Niu Technologies (NASDAQ:NIU) Q3 2023 Earnings Call Transcript

Niu Technologies (NASDAQ:NIU) Q3 2023 Earnings Call Transcript November 20, 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.

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Q&A Session

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.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.