Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies Second Quarter 2023 Earnings Conference Call. At this time, all participants are in 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. [Crystal Lee] (ph), Investor Relations Manager of Niu Technologies. Ms. Lee, please go ahead.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the second quarter 2023. 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 provision 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 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 discussions of certain non-GAAP financial measures. The press release contains a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. On the call today with me are our CEO, Dr. Yan Li; and CFO, Ms. Fion Zhou. Now, let me turn over the call to CEO Yan.

Well, thank you, everyone, for joining us on the call today. So, in Q2 2023, our total sales volume was 211,996 units, returning to the same level from one year ago, with a year-over-year slight increase of 1.5%. Specifically, sales volume in the China market, a small year-over-year drop of 1.0% to 178,567 units. And the sales volume in the overseas market experienced a year-over-year 17.1% growth to 33,429 units. Total revenue in Q3 2023 was RMB828.8 million, matching the level from Q2 2022 with a slight increase of 0.1%. For Niu, Q2 2023 was a quarter to get back on the track of long-term growth through a focus on premium and mass premium products, as well as sustained effort to enhance our brand. In the China market, the Niu products that launched in Q2 have demonstrated substantial growth potential, spreading our sales growth and generating extensive discussions on social media. Capitalizing on the momentum garnered from those new product launches, we also rolled out engaging user events. Those events incorporate our new products and collaborative effort with other brand partners, thereby positioning Niu not merely as a leader in urban mobility, but also as a pioneer in cultivating a desirable lifestyle. In the overseas market, we experienced a mixed results with sales of electric two-wheelers dropping by 68% year-over-year, while the micro-mobility sales increased by 48.5%. The decrease in the sales in electric two-wheeler market is mainly due to the macroeconomic shrink in Europe coupled with delay in our high-performance product rollout. Niu's improved 125cc high-performance product is now scheduled to roll out in Q3 2023 to fill in the current gap in product offerings and to stimulate growth. For the Southeast Asia market, we're rolling out the battery swapping solutions with local operating partners in second half of this year. The expectation on new products being released also contributed to the year-to-year decrease in sales volume in Q2. Regarding to the micro-mobility market, we continue to see stable growth driven by the established product portfolio and the foundation we laid out with the current sales network. In this quarter, our award winning micro-mobility products were sold through online channels during our anniversary sales, and in offline channels covering major retail partners in the U.S. and Europe. Now, delving into the China's market performance. In Q2 2023, we rolled out new products in China market as planned and new products are proven to be a strong driving factor behind the growth. During the last quarter's earning call, I introduced the new premium flagship product, MQiL and the mid-end product G400 and G400T. The new products are well received by the market with great popularities. The MQiL has garnered significant popularity across all major social media platform with its unique design that inherits the design from our all-time classic M series along with the significant upgrades in performance and smart connectivity. The MQiL is designed with extra long range, up to 170 kilometers, and the industry-leading smart technologies that support functionality like supercharging, smart dashboard with navigation display, smart lighting system that changes light setups with sunlight sensors, it's fully integrated with the Apple's ecosystem that allows simple control through Siri. In just a few months since its launch, video featuring the MQiL has amassed more than 50 million views and 1 million comments and likes on Douyin. Additionally, it has been a trending topic on electric scooter categories on Xiaohongshu. On the mass premium product, in June, we launched G400 and G400T, and those are the two products that we took an innovative approach to use the same platform to build two bikes. The light motorcycle G400 and electric bicycle G400T received positive feedback with almost 40 million views on Douyin short video, highlighting the scooter's simplistic design and practical functionalities like large storage space. With the competitive pricing from RMB4,599, G400 and G400T has been met with considerable popularities in the market. Now the enthusiastic response to our new products, namely the MQiL, G400, G400T, is a testament to our commitment to the innovative and -- innovations and quality. Those products, launched in May, accounted for over 60% of total sales volume in June, indicating their immediate popularities among customers. Our sales performance during the 618 mid-year Shopping Festival was also outstanding with a growth rate of 161% in sales revenue compared to the same period last year. Several of our key products featured on top-selling list of major e-commerce platform like JD.com and Taobao, reflecting their wide acceptance of popularities among users. Specifically, our recent launch, MQiL emerged as the most popular product on JD.com. The strong performance across multiple products demonstrates the effectiveness of our product strategy to focus on premium and mass premium market and our ability to cater to the market's needs. Now in quarter three this year, we launched F400T, which is another demonstration to our commitment to bringing quality product to the market. The design of F400T, inspired by the fighter jets along with the classic F Series Falcon [eye light] (ph), gives a sleek and stylish look, incorporates all the smart functionalities that the Niu is known for along with the unique hard boost mode that allow riders to enjoy a speed boost for 10 seconds. This mode not only makes the city commuting easier, but allowing riders navigate through traffic effectively, but also adds an element of fun to the ride. The F400T went online through live streaming on August 8 with the pricing of RMB4,999. The new product live streaming has generated nearly 1 million views and received nearly 6,000 preorders from live stream. Now the recent addition of F400T together with MQiL, G400 and G400T have already shown promising signs of popularity. As those products were only launched at end of Q2, their full impact of performance yet to be seen. We are optimistic that growth driven by those new launches and the product we plan to release in the future will further boost our performance in the upcoming quarters and strengthen our market position. Leveraging the momentum from launch of a new product, we initiated several marketing campaigns on user events this quarter, The marketing campaign were primarily conducted through online platforms like Douyin and Xiaohongshu, and together, the campaign has gained over 1.4 billion views across platforms. Moreover, leveraging the Niu's innovative and [vaster] (ph) network, we launched more than 30 user events in 70 cities in first half 2023. So with those high-user engaged event, we have successfully brought diversity and creativity into Niu user commitment. Our commitment to establish Niu as leading lifestyle brand for urban mobility goes beyond our unique and differentiated product offerings. This quarter, we took a significant stride in strengthening our brand positioning by engaging strategic collaborations and participating in high profile events. A key highlight was our collaboration with the global renowned IP [Kumamon] (ph). We hosted an online live stream event inviting beloved Kumamon to the new store in Shanghai. And this event generated significant buzz and we plan to further capitalize this momentum by launching two new cross Kumamon scooters soon. In addition to co-branding activities, we also participated in exhibitions and events organized by leading lifestyle brands like North Face and Sneaker Con. Our new scooters were showcased during the North Face Mountain Festival in Yangzhou and Sneaker Con in Guangzhou. Those opportunities allowed us to present the Niu brand to a larger and diverse audience, both on on-site and online. Through those initiatives, we have successfully positioned Niu as a leader in urban mobility and the desirable lifestyle partner. We will continue to leverage strategic collaborations and high-profile event to enhance our brand visibility, attract new customers, and solidify our position as a go-to brand for urban mobility solutions. Now on the overseas market, we delivered a mixed result with sales of electric two-wheelers dropping by 68% and the sales of micro-mobility categories increased by 48%. For the electric two-wheeler market, we released the [indiscernible] of improved 125cc high-performance product in the second half of 2023 to fill in the current vacancy in our product offerings in order to regain growth. We have experienced some challenges in electric two-wheeler market this quarter, primarily driven by the economic slowdown in our key European markets. The economic downturn, combined with gaps in our product portfolio in terms of high-performance electric scooters, has added to the challenges. Another factor impacted our performance is increase in lithium battery price in 2022, which has continued to affect our sales this quarter in Europe. However, our international distribution partners are eagerly awaiting for the schedule of Q3 rollout of the performance upgrade high-performance scooters. They're also anticipating a pricing adjustment as lithium battery price stabilizes and return to the normal levels. In the Southeast Asian market, however, we have observed a trend of rising demand in electric two-wheelers. We have delivered electric moped battery swapping solutions with swapable batteries and battery charging cabinets. We're currently working closely with local partners in bringing this solution, allowing the operators to combine selling the moped chassis and renting the batteries, which practice will substantially lower the upfront cost of purchasing electric moped. We plan to officially deliver the battery swapping solutions along with the first model that is compatible for battery swapping to our local Southeast Asia partners in the second half. Now our micro-mobility product has shown stable growth this year with a year-over-year increase of 48%. This growth has been driven by both our diversified product portfolio and our expanded sales network. Our current product offering cater to a wide range of market demand. We have high-end high-performance product at $800 to $900 price range, as well as entry-level options in the $300 to $400 range. This diversity allowed us to cater to a broader spectrum of customers' needs and preferences. Moving forward, we have a plan to further diversify our product portfolio, and we'll be rolling out more products in the second half 2023. Now we're pleased to share our kick scooter product that received significant attention recognition. The KQi2 and KQi Youth+ scooters were honored with the Prestige iF Design Awards 2023, a testament to our commitment to innovative design and functionality. Further solidifying our outstanding in industry, the KQi3 Pro was selected as the Gold Winner 2023 of the New York Product Design Awards. And the KQi3 MAX scooter has been the recipient of the Best Electric Scooter from [Tom Sky] (ph) Award. Most recently, the Rider's Guide Awards have named our KQi3 MAX scooter as the best high-performance computer and our KQi2 as the best electric scooter under $600. Now the recognition of those products from those market enable us to continue to expand our growth sales network. As of August 2023, Niu products are available in over 400 retail stores in the U.S. and over 700 in Europe through retail partners. This sales network has laid a solid foundation for ramping up our product sales in the coming quarters. Now, other than expanding the sales channel coverage, in this quarter, we leveraged the presence of our online channel to successfully bring up sales. In June, we initiated anniversary sales campaign time for Niu's eight anniversary. We launched a series of events from giveaway campaigns to special sales promotions to engage new and existing users. The anniversary sales campaign generated total around 1.5 million views. Now, in terms of marketing performance, we have continued to collaborate with influencers to strengthen our brand presence in the market. In the first half of 2023, we worked with over 50 influencers who boost large fan base. Through a co-created content featuring Niu product, we have been able to generate over 1.2 million views. Alongside our influencer collaborations, we have also forged partnerships with local business to further expand our brand presence. Now, other than the partnership, Niu has been actively participating in event exhibitions worldwide, making the global appearances, showcase our products and brand values. We participated in North America's largest electric vehicle festival, the Electrify Expo, in Los Angeles and San Francisco, and there was a plan to go to Expo in New York and Miami later this year. We're currently preparing to make product appearances of -- a few of our key products at some of the largest consumer electronic trade shows such as EFA and ACMA, and we're looking forward to share the details in a few months. Now, as a promoter of sustainable living for all, we are dedicated to providing our customers with more environmental-friendly smart urban vehicles to make a positive impact on the environment. We're spreading the ideas of sustainable living through not just our product, but also our daily operations. In this quarter, we continued with the renewed global sustainability initiative designed to renew our planet as part of our Earth Day campaign. In this year's Earth Day Clean-Up events, we will attract participants across Bali, Nepal, Guatemala, Hawaii, Dominican Republic to go on street riding Niu scooters and promote environmental-friendly lifestyle. Now looking ahead to the second half of 2023, we remain optimistic to -- for both our China and international market. The China market has already shown signs of recovery this quarter, largely driven by the launch of new products. We anticipate this growth in sales will continue into Q3 as we begin to deliver those new products to the market. Our focus on the premium market has also enhanced our brand recognition, thanks to our branding and marketing activities. However, we are also currently facing some temporary disruptions in some of our key cities due to some regulatory changes. For instance, regulatory changes in electric bicycles in Guangzhou and other cities who propose limited use of electric bicycle on the main roads during rush hours could potentially affect our sales in the short-term uncertainties. Now, regarding to the overseas market, we anticipate regaining growth in the electric two-wheeler categories as we roll out our high-performance electric moped in Europe and introduce our battery swapping solution in Southeast Asia in the second half. However, due to uncertainties in the macroeconomic factors, we expect the growth may take time to fully manifest in our sales performance. Conversely, for the micro-mobility categories, we're confident that we can maintain healthy, stable growth through our continuous channel expansion and brand recognition building, supported by our established product portfolio. We also plan to release major product portfolio upgrades later this year, which we believe will drive both sales volume and margin improvement over the long term. Now, I'll turn the call over to our CFO, Fion.

Thank you, Yan, and hello, everyone. First, before I start to talk about our financial performance, we are pleased to announce that our 2022 ESG report is also being available on our IR website today. Our smart electronic two-wheeled vehicles provide a clean alternative for urban mobility that make cities more liveable and sustainable when compared with traditional ICE vehicles and electronic vehicles, which continue to congest the road. Niu has a unique opportunity to play a pivotal role in driving this trend through the design and manufacturing of high-performance electronic motorcycles, mopeds, bicycles and kick scooter. Our diversified product portfolio directly addresses this global shift in consumer preference. As of today, we have sold more than 3.8 million scooters across the globe, enabling users to cover a distance of nearly 20 billion kilometers. This collective effort has resulted in a sustainable reduction of carbon emissions by nearly 4.8 million tons. And for more ESG-related information, please feel free to find full 2022 ESG report on our IR website. And now back to financial. 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, referring to the second quarter figures, unless I say otherwise, and all monetary figures are in RMB, if not specified. During the second quarter, our company achieved a total sales volume of 212,000 units. Of this figure, 179,000 units were sold in China market while the remaining 33,000 units was sold overseas. Over 60% of the sales volume in China contributed by our new launched products. Our MQi model stands out contributing about one-third of the total sales volume, G400 and G400T offered multiple purpose scooter choices to our consumers. In terms of the overseas sales, the kick scooter reached 30,000 sales units, which accounted for over 90% of the total sales in international sales, representing an increase of 45% year-over-year and 179% quarter-over-quarter. The total revenue for the second quarter amounted to RMB829 million, RMB1 million slightly increased compared to the same period of last year. In China market, revenue was RMB698 million, accounted for 85% of the total revenue. Amounting this, the China scooter revenue was RMB639 million, increased 7.1% year-over-year, and this increase was mainly driven by the strategic optimization of premium product mix. The China scooter ASP was RMB3,577, increased 8% year-over-year. This growth of ASP is due to the launch of our new models, whose retail price range was RMB4,599 to RMB8,299 depending on different version. The overseas market revenue were RMB130 million, accounted for 15.7% of the total revenue. The overseas scooter revenue, including e-motorcycles, e-moped, kick scooters and e-bikes, amounted to RMB115 million compared to RMB146 million in the same period of last year. And this decrease was mainly due to the decline in sales of e-motorcycles and e-moped. While the micro-mobility revenue still showed significant growth momentum, reaching RMB90 million, up 127% quarter-over-quarter and 33% year-over-year. The overseas scooter ASP decreased from RMB5,122 to RMB3,430 year-over-year, mainly due to a higher proportion of ick scooter sales, whose ASP is less than one-third of the e-motorcycle and e-moped. The revenue from accessories, spare parts and services amounted to RMB75 million, marked a 11% decrease compared to the same period of last year. And this decline was mainly driven by the overseas battery pack sales reduction, as we mentioned in previous quarters. The second quarter gross margin increased by 2.8 ppt year-over-year or 1.4 ppt quarter-over-quarter, reaching 23.1%. Among this, 1.4 ppt mainly due to a higher ASP in Niu domestic products and 1.3 ppt mainly due to the [decreased cost] (ph) both in electronic two-wheelers and kick scooters. One thing to be noted is that our gross margin has reached a record high, and we plan to pass this part of gain to channel and sales network to support our partnership. Our second quarter OpEx amounted to RMB199 million, representing a 14.9% increase compared to the same period of last year. And selling and marketing expenses were RMB110 million, representing a RMB17 million increase year-over-year, primarily due to our overseas micro-mobility business expansion, which resulted in increases in promotions, logistic and rental expenses. Research and development expenses amounted to RMB41 million, representing a RMB3.2 million decrease year-over-year, primarily due to increase in staff cost of RMB2.1 million and a decrease in system development, professional fees of RMB1.7 million. G&A expenses were RMB48 million, representing a RMB12 million increase year-over-year, while a RMB2.4 million decrease quarter-over-quarter. We have made a provision for a credit loss of RMB33 million. However, if we exclude this provision, G&A expenses decreased by 48% compared to last quarter and decreased by 50% compared to the same period of last year. With the expansion of our international operations, the extent of account receivable, which forms the basis for computing bad debt provision, has correspondingly increased. As we mentioned in the previous quarters, we've noticed a sense of caution in Europe consumer sentiment and leading our distributors to ask for extended payment terms due to a weak retail sales. Despite prudently raising provisions for credit loss on overdue payments, we retain our positive outlook on future receivable collections, given our partners robust financial spending and their ongoing payments continuously. In the second quarter, our net loss was RMB2 million on the GAAP measurement compared to a net profit of RMB14 million for the same period of last year. And turning to our balance sheet and cash flow. We ended the quarter with RMB1.1 billion in cash, restricted cash, term deposits and short-term investments. Operating cash flow was positive RMB217 million compared to negative RMB33 million in the same period of last year and negative RMB66 million last quarter. The bridge improvement was primarily due to favorable credit terms with our suppliers and [delicacy] (ph) management. Our CapEx for the second quarter amounted to RMB15 million, remaining stable for the past five quarters. And now let's turn to guidance. We expect the third quarter revenue to be in the range of RMB1.15 billion to RMB1.33 billion, representing a year-over-year flat to a 15% increase. Please be aware that this outlook is based on information available as of today and reflects the company's current and preliminary expectations, which was subject to change due to 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.

Thank you. [Operator Instructions] Our first question comes from the line of Yating Chen from CICC. Please go ahead.

Hello. Congratulations for your earnings result in the second quarter '23. I have three questions. The first one is, could you please give us a breakdown of the revenue guidance of third quarter '23? This is my first question.

So, Yating, you are asking about the breakdown of the third quarter revenue guidance, right?

Yes.

All right. So actually, we don't give the details of the guidance. Actually, we expect the sales volume in the third quarter that we may expect to around more than 10% increase blended altogether. And also, we expect the ASP -- the blended ASP remain a little bit increased compared to quarter two, considering the Chinese sales volume increase and the proportion of the domestic sales volume versus the overseas sales volume will be around 85% versus 15%. So that means we would expect the blended sales volume of the scooters, this is the scooter revenue. And we also expect around 8% to 10% non-scooter revenue for our services and spare parts and accessories. And altogether, those are all kinds of revenue we will combine at around RMB1.15 billion to RMB1.33 billion. This is our expectation regarding the quarter three revenue.

Okay. Thank you. Actually, we expect the new products released in the third quarter and the second quarter to whose sales volume keeps going in the third quarter. And my second question is about the reason for the gross profit margin in the second quarter because we have seen it keeps -- it had a year-on-year and quarter-on-quarter increase. And can it maintain in the high level in the third quarter?

Well, actually, if we don't make any support to our sales channel and also the retail stores, normally, our domestic gross margin will stay at even higher level of the gross margin compared to quarter two, since in quarter two, we -- our new products only launched half of the quarter instead of the entire quarter. While in quarter three, actually, our new products will release their comparative advantages in the retail market. So that, we will get an even higher gross margin. This is before we made any sales policies to support our sales channel distributors and also the retail stores. Well, we already made a decision to compensate or to transfer those gains to our sales channels to boost their retail traffic and also the retail market share. And that's why when we ended the quarter, we expect that the domestic gross margin, we will give up around 1 ppt gross margin to the retail channel. So, in quarter three, we only expect the blended gross margin for our group will be around 20% to 23%, which may -- the most possible way that our gross -- blended gross margin will fall into the range of 22.5% or something around this gross margin range. We won't expect the quarter three's gross margin reach 23%, those high.

Okay. Very clear. Thank you very much. And my last question is about what is your opinion on development of electric motorcycles overseas, especially in Europe and Southeast Asia, because we have seen that the consumers' demand was weak in the past several seasons. So, I wonder what is your opinion about that, especially on the consumers' demand, not to be.

Great. No, I think that's a good question. So, I look at this market from -- so I think we had to separate the European market and the Southeast market. So, we actually observed data in the European market, the electric scooter, what we call the electric mopeds and electric motorcycles, the actual sales has been declining in the first half this year versus last year. I think this is exactly what you mentioned. It's the weak economy and the electric has been -- compared with petrol, electric is a bit more expensive. And it's a big item purchase. We're looking at about [indiscernible] electric moped motorcycle, they are about -- basically about EUR5,000, anywhere between EUR4,000 to EUR5,000. So, it has been weak. So, we're actually being cautious about how that market -- the outlook of that market going forward. The upside for our case is, if you look at the first half of this year, we actually we didn't do well in Europe. But while one is because the economy is weak, and second is, we didn't really -- our 125cc motorcycle upgrade didn't got to market in the first half of this year. But that particular product line will be in the market second half of this year. So, even though the market is weak, but we're missing like -- really we're missing one big chunk of the product. And with that product coming in, that will actually help us in terms of our European market, even in a weak market. Now, Southeast Asia is very different. So last year, we put a tremendous growth in Southeast Asia. I think we doubled in Southeast Asia. And when we look at this year, the Southeast Asia market, we look at Thailand, we look at Indonesia, those market has been growing. So -- and we actually have products, more a pseudo product, for Southeast Asia. The particular product will be rolled out second half of this year, supporting the battery swapping. So I think from -- if I had to take sort of the forecast looking at this year, we're probably looking at a better growth in the Southeast Asia, because the market is growing. We're rolling out new products in Southeast Asia, more suitable for that market, where the European market, the economy is weak, but we do have a 125cc upgraded product to offset the weak economy.

Thank you very much. And one more question. I just want to know where the number of channels domestic will grow in third quarter and the fourth quarter?

I think if we look at the store's growth, I think basically in the second half of this year, we look at more stores. I think whether it's happening in Q3 or later half of Q3 versus Q4, I would imagine it's actually more on the Q4. I think the current planning is more on Q4 than in Q3, because Q3 typically is like hot season for China. So, typically, when we grow the channels, essentially a lot of times, it's not opening new stores, it's converting stores from other brands. And it's actually very difficult in the hot seasons. So, Q4 is usually a season where you see stores start to switch and new store build out. So, I think that's sort of in line with our plan as well for Q4.

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

Thank you. [Operator Instructions] There are no further questions at this time. So, I will hand the call back for closing remarks.

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.

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