NIO Inc. (NYSE:NIO) Q4 2023 Earnings Call Transcript
NIO Inc. (NYSE:NIO) Q4 2023 Earnings Call Transcript March 5, 2024
NIO Inc. beats earnings expectations. Reported EPS is $-0.45, expectations were $-0.51. NIO Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, ladies and gentlemen, thank you for standing by for NIO Incorporated Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Rui Chen, Head of Investor Relations of the Company. Please go ahead, Rui.
Rui Chen: Good morning and good evening, everyone. Welcome to NIO's fourth quarter and full year 2023 earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website. On today's call, we have Mr. William Li, Founder, Chairman of the Board and the CEO; Mr. Steven Feng, CFO; and Mr. Stanley Qu, Senior VP of Finance. Before we continue, please be kindly reminded that 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 inherent risks and uncertainties, as such, the company's actual results may be materially different from the views expressed today.
Further information regarding risks and uncertainties is included in certain filings of the company with the U.S. Securities and Exchange Commission, the Stock Exchange of Hong Kong Limited, and the Singapore Exchange Securities Trading Limited. The Company does not assume any obligation to update any forward-looking statements except as required under applicable law. Please also note that NIO's earnings press release and this conference call include discussions of the unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Please refer to NIO's press release, which contains a reconciliation of the unaudited non-GAAP measures to comparable GAAP measures. With that, I will now turn the call over to our CEO, Mr. William Li. William, please go ahead.
William Li: Hello, everyone. Thank you for joining NIO's 2023 Q4 and full year earnings call. In Q4 of 2023 NIO delivered a total of 50,045 premium smart EVs, up 25% year-over-year. In 2023, NIO's cumulative delivery reached 160,038 units, representing our goals above 30.7% from 2022. In January and February of 2024 due to the seasonality of industry and the Chinese New Year, NIO delivered 18,187 vehicles. On March 7, NIO will start to deliver for the 2024 model, featuring enhance the performance and experience, with that, NIO's will gradually bounce back, and the total delivery in Q1 is expected to be between 31,000 to 33,000 units. In terms of NIO's financial performance, with continuous improvements on the bond [ph] costs, the vehicle gross margin increased to 11.9% in Q4.
Now, I would like to share with you the recent highlights of our product, R&D and operations. On December 23 Nio Day 2023 was held in Xi'an, Shaanxi province, where the Smart Electric executive flagship NIO ET9 was unveiled. ET9 embodies NIO's full stack of capabilities, and the global leading technology, featuring core technologies, such as in-house development AD chip, NX9031 Full-Domain 900v architecture, SkyRide Chassis System, and the flagship safety and security. ET9 defines that technology standard for the next generation premium smart EV. The delivery will start in Q1 2025. In the meantime, NIO will soon start to deliver its 2024 model with the configuration and the performance upgrades including the brand new center computing platform, Adam, which brings the computing power to a new level.
Enabled by the industries high computing power, NIO’s software release has become faster, making our products more competitive. It means that NIO Assisted and Intelligent Driving or NAD [ph], NIO’s collaborative intelligence capabilities has seen that group with the total validated open mileage increase in 100v in five months. As of the end of January, navigate on pilot paths while validated and made available more than 1 million kilometers of roads in China including 650,000 kilometers of complicated urban driving scenarios in 606 cities. In Q2, the NOP+ for urban roads is expected to be released to all NT2 users, which will make this OTA update the largest public release of its kind in China. So computing sharing across different domains on the center computing cluster, [indiscernible] our multimodal large vision model will be released to make that cockpit smarter and more secure.
In addition, NIO’s mass market brand will make its debut in Q2. The first product will be launched in Q3 with the mass delivery to start in Q4. As a full assess and such a network so far NIO has 148 new houses and 352 new spaces, as well as the 314 service center and 62 delivery centers. About the charging and the swapping network to-date, NIO has 2,419 Power Swap stations worldwide, providing over 39.5 million swaps cumulatively. Collectively. It also has installed over 10,000 power chargers and the 11,600 destination chargers. During the Chinese New Year, on the billings day, NIO completes 19,199 swaps, one power stations on highway provides the 195 swaps, battery swap has become the most reliable solution for NIO users. Following the battery swap corporation with Changan and Geely, another two digital corporation agreement was signed with JAC and Chery in January, NIO will rollout comprehensive and in-depth cooperation on battery swap with these partners.
Moreover, NIO has partnered with multiple energy companies, such as [indiscernible] Energy Group and the China Southern Power Grid to jointly build swap stations. The value of batteries swap has been appreciated by more people, making a holistic chargeable, swappable, and upgradable solution, a well recognized the core advantage of NIO. In 2024, NIO plans to build 1000 new battery swap stations and the 20,000 charges, bringing in the total to over 33,310 swap stations and 41,000 charges by the end of 2024. Regarding the capital market, in December, NIO received $2.2 billion strategical investment from Abu Dhabi investor, CYVN Holdings. The investment has further strengthened NIO’s balance sheet, laying a solid foundation for NIO’s investment into the next generation core technologies and products shouldering [ph] corporate social responsibility and supporting global sustainable development, NIO always stayed true to its foundation mission of Blue Sky Company.
In general, NIO was selected by Corporate Knights into the 2024 Global 100 most sustainable companies making to the list for the second time in a row. NIO was placed safety, among more than 6000 companies worldwide, up 20 months both from last year. As competition intensified in 2024, we see both challenges and opportunities, with faster deployment of charging and swapping facilities and the change in consumer behavior, the premium BEV segment to which NIO brands belongs will soon arrive at an inflection point of growth. In the second half, a new brand for the mass market will also become a growth level. In 2024 we will continue to focus on the corporate top priorities, level up system capabilities [indiscernible] cost mindset and the costs management, so as to bring our A game to the next phase of competition.
As always, thank you for support. With that, I will now turn the call over to Steven to give financial details. Over to you Steven.
Steven Feng: Thank you, William. I'll now go over our key financial results for the fourth quarter of 2023. As we mindful of the length of this call as a reference to RMB only in my discussion today. I encourage listeners to refer to our earnings press release, which is posted online for additional details. Let me start with revenue for the fourth quarter of 2023 total revenues reached RMB17.1 billion, up 6.5% year-over-year, and 10.3% quarter-over-quarter. 90% of revenue come from vehicle sales in Q4, which was RMB15.4 billion, representing an increase of 4.6% year-over-year and a decrease of 11.3% quarter-over-quarter. The improvement year-over-year was driven by growing delivery volume despite the impact of lower average selling price resulting from product mix changes.
The decrease quarter-over-quarter was mainly attributed to a decrease of 9.3% in delivery volume. Moving to other sales. Other sales reached RMB1.7 growing 27.6% year-over-year and 0.4%, quarter-over-quarter, the year-over-year increase was mainly due to increased sales in accessories and the provision of power solutions, which both grew with our user base. Now, let's have a look at the gross margin. Overall gross margin was 7.5% compared with 3.9% in the same period of last year, and 8.0% in the last quarter. The increase year-over-year was mainly attributed to the increase vehicle margin. The slight decrease quarter-over-quarter was due to the decrease in margin from provision of power solutions as a result of expanded power network, even though vehicle margin was growing.
The closer look at vehicle margin, which was up to 11.9% in this quarter, compared with 6.8% in Q4 2022 and 11.0% in Q3 2023. The year-over-year increase was mainly due to the decrease material cost per unit in Q4 2023 and lower base in Q4 2022, which resulted from inventory provisions, accelerated depreciation on production facilities, and the losses on purchase commitments for the previous generation of ES8, ES6 and EC6 recorded. Let me move on to the operating expenses. R&D expenses were RMB4.0 billion, remained stable year-over-year and increased 30.7% quarter-over-quarter. The increase was mainly driven by incremental design and development costs for new products and technologies and higher personnel costs in R&D functions. SG&A expenses were RMB4.0 billion increased 12.6% year-over-year and 10.1% quarter-over-quarter, which was mainly related to hire personnel costs in sales functions and increased sales and marketing activities.
Let's move further to the bottom line. Loss from operations was RMB6.6 billion represents a decrease of 1.6% year-over-year and an increase of 36.8% quarter-over-quarter. Interest and investment income was RMB1.4 billion, increased 288.7% year-over-year and 375% quarter-over-quarter. The increase was primarily attributed to the recycling of unrealized gain from other comprehensive income to investment income of RMB977.3 million for available for the available-for-sale debt related to upstream industry investment. Net loss was RMB5.4 billion represent a decrease of 7.2% year-over-year, an increase of 17.8% quarter-over-quarter. Last but not least, our balance sheet get strengthened with RMB57.3 billion in cash and cash equivalents, restricted cash, short term investment and long term time deposits as of December 31, 2023.
For more information, details on our unaudited 2023 full year financial results, please refer to our earnings press release. Now, this concludes our prepared remarks. I will now turn the call over to the operator to proceed with our Q&A session.
Operator: [Operator Instructions] Your first question that comes from Tim Hsiao from Morgan Stanley. Please go ahead.
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