NIO Q2 FY 2021 Earnings Report Preview: What to Look For

NIO Inc. (NIO), one of China's fast-growing electric vehicle makers, continues to ramp up production of its premium smart electric automobiles. The company is so far outpacing two of its domestic rivals—Xpeng Inc. (XPEV) and Li Auto Inc. (LI)—in vehicle deliveries this year. But NIO faces a number of challenges going forward, including the ongoing worldwide shortage of semiconductor chips as well as potential stricter regulations amid a broader crackdown by the Chinese government on big tech companies.

Investors will be looking to see if NIO is continuing to improve its financial performance despite the various challenges it faces when it reports earnings on August 11, 2021 for Q2 fiscal year (FY) 2021. Analysts expect the electric vehicle maker's loss per share to narrow considerably compared to the year-ago quarter as revenue continues to grow at a rapid pace. Note that NIO shares referred to throughout this story represent NYSE-listed American depositary shares (ADS) with the ticker NIO.

Another important key metric investors are focused on is NIO's vehicle deliveries. The company already announced its vehicle delivery totals for the three-month period that ended in June on July 1, 2021. It was another strong quarter with total deliveries rising faster than analysts expected.

Shares of NIO have outperformed the broader market over the past year. The stock started the past year lagging the market but began to outperform in late August 2020, with the outperformance gap widening significantly around mid-October. The shares then reached a peak in the first half of February 2021 but have given back some of their gains since then. Overall, NIO's shares have provided a total return of 218.2% over the past year, well above the S&P 500's total return of 31.9%.

NIO Earnings History

NIO reported mixed results in its Q1 FY 2021 earnings release. Its loss per share was the biggest since the second quarter of FY 2019, and more than four times larger than what analysts were expecting. Revenue, however, came in above estimates, rising 481.8% compared to the year-ago quarter. NIO said that product demand continued to be strong during the quarter but that its supply chain was still facing significant challenges related to the global semiconductor shortage. The company was forced to shut down one of its factories for five days in late March due to the chip shortage.

In Q4 FY 2020, the electric vehicle maker missed both its earnings and revenue forecasts. NIO posted another loss per share, albeit a significantly smaller one than in the final quarter of FY 2019, while revenue grew at 133.2%, marking a slower pace than the slightly above 146% growth recorded in each of the previous two quarters. The company also noted that its vehicle margin, a measure of gross margin for its vehicle sales, was 17.2% in the quarter compared to -6.0% in the year-ago quarter.

Analysts expect NIO to post another loss per share in Q2 FY 2021. However, it is forecast to narrow significantly compared to the second quarter of FY 2020. Revenue, meanwhile, is expected to expand 123.4%, its slowest pace since Q1 FY 2020.

For full-year FY 2021, analysts are currently forecasting an annual loss per share of RMB3.16, the smallest such loss in at least five years. Annual revenue, on the other hand, is expected to rise 116.5%, its fastest pace in at least the past three years.

^{Source: Visible Alpha; NIO Inc.}

The Key Metric

As mentioned above, investors are also watching the number of vehicles NIO delivers each quarter. NIO generates some revenue from the various other products and services it provides, but the majority of revenue is derived from vehicle sales.

Currently, the company makes deliveries of three types of vehicles: the ES8, the company's six-seater or seven-seater flagship premium smart electric SUV; the ES6, the company’s five-seater high-performance premium smart electric SUV; and the EC6, the company’s five-seater premium electric coupe SUV. The number of vehicle deliveries provides an indication of the demand for NIO's vehicles as well as the company's ability to scale production, an ability that is complicated by the chip shortage and other logistical challenges.

NIO has significantly ramped up its production over the past few years. The company delivered a total of 11,350 vehicles in FY 2018. That number rose 81.2% in FY 2019 and another 112.6% in FY 2020 to reach a total of 43,730 annual vehicle deliveries.

The pace of delivery growth accelerated significantly in the first quarter of FY 2021, with deliveries rising 422.7% year-over-year (YOY). NIO then announced at the beginning of July its vehicle deliveries for Q2 FY 2021. Total deliveries rose 111.9% compared to the year-ago quarter, beating analysts' forecasts. For full-year FY 2021, analysts expect annual vehicle deliveries to more than double to a total of 89,810.