Q1 2021 NIU Technologies Earnings Call

May 17, 2021

[music].

Good day, ladies and gentlemen, thank you for standing by and welcome to the New technologies first quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions.

And it will follow at that time as a REIT.

A recording today's call.

Do you have any objections you may disconnect at this time.

Now I will turn the call over to Mr. Jason Young.

Investor Relations manager of New technologies, Mr Young and schools.

Okay.

Thank you operator, Hello, everyone and welcome to today's conference call to discuss new technologies results for the first quarter 2000 and Sunday.

And what the earnings press release, corporate presentation, and financial, especially happy and posted on the new <unk>.

That's a religious website. This call is being webcast from Communist IR website, and a replay of the call will be a level two and please note today's discussion will contain forward looking statements made under the safe Harbor provisions of the United States Private Securities Litigation Reform Act of 90, 95 forward looking statements involve risks and.

And certainties assumptions and other factors the company's actual results may be materially different from those expressed today further information regarding the risk factors is included in a communist public filings with the Securities and Exchange Commission.

A company does not assume any obligation to update and if we are looking statements except as required by law.

Our earnings press release and this call include discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and are a constellation of GAAP to non-GAAP financial results.

And the call with me today are our CEO, Dr. Yan Li and the CFO Mr. Hardy Zhang now, let me turn a call to over yet.

Thanks, Jason and thanks to everyone for joining us on a call today.

So in Q1, and we saw a 322% year over year jumped and China sales were shipped nearly a 145000 units and China propelled by a aggressive expansion of our retail footprint and a multichannel marketing campaign, nicknamed a year of new <unk>.

Additionally, our overseas market saw a shipment of 5000 units for the first quarter. The smart declined 15% in the overseas market was primarily due to the orders that could not be shipped out resulting from the ongoing global shipping bottlenecks.

We are aware of that.

Total Q1 sales per China and international market for Us.

And 273% year over year.

In Q1, and not even the Chinese new year holiday slowdown our retail expansion and we added 300, new branded stores crop, China, reaching 1916 stores by March 31.

During our global product launch event on April six we announced the opening of our 2000 store in China.

We're on track to hit our Q2 target of 300, new stores for the quarter.

For the international market, even under the strength of COVID-19, we managed to add additional several flagship and premium stores, which now total 123 across Europe, the Americas and the southeast Asia.

This is in addition to the 1000 plus also a new dealers in our global markets.

For those of you who didn't already know our company name New actually means Bull ox and English a year of 2021 happens to be the Europe, oxy and the Chinese lunar calendar. So we kick off the Chinese new year by launching a year of new B a newer nationwide campaign.

When you listed a help a popular musicians and social media, Influencers, which generated more than 200 million views across multiple social media platforms. During the holiday season, we also kicked off and over the air.

Advertisement campaign during the Chinese new year, which allowed us targeting over a 110 million viewers across markets in China that we have identified as key to helping us accelerate our growth.

We also collaborated with some of the hottest online documentary series call exactly a food availability, which helped us targeting another 41 million viewers and a key demographic segments.

Our new brand and so in a quite a show accounts also benefits from those activities with quarterly views, reaching nearly $55 million in Q1, marking a 38% year over year increase.

Now in the overseas markets, our social media channels gained nearly 1 million interactions on Instagram and Facebook, We also announced a partnership with formulary reward Champaign Antonio Flagstar, Castor as a official new and Baxter and the kickoff of our partnership with a line in a key U S. A European market, which will help.

The accelerated adoption of electric two wheelers.

We have been making noise, both in China overseas market in order to position ourselves as a go to lifestyle brand for urban mobility, and helping us grow sales by more than 300 per day in China alone.

Now riding our strong sales and marketing performance in Q1, we hit a ground running on April six with a global product launch 17, Insulet announcing both China and international product releases Bill.

Building upon the customer demand for our goal of a series of electric moped with launched a core F series with a zero up to and at Gore and a goal of C series with a six zero. This our two key product groups that will help us expanding into the wider range of urban market and the customer segments around China.

During that same event, we launched our first electric scooter for Europe, and the United States The <unk> series.

And despite new products were also accompanied by four upgrades to our existing serious a more pad electric bicycles.

First of all of the upgrades to the existing electric bicycle mopeds are made under the food first we're very excited to launch a seventh generation of our new energy system, which saw a upgrade of our proprietary battery management system. The introduction of <unk> electric motor and the optimization of our <unk>.

Algorithm for the motor controller, which kind of improve the driving range up by up to 32% and improved acceleration by 10% to 15% and at the same motor power in most of our existing vehicles.

And lastly, as we finalized commercialized a version of our urban motorcycles. The <unk>. We have made great strides of our Mount a motor that cash reached speed a 160 kilometer power.

As for a product upgrades and let's start with a brand new and <unk>.

Absolutely a a 2020 <unk>, which will serve as our flagship product added a new China National standard for electric bicycles.

So new and to US is equipped with our latest smart Iot technologies, a color display with navigation that can be can mirror your mobile phone. The okay go system with a distance sensing and keyless ignition, which unable user to start a bike I assume at least.

And seed and.

Those small user experience touches our customers really appreciate the and two as expected to be price at up to eight out and RMB and and we also upgrade our classic a UQM series with the old new color display a new handlebar design with more intuitive control function and most importantly, we have given customers.

Option to upgrade to a larger battery, which increase a driving range by 35% or up to 75 kilometers on a single charge on a new.

<unk> the after a <unk> is expected to be price.

Up to 6000 RMB.

For the new product, we launched two new go a series a core ethical a C series those two new series employer or new design language for the electric bicycles, and China, which will further expand our offerings and product lines, which help us to reach a wider range of customers taste.

Inside the Goa F series, and we announced three new models the zero as two and S. Four <unk> and up to our classify as the electric bicycles and China and a we're introducing a market on April six and may 17th respectively. The as far as a electric motorcycle and will be introduced later this year in Q3.

The entire global F series has a muscular and design style, which features the Eagle eyed headlights, all of those models, our lithium iron battery based.

<unk> has two versions primarily differentiated by the battery and drive range of 50, and 60 kilometers respectively.

Affordably priced at RMB, $28, 99, and a 3299, respectively. We believe those will be well received by the market. Our beliefs were confirmed and we launched a global at zero through the JD Dot com pre sales on April six where we sold 41000 units and surpassed more than RMB one.

100 million sales in sales and setting the JD dot com presale record for urban mobility products.

So as to have two versions 50 kilometer and 70 kilometer range options priced at RMB 36, 99, and a 4099 RMB the ex.

<unk> had three versions with drive range up to a 100 kilometers and expect this will be price at up to 7000 RMB.

Now under the Golar a C series, we had first announced a six zero and electric bicycle with a more filled and design style. The golar zero come with multiple macro and is there a flavor and color choices and a y.

Variety of accessories, including a child and enable mothers to write say safely to take their children to and from school every day. The Golar and <unk> also has two version with a drag range from 62, a 50 to 60 kilometers and expect it to be price around 3000 RMB.

Since first announcing a six zero in April we have received countless solicitations, both online and in our stores around the country. We expect to release the C zone for sales starting in June.

Now the global ex theory, and T series and significantly expand our KOL a product line portfolios.

Successful presale campaign for the <unk> as a direct evidence that there is a large group of consumers, who appreciate the design style and aesthetics.

And together with the G series, the three global Alliance will offer our customers a thoroughly design products that meet their taste and desires, where being competitively price and backed by our best in class technologies.

And last but not least we launched a completely new category in the new ecosystem, a product with our <unk> kicks scooter the urban mobility trends are changing around the world as customers adopt new models of safe transport and a <unk> begin to reshape their urban center.

Our electric more pad and a modal staples offer one type of mobility solutions for customers and cities across Europe, The Americas and Asia. We also recognized a rapid growth a user demand for micro mobility product that cater to shorter one and two five kilometer trips and.

And this is primarily being fueled by a electric scooters in both share and consumer loans and form factors.

Now in order to meet this demand and add to our product line. We have rapidly develop a team of seasoned engineers, who are specialized and the department and a manufacturing of micro mobility product.

All new <unk> III kick scooter will be the first of several models will release in the coming months for a key overseas market now.

And now equipped with a best in class 350, what's real hub motor and a powered by our 48 volt, New energy system, and there was a wider and safer platform decks and the handlebar architecture and a wider tires. The <unk> III will outperform many of the similar price a product in the market in both performance and a <unk>.

Writing stability.

And of course like all our products the <unk> III is app connected.

<unk> has a pro a sports version and we will be price from U S dollar $599, a United States and the 590, <unk> Europe and Europe.

Line Kris there will begin in the coming weeks with a delivery directly to the customer homes later this summer in Europe and United States.

In addition to our current solvent plus also as new dealers. The introduction of a kick scooter will also allow us to open new range of retail channel that were previously non ideal for electric more pet, including big box retail and electronics and electronic chains like best buy and media Markt micro mobility retailers.

And.

Online platform like Amazon.

Now I want to wrap up with a short comment about ramping up our manufacturing capability capacity for it.

Those of you who have been following allow for the past few quarters. You know we have plan to increase our manufacturing capacity and additional 1 million units per year. When we complete the phase II of our Changzhou factory, we expect a phase III to be completed by early Q3, which will bring our total and new designed compare.

The two 2 million units is a really supporting the projected growth in a quarters ahead now.

And now with this let me turn to a party to talk about financials.

Yeah.

Thank you Yan and Hello, everyone. Our price release contains all the figures and a comparison you need we have also uploaded excel format a peak a two hour IR website for easy reference.

And as I review, our financial performance, we are referring to the first quarter figures, unless I say, otherwise and that all monetary figures RMB unless otherwise noted.

Our Q1 sales volume reached a 150000 and unions, representing a 273% year over year growth.

China sales volume increased by 322% as a result of retail sales network expansion and effective branding activities.

International sales volume, however declined by 15% due to COVID-19, especially the reason the lockdowns in Europe, and a more challenging environment for international shipping.

And much the Suez Canal with blocked for a week and many ships were delayed or canceled we were not able to deliver our pretax non cash the.

And the situation has improved greatly since April and and we are catching up on a delivery.

And with regards to product mix.

And theories accounted for 9% of total sales volume, partially due to the lower international sales.

And here is a candidate for 13%.

You will see a rate accounted for 21%.

And a cola series a convertible 57%.

Out of the 57% from Nicole a theory.

38% from the media and a product T zero model and a 14% was from Tito model.

In China, the COVID-19 rebounded in Q1, which helped to accelerate the adoption of electric bicycles, because many people pay more attention to a social distancing and a try to avoid a public transportation.

Golar theory was a very popular choice for many new customers considering its attractive retail price.

This is a key reason for Cola series, and taking a larger proportion of sales in Q1.

Total revenue has increased by a 135% total $547 million above the guidance. We provided earlier, mainly due to the higher China sales volume and a stronger sales DSS and a spare parts.

The revenue from accessories spare parts and services reached a $102 million, representing a 118% year over year growth.

A strong sales came from both China and international markets.

Sales from China market increased by a 111% due to strong offline sales.

And the international market increased by 123% due to a strong sales of battery pack to sharing operators.

The ASP declined by 37% year over year.

Let's look at the detailed a reason.

For China market, the scooter ASP decreased by 27%, mainly due to the sales of low price <unk> zero entity to a model as well as sales discount offered.

Out of this 27% decline around a 20% was caused by the sales of these two models.

The remaining 7% was due to the change you had a product mix.

For international market, it's a scooter ASP decreased by 15%.

The decrease was caused by a depreciation of the U S dollar and also more significantly and the change in a way and distributor placed orders.

In Q1, many distributors and chose to play a separate orders first quarter reported and the battery pack so as to reduce their international shipping cost.

As a result of task orders and battery pack sales were booked as a statutory and a spare parts revenue instead of a scooter revenue.

After a normalized net impact to EPS.

For international sales and a decrease by around 5%.

Well the other words out of the total 15%.

ASP decline for international sales.

Around a 10% was caused by the way a separate orders and around a 5% what's caused by a depreciation of U S. Dollar.

Basically of separate ordering will likely continue into Q2, and a Q3 and considering the increase and cost for international shipping.

For the ESP of a century spare parts and services and with RMB 682 per scooter.

And a 42% a decrease compared with Q1 last year.

The decline was mainly due to the very low volume base in Q1 last year, which was only around 40000 units.

Because of the very low volume based DSP for essentially a spare parts and services was up a normally high last year.

And you compare ESP with Q2, Q3, and Q4 last year, our Q1 ASP actually increased.

Our revenues from accessories spare parts and services do not fluctuate as much as a sales volume because a portion of the sales came from existing customers. For example, the data service and a time accessories.

In summary, even though our ASP was down by 37% after considering the factors mentioned above the international Scooter ESP and SaaS, we spare parts and services were both stable compared with 30 day quarters.

A decline of China, ASP, followed a similar trend and to what should be useful in Q3, and Q4 last year due to the launch of Cola series.

In April we launched Ft, ROE model and the sales price collapsed hero model with RMB 200 higher than zero.

We also expect a product mix in China to improve in a second quarter posted a you'll have to stabilize our China's couture ESP.

Gross margin was 23, 8%.

<unk> two percentage points higher than this time last year.

And there are three key drivers.

First net sales of low margin models like GTR LNG to reduce debt our margin by around a 4%.

Second the lower proportion of revenue from high margin international sales market.

Our margin by around 3%.

Third the cost savings Uncomplaining raw materials, and a lower other costs for example, a manufacturer and labor cost benefits from economies of scale increase our margin by around a 7%.

In summary, the impact from unfavorable changes and product mix was offset by various cost savings.

This is a key reason for a stable margin in Q1.

In the past few months and we have seen a commodity price continue to rise, which affected our raw material procurement cost by 5% to 10%.

To mitigate the impact on gross margin, we increased retail sales price by RMB 100 to 300.

And one 5% to seven 5% for select and the models in China in May.

We may have another price increase for additional models together with performance upgrades in the coming months.

We believe the price increase affordable and a reasonable for our customers.

These price adjustments they will help us to stabilize the ASP and also to mitigate the negative impact on our gross margin.

Our total operating expenses, excluding share based compensation.

RMB $118 million.

<unk> by 35 million, a 42% year over year.

The increase was a monday caused by the higher sales and marketing expense of 20 million both branding activities during Chinese new year for.

<unk> 4 million for retail sales network expansion.

<unk>, a meaningful higher staff costs and around six meaningful foreign exchange loss.

Our sales and marketing expenses were particularly high this quarter, mainly due to the branding expenditures associated with Chinese new year event mentioned earlier.

As a percentage of revenues our operating expenses, excluding share based compensation was 22% lower than a 36% in Q1 last year, but a higher than other quarters in 2020.

In the coming quarters, and we expect the opening expense as percentage of revenue for a full back to the regular level similar to other quarters.

Our government grant was there a point for many and Q1 decreased by 7 million compared with last year due to the delayed a payment from a governance.

In May we received a grant of RMB 41 million and a part of that will be booked into the P&L in a second quarter.

Our income tax expense was 9 million much higher than a same period last year, mainly because some entities within the group and become profitable and have used a combination of the law.

This quarter, even though our consolidated profit before tax was only around $4 million. They book, a 9 million tax expenses for a few reasons.

First some expenses a non tax deductible for example share based compensation, you'll need to add that back before calculating income tax expense.

Secondly, the profit and loss were not evenly distributed among different entities.

Companies within the group, because we need to pay taxes based on each company's debt as a group.

For example in Q1 at a company for China sales was a very profitable, but a company for international sales to make a peak loss.

We have intra group transfer pricing arrangements to redistribute a profit, but that will take a time to adjust if.

You take a longer term view that profitability more evenly distributed and the impact will be mitigated.

So that a tax rate applied is average tax rate a calculated is based on full year forecast instead of one specific a quota for this year. We expect the average tax rate will be around 15% on a full year basis.

Our GAAP net loss was $5 4 million RMB.

But after adjustment of share based compensation, we made a profit of $6 7 million <unk>.

<unk> by more than 20 minutes 25 minutes compared with Q1 last year.

We've made a GAAP loss this quarter and mainly due to the higher rent expense expenses with.

<unk> expenditures and more investment in nature worthwhile spending and increase our brand awareness and we a support our continued growth.

Turning to our balance sheet and a cash flow we ended the quarter with RMB 1 billion in cash term deposits and short term investment.

Our operating cash flow was negative 16 million RMB, mainly due to prepayments from raw materials in order to secure supply for production.

Our Q1 Capex was around a 40 or around a 64 million mainly related to capacity expansion of 13 million New store building, a 48 million and RMB spending R&D spending of $3 million.

Now, let's turn to guidance range.

Expect second quarter revenue is typically a range of 900, a minute to 1030 minutes.

<unk>, a 40% to 60% year over year.

With that let's now open the call for any questions that you may have for us.

Operator, Please go ahead.

Certainly, sir ladies and gentlemen.

We will now begin the question and answer a question. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced once again it is thoughtful and wanted to ask a question.

Yeah.

And do you have the first question is coming from the line of Alex Potter from Piper Sandler. Please go ahead.

Hi, guys, thanks very much.

So I guess the first question I have is just on gross margin.

In the coming quarters.

And really a lot of moving parts right now there's a there's new products that are coming in a different price points, there and raw material inflation.

Inflation, there's a.

Yes.

Battery shipment issue, it's all kinds of different things and some are positives and negatives.

Last quarter I think you had said that you expected gross margin for this year to be a roughly similar to what it was last year do you still feel that way or do you are you reassessing after a.

Viewing some of these new changes.

Thanks, Alex for the question Phil has a way still wants to maintain a similar matching as to what we delivered last year. That's why in May we increased our retail sales price by one 5% to seven 5% and we may make another price adjustment and later months and based on holiday.

Material inflation goes also based on the peso from new product launch for the second quarter and of course, our market and there'll be a little bit a challenging because a we began to see the price increase since April but a very easily increase the <unk>.

Retail sales price on a from early May and so there is a one month like and for the price increase for a second quarter comp day, we estimate our gross margin will be anywhere between 20 percentage of 22%, but in Q3 Q4, we still want to target a run a 'twenty two 'twenty three 'twenty, 2% to 23%.

And the thing within our hand and price increase and also available also renegotiated some of the costs with our suppliers try to secure additional cost savings. So this is the answer to your first question Alex.

Okay, Great that's super helpful.

And maybe a little bit more on the cost pressure and the inflation and I know obviously inflation is a.

This is a topic that a lot of people are thinking about right now what specifically is it within your supply chain is it primarily batteries or is it basically across the board price inflation of all kinds of components and raw materials.

It's a it's across the board is because.

Our components and also involve a steel plastics and also pass battery sales and most of that most of the raw material. We see the price increases is a very much linked with the overall commodity price increase.

Alright.

And basically in the last few months and so we're accurate and the price increase starting in <unk>.

Later in March and that created a March and April and we started seeing that some of the raw material price is actually a hit that peak in early may and so.

And so we actually a increase our product price to reflect the sort of the latest update and term up a bump right bond price so going forward and hopefully we will see the raw material price will stabilize that actually potentially could start to decrease.

Okay great.

And I'm interested also on this topic of splitting apart battery shipments versus the scooter shipments is this a tariff issue, how how exactly do international and quarters save money by taking delivery of the battery pack separately from the scooter body.

Yes.

The reason is a.

Lease spaces.

Because of a shortage of containers.

The international shipping companies to come become a more strict.

And the cargo can be shipped for the battery pack because we have a lithium battery within that it was treated at tinder was cutoff. Therefore.

Shipping company, which has much higher tariff for anything which has a lithium battery raising it.

A separate order between battery.

Battery pack and that supported the body part can still be treated as a regular a cargo.

This marked a shifting tariff is much lower than a dangerous cocklebur, so different and more.

But a standard HOKA is right and a couple.

And that's the that's a key reason besides.

A different tariff and a different tariff and the money and the U S. In the U S. Theres different tariff a battery pack and a polypod, but because of a shortage of the.

Container shipping company, because a very very strict.

What kind of thing while within a container therefore, a tackled all the thing there for many and many distributors and try to put them separately to enjoy lower tariff for the exactly legato and so that's the background.

Interest.

Okay very good thanks, I appreciate it I'll pass it on.

Okay.

And we have the next question and this is coming from the line of Vincent Yu from Needham and company. Please go ahead.

Thank you management for taking my question.

Have a street questions first one is.

No.

We had a very good.

A strong can be number for first quarter and a strong.

And the store opening pace on a seems to be on track.

And is how should we think about the previously guidance you sell more than 1 million units for 2020 are.

A higher annual number that we are comfortable debt, we would be able to get off to a strong quarter.

And my question is in <unk>.

Ratio and a platform for our international business. So we have seen continued investments by made by ridesharing platforms, and Cuba, excluding writing share markets and.

And we'll take it.

A little bit more about what should we think about challenging challenging challenges and at the bottom.

And is that such.

Such a chance brings for when you.

And my last question is that's a for the new vehicle.

And your energy vehicle industry have being seen chip shortage. We know we are we.

We have and estimate.

And some chips, but we also have.

And we have quite some true ups associated with our apps.

What kind of effect so we have.

And all of our products in terms of margin or production schedules and thank you.

So let me give it a first cut of answer for a straight question and that they have.

And again to supplement first of all the store opening and definitely we are on track to achieve our targeted levels and 300 and Q1, we are going to open up a little under 300, and the second quarter with a more open and definitely we do see the volume continue to a two two.

And to grow and.

Definitely in the in Q1, we kept a in March and we gave a guidance of $900.

<unk> thousand per unit volume to $1 1 million a unit, we do see potential upside.

For the for the volume growth, but I think we'll wait until the end of Q2 before we make a net adjustment of our full year free a forecast. So this is more on the first question for a second question about the writing a ride sharing business and we are mainly supported by the share and business in the international market and we do see a demand.

And continue to go very very strong because you and Colgate a use we do see people pay more attention to social distancing and mainly there is also a fast adoption of electric two wheelers in overseas market some of our share sharing operator already to starting to deploy our vehicles in many cities across the world and that is a very positive.

And for our business growth in both the second quarter also in quarters.

And that's a.

We believe that is not only a short term momentum, let's maybe changed people's behavior, and a longer term and keep our foot outside and they give a longer term.

Third a question about the chip shortage and.

First of all we do see the threat for a chip shortage, however, compared with the EV manufacture the chips, we're using our scooters.

And that compliance complicated and compare with the EV.

Manufacture therefore, we are able to secure a majority of the things we really want to get currently we need to give a three to six months rolling forecast a two hour suppliers somehow and you also need to make a small prepayment to a secured at the supply and therefore, we do see the Chinese but so far we have some action we can take to mitigate the impact.

And the other comments and yet.

And our captured I think the only thing to add and basic and we initially announced a Bob.

And 1 million plus units I think that's the only talking about scooters and a whole pets. So it hasnt really cover our new products like a kick scooters, obviously is a key scooters will be a.

And we already announced that it will be on pre sales.

And the next month and so and then we'll be shipped basically.

And the early Q3, so that will actually start to adding volumes.

In addition to the women and a unit.

More pads and scooters.

Yeah.

Alright, Thank you very much.

Thank you and we have the next question and this is coming from a line of Cheng Cheng from CIC. Please go ahead.

Oh, hi, Thanks, Paul Yes.

Yeah, and Hardy and Jason and Paul you're Okay.

Reputation I'll first cover and.

And so.

Had two questions firstly about ex Tac.

Selling expense in first quarter and creates a lot we can see hardie has josh.

And that we adopt a small price discount and also other marketing activities.

So is it caused by a multi is competition or just due to our subs.

Subjecting a hot.

And a field trip.

And then also.

My question is.

And second question that we can see.

Non broker.

And Chris by three hanger in the.

First of all day, so Mckinney and record growth.

What is a regional distribution from your staff can we see and <unk>.

Yes, most of it.

Opening in a.

Lower tier cities and also our new products.

And with targeting.

More mass media markets.

It's a problem.

<unk>.

Craft week weekend exactly and of course.

Yes, two questions. Thanks.

Thanks for the question asked me a after the first of all a pastor expenses sales and marketing expenses.

Hi, and amount of witten, mainly due to the branding activities. We've made a few and the Chinese new year this year.

Chinese new year, the yield at all in China, and causing you Union because of that we spent some money for planning purpose, but also in case, a very popular a senior who take a video and havas to express.

The new <unk> brand. So it's mainly for the brand and purpose instead for a pure marketing purpose, because Chinese new year is kind of a one off event for a during June kilowatts, therefore way to not expect the suezmax and tends to be continue to be about a high percentage of revenue. We do believe the percentage a bill for back to a normal level and Thats, what we see.

In order to call in other cultures. So this is answer to your first question for a second question on the third distribution and you're off again to comment on that right. So I think just quickly to a comment on the stores.

<unk> towards more and more towards the lower tier cities basically tier two tier three and a some of the tier four cities are supposed to be a initiatives tier one cities. I think this was partially driven this faster expansions are really driven by our what we call our suitable products for a lower.

Tier cities basically the.

The three series the Golar series, a Google G series, and a global and actually go a serious company April and I think and hopefully also the Golar C series coming in June and July.

We actually see actually starting to see the starting the Q Q4, we'll start seeing that phenomenon, where with a suitable products and we have actually a habits from brand recognition and a brand name in a lower tier lower tier cities, but in a path and we just don't have a suitable product for those Cds to open more stores.

And we actually expect a store opening a speed is basically we hopefully to maintain a constant and speed of at least 300 stores dish per quarter.

Yeah, Yeah got it so and so.

And so what is it.

Maybe a proper pathway and shop.

Average selling price.

Sure.

And then maybe 3000, alright, and RMB two four.

RMB this week.

Yes, you mean, the blended ASP for the coming quarter, I think it'll be very similar and actually I think they will.

Similar to what we achieved a in Q3 last year is around a 3005 hundred and it may have a potential upside up to 4000, depending on a few things first of all about the price increase how much we got that back and by the way continue to increase our retail sales price and secondly, it depends on the recovery of international sales to more quicker.

International marketing and began to recover and the more quicker we can start shipping problems and of course, and we are going to have more and more suddenly it also depends on the.

A sharing business because part of it and one of the key contribution for our high ASP coming from the battery pack sales to sharing operators.

And if the if the adoption rate of sharing a weird.

And in overseas market, a become a higher and higher than the Shanghai Pudong and will continue to purchase a battery pack and in this is a three key drivers for the potential from 3500 to moving towards a full force R&D.

In the future quarters.

Okay got it thank you.

And we have our next question and this is coming from bin Wang from Credit Suisse. Please go ahead.

Thank you Goodbye thoughtful line is about sales momentum in April and firstly, two weeks off road map, because you actually give us some kind of a bummer.

Okay.

And in April so that's why.

Just wanted to you can ship on a total medical and maintain a pass and one half months. That's number one and number two is about a margin actually have given a guidance for second quarter I assume a complete about 20% of chemistry and.

And it's like a hub will be 22% to 23% a.

This is Scott gross margin guidance.

Net margin nicely because in a first quarter, we've got a similar or even higher gross margin by zero in the bottom line.

And what should we expecting a.

But tonight that margins should be a one five.

And thank you.

Sure I think and sort of put a first question up other sales Morton momentum I think our sales continue to be very strong in April I think a our sales growth and with more than 60 per cent of close to 7% a growth in April and that's what's still with a backlog of quite a lot a CLO.

A modest Huawei, we're not able to deliver and April and then we continue to deliver some of the pre sales orders in may So in short we do see quite a good a momentum into the second quarter. That's why we came to a rare.

Revenue guidance, we gave a 40% to 60% is a very very relatively wider guidance, mainly because there's too many uncertainty about the delivery shortages et cetera et cetera. So in general we do see continue the sales model strong sales momentum.

In terms of gross margin I think you are right I mean, a second quarter, we're looking and.

And to achieve anywhere between 2020, three 'twenty to 'twenty, 2% and the and the remaining two quarters, we target anywhere between $20 23 per cent.

Annual pace it is unlikely.

We ended up somewhere somewhere around 22% and that's how we see the debt to gross margins and with potential of course, there a so many moving parts it's a.

I mentioned earlier, there is a commodity price increase that theres. So much populate this day. It does make things a complicated also there are so many things coming from our international market.

The international market has a significant impact on our cost market, but our targeted 222 and maintain that and we have price and increase our tool within our hands and we can manage that theres also quite a few other things like launching new <unk>.

APAC to help with that debt.

Answer for your second question.

Uh huh.

We actually took about a gross margin line and fourth quarter pretty decent gross margin, but I actually have a dealer and a bottom line. So my question about bottom line.

Okay.

Yeah, I think in terms of bottom line. After gross margin what will be next day is the openings opening expense as a percentage of revenue. So it needs a deduct a bookings that the operating expense as a percentage of revenue will flow.

In Q2, Q3, Q4 will be similar to what we achieved last year.

So Q1 is kind of a special case, because we spent a whole about a in the in the.

Sales marketing and even look at the R&D. The G&A. They are a very reasonable amount a G&A is a slightly higher in Q1, because we have a one 5 million coming from foreign exchange loss cause a delay.

And throughout the remainder of the year that we won't see that there's a that.

And that's much only the suezmax and with a little bit a heightened you want because of this a Chinese new year, you land in a remaining quarter loss a year average our op expenses within a revenue was about 15%. So a <unk> 14 to <unk> 15 per cent and something we can think about so after U S. A.

And a 14% 15% from the 22% you called out 7% before before tax and related.

And it could happen.

I think being basically the Q1 as a quarter because traditionally Q1 has always been a low sales quarter.

And you look out.

Sales has a seasonality.

But this year in Q1.

A spend quite a bit of a marketing because to kick off the Chinese new year.

Really try to make sure this year a star with a high note.

That's why we you know we kicked off the year.

Europe, a ought to be newer thing.

And coupled with a lower sales season in Q1.

A lower I mean with respect with a four quarters within the entire year. That's why in Q1 and you see a huge marketing expense.

But in a.

We spread over the entire year.

The average marketing expense action will be fully in line with what happened last year.

Great. Thank you.

Yeah.

Thank you we have our next question is coming from Alan small. Please go ahead.

Hi management and thanks for taking a question I have two questions here and the fed.

One is a could you please.

Line is half the ODM a function.

And like how many times did you.

Have you Tom O T. A for the previous intellectual scooters and I saw that you have improved some of the Internet trolls.

Operating and stuff.

Just a characteristics of your new products and new products launched in April and could do a lot.

And how do you view that debt and consumers are viewing such interact.

A key characteristics and my second question is about the batteries you used for a different segmentation of your a product like fight a lloyds a tier product to still use a.

And like the a and C. M. R. L. L. A F P battery or what kind of a bad right, where you're using a future.

Could you please give us some guidance thank you.

Alright.

A great question first of all on a <unk> typically would do a OTA update every quarter or so every.

Two or three months or so.

And I think it's really just the otas to upgrade.

And the ICU the software in a <unk> as well as some of the software in a controlled motor controllers.

And so now as I mentioned in a call some additional smart functionality like oncologists to play with with a navigation mirror of your phone and that actually require not just the otas software upgraded actually also require a power upgrade.

And that's why we actually build a hardware upgrade into a new model as well as existing models and along with a upgrades and we manage also to increase a product price debt.

Loss to actually to increase asps to offset.

And the downward pressure on the price due to the product mix and the so far I mean based on the.

Some of the upgrade product line and.

And to us.

It Hasnt really come to the market yet will be in a market in may.

The <unk> upgrades will also be the marketing money. So we haven't really seen the actual users.

Feedback from those operating yet but based on the.

And the user comments from other product launch as well as a user comments from our social medias basics as users are actually asking for those upgrades, even we have a users with existing and QA two product asking whether their current product can be upgraded.

And by paying they're willing to pay more than a solid and RMB just to get the upgrade on the <unk> plan or the smart home technologies.

So I think we expect those upgrades will be welcomed by the users.

Now the second one and the battery solutions I think you're absolutely right. So.

Basically for the higher end products like the N series and M series, we tend to use more of a N cen and see and batteries the lithium ion battery NCAA and due to the higher battery densities such that we are actually kind of putting more battery capacities.

In a scooter to keep a scooter or a longer driving range.

But we also recognize the cost of MCA and <unk> and cm is a bit higher than our ASP batteries. So from a majority of global a series that gogo as a goal of <unk> and the potential that Golar E series will use the OSP batteries were actually will help too.

To reduce the cost.

And that we can price at a a relative lower price to our users while maintain a similar margin as our higher and price product now what.

Accurate.

What sacrifice of there's a compromise we took it with the LSP batteries, we are not able to put a lot a battery capacity and two of those batteries.

Because the way concentrating a 55 kilos per fleet entire scooter.

And was a user will compromise is actually on the drive range and so on those ones where twice from compensate that with basic the upgrade of the bead technology Motors and also to improve the tires such that for example at a low resistant tires will give a slightly bump up on the driver.

<unk>.

But I think that practically how we line up the battery solutions.

In order to basically to offer a wide range of pricing product to our users at the same time, maintaining a healthy margin.

Okay. Thank you a little.

L. A catch up on the previous question. So you will for sure not using the assay lead battery in a future right and also a since I also heard some comments syndrome and from the end users that normally you Didnt scuderi from Neil are having a more accurate like a deep battery man.

And then system a comp.

And with the other products in a market you could have a battery a better accurate.

As a matter of fact, a like a day.

How much the a S O C of the battery so when you use a.

L. A F. P. Direct can you also a reach such accuracy and a future.

Yes, I think Thats a great technical question. So when we first adopt using the O S. T batteries, we actually realize that.

These results using a better as yossi solution than the reading of the battery capacity is not as accurate as the MCM batteries.

<unk>.

And with Star Express exploring and was a L. S. T batteries last year actually last year. So we quickly actually improved and as to see within the LSP battery pack.

And as well as basically the battery management system as well as a sofa piece in the controllers, so that actually to improve the battery and reading capacity accuracies and so our accuracy is 20% higher than what it used to be in the market and the actual get us almost on par with.

And C M P a batteries.

Okay very clear thank you.

Okay.

Once again, ladies and gentlemen, and a star one to ask a question.

Seeing no further questions I would like to hand, the conference back to a host singles.

Yes.

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

Okay.

Yeah.

Thank you.

Ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.

[music].

Windup, we are recording today's call and if you have any objections you may disconnect at this time.

Now I will turn the call over to give us a Jason young.

And Investor Relations manager of New technologies. Mr. Young. Please go ahead.

Thank you operator, Hello, everyone and welcome to today's conference call to discuss new technologies results for the first quarter 2021 and the earnings press release, corporate presentation, and financial especially and have been on postpaid and on the new Investor Relations website. This call is being webcast from a communist IR website and a replay of the call.

And we will be a level two and <unk>.

No and today's discussion will contain forward looking statements made under the safe Harbor provisions of the United States Private Securities Litigation Reform Act of 90, 95 forward looking statements involve risks uncertainties assumptions and other factors the company's actual results may be materially different from those expressed a date.

And the information regarding the risk factors is included in a communist public filings with the Securities and Exchange Commission.

And it does not assume any obligation to update and if were looking statements except as required by law.

Our earnings press release and live call include discussions of certain non-GAAP financial matters.

Please continue a definition of non-GAAP financial measures and really a constellation of GAAP to non-GAAP financial results.

I'm a call with me today are our CEO, Dr. A young Li and the CFO and Mr. Hardy, Zhang and now let me turn a call to over yet.

Thanks, Jason and thanks to everyone for joining us on a call today.

We are aware of that.

Total Q1 sales per China and international market.

And 273% year over year.

In Q1, and not even the Chinese new year holiday slowdowns, and our retail expansion and we added 300, new branded stores across China, reaching 1916 stores by March 31.

During our global product launch event on April six we announced the opening of our 2000th store in China.

Well on track to hit our Q2 target 300, new stores for the quarter.

This is in addition to the 1000 plus also a new dealers in our global markets.

For those of you who didn't already know our company name New actually means bull ox and English the year, a 2021 happens to be the year of oxy and the Chinese lunar calendar. So we kick off the Chinese new year by launching a year of new B a newer nationwide campaign.

And when you listed a help a popular musicians and social media, Influencers, which generated more than 200 million views across multiple social media platforms during the holiday season.

We also kicked off and over the air and.

Advertisement campaign during the Chinese new year, which allowed us targeting over a 110 million viewers across market in China that we have identified as key to helping us accelerate our growth.

We also collaborated with some of the hottest online documentary series call exactly a food availability, which helped us targeting another 41 million viewers in a key demographic segments.

Our new branded though in a quite a show accounts also benefits from those activities with quarterly views, reaching nearly 55 million meals and Q1, marking a 38% year over year increase.

Now in the overseas market, our social media channel skin, nearly 1 million interactions on Instagram and Facebook, We also announced a partnership with formulary a world champion Antonio Afflict, a costa as the official neon and Baxter and the kickoff of our partnership with line in a key U S. A European market, which will help.

Accelerated adoption and electric two winners.

We have been making noise both in the China a horse this market in order to position ourselves as a go to lifestyle brand for urban mobility, and helping us grow sales by more than 300 per day in China alone.

Now driving our strong sales and marketing performance in Q1, we hit a ground running on April six with a global product launch seven tenuously announcing both China and international product releases Bill.

Building upon the customer demand for our goal of a series of electric Moped, We launched a core F series with a zero up to a net Gore and Nicole a C series with a six zero. This our two key product group that will help us expanding into the wider range of urban market and the customer segments around China.

During that same event, we launched our first electric scooter for Europe, and the United States. The <unk> series. This slide new products were also accompanied by four upgrades to our existing series, a more pads and electric bicycles.

First of all of the upgrade to the existing electric bicycle mopeds are made under the food first we're very excited to launch a seventh generation of our new energy system, which saw a upgrade of our proprietary battery management system. The introduction of <unk> electric motor and the optimization of our <unk>.

Algorithm for the motor controller, which kind of improve the driving range up by up to 32% and improved acceleration by 10% to 15% and at the same motor power and most of our existing vehicles.

And lastly, as we finalized a commercialized version of our urban motorcycles. The <unk>. We have made great strides of our mid mountain motor that can reach speeds of 160 kilometer power.

As for a product upgrade and let's start with a brand new and Q2 as well.

Absolutely a a 2020 <unk>, which should serve as our flagship product added a new China National standard for electric bicycles.

The new and to US is equipped with our latest smart Iot technologies, a color display with navigation that can be can mirror your mobile phone and the <unk> system with distance sensing and keyless ignition, which unable user to start a bike I assume at least.

And the seed and.

Though small user experience touches our customers really appreciate the attitude is expected to be price at up to 8000, RMB and and we also upgrade our classic a UQM a series with the old new color display a new handlebar design with more intuitive control functions and most importantly, we have given customers.

Option to upgrade to a larger battery, which increase a driving range by 35% or up to 75 kilometers on a single charge on a new.

<unk>. So after a UTI series is expected to be price at up to 6000 RMB.

For the new products, we launched two new go a series a core ethical a C series those two new series employer or new design language for the electric bicycle and China, which will further expand our offerings and product lines, which help us to reach a wider range of customers taste.

Inside the Golar F series, and we announced three new model the zero two and at four <unk> and up to our classify as electric bicycles and China and that were introduced into a market on April six and may 17th respectively. The as far as the electric motorcycle and will be introduced later this year in Q3.

The entire global ex curious has a muscular and design style, which features the eagle eyed headlights, well those models, our lithium iron battery based <unk> has two versions primarily differentiated by the battery and drive range of 50, and 60 kilometers respectively or affordably priced at RMB 28, 99, and a three.

And 299, respectively. We believe those will be well received by the market. Our beliefs were confirmed and we launched a global at zero through the JV Dot com pre sales on April six where we sold 41000 units and surpassed more than RMB 100, mainland sales and sales setting the J D Dot com presale record.

For urban mobility products.

So as to have two versions 50 kilometer and 70 kilometer range options priced at RMB 36, 99, and a 4099 RMB. The S. Four has three versions with drive range up to a 100 kilometers and expect it to be price and up to 7000 RMB.

And now under the Golar T series, we had first announced a <unk> zero and electric bicycle with a more filled and design style. The golar <unk> zero come with multiple macro and is there a flavor and color choices and a wide variety of accessories, including a Chelsea and April mothers to write stake safely to take their choke.

And to and from SKU every day.

Golar <unk> also has two version with a drive range from 62, a 50 to 60 kilometers and expect it to be price at around 3000 RMB.

Since first announcing the six zero in April we Havent received countless solicitations, both online and in our stores around the country, we expect to release a <unk> zero for sales starting in June.

Now the global ex theory, and T series and significantly expand our goal a product line portfolios and the successful presale campaign for the <unk> as a direct evidence that there is a large group.

Consumers, who appreciate the design style and aesthetics.

Together with a key series the three global Alliance will offer our customers a thoroughly design products that meet their taste and desires, where being competitively priced and backed by our best in class technologies.

Now last but not least we launched a completely new category in the new ecosystem a pre.

With our <unk> debt.

Urban mobility trends are changing around the world as customers adopt new models of safe transport and a series began to reshape their urban centers.

Our electric more pad and a modal cycles offer one type of mobility solutions for customers and cities across Europe, The Americas and Southeast Asia. We're also recognized a rapid growth a user demand for micro mobility product that cater to shorter 125 kilometer trips and.

And this is primarily being felt fueled by a electric scooters in both share and consumer loans and form factors.

All new <unk> III kick scooter will be the first of several models will release in the coming months for a key overseas market now.

And now equipped with a best in class 350, what's a real hub motor and a powered by our 48 volt, new energy system, and there was a wider and safer platform decks and the handlebar architecture and a wider tires. The <unk> III will outperform many of the similar price a product in the market in both performance and a <unk>.

Writing stability.

And of course like or a product the <unk> III is app connected.

<unk> III has a pro a sports version and we will be price from U S dollar, 599%, United States, and a 590, <unk> Europe and Europe.

And online Kris there will begin in the coming weeks with a delivery directly to the customer homes later this summer in Europe and United States.

Now a new addition to our current solvent plus also as new dealers and the introduction of a kick scooter will also allow us to open new range of retail channel that were previously non ideal for electric more pet, including big box retail and electronics and electronic chains like best buy media Markt micro mobility retailers.

And.

Online platform like Amazon.

Now I want to wrap up with a short comment about ramping up our manufacturing capability capacity for it.

And those of you who have been following allow for the past few quarters. You know we have plan to increase our manufacturing capacity and additional 1 million units per year. When we complete the phase II of our Changzhou factory, we expect a phase III to be completed by early Q3, which will bring our total and new design compare.

<unk> two 2 million units is a really supporting the projected growth in a quarters ahead.

Now with this let me turn to a party to talk about financials.

Thank you Yan and Hello, everyone. Our price release contains all the figures and comparisons you need.

And have also uploaded excel format, a pickers to our IR website for easy reference and.

And then review our financial performance, we are referring to the first quarter figures, unless I say otherwise and.

And that all monetary figures RMB unless otherwise noted.

Our Q1 sales volume reached a 150 southern union, representing a 273% year over year growth.

China sales volume increased by 322% as a result of retail sales network expansion and in fact, you are bending activities.

International sales volume, however declined by 15% due to COVID-19, especially the reason of Uptown in Europe, and a more challenging environment for international shipping.

And much the Suez Canal with blocked for a week and many ships were delayed or canceled we were not able to deliver our products on time.

And the situation has improved quite a bit since April and and we are catching up on a delivery.

With regards to product mix.

And theories accounted for 9% of total sales volume, partially due to the lower international sales.

And here is a 104, 13%.

Youll see a rate accounted for 21%.

And Nicole a series accounted for 57%.

Out of the 57% from Cola theories.

38% was from the media and a product T zero model and a 14% was from two to a model.

Golar theory was a very popular choice for many new customers considering its attractive retail price.

This is a key reason for Cola series, and taking a larger proportion of sales in Q1.

Total revenue has increased by a 135% to a $547 million above the guidance. We provided earlier not in a due to the higher China sales volume and a stronger sales DSS and a spare parts.

The revenue from accessories spare parts and services reached $102 million, representing a 118% year over year growth.

A strong sales came from both China and international market.

Sales from China market increased by a 111% due to strong offline sales.

And the international market increased by 123% due to a strong sales of battery packs to sharing operators.

The ASP declined by 37% year over year.

Let's look at the detailed a reason.

For China market, the scooter ASP decreased by 27%, mainly due to the sales of low price. She is zero entity to a model as well as sales discount offered.

Part of this 27% decline around a 20% what's caused by the sales of this two models.

The remaining 7% was due to the changing out a product mix.

For international market, a scooter ASP decreased by 15%.

The decrease was caused by a depreciation of U S. Dollar and also more significantly and the change in a way and distributor placed orders.

In Q1, many distributors and chose to play a separate orders first quarter reporting and the battery pack so as to reduce their international shipping costs.

As a result of such a separate orders and battery pack sales were booked as a statutory and a spare parts revenue instead of quarterly revenue.

After a normalized net impact to EPS.

For international sales on a decreased by around 5%.

Well the other work out of the total 15%.

ASPD climbed from international sales.

Around a 10% was caused by the way a separate <unk> and around a 5% what's caused by a depreciation of U S. Dollar.

Basically of separate ordering will likely continue into Q2, and a Q3 and considering the increase and cost for international shipping.

For the ESP of a century spare parts and services and with RMB 682 per scooter.

A 42% a decrease compared with Q1 last year to.

The decline was mainly due to the very low volume base in Q1 last year, which was only around a 40000 unit.

Because of the very low volume base day as people essentially a spare parts and services was up a normally high last year.

And you compare ESP with Q2, Q3, and Q4 last year, our Q1 ASP actually increased.

Our revenues from accessories spare parts and services do not fluctuate as much as a sales volume because a portion of the sales came from existing customers. For example, the status of it and some accessories.

The decline of China, ESP, followed a similar trend and to what you saw in Q3 and Q4 last year due to the launch of Cola series.

In April we launched the <unk> model and the sales price collapsed hero model was RMB 200, higher that and T zero.

We also expect a product mix in China to improve in a second quarter. Both a they will help to stabilize our China's couture ESP.

Gross margin was 23, 8% zero.

<unk> two percentage points higher than this time last year.

There are three key drivers.

First net sales of a low marketing models like a <unk> LNG to reduce debt our margins by around 4%.

Second the lower proportion of revenue from high margin International sales Mark Hughes, our margin by around a 3%.

Third the cost savings Uncompassionate raw materials, and a lower auto hub for example, a manufacturer and labor costs benefited from economy of scale increase our margin by around a 7%.

In summary, the impact from unfavorable changes and product mix was offset by various cost savings.

This is a key reason for a stable margin in Q1.

In the past few months, we have seen a commodity price continue to rise, which affected our raw material procurement cost by 5% to 10%.

To mitigate the impact on gross margin, we increased retail sales price by RMB 100 to 300.

A one 5% to seven five per cent for selected and models in China in May.

We may have another price increase for additional models together with performance upgrades in the coming months.

We believe the price increase affordable and a reasonable for our customers.

These price adjustments they will help us to stabilize the ASP and also to mitigate the negative impact on our gross margin.

Our total operating expenses, excluding share based compensation.

RMB $118 million.

<unk> by 35 million, a 42% year over year.

The increase was a monday caused by the higher sales and marketing expense of 20 million both branding activities during Chinese new year.

4 million retail sales network expansion.

<unk>, a meaningful higher staff costs and around 6 million so foreign exchange a law.

Our sales and a marketing expenses were particularly high this quarter, mainly due to the branding expenditures associated with Chinese new year event mentioned earlier.

As a percentage of revenues our operating expenses, excluding share based compensation was 22% lower than a 36% in Q1 last year, but a higher than other quarters in 2020.

In the coming quarters, and we expect the opening expense as a percentage of revenue will fall back to the regular level similar to a record highs.

Our government grants was there a point for many and Q1 decreased by 7 million compared with last year due to the delayed payment from a governance.

In May we received a grant of RMB $41 million and a part of that will be booked into the P&L in a second quarter.

Our income tax effect was 9 million much higher than a same period last year, mainly because some entities within the group and become profitable and has used up and accommodated a loss.

This quarter, even though our consolidated profit before tax was only around 4 million. They book and 9 million tax expenses for a few reasons.

First some expenses a non tax deductible for example share based compensation, you'll need to add that back before calculating income tax expense.

Secondly, the profit and loss will not be evenly distributed a multiple entities a companies within the group because we need to pay taxes based on each company's debt offer as a group.

For example in Q1 the company for China sales was a very profitable, but a company for international sales to make a peak loss we.

We have mutual growth transfer pricing arrangements to re distribute a profit but that will take a time to adjust.

If you take a longer term view that profitability more evenly distributed and the impact will be mitigated.

So that a tax rate applied is the average tax rate a calculated based on full year forecast instead of one specific a quarter.

So this year, we expect the average tax rate and we will be around 15% a full year basis.

I look at net loss was $5 4 million RMB.

But after adjustment of share based compensation, we made a profit of $6 7 million improved by more than 20 minutes 25 million compared with Q1 last year.

We've made a GAAP loss this quarter and mainly due to the higher rent expense expenses.

<unk> expenditures and more investment in nature, what we're spending and increase our brand awareness and and will support our continued growth.

Turning to our balance sheet and a cash flow we ended the quarter with RMB 1 billion cash term deposits and short term investments.

Our operating cash flow was negative 16 million RMB, mainly due to prepayments for raw materials in order to secure supply for production.

Our Q1 Capex was around a 40 or around a 64 million mainly related to capacity expansion of 13 million New store building, a 48 million and RMB spending R&D spending of $3 million.

Now, let's turn to guidance range.

Expect second quarter revenues to be in a range of 900, a minute to 1000 13 million <unk>.

<unk>, a 40% to 60% year over year.

With that let's now open the call for any questions that you may have for us.

Operator, Please go ahead.

Certainly, sir ladies and gentlemen.

We will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced once again you just started from a buy one to ask a question.

Yes.

And we have the first question is coming from the line of Alex Potter from Piper Sandler. Please go ahead.

Hi, guys, thanks very much.

So I guess the first question I have is just on gross margin.

In the coming quarters.

And really a lot of moving parts right now, there's there's new products that are coming in a different price points, there and raw material inflation.

Inflation fares.

This battery shipment issue and all kinds of different things. Some are a positive some are negative.

Last quarter I think you had said that you expected gross margin for this year to be a roughly similar to what it was last year do you still feel that way or do you are you.

And reassessing after a.

Viewing some of these new changes.

Thanks, Alex.

Question for as a way still wants to maintain a similar matching as to what we delivered last year. That's why in May we increased our retail sales price by one 5% to seven 5% and we may make another price adjustment and later months and based on how the raw material inflation goes also based on the peso from.

New product launch for the second quarter of course, our market and there'll be a little bit challenging because we began to see the price increase since April but it will be increased.

Retail sales price omni from early May and so theres, a one month like and for the price increase for a second quarter a condensate we estimate our class a margin we will be anywhere between 20% a 22% and in Q3 Q4, we still want to target a run a 'twenty to 'twenty, two it's kind of a 223% and the <unk>.

And within our hand is price increase and also a ill also renegotiated some of the costs with our suppliers 2000, <unk> secure additional cost savings. So this is the answer to your first question Alex.

Okay, Great that's super helpful.

And then maybe a little bit more on the cost pressure and inflation I know obviously inflation is a is a topic that a lot of people are thinking about right now what specifically is it within your supply chain is it primarily batteries or is it basically across the board price inflation of all kinds of components and raw materials.

It's a it's across the board is because.

Our components and also in <unk>.

We're still a plastics and also pass battery sales and most of that most of the raw material. We see the price increases is a very much linked with the overall commodity price increase.

Okay.

Basically and the last few months and so we're actually and the price increase starting in <unk>.

Later March and that created a March and April and we started seeing that from the raw material price is actually a hit that peak in early may.

Actually a increase our product price to reflect the sort of the latest update and come up a bump right from price. So going forward I mean, hopefully we will see the raw material price will stabilize that actually potentially could start to decrease.

Okay great.

And I'm interested also on this topic of splitting apart battery shipments versus the scooter shipments or is this a tariff issue how exactly do international and quarters.

Save money by taking delivery of the battery pack separately from the scooter body.

Yes.

The reason is a.

Lease spaces.

Because of the shortage of containers.

The international shipping companies to come become a more strict.

The cargo can be shipped for the battery pack, because we have a lithium battery and within that it was treated as dangerous copper and therefore.

Shipping company and touch much higher tariff for anything which has a lithium battery raising it.

A separate order between battery battery pack and a supporting the body part has to be treated as a regular a cargo.

There is a matter of shifting TARP is much lower than a tender and the console so the difference and more.

Whether it's been with alcohol as a regular a couple.

And thats the key rate and besides.

A different tariff and a different territories in Malaysia, and the U S. In the U S theres different tariff a battery pack and therefore the impact that it.

And a shortage of the container shipping company because of a very strict on what kind of thing while within a container. Therefore, they tackled all the things they are for many and many distributors and try to put them separately to enjoy a lower tariff for the Iraq and the Ocado. So that's that's a pipeline.

Interest.

Very good thanks, I appreciate it I'll pass it on.

And you have the next question is coming from the line of Vincent Yu from Needham and company. Please go ahead.

Thank you management for taking my question.

Have a street questions first one is.

So.

We had a very good strong to be number will push a quarter ended a strong.

And then the store opening pace seems to be on track, but my question is how should we think about a previously guidance you sell more than 1 million units for 2020.

Our higher revenue number that we are comfortable with debt.

And would be.

<unk> two ships.

A strong quarter.

My second question is.

Sharing platform for our international business. So we have seen continued investments by made by ratio and platforms into the exclude writing share markets and.

A commencement in the top line.

A little bit more about what should we think about challenging challenging challenges and opportunities that.

Such a chance brings for when you and my last question is that's a force.

For the new vehicle.

And your vehicle industry have been seeing chip shortage. We know we are we have less demand for some.

Some chips, but we also have.

We have quite some true ups associated with our App.

And what kind of effect so we have.

And all of our products in terms of margin or production schedule and thank you.

And you.

So let me give it a efficacy data for a straight question and that they have.

And again to supplement first of all for a store opening and definitely we are on track to achieve our targeted werewolf and 300 and Q, while we go into a opacities a another 300 and the second quarter with a more open and definitely we do see the volume continues.

To grow and.

Definitely in the in Q1, we gave in March and we gave a guidance of 900.

Sundance a unit volume to $1 1 million.

We do see potential upside.

For the for the volume growth, but I think we'll wait until the end of Q2 before we make a net adjustment of our full year free a forecast. So this is more first a question for the second request from underwriting.

And that is sharing business and we are mainly supported by the share and business in the international market and we do see a demand continue to go very very strong because you and collated with.

I do see people pay more attention from social distancing and mainly there is also a fast adoption of electric to later in the overseas market some of our share a sharing operator already to starting to deploy our vehicles in many cities across the world and.

That is a very positive for our business growth in both the second quarter also in the quarters ahead.

And that's a.

We believe that is not only a short term momentum, let's maybe changed people's behavior, and a longer term exited lava flow outside and they give a longer term for third a question about the chief a shortage.

First of all we do see the threat for a chip shortage, however, compared with the EV manufacture the cheapest way using our scooters and less.

Compliance complicated and compare with the EV Manny.

A manufacturer therefore were able to secure a majority of the things lately, we want to get currently we need to give a three to six months rolling forecast a two hour suppliers somehow and you also need to make a small prepayment to a secured at the supply and therefore, we do see the changes, but so far we have some action we can take to mitigate the impact.

And other comments and yet.

And then a captured I think the only thing to add as a basic and we initially announced a ball.

And 1 million plus units I think thats, the only talk about scooters and a whole tests. So it hasnt really cover our new products like a kick scooters, obviously is a key scooters will be a.

And we already announced that it will be on pre sales.

And the next month, a solo and then will be shipped basically.

Early Q3, so that will actually start with I think volumes.

In addition to the women and a unit.

A more patents scooters.

Got it thank you very much.

Thank you and we have the next question and this is coming from a line of Zheng Cheng from CIC. Please go ahead.

Yeah, So hi, thanks, Paul Yes.

Yeah, and Hardy and Jason employer.

Expectation I'll first cover a cloud so I had two questions firstly about the per day so far.

Selling expense.

Culture and create a lot we can see Hardie has just explained that we adopt a small price discount and also other marketing activities.

So I want to go that is caused by a Maltese computation or just due to a hour.

<unk> objective.

And the future.

And then also.

My question.

The second question that we can see.

Remember, okay and Chris Bye.

In the first quarter, so mckinney and rapid growth.

What is a regional distribution from you cannot.

And we see and <unk>.

Most of them.

Opening in a lower tier cities and the.

And then also our new products.

And C theory targeting.

A mass media market. So what do you think.

Power.

Last week, we can't exactly and approach.

Mr. Luke thank.

Thank you.

Thanks for the question and SME. After the first of all of our Boston expenses to stay with a marketing expense is a very high and amount. It was mainly due to the branding activities. We've made a few and the Chinese new year.

Net.

Chinese new year, a yield up all in.

And China, causing you a union because of that we spent some money for planning purpose. We also engaged in a very popular Athena, who take a video and how that spread.

News brand. So it's mainly for the brand and purpose instead of for a pure marketing purpose, because Chinese new year is kind of a one off event for a during June and <unk>. Therefore, a way to another impact suezmax and expense to be continue to be about a high percentage of revenue. We do believe the percentage of a bill for back to a normal.

And that's what we see and early call in other quarters. So this is the answer to your first question for a second question on the distribution of your off again to comment on that right. So I think just quickly to a comment on the stores.

A tooth towards more and more towards the lower tier cities basically tier two tier three and the some of the tier four cities.

<unk> B initiatives tier one cities I think this is partially driven the fast store expansions are really driven by our what we call our suitable products for a lower tier cities and basically the.

And the three series the Golar series, a Google G series and a global a actually go a serious company April and I think and hopefully also the Golar C series coming in June and July.

So we actually see actually starting seeing the starting the Q Q4, we start seeing that phenomenon, where with a suitable products and we have actually a habits from brand recognition and a brand name in a lower tier lower tier cities, but in a pass and we just don't have a suitable product for those Cds to open more stores.

And we actually expect a store opening a speed is basically hopefully to maintain a constant speed of at least 300 stores dish per quarter.

Yeah, Yeah got it.

And so.

What is maybe a proper pathway and shop.

And at a price we can expect.

In a future maybe maybe 3500 RMB two portals.

Our next week.

Yes, you mean, the blended ASP for the coming quarter, I think and it will be similar actually yes, I can and will be similar to what we achieved in Q3 last year is around a 3500 and it may have a potential upside up tearful held and depending on a few things first of all about the price increase how much we got that back and by the way continues to increase.

Retail sales price.

It depends on the recovery of international sales to more quicker and international marketing and began to recover and more quicker. We can start shipping problems and of course, and we are going to have more and more.

And suddenly it also depends on the.

Sharing business because a part one was a key contribution for our high ASP coming from the battery packs dealers to share and operators.

If the if the adoption rate of sharing.

And in overseas market and become a high and higher than the Shanghai operating we have continued to purchase a battery pack I think this is a three key drivers for the potential from 3500 to moving towards a full 2000 and R&D.

And the future quarters.

Okay got it thank you.

We have our next question and this is coming from bin Wang from Credit Suisse. Please go ahead.

Thank you Goodbye to talk about the sales momentum in April and a further two weeks off road map, because you actually give us some kind of a upon a F.

In April so that's why.

And you're going to can share up on a.

So if a medical and maintain a pass a one half a month that's number one and number two is about the margin you're actually giving a guidance for second quarter I assume a complete about 20% and with fleet and a second quarter and a stick a hep b, 22% a twist.

And.

And I assume this is the gross margin guidance.

What would be the net margin nicely because in a first quarter, we've got a similar or even higher gross margin by zero in the bottom line. So what should we expect the EBITDA.

Net margins should be around five 6%. Thank you.

Yeah.

Sure I think and sort of put a first question up other serious Morton momentum I think our sales continue to be very strong in April I think our sales growth with more than 60 per cent of close to 7% growth in April and that's what's still with a backlog of a quite a lot.

That's actually a little modest volume, we're not able to deliver a problem and then we continue to deliver some of the pre sales orders in may so in short a way to see quite a good a momentum into the second quarter, that's why while we get the.

Revenue guidance, we gave a 40% to a 60% is variable relative to the wider guidance, mainly because there is a two minute uncertainty about the delivery shortages et cetera et cetera.

And generally we do see continue the sales most strong sales momentum.

In terms of gross margin I think youre right I mean, a second quarter, we're looking and.

To achieve anywhere between 20 to 23, a 20% to 22% and.

And the and the remaining two contracts with a target to anywhere between 20% to 23%. So our annual basis is likely.

We ended up somewhere somewhere around 22% and that's how we see the gross margin with a potential of course, there a so many moving parts it's a.

And I mentioned earlier there is a.

Commodity price increase that theres. So much populate this day it does make things.

A complicated also there are so many things are coming from our international market data.

<unk> has a market has a significant impact on our gross margin, but our targeted two to maintain.

And maintain that and we have prices increase.

And our hand and manage that Theres also quite a few other things like a launch in U K y.

APAC to help with that debt.

And so for your second question.

How do you actually.

On a gross margin line because in first quarter, a pretty decent gross margin, but I actually have a deal and the bottom line. So my question is about about a b b.

Okay.

I think in terms of bottom line after gross margin with a it'll be next day the openings opening expense as a percentage of revenue. So you need to deduct a bookings that the operating expense as a percentage of revenue will flow in.

Q2, Q3, Q4 will be similar to what we achieved last year.

So Q1, and it's kind of a special case, because we spend a whole a lot to enter in a C.

It was a marketing, but even a look at the R&D. The G&A, there's a reasonable amount. The G&A is a slightly higher in Q1, because we have a run for a minute.

From a foreign exchange loss.

Throughout the remainder of the year that we won't see that this is a <unk>.

Only the suezmax with a little bit the heightened you want because with a Chinese new year's day lag in a remaining quarter lots a year average our operating expense as a percentage of revenue was about 15%. So a 14 day post 15 per ton is something we can think about so I'll tell you.

And a 14% and 15% from the 22% you kind of a 7% before a before tax and some of it.

And it could happen.

I think being basically the Q1 and the odd quarter, because traditionally Q1 has always been a low sales quarter.

If you look at the.

Sales has a seasonality.

But this year in Q1, we did a spend quite a bit of a marketing vehicles to kick off the Chinese new year.

Really try to make sure this year a star with a high note.

That's why we kicked off the year.

Europe ought to be newer thing.

And coupled with a lower sales season in Q1 by lower I mean with respect with a four quarters within the entire year. That's why in Q1 and you see a huge marketing expense.

But in a.

And we spread over the entire year.

The average marketing expenses actually will be fully in line with what happened last year.

Great. Thank you.

Thank you we have our next question and this is coming from Alan Smith. Please go ahead.

Hi management, Thanks for taking a question I have two questions here.

One is could you please remind us of the Odeon a function.

And like how many times did you have your time LTA for the previous intellectual scooters and I saw that you'd have improved some of the internet channel.

Property and stuff.

Just a characteristics of your new products.

And new products launched in April and to do a.

And like.

How do you view that and.

Consumers are viewing such interact toe.

A key characteristics and my second question is about the batteries you used for a different segmentation and I'm sure a product like fight a lloyds a tier products to still use a like.

The a and.

And C. M. R. L. L. A S P a battery or what kind of a battery will you use and a future.

Please give us some guidance thank you.

So I think a great questions first of all on the OTR typically would do a OTA after every.

Every quarter or so every day.

Two or three months or so.

I think it's really just the otas to upgrade.

And the EU, the software and the <unk> as well as some of the software and the controls motor controllers.

So now as I mentioned and the call. Some additional smart functionality like a color display with with a navigation a mirror of your phone and that actually require not just the ots software upgrades and actually also require a power upgrade sales.

That's why we actually build a hardware upgrade into the new model as well as existing models and along with the upgrade and we manage also to increase a product price fell a lot.

And <unk> to actually to increase the ASP to offset that.

And the downward pressure on the price due to the product mix and so far I mean based on the <unk>.

The upgrade product likes and and.

To us a hasnt really come to a market yet op and the market in may.

The <unk> upgrade will also be the market and may so we haven't really seen the actual user feedback from those operating yet but based on.

The user comments from other pilot launch as well as a user comments from our social media basics and users are actually asking for those operating well.

We have a users with existing and Q2 product asking whether their current product can be upgraded.

Paying they're willing to pay more than a solid and RMB just to get the upgrades on the <unk> plan or the smart functionalities.

So I think we expect those upgrades.

And welcome by the users.

And now the second one and the battery solutions and I think you're absolutely right.

Basically for the higher end products like the N series and M series, we tend to use more of a MTN and see and batteries the lithium ion battery NCAA and due to the higher a battery densities such that we actually kind of.

And more battery capacities in the scooter to keep a scooter or a longer driving range.

But we also recognize the cost of <unk> and <unk> and cm.

Is it higher than the RFP batteries, so from a majority of golar and serious that Google as a.

A goal of Chi and the potential that Golar C series will use the OSP batteries were actually will help to reduce the cost.

And that we can price at a relative lower price to our users while maintain a similar margin as our higher and price product now what.

Absolutely.

Sacrifice of Theres, a compromise we took with the LSP batteries, we are not able to put a lot a battery capacity and to those batteries.

Cause a weight concentrating a 55 kilos per fleet entire scooter. So that was a user will compromise is actually on the drive range and so on those one and we try to compensate that with basic the upgrade of the <unk> technology and motors and also to improve the tires such that for example, a load.

Resistant tires will give a slightly bump up on the dry range.

But I think thats, probably how we line up the battery solutions.

In order to basically to offer a wide range of pricing product to our users at the same time, maintaining a healthy margin.

Okay. Thank you a little a ketchup home to a previous question. So you will for sure not using the assay a lead battery and a future right and also since I also heard some comments.

From the end users that normally you didnt scuderi from Neil are having a more accurate like the battery management system, a comparing with the other products in a market.

Could have a battery a better accurate.

And then in fact.

Like a D D. How.

And how much the senior debt.

And so when you use a.

L. A PRA can you also a reach such accuracy and a future yes.

Yes, I think Thats a great technical question. So when we first adopt using the O S. T batteries, we actually realize that.

And the results using a better as dose a solution then.

The reading of the battery capacity is not as accurate as the NCI and batteries.

No.

And with Star Express.

Flooring was a L. M P batteries last year actually last year. So we quickly actually improved and I still see within the LSP battery pack.

And as well as basically the battery management system as well as a soft piece in a controllers, so that actually to improve a battery reading capacity accuracies and so our accuracy is 20% higher than what they used to be in the market and the actual get us almost on par with it and.

NPA batteries.

Okay very clear thank you.

Okay.

Once again, ladies and gentlemen, and a star one to ask a question.

Yeah.

Seeing no further questions I would like to hand, the conference back to a host singles.

Yes.

Thank you operator, and thank you all for participating in today's call and for your support.

We appreciate your interest and look forward to reporting to you again next quarter on our progress.

Thank you.

Ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.

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