NIO's Second-Quarter Loss Beat Estimates After Strong Sales Results

Chinese electric-vehicle maker NIO (NIO 2.62%) said that its second-quarter loss was less than Wall Street had expected, and that its sales in the third quarter are likely to beat expectations as well. 

Excluding one-time items, NIO lost $0.16 per American depositary share, beating the consensus analyst forecast as reported by Thomson Reuters, which predicted a loss of $0.26 per share. NIO's second-quarter revenue of $526.4 million was also above the consensus analyst estimate of $504 million. 

Both numbers were significant improvements over NIO's dismal year-ago results, further evidence that the company is on track after running dangerously low on cash earlier in 2020. 

Highlights of NIO's second-quarter earnings report

• NIO's second-quarter deliveries jumped 191% from the year-ago period to 10,331 vehicles, a record.
• That strong sales result gave NIO its first-ever positive gross margin for a quarter, 8.4%. (A year ago, its gross margin was negative 33.4%.) 
• NIO's "vehicle margin," calculated using revenue and cost of sales from its vehicle sales only, was 9.7%, versus negative 24.1% in the second quarter of 2019.
• NIO closed a strategic-investment deal with economic-development authorities in China's industrial-heartland province of Anhui in April, under which it will receive a series of cash infusions as it completes certain milestones. So far, it has received two installments of cash from the investors, a total of 5 billion yuan ($707 million). 
• NIO agreed to raise additional cash on its own as part of that strategic-investment deal. The company completed a secondary offering of 82.8 million American depositary shares in June, raising about $493 million -- more than enough to cover its obligations under the deal.
• NIO had cash and equivalents of $1.6 billion as of June 30, 2020.

NIO confirmed that deliveries of its new EC6 will begin in September. Image source: NIO.

What NIO's management had to say

CEO William Bin Li said that demand has remained strong, and the company is now focused on increasing production as it gears up to begin deliveries of its latest model, the sporty EC6 crossover, in September. 

"The current constraints on production will be lifted in the near future and we are confident that our production capacity can meet the accelerated demand of our models," Li said.

CFO Wei Feng said that the company has now demonstrated to auto investors that it can generate positive cash flow from operations, thanks to increasing scale and better control of costs. 

"With the strong deliveries in the second quarter of 2020, our vehicle margin significantly exceeded our target of more than 5%," Feng said. "We will continue to enhance our efficiencies across the company in the rest of 2020 and beyond."

Guidance: NIO expects more growth in the third quarter

NIO's guidance for the third quarter calls for continued strong deliveries and revenue growth.

• NIO expects deliveries of between 11,000 and 11,500 vehicles in the third quarter, up from 4,799 in the year-ago period.
• NIO expects its third-quarter revenue to fall between 4,047.5 million yuan ($572.9 million) and 4,212.3 million yuan ($596.2 million), versus 1,836.8 million yuan a year ago.

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 on the last business day of the quarter, June 30 ($1 = 7.0651 yuan).

Data source: NIO. "Adjusted" figures exclude share-based compensation expenses. Dollar-denominated 2019 figures are presented using the exchange rate in effect as of the last business day of that quarter, June 28, 2019 ($1 = 6.8650 yuan).