Q2 2022 NIU Technologies Earnings Call
[music].
Yes.
Yeah.
Good day and thank you for standing by welcome to the New technologies second quarter 2022 earnings release Conference call. At this time all participants are in listen only mode. After the speaker's presentation, there will be the question and answer session.
To ask a question during the session you will need to press star one on your telephone you will then get an automatic message advisors and Johan does right.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference all about your first speaker today once it's all please go ahead.
Thank you operator, Hello, everyone welcome to today's conference call to discuss <unk> Technologies' results for the second quarter 'twenty 'twenty to the earnings press release corporate presentation and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from company's IR website, as well and it will play out.
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 information regarding the risk factors is included in the Companys public filings with the Securities and Exchange Commission.
The company does not assume an obligation to update any forward looking statement, except as required by law.
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 a reconciliation of GAAP to non-GAAP financial results.
On the call with me today are our CEO Dr. Young Lee our CFO Mr. Young Joe now, let me turn the call over to Jim.
Thanks, Wendy and thanks to everyone for joining us on the call today.
Q2, 2022 with delivered mixed results in the China and international markets.
Although sales volume was down by 17, 4% year on year.
Total sales of oil and in international market.
Impressive to 100% Euro year, reaching nearly 29000 units mainly driven by the proceeds in your category all six quarters.
However in the total sales volume in the China market was down by 26, 7% year over year for China market was severely affected by the COVID-19 resurgence.
Now in the China market Colby infections by starting in early April and that affected throughout the entire quarter.
<unk> com and Hautelook are pretty much all business operations and the cities like Shanghai honest severely slowed down the most in others like Beijing.
New sales are highly concentrated in the higher tier cities, which were impacted by the COVID-19 more significantly at top tier cities accounted for 35 to 40 or 55% of total sales in the China market.
In addition, the lockdown in Shanghai also cost months itself delayed new product development at our R&D centers based in Shanghai.
This has impacted our sales performance in quarter, two as well as in Q3 as quite a few key.
Key new products that arent genomics, Saskatchewan in Q2 were delayed to late August .
For the international market in Q2 sales of <unk> continued to grow rapidly in the overseas market growing by 112% quarter over quarter. During the Prime day promotions New was ranked the number one I'll ask on best sellers in the case of cooler Categorizing, Canada, Germany, and France, and the rest top threes.
And U S and Italy market.
We're excited to see that in less than a year. Since we launched the first <unk> product would have already established a reputation as a top sellers in the European and U S market online.
With a strong performance from online sales. We're also expecting sales ramping up in offline channels are those usually it takes some more time.
Now delayed by the call. It was finally launched three new electric bicycle product for China in August .
<unk> plus and <unk>.
And on the new products in detail.
So <unk> position as our most high end product in the China electric bicycle product category with its innovative design cutting edge technologies and materials, so as to as futuristic straddle motorcycle like Luke with a clear cut geometric body frame and large 70 inch wheel.
Does it represent the unconventional desire for electric bicycles, yet still meeting the China New standard.
In order to meet the week requirement adopted a high performing aerospace magnesium alloy material at the body's frame the firstly in electric bicycle market with its unique design execute quickly gain attention from media and the users across China. According to some media vascular has pushed.
The product.
<unk> electric bicycle market.
The two items priced from RMB 8999 to RMB 9599, and it will be in production in November we launched a presale campaign on August 2nd within the first 10 days after launch nearly 9000 preorders or made.
Along with the launch of at Q I would also announced the collaboration was reason are the leading global lifestyle brand for gamers, We released a limited edition a new cross streets are co branded as <unk>, which is designed to embody news innovative design and a resource sticking with local advertisers Brent collar.
The 299 limited new rates or ask you I were priced at RMB 9999, Oh 299 scooters preorder, we're sold out during the launch event in just two seconds, we see great synergy in this co branding.
Put together news unique design with the readers gaming.
But also launched a co branded <unk>.
In Q IGT as we plan to sell the New Cross research <unk> Mark.
Now our youth serious it's one or two products that has won all seven international design awards in mobility category.
Our original Q1 was released in 2017 and a new class of U S were released in 2019 together accounted for nearly 25% of sales.
Although remaining at the top selling Sirius the design personalities needed upgrades. After five years in the market, we launched a brand new <unk>, plus which he inherited design styles of the classic users, but improved significantly on many aspects such as the likely size of smart control.
System, and writing economics, and additional functionalities for personalization.
The new U plus user uses the hollow Halo light the first of its kind in the industry, making it easier recognizable writing on the street as to additional spec tail light compared with the previous version makes it safer to write in the dark at night, that's compatible with our upgraded intelligence systems. Okay.
<unk>, which unable complete sense, let's control users started scooter ultimate seat box and storage box with just their cell phones in the pocket.
In addition, the new <unk> features not can be activated with series, which users can start up controls sooner with theory voice commands.
Upgrade intelligence system made a new you plus a most user convenience scooter to provide their own.
In terms of variety of economics, but also improve the seeding and attacking designed to make it right more comfortable the new class has increased the legroom and logistic height make a comparable four users with various heights for new UQM Scooter has to drive reach up to 95 kilometres on one.
Charge.
Now the biggest highlight on the design of the new Upi plus as interchangeable exoskeleton frame and magnetic panel on the site opening up countless possibilities for personalization.
We see many of our customers choose to personalize their school their parts to make their scooter represent their own taste, we believe by opening up the designing and accretion of the decorative parts to our users with further new cards and expression of their unique lifestyle.
Now the brand new <unk> plus is priced from RMB 5299, and two 7499.
The third product, we released an RFP to a large electric bicycle for them and price range market in China price from RMB 3999 to $4 99, the Btu comes with a simplistic design style, but with a large form factor, it's about 20% to 30% larger at dollar tree.
And as to which were released in 2020 and 2021, the <unk> up to as part of two series are among the most popular and market product in our portfolio together those two models accounted for 22% of sales in China.
The addition of B to complete the product offering and targeting them in March.
By having a large form factor designs with longer debt or a bigger storage box large form factor. It makes us comfortable to ride with bigger legroom and also enable additional PBC, making them more practical scooters for daily use.
It is also equipped with all the basic consumption systems, such as GPS location.
<unk> and our new App axis.
Now the three new models covered a wide range of market segments in China that <unk> with its unique design reinforce news brand as the innovation leader in the industry. The new U plus he has new product offerings within the high end segments and the new <unk> with a large form factor that enabled perhaps.
Design completes our product offerings targeting the mass segments with the potential of those products become not only just news next flagship products, but also product that these market trends.
Now along with the new product launches in August we have organized a series of marketing and branding campaigns via PR, social media PR collaboration and the user events, we have various price release events and invited nearly more than 100 media partners to test right and to cover all of them.
New product launches.
And those those have their media events has published more than 200 articles.
Now we also.
On the social media platform, we collaborate with nearly 60 tacked on lifestyle Influencers and <unk>.
With large fan bases to create context, showcasing our new scooters. So kyowa generic content together came more than 170 million views across all platform after lunch or product launches have also reached we will heartless August 2nd in August night, giving a total of $578 million of views.
More than 400000 discussions when initiative Weibo topic of urban <unk> electric scooter is better than driving to introducing our new scooters and soon become a phenomenon with more than 200 million views those huge media exposure serve that testimony on the market reactions to our newly launched products.
But also further improve our brand image as the innovative leader in the urban mobility market in China.
Now turning to the overseas market as our sales volume keeps growing with putting continuous effort in the marketing and to enhance our brand recognition as a global leader in the urban mobility sector.
In this quarter, the new product review videos has more than 7 million views on Youtube globally, but also actively participate in dense exhibitions worldwide, making global appears showcasing our products and our brand values will participate in electrify Expo the largest electric vehicle Festival North America in Los Angeles.
And it will continue to be a major exhibitor at electric Expo event throughout 2022.
Our product automates the periods during the bike show in London, which is the Europe , because independent annual motorcycle show New was among the few explorers that exhibited with electric motorcycles, bringing diversity to the traditional casio model cycle.
With nothing, especially in the event, we hope to gain global recognition in the industry.
Finally, I want to give a prospect on the coming quarters in the first half of 2022, we face great challenges both from the rising raw material prices, especially in the lithium ion batteries and from southern Colgate resurgence in lockdown in some major cities in China. This has impact our sales volume credit pressure.
Our gross margin and also caused delays in our new product rollout as mentioned earlier for.
For the China market, we remain cautious with the outlook as we put the 2022 first half behind us and announced three new products. The <unk> that you've got class at the between August we have received very positive response from the market media those new product will help to fuel the growth in late Q3, and Q4 of 2022.
Having said that we remain cautious with the sell through in Q3 due to unclear Cobra impact and temporary slowdown in retail sales introduced by the lithium arm.
Price hike so call me researches embarrass Cds have created a temporary impact on our sales with the most recent <unk>, Hainan, which accounted for 4% of sales last year.
<unk> price of lithium iron battery prices has caused the lithium iron based scooter to price up across the industry. In Q2, we have increased our price product prices by averaged 7%.
Now the price increase on the lithium iron battery for across the industry has also created a temporary lithium iron scooter demand decline is some of the tier two and tier three cities, where the light asset based scooters remain to be a cheaper at a more viable alternative.
We have all served a temporary trend of user purchasing preferences switching from lithium iron to la asset scooters in some cities like Jinan 19. Unfortunately, however, we expect a return in demand as the price for lithium ion batteries stabilizes to the normal level of new regulations being more strictly enforced.
Now for the international market will continue to be very optimistic with the sales growth, especially in the new category expansion and kick scooters and E bikes <unk> scooters. Besides the current phase III and pay too serious we're introducing several new series in the second half of this year to complete the clicks CDR product offerings. We also have.
APAC model ready for rollout in the coming quarters in the U S and European markets.
On the China expansions, we're actively expanding our offline sales network by the end of quarter three we plan to grow our point of sales to nearly 2000 stores the U S and Europe .
Putting the robust growth in our sales and preparing for the holiday seasons.
We expect to see sales to further ramp up in the global market as we expand our product portfolio and establish our sales network.
Now I'll turn the call over to.
Our CFO to go through our financial results.
Thank you Hello, everyone before going through the financials.
We're pleased to present, our inaugural ESG report on the IR website state highlighting our ESG achievements made over the past several years.
While the details of the company's performance in several key areas, including low carbon operation Green manufacturing technology innovation.
Cooperate governance.
Care for employees in cooperation with partners and peers.
Combining this report as a symbol of entering a new chapter of ESG.
And before I knew we have me acknowledging our responsibilities as a member of our community and will continue to remain cautious contribution to society.
There are ways to go in for Rob.
That AT&T economic growth, we also hope to enhance our ROI and communication with stakeholders to make a constructive.
Environmental protection and low carbon economy promotion.
Back to the financial results. Please note our press release contains all the figures and comparison.
And we have also uploaded excel format figures to our IR website for your reference as I review, our financial performance, we are referring to the second quarter figures on that size say, otherwise and that all monetary figures are beyond that otherwise noted.
In the second quarter, we de lever.
As a result total sales volume fell.
A 17, 4% to 290000 units.
Year on year basis.
Which 180000 with from China market.
He had 26, 7% decrease year over year, we were more exposed to and adversely affected by lockdown in top tier cities.
All lines peers, our retail network and it's a lot more concentrated on them on that where strict control measures mostly happen in.
International market countries into real basket growth biting scooter sales ramped up total sales volume reached nearly 29000 units increased by more than threefold year over year, among which kicked scooter sales volume therefore $2 21000.
Our record high.
Launched in the third quarter last year.
Meanwhile, Nemo cycles in the past.
<unk> sales volume reached five years, 10% to more than seven 7000 units.
In the second quarter, our total revenue were $828 million down by 12, 4% year over year.
Well blended school.
ASP increased more than 10% from three to 222357 year over year.
To break down the revenues by region E scooters revenue generated from China market was $597 million a year over year decrease of 21, 2% representing 83% of total scooter revenue.
And China markets reached in Raceway overnight.
745% higher year over year, and seven 7% higher quarter over quarter, mainly due to increase in retail pricing and a better product mix.
Talking now about product mix and nine new theories and Gogo premiums theorists together accounted for 76, 7% of total domestic sales volume this quarter.
Global entry serious only accounted for 23 three.
The lowest enamel quantity is 2021.
Overseas is worse revenue grow by one five times to 146 million out of which 78 million analysts more from Eagle stifle anything you will pass and $68 million or from cheap scooters landing <unk> international market.
Decreased by 37, 7% year over year.
25147, but rose by 14% or whatever it is a combination of uptick scooters and Nemo path. If we look at them separately both categories.
The year over year and quarter over quarter ASP increases.
Even more patents motorcycle ASP rose by nearly 24% year over year to over RMB 10000, due to a higher proportion of premium models.
<unk>, the better product mix and increase our retail price both contributed to a much higher ESP.
Revenue for accessories spare parts and services.
Our $85 million down 34.6% year over year from 13, 7% to 10, 2% of total revenues.
This decrease was due to the same reasons, we stated in the first quarter rising prices of battery and high freight costs have featured our own national distributors from purchasing spare battery packs and we perceive it may not recover in the near term.
Gross margin this quarter was 23% to four ppt lower.
On a year basis, but one two ppt higher than the fourth quarter of a year.
Oh quarter retail price increase contributed to this one to PBT margin increase.
Again, the adequate cost inflation this year.
On a year over year basis.
At 240, BP decrease $1 four ppt was due to the cost pressure, including raw material cost inflation hiking French team.
The real 0.7, ppt was contributing to a higher proportion of keep scooter sales.
Which have relatively lower margin and the remaining <unk>, which from the decline of Nascar's sales contribution to total sales.
Our total operating expenses for the second quarter with 173 million 26, 4% higher than the same period last year operating expenses as a percentage of revenue was 29% compared with 14, 5% year over year.
Going into detail about expenses total selling and marketing expenses.
The 93 million 24 million higher.
Yeah Nathan.
Great depreciation of new stores opening from that.
Research and marketing and development expenses.
$45 million.
14 million higher than last year.
Majority of the increase was due to 10 million higher staff costs, including share based compensation 3 million of higher design and tax expenses.
We are expanding our product portfolio.
We're continuing to invest in talent professionals and other R&D resources to support our technology development.
G&A expenses for a 36 million.
One 2 billion lower than last year.
7 million foreign exchange gain offset by staff cost and provisions, resulting declines in G&A total operating expenses, excluding share based compensation, our non-GAAP expenses.
$157 million increased by 25, 3% year over year and representing.
18th one 9% of revenue.
Q2, net income was $14 4 million compared with 91 8 million in the second quarter of 2021 and net income margin with.
One, 7% compared with $9 seven in the same period of 2021 and minus five 1% in the second.
Fourth quarter and the year.
Turning to our balance sheet and cash flow, we ended the quarter with $861 million cash term deposit and short term investments and 189 million restricted cash our operating cash flow was negative 33 million.
73 million, mainly due to a 126 million increase in inventories I'll kick scooters.
Saying that the way the consumer electronics from Chinese manufacturers ourselves overseas. So it keeps goulard, we established overseas well warehouses.
Stockpile locally to ensure a fast turnover when orders came in.
Capital expenditures for the second quarter was $15 million compared to 83 million in the same period last year.
Sure.
Now, let's turn to guidance.
Since Paul uncertainty remains over the pace of economic recovery, we expect third quarter revenue to be in the range of RMB 117 billion to 135 billion a decrease of 5% to an increase of 10% year over year.
For the full year volume guidance.
Prudently adjusting you'd be asking me to two 1 million to 1.2 million units.
Please be aware that this outlook is based on information available at that date and reflect the company's current and preliminary expectation, which is subject to changes due to uncertainties relating to the various factors such as the pace of COVID-19 pandemic recovery.
All the others.
But in that.
Well now open the call for any questions that you may have for US operator. Please go ahead.
Thank you as a reminder, if you wish to ask a question. Please press star and one one on your telephone Lake for a name to be announced at least in Basel. The composite you narrow this would take a few moment. Thank you.
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Dear participants as a reminder, if you wish to ask a question. Please press star one one on your telephone keypad.
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Dear speakers there are no questions at this time please continue.
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Yeah participants as a last reminder, if you wish to ask a question. Please press star one one.
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Dear speakers there are no further questions I would like to hand over back to yourself for the closing remarks. Please go ahead.
Great. Thank you operator, and thank you all for participating in today's call and for your support.
Appreciate your interest and look forward to reporting to you again next quarter on our progress.
Thank you.
That does.
Please have a conference for today. Thank you for participating you may all disconnect have a nice day.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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Good day and thank you for standing by welcome to the New technologies second quarter 2022 earnings release Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be the question and answer session to ask a question. During this session you will need to press star one.
One on your telephone you will then get an automatic message advisors and Johan does right.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your first speaker today when does all please go ahead.
Thank you operator, Hello, everyone welcome to today's conference call to discuss new technologies to results for the second quarter 2020 to the earnings press release corporate presentation and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from company's IR website, as well and a replay.
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 companys actual results may be materially different from those expressed today.
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.
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 a reconciliation of GAAP to non-GAAP financial results.
On the call with me today are our CEO , Dr. Yan Li and the CFO Ms beyond Joel now, let me turn the call over to Yan.
Thanks, Wendy and thanks, everyone for joining us on the call today in Q2 2022 were delivered a mixed results in the China and international market total sales volume was down by 17, 4% year over year the.
Total sales of oil in an international market were up by impressive to 100% Euro year, reaching nearly 29000 units, mainly driven by the growth in the new category of <unk>.
However, the total sales.
I am in the China market was down by 26, 7% year over year for China market was severely affected by the COVID-19 resurgence.
Now in the China market Colby infections by starting in early April and affected throughout the entire quarter.
<unk> part of it are pretty much all business operations in the cities like Shanghai and severely slowed down the most in others like Beijing.
New sales are highly concentrated in the higher tier cities, which were impacted by the COVID-19 more significantly at top tier cities accounted for 35% to $40 to 55% of total sales in the China market.
In addition, the lockdown in Shanghai also cost months itself delayed new product development at our R&D centers based in Shanghai. This has impact our sales performance in quarter, two as well as in Q3.
A few key new products that arent generally schedule in Q2 were delayed to late August .
For the international market in Q2 sales of <unk> continued to grow rapidly in the overseas market growing by 112% quarter over quarter during the Amazon Prime day promotions, New was ranked the number one I'll ask on best sellers and it keeps cooler categorizing, Canada, Germany, France, and the Red top threes.
And U S and Italy market.
We're excited to see that in less than a year. Since we launched the first product we have already established a reputation as a top sellers in the European and U S market online.
With the strong performance from online sales, we're also expecting sales ramping up in offline channels and those usually it takes more time.
Now delayed by the call. It was finally launched three new electric bicycle product for China in August the revolutionary <unk>, the new <unk> plus and <unk>.
Spend on new products in detail.
So <unk> positioned as our most high end product in the China electric bicycle product category with its innovative design and cutting edge technologies and materials.
<unk> has a futuristic straddle motorcycle like Luke with a clear cut geometric body frame and large 70 inch wheels. It represents the unconventional desire for electric bicycles, yet still meeting the China New standard.
Harder to meet the waiver requirement adopted a high performing aerospace magnesium alloy material at the body frame. The firstly in electric bicycle market with its unique design execute quickly gain attention from media and the users across China. According to some media SQL has pushed the.
Product innovation limit in the electric bicycle market.
Two items priced from RMB 8999 to RMB 9599, and it will be in production in November we launched a presale campaign on August 2nd within the first 10 days after launch nearly 9000 preorders were made.
Along with the launch of <unk> would also announced the collaboration was reason are the leading global lifestyle brand for gamers, We released a limited edition of our new Cross greater co branded as <unk>, which is designed to embody news innovative design and a resource signature logo is really their screen Brent collar.
The 299 limited new rates or <unk> were priced at RMB 9999, or 299 scooters preorder, we're sold out during the launch event and just two seconds.
We see great synergy in this co branding.
Put together <unk> unique design with the readers gaming.
But also launched a co branded <unk>.
<unk> as we plan to sell the new cross <unk> Mark.
Now our new serious it's one or two products that has won all seven international design awards in mobility category.
Our original Q1 was released in 2017 and the new class of U S were released in 2019 together accounted for nearly 25% of sales.
Although remaining at the top selling serious the design personalities needed upgrade after five years in the market, we launched a brand new <unk>, plus which he inherited design styles of the classic users, but improved significantly on many aspects such as the likely size of smart control.
System, the right economics, and additional functionalities for personalization.
The new U plus user uses the hollow Halo light the first of its kind in the industry, making it easier recognizable writing on the street as to additional spec tail light compared with the previous version makes it safer to be right in the dark at night. This is compatible with our upgraded intelligence system. Okay.
<unk>, which enable complete sense, let's control users started scooter opened the steep box of storage box with just their cell phones in the pocket.
In addition, the new <unk> features not can be activated with series, which users can start up controls sooner with theory voice commands.
Upgrade intelligence system.
You plus a most user convenience scooter to write their own.
In terms of variety of economics, we also improved the seeding and attacking designed to make it writing more comfortable the new class has increased the legroom and lowered his seat height make it comparable for users with various types of new UQM Scooter has to drive rates up 95 kilometres on one.
Charge.
Now the biggest highlights on the design of the new Upi plus as interchangeable exoskeleton frame and magnetic panel on the site opening up countless possibilities for personalization.
We see many of our customers choose to personalize their school their parts to make their scooter represent their own taste, we believe by opening up the designers and the creation of the decorated parts to our users with further new cards and expression of their unique lifestyle.
Now the brand new <unk> plus is priced from RMB 5299, and two 7499.
The third product, we released an RFP to a large electric bicycle for the mid and price range market in China price from RMB 3999 to $4 99, the <unk> comes with a simplistic lifestyle, but with a large form factor, it's about 20% to 30% larger at dollar tree.
As to which were released in 2020 and 2021, the G and F. Two as part of two series are among the most popular and market product in our portfolio together those two models accounted for 22% of sales in China.
The addition of B to complete the product offering and targeting the mid end market by having a large form factor designs with longer debt and bigger storage box large form factor. It makes us comfortable to ride with speaker legroom and also enable additional BBC, making them more practical scooters for daily use.
It is also equipped with all the basic assumption systems, such as GPS location.
And our new App axis.
Now the three new models covered a wide range of market segments in China that <unk> with its unique design Reed force new spread as the innovation leader in the industry. The new U plus he has new product offerings and the high end segments and the new <unk> with a large form factor that enabled practice.
Design completes our product offerings targeting the mass segments with the potential of those products become not only just news next flagship products, but also product that leads the market trend.
Now along with the new product launches in August we have organized a series of marketing and branding campaigns via PR, social media PR cooperations and the user events, we have various price release events in the environment nearly more than 100 media partners to test ride and to cover our new.
Product launches.
And those those hundred media events has published more than 200 articles.
Now we also.
On the social media platform, we collaborate with nearly 60 tack on lifestyle, influencers and with large fan bases to create context showcasing our new scooters.
Okay. All generic content together came more than 170 million views across all platform after lunch.
Product launches have also reached a weibo heartless August 2nd in August night, giving a total of $570 million of views I was more than 400000 discussions when initiative, we've been topic of urban <unk> with electric scooter is better than driving to introducing our new scooters and <unk>.
<unk> become a phenomenon with more than 200 million views those huge media exposure serve that testimony on the market reactions to our newly launched product, but also further improve our brand image as the innovative leader in the urban mobility market in China.
Now I'll turn into the overseas market as our sales volume keeps growing with putting continuous effort in the marketing and to enhance our brand recognition global leader in the urban mobility sector.
In this quarter, the new product view video has more than 7 million views on Youtube globally, but also actively participate in dental experience worldwide, making global appearance showcasing our products and our brand values will participate in electrify Expo the largest electric vehicle festival in North America in Los Angeles.
And we will continue to be a med exhibited at the electric Expo event throughout 2022.
Product automates the periods during the bike show in London, which is Europe's biggest independent annual motorcycle show new was among the few explorers that exhibited with electric motorcycles, bringing diversity to the traditional casio model cycle.
We will not experience they've been we hope to gain global recognition in the industry.
Finally, I wanted to give a prospect on the coming quarters in the first half of 2022 week phase great challenges, both from the rising raw material prices, especially in the lithium ion batteries and from southern Colby resurgence in lockdown in some major cities in China. This has impact our sales volume credit pressure.
Our gross margin and also cost delaying our new product rollout as mentioned earlier for.
For the China market, we remain cautious with the outlook as we put the 2022 first half behind us and announced three new products that <unk> got class of the between August we have received very positive response from the market media those new product will help to fuel the growth in late Q3, and Q4 2022.
Having said that we remain cautious with the sales rebound in Q3 due to unclear COVID-19 impact and temporary slowdown in retail sales introduced by the lithium ion battery price hike, who call. These are surgeons in various cities have created a temporary impact on our sales with the most recent <unk>, Hainan, which accounted for 4% of sales.
Last year the <unk>.
Sharp price of lithium iron battery prices has caused the lithium iron based scooter to price up across the industry. In Q2, we have increased our price product prices by averaged 7%.
Now the price is.
Chris on the lithium iron battery to across the industry has also created temporary lithium iron scooter demand decline is some of the tier two and tier three cities, where the light asset based scooters remained to be a cheaper at a more viable alternative.
We have all served a temporary trend of user purchasing preferences switching from lithium iron to la asset scooters in some cities like cheap 919, a slingshot. However, we expect to return to demand as the price for lithium ion batteries stabilizes to the normal level of new regulations being more strictly enforced.
Now for the international market will continue to be bear optimistic with the sales growth, especially in the new category expansion E scooters and E bikes for key scooters. Besides the current phase III and pay two series, we're introducing several new series in the second half of this year to complete the kicks CDR product offerings. We also have.
APAC model ready for rollout in the coming quarters in the U S and European markets.
On the China expansions, we're actively expanding our offline sales network by the end of quarter three we plan to grow our point of sales to nearly 2000 stores. The U S and Europe supporting the robust growth in our sales and preparing for the holiday seasons.
We expect to see sales to further ramp up in the global market as we expand our product portfolio of established sales network.
Now I'll turn the call over to.
Our CFO to go through our financial results.
Thank you Hello, everyone before going through the financials. We are pleased to present are really not be right. ESG report on the IR website state highlighting our key achievements made over the past several years.
While the details of the company's performance in several key areas, including low carbon operation Green manufacturing technology innovation cooperate governance.
Therefore employees in cooperation with partners and peers.
Valuing this report at the single aisle entering to a new chapter of FTE development for an ICU. We have me acknowledging our responsibilities as a member of our community and will continue to be cautious contribution to society.
A number of ways going forward, while dedicating to economic growth. We also hope to enhance our communications with stakeholders to make a constructive input on environmental protection and low carbon economy from ocean.
Back to the financial results. Please note that our press release contains all the figures and comparisons you need.
And we have also uploaded excel format figures to our IR website for your reference.
As I review, our financial performance, we are referring to the second quarter figures on that I'd say, otherwise and that all monetary figures are beyond that otherwise noted.
In the second quarter, we de lever.
The results total sales volume fell.
A 17, 4% to 290000 units a year over year basis.
Of which $180000 from China market, representing a 26, 7% decrease year over year, we were more exposed to and adversely affected by a lockdown in top tier cities.
<unk> peers, our retail network and a lot more concentrated on Montana, where strict control measures mostly happened in <unk>.
National market contributed to robust <unk> growth by kick scooter sales ramped up.
<unk> sales volume reached nearly 29000 units increased by more than threefold year over year, among which kicked scooter sales volume, therefore, $2 21000 quarter over quarter a record high since its launched in the third quarter of last year. Meanwhile, E mail cycle chemo.
<unk> sales volume reached five years, 10% to more than seven 7000 units.
In the second quarter, our total revenues were $828 million down by 12, 4% year over year.
While blended ASP.
ASP increased more than 10% from three to 222357 year over year.
To break down the revenues by region E scooters revenue generated from China market was $597 million a year over year decrease of 21, 2% representing 83% of total score Ers revenue.
And China markets reached in Raceway overnight.
Seven 5% higher year over year, and seven 7% higher quarter over quarter, mainly due to increase in retail pricing and a better product mix.
Talking now about product mix and nine new theories and Golar premiums theorists together accounted for 76, 7% of total domestic sales volume this quarter.
Global entry serious only accounted for 23, 3% the lowest level quantities in 2021.
Overseas.
<unk> revenue grew by one five times to 146 million out of which 78 million analysts more from an equal recycling EUR Pac and 68 million were from key scooters landing ESP up international market decreased by 37.
One 7% year over year to 5147, but rose by 14% quarter over quarter.
It is a combination of optic scooters and Nemo path. If we look at them separately. Both categories. So you can see year over year and quarter over quarter, ASP increases, but even more patents the motorcycle.
ASP rose by nearly 24% year over year to over RMB 10000, due to a higher proportion of premium models.
Well <unk>, the better product mix and increase our retail price both contributed to a much higher ESP.
Revenue for accessories spare parts and services.
Our $85 million down 34, 6% year over year from 13, 7% to 10, 2% of total revenues.
This decrease was due to the same reasons, we stated in the first quarter rising prices of battery and high freight costs have featured our international distributors from purchasing spare battery packs and we perceive it may not recover in the near term.
Gross margin this quarter was 23%.
Four ppt lower on a year over year basis, but one two ppt higher than the fourth quarter of this year.
On a linked quarter retail price increase contributed to this one to PBT margin increased again to be out of input cost inflation. This year.
Year over year basis.
The two four ppt decreased 1.4, ppt was due to the cost pressure, including raw material cost inflation in <unk>.
Zero seven ppt was contributing to a higher proportion of keep scooter sales.
Which have relatively lower margin and the remaining 0.3 ppt, which from the decline of non square sales contribution to total sales.
Our total operating expenses for the second quarter was 173 million 26, 4% higher than the same period last year operating expenses as a percentage of revenue was 29% compared with 14, 5% year over year.
Going into detail about expenses total selling and marketing expenses was RMB 93 million 24 million higher year over year.
Mainly due to the increased depreciation of new stores opening from that multi year research and marketing and development expenses were $45 million.
14 million higher than last year.
George the of the increase was due to 10 million higher staff costs, including share based compensation $3 million higher design and tax expenses.
As we are expanding our product portfolio, we will continue to invest in talent professionals and other R&D resources to support our technology development.
<unk> expenses for a $36 million.
One 2 million lower than last year $11 million foreign exchange gain offset by staff cost and provision, resulting in a decline in G&A.
Operating expenses, excluding share based compensation, our non-GAAP expenses were $157 million increased by 25, 3% year over year, and representing 18, 9% of revenue.
Q2, net income was $14 4 million compared with 91 8 million in the second quarter of 2021 and net income margin was.
One, 7% compared with $9 seven in the same period of 2021 and minus five 1% in the fourth quarter of the year.
Turning to our balance sheet and cash flow, we ended the quarter with $861 million in cash term deposit and short term investments and 189 million restricted cash our operating cash flow was negative $33 million.
73 million, mainly due to a 126 million increase in inventories off peak scooters.
That's the way the consumer electronics from Chinese manufacturers are sold overseas. So cheap scooters, we established overseas well warehouses stockpile locally to ensure a fast turnover when orders came in.
Capital expenditures for the second quarter was $15 million compared to 83 million in the same periods of last year.
Now, let's turn to guidance.
Since Paul uncertainty remains over the pace of economic recovery, we expect third quarter revenue to be in the range of RMB 170.
17 billion to $1 35 billion.
Increased 5% to an increase of 10% year over year.
For the full year volume guidance, we prudently adjust if you're asking me two 1 million to one two.
The only unit.
Please be aware that this outlook is based on information available at that date and reflects the company's current and preliminary expectation, which is subject to changes due to uncertainties relating to various factors such as the pace of COVID-19 pandemic recovery.
Others.
But in that.
Well now open the call for any questions that you may have for US operator. Please go ahead.
Thank you as a reminder, if you wish to ask a question. Please press star and one one on your telephone Lake for a name to be announced at least in Basel. The compile the Q&A wrote this would take a few moment. Thank you.
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Dear speakers there are no questions at this time please continue.
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Yeah participants as a last reminder, if you wish to ask a question. Please press star one one.
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Dear speakers there are no further questions I would like to hand over back to yourself for the closing remarks. Please go ahead.
Great. 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.
Yeah.
That does conclude our conference for today. Thank you for participating you may all disconnect have a nice day.