小牛電動 (NIU) 2018 Q4 法說會逐字稿

Welcome to NIU Technologies Fourth Quarter 2018 Earnings Conference Call.

歡迎參加小牛電動 2018 年第四季財報電話會議。

(Operator Instructions)

（操作員說明）

Now, I will turn the call over to Mr. Jason Yang, Investor Relations Manager of NIU Technologies.

現在我把電話轉給小牛電動投資者關係經理楊傑先生。

Hello, everyone. Thank you for joining us on today's conference call to discuss the Company's financial results for the fourth quarter of 2018. We released the results earlier today. The press release is available on the Company's Web Site as well as from newswire services.

大家好。感謝您參加今天的電話會議，討論公司 2018 年第四季的財務業績。該新聞稿可在本公司網站以及新聞專線服務上取得。

On the call with me today are Dr. Yan Li, Chief Executive Officer; and Mr. Hardy Zhang, Chief Financial Officer.

今天與我通話的是執行長李岩博士；和財務長張哈迪先生。

Before we continue, please note that today's discussion will contain forward-looking statements made under the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the Company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the Company's public filings with the SEC. The Company does not assume any obligation to update any forward-looking statements, except as required under applicable law.

在我們繼續之前，請注意，今天的討論將包含根據 1995 年美國私人證券訴訟改革法案的安全港條款做出的前瞻性陳述。因此，公司的實際結果可能與今天表達的預期有重大差異。有關此風險和其他風險和不確定性的更多資訊包含在公司向 SEC 提交的公開文件中。除適用法律要求外，本公司不承擔更新任何前瞻性聲明的義務。

Our earnings press release and this call include discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the audited most directly comparable GAAP measures and is available on our Web Site. Please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese Renminbi.

我們的收益新聞稿和本次電話會議包括對某些未經審計的非公認會計準則財務指標的討論。我們的新聞稿包含未經審計的非 GAAP 衡量標準與經審計的最直接可比較 GAAP 衡量標準的調整表，可在我們的網站上取得。請注意，除非另有說明，電話會議中提到的所有數字均以人民幣為單位。

With that, now let me turn the call over to our CEO, Dr. Yan.

現在讓我把電話轉給我們的執行長嚴博士。

Great. Thanks, Jason, and thanks everyone for joining us on the call today. So we're very excited to report another strong quarter with solid financial performance. We grew scooter volume by 78%, net revenue by 95% and improved gross margin to 13.5%. That is 9 percentage points better than this time last year.

偉大的。謝謝傑森，也謝謝大家今天加入我們的電話會議。因此，我們非常高興地報告另一個強勁的季度和穩健的財務表現。我們的踏板車銷量成長了 78%，淨收入成長了 95%，毛利率提高至 13.5%。比去年同期高出 9 個百分點。

So despite the sluggishness in the Chinese economy with respect to consumer spending, our results actually show the demand remains robust for electric scooters. So we believe our electric scooter is one of the most convenient and the economic solution for people taking urban commute and this transcends economic cycles.

因此，儘管中國經濟在消費支出方面低迷，但我們的結果實際上表明電動滑板車的需求仍然強勁。因此，我們相信我們的電動滑板車是城市通勤人們最方便、最經濟的解決方案之一，並且超越了經濟週期。

So cities around the world continues to struggle with traffic congestions resulting from more and more automobile use, but electric scooter enable commuters to avoid traffic jams. Furthermore, if more people switch from four wheels to electric two wheels, it will actually reduce traffic congestion, lessen aggregate energy consumption and eliminate point-of-use carbon emission which is a very positive network effect.

因此，世界各地的城市繼續與越來越多的汽車使用造成的交通擁堵作鬥爭，但電動滑板車使通勤者能夠避免交通擁堵。此外，如果更多的人從四輪轉向電動兩輪，實際上會減少交通擁堵，減少整體能源消耗並消除使用點碳排放，這是一個非常積極的網路效應。

So it's also one of the cheapest solutions for urban mobility. So we're spreading the retail price for the product lifecycle. The daily cost for users is roughly a few Renminbi per day, so it's even cheaper than taking a subway.

因此，它也是城市交通最便宜的解決方案之一。因此，我們將零售價分攤到產品生命週期內。用戶每天的費用大約是幾塊錢一天，甚至比搭地鐵還要便宜。

Beyond China, we continue accelerating demand growth for electric scooters. In addition, there are also new regulations being put in place to accelerate the adoption of electric scooters. In China, the State Administration for Market Regulation and the National Standardization Administration of China jointly released the regulation of 50 technical specifications for electric bicycles to go into effect on April 15, 2019.

在中國以外，我們持續加速電動滑板車的需求成長。此外，也推出了新的法規來加速電動滑板車的採用。在中國，國家市場監督管理總局和國家標準化管理委員會聯合發布了50項電動自行車技術規範規定，並於2019年4月15日起實施。

So this regulation prompts the industry to upgrade the traditional heavier lead-acid battery to lighter and more portable lithium-ion battery-based electric scooters by putting a weight restriction of 55 kilograms on scooters. So this policy will accelerate the adoption of the lithium-ion battery in the Chinese electric scooter market, while simultaneously improving the low safety for electric scooters, which will in turn promote more people to adopt electric scooters for daily commute. For nix, we have a great first-mover advantage by being the first and the largest lithium-ion-based scooter brand in China.

因此，這項規定促使業界將傳統較重的鉛酸電池升級為更輕、更便攜的鋰離子電池電動滑板車，對滑板車的重量限制為55公斤。因此，這項政策將加速鋰離子電池在中國電動滑板車市場的普及，同時改善電動滑板車安全性較低的問題，進而推動更多人使用電動滑板車進行日常通勤。對nix來說，我們是中國第一個也是最大的鋰離子滑板車品牌，具有很大的先發優勢。

Now, outside of China and especially Europe, we're seeing governmental support for electric scooters with a variety of subsidies to lessen the purchase price. For example, France provide EUR900 subsidy; Spain provided up to EUR750. So those continue to help the electric transformation in the two-wheeler globally.

現在，在中國以外，尤其是歐洲，我們看到政府對電動滑板車的支持，並提供各種補貼以降低購買價格。例如，法國提供900歐元的補貼；西班牙提供高達 750 歐元。因此，這些將繼續幫助全球兩輪車的電動轉型。

Now, we continue to execute our growth strategy in the fourth quarter last year throughout three key pillars. So those are, the first one, develop premium hit products that offers a great riding experience for urban user globally; second, continue to build a global new brand as the lifestyle urban mobility brand through an innovative yet cost efficient marketing and branding activities; and three, rapid expansion of our sales network globally at low costs.

現在，我們繼續執行去年第四季的成長策略，涵蓋三個關鍵支柱。第一，開發優質熱門產品，為全球城市用戶提供良好的騎乘體驗；其次，透過創新且具成本效益的行銷與品牌活動，持續打造全球新品牌作為生活風格城市出行品牌；第三是以低成本快速拓展全球銷售網絡。

Well, first, we launched all new product line of NGT, M+ and UM in June and August 2018, so as a result our Q4 R&D effort many focused on 2019 products which we're planning to launch soon. In addition to 2019 new product R&D, we have also upgraded existing product lines to improve the user experience.

嗯，首先，我們在2018年6月和8月推出了NGT、M+和UM的所有新產品線，因此我們第四季度的研發工作主要集中在我們計劃很快推出的2019年產品上。除了2019年新品研發之外，我們也對現有產品線進行了升級，以提升使用者體驗。

In late August, we upgrade our nix series with the enhanced battery solution to extend the riding distance from a single charge. So this upgrade builds upon extensive research on our battery and the riding data. And in October we made a performance upgrade to our M+ model by adding several driver assisted functions to the entry level models based on users' interactive feedback.

8月下旬，我們對 nix 系列進行了升級，採用了增強型電池解決方案，以延長單次充電的騎乘距離。因此，這次升級建立在對我們的電池和騎行數據的廣泛研究的基礎上。 10 月份，我們根據用戶的互動回饋，對 M+ 車型進行了性能升級，並在入門級車型上添加了多項駕駛輔助功能。

So both those upgrades not only improve [user satisfaction], but also allows us to increase the retail price by 3% to 10% depending on the models. Despite those price increases to the end customer, our demand remains strong and this is reflected in our Q4 sales volumes.

因此，這兩項升級不僅提高了[用戶滿意度]，還使我們能夠根據型號將零售價提高3％至10％。儘管最終客戶的價格上漲，但我們的需求仍然強勁，這反映在我們第四季的銷售中。

Besides those major upgrades, we have also [load out most of firmware] upgrades in Q4 for performance improvements such as more accurate GPS location, better battery management, our users are able to upgrade their scooter via over-the-air upgrade with our proprietary onboard telematics.

除了這些重大升級之外，我們還在第四季度[加載大部分韌體]升級以提高性能，例如更準確的GPS 定位、更好的電池管理，我們的用戶可以使用我們的專有技術透過無線升級來升級他們的踏板車車載遠端資訊處理。

So those performance upgrade are based on the aggregated riding data we have collected and analyzed. So by the way, we were very proud that our total cumulative mileage in China has surpassed 2 billion kilometers in December 2018, just three and a half years since our first scooters hit the road.

因此，這些性能升級是基於我們收集和分析的匯總騎乘數據。順便說一句，我們非常自豪的是，2018 年 12 月，我們在中國的累計總里程已超過 20 億公里，距離我們的第一輛踏板車上路僅三年半。

So besides [upgrading our] product line, we also actively enhanced our R&D platform to drive long-term innovation. Last week, we finalized and signed the Development Collaboration Agreement with the Volkswagen Group in Europe regarding the development of Micro-mobility solutions. We value the opportunity to work with Volkswagen and believe this collaboration will bring long-term benefit to both parties.

因此，除了[升級我們的]產品線之外，我們還積極增強我們的研發平台以推動長期創新。上週，我們與歐洲大眾集團敲定並簽署了關於微移動解決方案開發的開發合作協議。我們非常重視與大眾汽車的合作機會，相信這項合作將為雙方帶來長期利益。

Second, we continued to build new brands as the lifestyle of a mobility brand through an innovative yet cost efficient marketing and branding activities. The IPO in October 2018 was the key milestone that enabled us to build deeper trust with our end users and distributors.

其次，我們透過創新且具成本效益的行銷和品牌活動，持續打造新品牌作為行動品牌的生活方式。 2018 年 10 月的首次公開發行是一個重要的里程碑，它使我們能夠與最終用戶和分銷商建立更深的信任。

We have garnered both domestic and international media attention with more than 600 articles, spanning the likes of Wall Street Journal to Bloomberg to [Cimbai and Tenten News]. So this is a watershed moment for the two-wheeler industry as one Bloomberg opinion article claimed in the title that the electric future will run on two wheels.

我們以 600 多篇文章吸引了國內外媒體的關注，涵蓋《華爾街日報》、《彭博社》、《Cimbai 和 Tenten News》等。因此，這是兩輪車行業的分水嶺，正如彭博社的一篇評論文章標題中所聲稱的那樣，電動的未來將在兩輪車上運行。

Also being a user-centric Company, we have invited users to our IPO event and have also provided more than 20,000 IPO souvenirs to our existing users, which were claimed in 36 hours. Our user also broadcast this on their WeChat [mobile and] both the PR and their marketing among users have increased our brand awareness tremendously.

作為一家以用戶為中心的公司，我們不僅邀請了用戶參加我們的IPO活動，還為現有用戶提供了超過20,000份IPO紀念品，這些紀念品在36小時內就被領取了。我們的用戶也在他們的微信（手機）上傳播了這一點，用戶之間的公關和行銷極大地提高了我們的品牌知名度。

We also launched our lifestyle product line in December 2018 to promote NIU as a lifestyle brand in the urban mobility market. This includes brand apparel like T-shirts, hats as well as accessories such as notebooks, badges, keychains and mugs. So lifestyle accessories were welcomed by our customers and demonstrated our brand power and customer loyalty.

我們也於2018年12月推出了生活風格產品線，將小牛電動推向城市出行市場的生活風格品牌。其中包括 T 卹、帽子等品牌服裝以及筆記本、徽章、鑰匙圈和馬克杯等配件。因此，生活方式配件受到了客戶的歡迎，展示了我們的品牌力量和客戶忠誠度。

And third, we continue to grow our sales network rapidly. We increased our store count by 118 and closed the year with a total number of 760 stores, a 70% jump from 2017. Our store network is managed by 233 city partners across 178 cities, up from 215 at the start of the quarter in China.

第三，我們繼續快速發展我們的銷售網絡。我們的門市數量增加了 118 家，全年門市總數達到 760 家，比 2017 年增加 70%。 。

We grew our international distribution as well. We're selling in 27 countries compared with only 17 countries this time last year. So in 2019, we expect to grow our sales network by opening around 500 new stores in China and enter in new international market such as United States.

我們也擴大了國際分銷。我們的產品銷往 27 個國家/地區，而去年同期只有 17 個國家。因此，2019年，我們預計透過在中國開設約500家新店並進入美國等新的國際市場來擴大我們的銷售網絡。

Now, I will turn the call over to Hardy to discuss our financial results. Hardy?

現在，我將把電話轉給哈迪，討論我們的財務表現。哈迪？

Thank you, Yan, and hello, everyone. We concluded 2018 on a strong note. Our press release contains all the figures and comparisons you need. New this quarter, we are distributing the financial and operating data in Excel format. It is available for download from our IR Web Site. During my talk, keep in mind that we are referring to the fourth quarter figures unless I say otherwise and that all monetary figures are RMB unless otherwise noted.

謝謝嚴老師，大家好。我們以強勁的勢頭結束了 2018 年。我們的新聞稿包含您所需的所有數據和比較。本季度，我們以 Excel 格式發佈財務和營運數據。它可以從我們的 IR 網站下載。在我的演講中，請記住，除非另有說明，否則我們指的是第四季度的數據，並且除非另有說明，所有貨幣數據均為人民幣。

Revenue growth was driven by both scooter volume and the price increases. Scooter volume growth was primarily driven by three factors; new store openings in China, more product offerings and strong orders from international markets. We opened 118 new stores in China bringing the total number of stores in China to 716 versus 440 stores at the end of 2017.

收入成長是由踏板車銷售和價格上漲所推動的。踏板車銷量成長主要由三個因素推動；在中國開設新店、提供更多產品以及來自國際市場的強勁訂單。我們在中國開設了 118 家新店，使中國門市總數達到 716 家，而 2017 年底為 440 家。

The three new products launched during 2018, including the NGT, M+ and UM, contributed 36% of the total unit volume and were the key drivers of volume growth. International volume was particularly strong, more than tripling due to the orders on the new NGT and M+. International unit volume contributed 6.3% of the total compared with 3.4% a year ago. International sales will continue to play an increasingly important role in our growth strategy.

2018年推出的三款新產品，包括NGT、M+和UM，貢獻了總銷量的36%，是銷售成長的主要動力。由於新 NGT 和 M+ 的訂單，國際銷量尤其強勁，增長了兩倍多。國際銷售佔總量的 6.3%，去年同期為 3.4%。國際銷售將繼續在我們的成長策略中發揮越來越重要的作用。

I should note that scooter sales in both China and the international market are seasonal. In China, naturally summer sales in Q3 are peak season whereas winter sales in Q1 are the slowest due to weather conditions. Q1 sales in China are also impacted by the Chinese New Year holiday.

值得注意的是，滑板車在中國和國際市場的銷售都是季節性的。在中國，第三季的夏季銷售自然是旺季，而由於天氣原因，第一季的冬季銷售是最慢的。中國第一季的銷售也受到農曆新年假期的影響。

International markets are impacted by winter weather, the Christmas holiday and the lead time required for shipment from China. Please keep that in mind as you observe our sequential revenue pattern over the coming quarters.

國際市場受到冬季天氣、聖誕節假期以及從中國發貨所需的交貨時間的影響。當您觀察我們未來幾季的連續收入模式時，請記住這一點。

The increase in net revenue for scooter was mainly driven by our pricing actions and the product mix change. In January 2018, we increased the price on many models across N, M and U series. In August, we raised the prices of certain models in the U series. And in November, we raised the price of certain products reaching top line.

踏板車淨收入的成長主要是由我們的定價行為和產品結構變化所推動的。 2018 年 1 月，我們提高了 N、M 和 U 系列許多型號的價格。 8月份，我們提高了U系列部分型號的價格。 11 月份，我們將某些產品的價格提高到頂線。

The price increases were introduced together with performance upgrades in order to maintain a competitive value proposition. The net revenue per scooter increase was also helped by the higher percentage of volume from international markets where our prices are higher than those in China.

價格上漲與性能升級一起推出，以保持具有競爭力的價值主張。每輛踏板車淨收入的成長也得益於國際市場銷售比例的提高，我們的價格高於中國市場。

Gross margin was 13.5%, 9 percentage points better than this time last year and 1.1% better sequentially. The better [operability] was due to price increase and a higher proportion of international sales which had a higher price and higher gross margin. Compared to last year, the proportion of international scooter sales more than doubled to 14.5% of total scooter revenue.

毛利率為 13.5%，較去年同期增加 9 個百分點，較上一季提高 1.1%。較好的[可操作性]是由於價格上漲以及國際銷售比例較高，價格較高，毛利率較高。與去年相比，國際滑板車銷售佔比增加了一倍多，達到滑板車總收入的14.5%。

The sequential gross margin improvement was however muted by a higher rebate to distributors due to sales volume being higher than expected. Our distributors received additional rebate of 1% to 2% once their orders exceeded full year targets.

然而，由於銷售量高於預期，給經銷商的回扣較高，從而削弱了毛利率的環比改善。一旦訂單超過全年目標，我們的經銷商將獲得 1% 至 2% 的額外回饋。

Operating expenses increased in line with the growth of our business. G&A expense grew due to the cost of meeting regulatory requirements as a public Company. Sales and marketing expenses grew as we invested in branding activities together with IPO event in October.

營運費用隨著我們業務的成長而增加。由於作為上市公司滿足監管要求的成本，一般管理費用有所增加。由於我們投資於品牌活動以及 10 月份的 IPO 活動，銷售和行銷費用有所增長。

We also ramped up R&D spending to accelerate product portfolio growth. We believe that this investment in branding and R&D are smart spending as they will attract growth in the quarters ahead.

我們也增加了研發支出，以加速產品組合的成長。我們相信，對品牌和研發的投資是明智的支出，因為它們將在未來幾季吸引成長。

Despite higher expenses, we are still seeing meaningful operating leverage. As a percentage of net revenue, operating expense including the share-based compensation was 15.4% below the 17.4% we saw last year.

儘管費用增加，我們仍然看到有意義的營運槓桿。包括股權激勵在內的營運費用佔淨收入的百分比為 15.4%，低於去年的 17.4%。

Our GAAP net loss was 32 million which includes 24.8 million of share-based compensation. The share-based compensation was particularly high due to the accelerated vesting of certain restricted ordinary shares triggered by the IPO.

我們的 GAAP 淨虧損為 3,200 萬美元，其中包括 2,480 萬美元的股權激勵。由於IPO引發的某些限制性普通股的加速歸屬，股權激勵特別高。

Adjusting off the share-based compensation, we had net loss of 7.2 million. The loss was significantly reduced compared with the 27.5 million of adjusted net loss in the fourth quarter of last year.

扣除股權激勵後，我們的淨虧損為 720 萬美元。該虧損較去年第四季調整後淨虧損2,750萬美元大幅減少。

Our balance sheet ended the quarter in solid shape. As of December 31, we had cash, term deposits and short-term investment of 717 million. Our operating cash flow was a negative 144 million due to seasonality and also our management of [owning] capital.

本季結束時，我們的資產負債表狀況良好。截至12月31日，我們擁有現金、定期存款和短期投資7.17億元。由於季節性以及我們對[自有]資本的管理，我們的經營現金流為負1.44億。

Specifically, as mentioned earlier, Q3 is the peak season and therefore we have a large balance of account payables by the end of Q3. These [5] payables was settled in Q4, a slower season which affected our operating cash flow.

具體來說，如前所述，第三季度是旺季，因此截至第三季末我們的應付帳款餘額較大。這些 [5] 應付帳款在第四季度結算，這是一個淡季，影響了我們的經營現金流。

Secondly, we have reduced the payment credit days for selected supplier in exchange for lower cost for raw materials and components. This cost reduction should benefit 2019 gross margin.

其次，我們減少了選定供應商的付款信用天數，以換取原材料和零件成本的降低。這種成本降低應該有利於 2019 年的毛利率。

Now, let's turn to guidance. We expect Q1 net revenue to be in the range of 285 million to 305 million. This is lower than Q4 2018 but well above the 173 million we generated in Q1 last year. This represents year-over-year growth of 65% to 76%.

現在，讓我們轉向指導。我們預計第一季淨收入將在2.85億至3.05億美元之間。這低於 2018 年第四季度，但遠高於去年第一季的 1.73 億。這意味著同比增長 65% 至 76%。

Please keep in mind my early comments about seasonality. Third quarter sales are usually our strongest over the year whereas Q1 should normally be the softest. We also expect gross margin to improve when compared to last year. Gross margin in Q1 last year was [12.7]%. Also keep in mind that this forecast reflects our current expectations could change.

請記住我早期關於季節性的評論。第三季的銷售通常是一年中最強勁的，而第一季通常應該是最疲軟的。我們也預計毛利率將比去年有所改善。去年第一季毛利率為[12.7]%。另請記住，該預測反映了我們當前的預期可能會發生變化。

With that, let's now open the call for any questions that you may have for us. Operator, please go ahead.

現在，讓我們開始電話會議，詢問您可能向我們提出的任何問題。接線員，請繼續。

(Operator Instructions)

（操作員說明）

Brad Erickson from Needham & Company.

來自 Needham & Company 的 Brad Erickson。

Hi, guys. Good morning. Just a few. First, just starting with the revenue, it came in pretty materially ahead of your guidance you provided last quarter. It sounds like some of that is related to better orders on the international front. Can you just zero in specifically what trapped ahead of expectations in the quarter just a little bit more granularly?

嗨，大家好。早安.一些。首先，從收入開始，它遠遠超出了您上季度提供的指導。聽起來其中一些與國際方面更好的訂單有關。您能否將本季超出預期的具體情況歸零，更具體？

Sure. Brad, it's Hardy. I think the revenue was driven higher than early expectation of guidance because of two reasons. One reason is the international sales you mentioned. The international sales were particularly strong because we received additional orders especially for the sharing business [model] by the end of November and also early December. This helped us with our Q4 international sales. In addition to that, the [PR] sales is also exceeding our expectation because we continue to see solid demand in China. I hope this answers your question.

當然。布拉德，我是哈迪。我認為收入高於早期預期的指導有兩個原因。原因之一是你提到的國際銷售。國際銷售特別強勁，因為我們在 11 月底和 12 月初收到了額外的訂單，特別是共享業務[模型]。這有助於我們第四季的國際銷售。除此之外，[PR] 銷售額也超出了我們的預期，因為我們繼續看到中國的強勁需求。我希望這回答了你的問題。

Yes. That's great. And then just in terms of channel inventory, just maybe give a quick update how you're feeling at the moment? And then secondarily to that, you mentioned upcoming product launches as we go through 2019. Talk about any sort of extra inventory management that may have to occur to make room for some of those new products in various channels?

是的。那太棒了。然後就通路庫存而言，也許可以快速更新您目前的感受？其次，您提到了 2019 年即將推出的產品。

Sure. For the channel inventory, we continue to monitor inventory in two ways. The first way is our APP function. As you know, all of our scooters in China are connected. Therefore, once our consumers and users purchase the scooter, they can activate their scooter in our APP. In that way we can track how many scooters were sold. Secondly, our retailers, our dealers, they also report retail volume to us on daily basis as another way for us to track the China inventory. Based on our data, the China inventory is normally between one month and one half month, a similar level we see in the past few quarters. And your second question was about the new models potential to launch in 2019.

當然。對於通路庫存，我們繼續透過兩種方式監控庫存。第一種方式就是我們的APP功能。如您所知，我們在中國的所有踏板車都是連網的。因此，一旦我們的消費者和用戶購買了滑板車，他們就可以在我們的APP中啟動他們的滑板車。透過這種方式，我們可以追蹤踏板車的銷售量。其次，我們的零售商、我們的經銷商，他們也每天向我們報告零售量，作為我們追蹤中國庫存的另一種方式。根據我們的數據，中國庫存通常在一個月到半個月之間，與過去幾季的水平相似。你的第二個問題是關於 2019 年可能推出的新車型。

Right.

正確的。

Brad, this is Yan. Of all on the channel inventory, given it's only like a month or month and a half. So typically when you start to launch new models, the inventory of one month wouldn't be an issue for distributors or retailers. So I think that was the question you had, right?

布拉德，這是嚴。在所有通路庫存中，考慮到只有一個月或一個半月左右。因此，通常當您開始推出新型號時，一個月的庫存對於分銷商或零售商來說不是問題。所以我想這就是你的問題，對嗎？

Yes. That was great. And then maybe just one other if I could. It sounded like you mentioned the higher rebates to distributors which obviously was a positive because it occurred from higher volume. Maybe could you clarify for us just did that force gross margin a little bit below your expectations? Just wanted to clarify what you meant by that recognizing that the absolute volume came in higher just as a function of the volume upside, but then just want to understand how that translated relative to your gross margin expectations?

是的。那很棒。如果可以的話，也許只是另一個。聽起來你提到了向經銷商提供更高的回扣，這顯然是一個積極的因素，因為它是由於銷售增加而產生的。也許您能為我們澄清一下，這是否迫使毛利率略低於您的預期？只是想澄清一下您的意思是認識到絕對銷量隨著銷量上升而增加，但隨後只是想了解相對於您的毛利率預期而言，這是如何轉化的？

Sure. So let me first explain the [sales volume rebate] incentive plan we have with our distributors. Beginning of each year our distributors receive an annual target, a volume target which they need to achieve. Based on that annual target, they can receive a certain level of rebates. But on top that target we give them two other targets, more stretched target and if they are able to achieve that stretched target, they can receive additional 1% to 2% of rebate. And that 1% to 2% is linked to the annual volume, not quarterly volume. So in Q4, a few of our bigger distributors, they are very close to achieving the stretched goal and we see strong orders on those distributors. And after they achieved the stretched goal, as I mentioned, they receive 1% to 2% additional rebate. And the impact of rebate on our financials are two ways. First, it reduced our net revenue. Because of additional rebates we gave to distributors, our net revenue was less. Secondly, it has negative impact on our net margins. So based on our own estimate, the impact on the margin is close to 1.5% because of additional rebates we gave to distributors. Without the additional rebates, we could have achieved higher gross margin in the last quarter last year. I hope this answers your question.

當然。那我先解釋一下我們和經銷商的【銷售返利】激勵計畫。每年年初，我們的經銷商都會收到年度目標，也就是他們需要實現的銷售目標。根據該年度目標，他們可以獲得一定程度的回扣。但除了這個目標之外，我們還給了他們另外兩個目標，即更延伸的目標，如果他們能夠實現該延伸的目標，他們可以獲得額外的 1% 到 2% 的回扣。而這 1% 到 2% 與年度數量相關，而不是季度數。因此，在第四季度，我們的一些較大的分銷商非常接近超額目標，我們看到這些分銷商的訂單強勁。正如我所提到的，在他們實現了延伸目標後，他們會獲得 1% 到 2% 的額外回扣。回扣對我們財務的影響有兩個面向。首先，它減少了我們的淨收入。由於我們給予經銷商額外的回扣，我們的淨收入減少了。其次，它對我們的淨利潤率產生負面影響。因此，根據我們自己的估計，由於我們給予經銷商額外的回扣，對利潤率的影響接近 1.5%。如果沒有額外的回扣，我們去年最後一個季度的毛利率可能會更高。我希望這回答了你的問題。

That's great. Super helpful. And then maybe one more if I could. Just on VW announcement, that seems pretty noteworthy. I know it's early. I think you said you announced it or just signed it last week. But maybe just offer a little bit of color of how you'll be working with them? We saw the note in the press release, but just would be curious to understand a little bit more in terms of how you'll be working with Volkswagen here going forward? Thanks.

那太棒了。超有幫助。如果可以的話，也許還有一個。就大眾汽車的公告而言，這似乎非常值得注意。我知道現在還早我想你說過你上周宣布了它或剛剛簽署了它。但也許只是提供一些關於您將如何與他們合作的資訊？我們在新聞稿中看到了這一說明，但只是想更多地了解您未來將如何與大眾汽車合作？謝謝。

Yes, let me first comment and then maybe Yan can add later. First of all, even though the agreement was only recently signed, we have been working with them in the past few months. And this is a Development Collaboration Agreement with indefinite collaboration period. So both parties does have a lot of intention to cooperate with each other in the longer term. However, for the specific content we cannot disclose because we will probably have a very strict rule on the confidentiality and also publicity. Therefore, only when we have some concrete plan, when we have agreement with VW, we can release additional information to the public.

是的，讓我先發表評論，然後也許嚴可以稍後再添加。首先，儘管協議是最近才簽署的，但我們在過去的幾個月裡一直在與他們合作。這是一份合作期限無限期的開發合作協議。所以雙方確實有很多長期合作的意圖。但具體內容我們不能透露，因為我們可能會對保密和公開有非常嚴格的規定。因此，只有當我們有具體的計劃，當我們與大眾達成一致時，我們才能向公眾發布更多資訊。

That's great. Thanks very much.

那太棒了。非常感謝。

Thank you.

謝謝。

(Operator Instructions)

（操作員說明）

Seeing no more questions in the queue, let me turn the call back to Mr. Li for closing remarks.

看到隊列中沒有更多問題，讓我將電話轉回給李先生做總結發言。

Well, thank you, everyone, for dialing in the call. We'll continue to work hard and expect to talk with everyone in the next quarter earnings.

好的，謝謝大家撥電話。我們會繼續努力，期待下個季度的財報和大家聊聊。

Thank you. all, again. This concludes the call. You may now disconnect.

謝謝。所有，再一次。通話就此結束。您現在可以斷開連線。