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22-05-2025
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Q1 2025 WeRide Inc Earnings Call
Tony Han; Chairman of the Board, Chief Executive Officer, Founder; WeRide Inc Jennifer Li; Chief Financial Officer; WeRide Inc Joel Ying; Analyst; Nomura Tim Hsiao; Analyst; Morgan Stanley Li Ping Zhao; Analyst; CICC Yawen Tan; Analyst; BMP Paribas Tian Wang; Analyst; China Securities Leo You; Analyst; CLSA Operator Good morning and good evening, ladies and you for standing by and welcome to WeRide's first quarter 2025 earnings conference call. (Operator Instructions)Joining us today are WeRide's Founder, Chairman, and CEO Doctor Tony Han; and CFO Ms. Jennifer we continue, I'd like to refer you to the Safe Harbor statement and the company's earnings press release, which also applies to this call as today's call will include forward-looking statements, including rewrite strategies and future forward-looking statements are made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risk and company's actual results could differ materially from those stated or implied by these forward-looking statements, as a result of various important factors, and please refer to the risk factor section of the company's Form 20-F, filed with the FEC for full disclosure of these risk company does not assume any obligation to update any forward-looking statements except as required under applicable note that all numbers stated in management's prepared remarks are in RMB terms. And we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in the company's earnings release and filings with the that, I'll now turn the call over to the company's founder, Chairman and CEO Doctor Tony Han. Please go ahead, sir. Tony Han Hello, everyone. Thank you for joining us today. I'm excited to give you an update on our last quarter. We have reached a number of new milestones as we continue our global expansion and also semantic deeper collaboration with key partners such as basically, with Uber, we have committed to providing global taxi service in 15 additional cities internationally and accept -- and accepted a commitment for an additional $100 million in equity investment on the heels of their initial investment at our notable milestones included launching the first driverless robot taxi testing in Abu Dhabi, the first of its kind in the Middle East. In China, we roll out the country's first autonomous mobility service in the central area of Guangzhou, the number three city in some of this will be reflected in our near-term financial results, others laid the foundation for the robust growth in the quarters to let's quickly discuss our latest Uber announcement. This expanded partnership and the incremental $100 million dollar investment is a testament to our shared commitment to autonomous mobility and the confidence in our operational and technological began our partnership with Uber in the Mideast and they continue to scale our operations there. As a reminder, we first launched Abu Dhabi in December of last year and have recently announced plans to expand in has also been mentions of expansion to a third city recently in the press. So look out for more information there. We are excited by our progress in the region and the opportunities that it addition to the Mid East, we expect to scale and expand our global taxi presence to other geographies such as Europe, with a particular focus on markets, where we have already deployed some of our other autonomous mobility products such as our autonomous believe having multiple autonomous mobility products widens over time and also makes dialogues with stakeholders such as regulators, more substantial cases. We continue to expand our autonomous mobility operations in China and alluded to the earlier, we launched a full driverless robotaxi testing in Abu Dhabi. This means that we will be the first company to have robotaxi running without safety drivers. At the same time, we also expanded our operational service to include the new destinations such as Al Maryah Island and Al Reem Island, covering a range of vibrant areas in the this, you can see in action, our phased approach to operational expansion. This phase approach allows to ensure a high quality of service, while ensuring that we meet all regulatory and safety standards. To date, we have a leading safety track record in the commercial delivery of our China, we expanded our local taxi service in Beijing and Guangzhou. In Beijing, we added the routes between the subcenter of the city, Beijing, Yizhuang, and the Beijing railway station, spanning over 600 square Guangzhou, we launched China's first 24/7 autonomous ride-hailing network and added eight routes in the city center, connecting landmarks and transport hubs such as airport, Guangzhou South Railway Station, Canton Tower, and the Canton Fair Complex. These routes cover more than 250 kilometers of public roads in a densely populated urban area with very busy forward, our local taxi service in China will be integrated into Tencent smart transportation meaning program on WeChat to serve a wider use base in China. We also continue to expand our other autonomous mobility Robobus has entered downtown Guangzhou, one of the most complex urban environments. The development followed our -- follows our launch of the first robust BRT route in the city last has now become an integral part of the day life of Guangzhou citizens who can easily hop on the driverless shuttle in the main district by simply tapping their city pass. It stands a paradigm of the future mobility that we envision, where autonomous vehicles are fully integrated with the local transportation system, enabling safe and seamless movement for the are also making headway in the international market, bringing our products to Switzerland, Spain, and France. In March, our Robobus was granted an operation permit by France, making WeRide, the first and to-date, only autonomous driving company whose products have received operational approvals in five countries, including China, the UAE, Singapore, France, and the and safety are the cornerstones of our success. Our autonomous mobility product all operates atop what we call we ride one and autonomous driving technology platform designed to handle a broad spectrum of operational environments from complex urban settings to full-day functionality and varying weather is proven adaptability. It's proven adaptability in a range of real-world applications provide a fundamental tech advance, tech advantage over our high level of universality of WeRide One has recently demonstrated once again through our [Robo One advertise], which secured Guangdong's first top, first group of driverless testing permits for logistic equipment in less than three months after the product powerful adaptability of rewrite one is further demonstrated by our real-world operations across a broad geographic area. The initial deployment of our AV fleets in a new city can be completed in just a couple of weeks, enabling rapid adoption for our believe safety is the best test of autonomous driving technology. In over 2000 days of operation, our safety records remaining industry leading. Well, we have iterated multiple times. We have not had any accidents attributed to the failure of our autonomous driving systems. Our commitment to safety and transparency is key to earning the confidence of both regulator and also leverage our core autonomous mobility know-how in our ADAS business. In April this year, we announced a partnership with QNX, a division of BlackBerry, to work together to enhance the safety and the reliability of our ADAS integrating QNX OS for safety into our a system we pilot, we ride is helping OEMs and tier-one companies fast track the future of intelligent vehicles.I will now hand over the call to our CFO, Jennifer Li, to discuss our financial results in more details. Jennifer, please go ahead. Jennifer Li Thank you, Tony. Hello, everyone. Before we get into the financials, please know that all amounts are in RMB and all comparisons are on year-over-year basis, unless otherwise let's discuss our first quarter financial performance. Total revenue for the first quarter of 2025 increased 1.8% to RMB72.4 million, primarily driven by the growth in product revenue, which was partially offset by a slight decline in our service has been one of the core drivers in our business following our -- achieving the record high Robotaxi revenue for the financial year of 2024. We continue with the momentum in the first quarter of this year, with Robotaxi revenue of RMB16.1 contribution in group revenue reaches 22.3%, rising from 11.9% of the same period of 2024. Product revenue delivers strong growth, increasing by 46.7% to RMB9.5 million for the first quarter. This encouraging growth was primarily driven by a substantial increase in the sales of RoboTaxi and Robosweepers, which were introduced into a new international market with expanded RMB62.9 million, primarily due to a reduction of RMB33.5 million in revenue from ADAS research and development services as the customized R&D project for a certain client has been completed in decline was partially offset by an increase of RMB29.8 million in revenue from intelligent data services and an increase of RMB1.9 million in revenue from operational and technical support services as technical support engagement increases quarter along with the transition into the operation phase of certain recorded a group level growth margin of 35.0%, representing a gross margin for a product of 49.9% and a gross margin for service of 32.8%, respectively. This reflects a sustaining improvement of our business structure in line with our Robotaxi business expansion and globalized are building a sustainable business model by engaging trusted partners and localize deployment. It helps us sustain a healthy gross profit turning into our operating expenses, we recorded a rise of 14.2% for the first quarter, amounting to RMB463.5 million. The increase was driven by a 48.4% rise in personnel-related expense compared to the same period of remain highly cost cautious and disciplined. The increase of operating expense is mainly driven by our incremental R&D efforts. In this important phase of development, we prioritize strategic investment in talent acquisition and retention to drive our technological advancements. Combining with our expansion of selling and marketing activities, we aim to solidify our leading position by laying a sustainable further break down, R&D expense represents 70.3% of operating expenses. This [line] item increased by 17.3% to RMB325.7 million compared to the same period of 2024, excluding share-based compensation, R&D expenses increased by 54% to RMB278 expense increased by 5.2% to RMB123.9 million compared to the same period of 2024, excluding SBC, administrative expense increased by 105.8% to RMB73.9 million. Selling expense increased by 32.4% to RMB13.9 million compared to the same period of 2024, excluding [SBC]. Selling expenses were up 66.7% in the first net loss decreased by 17.7% to RMB385.1 million in the first quarter of 2025. On a non-IFRS basis, the net loss increased by 108.2% to RMB294.6 million, which was mainly contributed to our continuous investment in R& of March 31, 2025, we held a total capital reserve of RMB6.2 billion, including RMB4.4 billion in cash equivalent, and time million in restricted cash and RMB1.7 billion in financial assets, mattered at fair value through profit and loss. We believe that our strong cash capital position will continue to support our ongoing R&D initiative and facilitate the expansion of our growing global a separate note, our board has recently authorized a share repurchase program under which the company may repurchase up to $100 million of its class A ordinary shares over the next 12 months. It indicates a vote of confidence in our business fundamentals, growth trajectory, and long-term conclusion, we feel encouraged by our financial performance of the first quarter. As we continue to scale our operation with additional deployment underway in international markets, we are confident to build on the success and turn global opportunity into long-term value for our stakeholders. With that operator, we are not ready to take on questions. Operator (Operator Instructions)Tim Hsiao, Morgan Stanley. Tim Hsiao Hi, thanks for taking my question. This is Tim from Morgan Stanley. I have two questions, and both are related to collaboration with the first question, we noticed that Tony briefly touched on the collaboration with Uber at the beginning of the call. I just want to quickly follow up on why WeRide and Uber decided to expand this partnership. It'd be great if you can share more callers on the deal with us. That's my first question. Thank you. Tony Han Okay, I will take this question. Thank you, Tim, for this question. So first of all, I think our expanded partnership with Uber builds on a proven model. This model is demonstrated by our successful integration of WeRide Robotaxi into Uber's in Abu this collaboration, WeRide delivers our tried and tested autonomous driving product. With Uber manages -- Uber will manage fleet operations and the customer success via its we also announced a joint global taxi launch in Dubai, where we are currently finalizing mapping and expect to begin operations I want to talk about this strong collaboration. So we have committed to deploying services across 15 major global cities within the next five years. This is a significant milestone for scalable autonomous mobility. And I think this partnership combines WeRide's world-class, autonomous driving technology and the international expertise with Uber's unparalleled marketplace reach and the operational also, I want to reemphasize as a testament of this alignment. Uber is already our shareholder, and we will invest an additional $100 million in WeRide over the next six months. To my best knowledge, this ranks among Uber's largest investment in non-affiliated autonomous driving beyond the technology, I think mission is very important. Our shared mission is to make autonomous mobility affordable and accessible worldwide. WeRide operates in over 30 cities across 10 countries with our research, R&D testing commercial into new markets, we are not just solving the mobility challenges. We want to invest in local ecosystem by creating jobs in management, maintenance, and customer support. So we have a community-oriented approach to ensure sustainable growth and I think we share this kind of mission with also believe that by leveraging both companies' leadership in our respective fields, we can accelerate the global adoption of autonomy of autonomous mobility service. So I think in terms of [not] to some technology and mission and approach and the shared value, I think Uber and WeRide are well-aligned. We are very excited for the next five years and 15 cities, globally. Tim Hsiao Great. Thank you very much for sharing all the details, Tony. And just another quick follow-up on the collaboration. So according to the announcement, also what you just shared, out of the 15 cities and probably others, the potential global market, which regions or market would be the main focus to rewrite for the Robotaxi right out?And then, in the following quarters, any signposts or milestones, the investors should monitor? Yeah, that's my second question. Thank you. Tony Han So about the regions of focus currently, we are focusing on markets mainly in Europe and the Mid East. So we are going to take a phased approach. So basically, we are not going to roll out like a Robotech service in one night in 15 cities, we want to add cities one by one. So new cities will come online each year, maybe probably three new cities every year. It's just a rough estimate. And we will be following a pattern of regulatory approval and then testing and then commercial operation and then scale deployment. So there are four for this fourth stage has been approved in our current deployment in Abu Dhabi, and I think soon it will also be improved in Dubai. And cities will be chosen based on favorable policies, guidelines, and the initiatives for autonomous also we are -- we want to, we are looking forward to really maximize social value and also want to create value for our long-term stakeholders. Operator Li Ping Zhao, CICC. Li Ping Zhao Good evening, Tony and Jennifer. Congrats for the strong Robotaxi revenue in this quarter. I got two questions could you, share with us your Robotaxi economics? How should we consider the cost structure as you scale?And second, could you please share more about your recent rollout at Guangzhou City Center? When should we expect you to start to provide a Robotaxi service in the whole city? Thank you. Jennifer Li Okay, I'll take the first question, Tony. We'll take a second. And so the first question on the Robotaxomics, let's just take a look at the the conventional rackuline, driver takes home roughly like 60% of each fare that's like 6 out of every 10. RoboTaxis revolutionized its model by reducing the driver cost to nearly nothing. Yes, we do have the vehicle cost for RoboTaxi, which is slightly higher than traditional taxi, but eliminating the 60% cost changes everything about the business cost optimization has been one of our key focuses, and we are making cautious, continuous let's talk about the vehicle cost. Leveraging on the booming and like more mature EV supply chain here in China, we have access to components of high quality and competitive we have also build in-depth collaboration with global OEM such as Reno and Nissan, and thirdly, we got a mobilized design of our sensors which enable -- enabling 90% shared component across different like autonomous driving products. We also converted to the more -- to the most cost effective semi-solid leather a few years leveraging on all of those, our autonomous vehicles are quite cost competitive. For instance, the cost of our sensor suite has reduced by more than 70% over the past five years. And going forward with the more integrated design and increasing adoption of redundant drive-by wire services, we anticipate another 20% to 30% headroom for a future, cost reduction for the next gen of today, we operate one of the world's largest AV fleet globally, over 1,200 vehicles, and with more than 500 dedicated robotaxis. All of our vehicles using the standardized tech as well as the similar sensors, same computing gives us -- this will give us tremendous buying power and make the maintenance so much simpler in the long run. Our OEM partnerships will help -- helps us keeping optimizing every part of the supply in short, compared to the traditional taxi and road [dealing] services, RoboTaxi is expected to be 50% or more cost effective in developed markets. We're doing testing and operation of AV in 10 countries seeing that on the ground, confirms a very critical pinpoint, many markets are facing very severe driver shortage, also this growing challenge in hiring and retention of the drivers. This is exactly where our solution and by working hand in hand with our local partners, we're not just deploying technology. We're solving real transportation prices caused by the labor shortage, all for this first question, Li Ping [weighs]. Tony, I'll leave you to the second question on the Guangzhou plan. Tony Han Yeah, I believe the second question is about like we want to discuss a little bit about our recent rollout at Guangzhou City also, you know, want some details about our local taxi service. So first of all, I want to say, last week, we launched China's first 24/7 autonomous ride-hailing network, covering the core areas of Guangzhou. As I mentioned, Guangzhou is a number 3 city in then our expanded Robotech service features actually 8 pilot operation routes in the city center, connecting landmarks and transport hubs such as the airport, Guangzhou South Railway Station, Canton Tower, and the Canton Fair you are familiar with Guangzhou, they are all the most -- busiest and also the most important place and the hubs and you probably if you come to Guanghou, you will visit these places. And when we first kick off commercial taxi service back in the year of 2019, we started in Guangzhou, this is a mega city with traffic, very busy traffic and the population is at least 20 date, we have been providing autonomous mobility service to the local citizens for more than 200 days, so I'm quite confident and quite proud for this achievement. The expansion of this service is very important milestone in the the first time, Robotaxis is allowed in the central area of such a big city. That's not easy, actually. It incorporates some of the most complicated scenarios we have ever seen, including really various road types and traffic conditions as well as very subtle interactions with a wide range of road users like passenger cars, engineering cars, pedestrians, cyclists, the three wheelers. You have to handle all of these it is a big challenge to our technology, but I think we solve all these issues quite well. And also being allowed to operate in central Guangzhou underscores our confidence in safety records and robust we will strive to maintain a high standard of service and we will also be very careful. We will expand progressively and responsibly in accordance with the requirement of local authorities. So I think that's all I want to say about this question. Operator Joel Ying, Nomura. Joel Ying Thank you for taking my question. This is Joe from Nomura, and I have two questions. For the first one, what's the implication of the recent launch of driver testing in Abu Dhabi? Is there any operation plan as the next step?And my second question is since we see some aggressive OEMs, also plan to enter into a Robotaxi business. So what's our company's view on it? Are they comparative, compared to level 4 players given their, they have more driving data and what is our edge on this? Thank you. Jennifer Li And then I'll take the first question. We're very excited about the driverless test in Abu Dhabi. To my knowledge, this is the first of its kind in the Middle East, and it's also the first time that Robotaxi without safety driver on public road is allowed outside China and the is a veteran in the Middle East. We started Robotaxi trial in UAE as early as 2021. The desert climate of the country, including high temperature and the sunny environment, created all the special challenges to the autonomous vehicles. Nevertheless, our Robotaxi delivered a high level of reliability and safety during the initial two-year public on this confidence, so WeRide secured the first national autonomous driving permit in UAE in 2023, which also remains the only national permit in the world as of today. Last year, our local operation entered into a new chapter. I'm sorry. (inaudible) Tony Han Have some water and then, we have plenty of time. Jennifer Li Yeah, speaking of our our join forces with Uber, it also allows us to provide local citizens with better services and accessibilities. So the driverless testing marks a major milestone as we begin driverless testing. This is a significant leap forward in the journey, in our journey in the Middle are also particularly excited to have received approval to expand our service area to include Abu Dhabi's Al Maryah Island and our community. So both islands, they'll be most like dynamic urban center in Abu Dhabi. We're very excited to bring the cutting-edge transportation solution to those now, Tony, I'll leave you to to the next question. Thank you. Tony Han Okay, yeah. You can take this time to really clear the throat. Okay. I'll answer the question. So, I think -- thank you, this question is really deep, and I really appreciate this question is about like our competition about against major car [audience] for Robotaxi service and my view and our edge. So first of all, I want to say the competition is ubiquitous. If you are [wild], if you are afraid of competition, you are not eligible to be a leading company. We already is the first mover and a leading company, autonomous we welcome competition and as long as the winner can bring the best quality of service, most reliable robotaxi service to ordinary people, the citizen, I think that will be great enough. But we are confident with WeRide because, first of all, I think our proven record has already shown, the superiority of our technology and also the reliability of our we -- over the past seven years, we have been closely working with some major car OEMs. The major car EMs help us to build the reliable vehicle platforms for global taxi service. And I want to say OEM actually plays a very important part in the whole ecosystem. We did learn a lot from all this said, I want to emphasize the difference between the ADAS system and the global tax system. Okay. ADAS system stands for advanced driver assistance system. So the major component who are responsible for driving a car is the person. L4 level Robotaxi is for autonomous driving vehicle. There are two different things, two different using ADAS for Robotaxi, it's just like mistakenly using an L2 system for L3 system will lead to very tragic accidents. I think some accidents we have already I want to emphasize, if you really want to do Robotaxi to L4, you really need to spend lots of time, lots of energy in simulation platform in Robotaxi fleet, sharper technology and test for millions of miles, only have a big user base is not Lots of time, a big user base only tells you that your car is very good, can produce a very good L2 system, but there's nothing to do. You have -- you can do an L4 system. So basically, a warrior, a great warrior on the land, maybe not so good warrior in the seafare, the sea warfare. So they are totally today, we ride real-world Robotaxi operation in multiple locations is actually supported by continuous investment in building and improving our platform. And it has, it's -- the safety has been proved over -- we want to pro -- very proudly announced like over the past seven years, we have a very good record that we haven't experienced any autonomous driving system failure. I think that's a very remarkable currently, we write is one of very few companies that have brought level 4 mobility to the public and we are really confident to maintain a leading position in this industry. Okay. Thank you for this question. That's all I want to say about this question. Operator Yawen Tan, BMP Paribas. Yawen Tan Hi, this is Yawen from BMP. Thanks for Tony and Jennifer's time. And thanks for the opportunities to discuss the exciting industry here. And I have two first one is there any specific plan for further expansion of the full size and operation area? And secondly, what's your view on regulations in different markets? Have we seen there are countries that is accelerating the adoption of L4 technology? Thank you. Jennifer Li Thank you. I will take the first question for the plan for future expansion. So as Robotaxi is penetrating, traditional mobility in different regions will remain a balanced strategy, between China market and international in China, we will gradually increase the deployment in selected tier-one cities. Our service was throughout step by step and which is in accordance to this adoption was map by the local authority. We have a track record of more than five years public operation in China and our recent development that entered into the city center in both Beijing and Guangzhou, it's a natural progress built on the existing we'll keep the momentum, keep on the momentum, already on the momentum. And in overseas market, we'll be scouting through strong global partnerships, so by working together with mobility and transportation stakeholders worldwide, will be able to localize and accelerate our deployment in the market, more in the international market more, example, some of our global partners including like say UAE, we have the integrated transportation center in Abu Dhabi and the road and the transportation authority in Dubai that are extremely in France, we have -- we have Renault, Beti, and Macif as our partner. And in Switzerland, we have the SPB which is the Swiss National Railway and we have the Canton of Zurich and Swiss Transit Lab, that are also, we are working on multiple projects in Switzerland as in Singapore, we have Chye Thiam Maintenance in Singapore. And we also have in Germany, we have Bosch as a key partner. So, last but not least, Uber is a key partner with our plan rolling out commercial Robotaxi service in 15 new cities, like say, if we're talking about the size, the expansion plan, so all those cities we're planning to enter typically have -- already have an existing red healing and taxi ecosystem that ranges from a few thousands to tens of thousands of shared mobility this is an ideal environment for L4 technology to integrate and to scale up. So as part of this partnership, we [rush] Robotaxi service will be available through Uber's app, and Uber will be responsible for the big as you can see, our global partner strategy is based on our shared execution, risk management, and local market insight. We're not entering into the new market alone, so alone, we're building a network of trusted global collaborators to accelerate adoption, to shorten the deployment cycle, and to meet the regulators expectation of each region I'll leave you to the next question on the regulation in different markets. Tony Han Okay, so I'll talk about like the regulations of different markets. And actually, there are markets that are favorable to autonomous driving vehicles. And so currently, I want to name a few like several countries in Mid East like UAE and Saudi and also several countries in Europe and of course, is very welcome and it's also very -- China is actually fostering auto driving vehicle. And so they are the major markets we want to deploy. So actually, there are also for the cities actually, for the countries like, if they really want to welcome or embrace the autonomous driving vehicle, that's because of, there are several factors they can one is the safety, number two is the cost of labors. So we -- you need to take all of these factors into account. And also, for in this region, for the countries that's favorable autonomous driving or need autonomous driving, or need global taxi service, I think that represents huge opportunities for first movers like we experience like this kind of increasing interest in every technology and actually, this kind of increasing interest can be demonstrated by our expansion and our operation.I just want to name a few actually, in January and May, we roll out our Robotaxi and Robobus service in Guangzhou City Center successfully. And that's what I have already mentioned. And in February, we actually received approval to launch our GXR for fully online paid red handing service in Beijing, just only four months after we officially announced the new purposely built Robotaxi in March, we obtained level 4 operation permit in France. In April, we parted with Dubai, Dubai's Road and Transportation Authority and Uber to integrate our local taxi fleet into Dubai's public transportation system. I'm -- I can't wait for this to come because in our dream, our mission is like to deploy local taxi all over the May, we have started for the driver is testing in Abu Dhabi. Actually, I'm currently -- in Abu Dhabi, I just tested, and I think it's now have deployed in 10 countries across Asia, Mid East, and Europe. From our experience, we understand that regulators are generally supportive towards autonomous driving, but condition on -- we can keep our track record for we are really optimistic about the future and we believe WeRide is well positioned to capture the expanding penetration for autonomous driving technology. That's my answer to this question. Thank you for this question. Operator Tian Wang Hu, China Securities. Tian Wang Hi, everyone. Can you hear me? Tony Han Yes, we can. Tian Wang Yeah, my first question is there any new product development that you could share, especially Robotaxi? Tony Han Okay. So, new products, we are actually, last October, we launched a new generation of Robotaxi GXR which is really a purpose-built Robotaxi tailored for L4 driverless. We also trimmed it for the deployment in the Mideast in like for like in today, like the temperature is like 40 degrees Celsius, or you have to have a car that is with very powerful AC and a very big actually upgrade our GXR to make it more suitable. It's a purpose to build global taxi to make it more suitable for the market of Abu Dhabi and the Dubai. And we -- to work on this, we worked closely with the GD Verizon to customize GXR. We spent tons of time and efforts on our proprietary sensors with 5.6 and our HPC are ready and integrating into GXR and it's very suitable for the extreme heat weather condition. And we also work on some redundant system. Okay. So the whole system, the GXR is full redundancy, several round of redundancies so that we have very reliable and stable braking and steering there's another thing I want to mention like for the new products and new things like that is we are going to further upgrade GXR with the computational platform. In the second half of the year, we will build our computational platform for by newest Nvidia DRIVE Thor platform as you have already probably is the next generation Thor platform, extremely powerful and it has like, has a computational power, the whole computational power in our controller is actually more than 2000 tops. So, for the past five years, we also try to reduce the cost, like the cost of our census we have reduced by more than 70%.So we want to do it through innovation and new products. And for the next generation will taxi currently under development, I think we look forward to another 20% to 30% cost reduction and further details, we will review it after the spec be there are a lot of things, new things ongoing, that's the really happenings working on Robotaxi and this AI stuff, the new things comes every day. And we believe that with a powerful and smart brain, the new GXR will not only provide a high level of safety and comfortability, it will also our new purpose-built GXR will redefine the Robotaxi business and this car is ready for large deployment.I really look forward to see the large deployment of GXR in Abu Dhabi and Dubai. Okay, that's my answer to this question. Tian Wang Thank you. And my -- and I have another question. My second question is what's your view on the growing level of competition in China as more companies are rolling out autonomous driving technology? Tony Han As I mentioned in my answers in the previous question, right, as a leading global company, you have to face all kinds of competition, either globally or inside China, either from [Haoyue] or from ADAS system company or from Robotaxi, another Robotaxi for my view over my view is like the competition is good. I love the beauty of the free market, right, so through trading through competition, the customers can get the most cost-effective and high-quality products. What's wrong with that? That's a great but based -- are you worried about losing in this competition? I think for the past eight years of record has already shown, we might growth from 10 people start up to leading autonomous driving company with more than 2000 has already proven that, when we have nothing, we only have a few people, a very small farm, we can start to grow, and now, we are in very advantagous and in a leading position. We are very I always mention like we have 4-core pillars that we write apart from the competition. The four pillars, I want to name them one by one. They are tech competence; technology is always our foundation. Second, proven business model, and we are really looking to the large-scale deployment and also deploying global one is the safety and reliability collaboration record. Please go ahead to check your record. I believe we have the best safety record all over the world. And we have the first pillar is a strong partnership I have a time, do I still have some time? I want to elaborate actually these four pillars. Thanks for this question. So first of all, technology one, over the past eight years, we build up, we write one universal platform that can be deployed to use for Robotaxi, Robobus, Robosweeper, Robovan, and ADAS the same time, you get data from all over these five branches. So basically you are five times more efficient in collecting data, collecting common cases and five times more efficient improve your idea. You are deploying a large scale, not only in Robotaxi fleet, but also in Robo -- when in Robosweeper. That's a grand vision from me right?And I think no other company has such a grand vision, and I see no other company has achieved the concrete steps for such grand for proven business, look at our operation, I think I'm quite proud and every step we have create a repeatable, scalable, and monetizable business model across multiple verticals, including mobility, logistics, and the that proves actually our autonomous solution can address a variety of real-world challenges. So, we operate in 30 cities across 10 countries. So that means like the business-model approved, not in a time frame but also pillar, safe and reliable record. I want to read you something about some record. So our L4 autonomous vehicles have undergone successfully, successful tests, and commercial deployment in diverse and extreme environments including urban village in China such as congested and unpredictable road environments in downtown in a very northern part of China, Heihe, and that is like 30 degrees below, 30 Celsius degrees below zero in winter and also, in Abu Dhabi, the high heat where I'm currently sitting in the office, 40 degrees Celsisu. We show that we can still operate one, very strong partnership, we emphasize many times our collaboration with Uber, with all different local authority in Switzerland, with France, Singapore, UAE, and we also have partners with multiple partners in Singapore, like in Resort World Sentosa and the robots operation. So I won't be able to name them this way long list and also for ADAS system, we work with the top one, tier-one supplier Bosch. So with all of this, I think, from the competition, we are confident, and I think that's also the value of WeRide. Okay, that's my answer to this question. Operator Leo You, CLSA. Leo You Hi. Good evening, management. Thank you for the opportunity. So I want to ask about the use of cash. So we're quite excited about the share repurchase program. So would you please share more about your thoughts behind rolling out the program now? And how would you strike the balance between the shareholder return and investing in technology and products. Jennifer Li I'll take this question. Thank the board has authorized a share repurchase of $100 million, which reflecting their -- reflects their strong confidence in the company's solid foundation, and the leading position in the autonomous driving industry and the compiling long-term growth the proposed restructure can be made from time to time in the form of compliant transactions. So yeah, so, we think this initiative can allow us to opportunistically to buy back shares, we miss these opportunities, which also demonstrating our commitment to deliver value to the shareholder while maintaining financial flexibility for future growth. Yeah. Leo You Okay. Thank you, Jennifer. And I have another question on the financial part, so can you share more about the growth drivers behind the product revenue and service revenue in the first quarter and how do you see the trend of the revenue line? Jennifer Li Yeah, so, at this stage, so our growth momentum for the first quarter, it's primarily attributed to the growth of the Robotaxi business and our global at this stage, given, all the revenue for different product line is still relatively small, so we think we'll just like focusing on the product itself, instead of like breaking down for -- because the product and service makes changes every quarter as sometimes when we deliver like a mega project for one quarter, so the product revenue can significantly increase and on a different quarter while the service revenue can be the dominant factor for the then, let's -- if they're talking about the Robotaxi service at Robotaxi as a business. So this is our core business from day one and so the revenue contribution for Robotaxi witnessed a significant increase of 10.4% year on year, which marking up like 22% of the total revenue of this quarter. This is based on our knowledge and it's also like largest, like published, like announced the Robotaxi revenue among the and the margin level, we're still at a very healthy like level of around like gross margin of around 35%. So yeah. Operator Thank you. If there are no further questions, I'd like to hand the conference back to our management for closing remarks. Tony Han Okay. So, everyone, thank you again for your participation. I would also like to take this opportunity to thank our partners and our employees. I have to say none of the progress is possible without their support and hard we look forward to speaking with everyone again in our next call. Thank you. Goodbye. Operator Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Yahoo
20-05-2025
- Business
- Yahoo
Q1 2025 NIU Technologies Earnings Call
Kristal Li; Investor Relations Manager; NIU Technologies Yan Li; Chairman of the Board, Chief Executive Officer; NIU Technologies Fion Zhou; Chief Financial Officer; NIU Technologies Kyle Wu; Analyst; Citi Research Jing Chang; Analyst; CICC Michael Simmons; Analyst; Global View SA. Operator Good day ladies and gentlemen, thank you for standing by and welcome to the NIU Technologies First Quarter 2025 Earnings Conference Call. (Operator Instructions) Now, I will return the call over to Ms. Kristal Lee, Investor Relations Manager of NIU Technologies. Ms. Lee, please go ahead. Kristal Li Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss NIU Technologies with us for the first quarter 2025. The earnings press release, corporate presentation and financial spreadsheets have been posted on our investor relations website. This call is seeing webcast from our company's IR's as well, and a replay of the call will be available note, today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Security Litigation Reform Act of 1995. Forward-looking statements involves risks, uncertainties, assumptions, and other factors. The company's actual result may be materially different from those expressed information regarding the risk factors is included in the company's public filings with the Security and exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by earnings press release and this call included a discussion of certain non-GAAP financial measures. The press release contained 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. Now let me turn the call over to CEO Yan. Yan Li Thank you, Kristal. Hello everyone, thank you for joining us today. In the first quarter of 2025, we achieved a total sales volume of 2,003,000 units, marking a significant 57.4% year over year growth. Behind its strong performance was a 66% year over year increase in the sales volume in the China market and a 6.4% year over year growth in the overseas revenue for the first quarter reached to RMB682 million reflecting a 35% increase compared with the same period last year. The gross margin rebounded to 17.3% with 4.9% year over year increase, primarily driven by the pump cost reduction in product platformization, component standardization and procurement cost performance in Cuba in 2025 has set a tone for the rest of the year underlying our drive for high volume and revenue growth, as well as the possibility improvement. Taking a closer look at our performance in China, sales volume reached to 183,000 units in this product portfolio strategy emphasized on NIU Technology, innovation and expanding sales channels as well as targeting marketing strategy for the key drivers to the strong domestic performance. In Q1 2025, we maintain our focus in our key product strategy of NMU and enhance our existing products through upgrading and refining our product portfolio, which led to optimize product mix and offer our customers an even more enjoyable writing experience. Additionally, we step up our motorcycle offerings, introduce model like MX, ML, and FX. The expansion divers by our electric motorcycle range and helps to broaden our sales was successfully launch a comprehensive range of electric motorcycles, including the MX, ML and SX series spanning price range from RMB4,000 plus to over RMB10,000. Each model features significant enhancement in functionality and smart technologies aligning with our new performance and safety additions have significantly expand our electric motorcycle portfolio, offering consumers a more diverse options for reinforce our position as premium brand in the electric two-wheeler delve into detail of each product, on March 21, we first launched the NX Pro motorcycle price the RMB 9,999, position as the speed champion among the sub 10,000 RMB electric motorcycles. It's equipped with 72 volts, 42-amp hour high energy lithium battery, offering a range of over 90 kilometres on one by a motor with a peak power of six kilowatts and a boost mode. It hits the top speed of 80 kilometres per hour and accelerates from 0 to 50 in just five point four seconds. The power in intelligent fast charging system allows for full charging in only five NX Pro received around 2000 preorders and set the sales record on a platform like Douyin and T-all on its launch date. This model has established itself as a pioneer in the high-end two-wheeler motorcycle market, reinforced new reputation for high performance and attracting a younger demographic that values speed and significantly boost our presence in the premium electric motorcycle sickness. We also launched our entry level and the smart electric motorcycles. The upgrade included enlarged footboard, extended seats and expanded storage comes equipped with advanced intelligent features such as full color display, TFT display with the measuring navigation, as well as okay go and go by a 2000 watt power motor, that the top speed of 55 kilometres per hour and includes the TCS as a standard features. Price the RMB4,799 that offers a compelling combination of performance, smart technology, and affordability. We also expand our S series with the FX Pro, FX Sports, and FXCD completing the S series product lineup on their full aggressive design, those models now come with enhanced features such as full color TFT display, expanded battery compartments, offering options of 72 volts, 42 a power lithium batteries or 72 volts, 35 a power the asset models delivered 45% increase in the top speed and a 75%, 72% boost in the peak in power. The S series also featured dual channel ABS and the magic wheel, which significantly enhance playability and ease of the operation, establishing F series as a performance powerhouse. We launched that series on May 13, platform such as T-a, JD and Doe, and this series is set starting besides the electric motorcycles, we have also integrated those technologies into our electric bicycle line elevating the categories with innovation technologies. We start with the popular signature electric bicycle models such as an XT, and LT, MT and MMT, those approach bring a premium electric motorcycle experience to the electric bicycle NXT launch on the March 21, stands out as the first electric bicycle equipped with dual channel ABS, a 12-inch full disc motor, and a standard boost launch mode. The NXT similarly incorporated the top tier electric motorcycle features. Those advancement has made a high favour choice among the consumers, setting a new benchmark in the electric bicycle we also unveiled two new models and the M series targeting the female users, the MT and MMT. The MT stands up for ultra compact design, a vibrant color options and user-friendly features like GoPO systems, making it especially suitable for female users seeking a convenience and style. The MMT is smaller model, embraced the iconic M series design with fresh colorful aesthetics and a comfortable writing experience tailored to a diverse preference of Gen Z female users as targeting those demographics, the M series accounted for an impressive 32% sales in Q1, reinforcing its appeal and market in Q1, our strategic emphasize on standardizing those key product platforms has shown a sign of progress they enhance our R&D process and also reduce our bond cost, contributing a significant improvement of our gross margin in the China market. The positive impact was evident in Q1, the product, we also roll out a series of features in smart technologies, such as a full function by inch TFT display, the magic will, all those focusing on similar driving experience, AI smart control assistance and AI smart ecosystem features. Also, in terms of driving 50, we have a partner with Goo Maps to develop the industry pioneer data-driven dynamic safety warning system facilitate an advanced functionalities include one spot warning, a rear vehicle approach warning that AI pilot the traffic light has already been implemented in our new NX, NXT models with a more advanced feature to be released in Q2 and Q3 this year. We're aiming at a significantly enhanced riding safety and uplifting or riding experience for our in last quarter, we also continue to enhance our brand influence our products among the target consumer groups, especially the premium consumers and Gen Z riders. On March 21, the launch of our NX Pro was marked by strategic partnership with the renowned Game for Peace, this collaboration introduced a new cup racing tournament within a game which quickly topped the trending list on platforms like Weiboodou in advertising campaign spend over 10,115,000 placements across 160 major cities, targeting prominent landmarks, key business districts in the subway systems, and offices elevators garnering over 2.4 billion views. Also on May 13, we our electric motorcycle matrix products targeting the premium users and Gen Z users. With the NX and also the FX launch become a milestone in 2025 with stocking sales of over RMB100 million sales in just first, five hours and the volume of 10,000 units in terms of channel expansion, we continue our previous strategy with strong focus on penetrating the previous underrepresented market in China, strategically expanding our retail footprint to ensure our product reaching a broader consumer base. We have expanded our retail footprint by opening about 384 new stores in Q1 with significant focus on tier 3 and tier 4 cities, accounting for 50% of the new opening strategic expansion rein distribution network and also paved the way for upcoming launch of electric motorcycle product in additionally, our online presence has been strengthened with sales improvement across multiple online channels such as our official brand accounts, the localized accounts, regional localized account, also the 400+ store strategy has hosted about 10,000 live broadcasts, generating 430 million views, marking a 6 ex increase compared with Q1, 2024 last year. This has significantly boosted our online visibility and customer interactions, contributing about 100,000 units of sales, representing 60% of our total sales let me turn to the overseas market. In the overseas marketing Q1, 2025, the sales volume reached to 20,000 units. Within the overseas market, we focused on electric two-wheeler market, which is the electric mopeds and electric electric two-wheeler market achieved over 3% increase due to the readiness we put in place on the direct distribution operation in the key countries such as Germany, Italy, and France, and those direct operations contributed more than 50% of sales in with the logistics financing CRM system, also the underground team we have really built the operation in those key countries and accelerated in network expansion. The end of Q1, 2025, the number of dealers in those direct distributed regions have increased from 120 to 180 dealers with projection to reach about 250 dealers by mid-2025, exceeding our initial have also introduced the full line of electric two-wheeler products from 50 cc equivalent LYE models to 125 cc equivalent L3E models, as well as the motorcycles. Those product price between EUR2000 to EUR4600 catering to a diverse consumer the first batch of new product was shipped in 12,025 and now it's been stocked in local warehouse ready for the peak season sales in Q2. Now with those full lineup of electric to their products to electric motorcycles, most opt motorcycles, and also the direct distribution operation in place. We anticipate exponential sales growth targeting 3x to 5x increase in 2025 with Q1 as the early indicator of such the fast growth in the electric two-wheeler sectors with the direct distribution regional anticipate accounting for 60% to 80% of sales will contribute significantly our profit profitability turnaround in the international for the micro mobility market for the international markets such as the kick scooters and the for the e-bikes, Q1, 2025 is the underperforming quarter with nearly flat volume growth and delayed profitability turnaround due to the tariff situation in the US and also the inventory clear out in Europe. In Europe, our Q1 focus on sales out of all the inventories, he has the impact of gross margin and all the inventory impacts will continue partially into Q2, but we expect to be minimized by the second half of this year. Now in the US, the uncertainty around the tariff situation we deliberately hold back the sales of existing inventories in the US marketing Q1 for more have implemented the price increase in online channels in Q1 and negotiate offline channels for price increases to be factored in late Q2 and early for the supplies to the US market, our manufacturing in Southeast Asia have already dispatched our first delivers in late Q1 2025, taking advantage of the 10% tariff window. The ship product has not been reflected in the sales we are carefully watching the tariff situation. However, with the negotiated price increases and the inventories prior to the tariff hike, we expect to regain profitability for the second half in 2025 for the US micro mobility overall remain optimistic about the China market in Q2 2025, building on strong foundation in product development and also the brand momentum. This has already produced the positive initial results in Q1. On the product side, we will continue to focus on product portfolio on our core NMU and F series. The launch of the newly operated in the F series in Q2 is expected to elevate our attractiveness and recognition within the high premium consumers and the Gen Z the launch of motorcycle products has diversified our product portfolio, offering consumers a wide array of options. Also, we have moved up the launch of a new product in Q2 to May 13, right before the China top sales season of June 18, to take advantage of we'll continue to expand our sales channels, expanding, expecting to add another 300 to 400 stores in Q2. The channel expansion will drive sales growth, but also shows a sign of channel momentum turn around this lastly, we will continue to improve our gross margin as a result ratiovia product platformization in finally, we have worked diligently to modify our current product line up, to create a new design style to cook with the new electric bicycle standard in China to be in place in September. We have a solid product line up development ready to be in the market by looking at the international market, with the trend we observe in Q1 and Q2, we anticipate a steady growth in the overseas market and turn around profit loss this year. In the electric cooler market with a complete product portfolio and the established direct distribution operations, we anticipate a hyper growth in both revenue and profit sales growth we saw in Q1 is a testament to this foundation we have built. In the following quarters, our focus will be on expanding the direct distribution operations at a higher contribution the micro mobility market, even with the turmoil on the tariffs, we have started to return around signs from profitability perspective. With the clearing out of our inventory in Europe and also the clarity with the US tariff situation, we expect to rebound with the moderate growth and a significant improvement in the I'll turn over to our CFO Fion Zhou to talk about financial. Fion Zhou Thank you, and hello please note that our press release contains all the figures and comparisons you need, and we have also uploaded the Excel format figures to our IR website for your reference. As I review our financial results, I'm referring to the first quarter figures unless I say otherwise, and all monetary figures are non-not specified. At the end just mentioned, our total sales volume for the first quarter was 203,000 units, up 57% compared to the same period of last year. 183,000 units were sold in China, while the remaining RMB20,000 were sold total revenue for the first quarter amounted to RMB682 million, an increase of RMB177 million or 35% compared to the same period of last year. The China revenues were RMB608 million, accounting for 89% of the total revenues. Of this, the scooter revenue was RMB546 million a year increase of 39%. This increase was mainly due to the increase in sales volume and partially offset by a decrease in revenue per scooter ASP was found to nearly RV 3,000. This decline in ASP was primarily attributed to a shift in product mix. The notable increase in sales volume of high-end la asset models as mentioned in the previous quarters last year, has led to a more concentrated retail price range from RMB3,000 to RMB7, the overseas revenue was RMB74 million, representing 11% of the total revenue. The scooter revenues, including electric motorcycles, mopeds, kick scooters, and e-bikes, amounted to RMB60 million, up from RMB49 million in the same period of last year. And this growth was driven by stronger international demand. For electric motorcycles and mopeds, which command higher retail price and the premium pricing of these products also contributed to a year over year increase in the overseas AP rising from RMB22,577 to RMB2, the revenue from accessories spare parts and services amounted to RMB76 million a 20% increase compared to the same period of last year due to the increase in the spare parts sales in both China and overseas gross profit for the first quarter exceeded RMB118 million, marking a significant improvement compared to RMB96 million during the same period of last year, and the gross margin was 17.3%, 1.6 PPT lower than the same period of last year, but 4.9 PPT higher than the previous domestic market growth margin improved due to the successful cost reduction initiatives, which increased the overall GM by 1.2 the overseas cooler margins dragged down the total growth margin by 2.8 PPT, primarily due to the three factors. The impact of 25% of the US tariffs implemented last freight cost and aged inventory write operating expenses for the first quarter were RMB165 million remaining flat compared to the same period of last year. However, the OPEC ratio declined significantly from 32.7% to 24.2%. Selling and marketing expenses rose by RMB9 million year over year to RMB150million and RMB150 million driven by a higher staff cost, advertising and promotional activities and rental expenses. Selling and marketing for 16.8% of revenue, down from 20.9% in the first quarter of 2024. R&D expenses increased by RMB1 million year over year to RMB30 million, primarily due to the higher staff cost and share risk compensation. The R&D expenses as percentage of revenue are 4.4% compared to 5.7% in the first quarter of 2024. GNA expenses. By RMB10 million year over year to RMB21 million largely attributed to the foreign currency exchange gains and GNA expenses as percentage of revenue was 3%, a notable reduction from 6.1% compared to last fourth quarter in the first quarter we had a net loss of RMB39 million with the net loss margin of 5.7% on the non-GAAP accounting compared a net loss of RMB55 million with the net loss margin of 10.9% for the same period last adjusted net loss was RMB31 million with an adjusted net loss margin of 4.6% and turning to our balance sheet and cash flow, we ended the quarter with RMB963 million versus RMB1.1 billion last year. In cash, restive cash, term deposit, and short-term investments, and our operating cash outflow amounted to RMB154 caps for the first quarter amounted to RMB24 million, reflecting an increase of RMB3 million compared to the same period of last year, and this can be attributed primarily to an increase in the opening of new stores in let's turn to guidance. We expected the second quarter revenue to be in the range of RMB1.3 billion to RMB1.4 billion an increase of 40% to 50% year over be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectation which is subject to change due to the uncertainties relating to our various factors and with that we're now open the call for any questions that you may have for us, operator, please go ahead. Operator (Operator Instructions) Kyle Wu, Citi Research. Kyle Wu Thank you, operator. Hi, this is Kyle from Citi. Thanks for taking my questions. I have two questions. First is about the sales volume guidance. At the year beginning, we guide, 2025 full year sales volume to be 30% to 50% year on year growth. Do we still maintain this volume guidance? Second is about the margin. What's our margin outlook for the upcoming quarters of this year? And also, do we still expect second quarter to see net profit turnaround, thank you. Yan Li Yeah, let me address the first one. In terms of guidance for the annual volume we haven't reached, we have not changed the guidance. I think we're on the path. Fion Zhou Okay, for the growth margin annually, actually last year, our overall growth margin was only 15.2% overall, and for sure this year the annual growth margin will be recovered from 15%. And for the quarter this year, we still expecting that the, we will get the profit from the next margin, so the MP is the positive expectation for us. Kyle Wu Okay, thank you. Fion Zhou Hope you got answer for this question. Operator (Operator Instructions) Jing Chang, CICC. Please go ahead, your line is Jing Chang Hello, I have one question. I have seen that the average selling price decreased the quarter to quarter in Q1, but the gross profit margin improved significantly quarter to quarter. So I'd like to know what the main reason is and what is the outlook for average selling price in subsequent quarters. This is my question, thank you. Fion Zhou Okay. I'll take this question. Actually, in this quarter, the ESP, especially the China ASP dropped due to, we launched the new models, from starting from last year, the launch date of our new models, especially the flagship models vary each year. For instance, the retail price of MP 2025 is this quarter's best seller. The price ranges from RMB, nearly RMB4,000 to RMB5,000, whereas last year we launched the NXT last Q1. This is, our last year's top seller and the price between the RMB6,000 to around RMB12, the launching date of our new model. Actually, various our ASP each quarter, but this ASP will smooth if we're looking forward to the next, to the following quarters, especially the NASP as we just explained to the market that, the ESP will remain almost the same compared to last year or, change a little bit single digital change, for the, second quarter after this year actually we expected the ASP, especially in the domestic market will recover, compared to the Q1 this year, but we will, we concentrated actually the models retail price. Well concentrated in the range from RMB3,000 to RMB7,000. So, the ASP will, rebound from this quarters, RMB3,000 to around, RMB3,000 to RMB3,500 ASP in the domestic this is our expectation in the in the quarter two ASP and as to the gross margin recovered as I just explained that this quarters growth margin, recovered, especially from the, our domestic schoolers cost last Q4 we see a dramatic growth margin, drop down, due to our assets, motorcycles and moped in the domestic market contributed, more than 40% of our sales volume which are which are 3% to 5% gross margin lower than the same here in the recent one and we began to we began to change the smart function platform and also, the R&D, the R&D platform and also the cost reduction from the raw material and this quarter we saw the benefits from the cost reduction in the domestic market and in think the world's margin will, remain at this level, but you will change, a little bit, due to the product mixed in the domestic market, but will not go back to, lower than 15% as last year showing the figures. This is the this is the gross marking and the ESP for this year's explanation. Jing Chang Thank you very much. That's all my questions. Operator Michael Simmons, Global View SA. Michael Simmons Thank you. Yes, it's Michael here, Michael Simmons. Dr. Lee, perhaps I can just ask you a little bit about the balance sheet. I think it's the cash position has kind of come down a little bit, given what you've just been talking about and it sounds like the second quarter is looking quite good. How do you think the cash position, the net cash position is going to look at the end of the year? Fion Zhou Well, actually, each year the quarter one is the cash position is the lowest since it's the Chinese New Year, we need to clear out all the advance to the suppliers, the accounts payable, and also the notes payable to the bank. So if you're looking back to 2024 and 2023 each year, the fourth quarter's cash balance is the lowest, during the whole at the end of this year 2025 actually we expected the cash position will grow up starting from quarter to, since the peak season, both in the domestic market and the overseas market is coming and we give a high speed sales volume increase aligned with the revenue increase and this will brought us. The operating cash flow inflow starting from quarter to and we didn't expect a large pay for the for the furniture and equipment and also the doors open. So overall we think the cash position at the end of this year will be, higher than, the end of December 31, in 2024. Michael Simmons Great, thank you. Operator Mr President, we will take our next question. Zyan Wayan, South Capital. Okay. This is Daniel from CIA Capital, and I have only one question regarding overseas business. Why is good, as we, know that, why good revenue, has been negatively impacted by tariffs. Electric motorcycle sales have shown growth. How should we interpret the growth rate target for overseas operations under this these circumstances, thank you. Yan Li I think for the overseas growth rate, we remain; to be, we haven't really changed through our forecast. For this year, I think even at the last quarter when we, we talked about the last year results and even the forecast of this year, we know that our electric tool or the electric motorcycle market, the growth rate will be quite high because they start with actually, last year we only did about 3,000+ units of electric motorcycles and then during our peak time. We actually did it, close to, weigh about 20,000 we look at, the, that, the starting from 3,000 units last year, we look at a really a hyper growth this year, looking at somewhere at least 5X to 6X growth on the electric motorcycle side. On the, the which, on the quarter one where you see a 3X growth the micro mobility, the kick scooters, so we, the US tariff really started to impact us last year when, our tariffs actually increased to 25%, on May 30, post May 31, last year. So that already has an impact on the business. So we actually start to Relocating the manufacturing base from China to Southeast Asia, to try to cope with that 25% tariff where back then the Southeast Asia, it was a 0% I mean this quarter, Q1 this year, we see, the basically the tariff goes in the Southeast Asia tariff up to 10%, but the China side actually went up significantly. So we actually consciously made adjustment saying by holding off the sales for the US market. But you look at the entire year, I think the demand there with our Southeast Asia manufacturing base in place, also with how we negotiate the price increase. With a key US retailers like Best Buy, Walmart, I think we should be able to see that business goes as normal as what we expected at the beginning of the overall, I think with the micro mobility, both on the US, Europe, I think our key three footprint are US mark, well, the entire North American market, basically US and Canada, and also the European market, as well as some of the Australian market, New Zealand market. We expect moderate growth. We don't expect that business grow at 2X or something. We really expect.A simple double-digit growth, and with the key goal is actually a, I turn around the profitability. I think if you look at the two international market segments with the electric motorcycle, I think it's a hyper growth with the high profitability contribution and on the kick scooter or micro mobility market, you really should expect this moderate growth, but with the key focus on turning around from a profit loss to a profitability business unit. Okay, thank you. Operator There seems to be no further questions. I would like to hand back for closing remarks. Yan Li Alright, thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and looking forward to reporting to you again next quarter on our program, thank you. Operator This concludes today's conference call. Thank you for participating. You may now disconnect. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
20-05-2025
- Business
- Yahoo
Q1 2025 NIU Technologies Earnings Call
Kristal Li; Investor Relations Manager; NIU Technologies Yan Li; Chairman of the Board, Chief Executive Officer; NIU Technologies Fion Zhou; Chief Financial Officer; NIU Technologies Kyle Wu; Analyst; Citi Research Jing Chang; Analyst; CICC Michael Simmons; Analyst; Global View SA. Operator Good day ladies and gentlemen, thank you for standing by and welcome to the NIU Technologies First Quarter 2025 Earnings Conference Call. (Operator Instructions) Now, I will return the call over to Ms. Kristal Lee, Investor Relations Manager of NIU Technologies. Ms. Lee, please go ahead. Kristal Li Thank you, operator. Hello, everyone. Welcome to today's conference call to discuss NIU Technologies with us for the first quarter 2025. The earnings press release, corporate presentation and financial spreadsheets have been posted on our investor relations website. This call is seeing webcast from our company's IR's as well, and a replay of the call will be available note, today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Security Litigation Reform Act of 1995. Forward-looking statements involves risks, uncertainties, assumptions, and other factors. The company's actual result may be materially different from those expressed information regarding the risk factors is included in the company's public filings with the Security and exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required by earnings press release and this call included a discussion of certain non-GAAP financial measures. The press release contained 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. Now let me turn the call over to CEO Yan. Yan Li Thank you, Kristal. Hello everyone, thank you for joining us today. In the first quarter of 2025, we achieved a total sales volume of 2,003,000 units, marking a significant 57.4% year over year growth. Behind its strong performance was a 66% year over year increase in the sales volume in the China market and a 6.4% year over year growth in the overseas revenue for the first quarter reached to RMB682 million reflecting a 35% increase compared with the same period last year. The gross margin rebounded to 17.3% with 4.9% year over year increase, primarily driven by the pump cost reduction in product platformization, component standardization and procurement cost performance in Cuba in 2025 has set a tone for the rest of the year underlying our drive for high volume and revenue growth, as well as the possibility improvement. Taking a closer look at our performance in China, sales volume reached to 183,000 units in this product portfolio strategy emphasized on NIU Technology, innovation and expanding sales channels as well as targeting marketing strategy for the key drivers to the strong domestic performance. In Q1 2025, we maintain our focus in our key product strategy of NMU and enhance our existing products through upgrading and refining our product portfolio, which led to optimize product mix and offer our customers an even more enjoyable writing experience. Additionally, we step up our motorcycle offerings, introduce model like MX, ML, and FX. The expansion divers by our electric motorcycle range and helps to broaden our sales was successfully launch a comprehensive range of electric motorcycles, including the MX, ML and SX series spanning price range from RMB4,000 plus to over RMB10,000. Each model features significant enhancement in functionality and smart technologies aligning with our new performance and safety additions have significantly expand our electric motorcycle portfolio, offering consumers a more diverse options for reinforce our position as premium brand in the electric two-wheeler delve into detail of each product, on March 21, we first launched the NX Pro motorcycle price the RMB 9,999, position as the speed champion among the sub 10,000 RMB electric motorcycles. It's equipped with 72 volts, 42-amp hour high energy lithium battery, offering a range of over 90 kilometres on one by a motor with a peak power of six kilowatts and a boost mode. It hits the top speed of 80 kilometres per hour and accelerates from 0 to 50 in just five point four seconds. The power in intelligent fast charging system allows for full charging in only five NX Pro received around 2000 preorders and set the sales record on a platform like Douyin and T-all on its launch date. This model has established itself as a pioneer in the high-end two-wheeler motorcycle market, reinforced new reputation for high performance and attracting a younger demographic that values speed and significantly boost our presence in the premium electric motorcycle sickness. We also launched our entry level and the smart electric motorcycles. The upgrade included enlarged footboard, extended seats and expanded storage comes equipped with advanced intelligent features such as full color display, TFT display with the measuring navigation, as well as okay go and go by a 2000 watt power motor, that the top speed of 55 kilometres per hour and includes the TCS as a standard features. Price the RMB4,799 that offers a compelling combination of performance, smart technology, and affordability. We also expand our S series with the FX Pro, FX Sports, and FXCD completing the S series product lineup on their full aggressive design, those models now come with enhanced features such as full color TFT display, expanded battery compartments, offering options of 72 volts, 42 a power lithium batteries or 72 volts, 35 a power the asset models delivered 45% increase in the top speed and a 75%, 72% boost in the peak in power. The S series also featured dual channel ABS and the magic wheel, which significantly enhance playability and ease of the operation, establishing F series as a performance powerhouse. We launched that series on May 13, platform such as T-a, JD and Doe, and this series is set starting besides the electric motorcycles, we have also integrated those technologies into our electric bicycle line elevating the categories with innovation technologies. We start with the popular signature electric bicycle models such as an XT, and LT, MT and MMT, those approach bring a premium electric motorcycle experience to the electric bicycle NXT launch on the March 21, stands out as the first electric bicycle equipped with dual channel ABS, a 12-inch full disc motor, and a standard boost launch mode. The NXT similarly incorporated the top tier electric motorcycle features. Those advancement has made a high favour choice among the consumers, setting a new benchmark in the electric bicycle we also unveiled two new models and the M series targeting the female users, the MT and MMT. The MT stands up for ultra compact design, a vibrant color options and user-friendly features like GoPO systems, making it especially suitable for female users seeking a convenience and style. The MMT is smaller model, embraced the iconic M series design with fresh colorful aesthetics and a comfortable writing experience tailored to a diverse preference of Gen Z female users as targeting those demographics, the M series accounted for an impressive 32% sales in Q1, reinforcing its appeal and market in Q1, our strategic emphasize on standardizing those key product platforms has shown a sign of progress they enhance our R&D process and also reduce our bond cost, contributing a significant improvement of our gross margin in the China market. The positive impact was evident in Q1, the product, we also roll out a series of features in smart technologies, such as a full function by inch TFT display, the magic will, all those focusing on similar driving experience, AI smart control assistance and AI smart ecosystem features. Also, in terms of driving 50, we have a partner with Goo Maps to develop the industry pioneer data-driven dynamic safety warning system facilitate an advanced functionalities include one spot warning, a rear vehicle approach warning that AI pilot the traffic light has already been implemented in our new NX, NXT models with a more advanced feature to be released in Q2 and Q3 this year. We're aiming at a significantly enhanced riding safety and uplifting or riding experience for our in last quarter, we also continue to enhance our brand influence our products among the target consumer groups, especially the premium consumers and Gen Z riders. On March 21, the launch of our NX Pro was marked by strategic partnership with the renowned Game for Peace, this collaboration introduced a new cup racing tournament within a game which quickly topped the trending list on platforms like Weiboodou in advertising campaign spend over 10,115,000 placements across 160 major cities, targeting prominent landmarks, key business districts in the subway systems, and offices elevators garnering over 2.4 billion views. Also on May 13, we our electric motorcycle matrix products targeting the premium users and Gen Z users. With the NX and also the FX launch become a milestone in 2025 with stocking sales of over RMB100 million sales in just first, five hours and the volume of 10,000 units in terms of channel expansion, we continue our previous strategy with strong focus on penetrating the previous underrepresented market in China, strategically expanding our retail footprint to ensure our product reaching a broader consumer base. We have expanded our retail footprint by opening about 384 new stores in Q1 with significant focus on tier 3 and tier 4 cities, accounting for 50% of the new opening strategic expansion rein distribution network and also paved the way for upcoming launch of electric motorcycle product in additionally, our online presence has been strengthened with sales improvement across multiple online channels such as our official brand accounts, the localized accounts, regional localized account, also the 400+ store strategy has hosted about 10,000 live broadcasts, generating 430 million views, marking a 6 ex increase compared with Q1, 2024 last year. This has significantly boosted our online visibility and customer interactions, contributing about 100,000 units of sales, representing 60% of our total sales let me turn to the overseas market. In the overseas marketing Q1, 2025, the sales volume reached to 20,000 units. Within the overseas market, we focused on electric two-wheeler market, which is the electric mopeds and electric electric two-wheeler market achieved over 3% increase due to the readiness we put in place on the direct distribution operation in the key countries such as Germany, Italy, and France, and those direct operations contributed more than 50% of sales in with the logistics financing CRM system, also the underground team we have really built the operation in those key countries and accelerated in network expansion. The end of Q1, 2025, the number of dealers in those direct distributed regions have increased from 120 to 180 dealers with projection to reach about 250 dealers by mid-2025, exceeding our initial have also introduced the full line of electric two-wheeler products from 50 cc equivalent LYE models to 125 cc equivalent L3E models, as well as the motorcycles. Those product price between EUR2000 to EUR4600 catering to a diverse consumer the first batch of new product was shipped in 12,025 and now it's been stocked in local warehouse ready for the peak season sales in Q2. Now with those full lineup of electric to their products to electric motorcycles, most opt motorcycles, and also the direct distribution operation in place. We anticipate exponential sales growth targeting 3x to 5x increase in 2025 with Q1 as the early indicator of such the fast growth in the electric two-wheeler sectors with the direct distribution regional anticipate accounting for 60% to 80% of sales will contribute significantly our profit profitability turnaround in the international for the micro mobility market for the international markets such as the kick scooters and the for the e-bikes, Q1, 2025 is the underperforming quarter with nearly flat volume growth and delayed profitability turnaround due to the tariff situation in the US and also the inventory clear out in Europe. In Europe, our Q1 focus on sales out of all the inventories, he has the impact of gross margin and all the inventory impacts will continue partially into Q2, but we expect to be minimized by the second half of this year. Now in the US, the uncertainty around the tariff situation we deliberately hold back the sales of existing inventories in the US marketing Q1 for more have implemented the price increase in online channels in Q1 and negotiate offline channels for price increases to be factored in late Q2 and early for the supplies to the US market, our manufacturing in Southeast Asia have already dispatched our first delivers in late Q1 2025, taking advantage of the 10% tariff window. The ship product has not been reflected in the sales we are carefully watching the tariff situation. However, with the negotiated price increases and the inventories prior to the tariff hike, we expect to regain profitability for the second half in 2025 for the US micro mobility overall remain optimistic about the China market in Q2 2025, building on strong foundation in product development and also the brand momentum. This has already produced the positive initial results in Q1. On the product side, we will continue to focus on product portfolio on our core NMU and F series. The launch of the newly operated in the F series in Q2 is expected to elevate our attractiveness and recognition within the high premium consumers and the Gen Z the launch of motorcycle products has diversified our product portfolio, offering consumers a wide array of options. Also, we have moved up the launch of a new product in Q2 to May 13, right before the China top sales season of June 18, to take advantage of we'll continue to expand our sales channels, expanding, expecting to add another 300 to 400 stores in Q2. The channel expansion will drive sales growth, but also shows a sign of channel momentum turn around this lastly, we will continue to improve our gross margin as a result ratiovia product platformization in finally, we have worked diligently to modify our current product line up, to create a new design style to cook with the new electric bicycle standard in China to be in place in September. We have a solid product line up development ready to be in the market by looking at the international market, with the trend we observe in Q1 and Q2, we anticipate a steady growth in the overseas market and turn around profit loss this year. In the electric cooler market with a complete product portfolio and the established direct distribution operations, we anticipate a hyper growth in both revenue and profit sales growth we saw in Q1 is a testament to this foundation we have built. In the following quarters, our focus will be on expanding the direct distribution operations at a higher contribution the micro mobility market, even with the turmoil on the tariffs, we have started to return around signs from profitability perspective. With the clearing out of our inventory in Europe and also the clarity with the US tariff situation, we expect to rebound with the moderate growth and a significant improvement in the I'll turn over to our CFO Fion Zhou to talk about financial. Fion Zhou Thank you, and hello please note that our press release contains all the figures and comparisons you need, and we have also uploaded the Excel format figures to our IR website for your reference. As I review our financial results, I'm referring to the first quarter figures unless I say otherwise, and all monetary figures are non-not specified. At the end just mentioned, our total sales volume for the first quarter was 203,000 units, up 57% compared to the same period of last year. 183,000 units were sold in China, while the remaining RMB20,000 were sold total revenue for the first quarter amounted to RMB682 million, an increase of RMB177 million or 35% compared to the same period of last year. The China revenues were RMB608 million, accounting for 89% of the total revenues. Of this, the scooter revenue was RMB546 million a year increase of 39%. This increase was mainly due to the increase in sales volume and partially offset by a decrease in revenue per scooter ASP was found to nearly RV 3,000. This decline in ASP was primarily attributed to a shift in product mix. The notable increase in sales volume of high-end la asset models as mentioned in the previous quarters last year, has led to a more concentrated retail price range from RMB3,000 to RMB7, the overseas revenue was RMB74 million, representing 11% of the total revenue. The scooter revenues, including electric motorcycles, mopeds, kick scooters, and e-bikes, amounted to RMB60 million, up from RMB49 million in the same period of last year. And this growth was driven by stronger international demand. For electric motorcycles and mopeds, which command higher retail price and the premium pricing of these products also contributed to a year over year increase in the overseas AP rising from RMB22,577 to RMB2, the revenue from accessories spare parts and services amounted to RMB76 million a 20% increase compared to the same period of last year due to the increase in the spare parts sales in both China and overseas gross profit for the first quarter exceeded RMB118 million, marking a significant improvement compared to RMB96 million during the same period of last year, and the gross margin was 17.3%, 1.6 PPT lower than the same period of last year, but 4.9 PPT higher than the previous domestic market growth margin improved due to the successful cost reduction initiatives, which increased the overall GM by 1.2 the overseas cooler margins dragged down the total growth margin by 2.8 PPT, primarily due to the three factors. The impact of 25% of the US tariffs implemented last freight cost and aged inventory write operating expenses for the first quarter were RMB165 million remaining flat compared to the same period of last year. However, the OPEC ratio declined significantly from 32.7% to 24.2%. Selling and marketing expenses rose by RMB9 million year over year to RMB150million and RMB150 million driven by a higher staff cost, advertising and promotional activities and rental expenses. Selling and marketing for 16.8% of revenue, down from 20.9% in the first quarter of 2024. R&D expenses increased by RMB1 million year over year to RMB30 million, primarily due to the higher staff cost and share risk compensation. The R&D expenses as percentage of revenue are 4.4% compared to 5.7% in the first quarter of 2024. GNA expenses. By RMB10 million year over year to RMB21 million largely attributed to the foreign currency exchange gains and GNA expenses as percentage of revenue was 3%, a notable reduction from 6.1% compared to last fourth quarter in the first quarter we had a net loss of RMB39 million with the net loss margin of 5.7% on the non-GAAP accounting compared a net loss of RMB55 million with the net loss margin of 10.9% for the same period last adjusted net loss was RMB31 million with an adjusted net loss margin of 4.6% and turning to our balance sheet and cash flow, we ended the quarter with RMB963 million versus RMB1.1 billion last year. In cash, restive cash, term deposit, and short-term investments, and our operating cash outflow amounted to RMB154 caps for the first quarter amounted to RMB24 million, reflecting an increase of RMB3 million compared to the same period of last year, and this can be attributed primarily to an increase in the opening of new stores in let's turn to guidance. We expected the second quarter revenue to be in the range of RMB1.3 billion to RMB1.4 billion an increase of 40% to 50% year over be aware that this outlook is based on the information available as of the date and reflects the company's current and preliminary expectation which is subject to change due to the uncertainties relating to our various factors and with that we're now open the call for any questions that you may have for us, operator, please go ahead. Operator (Operator Instructions) Kyle Wu, Citi Research. Kyle Wu Thank you, operator. Hi, this is Kyle from Citi. Thanks for taking my questions. I have two questions. First is about the sales volume guidance. At the year beginning, we guide, 2025 full year sales volume to be 30% to 50% year on year growth. Do we still maintain this volume guidance? Second is about the margin. What's our margin outlook for the upcoming quarters of this year? And also, do we still expect second quarter to see net profit turnaround, thank you. Yan Li Yeah, let me address the first one. In terms of guidance for the annual volume we haven't reached, we have not changed the guidance. I think we're on the path. Fion Zhou Okay, for the growth margin annually, actually last year, our overall growth margin was only 15.2% overall, and for sure this year the annual growth margin will be recovered from 15%. And for the quarter this year, we still expecting that the, we will get the profit from the next margin, so the MP is the positive expectation for us. Kyle Wu Okay, thank you. Fion Zhou Hope you got answer for this question. Operator (Operator Instructions) Jing Chang, CICC. Please go ahead, your line is Jing Chang Hello, I have one question. I have seen that the average selling price decreased the quarter to quarter in Q1, but the gross profit margin improved significantly quarter to quarter. So I'd like to know what the main reason is and what is the outlook for average selling price in subsequent quarters. This is my question, thank you. Fion Zhou Okay. I'll take this question. Actually, in this quarter, the ESP, especially the China ASP dropped due to, we launched the new models, from starting from last year, the launch date of our new models, especially the flagship models vary each year. For instance, the retail price of MP 2025 is this quarter's best seller. The price ranges from RMB, nearly RMB4,000 to RMB5,000, whereas last year we launched the NXT last Q1. This is, our last year's top seller and the price between the RMB6,000 to around RMB12, the launching date of our new model. Actually, various our ASP each quarter, but this ASP will smooth if we're looking forward to the next, to the following quarters, especially the NASP as we just explained to the market that, the ESP will remain almost the same compared to last year or, change a little bit single digital change, for the, second quarter after this year actually we expected the ASP, especially in the domestic market will recover, compared to the Q1 this year, but we will, we concentrated actually the models retail price. Well concentrated in the range from RMB3,000 to RMB7,000. So, the ASP will, rebound from this quarters, RMB3,000 to around, RMB3,000 to RMB3,500 ASP in the domestic this is our expectation in the in the quarter two ASP and as to the gross margin recovered as I just explained that this quarters growth margin, recovered, especially from the, our domestic schoolers cost last Q4 we see a dramatic growth margin, drop down, due to our assets, motorcycles and moped in the domestic market contributed, more than 40% of our sales volume which are which are 3% to 5% gross margin lower than the same here in the recent one and we began to we began to change the smart function platform and also, the R&D, the R&D platform and also the cost reduction from the raw material and this quarter we saw the benefits from the cost reduction in the domestic market and in think the world's margin will, remain at this level, but you will change, a little bit, due to the product mixed in the domestic market, but will not go back to, lower than 15% as last year showing the figures. This is the this is the gross marking and the ESP for this year's explanation. Jing Chang Thank you very much. That's all my questions. Operator Michael Simmons, Global View SA. Michael Simmons Thank you. Yes, it's Michael here, Michael Simmons. Dr. Lee, perhaps I can just ask you a little bit about the balance sheet. I think it's the cash position has kind of come down a little bit, given what you've just been talking about and it sounds like the second quarter is looking quite good. How do you think the cash position, the net cash position is going to look at the end of the year? Fion Zhou Well, actually, each year the quarter one is the cash position is the lowest since it's the Chinese New Year, we need to clear out all the advance to the suppliers, the accounts payable, and also the notes payable to the bank. So if you're looking back to 2024 and 2023 each year, the fourth quarter's cash balance is the lowest, during the whole at the end of this year 2025 actually we expected the cash position will grow up starting from quarter to, since the peak season, both in the domestic market and the overseas market is coming and we give a high speed sales volume increase aligned with the revenue increase and this will brought us. The operating cash flow inflow starting from quarter to and we didn't expect a large pay for the for the furniture and equipment and also the doors open. So overall we think the cash position at the end of this year will be, higher than, the end of December 31, in 2024. Michael Simmons Great, thank you. Operator Mr President, we will take our next question. Zyan Wayan, South Capital. Okay. This is Daniel from CIA Capital, and I have only one question regarding overseas business. Why is good, as we, know that, why good revenue, has been negatively impacted by tariffs. Electric motorcycle sales have shown growth. How should we interpret the growth rate target for overseas operations under this these circumstances, thank you. Yan Li I think for the overseas growth rate, we remain; to be, we haven't really changed through our forecast. For this year, I think even at the last quarter when we, we talked about the last year results and even the forecast of this year, we know that our electric tool or the electric motorcycle market, the growth rate will be quite high because they start with actually, last year we only did about 3,000+ units of electric motorcycles and then during our peak time. We actually did it, close to, weigh about 20,000 we look at, the, that, the starting from 3,000 units last year, we look at a really a hyper growth this year, looking at somewhere at least 5X to 6X growth on the electric motorcycle side. On the, the which, on the quarter one where you see a 3X growth the micro mobility, the kick scooters, so we, the US tariff really started to impact us last year when, our tariffs actually increased to 25%, on May 30, post May 31, last year. So that already has an impact on the business. So we actually start to Relocating the manufacturing base from China to Southeast Asia, to try to cope with that 25% tariff where back then the Southeast Asia, it was a 0% I mean this quarter, Q1 this year, we see, the basically the tariff goes in the Southeast Asia tariff up to 10%, but the China side actually went up significantly. So we actually consciously made adjustment saying by holding off the sales for the US market. But you look at the entire year, I think the demand there with our Southeast Asia manufacturing base in place, also with how we negotiate the price increase. With a key US retailers like Best Buy, Walmart, I think we should be able to see that business goes as normal as what we expected at the beginning of the overall, I think with the micro mobility, both on the US, Europe, I think our key three footprint are US mark, well, the entire North American market, basically US and Canada, and also the European market, as well as some of the Australian market, New Zealand market. We expect moderate growth. We don't expect that business grow at 2X or something. We really expect.A simple double-digit growth, and with the key goal is actually a, I turn around the profitability. I think if you look at the two international market segments with the electric motorcycle, I think it's a hyper growth with the high profitability contribution and on the kick scooter or micro mobility market, you really should expect this moderate growth, but with the key focus on turning around from a profit loss to a profitability business unit. Okay, thank you. Operator There seems to be no further questions. I would like to hand back for closing remarks. Yan Li Alright, thank you, operator, and thank you all for participating on today's call and for your support. We appreciate your interest and looking forward to reporting to you again next quarter on our program, thank you. Operator This concludes today's conference call. Thank you for participating. You may now disconnect.
Yahoo
16-05-2025
- Business
- Yahoo
Q1 2026 Walmart Inc Earnings Call
Stephanie Wissink; Senior Vice President of Investor Relations; Walmart Inc C. Douglas McMillon; President, Chief Executive Officer, Director; Walmart Inc John Rainey; Chief Financial Officer, Executive Vice President; Walmart Inc John Furner; Executive Vice President, President and Chief Executive Officer - Walmart U.S. Division; Walmart Inc Christopher Nicholas; Executive Vice President, President and Chief Executive Officer - Sam's Club; Walmart Inc Kathryn McLay; Executive Vice President, President and Chief Executive Officer - Walmart International; Walmart Inc Paul Lejuez; Analyst; Citi Simeon Gutman; Analyst; Morgan Stanley Christopher Horvers; Analyst; JPMorgan Peter Benedict; Analyst; Robert W. Baird & Co., Inc. Brad Thomas; Analyst; KeyBanc Capital Markets Inc. Michael Lasser; Analyst; UBS Equities Edward Kelly; Analyst; Wells Fargo Securities, LLC Kate McShane; Analyst; Goldman Sachs Scot Ciccarelli; Analyst; Truist Securities Robbie Ohmes; Analyst; BofA Global Research Rupesh Parikh; Analyst; Oppenheimer & Co., Inc. David Bellinger; Analyst; Mizuho Securities USA Greg Melich; Analyst; Evercore ISI Krisztina Katai; Analyst; Deutsche Bank Operator Greetings. Welcome to Walmart's first quarter fiscal year 2026 earnings call. (Operator Instructions) Please note, this conference is being recorded. I will now turn to Steph Wissink, Senior Vice President, Investor Relations. Steph, you may begin. Stephanie Wissink Thank you. Welcome, everyone. We appreciate you joining us and your interest in Walmart. Joining me today from our home office in Bentonville are Walmart's CEO, Doug McMillon; and CFO, John David Rainey. Doug and John David will first share their views on the quarter, and then we'll open up the line for your questions. During the question-and-answer portion, we will be joined by our segment CEOs, John Furner from Walmart US, Kath McLay from Walmart International, and Chris Nicholas from Sam's Club. For additional detail on our results, including highlights by segment, please see our earnings release and accompanying presentation on our website. We will make every effort to answer as many of your questions as we can in the hour we have scheduled for this call. (Event Instructions) Today's call is being recorded, and management may make forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Please review our press release and accompanying slide presentation for a cautionary statement regarding forward-looking statements as well as our entire Safe Harbor and non-GAAP reconciliations on our website at Doug, that concludes my intro. We're ready to begin. C. Douglas McMillon Good morning, and thanks for joining us. I'll start today by thanking our associates. They continue to drive results for today while changing to strengthen our business for tomorrow. We have more than 475,000 associates participating in our Walmart share purchase plan, and 81% of them are hourly. For all those associates that are listening, nice job, everybody. For our first quarter, we grew sales 4% and profit by 3% in constant currency. We grew international sales by 7.8%. We drove a Sam's US comp of 6.7%, excluding fuel; and a Walmart US comp of 4.5%. Though strong Q1 results were not driven by inflation, transactions and units drove our top line. Globally, we grew e-commerce 22%, with each segment delivering growth of at least 20%. Inventory is in good shape. So the first quarter was what we expected on the top line and better than what we expected on the bottom line. It was a good first quarter. There's a lot to like about how we're changing and where we are. We feel great about our team, our strategy, and our stores and clubs. We feel great about how we're driving e-commerce growth in a way that not only serves customers and members better but reshapes our business model, resulting in a more profitable business with higher returns over time. Delivery speed continues to help drive our business. We'll soon reach 95% of the population in the US with delivery options of three hours or less. For Walmart US, the number of deliveries in less than three hours grew by 91% for Q1 versus a year ago. And in China and India, we're frequently talking about delivery times that happen in minutes. We're confident in our ability to strengthen this business even as we navigate cost of goods changes. Our short- and longer-term opportunities are clear. The immediate challenge is obviously navigating the impact of tariffs here in the US. Our mindset and approach haven't changed since our investor conference last month in Dallas. I want to thank President Trump and Secretary Bessant for the progress made recently. We're hopeful that it leads to a longer-term agreement between the US and China that would result in even lower tariffs. We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren't able to absorb all the pressure given the reality of narrow retail margins. In retail, managing inventory is always important. In this situation, it's even more important and even more challenging. It's helpful that we're entering the second quarter with well-managed inventory. It's helpful that we're crossing the threshold of profitability with e-commerce globally and that we have these newer, higher-margin businesses growing like membership and advertising. It's helpful that we sell a broad assortment that includes food, consumables and general merchandise. It's helpful that so much of our assortment is replenishable, which means we can flow it. We don't have to make a one-time call on a quantity. Instead, we can adjust the forecast and partner with our suppliers to adjust quantities over time as we navigate tariff impacts on costs. It's helpful that we have so many talented and experienced merchants and replenishment associates, treating our suppliers well as a priority. We've worked with most of these companies for many years, and we'll be doing business together for many years to come. So we'll have that longer-term mindset as we work together through this year. It's helpful that more than two-thirds of what we sell in the US is made, assembled or grown here. In recent years, our US percentage has grown. Last year, we purchased $296 billion in the United States, and we made a commitment back in 2021 to add another $350 billion in incremental US volume over the following 10 years. We recently announced additional support for US businesses in the form of Grow With Us, which will provide small businesses in the US with the education, training, and resources they need to help them get started with us. You might be surprised to know that nearly 60% of our suppliers in the US are small businesses. We'll also continue to hold our Open Call event in October where we invite US companies that aren't doing business with us to introduce their company and their products. That is one of the most fun days of the year for us as merchants. The merchandise that we import comes from all over the world from dozens of countries. Other than the US, the other large markets are China, Mexico, Vietnam, India, and Canada. China, in particular, represents a lot of volume in certain categories like electronics and toys. All of the tariffs create cost pressure for us, but the larger tariffs on China have the biggest impact. The cost pressure from all the tariff impacted markets started in late April, and it accelerated in May. Let me describe how we think about that and what we're doing about it. First, we want to keep our food and consumables prices as low as we can. Food prices in the US have gone up in recent years, and our customers have been feeling that all along. We won't let tariff-related cost pressure on some general merchandise items put pressure on food prices. But as it relates to food, tariffs on countries like Costa Rica, Peru, and Colombia are pressuring imported items like bananas, avocados, coffee, and roses. We'll do our best to control what we can control in order to keep food prices as low as possible. An example would be controlling the amount of fresh food waste. In some cases, we're holding our retails where they are despite the tariff cost pressure. Flowers for Mother's Day at Sam's Club US is a good example. When it comes to the general merchandise categories that are impacted, we'll move production where that's possible. That is an easier fast. But we've been working on that for years, so it's not like we've just started to make adjustments. In some cases, we'll absorb costs within a category or department and not simply pass on a tariff cost attributable to each item individually. We'll be managing mix across items, categories, and businesses. We also have suppliers shifting materials from tariff-impacted components like aluminum to fiberglass, where there is no tariff. Our merchants, sourcing team, and suppliers are being creative. It's been impressive to watch our team identify opportunities and adjust. As we continue to diversify our profit streams through our e-commerce offering, our marketplace and membership, and advertising, we have some room to absorb costs. We're committed to growing profit faster than sales. There isn't anything about this quarter or anything about this coming year that shakes our confidence about growing profit faster than sales over the term of our long-range plan. The strategy and business model are set up to do that. In summary, the takeaways from my remarks today are, one, we delivered a good first quarter. Two, our strategy and omnichannel capabilities are strong. We'll keep getting better in terms of assortment, delivery speed; and we'll keep scaling our newer businesses. We'll keep driving growth, and we'll control what we can control. We continue to be confident in our ability to strengthen this business even as we navigate cost of goods changes. Our short- and longer-term opportunities are clear. And three, we're positioned to manage the cost pressure from tariffs as well or better than anyone. But even at the reduced levels, the higher tariffs will result in higher prices. The timing of the tariffs and our inventory receipts matters as you interpret our results by quarter. John David will say more about how retail accounting and timing will play out through the year. I'll wrap up my remarks today the same way I opened, by thanking our associates. Our store, club, and supply chain associates are working hard in learning new capabilities. Our home office and tech associates are partnering to manage the short term while building for the long term. We've been operating in challenging environments for years now, and we'll come through this one stronger than ever, just as we have before. We have associates and shareholders a week coming up. It's my favorite week of the year. I look forward to seeing so many of our associates and many of you here in Northwest Arkansas. John David, I'll turn it over to you. John Rainey Thanks, Doug. Our first-quarter performance demonstrates the strength of our business and the relevance of our omni strategy in the context of a highly dynamic backdrop. I'm pleased with the continued sales momentum across the company, and it speaks to the competitive advantages that set us apart in the retail marketplace. Our commitment to delivering value and convenience to our customers is resonating more than ever. At the same time, we're driving progress in high-growth areas like advertising, membership, and marketplace services. Our April results were better than we had expected, particularly in Walmart US. Sales across segments improved as the quarter progressed, including strong Easter seasonal events. And our teams did a nice job managing inventory and controllable expenses, leading to a stronger-than-forecasted performance in both gross profit and SG&A. Consolidated revenue increased 4% in constant currency despite lapping last year's leap day. driven by strong growth in e-commerce of 22%. Currency headwinds reduced reported sales results by $2.4 billion or 150 basis points of growth. Walmart US comp sales grew 4.5%, aided by strong e-commerce sales growth of 21%. Momentum in grocery sales continued with a mid-single-digit comp and ongoing share gains. Health and wellness sales increased high teens, reflecting higher prescription volumes and over-the-counter sales; while general merchandise sales declined slightly with softness in electronics, home products and sporting goods. We're focused on value and managing our relative price position while also saving customers' time with our e-commerce options. In Walmart US, we have more than 5,000 price rollbacks across our assortment, and we've seen private brand sales outperform with grocery private brand penetration up 60 basis points versus last year. Our international business grew sales 7.8% in constant currency, reflecting strength in China and Flipkart. E-commerce was strong with double-digit growth across markets, led by pickup and delivery and marketplace. We're increasing speed of delivery for customers. In international, items delivered same or next day increased by 35%, with about 45% of those items delivered in under three hours. At Walmex, lapping last year's government stimulus payments, the Easter shift, and some early quarter softness tied to a weaker and uncertain macro environment led to slightly softer sales than anticipated. We're encouraged by the pickup in business more recently with sales back in line with our expectations. Sam's Club US comp sales, ex fuel, increased nearly 7% with strong growth in transactions, including strength in Members Mark. E-commerce grew 27%, led by triple-digit growth in club-fulfilled delivery and double-digit growth in pickup. Members value the convenience of Scan & Go, and their usage of this tool continues to grow, with penetration increasing 600 basis points versus last year. Over 50% of our members now transact digitally in some form with Sam's, online, or using digital solutions in Club. From a margin standpoint, consolidated gross margin increased 12 basis points due to better-than-expected results at Walmart US, partially offset by lower-than-expected results in international which saw increased pressure from channel and format mix changes. Gross margins in Walmart US increased 25 basis points, reflecting continued disciplined inventory management, including a lower level of markdowns and improvements in business mix that have offset increased pressure from merchandise category mix. As our business model evolves, contributions to profitability are increasingly influenced by a diverse set of drivers, including improved e-commerce economics and business mix. We achieved e-commerce profitability, both in the US as well as for the global enterprise in Q1 for the first time, an important milestone for our company. In the US, e-commerce net delivery costs have declined as we've continued to densify our last-mile deliveries and as customers pay fees for faster delivery. Business mix, most notably from higher-margin areas like advertising and membership fees, also contributed to the improvement in Q1 profitability. Our advertising business across markets increased 50%, including VIZIO. Walmart Connect in the US, which doesn't include VIZIO, grew 31%. Sam's Club US ad business was up 21%, and we saw 20% growth in our international markets, led by Flipkart. Membership fee income was up nearly 15% across the enterprise. In the US, Sam's Club continued to see steady growth in member counts, renewal rates, and increased penetration of Plus members, resulting in membership income growth of 9.6%; while Walmart+ membership income grew double digits. Within international, membership income from Sam's Club China grew more than 40% as member counts continue to increase. SG&A expenses deleveraged 6 basis points, including the benefit from lapping last year's business reorganization costs. As expected, International and Sam's Club US expense deleverage reflects planned investments in associate wages. Walmart US deleverage reflected increased depreciation expense as well as VIZIO operating costs post acquisition. As we previewed at our Investor Day, we experienced higher-than-expected casualty claims expense. We're accruing a higher rate for claims cost based on the industry trends that point to higher risk adjustment factors. We expect this trend to persist for at least a few quarters. Adjusted operating income was better than expected with growth of 3% in constant currency, and adjusted EPS of $0.61 was higher than our guided range. Importantly, our inventory is at a healthy level, up 3.8%. That's obviously as important as ever as we head into a tariff-impacted period where cost pressures will impact item pricing and make it more challenging to anticipate demand by item. This is a highly fluid situation, and we'll need to manage quantity decisions as we measure the price elasticity of impacted items. I'm grateful that we have a team of experienced merchants, various levers we can pull, and the tools available to manage this in a thoughtful and proactive way. Our cash position provides the flexibility we need to lean into opportunities to grow share while also continuing to invest in areas with long-term strategic value, such as supply chain automation, store growth, remodels, and tech. In April, we completed an approximately $4 billion debt issuance at attractive terms. We continue to expect FY26 CapEx to be in the range of 3% to 3.5% of sales. During Q1, we repurchased $4.6 billion in stock, an amount equivalent to our share repurchases for the entire year last year. We have a lot of confidence in our business, and we'll continue to be opportunistic with buybacks as share price dislocations occur. Now turning to guidance. As a matter of practice, we provide an update on our full year outlook at the end of the second quarter, if appropriate. But I'd like to give some color on how we're thinking about the impact from tariffs. I want to start with reiterating our message from our Investor Day in early April. We have a lot of confidence in our strategy, and there is nothing about this current period that makes us feel differently about anything we previously said about our long-term financial framework to grow annual sales about 4% and operating income faster than sales. We've seen during periods of economic uncertainty in the past, we tend to gain share and come out of the other side in an even stronger position. We expect this period to be no different. We'll play offense and may opportunistically invest in areas to improve our value proposition, but we're not fully immune from the financial impacts in the short term. We've done work internally to model various scenarios related to the ongoing trade policy discussions. These scenarios involve making assumptions about how long tariffs persist at certain levels versus coming down to some lower level once bilateral trade deals are completed. We also must make assumptions about the elasticity of demand as well as the overall macro backdrop in this environment. Perhaps it's obvious, but worth stating. The range of possible outcomes is much greater than when we originally provided our annual guidance. That said, in what we believe are the most likely scenarios that we've modeled, we still have the ability to achieve our full year guidance for both sales and operating income. These scenarios involve the belief that trade policy discussions will result in bilateral agreements, agreements in principle for the existence of good faith discussions moving toward agreements that could result in tariff levels lower than those initially proposed in early April. However, if we see a restoration of dramatically higher tariff levels, the impact on our financials could be significant and even jeopardize our ability to grow earnings year over year. In any case, we're comfortable with our ability to grow sales in the range we've guided for the year, though the mix of AUR versus units may be much different in these scenarios. While the swings from quarter to quarter could be large, we still think we can achieve our operating income guidance for the year given what we know and our assumptions that I referenced. Should more progress on trade in the next several weeks be favorable, there could be upside. If elevated tariffs remain in place for an elongated period, there would be downside risk. We will know a lot more in a couple of months, but we are equipped to manage this as well or better than other retailers. Turning to the second quarter. The operating environment is highly fluid, and it makes the very near term exceedingly difficult to forecast. The level and speed at which tariff-impacted prices could go up is more extreme than in normal periods. The US is by far our number one market for sourcing. For the less than a third of what we sell in the US that's imported, China, Mexico, Canada, Vietnam, and India are our largest markets. As Doug noted, we're encouraged by the recent trade negotiations, especially concerning China. The level of tariffs that result from those discussions, and the timing of when they ultimately become final may cause larger swings in our financial performance from one quarter to the next. Moreover, there are two specific accounting methods that make these swings more difficult to forecast. I want to take the time to explain these because they may impact the second and future quarters given cost pressures caused by tariffs. The first relates to our method of accounting for the cost of inventory for the majority of our US business, the retail inventory method, or RIM for short. We've always used RIM in Walmart US. It's not new for us, and it's a common method of accounting in the retail industry. RIM accounting implies a ratio of the actual cost of the inventory to its retail price to calculate an inventory and therefore, derive cost of goods sold. As prices go up, this can result in the potential for markups on our inventory and increased merchandise margin gains relative to periods of more constant price levels. To the extent that later markdowns need to be recorded, it can have an offsetting effect. The magnitude of these swings, both positive and negative, given the level of additional costs that could be applied to the inventory that we're purchasing right now, are unprecedented in our business and could result in swings in margin and earnings by quarter. The second is the possibility of LIFO-related charges as prices go up, which we experienced in Sam's Club US during a sustained inflationary period in FY24. We currently expect that sales growth on a constant currency basis will be in the range of 3.5% to 4.5% for the second quarter, though the composition of sales through AUR versus units may be different than what we expect today. Notably, if current exchange rates were to stay where they are right now for the entire second quarter, we would expect a headwind of approximately 120 basis points to reported sales growth. For operating income, the range of outcomes for the quarter is much wider. The information related to the trade discussions taking place is changing by the week and, in some cases, by the day. Importantly, we also want to provide flexibility for us to play offense in this environment. And lastly, our method of accounting for inventory could have a larger impact on our earnings than in normal quarters. For these reasons, the range of outcomes for the quarter is so wide that it would be impractical to provide a range of operating income guidance that investors could credibly rely upon. I want to encourage you to think about the next couple of quarters in the aggregate. We may experience larger gains related to markups in the second quarter, and some of those may be offset by markdowns in the third and fourth quarters. This is why we've underscored the importance of managing inventory well in this environment. In total, though, we believe that we can still achieve our operating income guidance for the year. In closing, as we look ahead, while operating conditions are expected to remain dynamic, our strategy is clear, our top-line momentum is strong, and we're flexing into our advantages to protect margins as we grow. History tells us that when we lean into these times of economic uncertainty, we emerge on the other side as a stronger company. We expect this time to be no different. We appreciate your interest in our company and are now ready to take your questions. Operator (Operator Instructions) Paul Lejuez, Citigroup. Paul Lejuez Thanks for all the detail on your pricing philosophy tied to tariffs, very helpful. My question is on e-com. Big milestone for the company, achieving profitability in the e-com business. Just curious what finally got you over the hump and where to from here in terms of where margins in that business can go relative to the rest of the business. And what do you see as the key drivers of further improvement to e-com profitability from here? John Rainey This is John David. Let me start with just giving a little bit more detail on global e-com profitability. We noted that we achieved it on an enterprise basis globally as well as for the US segment. And so if you were to break that down by segment, the US was profitable, Sam's was profitable, and the international was slightly unprofitable. But if you take all of those together, we had a profit for the quarter. So we're really pleased with that. There are a few things that have driven the performance, notably in the US, and John will talk more about this. But one is the densification of our network. And what I mean by that is we have customers that are coming to Walmart now and taking advantage of our e-commerce offerings. We're able to spread those deliveries over multiple households. So think about the opportunity to deliver a package to five houses on the street versus one house on the street. And so as we grow, we continue to spread those costs over more volume. The second is delivery cost. And this is where John and his team have made a tremendous amount of progress in reducing the unit cost, and this is a lot of the supply chain infrastructure that we've implemented. But part of that, too, is the willingness that customers have shown to be able to pay for expedited delivery. And what I mean by that is delivery within one hour or within three hours. We noted in the last quarter that fully a third of our are taking advantage of that option, and it shows the relevance of convenience. We've seen an uptick in that even in the most recent period. And so John, maybe you want to add a little bit more. But to me, those are a couple of things that stand out to help improve the profitability. John Furner Paul, a few things. If you look back over the last few years, I think it's a combination of investments we made for about the last decade. And those investments would include getting our applications to a single app, building new fulfillment centers, enabling stores to be part of the omni solution. The speed of delivery has been encouraging the last year. Our three-hour deliveries are up about 91% year on year. John David mentioned also the scale of the operation. It has taken a number of years, but we're pleased with the progress in the growth. We've been running 21% growth for multiple quarters in a row. For customers, in particular, what the team has done that I've been really impressed with is providing customers flexibility to serve customers when they want to be served, the way they would be served. So a Walmart customer can shop at the counter. They can shop with curbside pickup. We have in-home delivery. Our first and third-party delivery options, including fulfillment services for our sellers, has been on a strong growth rate for the last few years. And that has resulted in, as John David said, lower delivery costs due to density and frequency. All of that put together has enabled us to -- has helped us enable business mix with advertising our data businesses. And when you put it all together, just really proud of the team to be able to sit here today and announce a quarter of profitability for the first time, as we told you just a month ago we were together in Dallas. And importantly, the team has exited the quarter with momentum. There was a strong April. We had a strong Easter. Our omni capabilities enabled us to deliver floral and other things that people need last minute for the Easter holiday and Mother's Day. So we'll keep working on better ways to serve customers, improving speed, improving density, and working efficiently across all the channels. Operator Simeon Gutman, Morgan Stanley. Simeon Gutman So Doug and John David, you both touched on this. You built this business and financial model now that your margins could go up and invest faster for growth at the same time. I've asked you in the past about like the toggling that balance, and I heard some of the prepared remarks on this. I'll push back and say, why not toggle it in favor of investments even more in this environment? We know how much -- how important it is getting more gross profit dollars, especially in Jan, March. Why not lean into there? And you said it yourselves, Walmart should be better positioned than most to navigate this environment. C. Douglas McMillon This is Doug. I'll go first, and then John David can comment. I think with our guidance, where it is for the year, we positioned ourselves to be appropriately aggressive. I think as the quarters play out, we may make different choices depending on what's happening with pricing. It is fluid. We're watching what's happening with cost of goods. There are a lot of moving parts as it relates to merchandising these days. And as it relates to the retail prices, we'll watch where our price gaps are, but we'll also watch what customers are telling us and the response that we get from them and the pressure that they're feeling. So the bottom line is if we need to invest more, we can. Having said that, I really want to grow profit faster than sales. Like we've been working on this for a long time. I think we deserve that. You guys deserve that. And if we can navigate this in a way as we balance all the interest between customers, shareholders, and everyone else such that we can keep prices low enough to help people and grow profit faster than sales, that's what winning looks like to me. John Rainey I would underscore the points that Doug made. I feel, Simeon, that we are striking the right balance between investment and growing profits. If you look over the last two years, we grew operating income about 10% on average. Our guidance is, let's call it, roughly half of that this year. And so this is a year of investment. But even while doing that, we are hopeful to be able to grow profits faster themselves. If there's, to me, a story about the quarter from a financial perspective, it's really one of the diversification of our income streams. And so you're seeing all these things play out. If you were to just take advertising and membership as an example, that's a quarter of our profits. Membership was really strong. In the quarter, we grew each segment, membership double digits. International was north of 20%. So you're seeing this diversification of our income streams that allows us to continue to take a very long-term perspective and invest in this business. So these are always a little tricky in terms of what's striking that right balance. But we like the plan that we have right now is the right one for us. Operator Christopher Horvers, JPMorgan. Christopher Horvers So I wanted to ask a question about the consumer and the upper and lower end. You called out strong gains with upper income households. Is that coming through on the e-commerce side, mainly, in addition to what's going on in the store? And then on the other side, there's been a dialogue in the market that maybe the lower-end consumer is getting weaker and seeing some incremental pressure and perhaps leading to some bottom-of-funnel loss where they're trading out of Walmart to lower unit, lower average cost locations and doing smaller shops. So can you talk about what you're seeing on the both sides in terms of the health as well as the share performance? John Furner Christopher, it's John. I'll first anchor on comments that John David made earlier this morning, which are that customers, in some cases, we've heard of some concern. They remain choiceful and consistent. And we continue to see customers prioritizing value and speed of delivery. We have seen growth across all income cohorts in the quarter, fortunately. I'm proud of the fact that in April, we saw a number of new customers and probably -- it's probably a good time to remind you just the shape of the quarter in terms of the calendar. This is a calendar where we had leap year last year. and then we had a very late Easter. So February was softer than we expected. March was back to normal. And we exited the quarter with a very strong April, including a strong Easter holiday, which is a reminder that customers are prioritizing seasonal events, getting together, having meals at home. And importantly, we want to be very flexible for our customers. If customers choose to shop in store, we want to have a great store experience. We're very pleased with our remodel program. We continue to see accelerated results and high NPS scores after remodel. Our fast delivery scores are some of the highest scores that we have in the company. And over the course of the rest of the year, you will continue to see us expand our capacity and capability to deliver from FCs quickly, including same-day, next-day, and two days. And we are growing our fast delivery options almost 100% year on year, you heard that this morning, growing 91%. So we'll continue to focus on value with great products and meat produce, our Better Goods line; really proud of the progress in apparel. Toys has had a strong quarter, particularly the holiday. And then we'll remain very, very flexible for our customers as we move throughout the year. Christopher Nicholas I think from a Sam's Club point of view -- underlying everything that John just said, I think that right now, I think we're leaning into the power of the model of the membership warehouse retail model. We have incredible prices because we've curated items for members. And what we find is that this resonates whether you're earning a lot of money or whether you're working through how you spend your money each toward the end of your pay packet. We're seeing growth in convenience. We really see that convenience is something that resonates for everybody. And in fact, what we give them back is the power of time. So if we make things easier for people, they have more time; and that's incredibly valuable to people. So I would just close by saying that the growth in our membership, the 5% -- 10% growth in our membership income, is driven by more people renewing, more new members, and higher mix of Plus participation. And we're seeing that across all of our income cohorts. Operator Peter Benedict, Baird. Peter Benedict So just on capital allocation. You talked about CapEx, 3% to 3.5% of sales. Sounds like that probably trends towards the upper end of that range this year. I'm wondering if you could frame where we stand with the automation investment and the spend on that front. Should we be thinking CapEx in dollars is at a peakish level here, at least for the intermediate term? And then on the buyback, great to see. In the first quarter, it looks like you spent, as you said, more than last year but also more than two years ago. Any way we should be thinking about that going forward and your willingness to commit more to buy back? John Rainey Sure, Peter. On capital allocation, I'll start with CapEx. The right way to think about that level for our business is in the 3% to 3.5% of sales. So that should grow with revenue as we go forward. It may vacillate a little bit between the top end and the bottom end of that. But given what we know and opportunities that we have to drive improved returns through some of this investment, we're not shying away from this. And we're taking a very long-term perspective even in this current operating environment where we see some of those costs are coming in higher. We look at capital allocation as every dollar has to fight for its highest return. And this is one of the best ways that we can spend a dollar. That said, we saw significant price dislocation in the quarter as some of the uncertainties filtered through the market. And we are very aggressive in our share buyback as I noted, buying back more than we did in the entirety of last year. And we'll continue to do that as we see price dislocation because we have a lot of conviction in our strategy. We have a lot of confidence in the plan that we have, and we believe there's a lot of shareholder value to be created here. And so as we see these types of dislocations, you're going to see us be more aggressive. I think it's fair to say, obviously, we're going to use -- we're going to spend more in share buyback this year than we did last year, given that we've already done that one quarter into the year. The total amount of that is to be determined. We'll see where prices are. We need to balance this with both increasing our dividend as well as investing in ourselves through CapEx. Operator Brad Thomas, KeyBanc Capital Markets. Brad Thomas The Walmart Connect growth was particularly impressive this quarter and showed some acceleration for you. I was wondering if you could comment a bit more on the strength in advertising and any incremental learnings you've had so far as you continue to integrate VIZIO. John Furner It's John. We had a good quarter with Walmart Connect, as you mentioned, up 31% year on year and also a strong quarter around the world and the other advertising businesses that we operate. We're in the initial stages of integrating VIZIO. I'm excited about the plans we have for VIZIO the rest of the year. It's a great operating system, very frictionless, easy to sign up; and we're looking forward to the contributions of the VIZIYA team going forward. In terms of the core advertising business, we've had strength with the growth of advertising with our marketplace sellers. Our GMV and marketplace has been very consistent in the mid- to high 20s. Last quarter was in the mid-20s as well. We also have had continued strength with first-party and third-party suppliers. So it's a broad mix of capabilities. Additionally, this quarter, we launched pharmacy delivery, and that's another opportunity for our customers to enjoy the flexibility that we offer. And so there will be new opportunities, I think, as we go forward and look ahead. But in general, we're really pleased with the progress, the momentum, and the team that we've established at Walmart Connect. Operator Michael Lasser, UBS. Michael Lasser John David, in your remarks, you said if elevated tariffs remain in place for an elongated period, there would be downside risk. Now you guys are astute poker players and probably will not clearly define what elevated tariff rates are, but would you consider the current level of tariffs to be elevated, meaning that there could be downside risk if they don't come down? And more importantly, over the long term, is there anything about this tariff situation that would existentially impact Walmart margins, meaning that given the opportunity of time and flexibility, you would be able to fully mitigate all that you see in front of you such that you would be able to have margin rates that are consistent with what you would expect to do over the longer term? John Rainey Let me start with the second part of your question first. We don't see anything, and this is -- we indicated this in our prepared remarks. We don't see anything that changes the way that we think about our business long term related to the current environment that we're in. And so we think that we can navigate this. I think the thing that everyone is focused on, certainly the Fed, is to make sure that these are a one-time price increase and not something that persists and bleeds into wage growth and other things that have a more longer-term effect. In terms of the first part of your question, what I was referring to is where the level of tariffs that were announced at the beginning of April. Keep in mind, a week ago, we were at 145% tariffs in China. And certainly, you know as well as anyone the preparation that goes into this day for us. And so when we started the preparation around earnings, that's the construct that we were working under. And 145% tariff environment and tariffs at a level that are approaching 50% for other countries is not a good outcome for retailers. It's not a good outcome for the economy. We're very pleased and appreciative of the progress that's been made by the administration to bring tariffs down to this level. And the guidance that we gave today, the affirmation of our full-year guidance, is with tariffs at this level. But let me emphasize, we still think that's too high. There are certain items, certain categories of merchandise that we're dependent upon to import from other countries. And prices of those things are likely going to go up, and that's not good for consumers. Operator Edward Kelly, Wells Fargo. Edward Kelly I wanted to follow up on another tariff question and inventory planning. And as you stated, it's a difficult backdrop for planning inventory. Tariffs, obviously, a moving target; I think, uncertainty around elasticities. So against that backdrop, how are you thinking about the planning of the inventory? Do you stay lean, hoping the tariffs come down? Do you get aggressive because we're on a 90-day pause? And bigger picture question that I have related to this is, can you avoid the risk of another '22 scenario? Given the dynamic backdrop, do you think that that's a risk for retail? C. Douglas McMillon This is Doug, and you guys can chime in if you want to. I think the way to start is to remind you, as I said in my prepared remarks, that we have a lot of replenishable items at Walmart. It's such a strength to be operating off the side counters rather than some high-low marketing-driven model, where we're focused on features and the actionality and end caps, for example. So on replenishable goods, we have the opportunity to partner with our suppliers to see what happens with sales as cost and then eventually retails adjust and then manage that through the weeks and months ahead. So that's a great position to be in, and our merchants and our replenishment team are really good at that. And they're managing that on a daily basis. As tariff numbers have changed, they've done a great job of pivoting, recalculating quantities, and thinking through it again. Where it can get more challenging is we make decisions related to things like Halloween and Christmas further out. And how do you make a quantity call? And what tariff number do you use? And the best answer we can give you is we've got a sales plan. We're operating against that sales plan. Some of the quantities will be adjusted based on what we think the tariffs are going to be. We've made some tariff assumptions. And then we'll partner with our suppliers to flow that. And if we need to chase goods, chase some goods. And the bottom line is, yes, we want to avoid what happened back in 2022 and by paying close attention to our unit decisions, that's how we'll do it. Operator Kate McShane, Goldman Sachs. Kate McShane We wondered if you could talk about how the tariff situation is impacting your sellers on marketplace both from an inventory standpoint and how you think about the contribution to advertising as a result of this more difficult environment. John Furner It's John. In terms of overall inventory management, Walmart, along with our capability to serve sellers, we've built a number of tools in the last three years that are particularly helpful. And for sellers, in particular, having services like Walmart Fulfillment Service with heightened visibility of their inventory, where it is, our ability to move around the country is particularly helpful. As we sit here today, the ports are flowing, inventory is moving. So we don't have any concerns at this point about port backups in the United States. So our inventory is flowing through. I did mention earlier that our GMV growth rates in marketplace, in particular, have been consistent over the last few quarters. You saw that in the release. We are also seeing that again as you exit the quarter. So we had a strong April in e-commerce. And this is a big contributor to the overall health of the e-commerce business with the [21] growth rate that has been in place for some time, which we are pleased to see. And then finally, adding together our stores, our first-party e-commerce business, our new automated fulfillment centers, distribution capabilities, our third-party business, and fulfillment services, that has enabled us to have this ad business and data business, which has helped us mix out to achieve our first quarter of profitability in the United States. Operator Scot Ciccrelli, Truist Securities. Scot Ciccarelli I know you talked about 50% growth in advertising and 15% in membership. So can you help reconcile those figures against what looks like just under 4% growth in the membership and other line in the P&L, just so we can better understand the components there? And then secondly, now that e-comm has turned positive, can you provide any color on the magnitude of losses you had incurred over the last, call it, year or two, just so we can better understand the size of the profit improvement? John Rainey Sure. I'll take the question. First, on advertising, really pleased with the growth that we've seen there. It was inflated this period because we've got VIZIO in there versus comparing to, I guess, a period that we don't. But our overall advertising on an apples-to-apples basis was 27%. So we feel really good about that. On membership, we felt really good about the progress there. As I noted, we had international that grew north of 20%. Both Sam's and US grew double digits. The line that we have in our P&L, it includes other. It says membership and other, and that includes things like sustainability income. So think about recycling revenue, things like that. And that's probably a larger figure than what some people expect. And so that's what's -- that's the reconciliation to, I think, the 4% number that you quoted there. But overall membership is -- actually, it's really one of the shining points of the quarter. We're doing really well there. On e-comm losses, I don't think I want to get into the magnitude of some of the losses that we've had historically. We've consistently, though, for years seen improvements there. You'd have to go back several years to see the depth of where losses topped out. But John and his team, and it's really all segments -- So if you look at what Flipkart is doing in India, look at what Sam's has been doing, we've continued to see contribution profit be positive. And with the digital platform, as you grow that at a positive contribution profit, you ultimately get to overall profitability, which is where we are today. So this is a milestone moment for us as a company. Hopefully, we don't talk about it every single quarter, but I think it's notable this quarter that we've reached this milestone, and we've achieved this level of profit, and we're looking forward to continuing to have that growth in the future. Operator Robbie Ohmes, Bank of America. Robbie Ohmes I was wondering if you guys could talk -- give a little more detail on general merchandise. You guys had deflation in general merchandise in the first quarter. Can you help us think about deflation versus inflation in tariffs for the outlook here for the next three quarters? And also is there any -- are there pretty significant differences between mix of general merchandise or changing in mix of general merchandise for in-store versus what you guys are doing in e-commerce? John Rainey I'll start, and some of the others may want to jump in. General merchandise has been deflationary for over a year right now, and we've seen the impact of that. And think of it as deflationary in low single digits in the quarter. Importantly, though, we grew units in the quarter. So we continue to see progress there. But the consumer is pressured. We've seen for a couple of years now a shift in the baskets away from general merchandise to those items that are more necessities versus discretionary. So people are spending more on food. So we'll continue to monitor that going forward. But the team, in particular, has made really good progress on the assortment that we have and advancing general merchandise. John, do you want to -- John Furner Sure. Sure. We did see strong growth in categories like toys, kids apparel, in our baby categories, and others across the business. We do have stronger growth rates in e-commerce. In the total, you can see that as well with 21% growth rates, which would reflect really a strong mix across categories. And as we look at where we ended the quarter, we were softer in February. Just a reminder, we had really tough weather. It was lapping leap year. We had snow across the country, including the Southeast and on beaches across the Southeast. So we had unusual weather in February. I mentioned this earlier, March was -- felt like more of a normalized month, closer to what we expected given the flip in leap year and a much later Easter. And then as we got the Easter holiday, the units strengthened pretty significantly. And we reported this morning that we were slightly negative in general merchandise with deflation, but was really encouraged by the results that we had from the Easter holiday until the end of the quarter. Christopher Nicholas Yeah. And in Sam's Club, we had a positive quarter of GM sales back to back in a deflated environment. So units are the driver of that performance. Operator Rupesh Parikh, Oppenheimer. Rupesh Parikh So I just want to go back to a strong momentum in the health and wellness category. Just want to get a sense of how you guys feel about the sustainability of the momentum? And then as you look at the pharmacy rollout, how is that trending versus expectation? And any sense of whether it's driving new customer acquisition at this point? John Furner When we look at the pharmacy business -- and you saw in the reported results this morning growth in the mid-20s. When you strip out the impact of GLP-1s, we saw prescription growth over 10% growth in the quarter, which is very encouraging. That result is inclusive of market share gains. and it's driven by a few things. First, I would just like to complement our pharmacists, our pharmacy techs, the team in the field who do such a great job helping customers and patients with whatever they need help with. And then the second was the initiative of pharmacy delivery, which we launched in the first quarter, which has been helpful not only for customers to receive their prescriptions the way they want to receive them. But it has resulted in growth of new digital users in our e-commerce business. So we've had a digital business with text message for some time where you could renew. Now that you can deliver, we see people signing up for an account on and our app, and we're looking forward to being able to serve them in more ways across categories. Christopher Nicholas I think it's worth mentioning that Sam's, once again for the ninth year in a row, won the JD Power Pharmacy Company of the Year. And the ex-GLP growth is still double digit, so it's over 10%. So we're feeling really good about that business. Operator David Bellinger, Mizuho Securities. David Bellinger The first one, just on understanding outcomes for Q2. We're so wide on the guidance right now, and you can't give us a definitive range there on profitability. Can you just walk us through your positioning on the full year guide? Why are you still confident to keep that range? Do you expect these wide swings you talked about on margins and operating income -- could those be contained within the combined Q2 and Q3 time span? And just anything on international the momentum you're seeing there, especially on the operating income side? John Rainey I'll start with the first part of your answer and then kick it over to Kath to talk about international. It's hard to predict. We don't know the level of tariffs where the bilateral agreements are going to finalize that. We do know that we're probably going to be in a period in the second quarter. We're going to see more markups than normal. If we -- it's why Doug and others have mentioned that it's so important to get inventory right in this environment because that reduces the likelihood of taking markdowns in the third quarter and potentially even into the fourth. And so it remains to be seen what the elasticity of demand is. It's something that's 30% higher or, in other cases, 10% higher in certain items. So we'll have to see that. We've got a really, really good team of merchants; and we have a lot of confidence in their ability to navigate this environment. Fortunately or unfortunately, depending upon how you look at it, we've got some experience here from a couple of years ago. And so we'll try to navigate this. And as Doug said, I like our hand here. I think we can navigate this as well or better than anyone. But there's a lot of uncertainty, a lot of volatility. It's a dynamic and fluid environment, and we feel confident that we can land the year in the range that we've talked about. But the swings from quarter to quarter are a little harder to predict, and we'll have to see how that comes. Kathryn McLay If I pick it up from there -- because definitely, foreshadow that we have swings by quarter in international when we were together in Dallas. If I was to characterize the quarter, I would say it was a good result, but I think we can still do better. I don't think my team would be surprised to hear me say that because I think that's the constant posture we typically have. When I look across the composition of the markets, we had a couple that had a weaker backdrop, which would be more Mexico and Canada. I think we made strategic investments in high-growth markets like India. You heard Kalyan, our CEO Flipkart, talk about that when we were together. But if I -- And then I think we also had some choppy calendar results, Leap year, Easter, et cetera. So when I look -- step back and look at the overall result, I think we're in high-growth markets. We've got really strong businesses, and we're in a leading omnichannel position in those markets. And so I think holistically, I still feel really good about leading the enterprise from a growth perspective and growing profit faster than sales across the full year. C. Douglas McMillon This is Doug. It's probably worth just repeating one more time the point about retail accounting as it relates to the timing between Q2, Q3, Q4. In Q2, if we have a markup, we take it on all the inventory we have on hand even if we don't sell it in that quarter and even if we don't ultimately sell at that price. So you could get a situation where Q2 earnings look unusually high and the range of outcomes is wider, which is why we're not providing guidance for the quarter. Then think about Q3 and Q4. Can you sell it at the price that you marked it up to? Yes or no? What are the resulting margins look like? How do you manage markdowns? How do you manage inventory effectively through the Q3 and Q4 period? And there may be more markups in Q3 and Q4. We don't know right now because this environment is so fluid. I hope that helps everybody just -- I want to make sure that you all understand this is an accounting issue, a timing issue, b; it ultimately boils down to how well do we forecast sales, manage inventory and make quantity decisions. Operator Greg Melich, Evercore ISI. Greg Melich And I guess, Doug, I just want to follow up on that last point. Given where we are today with the tariff rate, the 30% incremental China and then the 10% seems to be the baseline, what's the time lag that you would expect to see that show up on the shelf? Is it three months, six months is when the peak effect would be? And as another question on that, what's the magnitude? Are we talking 50 or 100 bps if it had to pass through at current rates? C. Douglas McMillon It happens gradually. And as we mentioned earlier, we started to see increases happen in April and through May. We've been really focused on back-to-school receipts. When you have an imported item, you pay the tariff at the time it comes through through customs. And so the cost is higher. Even if the tariff rate comes down later, the cost has been elevated. So I wouldn't think of this as a moment in time necessarily, except when you think about seasonal things like back to school. So I think it will feel more gradual. And as we've been saying to everyone, the first thing that goes through my mind is food inflation. We've been through a number of years here where prices have gone up on food, and our customers have felt that. And they don't want any more food inflation. And so what we hope happens is that there are changes from a policy point of view that help us get prices back, ex tariffs, on bananas and things that we don't grow here. So food inflation is very much on our mind. And as it relates to GM, it will vary by category. Which country is it? If it's from China, obviously, it will have a higher amount. And this reset of costs will play out through the year. We'll have seasonal items. It will be higher than they would have been otherwise. So I think what we're looking at is upward pressure that began in April and plays through the entire year on things that are imported. And again, we've been working for years to try and make sure that we've got surety of supply, we're sourcing from the right places, create a more flexible supply chain, and we've made progress on that. And I think relative to others, we're well positioned. Operator Krisztina Katai, Deutsche Bank. Krisztina Katai I wanted to ask about the evolution of Marketplace and specifically, what your strategic priorities are for the current fiscal year as it relates seller additions, where you are looking to expand the depth or breadth of the assortment. And just given the cost of tariffs, how are you thinking about general merchandise elasticity for the in-store business versus marketplace in the back half of the year? John Furner It's John. I think the first thing that is important to note is we want to be flexible for our customers and deliver what they want, when they want it, however they want it to be delivered. And so what you'll see in the coming months, quarters, and years is a continued focus on expanding our assortment to be able to deliver our customers what they're looking for without the need of looking at another app or going to another location. Our supply chain capabilities that include our new -- next-generation fulfillment centers, our ability to use our stores for delivery in a very dense, local, low-cost way are all parts of the solution to be able to serve customers flexibly. So assortment would be first. Second, we want to ensure that we have the right suite of services available to our sellers. Our sellers need to know where their inventory is, the rate of sale. We have an application they can look at it on their phone that tells them a lot of the critical information that they're going to need. And then third, our sellers who are launching brands, developing brands, or selling someone else's product, they're looking for ways to connect to relevant customer cohorts that are interested in their products. So being able to use our data to help them access cohorts who are interested in their categories and then advertise through Walmart Connect is a big part of the solution that all of our sellers are going to need. In terms of elasticity, we watch elasticity and we are constantly reforecasting quantities placement. This is something that we do each and every day, every week, every month, every quarter. So there'll be a period here where we'll be watching this -- and we are watching this very closely with much better tools and visibility know what we own, where it is and where it's moving. And then we'll continue to ensure that -- just as we talked about earlier, the supply chains continue to flow. We're in stock for our customers in the store at the counter. We have great quality produce and fresh. And then finally, our fulfillment center inventory is placed well so that if a customer places an order, we'll be able to deliver it in a very fast manner and meet the promise that we told them. Kathryn McLay And if I can just chime in from an international perspective, like, we're very proud of the progress we're making in Flipkart. But if I focus on our other marketplace businesses in Canada, Chile, and Mexico, our total marketplace GMV grew over 30% year on year. And a lot of that is because we have -- in this quarter, we signed up over 4,000 new sellers in Mexico and Canada. We also launched Walmart Connect for our marketplace sellers in Canada, and we've seen really high engagement with that. And our SKU count grew over 80% in Canada and Mexico over this last quarter. So a lot of upside and a lot of growth and momentum in our Marketplace business across international. Operator Thank you. At this time, we've reached the end of the question-and-answer session. I'll now turn the call over to Doug McMillon for closing remarks. C. Douglas McMillon Thanks again for dialing in and asking great questions. We have momentum, and that momentum continues. We feel good about our ability to win with customers, to serve them how they want to be served. We're encouraged by the fact that e-commerce growth across all three segments continues to be strong, all three segments growing more than 20%. And secondarily, we're strengthening our business model, playing that through regardless of what's happening with tariffs. The 50% growth in advertising, the 15% growth in membership, I think, are really encouraging. And then thirdly, as it relates to the short-term environment, we think we are positioned to manage this as well or better than anybody. We will do our best to serve our customers well, to help keep prices low. That's really important in an environment like this, and it's our purpose. That's what we're here to do. But we believe we can do that while continuing to execute the strategy, change the business model, and grow profit faster than sales. So that's our consistent message, and we're confident in our plan. Operator This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-05-2025
- Business
- Yahoo
Kidoz Welcomes Strengthened COPPA Rule as a Win for Families and Safe Compliant Advertising
VANCOUVER, BC / / May 14, 2025 / Kidoz Inc. (TSXV:KDOZ) (the "Company"), mobile AdTech developer and owner of the market-leading Kidoz Contextual Ad Network ( the Kidoz Publisher SDK and the Kidoz Privacy Shield, applauds the Federal Trade Commission's ("FTC") updated Children's Online Privacy Protection Rule (COPPA), which takes effect June 23, 2025. The updated rule brings clarity and modernization to the regulatory framework that was originally conceived for a world without apps or streaming. The updated COPPA rule has a number of important implications to Kidoz including the confirmation of contextual targeting as a safe and viable way to advertising to children. The FTC also released important updates on audience definitions and enforcement. "The FTC update doesn't just modernize COPPA, it sets an enforceable bar for compliance and transparency in kids' digital experiences," said Jason Williams, CEO of Kidoz. "The Kidoz mission it to create a safe global advertising ecosystem based on the principle of privacy and we're proud to offer brands, developers, and families a compliant and high-performance solution. Kidoz technology is certified under PRIVO's FTC approved COPPA Safe Harbor and has been awarded PRIVO's GDPRkids™ Privacy Assured Shield." "Kidoz builds privacy first advertising infrastructure based on the foundation of strict COPPA compliance with zero use of behavioral or personal data. The FTC's COPPA update reinforces the privacy requirements that exactly align with our long-standing practices." According to Claire Quinn, PRIVO's CPO, the Rule update brings new requirements for consent in relation to advertising practices. "The FTC has clarified the requirements around consent for advertising to children. Kidoz provides a compliant solution for engaging with children that allows apps to generate revenue without harms and risks to younger users. It's a much needed solution that promotes a healthier ecosystem for kids and families." Key FTC Updates to the COPPA Rule in relation to Kidoz: Increased Importance of Age Screening for Mixed-Audience Publishers The new rule formalizes how platforms must handle "mixed audience" classifications, requiring neutral age screening before collecting any personal data. Kidoz will have the opportunity to grow with new partners who begin to segment their traffic with age gates. Confirmation of Contextual Ads as a Viable, Compliant Model The FTC reaffirmed that contextual advertising remains permissible without parental consent, as long as no other personal identifiers are collected. Kidoz contextual-only targeting technology is confirmed as compliant. Enhanced Oversight of Safe Harbor Programs The FTC has introduced requirements for Safe Harbor programs to disclose their membership lists and report additional information to the FTC. The rule also closes loopholes in how audience targeting and consent responsibilities are defined - particularly around actual knowledge and data minimization. Kidoz's non-compliant competitors will be at greater risk of detection. Heightened Scrutiny of Data Partner Integrations Although not directly targeted, the FTC emphasized responsibility for data shared with third parties, including ad tech partners. Kidoz operates with complete data transparently and encourages all partners to scrutinize the data connections for potential COPPA infractions. About Kidoz Inc. (TSXV:KDOZ) ( is a global AdTech software company and the developer of the Kidoz Safe Ad Network, delivering privacy-first, high-performance mobile advertising for children, teens, and families, whose mission is to keep children safe in the complex digital advertising ecosystem. Through its proprietary Kidoz SDK, Privacy Shield, and advanced contextual targeting tools, Kidoz enables safe, compliant ad experiences that adhere to COPPA, GDPR-K, and global standards, without using location or personally identifiable information data tracking commonly used in digital advertising. The Kidoz platform helps app developers monetize their apps with safe and relevant ads, while uniting brands and families in a compliant mobile ecosystem. Google-certified and Apple-approved, the Kidoz network reaches hundreds of millions of users monthly, and is trusted by leading brands including Mattel, LEGO, Disney, and Kraft. Kidoz offers both managed and programmatic media solutions, including SSP, DSP, and Ad Exchange capabilities and provides a platform for mobile app publishers to monetize their active users through display, rich media, and video ads. Trusted by top brands and developers, Kidoz runs campaigns in over 60 countries and generates the majority of its revenue from AdTech advertising. The Company also operates Prado, its wholly owned over-13 division. For brands, Prado enables scaled access with high quality inventory and audience engagement across teens, families, and general audiences. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made or to be made by the company) contains statements that are forward-looking, such as statements relating to anticipated future success of the company. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of the company. For a description of additional risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Specifically, readers should read the Company's Annual Report on Form 20-F, filed with the SEC and the Annual Financial Statements and Management Discussion & Analysis filed on SEDAR on April 24, 2025, and the prospectus filed under Rule 424(b) of the Securities Act on March 9, 2005 and the SB2 filed July 17, 2007, and the TSX Venture Exchange Listing Application for Common Shares filed on June 29, 2015 on SEDAR, for a more thorough discussion of the Company's financial position and results of operations, together with a detailed discussion of the risk factors involved in an investment in Kidoz Inc. For more information contact:Henry BromleyCFOir@ 374-2163 Neither the TSX Venture Exchange nor its Regulation Services Provider accepts responsibility for the adequacy or accuracy of this release. SOURCE: Kidoz Inc. 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