Q1 2022 NIU Technologies Earnings Call
Good day and thank you for standing by welcome two new technologies first quarter 2022 earnings release Conference call. At this time, all participants are in a listen only mode.
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And now I'd like to hand, the conference over to MS. Wendy Chow from New technologies IR team. Thank you. Please go ahead.
Thank you operator, Hello, everyone welcome to today's conference call to discuss new technologies results for the first quarter 'twenty 'twenty to the earnings press release corporate presentation and financial spreadsheets have been posted on the Investor Relations website. This call is being webcast from company's IR website, 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 provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements involve risks uncertainties assumptions and other factors the company's actual results may be materially different from those expressed today further.
Further information regarding the risk factors is included in the Companys public filings with Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statement, except as required by law.
Our earnings press release, and this call include discussions discussions of certain non-GAAP financial measures crush.
The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial result on.
On the call with me today are our CEO Dr. <unk> CFO , Mr. Young Joe now, let me turn the call over to yet.
Alright, Thank you everyone for joining us on the call today.
In Q1, 2022, we witnessed with growth in both the China and overseas market.
Sales volume was up nine 4% year over year, the China market has a volatile quarter, mainly caused by the COVID-19 outbreak and the city lockdown that knocked that we're a month in Shanghai and Mr. Andy Yeung Delta region.
We had a strong opening in China with sales volume grew 91, 6% year over year in January and February .
However in March our China sales performance was adversely affected by the Covid outbreak due to the retail lockdowns as well as the manufacturing and the logistic disruption for nearly two weeks.
And we experienced a 24, 1% decline year over year in March.
Despite the decline in March we still had a moderate positive growth of 3% year over year in China market in Q1 due to the strong performance in the first two months.
Now turning to the international market, we're seeing solid growth in the overseas market. Despite the manufacturing disruptions total sales volume outside China reached.
$14 seven K marked 193, 7% year over year growth in Q1, the solid growth was a result of our expansion of new product categories in Europe , and North America with newly launched.
Kick scooters with tested to be a success in the two market mission evolve.
In this quarter with nearly 85000 electric more pad in almost 10000 kick scooters. The strong sales performance in the nuc exclude product category confirmed our effort in developing a diversified products tailored to a different market has paid off.
We have built the infrastructure to support a design development and marketing of our broader product offerings.
Welcome to the Bel white of market reach in the geographic locations around the world. We aim to provide urban mobility solutions to the global market.
Now going into details on the expansion of our product portfolio. In Q1, 2022, we focused mainly on the growing up the golar product lines to complete our goal of kind of offerings in China. In Q1, we introduced the Golar <unk> six the light motorcycles Golar <unk> designed specifically for female users and the golar easier entry level.
Eric bicycle targeting the mass market.
In Q2, we're shifting the focus of our product portfolio expansion of our product performance improvements and to redefine classics, bringing back the improved version.
Some of our top selling models and that that new class series.
Being the leader of the smart who with US we will continue to improve smart functionality. So cross sell kind of portfolio. So allow me to go into detail one by one.
First we saw a sharp growth in the light electric motorcycle market as our goal of tier three being well received by the market was released last year to capture this growth. We released school of T. Six at the end of March logistics is designed with upgraded battery capacity and he has a rate of over 100 kilometers on a single charge.
Priced at RMB 3999 to 4399 at offerings.
Another trend, we didn't want to Miss this accrual market of the female electric.
<unk> electric bicycle users, we're well aware of the demand and the purchasing power behind this previously.
Market segment of the female scooter users belong.
Answer Golar <unk> earlier last year at the entry level product specifically for female users now this year, we launched <unk> III March.
Motto pressed at a 4000 RMB.
A company multiple pastel colors and it is designed with the special WC satellite that really makes the design stand out on the performance side of the Golar. <unk> also has the drive range of maximum 100 kilometers. The biggest highlight optical a C. III is the improvement of user experience.
It is equipped with smart lock on dynamic mode to assist their writing up you're making the right experience easy and enjoyable.
<unk> design, the user centric ready experienced created a unique selling proposition in the market.
Besides the two new global product.
Auto release, Golar B series, which is another addition to the core product line that continues Cola original design with creative color combos for entry riders, we introduced zero product entry level price from 2009, the RMB and there was more and go up be serious model to come later this year.
Now with the comprehensive model for Golar BC as P series, We believe we had a solid product range covers in the China electric bicycles electric motorcycle market price from $24 92, seven to $2 99, RMB. The newly released up to May Angola product <unk> 63, an entry level go up.
<unk> were well received by the market accounting for almost 18% of sales since the first month that we roll out. This again demonstrated our ability to create attractive and comprehensive product in the Midland market segment.
Coming into Q2, we're releasing some of the updated version of the new electric bicycle products, such as the U class with a 20% performance improvement also we're bringing back our and I use classic electric motorcycles of am one and plus we've signed with new features such as longer drive range and operate smart functions.
We're excited about the growth driven by the performance improvement products in the Niu.
Serious in the coming quarters.
Now for the international market, we continued efforts in product development in the newly entered a micro mobility categories. The KC three Max with our most powerful in the fastest kick scooters with maximum speed up 32 kilometer prowler ended longer dry ridge that can go up to 65 nanometers, we plan to release the strong IP.
Modeling Q2. This year also the <unk> III <unk> design with Astellas in the practical lightweight frame together was part of our system driving control make it easier comparable as the city coming back both products were exhibited during the CES in Q1 in Las Vegas.
That's well received by audiences.
And lastly, we continue to include the smart functionality across our product portfolio.
Uli lots of models for both the Golar. The new series are equipped with our new smart functions such as upgrade App with GPS.
Through more tracking scooter diagnostic features and also the Bluetooth MST lock system as well as the smart distorted lock those intelligent features into make the writing experienced smart and easy for our users.
Those new product offerings that function upgrade not only helped to drive sales growth, but also helped us to improve the product for the gross margin.
We all know that the sharp rise in the raw material price, especially the 40% plus price hike in the lithium iron battery cost has put a tremendous pressure on our gross margin given the lithium iron battery account for 35% to 40% of our Bom cost. This was the main cost for our gross margin drop in Q1 and impact.
Would it be even bigger in Q2 and some of the raw material price increases are fully recognized in Q2.
Now by launching new products and integrating new features to improve the performance of our existing products will increase the perceived value of our users are able to sell the product at a premium price in order to close the gap in gross margin caused by the rising materials.
Now as we grew our product portfolios, but also expand our sales network. In Q1 2022, we opened about 140, new branded stores in China totaling two 3248 stores across China in.
In the international market also broaden our sales channels with new partnerships previously with the electric motorcycles, we mainly held overseas branded premium stores and independent motorcycle dealers selling electric motorcycles.
Now with the freshly lunch category of kicks scooters and to be launched E. Bikes, we opened up to work with electronics and general retail stores as well as online with Amazon and also shop by website, we plan to keep growing the network as we grow kind of offerings and the penetrate into a broader market.
Our brand image, it's always a real feel behind the long term growth as we expand into new product category internationally. We continue to build our brand image as a global leader of urban mobility. In Q1, we acted actively participate <unk> worldwide showing case, our product lines. This year.
The global market, we participated in the consumer electronics show in Las Vegas, The Aviva Moto show in Madrid.
<unk> and <unk>.
Ballooner, Italy.
In summary, ambitions and Congresses, new was the only two Wheeler vehicle brands side, and our new product review gain exposures and the recognition in the industry.
Now as the promoter of the stable sustainable leaving for all we are also dedicate to provide our customers with more environmental friendly smart urban vehicles to make a positive impact on the environment. We're spreading the idea of sustainable leaving throughout not just our product, but also our daily operations Lastly.
We'll celebrate our 10 billion kilometre drive distance <unk> been calculating carbon emission reduction of $2 5 billion kilograms ease those distance where travel with perpetual.
During this quarter, we launched a program called renew a global sustainability initiative designed to renew our planet as part of our Earth day campaign without massive global OSA cleanup that was designed to breath life into our urban environment.
Galvanize the new users new actions across four continents, we have new clubs rally to cleanup tracks and public areas on the beach of Valley The Street of untrue.
Around the Asia remains of Guatemala in China would also have user to share their stories to leave greener with new the user generated content has gained over 66 million views and almost 150000 interactions of comments and likes across all social media platform.
Similarly, <unk> has been a core value to us it's day, one and I'm proud to see our brand, making a positive impact on the journey of sustainability with our users.
So in China, as we expand to cover more product range of consumer both demographically and geographically we continue to spur value be how a brand with a variety of campaigns we carried.
Our successful campaign slogan feel proud of yourself in this quarter was cap.
<unk> collaborated with the China comment.
On a nationwide TV show and again over $2 9 billion in viewership.
Also from March to April we implement AQR marketing until.
Platform was 16 technology and lifestyle Influencers with larger fund base to create a high quality content showing case, our scooters. The short video Santo <unk> in total 100 million views and the formula interaction likes and comments with further organize various user activities across China as a participation for.
<unk> participation in Guangzhou coming home with user modest by new base getting about $1 7 million views on social media also various new friends events, such as the one in Chengdu hosting a new comfort with well recognized fingers.
And also concluded Q1 2022, despite the headwinds caused by the COVID-19 on raw material price increase we were resilient and our business operation both the China overseas market have positive responses to our expanded product categories and operating model and we plan to keep a broadened our product portfolio and already.
Have a few products in line for production the market entrance for the coming quarters, our branding and marketing our operations. We actively promote our brand as a global leader in urban mobility industry brand awareness and recognition from market, we operate and create a long term fuel for our company's growth.
Now looking forward to Q2 'twenty two it.
It is no doubt a very challenging period for us given the uncertainty caused by the resurgence of COVID-19, China as of May 2022.
Some major Cts has been in full or partial lockdowns, which adversely affected consumer spending in all categories with no exception to the Demount Twitter and vehicles during the lockdown period.
We are particularly impacted our sales are highly concentrated in the top tier cities, where the covenant restraints or more region.
Additionally, we continue to experience supply chain disruptions at some of the key suppliers are you Shanghai vicinity, the slowdown in the manufacturing and logistic has affected our market performance globally.
While the market demand is China faces uncertainty in Q2, our diversified growth strategy put in place since last year have changed some lights the newly launched a category of kick scooters had been ground, the Europe and North American market.
Our key scooter rent cuts Amazon best sellers of electric Scooter category for two weeks narrow in may that will be launched electric electric bike products will further strengthen our position as the urban mobility brand the rising sales in our international market will help us to weather through the temporary downturn from the China market.
Now we're also confident in our rebound in the sales in China post the COVID-19 situation at the same trend of the therapy in 2020 now in the cities that have been hit by Covid, even though the sales are being hit temporarily now traveling with personal scooters appear to be recommended and sometimes even.
As the only form of transportation Cds for money riding a scooter safer and easier transportation method and as EBIT recommended measures by local community officials.
So we expect to see a need for electric scooter and bicycle rising with the call that easing in the coming quarters.
So, although Q2 will be a challenging quarter for us now with our new product offerings and pipeline for both the China market any international market, we're still optimistic for the entire year of 2022 now.
Now I'll turn the call over to our CFO to go through the financial results.
Thank you Yan and Hello, everyone. Our press release contains all the figures and comparisons you need and we have also uploaded excel format <unk> to our IR website for your reference.
As I review, our financial performance, we are referring to the first quarter figures on that otherwise.
Specified and that all monetary figures RMB unless otherwise noted in the first quarter of 2022, we are gratified to see the strong demand peak screwed or serious cancers.
Last year in Europe , and in the U S has been maintaining its momentum and the product mix in China market continue to move towards what we planned and expected among the total 149000 sales in Chinese domestic market 31.
4% are coming from the end user areas and 38, 4% from called a premium and only 32% from the Gulf of entry as Jan just mentioned keep scooter sales volume in the overseas market reached nearly 10000 and BMO Pat <unk>.
In motorcycles five styles.
Talking about revenue total revenue increased by five 1% to RMB 575, 5 million compared to the same period last year.
Typically revenue from scooters increased by 75% while revenue from accessories spare parts and services dropped by 48.9% nearly a half the contribution of school or revenue rose from 91 three.
3% to sorry from 81, 3% to 19, 9% year over year.
And in China market, we managed to achieve a slight growth despite headwinds from COVID-19 resurgence and E. Scooter revenue from China market increased by 12, 6% to RMB $457 7 million accounting for 87 five.
5% of total scooter revenue and the growth was mostly driven by the improvement in ESP as a result of a more optimized product mix as I mentioned.
Our newly released Golar premium models targeting at to meet end market has received a positive response and feedback.
Any growth from both our premium was also reflected in the ESP. The scooter ASP from China market was RMB 307 to nine 4% increase from the first quarter of 2021.
Scooter revenue from overseas market increased by 68, 9% to RMB $65 7 million fjord by strong <unk> sales.
Since its official launch in quarter three 2021.
Overseas Scooter revenue as a percentage of total scooter revenue increased by three eight ppt to 12, 5% year over year, indicating that our international sales keep keep growing steadily as we continue to expand product offerings tailored to different community and.
Travelling demand in those markets.
The total RMB $65 7 million overseas Scooter revenue 21 million came from <unk> and the other $44 7 million from more pads and motorcycles.
Overseas Scooter.
<unk> as a whole fell from RMB 70, 786 to 476 since the Keytruda, which retail price is much lower than hemo pads and in motorcycles is included in the number and the ESP of E OPEC and motorcycles in fact inquiry.
<unk> from increased by 18, 5% year over year.
Of our high end models like <unk> and <unk> account for a higher proportion of the total sales volume.
With all of the above being said branded scooter ASP increased by seven 5% to RMB three one.
Including China E scooters overseas E scooters, and E motorcycle and kicks corners altogether.
Accessories spare parts and service revenue were RMB 52, 1 million a decrease of 848, 9% from last year quarter, one representing a nine 1% of total revenues compared to 18, 7%.
Total revenues last year. The decrease was mainly due to the overseas battery pack sales reduction.
This rate cost and euro depreciation against the U S dollars has discouraged many distributors from stocking up in advance.
We do not meet the previous guidance for this quarter, mainly due to the COVID-19 impact on domestic margins, which led to not only manufacturing and logistics disruptions supply chain shortages, but also this is a retail difficulties and transportation limitations in many big.
These headwinds may continue to cast impact on our performance in the second quarter.
The gross margin for the first quarter declined by $4 seven ppt from the same period last year to 19, 1% largely due to the fewer sales from non scooter parts and services, which have higher margins and the consistent any sorry.
Cost for lithium ion batteries and the other call raw material price hikes for example.
You May now Cooper and rubbers.
Have found the cost pressure, we actually raised the retail prices for all of our lithium battery models in China market on April 1st.
And for some models in overseas market.
First we believe that the retail price increases will sustain us through upstream cost inflation.
And now let's turn to expenses total operating expenses were RMB $143 million, an increase of nine 6% from the same period 2021, and operating expenses as percentage of revenue was 24, 8% compare.
223, 8% in the fourth quarter of 2021, and this increase was mainly due to the rising R&D expenses, which jumped to RMB 41 8 million.
63, 4% up year over year, but 7% lower quarter over quarter, and the majority increase year over year, our design and testing expenses and staff costs.
Being able to stay competitive in the market and to achieve sustaining growth significantly rely on our ability to keep launching popular products, which meet the demands of our customers.
Just the RMB has always been our priority at <unk> and.
In the marketing and selling expenses were RMB $70 million decreased by four 7% compared to quarter, one 2021, mainly because of the decrease.
Hiseq and promotion expenses. However, we did put as much focus on ramping up keep scooters abroad sales channels, although net online channels like Amazon best buy and Walmart, which we have already entered into.
Expanded to some of the largest offline big box tailors.
Retailers like Costco capital Osha and snack we believe these efforts will pay off in the quarter sales going forward.
And G&A expenses remained flat.
Three ppt lower as a percentage of revenue as we continue to control costs and improve our operational efficiency.
The noncash non-GAAP operating expenses as percentage of revenue was 22, 6% compared to 21, 7% of last year.
One out of the 22, 6% annual non-GAAP operating expenses 11, 5% was from the study and marketing expenses, one four ppt lower than last year, 6.4% was from the R&D expenses to five.
PPG higher than last year, and four 7% was from G&A expenses.
Two ppt lower than last year.
This quarter, we recorded a net loss of RMB 29, 6 million compared to a net loss of RMB five 4 million in the first quarter of 2021, and the net margin was negative five 1% compared to the negative one.
Zero pretends last year non-GAAP loss was RMB 16, 3 million compared to last year's net profit of RMB $6 7 million.
Turning to our balance sheet and cash flow, we ended the quarter with RMB $819 million in cash term deposit and short term investments and RMB 223 restricted cash our operating cash flow was 168 million.
Mainly due to the reduction in payable of $174 million as a result of nationality.
<unk>.
And in addition, our purchase of raw materials.
We packed have increased since the second half of 2021, as we tended to locking the price and avoid the adverse impacts from the further price hikes.
Also due to the seasonality quite a light quarter in which we usually generating the lowest sales throughout the year. Considering these two factors. It's typical that operating cash flow is negative for the fourth quarter each year.
Talking about quarter two guidance.
Given the high uncertainty of China domestic markets as we as we mentioned, especially the continuing negative impact of the recent outbreaks of offline retail.
And we expect the revenue to be between RMB 803 million to $945 million, representing <unk> 15 decrease to no change year over year.
With that let's now open the call for any questions that you may have for US operator. Please go ahead.
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The management team for closing remarks.
Alright, Thank you operator, and thank you all for participating on today's call and for your support we appreciate your interest and looking forward to reporting to you again next quarter on our progress.
Thank you that does conclude our conference for today. Thank you for participating you may all disconnect.
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