Q4 2023 Hesai Group Earnings Call

Operator: Hello, ladies. Thank you for standing by for Hesai Group's fourth quarter and full year 2023. Next time all participants are, Please note that I will now turn the call over to our...... Thank you, Operator. Hello, everyone.

Hello, Ladies and gentlemen, thank you for standing by for Hess, I group's fourth quarter and full year 2023 earnings conference call.

At this time all participants are in listen only mode. Please note that today's conference call is being recorded.

I'll now turn the call over to our first speaker today, you're wanting she the company's Investor Relations Director. Please go ahead.

Yuanting Shi: Thank you for joining Hesai Group's fourth quarter and four-year 2023 earnings conference call. Our earnings release is now available on our IR website at investor.hesaitech.com, as well as via Newswire Services. Today, you will hear from our CEO, Dr. David Li, who will start the call with an overview of our recent updates. Next, our global CFO, Mr. Louis Hsieh, will discuss our financial results before we open the call for questions.

Thank you operator, Hello, everyone and thank you for joining the call cycle was false culture and full year 2023 earnings Conference call. Our earnings release is now available on our IR website at investors I'll close that touch all com as well as via Newswire services. Today, you will hear from our C O daughter, Debra Lee who will start the call.

With an overview of our recent updates next our global CFO, Mr. Louis Chen will address our financial results before we open the call for questions. Before we continue I refer you to the Safe Harbor statement in our earnings press release, which applies to this call as we will make forward looking statements. Please also note that the company.

Yuanting Shi: Before we continue, I refer you to the safe harbor statement in our earliest press release, which applies to this call, as we will make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnest release and SEC filing. With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead.

We'll discuss non-GAAP measures J, which I'm also really blend and are reconciled to the most comparable measures reported under GAAP in our earnings release and SEC filings.

With that I'm pleased to turn over the call to our C. O got today Lili David. Please go ahead.

David Li: Thank you, Yuanting, and thank you, everyone, for joining our call today. 2023 was a landmark year for Hesai. We not only continue to substantially outperform our LiDAR peers but also extended our leading market share with stellar full-year results across revenues, total shipments, and the blended growth margin, all of which surpassed our previous expectations. Furthermore, we created a virtuous cycle of cost control and economies of scale and achieved multiple significant milestones on our path to profitability. For instance, our operating cash flow for the full year of 2023 reached positive territory, a feat unparalleled within the industry. These remarkable accomplishments reflect our unwavering commitment to sustained and responsible growth in our mission of reducing accidents, saving lives, and making global transportation safer for everyone.

Thank you Andy and thank you everyone for joining our call today 2023 was a landmark year for <unk>.

We not only continued to substantially outperform our light our peers, but also extended our leading market share with stellar full year results across revenues total shipment and the blended gross margin of which surpassed our previous expectations. Furthermore, we create a virtuous cycle of cost control and economies.

Scale and achieved multiple significant milestones on our path to profitability.

Our operating cash flow for the full year of 2023 reached positive territory if feet unparalleled within the industry.

These remarkable complement accomplishments reflect our unwavering commitment to sustain any responsible growth to our mission of reducing accidents saving lives and are making global transportation safer for everyone.

David Li: Let's delve into our fourth quarter business update. On the domestic side, we achieved a significant milestone in the fourth quarter by expanding our collaboration with one of the world's largest EV manufacturers based in China. Our extended cooperation encompasses another fresh lineup of vehicle models that are set to debut in 2024. In addition, we were recently selected by Liaozhou as the exclusive LiDAR provider for their MEGA MTV platform.

Let's delve into our fourth quarter business updates on the domestic side, we achieved a significant milestone in the fourth quarter by expanding our collaboration with one of the world's largest TV manufacturer based in China are extended cooperation encompasses another fresh lineup of vehicle models that are set to debut.

Starting 'twenty one four in addition, we were recently selected by Rialto as exclusive lighter provider for their MPV platform. We also made eight are standard equipment on their popular al seven and our eighth pro versus immediately adding hundreds of thousands of lidar units to host as growing order book.

David Li: Leon also made Ada standard equipment on their popular L7 and L8 Pro versions, immediately adding hundreds of thousands of LiDAR units to Hesai's growing order box. We have also recently forged new strategic partnerships with Great Wall Motor, one of China's largest auto brands, and Leap Motor, who have recently formed a joint venture with Stellantis to include joint research endeavors and the integration of a variety of LIDARs into their vehicle models, with SOP scheduled to commence in 2024. We anticipate that our partnership with these prominent domestic OEMs will soon deepen even further. The EV revolution is in full swing, particularly in China. In 2023, the estimated NOA penetration rate in China stood at 10%.

We also recently forged a new strategic partnerships with great wall Motor one of China's largest auto brands and leaf border, who has recently formed a joint venture with <unk> to include a joint research endeavors and the integration of a variety of lidar into their vehicle models with <unk> scheduled to commence.

In 2024.

We anticipate that our partnership with these prominent domestic Oems will assume deepen even further.

The EV Revolution is in full swing, particularly in China in 2023, the estimated N O a penetration rate in China stood at 10%. It is projected to increase to over 20% between 25 Oems are eager to distinguish themselves through intelligence and OE functions for instance, as it just mesh.

David Li: It is projected to increase to over 20% by 2025, and OEMs are eager to distinguish themselves through intelligent NOA functions. For instance, as I just mentioned, the Alto's L8 and L7 Pro models now feature our LiDAR as a standard configuration with an urban NOA function, which navigates from an urban point A to point B with minimal driver intervention.

And the Alto <unk> H and L. Seven pro models now feature our Lidar as a standard configuration with an urban and OE function, which navigate from urban 0.8 to probably be with the minimum driver intervention. Additionally, lidar is increasingly recognized as an essential safety feature just like Airbus.

David Li: Additionally, LiDAR is increasingly recognized as an essential safety feature, just like airbags. Consequently, LiDAR has become a prerequisite for safety-conscious consumers seeking the highest safety standards. Moreover, as the industry advances towards L2 plus and L3 autonomous driving systems, a transformative trend is emerging with Ada systems equipped with LiDAR configurations making their way into passenger cars in a growing range of price categories. This evolution began with vehicles priced in the 400,000 RMB range in 2022 to 300,000 RMB in 2023 and now has extended to models priced near 150,000 RMB in 2024, as illustrated by the recent launch of Leap Motors' latest EV model.

Consequently, lighter has become a prerequisite for safety cautious consumers seeking the highest safety standard.

Moreover, as the industry advances towards our two plus N L. Three autonomous driving systems.

Formative trend is emerging with Adas systems equipped with lighter configurations, making their way into passenger cars in a growing range of price categories. This evolution together with vehicles priced at 400000 RMB range in 2020 223, hundreds out of the RMB.

In 2023, and now has extended to modest pricing priced near a 150000 RMB range in 2024 as illustrated by the recent launch of Leap Motors latest EV model that.

David Li: The widening accessibility of LiDAR technology across affordable price categories represents a transformative phenomenon for our industry, unveiling a mass market opportunity 10 to 20 times larger than the previously served premium sector only. This catalyst signal is a key inflection point for ADAS and LiDAR adoption in China and the rest of the world. China has maintained its global leadership in EV production and sales for nine consecutive years, achieving a majority market share exceeding 60% worldwide.

The widening accessibility of Lidar technology across affordable priced categories represents a trucks was formative phenomena for our industry are willing a mass market opportunity 10 to 20 times larger than the previously served premium sector only the catalyst signal is a key inflection.

Lloyd for Adas, and Lidar adoption in China, and the rest of the world.

China has maintained its global leadership in EV production to sales for nine consecutive years commencing a majority market share exceeding 60% worldwide. Meanwhile, Chinese Oems commenced mass EV production in 2021, and 2022 in contrast to global OEM timeline, which bass EVP.

David Li: Meanwhile, Chinese OEMs commenced mass EV production in 2021 and 2022, in contrast to global OEM timelines, which anticipate mass EV production to begin around 2025 and 2026. In other words, China's EV industry is approximately five years ahead of the global curve. We are in the right place at just the right time to capture the opportunity.

Production is anticipated to begin around 25% in 2026 in other words China's EV industry is approximately five years ahead of the global curve. We are in the right place at just the right time to capture the opportunity with accumulative shipments third passing three hundreds are the light are you in.

David Li: With cumulative shipments surpassing 300,000 LiDAR units by the end of 2023, Hesai has not only realized financial advantages through economies of scale but also amassed significant technological expertise and a profound understanding of mass production through a quality management system. This serves as compelling evidence of our established proficiency for global OEMs, particularly those who may be more conservative in vendor selection due to past unsuccessful attempts with our U.S. and European peers. Armed with this strength, we are well-positioned to compete successfully on the global stage. Let me walk you through some of the specific, First.

By end of 'twenty three has that has not only realized financial advantages through economies of scale, but also amassed significant technology technological expertise and a profound understanding of mass production at our quality management systems. This serves as a compelling evidence.

Of our established proficiency for global Oems, particularly those who may be more conservative in vendor selection due to past unsuccessful attempt with our U S and European peers.

Armed with this strength, we are well positioned to compete successfully on a global stage, let me walk you through some of the specifics.

First <unk>.

David Li: Hesai's pioneering R&D initiatives are defining the LiDAR industry's product development trajectory. In January 2024, we unveiled AT512, our next-gen ultra-long-range flagship ADAS LiDAR, scheduled for mass production in 2025. This cutting-edge technology is establishing new industry benchmarks, boasting the highest available detection range and resolution.

Besides pioneer a R&D initiatives are defining the lighter industries product development trajectory in January 2024, we unveiled $85 12, our next Gen Ultra long range flagship Adas Lidar scheduled for a mass production 25, this cutting edge technology is trapped.

<unk>, new industry benchmarks boasting the highest available detect a range and the resolution.

It's our only outperformed industry competitors by a significant degree, but also challenges longstanding misconceptions about technical bottlenecks, including the notion that only lidar designed with 15 15 nanometer wavelength can detect beyond 250 meters.

David Li: It not only outperforms the industry's competitors by a significant degree but also challenges long-standing misconceptions about technical bottlenecks, including the notion that only LiDAR designed with 1550nm wavelengths can detect beyond 250m. Standing out with industry-leading performance across every key metric, AT512 greatly enhances the vehicle's perception capability by detecting objects at least twice as far away as competing LIDARs in its category, giving the intelligent driving system over 40% more reaction time to make the safest decision. As the CEO of a leading global OEM declared, when it comes to safety, the second best LiDAR isn't good enough. We firmly believe that investing in the development of the best LiDAR products, which not only meet but exceed the dynamic demands of the market, provides substantial long-term benefits to society as well as our company and stakeholders.

Standing out with industry, leading performance across every key metric 80, 512 greatly enhances the vehicles perception capability by detecting objects at least twice as far away as competing lighters in its categories, given the intelligent driving system over 40% more.

Option time to make the safest physicians.

As the CEO of a leading global OEM declared when it comes to safety. The second best of Lidar isn't good enough. We firmly believe that investing in development of the best lighter products, which not only meet but exceed that dynamic demands of the market provide substantial long term.

Benefit to society, as well as our company and stakeholders.

We are seeing various new Lidar debuted at the 20th only foresee at the event in Las Vegas reflect eight technological convergence towards our innovation direction.

Several competitors, who has traditionally emphasize the use of the 15 50 nanometer lasers or maps technologies are now unveiling product based are rotating their scanning system or <unk> five nanometer laser.

David Li: We are seeing various new LiDAR debuts at the 2024 CES event in Las Vegas reflect a technological convergence towards our innovation direction; several competitors who have traditionally emphasized the use of the 1550 nanometer lasers or MAPS technologies are now unveiling products based on rotating mirror scanning systems or 905 nanometer lasers. This underscores a growing recognition of the benefits our technology offers in terms of cost, performance, and reliability. Our leadership and ingenuity were recognized at the CES event, where our groundbreaking ultrathin long-range in-cabin LiDAR G25 won the prestigious 2024 Innovation Award at CES. Second, we firmly believe that mass production at scale is the only way to ensure sustained operation, effectively manage cost, and cultivate enduring trust with our customers. As of now, we offer two major factories, our Maxwell Center in Shanghai, focusing on new product R&D and testing, and our Horse Center in Hangzhou, a facility dedicated to mass production, boasting an unprecedented automation rate of over 90% in parallel in the global lighter industry.

This underscores a growing recognition of the benefits of our technologies offers in terms of cost performance and reliability.

Our leadership and ingenuity were recognized at CES event, where our groundbreaking ultra thin low range in capital lighter twenty-five won the prestigious 2024 innovation award at CES.

We firmly believe that mass production at scale is the only way to ensure sustained operation effectively manage cost and cultivate enduring trust with our customers.

As of now we operate two major factories are Maxwell centre in Shanghai, focusing our new product R&D and testing and of course center in Hangzhou facility dedicated to mass production boasting an unprecedented automation rate of over 90% are unparalleled in the global lighter industry.

By the end of 2023, we achieved an annualized production run rate of over 800000 units.

Figure, we project to rise to one five to 2 million by end of 2024.

Meanwhile, we expect to accumulate to be shipped over to Miller Lite, our units to the market by end of 2025.

Third.

Beyond manufacturing capability stable quality and reliability have emerged as crucial indicators for Oems one considering mass installation of lidar system.

Lidar systems require the sophisticated integration Opex mechanics electronics.

As such quality on the positions are Paramount.

Amid intense competition and widespread adoption of Adas systems Lidar product maturity has become EV manufacturers primary concern from Oems perspective, there's no better indicator of our products superior quality and reliability than their outstanding long term performance in real.

David Li: By the end of 2023, we achieved an annualized production run rate of over 800,000 units, a figure we project to rise to 1.5 to 2 million by the end of 2024. Meanwhile, we expect to accumulate and ship over 2 million LiDAR units to the market by the end of 2025. Third, beyond manufacturing capability, stable quality and reliability have emerged as crucial indicators for OEMs when considering the mass installation of LiDAR systems. LiDAR systems require the sophisticated integration of optics, mechanics, and electronics, and as such, quality and precision are paramount.

Life Road conditions.

Drawing upon these asset no halt we are confident in our ability to expand our domestic leadership to our global scale.

We are beyond thrilled to announce that as of now we have well over 68, a serious production EV models from 16 major Oems and tier one suppliers worldwide. We've been selected by to Cop Global automotive Oems for their new E. V series production programs and there are more our global RFID RFP.

<unk> has expanded to include a total of 13 with nine leading global OEM from North America, and Europe, our adding Asia ex China to the roster of the cost quarter.

These major accomplishments marks a promising start to our global Adas journey stay tuned for the updates.

David Li: Amid intense competition and widespread adoption of Ada systems, LiDAR product maturity has become EV manufacturers' primary concern. From the OEM's perspective, there's no better indicator of a product's superior quality and reliability than its outstanding long-term performance in real-life road conditions. Drawing upon these assets and know-how, we are confident in our ability to expand our domestic leadership to a global scale. We are beyond surreal to announce that, as of now, we have won over 68 series production EV models from 16 major OEMs and Tier 1 suppliers worldwide. We've been selected by two top global automotive OEMs for their new EV series production program, and there are more. Our global RFI, RFQ lineup has expanded to include a total of 13 with nine leading global OEMs from North America and Europe, and we're adding Asia, ex-China, to the roster for the quarter. These major accomplishments mark a promising start to our global ADAS journey. Stay tuned for the update.

As we look ahead road ahead is filled with opportunity to broaden our impact our achievement. Thus far are just the beginning with market, leading lidar technology and strategic partnerships worldwide. We are poised to capitalize on the evolution of intelligent driving.

Reducing accidents saving lives and creating a safer global transportation system.

I'll now turn the call over to Louis to share more details on our financial performance and outlook Lewis. Please go ahead.

Thank you, David and Hello, everyone.

Go through our operating and financial figures for the fourth quarter and full year 2023 to be mindful of the length of our earnings call today I encourage listeners to refer to the fourth quarter earnings release for further details in the fourth quarter and full year of 2023, we achieved a host of remarkable miles.

Stones that underscores our leadership in the global Lidar industry.

In Q4, our net revenues exceeded RMB 561 million, an increase of 37, 1% year over year and 25, 9% sequentially quarterly total lidar shipments reached 87736 units.

An increase of 84, 6% year over year, and 84, 9% sequentially, our fourth quarter 2023 shipments alone surpassed our combined total for full year 2022.

Louis Hsieh: As we look ahead, the road ahead is filled with opportunity to broaden our impact. Our achievements thus far are just the beginning. With market-leading LiDAR technology and strategic partnerships worldwide, we are poised to capitalize on the evolution of intelligent driving, reducing accidents, saving lives, and creating a safer global transportation system. Louis, please go ahead.

Even more exciting for full year 2023, our net revenues increased by 56, 1% year over year to a new high of RMB, One 877 billion.

With a full year blended gross margin of $35, 2% above the top end of our guidance range of 30% to 35%.

Our 2023 total lidar shipments top 222000 up 176% year over year.

Louis Hsieh: Thank you, David. And hello, everyone. Let's go through our operating and financial figures for the fourth quarter and full year 2023. To be mindful of the length of our earnings call today, I encourage listeners to refer to the fourth quarter earnings release for further details. In the fourth quarter and full year of 2023, we achieved a host of remarkable milestones that underscore our leadership in the global LiDAR industry. In Q4, our net revenues exceeded RMB561 million, an increase of 37.1% year-over-year and 25.9% sequentially. Quarterly total LIDAR shipments reached 87,736 units, an increase of 84.6% year-over-year and 84.9% sequentially.

Meanwhile, our cumulative lidar shipments exceeded 300000 units by the end of 2023.

Sorry, the first automotive Lidar company worldwide to reach this mark.

We remain focused on.

Enhancing revenue scalability and cost efficiency and delivered positive operating cash flow.

For the first year underscoring our clear path to profitability.

Heartened by the stellar results.

Have set ambitious targets for the first quarter and full year of 2024, we anticipate that revenues in the range of 320 to 350 million RMB in total shipments to exceed 50000 units in the first quarter.

This muted guidance is attributable to two main factors.

First a significant slowdown in a robo taxi business compared to last year.

It is crucial to note.

Given the reasonable price discounts granted to certain large robo taxi customer the.

The suspension of deliveries to that customer will not hinder our ability to meet our gross margin target.

Despite this setback demand for the rest of our a M line Lidar products remains strong second the first quarter of the year traditionally in March the slow season for China's automotive industry due to the new year's holiday, both Oems and suppliers stroke.

Louis Hsieh: Our fourth quarter 2023 shipments alone surpassed our combined total for full year 2022. Even more exciting for full year 2023, our net revenues increased by 56.1% over a year to a new high of RMB 1.877 billion, with a full year blended gross margin of 35.2% above the top end of our guidance range of 30 to 35%. Our 2023 total LiDAR shipments topped 222,000, up 176% year-over-year

Typically pull forward production and deliveries to the fourth quarter of the preceding year.

Slide our shipments accelerates our revenue mix will transition from autonomous mobility led including Robo taxi and industrial robotics to Adas led in 2020 for Adas revenues are projected to increase from below 40% of our revenues in 2023 to approximately.

60% in 2024.

The first quarter of 2024 will be a transitional quarter with steady growth in robotics and strong growth in ddos accompanied by a drop in robo taxi contribution.

Louis Hsieh: Meanwhile, our cumulative LiDAR shipments exceeded 300,000 units by the end of 2023, making Hesai the first automotive lidar company worldwide to reach this mark. We remain focused on Enhancing revenue scalability and cost efficiency and delivered positive operating cash flow for the first year, underscoring our clear path to profitability, hardened by these stellar results. We have set ambitious targets for the first quarter and full year of 2024. We anticipate revenues in the range of 320 to 350 million RMB and total shipments to exceed 50,000 units in the first quarter. This muted guidance can be attributed to two main factors.

Thereafter, our outlook for 2024 is highly optimistic with a significant uptick in revenues and shipments expected in the second quarter of 2020 for.

This optimism is bolstered by the addition of 13 as Sop vehicle models and six S. O P. Eight us Oems in the second quarter alone.

We believe this will lead to an approximate three times quarter over quarter increase in total lidar shipments for about 150000 units in the second quarter of 2024.

By the end of Q2 2024, we anticipate our Sop for 'twenty six vehicle models from 12, eight us Oems we are poised for an even greater surge in shipment figures in the second half of 2024.

We expect over 200000 light our shipments per quarter in the second half of 2024, as we expect 12 OEM, representing approximately 40 vehicle models to Sop by the end of this year.

Louis Hsieh: First, a significant slowdown in our robo-taxi business compared to last year. It is crucial to note that given the reasonable price discount granted to a certain large Robotaxi customer. The suspension of deliveries to that customer will not hinder our ability to meet our gross margin target. Despite this setback, demand for the rest of our AM line LiDAR products remains strong. Second, the first quarter of the year traditionally marks the slow season for China's automotive industry.

These projections are based on current customers forecast and may be subject to change.

Our revenue guidance for full year 2024 stands firm in the range of U S dollars $450 million, an increase of $50 to 70% year over year means.

Meanwhile, we expect to maintain a blended gross margin within the 30% to 35% range for the full year of 2024, a testament to our robust cost management systems and growing economies of scale.

Furthermore, we expect our commitment to operational excellence and prudent expense management strategies to help us achieve profitability in the fourth quarter of 2024.

Louis Hsieh: Due to the New Year's holiday, both OEMs and suppliers strategically pull forward production and deliveries to the fourth quarter of the preceding year. As ADIS LiDAR shipments accelerate, our revenue mix will transition from autonomous mobility-led, including robotaxi and industrial robotics, to ADIS-led in 2024. ADIS revenues are projected to increase from below 40% of our revenues in 2023 to approximately 60% in 2024. The first quarter of 2024 will be a transitional quarter with steady growth in robotics and strong growth in ADAS, accompanied by a drop in robo-taxi contributions. Thereafter, our outlook for 2024 is highly optimistic, with a significant uptick in revenues and shipments expected in the second quarter of 2024. This optimism is bolstered by the addition of 13 SOP vehicle models and six SOP ADAS OEMs in the second quarter alone.

To wrap up the Si.

Defined by our unwavering commitment to reducing traffic accidents, saving lives and making global transportation safer for everyone.

We are firmly committed to delivering on our promise to our customers partners and shareholders. This concludes our prepared remarks for today operator, we are now ready to take questions.

Yes.

If you wish to ask a question. Please press star one on your telephone and wait for your name to be announced if you wish to cancel your request. Please press star two if you're on a speakerphone. Please pick up the handset to ask your question.

Okay.

<unk>.

We wish to ask a question to management in Chinese immediately repeat your question in English for the sake of clarity.

Please ask one question at a time management will respond and then feel free to follow up with me.

Your first question comes from Cindy Huang with Morgan Stanley. Please go ahead.

Hi, Thanks for taking my questions and congratulations on strong results.

So my first question is regarding the dispute with U S. D O D.

Asking all of the elements and will there be any impact in terms of working with Iraq Oh, yes.

Thank you Sandy this is Louis I'll take that first and then David can chime in.

Yes for the 12 months 60, as we have said in our statement.

After January 31st one where we're putting the D. O D list, we don't know why so we're trying to ascertain that as as we've said very clearly in the past too our investors into the whole world, We do not work with the Chinese military.

We do not R. R like ours cannot do surveillance do not stored data.

Louis Hsieh: We believe this will lead to an approximate three times quarterly over quarter increase in total LiDAR shipments for about 150,000 units in the second quarter of 2024. By the end of Q2, 2024, we anticipate SOP for 26 vehicle models from 12 ADAS OEMs. We are poised for an even greater surge in shipment figures in the second half of 2024. We expect over 200,000 LiDAR shipments per quarter in the second half of 2024, as we expect 12 OEMs representing approximately 40 vehicle models to SOP by the end of this year. These projections are based on current customers' forecasts and may be subject to change.

And we are only for civilian use and commercial use only so we made that very very clear.

So we have now asked the D O D for information as to why it wasn't a list we have moved forward with the legal proceedings, but at this point, we don't want to comment further given the sensitivity of litigation, but that's that's where it stands as far as.

Next on U S Oems.

Certainly has a reputation of effect.

And it has.

With us in a negative way.

So we.

We continue to monitor it we're still in discussions with our OEM customers, but it's certainly not something that we wanted to happen and we will do everything we can to get removed from that list. We don't believe it's justified.

Yes, yeah. Thank you Louis I think Louis has made our position very clear and we do not.

Louis Hsieh: Our revenue guidance for full year 2024 stands firm in the range of U.S. dollars 400 to 450 million, an increase of 50 to 70 percent year over year. Meanwhile, we expect to maintain a blended gross margin within the 30 to 35 percent range for the full year of 2024, a testament to our robust cost management systems and growing economies of scale. Furthermore, we expect our commitment to operational excellence and prudent expense management strategies to help us achieve profitability in the fourth quarter. To wrap up, Hesai is defined by our unwavering commitment to reducing traffic accidents, saving lives, and making global transportation safer for everyone.

We are not a military company and it was those acquisitions are false so I will not repeat that I think what I would try to at our two things a is and it is true that it's becoming an increasing increased concern of especially the U S Oems that and geopolitics economy part of the question.

And it is hurting us and of course this is not a company specific issue its become a AA.

A global issue that any U S Oems.

We will have the concerns using our parts directly from China. So that's why we're working very diligently with them hopefully to resolve the issue.

On top of what I like to comment is that it is also becoming clear that because geopolitics is going to become an issue.

Remember those European and American Oems the premium brands. They also have a significant size of the market in China at the sometimes up to 50% and Brazil is for those.

Operator: We are firmly committed to delivering on our promise to our customers, partners, and shareholders. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Thank you. Thank you, if you wish to ask a question, cancel your request. For the benefit of all participants on stage, if you wish to ask a question... For the sake of clarity and order, please ask... will respond, and then feel free to ask your first question, starting with, "Hi."

Cars and.

Actually we become a preferred vendor because they they like us anyways, but they definitely wanted to use us.

Or a Chinese brand in China for obvious reasons. So.

On the flip side of.

It is not great that geopolitics, there's a covenant issue across the border.

And it is impacting our U S business for sure, but they also build cars in China and its a significant volume and for that we don't have any problems there.

That is not a concern. So that is also a part of the equation that I think it's important to us.

Cindy: Thanks for taking my questions, and congratulations on splendid results. So my first question is regarding the dispute with USDOD. Is there any update on the development of the dispute? And will there be any impact in terms of working with US OEM? Thank you, Cindy. This is Louis.

To answer your question. Thank you, David and Lewis and my second question is really that too already shipment forecast.

Despite 40, new model launches in the pipeline and demand and demand their models are super volatile.

Louis Hsieh: I'll take that first, and then David can chime in. Yes, for the 1260, as we had said in our statement after January 31st, when we were put on the DOD list, we don't know why, so we're trying to ascertain that. As we've said very clearly in the past to our investors and to the whole world, we do not work with the Chinese military. We do not – our LIDARs cannot do surveillance, and do not store data.

That's helpful I apply any adjustment to Oems over there from a cost and how would you respond to the rapid odor chance.

Oh, you mean order changed for the positive or the negative.

Both weight, Okay. I think you you've known me if you guys know me for many many years.

I always build a discount into the forecast.

So our actual orders are much higher than the numbers we give.

So that is already built in.

As far as upside surprises, we have the capability with our manufacturing facility to meet almost any demand level.

Louis Hsieh: And we are only for civilian use and commercial use only. So we've made that very, very clear. So we have now asked the DOD for information as to why we're on the list.

Our efficiency in manufacturing and Hertz and also because of our automation and our access to raw materials. So upside is always good in fact, we were very very happy to to do the partnership with the auto where the Mega and the L. L Mega <unk>.

Louis Hsieh: We have moved forward with the legal proceedings, but at this point, we don't want to comment further, given the sensitivity of litigation, but that's where it stands. As far as effects on U.S. OEMs go, it certainly has a reputational effect, and it has impacted us in a negative way. So we continue to monitor it. We're still in discussions with our OEM customers, but it's certainly not something that we want to happen, and we will do everything we can to get removed from that list because we don't believe it's justified. Yes, yes, thank you, Louis.

Tendered equipment are light ours and it was just launched and then on their MPV their new L. L.

It was seven and Elliott models Pro will now be standard equipment to help us I bite ours used to only be the Max version that alone will do the take rate from the auto from 30 in the 30% range plus to probably 60% to 80%. So you think about that as hundreds of thousands of orders over the next couple of years. So there's very little we have upsides.

Prices and then any kind of downside surprises.

Obviously can handle because we discount to you the number we gave for our aligned our deliveries.

David Li: I think Louis has made our position very clear, and we are not a military company, and those accusations are false. So I will not repeat them. I think what I would try to add are two things. One is, and it's true that it's becoming an increasing concern, especially for U.S. OEMs, that geopolitics is becoming part of the equation, and it is hurting us. And of course, this is not a company-specific issue. It's becoming a global issue that any U.S. OEM will have concerns using parts directly from China. So that's why we are working very diligently with them, hopefully to resolve the issue. On top of that, what I'd like to comment is that it is also becoming clear that because geopolitics is going to become an issue, and remember that European and American OEMs, the premium brands, they also have a significant share of the market in China, sometimes up to 50 percent.

So again, let me.

And talk about this topic from a technical standpoint, so one thing worth noting is that we actually build a standard product. We always called out 80 128. It was like not specific to any customers because it's the same lidar the only differences in some of the communication software and some of the mountain which is a minute.

No change.

It means that and yes, you're absolutely right there are ups and downs across some $40 50 car models that we're expecting to ship and it is impossible to predict 60.

Months down the road, but if you look at the aggregate effect.

It is not very difficult to understand how many.

Of the units will be needed across the entire especially price category right well. We are happy to see is that it used to be more on the premium category and now it's penetrating down to the 150000 RMB level, which is much bigger market.

David Li: And actually, we became a preferred vendor because they like us anyways, but they definitely wanted to use us or a Chinese brand in China for obvious reasons. So on the flip side, it is not great that geopolitics is becoming an issue across the border, and it is impacting our U.S. business for sure. But they also build cars in China, and it's a significant volume. And for that, we don't have any problems.

Given that we have many car models now in a more cheaper part of that bracket and we're actually more confident that with the blended volume and it will be a very robust and is steadily growing.

Volume this year.

Thank you that's very clear and can I follow up with one more question on next generation product.

David Li: That is not a concern. So that is also a part of the equation that I think is important to us. That's your question. Thank you, David and Louis.

So how do we bridge the gap on the other transition from 81 to E. Two.

David Li: And my second question is related to our shipment forecast. The 540 new model launches in the pipeline and demand and model sales are super volatile. Does HSI apply any adjustment to the OEM's order forecast? And how would you respond to a rapid order? Do you mean order change for the positive or the negative? Okay, I think you've known me. You guys have known me for many, many years.

One two.

Yes, yes. This is a great question. Thank you.

So I think there are two parts of the strategy first.

And if you remember our overarching thesis has always been a simple term called Morse law.

If you look at it we're Moore's law does is that there are actually two ways of using Moore's law, one way is that and you try to keep.

The price range, its like Youre CPU right, but that your performance almost doubles every 18 months or so so that's one of the way we're doing essentially this is the past the 85 to 12 months is taking in that says that 85 to 12 will always stay at the range of the 80 128.

Louis Hsieh: I always build a discount into the forecast. So our actual orders are much higher than the numbers we give, so that is already built-in. As far as upside surprises go, we have the capability with our manufacturing facility to meet almost any demand level because of our efficiency in manufacturing at Hertz and also because of our automation and our access to raw materials. So upside is always good. In fact, we were very, very happy to do the partnership with Li Auto where the Mega and the LLN, Mega's standard equipment is LIDAR, and it was just launched, and then on their MPV, their new L7 or their L7 and L8 models, Pro, will now be standard equipment to have PLOS-I LIDARs. It used to only be the MAX version.

On the price.

But as you can already tell it is eight times more resolution and a.

Roughly 50% more on a range at the similar price range. So this is exactly what Moore's law that to a lot of the consumer electronics range of CPU didn't did have its price overtime right becomes zero rate of course that didn't happen.

<unk> said that we also recognize that for lidar to be widely deployed to more vehicles, not just hundreds of thousands of them, but tens of millions of them.

David Li: That alone will bring the take rate from the auto in the 30% range plus to probably 60% to 80%. So you think about it; that's hundreds of thousands of orders over the next couple years. So we have the upside surprises, and then any kind of downside surprises we obviously can handle because we discount to you the number we give for our LIDAR devices. So again, let me talk about this topic from a technical standpoint. So one thing worth noting is that we actually built a standard product. We always call it AT128.

The mass market needs, a cheaper lidar and that's possible to be a more and more small of course.

If we try to build a more affordable version of it it wouldnt have the full pro forma for performance of the 85 to 12, it will still be reasonably good, especially definitely better than 2008, but it could be cheaper over time, if you don't need the full performance of 85 that is the direction. We're looking at.

We're not quite there yet and we will release information as they become available, but this will definitely be another trial, especially for the Chinese market that people want and we know we have the technology platform to support that.

David Li: It was not specific to any customers because it's the same LiDAR. The only difference is some of the communication software and some of the mounting, which is a minimal change. It means that, yes, you're absolutely right. There are ups and downs across some 40, 50 car models that we're expecting to ship. And it's impossible to predict for months down the road. But if you look at the aggregate effect, it is not very difficult to understand how many units will be needed across the entire specialty price category, right? What we are happy to see is that it used to be more in the premium category, and now it's penetrating down to the 150,000 RMB level, which is a much bigger market.

Thank you that's very clear.

Thank you.

Thank you. Your next question comes from Tina Hu with Goldman Sachs. Please go ahead.

Thank you very much a high management congrats on the result, and the strong gross profit gross margin number I have four questions. So David are you. Just now you mentioned that by 2025, there will be you guys well accumulatively.

Chip 2 million by dollars, so which means about $1 7 million in 2024 and 2025 together. So I'm. Just wondering is that also a conservative number like a bear case scenario that you've given or if this is more of like a place case scenario. Thank you.

David Li: Given that we have many car models now in the cheaper part of the bracket, we're actually more confident that, with the combined volume, it will be a very robust and steadily growing volume this year. Thank you, that's very clear. And can I follow up with one more question on next generation products? So how do we bridge the gap amid the transition from AT128 to AT512? Yes, yes, this is a great question.

Thank you Tina I'll take that since you're giving some numbers question I think.

The 2 million cumulative figure is realistic and probably leaning towards the parasite. So I think as David mentioned in his remarks, the demand for lidar as it moves down to the affordable car the mid range and lower range.

The adoption of Lidar in new EV vehicles is going to just explode.

David Li: Thank you. So I think there are two parts to this strategy. First, if you remember, our overarching thesis has always been a simple term called Moore's law. If you look at it, what Moore's law says is that there are actually two ways of using it.

I think there was a Holy Grail mentioned in 2020.

All of the Lidar makers in the world of reaching 1 million units by 2025, I believe her side will be the only company to actually do so by next year. So yes. It was a 300000, we've done now six or 700000 for this year and we expect to ship over a million units in 2025.

David Li: One way is that you try to keep the price range, it's like your CPU, right? But then your performance almost doubles every 18 months or so. So that's one of the ways we're doing it. Essentially, this is the path the AT512 is taking, in the sense that the AT512 will always stay within the range of the AT128 in terms of price. But, as you can already tell, it is eight times more resolution and roughly 50% more on the range at a similar price range.

And that's partly because of what David discussed.

In a market, where we have high end 80, 512, and we have lower end versions for the mass market cars more.

More affordable those two together.

You'll have to wait to hear the details, but the those who together will generate expected units of well over $1 million for 2025.

David Li: So this is exactly what Moore's Law did to a lot of consumer electronics, right? Your CPU didn't just half its price over time, right? It became zero, right? Of course, that didn't happen.

I also believe attendance David I also believe this is could be on the more conservative side for another.

David Li: Having said that, we also recognize that for lidars to be widely deployed to more vehicles, not just hundreds of thousands of them, but tens of millions of them, the mass market needs a cheaper lidar. And that's possible, too, via Moore's Law. Of course, if we try to build a more affordable version of it, it wouldn't have the full performance of the AT512, but it will still be reasonably good, especially definitely better than AT128.

So in the consumer market, especially the car market in China, It moves very fast.

Bodies kind of looking at each other and what they do and then they try to in cooperate something into their car car model that will rollout in the next 18 months. So today's projections definitely based on a bottom up projection of the numbers, we already have but if you watch very closely for the media for the specialty.

Past, a month or two everybody's mentioning like ours. If you look at all the all the car releases and they always only mentioned now very few things right. One of them is light are very specific.

David Li: But it could be cheaper over time if you don't need the full performance of AT512. That is the direction we're looking at. We're not quite there yet.

David Li: And we will release information as it becomes available. But this will definitely be another trend, especially for the Chinese market, that people want. And we know we have the technology platform to support that. Thank you. That's very clear.

And the other is an 800 volt charging.

What was the other thing people talk about.

I I couldn't even remember I think it is one of the top three things that as I mentioned across.

Every car release and of course lot of the Oems are now just claiming that chart, we're going to make it a standard because this has become the symbol of the level of an intelligent driving.

Tina Hou: Thank you. Your next question: Part 2 with Goldman Sachs, go ahead. Thank you very much.

Tina Hou: Hi Management. Congratulations on the result and the strong growth margin number. I have a question.

That not a competition I cannot afford losing so so I think this snowball effect.

We know it will start its start to moving and ramping up really quickly. So that's why I think the current best estimate today from the bottom up numbers could be on the conservative side.

Louis Hsieh: So David, just now you mentioned that by 2025, you guys will accumulate ship 2 million LIDARs, which means about 1.7 million in 2024 and 2025 together. So I'm just wondering, is that also a conservative number, like a worst case scenario that you're given, or is this more of like a best case scenario? Thank you, Tina.

Okay.

You know that.

As we move into this year, we're actually our lidar will become platform Lidar for some of these top five or six Oems in the world. So they are actually going to be moderate volume or is there going to be actual on the platform was rolled out to the whole new fleet of EV cars, whether it's at the low end or the high end just may be different lidar.

Louis Hsieh: I'll take that since you've given some numbers questions. I think the 2 million cumulative figure is realistic and probably leaning toward the bearish side. So I think, as David mentioned in his remarks, the demand for LIDAR as it moves down to the affordable car mid-range and lower range, the adoption of LIDAR in new EV vehicles is going to just explode. So I think there was a holy grail mentioned in 2020 by all the LIDAR makers in the world reaching 1 million units by 2025. I believe Hesai will be the only company to actually do so by next year. So, yes, if you add the 300,000 we've done now, six or 700,000 for this year, and we expect to ship over a million units in 2025.

But all from my side. So then those that's why Dave is that the bottom was up but the number is actually can be much larger, especially if it's becomes standard equipment on all their EV models, which I believe will happen in the next several years to many of the top auto manufacturers.

And thirdly, the competing factors like aerodynamic coefficients tired of it.

Yeah.

Thank you so I'm going to answer your question really helpful and comprehensive yes, yes, and I do agree that.

It's definitely went up the top if not the.

Top functions that gets mentioned by the Oems recently and then.

Can I have a follow up question is in terms of the Opex. So wondering what is our SG&A and R&D as well as Capex budgets for 2024 and also do we have like an estimated time of non-GAAP net profit breakeven. Thank you.

Louis Hsieh: And that's partly because of what David discussed, a market where we have the high-end AT512, and we have lower-end versions for the mass market cars that are more affordable. Those two together, you'll have to wait to hear the details, but those two together will generate expected units of well over 1 million for 2025. I also believe, Tina, David, I also believe this could be on the more conservative side.

Yes, I think it's a good question Opex was higher in 2023.

Because we had a very large expansion year right. So we went into we went into we built a herd center rebuilt Maxwell R&D innovation Center.

And we also had rolled out a lot of new programs on the Adas side. So our hiring went from I think we had 905.

David Li: For another, the consumer market, especially the car market in China, moves very fast. Everybody's kind of looking at each other and what they do, and then they try to incorporate something into their car models that will roll out in the next 18 months. So today's projection is definitely based on a bottom-up projection of the numbers we already have. But if you watch very closely in the media, especially the past month or two, everybody's mentioning LiDARs. If you look at all the car releases, they always only mention a very few things, right? One of them is LiDAR, very specific.

People are trying to find people after a set of layoffs in 2022.

There's 2030 people with over 1100 people.

That was set to slow R&D us.

And G&A hiring will not will not increased much and sales and marketing will grow.

But together I think the total amount of increase.

The increase in Opex will be much lower than the revenue increase and as long as we maintain 30% to 35% gross margins. If we hit $550 to 600 million in U S dollars will be profitable from a GAAP basis and from a non-GAAP basis, we should be very close to breakeven or profitable in the second half of this year as volumes at over 200000, okay.

David Li: The other is the 800-volt charging. What was the other thing people talked about? I couldn't even remember.

Order and for Q4 of 2024 and a few quarters.

David Li: I think it's one of the top three things that is mentioned across every car release. And, of course, a lot of the OEMs are now just claiming that, sure, we're going to make it standard because this has become the symbol of the level of intelligent driving. And that's not a competition I can afford losing.

We hope to get GAAP.

Profitable for that quarter, because of course, Q1, and 2035 was our slowest quarter seasonally.

So that will slow down, but overall, we expect to be GAAP profitable in 2025.

Thank you so much Lewis.

Yes.

Yes.

David Li: So I think this snowball effect, we know it will start, it starts moving and ramping up really quickly. So that's why I think the current best estimate today from the bottom up numbers could be on the conservative side. Tina, you know that as we move into this year, our LiDAR will become platform LiDAR for some of these top five or six OEMs in the world. So they're actually going to be, volume-wise, they're going to be on the platform, which rolls out to the whole new fleet of EV cars, whether it's at the low end or the high end, just may be different LiDARs, but all from Hes So then those, that's why David said the bottom is up, but the numbers actually can be much larger, especially if it becomes standard equipment on all their EV models, which I believe will happen in the next several years with many of the top auto manufacturers. Yeah, the third one, the competing factor is like aerodynamic coefficient, now I remember. Yeah.

No negatives.

Comes from Jesse <unk> with Bank of America. Please go ahead.

Thank you management for taking my question. My first question would be related to our I shouldn't.

So apart from reorder could you also shed some light on beach, who will be the top either full client and how would the volume looks like in 'twenty 'twenty four.

Is that true.

Yeah, I think we don't have the right to mention their food names, but the auto is.

Roughly going to be more than half of our total volume, but the rest of the top five customers. They will each take at least 20 to 30000 units.

I think you probably will be able to figure out the names and as some of them are already had been disclosed, but we won't be able to associate associate those numbers directly with them. So essentially this is a.

Roughly half from the auto and half from the rest of the.

The top play.

Players Jesse without disclosing names the top five automakers in China will start shipping with our Lidar this year.

That's why the numbers got it.

Okay got it. Thank you my second question would be related to D. E. S. P a smoke or negotiation with that OEM. So if we take this as a revenue guidance of you saw that 400 to 450 million pack pairing with our shouldn't men or delivery guidance.

It sounds like he does a lidar E&C Trump wouldn't be as much as 10%. So could you maybe share some details about how are we dealing with our clients on ESPN.

Tina Hou: Thank you so much. That was really helpful. Yes, yes, and I do agree that it's definitely one of the top, if not the top, the top functions that get mentioned by the OEM. And then, can I have a follow-up question in terms of the OPEX, so I was wondering what our SG&A and R&D as well as CAPEX budget for 2024? And also, do we have like an estimated time of non-GAAP net profit breakeven? Yes, I think that's a good question. OPEX was higher in 2023 because we had a very large expansion year, right? So we went into, we went into, we built Hertz Center, we built Maxwell R&D Innovation Center. And we also rolled out a lot of new programs on the ADES side. So our hiring went from, I didn't get 905, people, how to identify people after a set of layoffs in 2022. There are 23 of you, but a little bit over 1,100 people. That was set to slow.

E S. P and then, especially we have a high concentration on I'll be able to and then be apart from that we also have more shipment on F. T series as well. Thank you.

I think the I mean, most of the product is in the eight T series four eight us so it's negotiated by contract and usually it's relatively.

Similar price for the whole year.

The ASP decline for 2024 is higher than 10%, it's actually closer to 20%.

But the key thing is that our cost goes down even faster. So we can still maintain the margins on a blended basis. Because you remember we still have the very high gross margin business, a robo taxi and robotics. So our gross margin is still intact with 33, 5%, but we're able to absorb any kind of a negotiated price.

Reductions better than anyone else in the market. So we have the ability to take down price, even though we don't obviously don't like to do it but the price decrease will be a little bit higher than 10%.

Yeah.

Got it got it. Thank you and also just from Oh, Yes, that's a real quick I want to quickly add.

Louis Hsieh: R&D and GNA hiring will not increase much, and sales and marketing will grow. But together, I think the total amount of the increase in OPEX will be much lower than the revenue increase. And as long as we maintain 30 to 35 percent gross margins, if we hit 550 to 600 million U.S. dollars, we'll be profitable from a gap basis. And from a non-gap basis, we should be very close to breakeven in the second half of this year as volumes hit over 200,000 a quarter. And for Q4 of 2024, in a few quarters, we hope to be GAAP profitable for that quarter because, of course, Q1 in 2025 is our slowest quarter seasonally, so that will slow down. But overall, we expect to be GAAP profitable in 2025. Thank you so much.

My comments on this so and also remember this is also due to a trifecta of economies of scale right and it is true that the ASP is declining and probably faster than we expected but are.

More importantly, the <unk>.

Total volume growth, it's much faster right.

So that you have to combine those factors to figure out I mean, just you can just look at Q4 and you can see that once we start manufacturing in high volume the kinds of skills really kicked it kicks in on the gross margin.

Got it got it. Thank you so much. So I also wanted to follow up on top of that fourth quarter gross margin. So previously we were still doing the transition. So how is that transition on the 80 series and then are we having any kind of like a product or a great improvement.

Improvement in 2024.

Louis Hsieh: Thank you again, from Jesse Lowe with. Thank you for taking my question. My first question will be related to our 10-minute orders. So, apart from Lee Odo, could you also shed some light on who will be the top other four clients and how the volume would look in 2025? Yeah, I think we don't have the right to mention their full names.

I'm sorry can you you transition the transition on the 18th smooth right no issues.

Two E T. R. A T 128 member from the old 80, Oh, Yeah, right that that is close to completion and it is a.

Very good and very solid upgrade and so and then also it has gone through more validation that the previous ones. So it is a very smooth transition.

There's one for a small number of cars one or two this year that will still ship with your old eight T cause it was validated last year, but it's very low numbers. So I think a T. The new a T is certainly going to be 90, 597% of and that has been agreed that it will it will finish in the transition there is yeah. So.

Louis Hsieh: But Li Auto is roughly going to be more than half of our total volume, but the rest of the top five customers will each take at least 20,000 to 30,000 units. And I think you probably will be able to figure out the names, as some of them have already been disclosed, but we won't be able to associate those numbers directly with them. So essentially, this is roughly half from Li Auto and half from the rest of the top players.

Yeah. I think this is a very smooth transition and F. T is rolling out of the numbers arent huge yet, but there is getting there. It is getting some traction and then of course E. T comes out next year.

Louis Hsieh: Jesse, without disclosing names, the top five automakers in China will start shipping with our LiDAR this year. That's why the numbers are going up. My second question would be related to the ASP adjustment or negotiation with OEN. If we take this revenue guidance of US$400-450 million, coupled with our shipment or delivery guidance, it sounds like the ADA's LIDAR ASP drop wouldn't be as much as 10%. Could you maybe share some details of how we're dealing with our clients on the ASP?

So people.

Yes.

And also 85.

Yeah.

Alright. Thank you. So much this is very clear that's all for me.

Thank you.

Thank you.

Next question comes from bin Wang with Deutsche Bank. Please go ahead.

Thank you I have two questions number one for Paolo crews because of course.

Trouble.

So what's the volume forecast Poland.

Accompanying impactful alexey <unk> honest limbo crews.

Second question is about.

And of course, some uptick in the number of full quota really high despite your product mix actually deteriorated, which means much more athos. Neither in the number of full quota. However, you have to pick up more than 10 percentage increase kind of what's the reason for that.

Louis Hsieh: And then, especially, we have a high concentration on Lyoto. And then, apart from that, we also have more shipments on the FT series as well. Yeah, I think the, I mean, most of the product is in the AT series for ADAS. So it's negotiated by contract, and usually it's relatively a similar price for the whole year. The ASP decline for 2024 is higher than 10 percent. It's actually closer to 20 percent.

What's the change in the first quarter.

It'll be the similar product mix in the coming quarter. Thank you.

Thank you or being I think we don't discuss individual customers.

So I think it is a first again, we won't be able to comment specific on individual customers without their permission, but I think you're right that we do see a significant citadel of the robo taxi market and it would be hard for us to speculate on whether its a technical.

Louis Hsieh: But the key thing is that our cost goes down even faster, so we can still maintain the margins on a blended basis. Because, remember, we still have the very high gross margin business of robo-taxi and robotics. So our gross margin is still intact at 30-35 percent, but we're able to absorb any kind of negotiated price reductions better than anyone else in the market. So we have the ability to take down prices, even if we obviously don't like to do it, but the price decrease will be a little bit higher than that. Got it, got it. Thank you. And if I may, just follow up.

A reason or.

Economics read them, but then the decline and the slowdown of some of the orders it is truth right. So.

Of course, the the flipside is that we see actually better momentum on the Adas side, and it's especially the penetration rate and unit shipment and is and also the new car models coming in and is exceeding our expectation so they they kind.

Of cancel out each other.

For the year to help us to maintain our very strong growth.

David Li: Yeah, sure. Sorry, real quick; I want to quickly add my comments on this. Also, remember that this is also due to a strong effect of economies of scale, right? And it is true that the ASP is declining probably faster than we expected, but more importantly, the total volume growth is much faster, right? So you have to combine those factors to figure out what it is.

But again as I said, we are not a robo taxi Lidar company, we are not a Adas Lidar company. We are a lidar company with very strong semiconductor capability on our manufacturing capability.

It is it was a true that when a robo taxi was growing very fast we capture the majority of the market now it's slowing down.

Yeah, I think that does it hurt us to continue to focus on that much faster growing part of the market, which is eight us so that.

That's the one thing you recall when I made when we made our forecast for this year of $400 million to $450 million in revenue at that time, our eight us.

David Li: I mean, you can just look at Q4, and you can see that once we start manufacturing at high volume, the economies of scale really kick in on the growth. Are we having a further product or cost upgrade for 2024? The transition from AT is smooth, right? No issues, right? AT to ET, or not? AT 128. Remember from the old AT?

Lidar count was about 400000.

That is now up to over 600000, and I still left the revenue intact at $440 million to $50 million just to be conservative given the impact from the slowdown in robo taxi. So we didn't take the number up yeah. So that that that shows you that because David said, it kind of evens itself out and as your question on the gross margin for Q4, you have to remember.

David Li: Oh, yeah, yeah, yeah, right. That is close to completion, and it is a very, very solid upgrade.

That's that's our busiest quarter and that's at a time when we still had the higher pricing from 2023 and also on top of it.

David Li: And so, and this also, it has gone through more validation than the previous ones. So it is a very smooth transition. I think there's one for a small number of cars, one or two this year, that will still ship with the old AT because it was validated last year.

So the slow down of the Robo taxi really starting this year. So last Q4, it was still a good quarter.

We do expect that this year and not be able to ship.

Hi, gross larger a larger volume robo taxi like ours, I think that has been already factored in and it is close to everyone but.

David Li: But they are very low numbers. So I think AT, the new AT is certainly going to be, you know, 95, 97% of the... And it has been agreed that it will finish during the transition. Yeah, yeah. So, yeah, I think this is a very smooth transition. And FT is rolling out. The numbers aren't huge yet, but it is getting some traction. And then, of course, ET comes out next year in S&P and also in 85 clubs.

Last Q4 was still very strong for both off don't read. This I think is robotics is still growing so that market will still grow 30% to 40% this year and eight us of course will grow well over 100% this year and so together on a blended basis, we still expect very very strong revenue growth of 50% to 70%.

<unk> year over year and that and then obviously the shipment numbers keep going up they don't go down so it's gone from 400000 to 600000 and still climbing.

Louis Hsieh: Thank you so much. This is very clear. That's all.

To answer both of your questions won't be.

Bin Wang: Thank you. Your next question. Thank you. I actually have two questions. Number one is about the cruise, right? Because the cruise seems to be a problem.

Yes. Thank you.

Thank you.

Thank you. Your next question comes from James <unk> with H T. S. C. Please go ahead.

Yeah.

Hi morning, Oh here my wife.

Yes.

Go ahead.

Bin Wang: So what's your volume forecast for this company, impact for the next year's volume? And number one, about cruise. The second question is about the growth margin in the number four quarter being really high, despite your product mix actually deteriorating, which means much more ADA in the number four quarter. However, you actually got more than 10% margin increase. Kind of what's the reason for that?

Uh huh.

My question.

My first question.

Of all the Robo taxis.

Robot, we noticed the demand longsword over to Hudson.

Hold on.

Uh huh.

Almost all the routing.

And really this year.

Could you give us a guidance for the treatment for the robo taxi and the robots. This year also to rehab and plan to launch or a specific collateral for the humanoid robots in the field.

Louis Hsieh: What's the change in the first quarter? This seems to be a similar product mix in the coming quarter. Thank you. Thank you, Wang Bin.

So oh I see.

Uh huh.

Louis Hsieh: I think we don't discuss individual customers. Yeah, so I think, Wang Bin, first, again, we won't be able to comment specifically on individual customers without their permission. But I think you're right that we do see a significant slowdown in the robot taxi market. And it'd be hard for us to speculate on whether it's a technical reason or an economic reason.

So the second question is kind of a surprise because.

You were talking about a completely different industry and this is a very exciting industry.

That at some point it will use a large amount of lidar I think that's one topic and then I think your question is are we going to deal with humanoid robot this year.

David Li: But the decline and the slowdown of some of the orders is true. So, of course, the flip side is that we see actually better momentum on the ADA side, and especially the penetration rate and the units of shipment. And also the new car models coming in are exceeding our expectations. So they kind of cancelled out each other for the year to help us to maintain our very strong growth.

Yeah.

As far as I know, we don't have concrete plans to to do that.

The robot itself today.

But that could benefit from using a different types of our lidar technology.

Hopefully this answers your question and then your first question on the number of units for Robo taxi and robotics. The actual number of total units last year for Pandora X T and Q T was approximately 27000, we expect that number to still increase so it's not overall, it's not shrinking but.

David Li: But again, as I said, we are not a robot taxi LIDAR company. We are not an ADA LIDAR company. We are a LIDAR company with very strong semiconductor capability and manufacturing capability. It was true that when robot taxis were growing very fast, we captured the majority of the market. Now it's slowing down.

Because you know there is price reduction.

And also there maybe mix shift toward.

Lower priced Pandora.

<unk> X T C.

The revenue will not be.

Hi, basically robotics will grow robo taxi, what market would actually shrink year over year.

David Li: It actually doesn't hurt us to continue to focus on the much faster growing part of the market, which is ADAS. So Wang Bin, you recall when we made our forecast for this year of $400 million to $450 million in revenue. At that time, our ADAS LIDAR count was about 400,000. That is now up to over $600,000, and I still left the revenue intact at $400,000, $450,000, just to be conservative given the impact of the slowdown in RoboTaxi. So we didn't take the number up.

Okay, but the actual units is still going up.

Yeah.

Okay. Thank you.

Another question I won't who asked it.

The cooperation with a global OEM in the world.

See our roadmap the ramp up in the sales from the global Oems owner.

Depend down depending on which one but it's a much later volume.

So we don't have the specific numbers to announced yet and it is slower than the rest of the the China EV market.

So Jamie.

And there too the two that are referenced in our earnings release, we'll sop in 2025, so it's not 2024.

Okay I got it.

Louis Hsieh: But that shows you that, as David said, it kind of evens itself out. And as for your question on the gross margin for Q4, you have to remember that it's our busiest quarter, and that's at a time when we still have the higher pricing from 2023. And also, on top of it, so the slowdown of the RoboTaxi really is starting this year. So last Q4 was still a good quarter.

Thank you.

Oh, that's all my question. Thank you. Thank.

Thank you.

Thank you. Your next question comes from Michelle Zhang with Haitong International. Please go ahead.

Alright, Thank you for taking my question.

I just I think I have a few questions. The first one would be I.

Based on your estimation for shipments do you guys have an idea about.

The eight instruments wonderful industry.

24.

So it was like the whole industry for ADR shipments, yeah, Oh, the entire amount of Italian market yeah.

I think you'll probably have to refer to the third party reports kiss.

We don't have the.

Louis Hsieh: So we do expect this year not to be able to ship high gross margin, large volume RoboTaxi LIDARs. I think that has already been factored in, and it is close to everyone. But I think last Q4 was still very strong for both of the reasons.

The full projections for some of the Oems that we don't directly work with.

My my very rough estimate is probably a little more than double of our volume.

That's my guess I mean, I I mean, we we have to be very close to 50% of the global market.

Louis Hsieh: I think robotics is still growing. So that market will still grow 30%, 40% this year. And ADAS, of course, will go well over 100% this year. And so together on a blended basis, we still expect very, very strong revenue growth of 50% to 70% over a year. And then obviously, the shipping numbers keep going up. They don't go down.

Yeah.

And I think if you break it down.

Without getting into geographic I think China will roughly be.

67% 60, 70% of the global market.

Over the next several years so.

Given our position as the market leader in China, we have to be close to if not higher than 50% of the global market.

Okay got it thank you.

Operator: So it's gone from 400,000 to 600,000 and is still climbing, to answer both your questions. Yes, thank you. Thank you. See you next time! Hi morning. Can you hear my wife?

For everything from either for Adas side, there's always the other categories of life or Adas automotive there yeah.

Yeah.

And my second question would be for product.

For the AP 512, you guys have any order.

Unnamed Questioner: Yes. Go ahead. Oh, thank you. Thank you for taking my question. My first question is about Robotaxi and robots.

Did you receive any audit.

So that would be the future a level three product for the global Oems. We have I think we are openly disclose that we have a quite a significant.

Unnamed Questioner: We noticed that the demands for the Robotaxi cooled down, and humanoid robots are developing really fast this year. Could you give us guidance for the shipment for the Robotaxi and robots this year? Also, do we have any plans to launch a specific ladder for humanoid robots in the future?

Difficult number of art, if I had to ask you and some of them are in the very late stage.

Okay.

Thank you that'll be everything thank you.

Basically there is very strong interest for photo, but theres only samples available so orders won't come in until those samples are evaluated and contracts negotiated but.

David Li: So, uh, I think the second question is kind of a surprise because I think you're talking about a completely different industry. And this is a very exciting industry, and at some point, it will use a large number of lidars. I think that's one topic. And I think your question is, are we going to build a humanoid robot this year? As far as I know, we don't have concrete plans to make the robot itself today, but it could benefit from using different types of our LIDAR technology.

The orders will come in usually the year before or the year is actually ships.

Actually firm orders.

Okay.

Thank you. Your next question comes from Ron.

Please go ahead.

I think you meant.

So I'll take that question. So I have some question regarding demand side. So apart from link power have you out there any demand from Oems for equipping vehicles price below 200000, RMB with Schneider systems, and how much longer do we.

I anticipate it would take from either product you've heard it penetrated market for vehicles under this price point.

David Li: And hopefully, this answers some of your questions. And then your first question on the number of units for RoboTax and Robotics. The actual number of total units last year for Pandar XT and QT was approximately 27,000.

So with the projection that neither sales will exceed 1 million units.

Hey, Dan.

Is it taking into account that this morning will include sales driven by this category of vehicles.

Louis Hsieh: We expect that number to still increase. So it's not overall, it's not shrinking. But because there is price reduction in that, and also there may be a mixed shift toward lower-priced Pandora or XT units, the revenue will not grow very high, basically. Robotics will grow. RoboTaxi will not. It will actually shrink.

Besides being powered thank you.

So I didn't quite get the last question, but I'll answer the first one first so yes, we have most of your models and that is already in the pipeline that will be in the range or below the 200000 RMB range.

We do start to see a lot more.

Louis Hsieh: Okay, but the actual units are still going. Okay, thank you. May I have another question? I want to ask about cooperation with the global OEMs and where should we expect the ramp up in sales from the global OEM orders? Yeah, depending on which one, but it's a much later volume.

Request, considering using lidar as the standard configuration for more car car models in a range again as a snowball effect right.

Uh huh.

And in China market is always right.

Rolling right and it was they see somebody doing that and the customers will always refer to the Oh you have why can we have that does that mean this car is inferior in terms of intelligent driving than the competition. So that is becoming amplified very quickly.

Louis Hsieh: And so we don't have the specific numbers to announce yet, and it is slower than the rest of the Chinese EV market. So the two that are referenced in our earnings release will SOP in 2025, so it's not... Okay, I got it.

And we do start to see that in the next already seeing that but definitely for the the negotiations. We have are in the next year, which of course will be shipping.

Unnamed Questioner: Thank you. That's all my questions. Thank you. Thank you. The next question... Hello, thank you for taking my questions. I just, I think I have a few questions.

In 2025 and 2026.

The second question I, just didnt quite get you remember yeah on the second question remember the the trend globally, Evs in China, where over $8 million or so last year and that's still growing over the next 10.

Unnamed Questioner: So the first one would be, based on your estimation for AIDA shipments, do you guys have an idea about the ADA shipment for the whole industry in 2024? Berit Daixiang, Oh, the entire market? Yeah, the entire market. I think you probably have to refer to the third-party reports because we don't have the full projection for some of the OEMs that we don't directly work with. And my very rough estimate is it's probably a little more than double our volume. That's my guess. I mean, we have to be very close to 50% of the global population, not even slightly.

$10 million to $12 million over the next this year and next year I think is as we said earlier.

The penetration for intelligent driving systems at a level two plus three is going to increase even into the mass market cars below 200000, RMB second trend is as David mentioned as people asking for intelligent driving systems with Lidar that will push and I think we've already had discussions with Oems.

Where they will make it as standard equipment on all the reviews. So those two factors will cause that snowball effect and will take us easily over 1 million units in 2025 based on current discussions with Oems. So so.

David Li: And I think if you break it down, you know, without getting into geography, I think China will roughly be 67%, 67% of the global market over the next several years. So given our position as the market leader in China, we have to be close, if not higher, than 50% of them. I got it. Okay. Thank you. Not for everything.

I think a year ago. This was a much more heated topic when everyone is saying that we know the competition is difficult in China everyone's cutting cost.

What makes you think that people will take more light hours as opposed to less right and my answer stands.

Is.

Prices are only deflation sector people consider we should all go back to William who want right. If they make a variable car with no aid US right why would we even talk about Adas at all the reader is that just because exactly competition.

David Li: For ADAS. For ADAS, there are obviously other categories of life.

They need to use the best Bang for the Buck so dip.

David Li: For ADAS automotive data. And my second question would be for products. So for the AT512, do you guys have any orders yet?

A bunch of the Buck, but the band is defined defined differently based on the market.

I used to be the Big Entertainment screen now is really the charging in the Lidar. So everyone has asked me about it then this becomes the bang for the Buck. So that's why it's a it's becoming more popular that people realize with this little of investment your vehicle.

Unnamed Questioner: to receive any, That will be the future level 3 product for the global OEMs. We have, I think we have openly disclosed that we have quite a significant number of RFIs and RFQs, and some of them are in the very late stage. Thank you. That'll be it for my question. Thank you so much. Basically, there's very strong interest in 512, but there are only samples available, so orders won't come in until those samples are evaluated and contracts are negotiated. But the orders will come in usually the year before or right at the year it's actually shipped. It was actually firm water.

That stand out or at least not falling behind so that's the rationale.

And it's all similar to airbags, it's all about safety and actually making you drive more.

Driving experience much more pleasurable, where the car helps.

You'll take the stress off your you are having to be full attention on the road all the time.

So its safety and convenience and.

Louis Hsieh: Your next question... Xiao Thank you. Thank you. Thank you. I thank you, man.

Driving enjoyment, that's pushing the lidar development.

Alright, Thank you that's fair okay.

Okay.

As there are no further questions now I'd like to turn the call back over to the company for closing remarks.

Unnamed Questioner: Thanks for taking my question. So I have some questions regarding the demand side. So apart from Link Power, have you observed any demand from other OEMs for equipping vehicles priced below 200,000 RMB with LiDAR systems? And how much longer do we anticipate it would take for LiDAR products to further penetrate the market for vehicles under this price point? And also, with the projection that LiDAR cells will exceed 1 million units by 2025, is it taken into account that this volume will include cells driven by this category of vehicles besides Link Power? Thank you. So, I didn't quite understand the last question, but I'll answer the first one first.

Thank you once again for joining us today. If you have further questions. Please feel free to contact our IR team. This concludes today's call and we look forward to speaking to you again next quarter. Thank you and goodbye.

This concludes today's conference call you May now disconnect. Your line. Thank you.

Keith.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

David Li: So, yes, we have a few models that are already in the pipeline that will be in the range or below the 200,000 RMB range. And we do start to see a lot more requests considering using LiDAR as the standard configuration for more car models in that range, again, as a snowball effect, right? In the Chinese market, it's always rolling, right? And once they see somebody doing that, the customers will always ask, "Why can't we have that?"

Okay.

Okay.

Okay.

David Li: Does that mean this car is inferior in terms of intelligent driving than the competition? So, that is becoming amplified very quickly, and we do start to see that in the next... Already seeing that, but definitely for the negotiations we have in the next year, which, of course, will be shipping in 2025 and 2026. All right, the second question I didn't quite understand.

Okay.

David Li: Remember, yeah, on the second question, remember that the trend globally, EVs in China were over 8 million or so last year, and that's still growing, so over the next 10... $10 million, $12 million over this year and the next year. I think, as we said earlier, the penetration for intelligent driving systems at level 2 plus and 3 is going to increase, even into mass market cars below 200,000 RMB.

[music].

Hum.

Louis Hsieh: The second trend is, as David mentioned, people asking for intelligent driving systems with LiDAR. That will push, and I think we've already had discussions with OEMs, where they will make it standard equipment on all their EVs. So those two factors will cause that snowball effect and will take us easily over one million units in 2025, based on current discussions.

[music].

Okay.

David Li: So I think a year ago, this was a much more heated topic when everyone was saying that we know the competition is difficult in China, and everyone is cutting costs. What makes you think that people will take more LIDARs as opposed to fewer, right? And my answer stands, price is the only differentiation factor people consider. We should all go back to Wu Linghong's one, right? Just make a bearable car with no ADAS, right? Why would we even talk about ADAS at all? The reason is that just because of competition. They need to use the best band for the buck. So a buck is a buck, but the band is defined differently based on the market.

Yeah.

Yes.

Okay.

Okay.

Okay.

Yeah.

Okay.

Okay.

Okay.

Okay.

Yes.

Okay.

Yes.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Louis Hsieh: It used to be the big entertainment screen, but now it's really the charging and the LIDAR. So everyone is asking about it, then this becomes the best bang for the buck. So that's why it's becoming more popular that people realize with this little investment, their vehicle can stand out, or at least not fall behind. So that's the rationale. And it's all similar to airbags. It's all about safety and actually making your driving experience much more pleasurable where the car helps take the stress off. You're having to pay full attention on the road all the time. So it's safety, convenience, and driving enjoyment that's pushing the LIDAR device.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Okay.

Yeah.

Okay.

Okay.

Okay.

Okay.

Louis Hsieh: All right, thank you. That's very clear. There are no further questions now. Thank you once again for joining us today. If you have further questions, please feel free to contact our IEI team.

Okay.

Okay.

Operator: This concludes today's call, and we look forward to speaking to you again next quarter. Thank you, and goodbye. This concludes today's webinar, and many more like it. Thank you for joining us. Have a great day. Princess Li... Princess Li is already not at home and has taken something effortless, difficult to enjoy. Her surname and family name, Bundang, were given to her by King Bao.

Okay.

Okay.

Okay.

Okay.

Operator: Thank you for watching! https://www.fox.com www.youtube.com, Thank you. Thank you. Thank you for watching! You are the future. We are the past. We are the present. Please subscribe and smash the notification bell. Thank you for watching!

Hum.

[music].

Okay.

Okay.