Yan Li; CEO; Niu Technologies
Fion Zhou; CFO; Niu Technologies
Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Niu Technologies third quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. And later we will conduct a question-and -answer session and instructions will follow at that time. As a reminder, we are recording for today call. If you have any objections, you may disconnect at this time.
Now I would like to turn the call over to Ms. Crystal Lee, 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 third quarter 2023. The earnings press release, corporate presentation, and financial spreadsheet had been posted on our Investor Relations website. This call is being webcast from company's IR site as well, and the 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 US Private Securities Litigation Reform Act of 1995. Forward-looking statements involves risks, uncertainties, assumptions, and other factors. The company's actual results may be materially different from those expressed today. Further information regarding those 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.
All of the remaining earnings press release and this call include 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 Zhao.
Now let me turn the call over to CEO, Yan.
Thank you, everyone, for joining us on the call today. In Q3 2023, our total sales volume was 265,923 units with a year-over-year decrease of 71%. Specifically, sales volume in the China market had a year-over-year drop of 12% to 230,445 units. And the sales volume in the overseas market experienced a year-over-year of 38% decrease to 35,468 units. Total revenue in Q3 2023 was RMB 927 million, a decrease of 19% year-over-year. In the China market during Q3, we encountered setbacks due to a sluggish consumption in top tier cities resulted in a slowdown in sales of our product. To address this challenge in Q3, we expand our product portfolio with a diverse design and functionality to address a wider customer needs. And it was the diversified product portfolio we plan to expand our retail coverage for greater market range in Q4 2023 and beyond.
In the overseas electric two-wheeler market, we have experienced a year-over-year decline of 62%, influenced by a combination of challenging factors. The decline in the electric two-wheeler marketing, our key market, Germany and Netherlands has impact our business. Additionally, we have also faced a temporary disruption in the key European markets due to operational difficulties faced by our distribution partner, which has further affected our sales performance in this period. In response to those challenges we have encountered, we had implement two strategic adjustments. Expanding the product portfolio to expand our addressable market and operational adjustment to a result of temporary disruption. We introduced key electric motorcycles and off-road motorcycle product to the European and North American market to expand our addressable market beyond the electric moped.
For the Southeast Asia market, we have officially introduced the battery swapping solutions with compatible swap batteries and mopeds. Operationally, we're also working with our distribution partner and retail partners closely to re-rent the retail operations in the key markets. The overseas micro mobility market has seen a year-over-year decrease of 37% in sales. This downturn is primarily attribute to the selling order delays in Q3. Despite the decline in the selling volume, we recorded highest number of kick-scooter activations in this quarter. The number of activation in Q3 show a significant year-over-year increase of 80%. This increase in product activation can be largely attributed to our comprehensive product portfolio and the expansion of sales network, both online, offline, and the key market channels. In addition, during Q3, we launched the innovative KQi Air kick-scooter for presales, which has been well-received in the market. We're continuously working on expanding our sales channel penetrations, aiming to reach a broader customer base and reinforce our market presence. We expect to get back to the growth track in the coming quarters in time for the holiday season.
So let me delve into the China market in detail. In this quarter, we continued to build our product portfolio with a diverse design style and functionality to address a wider customer needs. We introduced Q2 2023, the MQiL, emerged as successful addition on our product lineup. It is a product that inherits the design from our all-time classic M-series, along with the significant upgrade design performance. It has not only contributed positively to our sales volume, but also placed significant role in enhancing our brand image. In Q3, we also successfully introduced the Falcon series, that's a new style with Love Child at F400T and F200 complementing the previously introduced F100 in Q2. Collectively, the entire Falcon series accounted for more than 50% our total sales in this quarter in Q3.
The Falcon series represent our attempt to create another flagship design, which has proven popularity. We plan to run more product within the newly introduced series in the coming quarters. The F400T was introduced in August this year as a remarkable addition to our Falcon series product lineup. This electric bicycle was in inspiration from fighter jets and seamlessly incorporated newest essential smart functionalities with the maximum range of 90 kilometers. The F400 design has captured significant attention since its launch. Notably, it took center stage at ChinaJoy, the country's, largest gaming expo, garnered millions of views across all platforms. Another product added this series in Q3 was F200. It is released as a high-power commuter scooters with sports card inspired frame. It has the max range up to 70 kilometers and equipped them with new smart system.
The F200 was also launched with a collaboration with a globally renowned IP Kumamon. Our sales performance during the recent Double 11 shopping festival underscore the popularity of loose those recently launched product. In the first 24 hours of promotion period alone, the preorder sales revenue surpassed the sum of the entire period last year showcasing the robust demand for our offerings. Several of our key products has secure prominent positions on the bestselling list of major platforms, including Tmall and JD.com. Specifically, the latest iteration of our acclaimed SQi electric bicycles has gained significant traction during the Double 11 shopping festival, emerging as the number one, top-selling straddle electric bicycles in RMB 9,000 price range above on Tmall and JD.com.
Together, our UQi plus F200 and also SQi, has claimed HubSpot's ranking within the top three best-selling product in the electric bicycle categories on Tmall. This highlights a strong customer preference across our diverse product range. We -- remained highly engaged in events and cross-brand collaborations to enhance our brand exposures. In September, we established a presence on the G-Fusion Game Fest 2023, where we brought our F400 to the gaming enthusiasts. We recently forged our official partnership with JD Gaming well, the China's top eSports teams and the finalist in the League of Legends Worlds 2023. Those engagement underscore our commitment to establish a strong brand presence and the forging connections with diverse audience, even in the face of temporary market challenges. We're confident that those initiatives will contribute significantly to our brand exposures and long-term growth prospects.
Now turning into international electric moped market. We faced a challenge in this quarter with a year-over-year decline in the electric moped sales account for 62%. Several factors converge accretive this downturn, including the decline of the electric moped market in the key European countries like Germany and Netherlands, and the temporary operation disruption due to issue encountered by our distribution partner in Europe. While we acknowledge those challenges, we're actively engaged in addressing that breaking the traction in this market. First, we expand our product portfolio beyond electric mopeds widening our addressable markets. We have unveiled several key product ready for Q4 2023 and 2024, that come up in November.
One key product that we revealed was XQi3 electric dirt bike. It is designed with a futuristic look with a handful of twists. Aluminum frame colors, integrated with new signature halo light. We have revealed the XQi3 product during the EICMA in Milan, Italy in November, and also brought it to the Electrify Expo launch event in Austin, United States. The XQi3 marked an expansion into the third bike categories and the new XQi3 has attract tremendous amount of attention within the only week since its debut. The XQi have won the 2023 gold winner of the New York Product Design Awards. We'll anticipate making the XQi3 model available to the North American and European market in Q1 2024, and we're confident that will bring up the sales and therefore uplift the [newsprint] recognition.
Another product we launched for Europe is RQi, newest high-performance urban [clock] electric motorcycles. It is designed to deliver exhilarating city rider with features like dual removal batteries and ABS with a top speed of 110 kilometer per hour and 0-to-50-kilometer power acceleration time, just under the 2.9 seconds. The RQi targeted riders with exciting acceleration experience. The motorcycle is equipped with the integral traction control system, [building] from rear cameras, and the impact detection system making a sophisticated, and it's also a safe riding option. It also comes with newest core smart features. The RQi expected to be available from Q1 2024 in Europe.
During EICMA, we also brought award-winning XQi to the international market. It features a futuristic design that earns the 2023 Red Dot Best of Best Design Award. The best features the die-cast even body frame with [zero thousand] joint, ensure a seamless integration of form and function. They offer easy handling, making it ideal for city commute. Now, in addition to those electric motorcycle product, we officially launched a new swap battery swapping solutions compatible newly launched F600 e-moped. The swapping technology enables rider to swap batteries quickly reducing downtime and increase the convenience. During EICMA, we have presented NIUswap Cabinets that technical solution provider, collaborating with partners in Europe, Southeast Asia, and South America to deploy the battery swapping cabinets aiming to enter the respective local markets.
The recent EICMA events presented us a opportunity not only to unveil our latest product, but also engage in meaningful conversations with our key distribution and retail partners. We're actively working with our distribution partner to quickly resolve temporary operational disruptions and get back on the growth trajectory.
Now talking about the overseas micro mobility market. The micro mobility markets reported a 37% year-over-year decrease in sales in Q3. As mentioned earlier, the primary contributing factors due to a selling or a delay in Q3. While the sale -- or activation volume has increased by 80% year-over-year, driven by a diverse product portfolio and expanding sales network. During this quarter, we took a significant step in expanding our product portfolio by unveiling, one of our standout kick-scooter product, the KQi Air and Air X series at a IFA event in Berlin, Germany.
One of the standout features of the KQi Air is the construction with the main body, predominantly crafted from lightweight carbon fiber, resulting in an incredible low weight of 11.7 kilos. The weight reduction does not compromise performance. The KQi Air delivering impressive capabilities, including top speed of 32-kilometer per hour and the maximum range about 50 kilometers. It also incorporate two action brake caliper to ensure its shorter braking distance for added safety. Moreover, the KQi Air embrace the smart connectivity enabling functions like NFC and Bluetooth and marking, customizable charging, capacity settings, speed adjustment, and also the regenerative braking strength.
Notably the KQi Air was awarded the Best of IFA 2023 by GadgetMatch a highly regarded tech channel. The KQi Air has an MSRP of $1,400 for the standard version and the $1,799 for the KQi Air X full carbon fiber version. We launched the presale campaign on September, and then we expect to deliver the KQi Air to our customer in December this year in time for the holiday seasons. The launch of KQi Air marks our consistent effort in product innovation and that we have more kick-scooter product in through our pipelines the next quarter to further complete our product offerings. Meanwhile, we are also leveraging the traction that we gathered from our kick-scooter product to expand our sales network coverage. Currently, we have our new products sold in over 1,500 offline stores in the United States and Europe, in major retailers like Best Buy MediaMarkt.
Together with the product portfolio enhancement of sales, now expansion has laid a solid foundation for ramping up the sales in the next few months throughout the holiday seasons. Now, as we look forward, we remain a cautious outlook for Q4 this year as some of the operational adjustment in both the China and also the overseas electric moped markets will take time to be fully implement throughout the midterm growth. We're nonetheless confident to regain growth in 2024 after a temporary adjustment period this year. In the China market, the fourth quarter traditionally experience a low market demand. We're using this time to continue to enhance our product portfolio and build momentum for store expansions.
In term our product portfolio for the Falcon series is a testimony of successful product for full expansion, both are for clients spending our retail stores quarter. With those, we believe we are well positioned to get the effect on a high growth track in 2024. Now for the international electric two-wheeler market, the additional new product, the offroad of the motorcycle market product and also the swapping solutions that will position us for growth in the key European, United States, and the Southeast Asian market next year. We're also actively implementing operational adjustments for better deliver those product to our key markets through the key channels. But we expect those adjustment will take time. And hence, we remain cautious outlook for the Q4 2023.
Last but not least, for our international micro mobility markets. We're pleased to report a sustained and robust growth trajectory. This growth is fueled by two key pillars, the completion of our product portfolio and inspection of sales network. Our product lineup has not only boost the sales volume, but also significant elevate us the presence of new brands within this market segment. The recent addition of the KQi Air represents just one of the many exciting products yet to come. The expanding product portfolio has driven the development of our sales channels with remarkable growth observing our expanding retail networks. We're confident in our ability for sustaining high growth in Q4 and beyond.
Now I'll turn the call over our CFO, Fion.
Thank you, Yan, and hello, everyone. Please note that our press release contains all the figures and comparisons you need, and we have also uploaded Excel format figures to our IR website for your easy reference.
As I review our financial results, I'm referring the third quarter figures, unless I say otherwise, and all monetary figures are in RMB if not specified. As Yan just mentioned, during the third quarter, we sold a total of 266,000 units and 230,000 was sold in China while the rest was sold overseas. And the total revenue for the third quarter amounted to RMB927 million, a decrease of RMB226 million compared to the same period of last year. And China market revenue was RMB785 million, accounting for 85% of the total revenue. Of this, the China quarter revenues were RMB711 million, a year-over-year decrease of 17%, and this decrease was mainly due to the lower sales volume of our premium service and partially offset by the higher sales volume and revenue from our mass premium series. And the China scooter ASP was RMB308.5 million, a year-over-year decrease of 5.5%. And this decline in ASP was mainly due to the product mix change, which I just mentioned.
And the overseas market revenue was RMB142 million accounted for 15% of the total revenue. And the overseas scooter revenue, including the e-motorcycle, small packs, kick-scooters, and e-bikes amounted to RMB122 million compared to RMB195 million in the same period of last year. And this decrease was mainly due to the decline in the sales of e-motorcycles and mopeds. The micro mobility revenue were around RMB109 million, up 20% quarter-over-quarter. And the overseas quarter ASP increased from RMB338.6 million to RMB343 million year-over-year. And mainly due to our premium model case re-mass sales volume increased from 3,200 units to 7,100 units year-over-year.
And the revenue from accessories, spare parts, and services amounted to RMB94 million, a 5% decrease compared to the same period of last year, and this decline was mainly driven by the lower sales of battery packs overseas, as we mentioned in the previous quarters. And the gross margin decreased by 0.7 PPG year-over-year to 21.4%, and of this, 0.6 PPG of this decline was driven by the lower sales volume from the overseas e-motorcycle and e-mopeds, and the remaining 0.1 PPG due to the change to the product mix domestically.
And our third quarter OpEx amounted to RMB289 million, an increase of RMB25 million compared to the same period of last year, and this increase was mainly due to a RMB88 million increase in provisions for credit losses in this quarter. Excluding the impact of the credit losses in each period, the OpEx decreased 25% year-over-year as percentage of revenue also decreased by 1.4 PPG from 22.3% last year to 21% this year. For the details, I will explain in a moment. Selling and marketing expenses were RMB123 million as percentage of revenue was 13.2%, it is a year-over-year decrease of RMB48 million and 1.6 PPG lower than last year, primarily due to a reduction in advertising and promotion activities.
R&D expenses amounted to RMB39 million, representing a RMB11 million decrease year-over-year, primarily due to a decrease in share-based compensation and staff costs and also the design and system development professional fees. G&A expenses were RMB127 million, representing a RMB83 million increase year-over-year, and this is due to the increase in provision for credit losses of RMB88 million. Excluding this credit losses, the G&A expenses decreased by 13% compared to the same period of last year. Since our international operation has expanded, we have seen a corresponding increase in the extent of our account receivables, which forms the basis of computing the bad debt provisions. As we mentioned in the previous quarters, the European consumer sentiment remains cautious, leading our distributors to ask for extended payment terms due to the weak retail sales.
In the meantime, one of our key motorcycle and mopeds distributors in the European market announced on September 6 this year that it's going to into a court-supervised constructuring process due to the intense economic pressures. Consequently, this quarter we took a provision of RMB54 million, representing a full amount of receivable owned by this distributor. And despite the prudent raising provisions for credit losses on the overdue payments, we retain a positive outlook on the future receivable collections, given our other partners robust financial standing and their continuous ongoing payments.
To conclude, excluding the prudent provision for private office, our cost controls have driven an overall decrease in expenses and made us more efficient, linear, and flexible to negative today -- to navigate today's volatile and weak macro economy and emerge stronger when condition eventually improve. In the third quarter, our net loss was nearly RMB80 million under the GAAP measurements compared to a net profit of RMB3 million for the same period of last year. And turning to our balance sheet and cash flow. We ended our quarter with nearly RMB1.4 billion in cash, restricted cash term deposits, and short-term investments. The operating cash flow was RMB229 million compared to RMB450 million in the same period of last year and RMB217 million last quarter. And our CapEx for the third quarter amounted to RMB26 million and has remained stable for the past of four -- five quarters.
And now let's turn to guidance. We expect the fourth quarter revenue to be in the range of RMB490 million to RMB612 million, representing a year-over-year decrease from 20% to flat. And please be aware that this outlook is based on information available as of the date and reflects the company's current and preliminary expectations, which is subject to change due to the uncertainty 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.
Question and Answer Session
Thank you. We will now begin the question-and-answer session. (Operator Instructions) There are no questions at this time. I would like to hand the call back to management for closing remarks.
Well, 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 progress. Thank you.
This does conclude today's conference call, and thank you for your participation, and you may now disconnect your lines.