Niu Technologies (NIU) Q4 2022 Earnings Statement Conference Call

        Good afternoon and thank you for your support. Welcome to Mavericks’ 2022 Q4 earnings call. [Instructions to Operator] Please note that today’s meeting is being recorded.
        I would now like to turn over the conference to today’s speaker, Wendy Zhao, Senior Investor Relations Manager at Maverick Technology. please continue.
        Thanks operator. Hi all. Welcome to today’s conference call to discuss Niu Technologies’ Q4 2022 results. The earnings press release, company presentation and financial table are posted on our Investor Relations website. The conference call is also being streamed live on the company’s investor relations website, and a recording of the conference call will be available shortly.
        Please note that today’s discussion will contain forward-looking statements made pursuant to 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 could differ materially from those announced today. Additional information on risk factors is included in the company’s public filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statements, except as required by law.
        Our P&L press release and this call include discussion of certain non-GAAP financial ratios. The press release contains definitions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial results.
        Today, Dr. Li Yan, our Chief Executive Officer, and Ms. Fion Zhou, our Chief Financial Officer, joined me by phone. Now let me pass the challenge to Jan.
        Thank you all for joining our conference call today. In the fourth quarter of 2022, total sales were 138,279 units, down 41.9% from last year. In particular, sales in the Chinese market decreased by 42.5% year on year to approximately 118,000 units. Sales in overseas markets fell 38.7% to 20,000 units.
        The total revenue for the fourth quarter was 612 million yuan, down 38% from last year. This result ends the full fiscal year 2022, a year of great testing for us. Total sales were 831,000 units, down 19.8% from last year. The total revenue for the year was 3.17 billion yuan, down 14.5%.
        Now, especially our business in the Chinese market, is facing headwinds of uncertainty caused by the recovery from COVID and rising Li-ion battery prices starting in the second quarter of 2022. Total sales in the China market fell 28% year on year to around 710,000 units. Our total revenue in the Chinese market will decrease by approximately 19% to approximately 2.36 billion yuan in 2022. Not only has the COVID resurgence disrupted market demand, but several major product launches have also been delayed due to a month-long lockdown in Shanghai. Our R&D center is located in the city. We will not be able to launch several key products until September 2022, which will cause peak sales to be missed.
        In addition to disruptions due to COVID, we are also facing headwinds due to rising lithium battery prices. Since March 2022, the price of raw materials for lithium-ion batteries has risen sharply by nearly 50%, significantly slowing down the penetration of electric two-wheelers with lithium-ion batteries into the Chinese market. Price increases affect us more because most of our electric scooters use lithium-ion batteries.
        To maintain a healthy gross margin, we have had to raise prices by an average of 7-10% and optimize our product mix to launch high-quality products starting in the second quarter of 2022. So, with the exception of the first quarter of 2022, when we achieved year-on-year growth, sales in the second, third and fourth quarters of 2022 were down 25-40% year-on-year due to the impact of lithium. Prices.
        Now entering our international market, 2022 saw strong growth, with sales up 142% year on year to approximately 121,000 units, and scooter revenue up 51% year on year to 493 million yuan. The micromobility sub-sector, especially scooters, has been a major driver of this surge, with over 100,000 units sold.
        However, sales in the electric two-wheeler category fell by 46% with 18,000 units sold in 2022. The decline in sales of electric two-wheelers was mainly due to the stock market closing, as most stock operators did not raise additional funds for expansion. The fall in the stock market led to a decline in sales of more than 11,000 units, accounting for almost 70% of the total sales decline in the overseas electric two-wheeler market.
        Now our overseas market, like the Chinese market, is also facing the problem of lithium battery price rush. Rising lithium battery prices, combined with the appreciation of the euro and dollar, forced us to increase our selling prices by an average of 22% in the European market, where we previously sold 70% of our electric dual batteries. – wheeled. Rising sales prices have impacted sales of our electric motorcycles in consumer markets, especially in Europe.
        Now that we look back at the past year, changes in market dynamics have had a significant negative impact on our operations. In China, rising prices for lithium batteries have reversed the penetration of lithium-ion into the e-bike and motorcycle market, and they have entered our entry-level products, which account for 35% of our sales in 2021, and are not competitive in the market. this market.
        In the international market, with the exception of the rise in lithium-ion batteries, the stock market close basically accounts for zero to one third of our electric two-wheeler sales, or more than half of our electric two-wheeler revenue. Realizing that none of these changes are likely to be temporary, we have begun making strategic adjustments to adapt to changing market conditions in 2022. These adjustments take time and will cause some short-term setbacks in 2022, but will ensure long-term sustainable high-quality growth.
        First of all, in terms of product development in the Chinese market, we have shifted the focus of R&D to high-end product lines, namely Mavericks products and high-end target product lines. In 2021, we will mainly focus on entry-level products for the mass market, taking advantage of the low cost of lithium-ion batteries. However, while these entry-level products contributed to a one-time revenue growth, they had a negative impact on gross margin after the lithium battery price increase. Additional customer recognition suffers from shorter mileage and brand image.
        In 2022, we adjusted our product development strategy and refocused on high- and mid-price products. We also introduced graphite lead-acid batteries for our range of mid-range e-bikes and motorcycles, allowing us to increase range and reduce costs. Our high-end product line allows us to increase profits to strengthen our brand position, while our mid-range product line allows us to combine design aesthetics with practical features at affordable prices.
        To highlight our achievements in product development in 2022, I would like to mention the long-term revolution of SQi and the new UQi+ in the high-end market. SQi is our best offering in the e-bike market. Innovative design and advanced material technology at a price of more than 9,000 yuan. Straddle motorcycles like the SQi have been so well received by the market that buyers have to wait five to six months for delivery.
        NIU UQi+ is the latest addition to our all-time favorite Niu series. NIU UQi+ With improved lighting design, smart controls, ride economy and additional personalization features, UQi+ has attracted a lot of attention and spawned widespread social media trends since its launch, with close to 50,000 units ordered for the first time in January alone. This positive response is a testament to our brand leadership, capabilities and product creation, and we plan to release additional exciting products in the second quarter of 2023.
        We now have the 2022 V2 and G6 series in the mid-range lineup. The V2 is an e-bike with a minimalist design but larger. This is about 10-30% more than the popular G2 and F2 we are launching in 2022, 2020 and 2021. The G6 is a lightweight electric motorcycle with an extended battery capacity and a graphite-lead-acid battery with a range of more than 100 kilometers on a single charge.
        While all of our products released at the end of September missed peak season except for the G6, newly launched products quickly accounted for over 70% of sales in the fourth quarter, just three months after launch. It also helps our ASP grow 15% sequentially in Q4 2022. To a certain extent, this is [inaudible] our strategic adjustment work, focusing on high-quality integrated products. We are gradually mitigating the impact of rising lithium-ion battery costs and starting to offset gross margins.
        Now, with the launch of SQi premium products, NIU UQi+ is also changing its marketing strategy to focus on product and user. This resulted in an improved return on our marketing investment and also helped us continue to grow the brand. For example, 2022 marketing campaigns related to the launch of our new SQi and UQi+ products have reached 1.4 billion views across all platforms.
        We also launched the Mavericks Innovation Ambassador Program, which is the backbone of our user-centric marketing strategy, and invited over 40 Mavericks users and influencers to co-create and host local events with Mavericks. During the 2022 World Cup, we mobilized World Cup ambassadors to watch a new scooter show showcasing scooters that have been adorned with World Cup elements. In just two weeks, the featured scooters have racked up a total of 3.7 million views on Chinese social media.
        Now, in our international markets, our strategy has diversified and over the past two years our product portfolio has expanded beyond electric two-wheelers, expanding geographically beyond key European markets. This strategy had initial success in terms of new product growth in 2022, with new markets only partially offsetting the downturn in the electric two-wheeler stock market and improving initial investment in new products and new markets [inaudible].
        In terms of expanding the product range, we have achieved the first successes in the field of electric scooters in 2022. We launched this category in the last quarter of 2021 and have since strategically leveraged lour’s scooter portfolio to this premium product with established brand recognition in the market. We start with prices for premium products ranging from $800 to $900. and inexpensive products priced between $300 and $500. This strategy led to slow volume growth at first, but helped the brand establish itself in the newcomer category.
        Niu wins Riders Choice Award 2023 for best scooter company from Micromobility World. Our high tech product, K3, has also been covered by some of the leading tech media such as TomsHard [Phonetic], TechRadar and ExTaca [Phonetic].
        In terms of sales channels, we also took a step-by-step approach by launching the scooter category first, focusing on online channels such as Amazon. During the Amazon Prime Day 2022 event, our scooter models ranked 1st and 2nd on the Amazon bestseller list in several countries in Europe and North America. Leveraging the momentum of the online channel, we began to enter major offline sales networks such as MediaMarkt in Europe and Best Buy in the US through the second half of 2022. We believe that these approaches, while slow to take off, have a solid foundation for sustainable growth in 2023 and beyond.
        Now, in the segment of regional expansion in the field of electric two-wheelers, we see growth opportunities in the Southeast Asian market, mainly in Thailand, Indonesia and Nepal. We continue to work hard to expand the Southeast Asian market, hoping to stimulate the trend of shifting from traditional fuel-powered two-wheelers to electric two-wheelers. In these fast growing markets in Southeast Asia, we have expanded our store base and established an extensive sales network with local partners.
        In 2022, during the G20 summit in Bali, Niu products will provide electric scooters for the Indonesian National Police to support the local government’s sustainable transport. Now, thanks to these efforts, sales of electric two-wheelers in the Southeast Asian market are up nearly 60% year on year.
        Finally, as advocates of sustainable living, we are committed to providing our customers with environmentally friendly smart city vehicles to help reduce our environmental footprint. 2022 is another year in which we are committed to helping the entire two-wheeler industry develop in an environmentally friendly direction. This year we published our first ESG report. To date, cumulative travel data has reached 16 billion kilometers, meaning that 4 billion kilograms of carbon emissions have been reduced compared to multiple cars.
        To further spread the message of building a green future through technology, we launched ReNIU, a global sustainability initiative, during Earth Day 2022. The campaign includes a global Earth Day cleanup that mobilizes new users across four continents to clean up the planet. Public places, including places like Bali, Antwerp and Guatemala. Sustainability has been at the heart of our brand since its inception, and we pride ourselves on being a positive influence on our commitment to sustainability with our users.
        Now that 2022 has passed, we are confident that the strategic adjustments we made in 2022 will resume growth in 2023 and begin to have a positive impact in the second quarter of 2023. On an annual basis, compared to prior price adjustments in the first quarter of 2022, our first quarter of 2023 continues to show signs of being negatively impacted by price increases and product launch delays, which we expect to return in the second quarter. Now, with a strategy of product development, branding and marketing, and expanding sales channels, we believe we can resume year-on-year growth in China and overseas markets in 2023.
        Now, especially in the Chinese market, we will continue our leadership by driving quality growth with new products in the mid-range high-end segment, focusing on user-facing marketing to optimize ROI and retail efficiency. the same – 3000+ franchise stores. In terms of products, starting from the second quarter of this year, we have plans for several key products in China. These product lines will focus on high performance Niu and Gova series, ranging from high performance motorcycles such as motorbikes to high end and mid-range Chinese electric bikes, NCM lithium battery powertrain platforms, our SVs. [Phonetic] lithium batteries for graphite lead acid batteries. We started developing these products in 2022 and they will be released on schedule in the second quarter of 2023.
        Now, driven by a unique and differentiated product offering, we continue to focus on making Mavericks the leading urban mobility lifestyle brand, a company that extends beyond our products. In addition to our product and user-centric marketing strategies, we also plan to expand our co-branding program with brands with similar lifestyle speeds. In 2022, we successfully launched partnerships with the world’s leading lifestyle brands such as Razer and Diesel and developed joint products with each partner, and we plan to continue this successful model in 2023.
        Now, in terms of sales channels, we have launched measures to boost single-store sales in the fourth quarter of 2022, and view brick-and-mortar stores as important hubs for pilot demonstrations, test drives, and after-sales services. We support offline stores with online generated leads. Through this O2O approach, we are able to provide our users with a better pre-sales and after-sales experience and increase sales in our retail stores.
        We also initiated a project to streamline and standardize store layouts and marketing materials for each store in order to create a consistent high quality brand image. In addition, we have a digital plan to help stores showcase their products and build platforms, leading to increased traffic and potential conversion rates. These initiatives will help more than 3,000 stores achieve sustainable store-level growth.
        Now, with regard to international markets, we will continue to focus on our diversification strategy in terms of product portfolio and geographic expansion. These diversification efforts over the past two years will begin to contribute significantly to revenue and earnings growth. First of all, in the category of micro-movements, 2022 will have a high growth rate, and sales in 2022 will increase by almost 7 times. In 2022, we will continue to actively develop micro-segments, build a comprehensive product portfolio, and establish sales channels with retail partners such as Best Buy and MediaMarkt, both online and offline. In 2022, we plan to continuously update our scooter product line to expand the range of products for our users.
        Now, in addition to scooters, we recently officially launched our first BQi C3 e-bike in the US market in March 2023. The BQi C3 is a dual battery ebike with two lightweight replaceable batteries, offering a maximum range of over 90 miles. Now that we have built a strong sales network last year, the BQi C3 will be sold in over 100 Best Buy stores in the US and online, with plans to sell it in Canada in the near future.
       Now, as we start investing in the micromobility market from 2020, we are confident that the foundations laid over the past three years in terms of brand building, product mix and channel building will drive accelerated growth in 2023 and make a significant contribution to revenue and profit.
        Now, in the electric two-wheeler category, we have a setback due to the closure of the sharing market in 2022. We expect to be back on a fast growth path in 2023 through product expansion and geographic expansion. In terms of products, we plan to launch all new high-performance products such as the RCi four-wheel electric motorcycle to compete in the supply of electric two-wheelers and meet the aggregate demand in Europe.
        With regard to geographic expansion in Southeast Asia, in order to build on the growth achieved in 2022, we plan to launch products and solutions that support test substitution by partnering with several major operators in countries such as Indonesia and Thailand. These trials are already underway and we expect that they will eventually give us access to the Southeast Asian market, where more than 20 million petrol motorcycles are sold annually.
       Now that we are implementing these growth strategies for China and international markets, we expect our total sales to grow to 1-1.2 million units by 2023, up 20-45% from 2022.
        Thank you Master Yang and hello everyone. Please note that our press release contains all the data and comparisons you may need, and we have also uploaded the data in excel format to our IR website for reference. When I review our financial results, unless otherwise noted, we refer to figures for the fourth quarter and all currency figures are in RMB unless otherwise indicated.
        As Yang Gang said, we will face many challenges in 2022. Total sales in the fourth quarter were 138,000 units, down 42% from the same period last year. In particular, 118,000 vehicles were sold in the Chinese market, while 20,000 vehicles were sold in overseas markets. In overseas markets, we were able to maintain a 15% year-over-year growth in scooter sales to 17,000 units.
        Total sales in 2022 will be 832,000 vehicles, including 711,000 vehicles in the Chinese market and 121,000 vehicles in overseas markets. While overall sales in the Chinese market fell 28% year-on-year, Niu and Gova premium series combined only fell 10%. Growth momentum in overseas markets is strong, cumulative scooter sales increased to 102,000 units, and electric moped sales fell by about 45%, mainly due to the termination of [reliable] sharing orders, Yang Gang noted.
        The total revenue for the fourth quarter was 612 million yuan, down 38% from last year. Breaking down scooter revenue by ranking, scooter revenue in the Chinese market was 447 million yuan, 35% less than we started with our strategy to refocus on premium and mid-range segments. Gova’s launch series accounted for just 5% of domestic sales in the fourth quarter. As a result, the average selling price in the Chinese market increased by 378,314 yuan [voice] year on year. The revenue from overseas scooters, including scooters, electric mopeds and electric motorcycles, was 87 million yuan. The average selling price of hybrid scooters in overseas markets was 4,300 yuan, down a quarter from the previous year due to a higher proportion of scooter sales but lower ASP. However, the average selling price of scooters increased by more than 50% year on year and 10% quarter on quarter due to a higher proportion of high end scooters such as the K3 series priced between $800 and $900.
        Accessories, parts and services revenue was 79 million yuan, down 31% due to lower battery sales from overseas mobile device sharing operators. For the whole of 2022, total sales – total revenue fell 14.5% to 3.2 billion yuan. Scooter revenue in China overall fell 19% year-over-year. Medium and high-end goods fell by only 6%. International Scooters – International Scooters’ revenue increased by 15% to 494 million yuan. Total international revenue including scooters, accessories, parts and services accounted for 18.5% of total revenue due to the rapid growth of scooters.
        Let’s look at the average selling price in 2022. The overall average sale price of scooters was 3,432 vs. 3,134, up 9.5%. Domestic ASP 3322 scooters, 12% growth, half of which is due to the best combination of premium products, and the rest due to price increases. The international average selling price of hybrid scooters was 4,079 vs. 6,597, lower than last year, as the share of scooters increased 10 times, while the average selling price of electric motorcycles and ASPs and scooters increased by 17% and 13%, respectively. %.
        The gross profit margin in the fourth quarter was 22.5%, down 0.1 percentage points year on year and up 0.4 percentage points from the previous quarter. Gross profit was 21.1% for the year ended December 31, 2022, compared to 21.9% for the year. Improved product mix in China boosted gross margin by 1.2 percentage points, while higher battery costs and a higher share of scooter sales reduced gross margin by 2 percentage points. In particular, gross profit in the Chinese market increased by 1.5 percentage points.

Post time: Mar-23-2023