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NIO's Fourth-Quarter Loss Narrowed, but the Outlook Is Mixed

By John Rosevear - Mar 18, 2020 at 9:46AM

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The electric-vehicle maker may be through the worst of the virus pandemic.

Chinese electric-vehicle maker NIO (NIO -4.69%) reported an operating loss of $406 million for the fourth quarter of 2019, an improvement from its $509.5 million loss in the year-ago period, as its deliveries increased by 3.1% to 8,224 vehicles. 

But the company said it expects deliveries and revenue to be down in the first quarter of 2020, as sales have declined amid the outbreak of the COVID-19 virus in China.

A red NIO ES6, an upscale five-passenger electric SUV.

NIO's ES6 has been its sales leader since its introduction in mid-2019. Image source: NIO.

The raw numbers

NIO is based in China and reports its results in yuan. But because its stock is listed in the United States, it provides U.S. dollar equivalents for key figures in its earnings release using the exchange rate that was in effect at noon on the last business day of the fourth quarter, Dec. 31 ($1 = 6.9618 yuan). Results in the chart below are shown in dollars, calculated at that exchange rate.

Metric Q4 2019 Change (Decline) vs. Q4 2018
Revenue $409.1 million (17.1%)
Vehicles delivered 8,224 3.1%
Gross margin (8.9%) (8.5 pp)
Operating profit (loss) ($406.0 million) 18% improved
Adjusted operating profit (loss) ($398.6 million) 16% worse
Net income (loss) ($411.5 million) 18.2% improved
Net income (loss) per American depositary share ($0.40) $0.09 improved

Data source: NIO. Adjusted figures exclude share-based compensation expenses.

The takeaway: NIO delivered a solid fourth quarter amid a tough market for new passenger vehicles in China, despite being very low on cash through the period.

What the CEO and CFO said about 2020

NIO's sales fell 11.9% in the first two months of 2020, after the Chinese government imposed aggressive measures to get the COVID-19 virus outbreak under control. 

The company is now working to get production back up to full speed and its sales and other business offices back to normal, CEO William Bin Li said in a statement. He said that he is confident that NIO has the infrastructure to do well in 2020 as the virus pandemic subsides.

"We are well prepared to proceed through the headwind and become stronger in 2020," Li said.

CFO Wei Fang said that the company's recent financing efforts, including several private placements of convertible notes, have generated enough cash to support the company's operations as things get back to normal. NIO had just $151.7 million in cash remaining as of Dec. 31, but it has since raised about $435 million, Fang said. 

The company is now working to close a longer-term deal with the municipal government of the City of Hefei, he said. NIO said in February that it had agreed in principle to a deal with Hefei that would provide it with financing for a new factory and headquarters in that Chinese city. 

Looking ahead: NIO's guidance for the first quarter of 2020

The company said that in light of the sales disruptions caused by the coronavirus outbreak, auto investors should now expect first-quarter results as follows:

  • Deliveries between 3,400 and 3,600 vehicles (Q1 2019: 3,989).
  • Total revenue between $173.7 million and $182.9 million (Q1 2019: $243.1 million). 

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