Q3 2021 Ehang Holdings Ltd Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the <unk> third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time as a reminder, we are.
Today's call. If you have any objections you may disconnect at this time.
Now I will turn the call over to Julia Chin managing director after Blue shirt Group Asia Ms. Chen. Please proceed.
Hello, everyone and thank you all for joining us on today's conference call to discuss the company's financial results for the Sot cot over 'twenty 'twenty. One we released the results earlier today. The press release is available on the company's website as well as from Newswire services on the call with me today are Mr who wants to shift.
Exactly officer, Mr. Edwards, Shea Chief strategy Officer, and Mr. Reach her new Chief Financial Officer before we continue. Please note that today's discussion will contain forward looking statements made under safe Harbor provision of the U S. Private Security Litigation Reform Act of 1995 forward looking.
Staying with you what's inherent risks and uncertainties as such the company's actual results may be materially different from the expectation expressed today further information regarding these and other risks and uncertainties is included in the company's property finding with the SEC. The company does not assume any obligation to update any.
Any forward looking statement, except as required under applicable law.
Also please note that unless otherwise stated all the figures mentioned during this call E. R. M. B with that let me now turn the call over to our CEO, Mr who want to Mr who will speak in Chinese and then all of a CSO edible she will translate his remarks to English. Please go ahead Mr. <unk>.
Sure.
That's helpful.
We'll watch it closely.
And so you'll see in here.
And he said I got a flu shot.
Are you know SUNS you do the G HN Paul.
Doug I told you at all when they feel that Sean from Columbia, Harvard Ascension, wherein Joseph I'll point, you to Chicago.
Colorado show Honda Latuda Chabot, XOMA frequency, social so you would've gone Jay you've won.
Also the converter machine.
<unk> Com has always.
Are those changes a woman, especially mobile being say tweeds entirely on the social.
Excuse me.
Immunology djibo onto a wound Josh at home tissue culture Hudson didn't build the liquidity.
Holger tissue.
She will hold us in the model.
Cause you woman she didn't listen don't U haul one drillship themselves.
P J well make huge advance absolutely true you shouldn't your faucet Lucia pay downs.
No.
Useful culture, while Mitsubishi <unk> walnuts driven by share gains you have dialed in on the Bougie Youll just infusion so hamzah.
She is looking for better together, well and we couldn't do it out of the sort of woman clearly do them at a time contingent going Johnson's Sheila pool.
This oil she told right you can get he isn't going to blow the Eileen Fisher.
Clearly one equaled Archie for fun.
The boyfriend hold it all come to Jive that with social legal remedies are fishing for Lifeco call.
So you're facing well wait I just thought how you well know.
So this whole your bullshit jewelry the entre.
Woman's egg Huangzhou hurdle.
Yeah sure.
Hi Chi.
Hum.
<unk> seen some social fishing push the geologist creation.
Does this disease on hold on hold he Sheila Joshua.
Peter Huddle around Cornwell, Joseph until imago plutonium or Camila intrusion function.
So theres Huntington's isn't going younger horticulture, where my head I've got off to a good in tissue potentially lethal.
So it comes in the quarterly.
Food don't see she found niches and youngest realty.
Oh sure.
Hi.
The food all of them yet.
<unk> been doing this she had her vision.
And why does that one Sean why don't tell what Congress will do if you feed them.
So Jim Scheel hit it on Bajaj Condor.
So you want to make good on the <unk> trends, a little efficiency, while European kind of ABB.
That's how I would hold time came from it one other way if you're selling to very efficiently bulk always just having done it you harness soil time in the frequencies dentulous evil causal shishido dingy the congestion doshi Goldman possibilities.
Cause a woman's highway life milk tissue boxes, Charles in the Hudson generally that will gain do you wages are you woman of Google at children's Iona wouldn't do shareholder chief no we'd use eylea, you'll at home young and we always had the COO Sarnia hottest shuttle shortly.
So it is truly a woman filled up with one of the things are sort of equal more powerful T shirt, because I like the makeup.
One jump agenda with insurance the answer is yes.
Sure sure people with designing the Hawkeye facing the culture. So around household where you've got homes will go at Etame.
Well I mentioned that is hosted of psychiatrists in this area.
Shelley Cushman.
Sure Doug How're, you doing the nation or kind of on both wholesale polyol, though each of them more and more of that for sure. The center, you'll highlight of chromium gaucher oil Michelle.
While mature at all drill to dwell at Shire Hall Union has it been deliberately woman no leeway to the mobile udon chain, you'll get the Jaguar like weekly, it's our job to Honda Shuang.
Xiaomi, you'll woman, let's see I saw shuttle without you should you at all.
Thank you Mr. Hu, Hello, everyone I'm, Ed Washy, Chief strategy Officer of Hum first let me translate our ceo's remarks into English.
Hello, everyone, I'm, a who watches our founder chairman and CEO of E. Com. Thank you all for joining our earnings call today I would like to start by sharing with you our business progress for the third quarter of 2021.
Although he is known to many of you know that we are applying for airworthiness certification for unmanned aircraft with the civil Aviation administration of China or E C.
So read that all obtaining the airworthiness certification is critical to the sales and operational services for our avs.
He also recent the focus remains on accelerating our progress.
Obtaining airworthiness certification for the EU Honked, one six instead of achieving large number off of sales.
To give more details on where we are with airworthiness certification C. AAC has basically completed the formulation of air Worthiness certification standards for unmanned aircraft systems. Meanwhile, we are continuing to work on the Ehealth, one six type certification and the completing the certification.
Program. According to our established the certification plan.
And the C. A S E have reached a consensus on the guiding principle that operational trial flights can graduate to be carried out while advancing their certification progress.
Moreover, we continue to implement our 100 air mobility routes initiative with several operational spots established.
During the trial operation stage, we can use this opportunity to optimize our product conductor more stress tests are all hardware and the software systems.
Reveal upon all kinds of simulated the failures and increase tests of of the fusion controllers for multiple flight control systems to make each and every flight smooth and safe, we will not tolerate any possibility of errors for any flights or operations and must maintain absolute.
Safety, we are conducting test flights and trial operations based upon actual and arrows in cities, such as Guangzhou, Hangzhou, Shenzhen, Chongqing, and Australia et cetera.
This way we are exploring the construction of air mobility systems that will also make air mobility are come on transportation methods for everyone.
At the same time.
We are also creating our entire operational system strictly designing product the management operation services and other systems that include our digital operational platform hardware and the software such as costs or management of a multi AAV formulation flights he hung cloud cyber security and air taxi booking.
B piece et cetera.
I believe that in the near future. These autonomous air taxi booking platform ADP will be commercially available for everyone to use.
As for long range of products. All V. T 30 is already capable of flying the T systems in all our products, including those for flight control batteries speed control motors or develop designed and produced independently by ourselves, which form our core competitiveness.
For future.
Our goal for the video 30 is to achieve well developed and commercially available system and deployment based upon the stability of the Johan to Asics Yuri.
In recent months, we have been working on test flights to significantly improve the stability and the safety of every key component in the VT 30 to prepare for a flight demo in due course, while ensuring it is a mature and quantify the product.
We are now actively engaged in pioneering business without any precedent to follow so patience is needed for success I see that many investors have been supporting us and even some singers from overseas have original songs for US we greatly appreciate the support and we.
No that only achieving commercial operation can we call it a true victory.
We will keep moving forward towards this goal to meet everyone's expectations for Ehow and realize.
Our company's potential value.
Above where Mr whose remarks, following chris' remarks, I will elaborate on our operational results in the third quarter and our plan for future.
We continue to make further progress in our <unk> operations on air Workplaces certification efforts.
In our previous conference calls, we continue to make efforts in executing our 100 air morbidity routes initiative in third quarter of 2021 with a specific focus in the Guangdong Hong Kong Macau Greater Bay area.
During this quarter, our footprint further expanded to Shenzhen, a major city in the greater Bay area.
With our cooperation with our local partners are ear Antoine seeks avs are able to fly regularly in Shenzhen Yadkin more importantly. This these awards are Firstly example of operating both I avs in helicopters in that integrated aerospace a great breakthrough in the history of aviation.
Notably we have been establishing a sample regular air mobility operation model for errors I'd seen had the Verde board of our partner had Easter in the Ocean front of Omar one heel area in Shenzhen since mid of November.
With our radio frequency over six operational trial flights currently we look to expand the flight frequencies to meet increasing market demand, we estimate our full scale operation in this spot we will serve over 30000 passengers per year.
Furthermore, we have launched more operational spots in Guangzhou, Hangzhou charging Shanghai et cetera in collaboration with our partners, providing aerial tour and the short distance travel experiences to passengers.
With the execution of our 100 Air Mobility Route initiative, we have launched seven operation spots.
In compliance with the relevant to regulations, we conducted about a 2800 operational trial flights at these spots there.
The abundant operational experience accumulated in the safety records of builder from these operational trial flight provides us with essential information for future commercial operations officially.
On the certification of our <unk> six AAV.
We have attached a paramount of emphasis on these projects and have been promoting our cooperation with C. A Z.
After multiple rounds of discussion, we'll see as the expert team. Our certification work has entered into the final stages of verification. So far the work of progress appears to be satisfying. So we remain hopeful to obtain he sees approval on <unk> six type of certification in the next few months.
This year. He hunt one six has received attention of government officials from all over the world which include the President Macron.
From France Premier Li of China, and the King of Spain, All who have visited the E. <unk> Zika submission booth to express as a recognition of our products and technologies. Our sales focus remained on the sale of our Ehealth one six F avs the fire.
Fighting version in promotion of our product we have participated in several fire drills are held by a local governments in Guangzhou Hugill, Qingdao youthful and.
And the Qingdao, which have one why the recognition from the authorities, we will strengthen our promotion activities and sales channels further.
Looking forward, we will attempt to accelerate that type of certification work before Ihan Tuan six according to our established certification plan. We will also continue to implement a 100 air mobility routes initiative by adding more operation spots and our frequencies to gradually build our U N Nab to work in the <unk>.
Kwang Dong, Hong Kong, Macau Greater Bay area, I will now turn the call over to our CFO Mr. Ricardo for financial results Rich are please go ahead. Thank you.
Thank you Edward and Hello, everyone before I go into details. Please note that all numbers presented are in RMB and are for the third quarter of 2021, unless stated otherwise or percentage hinges on a quarter over quarter basis, unless otherwise specified.
Detailed analysis are contained in our earnings press release, which is available on our IR website.
I want to highlight some of the key points here.
We have been strategically transitioning from a product sells century model into an operating platform our input model since early this year.
This shift is a gradual process and important for the long term growth of the company.
Total revenues were 13 million in Q3, an increase of six one and 6% quarter over quarter. The Hunter 16 serious of AAV deliveries in Q3 were eight units, including two units of Ehow to seeking F. The fire fighting motto, an increase of five units from Q2.
Gross margin in Q3 was 61, 8%, though it was 6.2 percentage points lower than Q2 due to the changes in revenue mix with the higher margin come in control system deliver in Q2.
Our gross margin continued to be maintained and had radically high level, which reflect that unique inherent competitive value in our business.
Adjusted operating expenses, which are operating expenses, excluding share based compensation expenses increased by $1 9 million to $61 8 million in Q3 from $59 9 million in Q2 the.
The increase in Q3 was mainly due to the continuously increasing R&D expenditures in developing and upgrading AAV models, including the long range, reaching 30 and other products in pipeline and expansion of the R&D team to enhance the R&D capabilities of the company.
As a result, our adjusted operating loss in Q3 was $48 9 million.
A slight decrease as compared to $49 4 million in Q2.
Adjusted net loss in Q3 was 47.8 million as compared to $49 1 million in Q2.
In respect of the balance sheet and our cash flow. We ended Q3 with 357 million of cash cash equivalents and short term investments compared with 184 million as of December 31, 2000 and funny.
We will continue to run a healthy operation and manage the cash burns and the development process.
Now, let's turn to the business outlook.
We have adjusted the annual revenue forecast for 2021 to be between $50 million and the 60 meter mainly due to the falling reasons.
First the company has been strategically transitioning from a product south central model into a more pushing platform oriented model and the ramp up of operational revenues is subject to the ongoing certification processes.
Hunter says 16 AAV and.
And secondly, the potential orders of the Hunter assisting F are expected to take longer sales cycle due to the procurement procedures of relevant government entities, which are typical customers for the product.
Further on November 29th we announced the appointment of Peter C. Succeeding E Y as our independent registered public accounting firm in connection with the audit of our consolidated financial statements for the fiscal year of 2021.
The change was made after careful and thorough evaluation process and has been approved by the company's audit Committee and the board of directors.
Pwc has abundant experience and knowledge in clean them up on it he technology sectors, such as electric vehicles mobility as a service and in particular, our global E Vito and urban Air mobility industries.
We believe that Pwc's appointment is helpful to our next phase of growth under our long term U M platform operator strategy.
Now it's also a good timing for the change that there will be adequate time for a smooth transition for 2021 antibody.
As always we are committed to maintaining the highest standards of corporate governance, and timely disclosures and compliance with the applicable rules and regulations of the SEC and NASDAQ.
That concludes our prepared remarks this I'll open the call for questions.
Please go ahead.
Thank you we will now begin the question and answer session. 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 husky.
Your first question comes from the line of Tim Chow from Morgan Stanley. Please ask your question.
Hi Hum.
Match pace for taking my questions.
I have two questions there.
The first one.
It's about the competitor landscape.
How do we see the dressing changes of the compact as Scott.
All the other peers or you go to a companies going public the spec.
And Meanwhile, in China with Huawei, So saw some new players.
Trying to tap into this market such as expand.
So could you briefly comment on the <unk>.
Are you on potential competition.
And second question is about our strategic partnership.
I think we made it sound announcement regarding our partnership with Greenland in children used to general aviation.
So looking for it.
Next six to nine months.
If there is any potential partnership deal.
Data, we can make a more substantial progress and could help us to accelerate our commercial rollout. Thank you.
Okay. Thank you Tim this is edmar.
Your question.
So first of all about these emerging players on the market both domestically and overseas.
We think of that so this is not a surprise this is within our expectation it definitely shows that more and more companies and institutions.
The end market as a very attractive industry to enter.
Especially with notice.
Is auto.
Manufacturers are made.
In this flying cars, which is similar to two of these.
AAV.
No.
But we see that.
Many of these.
So called new products.
Rd prototype stage and we are proud that two were still leading the curve and we are definitely the leader.
So there is nothing to worry about.
The competition, but we were definitely we acknowledge.
The potential competitors.
We believe that the market.
It is big enough Taco mandate.
This sense of more companies and if you look at the auto industry is there are so many.
Different.
New energy carmakers.
Still it is very attractive and the sofar for these urban air mobility market. It is a very big and it is very early stage and of course, we see the emerging players on this market and actually we welcome this trend and.
And there is nothing to be seriously.
And we will focus on.
Sure.
Strategy first is to implement to accelerate our workplace certification. We believe that this is a very.
It's quite a long journey and for US we have already made the efforts.
In the past few years and we believe that this is also a big challenge for the new Commerce and second we will improve.
Implement our.
100.
And air Mobility Route initiative.
We have achieved very good progress so that comes to your second question right. So.
I'm happy that you noticed that we have already achieved.
Strategic partnership with several players one in Shenzhen, which is the eastern.
Which is a conventional helicopter operating company, but.
Helicopter company definitely there is a notice of that.
Future.
For autonomous aviation, and and so and especially from the cost perspective.
They noticed that our AAV can definitely.
Save cost for them because this is a 40 autonomous and it is driven by electric power and the show.
We took this opportunity to introduce our AAV service.
And the launch of a lot of the trial flight in Shenzhen and we believe that the Xinjiang is very important in the greater Bay area in Guangdong and so this.
This is very important and the wind this partnership we are able to gradually.
Add more frequency.
A more operational sites.
In Shenzhen and the second.
Our partnership with Greenland, Greenland, Hong Kong is a listed company.
Our property.
Company listed in Hong Kong, and this Greenland developed type of large.
Real estate project in Georgia.
So.
We were able to introduce our AAV trial flights.
There are projects, which you received a very good recognition from both.
The developer and also with their customers.
Because the shoes.
Sure AAV service.
How is that traction for their customers.
Either tool with each of their project or even buy if they are apartments.
So this is a very good application so going forward the web getting to ramp up with more.
Operation projects, especially.
The one which is.
Worth noting is into high right. So we are working with.
With our partner into high and recently, we did a test flight in the opera house into a high very very beautiful scenery and very good.
Acacia because of these opera house.
Located on the island and the show this.
The service can be both.
Air Tour and also with the transportation and Moreover, we are further expanding our services Hello, Joe and.
And.
Even your overseas.
Just all you will notice that we are.
So long shelf life.
Yeah, right so in the release.
Do you see I use is country Oh for many many islands, so which is ideal for the application of Avs and Moreover, we had to this.
Partnership with the Spanish National police et cetera, and to further expand our network.
Network in Europe, So we believe that with our progress.
Our aerospace certification going on.
We should be able to expand our trial flights or even more regular.
Marshall flights.
In those areas in the future. So now it would appear it is very important for us because we are able to accumulate.
Data safety record and also the experiences and also building our team.
To further.
Our lives our operations and future. Okay. So please stay tuned for more news in future. Thank you.
Got it okay and supported the Tito Sherry Thank you very much.
Your next question comes from the Woo from Tien Fang Securities. Please ask your question.
Hello, Richard and Edward Thanks for taking my questions and I have two questions as well first I read in Q3 earnings that have established operation spots and come back that about 'twenty 'twenty 100 operational trial flights at these offers and I'll start on the relevant comply.
This framework.
Could you shed more light on this particular compliance framework and the second question is could.
Could you elaborate on the central model regular air mobility operation in Shenzhen.
What's our plan regarding expand operational spots for next year and for achieving the 100 Air mobility Route plan.
Thank you.
Thank you.
This is Richard I'll take your first question.
There are.
Too many aspects forming the combined.
Our framework for all of these operational flights in China.
First on the product and operation fronts.
You mentioned in the in this year.
Our news release, we began the CIC have reached a consensus on the guiding principle that all.
Personal try flight.
Naturally be carried out.
Advancing the certification process.
Understood more operational experience in the records are instrumental in facilitating and accelerating.
Certification process.
In respect of the use of aerospace in China approvals from various tax Department of China Air Force.
He is responsible for regulating the air space in China.
Entertained for every for all of the operation of trial sites.
Okay.
So im answering your second question regarding the.
And mobility operation in Shenzhen.
Uh huh.
The plan to expand our sports next year right. So first of all we believe that our operation model in Shenzhen is very representative because this is.
Definitely three cooperation between us which.
Which is AAV or jewelry and company with converge.
Conventional helicopter company and the show this I had a couple of company. It is a very professional because they have trained and they.
Barry the ups.
These are certain standards and.
Certification from the AC so which means that they can definitely help to improve the overall operating standards.
Hi.
Adopting some of the existing E Z standards. So and this is also the first.
Operation our full integrated aerospace.
<unk> AAV <unk> and helicopters, which is a first in the history of aviation. So this is also very great significance and also the cooperation with <unk>.
So far as very smooth and successful and so we had about a six.
<unk> per day on a frequency and gradually we are going through.
Launch more right and.
And so this.
That help to two two game, we can gain more experiences.
From from this operation and we should be able to replicate such.
Such a model to more operations spots in future so in future.
We look to further intensify.
Our operational frequencies, especially in the Hong Kong, Macau, Guangdong Greater Bay area. Because this is a very highly.
Important.
China and also in the World.
With a very strong market potential for AAV and gradually.
Should be launch the more longer distance service after the.
The launch of our <unk> in the future, so which will help to to concrete.
More network, all four of our AAV services and so.
And so far.
We mentioned in our guidance right, we were about to launch our service.
Hi.
Is the other side of that.
Per rig or downtown or the greater Bay area. So.
Which is another important city.
In this area.
In the future will look.
There are big a triangle in Guangzhou, Shenzhen, I mean July right and Moreover, we are going to.
And our operation sites.
And et cetera, so so in the future.
We see more and more AAV is can be flying.
In this area and to show that to we definitely we are going to build towards a first you and field.
In China, agile, so I hope.
Youre going to see more of our progress in future. Thank you.
Oh I see thank you. Thank you Richard Thanks for the detailed elaboration.
Seeing no more questions in the queue, let me turn the call back to Mr. Liu for closing remarks.
Okay. Thank you operator.
Thank you all for participating on today's call and for all your support.
Sure your interest and look forward to reporting to you again next quarter.
Further progress.
Yes.
Thank you.
Ladies and gentlemen that does conclude our conference for today. Thank you for participating you may now all disconnect.
[music].