Q3 2024 Niu Technologies Earnings Call
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Speaker Change: Ladies, gentlemen, thank you for standing by and welcome to New Technology's 3rd Quarter 2024 Earnings Conference Call. At this time, all participants are in limo. Later, we will have a question and answer session and instructions will follow at this time.
Speaker Change: Securities Litigation Reform Act of 90 95.
Speaker Change: Five.
Speaker Change: Forward looking statements involve risks uncertainties assumptions and other.
Speaker Change: The companys actual results may be materially different from those expressed today further information regarding to the risk factors is included.
Speaker Change: <unk> public filings with the Securities and Exchange Commission.
The company does not assume any obligation to update any forward looking statements.
Speaker Change: As required by law.
Speaker Change: Our earnings press release, and this call include a discussion of certain non-GAAP financial measures in the press release contains a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial resolved.
On the call with me today are oversee Oh, Dr Yan Li and the CFO Mr. Jos.
Speaker Change: Now, let me turn the call over to CEO yet.
Speaker Change: Thank you Christopher Hello, everyone and thank you for joining us today.
Speaker Change: So Q3 2000.
Mark: 2024, Mark.
Mark: A quarter that shows continuous growth in this quarter. Our total sales volume was 312000 units with a year over year increase of 17, 5% specific late sales of oil in the China market had a year over year increase of 12, 4% to 259th all the units.
Mark: There's still spoiled me in the overseas market experiences.
Mark: Your ear, a 50% increase to 53000 units total revenue in Q3 2024. It was RMB, one 2 billion increased by 10, 5% year over year.
Mark: So this quarter's performance highlights the effectiveness of our strategic focus on expanding the product offerings expanded sales channels.
Mark: The market, which.
Mark: We have notable growth in both China, where she's market, reflecting the increased recognition that improve sales.
Mark: So as we continue to build on its results.
Mark: We remain committed to refine our strategy to meet the ambitious target depth of market demands.
Mark: China's coffee back on the recent launch something and amused series has reinforced our focus on enhancing our core product offerings. Since Q2, 2024, and the targeted marketing and store expansion and increase our market presence.
Mark: Positioned us well for the growth in Q3.
Mark: Operator.
Speaker Change: In Q3 did have faced headwinds due to a new standard on battery electric system safety, which pretty effective at it.
Speaker Change: End of October.
Speaker Change: And the retailers, who are not allowed to sell electric bicycle product that we're not compliant with the new standard.
Speaker Change: As a result of stocking orders from factory to.
Speaker Change: The distributors in September was significantly reduced.
Speaker Change: And that you should be yourself focused on clearing the existing channel inventories, which are typically one to one five months.
Speaker Change: The execution of policy also impactful product mix of high priced product will order less which reflected lower E. S. P. A lower margin quarter over quarter, the sales percentage with the ESP over 6000, RMB dropped by eight one percentage points in Q3 compared with Q2.
Speaker Change: No in the overseas market the micro mobility segment achieved significant gross leverage momentum from expanding the case Ts sales network and introduced new product tailored for the diverse networks in the electric two Wheeler segment, we're focused on direct distribution operation in priority market laying a good foundation.
Speaker Change: For operations at electric weapons, 30 sales and marketing events already show a gross potential.
Speaker Change: So let me talk about kind of marketing detail.
Speaker Change: This year, we're focused on really all key product because it's clear target consumer groups to try to hit gross in the first two quarters. This year. We introduced the next tea to address the premium segment and play motorcycle and that your Max electric bicycle to address the agenda. These younger generation.
Speaker Change: You want to eat for female writers in Q3, we continue to be able to electric bicycles. The N T to address the chassis and empty to address the female users together those new product launches. This year contributed to more than 50% of the total units sold in 2024.
Speaker Change: To continue to address the premium users that agenda users in the motorcycle market. We released two more electric motorcycle lines recently, the utmost premium and X high performance motorcycle and the Falcon style defined FX motorcycle.
Speaker Change: Next motorcycle is our most premium at Sirius was to model X hyper isn't that the next ultra as news most premium series. The next slides combined powerful performance the best safety and intelligent systems.
Speaker Change: The next high for its new flagship electric motorcycle design for the performance of <unk> and Taylor foot track racing.
Speaker Change: <unk> by 10 kilowatt motor was the peak of 2009 kilowatt. It reached the top speed of 135 kilometer per hour, it's inverted titanium titanium coated from force and adjustable nitrogen rear shocks provide exceptional stability uncomfortable rocket spring, we're reaching more than that makes our 42 degree Liang.
Speaker Change: And a two disc brakes with for pistol calibers are you sure.
Speaker Change: Precise control and the maximum safety priced at near 30000, RMB, the Max hyper combined cutting edge technology with rates ready agility.
Speaker Change: Our next ultra equipped with a robust by kilowatt motor a top peer Henry.
Speaker Change: Meter per hour and offered a range up to 130 feet of interest on a single charge. This caters both daily commute and weekend getaways and should have a top three months cycles.
The next altra is priced at RMB 18000, not hundreds.
Speaker Change: No. It was the top performer next series, we had an.
Extra mile to ensure their safety.
Speaker Change: That's one of the fact that the first electric tour in trying to around a five star fire safety certification from the China merchant vehicle researches to a pass through rigorous tests for electric fire protection impact resistance and what are your immersion. This achievement highlights news dedication to advancing E mobility safety standard.
Speaker Change: Now since the next hybrid Nix ultra represents our highest performance releases we celebrate.
Speaker Change: That deal with the innovative track test drive event in Beijing Joint more 100 top media I'll, let the influencers.
Speaker Change: This event not only showcase the exceptional performance of our products are also significant boost to commit community engagement with content tracks pest drivers back together more than 52 million views across all platforms.
Speaker Change: The double 11 shopping festival was also a good first test them as far as the next product in this market during the online shopping sales well achieve top ranking cross major ecommerce platforms with next hybrid acts Ultra study at the best sellers see its own category.
Speaker Change: During this quarter. We also introduced the FX series for the Gen Z consumers at the mass premium motorcycles for practical use the FX serious equals three models all featuring the same slip behind the FX to you're supposed to Aflac family aesthetics with Eagle eye headlights.
Speaker Change: Adding sophistication to the type of woman flying off the proportion is equivalent to <unk> 45, a M and called batteries. The 1500 watts motor and top speed at a 55 kilometer powered with impressive dry range of 130 kilometers designed for urban commuting FX series combines powerful features.
Speaker Change: What's the.
Speaker Change: The advanced safety system extended battery life Smart integration via the Okay go Mad.
Speaker Change: Sure.
Speaker Change: Has convenience control the FX seriousness price from 5500 or RMB in the box.
Speaker Change: Now as this product is designed for charity users to connect more deeply with the E gaming community and the younger audience, we launched FX products, along with co branding initiative with the popular game pop T. Mobile was 200 million plus users.
Speaker Change: We introduced exciting co brand cooperations that FX product series to a range of online offline events, including building product lunch campus event E gaming tournaments, I influence or promotions.
Speaker Change: Overall, the campaign achieved over 920 million views cross social media Influencer engagement target medias.
Speaker Change: Now in terms of our channel.
Speaker Change: <unk> ability and channel expansion as we discussed earlier this year. Our first focus is I'm channel health, especially store profitability with the goal to reversing the trend of store closures over the past two years and to prepare for future expansion.
Speaker Change: To achieve this we concentrate on improving same store sales by significantly enhancing our online to offline operation driving sales leads from the online platform to our physical stores to increase foot traffic.
Speaker Change: In addition to traditional platinum like JD and Tmall will also increase our investment in quite short shelf almost 1 million tonne online sales leads accounted for more than 50% of store sales for the first three quarters Mark.
Speaker Change: Marking a significant increase compared with less than 30% in the same period last year.
Speaker Change: We have also made a substantial investment in training outdoors photo and sharepoint to operation, including creating accounts for each stores that providing lives through training to argue with them generally online.
As a result, we achieved over 33000 live streaming sessions generating 115 million RMB <unk> in the first three quarters with 18000 live sessions in Q3.
Speaker Change: Now with the launch of new products improve store profitability will have successfully reversed the previous trend and began to expanding our sales network in Q3, despite being a traditional slow period for store openings, we were still able to add 240, new stores to expand our sales network.
Speaker Change: Now, let me turn into the overseas market this quarter demonstrates strong growth strategic advancements in our overseas market in the micro mobility segments, leveraging our strong product portfolio, we're able to spend more resellers achieve over 50% year over year sales volume growth now for the electric two wheelers.
Speaker Change: We are focused on direct sales operations in the key market and unveil new products doing our 10th anniversary at X months just November.
Speaker Change: Those product launches along with business development events in branding marketing activities helped us to build a solid foundation for strong growth.
Speaker Change: Now in tumor micro mobility since the beginning of this year, we have focused concentrated on retail China expansion in a key market in the U S market, we worked with best buy Ontario, 800 stores in North America.
Speaker Change: Additionally, we've been working with Walmart coast, Macy's target and home depot.
Speaker Change: In Europe. In addition to the current retail network of media Mark, but also enter one of the leading retail chains Euro, Italy, having a fixed cooler product placed in their 300 stores.
Speaker Change: Now to further benefit from already established sales network, we have to spend the proper product portfolio. We launched a <unk> hundred series. This quarter featured Kiko at 100 at 100 P. This serious bring a quality performance and the actual level price starting at $299 and making it affordable.
Speaker Change: Yet powerful choice for urban mobility.
Speaker Change: Yes.
Speaker Change: Features include included due to hydraulic suspensions with 2019 O meter driver inkjet tops be up to 25 kilometer power.
Speaker Change: Now on the <unk> scores side, the recent increase in the U S tariff on the cake scooters from 2% to 25% starting in June had temporarily if we got our margins leading a negative gross margin for product shipped to the United States in Q3, and part of Q4 to address this we have initiated a.
Speaker Change: Process to start production of the U S version in the Southeast Asia to address the tariff situation. However, due to the complexity of supply chain adjustment, we expect to see the first manufacturing product out of southeast Asia to be shipped.
Speaker Change: In early 2025.
Speaker Change: Now for electric tools in the first three quarters, we focused on establishing direct distribution operations in key markets by Q3. This year. We completed the first phase of operations set up in Europe, including in the dealer network development financing for dealers logistics after sale support.
Speaker Change: Well the team set up.
No we'd have a operations covering Italy, Germany, France recently, we recruited over 100 dedicate dealers into our European sales network and planned to double this number by first half 2025.
Speaker Change: Now with the operations that are in place we introduced key electric motorcycle product X months. This year in the motorcycles segment, we launched an X series.
Speaker Change: National version of our premium products with price range from 3000 Eurostat for Ya.
Speaker Change: We also unveiled the ask two I seriously international version of our <unk>, starting with <unk> 500. It features the 5000, Mark motor capable speed up to 95 kilometer per hour and the driver inch up 91 kilometers of advanced safety features such as CBS grapes and tire pressure monitoring he has the rider confidence.
Speaker Change: Starting at around.
Speaker Change: Around 3000 euros <unk> series to offer a combination of an eco friendly high tech design and robust performance.
Speaker Change: Additionally, we operate our execute three offer a motorcycle equivalent Ot update that post the part two to six kilowatts improved acceleration and reached the top speed a kilometer crowd Pratt $4000 to execute <unk> made our HIFU pro forma step back more assessable.
Speaker Change: Unused new product release has generally extensive media and influencer coverage of asthma, the leading industry I'll, let such that electric modern use model because thats have moratoria cover all ex Milan just days after the events.
Speaker Change: And online channels, where feature about ql's with millions of followers and the contents of our new product driven.
The significant online engagement since it's released.
Exxonmobil also hosted our largest new connected events inviting around 200 partners dealers and distributors to join us.
Our new products.
Speaker Change: This event will also launch a deal expansion project for 2025 targeting doubling the theaters by first half of 2025.
Speaker Change: Nowhere towards the closing of the year of 2024, we have strategies plans for the last quarter of this year to build a solid foundation for 2025, we plan to run our growth momentum in the product development and sales expansion to drive the growth in.
Speaker Change: In the China market, well positioned product portfolio that spans a wide range of market demand from daily commuters electric bicycles to high performance motorcycles with price renew from 3000, RMB up to 30000, RMB or product hitting a diverse customer base, including a young people the generation Z.
Speaker Change: The female users daily commuters and little cycle your suits that we plan to build on our.
Speaker Change: Our existing portfolio with the upgraded products and new designs that are compliant with Chinas new standards.
Speaker Change: Now along with the improvement of our product portfolio. We have also strengthened our brand image at the premium brand with the introduction of our next series, we have allocated the product performance to a new level the premier NXT electric bicycle series equivalent with cutting edge smart technology, such as millimeter radar for collision detection.
Speaker Change: <unk> navigation protection system represented the most advanced smart electric bicycles in this class.
And on the sales channel expansion front, we plan to accelerate store expansion in Q4, and Q1 2025 targeting.
Speaker Change: 1000 stores to establish a solid foundation for growth in 2025. Additionally, our expansion effort will focus on tier three Cte surplus where we have historically been underrepresented due to lack of the right product.
Speaker Change: No in the overseas market the new strategy for 2025 focused on driving robust growth across both micro mobility in the electric tools market for micro mobility will plan to continue to expand our retail presence supported by enhanced product lineup.
Speaker Change: <unk> in the Southeast Asia will also help to mitigate tariff challenges and accelerated growth in the U S market.
Speaker Change: Now in the electric two we'd expect will leverage of new product launches like an accident Spi series to cater to urban commuters with strong focus on direct sales in the core market driven by the new product and the momentum the ecmo or plan to significantly expand our dealer network in those key market laying a solid foundation for the growth in next year.
Speaker Change: Now with that let me turn the call Sofia.
Sofia: Yes, Hello, everyone. Please note that our press release contains all the figures and comparisons you need and we have also uploaded in a cell phone that figures to our IR website, where you can reference as I review, our financial results I am referring to the third quarter. He goes some of that shall I say, otherwise and all monetary.
Sofia: Seekers are in RMB is not specified.
As John just mentioned, our total sales volume for the third quarter was 312000 units up 17, 5% compared to the same period of last year 259000 units with Celgene, China, while the remaining 53000 units with sound overseas.
Sofia: Over 60% of our sales volume in China came from the new products launched this year.
Sofia: And the total revenues for the third quarter amounted to 1.02 billion up 10, 5% compared to the same period of last year and China revenue.
Sofia: 880 million accounting for 86% of the total revenue.
This quarter revenue was 797 million up 12% year over year due to the increased sales volume of E scooters.
Sofia: China's food, our ESP was RMB 3078 remain flat year over year and quarter over quarter down 12%.
Sofia: Hi, and that asset models that command similar Asps <unk> semi on models accounted for nearly half of the sales volume in China This quarter.
Sofia: Quarter over quarter decline was primarily driven by a narrowing of the retail price range from RMB 4000 to 6000 down from the previous RMB 4000 to eight solid and despite this adjustment our product price remains significantly higher than that.
Sofia: The industrial average level.
Sofia: The overseas revenue 144 million accounting for 14% of the total revenue.
Sofia: Quarter revenue, including in motorcycles, emo past peak scooters and E bikes amounted to $130 million compared to 122 million in the same period of last year. This growth was mainly due to increase the sales up to keep scooters, partially offset by the decline of the revenue per SKU.
Sofia: <unk>.
Sofia: Of this the micro mobility revenue around $114 million up 6% year over year.
The overseas Scooter ESP decrease from RMB 34302424 for over a year.
Sofia: Primarily due to a shift in product mix and old model discounts that impacted you exclude our CSP.
Speaker Change: In the third quarter, our entry level keep score with the lower price and lower margin as Dan just mentioned the K, one south 100 accounted for over 30% of the sales, replacing the higher price and higher margin K, two encase, remodels, which dominated dominated in the prior quarters.
Speaker Change: Yes.
Speaker Change: Additionally, the rollout of the new model K 100, <unk> hundred led to discount sales of the old models K, two encase rain, especially online sales this quarter.
Speaker Change: And the revenue from accessories spare parts and services amounted to 96, million% to 2% increase compared to the same period of last year due to the increase of the spare parts sales in China.
Speaker Change: Gross margin for the third quarter.
Speaker Change: 13.8% seven six ppt lower than the same period of last year and $3 two ppt lower than the previous quarter. The decline in gross margin were driven by the following factors.
Speaker Change: Our international markets fast growing sales of <unk> hundred model and promotional sales off the old models lowered the overseas margin compared to last quarter and the same period of last year. Additionally, starting from June <unk>.
25% of the U S tariff on nearly half of our kicks cooler salus further reduced our overseas margins.
And these two reasons both made the quarter over quarter gross margin decreased cloud in China, We continue to allocate part of our margins to our domestic distribution partners to reward their loyalty, which drove further year over year decline.
Talking about the operating expenses the third quarter Opex was 201 million, representing a 31% decrease compared to the same period of last year and the total opex ratio decreased from 31% to 20%.
And marketing expenses were 128 million up 5% year over year, primarily due to the increased promotion and keep score their new models.
Speaker Change: And marketing expenses as a percentage of revenue went down from 13, 2% to 12, 5%.
Speaker Change: R&D expenses amounting to $30 million down 9 million year over year, mainly due to a decrease in staff cost and share based compensation and sample expenses.
Speaker Change: R&D expenses as a percentage of revenue went down from four 2% to 3%.
Speaker Change: G&A expenses were 43 million down 84 million year over year, mainly due to a decrease in the allowance for doubtful accounts that were made credit loss provision for our European distributor in last quarter's rating G&A expenses as percentage of revenue went down from 13.7 per.
Speaker Change: <unk> two <unk>, 2%.
In the third quarter, we had a net loss of 41 million with a net loss margin of 4% under GAAP accounting compared to a net loss of 79 million for the same period of last year.
Speaker Change: Turning to our balance sheet and cash flow with any of the quarter was $1 3 billion in cash restricted cash terminated deposit and short term investments last quarter. This amount was the same and the last year and was $1 1 billion in Capex for the third quarter was outflow of 41 million with that.
Speaker Change: Can't increase of $14 million compared to the same pure add up last year and this can be attributed primarily to an increase of the new stores in China.
And now let's turn to guidance, we expect the fourth quarter revenue to be in the range of $6 22 million to $718 million, an increase of 30% to 50% year over year.
Speaker Change: Please be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectation, which is subject to change due to the uncertainties relating to various factors.
Speaker Change: And with that we're now open for the call for any questions that you may have for US operator. Please go ahead.
Speaker Change: Thank you.
Speaker Change: We will now begin the question and answer session to ask a question. Please press star one on your telephone you would add.
Speaker Change: If youre, an automated message advising yohan its rate.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Once again to style one one quick question.
Speaker Change: We will now take our first question from the line of <unk> Chen from CIBC. Please go ahead.
Speaker Change: Good evening.
Great question.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: That does.
Speaker Change: We understand that.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Oh I'm sorry.
Speaker Change: Thank you.
Speaker Change: Tom.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sure Kim.
Hudson MX cluster is a noise around.
Speaker Change: Okay. Okay.
Speaker Change: I beg your pardon getting your line is disgusting.
Speaker Change: Using a handset can you please pick it up thank you.
Speaker Change: We have seen the domestic average sales price per unique dropped quarter over quarter, but considering the release of the new National standard how do you expect the trend of domestic average selling price.
Speaker Change: Yes, so if you look at.
Speaker Change: I think in general we expect from the.
Speaker Change: At least from the average sales the ASP.
Speaker Change: Per unit with the new standard coming out in next well.
Speaker Change: <unk> basically later this year, but in fact to be next year I think the ASP will go up.
Because some of the new standards require us to use new materials.
Speaker Change: Can you hear me.
Speaker Change: Oh, okay.
Speaker Change: And my second question is that how do you see the trend of gross margin.
Speaker Change: Yes, I think the basic Q3, our gross margin.
It's hitting sort of the lowest point this year.
Speaker Change: There were double hit once the actually the with.
Speaker Change: <unk>, especially to the U S market, it's actually a negative margin.
Speaker Change: But the fact, we do have two with Hatteras continued operation because we're already in the retailers, it's difficult to not to ship the product to the retailers.
Speaker Change: So that was it.
Speaker Change: And the second on the China side, I think I just mentioned partially because.
Speaker Change: Our products the percentage of products sold for the with ASC 6000, RMB beyond that percentage shrink a bit because of that.
Speaker Change: With this new battery safety.
Speaker Change: Standards are I think we're looking at the gross margins should start to recover in Q4 this year and it will continue to rise next year.
Speaker Change: Partially due to three things one I think.
Speaker Change: Some of the cost reduction or cost saving initiatives, especially on the bottom cost.
Speaker Change: Some of those start not complete reflected we start some of the initiatives basically in.
Early Q3, but for them to truly reflected in the financials that usually take at least three months to four months.
Speaker Change: So that's on the cost savings associated with the product mix, we expect that the high priced product percentage will come back up in Q4, and Q1, especially in 2025 and that will allow us to actually to recover a bit gross margin on the China side on the international side I think.
Speaker Change: The gross margin for kick scooter.
Speaker Change: For Q4, its still going to be relatively low because.
Shipments from the.
Speaker Change: Southeast Asia manufacturing would've happened until basically January next year. So Q4 was still separately that negative gross margin on the <unk> side.
Speaker Change: But coming to Q1 2020 flights with the manufacturing start happening.
Speaker Change: Southeast Asia, we expect the gross margin to come back to.
Speaker Change: It's sort of a normal range.
Speaker Change: Those setting the international gross margin will cover in Q1 next year, the China gross margin you will start to see the recovery.
Stark senior recovered Q4 this year.
Speaker Change: Understood. Thank you.
Speaker Change: My last question is about <unk> <unk>.
Speaker Change: Could you please share the sales volume of chaos I'll skip scooters overseas in the first three quarters.
Speaker Change: And and and and.
Speaker Change: Do you have an outlook for sales volume next year at present. Thank you.
Speaker Change: I think for the kick scooter spending so far we have something around 120000 230000.
Speaker Change: About 120000 units.
Speaker Change: Fourth for the first three quarters. So we expect to finish the year, probably somewhere around 160 270000 units.
Speaker Change: We could go more but actually we decided to reduce the boy and especially for the U S market.
Speaker Change: To have enough for the U S market for the for the Black Friday to satisfy the retail retailers needs, but not aggressively.
Speaker Change: Yeah.
Speaker Change: The shipping products with United States, because because of the tariff situation no I think for the next years, we looked at on the <unk> score of at least.
Speaker Change: You look at this year, it's excluded market growth from last year. It would probably had a rapid volume growth like 60%.
Speaker Change: We're looking at next year, probably somewhere around 50% to 60% growth. So continue we will maintain a growth rate.
Speaker Change: Sure.
Speaker Change: For next year.
Thank you. Thank you very much that's all my questions.
Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone keypad.
Speaker Change: Okay.
Speaker Change: Once again Thats Star one one quick question.
Speaker Change: Thank you seeing no more questions in the queue, Let me turn the call back to Mr. Li for closing remarks.
Alright, Thank you operator, and thank you all for participating on this call and for your support.
Speaker Change: Appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Speaker Change: Okay.
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