Q1 2023 EHang Holdings Limited Earnings Call
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Good day ladies and gentlemen. Thank you for standing by and welcome to the EHANG first quarter 2023 earnings conference call. As a reminder we are recording today's call. I will turn the call over to Angie.
Ehangs, Senior Director of Investor Relations. Miss Anne, please proceed.
Hello everyone, thank you for joining us on today's conference call to discuss the company's financial results for the first quarter of 2023. The earnings release is available on the company's IR website. Please note the conference call is being recorded and an audio replay will be posted on the company's IR website.
On the call today, we have Mr. Hua Qiu Hu, our founder, chairman, and chief executive officer, Mr. Xin Fang, chief operating officer, and Mr. Richard Liu, chief financial officer.
The management team will successfully give prepared remarks. Remarks delivered in Chinese will followed by English translations.
All translation is for convenience purpose only.
In the case of any discrepancy, the management statement in a regional language will prevail. A Q&A session will follow afterwards.
Before we continue, please note that today's discussion will contain four looking statements made pursuant to the safe harbor provisions of the U.S. Private Security Solidification Reform Act of 1995.
Forward-looking statements involve 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 public findings with the SEC.
to update any forward-looking statements except as required to enter the applicable law. Also, please note that all numbers presented are in RMB and are for the first quarter of 2023. Unless they did otherwise.
With that, let me now turn the call over to our CEO , Mr. Huan-Chi Hu. Please go ahead, Mr. Hu.
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This is the English translation of the MIS2 course remarks. Hello everyone, thank you all for joining our conference call today. Since the beginning of this year, as the pandemic has eased, we have seen in current designs on recovery in the tourism industry.
As a result, the demand for RAVs from the client in this sector has been growing.
However, our eHAND 216S is currently undergoing the process of obtaining a worthless certification, and we are fulfilling customer orders with discernment. In Q1 2023, we deliver a total of 11 eHAND 216 series AAVs.
resulting in a revenue of $22.2 million.
This represents an increase of 42% compared with the previous quarter and an increase of 283% year-over-year.
Along with the considerable surge in revenue, our growth margin remains strong.
maintaining a high level of 64% in the first quarter.
Meanwhile, our operational performance has shown significant improvement. Both the adjusted operating loss and adjusted net loss have significantly narrowed, representing an improvement of 44% compared with Q4 last year.
Additionally, it has cash position remains healthy and the strategic investment of US$10 million by Qingdao West Coast new area was closed in the first quarter.
So far, the EHANG-216S air-worcestership certification has been at the last phase of demonstration and verification of compliance.
and we have completed over 90% of the combined tests.
We entered into the final sprint in late April .
Even so, our dedicated eHAN team remains tirelessly committed to providing a flawless performance report as soon as possible.
I would like to extend my sincere gratitude to the CAAC for their unwilling support to EAM, their commitment throughout this process day and night. And they are proud to approve us for the completions of each subject.
Yihang is not only an industry pioneer, but also an advocate for low altitude air mobility.
Against the micro-policy background of our comprehensive national transport network.
We have seen that China has the established a range of available policies regarding the low-outitude economy since the beginning of this year.
Put a report of the National Law Advote to the Economy Integration and Innovation Research Center.
16 provisional governments have included specific provisions related to the low-out-eud economy in the art 2023 government work reports.
These government initiatives focus on the MN aviation industry within the 20 designated experimental zones is across China. Demonstrating vigorous policies support and creating an environment conducive to further exploration of the AV market across China.
During this period, we are also relentlessly broadening our international collaborations and delivering products.
We are glad to explore urban air mobility alongside our customers and partners from more countries.
Next, I will hand over the quote to our Chief Operating Officer, Mr. Xinfang. Thank you.
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This is the English translation of Mr. Xin Feng's remarks.
Thank you, Mr. Hu and hello, everyone. During the first quarter, we continue to advance towards the final stage of air-worseness evocation for the Yihan 216S. On the other hand, we further expanded new opportunities, both domestically and abroad, without cutting-edge AAB product.
including sending up new customers and a conducting fly demonstrations and tasks.
This endeavors are instrumental to pave the way for future commercial deliveries and operations. Once the certification process is successfully completed.
Following the lifting of epidemic restrictive policies, we were delighted to see a strong recovery in domestic tourism market.
An over the example is, according to the data from China's Ministry of Culture and Tourism, a year-on-year increase of 71% into Master Tourism trips during the Liberty Holiday period in May, reaching a total of 274 million trips.
representing 119% of the pre-epidemic level in the same period of 2019.
This trend is very beneficial to the commercial low altitude tourism market that we are targeting.
And this allows for potential customers to have a more capital and motivation to consider utilizing the needy's added their risk and attractions for higher growth.
Considering its huge market growth potential, low altitude tourism has become the primary target market we plan to tap into after obtaining suffocation.
Our business plan is also supported by the guidelines and policies introduced by multiple governments to foster the development of the low altitude tourism and economy.
For example, Shenzhen included the low altitude economy in this government work report in the first time this year. And made the Shenzhen special economics on low altitude industry promotion regulations, a key legislative project committed to building the worst first urban mobility demonstration city.
and boosting the high quality development of the low altitude economy.
We have been actively seeking cooperation opportunities with local domestic government departments or upstream and downstream partners for exploring prospects in the development of urban mobility and low altitude tourism.
In the first quarter, we delivered the E-Han 216F AABs to Guangxi, Anhui, Ji Shou, Guangdong, in China, and the Japan overseas.
Among these deliveries, Feng Shan Shan had four A-Synic area. We now the car's landscape tourist attraction located in Guangxi purchased the total of the six E-Han 216 S units from us.
All of which were delivered within the first quarter. The customer plans to launch low-altitude tours locally, creating the first low-altitude fast camps in Guangxi.
This initiative aims to offer a unique and innovative way for tourists to enjoy the breathtaking beauty of function from the sky, providing an exceptional experience of leisure and sightseeing.
In addition, we have officially signed a corporation framework agreement with the heavy tourism development company, a leading Xinjiang Tourism Company listed on the Xinjiang Stock Exchange. This corporation compromised other plans for us.
to establish a joint venture in developing low altitude sightseeing businesses in Xinjiang's major scenic spots like the Tian Shan Heavenly Lake.
The cooperation is effective to operate at least the 120 units of E-Han 216S or comparable passenger carrying A-EVs within the next five years. The cooperation is effective to operate at least the 120 units of E-Han 216S or comparable passenger carrying A-EVs within the next five years.
We see an increasing number of cultural tourism customers who intend to actively integrate high technology with traditional services to bring vitality into the industry's development.
Additionally, this March, we're entering to a strategic partnership with Tian Erwa Space Investment Science and Technology Development Holding Group for Urban and Mobility and Smart City Development.
In this partnership, we have received an indicated order for 20 units of e-hung 216S, that is anticipated to be finalized by 2025.
To summarize, the tourism revival is propelling a positive trend in the domestic deliveries and to prevent the crash of colds when it flows.
By seizing this momentum, we will continue to drive out of commercial deliveries and operations after
Meanwhile, our trial operations in China are still ongoing. To date, we have developed 19 Mi 116S trial operations box in collaboration with our customers across 17 cities nationwide.
Pramely for low altitude altruism scenarios, RE-HU216F have successfully completed around 8,800 safe child flights.
Internationally, Asia stands as our principal region of focus. Following our expansion and partnerships established across East and Southeast Asia last year, this February , our EHOME 216 S-AEV completed its first passenger-carrying autonomous flight demonstration within Japan.
which is also mouthpiece first to pass the new carrying flight in an open news space outside China.
The demonstration reflects the safety and the reliability of RAVs and the recundation from international regulatory authorities.
As of April , I have became a member of the Public Private Committee for Advanced Air Mobility, established by the Japan's Ministry of Economy, Trade and Industry, and the Ministry of Land, Infrastructure, Transport and Tourism. This committee aims to engage in the collaborative effort
with global government and corporate entities to advance the usage of aircraft within Japan, including at Expo 2025 Osaka Kansai Japan.
Ehang as the only autonomous e-vital company among the 56 committee members is the poised to leverage its pioneering navy technology and the trial flight experience in six Japanese cities to catalyze the growth and the revolution of advanced air mobility in the country.
Submultaneously, we're actively seeking out and fostering partnerships in overseas markets like Europe , the Middle East, and South America.
As of the end of May, the HM-16 series 80 had conducted over 37,000 safe child flights across 12 countries in Asia, Europe and America.
which is the amount of highest of light records in the global Yveta industry.
We are willing to work with customers and partners from more countries to explore safe, intelligent and innovative UMA industry so as to bring unique, environmentally friendly and efficient flight experience to more passengers.
I'd like to note that Yihan will participate in the upcoming Paris Airshow District. At this world-renowned aviation and aerospace exhibition, we will showcase our advanced Yihan 260 SAV and partake in a series of urban air mobility-themed events.
to share our value and experience. We warmly invited the global investors to join us for discussion during this event.
Moving forward, we remain to comment to the principal of conducting trial operations while going through the worst-needs certification process.
thereby paving the way for a crucial pivot towards post-subsidication commercialization.
As an industry first mover, we have harnessed our unique AAV leading technology and a first mover advantage to build a robust customer base and a substantial trial operation experience.
We remain optimistic about discovering as far as creating values in a growing UN market.
Next, our Chief Financial Officer, Retruit will shed light on our financial status.
our Chief Financial Officer, Richard, will shed light on our financial status. Thank you.
Thank you, Xin. Hello, everyone. Before I go into details, please note that all numbers presented are in R&B and are for the first quarter of 2023 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 IOW website.
analysis are contained in the earnings press release which is available on our website. I want to highlight some of the key points here.
Following the listing of China's zero-Covid policies, we have observed a robust resurgence in the tourism industry in China, attributable to the significant Latin demands for travel.
Together with favorable policies, these have been driving up demands and inquiries for AAVs recently. These phenomena are in alignment with our current strategic business development focus on aerial tourism.
As such, we are confident in our future growth prospects and capabilities in growing our post-settification AAD order pipeline going forward.
In Q1, total revenues were 22.2 meters, up 41.6% from 15.7 meter in Q4.
primarily driven by the increase in the sales volume of EH216 series AAV products. The deliveries of EH216 series AAVs in Q1 were 11 units.
and 83% increase from six units in Q4. Gross margin was 63.9% in Q1, a slight decrease of 2.2% points from 66.1% in Q4.
Despite this minor fluctuation, our gross margin maintains at a high level, compared to those of other electrically powered mobility products such as electric vehicles.
This is a result that attaches to our competitive strengths and first mover advantages in the global UAM and EVITO industries.
In Q1, our adjusted operating expenses, which are operating expenses excluding share-based compensation expenses, were $50.1 million.
compared with 73.2 million in Q4. The decrease was mainly attributed to the non-cash item of additional proofed provisions for receivables in response to the COVID impact on customers in Q4 last year.
while there were increased expenditures for aircraft conformity and compliance tests in the final phase of the EH216S type certification this quarter. As a result, our adjusted operating loss in Q1 was 34.3 million.
significant improvement of 44.1% from 61.3 million in Q4.
Adjusting net loss was 33.6 million, a 43.5% improvement from 59.4 million in Q4.
Moving on to our balance sheet, we maintain a proof-of-the-approach in managing our cash position and assessing our liquidity.
As of the end of Q1, we had $217.6 million of cash, cash equivalents, restricted cash, restricted short-term deposits and short-term investments.
This includes a US$10 million strategic investment made by the Qingdao West Coast New Area in Q1, which provides additional liquidity support to bolster our operations and growth.
That concludes our prepared remarks. Let's now open the call to questions.
Operator, please go ahead. Thank you.
If you wish to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To which or your question, please press star 1 and 1 again.
Once again, if you would like to ask a question, please press star 1 and 1 on your keypad. We will now take our first question.
Please stand by. This is from the line of Farina Jeng from Goldman Sachs. Please go ahead.
Thank you, thank you management team for the presentation. Two questions from me. First is about the TC progress. We have completed over 90% of the progress. So wondering if there is any timeline for the rest of 10%.
and are there any hurdles going forward? My second question is about the following quarter outlook. So we delivered a strong sales volume and also the revenues in first quarter. So just wondering if we see the strong momentum to continue in the following quarters.
Thank you.
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This is the English translation of Mr. Fan's answer to your first question.
First, I'd like to highlight that we are currently in the final phase for obtaining our TC, which offered 90% of the compliance tasks successfully completed.
First, I'd like to highlight that we are currently in a final phase for obtaining our TC, with over 90% of the compliance tasks successfully completed. This has been a considerable undertaking.
Throughout this process, we work closely with multiple professional science and facilities in China that have extensive aviation experience and credentials.
We conducted hundreds of specific review meetings with the CDC's TCTM and diligently performed the new laboratory tests, ground tests, and fly tests.
step by step according to our plan. And this test ranges from battery, environmental, materials and structural strength to software, communication and data link, and ground control station.
This enables us to verify the safety and airworthiness of our EH-216S aircraft.
from both the hardware and software processes. And for the remaining roughly 10% tests, we are in the final sprint and expect to finish them as soon as possible in the near term.
At this stage, we do not see any major obstacles, as we have already overcome the most difficulties.
And our test work in this final phase is essentially a matter of time now.
After we complete the test, we have submitted and will continue to submit the test reports to the CDC for their review and approval and issuing the certificates.
Here I want to express my gratitude for everyone's attention, interest and patience during this process.
and the pre-statement for update.
Please see the complete disclaimer at the end of the video.
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The notable increase in our human sales and revenues is probably attributed to the rapid recovery of the domestic tourism market post the pandemic.
Additionally, driven by both the corn needs for attracting passengers to the scenic sports, as well as the favorable policies for encouraging the low-altitude aero tourism all over China.
Our tourism customers have shown keen interest in utilizing our innovative AAVs in their tourism business.
And they are actively tapping into this market because they believe our AAVs can drive up their growth and revive the traditional tourism industry.
The customers in the first quarter like Xinjiang City Tourism and Guangxi Fengshan are good examples.
And as such, we foresee that the domestic tourism will maintain the trains throughout the falling quarters.
And consequently, it is expected to have a growing auto pipeline from tourism customers.
In terms of the delivery pace, based on obtaining the TC, we expect a gradual increase in deliveries after TC.
And the few units delivered before TC are mainly for the customers' internal testing, training, and the truck lights, etc. And post-TC will gradually fulfill the current domestic order pipeline of more than 100 units for the requirement of our customers.
And a few units delivered before TC are meant for the customers' internal testing, training, and truck lights, etc. And post-TC will gradually fulfill the current dramatic order pipeline of more than 100 units for the requirement of our customers and put them into operation.
Thank you.
Thank you. We'll now move to the next question.
Please stand by. And this is from the line of Di Wu from Tiangfeng Securities. Please go ahead.
Hi, thank you, Medicine Team, for taking my questions. I have two questions as well. My first question is, as there are many evolvable use cases with great potentials in the emerging urban air mobility industry, why do you choose the aerial tours as the initial target market to tap into? Why do you choose the aerial tours as the initial target market market?
Could you please elaborate on your thinking behind that? And my second question is, what's your corporation mode with your tourist customers? Thank you so much. Hi, this is Richard. I will take your questions. Let me just%.
Basically we have found that the AERI tourism or AERI-SICing is a use case which is very suitable as an initial target market for AH-216 as a... First of all it has immediate company needs.
that are sufficiently sizable but not well served by traditional solutions such as helicopters.
According to an estimate published by the China Air Transport Association,
the potential market size would amount to 58.5 billion RMB, roughly 8.5 billion USD. Secondly, area size seeing is a type of experiential services.
and novelty and experience are attractions. Thus, the end customer or passengers are not very price sensitive.
This will help with the economic viability of the services and provide more room for pricing.
Thirdly, compared to traditional helicopters, our EH-16SAEs are inherently safer, have lower level of noise and no pilot costs and much lower acquisition and maintenance costs.
and are more eco-friendly and economical, due to being electrically powered. Further, it is easier and more efficient to operate the frequent multiple fly-abouts, given the autonomous modes of the EH216SAE and the cost and management by our common control system.
With all these advantages, our EH16S AAEs have been recognized by Proteasome operators as a new solution, not just to meet the existing needs, but to meet more needs for EH16 uses.
Policy-wise, the State Council and the CAAC in China have been promoting the integrated development of general aviation and tourism.
aiming to establish aerial tourism networks in scenic spots, resorts, theme parks, and other tourist destinations. And recently, as everybody can see, the tourism industry in China has been quickly recovering from the COVID impact after the release of the restrictions.
Further, given the similar point-to-point passenger transportation feature that the aerial tourism or aerial sightseeing use case also has, it is essentially a typical urban air mobility use case that is located in scenic areas.
Thus, it can provide a very good foundation for us to accumulate operational experience for our strategic goal to offer urban mobility services such as aerial commuting in cities in the near future.
So these are some of our main thoughts behind this strategic approach. And we believe airway tourism presents an excellent opportunity for our EH216S AAVs as an initial market that has already been cited for itself.
In respect of your second question, the cooperation mode or models with our toys and operators customers or partners we have been exploring different models.
So far, they can be summarized in two basic scenarios. First of all, we just sell our EH216S AAVs to the tourism operators, and they can operate the AAVs themselves to offer aerial sightseeing services to their choice passengers.
We will provide unnecessary support to them, such as training, initial setup, technical support, etc. In this case, we are essentially an AAV product provider, and the related revenues would be mainly generated from product sales.
Secondly, we can carry our YEDS to 16 SAEs to cooperate with the tourism operators.
They can open up their scenic areas to us and we will offer our AAVs to offer airway sightseeing services.
to the tourist passengers. In this case, we are essentially an AAV operational service provider and the related revenues would be mainly generated from operational services.
In reality, there will be more different corporate models based on the special needs and conditions of different parties. So this is basically my answer to your questions. Thank you.
Thank you so much. Thank you.
Seeing no more questions in the queue, let me turn the call back to Ms Anne for closing remarks.
Thank you all for participating on today's call. If you have any further questions, please contact our IR team by email. We're participating in our following investor events through the common information provided on our website. Multiple division now.
And we appreciate your interest and look forward to our next learning call. Thank you. Thank you all again. This concludes the call. You may now disconnect.
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