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Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to Niu Technologies Third Quarter 2024 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we’ll 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’ll turn the call over to Ms. Kristal Li, Investor Relations Manager of Niu Technologies. Ms. Li, please go ahead.

Kristal Li: Thank you, operator. Hello, everyone. Welcome to today’s conference call to discuss Niu Technologies results for the third quarter 2024. The earnings press release, corporate presentation and financial strategies has 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 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. And the press release contains a 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, Kristal. Hello, everyone. Thank you for joining us today. So Q3 2024 has marked a quarter that shows continuous growth. In this quarter, our total sales volume was 312,000 units, with a year-over-year increase of 17.5%. Specifically, sales volume in the China market had a year-over-year increase of 12.4% to 259,000 units. And the sales volume in the overseas market experienced a significant year-over-year of 50% increase to 53,000 units. Total revenue in Q3 2024 was RMB1.02 billion, increased by 10.5% year-over-year. So this quarter’s performance highlights the effectiveness of our strategic focus on expanding the product offerings, expand the sales channels, and expand the market reach. We have achieved notable growth in both China and overseas market, reflecting the increased recognition and improved sales.

So as we continue to build on these results, we remain committed to refine our strategy to meet ambitious targets at that market demand. Now in China, strong feedback on the recent launch of the [N & U] (ph) series has reinforced our focus on enhancing the core product offerings. Since Q2 2024, the targeted marketing and store expansion increase of market presence, positioned us well for the growth in Q3. However, the sales in Q3 did face headwinds due to a new standard on battery electric system safety, which put an effect at the end of October. And the retailers were not allowed to sell electric bicycle products that were not compliant with the new standard. As a result, the sell-in orders from factory to the distributors in September was significantly reduced and the distributors are focused on clearing the existing channel inventories which are typically 1.5 months.

The execution of the policy also impacts our product mix as high-price product or order less which reflected a lower ASP and lower margin quarter-over-quarter. The sales percentage with ASP over RMB6,000 dropped by 8.1 percentage points in Q3 compared with Q2. Now in overseas market, the micro mobility segment achieved significant growth, leveraged momentum from expanding the key sales network, and introduced new product tailored for the diverse networks. In the electric two-wheeler segment, we focused on direct distribution operations in priority market, laying a good foundation for operations and dealer development. Early sales and marketing events already show its growth potential. So let me talk about China marketing in detail. Since this year, we are focused on rolling out key products with clear target consumer groups to drive [indiscernible] growth.

In the first two quarters this year, we introduced the NXT to address the premium segment, the Nplay motorcycle and the UMax electric bicycle to address the Gen Z, the younger generation, and the U1E for the female riders. In Q3, we continue to unveil two electric bicycles, the NT to address the Gen Z and MT to address the female users. Together, those new product launches this year contribute to more than 50% of total units sold in 2024. To continue address the premium users and Gen Z users in the motorcycle market, we released two more electric motorcycle lines recently, the utmost premium NX high performance motorcycle and the Falcon style design FX motorcycle. The NX motorcycle is our most premium series with two models, NX Hyper and NX Ultra.

As Niu’s most premium series, the NX lines combine powerful performance, advanced safety, and intelligent systems. The NX Hyper is the new flagship electric motorcycle designed for the performance enthusiasts and tailored for track racing. Powered by a 10 kilowatt motor with peak output of 29 kilowatts, it reaches the top speed of 135 kilometers per hour. Its inverted titanium coated front force and adjustable nitrogen rear shocks provide exceptional stability and comfort in rocket touring. With racing mode dynamics, a 42 degree angle, and a two disc brakes with four piston calibers, it ensures precise control and maximum safety. Priced at near RMB30,000, the NX Hyper combined cutting-edge technology with race-ready agility. Now, the NX Ultra equipped with the robust 5 kilowatt motor at top speed of 100 kilometers per hour and offered a range up to 130 kilometers on a single charge.

This caters both daily commute and weekend getaways as the entry-level top speed motorcycles. The NX Ultra is priced at RMB18, 900. Now with the top performance of NX Series, we have done X mile to ensure rider safety. The NX motorcycle is the first electric two wheeler in China to earn a 5-star fire safety certification from the China Merchant Vehicle Research Institute. It passed rigorous tests for electric fire protection, impact resistance, and water immersion. This achievement highlights Niu’s dedication to advancing e-mobility safety standards. Now, since the NX Hyper and NX Ultra represent our highest performance releases, we celebrate their debut with the innovative Track Test Drive event in Beijing, drawing over 100 top media outlets’ influencers.

This event not only showcases exceptional performance of our product, but also significantly boost the community engagement. With content around the NX Tracks Test Drive event gathered more than 52 million views across all platforms. The 11:11 Shopping Festival was also a good first testament for our NX product in this market. During the online shopping sales, we achieved top ranking across major e-commerce platforms with NX Hyper and NX Ultra standing as the best sellers in its own category. Now, during this quarter, we also introduced the FX Series for the Gen Z consumers as the mass premium motorcycles for practical use. The FX Series includes three models, all featuring the same sleek design. The FX Series boasts the F-Line family aesthetics with eagle-eyed headlights, adding sophistication to the high-performance line-up.

The pro version is equipped with 45 amp-power batteries, the 1500-watt motor, and top speed at a 55 kilometer per hour, with impressive driving range of 130 kilometers. Designed for urban commuting, the FX Series combines powerful features with the advanced safety system extended battery life, a smart integration via the [OkGo map] (ph) for enhanced convenience control. The FX series is priced from RMB5,500 and above. Now, as this product is designed for Gen Z users to connect more deeply with the e-gaming community and the younger audience. We launched this FX products along with co-branding initiative with the popular game PUBG Mobile with 200 million plus users. We introduced the exciting co-brand collaborations, the FX product series through a range of online, offline events including the in-product launch, campus events, e-gaming tournaments, and influencer promotions.

Overall, the campaign achieved over 920 million views across social media influencer engagement and target media. Now, in terms of channel profitability and channel expansion, as we discussed earlier this year, our first focus is on channel health, especially store probability with a goal to reversing the trend of store closures over the past two years and prepare for future expansion. To achieve this, we concentrate on improving same store sales by significantly enhancing our online to offline operations, driving sales leads from the online platform to our physical stores to increase foot traffic. In addition to traditional platform like JD and Tmall, we also increase our investment on Douyin, Kuaishou, Xiaomengshu and Meituan. Online sales leads account for more than 50% store sales for the first three quarters, marking a significant increase compared with less than 30% in the same period last year.

We have also made substantial investment in training our stores for the [indiscernible] operations, including creating accounts for each store and providing live stream training to enable them to generate online leads. As a result, we achieved over 33,000 live stream sessions, generating RMB115 million GMV in the first three quarters, with 18,000 live sessions in Q3. Now with the launch of new product improve store profitability, we have successfully reversed the previous trend and began to expand our sales network. In Q3, despite being a traditional slow period for store openings, we were still able to add 240 new stores to expand our sales network. Now let me turn you to the overseas market. This quarter demonstrated strong growth and strategic advancements in our overseas market.

In the micro-mobility segment, leveraging a strong product portfolio, we’re able to expand more retailers and achieve over 50% year-over-year sales volume growth. Now for the electric two-wheeler market, we focused on direct sales operations in the key market and unveiled new products during our 10th anniversary at [ECMA] (ph) this November. Those product launches along with business development events and branding marketing activities helped us to build a solid foundation for strong growth. Now, in terms of micro-mobility, since the beginning of this year, we have focused concentrate on retail channel expansion in the key market. In the U.S. market, we worked with BestBuy entering all 800 stores in North America. Additionally, we’ve been working with Walmart, Coast, Macy’s, Target, and Home Depot.

In Europe, in addition to the current retail network of MediaMarkt, we also entered one of the leading retail chains in Europe, in Italy, having our kick scooter product placed in their 300 stores. Now to further benefit from already established sales network, we have expanded our product portfolio. We launched a KQi 100 series this quarter featuring KQi 100S and 100P. This series brings a quality performance at an entry level price starting at $299 and making affordable yet powerful choice for urban mobility. Features included due to hydraulic suspension with 29 kilometer dry range and top speed up to 25 kilometer per hour. Now on the kick scooter side, the recent increase in the US tariff on kick scooters from 0% to 25% starting in June has temporarily grown our margins, leaving a negative gross margin for product shift to the United States in the Q3 and the part of Q4.

To address this, we have initiated a process to start production of US version in the Southeast Asia to address the tariff situation. However, due to the complexity of supply chain adjustment, we expect to see the first manufacturing product out of Southeast Asia to be shipped in early 2025. Now for electric two wheelers, in the first three quarters, we focused on establishing direct distribution operations in key markets. By Q3 this year, we completed the first phase of operations set up in Europe, including the dealer network development, financing for dealers, logistics, after sales support, as well as the team set up. Now we have an operations covering Italy, Germany, France. Recently we recruited over 100 dedicated dealers into our European sales network and plan to double this number by first half 2025.

Now with the operation set up in place, we introduced key electric motorcycle product at ECMA this year. In the motorcycle segment, we launched the NX Series, the international version of our NX premium products, with price range from EUR3,000 and beyond. We also unveiled the SQi Series, the international version of our S-Series, starting with SQi 500. It features the 5,000 watt motor capable of speed up to 95 kilometer per hour and a drive range of 91 kilometers. The advanced safety features such as CBS brakes and tyre pressure monitoring enhance the rider confidence. Starting at around EUR3,000, the SQi series offers a combination of eco-friendly, high-tech design and robust performance. Additionally, we upgrade our XQi3, an off road motorcycle-equipped with OT update that boosts the power to 10.6 kilowatts, improved acceleration, and reaches top speed of 800 kilometers per hour.

Priced at $4,000, the XQi3 made a high-performance dirt bike more accessible. Now, Niu’s new product release has generally extended media and influencer coverage at ECMA. The leading industry outlets [indiscernible] Electric, Motor News, Moto, Gazetta, Motori cover our ECMA launch just days after the event. And online channels were featured by KOLs with millions of followers. And the contents about our new product driven a significant online engagement since its release. During ECMA, we also hosted our largest new Connect events, inviting around 200 partners, dealers, and distributors to join us in unveiling our new products. At this event, we’ll also launch a dealer expansion project for 2025, targeting to doubling the dealers by first half of 2025.

Now we are towards the closing of the year 2024. We have strategies planned for the last quarter of this year to build a solid foundation for 2025. We plan to run on gross momentum in the product development and sales expansion to drive the growth. In the China market [indiscernible] well positions product portfolio that spend a wide range of market demands from daily commuters, electric bicycles to high-performance motorcycles with price ranging from RMB3,000 up to RMB30,000. Our product is catering a diverse customer base, including young people with Generation Z, the female users, the daily commuters, and motorcycle enthusiasts. We plan to build our existing portfolio with the upgraded product and new designs that comply with China’s new standards.

Now, along with the improvement of our product portfolio, we have also strengthened our brand image as a premium brand. With the introduction of NX Series, we have elevated the product performance to a new level. The premium NXT electric bicycle series, equipped with cutting-edge smart technology such as millimeter radar for collision detection, navigation projection system, represented the most advanced smart electric bicycles in its class. And on the sales channel expansion front, we plan to accelerate store expansions in Q4 and Q1 2025, targeting over a thousand stores to establish a solid foundation for growth in 2025. Additionally, our expansion effort will focus on Tier 3 cities and plus, where we have historically been underrepresented due to lack of right products.

Now in the overseas market, the Niu strategy for 2025 focused on driving robust growth across both micro-mobility and the electric two-wheeler market. For micro-mobility, we plan to continue to expand our retail presence supported by enhanced product lineup. Production in the Southeast Asia will also help to mitigate tariff challenges and accelerate growth in the U.S. market. Now in the electric two-way segment, we’ll leverage the new product launches like the NX and SQi series to cater to urban commuters with strong focus on direct sales in the core market. Driven by this new product and the momentum in ECMA, we plan to significantly expand our dealer network in those key markets, laying a solid foundation for the growth in next year. Now with that, let me turn the call to Fion.

Fion Zhou: Thank you, Yan. And hello, everyone. Please note that our press release contains all the figures and comparisons you need, and we have also uploaded Excel format figures to our IR website for your easy reference. As I review our financial results, I’m referring to the third quarter figures unless I say otherwise, and all monetary figures are in RMB if not specified. As Yan just mentioned, our total sales volume for the third quarter was 312,000 units, up 17.5% compared to the same period of last year. 259,000 units were sold in China, while the remaining 53,000 units were sold overseas. Over 60% of our sales volume in China came from the new products launched this year. And the total revenues for the third quarter amounted to RMB1.02 billion, up 10.5% compared to the same period of last year.

And China revenue were RMB880 million, accounting for 86% of the total revenue. Of this, the scooter revenue was RMB797 million, up 12% year-over-year due to an increase in sales volume of e-scooters. China’s scooter ASP was RMB3,078, remained flat year-over-year and quarter-over-quarter down 12%. The high-end lead asset models that command similar ASPs to [indiscernible] models accounted for nearly half of the sales volume in China this quarter. A quarter-over-quarter decline was primarily driven by a narrowing of the retail price range from RMB4,000 to RMB6,000, down from the previous RMB4,000 to RMB8,000. Despite this adjustment, our product price remained significantly higher than the industrial average level. The overseas revenue were RMB144 million, accounting for 14% of the total revenue.

The scooter revenue including e-motorcycles, e-mopeds, kick scooters and e-bikes amounted to RMB130 million compared to RMB122 million in the same period of last year. This growth was mainly due to increased sales of the kick scooters, partially offset by the decline of the revenue pre scooters. Of this, the micro mobility revenue were around $114 million, up 6% year-over-year. The overseas scooter ASP decreased from RMB3,430 to RMB2,444 year-over-year, primarily due to a shift in product mix and old model discounts that impact the kick scooters ASP. In the third quarter, our entry-level kick scooter with the lower price and lower margin, as Yan just mentioned, the K100 accounted for over 30% of the sales, replacing the higher price and higher margin K2 and K3 models which dominated in the prior quarters.

Additionally, the rollout of the new models K100 and K300 led to discount sales of the old models K2 and K3, especially online sales this quarter. And the revenue from accessories, spare parts and services amounted to RMB96 million, a 2% increase compared to the same period of last year due to the increase of the spare parts sales in China. Gross margin for the third quarter was 13.8%, 7.6 ppt lower than the same period of last year and 3.2 ppt lower than the previous quarter. The decline in gross margin were driven by the following factors: in our international market, fast growing sales of K100 model and promotional sales of the old models lowered the overseas margins compared to last quarter and the same period of last year. Additionally, starting from June, a 25% of the US tariffs on nearly half of our kick scooter sales further reduced our overseas margins.

And these two reasons both made the quarter-over-quarter gross margin decrease. While in China, we continue to allocate part of our margins to our domestic distribution partners to reward their loyalty, which drove further year-over-year decline. Talking about the operating expenses, the third quarter OpEx was RMB201 million, representing a 31% decrease compared to the same period of last year and the total OpEx ratio decreased from 31% to 20%. Selling and marketing expenses were RMB128 million, up 5% year-over-year, primarily due to the increased promotions in kick scooter new models. Selling and marketing expenses as a percentage of revenue went down from 13.2% to 12.5%. R&D expenses amounted to rmb30 million, down RMB9 million year-over-year, mainly due to a decrease in staff cost and share base compensation and sample expenses.

The R&D expenses as a percentage of revenue went down from 4.2% to 3%. G&A expenses were RMB43 million down RMB84 million year-over-year, mainly due to a decrease in the allowance for doubtful accounts that were made credit loss provision for our European distributor in last quarter three. G&A expenses as a percentage of revenue went down from 13.7% to 4.2%. In the third quarter, we had a net loss of RMB41 million with a net loss margin of 4% under GAAP accounting compared to a net loss of RMB$79 million for the same period of last year. Turning to our balance sheet and cash flow. We ended the quarter with RMB1.3 billion in cash, restricted cash, term deposits and short term investments. Last quarter this amount was the same and the last year end was RMB1.1 billion.

CapEx for the third quarter was The CapEx for the third quarter was outflow RMB41 million, reflecting an increase of RMB14 million, compared to the same period of last year. And this can be attributed primarily to an increase of the new stores in China. And now let’s turn to the guidance. We expected the fourth quarter revenue to be in the range of RMB 622 million to RMB 718 million, an increase of 30% 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 expectations, 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 that you may have for us. Operator, please go ahead.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] We will now take our first question from the line of Yating Chen from CICC. Please go ahead, Yating.

Yating Chen: Good evening. I have three questions about the [Technical Difficulty] ground. The first question is, we have seen [Technical Difficulty]

Operator: Sorry, Yating, can you repeat your question one more time? Because there is a noise around.

Yating Chen: [Technical Difficulty]

Operator: I beg your pardon, Yating, your line is disturbing. So if you’re using a handset, can you please pick it up? Thank you.

Yating Chen: We have seen the domestic average scooter sales price per unit dropped a quarter-over-quarter. But considering the release of the new national standard, how do you expect the trend of domestic average selling price?

Yan Li: Yes. So if you look at — I think in general we expect from the — at least from the average sales, the ASP per unit with new standard coming out next year — well, basically later this year, but effective will be next year. I think the ASP will go up because some of the new standard require us to use new materials. Can you hear me?

Yating Chen: Okay. Thank you. And my second question is that how do you see the trend of growth margin?

Yan Li: Yeah, I think basically Q3 our growth margin is hitting sort of the lowest point this year because there were double hits. One is actually with the international kick scooter, especially to the US market, it’s actually a negative margin. But the fact we still have to — we have to continue operation because we’re already in the retailers, it’s difficult not to ship the product to the retailers. So that was a hit. And the second on the China side, I think I just mentioned partially because our product, the percentage of products sold with the [AIC] (ph) RMB6000 beyond that percentage shrink a bit because with this new battery safety standard. I think we’re looking at the gross margin should start recover in Q4 this year and it will continue to rise next year partially due to three things.

One, I think some of the cost reduction or cost saving initiatives, especially on the [bottom] (ph) cost, some of those are not completely reflected. We start some of the initiatives basically in early Q3, but for them to truly reflect it in the financials, they usually take at least three months or four months. So that’s on the cost [indiscernible]. And second was the product mix. We expect that the high-priced product percentage will come back up in Q4 and Q1, especially in 2025. And that will allow us to actually to recover the gross margin on the China side. On the international side, I think the gross margin for kick scooter for Q4 is still going to be relatively low because, the shipment from the Southeast Asia manufacturer wouldn’t happen until basically January next year.

So on Q4 we’re still suffering a little bit negative growth margin on the kick scooters side. But coming to Q1 in 2025, with the manufacturing start happening in Southeast Asia, we expect the gross margin to come back to sort of the normal range. With those, I think the international gross margin will recover in Q1 next year. The China gross margin, you will start to see the recovery — start seeing the recovery Q4 this year.

Yating Chen: I understand. Thank you. My last question is about kick scooters. Could you please share the sales volume of kick scooters overseas in the first three quarters? And do you have an outlook for its sales volume next year at present? Thank you.

Yan Li: I think for the kick scooters, so far we have something around 120,000 to 130,000, slightly above 120,000 units for the first three quarters. We expect to finish the year probably somewhere around 160,000 to 170,000 units. We could go more, but actually we decided to reduce the volume especially for the US market, just to have enough for the US market for the Black Friday and to satisfy the retailer’s needs, but not aggressively — not aggressively shipping products to the United States because of the tariff situation. Now, I think for next years, we look at, on the kick-scooter at least, if you look at this year, kick-scooter market growth from last year, we probably had a rapid volume growth of like 60%. We’re looking at next year, probably somewhere around 50% to 60% growth. So continue, we’ll maintain a growth rate for next year.

Yating Chen: Thank you. Thank you very much. That’s all my questions.

Operator: Thank you. [Operator Instructions] Thank you. Seeing no more questions in the queue, let me turn the call back to Mr. Li for closing remarks.

Yan Li: All right. Thank you, operator, and thank you all for participating on today’s call and for your support. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Thank you.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.