Q4 2022 EHang Holdings Ltd Earnings Call
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Speaker 2: Good day, ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2022 and fiscal year 2022 earnings conference call. As a reminder, we are recording today's call.
Speaker 2: Now I will turn over the conference to Anne Jee. He hangs Senior Director of Investor Relations. Miss Anne, please proceed.
Speaker 2: Hello everyone. Thank you for joining us on today's conference call to discuss the company's financial results for the fourth quarter and the fiscal year of 2022. The earnings release is available on the company's IR website.
Speaker 2: Please note that the conference call is being recorded and an audio replay will be posted on the company's R website.
Speaker 2: On the call today, we have Mr. Huanchu Hu, our founder, chairman, and chief executive officer, Mr. Xin Fang, chief operating officer, Mr. Richard Liu, chief financial officer, and Nick Yang, an independent director of the board.
Speaker 2: The management team will successfully give prepared remarks. Remarks delivered in Chinese will be followed by English translations. All translation is for convenience purposes only. In case of any discrepancy, management statement in the original language will prevail. A Q&A session will follow afterwards.
Speaker 2: Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker 2: Overlooking statements involve inherent risks and uncertainties. As such, the company's actual results may be maturely different from the expectations expressed today.
Speaker 2: Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that all numbers presented are in RMB.
Speaker 2: and are for the fourth quarter and fiscal year of 2022. Unless they did otherwise.
Speaker 2: With that, let me now turn the call over to our CEO , Mr. Huaju Hu. Please go ahead, Mr. Hu.
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Speaker 2: This is the English translation of Mr. Hu's remarks. Hello everyone. Thank you for joining our earnings conference call today.
Speaker 2: 2022 was a year of opportunities and challenges for Yiten.
Speaker 2: Against the ever-changing backdrops of macroeconomic volatilities, political uncertainties, and pandemics, we remain committed to our strategies and continue to make meaningful progress during the year in our main priorities of airworthiness certification, business development, and business development.
Speaker 2: and ecosystem establishment.
Speaker 2: This not only strengthens our resilience for long-term development, but also reinforces our leadership in the global urban air mobility industry.
Speaker 2: In the fourth quarter of last year, the EHEM 216S type certification successfully entered the final phase of the demonstration and verification of the compliance.
Speaker 2: However, due to the massive infections after China lifted the COVID control policies, until this year's Chinese Spring Festival holiday, the relevant PC progress was delayed to a certain extent.
Speaker 2: But now we have manufactured the confirming aircraft for the purpose of airworthiness verification at our Yung Fu production facility, passed the aircraft manufacturing conformity inspection, and are conducting compliance tests at flight bases in Guangzhou, Hezhou, and other
Speaker 2: In February this year, the CDC chief engineer and officials from the Department of Aircraft and Air Force notification, the Department of the Flight Standards, the Office of Air Traffic Regulation, the Central and Southern Regional Administration, as well as the experts from the TC team inspected the flight base in Hezhou.
Speaker 2: We worked together effectively, and the joint efforts of all parties not only accelerated the compliance flat test and other review process in the final stage, but also made plans and arrangements for the next steps.
Speaker 2: which boosts our confidence in post-certification operations. As of today, we have been actively carrying out the work for demonstration and verification of compliance, based on the means of compliance agreed by the CEC.
Speaker 2: Our work includes submission of compliance test plans, laboratory tests, ground tests and inspections, flight tests, etc.
Speaker 2: At present, over 70% of compliance tests have been either completed or to be signed soon.
Speaker 2: It means we have substantially completed over 90% of the entire type certification process.
Speaker 2: We believe eHAN is the leading among the few eVito type certification projects that have been officially accepted by civil aviation regulators worldwide.
Speaker 2: Although the TC process for such a new innovative aircraft is full of difficulties.
Speaker 2: I am proud of our team's unwavering efforts and groundbreaking achievements over the past few years.
Speaker 2: At the same time, we are very grateful to China's civil aviation regulator, the CAC, for their full support and high attention to this innovative AAV.
We believe we will bring the expected good news in the near future.
Therefore, we believe we have well taken lead in entering a new year of air mobility in a global UEM industry.
What is worth mentioning other than Yi Han being the evader industry leader is the large Chinese market that we are rooted in and is huge potential for the UAM development.
According to Morgan Stanley 's forecast, China is expected to account for about 30% of the global UAM market.
Morgan Stanley 's forecast, China is expected to account for about 30% of the global UEM market.
Chinese central and local governments have introduced a series of supportive policies for emerging sectors related to unmanned civil aviation, electric aviation, low altitude economy, urban three-dimensional transportation, aviation tourism, and so on.
This has provided us with beneficial policies, a favorable market environment, and a growing demand from government and enterprises customers.
Our CEO Mr. Xinfang will talk more about it later.
On the other hand, China has been a leader in the global UAV industry. It has accumulated profound expertise in aspects of upstream and downstream industry chain and professional talents.
Besides, China has the supply chain advantages of higher cost-effectiveness and delivery efficiency.
These lead a solid foundation for our product R&D, manufacturing, and product delivery.
In overseas markets, we are committed to actively engaging in the Asian market and participating in multiple air mobility projects in Europe as an individual pioneer.
We will continue collaborating with local customers, partners, and governments to jointly explore a safe, intelligent, efficient, and sustainable UAM operational system.
To date, the E-116 series of AAVs have successfully completed over 34,000 autonomous flights across 12 countries in Asia, Europe and Americas.
which is the top-line record in the global evader industry.
Looking ahead, we will remain dedicated to expanding our reach and bring our AV solutions and flight experiences to more customers, passengers and passengers worldwide.
In December last year, we are thrilled to welcome Mr. Nick Young joining our board of directors as an independent director.
Although he is a new member of the board, he is also our old friend as one of the e-Hands Early Investors, who has been following the company's growth and the development of the UEM industry for many years.
With over 20 years of capital market experience and entrepreneurial experience in multiple listed companies, I believe that Nick will bring strong support to e-house growth in our new stage.
Today we also have Nick with us on the call and he will be available to communicate with everyone in a Q&A session later.
Next, I will turn over the call to our Chief Operating Officer, Mr. Xin Tang. Thank you.
Thank you very much.
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This is the English translation of Mr. Fan's remarks.
Thank you Mr. Hu and hello everyone. Since the fourth quarter of last year, our top priority remained the TT project.
We are pleased to report that we are now in the final sprint.
In preparation for post-certification sustainable long-term growth, we are capitalizing our leading first-mover advantages to explore both domestic and overseas markets.
We have been extending our business and corporation opportunities throughout the entire industry chain related to air mobility and the low altitude economy.
The building of AutoDemand, enhancing our partnership and cooperation, will lay a solid foundation for commercial delivery and operational services following certification.
In China, the tourism industry, which has seen heavy impact from COVID, has rapidly recovered this year as the control policies were lifted. The China Tourism Academy predicts that in this year, the number of domestic tourists can be reduced by about 1.5 percent.
will reach $4.55 billion, up 80% compared to last year.
And the domestic tourism revenues will reach 4 trillion RMB, about 580 billion US dollars, an increase of 95% compared to last year.
This presents excellent development opportunities for the low altitude tourism, the first market where we plan to launch commercial operations after certification.
as well as for our tourism industry customers.
Since last year, we have been dedicated to developing our domestic market in China, against the backdrop of macro policies promoting low-altitude tourism and economy, building a more than integrated transportation system, and developing new smart cities. We have continued extensive and deep business cooperation.
in Jiangxi, Xi'an in Shaanxi, He Chü in Guangxi.
Xinjiang, Shenzhen, Yinkongdong, etc.
To date, we have received orders for over 100 units of the EH-216 series AAVs in China.
These orders are expected to be fulfilled within 1 to 3 years after the GC process is completed.
Additionally, with the approach of TC completion, there has been a significant growth in our customers' inquiries and demand for new orders from all over China.
For example, most recently, Xiyue Tourism, a leading tourism company in Xinjiang and listed on Shenzhen Stock Exchange, announced today's intention to sign a cooperation framework agreement with us.
It plans to establish a joint venture and operates a minimum of 120 units of EHEM 216S for our comparable passenger grade AAVs in five years for conducting low altitude sightseeing tourism projects in key scenic locations in Xinjiang, such as the Heavenly Lake of Kinshan.
Another example, in March this year, Xian Aerospace Investment Company signed a strategic partnership agreement and an inductive purchase order with us. They plan to buy 20 units of BHEM 26 aircraft within three years in order to develop a smart air city and a low altitude flight.
cost the new area, reaching long-term strategic partnership with us over investment and business. It has not only provided $10 million in investment, but will also facilitate the local government's applications of our entire product portfolio, which is expected to generate productive demand.
worth over 100 million RMB, about $15 million within the next two years. They will also provide full support to our local business operations, sales and services, production and infrastructure construction among other things.
with the goal of building Qingdao City into an outstanding world-class pilot zone for UAM demonstration and applications.
In the future, we plan to adopt an integrated business strategy by both selling products and providing operational services for government and enterprises customers.
Based on the principles of safety first, high standard, low cost, and high efficiency.
We will utilize a complete set of AV-Command Control System platform at UEM Operations System to support our three major businesses.
which are air mobility, smart city management, and air media.
Therefore, we are able to meet our customers' demand for diversified applications in low-altitude tourism, urban transportation, aerial logistics, firefighting emergency, medical rescue, smart city management, and aerial media, etc.
In the past two years, under the CAC's guidance, we have been taking a lead in carrying out trial operations while conducting type certification. To date, we have developed 18 operation spots for LSI-C in 16 Chinese cities.
More than 8,200 safe operational travel flights have been completed with EH-216 AAVs.
During this process, we have cultivated a professional and well-trained AAV operation team, developed a digital platform for AAV operation management and services.
and accumulated rich, visible and irreparable trial operation experience.
All of these give us input confidence and ability to create a considerable UEM flight service values together with our customers and partners in the future, upon obtaining certification at a beginning commercial operation.
This is also our first mover advantages and our operation benchmarks that we have built over the long term and are ahead of other companies in the industry. Additionally, we have been actively working on expanding cooperation across the UEM upstream and downstream industry chains as well as building the ecosystem.
For example, we are very pleased to partner with Heckle Group, a subsidiary of Swire Group in last October . This partnership tends to build an after-sales maintenance service system for e-home AAVs to provide our customers worldwide with more high quality and efficient maintenance service.
while empowering our continued airworthiness following certification. In overseas markets such as Asia, last year we actively explored markets in Japan, Malaysia, Indonesia and Thailand.
secured more than 200 units of pre-orders for EH-216 series, and established cooperation with local partners to carry out local travel flights surrounding AAV application scenarios such as low altitude sightseeing tours, and helping mobility and logistics transportation.
This February , we successfully conducted the first passenger-carrying YI-116 demo flight in an open airspace overseas in Japan.
This is also the first-ever passenger-carrying flight of an autonomous Yvito in Japan with approval.
In Europe , in the fourth quarter of last year, we completed the E-116's first flight in Spain, under the EU's AMILAD project to successfully verify the UEM concepts of operations. We also joined the EU's SAMBA project to explore unmanned aircraft system traffic management.
In addition, we assisted the Spanish National Police to complete the HEN 26 maiden flight for their trial operations.
As noted by Mr. Hu, 2023 is a crucial year for us. As the turning point of airworthiness in vacation approaches, Yihang and even entire UMA industry are about to enter into commercialization.
We are prepared and confident and feel responsible to be a pioneer for commercialization in the global e-vital industry.
We plan to provide earnings guidance after certification.
I will now turn the call over to our CFO , Mr. Richard Liu, for financial results.
Richard, please go ahead. Thank you. Thank you, Xin. Hello, everyone. Before I go into details, please know that all numbers presented are in RMB and are for the fourth quarter and the fiscal year of 2022, unless stated otherwise. All presented changes are on a quarter-over-quarter basis unless otherwise specified.
Detail analysis are contained in an earnings press release, which is available on our IELTS website.
I want to highlight some of the key points here. Despite numerous uncertainty and challenges in 2022, we not only move to the final phase of type certification, but also achieve significant progress in developing business and building an AAV ecosystem.
for post certification growth. Meanwhile, we further enhance our cost management, operational efficiency, and financial soundness.
and we are optimistic to see a turning point for the expected expansion of our commercial operations and a new era for our company and the UM industry.
In Q4, total revenues were 15.7 million, an increase of 90.7% from 8.2 million in Q3.
The EH216 series of AAV deliveries in Q4 were 6 units, up 50% from 4 units in Q3.
For the fiscal year 2022, total revenues were 44.3 million compared with 56.8 million in 2021.
The EH216 series of AAV deliveries in 2022 were 21 units.
compared with 30 units in 2021.
Gross margin was 66.1% in Q4, a slight increase of 0.2 percentage points from 65.9% in Q3.
Gross margin was 65.9% in 2022, representing an increase of 2.5 percentage points from 63.4% in 2021.
mainly attributed to the higher average selling price of EH216 AAVs.
This represents the continued high-growth margin levels compared to those of other electrically powered mobility products such as electric vehicles.
as a result of our competitive strengths and first mover advantages in the global UAM and EV2 industries.
In Q4, our adjusted operating expenses, which are operating expenses excluding share-based compensation expenses for 73.2 million.
compared with 59.7 million in Q3. The increase was mainly driven by the non-cash item of additional proven provisions for receivables in response to the impact of COVID into customers.
and more expenditure on aircraft conformity for EH216-S in its verification process for types of education, with reductions in travel and marketing expenses and professional service expenses, etc.
On an annual basis, the adjusted operating expenses were $242.4 million in 2022, compared with $246.6 million in 2021.
As a result, our adjusted operating loss in Q4 was 61.3 million compared with 52.9 million in Q3.
Adjusting our loss in Q4 was 59.4 million compared with 55.1 million in Q3.
For the fiscal year, adjusted net loss was 206.2 million in 2022, compared with 192.8 million in 2021.
Moreover, our cash balance remains solid as we have been proactively managing our cash position and assessing our liquidity.
As of the end of Q4, we had $249.3 million of cash, cash equivalents, restricted cash, and short-term investments.
compared with 208.8 million as of the end of Q3.
In December , we formed a strategic partnership with Qingdao West Coast New Area, one of China's national new areas in Shandong province.
This partnership comes with a $10 million US dollar equity investment into the company and a potential additional investment of $10 million US dollars in the future.
This service has additional liquidity support for operations integrals. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead.
Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, you can please press star 1 and 1 again. Once again, to register for question, please press star 1 and 1 on your telephone and wait for your name to be announced.
Please stand by while we compile the Q&A roster. This will take a few moments. We are now going to proceed with our first question. The questions come from the line of the Rayna Jeng from Goldman Sachs. Please ask your question. Your line is opened.
Thank you for taking my question. I have 2 questions. 1st 4 is about the progress. Could you share when we expect to get a PC and how should we think about the timeline for the mass production delivery and also book the revenues? Is it like, after 1 to 2 months, we get a PC, or we will have the revenues and those are the cash.
operates properly or the component makers if it is caused by the certain component value, or it could be really hard to prove what reasons cause the failure and eventually we will need to take all the responsibility. Thank you.
Hello.
Most importantly, EH216S.
Can anybody hear me?
Hello? Yes, I can hear. Am I connected?
Hello yes, I can. Yeah. Am I connected. Hello.
Yes, we can hear you. Okay, okay. Hi. Please stay on the line. I think we've just lost the line, Fenik Yang.
Please stay on the line. I think we've just lost the line. Thank you.
Hello? Yes.
Yes, can anybody hear me? I disconnected.
We can hear you Nick. Thank you. Sorry about that. Yes, as Mr. Hu mentioned earlier, the TC process has completed over 90%. So it's just a matter of time that we complete the entire process and it's near the end right now.
So if you compare this to other EV2 companies' progress, I think Yihan is very far ahead. Most importantly, EH216S is the only autonomous one among all EV2 TC projects, as you know, while other ones are all piloted. For details, Yihan has published an illustration about the entire TC process and a checklist of key milestones.
it has accomplished. So we want to bring clarity to the process and we'll update it very timely. So this will act as a status bar and it's very available on the IR website. So regarding to the post-PC production and delivery, I think it won't take much time or concern to generate revenue soon because the company has prepared for it all along by collecting more and more pre-order
facilities. So that's enough for the near term. But so if needed, the company is very able to hire more local staff in the future.
So that's enough for the near term. But so if needed, the company is very able to hire more local staff in the future.
And the second question will be answered by our student, Mr. Hingfang, and followed by Mr. Hingfang with translation.
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Okay, thank you for your questions. Firstly, on general occasions, aviation accidents have caused a divide in multiple factors and determining the safety responsibility for aircraft accidents requires specialized investigation by relevant regulatory authorities, which is a complex process. For more information, visit www.fema.gov
This investigation is required to identify various reasons and factors related to the accident before a final liability determination can be made. In order to ensure safety and prevent accidents, we have adopted a redundancy method in a tight design.
and the structural safety and communication of the athletics at AAV.
This ensures there is no single point of failure. Since our AAV is autonomous, the passengers on board do not need to pilot it. As a result, there is no safety hazard caused by the passenger mis-controlling of the vehicle during the flight. We will also create operation rules and provide safety instructions.
to passengers to ensure their safety.
And in terms of production and manufacturing, we strictly manage our suppliers and production procedures with high quality standards in accordance with the requirements of the GAC and ensuring that we can create the original sources while determining the safety responsibilities.
And in terms of operations, we will also set our standards for operators and the context personnel training. So as to ensure the operation safety throughout the process.
And at last, we provide liability insurance coverage for aviation products and passengers as well as the relevant third parties.
That is the answer to your second question. Thank you.
Once again, as a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, you can please press star 1 and 1 again. Once again, it's star 1 and 1 if you have any questions or comments at this time.
Thank you. We are now going to proceed with our next question.
The next question has come from the line of tea from 10 thing security is please ask a question.
Hi, thank you for the management team to take my question. I have two questions as well. First is, as EHOM is more focusing on China market and you talk about an increasing customer demand in China, could you share more color over the total revenue in your EHOM 216?
type certification in respective countries or your progress of type certification in trying to help these foreign type Certification or is it like a whole new process all over again? Thank you so much.
Thank you, Dean. This is Richard. Let me take your questions.
First of all, as discussed earlier, we currently have an order pipeline of 100 plus units of EH216 in China. And this order pipeline has been growing with increasing inquiries, discussions from more potential classmates in China, especially from the tourism sectors.
of the related total contrast value of what it meant to around 200 million RMB or more.
And if you set up the EAT in China, you can get the corresponding driving estimate roughly
It's roughly around 170,000 people.
roughly around 177 million something RMB.
So as put in the earnings release, most of these technical orders in China are conditional upon the PC and are expected to be due in 1-3 years after that.
However, there are indeed some customers in China who are more sophisticated and understand that the TTE is to be obtained so and thus I do not require that report the database.
In respect of your second question,
those pre-orders in other Asian countries are usually required for local disease.
So we have been working with our local farmers in communicating with local aviation authorities.
What we have been experiencing is that the authorities in those Asian countries are open-minded to these type of innovative, able vehicles.
and is practically interested in the uses in tourism, which are an important industry in their respective economies.
So after we obtained the certification in China, we would provide a base for us to apply for the local applications with the local aviation companies.
And we will not have to go from zero. To give an example, in those Southeast Asian countries, like Indonesia, we put a price for the local Tc to a post-ETC process.
mainly validation of type certificates with the local aviation authorities. And it is expected to be a simplified process. Given so, it would help shorten the time and be more efficient for us to establish and further extend our market presence in those countries.
We're now going to proceed with our next question. The questions come from the one I've seen, Cindy Huang from Morgan Stanley . Please ask your question. Your line is opened. Hi, Nandman Singh. Thank you for taking my question. I only have one question on margin.
So Yihang currently has quite good gross margin at around 60%. And how should we think about the gross margin this year and over time, especially after we take off commercial operations? Thank you.
Hi, thank you, Richard and again. I will take your questions.
The current 60% class GP margin is actually a comprehensive GP margin covering our vehicle hardware software products and services.
at the core of the company, the technology advantage actually lies in our software. So to some extent, eHAN can be regarded as a software-based technology company that integrates intelligent aerobatic products.
and software products using Intel 5G technologies. In addition, the TT for the EH215-S is expected to be a consumed. After that, we will probably be the only new companies to succeed in the market, especially in China for Its own a Choo.
So as you can tell, we would have some more pricing power on the market. Further, if our sales are expected to scale up after T3, it is also anticipated we would also have more negotiation over the past five years.
to control our procurement costs. Therefore, it is expected that we will continue to maintain this 60% GP margin level.
Please be time-constrained. We will end the Q&A session here. And I would like now to turn the call back to Misan for closing remarks. Thank you, operator, and thank you all for continuing on today's call. If you have further questions, please contact our team by email or participate on our calling in after event.
through the calendar information provided on our website. We appreciate your interest and look forward to our next earnings call. Thank you.
Thank you all again. This concludes the conference call today. You may now disconnect your lines. Okay.
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Good day, ladies and gentlemen. Thank you for standing by and welcome to the EHANG fourth quarter 2022 and fiscal year 2022 earnings conference call. As a reminder, we are recording today's call.
Now I will turn over the conference to Anne Jee. He hangs Senior Director of Investor Relations. Ms. Anne, please proceed. Hello, everyone. Thank you for joining us on today's conference call to discuss the company's financial results.
for the fourth quarter and fiscal year of 2022. The earnings release is available on the company's IR website. Please note that the conference call is being recorded and the audio replay will be posted on the company's IR website.
On the call today, we have Mr. Huanchi Hu, our founder, chairman, and chief executive officer, Mr. Xin Fang, chief operating officer, Mr. Richard Liu, chief financial officer, and Nick Yang, an independent director of the board. The management team will successfully get prepared to relaunch.
Remarks delivered in Chinese will be followed by English translations. All translation is for convenience purposes only. In case of any discrepancy, management statements in the original language will prevail. A Q&A session will follow afterwards.
Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Over-looking statements involve inherent risks and uncertainties.
As such, the company's actual results may be maturely different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.
Also, please note that all numbers presented are in RMB and are for the fourth quarter and fiscal year of 2022. Unless they did otherwise.
With that, let me now turn the call over to our CEO , Mr. Huaju Hu. Please go ahead, Mr. Hu.
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This is the English translation of Mr. Hu's remarks. Hello everyone, thank you for joining our earnings conference call today. 2022 was a year of opportunities and challenges for Yihan.
Against the ever-changing backdrops of macroeconomic volatilities, political uncertainties, and pandemics, we remain committed to our strategies and continue to make meaningful progress during the year in our main priorities of air-washing certification, business development, and ecosystem establishment.
This not only strengthens our resilience for long-term development, but also reinforces our leadership in the global urban air mobility industry. In the fourth quarter of last year, the EHAN-216S type certification successfully entered the final phase of the demonstration and verification of compliance.
However, due to the massive infections after China lifted the COVID control policies, until this year's Chinese Spring Festival holiday, the relevant PC progress was delayed to a certain extent.
But now we have manufactured the confirming aircraft for the purpose of airworthiness verification at our Yung Fu production facility, passed the aircraft manufacturing conformity inspection, and are conducting compliance tests at flight bases in Guangzhou, Hezhou, and other locations.
In February this year, the CDC chief engineer and officials from the Department of Aircraft and Air workforce certification, the Department of the flight standards, the Office of Air Traffic Regulation, the Central and Southern Regional Administration, as well as the experts from the TC team inspected the flight base in Huizhou.
We worked together effectively, and the joint efforts of all parties not only accelerated the compliance test and other review process in the final stage, but also made plans and arrangements for the next steps.
which boosts our confidence in post-certification operations. As of today, we have been actively carrying out the work for demonstration and verification of compliance, based on the means of compliance agreed by the CEC.
Our work includes submission of compliance test plans, laboratory tests, ground tests and inspections, flight tests, etc.
At present, over 70% of compliance tests have been either completed or to be signed soon. It means we have substantially completed over 90% of the entire type certification process.
We believe eHAN is leading among the few eVito type certification projects that have been officially accepted by civil aviation regulators worldwide.
Although the TC process for such a new innovative aircraft is full of difficulties, I am proud of our team's unwavering efforts and groundbreaking achievements over the past few years. At the same time, we are very grateful to China's civil aviation regulator, the CAC, for their full support and high attention to this innovative AV.
We believe we will bring the expected good news in the near future. Therefore, we believe we will take a lead in entering a new year of air mobility in 2023 and anticipate witnessing and echo-making our strong in a global UAM industry.
What is worth mentioning other than Yi Han being the evader industry leader is the large Chinese market that we are rooted in and is huge potential for the UEM development.
According to Morgan Stanley 's forecast, China is expected to account for about 30% of the global UEM market. In recent years, Chinese central and local governments have introduced a series of supportive policies for emerging sectors related to MNC radiation, electric aviation, and aviation.
low altitude economy, urban three-dimensional transportation, aviation tourism, and so on.
This has provided us with beneficial policies, a favorable market environment, and a growing demand from government and enterprise customers.
Our CEO , Mr. Xinfang, will talk more about it later. On the other hand, China has been a leader in the global UAV industry. It has accumulated profound expertise in aspects of upstream and downstream industry chain and professional talents.
Besides, China has the supply chain advantages of higher cost-effectiveness and delivery efficiency. These lead a solid foundation for product R&D, manufacturing, and product delivery. In the overseas market, we are committed to actively engaging in the Asian market.
and participating in multiple air mobility projects in Europe as an individual pioneer. We will continue collaborating with local customers, partners, and governments to jointly explore a safe, intelligent, efficient, and sustainable UAM operational system. To date, the EH16 series of AAVs has been developed in the last 20 years.
have successfully completed over 34,000 autonomous flights across 12 countries in Asia, Europe , and America.
which is the top flight record in the global EV video industry. Looking ahead, we will remain dedicated to expanding our reach and bring our AV solutions and flight experiences to more customers, partners and passengers worldwide. In December last year, we are thrilled to welcome Mr. Nick Yang to join our board of directors as an independent director.
Although he is a new member of the board, he is also our old friend as one of the eHance Early Investors, who has been following the company's growth and the development of the UEM industry for many years. With over 20 years of capital market experience and entrepreneurial experience in multiple listed companies, I believe that Nick will bring strong support to eHance growth in our new stage.
Today, we also have Nick with us on the call, and he will be available to communicate with everyone in a Q&A session later. Next, I will turn over the call to our Chief Operating Officer, Mr. Xin Fang. Thank you. fearless and
2019 let us continue our success by accepting global We hope to see you again soon. We hope to see you again soon. We hope to see you again soon.
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Thank you Mr. Hu and hello everyone. Since the fourth quarter of last year, our top priority remained the TC project. We are pleased to report that we are now in the final sprint. In preparation for post-certification sustainable long-term growth, we are capitalizing our leading first-mover advantages.
to explore both domestic and overseas markets. We have been extending our business and cooperation opportunities throughout the entire industry chain related to air mobility and the low altitude economy. The building of all the demands, enhancing our partnership and cooperation, we are laying a solid foundation for commercial delivery and operational services following certification.
In China, the tourism industry, which has seen heavy impact from COVID, has rapidly recovered this year as the control policies were lifted. The China Tourism Academy predicts that in this year, the number of domestic tourists will reach 4.55 billion, up 80% compared to last year.
And the domestic tourism revenues will reach 4 trillion RMB, about 580 billion US dollars, an increase of 95% compared to last year. This presents excellent development opportunities for the low altitude tourism, the first market where we plan to launch commercial operations after certification, and FOS for our tourism industry customers.
Since last year, we have been dedicated to developing our domestic market in China, against the backdrop of macro policies promoting low-altitude tourism and economy, building a more than integrated transportation system, and developing new smart cities. We have continued extensive and deep business cooperation.
and industry layout with local governments, tourism and aviation enterprises in many provinces and cities.
Xinjiang, Shenzhen, Yinkuangdong, etc. To date, we have received orders for over 100 units of the Yihan 26 Series A AVs in China.
These orders are expected to be fulfilled within 1 to 3 years after the TC process is completed. Additionally, with the approach of TC completion, there has been a significant growth in our customers' inquiries and demand for new orders from all over China. For example, most recently, the
Xiyue Tourism, a leading tourism company in Xinjiang and listed on Shenzhen Stock Exchange, announced its intention to sign a cooperation framework agreement with us.
It plans to establish a joint venture and operates a minimum of 120 units of EHEM 216S for our comparable passenger grade AAVs in five years for conducting low altitude sightseeing tourism projects in key scenic locations in Xinjiang, such as the heavenly lake of Kinshan.
Another example, in March this year, Xian Aerospace Investment Company signed a strategic partnership agreement and an inductive purchase order with us.
They plan to buy 20 units of BHEM-216 aircraft within three years in order to develop a smart air city and a low altitude flight demonstration area in northwest China. Meanwhile, we welcome partnerships with strategic investors who are willing to cooperate with Dihang for long-term growth.
For example, last December , Qingdao West closed the new area, reaching long-term strategic partnership with us over investment and business. It has not only provided US$10 million investment, but will also facilitate the local government's applications of our entire product portfolio, which is expected to generate productive demand worth over 100 million RMB.
about $15 million within the next two years. They will also provide full support to our local business operations, sales and services, production, and infrastructure constructions, among other things, with the goal of building Qingdao City into an outstanding world-class pilot zone for UAM demonstration and application.
We will utilize a complete set of AAV Command and Control System platforms and UEM Operations Systems to support our three major businesses, which are Air Mobility, Smart City Management, and Aeromedia.
Therefore, we are able to meet our customers' demand for diversified applications in low-altitude tourism, urban transportation, aerial logistics, firefighting emergency, medical rescue, smart city management, and aerial media, etc. In the past two years, under the CDC's guidance, we have been working with the CDC to ensure that our customers' demand for diversified applications is high and that they are able to meet their needs. We are also working with the CDC to ensure that our customers' demand is high and that they are able to meet their needs.
we have been taking a lead in carrying out trial operations while conducting type certification. To date, we have developed 18 operation spots for LSIC in 16 Chinese cities.
More than 8,200 safe operational travel flights have been completed with EH-216 AAVs. During this process, we have cultivated a professional and well-trained AAV operation team, developed a digital platform for AAV operation management and services, and accumulated rich, visible and irreparable travel.
and operation benchmarks that we have built over the long term and are ahead of other companies in the industry.
Additionally, we have been actively working on expanding cooperation across the UEM upstream and downstream industry chains, as well as building the ecosystem. For example, we are very pleased to partner with Heco Group, a subsidiary of Swire Group in last October .
This partnership tends to build an after-sales maintenance service system for e-home AAVs to provide our customers worldwide with more high quality and efficient maintenance service while empowering our continued airworthiness following certification. Might iPhone po Tommy Greer be agreed to the governance of Hweetz?
Last year, we actively explored markets in Japan, Malaysia, Indonesia, and Thailand, secured more than 200 units of pre-orders for EH-26 series, and established cooperation with local partners to carry out local trial flights surrounding AAV applications in our roads.
such as low altitude sightseeing tours, island hopping mobility, and logistic transportation. This February , we successfully conducted the first passenger-carrying YIHEM 216 demo flight in an open airspace overseas in Japan. This is also the first-ever passenger-carrying flight of an autonomous YIHEM in Japan with approval.
In Europe , in the fourth quarter of last year, we completed the E-116's first flight in Spain, and the EU's AMILAD project to successfully verify the UAM concepts of operations. We also joined the EU's SAMBA project to explore unmanned aircraft system traffic management. In addition, we assisted the Spanish National Police to complete the E-116 maiden flight for their travel operations.
As noted by Mr. Hu, 2023 is a crucial year for us. As the turning point of airways certification approaches, Yihang and even entire UAM industry are about to enter into commercialization.
We are prepared and confident and feel responsible to be a pioneer for commercialization in the global inventory industry. We plan to provide earnings guidance after certification. I will now turn the call over to our CFO , Mr. Richard Liu, for financial results. Richard, please go ahead. Thank you. Thank you, Xin. Hello, everyone.
Before I go into details, please note that all numbers presented are in R&D and are for the fourth quarter and the fiscal year of 2022 unless stated otherwise. All presented changes are on a quarter-over-quarter basis unless otherwise specified. Detail analysis are contained in an earnings press release, which is available on our IELTS website. I want to highlight some of the key points here.
Despite numerous uncertainty and challenges in 2022, we not only move to the final phase of type certification, but also achieve significant progress in developing business and building an AAV ecosystem for post certification growth.
Meanwhile, we further enhanced our cost management, operational efficiency, and financial soundness. And we are optimistic to see a turning point for the expected expansion of our commercial operations and a new era for our company and the UM industry. In Q4, total revenues were $15.7 million.
year 2022, total revenues were 44.3 million compared with 56.8 million in 2021. The year 2016 series of AAV deliveries in 2022 were 21 units compared with 30 units in 2021.
Gross margin was 66.1% in Q4, a slight increase of 0.2 percentage points from 65.9% in Q3. Gross margin was 65.9% in 2022, representing an increase of 2.5 percentage points from 63.4% in 2021.
mainly attributed to the higher average selling price of EH216 AAVs. This represents the continued high gross margin levels compared to those of other electrically powered mobility products such as electric vehicles.
as a result of our competitive strengths and first mover advantages in the global UAM and EV2 industries. In Q4, our adjusted operating expenses, which are operating expenses excluding share-based compensation expenses for 73.2 million compared with 59.7 million in Q3.
The increase was mainly driven by the non-cash item of additional proven provisions for receivables in response to the impact of COVID into customers. And more expenditure on aircraft conformity for EH216-S in its verification process for PEPs education, with reductions in travel and marketing expenses and professional service.
compared with 52.9 million in Q3. Adjusted net loss in Q4 was 59.4 million compared with 55.1 million in Q3. For the fiscal year, adjusted net loss was 206.2 million in 2022.
compared with 192.8 million in 2021. Moreover, our cash balance remains solid as we have been proactively managing our cash position and assessing our liquidity. As of the end of Q4, we had 249.3 million of cash, cash equivalents, restricted cash and short-term investments compared with 208.8 million as of the end of Q3.
and the grills. That concludes our prepared remarks. Let's now open the call for questions. Operator, please go ahead. Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced.
To withdraw your question, you can please press star 1 and 1 again. Once again, to register for question, please press star 1 and 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments.
We are now going to proceed with our first question. The questions come from the line of the Rayna Jeng from Goldman Sachs. Please ask your question. Your line is opened. Thank you for taking my question. I have two questions. First of all, it's about the TC progress. Could you share when we expect the TC to be in the process?
And the second question is about the responsibility. Could you share if the failure happens? Is there a clear line of who to take the responsibility? For example, the users if they do not operate properly or the component makers if it is caused by the certain component value.
Or it could be really hard to prove what reasons cause the failure and eventually we will need to take all the responsibility. Thank you. Hello. Yeah, this is Nick. Hi.
As Mr. Hu had mentioned earlier, the TC process has completed over 90%. It's just a matter of time and it's near the end now. If you compare with other EVO companies progress, I think EHAN is far ahead. Most importantly, EH216S. Can anybody hear me? You're talking about something that's node.
Hello? Yes, I can hear. Yes. Am I connected? Hello? Yes, we can hear you. Okay. Okay. Please stay on the line. I think we've just lost the line for Nick Yang. Thank you. Hello?
Can anybody hear me? I just connected. We can hear you Nick. Thank you. Sorry about that. Yes, as Mr. Hu mentioned earlier, the TC process has completed over 90%. So it's just a matter of time that we complete the entire process and it's near the end right now. So if you compare this to other individual companies' progress, I think Yihan is very far ahead.
Most importantly, EH216S is the only autonomous one among all EV2 TC projects, as you know, while other ones are all piloted. For details, Yihan has published an illustration about the entire TC process and a checklist of key milestones it has accomplished.
So we want to bring clarity to the process and we'll update it very timely. So this will act as a status bar and it's very available on the IR website.
So, regarding to the post-PC production and delivery, I think it won't take much time or concern to generate revenue soon because the company has prepared for it all along by collecting more and more pre-orders beforehand and also getting the uniform production facilities established and operational for almost two years and procured stocks of key components from suppliers. All these efforts can shorten our lead time to delivery.
So for cost control reasons, we have over 100 workers in our manufacturing facilities. So that's enough for the near term. But so if needed, the company is very able to hire more local staff in the future. Okay? That's your question. And the second question will be answered by our CEO , Mr. Tingfang, and followed by English translation. Car save.
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Okay, thank you for your questions. Firstly, on general occasions, aviation accidents have caused a bite and multiple factors and determining the safety responsibility for aircraft accidents requires specialized investigation by relevant regulatory authorities, which is a complex process.
This investigation is required to identify various reasons and factors related to the accident before a final liability determination can be made. In order to ensure safety and prevent accidents, we have adopted a redundancy method in the type design, and the structural safety and communication of the e-h
And this features, there is no single point on failure. And the CISRA is autonomous. The passengers onboard the dynamite were piloted. Other results, there was no safety hazard caused by the passenger mist controlling of the vehicle during the flight. We will also create operational rules and provide safety instructions to passengers to ensure they are safe.
And in terms of our production and manufacturing, we strictly manage our suppliers and the production procedures with the high quality standards in accordance with the requirements of the TAT. And ensuring that we can create that original sources while determining the 50 risk of quality.
And in terms of operations, we will also set our standards for operators and the contact personnel training so as to ensure the operation safety throughout the process. And at last, we provide liability insurance coverage for aviation products and passengers as well as the relevant third parties. That is the answer to your second question.
Thank you. Once again, I would like to ask a question. Please press star one and one on your telephone and wait for your name to be announced. So we will go your question. You can please press star one and one again. Once again, it's star one and one. If you have any questions, comment on this time. Thank you. We are not going to proceed with our next question. The next question is.
And my second question is, our company has secured a significant number of pre-orders in Asia, I mean, excluding China. Do these pre-orders also have any type certifications in respective countries? Will the progress of type certification in China help these foreign type certifications? Or is there like a whole new process all over again? Thank you so much.
And my second question is, our company has secured a significant number of pre-order in Asia, I mean, excluding China. Do these pre-orders also have new type certifications in respective countries? Will the progress of type certification in China help these foreign type certifications, or is it like a whole new process all over again? Thank you so much.
Thank you, Dean. This is Richard. Let me take your questions. First of all, as discussed earlier, we currently have an order pipeline of 100 plus units of EH216 in China. And this order pipeline has been growing with increasing inquiries, discussions from more potential customers in China, especially from the...
of the total sectors. The related total contract value would amount to around 200 million RMB or more. And if you set up the EAP in China, you can get the corresponding value estimate roughly around 170 million RMB.
77 million something RMB. So as put in the earnings release, most of these partner orders in China are conditional upon the TC and are expected to be sealed in one to three years after that.
However, there are indeed some customers in China who are more sophisticated and understand that the TTE is to be obtained so and thus I do not require that report the relation.
In respect of your second question, those pre-orders in other Asian countries usually require the local disease. So we have been working with our local partners in communicating with the local aviation authorities. What we have been experiencing is that...
the authorities in those Asian countries are open-minded to this type of...
authorities in those Asian countries are open-minded to this type of innovative and loan vehicle.
And it's actually interested in the uses in tourism, which are an important industry in their respective economies. So after we obtain the certification in China, we will provide a base for us to apply for the local certifications with the local aviation authorities. And we will not have to go from here.