NIU Technologies

NASDAQ:NIU

Earnings Call Transcript

[Operator]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies First Quarter 2025 Earnings Conference Call. [Operator Instructions] 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. Li, please go ahead.

[Kristal Li, executive]

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 spreadsheets have been posted on our Investor Relations website. This call is being webcast from our company's IR site 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 results may be materially different from those expressed today. Further information regarding the risk factors is included in the company's public filings with the Security 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 included a discussion of certain non-GAAP financial measures. The press release contain a definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial result. 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, executive]

Thank you, Kristal. Hello, everyone. Thank you for joining us today. In the first quarter of 2025, we achieved a total sales volume of 203,000 units, marking a significant 57.4% year-over-year growth. Behind the strong performance was a 66% year-over-year increase in the sales volume in the China market and 6.4% year-over-year growth in the overseas market. Total revenue for the first quarter reached to RMB 682 million, reflecting a 35% increase compared with the same period last year. The gross margin rebounded to 17.3% with 4.9% year-over-year increase, primarily driven by the pump cost reduction in product optimization, 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 to 183,000 units in this quarter. Our focused product portfolio strategy emphasized on technology innovation and expanding sales channels, as well as targeted marketing strategy were the key drivers to the strong domestic performance. In Q1 2025, we maintained our focus in our key product strategy of Niu and F-Series. We enhanced our existing products through upgrading and refining our product portfolio, which led to optimize product mix and offer our customers a even more enjoyable riding experience.

Additionally, we stepped up our motorcycle offerings, introduced model like NX, NL and FX. The expansion diversify 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 plus to over RMB 10,000. Each model feature significant enhancement in functionality and smart technologies, aligning with our new performance and safety standard. Those additions have significantly expanded our electric motorcycle portfolio, offering consumers a more diverse option, while reinforce our position as a premium brand in the electric 2-wheeler sector.

So, diving into detail of each product. On March 21st, we first launched the NX Pro motorcycle priced at RMB 9,999, positioning as a speed champion among the sub RMB 10,000 electric motorcycles. It's equipped with 72-volt, 42 mPower high-energy lithium battery, offering a range of over 90 kilometers on 1 charge. Powered by a motor with a peak power 6 kilowatts under boost mode. It hits the top speed of 80 kilometers power and accelerates from 0 to 50 in just 5.4 seconds. The 8 mPower plus intelligent fast charging system allows for full charging in only 5 hours. The NX Pro received around 2,000 preorders and set a sales record on a platform like Douyin, JD.com and Tmall on its launch date. This model has established itself as a pioneer in the high-end 2-wheeler motorcycle market, reinforce new reputation for high performance and attracting a younger demographic that value speed and innovation.

It significantly boosts our presence in the premium electric motorcycle segment. We also launched our entry-level NL smart electric motorcycles. Key upgrade include a large footboard, extended seats and expanded storage compartment. It comes equipped with advanced intelligent features such as full color display, TFT display with the screen metering navigation, as well as [indiscernible] technologies, powered by a 2,000 watt power motor that average top speed of 55 kilometer per hour and include TCS as standard features. Priced at RMB 4,799 that offers a compelling combination of performance, smart technology and affordability.

We also expanded our F-Series with the FX Pro, FX4 and FXC, completing the F-Series product lineup on the motorcycle side. With their both aggressive design, those models now come with enhanced features such as full color TFD display and expanded battery compartments, offering options of 72-volt, 42 mPower lithium batteries or 72-volt 35 mPower lead acid batteries. Those models delivered 45% increase in the top speed and 72% boost in the peak input power. The F-Series also featured in-channel ABS and magic wheel, which significantly enhanced playability and ease of operation, establishing F-Series as a performance powerhouse.

We launched the F-Series on May 13 across platforms such as Tmall, JD and Douyin and the series delivery starting in Q2. Now besides electric motorcycles, we have also integrated those technologies into our electric bicycle line-up, elevating the categories with innovation technologies. We started popular signature electric bicycle models such as NXT, MLT, MT and MMT. Those approach bring a premium electric motorcycle experience to the electric bicycle categories. The NXT launch on March 21 stands out as the first after electric bicycle equipped with dual-channel ABS, a 12-inch full disk motor and a standard boost launch mode.

The NXT seamlessly incorporate the top-tier electric motorcycle features. Those advancements have made a high favorite choice among consumers, setting a new benchmark in the electric bicycles market. Now we also unveiled 2 new models under the M-Series targeting the female users, the MT and MMT. The MT stands out for it's ultra-compact design, vibrant color options and user-friendly features like goEgo systems, making it especially suitable for female users seeking convenience and style.

The MMT, a smaller model, embraced iconic M-Series design with fresh colorful aesthetics and a comfortable riding experience, tailored to a diverse preference of Gen-Z female users. As product line targeting those demographics, the M-Series accounted for a impressive 32% sales up in Q1, reinforcing its appeal and market success. Now in Q1, our strategic emphasis on standardizing those key product platforms has shown sign of progress. The enhanced our R&D process and also reduced our BOM cost, contributing a significant improvement of our gross margin in the China market. The positive impact is evident in Q1 of 2025. Besides the product, we also roll out a series of features and smart technologies such as a full function 5-inch TFT display, the magic wheel, all those focusing on seamless driving experience, AI smart control assistance and AI smart ecosystem features.

Also in terms of driving safety, we have partnered with [indiscernible] to develop industry pioneer data-driven dynamic safety warning system. The system facilitate advanced functionalities include [ plant swap ] warning, rear vehicle approach warning and AI-piloted traffic light navigation. This has already been implemented in our new MX, NXT models with more advanced features to be released in Q2 and Q3 this year. We're aiming at significantly enhanced riding safety and uplifting overall riding experience for our customers.

Now in last quarter, we also continued to enhance our brand influence of products among the target customer groups, especially the premium consumers and Gen Z riders. On March 21, the launch of our NX Pro was marked by a strategic partnership with a renowned game for peace. This collaboration introduced a new cup racing tournament within the game, which quickly topped the trending list on platform like [indiscernible]. The advertising campaign spent over 115,000 placements across 60 major cities, targeting prominent landmarks, key business district in subway systems and office building elevators garnering over 2.4 billion views. Also on May 13, 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 become a milestone in 2025 with starting sales of over RMB 100 million sales in just first 5 hours and a volume of 10,000 units plus.

Lastly, in term of channel expansion, we continue our previous strategy with strong focus on penetrating the previous underrepresented market in China, strategically expanding our retail footprint to ensure our product reaching 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 new opening stores. This strategic expansion refine our distribution network and also paved the way for upcoming launch of electric motorcycle product in Q2.

Now additionally, our online presence has been strengthened with sales improvement across multiple online channels, such as our official brand accounts, the localized account -- regional localized account 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 about 100,000 units sales, representing 60% of our total sales volume.

Now let me turn to the overseas market. In overseas market in Q1 2025, the sales volume reached to 20,000 units. Within the overseas market, we first focused on electric 2-wheeler market, which is the electric two-wheeler moped electric motorcycles. The electric 2-wheeler market achieved over 3x increase due to the readiness we put in place on the direct distribution operation in those key countries such as Germany, Italy and France. And those direct operations contributed more than 50% of sales in Q1.

Now with the logistics financing CRM system, but also the on the ground team, we have really built the operation in those key countries and accelerated enough network expansions. By end of Q1 2025, the number of dealers in those direct distributed regions have increased from 120 to 180 dealers with projection to reach about 250 dealers by mid-2025, exceeding our initial forecast.

We have also introduced a full line of electric 2-wheeler products spanning from 50cc equivalent LYE models to 125 cc equivalent L3E models, as well as the off-road motorcycles. Those products price between EUR 2,000 to EUR 4,600 catering to a diverse consumer needs. Now the first batch of new product was shipped in Q1 2025 and now it is stocked in local warehouse, ready for the peak season sales in Q2. Now with those full lineup of electric 2-wheeler products, specifically electric motorcycles moped and off-road motorcycles and also the direct distribution operation in place, we anticipate exponential sales growth targeting 3x to 5x increase in 2025 with Q1 as a early indicator of such growth.

Now the fast growth in the electric 2-wheeler sectors with the direct distribution region sales anticipated accounting for 60% to 80% of sales will contribute significantly in our profitability turnaround in the international market. Now for the micromobility market for the international markets, such as the kick scooters and for the e-bikes. Q1 2025 is a under performing quarter with nearly flat volume growth and delayed profitability turnaround due to the tariff situation in the U.S. and also the inventory clear out in Europe. In Europe, our Q1 sales focused on sales out of inventories, hence have impacted our gross margin and profitability. Those are the inventory impacts will continue partially into Q2, but we expect to minimize those by second half of this year.

Now in the U.S., given the uncertainties around the tariff situation, we deliberately hold back the sales of existing inventory in the U.S. market in Q1 for more clarity. We have implemented price increase in online channels in Q1 and negotiated with offline channels for price increases to be effect in late Q2 and early Q3. Now for the supply to the U.S. market, our manufacturing in Southeast Asia have 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 strong foundation in product channel development and also the brand momentum. This has already produced a positive initial result in Q1. On the product side, we'll continue to focus on our product portfolio around our core NU and F-Series. The launch of newly upgraded 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 product has diversified our product portfolio, offering consumers a wide array of options. Also, we have moved up the launch of a new product in Q2 to May 13th, right before the China top sales season of June 18 to take advantage of this. Now we'll continue to expand our sales channels, expecting to adding another 300 to 400 stores in Q2. The channel expansion will drive sales growth, but also shows the sign of channel momentum turnaround this year.

Now lastly, we'll continue to improve our gross margin as a result ratio via product platformization in Q1. And finally, we have worked diligently to modify our current product lineup to create 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 2-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 yield a higher contribution margin.

For the micro mobility market, even with the turmoil on the tariffs, we have started to offer turnaround signs from a profitability perspective. With the clearing out of outstate inventory in Europe and also the clarity from the U.S. tariff situation, we expect to rebound with moderate growth and a significant improvement in the profitability.

Now I'll turn over to our CFO, Fion Zhou, to talk about the financials.

[Wenjuan Zhou, executive]

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 to the first quarter figures unless I say or otherwise and all monetary figures are in RMB if not 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 was sold overseas.

The total revenue for the first quarter amounted to RMB 682 million, an increase of 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 were RMB 546 million, a year-over-year increase of 39%. And this increase was mainly due to the increase in sales volume and partially offset by a decrease in revenue per e-scooters.

China scooter 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 to RMB 7,000. And the overseas revenue was RMB 74 million, representing 11% of the total revenue. The scooter revenues, including electric motorcycles, moped, kick scooters and e-bikes amounted to RMB 60 million, up from RMB 49 million in the same period of last year.

And this growth was driven by stronger international demand for electric motorcycles and mopeds which command higher retail price and the premium pricing of this products also contributed to a year-over-year increase in the overseas scooter ASP rising from RMB 2,577 to RMB 2,962. And 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 and the gross margin was 17.3%, 1.6 ppt 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 3 factors: the impact of 25% of the U.S. tariffs implemented last June, elevated freight costs and 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% to 24.2%. Selling and marketing expenses rose by RMB 9 million year-over-year to RMB 115 million, driven by higher staff costs, 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 costs and share-based compensation. The R&D expenses as a percentage of revenue is 4.4% compared to 5.7% in the first quarter of 2024. G&A expenses decreased by RMB 10 million year-over-year to RMB 21 million, largely attributed to the foreign currency exchange gains. And G&A expenses as a percentage of revenue was 3%, a notable reduction from 6.1% compared to last -- first quarter in 2024.

In the first 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 last year. The adjusted net loss was RMB 31 million with an adjusted net loss margin of 4.6%. And 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, restricted cash, term deposit and short-term investment 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, and 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 to RMB 1.4 billion, an increase of 40% to 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.

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

[Operator]

We will take our first question -- and the first questions comes from the line of Kailin Wu from Citi Research.

[Kailin Wu, analyst]

This is Kailin from Citi. I have 2 questions. First is about the sales volume guidance. At the year beginning, we guide 2025 full year sales volume to be 30% to 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?

[Yan Li, executive]

Yes. Let me address the first one. In term of guidance for the actual volume, we have reached -- we have not changed the guidance. I think we're on the path.

[Wenjuan Zhou, executive]

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

[Operator]

And the next question comes from Yating Chen from CICC.

[Yating Chen, analyst]

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. So I'd like to know what is the main reason? And what is the outlook for average selling price in subsequent quarters? This is my question.

[Wenjuan Zhou, executive]

Okay. I'll take this question. Actually, in this quarter, the ASP, especially the China ASP dropped due to -- we launched new models -- from -- starting from last year, the launch date of our new models, especially the flagship model varies each year. For instance, the retail price of MT2025 models, this is our -- this quarter's best seller. The price range from RMB nearly RMB 4,000 to 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. So the launch date of our new models actually varies our ASP each quarter. But this ASP will smooth if we're looking forward to the -- 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 this year, actually, we expected the ASP, especially in the domestic market will recover compared to the Q1 this year. We will concentrate -- actually, the models retail price were concentrated in the range from RMB 3,000 to RMB 7,000. So the ASP will rebound from this quarter's RMB 3,000 to around RMB 3,000 to RMB 3,500 ASP in the domestic market. So this is our expectation in the quarter 2 ASP. And as to the gross margin recovered, as I just explained, this quarter's gross margin recovered, especially from the -- our domestic scooters cost reduction. Since last Q4, we see a dramatic gross margin drop down due to our lead acid motorcycles and moped in the domestic market contributed more than 40% of our sales volume, which are 3% to 5% gross margin lower than the same year in the lithium ion one.

And we began to change the smart function platform and also the R&D platform and also the cost reduction from the raw material. And this quarter, we saw the benefit from the cost reduction in the domestic market. And 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. But we will not go back to lower than 15% as last year showing the figures. This is the gross margin and ASP for this year's explanation.

[Operator]

We will take our next question, and the question comes from the line of Michael Simmonds from [ GlobalViewSA ].

[Unknown Analyst]

This is Michael here, Michael Simmonds. Dr. Lee, perhaps I can just ask you a little bit about the balance sheet. I think it's -- 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 is looking quite good. How do you think the cash position -- the net cash position is going to look at the end of the year?

[Wenjuan Zhou, executive]

Well, actually, each year, the quarter 1, the cash position is the lowest. Since it's the Chinese New Year, we need to clear out all the advance to the suppliers, the accounts payable and also the notes payable to the bank. So if you're looking back to 2024 and 2023 each year, the fourth quarter cash balance is the lowest during the whole year. But at the end of this year 2025, actually, we expected the cash position will grow up starting from quarter 2 since the peak season, both in the domestic market and the overseas market is coming. And we give a high feed sales volume increase aligned with the revenue increase. And this will -- brought us the operating cash flow inflow starting from quarter 2. And we didn't expected a large CapEx for the furniture and equipment and also the stores opened. So overall, we think the cash position at the end of this year will be higher than the end of December 31 in 2024.

[Operator]

We will take our next question -- your next question comes from the line of [indiscernible] William from [ SAESO Capital ].

[Unknown Analyst]

Okay. This is Daniel from [ CFI ] Capital and I have only one question regarding overseas business. While as we know that while scooter revenue has been negatively impacted by tariffs, electric motorcycle sales has shown growth. How should we interpret the growth rate target for overseas operations under these circumstances?

[Yan Li, executive]

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 results and even the forecast of this year, we know that our electric 2-wheeler electric motorcycle market, the growth rate will be quite high because it started with actually -- last year, we only did about 3,000-plus units of electric motorcycles. And then during our peak time, we actually did close to way above 20,000 units. So we look at that starting from 3,000 units last year, we look at really a hyper growth this year, looking at somewhere at least 5x to 6x growth on the electric motorcycle side. On the -- as which on the Q1, the quarter 1, we see a 3x growth there. On the micromobility basically the kick scooters, so we -- the U.S. tariff really started to impact us last year when our tariff actually increased to 25% on May -- post May 31 last year. So that already has the impact on our kick scooter business. So we actually started to relocating the manufacturing base from China to Southeast Asia to try to cope with that 25% tariff, where back in the Southeast Asia, it was a 0% tariff. So 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 actually went up significantly.

So we actually consciously made adjustment saying by holding off the sales for the U.S. market. But 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 goes as normal as what we expected at the beginning of the year. But overall, I think our -- with micromobility, both on the U.S., Europe, I think our key 3 footprint are U.S., 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 don't expect that business to grow at 2x or something. We really expect a simple double-digit growth. And with the key goal is actually a turnaround in the profitability. I think if you look at the 2 international market segments with the electric motorcycle, I think it's a hyper growth with a high profitability contribution. And on the kick scooter micromobility market, you really should expect this moderate growth, but with the key focus on turning around from a profit loss to a profitability business unit.

[Operator]

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

[Yan Li, executive]

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]

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