EHang Holdings Limited

Hello, everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the first quarter of 2025. The earnings release is available on the company's IR website. 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. Hua Zhihu, our founder, chairman, and the chief executive officer. Mr. Zhao Wang, Chief Operating Officer, and Mr. Connor Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB, and after the first quarter of 2025. Unless they did otherwise. With that, let me now turn it over to our CEO, Mr. Hua Zhihu. Please go ahead, Mr. Hu.

Hello everyone, and thank you for joining our earnings conference call today. We started the 2025 with another major regulatory breakthrough. In the end of March, Ehan General Aviation, our wholly owned subsidiary, and Heyi Aviation, an operator of our client in Hefei, were granted the first batch of air operator certificates for human-carrying, pilotless aerial vehicles by the Civil Aviation Administration of China. This approval officially takes us from product certification into the era of commercial flight operations. It marks the beginning of commercial eVito services in China's low-altitude economy, allowing the general public to experience eVito flights for the first time. The issuance of the OC signifies that Ehon has achieved full lifecycle capabilities of eVito, from design and R&D to manufacturing, airworthiness certification, and now operational readiness, This completes a fully integrated commercial loop. At the same time, we are gradually contributing to the development of industry innovation standards in areas like infrastructure, personal training, and operational safety. Step by step, we are advancing toward our long-term strategic goal, evolving from manufacture of autonomous aerial vehicle into a comprehensive urban air mobility platform operator, delivering a one-stop solution to our clients covering aircraft hardware, software, operational services, and standard systems. The first OC represents the most critical milestone for enabling commercial operations. With this issuance, EHON has officially entered the commercialization phase, a stage that brings both opportunity and great responsibility. Aviation has always progressed with caution and discipline, and as a pioneer in this emerging field, EHON remains deeply committed to the principle of safety first. We're taking a deliberate and phased approach. On one hand, we continue to accumulate flight test data and provide strong support to our operator partners. such as safe operation guidance and maintenance. On the other hand, we're adopting a phased strategy, first isolation and then integration, first tourism, then transportation, and first pilot projects, then expansion. We're not rushing to scale or chasing short-term gains. Instead, our early efforts are focused on pilot cities where our clients are to accumulate operational experience and build reputable models to gradually lift OC operational restrictions. For example, we started with clearly defined low-risk scenarios, such as sightseeing flights, before expanding into more complex urban air mobility services like urban air commuting. This will pave the way for the gradual realization and scaling of commercial operations for autonomous human-carrying aircraft. We believe this is the right path forward for our customers, for our partners, and for the healthy development of the entire urban air mobility industry. Turning to the product development, our next-generation long-range pilotless human-carrying vehicle, the VT-35, has completed the final assembly of its first unit. Based on the VT-30 prototype, the VT-35 features significant upgrades, including the industry's most stable and safe autonomous flight control and propulsion systems. With our proprietary autonomous platform and command and control system technologies, the VT35 delivers disruptive innovations in both the design and reliability. We believe it will become an outstanding model among medium and long-range EVITL products. It is now undergoing full-scale flight testing. The CAAC has officially accepted our type certification application for the VT35. And the aircraft is ready being used for airworthiness validation test. Leveraging our EH216-S certification experience, we expect it helps accelerate the VT35 certification process. We plan to unveil the VT35 in the third quarter of this year. In the international market, we believe the VT35, backed by China's industrial strength and advanced manufacturing, will offer a clear cost and competitive advantage over other long-range fetal products globally. On the innovation front, R&D has always been at the driving force behind Ehon. We currently hold over 700 issued and pending patent assets worldwide. Nearly half of our team is dedicated to R&D, and many of our top engineers and technical leads, like me, come from Tsinghua University. Their strong academic foundation in aerospace automation and intelligent manufacturing, along with a nearly 10 years experience at Ehon, have positioned us as a global leader in autonomous flight systems and technologies. In February this year, the Aerospace and Intelligent Manufacturing Committee of the Tsinghua Alumni Association was officially launched at Yihan's headquarters in Guangzhou. We're honored to serve as the chair member and myself as the chairman. Through this committee, we aim to build an innovative ecosystem for the low-altitude economy in the Greater Bay Area, combining EHAU's leadership in autonomous aviation with Tsinghua University's deep strengths in research and talents. Our shared goal is to drive continuous R&D and achieve breakthroughs in next-generation pilotless aerial vehicle technologies. In March, we also signed an MOU with the University of Zaragoza in Spain and Guangzhou University to establish a joint low-altitude flight safety lab. With their support, we are deepening our cooperation with the European Union Aviation Safety Agency and advancing joint R&D and talent development in Europe. With continuous innovation and differentiated core competitiveness, we will remain a global leader in the pilotless video industry and continue to shape the future of urban air mobility. With that, I'll hand it over to our Chief Operating Officer, Mr. Wang, to walk through our operational highlights. Thank you. Thank you, Mr. Hu. In the first quarter, we delivered 11 units of our EH216S and generated revenues of 26.1 million RMB. The load delivery volume was primarily due to three factors. First, seasonal slowdown. The winter months and the Chinese New Year holiday typically make Q1 an off-season for product deliveries. Second, after the holiday, many clients, especially those involving government procurement, require time for their internal budgeting and approval process. Third, as the issuance of an OC was approaching, some customers chose to place their orders after the OC was granted, meaning those orders were not reflected in Q1 results. At the same time, in Q1 2025, we kicked off the expansion and upgrade of our Unifu production base. The size of our main factory has now doubled, and once fully operational, it will support an annual production capacity of up to 1,000 units. In parallel, we are also building additional assembly facilities in Hefei, Anhui Province, and Weihai, Shandong Province. These multiple sites will ensure we have ample production capacity to fulfill orders in the future, while also providing supply of spare parts and consumables for the aircraft in operations. On March 28, two operators of the EH216S and relevant services were officially granted their OCs, This marks a significant milestone for both Ehon and the industry as it formally allows autonomous human carrying aircraft to begin commercial operations in China. It also demonstrates strong recognition and validation of our EH216S from both the CAAC and the market. With the commercial operations now underway, we expect the flight activities to ramp up significantly since the second quarter. The declining Q1 performance was only temporary. Underlying demand remains robust, with procurement and deliveries were simply deferred to later quarters. We are pleased to see that following the issuance of the OCs, consumer inquiries and order volumes have picked up significantly. We could expect a strong rebound in the second quarter. Several major orders were discussed in Q1 with customers from provinces such as Jilin, Jiangxi, Guizhou, Hainan, Anhui, and Guangdong. in China are now moving forward and will begin to convert into deliveries starting in the second quarter in phased batches. On the operations side, following the CAAC's principle of safety first, EHON and our operator partners are implementing enhanced standards to ensure safe and compliant flight operations. The two certified operators, He Yi Aviation and EHON General Aviation, are taking a phased three-step rollout, starting with lead-only trial operations, followed by human-carrying trial operations, and ultimately transitioning into routine human-carrying commercial services. This approach ensures a safe, stable, and seamless progression toward full-scale commercial operations. Currently, both operators have entered the human-carrying trial phase at designated ifeiro cities. in Guangzhou's Suigan Pier and Hefei's Luogang Park. These flights are being offered initially to internal staff and a selected group of invited passengers via ticketing platforms. Once sufficient experience and safety data have been accumulated, the operators will begin offering flight tickets sales to the public. At the same time, we're actively laying groundwork for scaled commercial operations by enhancing our customer service infrastructure, This includes providing standardized and scalable flight route planning, modular and customized vertiport designs, and the systematic training program for operational and maintenance personnel. These efforts are aimed at helping more customers prepare for their OC applications. In Q1, we supported a customer in Shanghai in establishing an EVITO operation center at Longhua Airport. on the Xuhui River side and successfully completed the first EH216S flight in the city. This also marked the start of routine sightseeing flights along the Huangpu River in Shanghai. In Wencheng, Zhejiang Province, the world's largest UAM center for evito expiration sales and operations was established. Meanwhile, in Shenzhen's Lohu District, our client has launched a UAM Demonstration and Experience Center. This facility features the world's first fully-autonomated multi-level smart eVito Vertiport, setting a new benchmark for urban low-altitude infrastructure. Additionally, in collaboration with the China Communications Information and Technology Group, we are building a multi-level urban transportation hub in Nalati Xinjiang, these are examples of how the low-altitude economy will diversify its operational models and shape a more vibrant future-oriented way of lifestyle. On the industrial collaboration front, in February, we entered into a strategic partnership with JAC Motors and Guo Xian Holdings to jointly develop a next-generation EVITO manufacturing base in Hefei. More recently, we expanded our partnership with CCIT to include CCCC-FHDI Engineering Company, forming a trilateral collaboration on three key areas. First, we're focusing on delivering specialized low-attitude tourism routes, smart inner-city transportation corridors, and emergency response networks. This includes creating unique transport systems such as themed low-attitude tourism experiences and aerial canal logistics pathways. Second, we are jointly building a multi-dimensional infrastructure network, covering airspace management, flight route planning, and deployment of digital base stations. Third, we're jointly expanding into international markets across Southeast Asia, Africa, and South Asia, to develop integrated land, air, water transportation solutions. Our goal is to build a globally connected low-altitude economy ecosystem, promote the adoption of Chinese standards worldwide, and bring safe, intelligent air mobility to more regions across the world. At the same time, we're establishing low-altitude aircraft testing sites across multiple regions to evaluate performance under extreme conditions such as high altitude, high temperature, high salinity, low temperature, and severe weather conditions. Continuous testing and refinement will help enhance the resilience and safety of our aircraft. In Guangzhou, we are working closely with government authorities and construction partners to transform the area surrounding our new headquarters into an aerospace industry hub, promoting industrial clustering, accelerating the deployment of standardized infrastructure. and promoting the growth of low altitude economy. Currently, the construction is already underway. In addition, we're also actively expanding our businesses into other applications such as logistics and emergency rescue. Our logistics autonomous aerial vehicle have already completed multi round trip flights between Guangzhou and Zhuhai covering distances of up to 200 kilometers. With the upcoming launch of our VT35 series, we expect to further enhance our long-range, high-efficiency logistics capabilities. Emergency rescue is another major focus area. The ground use of UAVs offers new solutions for high-rise firefighting, forest firefighting, search and rescue, and medical transport. EHON has developed a new generation of specialized UAVs tailored for these use cases. These aircraft have already been used in multiple emergency drills and have drawn strong interest from China's Ministry of Emergency Management and National Firefighting Authorities. These products have already received initial purchase interest. As these products near finalization, we expect them to begin generating sales later this year and contributing to our revenues this year. In addition to advancing low-attitude products, Yihan is exploring our collaborations with aviation sector. We've launched pilot initiatives through different approaches for integrated trial operations of low-altitude aircraft in general aviation airports in Guangxi, Hezhou, Beijing, Pinggu, and Fengshan, Hainan, Wanning. We're also planning additional projects in Nianhui, Hefei, Guangdong, Guangzhou, and Hainan Linggao. As our operations in airports and the network expands in the future, we expect to unlock greater deployment potential for our full range of aircraft. As China's low-attitude economy continues to gain momentum, Ehon, as a recognized industry leader, is attracting increasing interest from cities and enterprises nationwide. Our product's operational philosophy and unwavering commitment to safety are gaining broader recognition and acceptance across the market. In the first quarter, Yihan was featured in over 19,000 domestic media reports, including coverage from the CCTV Spring Festival Gala, national television networks, newspapers, and major online platforms, reaching an estimated 80 billion views. Internationally, we were mentioned more than 3,600 times across media outlets in the UK, France, Spain, the US, Japan, and other countries, generating a global reach of over 1.69 billion views. e-hoth products have been featured at a wide range of low-altitude economy exhibitions and forums, both in China and internationally. Our brand has earned strong recognition at home and abroad. Internationally, our global flagship footprint continues to expand in the first quarter. Our EH216s successfully completed demo flights in Benidorm, Spain, and in Mexico. In Thailand, our local partners have started working with the National Air Traffic Control Authority to conduct preliminary route and site assessments in Phuket. An operational team is already in place aiming to launch commercial trial flights within Thailand's designated regulatory sandbox in the near future. Looking ahead to the rest of 2025, we will continue advancing both operations and product sales with a clear focus on building diversified revenue streams. We are confident in our growth momentum over the next few quarters and remain fully committed to achieving our full-year revenue target of 900 million RMB. Now, I'll turn it over to our CFO, Connor, to walk us through the financial results. Thank you. Hello everyone, this is Connor. Before I go into the details, please know that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site. Total revenues were 26.1 million RMB in Q1 2025, a decrease compared with Q1 last year and Q4 2024. This change is primarily driven by decreased sales volume of EH216 series products. As our COO mentioned earlier, although there was a short-term decline in performance in the first quarter, this doesn't affect the company's long-term growth trend. In fact, we have observed a significant improvement and growth in potential orders and deliveries in Q2, which keeps us confident in the company's future performance. Gross profit was 16.3 million RMB in Q1 and gross margin improved to 62.4% compared with 61.9% in the same period of 2024 and 60.7% in Q4 2024. The increase in gross profit was mainly benefited from the higher average selling price of EH216 series product. indicating that our products have strong market competitiveness and pricing power. Turning to expenses, total operating expenses in Q1 were 110 million RMB, a quarter-on-quarter decrease of 31.6%, mainly due to a significant reduction in employee compensation and share-based compensation expenses. Adjusted operating expenses which exclude share-based compensation expenses were 63.6 million RMB in Q1, up 16.8% year-over-year and down 19.3% from the previous quarter. The year-on-year growth is due to the company's continuous expansion of key positions and recruitment of talents to support sustained business growth, leading to an increase in overall employee compensation expenses. Meanwhile, we continue to invest in R&D to maintain our technological leadership The quarter-on-quarter decrease reflects our achievements in cost control and efficiency optimization. Adjusted net loss was 31.1 million RMB in Q1, primarily driven by a decline in deliveries in the quarter. While this represents a decline compared with an adjusted net income of 36.4 million RMB in last quarter, we believe the impact is only temporary. As deliveries recover and continue to grow in the coming quarters, we expect financial performance to gradually improve accordingly. The company still has sufficient capital reserves. As of March 31, 2025, cash, restricted deposits, and short-term investments totaled 1.11 billion RMB, giving us solid flexibility to support upcoming R&D investment, production scale-up, and commercial deployments. With the achievement of the important OC milestone in Q1 and the EVITO commercial operations to be gradually launched going forward, we're confident in our business growth throughout the year. As such, we're maintaining our annual revenue guidance of 900 million RMB for the full year 2025. We believe that the market increasingly recognizes Ehon's commercialization capabilities and the low-altitude economy industry continues to gain momentum. We are able to continuously create value for our shareholders over the long term.

Thank you.