Good day, ladies and gentlemen. Thank you for standing by. Welcome to Niu Technologies Second 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.

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the second 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 included discussion 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 with me today are our CEO, Dr. Yan Li; and CFO, Ms. Fion Zhou. Now let me turn the call over to CEO, Yan.

Thank you, Kristal, and hello, everyone. Thank you for joining us today. The second quarter of 2024 continued the growth trend from Q1, with a total sales volume of 256,000 units, reflecting a year-over-year increase of 21%. The China market saw a 16% year-over-year increase to 207,000 units while the overseas market experienced a significant year-over-year growth of 45% to 48,600 units. Total revenue reached RMB940.5 million, marking a 13.5% year-over-year increase. This performance underscores the effectiveness of our strategic focus on expanding product, field channel and market coverage. We have made substantial progress in both China and overseas market reflected in the improved performance and increased recognition from our partners. In China, we focus on enhancing our product portfolio with new offerings around the core series. The new product introduced received positive feedback from users. In Q1, we launched product strategy to focus on target groups and in Q2 expand our product offerings to further meet the diversified needs from the core groups. In the overseas market, we have significantly expanded our sales network for micro mobility product, by partnering with the key retail channels. This expansion has greatly increased our market presence expected to further drive long-term growth. In the electric two-wheeler segment, we are optimizing our business operations, to focus on key markets. We have completed the initial phase of building a foundation of direct sales in key markets in Europe and United States for our key products. Although the strategy to invest more heavily in local operations takes time to implement in the beginning. We're confident that direct-to-market approach allows us, to adapt more to local market, thus can bring substantial growth in the long-term. Now let me dive into the China market. Our growth is driven by strategic focus on product portfolio expansion, sales channel growth and same-store sales improvement. This year, we emphasize on product divestment on targeting both the high-end Premium segment, to reinforce our brand premium image, and specific consumer segment like Gen Z and female users. We initiated effort to expand sales channel by increasing the number of stores increased under-penetrated cities. Additionally, we strengthened our omni-channel approach, integrating online offline strategy to boost same-store sales. In Q1, we introduced the NXT, our most premium electric bicycle price at RMB12,499. It quickly became the leading product in segments, equipped with advanced features like full-function ABS, TCS, blind spot detection, a car-grade dashboard, and a millimeter wave radar. Riding on this success, we launched the NPlay electric motorcycle and the UMax electric bicycle designed to appear to the young Gen Z riders. The NPlay inherits the classic and design and the UMax offers a larger form factor, inherits the classic U-series design. Additionally, we focus on female demographics by launching upgraded U1E in March coincided with the International Women's Day, combining the classic design with user-friendly and safety-focused features. Those new products are well received, collectively accounting for more than 50% of units sold in Q2, underscoring our strategic focus on targeting product development. In Q2, we continued the product development strategy, to roll out our key premium products, and expand the product portfolio for Gen Z and female users. We prepared the launch of UMax, our most premium electric motorcycles, which was recently released in the market in July. The UMax offers a customizable smoke, smart tire pressure monitoring system, high-quality dual disc brakes, and adjustable suspension for smooth ride. Equipped with the most up-to-date new smart functionality, the UMax is priced from RMB6,500 to RMB20,900. We believe the product will not only contribute to sales volume, but also reinforce new leading position in the premium electric scooter market. To continue to explore products targeting the Gen Z user group, we recently launched the [NT Play], an electric bicycle that inherited the classic design of the N-Series and combined the advanced motorcycle grid handling in electric bikes. Equipped with smart features such as keyless ignition, TCS traction control, cruise control, and push-pull assist during the ride, the NT is priced competitively at RMB4,499. For the female consumer segment in May, we released the O-Series to complete our product offerings covering the premium female sector. The O-Series is designed for young female riders with focused on comfort and looks. It emphasizes easy long-distance riding safety, simple operations, and design excellence. Key design features include comfortable seating, ergonomic handles, stable riding triangle, in addition to the new smart features to ensure delightful and a comfortable riding experience for urban commuters. The O series will be launched in the market on June 1 through our live stream. So our product rollout strategy positions new portfolio with premium product, while also focusing on diversified offering for unique user needs. Each product maintains a consistent design element, a new signature halo light, to help strengthen our brand recognition in the market. Now for our marketing campaigns this year, we have strategically focused on penetrating target user groups, with our new product launches. Specifically, we have integrated marketing efforts aimed at the Gen Z and female demographics. To engage the Gen Z group, we expand our partnership with JD Gaming, a popular online gaming team in China, through co-branded product launches, live stream sessions, and the gaming competition sponsorship. Additionally, we collaborated with Razer, include launching a new Razer X Razer, SQi limited edition and participating in a game competition across 15 universities, generating over 50 million views online. Other initiatives including a sponsored new [18 bucks 14 game] and then running in university in U.K. our ambassador programs. With the product focused on female user groups, we launched a targeted sales and marketing initiative. For the O-Series launch, we executed a comprehensive campaign on the Xiaohongshu, leveraging KOL content marketing and influencer event. This included widespread exposures, in-depth user experience, and media coverage. Across all platforms, we have our content around the product released this year, gaining 1.1 billion views. With those marketing efforts, new products observed a significant increase in interaction across all social media platforms. This quarter, the new brand received a total of 125 million interactions, representing a 22% increase in year-over-year. The growth interactions on social media platforms, indicates that both our product marketing campaigns are gaining significant traction, and effectively resonating with our audience. Now regarding the sales network expansion, we made efforts to enhance our sales networks through both channel expansions and same-store sales improvements. Driven by the new product introductions, we resumed the channel expansion this year, opening 400 plus new stores in the first half, resulting in close to 300 store ads, primarily in Tier 3 and Tier 4 cities. While those growths is modest compared with our total store counts, it signals the start of a renewed momentum in our sales network expansion. We anticipate a continuous positive trend in Q3 and Q4. In addition to new store openings, our key focus this year has been on improving same-store sales through our omni-channel approach, driving online traffic to offline stores. We significantly increased our effort on the traditional e-commerce platform with online orders accounting for 48% of total orders in the first half versus last year at 26%. In addition to traditional e-commerce platform, we actively expand our online presence on Douyin, Xiaomengshu, and Kuaishou, leveraging a strong content from our influencer network, those platforms became our fastest growing channels. For example, on Douyin, we ramped up the in-store live stream sessions across 15 major cities, conducting more than 500 sessions and nearly 2,000 hours of streaming this quarter. By end of Q2, over 22,000 orders were placed on Douyin, compared to a double-digit from same tier last year. Those efforts improved the same-store sales by close to 70% year-over-year in Q2, laying a strong foundation for future growth. Now let me turn to the overseas market. This quarter marks the period of growth and strategic execution. In the micro-mobility category, we achieved a 54% year-over-year growth in volume, and launched a key strategic partnership to expand our sales network. For the electric two-wheeler segment, we focused on building direct sales operations to revive our market presence in key markets. Now in micro-mobility, we leveraged our established product portfolio to grow market presence, by updating our well-received products with new versions that enhance channel penetration in key offline channels. In Q2, we introduced the KQi 300 series as a significant update to the popular KQi 3 series, offering versatile and powerful options for urban commuting, including the KQi [300P X]. Both features advanced due to hydraulic suspension system for smooth ride or rough surfaces. Both models include a smart connectivity to the new app, enhancing the overall ride experience with customizable settings and safety features. The KQi 300 sold over 10,000 units in the first few months during its launch, and then quickly attracted attention from influencers, media, and industry. In the first half of 2024, we also expanded our micro-mobility offline retail channels in key countries in the U.S., Germany, and Australia, achieving notable growth in the key markets. In the U.S. in July, we announced our strategic partnership entering all 800-plus Best Buy stores. This milestone allows us to reach a wide market across the United States. Building on this momentum, we're also collaborating with Walmart, Kohl's, Target, and Home Depot to diversify our product offerings across various channels. Similar expansion efforts were carried out in Europe and Australia. In Germany, our products are now over 400 MediaMarktSaturn stores. And with successful pilot programs, Australia saw a considerable progress with JB Hi-Fi stores increasing to 230, and hundreds of Blue Guys and Harvey Norman stores also displaying our products. Now moving forward, our focus for the rest of the year, is to leverage our well-rounded product portfolio and establish a sales network to drive growth in both sales volume, and profitability. In response to changing import tariffs to the United States, we have an initial effort to relocate part of our manufacturing outside China. Now shifting to the electric two-wheeler segment, the business decreased by 69% year-on-year in the first half of 2024, driven by both external and factors. Externally, key markets in Europe, like Germany, France, and Dutch regions, saw a significant drop in the total market volume after withdrawal of government subsidies for clean energy product, leading to over a 50% decrease in total market size. Internally, we transitioned to a direct sales model in core markets, while this shift will drive substantial long-term growth that requires time to be fully implemented and realized. By Q2, we have added 100-plus leaders on board in those key countries, and those build a good foundation for future growth, when the market starts to turn around. Now looking ahead, we are optimistic about the coming quarters for both China and overseas operations. In China, we will continue our strategy of optimizing product portfolio with premium products and Gen Z mass premium products to be announced in this market in July and August, improving the same-store sales with omni-channel approach and building our market effort around the specific consumer segments. Those adjustments have shown very positive results in Q1 and Q2, and we are confident that this will bring faster growth in Q3 and Q4. Overseas markets expect sustained growth in Micro-Mobility segments supported by the comprehensive product portfolio and solid channel presence in key markets like Germany, U.S., and Australia. We have observed a strong 32% year-on-year growth in product activation in July, and those growths are sustainable throughout the year. In the electric two-wheeler market, while we are updating our product offerings, our focus remains on expanding the dealer network throughout the rest of the year, to regain the dealer network footprint. Now with that, let me turn the call to Fion.

Thank you, Yan. 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 second 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 second quarter was 256,000 units, up 21%, compared to the same period of last year. 208,000 units were sold in China, while the remaining 48,000 units were sold overseas. Nearly 60% of our sales volume in China was contributed by the new products launched this year. And the total revenue for the second quarter amounted to RMB940 million, up RMB$112 million, or 13.5% compared to the same period of last year. China revenue was RMB8.2 million, accounting for 85% of the total revenue. And of this, the scooter revenue was RMB727 million, up 14% year-over-year. And this increase was mainly due to the higher sales volume and partially offset by a decrease in the revenue for scooters. China's scooter ASP was RMB3,503, down 2% year-over-year and 2% quarter-over-quarter. The year-over-year decline in ASP was mainly due to a change in product mix within the premium series. This quarter, the sales volume of our high-end lead asset motorcycles grew favorably in the premium market, accounting for one-third of the sales in our premium series. And these models are typically offered a competitive price, which explains the slightly decline in ASP and margins as well. The overseas revenue were RMB138 million, accounting for 15% of the total revenue. The scooter's revenue, including the motorcycles, the mopeds, kick scooters, and the bikes amounted to RMB130 million, compared to RMB150 million in the same period of last year. And this growth was mainly due to the increased sales of kick scooters, and partially offset by the decline in the sales of electronic motorcycles and mopeds. The micro-mobility revenue was around RMB119 million, up 32% year-over-year, and the overseas scooter ASP decreased from RMB3,430 to RMB2,682 year-over-year, as the increased proportion in the sales volume of kick scooters. However, compared to the first quarter 2024, the ASP increased 4% quarter-over-quarter. The revenue from accessories, spare parts, and services amounted to RMB83 million, a 10% increase, compared to the same period of last year due to the increase of sales, spare parts in China markets. And the gross margin for the second quarter was 17%, 6.1 ppt lower than the same period of last year, and 1.9 ppt lower than the previous quarter. This decline was mainly, due to the lower margins of China scooters and the increased proportion of the overseas kick scooters, with a lower margin. In China, as we mentioned previously, our high-end lead-acid motorcycles offered a lower margin, compared to our classic premium lithium-ion ones. And meanwhile, we contributed to allocate part of the margins to our domestic distribution partners to reward their loyalty to the company. And talking about operating expenses, the second quarter OpEx was RMB192 million, representing a 3.5% decrease, compared to the same period of last year, and the total OpEx ratio decreased from 24% to 20%. Selling and marketing expenses were RMB120 million up RMB11 million year-over-year, primarily due to the new product promotion in online shopping festivals like June, 18, May 20 and other advertisements in China. Selling and marketing expenses as a percentage of revenues were down from 13.2% to 12.8%. R&D expenses amounted to RMB32 million down RMB9 million year-over-year, and mainly due to a decrease of RMB9 million in share based compensation and staff costs. R&D expenses as a percentage of revenue were down from 5% to 3.4%. G&A expenses were RMB39 million down RMB9 million year-over-year, mainly due to the decrease in allowance for doubtful accounts. G&A expenses as percentage of revenue were down 5.8% to 4.2%. In the second quarter, we had net loss of RMB25 million with a net loss margin of 2.6% under the GAAP accounting, compared to a net loss RMB2 million for the same period of last year. The adjusted net loss was RMB20 million with an adjusted net loss margin of 2.1%. And turning to our balance sheet and cash flow, we ended a quarter with RMB1.3 billion in cash, restricted cash, term deposits, and short-term investments. Last quarter, this amount was RMB1.2 billion and last year-end was RMB1.1 billion. Our operating cash inflow amounted RMB174 million, and we expect the operating cash flow to remain healthy going forward. The CapEx for this quarter was the outflow RMB20 million and reflecting an increase of RMB5 million, compared to the same period of last year. This can be attributed primarily to an increase in the opening of new stores in China. And now let's turn to the guidance. We expected the third quarter revenue, to be in the range of RMB1,298 million to $1,483 million, an increase of 40% to 60% year-over-year. And 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 subjected to change due to the uncertainties relating to various factors. And with that, we're now open for the call for any questions that you may have for us. Operator, please go ahead.

Thank you. [Operator Instructions] One moment for the first question. Our first question comes from Kai Kang from CITIC. Please go ahead.

Okay. Thank you for the opportunity. And thank you, Mr. President Li, and thank you, President Fion. And I'm Kai Kang from the CITIC Security and also from CISA. And I have two questions. And the first question, as we have mentioned, that we will have a strong growth on the third quarter of 2024. So what GPM do we think we can achieve in the third quarter as our volume will be much better with scale effect? And - maybe for the long-term or the midterm, GPM, do we think we can achieve or can get? And that's the first question?

Sorry, let me repeat the question. So basically, you're asking about the third quarter strong growth and you're asking about the GPM or I think…?

Yes. Yes.

What do you mean by GPM? The go-to-market plan?

The gross profit margin.

Okay. So regarding to the gross - so you're asking about the reason why the gross margin dropped, right? This is Fion?

Yes. And the trend of the gross profit margin in the next few quarters.

Okay. All right. So regarding for the gross margin, actually, this quarter and last quarter, the reason is mainly in count on the domestic gross margin drop. As I just explained, starting from this year, we plan to launch the high-end, that as a motorcycle in our premium series. Normally in domestic market, we set a bar that the MSRP above 4,500 is our premium series. And below that is our mass premium series. And this year, our high-end lead-acid motorcycles, the cheapest model of our high-end lead-acid one, is around RMB4,800. So this means, and we also launched the other lead-acid, high-end motorcycles set the price around RMB6,000 to RMB8,000 MSRP, which is also the leader in the premium market in our premium series and also in - China market. But those lead-acid one, gross margin is around five to seven ppt gross margin less than our premium models. Normally our premium, [lead-amino one] got the gross margin around 22% to 28% gross margin. And the lead-acid one is around 5 to 7 ppt lower than our traditional premium lead-amino one. This main factor drives our gross margin in China market, and also in blended in total to around 3%. And the rest 3%, as I just explained last quarter, that - this year, since we launched the different new products fitting to different consumers, like Yan just mentioned, the Generation Z, the female one, the lead-acid products, which are new to the market. So, we offered several points of the - channel profit to our distributors to thank for their loyalty to our brand during last year, and the year before last when we're facing the difficulties in the domestic market. And also, to boost their confidence and help us to build in the more, healthier sales channel in the domestic market. And that's why we're able to open the new stores - in the first half of this year, more than 400 new stores in China market. And those are the two major points, which drag down our gross margin in China market. And in the meanwhile, our overseas markets, the kick scooters revenue contributes around 14% of our total revenues, compared to only 10% last year. And those increased proportion of the overseas kick scooters, also drag down our blended gross margin in total. And those are the main reason why the gross margin dropped, compared to last year. But for the following quarters, and when we see this overall this year's guidance, we won't expect our year-end, or the average annual gross margin go back to around 22% to 23%, as we previously did in 2021 or 2022. But we expected the gross margin this year would be lower, than the year before that and last year. But still, we'll remain at the higher level when we compare to our competitors in China scooters market. This is the - hope this will answer your question.

Thanks a lot. I see the trend on this margin. And also you also mentioned about the new shops, and new dealer networks that we are expanding in China. So, do we now have a higher target on the dealer network volume or shop volume in China at the end of this year? Or what's the target on the dealer network?

I think the goal is actually - I look to add - roughly another thousand stores this year, in addition to the first new ones we have. I think the first half, I mean we opened up 400 plus stores, but also I think we shut down about 100 something. So basically that resulted in net-adds of close to 300 stores. I think the rest of - we're looking at is basically what we need to do for Q3 and Q4.

Well. Thank you. It's very clear. And thank you.

Thank you for the questions. Our next question comes from the line of [James Joe] from UBS. Please go ahead.

Dear management, thanks for taking my questions. I have one question. And so the - we all know that the new national standard is about to roll out in a few months. So there is any comments on the potential policy, and maybe its impact on the high-end intuitive markets we are in?

Well, I think we're still very closely monitored and actually looking - study this new national standard. I think it has a - basically the standard has some key things around battery safety, which I think - actually I think we'll be positive news for us. And also the standard also has some requirement on sort of the design form factors. So our design team, is actually really looking into the standard and actually in the path, basically are developing products that meeting new standards. So in terms of the impact, I guess we had to just watch and see.

Okay. Thank you.

Thank you for the questions. [Operator Instructions] One moment for the next question. Our next question comes from the line of Yating Chen from CICC. Please go ahead. Ms. Chen, your line is open. You may unmute locally.

Oh, hello. Good evening. I'm Yating from CICC. And my first question is, what is your expected gross margin of kick scooters in the mid to long-term? Because we can see that the gross margin of kick scooters may be lower than scooters in domestic markets. So how can we improve the gross margin of kick scooters? And what is your expectation of it?

Well, this is Fion. I'll answer this question. Actually, our kick scooters' gross margin remain almost stable for the past three quarters, when our sales volume - ramped up to around 40,000 units per quarter. And in the meanwhile, the other reason why the gross margin remains stable is that we set up a stable partnership with our overseas sales partners like Yan just mentioned in U.S. the best by Walmart and also in the EU, the major electronic markets like the media markets, those big partners. But our kick scooters business is still at the very beginning stage. Even this year, we don't expect a huge increase, compared to last year all we made a market somebody in those countries. We still expect that once when our sales volume reach around 0.5 million sales volume in total in the overseas markets, we are able to see the scale of economy benefits from the production cost, and also the bargaining power in the shipping and logistic cost. But below those sales volumes, since we sell it across the U.S. and the EU, there is no strong benefit from the cost reduction way for us. And in the meantime, we didn't expect the kick scooter as a profit stream to our company. We still see the kick scooter as the strategic footprint for our micro mobility and our mobility business in the developed countries. To reinforce our brand and to help us build up the brand image, compared with our motorcycles. And that's why we didn't put a harsh pressure on the kick scooter's profitability. Hope this will answer your question.

Thank you. It's very clear. And my second question is about expense ratio, because we have seen a downward trend in operating expense ratio in quarter two. So will it continue to decline in the second half of the year, quarter-to-quarter?

Yes, for sure. Once when our revenue increased, and we get back to the right track in the growth of our business, those expenses as percentage of revenue will drop dramatically. Since last year, we already done the cost reduction and improved our operating efficiency at the second half of last year. Normally, the expenses as kind of the fixed cost, or fixed expenses are at the lowest level to our production and our business scale. And this year, the only thing is, will be changed - with the only expenses will be changed aligned with our revenue is the selling and marketing expenses. For the R&D and G&A, since the revenue increased, those expenses - as percentage of revenue will drop. And this year, we expect even the annual OpEx, as percentage of revenue will drop dramatically, compared to last year. We'll be back to the same level as the year before last, which is around annually around 16% to 20% is our normal level for the annual OpEx as percentage of revenue.

Okay. Thank you very much. That's all my questions. And we are looking forward to the earnings - in next quarters. Thank you very much.

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

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

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect your lines.