Ladies and gentlemen, thank you for standing by. Welcome to the Niu Technologies' Fourth Quarter 2019 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Jason Yang, Investor Relations Manager. 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 and Full Year 2019. The call is being webcast from company IR website. Investor presentation and the 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 provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions, and other factors. The company 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 current news 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 the reconciliation of GAAP to non-GAAP financial results. On the call with me today are our CEO, Dr. Yan Li, and the CFO, Mr. Hardy Zhang. Now, let me turn the call over to Yan.
All right. Thanks, Jason, and thanks, everyone, for joining us on the call today. On the performance, our sales volume has increased by 14% in Q4 2019, and by 24% for the full- year of 2019. Our revenue has also increased by 25% in Q4, and by 41% full- year 2019. We have also enhanced our gross margin, achieving a historically high gross margin at 26.1%, and net profit margin at 11.3% in Q4 2019. All financial data were beyond our expectation. Now, we continue to build our leadership in urban mobility via product and technology development, event and user-based activity. We launched our UGT in late December. UGT is an upgraded high-end version of U-series, targeting primarily Europe and the U.S. market. UGT inherited a simplistic design style and lightweight body of our award-winning U-series, while increased wheel size and performance.
With the retail price started at EUR 1,599 in Europe. Second, we have launched our first straddle electric motorcycle product, R, and our first three-wheel electric motorcycle, T, at the CES in January. Both are revolutionary products to redefine urban mobility. R is our power performance product. It has a top speed of 160 km per hour and a maximum drive range of 130 km. It comes with a maximum 30 kW mid-mounted motor and a 7 kWh portable dual battery. R primarily targets Europe and the U.S. market, as well as high-end motorcycle market in China. As a high-end straddle motorcycle, it listed our new brand in urban mobility. Our video of R on Douyin has received more than 25 million views, as one of the top viewed videos on our Douyin platform. This is just another testimonial on the popularity of this product.
We expect R will be in the market in late 2020. While R focuses on performance, T focuses on comfort and smart commute in urban mobility. A self-balancing three-wheeler with a roof cover. T is the urban all-weather commuter with a top speed of 80 km/h and a maximum drive range of 200 km. It's spacious to take additional passenger and with extra cargo space. In addition, T is a level two autonomous driving capable, including adaptive cruise control, self-parking, and a collision detection system. It is the perfect urban mobility vehicle for individuals and couple commuters. Easy to use, robust to all weather conditions, and smart for safe driving. Now, besides the new products, we continue to enhance our brand awareness through product launches, viral marketing, and targeted marketing. First, we attended for the first time CES in the United States in January.
At the CES, we successfully launched the two revolutionary products, R and T, as mentioned before, and it continue to strengthen our brand of style, technology, and freedom in urban mobility. We received more than 200 media coverage with more than 2,000 articles published. We also broadcasted the launch on social media platforms, achieved around 120 million views on Weibo and 34 million views on Douyin. Second, we continue to create a viral marketing on social media platform. Our quarterly Douyin views increased to 20 million in 2019 Q4 from just a few million in the first three quarters in 2019. Due to the popularity of short video platforms, we plan to invest more resources on Douyin, Kuaishou, and Bilibili as well. Internationally, our 30+ KOLs across Europe have also created more than 1,000 pieces of new branded content, displayed them on Instagram and YouTube.
The highlights of those came from key strategic cities such as Hamburg, Paris, Frankfurt, and Milan. Lastly, a Chinese TV series called "An Jia" was aired in February this year and has become one of the most popular shows in China recently. Our scooters were used numerous times as the commuting vehicles in this TV series, selected by the cast due to our fashionable design. This has achieved more than 2.6 billion views, and the show is still running. Now, supported by the new products to enhance customer engagement and brand awareness, we continue to expand our footprint. By end of Q4 2019, the number of franchise stores in China has reached to 1,050, as we added a total of 290 stores in the entire year of 2019. We further expanded our international footprint to 38 countries, with 26 flagship and premium stores overseas and 1,000+ dealers.
Despite the significant progress that we made in Q4 2019, our business operations have been disrupted by the outbreak of coronavirus in Q1 2020. First, our sales in China have been impacted significantly. Most of cities have shut down business for part or the entire February. We started February with all our stores closed, but ended with 65% of our stores open at end of February for business. Furthermore, as people were recommended to stay home and work from home, there were little retail traffic or retail demand. We started to observe recovery in March as businesses start to be back in operation, and up until now, 85% of stores have opened for business. In addition, for the past month and a half, we also focused on store sales improvement, linking offline stores with online presence.
In February, we trained all our store operators to set up online virtual stores via WeChat and provided online sales consultations to potential customers. We also marketed the online purchase, offline delivery campaign and received promising results. Our online-to-offline orders have increased by 2.5x over the same time last year. Our international sales have also been impacted due to the disruption in production and shipping. Our factory was shut down for the first half of February, and after the factory reopened in mid-February, we also experienced a shortage of frontline workers as many of them were still in quarantine in their hometown. Our upstream suppliers also experienced similar situation. This disruption has caused slight delay in our international order fulfillment.
Amid the current outbreak globally, we also focuses on expanding our international footprint, enter additional countries in South America, as well as establish a stronger footprint in Southeast Asia to diversify the international sales. Now, despite the current setbacks, we remain very positive about our business performance after the coronavirus outbreak is over. First, the long-term industry trend or the fundamental market demand remains unchanged. Urban mobility is a necessity, and there's always a strong demand for more convenience, more efficient, and cleaner urban commuting solutions. Second, we observed that in many markets that the forced quarantine has further shifted the consumer focus from offline to online, which we will benefit from due to our strong presence in both online and offline for marketing and sales.
In the meantime, we're managing our business in a very prudent manner, and ready to accelerate as soon as the market starts to recover. I will turn the call over to Hardy to discuss our financial results. Hardy?
Thank you, Yan. Hello, everyone. Before I discuss the Q4 financials, I would like to first share with you our cash and liquidity status because I think some of you may have concerns. The short answer is, we do not foresee cash and liquidity problem in the short- term based on our current estimate. By the end of last year, we had cash, term deposit, and short-term investment of CNY 765 million in total. In early February, when the Chinese government first announced the restrictive measures to combat the virus, we did a stress testing and around different scenarios to assess the impact. Subsequently, we took proactive actions to manage our cash spending and the working capital. In the meantime, we have been monitoring cash sales on daily basis. We are glad to see cash sales coming in consistently during the past few weeks.
In terms of debt, we have short-term bank borrowings of RMB 217 million as of December 31st last year. Out of the total borrowings, only RMB 20 million is credit loan. The rest are cash pledge loans. We pledged our U.S. dollar cash to banks and borrow RMB loan to achieve a reasonable cash balance in different currencies. Considering our cash balance and debt structure, we do not foresee short-term liquidity problem. Of course, to ensure we always have a plan B, we keep active communications with our relationship banks. They are very supportive and stand aside with us to provide support when needed. I hope I've addressed your concerns, and let's turn back to discuss our Q4 financials. Our press release contains all the figures and comparisons you need. We have also uploaded Excel format figures to our IR website for your easy reference.
As I review our financial performance, keep in mind that we are referring to the fourth quarter figures, unless I say otherwise, and that all monetary figures are RMB, unless otherwise noted. Our Q4 sales volume reached 106,000 unit, increased by 13.5% year-over-year, in line with our expectation. Total revenues rose 25% to RMB 536 million, above the guidance we provided earlier, mainly because of two reasons. First, the product mix for e-scooter sales are more favorable. The higher price N-series and M-series continues to take a decent proportion of our total sales volume. In Q4, N-series and M-series, in total, accounted for 40% of sales volume, compared with 35% in Q3. Second, strong sales in accessories, spare parts, and services. In Q4, for each e-scooter sold, we also sold RMB 820 accessory, spare parts, and services, compared with RMB 524 in Q3 and RMB 327 in Q4 2018.
The strong sales came from the spare parts sold to our overseas sharing operator and to our after-sales service providers. Our e-commerce platforms also had strong sales in accessories and services in the fourth quarter, benefiting from the larger user base, higher brand recognition, and more effective marketing activities. Revenue per scooter was 5,046 RMB, up 10% year-over-year. That growth was mainly driven by strong sales of accessories, spare parts, and services, as I mentioned above. Gross margin was 26.1%, 12.6 percentage points better than this time last year, and is 3.9 percentage points higher sequentially. Our full- year gross margin was 23.4%, 10% better than full- year 2018. Q4 margin expansion was helped by the similar factor as we discussed during last quarter, being the overall favorable revenue mix and cost-cutting efforts. Operating expenses on comparable basis increased in line with the growth of our business.
Our total operating expenses, excluding share-based compensation, was CNY 86.5 million, increased by 31% year-over-year. Operating expenses as a percentage of revenue were 16.1%, 0.6 percentage points higher than same time last year. The increase was mainly caused by the higher G&A expense because we made provisions for bad debt and had additional professional service fee related to our global trademark registration. When you look at the full- year 2019 numbers, our total operating expenses, excluding share-based compensation, were 14.9% of total revenue, reduced by 1.9% compared with 2018. We achieved the leverage in our operating expenses on a full- year basis. In the fourth quarter, we have CNY 13.5 million government grants, mainly related to our new factory in Changzhou, which commenced operation in December. For full- year 2019, we had CNY 29.8 million government grants. CNY 22.6 million is related to the new factory expansion and the tax paid.
Remaining are one-off grants. During 2020, we expect to continue to receive government grants, but it will be a much smaller amount. Our GAAP net income in Q4 was CNY 60.7 million, with net income margin of 11.3%. Our GAAP net income for full- year 2019 was CNY 190 million, with net income margin 9.2%. The margin is higher because of above mentioned improved gross margin, the operating leverage achieved, government grants, and also because of limited income tax expense as the company benefited from the cumulative loss carry-forward from earlier years. In the coming 2020, when the company continues to generate profit, we expect to pay the regular income tax during the year. Turning to our balance sheet, we ended the quarter with CNY 765 million cash, term deposits, and short-term investments.
Capital expenditure was RMB 42 million in Q4, mainly for building the new manufacturing facility in Changzhou and for expanding our retail sales network. Short-term bank loan was reduced by RMB 51 million compared with Q3, as we repaid bank loan. For full- year 2019, our operating cash flow was +RMB 201 million. Cash expenditure was RMB 164 million. Let's turn to guidance. We expect first quarter revenue to be in the range of RMB 195 million-RMB 265 million, a decrease of 44%-25% year-over-year. Please keep in mind that this forecast reflects our current and preliminary expectation and could change in light of the uncertainty related to the COVID-19 developments. As Yan already mentioned, our operation affected by the outbreak in many aspects in the short- term. When taking a longer-term view, we remain positive about our business perspective.
With that, let's now open the call for any questions you may have for us. Operator, please go ahead.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, if you wish to ask a question, you may press star one on your telephone keypad. Your first question comes from the line of Winnie Dong of Piper Sandler. Please ask your question.
Hi. Good morning. Thank you so much for taking my question, and for Alex Potter. I'm wondering, you have your guidance down for March, down 25%-45%. Can you elaborate on what kind of scenarios you're baking into that wide range? What would get us to the higher- end, and what would get us to the lower- end? Then just any sort of on-the-ground development that you're hearing in March, as we stand now. Obviously, a lot of impact has spread to Europe and to the West. Anything that you're seeing in China, if you can share that'd be great. Thank you.
Yeah. For the guidance, yes, we gave a wide range with 45%-25% decrease compared with last year. The basis for giving that is we first took a conservative estimate based on the orders we more or less already have on our book. That's including both the orders from overseas distributors and also the estimated orders from domestic distributors. Because, as you may know, there's seasonality in the sales of e-scooters in China, and the Q1 is the slowest season, and normally the sales begin to pick up weeks from March. Therefore, we expect the second half of March will be quite key and two weeks for us to sell additional scooters. Therefore, we are betting on additional 20% from the second half of March.
First, if the government lifted some of the restrictive measures for store openings, then there's additional shops can open in the next two weeks. As Yan already mentioned, up to now, we have only 85% shops opened. If the additional 15% shop can open, then we can generate additional revenue from our retail shops. It's the first reason. Second reason, as we have seen some of our distributors who have their shop open, they are increasing their retail sales, therefore we expect they will continue to order from us. However, as I said, there's a lot of uncertainties due to the current outbreak, therefore we have take a conservative approach and also give a wider range due to the risk involved. Maybe Yan to comment on the rest.
I think Hardy pretty much covered it. We're actually watching the situation on daily basis at this point. We look at the retail sales in March, basically the first two weeks. If I look at the second week versus the first week, the retail sales actually increased by almost 10%-15%. It's really about the third week and the fourth week, how that picks up and how we fulfill the orders. At this point, our factories has pretty much back online, so we have no issues of fulfilling the orders. It's really the market needs to be picked up, both from the China side, as well as we look at the Europe and the U.S. as well.
We'd h ope that answered your question.
Yes. That's very helpful. Thank you very much.
Your next question comes from the line of Vincent Yu of Needham & Company. Please ask your question.
Hi, management. I have two questions. First question is trying to understand what's our view in international market in first half 2020, especially when the European, the outbreak continue to go on. The second question is, what's our view in gross margin in the short- term to mid-term, and especially how big headwind we should expect, especially when overseas market is being impacted. Third question is, what's our view on our 2020 OpEx and CapEx plan, given the industry headwind? Thanks a lot.
I'll cover the market.
Yeah.
This is Yan Li. I'll cover the international market. I'll have Hardy cover the gross margin, the CapEx, OpEx as well. I mean, to be frankly, I think, we're actually watching the international market on a daily basis right now. If you look at last year, I think the European sales represent roughly about 70% or 60%-70% of our sales internationally. The U.S. market probably represent about 80% of our sales. We have orders from European distributors, and we have orders from U.S. distributors, as well as some of the sharing operators in Europe and the United States. Those are orders actually in our backlog at this point we're actually trying to fulfill. They will actually serve as a basis for the first half in 2020.
Having said that, right, it depends on how. Obviously, our sales operation has been impacted. Retail sales operation has been impacted. For example, Italy, where initially we plan actually to build out about 10 - 20 flagship stores in Italy, and right now we only have a few, and then the entire country practically got shut down, so that retail sales are practically gone for few weeks. We're actually watching the situation on daily basis at this point. Maybe I'll see Hardy on the gross margin part.
Yeah. For the gross margin, for the full- year 2019, our gross margin was around 23%. For the Q1 this year, we do expect some of the decrease of gross margin, mainly because our factory cannot work under full capacity. However, for the full- year 2020, we still have the plan to at least keep the same gross margin as what we already achieved in 2019. There's a couple of initiatives we have already started since the end of last year. One of the things is we are trying to re-negotiate some of the component costs with different suppliers, and we made progress with many of them. Therefore, we do see continuous cost down opportunities. Secondly, as you know, commercial operation in our new manufacturing facility in Changzhou. That facility was designed by ourselves. Therefore, we do expect high efficiency from this new facility.
Very lastly, as we continue to improve our revenue mix, including both the accessories spare parts and also some of the international sales, we do expect some potential upside from the revenue mix. Overall speaking, we target to achieve at least the same gross margin as what we have in 2019. This is gross margin. To answer your last question on the OpEx and the CapEx. For the OpEx, as a percentage of revenue in 2019, it was around 15% of our revenue. Given we expect to continue to grow in 2020, we think we could probably at least maintain this 15%, and maybe we can even achieve further synergy or leverage from opening expenses. In terms of CapEx, during 2020, there's two areas where we want to spend money. One is to continue to expand our retail sales network.
Because of this coronavirus outbreak, we are re-evaluating how many shops we need to open. Anyway, I think maybe RMB 50 million-RMB 100 million will be more than enough for us to open all the retail shops which we need. The second area we want to spend money is we reserved a piece of land next to our current facility, and we do have a plan to acquire at least the land use right of that facility, and therefore, we can ready to construct new factory whenever needed. In China, because of new national standard implementation last year, Chinese government gave a three-year transition period for the consumers to replace their e-scooter or bicycles. Therefore, we do expect some of the increasing demands during 2021 and also 2022. Therefore, we do believe we need to get ready for some of the capacities.
These are the two areas that we may spend money, but they are more or less in our control, and we can base on how the things developed to decide how much and also how fast we spend money. I hope this answered your question. Do you have anything to add?
Vincent, just actually to start out. One thing I forgot to mention on your first question is actually, there's one thing we have done, and actually, we believe it actually will help the international market this year as we diversify our revenue streams, not just from, used to be Europe and the United States represent 80% of market. Literally starting the second half last year as we actually expanded to more countries. For example, we successfully entered Japan, we're well in Korea. We're actually starting to develop more businesses in Southeast Asia. Just recently, we actually signed quite a few distributor agreement in South America. Obviously, some of the sales actually, whether it will show up in Q2 or second half of Q2, it also depends on how the situation in those countries actually turned out to.
I think if I look at in the long- run, not for the entire year, it actually opened up more market for us, which actually helped us to basically reduce the risk.
Got it. Thank you very much. [Non-English content] .
Once again, if you wish to ask a question, you may press star one on your telephone keypad. Your next question comes from the line of Ben Wang of Credit Suisse. Please ask your question.
Thank you. I actually have three questions. Number one is about volume growth in the past three months. If you see you guide 25%-45% revenue decline, how long it includes decline? Because ASP increased by 5% last year, the volume guidance is likely to be 20%-40% decline. If is that the case, can you provide by month say, what's the number in January, what's the number in February, and what's likely in March? Can I assume that March will be much higher growth compared to February, so we see a sequential improving trend? That's number one about volume growth. Number two is about new products. We're actually expecting you relaunch the M-series called MQi, because that currently is still a motorcycle. It didn't return to the e-scooter category.
Our M+, we are back to the e-scooter category. That's actually our key driver for the volume growth this year. That's the second question. Third one's about the cost reduction. We actually observed the battery price has been declined around 28% year-over-year in the first quarter this year. If you see sequential also decline by around 20% Q- and- Q. This actually is the only battery. Can I assume a similar pricing decline for the e-scooter battery as well? If the case, can I assume 20% cost reduction in the battery price? Thank you.
Let me address your first question about the volume for the first three months. Normally, we combine January and February together because different year, the Chinese New Year are on different months. If you combine January and February, our volume was down around 60% compared with last year. In March, at least in the first two weeks, we have seen volume down only 20% to 30%. We do see an improvement in the first two weeks of March, and we continue to see improvement during the past few days. This is answer your first question on the volume. For the second, for the new product, I will leave to Yan to comment.
On the product part, we do have a plan to not just have one M-Series, also have two products that compliant with the Chinese new regulations on electric bicycles. Those products were scheduled to be launched in April, now actually due to the coronavirus outbreak, we had to push it. It's basically created a delay roughly about a month or so. The entire team try to work very hard to actually try to accelerate that schedule such that we can actually see the product either by end of April or early May. The delay is mainly needless to say, entirely, basically entire country got shut down for a month or a month and more. It's actually very difficult to accelerate the product development, we're trying hard on that one.
Also we do have high hope on those two products, especially the one, first on the one thing you mentioned, the new M-Series, that will be actually a full covered electric bicycle product. It will have the inherited the design style of our M-Series, but same time compliant with the China new regulations. I think people being expecting that product since last year and finally we should be able to give what people want in Q2 this year.
Yeah. Just to add to Yan's point on your second question about the new M, we have successfully got the certification for that product. I think that's one of the key milestones we already achieved. To answer your third question about cost reduction, I think during 2019, we have seen the whole battery, including battery cell, also battery pack, the cost has reduced around 9% during 2019. For 2020, based on the current estimate, we see at least a 5%-10% reduction. This was before the Coronavirus outbreak. This outbreak may give us additional leverage to continue to negotiate the price down. That's our current expectation, probably 5%-10% cost reduction for the battery cell.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone. There are no further question at this time. I would now like to hand the conference back to today's presenter. Please continue.
Well, 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.
Thank you.
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.