Niu Technologies American Depositary Shares 2026 Q2 Earnings Call

Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss Niu Technologies results for the second quarter 2026. The earnings press release, corporate presentation, and financial spreadsheets has been posted on our investor relations website. This call is being webcast from company's IR site as well. A 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties, assumptions and other factors. The company's actual results may be materially different from those expressed today. Further information regarding the risk factors is included in company's public filings with the Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by law.

Our earnings press release and this call include a discussion 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 CFO, Ms. Fion Zhou. Let me turn the call over to CEO Yan.

Hello, everyone. Thank you for joining our second quarter 2026 results call. In the second quarter of 2026, we continue to execute our core mandate of high quality resilient growth while navigating a profound structural adjustment in the domestic two-wheeler market. Accelerating the strategic realignment of our international business. For Q2 2026, we will achieve a total sales volume of 434,000 units, representing a robust year-over-year increase of 24%. This expansion was propelled by the China sales reaching 400,000 units, up 26% year-over-year. Overseas shipments scale to 32,000 units, up 3.6% year-over-year, signaling a steady operation recovery in the international business. Total revenue for the quarter reached RMB 1.44 billion, representing a year-over-year growth of 14.7%. Gross margin stood at 16%. This primary trajectory was driven by three main factors.

First, the active promotional sales clearance and inventory write-off of our international micro-mobility business. Second, the structural product mix shift towards the higher volume electric motorcycles in China, which carries relatively lower margins compared to our historical premium e-bicycle segment. Third, ongoing cost pressure from elevated raw material prices. Crucially, those collective headwinds will partially offset our ongoing components platformization and the commercial cost reduction initiatives. Now I would like to provide more details on our performance and strategic executions across both China and the international market. First, let's talk about China market. In Q2 2026, the China sales volume grew 26% year-over-year to 400,000 units. This strong volume growth was achieved against the challenging regulatory and the macroeconomic backdrop.

Now with the full enforcement of new national standard for electric bicycles, coupled with broader consumer demand decline in the top-tier cities, the domestic two-wheeler market is undergoing a significant structural transformations. Specifically, the premium e-bicycle segment, historically our strongest category, experienced a meaningful industry-wide contraction, with the first half decline estimated between 25%-30%. Concurrently, consumer demand has decisively expanded towards electric motorcycles, especially in lower-tier cities where the motorcycles are not banned, a category with lower average selling prices and the margin than the premium e-bicycles. We proactively reallocate our R&D and the product resources in advance, aggressively pivoting towards a high growth electric motorcycle segment. The structural momentum of electric motorcycle business is now directly offsetting the pressure in the premium e-bicycles, establishing a strong foundation for our next growth phase. Now, first talk about the product portfolios.

During the second quarter, our execution focused on decisive structural reengineering our product portfolios. In terms of electric motorcycles, the electric motorcycle category contribute approximately 60% of our China sales volume in Q2, serving as a primary growth engine of our domestic business. We continue to strategically concentrate resources here, building our comprehensive product matrix across key consumer user cases. First, following the strong reception of Windstorm series, and we expand aggressively with the N Fengchi series, a high performance model purposely built for delivery professionals and high-frequency cargo use. Delivering 0 to 50 km per hour acceleration in just 5.4 second and top speed of 70 km per hour, and support for mainstream battery swapping. A price at an accessible RMB 3,399 achieved a record-breaking online pre-order of 32,000 units on its very first day.

In April, we also launched the NX Marathon series to directly eliminate range anxiety and the charging constraint. Equipped with a high capacity 72-volt, 50 amp hour battery, it delivers a verified full throttle range of 146 km. In Q2 alone, the NX Marathon contributed 11% of our total domestic sales volume. Now building on this momentum, we further expand the lineup in July with the NX 100 and NX 70, extending our price point coverage and solidifying our leadership in the family commuting segment. Now, in terms of e-bicycle segments, we maintain a strong long-term commitment to a market while systematically strengthening our product matrix under the new national standard. First, we enhance our entry-level offerings led by the Y series, to effectively broaden the consumer access.

Second, we're actively in the process of reintroducing key models in the RMB 5,000-RMB 7,000 price range, reestablishing our technological leadership in the premium e-bicycle space. While maintaining a prudent discipline during the current market condition, we're fully prepared to capitalize on market recovery when demand returns, leveraging our complete and diversified compliance portfolio. Second, let me talk about R&D and technology. The technology and continuous innovation remains core to Niu's long-term strategy. Following our March vision announcement to redefine mobility and enter the era of AI-powered two-wheeled electric vehicles, we moved decisively in Q2 alongside leading technology partners to convert hardcore AI capabilities into tangible mass-market user experience. Core features including the Niu AI OS, screen navigations, integrated triple camera quarter system, AI pets, and AI voice interaction are now fully integrated across multiple mass production models.

Our user data confirm those features have been frequently used. For example, in terms of our screen navigations, they reach approximately 190,000 monthly active users. Adding to those technology momentum, our Niu AI officially awards for interface and user experience design. This marks the first time two-wheeler operating system has received international recognition, serving as a powerful global validation of our design and technological leadership. Let me talk about the brand and marketing. On the brand front, we continue to execute our strategy of brand-driven growth, deliberately expanding Niu's position from a niche, top-tier urban geek brand towards a broader mass premium market. We're driving a full funnel brand awareness and mainstream consumer acquisition through a multi-touch point approaches. First, the support of our global celebrity ambassador, large-scale brand campaigns, influencer content, and user engagement programs.

We're actively shifting brand perception from single brand recognition to a deeper consumer understanding and engagement. Second, we sustain a target brand of visibility investment across 37 key cities, occupying high traffic touch point including outdoor digital screens, major transit hubs, cinemas, and the central commercial district, generating over 5.9 billion total impressions. Last, we successfully launched a targeted offline community event such as Earth Day campaign that generate 250,000 exposures, and also Shanghai outdoor exhibitions, which generate 3.25 million impressions. On the retail channel side, in light of broader market uncertainties, we focus on same-store sales increase and prioritize the operational health and the profitability of retail ecosystem. In terms of network footprint, by end of Q2, our store network stood at 4,570 stores nationwide, with lower tier cities account for 36% of our total footprint.

By concentrating our resources to empowering existing retailers, the same-store sales surged by 24% year-over-year, driving a consecutive operation efficiency gains across our store network. We focus on online channels. The online channel deliver a standout performance. In Q2, online sales grow by 50% year-over-year and accounts for 64% of our total domestic retail sales. Besides the traditional Tmall and JD.com, we also open on Douyin, powered by 9 official flagship accounts and 1,600 dealer-operated accounts. We execute 57,000 live streams and produce 90,000 short-form video clips in Q2, and generating over 720 million impressions. Let me talk about the international business. In Q2 2026, the overseas sales reached 32,485 units, representing a 3.6% year-over-year growth. This demonstrate our international business has steadily exited its structural adjustment phase to reenter the growth trajectory. I'll first talk about the international electric motorcycle business.

Our overseas electric motorcycle business maintain a powerful momentum, deliver a 4,800 units in Q2, a substantial year-over-year increase of 50%. This performance directly validate efficacy of our direct-to-retailer strategy. In term of networks, our dealer network successfully expanded from 307 stores at beginning of year to 417 active locations by end of Q2. In terms of product mix, following the successful introduction of our high-performance models such as NX500, NX300, FX300, the 125cc plus category has rapidly climbed to account for approximately 50% of our total European sales volume. This premium mix optimization structurally lifts the gross margin profiles and enabling our team to achieve a key milestone of local profitability. In the emerging market like Asia Pacific and other areas, we made a steady progress through an asset-light profitability-first approach.

We have made a first approach, for example, Algeria with sales over 1,000 units, and Thailand with sales over 1,000 units. We'll maintain this disciplined asset-light expansion models. First validate the product-market fit and local profitability, then selectively scale into additional high-potential markets. In our micromobility business internationally, Q2 marked a successful completion of seamless channel transition, bringing the terminal sales velocity firmly back to an onward growth path. While the wholesale shipment reached at 27,000 units, the end-user retail activation, which truly measured the organic consumer demand, exceeded 36,000 units, represent a 21% year-over-year growth in Q2. This activation trend accelerated month-over-month. For example, it grew at 21% in May and 37% in June, proving our inventory clearance initiatives are working effectively. Our promotional strategy for legacy models yield a highly positive result in terms of channel clearing.