Niu Technologies (NASDAQ:NIU) reported a significant decrease in sales volume and total revenue in Q3 2023, and outlined its strategies to address these challenges in both the China and overseas markets. Despite the downturn, the company highlighted a notable increase in kick-scooter activations and expressed confidence in regaining growth in 2024.
Key takeaways from the earnings call include:
- Total sales volume dipped 71% YoY in Q3 2023, with the China market and overseas market experiencing a 12% and 38% decrease respectively.
- Total revenue for the quarter was RMB927 million, marking a 19% YoY decrease.
- The company plans to expand its product portfolio and retail coverage in the China market in Q4 2023 and beyond.
- Niu Technologies has implemented strategic adjustments in the overseas market, including product diversification and resolving operational disruptions.
- The company introduced new electric motorcycle and off-road motorcycle products in the European and North American markets, and launched battery swapping solutions in Southeast Asia.
- Despite a decline in the overseas micro-mobility market, the company reported a significant increase in kick-scooter activations.
- Niu Technologies unveiled the KQi Air kick-scooter, which received an award for Best of IFA 2023, and launched a pre-sale campaign with delivery expected in December.
- The company sold a total of 266,000 units in Q3, with China market revenue accounting for 85% of the total, and overseas market revenue making up 15%.
- Gross margin decreased to 21.4%, and operating expenses increased by RMB25 million.
- The company ended Q3 with RMB1.4 billion in cash and expects Q4 revenue of RMB490 million to RMB612 million, representing a YoY decrease from 20% to flat.
During the earnings call, Niu Technologies (NASDAQ: NIU) also reported a 25% YoY decrease in operating expenses, excluding the impact of credit losses. This was primarily due to a reduction in advertising and promotion activities and a decrease in share-based compensation and staff costs. However, G&A expenses increased due to higher provision for credit losses. The company reported a net loss of nearly RMB80 million for the quarter, compared to a net profit of RMB3 million in the same period last year. Despite economic pressures from a key distributor in the European market, the company remains optimistic about future receivable collections.
InvestingPro Insights
Drawing from the valuable metrics provided by InvestingPro, Niu Technologies has a market capitalization of 182.05M USD. The company's P/E ratio stands at -14.22, which reflects its current unprofitability. The revenue for the last twelve months as of Q2 2023 is 415.06M USD, with a decline of 16.71% from the previous year. This aligns with the company's reported decrease in sales volume and total revenue in Q3 2023.
InvestingPro Tips offer some additional insights. Despite the challenging conditions, Niu Technologies holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. This financial stability might support the company's strategic adjustments for recovery. However, the company's earnings per share show a declining trend, and it has not been profitable over the last twelve months. This is consistent with the company's reported net loss for the quarter.
InvestingPro provides a wealth of additional tips for subscribers, which are now available for a special Black Friday sale with a discount of up to 55%. Subscribers can access 11 more tips for Niu Technologies, providing them with a comprehensive understanding of the company's financial performance and future prospects.
Full transcript - Niu Technologies (NIU) Q3 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: expanding the product portfolio to expand our addressable market, and operational adjustment to resolve the temporary disruption. We introduced key electric motorcycle and off-road motorcycle products to the European and North American market to expand our addressable market beyond the electric moped. For the Southeast Asia market, we have officially introduced the battery swapping solutions with compatible swap batteries and mopeds. Operationally, we're also working with our distribution partner and retail partners closely to revamp the retail operations in the key markets. The overseas micro-mobility market has seen a year-over-year decrease of 37% in sales. This downturn is primarily attributed to the sell-in order delays in Q3. Despite the decline in the sell-in volume, we recorded highest number of kick-scooter activations in this quarter. The number of activations in Q3 show a significant year-over-year increase of 80%. This increase in product activation can be largely attributed to our comprehensive product portfolio and expansion of our sales network, both online and offline in the key market channels. In addition, during Q3, we launched an innovative KQi Air kick-scooter for pre-sales, which has been well received in the market. We're continuously working on expanding our sales channel penetrations, aiming to reach a broader customer base and reinforce our market presence. We expect to get back to the growth track in the coming quarters in time for the holiday season. Now, let me delve into the China market in detail. In this quarter, we continued to build our product portfolio with a diverse design style and functionality to address a wider customer need. We introduced Q2 2023 the MQiL, emerged as a successful addition to our product lineup. It is a product that inherits the design from our all-time classic M series along with a significant upgrade in design and performance. It has not only contributed positively to our sales volume, but also plays a significant role in enhancing our brand image. In Q3, we also successfully introduced the Falcon series as a new style with the launch of F400T and F200, complementing the previous introduce of F100 in Q2. Collectively, the entire Falcon series accounted for more than 50% of our total sales in this quarter in Q3. The Falcon series represent our attempt to create another flagship design. With its proven popularity, we plan to roll out more products within the newly introduced series in the coming quarters. The F400T was introduced in August this year as a remarkable addition to our Falcon series product lineup. This electric bicycle draws inspiration from fighter jet and seamlessly incorporated NIU's essential smart functionalities with a maximum range of 90 kilometers. The F400 has a -- design has captured significant attention since its launch. Notably, it took center stage at the ChinaJoy, the country's largest gaming expo, garnered millions of views across all platforms. Another product added to this series in Q3 was F200. It is released as a high-powered commuter scooters with sports car-inspired frame. It has the max range up to 70 kilometers and equipped with NIU's smart system. The F200 was also launched with a collaboration with a globally-renowned [IP Kumamon] (ph). Our sales performance during the recent Double 11 Shopping Festival underscored the popularity of those recently launched products. In the first 24-hours of promotion period alone, the pre-order sales revenue surpassed the sum of the entire period last year, showcasing the robust demand for our offerings. Several of our key products have secured prominent positions on the best-selling list of major platforms, including Tmall and JD (NASDAQ:JD).com. Specifically, the latest iteration of our [claim] (ph), SQi electric bicycles, has gained significant traction during the Double 11 Shopping Festival, emerging as the number one top-selling straddle electric bicycle in the RMB9,000 price range above on Tmall and JD.com. Together our UQi+, F200 and also SQi has claimed top spots, ranking within the Top 3 best-selling product in the electric bicycle categories on Tmall. This highlights strong customer preference across our diverse product range. We have -- we remain highly engaged in events and cross-brand collaborations to enhance our brand exposures. In September, we established presence on the G-Fusion Game Fest 2023, where we brought our F400 to the gaming enthusiast. We recently forged an official partnership with JD Gaming, one of China's top e-sports teams and a finalist in the League of Legends for 2023. Those engagements underscore our commitment to establish a strong brand presence and the forging connections with diverse audiences even in the face of temporary market challenges. We're confident that those initiatives will contribute significantly to our brand exposures and long-term growth prospect. Now, turning into international electric moped market. We faced the challenge in this quarter with a year-over-year decline in the electric moped sales, accounts for 62%. Several factors converge and created this downturn, including the decline of the electric moped market in the key European countries like Germany and Netherlands and the temporary operation disruption due to issue encountered by our distributed partner in Europe. While we acknowledge those challenges, we are actively engaged in addressing them and regaining the traction in this market. First, we expanded our product portfolio beyond electric mopeds, widening our addressable markets. We have unveiled several key products ready for Q4 2023 and 2024 at EICMA in November. One key product that we revealed was XQi3 electric dirt bike. It is designed with a futuristic look with a handful of choice aluminum frame colors integrated with new signature Halo light. We have revealed the XQi3 product during the EICMA in Milan, Italy in November, and also brought it to the Electrify Expo launch event in Austin, United States. The XQi3 marked our expansion into the dirt bike categories and the new XQi3 has attracted tremendous amount of attention within the only week since its debut. The XQi has won the 2023 Gold Winner of the New York Product Design Awards. We anticipate making the XQi3 model available to the North American and European market in Q1 2024. And we're confident that it will bring up the sales and therefore uplift the NIU's brand recognition. Another product we launched for Europe is RQi, NIU's high-performance urban quad electric motorcycles. It is designed to deliver accelerating city ride with features like dual removable batteries and ABS. With a top speed of 110 kilometer per hour and 0 kilometer to 50 kilometer per hour acceleration time just under the 2.9 seconds, the [RQi's targeted] (ph) riders for exciting acceleration experience. The motorcycle is equipped with the integrated traction control system building from rear cameras and the impact detection system making it sophisticated and it's also a safe riding option. It also comes with NIU's core smart features. The RQi is expected to be available from Q1 2024 in Europe. During EICMA, we also brought the award-winning XQi to the international market. It features a futuristic design that earns the 2023 Red Dot Best of Best Design Award. The bike features the die-cast unibody frame with 0 solder joint, ensuring seamless integration of form and functions. They offer easy handling, making it ideal for city commute. Now, in addition to those electric motorcycle products, we officially launched the NIUswap Battery Swapping solution compatible with the newly launched F600 e-mopeds. The swapping technology enables rider to swap batteries quickly, reducing downtime and increasing the convenience. During EICMA, we have presented NIUswap cabinets that technical solution provider collaborating with partners in Europe, Southeast Asia, and South America to deploy the battery swapping cabinets aiming to enter the respective local markets. Now, the recent EICMA events presented us an opportunity not only to unveil our latest product, but also engage in meaningful conversations with our key distribution and retail partners. We're actually working with our distribution partner to quickly resolve temporary operation disruptions and get back on the growth trajectory. Now, talking about the overseas micro-mobility market, the micro-mobility market has reported a 37% year-over-year decrease in sales in Q3. As mentioned earlier, the primary contributing factor is due to a sell-in order delay in Q3, while the sale of our activation volume has increased by 80% year-over-year, driven by a diverse product portfolio and expanding sales network. During this quarter, we took a significant step in expanding our product portfolio by unveiling one of our standout kick-scooter product, the KQi Air and Air X Series, at IFA event in Berlin, Germany. One of the standout features of KQi Air is the construction with the main body predominantly crafted from lightweight carbon fiber, resulting in an incredible low weight of 11.7 kilos. The weight reduction does not compromise performance. The KQi Air delivers impressive capabilities, including top speed of 32 kilometer per hour and a maximum range of 50 kilometers. It also incorporates dual-action brake caliper to ensure its short braking distance for added safety. Moreover, the KQi Air embraces smart connectivity and enabling functions like NFC and Bluetooth unlocking, customizable charging, capacity setting, speed adjustment, and also the regenerative braking strength. Notably, the KQi Air was awarded the Best of IFA 2023 by GadgetMatch, a highly regarded tech channel. The KQi Air has MSRP of RMB1,400 for the standard version and RMB1,799 for the KQi Air X full carbon fiber version. We launched the pre-sale campaign on September and we expect to deliver the KQi Air to our customers in December this year in time for the holiday season. The launch of KQi Air marks our consistent effort in product innovation and we have more kick-scooter product in our pipeline for next quarter to further complete our product offerings. Meanwhile, we're also leveraging the traction that we gathered from our kick-scooter product to expand our sales network coverage. Currently, we have our new products sold in over 1,500 offline stores in the United States and Europe in major retailers like Best Buy (NYSE:BBY) and MediaMarkt. Together with the product portfolio enhancement, the sales network expansion has laid a solid foundation for ramping up sales in the next few months throughout the holiday seasons. Now, as we look forward, we [maintain] (ph) cautious outlook for Q4 this year as some of the operational adjustments in both the China and also the oversea electric moped market will take time to be fully implemented to drive the midterm growth. We're nonetheless confident to regain growth in 2024 after a temporary adjustment period this year. In the China market, the fourth quarter traditionally experience a low market demand. We're using this time to continue to enhance our product portfolio and build momentum for store expansions. In terms of product portfolio, the Falcon series is a testimony of a successful product for full expansion. We're also focused on expanding our retail store this quarter. With those, we believe we're well positioned to get back on the high-growth track in 2024. Now, for the international electric two-wheeler market, the addition of new products off-road and also the motorcycle product and also the swapping solutions well position us for growth in the key European, United States and the South East Asia market next year. We're also actively implementing the operational adjustments for better delivery of those products to our key markets through the key channels. But we expect those adjustments will take time and hence we [maintain] (ph) cautious outlook for the Q4 2023. Last but not least, for our international micro-mobility market, we're pleased to report a sustained and robust growth trajectory. This growth is fueled by two key pillars: the completion of our product portfolio, and expansion of our sales network. Our product lineup has not only boosted sales volume but also significantly elevated the presence of new brands within this market segment. The recent addition of the KQi Air represents just one of the many exciting products yet to come. The expanding product portfolio has driven the development of our sales channels with remarkable growth observed in our expanded retail networks. We're confident in our ability for sustaining high growth in Q4 and beyond. Now, I will turn the call over to our CFO Fion.
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.
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