Good day, ladies and gentlemen. Thank you for standing by and welcome to the Niu Technologies Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Now, I will turn the call over to Mr. Jason Yang, Investor Relations Manager of Niu Technologies. Mr. Yang, please go ahead sir.

Thank you, operator. Hello, everyone. Welcome to today’s conference call to discuss Niu Technologies results for the third quarter 2019. The call is being webcast from company's IR website. A investor presentation and replay of the call will be available soon at ir@niu.com. Please note today's discussion will contain forward-looking statements made under the Safe Harbor provision of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve certain 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 the non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li; and CFO, Mr. Hardy Zhang. Now, let me turn the call over to Yan.

Thanks, Jason. Thanks everyone for joining us on the call today. We’ve observed a gradual market recovery in Q3, being traditionally a peak season of the year. Our sales volume has increased by 24% and revenue by 33% in Q3. We’ve also enhanced our gross margin to 22.2%, and net profit margin at 10.1%, both were beyond our expectation. We continue to build our leadership in urban mobility via products and technology development, marketing events and user based activities and retail expansions. First, we launch our global product line with three products, G1, G3 and G5 in late September. The global product lines beautifully designed, but with a different design style to expand our style diversity. With product specs bias towards functionality, the goal of product lines position as a value for money product with retail price starting at RMB2599 [ph] perfect for entry level users and as a new China regulations. G1 was shipped in late September and the G3 and G5 were shipped in late October. Despite the market already headed to a low season in October, we’ve seen quite a bit demand on this new product line. Second, we’ve launched our first power assisted bicycle product NIU Aero EB-01 in Web Summit in Lisbon in November this year. The new NIU Aero EB-01 is the hybrid model of electric scooter and bicycle combining best features from both sides, such as high battery capacity and pedal assistance for longer range. Scooter level 2 suspension with sports pack wheels for better riding experience and intelligent lighting system for safety. The EB-01 is classified as a electric bicycle in Europe and United States. And this is our first product to target more than 4 million units electric bicycle market in the Europe and U.S. The EB-01 will be manufactured in Europe and we plan to shift this product first half 2020. Third, we have also launched our full GT Series, lead by our newly designed N-GT scooter together with upgraded N-GT and U-GT. We inherited the design style of our award-winning M series and combined with the GT powertrain technology, N-GT is a dual pattern electric motor with top speed up to 70 kilometer per hour and a range of 110 kilometers. We target to ship this product in first half 2020 as well. Lastly, we will also attend the 2020 CES in Las Vegas, with quite a few revolutionary products to be launched at the CES. Make sure you do visit our booth then. Besides our products, we’ve also enhanced our fleet management solution. It is the hardware and software SaaS solution with our connected vehicles, the fleet management software and adapt APIs. It's a one stop solution for all the shared operators and the fleet management businesses. We have supported 16 sharing operators across 14 countries year-to-date. Now as Niu is a leading lifestyle branding of mobility, we continue to enhance our brand awareness through both via [ph] marketing and targeted marketing. We understood that the most efficient approach to enhance the brand awareness is through via marketing or word of mouth of our existing customers, hence the continuous improvement of customer experience and engagement is essential. In July, we have rolled out our NIU point system on our app. Users can obtain new points via various activities and milestones and redeem points for new lifestyle accessories such as T-shirt, mugs, key chains. User, we have more than 86,000 users participating in the program with over 5 million points distributed. In September, we also rolled out our new wash program. Each user can obtain a free wash coupon via our app and redeem at any of the 1,000 stores in China. The program has been online for about six days and we have more than 240,000 coupons claimed. In September, we also launched a one-month new user referral promotion sales where existing users can receive new points by referring a new customer. More than 30,000 users have participated in this promotion. So all those programs enable us to engage our uses more frequently online and offline and all those programs rely on our direct interaction with our users on the new app, enabled by our smart scooters. With the largest connected user fleet globally with more than 960,000 units, we have a much competitive advantage over any competitors in this market. And we will continue to add more user into action features to increase user engagement. Second, being a lifestyle brand and with the fashionable design scooters, we are very unique positioned to go viral on any social media channels. Besides the surprising celebrity spot on we mentioned last quarter, we continue to create content either internally or through our users to go by around the main social media platforms, such as Weibo, Douyin and WeChat in China and Instagram, Facebook and YouTube globally. Our quarterly Douyin views across multiple accounts has increased from 3 million to 10 million. For example, our long distance riding event of user riding to Tibet also received more than 8 million views on Douyin. Lastly, our 30 plus KOLs across Europe has also created more than 3,000 pieces of content and received more than 1 million views. We continue to participate in major exhibitions globally to build our brand awareness. We have attended IFA in Germany in September; Autonomy in France in October; Tokyo AutoShow in Japan in October; and the Web Summit in Lisbon, Portugal; and ACMA in Milan, Italy in November. Collectively, we’ve received more than 100 media coverage. Niu is well positioned as the new variability for urban mobility in all those shows. Now supported by the new products, the enhanced customer engagement and brand awareness we continue to expand our footprint. By end of Q3, the number of franchise stores in China has reached to 1,020, covering 182 cities. Our flagship and premium stores overseas have also reached to 20 by Q3. We are also very happy that we had our first flagship store opened in London, U.K and Milan, Italy in November, a great milestone for the future growth in those two countries. We are also signing up dealer showrooms across the United States, expecting to have more than 12 dealer showrooms from East Coast to West Coast by end of this year. Now on the operations side, we have finished the build-up our Phase 1 of our new factory. The factory will be fully in operation in December, and this will add additional 700,000 units capacity, totaling our overall capacity to 1.08 million units a year. Lastly, let me give a brief update on the China market. As mentioned last time, the overall retail market has been uncharacteristically soft since the implementation of new regulation. We have observed a significant market contraction in May and June in the market where the regulation where strictly enforced. We’ve observed some bounce back in Q3, partially due to Q3 was traditionally high season and partially due to the spillover of Q2 demand. The retail market quickly declined in Q4 as Q4 was traditionally a low season and the true market demand has not really bounced back yet. The sluggishness were likely to extend to the Chinese New Year in 2020 and we do expect the market will start to bounce back post the Chinese New Year as consumers begin to get used to the new regulations and the many administrative processes such as getting license plate are smoothed out. Currently, we have four models, the U+ U1 US and the G1 complying with the new regulation for the electrical bicycle category in China where our N and M Series are classified as the electric motorcycles. We are accelerating our product development effort and expecting to launch several new product lines for the electric bicycle categories in first half 2020. We believe those new products will put us in a [technical difficulty] position when the market start to recover next year. Now I will turn the call over to Hardy to discuss our financial results. Hardy?

Thank you, Yan, and hello, everyone. Our press release contains all the figures and comparisons you need. We have also uploaded the Excel format figures to our IR website for easy reference. As I review our financial performance, keep in mind that we are referring to the third quarter figures unless I say otherwise. And that all monetary figures are RMB, unless otherwise noted. As Yan mentioned, the China e-scooter market recovered gradually during the third quarter, even though at low pace. Our Q3 sales volume reached 149,000 unit, increased by 23.5% year-over-year compared with 13.8% in the second quarter. The new national standards continues to affect the China retail sales market and the competition become more serious with competitors lowering sales price to maintain their market share. We are pleased to be able to deliver double-digit growth with improved margin. Our gross margin reached 22.2% as net margin 10.1%. Total revenues rose 33% to 654 million, in line with the guidance we provided earlier. The revenue growth was mainly driven by volume growth of 23.5% as a result of the recovery in China market and continued strong performance in the international market. I want to highlight that our revenue growth in this quarter has high-quality. First, our accounts receivables reduced from 120 million in the second quarter to 62 million in the third quarter. And the customer receipts in advance, or in other words the prepayments from our distributors was 44 million. Second, we maintained a high gross margin at 22.2%, which is 9.8% higher than Q3 last year. We managed to grow our top line with higher probability. All of this translated to our strong cash flow and increased the cash balance. By the end of Q3, we had cash from deposit and short-term investments of 990 million in aggregate compared with 667 million in the second quarter, an increase of 252 million to our cash balance. All of them demonstrated the high quality of our revenue growth. Revenue per scooter was 4,380, up 7.4% year-over-year. Net growth was driven by both higher average sales price per scooter and a strong sales of accessory, spare parts and services. The average scooter sales price below 1.5%, driven by three key factors. First and more important, the higher proportion of scooter sales from international markets where our sales price are much higher than China sales price. In the third quarter, our international scooter sales accounted for 7.6% of the total scooter revenue compared with the 5.1% in the same period of last year. Secondly, in April this year we increase China retail sales price by 1% to 5% for selective models. Third, the unfavorable change of product mix in China market and this partially offset to two positive factors mentioned above. The proportion of sales volume from the N and M Series was around 35% in the third quarter compared with 65% in the same period last year. N and M Series, in general, have higher sales price and therefore the lower proportion of sales from the two series actively affected our average sales price per scooter. Our sales of accessories, spare parts and services continues to be very strong in this quarter. On average, for each scooter sold, we also sold RMB524 of accessories, spare parts and services, increased significantly from RMB278 per scooter last year. The increase was mainly driven by strong accessory and spare parts sales in both China and international markets, and also by the R&D service revenue from this development collaboration agreement we signed with BW Group early this year. Gross margin was 22.2%, 9.8 percentage points better than this time last year and 1.5% lower sequentially mainly due to seasonality. Over the longer term, we expect our gross margin to be in the range of 20% to 25%. So we're happy to be moving close to our long-term goal. Margin expansion was helped by three key factors. First, the favorable revenue mix. Ancillary revenue from sales of accessories, spare parts and services was 12% of total revenue compared with 6.8% last year. International scooter sales was 7.6% of total scooter revenue compared with 5.1% last year. Both the ancillary revenue and the international scooter sales have higher gross margin and hence helped our margin expansion. However, I want to caution you that our sales have a seasonality as above mentioned revenue mix will fluctuate from quarter-to-quarter. Second, the margin expansion was helped by the price increase. As mentioned earlier, we increased retail sales price in April this year and adjusted the wholesale price to our distributors accordingly. Such price increase contributed to the improved gross margin. Third, our continued efforts to optimize cost help the margin expansion. The cost of revenue on a comparable basis further declined. We secured cost savings on raw materials and benefited from the economy of scale in our production. We were able to negotiate lower procurement price because of our larger scale and in-depth knowledge of the supply chain. We believe such cost reductions are sustainable and will continue to benefit our gross margin for the coming quarters. In summary, out of the total 9.8% margin expansion in the third quarter, we estimate roughly 2 percentage points came from revenue mix, another 2% came from price increase and the remaining 6 percentage points came from cost reduction. Operating expenses on a comparable basis increased in line with the growth of our business. Our total operating expense, excluding share based compensation was 86 million, increased by 46% year-over-year. Operating expense as a percentage of revenue was 13.1%, 1.2 percentage points higher than the same period last year. The increase was mainly due to our marketing and the promotion activities in the third quarter and also higher depreciation and amortization expense as a result of expanded retail sales network. As you may recall that in our second quarter earnings release, we advised you that we intentionally postponed some of our sales and marketing expenditures from the second quarter to the third quarter due to the implementation of the new national standards. Therefore, the 1.2 percentage higher sales and the marketing this quarter was mainly driven by the timing of the spending. When looking at the first three quarter numbers, our sales and marketing expenses including share-based compensation was 8.5% of total revenue, reduced by 1.7% compared with the 10.2% in the third quarter last year. We continue to see the leverage of operating expense. In the third quarter, we have 12.6 million government grant, out of which 5 million is a one-off reward and remaining his letter to our new factory expansion in Changzhou. Our GAAP net income was 66.4 million with net income margin of 10.1%. We are pleased to operate profitably, even as we invest heavily in growth, which demonstrates the strength of our business model. Turning to our balance sheet. We ended the quarter with 990 million cash, term deposit and short-term investments of 252 million higher than last quarter. Operating cash flow was positive 276 million. Capital expenditure was 39 million, mainly for building the new factory in Changzhou and for expanding our retail sales network. Now, let’s turn to guidance. We expect fourth quarter revenue to be in the range of 450 million to 550 million. This represents year-over-year growth of 5% to 20%. We recognize the challenging market environment and we’re working hard to accelerate the growth next year with increased product portfolio in both China and international markets. Please keep in mind that this forecast reflects our current expectations and could change. With that, let’s now open the call for any questions that you may have for us. Operator, please go ahead.

Thank you, sir. [Operator Instructions] We have the first question from the line of Alex Potter [ph]. Please ask your question.

Hi, guys. Thanks for taking my question. How very nice quarter. I wanted to ask first of all about the competitive environment given the new regulations. You mentioned a lot of the lower end competitors are cutting price in order to try to maintain market share. Yet you are increasing price or you did in April and it seems like your market share is increasing. So it sounds like the pressure on the low-end competitors must be rising pretty substantially. If you could comment on your ability to continue consolidating the market, that would be helpful. Thanks.

Thanks, Alex. I think that's a good question. So what we have observed basically when the new regulation was in place, in the China market, they -- they due to -- actually due to the sluggish of the retail market, we do see traditional players really slashing prices, try to maintain the volume. We’ve seen fierce competition on product, which used to sold at RMB2,000-ish, now being sold at almost RMB1,500 or RMB1,200. Most of those products are still asset based, because there is -- at this point there is still one version of that asset based electric scooter that meet the new regulation requirement. It's -- basically it's a 60 -- I’m sorry, it's a 48 volt and 12 M powered, lead acid battery based scooters, very much look like a bicycle type and most of the pricing competition is at -- on that particular product line where people competing really RMB1,500, less than RMB1,500. So if you look at that particular product and then market segment of that product is addressing to is actually very different with our product lines. Most [indiscernible] with exception of Gova [ph], before -- with Niu, even while our cheapest one in U.S. is a RMB3,500 and [indiscernible] RMB3,000. So we’re actually addressing sort of, at least the mid to high-end of the entire market, where that to our extent really there hasn't really been any sort of price competition there. And we're sort of enjoying a -- more or less a unique leadership there.

Okay. Very good. Hopefully, you mentioned obviously the gross margin holding up very nicely. You mentioned that the raw material pricing obviously you did in some procurement benefits as your scale rises, is this specifically related to battery procurement, or is it across the board what raw materials in particular are you benefited from?

Yes. This is Hardy. I think across the board we do see the cost decline. And normally see the body parts of the scooter has declined anywhere between 3% to 5% depending on different components. And for the entire battery cell or battery pack, we see gross of 10% decline. This is compared to the cost of base last year. And in the third quarter we see slightly decline compared with the second quarter and so far, based on the current trend on this market or the supply in the market, we do believe there's potential for us to further negotiate for this cost so that we can benefit further in the future. Hope this answer to your question.

Okay. That's great. And last question. Obviously, you are generating cash, What are your plan for deploying this cash that you are raising? I mean, is that primarily into more sales and marketing, new product development, breaking into overseas markets? What are your priorities? Because obviously having a positive cash position and positive operating cash flow is a nice position to be in. Just wondering how you're going to spend it? Thank you.

I think that's a good question. So we're looking at actually any sort of cash we are generating eventually it has to translate or transform to -- translate to profit. So we're looking at the profit are coming really through three parts. One is actually continue to really accelerate the growth from this revenue from the sales volume perspective. That means some part of cash will be invested in building out the retail expansions. If you look at this year, we actually have significantly accelerated effort in the first half this year to build up stores. We also start to build up retail stores globally, and that -- each of the store require a minimum anywhere between -- in China it will be somewhere around 100 -- sorry, US$10,000 versus globally it's about that €20,000-ish of CapEx investment per store. But having the retail footprint is actually essential for us to build up the brand and also support the sales growth. So I think that's one part of cash got invested in. I think second, yes, we do have put cash into building of the capacity to support growth. This year, you see we’re actually building up the new factory this year to add another 700,000 units new capacity and really to support the future growth. And third part is actually I think they’re -- always say, there will be -- so the first two I mainly talk about the CapEx part. I think the last part is actually, said cash or you can think a portion of profit will be reinvested into the R&D such that we can continue to come up with new product lines as well as the marketing and branding expenses. I will turn to Hardy for additional add.

No, I think it is [indiscernible].

Okay. Very good. Thanks a lot guys. Nice quarter.

Thank you for your questions.

We have the next question from the line of Bin Wang. Please ask your question.

Hi. I am Bin Wang. Actually I have a few questions. Number one, about the competition because basically the [indiscernible] the number one producer has been announced to build 1.5 million plant in Changzhou actually mainly focused on the high-end. So naturally providing a new target will be around 6 million. So implying ASP is around RMB4,000, so if you can -- did you actually had a -- it has a high competitor 1.5 million. So I just want to seek your view about this high-end production base for Yadea [ph], the competitor is number one question. And number two is about dealer expansion, actually because in this quarter only 51, 1-5 dealers established compared to a few hundred in the past several quarters. So I just want to know the reason why the expansion expense going down, because will be the key driver for future growth. And you just mentioned so many cash which you’re able to support dealer expansion, but why is that just 15? And what’s the guidance for year-end. That’s the second question about the dealer expansion. And third one is about new products as mentioned, in ECS we’ve signed new products. At the same time you also mentioned that a revised version for M Series also to be debuted. I just want to check whether this is the same product. I mean, Niu M will be in ECS or two different products. These are pretty much my questions. Thank you.

I think, Bin, great questions. So let me try to address one-by-one and hopefully I don’t miss any. I think first of all on the -- I think the market there, so there's nothing we can prevent other players to enter the market and try to sell or try to attack or address our market there. But if we look at the IPO and other competitors in this market, I think they -- obviously we have seen those competitors actually announce or actually commercialized high-end product. And I don't think actually by simply building up a 1.5 million high-end capacity will allow them to actually obtain a market share. I think it's a combination of branding having the right product and also having the right retail to actually to address that high-end market. And so far we are still very confident. I don't have exact data, but if you look at any some -- around city by city basis, we will look at some of the cities, basically you look the price range anywhere between RMB4,000 and up in some of the key cities we’re almost holding more than 50% of market share. So that’s really a demonstration that de facto we are the dominant force in sort of the mid to high-end market. So -- and with the competition coming, obviously we are going to continue to also to ramp up our gains as well with new products rolling out. So let me address on the new product part and I'll talk really to expansion. So if you look at and observe how we build up this business and build up this team in 2015, '16, '17, that three years each year we only announced one new product line. 2018 we did about three. And so far this year, we already announced actually coming myself right, but almost 5 to 6 or 7, right? So it's -- we had a U+, US, that’s two and we have the global G1, G3, G5. So those are commercialized and also the bicycle. Now we also have the product that ready to be commercialized next year, which is the new Aero EB as well as N-GT and the U-GT , right. So we really upped our games in terms of getting new product development. Now for the CES, the two revolution about the -- couple of revolutionary products to be announced at CES, very different with the new M Series. We will have a new M Series announced in the first half next year, but the product that we are going to show in the CES are actually different. So -- and actually next year we're not just talking about three product. I think if you look at -- we have -- look at, how, I guess, the number of products we developed in 2019, right, I think we're going to try to do our -- basically, I don’t have the exact number in count, but we can try to realize many products as possible as well in 2020, with -- basically with the ramp up in R&D team. And lastly, on the retail expansion. Yes, we have slowed down retail expansion in Q3. If you look at our historically weaker 2018 and 2017, Q3 has always been a very low season to open retail stores, because the Q3 has been traditionally a very hot season for selling scooters. So it's actually very difficult to turn over the stores. So typically, the hot season to open stores are Q1 and Q4. So we actually try to accelerate our store opening in Q4 as well as Q1 2020.

Thank you. I actually have a last question about the outlook -- guidance outlook. For next year what’s the volume number which you’re expecting? If you possibly can break down about overseas and China, or especially in the China count breakdown about [indiscernible] brand and look [indiscernible].

This is …

You're asking for the outlook for next year or …

Yes.

… or for the third quarter?

Next year, for sure. For next year, 2020.

[Indiscernible] I think we will probably provide an update probably into the release in next quarter.

Okay. Thank you.

We have the next question from the line of Ken Ho. Please ask your question.

Yes. Good evening, management. Couple of detailed question. One is, for the bike you sold [indiscernible] 49,000. And so could you please give us the breakdown for the NM U Series. And also how much did you sell for Gova [ph] this series. That is number one. Number two, the ASP in 3Q was down to 3,856 and compared with 2Q at 4,543. So I wonder what are the reason behind that? That’s number two. Number three, Q4, what's the plan for the store open in Q4? Thank you. That's all my questions.

Sure. It's Hardy. Let me first answer your first two questions. For the mix between our product line, as I mentioned, is N and M, the top end 2 Series. They comes to around 35 of the total sales volume in the third quarter. And Gova [ph] [indiscernible] and of the total volume. The remaining 60% came from our U Series. So this is the mix of the product in the second -- in the third quarter. In terms of ASP, normally we encourage you to look at the year-over-year comparison, instead of quarter-to-quarter comparison, then because of the seasonality. If you look at ASP from last year, you will see a similar trend. Normally, the third quarter has the lowest average ASP throughout the year. And the reason behind is because the third quarter is the peak season for China sales, but the slowest season for overseas sales. Normally, the sales price of overseas products is more than double of the China sales price. So because of this unique of product, you will see various change in the ASP. So this is first reason part of the similarity. Second it links to your first question because of the change of the product mix. In last year, our top models N and M, they contributed for around 65% of the total sales volume in the next quarter. This year that percentage has reduced to around 35%. That also have an impact on our average sales price. So that’s the two key contributors for the lower ASP compared with the second quarter. For the last question on the retail expansion for the fourth quarter, I would like Yan to comment on that.

So, obviously the Q4 hasn't really ended yet. So we still have a number of stores actually in construction. And so I don’t -- I wouldn't be able to give exact number by end of Q4, what number of stores we’re going to have open. And I think there will be a combination of either some of the stores that we will get to open in December or some store we will get opened actually January next year. So basically we are always looking at the Q4 this year and the Q1 next year sort of the season we need to open stores. So obviously some stores are shifted. In Q4, some store might be got shifted in Q1.

Okay. Thank you.

[Operator Instructions] At this time there are no further questions, I would like to hand the call back to you speakers for any closing remarks.

Thank you, operator and thank you all for participating in 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, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.