Niu Technologies
Q3 2023 Earnings Call Transcript

Published: 20 Nov 2023

[Operator:]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now, I would like to turn the call over to [Ms. Crystal Lee] (ph), Investor Relations Manager of Niu Technologies. Ms. Lee, please go ahead.

[Unidentified Company Representative:]

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the third quarter 2023. The earnings press release, corporate presentation, and financial spreadsheets have been posted on our Investor Relations website. This call is being webcast from companies IR site as well, and the replay of the call will be available soon. Please note, today's discussion will contain forward-looking statements made under the safe harbor provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve risk, 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 company's public filling with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law. Our earnings press release and this call include discussion of certain non-GAAP financial measures. The press release contains 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 CFO, Ms. Fion Zhou. Now let me turn the call over to CEO Yan.

[Yan Li:]

Thank you, everyone, for joining us on the call today. In Q3 2023, our total sales volume was 265,923 units with a year-over-year decrease of 71%. Specifically, sales volume in the China market had a year-over-year drop of 12% to 230,445 units, and the sales volume in the overseas market experienced a year-over-year of 38% decrease to 35,468 units. Total revenue in Q3 2023 was RMB927 million, a decrease of 19% year-over-year. Now, in the China market, during Q3, we encountered setbacks due to a sluggish consumption in top-tier cities, resulted in a slowdown in sales for our products. To address this challenge, in Q3, we expanded our product portfolio with a diverse design functionality to address the wider customer needs. And with the diversified product portfolio, we plan to expand our retail coverage for greater market reach in Q4 2023 and beyond. In the overseas electric two-wheeler market, we have experienced a year-over-year decline of 62%, influenced by a combination of challenging factors. The decline in the electric two-wheeler market in our key market, Germany and Netherlands, has impacted our business. Additionally, we have also faced a temporary disruption in the key European markets due to operational difficulty faced by our distribution partner, which has further affected our sales performance in this period. In response to those challenges we have encountered, we have implemented two strategic adjustments

[Fion Zhou:]

Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and comparisons you need. And we have also uploaded excel format figures to our IR website for your easy reference. As I review our financial results, I'm referring the third quarter figures, unless I say otherwise, and all monetary figures are in RMB, if not specified. As Yan just mentioned, during the third quarter, we sold a total of 266,000 units and 230,000 were sold in China while the rest was sold overseas. And the total revenue for the third quarter amounted to RMB927 million, a decrease of RMB226 million compared to the same period of last year. And China market revenue was RMB785 million, accounting for 85% of the total revenue. Of this, the China scooter revenues were RMB711 million, a year-over-year decrease of 17%. And this decrease was mainly due to the lower sales volume of our premium series and partially offset by the higher sales volume and revenue from our mass premium series. And the China scooter ASP was RMB3,085, a year-over-year decrease of 5.5%. And this decline in ASP was mainly due to the product mix change, which I just mentioned. And the overseas market revenue were RMB142 million, accounted for 15% of the total revenue. And the overseas scooter revenue, including the e-motorcycles, mopeds, kick-scooters, and e-bikes, amounted to RMB122 million compared to RMB195 million in the same period of last year. And this decrease was mainly due to the decline in the sales of e-motorcycle and mopeds. The micro-mobility revenue were around RMB109 million, up 20% quarter-over-quarter. And the overseas scooter ASP increased from RMB3,386 to RMB3,430 year-over-year, and mainly due to our premium model [K3 Max] (ph) sales volume increase from [3,200] (ph) units to [7,100] (ph) units year-over-year. And the revenue from accessories, spare parts, and services amounted to RMB94 million, a 5% decrease compared to the same period of last year. And this decline was mainly driven by the lower sales of battery packs overseas, as we mentioned in the previous quarters. And the gross margin decreased by 0.7 ppt year-over-year to 21.4%. And of this, 0.6 ppt of this decline was driven by the lower sales volume from the overseas e-motorcycle and e-mopeds, and the remaining 0.1 ppt due to the change to the product mix domestically. And our third quarter OpEx amounted to RMB289 million, an increase of RMB25 million compared to the same period of last year. And this increase was mainly due to a RMB88 million increase in provisions for credit losses in this quarter. Excluding the impact of the credit losses in each period, the OpEx decreased 25% year-over-year. As percentage of revenue also decreased by 1.4 ppt from 22.3% last year to 21% this year. Further detail I will explain in a moment. Selling and marketing expenses were RMB123 million. As percentage of revenue was 13.2%. It is a year-over-year decrease of RMB48 million and 1.6 ppt lower than last year, primarily due to a reduction in advertising and promotion activities. R&D expenses amounted to RMB39 million, representing an RMB11 million decrease year-over-year, primarily due to a decrease in share-based compensation and staff costs and also the design and system development professional fees. G&A expenses were RMB127 million, representing an RMB83 million increase year-over-year, and this is due to the increase in provision for credit losses of RMB88 million. Excluding this credit losses, the G&A expenses decreased by 13% compared to the same period of last year. Since our international operation has expanded, we have seen a corresponding increase in the extent of our account receivables, which forms the basis of computing the bad debt provisions. As we mentioned in the previous quarters, the European consumer sentiment remains cautious, leading our distributors to ask for extended payment terms due to the weak retail sales. In the meantime, one of our key motorcycle and mopeds distributors in the European market announced on September 6 this year that it's going to -- into a court-supervised constructing process due to the intense economic pressures. Consequently, this quarter, we took a provision of RMB54 million, representing a full amount of receivable owned by this distributor. And despite the prudent raising -- provisions for credit losses on the overdue payments, we retain a positive outlook on the future receivable collections given our other partners' robust financial standing and their continuous ongoing payments. To conclude, excluding the prudent provision for credit losses, our cost controls have driven an overall decrease in expenses and made us more efficient, linear and flexible to negative today's -- to navigate today's volatile and weak macro economy and emerge stronger when conditions eventually improve. In the third quarter, our net loss was nearly RMB80 million under the GAAP measurement compared to a net profit of RMB3 million for the same period of last year. And turning to our balance sheet and cash flow. We ended the quarter with nearly RMB1.4 billion in cash, restricted cash, term deposit and short-term investment. The operating cash flow was RMB229 million compared to RMB415 million in the same period of last year and RMB217 million last quarter. And our CapEx for the third quarter amounted to RMB26 million and has remained stable for the past four -- five quarters. And now, let's turn to guidance. We expect the fourth quarter revenue to be in the range of RMB490 million to RMB612 million, representing a year-over-year decrease from 20% to flat. And please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectation, which is subject to change due to the uncertainty relating to various factors. And with that, we'll now open the call for any questions that you may have for us. Operator, please go ahead.

[Operator:]

[Yan Li:]

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

[Operator:]

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