Marbridge Daily

Niu Technologies Posts Q1 2019 Profit of RMB 12 Mln

Niu Technologies, 5/13/19

Chinese smart urban mobility solutions firm Niu Technologies (Nasdaq: NIU) today announced its financial results for the first quarter 2019.

First Quarter 2019 Financial Highlights

• Revenues were RMB 355.2 mln, an increase of 105.5% year over year
• Gross margin was 21.3%, compared with 12.7% in the first quarter of 2018
• Net income was RMB 12.0 mln, compared with net loss of RMB 61.9 mln in the first quarter of 2018
• Adjusted net income (non-GAAP) was RMB 14.6 mln, compared with adjusted net loss of RMB 12.5 mln in the first quarter of 2018

First Quarter 2019 Operating Highlights

• The number of e-scooters sold reached 66,284, up 75.7% year over year
• Franchised stores in China reached 881, an increase of 121 or 16% since December 31, 2018
• Overseas sales network expanded to 23 distributors covering 28 countries
• NIU entered into a definitive Development Collaboration Agreement with Volkswagen Group in Germany regarding the joint development of Micro-mobility solutions

Dr. LI Yan, Chief Executive Officer of the Company, commented: "Our business momentum continued in the first quarter. Sales volume grew 76% and revenues grew 106%. Gross margin increased significantly to 21.3%, a result of cost reduction and favorable changes in product and revenue mix. We achieved net income of RMB 12 mln, a milestone for the Company that demonstrates our ability to grow profitably."

Dr. Li continued, "We are committed to providing high-quality products to our customers. In April, we launched two all-new e-scooter models, the U+ and US, together with our new lifestyle brand category, Niu Aero bicycles. Meanwhile, we are expanding our global presence. In March, we attended the Seoul Motor Show and saw the potential for robust demand in South Korea. In April, we made our first shipment of scooters to the U.S. We are excited by our business prospects and look forward to continued growth in the quarters ahead."

First Quarter 2019 Financial Results

Revenues were RMB 355.2 mln, an increase of 105.5% year over year, due to increased sales volume of 75.7% and increased revenues per e-scooter of 17.0%.

• E-scooter sales represented 87.5% of revenues, while accessories, spare parts sales and service revenues represented 12.5% of revenues.
• Higher e-scooter sales volume was mainly driven by the expanded sales network and higher demand on certain products ahead of the implementation of the new national standards. After the new national standards for electric bicycles became effective on April 15, 2019, certain existing models could no longer be sold in the category of electric bicycles. We accommodated some demand for these models during the first quarter.
• Increased revenues per e-scooter was mainly driven by higher sales price of NGT model, a larger proportion of high-end model sales in the N and M series, and higher sales volume in accessories and spare parts.
• China represented 81.2% of total e-scooter revenue, while overseas markets represented 18.8% of total e-scooter revenue, compared with 18.5% in the first quarter of 2018.

Cost of revenues were RMB 279.5 mln, an increase of 85.3% year over year, mainly due to higher e-scooter sales volume. The cost per e-scooter, defined as cost of revenues divided by the number of e-scooters sold in a specified period, was RMB 4,217, up 5.5% from RMB 3,998 in the first quarter 2018 as a result of product mix change.

Gross margin was 21.3%, up substantially from 12.7% in the same period of 2018, mainly due to lower raw material costs, higher retail prices, favorable changes in product mix and a greater proportion of revenue from accessories and spare parts.

Operating expenses were RMB 64.8 mln, an increase of 35.0% from the same period of 2018. Operating expenses as a percentage of revenues was 18.2%, compared with 27.8% in the first quarter of 2018.

• Selling and marketing expenses were RMB 29.8 mln (including RMB 0.7 mln of share-based compensation), an increase of 54.8% from RMB 19.3 mln in the first quarter of 2018. The increase was mainly due to the increases in staff cost of RMB 4.0 mln, depreciation and amortization expense of RMB 1.7 mln, and advertising and promotion expense of RMB 1.4 mln, which resulted from the growth in e-scooter sales volume, the opening of new franchised stores and an increased number of sales staffs. Selling and marketing expenses as a percentage of revenues was 8.4% compared with 11.1% in the first quarter of 2018.
• Research and development expenses were RMB 14.3 mln (including RMB 0.4 mln of share-based compensation), an increase of 41.7% from RMB 10.1 mln in the first quarter of 2018, mainly driven by the increases in staff cost of RMB 3.3 mln and design expense of RMB 3.6 mln, which was partially offset by the decrease of share-based compensation expenses of RMB 2.8 mln. The share-based compensation was lower due to the full vesting of certain founders' restricted ordinary shares in 2018. Research and development expenses as a percentage of revenues was 4.0%, compared with 5.9% in the first quarter of 2018.
• General and administrative expenses were RMB 20.7 mln (including RMB 1.5 mln of share-based compensation), an increase of 10.9% from RMB 18.6 mln in the first quarter of 2018, mainly due to increase in staff cost of RMB 5.4 mln, professional fees of RMB 3.9 mln, travelling and other expenses of RMB 2.4 mln, as a result of increased number of staffs and engagement of professional firms to meet the regulatory requirements as a public company. The higher expenses were partially offset by decreases of share-based compensation expense of RMB 9.6 mln due to the full vesting of certain founders' restricted ordinary shares. General and administrative expenses as a percentage of revenues was 5.8%, compared with 10.8% in the first quarter of 2018.

Operating expenses excluding share-based compensation was RMB 62.2 mln, increased by 87.5% year over year, and represented 17.5% of revenues, compared with 19.2% in the first quarter of 2018.

• Selling and marketing expenses excluding share-based compensation were RMB 29.1 mln, an increase of 55.1% year over year, and represented 8.2% of revenues, compared with 10.9% in the first quarter of 2018
• Research and development expenses excluding share-based compensation were RMB 13.9 mln, an increase of 103.2% year over year, and represented 3.9% of revenues, compared with 4.0% in the first quarter of 2018
• General and administrative expenses excluding share-based compensation were RMB 19.2 mln, an increase of 153.2% year over year, and represented 5.4% of revenues, compared with 4.4% in the first quarter of 2018

Change in fair value of a convertible loan was nil, compared to a loss of RMB 34.5 mln associated with change in fair value of a convertible loan in the same period of 2018.

Share-based compensation was RMB 2.6 mln, a decrease of RMB 12.3 mln compared to RMB 14.9 mln in the same period of last year mainly because certain founders' restricted ordinary shares have been fully vested during 2018.

Net income was RMB 12.0 mln, an improvement of RMB 73.9 mln compared with a net loss of RMB 61.9 mln in the first quarter of 2018.

Adjusted net income (non-GAAP) was RMB 14.6 mln, compared with an adjusted net loss of RMB 12.5 mln in the first quarter of 2018. The adjusted net income margin was 4.1%, compared with an adjusted net loss margin of 7.2% in the same period of 2018.

Basic and diluted net income per ADS were RMB 0.161 (USD 0.024) and RMB 0.157 (USD 0.023) respectively.

Balance Sheet

As of March 31, 2019, the Company had cash, term deposit and short-term investments of RMB 694.1 mln in aggregate. The Company had restricted cash of RMB 205.1 mln and short-term bank borrowings of RMB 208.5 mln.

Business Outlook

Because certain distributors advanced their purchase in the first quarter ahead of the implementation of the new national standard in April, NIU expects revenues of second quarter to be in the range of RMB 580 mln to RMB 660 mln, representing a year-over-year increase of 50.9% to 71.8%. The revenue for the first half of 2019 will be in the range of RMB 935 mln to RMB 1,015 mln, representing a year-over-year increase of 67.9% to 82.2%.

Editor's Note: To view Niu's full Q1 2019 earnings report, please click here.