Q4 2021 EHang Holdings Ltd Earnings Call
Good day, ladies and gentlemen, thank you for standing by and welcome to the E Hang fourth quarter 2021, and fiscal year 2021 earnings Conference call.
As a reminder, we are recording today's cold.
Now I will turn the call over to Judy Chen managing director of the Blue shirt Group Asia. He hangs I often Miss Chen. Please proceed.
Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the fourth quarter and the fiscal year of 'twenty 'twenty. One the earnings release is a variable Ali I website as well as from Newswire services. Please note the conference call is being recall.
And the audio replay will be posted on the company's IR website today, how management team, which includes Mr. Who was the Chief Executive Officer, Mr. Edwards Shea Chief Strategy Officer, Mr. Xing, Fong, Chief operating officer, and Mr. Richard Liu Chief financial.
Offices were successfully give prepared remarks remarks delivered in Chinese tour before with by English translation. All translation is for convenience purpose only in the case of any discrepancy management. The statements in all regional language would be prevail a Q&A session.
We're photo afterwards before we continue please note that today's discussion will contain forward looking statements made a pursuit to the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 1995 forward looking statements involved inherent risks and uncertainties.
As such the company's actual results may be materially different from the expectations expressed today further information regarding these and other risks and uncertainties is included in the company's pop refining with the S. D. C. The company does not assume any obligation to update any forward looking.
Statements, except as required under applicable law also please note that all the number present, our E. R. M D and the off for the fourth quarter and a four year of 2021 unless stated otherwise wasted that let me now turn the call over to CEO . Mr. Hu <unk>. Please go ahead.
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But I always stick translational Mr. Hersh remarks, Hello, everyone. Thanks for joining our earnings call today I'm very delighted to show you have operating performance for the first contact and fiscal year 2021 .
Why why some recent developments.
Despite challenges had homeland Cross group will be in the past year. He has always focused on exploring the vast market of the urban air mobility, as an innovative and technology driven enterprise.
We are committed to creating value for our industry partners and shareholders, while making significant progress in the following key areas.
First obtaining the Ann witness certification of the <unk> S.
As always been placed as our top priority and a past year has seen remarkable progress on these project.
Notably we work, we just don't see the radiation and administration of China issuance C. C to developing the special conditions for the Ehow to Essex F type certification.
The first four passenger carrying autonomous vehicles in the world, which was formally adopted and issued by the CDC in February this year.
And this means that the cap certification that we had to my success has the certification basis for further implementation.
At present this is vacation dummy into our success is in our compliance with new face.
And we are grateful for the CEC score too.
Next turning to our 180 ammo Burlington Ross initiatives, where I know, France round here of the industry and it carried out operational trials 19, China doing instead of vacation process.
We are developing U N pilot projects in multiple cities in China to continuously accumulate real flight experience in their risk scenarios.
In the near future, we will disclose the first two group of Chinese cities that will have our commercial U N services in flight routes. After we secure a witness education.
Moving onto sales and marketing we are pleased to gradually open Napa equator Asian market. Following our significant new achievements in South Korea, Japan, Indonesia, and Malaysia, We will continue close cooperation with more partners in southeast Asian countries.
More importantly, the orders and the preorders of our passenger great eighties in a past few years have accumulatively surpassed a 1000 units forming a solid foundation for our future revenue growth.
Moreover, I like to address our product ended technological developments firstly about a V T 38.
He hung his accumulated ear save considerable experience and the technical reserves and aircraft in manufacturing and aircraft to control in a few WAM.
So the product of our BD, Turkey, we maintain a principle of safety first without in patients where Russia inches.
At the beginning of the process of designing R&D ashrawi testing for this product we have been establishing this year with a system already.
So far we have added a large number of aircraft components tests and have conducted a large stand barrels a flight test after ensuring the overall safety of the aircraft.
As of March 25th the test flight tying up the V. T 30 has existed 50 hours.
Secondly, with regard to air logistics in a past few years, we have never stopped to research and development of aircraft for logistic usage.
Our main target air logistic use cases, I felt interprovincial air logistics, and a long range air logistics over Allen and advantage.
Currently we have about five aero logistic models that can fly autonomously in automatic dispatching system <unk>.
These five models has been tested with loads ranging from two kilograms to two hanger to kilograms.
We are conducting a large number of operational trial sites and the island logistics scenarios in coastal areas.
It's worth noting that our intra provincial erle just take routes between clue Joel in Guangzhou City is about to open soon wished.
Which will be a significant step forward to our future operation for Interprovincial long range Air logistics.
Next let's turn to our team.
Our staff has gradually increased in the past year with a key focus on the expansion of our technical R&D team.
We established a special team body and to US it's S with new syndication project to address our top priority.
And also viewed app and experienced a U M operations team.
Italy, and very thrilled and Ms dressing phone join our company in February as our Chief Operating Officer Officer.
Today. He is also the first time for him to join our earnings call.
Mr. Fang has more than 20 years of experience in coverage management, so solve the technology products and solutions and tourism projected development and operation.
I believe he will bring us significant strengths to our future business growth.
I will now turn the call over to our Chief strategy Officer, Outerwear XI to bring more detailed performance.
You.
Thank you Mr. Hu, Hello, everyone E Chief strategy officer of Hum.
Now, let me summarize the operational results of the ear of tooth on 'twenty one.
Basically we followed our strategic positioning as a U M platform, operator, and prioritized the airworthiness certification of the Ehealth one seats S aav's throughout the year.
We invested significant resources in the certification projects by working closely with E. C experts since the beginning of the year.
With Ehealth, a diligent and solid contributions in December .
E. C. Finally publish the words of first a special conditions for the Ehealth to one six S pipe certification, which set the foundation for airworthiness certification for all the avs.
We believe this is a new milestone not only in the certification project, but in the history of human aviation.
Why would the type certification process for the Ehealth one six S is still ongoing we have added the strengths in our efforts to obtain that type certificate as soon as possible.
On the other hand, we accelerated the test operations of <unk>, one six <unk> with the aim to 40 roll out commercial operations soon after obtaining a type certificate.
As we have positioned ourselves as the world's leading U M platform operator, it defines our innovative business model as a hybrid one of sales plus operation, which is a combination of OEM and AAV operations.
As we have highlighted in our previous calls we believe this new model has strategic importance because a b sales should be boosted by a real commercial operations.
This is especially true when ourselves develop autonomous flight to technologies make it a hybrid model possible and necessary to ensure absolute safety and maximum market acceptance of our products.
Specifically, our ongoing 100 M, albeit a urology initiative was launched in mid of 2021 under the guidance of the C. A C with a focus on the Guangdong Hong Kong Macau Greater Bay area were launched align operational spots in cities of Guangzhou Shenzhen Hangzhou.
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And shine yacht et cetera.
So far we have completed more than 4000 trial flights.
Nobody we collaborated with our Guangzhou development District that communication investment group in the fourth quarter of 2021 to add a new five G intelligent and morbidity because burn center in Guangzhou.
Through such activities, we were able to accumulate the necessary data and gain relevant experiences for future you in operations.
On sales and the promotion of our products and services, we have expanded our efforts by acquiring new customers and our partners specifically.
Specifically since fourth quarter of two was on 'twenty. One we highlighted the partnerships with major S. O use include Engendering Expressway, the Guangzhou Development District communication investment group and Guang see where you've gone Chin Tung district urban construction investment group in overseas market, we have built.
New partnerships with prestige aviation, Indonesia, the M. A S E.
In Air X in Japan.
Our tree ruble in Malaysia et cetera.
We believe the expanded partnerships will help us in our future business operations within the next six to 12 months.
Especially upon receiving official wrongdoer Alpha type certificate from the S E C.
Now, let me turn the call to our CEO , Mr phone to address the operational plan for 2022.
Mr. Han. Please go ahead. Thank you suggest Eagle, Idaho, Wahoo, Archie with oncology as with all of those without heartless doesn't the algae shallow yamana and goes to the balance. He also salary a halt wassa suddenly got involved siggi Hollander PON people eat healthy lodging a pinball genes.
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The lowest the translation of our MS Jersey Tongs remarks.
Thank you Edward Hello, everyone and Samsung first I would like to thank Mr. Hu for inviting me to join me hung a sale.
After joining the company I was deeply impressed by the energy dedication to innovation and relief efforts of everyone at <unk>.
Safety and security at the heart of every member of <unk> team and they strive for innovative AAV technology research and development.
We expect to obtain that type certificate of the two and six S. A V. A random mito off 2022 which will lay a solid foundation fleets commercial operations.
Meanwhile, we are accelerating our arrangement for operating NIE to Asics eighty's to ensure that our commercial services can be lounge to gradually after obtaining the Tet certificate.
We plan to upgrade the production line at the same time.
This way, we can quickly and has steadily increased production based on the highest standard of the aviation industry after obtaining the tap certificate.
Close attention to high quality will also be strictly implemented in order to ensure we won't deliver safe reliable and compliant product to the market.
For the fiscal year 2022 we expect total revenues to be in a range between 119 million RMB and 210 million RMB.
With most of the revenues are expected to be generated in the second half of the year upon receiving the hand to ethics S. A V type certificate and launching commercial operational services.
From the perspective of applications and arrows.
We expect our revenues in 2022 will mainly come from <unk> users, including errors IC aerial firefighting and aerial logistics as well as smart city Massman area etcetera.
Henry is now seeking partnerships with leading companies in the industry with application potentials that leveraging our existing technologies.
Who are the leading advantage in your original films and a U M platform any command control center provided by him was a jointly conducted at derivatives development of Avi platforms to address their specific industry needs.
Through our panders industry expertise favorable channels and the reputations. We can quickly opened up additional applications and sells bar and mobility businesses.
Urban mobility is E House course Jesse.
And we actively seek related to strategic cooperation with partners such as domestic mainstream helicopter general aviation companies.
By leveraging the original airlines and is showing infrastructures such as airports.
We plan to gradually promote operations of low and medium altitude ammo later Richie routes in China.
We also expect to bring <unk> to the market in the following three areas.
First in the tourism sector when it started to carry out in depth, Eros I seemingly outs and actively cooperate with target tourism operators to exploring novel and tourism revenue growth opportunities.
We plan to launch the hunt to Essex arrows I seeing operational services after obtaining the type certificate.
Through collaborations with multiple domestic tourist attractions and a continuous expansion of our commercial operation scenic spots such as the voice the Lake in Johnson City in Guangdong Province, and the Chin Tung English Ghana, Cte in Guangxi Province.
Lee will go partner with leading integrated firefighting solution providers in China for the needs of an emergency management departments in firefighting and emergency response, we're going to leverage our partners existing channels to promote efficient and tailored aerial firefighting solutions that address the difficulty.
And the pinpoints of the high rise building firefighting.
As an innovative enterprise.
We have not only developed our own business, but also undertake our social responsibilities to bring values to the people and the community.
Thirdly, we are also communicating with several leading logistic companies to jointly develop proper and logistic use cases.
Combining <unk> self doing a lease and it came out of control platform with the M home operation experiences from Laura logistic partners, we can create cost effective and efficient and logistics solutions and operating models. Meanwhile, we plan to utilize our.
Chico advantages after self developed kinetic control system platform for further protected nation as well as strengthening its promotion and outpatient in the oven management films, such as Smart city and as managed transportation.
We will gradually establish an operational ecosystem with the integration of the hardware and software that combines fleet management and the air traffic measurement when aves enter into mass market.
As a result size will be safer and more efficiently conducted and the ecosystem will also be involving in housing Lee with an increasing fleet heinous Guy. He had he used to continuously improving our training center post. So survey system. Moreover, you have partners with professional international and domestic.
Mystic institutions to swiftly establish a more sophisticated training unopposed House survey system based on our partner's existing system any experience.
We firmly believe that listed join efforts from Ehow and older authorities partners concern was the U M industry, we will be able to accelerate to provide everyone with a safe economists and eco friendly and mobility.
I will now turn the call over to our CFO , Richard Liu for financial results.
Please go ahead. Thank you.
Thank you Sheng and Hello, everyone before I go into details. Please note that all numbers presented are in RMB and up for the fourth quarter of 2021, unless stated otherwise or percentage changes 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 will now highlight some of the key points here.
2021 was a unique year as we initiated a strategic upgrade and transition to implement our strategic positioning as an urban air mobility platform, operator, and migrate our sales model from a product sale century model towards a more operational platform oriented and <unk>.
Integrated model.
As discussed earlier in 2021, we have been focusing on the ongoing certification projects and preparation for the 100 Air mobility routes initiative in China.
And we believe these were made essential foundation for our next stage revenue growth with increased sales and deliveries and our personal services. After obtaining this certification.
As such in Q4 total revenue was $8 7 million compared with $13 million in Q3, the <unk> series of AAV deliveries in Q4 was four units compared with eight units in Q3.
For the fiscal year 2021, total revenues were $56 8 million compared with $180 1 million in 2020.
<unk> two <unk> series of AAV deliveries in 2021, or 30 units compared with 70 units in 2020 gross margin was 61% in Q4, a minor decrease of one seven percentage points from 61, 8% in Q3, mainly due to.
The changes in revenue mix.
Glad that our margins continue to be capped at a relatively high level demonstrating our solid competitiveness.
We even achieved a year over year increase of one four percentage points in 2021, a record high gross margin of 63, 4% with.
With a contribution from a command and control system deliver in 2021.
In Q4, our adjusted operating expenses, which are operating expenses, excluding share based compensation expenses increased by 46, 2% quarter over quarter to 94 million from $61 8 million in Q3.
The adjusted operating expenses was $246 six media in 2021 up 62, 6% from $151 6 million in 2020.
We continue to maintain significant R&D expenditures for the development of a new models, including the urge to sequence series.
T study and the other new models, along with their related operating systems with enhanced functionalities as well as for the growing R&D team.
This reflects our commitment to strengthening our product development and certification efforts in order to drive future sales growth and commercial operations continues and our advanced R&D is a cornerstone of our business and we will remain dedicated to R&D to propel future business growth.
Furthermore, there were additional provisions for receivables due to the impacts of the continuous COVID-19, pandemic and related prevention and control measures in China.
As a result, our adjusted operating loss in Q4 was $83 8 million compared with 48 9 million in Q3.
Adjusted net loss in Q4 was $82 2 million compared with $47 in Q3.
For the fiscal year adjusted net loss was $192 8 million in 2021, compared with 37 2 million in 2020.
Nevertheless, our balance sheet remains healthy.
As of the end of Q4, we had $312 1 million of cash cash equivalents restricted cash and short term investments compared with 357 million as of the end of Q3 and $189 4 million a year earlier.
We will continue to maintain and in fact, our personnel expense and cost management.
That concludes our prepared remarks, let's now open the call for questions. Operator. Please go ahead.
Thank you for the reminder to ask a question you would need to press star one on your telephone.
To withdraw your question. Please press the hash key.
Please standby, while we compile the Q&A roster.
Your first question comes from the line of Tim <unk> from Morgan Stanley . Please ask your question.
Okay.
Hi, I'm, calling one thanks for taking my questions. This is came from Morgan Stanley .
I've got two questions. The first one is about the in petrol in the Russian pandemic in China.
In light of the recent tightening.
Tightening Colgate contrary majors in China, especially in the first quarter.
Calgary seeing any potential hiccup.
T our supply chain management Tc certification progress.
And so the order delivery.
Especially in larger into second quarter this year.
Meantime.
How do we think about this kind of margin trained.
This year, given the pending impact from the pandemic and of course the cost inflation.
So that's my first question.
And my second question is about the urban air mobility operation.
We saw pretty strong progress, but could you please share.
Sure, let them more about more like a quantitative update about business development and it.
It would be great.
And can you elaborate a lot more about if lease highs.
Good volume with centers of numbers.
That have been implemented and.
Of course, all our current operation situation.
Yes.
Ah okay. Thank.
Thank you Tim for your questions. This is edmar Shea Chief strategy Officer.
So let me answer your.
Your first question and I think the yeah, our CFO Richard can you elaborate more on the on the margin trend.
So on the on your first question basically regarding the ongoing Kobe.
19.
In China.
Ah so far with the.
Not a material impact on our supply chain, because the our supply chain.
Our suppliers are mostly distributed in south China in Tom Guar area.
We noticed that the recent.
All of a sudden jen.
But it didn't have much impact so far and also we did have some preparation by prepare the inventories.
For our product beforehand.
So far we see.
See our inventories are.
At a satisfactory level. So we don't see any major impact so far and all of these P C.
The certification progress.
We are we think of it is that you're on the right track and the sofa.
Our special special team is working very closely with them.
C. A S E exports and so which is not disrupted by the pandemic as well.
So that's all off or are these and Richard can you elaborate more on the margin trend. Thank you.
Okay.
Richard.
I will take that.
The second part of your first question regarding margins.
And Thats, what just said.
<unk>.
Not seeing any.
Our maturity.
The increase to situational recent pandemic.
Right.
China.
In addition.
Sure.
Sure Tom.
Some price increases for raw materials.
Hello.
Yes.
The word political landscape.
We have so far seen some.
Some impact from this aspect.
As such we have been trying to stock up some key components and materials.
As our stock deserves.
On this slide it is expected that our.
Our overall.
Gross margin.
Might be brought to the average levels of previous years.
Rafi.
Range from 55%.
To pick up.
Sure.
I haven't heard that.
Revenues.
Of note there are revenues from selling our proprietary.
So systems.
The price increases for materials and supplies.
Would be limited so therefore, if the percentage of the revenues from this in the total revenues.
Go up into the year.
Actually it's helping our overall gross margin as you can see.
So basically.
We will continue to pay close attention to the deep Hoffman.
Oh.
Cost conditions.
As a result of the recent recently.
Recent development and pickup from current mattress.
Two to minimize such impacts.
On our gross margin.
Okay.
Tim I would.
Yeah, I would add one point to yes on the operational side.
But maybe there are some some impact on our operation because we do have a I have a collaboration with a helicopter company in Shenzhen and and also we plan to launch a more operational spots in Ohio for example.
For which it was disrupted by the pandemic at this at the moment. So so on the operational side, we do see some some impact yes.
So next though regarding your second question right. So as updated in our earnings release, so far there Rob.
Under the 100 air mobility routes initiative.
No.
Our U M operating team that has selected and develop the line operational spots in Chinese cities.
Including Guangzhou, Hangzhou, Shenzhen, Chongqing, and <unk> et cetera.
Or are these nine operational spots.
We have conducted over 4000 operational trials.
With our <unk>.
In real practical scenarios for.
Or the arrows IC.
So far multiple flight roadhouse can be developed at each operational sports so.
In the near future, we will be able to release the first group of cities in China.
Two as our target to launch our commercial operational services and flight routes at the local operation.
Sports.
After we obtain.
The T C and also the commercial license.
From the government from CEC. Thank you.
Thank you very much recurring afterwards, thanks, Brita Tito Sharon Thank you.
Thank you.
Okay.
Yeah.
Yeah.
Thank you once again, if you do wish to ask a question. Please press star one on your telephone.
Okay.
Your next question comes from the line of <unk> from Teng Fang Securities. Please ask your question.
Hi, Thanks management team for taking my question.
I have two questions as well first is.
Geographically speaking like can we stay on China beyond topmost priority regarding obtaining.
Significant and auto licenses and how should we think about other regions coming down on like for example in terminal from licenses.
We'll be.
Targeting next like for example, like Korea, or like Europe , and my second question is in terms of our competitive advantages and market share wise.
How does the management team view other competitors and where does he hung span among those competitors like foreign or domestic thank you so much.
Yeah. Thank you for your question. This is edmar again, let me answer your questions.
So first of all.
Regarding the geographic distribution.
We believe that the China appears to be our most of our aura ties the market. So far given the following reasons first it is our home market, where all firm used space a second.
We got the support from the regulator Ah I E. The CEC irrespective at worst ratio certification for unmanned aircraft are for low altitude passenger carrying urban air mobility operations.
And three.
This is a huge market and there was a good potential with the largest population in the Pos Bowers.
C D clusters.
Does the Pearl River Delta, the Yangtze River Delta and the Bohai Bay areas et cetera, So which means that the you know the.
The huge urban population has a potential for these mobility market and Meanwhile.
We also keep our focus on the overseas market.
Such as the Asian countries.
Including Japan, Korea, Indonesia, Malaysia et cetera.
Those countries, which we have made visible progress in client acquisition, our trial slides and our regulatory relationship construction et cetera, and if they are we think that's a you know some western countries, including Europe and the U S. But those markets are.
The regulations could be more conservative so we are taking a more passive.
You know as dense and we are focused on China, and then we believe that the.
China any success in China is a certification.
B a.
Leverage.
For us to try to go into those markets and so regarding your second question.
So yeah, we have we have kept a close watch on the global U M market, especially on the development of the peer group as well and we believe we are a leading player in terms of product design and a real flight record so far.
For example, our young towards six AAV is by far the world's leading ever a vehicle product that I was able to complete a autonomous flights we noticed that you.
You know from the peer group we are most of them are still focused on this.
Mendell right you know autonomous supply is definitely something that is.
On the next steps and we have built the world's first a centralized AAV platform to manage multiple AAV operations with cluster management technologies and so far we have conducted over 20000 autonomous trial flights.
Seven countries. Moreover, would have made the most progress in airworthy certification with the CEC.
We published the awards. The first is that off of special conditions for that type of certification for autonomous vehicles like the R. E. One six right. So that means that we are leading.
In terms of all the certification progress as well.
As we are targeting around the middle of the year for types of engage ground.
Where are you on 206 S. Ceb's, we aim to be the first firm to launch commercial operational service in the World you know probably in the second half of the year Joe.
Given that are we believe that our you know we do have the first mover advantage over our peer group.
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Thank you so much.
Thank you asked about any further questions on the interest of time I would now like to hand, the conference back to the speakers for any closing remarks.
Yeah.
No further questions.
Thank you operator, okay.
We do have a question that has just come through are you happy to take this.
Your question comes from the line of David Since you left from Barclays.
Apologies it looks like we are not taken no further questions.
Yeah.
Okay.
Okay.
Okay operator.
You hear me.
I can't hear you yes.
We can give the closing remarks great.
Yes. Please please go ahead.
Thank you.
Thank you all for participating on today's call.
We will look forward to reporting to you.
Now next quarter. Thank you very much.
That does conclude the conference for today. Thank you for participating you may all disconnect.
Yeah.
Okay.
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