Q1 & Q2 2021 Ehang Holdings Ltd Earnings Call
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Thank you Mr. Hu, Hello, everyone I'm, Alan Shea Chief strategy Officer.
Uh huh.
I'm glad to help translate our ceo's remarks into English.
Hello, everyone. Thank you all for joining our earnings conference call today.
I'd like to start by sharing with you our business progress for the first half of 2021, then I will give you some highlights.
Business.
And for second half.
As I shared with you in our last quarterly earnings call.
Has led the way you am operation with the aim to become.
<unk> Air mobility platform, operator, empowered by our autonomous vehicles to.
To achieve this exciting goal.
<unk> paid relentless efforts and the careful preparations in the past few months.
As you know with newly released our BT 30 passenger grade AAV as one of our flagship product besides.
One six.
The release of the V. T 30, 40 demonstrated our ticket.
Medical staff in the field of AAV industry.
And it is also complementary to the IATA.
Thanks.
Designed for short to medium range intra city and mobility.
Our priority is to launch intra city and mobility first with application.
On slide six to make.
Air taxi.
Reality.
I believe many of you know that we have made a quite a number of a child's life carrying passengers in cargoes during recent years.
There are still people looking forward, we're taking a ride with our logistics profile.
Yes life experience.
I think what he has done essentially in the past few years is not only to build AAV.
Build safety.
Over the years, we have been making travel flights with good safety Records.
While we have accumulated abundant experiences and.
Also problems that May help us think seriously for further improvement, which we have been working on recently.
To ensure safety records in the upcoming operations of our AAV. After the population of Airbus meets the standards and completion of the certification process we have been.
We're making comprehensive preparations from various perspectives.
In terms of sales with deliver 18 units.
<unk>.
First half of 2000.
20 watt, including 15 units in the first quarter and three units in the second quarter.
As we mentioned in our last earnings conference call.
<unk> is gradually transitioning into an operation platform model from a product sales centric model, which is also reflected in our actuals AAV sales performance.
Next I'm glad to share with you the progress of our 100.
Moving into growth initiatives.
As of now we have a screen and tested seven operation.
Most of which are located in South China. In addition to the ones that are operated by our partners with.
We position our operations as new transportation mode for island hopping.
<unk> attitude era, tourism and suburban transportation, we started by focusing on south China and plan to expand gradually to other areas in China. So.
So far we have targeted the 15 self run operations spot six are in Guangdong province, and another six in the youngsters.
Actually the Delta region.
We also plan to assist our customers to conduct operations in additional 21 locations.
Meanwhile, our collaboration with E C.
One six type certification is going down there well see.
E C has officially.
Load our application on January 19th 2021.
It has spearheaded a project team by recruiting over 'twenty exports from the country to start the certification process.
We have held several rounds of.
Few meeting and inspections in Guangzhou and Hangzhou.
<unk> critical consensus has been reached between the expert team at E. On the basis of a complete understanding of the design features of <unk> now.
Now the type certification process.
Proceeding in an orderly manner in accordance as Brent.
We have taken.
One six type certification program at the company's top priority.
We expect to work with the CDC to formulate Airbus is certification standards for the Eagle Ottawa six passenger great AAV in the third quarter of this year, which will be unprecedented in the aviation industry.
In addition, we expect to obtain the type certification for <unk> within the next four to six months.
We will strive to complete all the relevant certification inspection work ahead of schedule within this year.
In terms of new products, we haven't released a brand new.
Oh through hybrid E veto the V. T 30 in May of this year, which is designed longer range urban air mobility.
<unk> is designed to travel.
<unk> of up to 300 kilometers with a designer lifetime up to 100 minutes.
As a.
<unk> tightened to the existing <unk> six a product focusing on short to medium distance interested the air mobility.
Currently we have 30 is undergoing large number of internal flights and have made a good progress.
<unk> F a firefighting model at other.
Company literally products have filled the gap urban high rise firefighting and.
In January of 2021, we successfully completed the technical examination of the EUR one six.
By the China National firefighting equipment quality supervision testing center, which has certified the reliability of our products.
Other of firefighting equipment and pave the way for the commercialization of <unk> F AAV.
Subsequently, we will start to promote side and deliver the EUR 200.
Six F related orders.
With so many technical advantages we believe it will.
<unk> important role in our real scenarios of firefighting rescue and emergency activities in various places.
With our new production facility.
So officially put into operation in June of 2021.
Production capacity has been <unk>.
Kris.
The facilities are mainly used for the production of one six in service of passenger great a visa and others.
First one covers our gross floor area of 'twenty four.
Square meters and it has a designed the initial annual capacity of.
About 600 units.
Although the Investor day.
Which was scheduled to be held at the new Greenfield production facility on August 18 has been unexpectedly caught up by the local government right before the event due to the reemergence of the COVID-19 cases in Guangdong, we still hope to reschedule the event after the lift of traveling ban we would then.
Expect to provide investors with the opportunities for in person visits and communications.
In the first half of the year, we continue to carry out a large number of trial sites, which are benign with the SEC is regulatory methods to encourage trial sites first and integrate our operations.
She experiences into the certification process.
For example, we made a trial and demo flights at the opening ceremony of the Chinese Super League in Guangzhou.
Digital China summit.
In Japan and in Beijing for the first time in over South China Sea from July.
Unchanged to Boeing.
Our islands etcetera in June we participated in the anti COVID-19 campaign in Guangdong, Guangzhou by transporting medical and emergency supplies.
On time areas using the EUR 206, and you have 206 L. AAV.
In Europe.
Successfully being selected and deeply involved in a large number of urban air mobility projects supported by the European Union and have reached extensive industry collaborations with the government and the partners in Spain, France, Italy and other countries.
Looking forward to the.
We have half of the year, we expect to continue to sell and deliver our service of AAV products.
During the strategic transition of our business model. We have also maintained the sufficient cash reserves for at least 12 to 24 months to support a smooth progress of our business development.
Second future.
Although the transition may lead to a potential decline in the short term say with the revenues. We will continue to vigorously advance the preparations and a gradual implementation of our 100 Air mobility Route initiative, which we view as more important.
We are continuously expanding our operations.
In the <unk> and the route increasing frequencies of flight expanding the existing professional and mobility operation team. So as to put eight income from our operations and make it eventually become our main pillar of revenue sure.
And to enable <unk> to be the worst.
And as far as the company to start with the commercialization of urban Air mobility operations.
And now I would like to say that he has removed step by step towards our strategic goal.
Coming.
And mobility platform operator.
Meanwhile, we are very pleased to see that more.
Third for upstream and downstream companies joining the emerging you will have an industry. We are confident that <unk> will continue to lead the way and to maintain our comprehensive competitiveness in the global you end market. Thank.
Thank you for all our investor support.
About where Mr. <unk> remarks.
And following his remarks I'm going to elaborate on our strategic is transitioning in the first two quarters and our plans for the future.
As we have defined our goal is to build an advanced global OEM operation platform.
We have switched our focus more towards the operations.
Second quarter of 2021, which led to a scaled down in our sales level.
The re attack by COVID-19 is all China had adverse impact on our sales and deliveries of our AAV in a P.
Period as well.
Other than we started.
Two weeks ago, the field of tactical UAS operations.
Specifically, we build our U M operation team by recruiting industry professionals from World class organizations. We believe we are able to leverage their battery experiences and background in leading aviation in the mobility companies such as.
<unk>.
Airlines, Hong Kong Express Hong Kong Airlines, Citic helicopter, BMW, IBM et cetera, and to build a whole new operation platform for AED, One report Julia M. Three zero.
More importantly, we have started to implement our 100.
Route initiatives by screening and testing appropriate support for U M routes. So far we have a screen and tested seven spot for AAV.
Operation most are located in south China.
We position our operations offer a new transportation mode for island hopping no attitude.
Our tourism in the suburban transportation. Our initial focus is on the Guangdong Hong Kong Macau briefly earlier and a plan to expand gradually to other areas in China.
Upon our latest operational plan, we have targeted 15 self run operations slot, including six in Guangdong and <unk>.
Bye now.
We're also planning to help our customers to launch operations in 'twenty, one sports, including 10 in Guangdong and four in <unk>.
Achieving our operational goals, we are working broadly with our local partners, including government authorities and the business organization from industry.
Those trees, such as real estate tourism construction transportation and aviation.
Able to share their valuable resources, especially highlight.
In the land and infrastructure.
Our goal is to build a moat to give us a first mover advantage in the U S industry.
Meanwhile, our cooperation with.
Civil Aviation administration of China of course, Johan <unk> six type service application its going on very well, let's see AC has officially accepted our application.
January 19th of 2021.
Our project team by recruiting over 20 experts a nationwide to start the certification process.
We have held several rounds of meetings and inspections to call back to Eric.
With me still reviews of the design safety and operations of our <unk> AAV <unk>.
We are hopeful that the further reviews and perhaps will be completed in the next four to six months with a type certificate for <unk>.
Could be grounded by CEC, which shall paved the way for larger scale operations of our AAV.
Looking ahead, we will continue to implement our 100 urban air mobility routing you should you accelerate the testing process, we will strengthen our existing partnerships with key entities.
Including E C local governments and business organizations, we expect to acquire new resources by demonstrating our successful models, which should further extend our operational scale.
Meanwhile, we will also.
Actively look for various business opportunities.
To better monetize our model at least the stage by generating ancillary revenues from advertisement static display also.
These students camps training schools wedding shows et cetera.
I will now turn the call over to our CFO, Mr. Retard deal to provide.
Actual results Richard Please go ahead. Thank you.
Thank you Edward and Hello, everyone.
Before I go into details here.
Note that all numbers presented are in RMB unless stated otherwise all percentage changes on a year over year basis, unless otherwise specified detailed analysis.
This are contained in our earnings press releases, which are available on our IR website.
I'm going to highlight some of the key points here.
And so our business is strategically transitioning into a more operation platform oriented model with AAV honest to third parties and has the same time shifting towards an operation.
The platform oriented model.
The ship is gradual and important our revenues indicated a delicate balance during this strategic transition period. In Q1 2021 total revenues were 23 million an increase of 22, 1% year over year.
The 16th serious.
So passenger grade AAV soda in Q1 was 15 units compared to nine units in Q1 last year.
Q2 revenues were $12.2 million a decrease of 65, 9% year over year, because three units AAV with soda in Q2 compared to 16 units sold in Q2 last year.
This revenue decrease in Q2 is sending anticipated impact of the strategic to just get a condition.
We continue to optimize the cost structure of our mobility products and improved overall gross margin.
Q1 gross margin was 63, 2% an increase.
Of three nine percentage points from that in Q1 last year Q.
Q2 gross margin reached a record high of 68%.
Not 10, four percentage point increase year over year.
This was mainly due to the completion of a higher margin command and control system for.
T T management project in addition to continuous cost structure optimization in Q2.
Adjusted operating expenses, which are up operating expenses, excluding share based compensation expenses increased by three $3.4 million to 34.5 million in Q1.
Smashed by 'twenty four.
<unk> to $59.9 million in Q2 compared to the members in the same periods of last year.
The increase in Q2 was mainly due to the continuous increase.
R&D expenditures.
We're developing and upgrading AAV models, including the newly released.
And long range.
The T.
<unk> designed for Intercity Air Transportation.
And increases improve them provisions related to the new virus outbreak impacts and additional expenses related to the extending extended filing of our 2020 annual report.
A.
We leased it up and loss in Q1, 2021 was $17.3 million $1.9 million improvement compared with $19.2 million in Q1 last year.
Q2, adjusted operating loss was $49.4 million compared to $11.1 million in last Q2 due to.
To lower revenues and higher adjusted operating expenses in Q2 this year.
As a result, adjusted net loss in Q1, 2021 were $13.7 million compared with that of $18.5 million in Q1 last year and in Q2 2021 was $49.1 million.
And compared with that of $11.7 million in Q2 last year.
In respect of the balance sheet on the cash flow. We ended the second quarter was $406.5 million of cash and cash equivalents and short term investments, which we believe are adequate to support operations for the next 12 to 24.
But more importantly, we achieved again positive quarterly operating cash flow in Q1. This year of $16.2 million last time was in Q4 2019.
This again reflects the unique inherent value in our business and our continuous efforts that the company has been taking to run a healthy operations.
Operations and minimize the cash burn in the development process.
And now, let's turn to the business outlook, we expect to maintain the annual revenue forecast in 2021 to a range between one $130 million and 180 million as we strategically transition into a more operating platform.
Oriented model and the commercialization of income to assisting F. The firefighting model among other products.
That concludes our prepared remarks, so let's now open the call for questions. Operator. Please go ahead.
It took me ladies and gentlemen, we will now begin.
And the land position if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your request. Please press the pound or hashed E.
Once again it is followed by one on your telephone keypad. If you wish to ask a question do you have the first question is coming from the line of Tim Seattle from.
The question Stanley. Please go ahead.
Hello.
Thanks for taking my questions and congrats on the results.
Question from my side. The first one I think Mr. Hu at beginning of this call I mentioned that some of the company.
It's a good progress in terms of transforming <unk>.
Into the upper their justification operator.
So on a full year basis.
Could you please share some further information how much of that.
Or how many percentage of revenue.
Be contributed by this COVID-19.
Most of them are here or urban.
Transportation related accretion.
And my second question is about the devote ourselves huh.
Because you mentioned dehorn shipped up 18th units in the first half.
So just based on our guidance.
Second half, we do need to have some.
Progress, but in light of the restaurant Covid Lockdowns, what's our latest guidance regarding the Baldwin and how many of the units would be contribute by something like the government project for example.
216 times.
So those are all my questions. Thank you.
Okay.
Thanks, Tim.
Just to add what I'll answer your first question I'll try to answer your first question because that would.
We may not.
Everything you know the numbers there.
You know that in the first half.
We have all been moving gradually from.
You know say with centric model more towards our operation a platform operator model right and but now the key bottleneck is the.
The regulatory issue I E. The type certification. So that's why we are also very focusing on this.
ER type certification.
But why we are moving towards the operation. So already is because in order to achieve this goal we need to do more preparation and especially to set out for our team as you know we've recruited professionals from world class organizations.
And and set up a very talented team.
And also we need to accumulate.
Enough experiences and so so as you can see especially in the second quarter of this year, we made a love for the separation technically and you know in.
Human resources and also we were visiting so many places in the screening and testing a different a spot for real operation right. So that's all I think we are still in the very early stage to prepare all the necessary elements.
This is a very necessary step for us to do right and so far I think we made a very good operation.
Looking into the second half.
Going to launch the operation.
Very smoothly and yeah in the next.
Smartphones are going to see are the release of more operational votes, and so which is a proof of our work.
In terms of revenue as I said.
So far based upon our.
Our estimates are.
H E B.
Your target is to generate about.
1 million renminbi of revenues.
Much of this is based upon.
The approval by the by the CEC, which means that the after the obtaining the type certificate.
So at this stage, we I'm trying to.
Through the business opportunities from the scenery revenue. So for example.
We made a very good contract with our advertisement to clients, who would like to pay for displaying the logos in the.
In the body.
Our easy right and also we were you round up with some corporate <unk>.
Customers you know for example, one call a corporate customer in second quarter.
They contributed.
About.
100000 or renminbi.
Revenue right, which is a win.
The only this one.
Customer so shall we.
Trying different ways of generating our revenue.
Revenue from our existing.
Equipment right, but.
But still.
<unk>.
Knowledge of that it is.
Too early to too to tap the full potential of our commercial revenues because we are not able to explicitly sell tickets for passengers, taking a write off our AAV right, but with a lot of trial flights and experience accumulated.
This would definitely paved the way for our further commercialization.
Commercialization.
Which is our plan.
After the certification so I think as Mr. Hu mentioned, and we did very well in terms of this.
E C collaborate.
And so we are very hopeful that the.
Certification.
It could be obtained within next four to six months right. So yeah, I I hope I made.
Myself clear to you and the next question will be answered by Richard.
Tim basically Richard Thanks for the question. The second question I understand regarding the.
Kind of Protocells are situations.
As we discussed a lot in our.
Marks were in the statistics in addition from a product sells.
Focused model to a platform oriented model and.
Also as as Edward mentioned earlier in.
In the second quarter re attack by the COVID-19 outbreak in Guangdong.
Bruce and pack them on the product sales.
Sure.
Quarter.
But looking.
Into the second half.
In a period of this year.
It is expected that the our ourselves focus will be more towards the fire fighting model Yount assisting F.
Which you know that the technical examination.
I N S.
He has been completed.
After that the technical explanation on competition, we actually have been working with.
The local emergency department in and found departments.
Several cities as we explained in our earnings release, such as searching Docility, Guangzhou City, who you'll see D et cetera.
To realize you Hunter 16 F.
In the urban fire rescue groups.
In doses.
Cities with those departments.
So this has laid a good solid foundation.
Ongoing onward commercialization that'd be home to 60 half an hour visit team had beam forming up with the veterans.
Departments are in those cities are trying to materialize.
The actual water.
And there would be a there'll be more cities in the in the Congress.
Great. Thank you very much for sure where the T cells.
Thank you.
Thank.
<unk>.
Thank you once again, ladies and gentlemen, it is star followed by the number one on your telephone keypad to ask the question.
Once you get into star one to ask a question.
Do you have a good.
Pardon me, ladies and gentlemen.
It is strong one on your telephone keypad, if you wish to ask a question.
Yeah.
Yeah.
Do you have the next question is coming from the mine.
Tokyo.
Grimaldi Pease go ahead.
Okay, Yes.
Yes.
One question two to try to better than the same with the sheets there Europe beautiful.
Yeah.
Basically you are saying to our.
Investors there.
Yeah.
You have much more interesting to Sip products.
You see there.
So instead of them its thing.
Going forward.
So going into the future.
The new team did that.
So that's making.
Would it be the big Guy right.
Domains and some guy.
And.
And so on.
And you will be army.
You say.
Managing the road to doing cross factor all these.
Kind of Europe.
Sam Moore.
He died a little but it won't be too.
We do need.
Bye.
I didn't know if you have a projection of when you say if they renewed that every.
In addition, we need approval in Europe.
And do you already have a 16 routes.
Yeah.
<unk>.
The difficulty I, yeah, it might be your revenue.
Okay.
It's a completely new leasing.
Is that how to think tooth surrounds the leak.
The fact that you get.
Let's say it could be crying Ruth Inc.
Two things.
Free cash flow.
So the equation.
Can you give it to me.
Playable.
Of the one or two I used to do its thing.
China or are you seeing an Italian and all of the units.
Sure.
Foreign currency laid for you in term of operating free cash flow.
And because.
I see.
Recently the products.
Cause I never believed that you could make the product just to make the product you need.
Got it.
Thank you.
It doesn't allow us to.
It makes a lot of profit.
Appreciate.
Yeah Europe.
Europe comp.
Because.
The topics for Europe.
Whoever lots of money.
Before you're kind of in defense.
But yeah, it's still.
If you just can give me a flavor of how to tell them that they want us to ride through that.
In one place for them moved into operating profit. Thank you.
Uh huh.
Thank you your first question.
Can you clarify that.
We're not saying by the way.
We are not setting our product actually we oh are.
Our new facility beautiful has just been launched and which would increase our capacity to 600 million per year right. So so basically.
To reach our mission our sales.
We're still going on.
Maybe we'll be more focused on the <unk> six F. The firefighting version and as well as maybe some logistical portion as well, but in terms of who the standard standard <unk> six.
Are we.
You know more.
Focusing on the operation because operation, it's very important without operation there is no way for.
You know ultimately the commercialization. So Meanwhile, we still received good interest from customers who are.
Willing to buy so there.
Reason, we are launching our self operated model is just too to set a model for our customers and we.
We are launching our operation are relative to successfully and so that to us and demonstrates the.
The real bad right because as we estimate you know the.
The operating margin of food.
Operating the AAV.
Can be as high as about 35% or even 40% right depending on the scale, so which can prove to.
The very successful investments right so be attractive for our customers who buy our AAV is for commercial purposes right. So we are actually doing two ways one on the.
On one hand, we are launching the operation on our hand, and we are also healthy.
To be averse to launch operations and so that's why at least 100.
Air Mobility royalty initiative is about but on the other hand.
We are welcome we are welcoming our customers are new customers to buy the avs from us and we but we integrate.
Customers consolidate all the operations on our platform. So that's that's the value of our platform. So.
I hope I can make this very clear.
And hopefully this answers your question.
Okay.
Yeah. Thank you.
Yeah.
When you say U U U shaped the Ethernet and it is still an integration redoing your production there.
<unk>, let's say or rather sang Don.
Julia.
You see that going.
Going to produce it.
Yeah.
Yeah.
Yes.
We're still remain the OEM producer.
We will continue to produce.
Yeah, that's for sure.
Thank.
Thank you.
No more questions on the line I would like.
Seeing no more questions on the line I would like to hand, the conference back to Mr. Liu.
Please go ahead Sir.
Thank you operator, and thank you all for participating on today's call and for all your support.
Appreciate your interest.
And look forward to reporting to you again next quarter on our progress.
Thank you, ladies and gentlemen that concludes.
Ladies and gentlemen that concludes our conference call for today. Thank you all for your participation you may disconnect now.
[noise].
Yeah.
Sure.
Okay.
Okay.
Uh huh.
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