Niu Technologies - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies' First Quarter 2025 Earnings Conference Call. At this time, all participants are in a 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 will turn the call over to Ms. Kristal Li, Investor Relations Manager of Niu Technologies. Ms. Lee, please go ahead.

Kristal Li (Investor Relations Manager)

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the first quarter 2025. The earnings press release, corporate presentation, and financial spreadsheet have been posted on our investor relations website. This call is being webcast from our company's IR as well, and a replay of the call will be available soon.

Please note, today's discussion will contain forward-looking statements made under 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 result may be materially different from those expressed today. Further information regarding the risk factors is included in the company's public filings 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 a discussion of certain Non-GAAP financial measures. The press release contains a definition of Non-GAAP financial measures and the 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 (CEO)

Thank you, Kristal. Hello, everyone. Thank you for joining us today. In the first quarter of 2025, we'll achieve a total sales volume of 203,000 units, marking a significant 57.4% year-over-year growth. Behind this strong performance was a 66% year-over-year increase in the sales volume in the China market and a 6.4% year-over-year growth in the overseas market. Total revenue for the first quarter reached RMB 682 million, reflecting a 35% increase compared with the same period last year.

The gross margin rebounded to 17.3% with a 4.9% year-over-year increase, primarily driven by the BOM cost reduction in product platformization, component standardization, and procurement cost improvement. The performance in Q1 2025 has set a tone for the rest of the year, underlying our drive for high volume and revenue growth, as well as the profitability improvement.

Taking a closer look at our performance in China, sales volume reached 183,000 units this quarter. Our focus product portfolio strategy emphasizes technology innovation and expanding sales channels, as well as targeting marketing strategy for the key drivers to the strong domestic performance. In Q1 2025, we maintain our focus on our key product strategy of N, M, U, and S series.

We enhanced our existing products through upgrading and refining our product portfolio, which led to an optimized product mix and offered our customers an even more enjoyable riding experience. Additionally, we stepped up our motorcycle offerings, introducing models like NX, NL, and FX. The expansion diversified our electric motorcycle range and helped to broaden our sales channel. First, we successfully launched a comprehensive range of electric motorcycles, including the NX, NL, and FX series, spanning price range from RMB 4,000+ to over RMB 10,000.

Each model features significant enhancements in functionality and smart technologies, aligning with our new performance and safety standards. Those additions have significantly expanded our electric motorcycle portfolio, offering consumers more diverse options while reinforcing our position as a premium brand in the electric two-wheeler sector.

To delve into detail of each product, on March 21st, we first launched the NX Pro motorcycle, priced at RMB 9,999, positioning it as a speed champion among the sub-10,000 RMB electric motorcycles. It's equipped with a 72-volt, 42-amp-hour high-energy lithium battery, offering a range of over 90km on one charge. Powered by a motor with a peak power of 6kW under a boost mode, it hits a top speed of 80km per hour and accelerates from 0km-50km in just 5.4 seconds. The 8-amp-hour intelligent fast charging system allows for full charging in only 5 hours.

The NX Pro received around 2,000 pre-orders and set a sales record on platforms like Douyin, JD.com, and Tmall on its launch day. This model has established itself as a pioneer in the high-end two-wheel motorcycle market, reinforcing Niu's reputation for high performance and attracting a younger demographic that values speed and innovation. It significantly boosts our presence in the premium electric motorcycle segment. We also launched our entry-level NL, the smart electric motorcycles.

Key upgrades include an enlarged footboard, extended seats, and expanded storage compartments. It comes equipped with advanced intelligent features such as full-color TFT display with a screen measuring navigation, as well as OKGO and GOCC technologies. Powered by a 2,000-watt peak power motor, the NL reaches a top speed of 55km per hour and includes a TCS as a standard feature.

Priced at RMB 4,799, the NL offers a compelling combination of performance, smart technology, and affordability. We also expanded our F series with the FX Pro, FX Force, and FX City, completing the F series product lineup on the motorcycle side. With their bold, aggressive design, those models now come with enhanced features such as full-color TFT display, expanded battery compartments, offering options of 72-volt, 42-amp-hour lithium batteries, or 72-volt, 35-amp-hour lead-acid batteries.

Those models deliver a 45% increase in the top speed and a 72% boost in the peak input power. The F series also features dual-channel ABS and a matrix wheel, which significantly enhance playability and ease of operation, establishing F series as a performance powerhouse. We launched the F series on May 13th cross-platforms such as Tmall, JD.com, and Douyin, and this series is set to be delivered starting in Q2.

Now, besides electric motorcycles, we have also integrated those technologies into our electric bicycle lineup, elevating the categories with innovation technologies. We start with popular signature electric bicycle models such as NXT, NLT, MT, and MMT. Those approaches bring a premium electric motorcycle experience to the electric bicycle categories. The NXT launched on March 21st stands out as the first lead-acid electric bicycle equipped with dual-channel ABS, a 12-inch full-disc motor, and a standard boost launch mode.

The NXT seamlessly incorporates top-tier electric motorcycle features. Those advancements have made it a highly favored choice among the consumers, setting a new benchmark in the electric bicycles market. Now, we also unveiled two new models under the M series, targeting the female users, the MT and MMT.

The MT stands out for its ultra-compact design, vibrant color options, and user-friendly features like KoPiGo systems, making it especially suitable for female users seeking convenience and style. The MMT, a smaller model, embraces the iconic M series design with fresh, colorful aesthetics and a comfortable riding experience tailored to a diverse preference of Gen Z female users.

As a product line targeting those demographics, the M series accounted for an impressive 32% sales in Q1, reinforcing its appeal and market success. Now, in Q1, our strategic emphasis on standardizing those key product platforms has shown a sign of progress. It enhanced our R&D process and also reduced our BOM cost, contributing to a significant improvement of our gross margin in the China market. The positive impact was evident in Q1 2024.

Besides the product, we also rolled out a series of features in smart technologies such as a full-function 5-inch TFT display, the magic wheel, all those focusing on seamless riding experience, AI smart control assistance, and AI smart ecosystem features. Also, in terms of driving safety, we have partnered with Google Maps to develop an industry-pioneer data-driven dynamic safety warning system.

The system facilitates advanced functionalities to include blind spot warning, rear vehicle approach warnings, and AI-piloted traffic light navigation. This has already been implemented in our new NX and NXT models, with a more advanced feature to be released in Q2 and Q3 this year. We're aiming at a significantly enhanced riding safety and uplifting overall riding experience for our customers.

Now, in the last quarter, we also continued to enhance our broad influence of our products among the target customer groups, especially the premium consumers and Gen Z riders. On March 21st, the launch of our NX Pro was marked by a strategic partnership with the renowned Game for Peace. This collaboration introduced a new cup racing tournament within the game, which quickly topped the trending list on platforms like Weibo, Douyin, and Xiaohongshu.

The advertising campaign spanned over 115,000 placements across 16 major cities, targeting prominent landmarks, key business districts, subway systems, and office building elevators, garnering over 2.4 billion views. Also, on May 13th, we debuted our electric motorcycle matrix product targeting the premium users and Gen Z users with the NX and also the FX series.

The launch became a milestone in 2025, with staggering sales of over RMB 100 million in just the first 5 hours and a volume of 10,000 units plus. Lastly, in terms of channel expansion, we continue our previous strategy with a strong focus on penetrating the previously underrepresented market in China, strategically expanding our retail footprint to ensure our product reaches a broader consumer base.

We have expanded our retail footprint by opening about 384 new stores in Q1, with significant focus on Tier 3 and Tier 4 cities, accounting for 50% of the new opening stores. This strategic expansion refined our distribution network and also paved the way for the upcoming launch of electric motorcycle products in Q2.

Now, additionally, our online presence has been strengthened with sales improvements across multiple online channels, such as our official brand accounts, the regional localized accounts, and also the 400-plus store accounts. This multi-tier strategy has hosted about 10,000 live broadcasts, generating 430 million views, marking a 6x increase compared with Q1 2024 last year. This has significantly boosted our online visibility and customer interactions, contributing to about 100,000 units sales, representing 60% of our total sales volume.

Now, let me turn into the overseas market. In the overseas market in Q1 2025, the sales volume reached 20,000 units. Within the overseas market, we first focused on the electric two-wheeler market, which is the electric mopeds and electric motorcycles. The electric two-wheeler market achieved an over 3x increase due to the readiness we put in place on the direct distribution operation in key countries such as Germany, Italy, and France.

Those direct operations contributed more than 50% sales in Q1. Now, with the logistics financing CRM system, also the on-the-ground team, we have really built the operation in those key countries and accelerated internet network expansions. By the end of Q1 2025, the number of dealers in those direct distributed regions had increased from 120 dealers-180 dealers, with projections to reach about 250 dealers by mid-2025, exceeding our initial forecast.

We have also introduced a full lineup of electric two-wheeler products spanning from 50 cc equivalent LYE models to 125 cc equivalent Ultra E models, as well as the off-road motorcycles. Those products priced between EUR 2,000-EUR 4,600 cater to diverse consumer needs. The first batch of new products was shipped in Q1 2025, and now it's in stock in local warehouses, ready for the peak season sales in Q2.

Now, with those full lineup of electric two-wheeler products, specifically electric motorcycles, mopeds, and off-road motorcycles, and also the direct distribution operation in place, we anticipate exponential sales growth targeting a 3x-5x increase in 2025, with Q1 as an early indicator of such growth. Now, the fast growth in the electric two-wheeler sectors with the direct distribution region sales anticipated accounting for 60%-80% of sales will contribute significantly to our profitability turnaround in the international market.

Now, for the micromobility market for the international markets, such as the kick-scooters and also the e-bikes, Q1 2025 is an underperforming quarter with nearly flat volume growth and delayed profitability turnaround due to the tariff situation in the U.S. and also the inventory clearout in Europe. In Europe, our Q1 sales focused on sales out of outdated inventories, hence have impacted our gross margin and profitability.

Those outdated inventory impacts will continue partially into Q2, but we expect to be minimized by the second half of this year. Now, in the U.S. due to the uncertainties around the tariff situation, we deliberately hold back the sales of existing inventories in the U.S. market in Q1 for more clarity. We have implemented price increases in online channels in Q1 and negotiated with offline channels for price increases to be effective in late Q2 and early Q3.

Now, for the supplies to the U.S. market, our manufacturing in Southeast Asia has already dispatched our first deliveries in late Q1 2025, taking advantage of the 10% tariff window. The shipped product has not been reflected in the sales yet. Now, we are carefully watching the tariff situation.

However, with the negotiated price increases and the inventories prior to the tariff hike, we expect to regain profitability for the second half in 2025 for the U.S. micromobility market. Now, overall, we remain optimistic about the China market in Q2 2025, building on a strong foundation in product channel development and also the brand momentum. This has already produced positive initial results in Q1.

On the product side, we'll continue to focus on our product portfolio around our core NM, U, and F series. The launch of the newly upgraded NM F series in Q2 is expected to elevate our brand attractiveness and recognition within the high premium consumers and the Gen Z customers. Simultaneously, the launch of motorcycle products has diversified our product portfolio, offering consumers a wide array of options.

Also, we have moved out the launch of a new product in Q2 to May 13th, right before the China top sales season of June 18th, to take advantage of this. Now, we'll continue to expand our sales channels, expecting to add another 300-400 stores in Q2. The channel expansion will drive sales growth, but also shows the sign of channel momentum turnaround this year.

Lastly, we'll continue to improve our gross margin as a result of the ratio via product platform evaluation in Q1. Finally, we have worked diligently to modify our current product lineup to create a new design style to cope with the new electric bicycle standard in China to be in place in September. We have a solid product lineup in development, ready to be in the market by then.

Now, looking at the international market, with the trend we observed in Q1 and early Q2, we anticipate a steady growth in the overseas market and turnaround profit loss this year. In the electric two-wheeler market, with a complete product portfolio and established direct distribution operations, we anticipate a hyper growth in both revenue and profit contribution. The sales growth we saw in Q1 is a testament to this foundation we have built. In the following quarters, our focus will be on expanding the direct distribution operations as it yields a higher contribution margin.

For the micromobility market, even with the turmoil on the tariffs, we have started to observe return-around signs from a profitability perspective. With the clearing out of the outdated inventory in Europe and also the clarity with the U.S. tariff situation, we expect to rebound with the moderate growth and a significant improvement in the profitability. Now, I'll turn over to our CFO, Fion Zhou, to talk about the financials.

Fion Zhou (CFO)

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 the Excel format figures to our IR website for your easy reference. As I review our financial results, I'm referring to the first quarter figures unless I say otherwise. All monetary figures are in RMB, unless specified.

As Yan just mentioned, our total sales volume for the first quarter was 203,000 units, up 57% compared to the same period of last year. 183,000 units were sold in China, while the remaining 20,000 were sold overseas. The total revenue for the first quarter amounted to RMB 682 million and increased by RMB 177 million, or 35%, compared to the same period of last year.

The China revenues were RMB 608 million, accounting for 89% of the total revenues. Of this, the scooter revenue was RMB 546 million, a year-over-year increase of 39%. This increase was mainly due to the increase in sales volume and partially offset by a decrease in revenue per e-scooter. China scooters ASP fell to nearly RMB 3,000. This decline in ASP was primarily attributed to a shift in product mix.

The notable increase in sales volume of high-end lead-acid models, as mentioned in the previous quarters last year, has led to a more concentrated retail price range from RMB 3,000-RMB 7,000. The overseas revenue was RMB 74 million, representing 11% of the total revenue. The scooter revenues, including electric motorcycles, mopeds, kick-scooters, and e-bikes, amounted to RMB 60 million, up from RMB 49 million in the same period of last year.

This growth was driven by stronger international demand for electric motorcycles and mopeds, which command a higher retail price, and the premium pricing of these products also contributed to a year-over-year increase in the overseas scooter ASP, rising from RMB 2,577-RMB 2,962. The revenue from accessories, spare parts, and services amounted to RMB 76 million, a 20% increase compared to the same period of last year due to the increase in the spare parts sales in both China and overseas markets.

The gross profit for the first quarter exceeded RMB 118 million, marking a significant improvement compared to RMB 96 million during the same period of last year. The gross margin was 17.3%, 1.6 percentage points lower than the same period of last year, but 4.9 PPT higher than the previous quarters.

The domestic market gross margin improved due to the successful cost reduction initiatives, which increased the overall GM by 1.2 PPT. However, the overseas kick-scooters margins dragged down the total gross margin by 2.8 PPT, primarily due to the three factors: the impact of 25% of the U.S. tariffs implemented last June, elevated freight cost, and aged inventory write-downs.

The operating expenses for the first quarter were RMB 165 million, remaining flat compared to the same period of last year. However, the OpEx ratio declined significantly from 32.7%-24.2%. Selling and marketing expenses rose by RMB 9 million year-over-year to RMB 150 million, driven by a higher staff cost, advertising and promotional activities, and rental expenses. Selling and marketing expenses accounted for 16.8% of revenue, down from 20.9% in the first quarter of 2024.

R&D expenses increased by $1 million year-over-year to $30 million, primarily due to the higher staff cost and share-based compensation. The R&D expenses as percentage of revenue is 4.4% compared to 5.7% in the first quarter of 2024. G&A expenses decreased by $10 million year-over-year to $21 million, largely attributed to the foreign currency exchange gains.

G&A expenses as percentage of revenue was 3%, a notable reduction from 6.1% compared to last first quarter in 2024. In the fourth quarter, we had a net loss of RMB 39 million with a net loss margin of 5.7% under the GAAP accounting, compared to a net loss of RMB 55 million with a net loss margin of 10.9% for the same period of last year. The adjusted net loss was RMB 31 million with an adjusted net loss margin of 4.6%.

Turning to our balance sheet and cash flow, we ended the quarter with RMB 963 million versus RMB 1.1 billion last year. In cash, we stood the cash term deposit and short-term investments, and our operating cash outflow amounted to RMB 154 million. The CapEx for the first quarter amounted to RMB 24 million, reflecting an increase of RMB 3 million compared to the same period of last year.

This can be attributed primarily to an increase in the opening of new stores in China. Now, let's turn to guidance. We expect the second quarter revenue to be in the range of RMB 1.3 billion-RMB 1.4 billion, an increase of 40%-50% year-over-year. 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.

With that, we'll now open the call for any questions that you may have for us. Operator, please go ahead.

Operator (participant)

Thank you. If you wish to ask a question, please press star one one on your telephone, and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. We will take our first question. The first question comes from the line of Kyle Wu from Citi Research. Please go ahead. Your line is open.

Kyle Wu (Analyst)

Thank you, Operator. Hi, this is Kyle from Citi. Thanks for taking my questions. I have two questions. First is about the sales volume guidance. At the year beginning, we guide 2025 full year sales volume to be 30%-50% year-on-year growth. Do we still maintain this volume guidance? Second is about the margin. What's our margin outlook for the upcoming quarters of this year? And also, do we still expect second quarter to see net profit turnaround? Thank you.

Yan Li (CEO)

Let me take the first one. In terms of guidance for the annual volume, we have not changed the guidance. I think we're on the path.

Fion Zhou (CFO)

Okay. For the gross margin annually, actually, last year, our overall gross margin was only 15.2% overall. For sure, this year, the annual gross margin will be recovered from 15%. For the second quarter this year, we still expected that we will get the profit from the net margin. The NP is the positive expectation for us.

Kyle Wu (Analyst)

Okay. Thank you.

Fion Zhou (CFO)

Hope this was a good question.

Operator (participant)

Thank you. Once again, if you wish to ask a question, please press star one one on your telephone. We will take our next question. The next question comes from Yating Chen from CICC. Please go ahead. Your line is open.

Yating Chen (Analyst)

Hello. I have one question. I have seen that the average selling price decreased quarter over quarter in Q1, but the gross profit margin improved significantly quarter over quarter. I would like to know what is the main reason and what is the outlook for average selling price in subsequent quarters. This is my question. Thank you.

Fion Zhou (CFO)

Okay. I'll take this question. Actually, in this quarter, the ASP, especially the China ASP, dropped due to we launched the new models. Starting from last year, the launch date of our new models, especially the flagship models, varies each year. For instance, the retail price of MT 2025 models, this is our this quarter's best seller. The price ranged from nearly RMB 4,000-RMB 5,000. Whereas last year, we launched the NXT in last Q1.

This is our last year's top seller, and the price between RMB 6,000 to around RMB 12,000. The launching date of our new models actually varies our ASP each quarter. This ASP will smooth if we're looking forward to the next to the following quarters, especially the annual ASP, as we just explained to the market that the ASP will remain almost the same compared to last year or change a little bit within the single digital change.

For the second quarter after this year, actually, we expected the ASP, especially in the domestic market, will recover compared to the Q1 this year. We'll concentrate it. Actually, the model's retail price will concentrate it in the range from RMB 3,000-RMB 7,000. The ASP will rebound from this quarter's RMB 3,000 to around RMB 3,000-RMB 3,500 ASP in the domestic market.

This is our expectation in the quarter two's ASP. As to the gross margin recovered, as I just explained, this quarter's gross margin recovered, especially from our domestic scooters' cost reduction. Since last Q4, we see a dramatic gross margin drop down due to our lead-acid motorcycles and mopeds in the domestic market contributed more than 40% of our sales volume, which are 3%-5% gross margin lower than the same year in the lithium-ion one.

We began to change the smart function platform and also the R&D platform and also the cost reduction from the raw material. This quarter, we saw the benefit from the cost reduction in the domestic market.In Q2, we think the gross margin will remain at this level, but will change a little bit due to the product mix in the domestic market. It will not go back to lower than 15% as last year showing the figures. This is the gross margin and the ASP for this year's explanation.

Yating Chen (Analyst)

Thank you very much. That's all my questions.

Operator (participant)

Thank you. Once again, if you wish to ask a question, please press star one one on your telephone. We will take our next question. The question comes from the line of Michael Simmonds from GlobalView SA. Please go ahead. Your line is open.

Michael Simmonds (Analyst)

Thank you. Yes, it's Michael here, Michael Simmonds. Hey, Dr. Li, perhaps I can just ask you a little bit about the balance sheet. I think the cash position has kind of come down a little bit. Given what you've just been talking about, and it sounds like the second quarter's looking quite good, how do you think the cash position, the net cash position, is going to look at the end of the year?

Fion Zhou (CFO)

Actually, each year, quarter-wise, the cash position is the lowest. Since it's the Chinese New Year, we need to clear up all the advance to the suppliers, the accounts payable, and also the notes payable to the bank. If you're looking back to 2024 and 2023 each year, the fourth quarter's cash balance is the lowest during the whole year. At the end of this year, 2025, actually, we expect the cash position will grow up starting from quarter two since the peak season, both in the domestic market and the overseas markets, is coming. We give a high-speed sales volume increase aligned with the revenue increase.

This will broaden the operating cash flow inflow starting from quarter two. We did not expect a large CapEx for the furniture and equipment and also the stores opens. Overall, we think the cash position at the end of this year will be higher than the end of December 31st in 2024.

Michael Simmonds (Analyst)

Great. Thank you.

Operator (participant)

Thank you. We will take our next question. Your next question comes from the line of Zion Wanyan from Seville Capital. Please go ahead. Your line is open.

Okay. This is Daniel from Seville Capital. I have only one question regarding overseas business. As we know, white scooter revenue has been negatively impacted by tariffs. Electric motorcycle sales have shown growth. How should we interpret the growth rate target for overseas operations under these circumstances? Thank you.

Yan Li (CEO)

I think for the overseas growth rate, we remain to be we haven't really changed our forecast for this year. I think even at the last quarter, when we talked about the last year's results, I think in the forecast of this year, we know that our electric two-wheeler or the electric motorcycle market, the growth rate will be quite high because it started with actually last year, we only did about 3,000+ units of electric motorcycles. And then during our peak time, we actually did close to way above 20,000 units. We look at that, starting from 3,000 units last year, we look at a fast, really a hyper growth this year, looking at somewhere at least 5x-6x growth on the electric motorcycle side. On which in Q1, quarter one, already see a 3x growth there. On the micromobility, basically the kick-scooters.

The U.S. tariff really started to impact us last year when our tariff actually increased to 25% on May 31st, 2023. That already had the impact on our kick-scooter business. We actually started to relocate the manufacturing base from China to Southeast Asia to try to cope with that 25% tariff, where back then in Southeast Asia, it was a 0% tariff. I mean, this quarter, Q1 this year, we see basically this tariff goes, even the Southeast Asia tariff went up to 10%, but the China side actually went up significantly. We actually consciously made adjustments by holding off the sales for the U.S. market.

If you look at the entire year, I think the demand there with our Southeast Asia manufacturing base in place, also with how we negotiate the price increase with the key U.S. retailers like Best Buy, Walmart, I think we should be able to see that business go as normal as what we expected at the beginning of the year. Overall, I think with the micromobility, both on the U.S., Europe, I think our key three footprints are U.S. market, well, the entire North American market, basically U.S. and Canada, and also the European market, as well as some of the Australian market, New Zealand market. We expect moderate growth. We do not expect that business grow at 2x or something. We really expect a simple double-digit growth. The key goal is actually a turnaround, the profitability.

I think if you look at these two international market segments, with the electric motorcycle, I think it's a hyper growth with a high profitability contribution. On the kick scooter micro mobility market, you really should expect this is moderate growth, but with the key focus on turning around from a profit loss to a profitability business unit.

Okay. Thank you.

Operator (participant)

There seems to be no further questions. I would like to hand back for closing remarks.

Yan Li (CEO)

All right. Thank you, Operator. And thank you all for participating on today's call and for your support. We appreciate your interest and looking forward to reporting to you again next quarter on our progress. Thank you.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.