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.

...year revenue guidance of a 900 million RMB unchanged. I was wondering, could you please give us an outlook on... which in which quarter we could probably see significant growth in both the sales and as well as the deliveries um so just to give us an uh a look on that so that's the first question

Q1 performance declined due to several factors.

seasonal impacts from winter and Chinese New Year holidays, which typically create slow delivery periods in the first quarter. Second, as we enter the new fiscal year, customers require time to finalize their annual budgets, especially for government procurement, which involves longer approval cycles. Third, anticipating OC certification, some customers delayed their orders until after certification was granted.

which pushed these sales beyond Q1.

However, after obtaining OC certification, our internal data shows improvements in both Q2 delivery volumes and sales. Large orders from customers in Jilin, Jiangxi, Guizhou, Hainan, Anhui, and Guangdong that were negotiated in Q1 will begin converting into contracts and deliveries in batches starting from Q2. Therefore, we maintain our full-year revenue guidance of 900 million RMB unchanged. Thank you.

Okay, thank you for your answer. My second question, first of all, congratulations. We saw that during this report, there were two operators, including the company of Gui Group, who obtained the license. I also want to know, in general, And thank you for

your answer and a follow-up question. I've noticed that in the reporting period, two EH216S operators, including one of your wholly-owned subsidy, have obtained the air OC from the CAC, enabling commercial operations. I was wondering, on average, how long will it take for EH216 owners to get the certificate on average? and how many more operators may get the approval of commercial operations this year. Hopefully that will translate into more deliveries and the scaled operation fleet in the second half of the year. So that's my second question. Thank you.

I'm Wang Zhou. I'll answer the second question. One-air, one-air, one-air and one-air is the country's first standard for the operation and certification of unmanned aerial aircraft in humans. This is Wang Jiao.

I'll also take your second question. Yihong General Aviation and Hefei Heyi are the first to operators nationwide to receive operating certificates for the unmanned civilian aircraft. The OC issuance actually clarifies the regulatory standard and framework, which should reduce application timelines for future operators. At the moment, many of our customers' operating companies are currently in the application process. Thank you.

Your next question comes from Lorelei with Deutsche Bank.

Hey, thank you for taking my question and congrats on the OC award. So my question is about the competition. So we have seen some of your peers start to win orders recently. Most of them are with different designs like Toyota Rotor or like Lexan Cruise. But some of those have applied for TC like one or two years ago ahead of our 5035. So and they might be granted maybe next year or so. So how should it stay like competitive going forward, especially beyond our current like multi-copter design?

Thank you for accepting my proposal. Congratulations to your company for obtaining the contract. My question is about competition. We have noticed that some of our colleagues have also started to receive some orders. I have noticed that some of our colleagues' design solutions are different. Some of them use new and retrofitted designs. But I guess these designs may also get the corresponding brand certification next year. So, how can we maintain competitiveness in the future, especially in such an area where there are more and more elective designs?

How can we ensure our competitiveness? I will answer this question.

Air traffic in cities and air traffic in cities are two different operating scenarios and different markets. The requirements of the former are that the land space is small, high density deployment, high density network deployment, and practicality and economy are relatively strong. The latter requires long-term navigation. These two do not exist in direct competition. Their real competitors are the traditional and mainstream indoor and high-speed railways. Compared to most of the other IVECO products, our EH21-S is a multi-layer design structure. The entire base space is only 6 meters by 6 meters, which is even smaller and lighter. It is more convenient for large-scale operation in the air-to-air scenic areas and cities.

Urban air mobility and intercity air transport serve different markets with very distinctive requirements. Urban operations need small footprints. high density networks quick turnarounds and cost efficiency while intercity requires long range these markets aren't directly competitive with each other the real competition comes from traditional ground transportation say cars from urban travel and high speed for intercity routes Compared to other EVO designs, our EH216S multi-copter configuration has a compact six-meter times a six-meter footprint, making it lightweight with minimal infrastructure requirements for takeoff and landing sites. This enables larger scale deployment in tourist areas and urban environments. In contrast, aircraft with 10-plus meter wingspans like tiltrotors and lift-and-crow models would require expensive, large-scale airport infrastructure, which makes it impractical for dense urban deployment.

Secondly, our operating economy is also better. The domestic price of EH216-S is only RMB 2.39 million, which is significantly lower than the price of a large-scale aircraft with a price of more than RMB 10 million. And we follow the technical route of unmanned driving. The actual operation also greatly reduced the training and hiring costs of pilots, and with the accumulation of operating data and experimental data, we continue to carry on the continuous market work. can further greatly reduce the operating cost of the aircraft. This can further strengthen our operating competitiveness.

Our economics are also superior. The EH216S sells for only 2.39 million RMB domestically, which is significantly below our competitors' large aircraft. priced above 10 million RMB. Our autonomous flight approach eliminates pilot training and employment costs. As we gather and accumulate more operational data, our continued airworthiness programs enable significant cost reduction, strengthening our competitive position.

We will make full use of our own avant-garde advantages and continue to upgrade our technology and product line. On the one hand, in the upgrade of EH216S, we are developing more efficient battery solutions and fast charging batteries and portable batteries. On the other hand, in the development of long-range products, our VT35 has already entered the testing process of TC. In the future, when it enters the market, it will have a better price and market competitiveness than other long-range products of the same type.

Thank you. Last but not least, we are leveraging our first mover advantage through continuous technology and product development. For EH216S upgrades, We are developing more efficient motors, fast-charging batteries, and solid-state battery solutions. For long-range products, our VT35 is progressing through PC certification. When it is launched, it will offer superior pricing and competitiveness compared to other long-range EVITA products. Thank you.

Thank you for the call. That's very helpful.

Your next question comes from Shen Wei with UBS.

各位领导好,我想再问一下就是关于二季度的订单。 刚刚就是领导也说了二季度订单会有一个很明显的改善。 那我想问一下像上半年如果放在一起看, we can achieve a rapid growth. This is the first question. And the second question is, the company usually talks about the back-end orders in the past. So I want to ask, for example, how is the back-end order situation at the end of May? Finally, I also want to ask, because we saw Hefei, Thank you, management, for taking my question.

Got three questions. First one is on your delivery. When are we expecting to see sales growth? Are we able to achieve growth in the first half of the year? Second question is with regard to the order guidance. Can you please share some color on the order guidance as of May? And last question is on when are we able to see the operator commence commercial operation? Because infrastructure-wise, it's almost ready. So these are the three questions.

Of course, Conor. I want to answer the order question. As we mentioned before, the current decline in the first quarter is a short-term effect. In the second quarter, we also observed a lot of customers and orders showing a lot of growth. So we are very confident that the second quarter can maintain a very strong growth in the second quarter. Currently, the whole year's direct income is 900 million. This is Connor.

I'll take your question on new order guidance. As I've explained, Q1 to sellers was impacted. however, due to the seasonal factors as well as the OC certification progress. However, we believe it is temporary, and we have already seen our orders and the number of clients have picked up in Q2, which the sales is quite strong. Therefore, we maintain our full year revenue guidance of 900 million RMB unchanged. Additionally, many large orders are progressing at the same time, So as we near or finalize those contracts with our clients, we will disclose them as we previously do. So that's on your first question, on your new order guidance.

I'm Wang Zhuo. I'd like to answer a question about Hefei's operation. After the acquisition of Hefei, the commercial operation at Hefei's point of operation has already started. So this is Wang Zhao.

I'll take your second question. So actually, the operator in Hefei has already started the operation. However, we're taking a phased approach. The first approach currently for phase one, it's only limited to internal employees and invited passengers. And employees can already book flight experiences through our ticketing platform. And in phase two, we will open ticket sales to the general public.

This is it.

Thank you.

Your next question comes from Wade Wu with Jefferies.

Can you hear me? Okay, thank you.

Hello, I'm Jingying. I have three questions. The first question is, what is the schedule for the fee-making ceremony in Guangzhou and Hefei? It's for public fee-making. The second question is, what is the situation of our customers applying for OZ? The previous company told me that there are five companies that can get OZ this year. Has the data been updated? This is the first question. Thank you.

Sorry, I was on mute. A couple of questions. First one is on the timeline for inaugural flight ceremonies. When are we expecting the formal commercial operation at the Guangzhou NFA? My second question is on the end customers who is applying OCIE. Uber says that around five operators is going to obtain OC certificates by the end of the year. Are there any updates on that?

I'm Wang Zhao. I'd like to answer these two questions.

First, Guangzhou and Fei are currently doing pre-approval work after obtaining the OC. Safety is the first priority for low-income economy and sustainable development. Without safety, there is no development in the industry. As mentioned before, we will take a split mode of operation. Currently, these two operators are operating in Suigang Port and Hefei Luoguang Park in Guangzhou. They have entered the stage of in-person operation. First, they will face the internal employees and the guests outside the fixed line. They will experience it through the purchase platform. After accumulating sufficient security operation experience, the operator will directly sell the tickets to the outside public. It can be said that the operation has already started. There is no need to hold a fee ceremony again.

This is Wang Zhou. I'll take your questions. Guangzhou and Hefei operators are conducting trial operations following the OC certification. But what I say is that safety remains paramount for sustainable low-altitude economy deployment development. Like I said earlier, we're implementing our phased operational approach. Both operators at Guangzhou Suigon Terminal and Hefei Luogang Park have entered manned trial operations, initially serving internal employees and invited passengers through our booking platform. Once we accumulate sufficient operational experience, operators will open public sales. Since operations are already underway, so inaugural ceremonies aren't necessary.

And with regard to the progress on OC applications from other clients,

Our customers with substantial fleets are right now actively preparing OEC applications. For instance, our Wenchang customer has assembled a professional team with our guidance and submitted to their application, which the East China Regional Administration has accepted for review. Thank you.

Your next question comes from Fiona Liang with Bank of America.

各位领导,晚上好。 我这边是有两个小问题想请教各位领导。 第一个是关于我们刚才提到的订单和交付的问题。 因为领导刚才说我们二季度的一个订单情况下比一季度有一个很大的改善。 From the point of view of the delivery, from the point of view of the delivery, is it that we have only seen this income or delivery volume rise in the second half of the year? Then the second question is about our gross profit. Because we see that the gross profit ratio of the first quarter and the same ratio have improved. In the financial report, 你也说到是因为我们的这个价格的一个上升, 那能不能给我们再猜一下就是我们这个毛利率上升的一个主要的因素? 你好。 Hi, can I ask a question, please?

Thank you. Your next question comes from Yiming Wang with China Renaissance.

管理层好。 Thank you for taking my question.

With the current commercialization progress and the operational status after receiving the OC, I was wondering whether the company has conducted any preliminary assessment or survey. What is the daily revenue and also the passenger flow slash traffic is like? And how much revenue does that translate into on a daily basis?

I'm Wang Zhuang. I'd like to answer this question. On the one hand, two operating license companies have already started to test operation. First, maintain a certain daily flight time, and remember the operating experience and data. At the same time, monitor our appointment and purchase system platform. On the other hand, in the future, normalization of flight is very important. With the acquisition of OCD, it should be in the second quarter that we will have a very high increase in operating times and numbers. This increase may be a number of hundreds or even thousands of times per month. The two certified operators have begun trial operations, maintaining regular daily flights to accumulate operational experience.

and data while testing our booking platform. And as more customers obtain OC in a second, starting from Q2, we are going to see a larger fleet and more operators will begin their trial operations. We expect the number of trial operations to grow to even 1,000 flights. And we are expecting that number to grow even further as more customers obtained their OCs into the rest of the year. Thank you.

Your next question comes from Ron Yangzoo with SciTechs.

Hello, everyone. I have two main questions. One is about our products, and the other is about our market expansion. The first question is about the uncooperative products that we mentioned before. How is the supply chain going? This is my first question. The second question is about the current progress of our overseas market expansion. How is it going? I'll give you an overview. Thank you.

Thank you, management, for taking my question. Got two questions. One is on the lift and cruise product. What's the progress is like on the product airworthiness certification? Second question is on the overseas market expansion. What's the progress is like? Is it okay for the management to share some color on that?

I am Wang Zhihao. I will answer these two questions. The first question is about the product. Currently, the VT35 has completed the assembly of the test aircraft. Based on the VT30, we have upgraded the structure, flight control system, power system, and other key components of the first generation aircraft. We have achieved a more perfect design and more reliable flight and reduced the size. In the next three seasons, we will officially release a batch of VT357 aircraft to everyone. This is Wang Zhou. VT35 assembly is complete.

Building on the VT30, we have upgraded key components, including configuration, flight control, and propulsion systems, achieving far superior design, more reliable flight performance, and reduced size. We will officially launch the EHON VT35 series in Q3 this year. As for VT35, it is currently undergoing comprehensive flight testing. And CAAC, China Aviation Administration of China, has formally accepted our type certificate application. Built on our successful EH216A certification experience, we expect an accelerated VT35 certification progress.

The second is about the overseas market. In the first quarter of this year, DH216S successfully completed flight demonstration and verification in the Benidorm region and Mexico in Spain. One flight has been deployed to more than 20 countries around the world. With regard to your question on international market expansion progress,

Actually, in Q1, we have conducted successful flight demos in Benidorm, Spain, and Mexico. Ehang has now operated in 20 countries globally. With our progress in Southeast Asia, we plan to launch commercial operations in Thailand first. Our partner in Thailand is collaborating with the National Air Traffic Company on route and site surveys in Phuket. The operational team is established, and we are working to begin operations in Thailand's sandbox pilot zone.

Thank you.

Your next question is with Tiana Lang with Bank of America. Can you hear me?

Yes.

Hey, 各位领导好, 我这边有两个小问题想请教一下各位领导。 第一个就是想追问一下刚才我们二季度的订单和交付的问题。 因为领导提到二季度我们的订单有一个比较快的增长, 那根据我们的生产节奏来说, 如果从交付的角度来说, 是不是说我们可能收入或者说交付从下半年才开始有一个非常大幅度的改善? 好。 Thank you, management, for taking my question.

you briefly talked about you're expecting a significant growth in sales in Q2 as well as the deliveries in Q2. So the way I understand it, as you deliver more, as you ship more to clients, which will translate it into revenues, so I assume there's going to be significant revenue increase in the second half of the year. So is that so? And my second question is on the gross profit margin. The Q1 gross margin improvement was partly due to the ASP gains. So can management share the reasons or give us a breakdown on the delivery volumes by the models shipped? Thank you.

This is Connor.

I'll take your first question. You're absolutely right. Q2 is showing very strong sales growth, and we're expecting very strong year-over-year growth. And as we negotiate and engage more clients, and according to their actual needs, we can tell that in the second half of the year, we're going to expect much stronger year-over-year revenue growth.

Yes, the second question is about the interest rate. In the past two or three seasons, there have been a lot of relatively large orders, so there have been some discounts in terms of price. In the first season of this year, our exchange rate was mainly 11 shares of EH216-S. from some customers. Therefore, according to the guidance of the retail price, our sales price is 2.39 million RMB per unit. There is no discount. Therefore, in the SP, which is the military price, it is relatively high, which also leads to a higher trade efficiency. In addition, in terms of the purchase of the cost, the current volume, according to last year's record, the entire purchase volume has

and on your second question um for the past two to three quarters since there were a lot of large orders which we have which we give uh discounts to um however in q1 we delivered 11 These are retail customers, so we're selling them at 2.39 million RMB per unit without any discount, pushing up the average selling price. Additionally, since we are having a bigger volume of procurement, So that brings the total boom down on a year-over-year basis in Q1. So these two factors contributed to the improved gross profit margin in Q1.

Thank you.

Your next question comes from Yuchen with Guangfa Securities.

Can you hear me? Can you hear me? Yes, I can. In addition, I would like to confirm the details of the two aspects. The first one is about our production capacity. What is the progress of the production capacity of Yunfu base and the production line of Hefei Industrial Park? Especially the production line of Hefei Industrial Park, how much is the expected expansion capacity and the time of landing? Thank you, management, for taking my question.

This is Chen Yu, a trader and analyst from GuangFa Securities. Actually, my questions are pretty echoed what other analysts have touched on. I just want to clarify and double-check on a few details. First one is on the base capacity to Yunfu and also the Hefei Industrial Park. Can the management give an update on what's the planned production capacity for our Hefei facility, as well as the timeline in terms of its progresses? And my second question is on the SG&A expenses. In Q1, it showed, you know, it declined on adjusted terms. I was wondering if the management or the company is, you know, maintaining the SG&A expense ratio at 40% growth guidance unchanged. Thank you.

I'm Wang Zhou. I'll answer the first question. I'm from Guangdong. In the first quarter of this year, we launched the expansion and upgrade of Yunfu Production Plant, which increased the area of the main factory to 48,000 square meters, and at the same time increased the automatic level of the factory. Before the end of this year, we plan to increase the annual production capacity to 1,000 units. In Hefei, we also announced the strategic cooperation of Jianghuai Motor Company and Guoxian Control Group. This is Wang Jiao.

Q1, the launched expansion and upgrade at our Yunfu facility, which has doubled the main factory growth floor area to 48,000 square meters. And with enhanced automation, we plan to increase the total annual production capacity to 1,000 units by the end of the year. And in Hefei, we have also announced a strategic partnership with JAC Motors and Koshien Holdings to establish a modern low altitude aircraft manufacturing base. According to the government plan, the completion is expected within one to two years from now. Currently, we are building a transitional or makeshift facility with completed infrastructure and ongoing equipment installation. Also, I want to mention that our factory site selection in Beijing and Weihai is complete with construction now underway.

My name is Connor. I will answer the cost question. The control of costs and expenses is one of the key tasks of the company this year. The specific results are also reflected in the 1st quarter financial report. Before the 1st quarter of the company's adjustment, the cost of three items was reduced. In addition, in the next few quarters, the company will continue to control the cost of three items and the rate of growth of related expenses. This is Connor.

Cost and expense management is a key focus this year for the company. We have already seen the results reflected in Q1 financial results. It shows quarter-over-quarter decrease in the pre-adjusted expenses. We will continue to maintain stringent control on the SG&A expense growth in the coming quarters. While maintaining our full-year revenue guidance of $900 million unchanged, we will keep our 40% operating expense growth guidance for the full year of 2025. Thank you.

Our next question comes from Ling Liu with Goshen Securities. Thank you, management, for taking the question.

I was wondering how the management and the company perceive the recent narrative or statement from the NDRC, because according to the NDRC's recent statement about expanding low-attitude economy applications, it should follow Cargo before passengers, isolation before integration, and suburbs before urban areas principle. So just wondering what's management's view on that statement?

I'm Wang Zhao, and I'm going to answer this question. Yihang has maintained its first principle of safety since its establishment. Currently, the two companies that have received OCT operations will also adopt a three-step plan from Zaihe-style operation to Zai Ren-style operation and then to Zai Ren-style operation to ensure safety, stability, and smooth transition to Zai Ren-style commercial operation mode. Currently, these two operators have entered the Zai Ren-style operation stage in the Ibeto operation site of Suigang Port and Hefei Luoguan Park in Guangzhou.

EHON has always prioritized safety since its inception. For our two OC certified operators, they will follow a three-phase approach. Cargo trial operations, passenger trial operations, and then routine passenger operations, ensuring safe, stable transition to commercial operations. Both operators at Guangzhou-Sui Gon Terminal and Hefei-Zhougan Park have entered passenger trial operations.

Currently, the construction and economic industry is developing very rapidly, and there are many new enterprises coming into the market. The safety operation of the aircraft is very important, combined with the road that the industry has walked. The guidance of the Development Commission is to express the safety requirements of the entire industry. The low-altitude economy is developing rapidly with the many new entrants

Well, from EHON's experience, ensuring aircraft safety is always paramount. So the NDRC's guidance emphasizes industry-wide safety requirements. Thorough research and validation must go ahead before passenger aircraft development and production. In this regard, EHON has invested over 10 years in this development. And additionally, the low-altitude office of NDRC continuously tracks EHON's passenger operations through regular communication meetings. Thank you.

Thank you. Seeing no more questions in the queue, let me turn back to Ms. Sam for closing remarks.

Thank you, host, and thank you to all the investors and analysts who participated in our performance meeting today. If you have further questions, please contact our IR team via e-mail. In addition, we have also released the information of the following investors' activities and meetings on the Internet. We also welcome everyone to communicate with the management team of the company in the following meetings. Thank you, operator, and thank you all for participating on today's call.

If you have further questions, please contact our IR team by email or participate in the following investor events through the calendar information provided on our IRO site. We appreciate your interest and look forward to our next earnings call. Thank you.