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$NIO Inc (NIO.US)$
NEWS COMPANY NEWS
NIO Earnings: What to Look For
Focus on NIO vehicle deliveries
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By MATTHEW JOHNSTON
Updated Mar 1, 2021
KEY TAKEAWAYS
Analysts estimate earnings per ADS of -0.70 yuan vs. -2.81 yuan in Q4 FY 2019.
Vehicle deliveries, already reported, rose YOY.
Revenue is expected to soar in Q4 as vehicle deliveries ramp up.
NIO Inc. (NIO) has seen its shares stage a dramatic turnaround in the past year. The China-based electric vehicle (EV) maker was on the brink of bankruptcy in 2019. But last April, state-owned entities made a $1 billion investment in NIO, saving the EV company from financial ruin. Since then, NIO's shares have skyrocketed and the company today is one of the world's most valuable automakers.12

Investors will be looking for significant improvement in NIO's financial position when it reports results on March 1, 2021 for Q4 FY 2020.3 Until this quarter, NIO has often posted strong revenue growth, but it has posted net losses in every quarter for the past three years. For Q4, analysts are expecting a rapid rise in revenue. But they also estimate another loss per American depositary share (ADS) for NIO, though it would be the company's lowest in at least 13 quarters.4

Investors are also interested in NIO's vehicle deliveries for the quarter, a key metric indicating the company's vehicle sales. Vehicle sales generate the majority of the company's revenues. NIO already released totals for the fourth quarter and all of FY 2020 in January. Both quarterly and annual vehicle deliveries rose considerably and surpassed analysts' expectations.45

Shares of NIO have soared over the past year. Before the $1 billion investment by state officials from the city of Hefei in April 2020, the EV maker's shares were trading at around $3.30 each. They rose as high as $66.99 per share in early January of 2021 before trading sideways over the next month and then pulling back sharply in recent weeks. NIO's shares have provided a total return of 954.8% over the past 12 months, dramatically higher than the S&P 500's total return of 22.3%.

One Year Total Return for S&P 500 and NIO
Source: TradingView.
The stock's rise has been supported by strong revenue growth and the significant narrowing of NIO's net losses in recent quarters. In Q3 FY 2020, the company posted a loss per ADS of 0.98 yuan ($0.15 as of the CNY/USD exchange rate on February 28, 2021).6 It was the smallest loss in at least 11 quarters. Revenue rose 146.4%, maintaining the pace of growth achieved in the second quarter.4 NIO said it delivered a record number of vehicles and saw improvements in its average selling price. The company said that it was the second straight quarter of positive cash flow from operating activities.7

NIO posted a loss per ADS of 1.15 yuan in Q2 FY 2020, improving on the first quarter's loss of 1.66 yuan per ADS. Revenue rose 146.5% compared to the same three-month period a year ago. It was the first revenue increase after two consecutive quarters of declines. The company said it achieved the first positive cash flow from operations in its history.8 Following the earnings report, NIO's stock traded sideways over the week before beginning to gather upward momentum.

Analysts expect this improving financial performance to continue in Q4 FY 2020. NIO's loss per ADS is expected to shrink to 0.70 yuan as revenue is forecast to rise 136.8%. It would be the smallest loss in at least 12 quarters and the third straight quarter of increasing revenue. For full-year FY 2020, analysts expect a loss per ADS of 3.82 yuan, the smallest loss in at least five years. Annual revenue is forecast to rise 105.9%, a significant acceleration from last year's pace of 58.0%.4

NIO Key Metrics
Q4 2020 (FY) Q4 2019 (FY) Q4 2018 (FY)
Earnings Per ADS -0.70 yuan (estimate) -2.81 yuan -3.37 yuan
Revenue 6.7 billion yuan (estimate) 2.8 billion yuan 3.4 billion yuan
Vehicle Deliveries 17.4 thousand (actual) 8.2 thousand 8.0 thousand
Source: Visible Alpha; Nio Inc.

As mentioned, investors are also watching the number of vehicles NIO delivers each quarter. NIO generates some revenue from various services it provides, but the majority of revenue is derived from vehicle sales.9 Currently, the company makes deliveries of three types of vehicles: the ES8, the company's 6-seater and 7-seater flagship premium smart electric SUV; the ES6, the company’s 5-seater high-performance premium smart electric SUV; and the EC6, the company’s 5-seater premium electric coupe SUV.10 The number of vehicle deliveries provides a measure of how well NIO is able to scale up production, a major challenge for EV makers.

NIO has significantly increased the number of vehicle deliveries over the past couple of years. In FY 2018, the company delivered approximately 11.4 thousand vehicles. That number nearly doubled to almost 20.6 thousand vehicles in FY 2019. However, vehicle deliveries fell 3.8% year over year (YOY) in the first quarter of FY 2020, primarily due to the adverse impact of the outbreak of COVID-19 in China.11 Deliveries quickly rebounded in the second quarter to 10.3 thousand, the most quarterly deliveries on record up until that point.8 But the record was quickly broken in subsequent quarters. Vehicle deliveries rose 154.3% YOY in the third quarter and then by 111.1% YOY in the final quarter of FY 2020, beating analysts' expectations. For full-year FY 2020, NIO delivered more than 43.7 thousand vehicles, more than double total deliveries in the previous year.54

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