Q4 2019 Earnings Call
Gentlemen, thank you for standing by for Neal Incorporated's fourth quarter and full year 2019 writings.
Conference call at this time it looks like you said that only though.
This conference call you've seen recorded.
I will try to go live with your host Mr. Richard.
So because that's what makes use of the company.
Go headway.
Good evening and good morning, everyone welcome to view fourth quarter and full year 2019 earnings conference call. The Companys financial and operating results published in the press release earlier today and I posted at the company's IR website.
Today's call. We have missed the will then be sounder cheer about the board and Chief Executive Officer, Ms., Steve Fowle, Chief Financial Officer, Ms., Danny Chu repeal finance and Ms. Jade weight <unk> Investor Relations.
Before we continue but he's be kind any reminded that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act 90, 95 forward looking statements involve inherent risks and uncertainties.
The companys actual results may be materially different from the views expressed today further information regarding risks and uncertainties is included certain findings of the company with the U.S. Securities Exchange Commission, the company's does not assume and obligations to update forward looking statements.
Except as required under applicable law.
We also know dot Neil earning properties and this conference call include discussion of the UN audited GAAP financial information.
That's where all the to non-GAAP financial measures.
Please refer to meals press release, which contains a reconciliation of the UN audited and they've gotten matters for comparable GAAP metrics with that I would now I'll turn the call what to all the field with the will then be whatever go ahead.
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Hello, everyone and thank you for going over 2019 cute and they quote today.
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We do we've heard a combined 8000 to 200 compete for years to 8.6 of vehicles in the fourth quarter of 2019, representing a 71% for sequential increase from the prior quarter Accumulative do we very selfie, yes, I tend to get to six reached 20000.
Hundreds of 65 in 2019, representing 81% increase of from 2018.
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The Kobe 19 has broken out in China seems generate twentytwenty. So.
Auto industry, Hi, I'm materially impacted.
Passenger vehicle itself.
The 1% in total in January and February 2020, compared to the same period to loss here against this backdrop. You has delivered a total of 2305 vehicles in January and February which is lower than our target the prior to the outbreak.
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In response to the micro environment on one hand, we have actively explore a variety of online channels, including my streaming platforms and fully leverage that are well developed online functions off new app to promote on myself news and director.
Business process has enabled us to continue our South Africa during these especially with time.
On the other hand from Spring Festival to now Neil has maintained a 24 seven tenants and the power cemeteries <unk> cloud based there's somebody to seek them to support to users. It daily usage of a product and the services Houston half a waste due to the arduous task given the outbreak and why.
Why do recognition of over user community.
Thanks to all the loyal user community and to superior word of mouth reputation recently order is generated through use of referrals have reached a 69% much higher than the 45% average use a referral rate in 2019.
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With that joint effort off over users and teams. The total number of new production orders decreased over 2001 hundred in the past the 30 days, representing 70% of the order growth collateral in December 2019.
Outbreak gradually brought under control in China, you houses and annual spaces are cautiously been open with increasing foot traffic in school.
Based on the current trend would hope with a daily new order right to return to the level awful lot of December in April.
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He turns off for production. The work, we assumption has being postponed across China, which has impacted over production and supply chain to various expense.
Although over coffee palms, averaging for production February 10th and the production of most of our supply chain partners have basically returned to normal.
Our nursing located in who pay probably well still meet some time to recover.
Strength by the limited to supply capacity, we expect the aggregate to do live race off the Q1 2020 to be around 3400 to 3600.
We have seen monitoring the supply chain very closely and have seen positive changes every day, we do see their supply chain recovery has speed. It up I think that meet off March. So we hope that the production capacity have returned to normal in April.
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In the first quarter the safety of operating before you send to users remain our top priority.
Thanks to the efforts of our users and team we have a weather the storm and pasta talked for some time in particular.
Thanks off when you use or it's going to create toppling benefits activities during the outbreak and make contributions to the prevention and control initiatives include Bay and other weekend.
Looking forward to two twentytwenty, there many challenges facing the China and the global economy, which is phones to significantly affected the although all auto industry in China.
We believe that Neil will stand out from the competition, it's difficult to market environment. We're confident about other product competitiveness integrated online and offline operations and innovative business models based on user enterprise.
After the organization, nobody Jasmine and the efficiency improvements into that 19, our teams are well prepared to achieve 2020 sounds target.
Tediously improved gross margin and systematically optimize the although operational efficiency.
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[noise] first facing the pressure off of the outbreak we're still confident to achieve that precepts so targets for twentytwenty.
It's part of family well be more competitive and diverse and twentytwenty.
In April Neil will start to the delivery of the on you guys say, a smart electric flagship as.
On your yes, they have made nearly 188 improvements and most importantly, they need to see range will be Fortunately improved.
In September we will kick off with the delivery of that you see it smart electric a quick pay sq feet.
In the fourth quarter over 100 kilowatt hour battery packs lumpy launch the to the market [noise].
They take part I can spirits, it's the most important cornerstone for Neal to maintain our leading position in the premiums smart electric as TV marketing China.
In addition, well continue efforts in South network expansion and do more news basics, which are estimated to be around 200 by the end of this year.
He was every for ROE is another important driver office so its growth.
The growing user base and industry, leading word of mouth reputation. We believe that did the orders that generated strong user reefer rose well increase I didn't even faster rate in the future.
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Second both marketing, who monday's worn off the top objective stuff Neil in Twentytwenty, what's the supply chain optimization continuous cost reduction often battery pack and manufacturing cost saving per vehicle brought forward by production going up and the management optimized.
Action, we have confidence to achieve offer goes that although gross margin kind of turned positive in the second quarter and the right to take it by the end of the here.
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[noise] third well continuously improve operational efficiencies well make a significant organizational optimizations and businesses adjustment in 2019. The overall headcount has reduced the from close to 10000 at the beginning of 2019 to less than seven.
Excellent due to one off expenses in Q4, GAAP operating loss in the fourth quarter of 2019 with hires and that off the third quarter. We have basically finished all the other documents, which has played a solid foundation for 2020.
In Twentytwenty. The company has set up a very strict expense control and efficiency improvement targets and implemented rigorous measures in baby operations. Accordingly, we are pleased to see encouraging results year to date and expect around 35% expense reduction compared to the.
Prior quarter given onto the pressure off the outbreak.
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Chen said it couldn't possibly so you didn't similar.
Lastly, with regard to all the financing efforts you issued 4430 $5 million convertible note in February and March to several affiliated Asia based investment funds to support to the Companys daily operations and business developing.
At this moment, we have already finished the all that private placement.
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On February 25th we signed for the cooperation framework agreement with Hossein many supposed government that Jason Neo manufacturing plant for yes, eight yes effects and easy six it's located in cafe.
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Under the framework and Brent.
<unk> class three step away from new and trying to headquarters in coffee and Hefei government plans to provide resources and funding support for that long term growth off new China. Both parties expected signed a definitive agreement to before the end of April.
I hear about Uh huh.
But Stephen Dunn without that yourself you for people to Taiwan, Yes, you can see them.
Thank you for your support with that I will now turn to pull over to Stephen to provide that the financial details for the quarter Stephens. Please go ahead.
Thank you for them.
I'll go of our key financial results for the fourth caught up to us online.
As to be mindful of the length of its cold.
In college designers to refer <unk> earnings press release, which is posted online for our full year results and other additional details.
Our total revenues in the fourth quarter.
Two point it far beyond the.
Oh.
400 old line could want me to just on US we present, the increase of 55.1% quarter over quarter.
Our total revenues on mid of two parts.
Because bills and August sales.
Because the ultimate role in the fourth quarter.
2.68 beyond the whole 384 point for many years Thomas.
Well, there's an increase of 54.8% quarter over quarter.
An accounting for 94% <unk> total revenues in this quarter.
The increase in vehicle sales quarter over quarter.
Was attributed to how to divorce achieved for all existing use a threefold.
The expansion of our skills that.
Through the continue with the launch of New York bases in the fourth quarter 2019.
Oh, that's still in the fourth quarter 100.
64.4 meeting.
Oh finished reported 16 just on us.
He is an increase of 59.8% quarter over quarter.
The increase in policy all over the last quarter.
Like many attributed to the increase of home to address bold and access or sold which was <unk> nine with improvement of vehicle sales in the fourth quarter.
<unk> sales in the fourth quarter.
3.10 being Oh.
Oh 444.6 million your stones.
As an increase of 50.7% quarter over quarter.
The increase in cost of sales, what meaning to them bogs increase did he was born.
Yes.
Yes, Hey.
Golf Monty in the fourth quarter.
Let's go back to April 9%.
Compatible productive.
<unk> 0.1 person in the solid quarter of 2019.
The improvement in golf module, but last quarter.
Meaning to them Bobby improvement of recall Montreal.
More specifically.
Modern fourth quarter, like Mexico, 6.0 per cent compared with back to 6.8% in the so called off with online can you.
The improvement will be commodity magnitude improved efficiency.
Tourism button crude production and to do both of you fix and he is page.
On expenses in the fourth quarter, one most we'd be lumpy.
Represented an increase.
But the 2.3% year over year.
An increase of 0.3% quarter over quarter.
The bottom Crane <unk> on defense is over last quarter.
That's promote attributed to incremental design and development costs.
So easy Dicks, and all new ethane launch in December 2019.
Offset that employee compensation.
Do you lumber <unk> R&D personnel.
As Jim expenses in the fourth quarter.
1.5 far beyond.
Presenting a decrease of 20.4% year over year, an increase of 32.8% caught up a culture.
The increase he has trim expenses over last quarter.
It's probably actually building couldn't crazed marketing and promotional activities.
If you look caught.
And optimization of our organization and felt that it works.
With that but that's an employee compensation.
To sum up selling general and problem is pretty firm called [noise].
Loss from operations in the fourth quarter was 2.83 Guinea RMB, representing a decrease of 18 point all person you over a year, an increase of 17.3% quarter over quarter.
Shorebirds Commission expenses in the fourth quarter, but.
<unk> 51.2 million RMB, representing a decrease of 63.9% year over year, and a decrease of 27.3% quarter over quarter.
The the crazy share based compensation expenses over last quarter.
Lets permanent attributed to the continues to call out from putting numbers and the impact of part of the sharp based compensation expenses being the Cook lie to you didn't they accelerate him banner.
On the wage expenses decreased gradually over the best compelling out.
Net loss was 2.386 Biamby <unk>.
In the fourth quarter.
Representing a decrease of 18.2 person Yoba Ya.
I'm Crazy.
Turning 0.6% caught up a contract.
Net loss I should go to attributable to New York.
Ordinary shareholders in this quarter.
Plus 2.8 non been RMB represent a decrease.
Of 17.7% year over year, an increase of southern plus 3% quarter over quarter.
Basic.
I have a diluted that boss prepaid asking the fourth quarter or.
For both 2.1 arm b.
Oh 40 cents per hideous.
Excluding share based compensation expenses.
Question on redeemable non controlling interests to redemption Daddy.
Non-GAAP adjusted basic and diluted net loss radius.
But those 2.7 history, all pretty nice and pretty happy in the fourth quarter.
All of that cash and the cash equivalents restricted cash and short term investment.
1.06 beyond be.
As of December 31st 2019.
No Fabio.
Had we didn't mention.
Most called Twentytwenty.
Comping, it's Pat did they've always to be between.
3400.
3600 vehicles.
Representing a decrease of approximately.
6.2% to 58.7%.
Fourth quarter all 2019.
The expected crazy because it's primarily contributed to the constrained the production did differently.
Patrick by the novel Cola virus outbreak.
Let me come all these past the total revenue of the fourth quarter two twentytwenty.
We'd between 1.21 to 1.37 Biamby.
Oh between 173 to 100, and it's really been good thoughts.
This would presumably presents a decrease.
Approximately <unk>.
5.3 person to 57.6% from fourth quarter all 29.
This business.
Although the flat.
Companies concurrent and the preliminary view on the stipulation and market conditions, which is subject to change.
No. This concludes our prepared remarks.
I'll turn the call over to a pretty tough for sort of hit our kinase Ashley.
[noise] Q3, two gentlemen, I'll begin the question and answer session and for your questions. Please press Taiwanese telephones and we'll see needs.
Had to catch busy question.
Once again for your questions. He says Taiwan's telephones and leasing.
And for the benefit of all participants on today's call. Please limit yourselves to questions and if he has additional questions you can reenter the queue.
First question comes on line of only one see ICICI.
Please go ahead.
Well good evening, Oh, we didn't Miss Steven This is one way speaking from pharmacy as you say congratulations on on the reason to find a chance to dish I do believe for something so knowledge. So basically I got two questions. So indeed business outlook. It garbage according to read between Oh, sorry for if I'm hungry.
She was 3600 into first quarter up 2020, so do you might provide some guidance on the sales targets over this year, so it'll be something close to like certainly it's only been litch.
That's the first question.
So to do.
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She's a two we all know it's a good Jones, who has a silly because sometimes they get Michelle.
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[noise]. Thanks for your question.
In my previous remarks, and we have provided to the guidance is for Q1 that he said 3400 to choose 3600.
Just like we mentioned that they season mining affected suffice to production capacity, although over Coface found passive resumed production.
In February test, but.
The production capacity still limited by the supply capacity, especially for those partners are located in who'll be province.
Oh, that's separate and March delivery.
Although at this moment.
Most off with a partner have resumed their production, but we still have the some limitations and kind of strings of regarding the parts supply. So for the partner think Hussein there was doing meet some time to recover.
The main challenges for the delivery and generate isn't because so for the production constrained because after we produce other products. So we want me to ship other products into the de lever centers and also make the appointment of we saw the users to de lever the product to them.
For the first quarter delivering the main reason office the constraint as because after the production, but just like I mentioned in the past 30 days over there or have they increased and.
Right now is the new orders have accumulated to fall over 2000 to 100 or close to 2200.
It means that the daily new orders, it's around 17, so for that.
Oh, it's actually quite similar or actually close to that 70% of the December December level last year at this moment, the whereas they were saying the orders they used to ramping up so we're quite confident about over I knew south targets.
Because our mono is made to order. So if away can presume the normal production then I mean, so we can delever over products into the users at the mine are they much faster right.
[noise] everyday we have accumulated to some new orders from the users and at this moment a we have around 5000 order backlogs I cannot give you any specific numbers regarding over I knew so target, but according to all the data as I have a shared we're quite confident to achieve.
I'll, then turn no annual sales targets.
Your next question.
Once again, you simply saying please press star one for your second question.
[noise] I appreciate everything that's name was stopped so keep talking you with next to please thank you.
Sure. Thank your next question is from design of Levine said that Galvus Wolfe Research. Please go ahead.
Thank you very much for taking my questions.
So <unk> volume was much higher than Q4 versus Q3.
But the gross margin only improved a small amount can you talk about some of the things that may be offset the impact a a better scale.
[noise] semi <unk>.
Yes.
Chris.
Setting.
But as you mentioned they would have increased during the fourth quarter, but the gross margin slightly increase so many reasons it's about the.
A a water mix left a a product we sold all 60 based version in the fourth quarter. So the set in price is a little bit lower than the yes, eight so [noise].
Yes, that's the main reason.
For the gross margin.
Like an increasing fourth quarter yeah.
The.
Ah, yes, so yeah.
Okay, Okay that makes I make sense and then [laughter] as as you're looking ahead.
I think that you said that.
You are expecting double digit.
Gross margin by the end of the year, but maybe you could clarify.
That comment can you give us a sense of what volume level.
That would require to get to that double digit.
Gross margin.
Targets and if you can achieve that would that support.
Cash.
Outflow of neutral or would you think that there would still be a cash outflow outflow. Once you got to double digit margins on the vehicles Ah. Thank you.
Okay, Yes, Ah onez with emotion.
In his speech and a the core from a gross margin improvement in the EUR 20 to 20.
Is mainly because the ER, our supply chain optimization and the continuous cost reduction that battery pack and also manufacturing cost saving a broad for four to buy production scaling up at the management of optimization.
And so we have confidence that workout choosing 2020 regarding the water I also as we mentioned before is Oh, we have cleared talking about this is difficult flock to two Moshe This oh volume a skill here here here for you, but we are.
Within two to get a a cheap a cheap of this this target yeah.
So given some of its elm coulee.
What's needed to so I'm, hoping to income I want to somebody sorta Honda, maybe us with him as he there'll be no change either you could you go to show you that you.
I see a woman well underway women food.
Side Union, who will Miss Leo deal with automakers Julio maybe this is impetigo.
I just want to a one point in terms of the production capacity of the Humphrey problem. We think it affects the economy of scale should be around the 4000 per mountains to look back that as a combined.
Sure.
Production. So the one sector production should be around the 4000 per month, if we can get today says I'm, probably this kinda basically support offer operation target.
I believe that for this year, we should have some opportunities to a chip.
And then perhaps some comments from Stephen if you look at our GP margin.
It's related with several parameters of cost first the volume.
Second our price [noise].
Our cost.
Of course, we expect with don't change all work just talking for can do 20, I'm very confident we can achieve this desktop adult that I'll break off no real cool off Alice in there I know in February.
And if we look out to all it feels choice.
We think and you've got confidence, we're able to upgrade the ASP as more attractive coffee options such as Neal Panama.
And also if you recall our cost side.
Of course, the battery cost.
Great decline.
Then if we look on our other Bom cost.
That's the auto parts from other suppliers would be a 10% decrease is reasonable.
Sorry.
If you look at our previous.
Colony reports.
We actually compensate the JV meal plant.
I'm not means with the production volume to watch.
Our manufacturing expenses.
Gradually stop calling.
I would expect that to attribute that 40%.
Because it here.
Just from its manufacturing cost.
Yeah.
[noise], that's very helpful. Thats all for this.
Okay.
[noise]. Thank you. My next question is from the light of dance Yao of Morgan Stanley. Please go ahead.
Hi, I realize Peyton and management team, thanks for taking time to host to call.
Just a few quick question.
Okay. Just a quick follow up question recording the gross margin because.
You just mentioned about Oh, probably that mix.
So we have to let's say more color about of course Marciano Tc six somebody launch in the upcoming septembers I would that be similar to yours fix or yes hate or it could be a slightly higher whores seem there were quite a lot we.
Had a separately.
We noticed that failed in <unk> expenses rose a bit in fourth quarter last year sequentially. So we expect that to be called annoying hoary for their trend does cause catering.
Target you opened up to 200 stores I mean neo space by end of this year.
And lastly.
Collaboration agreement biting on Jose Kaufman before detailed is officially site by end of April.
Well the collaboration or potentially investment in took place at how are you trying to hard core have to theirs. They pick company level. Thank you.
Yeah.
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Right.
We'll move quick interest is how much closer to the <unk> as a model that 'cause a jones fully hoti hitchen power locally to sit in one niko to tune the telco thoughts here, because that's a children's what youre with top with individual et al good, though woman, who should a home with by Moody's doesn't want to go through the Bill you want you to see.
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[noise]. Thanks for your question.
Because we havent disclosed full announced it that specific pricing if they see sick.
And over 60 factory Benchmarked against Wonder why we launched disease easy fix it add to the end of last year, and we received very positive feedback and from the top weekend over user.
Turning that specific a pricing of 86 and based on the market situation. We think it probably will announce those specific a pricing around two line.
Gross margin he's a very important objective for the company just like I mentioned in my speech. He say six is shared many components. It together with the I suspect at the same time he does fix it battery cost there can be significantly reduced.
In terms of the unit cost to hurt our <unk> based Q4, well be reduced it by 25% compared to waive the same period last year. So with all those factors in consideration we are quite confident about achieving that good growth gross margin targeted for they say six every car.
So for the pricing.
No. It's a neal space from in a woman who it to the woman's home team to focus on meal space. So that puts us well sure who also has also been can go Neal. It's based upon closing of houses Hutchinson put that number woman. She was on tirelessly to unto itself will put us any good she has a more sure.
So can you shouldn't Saturday I don't know who until late heights deltas for the home food weaker or so so you go couldn't go to for you on the thing funds.
Someone who's on those sorts of doing the from the south in woman to tick or not the Pea Nieto space with them as Jay the unions on she's the has piece, though you'll shouldnt. So you will then to the charlatan, sometimes because I'm going to.
No no say as opposed to a woman no houses Donegal Muslim Neil how the T. and he was not because I've been darla.
Just like we have a mention yes. They started to from last Oh actually last year Q4. The main corporation model for the unused space is to work together with other partners to set up and expanding the then he'll spaces in the market.
[noise], we work together with the partner based on the orders with us.
Specific transactions and they kind of achieving in their stores. So based transaction fees based on the offline traffic onto the orders as they can settle in their own spaces.
A lot speaking the unused space model isn't quite efficient and they do friend to from Daniel houses were not going to increase the number off then you'll how stays at these here. So we believe it then you space why not half its its significant impact over SGN eight and do they efficiency off then your space Isa actually quite high.
There's some goes for though a woman.
So what they change what to do the clung to see not gonna Mcclung, I say either from the tone of and I will Miss a or to go well as I don't go to yet we are so eager to leader so eager to would be too. She has to she and let me be local do them. Some so basically the some food service with a tick or did something real quick.
It's easy to Neil and stay tuned going into the you can look I mean people queued up homes, which is eager to.
It took a big boost to take a million could sounds going through two minutes ago equity visits or a dominant <unk> oh, well done to go to show you how many patients who on the that they don't see each unfolded, we hope on one Moody's within their repeatable she's yet.
[noise] under the cooperation framework, a frame and ways that though Jose municipal government.
Is a independent entity for the arm b financing activities. The Hefei municipal government, a well support the China is a long term growth through the arm B financing project.
It's not part of the new Inc. equity financing hard that.
We haven't signed a definitive agreement yet with the municipal government. After we signed at the final agreement well disclose that the specific detail.
[noise]. Thank you.
Take care. Thank you.
Thank you next question, if something I know Ryan Brinkman of JP Morgan.
Please go ahead.
My question.
Thanks for taking my question I'm, just curious how youre thinking about the likely sales or pricing outlook for battery electric vehicles, including for your vehicles relative to internal combustion engine vehicles in light of the almost unprecedented recent decline in the price of oil and presumably soon gasoline. Thank you.
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Equally to see on trend but.
Hi, there could be good to good shields us from behind you should do the you'll see that bill how people could put into.
[noise] actually today.
China Government has said just into the oil price and reduce the day supply 15%.
<unk>.
The government subsidies or your price based on things National oil price, but you will not go any lower than 40 U.S. dollar.
Because there's a crude oil crisis is that it's a 48 your shoulder.
This moment that crude oil pricing the international market. They sit around 30 years dollars. So I mean side with the Chinese government why not have any space to reduce that price further.
The current hi.
Cost of TV usage is do much better than that offset combustion card. So we think I'd say why not have any significant changes regarding the so called stuff music.
The only about a woman doing weight or 10 on switch.
Hey, good shields, who today I'm going to choose what I itself, but consistent with the ceiling.
Can go to actually you, it's hard to achieve to conform poker aided us eightys and they.
Certainly should choose who haven't SHUSA denotes will definitely has a tendency I didnt see telephony attention to the to go or to go some useful do how many units.
Doing like a no women the ways to the time to go there's some food side suits will generally Jim have them in the traditions of hit on bottom focal. It's in the 10 on sort of township kits into hundreds of high they'll come in Asia. Today, you would that have fish over him in a sound. They show you that no minimum wage fish ITSM tour or do you, culminating in school.
Do you think would I sure cousins to truly although you should only.
I think it is a market consensus that in the long term if he's going to replace come back strong cars. The main reason for this trend it's not because of for the cost of a usage. It's money because he is better fitted food the autonomous driving tech.
Allergies, and eight and intense off at the response time on the motors.
At the same time, the Chinese government is quite determine thing tens of the emission reduction.
For example, with the government has it really cementing favorable policies for the views in terms of the license plate and the tax reductions. So those are the main impetus AFFO they users to choose E V over combustion cars.
Thank you.
No.
Thank you.
Thank you once again for those who wish to ask the question. He says Taiwan on your telephones.
<unk>.
That's a cancer that'd be collected as a child.
Yes.
It is Taiwan's ask a question.
Your next question is for that I end up paying one of credit Suisse. Please go ahead.
Thank you.
Actually wouldn't you clarify similar numbers.
Gross margin you mentioned gross margin will be improving ondeck onto 2026 that we couldn't imagine always.
I was much including vehicle.
I wanted to clarify sick and think about.
While expense can you quantify how big you started off for a while expense and what's the CTO Apollo expense.
Second thing and the sort of see actually you mission.
Your first quarter the cost with the current by 35% another transmission side, the loss, making into one quarter with declined by 35% So what's the.
Thanks for the decline was 35% conducted quarter. This year, that's the three things I went to 25 and besides actually.
I for one question, but anything because.
Share price, we now see be actually has the potential risk to the man be kept not commit to a share so.
Upcoming do you have any sort of frenzy. After the I'm pleased to phase out any further pricing planning and actually you can see in the media report field automaker match that showing your investments such as Judy essentially J.C.. So do you see anything that JBT.
Sure the from the traditional kind of maker.
Got it gets shared asked the question and there maybe the components the president Bachelet caught thank you.
[noise], Okay, so, perhaps oh I'm sorry, the GP margin question, Yes, we think we will achieve positive GP margin full second caught up to 2020 and a double digits GP margin in 22 full of Twentytwenty and of course, we first.
As far as as other.
Vehicle GP margin and you can see all all overall.
Because.
Vehicle sales accounted for 94% of our total revenue so I'll have a whole gotten over all GP margin will be.
Calls to I'll walk vehicle GP margin as first second if you look at all obviously always GP managing it also improved in.
I will fall to 19.
And we're confident that be our efforts how are the fios TV module will also improve.
Twentytwenty.
That's the first and I think then it will give you much finishing above the one Paul onetime costs. Yeah. That's the second question is about the well well my time Opex, but the merger majority were related to organizational restructuring a across all functions.
To facilitate a leasing contract termination compensation.
And also the strategy adjustment around the manufacturing supply chain.
That's the second question yeah towards them.
[music].
'cause it wouldn't because those are lovers around a four had her mother and baby.
Okay. That's the second question a third is about the.
[laughter] our forward looking about the a net loss of Ah Ah the fourth quarter. After the 20, the kinda Eraserhead is ways the fourth quarter 2019, so compared with fourth quarter of 2019, we expect the.
For the first when they tend to grow decreased by 35, yeah its quarter.
I'm quoting a corporation yeah.
Uh huh.
If the button that so it's about two point not been and I mean beat your capacity, 5% [laughter] just about the Matt.
Yeah that law yeah.
Okay, Yeah, that's lost confirmed that law.
So the fourth question goes to whatever.
Yeah.
Well.
I think.
Hi, good woman Saddam logic or are you should be though thoughts you the ones for the whole door used with the political houses so youre under the Hood. So a vocal kind on the sometimes those off I'm going to hold for hotel by almost lets you say use insight to that is a meal familiar to go how does your thoughts or normal woman shouldn't say denom iPhone bound to date.
I mean, they choose a new insights and deleverage the total number.
I'm, a tick or how does how to put 100 city or would downtime no should the honnold, whose whose shoe that somebody who's in New York Chitale, who comes to the Tommy go home to the when she told me, it's easy to who up yet is it she wants.
So going into two should finish up.
Jim father things out the go home in due time patients in cohort. So that's one that I'm going to hurt them would show woman or some which always I mean were tied to appeal to the ones you will yield to the shelf Ulysses utilizing that you sort of Jody.
[noise], that's why we have been working together with other Oems in various ways, but somehow we have been working together with A.J.C. you ticked up for that manufacturing and we also has a very good cooperation way said Gee see intent of taking.
See you know joint venture recently, both parties have decided to increase investment in this joint venture and they said joint venture is going to kick off the mass production office. There vehicle models will will continue this cooperation with those Oems regarding other Oems as well.
<unk> for other possibilities to work with them and can sometimes applying king and R&D, but intends up the accuracy or capital S. back that we don't have any specific information that we can't disclose at this stage. If the we have the any information that we would like to disclose a way we'll share that.
Information as to what's possible.
[noise] [noise], thank you [noise].
Oh, sorry, the army. Thank you.
Thank you.
Next question is from the line only one <unk>.
Please go ahead.
Hi, how are we done that's doing this today against hurdles because that's connected and there was no go to finish the loss Christian So do we have some but guidance on what the Capex is going to be this year everybody's. It was reported that were watching breasts R&D Center, a new R&D center.
So the second to manufacturing sites.
Womens or are they going into topic of food has oh. He's here are some to go seemed a push in cotai somebody makes you more twos that I'm going to hit so tool.
No. The someone gets all I thought that guy or you're just as a group that you made some uptick or not that's the living be though he made sense to suit. So so do you mean, Peter thanks, yes, he's little bit a thought.
Woman, so good say, who if they did I suppose will go and then go Cios, who I'd say don't Assia you'd have a well then to the people would shoot closer to 10 billion here, but we should know or take a tick up what they own the capex.
<unk>.
In terms of the Capex for 2020, the majority will be used as for the new product and model launch for some post the tooling required to for the product launch. It is less than 200 million guess dollars intense off the call person ways that Oh say many spoke of.
And after we signed a definitive agreement with the government, we are not going to invest to two due to the R&D center or their manufacturing, they see and Uh Huh say, Mexico city, and if it's not going to pose any pressure on overt capex.
Okay. Thanks, Whit, it's very clear.
Oh sit on it.
Thank you next question, if something I'd say sang of Goldman Sachs. Please go ahead.
Hello facing of Goldman Sachs. Your line is open financial question.
Right.
I just really shouldn't line please.
Press Star one again.
Thank you.
Next question is something line Oh Gong.
Yes.
He's calling.
Hi, where there has to be fun Oh. Thanks for taking my question two questions. The first one if I remember you first quarter last year, you have to pay you have to pay the battery all purchase.
To see shelf or the Fuji Oh, yeah, that's still the case Oh heading into <unk> or this is my first question on my second question is saw regarding your function on the battery price declined in thrall. It just wasn't here are you mentioned that charge in Q4.
Off 2019.
Free coffee is plenty for Sun chip cards on fuel fall off 2018.
In Q4, 2019, Youre still Beacon next few of course March out and despite all 5000 feet Avery or so when you mention by end of this younger welcoming taught you double digits all cost cost.
Hi margin.
What's Ford, though battery cost decline assumption, our usual sorry, I think Steve somebody <unk>, 10% decrease on the Aldo Bom cost.
That's how I just want to half your assumption and the battery all costs assumption for the thank you.
Oh says it.
Women since its own but it was I would say good that she NIM would have to poorly whole CES is on its own don't go to the didn't put it to goods humans. So to show a U two you shut down though the woman. The you went well know Toyota Honda centralized somebody to schooling with him what has happened.
Yeah, the consultants will come to somebody that means for them separately Cody who criticism that shows what I have another yaniv will the mills mentally Ali.
Oh, yes, even with the hearing you my will need and certainly say too good idea to me all the cohu.
So you say GGR no Oh, well me and then we'll conduct a woman who see tariffs are the ones who can use conducted to me, let's say some she outside Chicago they'll come in a high no. One really good ticker really good look I know how to tell them up when they send out a token convene so I'm going to cogent can be truly a whole door.
Thanks for question last year did she does have the reduction the passenger vehicle sales in China has a swamps to significantly that because it alright users are private users.
And for other Oems and normally they sell their cars as for the operating usage.
In this case office, how students the decline that significant compare ways that the south of other Oems that is why right. Now we are one of the most important to partner with his age out this year.
Our cooperation with its activity, how it's going to be even closer. This means we can get a much better deals together with its a tail compared with last year for example, intense after the payment terms.
Now, let's say a it sounds go home in a hotness has its own woman's home goods for the Union bundled Oceanside Olin.
Triggers food side, who issue there you go to the it sounded like of course, no one's at Union suicide in a food to connect with timeshare maybe to the Simeon Suncor has made it to do is just not jump in with the Q, Florida Honda automobile he Shia chickens abolish you buy two then salaries hitting the ball.
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That's the most of whom to both total icon.
So you too high with somebody who is sad to see to me it down a woman to go to Minnesota to the molded Houston, but to also boco it into the permanent shutdown.
To go boomed should how to pull him as a sat down I will take over the two though field as a shutdown. So you too much and I kinda handler a woman the multi did he isn't that the publishing Susan this problem I believe.
[music].
[noise] intensified surprise, starting from pioneer and have hurt because we have been working together with the same count to reduces the pricing for the battery, but here, we have witnessed a significant cost reduction starting from the second quarter.
Well half of continues to talk to reduction every quarter in the fourth quarter. After this here.
Onto the 100 kilowatt hour battery pack and does the CTC battery pack.
So the new battery pack says we can further reduce the cost the without affecting the performance and that drive wrench off over vehicle models. The caused the unit cost a per flight hour is going to be reduced it by 20% to compare ways that lots.
Fourth quarter.
Battery pack level, so were confident that we can improve that both marketing.
Jeff I could we have mentioned in terms of that gross margin improvement. The main drivers are the battery cost reduction other from cost reduction and to the manufacturing cost savings were quite confident to see the positive or without the from those of course marketing effort.
Thank you for myself or how far collateral that thank you.
Thank you.
Thank you once again for those who wish to ask a question. It is Taiwan telephones and we see needs to be in house.
First question is on that I, just mainly of Bank of America Merrill Lynch. Please go ahead.
Oh, Thank you see Williams, Oh, and the management team for your time, So I chose handles a few quick friendship. So my first question section.
Right now because the overall you'd be consumption sentiment, but still not very strong China. So.
How do you think football and new strategies.
Hello.
Yes, I know you took advantage you called out and the older than meals face extension, but does or do you. Although you have and new strategies to help them. Those are the body himself. Since my first question, so conclusions or some of.
Your competitors.
Already.
Oh he's going.
To use Oh, Gee factories to lower the century calls it took US do you think it's excusable Oh choice for you.
Do you have actually shops movies and do you have.
So it's in batteries.
So swap so he was thinking it's impossible chase or you don't think Oh, it's a good choice for you to lower.
Oh.
Some wholesale actually.
Second question.
Good question.
Hello flexibility, Okay pets, I do you plan to spend on.
Actually swaps and that's actually charging stations.
At least.
Lets myself questions inches.
Oh yeah.
The chip it are you gonna John <unk> to go can battery, so I'm going to do something in that sound. They said functions. So unless you're could you know much in young woman, you'll pay down to know that you could computer you go to the as you see bigger from Joe pair trade as a service to a woman dealing woman the trigger.
Tends to be a one days you woman trend what does it go fundings on a bushel not too because we want to sit on from you all the good she should a useful.
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Woman Peugeot and they use in case, we found the including teaching them into a new locations by the through due diligence with ball to chicken what a normal if I if there's some oh well see some she is something I saw opinion Ziggo battery as a service to therapy is serious liquids almost andreotti too.
He was in show them the to go to almost getting quotes out are you sure you'll one Pullman yeah, sorry, she didn't put onto me either to the total.
And go luxuries tons of I mean, how do we didn't show to the bus shelter. Since these are cool it doesn't tell me that I suppose if it until midnight hosted a show him. It was enough it seems the told it.
[noise], yes. It is.
Quite unique advantage for Neil intense off at the battery related innovations.
This year, we aren't going to launch a new concept to quote battery as I said that.
This is there going to leverage the power swaps stations and that's why I'm technologies. We have is quite important the team here for the about 15 efficiency in the world only Neil can provide these kind of services to the users users. The can wait the battery swap the battery and upgrade.
Battery according to their specific a neat.
Right now we have already launched at the 84 kilowatt hour battery pack to the users ending up at battery situation safe and so that users they are.
Preachy, a allowed it to upgraded their battery packs it would be the 84 kilowatt hour battery.
Intends out for the battery out to service that they just going to be a very importantly strategy if I'm superstar myself. Besides all the other strategies. We have a mentioned we are now having very close discussions waste that government authorities regarding that specific apologies for that battery I say surveys.
Probably the progress is quite positive it if there's any kinda important information that way well share with everyone right away.
You Wonder woman don't eat go across the World with bank of TV show, a woman thoughtfully to youre pulling the trigger tidal <unk>, chief who south Asia to the against both of those things you teach you that you saw that make a panel autonomously its home.
Who the tick or who are included tell to tee NHL to put on timberland tell to some questions whether it's a particularly I saw the fifth colleagues or could you Angelo Amiga seemed a bit in football.
You don't need back to did that play on pass out of those even clearer about installment union, you'll see the viewed as usual million until that you buy two did not down the ship to go chief who hominids to use it up I guess, we'll need.
To put it into new should certainly gone that sort of the P. I don't know who's who of Adobe.
He did a true to the cheesy they should have no.
[noise] because if we have for the swapping technology in place so were quite willing to explore different technologies on the materials for the battery packs.
But when we make these decisions where well consider the performance experience and cost.
For example, we have the same battery pack size of ways, a different kind of the energy, Kentucky like a 100 kilowatt hours battery pack and 84 kilowatt hour battery pack based here with the teachers <unk> technology. So we won't be able to long today's I want to our battery pack they take off a unique advantage.
This means that we should also be three takes for the possibilities in terms of the Alberta key material.
Well I guess it goes some go swabs station the T.C.G. sound build on 10, so down that you see a considerable room opinion.
I live with Indonesia.
And then some good okay moment thought he found side, who today, so I'm going to capital data that you could you live in people you.
<unk>.
In terms of for the swaps station that Capex seem fine investment related with the battery well well you Crazy thing investment Atlanta based at this year, because don't forget that basically is increasing but about speaking for these here is going to be around 100 kneeling RMB.
Thank you.
Thank you would.
Thank you.
So again for those who wish to ask a question is Taiwan tell the cells.
Retreating to the in house.
Our next question is something line of a face.
Thanks Scott.
Okay, Great color, let me, let me try my luck at this time.
Okay. Thanks, Sweat M., Steven Jay just two quick questions. So apologies if this has been covered before.
For the first quarter volume guidance, it's impossible to break it out by yes, eight six said that the second question is how we notice that that cash in the fourth quarter of either really change box from the third quarter call. Despite we still have a 2.8 beta whether it be lumps. So can you maybe walk us through some of the major items.
Cash flow statement.
What has been sort of swiping, though so bad or that sort of earnings.
Free cash flow.
<unk>. Thank you.
A woman or did you do that took a showdown Atlanta to us a yes deal and we will Miss slip and do a joke with Susquehanna your spot. So he or she was on still today you should go to the Chauvet, it's holding on to install and saw the yet a slow you want to have a shale reserves.
Okay, Okay, yes, or no been figures shown that didn't put upon achieving a those that they are those that things seem like yes, Oh, so yes part of the tofu the to the to the down the hall. Please see <unk> hallways solid huh duration as you go to show up and they go to 30, good things go more soliciting even those that trade unions.
So far too you know Pablo changing that you're talking to each it'll be deep thought so you take us a traditionally you could you does show justified.
Secondly, yes.
So youre, hoping somebody.
Intends to offer the south for the first quarter and maturity of further south Arne contributed to buy the yes. Its fixed because we are about the to delever. The on you guys eight in April.
This means that the orders and for the current USAID, he's going to get crazy because people would like a cheap placed orders for the audio yes eight.
Well my motto is a make to order. So this is quite unique foster because it at the end of Luckier, we have launched at the on your yes, eight and started to accepted the orders from the public.
Okay Brooks regarding the second question about the cash flow of fourth quarter 2019, I think first is about a we closely monitor is our cats, but james position in fourth quarter.
ER so the operating cash flow I think it decreased compared to last quarter.
Secondly, or as we mentioned the cover a Q3 2019, earning release what MCB was closed in the fourth quarter. So there's still some cash injection in this quarter. So combined to those effects I think a total net cash outflow is ah.
Little bit lower than it was a wall. So I think that's the reason thank you.
Since I started just want to come from the Williams C. B was $100, that's the inflow financing slowed the fourth quarter.
Yeah.
A great.
Hopefully a $100 million and to them or majority a campaign in the fourth quarter Uh Huh.
[noise] scrapes very helpful. Thank you.
So.
Thank you.
And then that's what his question now I'd like to tend to call back over to the company for closing remarks.
Thank you again for joining us today, if you have any questions. They appear to contact meals investor relations team through the contact information provided on our website. So this concludes the conference call. You may now disconnect connect your night. Thank you. Thank you. Thank you everyone bye.
Thank you, ladies and gentlemen that stupid to conference for today and thank you for participating.
Just.
[music].
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