EH Q2 2026 Earnings Call
Speaker #1 (AI Assigned): The corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenience purposes only. In case of any discrepancy, the management statement in the original language will prevail.
Speaker #1 (AI Assigned): To listen to the original remarks by management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions, and today's call is being recorded.
Speaker #1 (AI Assigned): Now I will turn the call over to Angie Ehang, Senior Director of Investor Relations. Ms. Anne, please proceed.
Speaker #2 (AI Assigned): Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the second quarter of 2026. The earnings release is available on the company's IR website.
Speaker #2 (AI Assigned): Please note the conference call is being recorded, and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our founder, chairman, and CEO; Mr. Feng Song, CTO; Mr. Wang Jia, COO; and Connor Yang, CFO.
Speaker #2 (AI Assigned): Before we continue, please note that today's discussion may contain forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker #2 (AI Assigned): Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC.
Speaker #2 (AI Assigned): The company does not assume any obligation to update any forward-looking statements, except as required by law. Also, please note that all numbers presented are in RMB for the second quarter of 2026, unless stated otherwise. With that, I'll turn the call over to our CEO, Mr. Huazhi.
Speaker #2 (AI Assigned): Please go ahead. Good day, everyone. Thank you for joining our Q2 earnings call. Since Q2, EHang has entered a vital strategic transition, moving beyond certification toward operational readiness, scenario validation, capability development, and global expansion.
Speaker #2 (AI Assigned): Certification is just the entry ticket into commercial operations. What really determines whether a company can sustain flights and scale commercial operations is not just having an aircraft or a certificate.
Speaker #2 (AI Assigned): It's about having an end-to-end operational capability, replicable solutions, a solid product pipeline, and the ability to deliver standardized solutions to global markets. We have been investing in these areas and have made meaningful progress.
Speaker #2 (AI Assigned): Of course, all of these rely on a sound regulatory environment. That's the foundation that enables qualified, capable companies to grow. In late June, a serious accident involving a piloted light sport aircraft in China has led regulators to adopt a more cautious approach to safety oversight.
Speaker #2 (AI Assigned): While unrelated to EHang's pilot listing videos, this has affected our humanitarian commercial operations approval process in Hefei, and the timeline remains uncertain. To be clear, this is a temporary, industry-wide timing issue.
Speaker #2 (AI Assigned): It products, nor does it indicate any issue with our technology or safety record. Recent accidents highlight that safety regulation and traceability are baselines for low-altitude commercialization.
Speaker #2 (AI Assigned): EHang operates with a pilotless aircraft, pre-sets a fixed route, intelligent fleet dispatching, and centralized monitoring. Our goal is to make urban air mobility safer, more transparent, and easier to regulate.
Speaker #2 (AI Assigned): Pilotless, passenger-carrying aviation fundamentally changes how we travel. We fully understand the regulators' caution, and we respect that. It is a responsible commitment to public safety.
Speaker #2 (AI Assigned): However, technology innovation and regulation must evolve together. More than a century ago, when automobiles first appeared, people had similar concerns about this new form of transportation.
Speaker #2 (AI Assigned): The UK passed the Red Flag Act, which required a person to walk in front of a motor vehicle carrying a red flag to warn pedestrians and limited vehicle speed.
Speaker #2 (AI Assigned): The law was essentially old rules overregulating new technology. History shows that safety validation, operational rules, and regulatory frameworks for disruptive transportation technologies all take time to mature.
Speaker #2 (AI Assigned): History shows technology and regulation eventually align. New forms of transport don't mature overnight. EHang's role isn't to sit and wait, but to proactively provide regulators with real safety data, proven operations, and reliable technology.
Speaker #2 (AI Assigned): The EH216S and its operating system have obtained all key certificates under the China Civil Aviation Regulatory Framework: TCPC, airworthiness certificate, and A air operator certificate.
Speaker #2 (AI Assigned): Our entry and assistant in Guangzhou and Hefei are fully operational. Within our internal trial operations, both sites have been operating continuously and safely for around one and a half years, with a 4.94 out of 5 passenger satisfaction score.
Speaker #2 (AI Assigned): The EH216 series has accumulated nearly 100,000 safety flights. With the demand for product certification and strong safety records in place, we only await regulatory approval for public ticket sales.
Speaker #2 (AI Assigned): Despite this critical transition point, we are confident that the commercialization window will eventually open. Amidst uncertainty, EHang isn't sitting still. We're tackling challenges head-on and finding new opportunities.
Speaker #2 (AI Assigned): Since Q2, we've been pushing hard on three things. First, expanding globally on one of our fronts, strengthening domestic readiness while accelerating overseas deployment. In China, we continue to strengthen our end-to-end operations to develop standardized, replicable operating models and solutions.
Speaker #2 (AI Assigned): We have completed preparations across four operating cycles, including personnel training, maintenance, insurance services, airspace coordination, and emergency response, in Guangzhou and Hefei, accumulating practical operating experience.
Speaker #2 (AI Assigned): We initiated point-to-point trial operations to build experience in advance. Once the regulatory window opens, we will rapidly deploy and help customers operate to standard.
Speaker #2 (AI Assigned): Overseas, our footprint extended to 23 countries, adding Mexico and Switzerland since Q2. Thailand is running validating flights via sandbox, and the Civil Aviation Authority of Thailand has established a clear path forward.
Speaker #2 (AI Assigned): We're targeting commercial approval in 2026. We were also selected for Hong Kong's Low-Altitude Economy Regulatory Sandbox X trial project, with the demo coming soon.
Speaker #2 (AI Assigned): Furthermore, we advanced our global fast track program. Many countries want to bring in pilotless CVs, but lack the regulatory framework on how to build a complete path from safety validation to operational standards to commercial deployment. Drawing on a decade of experience, as well as our engagement with the civil aviation authorities in multiple countries, EHang is turning this experience into a standardized market entry framework.
Speaker #2 (AI Assigned): This is the basis of our global fast track program. It's not simply about selling an aircraft. EHang is providing a standardized methodology, from validation to operational preparation to commercial deployment.
Speaker #2 (AI Assigned): Helping local regulators and partners move more efficiently. Sri Lanka has become the first country to join our Fast Track program, and we are also engaging with multiple other countries regarding the framework.
Speaker #2 (AI Assigned): This shifts our global strategy from merely selling products to exporting experience, standards, and capabilities. Second, revenue diversification: keeping passenger transportation as our strategic focus while developing non-passenger-carrying businesses and a broader product portfolio.
Speaker #2 (AI Assigned): Passenger air mobility remains our strategic focus, while domestic passenger commercialization is still pending regulatory approval. We're actively developing logistics, firefighting, and air media to build additional revenue streams.
Speaker #2 (AI Assigned): We're developing and validating logistics and firefighting aircraft based on our passenger-grade safety technology. These products address real needs such as forest firefighting, portal logistics, and emergency response.
Speaker #2 (AI Assigned): They are moving through testing, certification, and customer validation, with the potential for faster market deployment. Alongside steady progress on the EH216 platform and the VT-35 certification and flight test, EHang is building a multi-scenario product matrix rather than relying on a single aircraft.
Speaker #2 (AI Assigned): Meanwhile, aerial media revenue surged over 270% year-over-year in Q2, and is now expanding to Europe, Japan, Thailand, and other overseas countries. We're expanding one-off event performances to regular onsite shows for sustainable revenue and replicable business models.
Speaker #2 (AI Assigned): Third, improving cost efficiency and focusing our resources on long-term competitiveness. Since Q2, we have streamlined the organization, refreshed our talent structure, cut non-essential components, and improved efficiency. The outcomes will be visible in the second half.
Speaker #2 (AI Assigned): We are focusing resources on things that matter most: core product development, certification, capability, operating system, overseas commercialization, and business data. These can generate revenue, deliveries, and cash flow.
Speaker #2 (AI Assigned): Over the past decade, EHang's core strength has been getting aircraft flying and operations running. Now, we are turning that into standardized, scalable capabilities.
Speaker #2 (AI Assigned): Customers value our ability to guide them from zero to commercial operations, not just the aircraft itself. We are validating our capabilities in China and scaling them overseas to tracks, reinforcing each other.
Speaker #2 (AI Assigned): The demand is real, and the path is proving out. Now we're focused on execution—converting operational capability into orders, deliveries, and cash. Finally, EHang is building a long-term business.
Speaker #2 (AI Assigned): We are breaking technology barriers and helping shape industry rules. While navigating evolving regulatory frameworks requires careful management, our long-term vision remains unchanged. The end game for low-altitude mobility remains pilotless flight, but regulation and ecosystems take time to mature.
Speaker #2 (AI Assigned): Short-term friction won't alter our direction. With the window open, EHang will be the first to walk through, with the credentials, capabilities, and the readiness.
Speaker #2 (AI Assigned): And the moat we're building through standardized operations will only get deeper. The strategic direction of the low-altitude economy will not be disrupted by short-term volatility.
Speaker #2 (AI Assigned): For 12 years, EHang has focused on making safe flights accessible. We will maintain a pioneer's spirit and execute what needs to be done. Thank you.
Speaker #2 (AI Assigned): I would like to invite our CTO from Shanghai to introduce our latest progress in technology and R&D. Thank you, Mr. Hu, and hello everyone.
Speaker #2 (AI Assigned): In Q2, our R&D focused on three aspects. First, we continued to upgrade existing products and validate operations for current customers and scenarios. Second, we accelerated R&D for new products and new applications.
Speaker #2 (AI Assigned): Third, deepen core underlying system capabilities. These three aspects together build a more complete technology foundation for scaled commercial operations. First, upgrading existing products and operational validation.
Speaker #2 (AI Assigned): This quarter, we completed a series of upgrades and validations for EH216 as route operations. We established our first point-to-point test route at our Guangzhou headquarters, continuously accumulating trial data.
Speaker #2 (AI Assigned): This marks a meaningful step, moving the EH216's operations from single-point takeoff and landing toward more regular, route-based operations. On passenger experience, we completed several key updates.
Speaker #2 (AI Assigned): We validated the operational capability of our new battery cooling vehicle. Under test conditions, it increases daily sorters per aircraft from about 6 to 12–15.
Speaker #2 (AI Assigned): A meaningful boost for daily capacity. With the same fleet and infrastructure, each aircraft can handle significantly more flights per day, which matters a lot for operational efficiency and unit economics.
Speaker #2 (AI Assigned): Additionally, our new independent air conditioning system rapidly reduced cabin temperature by 10 to 15 degrees Celsius, enhancing passenger comfort. Second, new product development and scenario expansion.
Speaker #2 (AI Assigned): For the VT35, we completed a truck wind tunnel testing and lightning direct effects and LIE protection testing for key components, alongside multiple flight tests in China.
Speaker #2 (AI Assigned): To support aerodynamic calibration and airworthiness validation. Meanwhile, we're extending our technology into new applications. For forest firefighting, we're testing an air burst delivery system with our existing products to enable early-stage crown fire response.
Speaker #2 (AI Assigned): Based on the 35 EH216 platform, we're also developing a cargo version. Adapting this mature platform is expected to shorten development and certification timelines. Our prior work on the EH216L will also be integrated into this new configuration.
Speaker #2 (AI Assigned): Ensuring logistic capability continuity. Third, deepening core systems. On the operational system front, we're building differentiated product capabilities for two key customer types. First, a low-altitude operations control system for operators and aircraft consumers.
Speaker #2 (AI Assigned): Second, city-level low-altitude integrated supervision platform for government agencies. The latter covers aircraft use applications, plan filing and review, airspace designation, real-time monitoring, and information publication.
Speaker #2 (AI Assigned): This quarter, we focus on two key areas. First, improving our platform situational awareness, tiered supervision, and emergency response efficiency. Second, deepening system integration with the Health Government Flight Service Center.
Speaker #2 (AI Assigned): We've developed a set of framework documents covering airspace destination, operational standards, and service processes, helping the Healthy Flight Service Center build a city-level low-altitude supervision system. Think of it as a software-plus-hardware foundation for future large-scale, high-density urban operations.
Speaker #2 (AI Assigned): We'll continue holding our product and system development to aviation-grade standards, translating technological breakthroughs into a tested, validated, and deliverable commercial capability to sustain EHang's long-term leadership in the global low-altitude mobility market.
Speaker #2 (AI Assigned): Next, I'll turn the call over to our COO for sales and operational updates. Thank you. Thank you, Mr. Phelan, and hello everyone. I'll discuss our Q2 operational progress and how we are approaching lean operations, product diversification versus markets, and safety systems.
Speaker #2 (AI Assigned): In Q2, we delivered 35 units of EH216-S and one VT-35. On the aerial media side, we completed 22 aerial media shows and delivered 520 units of GD-4 drones.
Speaker #2 (AI Assigned): Beyond these numbers, we want to be transparent about our current environment. This year, China's low-altitude economy entered a more cautious phase across safety oversight, airworthiness management, and operational regulation.
Speaker #2 (AI Assigned): This has been reinforced by the new airworthiness frameworks and civil aviation laws. Recent industry safety incidents have heightened regulation and public attention on low-altitude flight safety.
Speaker #2 (AI Assigned): leading to intensified safety inspections of general aviation and low-altitude economy operators, aircraft, and operational projects. As a
Speaker #1 (AI Assigned): Result , a slows down approach . Deliveries , acceptance and commercial operations . For some projects and a passenger carrying a commercial operations for low altitude aircraft has also been affected .
Speaker #1 (AI Assigned): So we are being more cautious about our operational expectations and resource allocations. Our CFO will address our adjusted full-year revenue guidance shortly. However, we firmly believe that in passenger aviation, safety and compliance must always come first.
Speaker #1 (AI Assigned): Commercial speed to be clear , only the local timeline for commercialization has shifted , not long term market demand or enhanced competitiveness going forward , we'll keep the market informed with a clear operational progress .
Speaker #1 (AI Assigned): Updates, Mr. . Who talked about our three strategic priorities: global expansion, revenue diversification, and cost efficiency. On the operational level, our approach covers the following areas.
Speaker #1 (AI Assigned): First, improving internal efficiency through lean management and AI integration during the period of external adjustment, we haven't been waiting passively. We have been proactively streamlining our organization and focusing our resources on R&D.
Speaker #1 (AI Assigned): We're concentrating our core talent and improving technology reuse across platforms. On the digital side, we're integrating AI tools into our R&D knowledge management and cross-functional workflow to shorten development cycles and boost productivity. Our rule is simple: cost reduction will never compromise safety.
Speaker #1 (AI Assigned): Product quality , or core and D we won't sacrifice long term competitiveness for short term financials , but we're strictly scrutinizing expenses to strengthen cash reserves and ensure sustainable operations .
Speaker #1 (AI Assigned): Second , strengthening our operational foundation for passenger commercialization . Our Guangzhou and Hefei sites continue to refine flight operations , grant support and emergency response , and regulatory data integration through internal trial operations or accumulating real operational data to ensure we're ready to start safe and stable commercial operations as soon as regulatory approved .
Speaker #1 (AI Assigned): We're also building pilot to point capabilities in advance , including route planning , vertical coordination , support , and aircraft , dispatch , continued contingency handling and passenger services .
Speaker #1 (AI Assigned): These are fully operational capabilities for future low altitude transport. Take the Arrowhead Lake project—ground trip across the lake takes an hour, over an hour.
Speaker #1 (AI Assigned): Our planned route reduces the time to about ten minutes. The Hainan Lingao Cross-Sea Low Altitude Corridor project has also broken ground.
Speaker #1 (AI Assigned): This is the first project under our strategic partnership with the China State Construction Engineering Corporation. Six View, the key first, the key flight station, the wing is currently under construction.
Speaker #1 (AI Assigned): Together , we're building a closed loop out to the economy that combines infrastructure and operations for local governments and funders , Yihan delivers more than just an H1n1 success , will provide a comprehensive solution , including aircraft command and control systems , scenario planning , route design , Vertiport infrastructure planning , and personnel training , maintenance , regulatory coordination and safety assurance .
Speaker #1 (AI Assigned): Third , we're leveraging the mature safety architecture of the E 26 to accelerate the non-passenger products and specialized applications . Passenger carrying operations are a core direction , but they're not our only growth plan .
Speaker #1 (AI Assigned): Our path . We're leveraging E 216 mature aviation grade safety architecture , including its flight control powertrain design and command and control for logistics , firefighting , aerial meeting products , building a diversified portfolio less reliant on passenger commercial approval , atrial media remains a key revenue driver in Q two .
Speaker #1 (AI Assigned): Completed 22 shows and delivered 520 units of GDE for joints. The business is evolving from a one-time event to regular onsite service projects. Clients like Chongqing Media Group and Xinyi in Shanghai are helping us build experience and continuous operations.
Speaker #1 (AI Assigned): Content production , fleet management and on site support regular commercial shows improved equipment utilization , customer thickness and revenue predictability overseas . We also deployed a GD four drones across Japan , Thailand and Europe , accelerating international , international expansion on firefighting and logistics .
Speaker #1 (AI Assigned): We're working with customers on product customization, advancing T30 firefighting drone prototypes and logistics aircraft, and trial flagship scenarios in forest firefighting and port logistics. Or we're accelerating overseas.
Speaker #1 (AI Assigned): Commercial deployments help build a reputable international pathway. Overseas markets are a key part of enhancing our long-term strategy and are an important platform for validating adaptability, regulatory coordination, and business models.
Speaker #1 (AI Assigned): In Hong Kong, we were selected as an early participant in the regulatory sandbox project. We've chosen this as our first set of flights. Test flights started this month with a public demo coming soon, and additional flight validation.
Speaker #1 (AI Assigned): And as for now, deployment will follow under regulatory oversight. In Thailand, we have established a communication coordination with the city and are targeting a Commercial Operations Certificate in 2026.
Speaker #1 (AI Assigned): This work will proceed according to the safety review process, with the final timeline subject to the regulator's schedule. Based on the experience we launched at the Globe Fast Track Program, a four-stage framework of regulatory alignment, a sandbox buildout, validation flights, and commercial launch was designed to compress the timeline for market entry to commercial operations.
Speaker #1 (AI Assigned): Sri Lanka is the first country to formally adopt the program. Over the coming months, we will accept a project deployment in Sri Lanka.
Speaker #1 (AI Assigned): According to the Fast Track Roadmap, Fast Track does not bypass local regulatory processes or lower safety or standards. Instead, it reduces technical documentation, safety data, and our accumulated operational experience to reduce duplication and improve the efficiency of a project.
Speaker #1 (AI Assigned): Collaboration , regulatory engagement and local operational setup . Beyond Lanka , we are also exploring this program in Central Asia through the program , we aim to transform individual overseas projects into a standardized , replicable capability , providing a clear , compliant and efficient implementation pathway for more countries and regions to introduce pilotless videos Since we are feeding operational standards and safety Foundation to convert our first mover advantage into a sustainable , competitive mode , over the years , we have accumulated nearly 100,000 safe flight records and these are flights span of diverse geographies , weather conditions , terrain , application scenarios , and operating environments .
Speaker #1 (AI Assigned): Providing a critical data foundation for continuous improvement in aircraft performance, operational procedures, and command and control systems. We are working with airworthiness and operational experts to advance air operator certification standards.
Speaker #1 (AI Assigned): The goal is to turn our accumulated flight experience and internal operational capabilities into standardized, verifiable, replicable operational benchmarks that the industry can use.
Speaker #1 (AI Assigned): At the same time , we are building comprehensive . After sales support network covering delivery personnel , training , spare parts , maintenance data support , and emergency response .
Speaker #1 (AI Assigned): We need to have the organization systems and service capability in place to support scaled operations before commercial scale up . Actually begins . While this may not immediately reflect in short term revenue , establishing this scalable service capabilities now ensures we can rapidly capture market demand once the commercial window opens , we'll continue translating investments into efficiency , building quality products , and closing the loop on operations by enforcing lean management , diversifying revenue , and establishing robust safety standards , we will build a sustainable , competitive advantage and earn investor trust with verifiable results .
Speaker #1 (AI Assigned): Thank you Next , I'll pass the floor to our CFO for financial updates . Hello everyone . I am Connor , CFO of Yihan .
Speaker #1 (AI Assigned): Before I go into details , please note that all numbers in presented are in RMB unless otherwise stated . A detailed analysis is available in our earnings press release on the IR website Next , let me walk you through the key financial data for Q2 in Q2 , revenues were 77.9 million , down from 113.3 million in Q2 2025 .
Speaker #1 (AI Assigned): But up significantly by $20.3 million from $25.7 million in Q1 2026. The sequential increase was mainly due to higher sales volume of 206 series, and with additional contribution from VTi 35 aircraft.
Speaker #1 (AI Assigned): The year over year decline was due to lower sales volume of the E 216 series , compared to the same period last year , gross margin in Q2 was 61.2% , compared with 61.5% in Q2 2025 .
Speaker #1 (AI Assigned): And 62.5% in Q1 2026. Overall, gross margin remained stable. Our margin profile reflects the competitiveness of our products as well as our continued strength in manufacturing efficiency and supply chain management.
Speaker #1 (AI Assigned): Despite changes in quarterly revenue and product mix Turning to operating expenses , adjusted operating expenses defined as total operating expenses excluding share based compensation were $112.7 million in Q2 , representing a 16.9% increase year over year and a 11.5% increase quarter over quarter .
Speaker #1 (AI Assigned): The increase in operating expenses primarily reflects the combined effect of our phase, the strategic business investments, and the transition costs associated with the organization.
Speaker #1 (AI Assigned): Optimization during the period: we continue to make targeted investments in commercialization, global expansion, and R&D to reinforce our long-term competitiveness.
Speaker #1 (AI Assigned): It's worth noting that the Q2 expenses haven't yet fully reflected the outcomes of our organizational optimization and CapEx control measures, as these initiatives were mostly rolled out during the quarter. We expect the outcomes to gradually show in the coming quarters going forward.
Speaker #1 (AI Assigned): While protecting our core R&D , airworthiness , operating and global expansion capabilities will continue to improve the resource efficiency and reduce non-essential spending and maintain strict cash discipline As we continue to invest in our future growth , our Q2 profitability was affected by both revenue scale and operating expenses .
Speaker #1 (AI Assigned): Adjusted operating loss in Q2 was $62 million, compared to $77.1 million in Q1 2026. Adjusted net loss was $58.5 million, compared to $75.6 million in Q1 2026.
Speaker #1 (AI Assigned): As of June 30th , 2026 , our combined cash and cash equivalents , short term and Treasury investments totaled 929.4 million RMB . This healthy cash position provides strong support for our continued commercialization efforts .
Speaker #1 (AI Assigned): Core product development , global expansion , and day to day operations Turning to our full year guidance . Given the regulatory policies and supporting mechanisms for low altitude human carrying , commercial operations are still evolving .
Speaker #1 (AI Assigned): There remains uncertainty around the timing of domestic commercial operations. Accordingly, the company has decided to withdraw its previously issued 2026 annual revenue guidance of RMB 600 million.
Speaker #1 (AI Assigned): The company will not provide a replacement of full-year revenue guidance at this time. As the regulatory environment and business visibility become clear, we will provide an updated outlook to the market when appropriate. In the meantime, the company will continue to provide transparent and timely updates on key operating milestones. These include preparation for and the approval process of domestic commercial operations, as well as progress in international markets.
Speaker #1 (AI Assigned): Product development, orders, and deliveries for non-passenger-carrying businesses such as logistics, firefighting, and aerial media, as well as continued improvements in operating efficiency and our cash position.
Speaker #1 (AI Assigned): Going forward, we'll stay focused on driving commercialization and core tech development, while continuing to improve operating efficiency and resource allocation. We believe these efforts will strengthen our foundation for long-term growth and create sustainable value for our shareholders.
Speaker #1 (AI Assigned): Thank you all
Speaker #2 (AI Assigned): Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced.
Speaker #2 (AI Assigned): 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. Your first question comes from Tim Hysiol with Morgan Stanley.
Speaker #2 (AI Assigned): Please go ahead
Speaker #3 (AI Assigned): Hi , this is Tim from Morgan Stanley . Thanks for taking my questions I have two questions about commercialization . The first question is , is as we just discussed , I think the company target get a commercial operation permit in Thailand this year .
Speaker #3 (AI Assigned): So, just want to get more details. When do you think that would happen? Like in the third quarter, in the fourth quarter?
Speaker #3 (AI Assigned): And if it happens , how many units of two , one , six . You think we can we are going to ship this year based on the contract .
Speaker #3 (AI Assigned): So that's my first question. My second question is about the commercialization in China. Although I think the management just mentioned we are not going to provide updated guidance.
Speaker #3 (AI Assigned): And the to the uncertainty to the incidents that took place in June . But as we remember , the incident was caused by human factors and if there's any potential barrier , as we discussed with the management , I think previously management believe that that's that's would favor yuan because it the products are designed to follow the scheduled route .
Speaker #3 (AI Assigned): And which fly autonomously and can be under system control. So, just wondering what really changed management's view on the impact and the schedule.
Speaker #3 (AI Assigned): Just what happened over the past few months? Yeah, those questions. Thank you.
Speaker #1 (AI Assigned): Is there For the Should I RL Liu Xiao Two . You can a so I think the The schedule Or the . You .
Speaker #1 (AI Assigned): Young, the... All. See to the... The.
Speaker #4 (AI Assigned): To The . Routine . A . To make The . Fishing On the The . The . Fishing . A And the Stream
Speaker #1 (AI Assigned): Let me take your first question . We are deploying both passenger carrying and non-passenger carrying operations in Thailand in parallel on the passenger carrying side , we have further clarified the approval pathway for flight qualifications with Thailand Civil Aviation Authority and we expect it to obtain an experimental flight permit in Q three and we also expect to secure a formal commercial operation certificate by the end of the year .
Speaker #1 (AI Assigned): By then , we'll start . So by that milestone , it represents that our video will be officially registered within the Thailand's civil Aviation Authority , though we may not be able to directly sell tickets to the public .
Speaker #1 (AI Assigned): But that is indeed a milestone that we are hoping to achieve within the year.
Speaker #4 (AI Assigned): Are the Thailand and Wichita autumn deliveries to the million?
Speaker #1 (AI Assigned): So we are striving to secure the operational certificate in Thailand by the end of the year, and we are working with the local civil aviation regulator to plan ten routes that will cover Bangkok, Phuket, some islands, and Pattaya.
Speaker #1 (AI Assigned): Official deliveries of our 216 models will start sometime next year , according to the plans . Each location will require at least five units of H216S , so we are going to see a significant increase in our in deliveries in next year
Speaker #4 (AI Assigned): And the
Speaker #1 (AI Assigned): From the non-passenger side, the company has shifted over 1,000 GD formation drones by sea to the Thai market. We plan to launch regular drone light show operations in Bangkok and Pattaya.
Speaker #4 (AI Assigned): Chiang
Speaker #1 (AI Assigned): This incident . You . Regarding the impact of the June flight incident . The incident you mentioned manned light sport aircraft incident accident in China at the end of June was indeed a .
Speaker #1 (AI Assigned): Caused by human factors. The subsequent regulatory tightening has been noticeable, particularly around manned aircraft and their pilots. We continue to hold our original view.
Speaker #1 (AI Assigned): Our unmanned , pre-programmed , fixed route fleet oriented , coordinated operating model has inherent safety advantage and stricter safety regulation is a net positive for us in the long run
Speaker #4 (AI Assigned): In You The
Speaker #1 (AI Assigned): Regarding the change in our outlook on the OC operator certificate timeline, however, the regulatory response has been far more far-reaching than we initially anticipated.
Speaker #1 (AI Assigned): This incident has prompted regulators to adopt a more cautious stance toward the entire low altitude industry . Although it is not directly related to our unmanned evidence , the overall cautious regulatory environment has indeed slowed the approval timeline for domestic carrying commercial operations , specifically , the commercial operation approval process for the project has been delayed , and the timing of regulatory clearance remains uncertain
Speaker #4 (AI Assigned): Fast track
Speaker #1 (AI Assigned): So our assessment is that the actual regulatory tightening , you know , at the enforcement level , this is not a rejection of our technology pathway , but rather a periodic temporary impact on the approval cadence across the industry .
Speaker #1 (AI Assigned): We respect and understand the regulator's strong commitment to public safety And they hope at the same time , we hope that the , you know , the regulators would provide a reasonable policies while ensuring safety and for us , we're going to focus on executing what can be done from our side .
Speaker #1 (AI Assigned): In the meantime , we are proactively pursuing our global or overseas initiatives so that we can move the industry forward Just to just a quick add , we are working with the local civil aviation authorities to clarify validation pathways and shorten the time from validation to market access through our overseas fast Track program .
Speaker #1 (AI Assigned): That's the end. Next question, please.
Speaker #2 (AI Assigned): Your next question comes from Wade Wu with Jefferies. Please go ahead.
Speaker #1 (AI Assigned): Hi .
Speaker #5 (AI Assigned): Thanks . From Jefferies Two two question , please . The first one being given the full year guidance on the revenue has been withdrawn and I understand it could be difficult to quantify , but do you mind ?
Speaker #5 (AI Assigned): Give us a little bit color on the kind of like the second half run rate versus the two Q kind of numbers ? It would be great if you kind of split it out between EBITDA and the non passenger segments .
Speaker #5 (AI Assigned): And my second question will be coming to towards the accounting adjustment that we mentioned in the one Q call . So do you might give us some sense on the numbers being delivered in this second second .
Speaker #5 (AI Assigned): Q: And are there any more to be delivered down the line? Thank you.
Speaker #1 (AI Assigned): Thanks . Can you repeat the second question ? I didn't quite . Oh , okay . Got it .
Speaker #5 (AI Assigned): Yep , yep .
Speaker #1 (AI Assigned): Got it .
Speaker #5 (AI Assigned): Perfect .
Speaker #1 (AI Assigned): What do you mean ? And what 20 ? Sure Liu , you know To Listen you . The run rate be Is The 32 .
Speaker #4 (AI Assigned): Year
Speaker #1 (AI Assigned): Given the uncertainties, the company has decided not to update its full-year 2026 revenue guidance at this time, and neither do we.
Speaker #1 (AI Assigned): Nor will we provide any specific quantitative expectations on the revenue mix between passenger carrying and non-passenger business . However , based on the actual operating data that has already been achieved , air mobility revenue accounted for around 92% of our Q2 revenue , while non passenger business primarily GD for formation drone performance accounted for approximately 8% .
Speaker #4 (AI Assigned): So In
Speaker #1 (AI Assigned): Non passenger revenue is expected to trend upward . Both in percentage as a share of the total revenue as well as the absolute amount .
Speaker #1 (AI Assigned): In the second half of the year , driven mainly by increased deliveries of formation drones as well as a number . A small number of other model deliveries such as firefighting series , passenger business revenue will continue to dominate , largely depending on the pace of commercial operation launches on passenger routes in Guangzhou and Hefei , as well as overseas market expansion .
Speaker #1 (AI Assigned): The company will continue to advance both passenger commercial operations and non-passenger use case expansion in parallel, with a specific revenue mix evolving dynamically as each business line progresses.
Speaker #4 (AI Assigned): The Hong Kong Key, Shanghai 20.
Speaker #1 (AI Assigned): In the second quarter , the company recognized revenue for a portion of the E 200 series aircraft that had been previously delivered and going forward , we will recognize revenue as the contract meet the certain criteria .
Speaker #1 (AI Assigned): According to applicable accounting policies , and the company will disclose them to the market in a timely , timely fashion . Thank you Question please .
Speaker #2 (AI Assigned): Thank you. Your next question comes from Laura Lee with Deutsche Bank. Please go ahead.
Speaker #6 (AI Assigned): Hey , thank you for taking my question . Two on the topics that you mentioned before . Firstly , on the regulation side , I think you mentioned there's a certain level of consciousness , but just trying to see like for this current sentiment , what kind of safety evidence or milestones will likely be needed for this approval phase to normalize ?
Speaker #6 (AI Assigned): My second question is around the diversification of your revenue stream. Could you update us on the progress across the non-passenger businesses, like the logistics or firefighting teams? Which area looks more promising in the near term, or are there any contract programs you're pursuing?
Speaker #6 (AI Assigned): Yeah , question . Thanks
Speaker #1 (AI Assigned): For do you Do Are you woman . If the figure in the ginger Q1 . Okay . You should go Now , let me take your questions first .
Speaker #1 (AI Assigned): The review and approvals are conducted with a strong emphasis on ensuring safety . So there are still ongoing reviews . It doesn't mean that the review and approvals have completely come to a ground halt because , you know , the low altitude , low altitude economy represents a worldwide trend .
Speaker #1 (AI Assigned): And with regard to operations, we are still advancing our operational capabilities, and the operational model will still need to be reviewed and approved.
Speaker #1 (AI Assigned): And for approval to become normalized, our operational model needs to be passed regulatory review and enter regulatory operations.
Speaker #4 (AI Assigned): So
Speaker #1 (AI Assigned): I think to see a full-scale, back-to-normal review and approval condition, we need to see that the trial operations that we have in Hervey are moving into routine operations.
Speaker #1 (AI Assigned): And then we will establish this routine operation, using this site as a role model for other operators, even as an industry benchmark. So currently, we are helping our customers by putting together related documents, etc.
Speaker #1 (AI Assigned): as regulatory clearance clears . This way . And the industry goes back to its normal review and approval . And then our customers will be able to expedite their approval process and move into routine operations
Speaker #4 (AI Assigned): Phase
Speaker #1 (AI Assigned): There is a real demand Well , there is clear and genuine demand across all of these areas . And Ihan has a deep tech reserve and we are reusing some of our technologies from the human caring products onto the non-human carrying products .
Speaker #1 (AI Assigned): And to give you some examples , there are some short range emergency logistics and long range logistics and etc. and those are some of the critical use cases where again , use our products and looking into the second half of the year , we are also going to ship firefighting products .
Speaker #1 (AI Assigned): And there's quite a very, quite promising prospect for our—for the orders of these products. And this is exactly where our strategy is this year.
Speaker #1 (AI Assigned): We're going to continue to focus on diversifying use cases , particularly in terms of the revenue mix , as you already seen non-passenger business has already reached 80% of the total revenue , and we expected this to further expand .
Speaker #1 (AI Assigned): And the share will continue to grow as our business progresses. Thank you.
Speaker #2 (AI Assigned): Thank you, all. Given that time is limited, let me turn the call back to Miss Ann for closing remarks.
Speaker #6 (AI Assigned): You Can
Speaker #1 (AI Assigned): Thank you once again for joining us today. If you have any further questions, you can reach out to us through the email on our website.
Speaker #1 (AI Assigned): IR website . Additionally , we are going to host some offline sessions where we are going to have more in-depth communications with you , and we look forward to seeing you in our next earnings call .
