents just 1 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 assisting high growth in Q4 and beyond. Now I will turn the call over to our CFO, Fion.

[Wenjuan Zhou, executive]

Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and comparisons you need and we have also uploaded excel format figures to our IR website for your easy reference.

As I review our financial results, I'm referring the Third Quarter figures, unless I say otherwise, and all monetary figures are in RMB, if not specified. As Yan just mentioned, during the Third Quarter, we sold a total of 266,000 units and 230,000 was sold in China, while the rest was sold overseas. And the total revenue for the third quarter amounted to RMB 927 million, a decrease of RMB 226 million compared to the same period of last year. And China market revenue was RMB 785 million, accounting for 85% of the total revenue.

Of this, the China schooler revenues were RMB 711 million, a year-over-year decrease of 17%. And this decrease was mainly due to the lower sales volume of our premium service and partially offset by the higher sales volume and revenue from our mass premium series, and the China scooter ASP was RMB [ 30 ]5, 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 RMB [ 42 ] million, accounted for 15% of the total revenue. And the overseas schooler revenue, including the [ immoralcycle], moped, [ Kikoders and Box ] amounted to RMB 122 million compared to RMB 195 million in the same period of last year.

And this decrease was mainly due to the decline in the sales of e-motor cycle and moped. The micromobility revenue were around RMB 109 million, up 20% quarter-over-quarter, and the overseas quarter ASP increased from RMB 3386 to RMB 3430 year-over-year and mainly due to our premium model [ KMAX ] sales volume increase from 3.2000 units to 7.1000 units year-over-year. And the revenue from accessories, spare parts and overseas amounted to RMB 94 million, 5% decrease compared to the same period of last year. And this decline was mainly driven by the lower sales of battery packs overseas, as we mentioned in the previous quarters.

And the gross margin decreased by 0.7 ppt year-over-year to 21.4%, and of this 0.6 ppt of this decline was driven by the lower sales volume from the overseas [ immoral ] cycle and moped and the remaining 0.1 ppt due to the change to the product mix domestically. And our Third Quarter OpEx amounted to RMB 289 million, an increase of RMB 25 million compared to the same period of last year. This increase was mainly due to an RMB 88 million increase in provisions for credit losses in this quarter.

Excluding the impact of the credit losses in each period, the OpEx decreased 25% year-over-year. As a percentage of revenue also decreased by 1.4 pt from 22.3% last year to 21% this year. For the [ eastern ] I will explain in a moment.

Selling and marketing expenses were RMB 123 million. As a percentage of revenue was 13.2%, it is a year-over-year decrease of RMB 48 million and 1.6 ppt lower than last year. primarily due to a reduction in advertising and promotion activities. R&D expenses amounted to RMB 39 million, representing a RMB 11 million decrease year-over-year, primarily due to a decrease in share base compensation and staff costs and also the design and system development professional fees.

G&A expenses were RMB 127 million, representing a RMB 83 million increase year-over-year, and this is due to the increase in provision for credit losses of RMB 88 million. Excluding these credit losses, the G&A expenses decreased by 13% compared to the same period of last year. Since our international operation has expanded, we have seen a corresponding increase in the extent of our account receivables, which forms the basis of computing the bad debt provision.

As we mentioned in the previous quarters, the European consumer sentiment remains cautious, leading our distributors to ask for extended payment terms due to the weak retail sales. In the meantime, 1 of our key motorcycle and moped distributors in the European market announced on September 6 this year, that it's going into a core supervise this constructing process due to the intense economic pressures.

Consequently, this quarter, we took a provision of RMB 54 million, representing a full amount of receivable owned by the distributor. And despite the prudent raising provisions for credit losses on the overdue payments, we retain a positive outlook on the future receivable collections. Given our other partners' robust financial standing and their continuous ongoing payments.

To conclude, excluding the prudent provision for [ credit ] losses, our cost controls have driven an overall decrease in expenses and made us more efficient, linear and flexible to navigate today's volatile and weak macro economy and emerge stronger when conditions eventually improve.

In the Third Quarter, our net loss was nearly RMB 80 million under the GAAP measurement compared to a net profit of RMB 3 million for the same period of last year. And turning to our balance sheet and cash flow, we ended a quarter with nearly RMB 1.4 billion in cash, restricted cash, term deposits and short-term investments.

The operating cash flow was RMB 229 million compared to RMB 415 million in the same period of last year, and RMB 217 million last quarter. And our CapEx for the Third Quarter amounted to RMB 26 million and has remained stable for the past 5 Quarters.

And now let's turn to guidance. we expect the Fourth Quarter revenue to be in the range of RMB 490 million to RMB 612 million, representing a year-over-year decrease from 20% to flat. And please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary 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 questions that you may have for us, operator. Please go ahead.

[Operator]

We will now begin the question-and-answer session.

[Operator Instructions]

There are no questions at this time I would like to hand the call back to management for closing remarks.

[Yan Li, executive]

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.

[Operator]

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