Q4 2022 Hesai Group Earnings Call
Speaker 1: Tr TR we.
Speaker 2: At this time all participants are in listen only mode.
Speaker 2: Please note that today's conference call is being recorded.
Speaker 2: I will now turn the call over to the first speaker today, Rachel Yang, Vice President of Operations for the Company. Please go ahead.
Speaker 3: Thank you, operator. Hello everyone and thank you for joining CoSci Group's fourth quarter and four-year 2022 earnings conference call. Our earnings press release was distributed earlier today by NewsWell Services and is posted in the investor relations section of our website at investors.cocetech.com.
Speaker 3: along with the webcast access to today's call. On today's call, we have our CEO , David Li, and our global CFO , Luis Hsieh. David and Luis will each provide prepared remarks and will conclude the call with a Q&A session.
Speaker 3: I'd like to remind everyone that our earnings calls and investor materials contain forward-looking statements, which are subject to future events and uncertainties. Our actual results may differ materially from those forward-looking statements. No forward-looking statements should be considered.
Speaker 3: in conjunction with a cautionary statement in our earnest release and the risk factors included in our filings with SEC. Finally, this call also includes certain non-GAAP financial measures. You should carefully consider the comparable GAAP measures.
Speaker 3: Recipitation of non-GAAP and GAAP measures is included in our early 3D. I would now like to turn the call over to our CEO , David Li. Please go ahead.
Speaker 4: Thank you, Rachel, and welcome everyone to her first early conference call as a public company.
Speaker 4: I'd like to first express my gratitude to our investors, partners, dedicated employees, and everyone who contributed to our successful IPO on February 9th. During our IPO, the site sold 10 million ADRs at $19 per share, and the honor writers partially exercised their over-element option.
Speaker 4: raising approximately $192.4 million. Listing on the NASDAQ marks a milestone in the new
Speaker 4: for the fourth quarter and 2022.
Speaker 4: We continued our strong growth momentum in fourth quarter. In September , the first company in the world to deliver more than 10,000 LiDAR units in a month.
Speaker 4: Total shipments during the fourth quarter reached 47,518 units, among which ADAS LIDAR shipments accounted for 91%.
Speaker 4: Note that in December , we shipped more than 20,000 LiDAR units. These achievements are groundbreaking in the industry.
Speaker 4: In the fourth quarter, our new ADAS LIDAR product continues to win new customers, including firstly the largest EV maker in China, secondly the largest EV maker in China, and thirdly electric technology company ROX, followed in January by CERIS, a leading China-based EV-OES. That is what yeah, I gotta win— Marginal Webaman today.
Speaker 4: These were followed by a design win with DB's autonomy strength.
Speaker 4: Additionally, in February 2023, the company secured a LiDAR design wing for AT128 with the V-Alto on its new battery electric vehicle platform.
Speaker 4: Are successful Q4 half a successful 2022?
Speaker 4: During the year, we proved that our mass production capabilities empower us to capitalize the route's ADAS and autonomous mobility. Our total shipment in 2022 reached more than 80,000 Niner units and accumulated the third-pass 100,000 shipped units. That represents an explosive 337% taker since 2020.
Speaker 4: significantly outpacing the global item market.
Speaker 4: In fact, our LIDAR deliveries and data revenues for 2022 will higher the cumulative LIDAR deliveries and revenues of all eight of our US public-distance peers combined in 2022.
Speaker 4: Notably, we shipped more than two times the number of automotive radar units that our eight U.S. lists of peers combined.
Speaker 4: The backdrop of our success is our people. In 2022, we grew our talent force to more than 1,000, most of whom are on the R&B Action Engineering team, a scale significantly higher than our peers.
Speaker 4: Our success is further defined by our innovative customers and partners in health manufacturing capabilities and breakthrough line of technology.
Speaker 4: In the ADAS market, we're working with many market-leading OEM partners, including Li Auto, Charlie Automobile, Lotus, Jisoo, HiFi, Roxas. In the autonomous mobility market, where we are dominant, our customer base includes some of the most prominent global players.
Speaker 4: including the world's leading robotactic technology company in the US. Our customers also include Aurora, PonyAI, WeRed, and AmbelLux.
Speaker 4: In a robotics market, we provide products for the largest player in China, Meituan, alongside global players such as Muro and others.
Speaker 4: Our commitment to building superior products, which also optimize performance, quality, and cost is a key to our wings in both the ADAS and autonomous mobility markets. We believe advanced in-house manufacturing capabilities are critical for developing lighter products like ours.
Speaker 4: but utilize fast and advanced technologies.
Speaker 4: We can automate R&D advances in application-specific integrated circuit, also known as ASICS, to drive the performance with in-house manufacturing capabilities to design, iterate, and bring the best in-class products to our customers. Our integrated in-house model for advanced and transformative solutions is in-house.
Speaker 4: enables fast development and proprietary know-how to reinforce each other, establishing a virtuous cycle and a formidable competitive advantage.
Speaker 4: Vado also helped us to optimize cost, deliver higher performance solutions, and make our supply chain safer.
Speaker 4: Through this model, our talented R&D and Manufacturing Engineering team Poppy approximately Venitardnit?
Speaker 4: We developed our FD120, a solid-state blind spot lidar sensor with no moving parts inside, designed for ADAS series production vehicles.
Speaker 4: We plan to launch the F120 later this year. In addition to F120, during the course of the year, we expect to announce several really exciting industry-leading ladder products, but you have to stay tuned for those future-leading announcements.
Speaker 4: We're proud that Hetal has become the most commercially successful LIDAR company in the world. To date, we've signed 11 OEMs, six of which will be in mass production, and all 11 by 2024. For presently in discussion with several other leading Chinese and global OEMs, we've
Speaker 4: which we expect to add in 2023, I look forward to sharing more information with you in due course.
Speaker 5: Moving forward.
Speaker 4: We'll continue to build partners and relationships with OEM and autonomous technology companies.
Speaker 4: perfect core-like technologies and manufacturing capabilities.
Speaker 4: Our growth has just begun, and our path is clear. We're optimistic about the future trajectory.
Speaker 5: With that...
Speaker 4: I'd now like to turn the call over to Michael Lewis, who will share about our financial performance for Q4 2022 and our outlook for the rest of the 2023.
Speaker 6: with it. Keep going.
Speaker 6: Thank you, David.
Speaker 7: First, I want to thank everyone for attending HOSAID's inaugural earnings call.
Speaker 7: as a public company. In its operating figures, our commercial success is evident in our financial performance.
Speaker 7: To be mindful of the length of our earnings call today, I encourage listeners to refer to the earnings press release for the 2022 and full year results for further analysis.
Speaker 7: details. Clearly, Hasai had a stellar 2022 as we extended our market leadership in LIDAR Solutions.
Speaker 7: both for autonomous mobility and now for ADAS.
Speaker 6: today
Speaker 7: I will just go over the highlights of our Q4 and FOIA 2022.
Speaker 7: as I'd like to spend the bulk of our time together talking about our future.
Speaker 7: We achieved record net revenues of RMB 409.2 million.
Speaker 7: equivalent to US dollars 59.3 million for the quarter of 2022, representing an increase of 56.6% from the same period of 2021 and an increase of 22.6% from the third quarter of 2022.
Speaker 7: Gross margin was 30% for the fourth quarter of 2022 compared to 52.4% for the same period of 2021 and 1% for the third quarter of 2022.
Speaker 7: that revenues were one point
Speaker 7: $203 billion RMB equal to US dollar $174.4 million for the full year of 2022, representing an Inc 6.9% from the previous year. Gross margin was 39.2% for the full year of 2022.
Speaker 7: compared with 53% for the prior year.
Speaker 7: Many of you have asked about our gross margin profile as we enter the nascent but rapidly growing ADES market.
Speaker 7: 2023 is a transition year for HSI.
Speaker 7: as we migrate from traditionally higher margin autonomous mobility of PandR, XT, and QT to the exploding but relatively lower margins.
Speaker 7: ADAS sales of AT and FT.
Speaker 7: To give you an understanding of the difference, our average ASP for autonomous mobility...
Speaker 7: has been over US $5,000.
Speaker 7: with approximately 50% gross margins. Compared to that for ADAS, where the ASP is expected to be around US $500, you now have quality visibleAS srfAttach for the merely minus four digits
Speaker 7: gross margins by year end. In 2022, our ATIS AT sales accounted for about 25%.
Speaker 7: 46 million US dollars.
Speaker 7: but expected to increase and account for 40 to 45% of revenue in 2023, with an expected more than 3x increase from the 62,000 units in 2022.
Speaker 7: The bulk of the ADES shipments will be in the second half of 2023 as we expect to be the operating date....
Speaker 7: with all, at least, OEM partners by Q3 2023.
Speaker 7: It will take some time for us to gain economies of scale in manufacturing efficiency.
Speaker 7: and utilization, material procurement, and labor intensity to reach our long-term target of 25 to 30% gross margin in ADAS for AT and its projects. Against this very strong demand and order backlog,
Speaker 7: backdrop. And during the first half of 2023, we are going to expand our manufacturing footprint with investment in two plants.
Speaker 7: and to get both operational by Q3 of this year.
Speaker 7: Let me give you more color about –
Speaker 7: Let me give you more color about this capacity expansion.
Speaker 7: First, we are excited to confirm that our new in-house manufacturing facility, Maxwell, a state-of-the-art, comprehensive art innovation design center manufacturing and testing complex.
Speaker 7: We are excited to confirm that our new in-house manufacturing facility, Maxwell, a state-of-the-art comprehensive art innovation design center manufacturing and testing complex in Shanghai.
Speaker 7: covering over 600,000 square feet will come online in Q2.
Speaker 7: 100,000 square feet will come online in Q2 of this year.
Speaker 7: Maxwell will expand our manufacturing capital 1 million units in terms of annual shipments and will equip us with a full range testing capability. Second, in late Q2 or Q3, we plan to open and start another AT production line in our 300,000 square foot.
Speaker 7: new manufacturing facility in Hangzhou, which will also eventually have capacity for over one million units annually and be highly automated. Along with our two smaller production facilities, which currently manufacture PANDAR, QT, XT, and one line for AT128.
Speaker 7: our towing capacity will exceed 2 million units on an annual basis by year-end.
Speaker 7: The combined effects of product mix
Speaker 7: with ADES increasing in revenue mix from approximately 25% to 45% of revenue and the opening of two large production facilities which will take time to be used to
Speaker 7: to reach optimal scale efficiency and realization, will put downward pressure on blended growth market percentage in 2023.
Speaker 7: We bounced somewhat in 2024.
Speaker 7: Long-term target for blended gross margin remains at 33 to 35 percent.
Speaker 7: The return target for blended gross margin remains at 33 to 35 percent. Now I'd like to turn to our business outlook.
Speaker 7: first quarter of 2023, the company expects net revenue to be between RMB 390 million US 56.
Speaker 7: and RMB 410 million, US dollars 59.4 million.
Speaker 7: representing a year-over-year increase of approximately 57% to 65%.
Speaker 7: The above outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating engines.
Speaker 7: and customer demand. All are subject to change.
Speaker 7: This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Speaker 2: Thank you. If you wish to ask a question please press star 1 on your telephone and wait for your name to be announced.
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Speaker 2: For the benefit of all participants on today's call, if you wish to ask your question in Chinese, please immediately repeat your question in English. For the sake of clarity and order, one question at a time. Management will respond and then feel free to follow up with your next question.
Speaker 2: Your first question comes from Olivia Zu from Goldman Sachs. Please go ahead.
Speaker 3: Hi, David and Louis. Congrats on the company solid performance. This is Olivia from Goldman. I have two questions. The first one is about the ownership. We noticed that HOSA has made a breakthrough in the partnership expansion and product domination, including BYD, Serus, and the auto's Pure EV platform. On the auto side, the company has recently launched the out version of our seven out.
Speaker 4: Hi, this is David Lee. Thank you for the question. Let me maybe address the Liato one first because it's one of our largest clients. So you're right that the BIDARs are the standard configuration for the L9 and then they are optional for the L8 and L7. And for both editions, you can see that the L9 is the standard configuration for the L9.
Speaker 4: They have the AD Max which is the one with LiDAR and AD Pro which is the one without LiDAR. Having said that, the L7 and L8 are larger volume products and the take rate is actually pretty decent.
Speaker 4: even today. That's why we're able to come up with our projections for the rest of the year based on the take rate of the L7, L8, L9 and all of the lidars, not from all our clients. And also, one interesting note is that...
Speaker 4: And if you watch very carefully the L7 release, they actually mention that now by end of the year they're going to have more urban and more urban areas.
Speaker 4: and other way navigation and auto-passing functions when it's with LiDAR, which means that the version with LiDAR will be much more valuable in terms of its ability to provide advanced driving functions. And that was actually a very big boost on the take rate of the max version.
Speaker 4: L7. So which is extremely encouraging to know that even L7 is technically considered a more affordable version. You would assume that people wouldn't have a higher take rate for the consideration with LiDAR. It turned out that it's not entirely true. People still like it, people still buy that with more.
Speaker 4: expensive configuration because they really look forward to the driving function that will be available down the road and Also on top of it. I want to point out the fact that it when you buy a smart EV today You're paying the price today, but you're not getting the full function yet Most of a lot of the functions especially on the autonomous driving side are being released in the OTA
Speaker 4: And now...
Speaker 4: Do you want me to comment on the series and a few ideas? It's confirmed that we started working with them with some of the models. Unfortunately, I don't have more information about the more models that were in discussion with them, and some of them have not come to the decisions yet. What I could say is that.
Speaker 4: because both series and the BYD, it's not on their entire fleet yet. There are quite a few exciting design wins that could come out later this year, or even some of them are very soon. We look forward to it, and we'll keep you updated on that.
Speaker 7: Olivia, this is Louis. For series, we do expect to shift this year. BYD is more likely the volume will be next year when their models come out.
Speaker 3: Does that answer your question?
Speaker 3: Yeah, right, that's very helpful. My next question is about the implication of the recent EV pricing cut. We noticed that year to date, Tesla has a greater price in China, and a lot of other EV makers have to revise their pricing as well. Given the diminishing government subsidies, it is likely that the carmaker's margin will get squeezed.
Speaker 3: Just wondering does the pricing pressure has passed to the LIDAR suppliers now and what the test response to drive it towards the EV pricing cut. Thanks.
Speaker 4: Yeah.
Speaker 4: We are observing that now also already. What I'd like to point out is that if you look at the pricing cut phenomena, it's really on the more affordable part of the spectrum of the market.
Speaker 4: If you think about it, the nature of LiDAR, it's at least now, and the penetration is mostly on the more premium part of the market, especially if you look at LiO2. I don't think they have sold anything that's below 300,000 RMB. And it's at least from what we receive and observe that it's...
Speaker 4: the cold choices for cars when they want to buy LIDAR. If you're buying a car that's costing you 150K RMB, you probably don't really care about LIDARs today. You want the leather data and all the big screens and all that today, the batteries. And it only becomes a much more serious interest when you're paying for, I would say, at least 200.
Speaker 4: Ideally 250,000 RMB and that's the range where people started to look for things that's beyond battery and the infotainment system and that's where LiDAR became a symbol of intelligent driving.
Speaker 7: I think Olivia for us, as David said, we're basically more in the higher end of each of these lines. So we probably won't see as much impact from price reductions at the lower end of their pipelines. But for us, all six OEM shipping this year, the majority will come in Q3 and Q4. They will be in cars above 250,000 RMB.
Speaker 7: So they're less impacted by price cut competition. And then the bulk of the volumes will be in 24, right? We expect volume to at least double or triple from 2023 level. And that's when we'll, I guess, see if the price increases will affect the demand.
Speaker 3: Got it. That's very clear. Thank you, David. Thank you, Luis.
Speaker 2: Thank you, Olivia. Next, please. Thank you. Your next question comes from Tim Sial from Morgan Stanley . Please go ahead.
Speaker 7: Hi, David. Hi Liz, these are for product results, I've got two questions.
Speaker 7: So the first one, I think Dave has already touched on some feedback and observations about the consumers on the larger adoption. But based on your resident conversation with carmakers, is there any chance to hear thoughts about an adoptionucp?
Speaker 7: of LIDAR doing the mounting, pricing, pressure and competition. Will there be any risk of or after the car makers would be catching more aggressive?
Speaker 7: to operate a stack with more light adoptions to differentiate themselves.
Speaker 7: Tim, is your question about in our conversations with car makers, are they more or less inclined to use LIDAR for next year? Is that sort of what you're getting at?
Speaker 7: Yes, yes, because I think some of the car makers might consider to be more cost conscious and by more the bad or more the adoption rate of life are enough, but probably our customers might be more even more blessed.
Speaker 7: and considering to adopt LIDAR. So what's the feedback of your major customers to be across so far? I think this goes in line with Olivia's question is that our LIDAR are typically on the premium models. So that's likely that they will cut this because it is a marketing play, right?
Speaker 7: So if you have LIDAR and your competitor doesn't have LIDAR, it's actually a big selling point. In addition, these models are coming out in 24. So what they don't want to do is their new generation models be seen as really standard models with no differentiation. So so far, as far as I know, we have not seen a lot of new generation models that are coming out in 24. So we're not seeing a lot of new generation models that are coming out in 24.