Good day, thank you for standing by. Welcome to Niu Technologies's fourth quarter 2021 earnings release conference call. At this time, all participants are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. Now I'd like to turn the conference over to Ms. Irina Chen from Niu Technologies IR team. Thank you. Please go ahead.
Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the fourth quarter 2021. The earnings press release, corporate presentation, and the financial spreadsheets have been posted on Niu's Investor Relations website. This call is being webcast from the company's IR website 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 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 with me today are our CEO, Dr. Yan Li, and the CFO, Ms. Fion Zhou. Now, let me turn the call over to Yan.
Thanks, Irina, and thanks everyone for joining us on the call today. In the fourth quarter, we have seen a strong growth of both the China and overseas markets. Our total sales volume reached more than 238,000 vehicles, a 58.3% year-over-year increase. The sales volume in the China market alone was up 49.2% year-over-year, reaching 205,000 vehicles. The sales volume in the international market reached nearly 33,000 vehicles, including over 18,000 units of mopeds, a 40% year-over-year increase, and nearly 15,000 kick scooters, a significant breakthrough in the micro-mobility market. Now, with the strong performance in the fourth quarter, we have wrapped up our 2021 as a milestone sales year.
We're proud to announce that our global sales volume surpassed 1 million vehicles. This represents an increase of 72.5% compared to last year. The sales volume in the China market was more than 988,000 units, nearly breaking 1 million units, a 72.7% year-over-year increase, while the volume in the international market was just shy of 50,000 units, including nearly 35,000 units of mopeds, a 16% year-over-year increase, an additional 15,000 kick scooters. This is a milestone for us as a product company and a global brand. From product company standpoint, despite all the global supply chain issues and the COVID-19 situation, we grew our volume by 72% while also expanding into new product categories.
From a brand perspective, we're now the leading urban mobility company in more than 50 countries around the world with 4,000-plus retail and online shops. The strong growth in 2021 is a testament to the successful implementation of our 2.0 growth strategy, which is leveraging our design technology to create electric urban mobility product solutions suitable for all regions and market segments, and in return, making Niu a global urban mobility brand. Now, for last year, we focused in 5 key markets and advanced our product portfolio in those. The China electric bicycle market and the electric motorcycle market, the international electric motorcycle market, the kick scooter market, and also the e-bike market for micro-mobility.
In 2021, we launched a total of 5 new products to the China electric bicycle market, the M2S, the upgraded U, and the S2, S0, and C0 of the Gova series, priced between RMB 3,099-RMB 7,999. Those 5 new products have been a hit in each of their respective target markets, accounting for 27% of our 2021 sales. Those 5 products enjoy a handful upgrade to the smart connectivity and the battery management system that comply with the new China national standard for electric bicycles.
This allowed our customers to enjoy a more connected and smarter experience while benefiting from an enhanced battery performance, providing extended ride range from 40 km to 80 km on a single charge, meeting multiple consumer segments mobility needs. This has been a key for us to tap into even larger total addressable market in China. Now for the electric motorcycle market in China, we have expanded upon the upgraded GOVA G3 and GOVA S4. The upgraded G3 now has a range of over 100 km on a single charge. It has been well received by the market and accounted for close to 6% of our 2021 sales in just a few months a year. For Europe and Americas market, motorcycle market, we introduced three new products. Our first EVO product, the NQi GT EVO, the most powerful electric 125cc, shipped in 2021.
The RQi electric motorcycle and our first 150 cc hybrid moped YQi both shipped in 2022. Those three products represented our expansion into performance mopeds and motorcycles. All of those products reached top speed over 100 km/h, and each has acceleration 0-60 km/h time, even outstripping its gasoline-powered rivals. Those product offerings effectively triple our addressable motorcycle market overseas, expanding from 50 cc equivalent to up to 125 cc equivalent. In December alone, right after the NQi GT EVO was ready to ship, we have shipped-
Ladies and gentlemen, your speaker is currently experiencing some technical difficulties with the line. Please stand by while we address the situation. Please continue, speaker.
Sorry, our signal just broke up. Basically, let me just quickly talk about Niu's three new electric motorcycle offerings. These new electric motorcycle offerings were enabled by our continuing investment in R&D, such as the upgraded powertrain system to increase the top speed up to 160 km/h, the upgraded battery system to increase drive range by 30%+, and the smart 2.0 features to add additional technology flair in the traditional motorcycle market. Now, as we mentioned during the last earnings call, besides the scooter and motorcycle product, we have entered the micro-mobility market with two new categories, the kick scooter and e-bikes.
In 2021, we introduced the two new kick scooters, the KQi3 and KQi2, a robust lineup of kick scooter product with price starting from $549-$899. Those products are pursued by their respective target markets, and we ship more than 15,000 units between September to December 2021. The release of those models is only the beginning, and we have a handful of new models to launch in 2022 to meet the budget demands of a wide range of customers who are looking for affordable solutions for their urban commute. Now, for the e-bike market, we launched the BQi that has established urban minimalist design and is capable of extended ride range of 100 km, thanks to its two removable batteries.
The BQi will start from $1,500, making it most powerful and affordable commuter e-bike to hit the market in 2022. We expect to launch more e-bike products to enhance our offerings across the European and the Americas markets before the end of 2022. Supported by the new product and the new category launched in the previous three quarters in 2021, we accelerated our sales network expansion in the fourth quarter in 2021. In Q4, we launched 422 new branded flagship stores across China, bringing our total store count to 3,108 stores by the end of 2021. For the entire year, we added nearly 1,500 more stores, doubling our total store counts in China.
In addition, we have expanded into 40 new cities, reaching a total coverage of nearly 240 cities in 2021. Those, together with a wide range of product offerings, drove our growth in 2021 and also serve as strong base for 2022. For international market, in 2021, we have increased our market coverage to 50 countries with total 174 flagship and premium stores across the globe to form a dense sales network and bring better products and services to our customers.
This is in addition to our more than 1,000 motorcycle and e-mobility dealers across five continents. Now, in addition to our offline store growth, and thanks to the launch of micro-mobility product, we successfully opened a new range of retail channels that previously were not ideal for our electric moped scooters, including not only the big box retail electronic chains like Best Buy and MediaMarkt, but also online platform like Amazon. Those new channels will accelerate our sales while simultaneously expanding our brand recognition. Now, in order to support and enhance the new 2.0 strategy for product store expansion, we have also expanded our branding and marketing activities to penetrate even deeper into the new markets. For China markets, we successfully wrapped the entire 2021 with the brand promotion station, the Feel a Bit Proud or a Bit New in the Year of the Ox.
Starting back in February 2021, we kicked off the Chinese New Year by launching the Year of Niu nationwide campaign, which generated more than 400 million views across multiple social platforms. In October, we reached an important milestone, becoming the first electric two-wheeler brand to have our customers record a 10 billion kilometer riding distance. To celebrate such an event, we launched our 10 billion kilometer Feel Proud campaign, which went on to have an incredible reach, accumulating more than 1.4 billion views online and offline around the world for the entire Q4. More importantly, it helped convey our brand value to our fans, riders, and future customers. The message is, position Niu not just as an electric scooter company, but more importantly, as a lifestyle brand. In the international market, we also continued deepening our efforts.
In Q4, specifically, we upped our social media effort with close to 1 million interactions across Instagram, Facebook, and YouTube. We also attended EICMA in Milan, Italy in November 2021, and the CES in Las Vegas in the United States in January 2022. We launched five new products, received 10 million-plus impressions with more than 100 articles published. This branding and marketing effort has significantly increased our brand awareness. Our recent survey in China has shown that we are ranked top three in brand awareness, significantly higher than our market share position, which is currently at number 10. As we wrapped up 2021, our most successful year so far, we feel very optimistic for 2022.
For our addressable market in China, the continued implementation of China national standard for electric bicycle is helping to push the two-wheeler owners to convert to lithium battery-powered electric bicycles even faster than the original projections. As a leader in the China smart lithium two-wheeler industry, we are well ahead of our competitors and lead this technology transformation. We continue to push our R&D, and we'll roll out five new models and a handful of existing product upgrades, with majority of those products debuted from April to September in 2022 this year. In addition, we also observed a fast growth in the light electric motorcycle market, fueled by our enhanced driving range battery and powertrain solutions.
We'll roll out 5 new models in this sector, with the first model, GOVA C3, priced from CNY 3,899- CNY 5,499, rolled out in March, and the rest are from April to September. Those new models will drive the main growth in the hot season in Q2 and Q3. Now, for the overseas market, the advancement in battery technology and powertrain technology last year has enabled the transformation from petrol to electric motorcycle for the mass commute market, i.e., the 125 cc category. Our market leading advances, coupled with our mature smart connectivity features, has allowed us to stand out as a leader in all of the 50+ markets we have penetrated so far. For example, we ranked at number one in electric moped in Europe.
As we expand our product range beyond the lower powered 50 cc category into the 125 cc categories, we instantly grow our total addressable market by 3x. Our upgraded NQi GT, our newly rolled out MQi GT EVO, the RQi and the YQi will be the main feature product for this year, and we have additional two products in development. Now, at the same time, the COVID-19 pandemic has accelerated the use and ownership of micro-mobility e-bikes and kick scooters for short trips in communities around the globe, and especially in those markets where Niu has been established and a trusted brand since 2016. Our first batch of kick scooter products, the KQi3 and KQi2, have been a hit last year, and our BQi e-bikes to be shipped in early Q2 2022, has also received very positive attentions.
We're developing five new products in those categories in 2022 to seize the market growth across all segments and take advantage of a hundred thousand-plus points of sale across Europe and Americas. Supported by the suitable products and tech offerings, our sales network expansion will also continue to be accelerated. We plan to add additional more than 1,000 new branded stores in 2022. Starting Q4 last year and continuing Q1 2022, we have observed the raw material price continue to increase. For example, the lithium battery cost increased by 10%-20%. We increased our product price by average 5% in March 2022 this year to cope with the raw material price increase. Together with our R&D effort on cost reduction, we will maintain a healthy growth margin with this 5% price increase.
For the international product, we also plan to increase price in April. All those price increases, the full impact on our gross margin will be fully reflected in Q2 this year. Now, with all those efforts underway, we're very optimistic with this year's growth, targeting an annual sales volume between 1.5-1.7 million vehicles for the entire year of 2022. Now, I will turn the call over to Fion to discuss our financial results. Fion?
Thank you, Yan Li, and hello, everyone. 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 performance, and we are referring to the fourth quarter figures, unless I say otherwise, and that all monetary figures are RMB unless otherwise noted. I'll quickly go through the sales volume, which Dr. Yan Li just mentioned. Our quarter four sales volume reached 238,000 units, representing a 58.3% year-over-year growth. China sales volume increased by 49%, primarily driven by the new product launches in the past three quarters. International business performed extremely well in quarter four, and over 18,000 e-scooters and nearly 15,000 kick scooters delivered in quarter four.
International sales volume exceeds our initial expectation, and the main reason is the ease of the international shipping gradually. With regards to the product mix, in China market, the proportion of NIU series rebounded from 24%- 47%, and correspondingly, global products accounted for the rest of 53%. Out of the 53% of global products, 24% was from the entry-level models G0, F0, and C0, and the remaining 29% was from other global models with higher retail prices. The overall product mix for China market improved this quarter since the premium models, here I am referring to both NIU series and all non-zero global models, took a heavier proportion of 76% compared to 58% in quarter three.
For international markets, we achieved around 33,000 deliveries in quarter four, with e-motorcycles and e-mopeds accounting for 55% of them, and kick scooters accounting for 45%. Total revenues in quarter four were CNY 986 million, exceeding top line guidance provided in the third quarter and up by 46.7% year-over-year. This growth was attributable to increased sales volume across our domestic and international segments, particularly an increase of 156% for international deliveries I mentioned before. Revenue for international e-motorcycles and e-mopeds rebounded after quarter three, 2021, rose by 2.7x to CNY 156 million, 35% up year-over-year. Revenue from kick scooters soared by over 29x compared to quarter three. Revenue from China e-scooter sales remained strong and increased by 48% year-over-year.
The accessory spare parts and services revenue also increased by more than 20% year-over-year, though partially offset by 7.3% decrease in overall revenue per scooters. For the year ending December 31, 2021, our total revenue increased 51.6% to CNY 3.7 billion, as compared to CNY 2.4 billion in 2020. Now, let's look at our ASP. The overall ASP in quarter four declined by 7.3% year-over-year, but improved by 34% quarter-over-quarter. In China market, the e-scooters ASP remained almost the same compared to quarter four, 2020, with a slight decrease by 0.9% from CNY 3,355- CNY 3,326, while improved 21% significantly quarter-over-quarter.
The e-scooters ASP from international market decreased 36% year-over-year from CNY 8,979- CNY 5,749. The key reason for the decline was the change in the product mix. Nearly 15,000 units sold of the kick scooters affected our international ASP to a large extent, whose sales price is lower than the e-motorcycles and e-mopeds price. If we take out the impact of kick scooters, the international ASP decrease was only around 3% year-over-year. In terms of numbers, 8,678. In total, the ASP of e-scooters was only 4.6% decrease. The ASP of accessories, spare parts, and services was CNY 479 per scooter, decreasing by 24% year-over-year, mainly because of acceleration in the expansion of sales volume.
The gross margin in quarter four was 22.6%, 2.6 percentage points lower than the same period last year, while 2.6 percentage points higher than last quarter. The decrease year-over-year was the consequence of higher raw material cost and change in product mix. The raw material cost remained at the elevated level in the fourth quarter, and we were still experiencing additional inflation in the international shipping. The cost inflation has reduced our margin by around 1.9 percentage points, while product mix enlarged this impact by 0.7 percentage points. To combat the cost inflation, we increased domestic scooter retail price from March 2022, and international scooters retail price from April 2022.
We continue to aggressively manage all aspects of our cost structure, including the advanced technology to the pro-product body and the purchase agreement to secure sustainable suppliers of the key components parts and other cost-saving initiatives. Our total operating expenses, excluding share-based compensation, were CNY 176.2 million, increased by CNY 66.5 million or 60.6% year-over-year. The increase was caused by CNY 17.3 million higher branding and advertisement in sales and marketing expenses, and CNY 13.2 million higher depreciation expenses of the new store openings, and CNY 9.7 million higher staff costs. Expressed as percentage of revenue, our operating expenses exclude share-based compensation was 17.9%, 1.6 percentage point higher than quarter four last year, mainly caused by the retail sales network expansion and branding and marketing activities.
We believe there was no better time for retail sales network expansion and brand marketing than now to gain more ground, extending the fast-growing lithium-ion battery power to wider market segments. A series of marketing activities were launched in fourth quarter as ramping up the branding, like nationwide campaign, 10 billion kilometers of riding, as Dr. Li just mentioned, and city promotions, which were targeted to those cities forced to implement the new national standards in 2022. I would also like to add that although our operating expenses as percentage of revenue in quarter four increased 1.6 percentage points, our annual non-GAAP operating expenses as percentage of revenue maintained the same level as last year at 15.2%.
Furthermore, our annual GAAP operating expenses as percentage of revenue decreased from 16.8%- 16.4%, and we are in the good position to leverage our brand awareness, retail sales network expansion, and our total operating expenses at a healthy level. Our GAAP net income was CNY 47.6 million, and net margin was 4.8%. The adjusted net income was CNY 60.2 million, and the adjusted net margin was 6.1%, 4.1 percentage points lower year over year. As mentioned above, this was briefly due to 2.6 percentage point gross margin decline and 1.6 percentage point operating expenses increase. For the year ended December 31, 2021, our net income was CNY 225.8 million, and adjusted net income was CNY 273 million.
Our net margin was 6.1%, decreased slightly by 0.8 percentage point. Our adjusted net margin was 7.4%, decreased by 1.1 percentage point. The decrease mainly came from the decline in the gross margin. Turning to our balance sheet and cash flow, we ended the quarter with RMB 1.1 billion in cash, term deposit, and short-term investment, excluding the restricted cash. Our operating cash outflow was RMB 340 million, mainly due to the reduction in payable of RMB 214 million and increase in receivables as a result of seasonality. On the full year basis, our operating cash flow was RMB +334 million. Quarter four CapEx was around RMB 63 million, mostly related to capacity expansion of RMB 27 million and new store buildings of RMB 36 million.
Now let's turn to guidance. We expect the fourth quarter revenue to be in the range of CNY 647 million-CNY 712 million, an increase of 20%-30% year-over-year. With that, now let's open the call for the question that you may have for us. Operator, please go ahead.
Our first question comes from the line of Ben Wang from Credit Suisse. Please ask your question.
Thank you. Management, I actually got two questions. Number one is about can you share about the first two months sales performance because we're already in the beginning of March, what's the growth and roughly volume? And second is that about the full year volume. Can you have a roughly breakdown how much came from N, M, and GOVA? Thank you.
Okay. I'll answer this question. For the first two months in this year, we already got the sales order around 100,000 in total, including domestic and international sales orders. The sales volume we delivered in the first two quarters is 78,000, including the kick scooters, around 12,000 and the other are the electric motorcycles and e-mopeds globally, including domestic and international markets. For the guidance in 2022, we expected around 1.3-1.4 sales units in the China market. We expected around 200,000-300,000 units in the international market.
As to the product mix, we expected the N/M/U compared to the GOVA series is around three versus seven. Within the GOVA series, actually, we expected the majority of the GOVA series are the GOVA premium products other than the entry-level one. Hope I addressed-
Thank you.
the questions for you.
Great. Thank you.
Thank you. Our next question comes from Jane Chang from CICC. Please ask the question.
Hi. Hello, Yan. Hello, Fion. Thanks for your detailed illustration for the results. I have two major questions. The first is about a further question about the product structure. We can see that the proportion of GOVA Zero series in last year fluctuated greatly, from 20%-40%. And you just mentioned you're maybe satisfying product structure. We expect this year we can see that customers are still very price-sensitive. If we want to achieve a stable relatively high proportion of mid to high-end products, how we can achieve a much stronger product differentiation for our maybe higher priced products? This is my first question.
Second is about the expense. We can see that SG&A expense ratio are high in the fourth quarter. Looking at the ratios, selling expense ratio increased a lot. Mainly comes from increasing advertising and promotion expense and also the increase in amortization of store expansion. How can we expect overall expense ratio or the amount this year? How can it reflect a stronger scale effect? That means whether we can see the expense ratio to go down this year. This is my two questions. Thank you.
Both are great questions. Let me address the first one, and then I'll let Fion talk about the expense part. I think the great observation on the G0 series for the entry level. In last year, 2021, we do see the fluctuation because we actually, you know, we announced the F0, we roll out a C0 product. It's actually coupled with the new product rollout of the G0 series, along with some of the promotions. Looking at 2022, so far we have only one G0 entry product to be rolled out. That was the P0, which is actually close to effective rollout end of March.
The rest of GOVA products, more on the Two series, the B2, also on the Six series, which is not showing there, the G6, also the C3 and the C6. Most are more towards the high-end and the entry level. Keep in mind that, you know, a lot of those entry-level models, they're priced low because they have a relatively shorter driving range.
From the user's perspective, actually, it's actually the users prefer what we call the mid-price level. It's basically somewhere around CNY 4,000, but it give a good drive range. For example, our GOVA C3 actually represent alone, it launched last year, actually on sale for about three to four months, actually already represent 6% of sales. That product has a drive range of 100 km. You know, I just want to make a point that we don't really. It's not like, hey, the cheaper, the better. It's actually you always have to look at the price versus the drive range. I think this year, the focus on the lower product is more on the extended drive range product.
I think this year we have about three or four new models for the Niu series to be rolled out for China that will help to continue to drive the increase for the higher, basically our premium brand. I'll let Yan Li to talk to the expense part.
Okay. Sure. Get it.
Yeah.
Okay. Regarding the sales and marketing expenses in quarter four, actually, you know, I already explained the nature of those sales and marketing expenses. The majority parts are the branding and marketing activities, and the rest are the depreciation and amortization expenses related to the new stores opening. If you look at the absolute figure, it's around CNY 100 million sales and marketing expenses in quarter four, almost one-third of the total whole year's sales and marketing expenses. Actually, this was caused by the new stores opening during the whole year, and you will see the full effect in quarter four 'cause we opened more than 15,000 new stores this year, almost double compared to the year-end in 2020.
That is the main reason. Regarding the operating expenses ratio, especially the sales expenses ratio for this year, since you know, we already got the economies of scale in the G&A and almost in the R&D considering the different new models, and we are about to deliver for the next two to three years. Actually, we think you know, the R&D expenses and G&A expenses as percentage of revenue will lower around 0.2 percentage point. Therefore the selling and marketing expenses will remain to 8%-9% as percentage of revenue for this year.
In total, we may remain the operating expenses ratio around 15%-16% for this year, 'cause we are still in the process of growing the China sales marketing channel for the offline sales volume this year. And as Niu as always are, we are the premium brand in China and in the international markets. We will take this window to improve the brand awareness globally, but we may keep the expenses at a healthy level. Okay. Sure. Got it. Very clear. Yeah. That's all my question. Yeah.
Okay. Thank you.
Thank you. Our next question comes from Wei Shen from UBS. Please ask your question.
Hi, Yan Li. Hi, Fion Zhou. My question is about the gross margin. We understand that battery prices, the lithium battery price has been rising in recent weeks. I'm wondering what's your strategy towards it? Will you further increase the mix of the lead acid battery in 2022? I also understand that you have raised price by RMB 200. Will it cover the battery cost, and will you consider another round of price hike? Thanks.
Yes. I think let me address that. We actually are seeing last quarter, we see the lithium battery price increase a bit, but then actually, really at ending starting January this year, we started lithium battery to really shoot up. We have seen some cases, the NCM battery price increased by almost like 20%, and also the LFP battery price also increased by 15%. Keeping in mind, the battery cost is roughly about 30% of our revenue to that extent.
Now we increased our price by 5%, but really in order to maintain, still maintain the same margin, we have also done some cost reductions in terms of the chassis, to be able to manage to maintain the same healthy margin, at the same time, not increase the price too much. I think that's one. We actually look at the market. You know, in front of market, we have observed that our competitors, so in the industry, people increase the lithium scooters or moped price by up to from anywhere between 8%-10%. Actually, even significantly higher than what we have done. That means, you know, one, we do have additional room to increase the price if we have to really observe the future battery price increases.
We're also exploring and looking at some of the for the electric bicycle solutions. It's difficult to do the lead acid, but then also for the light electric motorcycle solutions in China, in some of the tier two and tier three cities, we also look at what we call the graphite lead acid battery solutions as a very viable solution for those light motorcycles. We will have a few products in that range to really, you know, to combat with the lithium battery price increases.
Can I confirm with you that as you raised price by CNY 200, which only covered the price hike of today from the end of 2021 till now, but the gross margin will remain if other items are flat, the gross margin in the first quarter will be similar at a similar level of the fourth quarter of last year, which is still lower than the third quarter?
I think the gross margin questions are also related to the product mix as well. Let's say if you keep the same product mix, it's similar. It's actually, the gross margin has also slightly increased. Let me put it this way. The gross margin post-price increase versus the gross margin before the price increase, the gross margin actually will improve by, you know, almost one percentage point if we keep the product mix same. The product mix mainly, I talk about the international sales versus China sales, also kick scooter sales versus all that stuff. But for the entire year, I think we talked about, we're still very optimistic that we're able to get, on average, a gross margin somewhere around the 22%.
Okay. Thank you.
Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star one on your telephone keypad. Once again, if you wish to ask a question, please press star one on your telephone keypad. All right. There are no further questions. I'll turn the call back to the management team for closing remarks.
Great. 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. Back to you, operator.
Thank you. Well, ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.