ECARX Holdings Inc.

Good morning and welcome to eCorex's second quarter 2026 earnings conference call. With me today from eCorex are our founder and chief executive officer, Ziyu Shen, chief operating officer, Peter Cirino, and chief financial officer, Dylan Jeng. Following their prepared remarks, they will all be available to answer your questions. Before we start, I would like to refer you to our forward-looking statements at the bottom of our earnings press release, which also apply to this call. further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC. In addition, this call will include discussions of certain non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the GAAP financial measures can be found at the bottom of our earnings press release. With that, I'd like to hand the call over to our founder and CEO, Ziyu Shen. Ziyu, please go ahead.

Thank you, Mark. Hello everyone and thank you for joining us today. Last quarter, we outlined our vision to push the boundaries of automotive intelligence globally and how we are transforming into a truly global business, uniquely positioned to capitalize on the surging demand for higher value software and physical AI. At our earnings in May, we said we expected a significant rebound in the market from Q2, both in terms of vehicle launches and shipments. The second quarter delivered exactly as expected. We delivered a strong financial result, and we continue to build momentum and make strong progress on our strategic objectives. The second quarter continued to be defined by disciplined execution and accelerating global momentum. Our top-line revenue increased 45% year-over-year and up 71% from Q1. We reduced our operating expenses year-on-year despite the increased revenue. We grew gross margin to 19.8% up from 10.8% this time last year. Most notably, we delivered our fourth consecutive quarter of positive adjusted EBITDA. I want to be clear about the market in which we achieved this. Demand in Chinese automotive has remained challenging through the first half of this year, and global memory costs continue to be a significant factor. The growth in our revenue and profitability in this environment clearly demonstrates that the lean operating strategy we built through 2025 is doing exactly what we designed it to do. Throughout the quarter, we suited on our core priorities for the year with focus, accelerating our global strategy and investing in our R&D roadmap. That progress has strengthened our confidence going into the second half of 2026. First, our global expansion was accelerated during the quarter with more new models entering mass production, expanding the visibility and scale of our solution. Our partnership with Volkswagen Group continues to make good progress. We are now putting the engineering, supply chain, and support infrastructure in place across the Latin America region and remain on target for launch in 2027. Second, we continue to invest in our robust product and R&D roadmap. We expanded in two important ways this quarter. In June, we signed a definitive agreement to acquire the entire Flymeam software business for approximately $266 million. This brings a highly strategic piece of our full-stack ecosystem into the business. Flymeam Auto is already deployed in more than 2 million vehicles, and Flymeam OS is already a core part of our Cloud Peak middleware used globally. So we are acquiring a mature platform that our own business already depends on. Army's momentum continues. It has recently been nominated to provide the software for a leading international luxury brand in China. In May, we entered into a strategic partnership with TPK Holdings to co-develop the Orca LiDAR platform. As part of the process, will lead the system's integration capabilities and TPK will provide its manufacturing expertise. We are looking forward to seeing mass production begin in 2028. And lastly, we signed a share exchange agreement with Qualcomm Ventures last month. Qualcomm has been a strategic partner of ours for many years. We have collaborated deeply across multiple generations of solutions, including Zenith, which will be built on the upcoming Snapdragon Elite automotive platform. This agreement reflects another major milestone in our relationship to jointly develop highly specialized and integrated solutions. The progress we made during the quarter all points in the same direction. Our financial results are delivering even in difficult markets. We own more of our technology stack than we did before, allowing us to capture higher value opportunities. And we enter the second half of the year with continued confidence in our strategic and financial direction. I will now pass the call over to Peter Cirino to discuss our operational progress in more detail. Thank you, Ziyu. Good morning, everyone.

At our earnings in May, We described Q1 as being a historically subdued quarter for both seasonal and quarter-specific reasons, and we guided to increasing momentum from Q2 onwards, both in terms of vehicle launches and shipment volumes. This is played out in Q2 as we expected. We achieved the launch and volume rebound we guided to in the first quarter, underscoring our strategy for a global commercial build out through executing complex global programs across diverse vehicle lineups and markets. Shipments in the second quarter were approximately 550,000 units, an increase of 51% quarter on quarter that directly contributed to strong top line growth. Again, same quarter last year, volumes were 2% lower. While year on year shipments were marginally down, overall revenue and revenue quality was significantly increased. Sales of goods revenue increased both quarter on quarter and year over year as shipments of our high-end solutions continue to grow and demand accelerates. Shipments of our high-end and tourist solutions in particular increased 92% quarter over quarter and 52% year over year. Furthermore, shipments of our high-end performance AI-driven computing platform Pykes increased 43% quarter-over-quarter and over 2,000% year-over-year. And Tora and Pykes now make up 42% of shipments. These are the direct results of the decision we took during Q2 last year to begin phasing out our lower-margin legacy platform business and concentrate on high-end fully eCARX architected solutions. That decision moderated our unit volumes for a period, but is now improving the quality of what we sell. The second quarter is also where our 2026 model launches began, landing at scale. And every launch pulls hardware volume and associated engineering revenue with it. Software revenue decreased from the same quarter last year by 42%. due to lower sales volume, whereas services revenues increased substantially from the same quarter last year by 21%, driven by new model launches. Services revenue comprised of reoccurring software fees, but the bulk of it today tracks the timing of design and development contracts and the vehicle launch cycles they support, so it can be lumpy by nature. We are pleased to see this improvement as we guided to expect three months ago. As launches accelerate, we anticipate software and services revenue will accelerate with them. To provide some context here, revenue in any given quarter is a function of three things. Those are vehicle model launch timing, shipments driven by end market demand, and component pricing. We manage the first through operational discipline The second through geographical and customer diversification. And the third through pricing adjustments to structurally support top line revenue and protect profitability. But this business will show quarter to quarter variability, and we encourage you to look at the trailing four quarters rather than any single one. Turning to our customer base and growth strategy. During the quarter, we began mass production for nine new models across four brands. of which a majority are using our next generation Pikes or Antora series solutions. Of these new models, four are designated for markets outside of China, including Europe, Southeast Asia, and South America. We are pleased to see this type of growth that further reinforces our strategy on transforming into a global company. We now have 12 million vehicles with our technology on the road. As Ziyu mentioned, our partnership with Volkswagen Group continues to drive forward during the quarter as we continue to build out engineering, supply chain, and support infrastructure in the first region to support its expected launch in 2027. The program integrates our high-end Antora 1000 with CloudPeak and Google built-in for premium segment vehicles, alongside our cost-effective Antora 500 for entry-level segments. I want to again highlight the flexibility and scalability of the unique value proposition we are offering here. One portfolio of solutions that covers the full price ladder. Ziyu has already covered the strategic rationale of the pending FlyMe acquisition. FlyMe consists of two distinct but related pieces of software. The first is FlyMe Auto, which is the application layer which we use for the interface for products sold in China. In international markets, we use Google built-in for this layer. The second piece is FlyMeOS, which is the Android platform that we embed into our Cloud Peak middleware. This is the core of our software stack, used both in China and internationally. Let me turn to what this acquisition will change operationally in both of these markets. The first is roadmap control, a competitive advantage of eCRX is our ability to tightly integrate our product solutions across layers, from silicon to sensors to software. Owning FlyMe allows for deeper hardware and software integration and greater customization. That shortens the integration timelines for automakers, provides them with standardized flexible solutions for diverse vehicle lineup, and accelerates time to market. More importantly, this will also create a competitive moat strengthening our ability to execute complex vehicle programs at scale. The second is a revenue stream that is not tied to hardware volume. Flyme generates revenues today from software licensing, from custom development work, and from intelligent cockpit system delivery. Adding a licensable software asset will allow us to move up the automotive value chain and capture greater margin. The third is interoperability. FlyMeOS, which is embedded in CloudPeak, already spans vehicles, smartphones, and wearable smart devices, which means the car connects seamlessly to these devices which drivers already carry. What differentiates FlyMeOS from current products is its speed and close integration with the rest of the stack, delivering a superior user experience. This fully integrated cross-domain ecosystem equips automakers with solutions they can deploy, whether that is FlyMe Auto in China or Google built-in outside of China, across a lineup to differentiate their vehicles in an intensely competitive market. We will operate FlyMe as an independent software division which will preserve R&D continuity and ensure a seamless transition for existing customers. Existing operators of FlyMeOS will continue to receive updates and user data remains in each operator's ownership. The second addition to our portfolio is our partnership with TPK to co-develop the Orca LiDAR platform, making our formal entry into the LiDAR sector. Under that agreement, we will lead system integration, sensor fusion, and global commercialization drawing upon our relationships with international automakers and robotaxi operators. TPK will contribute optical design, engineering, and high-volume precision manufacturing. Mass production is scheduled for 2028 at TPK's facility in Thailand, and we're excited about the additional options this will allow us to provide automakers as we continue to drive further hardware and software integration. Before I pass the call to Dylan, I want to leave you with one final thought. What these partnerships and solutions provide are critical to our broader strategy. When a global automaker asks us for a solution, we can answer with our own silicon heritage, our own computing platform, and soon our own operating system and our own expanding sensor technology. Very few companies in the industry can offer this sort of closely integrated stack comprising silicon to software to sensors. With that, I will turn the call over to Dylan.