Q3 2024 Hesai Group Earnings Call
Listen only mode.
Please note that today's conference call is being recorded.
Yeah.
Speaker Change: I will now turn the call over to our first speaker today Guangcheng Chi the company's Investor Relations Director. Please go ahead.
Guangcheng Chi: Thank you operator, Hello, everyone and thank you for joining <unk> third quarter 2024 earnings Conference call. Our earnings release is now available on our IR website at investors at that time.
Guangcheng Chi: Dot com as well as newswire services today.
Guangcheng Chi: Today, you will hear from our CEO, Dr. David Lee, who will provide an overview of our recent updates next we would like to welcome our new CFO, Mr. Andrew <unk>, who 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.
Guangcheng Chi: As we will make forward looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly slim and are reconciled to the most comparable measures reported on a GAAP in our earnings release and SEC filings.
Guangcheng Chi: I'm pleased to turn over the call to our CEO, David Li David. Please go ahead.
David Li: Thank you Adrienne and thank you everyone for joining our call today.
David Li: <unk> with an overview of this quarter's progress.
David Li: First we surpassed the high end of our revenue guidance for the third quarter, delivering net revenue of RMB, $539 4 million and maintaining a strong growth trajectory.
We also continue to accelerate lidar adoption among our customers. We delivered a total of over 134000 units during the third quarter, marking our second consecutive quarter of nearly 50% sequential growth.
David Li: This trend underscores a growing recognition of the value that lidar brings to autonomous driving systems.
And we're confident that this momentum will carry into remainder of 'twenty 'twenty four and next year.
David Li: Second.
David Li: Strong commitments to operational efficiency and financial discipline has enabled us to consistently reduced our GAAP net loss for four consecutive quarters.
David Li: By powerful trends and exceptional financial performance, we're moving full speed ahead towards a monumental go a projected revenue of USD $100 million with an estimated net profit of USD $20 million for the fourth quarter alone.
David Li: <unk>.
David Li: We couldnt be more excited as we're now projecting full year profitability on a non-GAAP basis for 2024.
David Li: Making us the first automotive Lidar company worldwide to reach this remarkable milestone.
This puts us on a path to close the physical year with its unprecedented overall financial performance.
David Li: Looking at the broader industry landscape Lidar technology is increasingly recognized as a key driver in advancement of autonomous driving according to recent data from <unk>, a leading automotive industry information service platform approximately two thirds of the models with highway.
David Li: <unk> are now equipped with lidar.
David Li: And the city and our models have achieved 100% Lidar adoption. Moreover, a recent research report projected a strong increase in level, two and level two plus adas adoption in China, estimating a 40% penetration rate for 2024 and 50% by 2025.
David Li: A key turning point is anticipated in 2026.
David Li: The introduction of level, three autonomous driving solutions, which will demand even higher standards for perception and safety capabilities.
David Li: This evolution marks an exciting space of market expansion and the technological progress in autonomous driving sector as the analysis indicate that not only will more advanced vehicles adopt our technology.
David Li: They will also likely employ multiple lighter unit to create a 200 to 300 meters safety buffer significantly enhancing overall safety standard.
David Li: A recent U S safety investigation highlights the critical role of Lidar technology in vehicle safety system.
David Li: The National Highway traffic Safety administration, Mr has launched a probe into around $2 4 million vehicles equipped with vision only adas system after collisions occur in low visibility conditions.
And glare.
David Li: These incidents have exposed the limitations of relying solely on a camera based system for vehicles 50, reaching a critical question.
David Li: His vision only approach truly sufficient for autonomous driving.
David Li: Future AI and the visual language models will undoubtedly enhanced visual systems. They will still require extensive training and remain vulnerable in low visibility scenarios.
David Li: In contrast, lidar generates its own light and offers.
David Li: A real depth measurement without depending on vision algorithms, which may struggle in poor visibility conditions or with irregular objects.
David Li: With light are becoming more affordable and scalable it directly addresses the limitations of vision audio system.
David Li: We believe that adopting lidar, which functions like an active the belt or airbags alongside with cameras is essential for improving safety and autonomous driving making it as safe if not safer the human drivers.
David Li: Now, let's shift our discussion to our roster of Adas clients, who are strong advocates for integrating <unk> into their system.
David Li: Also our largest data clients achieved a remarkable milestone by producing its one millionth vehicle in October which also marked a proud moment for us showcasing our success in supporting the outsource rapid growth as well as maintaining a leading share of the lighter market in China.
David Li: We're confident that this momentum will continue as our OEM partners pursue new goes further cementing our role as a key supplier in the eight et cetera.
We also recently secured a new platform wins with leap motor leading EV maker.
David Li: China.
David Li: In the face lips to flagship models with a premium EV brands backed by a leading Chinese automotive group.
David Li: Production of these models is expected to commence.
In 2025.
Cause I will be serving as the exclusive mainline supplier. So these new wins.
David Li: This exclusivity reflects the trust and the confidence that these manufacturers played in our technology, while broadening our presence in the rapidly growing <unk> market.
What's more we're thrilled to announce a new collaboration with a leading EV manufacturer in China as one of our top customers by shipment volume and a leader in the EV industry. This pioneering OEM has also exclusively selected our next generation level three ultra high performance <unk>.
David Li: Alongside with cost effective <unk> lidar to power their upcoming models slated for release in 2025.
Building on this momentum our Ats Lidar is rapidly approaching <unk> face it.
Innovative integrated design and exceptional cost efficiency have already sparked significant interest with multiple customers planning to adopted as a standard feature in their 2025 lineups.
David Li: The future of scalable intelligent driving is here and we're proud to lead the way.
David Li: This quarter's success extends beyond the domestic aided market with the new progress in expanding our global reach.
David Li: First.
David Li: Our worldwide shipping programs with a leading global automotive OEM have advanced through several critical critical phases to the successful delivery of the sample units a key step in validating our technology's performance and ensuring that it aligns with our partners to rigorous standards.
David Li: The samples are essential for assessing how our lidar solutions performed under real world conditions and verify their integration into the Oems vehicle platforms.
David Li: Our progress also enhances our position as a vital contributor to the global automotive ecosystem, helping shape. The next generation of vehicles that will define the future of mobility.
Furthermore, we recently signed a collaborative framework with fake folks walk us foreign automotive Lidar program, marking a new chapter in our partnership and elevating our position to a strategic supplier for the top selling automotive joint venture in China.
David Li: <unk> <unk>.
David Li: Together, we aim to innovative the integrate advanced lidar technology into vehicles enhancing safety and automation features while propelling the Oems visions for smart vehicle innovation.
To date, we have secured the design wins with five prominent global Oems, including Ford Joint Ventures in China with two Americans in two European automotive companies.
David Li: These joint venture collaborations enable us to leverage our partners to establish network resources and expertise.
The guidance has been instrumental in enhancing our collaborative capabilities, helping us streamline operations and meet global standards more effectively.
David Li: We believe our strategic alignments will position us to capitalize on emerging opportunities and to pave the way for our participation in the global supply chain.
David Li: Our effort to expand our global footprint across broader Asia market have also yielded promising results.
David Li: Delighted to announce two newly secured the development projects.
Both proof of concepts POC programs with a top three OEM in Japan. These.
David Li: These programs cover both level, two plus passenger vehicles and level four robo taxi application, highlighting our growing influence and their capabilities in diverse settlement of the Adas and am market.
Securing these POC projects with a leading OEM in Japan underscores the trust placed in our technology and expertise, while providing a valuable opportunity to showcase our lidar systems functionality across various scenarios.
David Li: Currently we have four Vod programs underway with.
David Li: With three global OEM and we're excited about the potential of these partnerships as they move into the next phase.
David Li: Over the past two years, both today and the broader lighter industry have largely concentrated on the Adas sector, which has seen substantial growth driven by rapid advancements in intelligent driving particularly in China, where the Adas sector will remain a key focus.
David Li: We're also committed to exploring the opportunities in the broader autonomous mobility market, where we have traditionally held a significant global share.
David Li: A market that prioritizes.
Performance over price sensitivity autonomous mobility offers exciting growth opportunity as the new valuable used cases to continue to emerge.
David Li: In September we unveiled our latest flagship 360 degree mechanical automotive grade long range Lidar Ot 128.
David Li: The 2020 for IAA transportation fair in Germany.
David Li: Inheriting 95% of the key components from her best to selling.
David Li: 120, <unk> Adas Lidar Ot $1 28, both a point right.
David Li: 345 million per second and a 200 meter of detection range at 10% with activity.
David Li: This high performance 360 degree perception lighter with a market proven vertically integrated architecture next OTR 128 ideal solution for scalable applications, including Robo taxis industrial robotics, Smart factory and logistics.
David Li: 100008 also integrated her size proprietary all weather for subsea system. The intelligence pulling cloud engine to enable effective detection of green for it as Austria and water slashes distinguishing it as a unique and innovative mechanical lidar offering and.
The market.
David Li: Since its debut Ot 128 has made a strong impression in the market emphasizing our technology's potential across diverse applications scenarios and autonomous system. We have already secured contracts for <unk> 2008, with 90, plus global and domestic clients.
Such as we were at West well and both at an easy mile and the production and delivery have already begun notably our Ot. Once you <unk> played an instrumental role in the success of the champion Autonomous race car at Formula Student, Germany 2024.
David Li: The world's largest competition for electric and driverless vehicles.
David Li: These early successes highlight the growing recognition of our advanced Lidar solutions across a wide range of industries.
David Li: We remain committed to exploring new use cases, and engaging new customers in both the Ada and aam's sectors, leveraging our lineup of versatile lighters.
David Li: Last but not least I would like to introduce Mr. Andrew fan, who has recently joined <unk> as our new CFO.
Andrew Fan: With over 18 years of expertise in accounting and corporate finance.
Andrew Fan: Covenant that he will further strengthen our financial management enhanced our engagement with the investor community and help us create sustainable value for her side and our shareholders welcome Andrew.
Speaker Change: At this point I will now turn the call over to Andrew to share more details our financial performance and outlook. Andrew. Please go ahead.
Andrew Fan: Thank you, David and Hello, everyone.
Andrew Fan: Let's go through our operating and financial figures for the third quarter of 2024 to be mindful for the length of our earnings call today.
Andrew Fan: Courage listeners to refer to our third quarter earnings release for further details start.
Andrew Fan: Starting with numbers in the third quarter, we achieved quarterly revenues of RMB $549 4 million.
Andrew Fan: Our U S dollar $76 9 million, surpassing the high end of our revenue guidance.
Andrew Fan: The momentum across our revenue streams was supported by strong <unk> shipments of over 134000 units this quarter.
Andrew Fan: <unk>, our second consecutive quarter of nearly 50% sequential shipment growth.
Andrew Fan: Shipments this year are distributed more broadly across our diverse range of customers.
Reflecting a significant increase in customer diversification compared to the previous year.
Andrew Fan: Meanwhile, our blended gross margin remains robust at approximately 47, 7%.
Andrew Fan: Thanks to effective cost management.
Andrew Fan: And our flywheel approach to cost and scale optimization.
The margin was further bolstered by NRT revenues from our <unk> lineup, which is being prepared for potential large scale deployment by a leading global robo taxi player in the coming years.
Andrew Fan: As a result, our quarterly GAAP net loss has narrowed for four consecutive quarters.
Andrew Fan: This consistent improvement reflects our commitment to operational efficiency and financial discipline.
Andrew Fan: Enabling us to better manage our resources, while focusing on sustainable growth.
Andrew Fan: Looking ahead we.
Andrew Fan: We are expecting a record breaking fourth quarter was light shipments projected to reach 200000 units and as Tony volume nearly matching our total shipments in 2023.
Andrew Fan: Based on our current estimates.
Andrew Fan: Fourth quarter net revenues are expected to soar to nearly U S dollar $100 million delivering an estimated net profit of U S dollar $20 million and a positive operating cash flow.
Andrew Fan: Additionally, we anticipate achieving full year profitability on a non-GAAP basis for 2024.
Andrew Fan: Positioning us to become the first automotive Lidar company worldwide to reach these notable milestone.
Andrew Fan: This anticipated explosive growth underscores our unstoppable momentum as we drive towards a landmark fiscal year finish.
Andrew Fan: We would like to remind you that this outlook is based on the current market conditions and reflects the company's preliminary estimates of market and operating conditions and customer demands, which are all subject to change.
Andrew Fan: In conclusion.
Andrew Fan: Our strong market acquisition capabilities.
Andrew Fan: Robust financial performance.
Andrew Fan: And commitment to operational excellence have positioned us for a successful close to 2024.
Andrew Fan: We are proud of the progress we have achieved and are enthusiastic about the opportunities ahead. Thank.
Andrew Fan: Thank you for your continued trust and support as we work to build a stronger future.
And as the global industry.
This concludes our prepared remarks today.
Speaker Change: We are now ready to take questions.
Speaker Change: If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced.
Speaker Change: Participants on today's call. If you wish to ask a question to management in Chinese. Please immediately repeat your question in English.
Of clarity and odor. Please ask one question at a time management will respond and then feel free to follow up what's your next question.
Speaker Change: Your first question comes from Cindy Guan with Morgan Stanley. Please go ahead.
Cindy Guan: Hi, Thanks for taking my question.
Speaker Change: <unk> from Morgan Stanley.
Speaker Change: So my first question is Washington, Dallas development contention between clarify am USD M D.
Speaker Change: While the dish dispute and both know Dan when you extend the overhang could be fully remote.
Speaker Change: Move.
Our projects are scheduled for 2025 lunch in the United States are still on track.
Speaker Change: Yeah.
Speaker Change: Hi, Thank you. Thank you for the question David.
Speaker Change: And I want to give you some updates on.
The $12 68 lots of progress or first.
Speaker Change: Glad to see that the Dod actually removed aside from the 12 60 H listing October and this delisting was undoubtedly a win for us as the Dod has acknowledged and correct. There are in this and the baseless decisions from January by removing us from the list.
Speaker Change: We believe it also validated the truthfulness off our position, which has remained consistent throughout this entire process well. However, we are disappointed that Dod you re listed us.
Speaker Change: A different basis.
Speaker Change: After acknowledging that its original evidenced towards is of sufficient we had hoped.
Speaker Change: That the Dod with the correct mistakes and move on or but instead has continued to firstly accused us of associating with the Chinese military Rick This.
Speaker Change: Especially frustrating because the.
Speaker Change: The government has never really asked US a single question or try to confirm any facts with us before we made the decision to re list us.
Speaker Change: The government did share with us the new basis of our re listing.
Speaker Change: Though due to the ongoing nature of the lawsuit. We're currently limited in what we can discuss from our first reading.
<unk> media has realized that deal.
Speaker Change: Quote unquote few evidence and it's a quote unquote fuel rationale.
Speaker Change: As for the <unk> and the flawed as original this thing was.
Speaker Change: We can state desk.
Speaker Change: Definitely.
Speaker Change: The Dod has not acute <unk> owned or controlled by any military bodies.
Selling products to any military bodies or otherwise directly supporting.
Speaker Change: Any minute every bodies.
Speaker Change: The Dod instead puts forward vague claims that her size somehow supports Chinese military civil fusion.
And <unk>.
Speaker Change: Protecting the interest of our shareholders remains our top priority we.
Speaker Change: We've been very transparent and consistent in sharing these facts.
Speaker Change: But the moment when the Dod related.
Speaker Change: Our integrity.
Speaker Change: Also caused confusion for our customers and investors and they were concerned that we might be hiding something.
Speaker Change: We will continuously seek open dialogue with the Dod so that we could correct those errors.
Speaker Change: While we look forward to providing.
Speaker Change: That the government's new analysis is unlawful in court in the coming months.
And these are the current status of.
Cindy Guan: The 12 60 H situation Cindy do you believe this is helpful.
Cindy Guan: Yeah, that's very helpful. Thanks for the colors.
Cindy Guan: Right right I think in the prepared remarks.
Jim.
Cindy Guan: So I will achieve GAAP net profit in for Q.
Speaker Change: Should we expect 2025 to be the first full year GAAP profitable as well.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Thank you Cindy.
Speaker Change: This is Andrew and let me take this question.
Speaker Change: <unk> addressed this question, let me express my gratitude for your continuous support to us and I look forward to all of you in the future together with Hersheys IR team.
Speaker Change: For this question we are happy to share that we are on a steady path towards profitability in the fourth quarter of this year.
Speaker Change: Major milestone for us.
Speaker Change: Q4 is that will be our peak season every year with projected revenues approaching 100 million U S dollar and the deliveries, reaching 200 units and unprecedented achievements since our inception.
Speaker Change: Besides our cost management remained robust ensuring financial strengths.
Speaker Change: <unk> scale up mass production.
Our knowledge no other player in the global light industry matches, our financial resilience, while operating at such an impressive delivery schedule.
Speaker Change: As highlighted in our financial statements. Our Q3 gross profit nearly doubled year over year, while operating expenses grew by only 10%.
Speaker Change: We're showcasing our exceptional operating leverage.
Speaker Change: We also anticipate the blended gross margin for Q4 to exceed 40%.
Speaker Change: Operating expenses remaining stable quarter over quarter.
Additionally, our average quarterly other income and interest income typically are around $30 million I mean b position.
Speaker Change: Positions us well to reach breakeven in Q4.
Speaker Change: Taking it to the next level, we have received additional payments from a leading customer preparing us toward an estimated 20 million U S. Dollar net profit in Q4. This is an incredible achievement and attachment to the solid financial Foundation. We are building as we continue to drive growth.
Speaker Change: And our scale our success hopefully that covers your question.
Speaker Change: And for 2025, I think what's relevant to your question Sandy.
Speaker Change: Top line growth.
Speaker Change: Because more and more customers.
Speaker Change: Internationally I'm talking about.
Speaker Change: Alright.
Speaker Change: We see the penetration rate has been ramping faster.
Speaker Change: And on the other side.
Speaker Change: It is well controlled expenses will be well controlled so for full year 2025 will be targeting for profitability as well.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thank you that's very helpful.
Speaker Change: Your next question comes from Dana Hari with Goldman Sachs. Please go ahead.
Thanks management for taking my question. So the first question is regarding our 2025.
Speaker Change: Volume revenue as far as margin guidance that since we're onboarding more Oems and then at.
Speaker Change: At the same time that might be more mix of that.
Speaker Change: X product. So just wondering what we should think about in terms of 2025 overall and also for third quarter 2000 and for wondering.
Speaker Change: I'm wondering if excluding the <unk> project.
Speaker Change: Impact what is our more normalized gross.
Speaker Change: Gross margin thanks.
Speaker Change: Okay. Let me take this question.
Speaker Change: Looking forward in year, 2020 five.
Speaker Change: We believe that we have already secured a significant design wins for new car models, which are achieving ISO P in year, 2020 five and beyond.
Speaker Change: Some of our major customers best selling modules, including those from the world's largest EV manufacturer.
Spectator to begin production with our Lidar solutions very soon.
Speaker Change: Additionally, some of our clients are adopting lidar as a standard configuration starting next year.
This positions us to ship millions of units throughout 2025, and 2026 based on our customers forecast.
Speaker Change: As of now we have two manufacturing facilities in operation one in Shanghai in Hawaii, Hangzhou, and expanding with new production lines to meet our clients' needs for the coming year.
Speaker Change: Our revenue wise.
Speaker Change: By our year end earnings next March we'll have a clear view about that.
Speaker Change: As of now for year 2025, we will have three different modules of a T. In production. The first one is the current ATP, which will experience experienced a moderate annual decline ESP in teams.
Speaker Change: The second module is the ultra high performance.
Speaker Change: Designed to meet L Three's tenders, which will enjoy a much higher price tag.
Speaker Change: Lastly, the cost effective compactor ATX will begin production in 2025 wisdom flagship series <unk> modules are adopting it as a standard pumping duration.
Speaker Change: I expect that the revenue contribution from <unk> will start to increase relatively quickly in year 'twenty five.
Speaker Change: Second question about <unk>.
Speaker Change: Q3 margins, if we exclude that NRT revenue I would expect that that this will be largely the same as our normalized quarters, which is about a 40% plus gross margins.
Speaker Change: Yeah.
Speaker Change: That's very clear thanks.
Speaker Change: Your next question comes from Shang you with <unk> Securities. Please go ahead.
Speaker Change: Hmm.
Speaker Change: Thanks for taking my question.
My first question is a box robotics I won't promo currently what's the main light oil production for the customers in robotics and then in the long term or what are the.
Speaker Change: Technology difference between the robotics.
Speaker Change: And the difference in ASP.
Speaker Change: Thank you.
Speaker Change: But in general women, so I'm not sure.
Speaker Change: Okay.
Speaker Change: Our whole country like home petrodollar.
Speaker Change: We don't really know that you're wrong.
Speaker Change: Hi, Susan.
Speaker Change: Okay.
Speaker Change: Let me address this.
Speaker Change: Questions in English first for.
Speaker Change: For the industrial robotics applications AEG in logistics and hub operations. They are rapidly growing and we have successfully secured some new orders from both domestic and international clients regarding the product series that we are selling to these.
Speaker Change: Segment market I think pen O T X T et cetera. These are all have their their own.
Speaker Change: Clients.
Speaker Change:
Speaker Change: Whether through autonomous vehicles or robotic platforms. Our goal is always to deliver superior services and experience experiences to our users and alignment with our mission to empower robotics and elevates our lives.
Regarding the.
Speaker Change: Asps I think we have to monitor.
Speaker Change: The development of the revenue contributions from different clients from different.
Speaker Change: Segments.
Speaker Change: I'll have to.
Speaker Change: I'll give you a clear forecast yet.
Speaker Change: We see.
Speaker Change: More visibility from the revenue contributions.
Uh huh.
Speaker Change: Hey, This is David Lee and I wanted to give a.
Speaker Change: A few more remarks regarding.
Speaker Change: The.
Speaker Change: Robotics industry first let's define robotics, I think it's pretty much everything we cover them.
Speaker Change: That's not Adas and not strictly a robo taxi.
Speaker Change: So a few direct comparisons first.
Speaker Change: The robotics Lidar the ASP is much higher than eight us because of the volume right. When we talk about Adas, we're talking about close to 1 million units a year volume and even bigger there is still a.
Speaker Change: <unk>.
They are in the tens of thousands at the most optimistic side.
Speaker Change: And secondly, it's about.
Speaker Change: Application on the technical side.
Speaker Change: Or Adas as we clearly see it needs.
Speaker Change: Stream the.
Speaker Change: Miniaturize packaging as well as a forward looking like a box looking forward right through most of the robotics applications that is not the highest priority. The priority is to cover a wider F O V.
Speaker Change: Hopefully with better resolution it does not need to see longer range. So as a readout for longer range, we have owed.
Speaker Change: And if a shorter range, we have XT end of Q2, and it's a different type of product.
Speaker Change: Having said that.
Speaker Change: They share a great level of similarity in terms <unk>.
Speaker Change: Of her size fundamental capabilities of semiconductors, our manufacturing capability and all the very strong.
Speaker Change: Capability of our quality system.
Speaker Change: Especially.
Speaker Change: The.
Integrated design of the Asics.
Speaker Change: You may think that.
Speaker Change: The Adas Lidar and robotics Lidar.
Speaker Change: A great deal in terms of functions and.
Speaker Change: Performance et cetera, the truth is that if you boil it down to the different part itself robotics.
Speaker Change: Oh robotics Lidar, it's really in the end they either the receiver the driver.
Speaker Change: And the signal processing units at the computation of units, the backboard and power et cetera, if you breakdown them into each of them a lot of them. We already have a preparer terrorist chip that can support both aid us and robotics.
Speaker Change: In other words, the great strength and the capability, we develop from Adas, especially China, Adas, we leverage them.
Two.
Speaker Change: Go after extreme cost or the quality of the performance and use those technologies are robotics, it's like telling me that I see.
Speaker Change: Alright, Thats why we are extremely competitive and remain high profitable.
Speaker Change: Actually our extremely high gross margin a robotics lidar compare to aid us for that reason thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
So I remember it correctly.
Speaker Change: Starting at the Crossroads of also era.
Just now you mentioned that the ETR will grow rapidly Mexico year, and I want to know what's the accumulator.
Speaker Change: Sacramento.
Speaker Change: The proportion of our new production.
<unk> one point in next year and also in the long term.
Speaker Change: I'm going to charge them for many young women young clients.
Speaker Change: Required.
Speaker Change: Can you see Kozmino notes.
Speaker Change: The only national entry hole.
A woman sequel, Sangamo Com Hem B E.
Speaker Change: <unk> is about $100.
Speaker Change: Alright.
Speaker Change: Yeah.
Speaker Change: Okay. Let me take this question.
Speaker Change: Again.
If we look you look at our year.
Speaker Change: Year 2025, I believe that the total shipment in year 2025, where exceeds millions of units in that year.
Speaker Change: However, regarding the detailed breakdown between <unk> and <unk>.
Speaker Change: 128.
Speaker Change: We have to share we can only share more details as we go along probably.
Speaker Change: He'll say March next year, but no matter how the mix tons. We are still confident with our long term blended gross margins, which will stay healthy thanks to the effective cost management and our flywheel approach of cost and the scale optimization.
Speaker Change: Okay.
Speaker Change: Yes.
Oh, Thank you thanks very much.
Speaker Change: Oh, that's Walmart.
Speaker Change: Your next question comes from Olivia Zhang with Hei. Please go ahead.
Speaker Change: Hi, Thanks for taking my question. This is an easy out there. Okay. So my question is you know probably has become an important intelligent driving market.
Speaker Change: I want to know.
Speaker Change: We have established cooperation with some OEM brands.
Speaker Change: <unk> ecosystem, so how do we see the cooperation going forward.
Speaker Change: Well the one piece of Huawei back when they just asked us how long you've been kind of.
Speaker Change: Oh My God.
Speaker Change: You've had this year.
Speaker Change: Hello, Brian.
Speaker Change: Got it.
Speaker Change: It sounds like that just yet.
Speaker Change: Okay.
Speaker Change: Thank you Olivia this is David Lee.
Speaker Change: Yeah sure, let me try to clarify our view.
Speaker Change: On the.
Speaker Change: Collaborations slash competition with highway right first of all is a very competitive player right.
Speaker Change: As of now a user of our Tri fold for NIH Highway watch, which are very good products. So as they build their good products and having said that I feel like our competition against Huawei.
Speaker Change: Is it is a clear situation.
Speaker Change: In the sense that as far as what we see today.
Speaker Change: And the people, who use our lidar or within the hallway ecosystem, namely the wind, Yes challenge Yeah, It's India of the World.
And they not only use always components they used car with a solution at a system level. So they essentially.
Speaker Change: Everything from Huawei, and we believe for that reason, it's unlikely that we will.
Speaker Change: Become a individual.
Speaker Change: Component supplier within the off highway ecosystem today.
Speaker Change: Because we only sell components right, we don't sell solutions and so that's why today at.
Speaker Change: The market has been sort of divided between the highways brands and their own supply chain and the rest of the world.
Speaker Change: And so far it seems to be very clear for both side. Our goal of course is to hopefully maximize our market share in.
Speaker Change: In our own world.
Speaker Change: So that has been our strategy.
Speaker Change: Of course, having said that.
Speaker Change: There are overlaps there are brands, who have there huawei cars and have their own branded cars.
Speaker Change: We have a few of our OEM customers are like that but.
Speaker Change: But in my mind.
Speaker Change: It works the same way the car models.
Speaker Change: Work with our system.
Speaker Change: Very likely it will have only our lidar.
Speaker Change: On the way out with Lidar.
Speaker Change: It has to be in their strategy.
Cars that Oems build with their own effort will have very little or zero. Our components. That's the market. We're going after and we have been very successful in working with those customers when they don't use our solutions and.
I believe is that in the end if I, we would continue to have a significant share as a OEM.
Speaker Change: But you know.
The rest of the world is doing much bigger and we'll also continue to work with our global customers.
Who are now working with Huawei today.
Speaker Change: Thank you Debbie that's Super clear that's all my question. Thank you.
Thank you.
Speaker Change: Yeah.
The next question is a follow up from Cindy Wang. Please go ahead.
Speaker Change: Hi, Thank you for taking my question I have a follow up question on Oh do you want to eat.
Speaker Change: Who will be the first batch of customers adopting this new product and that was how can we also get some say regarding our partnership with curse.
Speaker Change: Okay. Let me take this question.
Speaker Change: Regarding OTT, yes. This new flagship mechanical Lidar is built for scalable applications like robo taxi industrial.
Speaker Change: Robotics, smart factories and logistics.
Speaker Change: It has already got deals locked in with over 90 clients worldwide.
Financials around 90%, 95% of its key components come from our best selling Adas Lidar, which keeps our cost down also thanks to vertical integration like our Adas products, we can scale production and to take advantage of economies of scale.
Speaker Change: For customers for clients. This means it can be priced more competitively, especially for large volume orders.
Speaker Change: Gross margin is comparable to our typical al four products or even slightly higher with large orders the gross margin can improve even further.
Speaker Change: We have already started production and deliveries and it has already brought in over $10 million in revenues so far.
Speaker Change: The AAM sector is more about performance less on price and it's full of exciting growth opportunities with new use cases popping up we are thrilled about what's ahead.
Speaker Change: Your other question regarding GM cruise updates based on public information cruise has made significant progress this year.
Speaker Change: <unk> group has invested additional funds into crews to support its ongoing operations and our strategic initiatives.
Speaker Change: Following a temporary halt operations since late 2023.
Speaker Change: TSA closed its investigation into cruise vehicles in August of 'twenty 'twenty four.
Speaker Change: Recently cruise has resumed supervised autonomous driving pets in cities like Phoenix, Dallas and Houston.
Speaker Change: <unk> is clearly making efforts to overcome challenges and solidify its position as a leader in autonomous vehicle technology. As you see we recorded R&D revenues in Q3 from our al for Lidar, which is being prepared for potential large scale deployment.
Speaker Change: By a leading global robot taxi player in the coming year International Robo Robo taxi players are expanding Xerox and the neuro will also recently reported to be actively scaling their testing operations.
Speaker Change: Making strides towards that.
The commercial deployment of their autonomous vehicle technologies, we remain optimistic about the business opportunities in our full autonomy and beyond as the.
Speaker Change: The industry continues to evolve and grow.
Speaker Change: That's my answer to this question.
Speaker Change: Yeah, that's very clear thank you.
Speaker Change: Your next question comes from Jeff <unk> with Citi.
Speaker Change: Please go ahead.
Speaker Change: Hi, This is <unk> from Citi.
Speaker Change: Excellent result, and the guidance.
Speaker Change: Thank you Sir for the good work and then my question is number one.
Speaker Change: We recognize the opec's for each quarter.
Speaker Change: For the third quarter is around the $350 million.
Speaker Change: In order to approach, 20% net margin level into the fourth quarter or the old packaging through the fourth quarter would be a wrong.
Speaker Change: $250 million, so could you, let us know what should be the normalized opex.
Speaker Change: Going forward into two.
225.
Number one number two is about the low season impact into our first quarter 225.
Speaker Change: As we all know that there should be a potential pre barring happening in the fourth quarter of this year, we saw in him.
Speaker Change: A sloppy demand growing into the first quarter potentially so could you give us the margin guidance in the first quarter.
Speaker Change: And also the normalized that GP margin guidance for all those who are too far Oh, sorry.
Speaker Change: So the first two questions. Thank you.
Speaker Change: Your first question regarding Opex.
Speaker Change: Yes on a full year basis in 'twenty, two 'twenty three our opex on a non-GAAP basis is about.
1 billion renminbi out of which 65%.
Speaker Change: R&D, 15% as sales and marketing and the rest go.
Speaker Change: As to G&A.
Speaker Change: On a full year basis, we believe that a 'twenty 'twenty four.
Speaker Change: Opex will grow by less than 5% on GAAP basis, and 10% to 15% growth on non-GAAP basis.
Speaker Change: Our full year 2025.
Speaker Change: We have committed to it takes to take more active expense management.
Speaker Change: To ensure a better efficiency and financial discipline.
Speaker Change: That actually is my response to a question for Opex.
Speaker Change: Regarding the guidance on Q1.
Speaker Change: Typically do.
Speaker Change: Due to the seasonality reasons Q1 tends to be weaker than Q4, and a quarter over quarter basis.
Speaker Change: But in order to give you a clear our guidance for Q1, probably will have to wait till end of this year.
Speaker Change: Okay. Thank you.
No more questions. Thank you.
Speaker Change: Your next question comes from Terry <unk> with Jpmorgan. Please go ahead.
Yeah. Thanks for taking my question I actually just have one question about the ACX.
Speaker Change: I'm wondering among your 75 design wins, how many of them are.
Speaker Change: Kind of a pending ESOP and how many of that won't be for a T X and also for the secured design wins.
Speaker Change: I'm wondering do you see any clients willing to kind of switch from the a T cell <unk> for better cost structure, and how do you think of that potential.
Speaker Change: <unk>.
Thank you. Thank you for the question. So maybe I'll first give you a more fair comparison off.
The product ATX versus.
Speaker Change: So the <unk>.
Started it.
Speaker Change: Ernie of Sop in July of 2022, right, so which means that 80 axis.
Speaker Change: Two to three years.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: It has a equally competitive performance and some parts of our optimized sometimes are slightly worse than <unk>, but overall, it's a highly competitive product.
Speaker Change: But it's a much more affordable way.
Speaker Change: And the $200 range so.
Speaker Change: Which means that for people who are looking to do similar level, which is the level two plus driving with a G.
A natural and a rational choice by the way total smaller right.
Speaker Change: So, it's a natural and a rational to fisher to switch from <unk> to.
Speaker Change: Two <unk>.
<unk>.
Speaker Change: As long as they can accommodate the change design.
Speaker Change: It's really because the access to our fourth generation semiconductor. It has a lot of new innovations in making sure that we processed a large amount of our polling card with a very.
Speaker Change: Very low power and.
Speaker Change: Our low cost and on top of it has additional features like hub.
Speaker Change: The IP the intelligent deploying cloud engine to analyze different weather conditions et cetera, but has a lot of great features.
Speaker Change: So thats why the takeaway is that for anybody who is looking at the similar level of performance of <unk>.
Speaker Change: And of a no brainer to switch over as long as you can accommodate the engineering changes and you can enjoy the savings.
Speaker Change: However.
Speaker Change: If you look at the the direction the industry is moving towards especially the fact that for the past year, we see great.
Speaker Change: <unk> of adoption of Lidar to me not owning a signal of a.
Speaker Change: The increase the demand of Lidar and intelligent driving.
Speaker Change: Also a statement.
Speaker Change: The value of such a system create so naturally when it creates more value people want more and a better version of it which.
Speaker Change: What we call is level three right. So if you look at the global level three market.
We already announced that we have a global design wing as one of the most famous automotive brand in the world.
Speaker Change: That's the level three system that is a much higher price.
Speaker Change: Much more powerful in terms of everything in terms of a distance.
Resolution K.
Speaker Change: Capability.
So that will be a much higher ASP product that is in the <unk>.
Speaker Change: 512 family. So that's why it is true that a lot of the customers will be using ATF, while they already use.
There will they will also have a premium trend line.
With.
Speaker Change: Strictly level III function with a much more powerful lidar.
Speaker Change: To handle the different conditions with close to 10 times of the resolution and the.
Speaker Change: Roughly 50% of the increase.
Speaker Change: So that's the situation we're facing.
Speaker Change: Are there more to it yes, hopefully that answers your question.
Yeah, that's very helpful. Matt just follow up that clears share that colouring himself the price gap between your <unk> and also these are advanced eight to protect.
Okay. So.
Speaker Change: Without disclosing the actual numbers because there's always a case by case, depending on the volume and esselte time.
Speaker Change: A T X is a 200 dollar.
Speaker Change: $200 range lidar, depending on the configuration could be higher or lower.
Speaker Change: The $85 12 family.
Speaker Change: Which will remain at the 80 range, which is more than double of that its a much much more expensive lidar, but again it handles.
Speaker Change: It handles level III functions. So the value proposition is a completely different equation.
Very helpful. Thank you Kelly.
Speaker Change: And we are hoping to ship ultra high performance Lidar, which is in the family up 85 trial studying for all that.
Speaker Change: And shipping overseas will enjoy a better margin as well.
Speaker Change: And that's it thank you Anthony.
Anthony: Thank you.
Anthony: As there are no further questions.
Speaker Change: I now turn the conference back over to the company for closing remarks.
Speaker Change: Thank you once again for joining us today, if you have any 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.
Speaker Change: This concludes today's conference call you May now disconnect. Your line. Thank you.