NIO Inc. Reports Unaudited Fourth Quarter and Full Year 2019 Financial Results

SHANGHAI, China, March 18, 2020-- NIO Inc. (“NIO” or the “Company”) (NYSE: NIO), a pioneer in China’s premium electric vehicle market, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2019.

Operating Highlights for the Fourth Quarter and Full Year 2019

• Deliveries of vehicles were 8,224 in the fourth quarter of 2019 including 6,824 ES6s and 1,400 ES8s, compared with 4,799 vehicles delivered in the third quarter of 2019.

• Deliveries of vehicles were 20,565 in 2019, compared with 11,348 vehicles delivered in 2018ii.

Financial Highlights for the Fourth Quarter of 2019

• Vehicle sales were RMB2,683.9 million (US$385.5 million) in the fourth quarter of 2019, representing an increase of 54.8% from the third quarter of 2019 and a decrease of 20.6% from the same quarter of 2018.

• Vehicle marginiii was negative 6.0%, compared with negative 6.8% in the third quarter of 2019 and 3.7% in the same quarter of 2018.

• Total revenues were RMB2,848.3 million (US$409.1 million) in the fourth quarter of 2019, representing an increase of 55.1% from the third quarter of 2019 and a decrease of 17.1% from the same quarter of 2018.

• Gross margin was negative 8.9%, compared with negative 12.1% in the third quarter of 2019 and 0.4% in the same quarter of 2018.

• Loss from operations was RMB2,826.2 million (US$406.0 million) in the fourth quarter of 2019, representing an increase of 17.3% from the third quarter of 2019 and a decrease of 18.0% from the same quarter of 2018. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB2,774.9 million (US$398.6 million) in the fourth quarter of 2019, representing an increase of 18.6% from the third quarter of 2019 and a decrease of 16.0% from the same quarter of 2018.

• Net loss was RMB2,864.6 million (US$411.5 million) in the fourth quarter of 2019, representing an increase of 13.6% from the third quarter of 2019 and a decrease of 18.2% from the same quarter of 2018. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB 2,813.4 million (US$404.1 million) in the fourth quarter of 2019, representing an increase of 14.8% from the third quarter of 2019 and a decrease of 16.3% from the same quarter of 2018.

• Net loss attributable to NIO’s ordinary shareholders was RMB2,893.8 million (US$415.7 million) in the fourth quarter of 2019, representing an increase of 13.3% from the third quarter of 2019 and a decrease of 17.7% from the same quarter of 2018. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB2,810.7 million (US$403.7 million).

• Basic and diluted net loss per American Depositary Share (ADS)iv were both RMB2.81 (US$0.40) in the fourth quarter of 2019. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB2.73 (US$0.39).

• Cash and cash equivalents, restricted cash and short-term investment were RMB1,056.3 million (US$151.7 million) as of December 31, 2019.

Financial Highlights for the Full Year 2019

• Vehicle sales were RMB7,367.1 million (US$1,058.2 million) for the full year 2019, representing an increase of 51.8% from the previous year.

• Vehicle margin was negative 9.9% for the full year 2019, compared with negative 1.6% for the previous year. Excluding the negative impact of battery recall costs, vehicle margin was negative 6.0%.

• Total revenues were RMB7,824.9 million (US$1,124.0 million) for the full year 2019, representing an increase of 58.0% from the previous year.

• Gross margin was negative 15.3% for the full year 2019, compared with negative 5.2% for the previous year. Excluding the negative impact of battery recall costs, gross margin was negative 10.9%.

• Loss from operations was RMB11,079.2 million (US$1,591.4 million) for the full year 2019, representing an increase of 15.5% from the previous year. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB10,745.7 million (US$1,543.5 million) in 2019, representing an increase of 20.5% from the previous year.

• Net loss was RMB11,295.7 million (US$1,622.5 million) for the full year 2019, representing an increase of 17.2% from the previous year. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB10,962.2 million (US$1,574.6 million) for the full year 2019, representing an increase of 22.4% from the previous year.

• Net loss attributable to NIO’s ordinary shareholders was RMB11,413.1 million (US$1,639.4 million) for the full year 2019, representing a decrease of 51.1% from the previous year. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB10,953.0 million (US$1,573.3 million).

• Basic and diluted net loss per ADS were both RMB11.08 (US$1.59) for the full year 2019. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB10.63 (US$1.53).

CEO and CFO Comments

“We delivered, on a combined basis, 8,224 ES8 and ES6 vehicles in the fourth quarter of 2019, representing a 71.4% sequential increase from the prior quarter. Cumulative deliveries of ES8 and ES6 reached 20,565 in 2019, representing an 81.2% increase from 2018,” said William Bin Li, founder, chairman and chief executive officer of NIO. “As a leading premium smart EV brand from China, we are proudly serving over 34,218 NIO users across 296 cities in China as of the end of February 2020. Our ES6 ranked No.1 in electric SUV sales in China for the fifth consecutive month since October 2019.

“We started 2020 in a challenging environment due to the COVID-19 outbreak. While we keep safety and health of our global employees a top priority, our teams strive to resume productions, expand our traffic channels, integrate our online and offline sales efforts and offer best services possible to bring business and operation back to normal. Looking into year 2020, we are confident that we will produce the most competitive electric SUVs in China, including ES6, all-new ES8 and EC6, together with more comprehensive battery and power solutions. We are pleased to see our growing user community becoming an essential part of our brand and business growth. We have covered 59 cities with 22 NIO Houses and 62 NIO Spaces in China, which efficiently support our branding and sales efforts. We are well prepared to proceed through the headwind and become stronger in 2020,” concluded Mr. Li.

“We are pleased with our financial performance in the fourth quarter of 2019, with the top line growing 55.1% from the previous quarter,” added Wei Feng, NIO’s chief financial officer. “We have put great efforts to optimize our organizations and to improve operation efficiency, which resulted in certain one-off expenses in the fourth quarter. However, we believe that these efforts will significantly reduce our operating expenses and improve our cash flows in 2020 and beyond. We will continue to improve operation efficiency in all business fronts to bring positive changes to the performance of our margins in the future.

“Additionally, we made several private placements of convertible notes in February and March 2020, in an aggregate principal amount of US$435 million, which supported our daily operations and business development. On February 25, 2020, we entered into a collaboration framework agreement with the municipal government of Hefei, Anhui Province, who expects to provide resources and funding support for NIO to establish NIO China headquarters in Hefei for our long-term growth. The parties are working on the legally binding definitive documents to be signed.”

Financial Results for the Fourth Quarter and Full Year 2019

Revenues

• Total revenues in the fourth quarter of 2019 were RMB2,848.3 million (US$409.1 million), representing an increase of 55.1% from the third quarter of 2019 and a decrease of 17.1% from the same quarter of 2018.
   

• Total revenues for the full year 2019 were RMB7,824.9 million (US$1,124.0 million), representing an increase of 58.0% from the previous year.
   

• Vehicle sales in the fourth quarter of 2019 were RMB2,683.9 million (US$385.5 million), representing an increase of 54.8% from the third quarter of 2019 and a decrease of 20.6% from the same quarter of 2018. The increase in vehicle sales over the third quarter of 2019 was attributed to higher deliveries achieved from the existing users’ referrals and the expansion of our sales network through the continued launch of more efficient NIO Spaces in the fourth quarter of 2019. The decrease in vehicle sales over the fourth quarter of 2018 was due to a higher proportion of ES6 sold in the fourth quarter of 2019, of which the selling price is lower than that of the ES8, which accounted for a larger portion of the sales in the fourth quarter of 2018.
   

• Vehicle sales for the full year 2019 were RMB7,367.1 million (US$1,058.2 million), representing an increase of 51.8% from the previous year.
   

• Other sales in the fourth quarter of 2019 were RMB164.4 million (US$23.6 million), representing an increase of 59.0% from the third quarter of 2019 and an increase of 202.1% from the same quarter of 2018. The increase in other sales over the third quarter of 2019 was mainly attributed to increased revenues derived from the home chargers installed and accessories sold in line with the incremental vehicle sales in the fourth quarter. 
   

• Other sales for the full year 2019 were RMB457.8 million (US$65.8 million), representing an increase of 363.8% from the previous year.

Cost of Sales and Gross Margin

• Cost of sales in the fourth quarter of 2019 was RMB3,102.1 million (US$445.6 million), representing an increase of 50.7% from the third quarter of 2019 and a decrease of 9.3% from the same quarter of 2018. The increase in cost of sales over the third quarter of 2019 was mainly driven by the increase of delivery volume of the ES6 and ES8 in the fourth quarter of 2019.
   

• Cost of sales for the full year 2019 was RMB9,023.7 million (US$1,296.2 million), representing an increase of 73.3% from the previous year.
   

• Gross margin in the fourth quarter of 2019 was negative 8.9%, compared with negative 12.1% in the third quarter of 2019 and 0.4% in the same quarter of 2018. The increase of gross margin compared to the third quarter of 2019 was mainly driven by the increase of vehicle margin in the fourth quarter of 2019. 
   

• Gross margin for the full year 2019 was negative 15.3%, compared with negative 5.2% for the full year 2018. Excluding the negative impact of battery recall costs, gross margin was negative 10.9%.
   

• Vehicle margin in the fourth quarter of 2019 was negative 6.0%, compared with negative 6.8% in the third quarter of 2019 and 3.7% in the same quarter of 2018. The increase of vehicle margin compared to the third quarter of 2019 was mainly driven by the increase of production and delivery volume of ES6 and ES8 in the fourth quarter of 2019.
   

• Vehicle margin for the full year 2019 was negative 9.9%, compared with negative 1.6% for the full year 2018. Excluding the negative impact of battery recall costs, vehicle margin was negative 6.0%

Operating Expenses                                  

• Research and development expenses in the fourth quarter of 2019 were RMB1,026.4 million (US$147.4 million), representing an increase of 0.3% from the third quarter of 2019 and a decrease of 32.3% from the same quarter of 2018. Excluding share-based compensation expenses (non-GAAP), research and development expenses were RMB1,014.4 million (US$145.7 million), representing an increase of 1.1% from the third quarter of 2019 and a decrease of 32.1% from the same quarter of 2018. The slight increase in research and development expenses over the third quarter of 2019 was primarily attributed to the incremental design and development costs for EC6 and all-new ES8 launched in December 2019, offset by less employee compensation due to a reduced number of R&D personnel. The decrease in research and development expenses over the fourth quarter of 2018 was caused by the decrease of R&D expenses related to ES6, which came to mass production in June 2019.
   

• Research and development expenses for the full year 2019 were RMB4,428.6 million (US$636.1 million), representing an increase of 10.8% from the previous year. Excluding share-based compensation charges (non-GAAP), research and development expenses were RMB4,345.9 million (US$624.2 million).
   

• Selling, general and administrative expenses in the fourth quarter of 2019 were RMB 1,546.0 million (US$222.1 million), representing an increase of 32.8% from the third quarter of 2019 and a decrease of 20.5% from the same quarter of 2018. Excluding share-based compensation expenses (non-GAAP), selling, general and administrative expenses were RMB1,509.0 million (US$216.8 million), representing an increase of 35.2% from the third quarter of 2019 and a decrease of 17.3% from the same quarter of 2018. The increase in selling, general and administrative expenses over the third quarter of 2019 was primarily attributed to increased marketing and promotional activities and costs on the optimization of our organization and sales network, offset by less employee compensation due to a reduced number of selling, general and administrative employees. The decrease in selling, general and administrative expenses over the fourth quarter of 2018 was mainly due to less marketing and promotional activities and less employee compensation due to the reduced number of selling, general and administrative employees.
   

• Selling, general and administrative expenses for the full year 2019 were RMB5,451.8 million (US$783.1 million), representing an increase of 2.1% from the previous year. Excluding share-based compensation charges (non-GAAP), selling, general and administrative expenses were RMB5,210.7 million (US$748.5 million).

Loss from Operations

• Loss from operations in the fourth quarter of 2019 was RMB2,826.2 million (US$406.0 million), representing an increase of 17.3% from the third quarter of 2019 and a decrease of 18.0% from the same quarter of 2018. Excluding share-based compensation expenses, adjusted loss from operations (non-GAAP) was RMB2,774.9 million (US$398.6 million) in the fourth quarter of 2019, representing an increase of 18.6% from the third quarter of 2019 and a decrease of 16.0% from the same quarter of 2018.
   

• Loss from operations for the full year 2019 was RMB11,079.2 million (US$1,591.4 million), compared with loss from operations of RMB9,595.6 million in 2018. Excluding share-based compensation charges, adjusted loss from operations (non-GAAP) was RMB10,745.7 million (US$1,543.5 million) in 2019.

Share-based Compensation Expenses

• Share-based compensation expenses in the fourth quarter of 2019 were RMB51.2 million (US$7.4 million), representing a decrease of 27.3% from the third quarter of 2019 and a decrease of 63.9% from the same quarter of 2018. The decrease in share-based compensation expenses over the third quarter of 2019 was primarily attributed to the continuous decline in the number of employees, and the impact of part of the share-based compensation expenses being recognized by using the accelerated method previously.
   

• Share-based compensation expenses for the full year 2019 were RMB333.5 million (US$47.9 million), compared with RMB679.5 million for the previous year.

Net Loss and Earnings Per Share

• Net loss was RMB2,864.6 million (US$411.5 million) in the fourth quarter of 2019, representing an increase of 13.6% from the third quarter of 2019 and a decrease of 18.2% from the same quarter of 2018. Excluding share-based compensation expenses, adjusted net loss (non-GAAP) was RMB2,813.4 million (US$404.1 million) in the fourth quarter of 2019, representing an increase of 14.8% from the third quarter of 2019 and a decrease of 16.3% from the same quarter of 2018.
   

• Net loss for the full year 2019 was RMB11,295.7 million (US$1,622.5 million), compared with net loss of RMB9,639.0 million in 2018. Excluding share-based compensation charges, adjusted net loss (non-GAAP) was RMB10,962.2 million (US$1,574.6 million) in 2019.
   

• Net loss attributable to NIO’s ordinary shareholders in the fourth quarter of 2019 was RMB 2,893.8 million (US$415.7 million) in the fourth quarter of 2019, representing an increase of 13.3% from the third quarter of 2019 and a decrease of 17.7% from the same quarter of 2018. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB2,810.7 million (US$403.7 million) in 2019. 
   

• Net loss attributable to NIO’s ordinary shareholders for the full year 2019 was RMB11,413.1 million (US$1,639.4 million), compared with net loss attributable to NIO’s ordinary shareholders of RMB23,327.9 million in 2018. Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted net loss attributable to NIO’s ordinary shareholders (non-GAAP) was RMB10,953.0 million (US$1,573.3 million) in 2019. 
   

• Basic and diluted net loss per ADS in the fourth quarter of 2019 were both RMB2.81  (US$0.40). Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB2.73 (US$0.39). 
   

• Basic and diluted net loss per ADS for the full year 2019 were both RMB11.08 (US$1.59). Excluding share-based compensation expenses and accretion on redeemable non-controlling interests to redemption value, adjusted basic and diluted net loss per ADS (non-GAAP) were both RMB10.63 (US$1.53) in 2019.

Balance Sheets

• Balance of cash and cash equivalents, restricted cash and short-term investment was RMB 1,056.3 million (US$151.7 million) as of December 31, 2019. The Company’s cash balance is not adequate to provide the required working capital and liquidity for continuous operation in the next 12 months. The Company’s continuous operation depends on the Company’s capability to obtain sufficient external equity or debt financing. The Company will continue to work on financing projects to improve its liquidity and cash position. However, the consummation of any additional financing project is subject to inherent uncertainties. Based on the management’s assessment, as a result of the relevant conditions and events including continuous losses, net cash outflows, negative working capital, negative equity and uncertainties on consummation of the financing projects, there is substantial doubt about the Company’s ability to continue as a going concern. The fourth quarter and full year unaudited financial information does not include any adjustment that is reflective of this uncertainty. The Company will announce any material developments or information subject to the requirements by applicable laws.
   

• On January 1, 2019, the Company adopted ASC 842 Leases and used the additional transition method to initially apply this new lease standard at the adoption date. Right-of-use assets and lease liabilities were recognized on the Company's consolidated financial statements.

Business Outlook

Given the COVID-19 outbreak in China since the end of January 2020, the China auto industry in general and the production and delivery of vehicles of the Company have taken a hit for the first quarter of 2020. Therefore, the Company expects:

• Deliveries of the vehicles to be between 3,400 and 3,600 vehicles, representing a decrease of approximately 56.2% to 58.7% from the fourth quarter of 2019, and a decrease of approximately 9.8% to 14.8% from the first quarter of 2019.
   

• Total revenues to be between RMB1,209.0 million (US$173.7 million) and RMB1,273.2 million (US$182.9 million), representing a decrease of approximately 55.3% to 57.6% from the fourth quarter of 2019, and a decrease of approximately 21.9% to 25.9% from the first quarter of 2019.

This business outlook reflects the Company’s current and preliminary view on the business situation and market condition, which is subject to change.