EHang Holdings Limited

Ladies and gentlemen, thank you for standing by and welcome to the EHANG third quarter 2025 earnings conference call. Please note that the management's prepared remarks and the subsequent Q&A session will primarily be conducted in Chinese and the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenient purpose only. In case of any discrepancy, the management statement in the original language will prevail. To listen to the original remarks by management, please join the Chinese line. Additionally, both Chinese and English lines are open for questions, and today's call is being recorded. Now I will turn the call over to Angie Ehang, Senior Director of Investor Relations. Ms. Ann, please proceed.

Thank you all for joining us on today's conference call to discuss the company's financial results for the third 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. Huan Zhihu, our founder, chairman, and 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 are for the third quarter of 2025, unless stated 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 call today. In the third quarter of 2025, we continue to advance our business roadmap in a steady and disciplined manner. We delivered 42 units during this quarter, generating $92.5 million in total revenues. Under our annual strategy of operations-driven sales, we proactively optimized our delivery pace and prioritized resources toward supporting existing customers in building regular operations in order to establish sustainable commercial operating capabilities. As a result, delivery saw a temporary slowdown while new orders continued to grow strongly and our order backlog further increased. We believe this strategy will strengthen the foundation for commercial operations and drive e-homes healthier and more sustainable long-term growth. This quarter, we achieved a sustainable progress in product portfolio, product development, industrial deployment, and international expansion, laying a solid foundation for the next phase of growth. First, in terms of product portfolio, we continue to expand our product line this year to cover more diverse application scenarios in the low-altitude economy. In October, we officially launched the VT35, our next-generation long-range lift and cruise pilotless human-carrying EVITO. The VT35 has gone through a long six-year period from finalization to productization, integrating the advantages of EVITO's while avoiding shortcomings of products with other configurations. Adopting an advanced tandem wing design, the VT-35 maintains full aerodynamic efficiency and flight stability while minimizing the overall size of the aircraft. Its design range with a full load is at least 200 kilometers. This is only our conservative data under the strict conditions. It can cover various medium to long-distance scenarios, such as cities, islands, and mountains areas, greatly expanding the application scope of VITOS in intercity and regional transportation. Consistent with our Safety First principle, the VT35 adopts fully redundant systems and autonomous obstacle avoidance, ensuring further enhancements in safety and reliability. Meanwhile, the VT35 extensively uses the mature system architecture of the EH216S, including its command and control system and ground infrastructure such as standardized vertiports and charging platforms. In the future, this will enable the true realization of intercity door-to-door travel while significantly reducing infrastructure costs and deployment thresholds. We announced the pre-sale price of 6.5 million RMB for the standard version of VT35 in China. Supported by China's strong manufacturing capabilities and new quality productive forces, we believe these compelling pricing advantages will make the VT35 highly competitive in global markets. We have already received purchase orders from customers in Hefei, Zhejiang and Hainan and have started delivery and test flights in the third quarter. On certification and industrial deployment, the Civil Aviation Administration of China formally accepted the VT35's type certificate application in March of this year, and the certification progress is progressing steadily. We're following the proven certification path of the EH216S, and are fully accelerating the testing and certification efforts of the VT35. Meanwhile, we further deepen our strategic partnership with the Hefei government to establish the VT35 product hub in Hefei. The Hefei government will provide comprehensive support totaling 500 million RMB, including purchase orders to build an integrated layout across R&D, manufacturing, airworthiness, certification sales, and operations. This partnership meaningfully strengthened our foundation across the entire industry chain. From the product portfolio perspective, the EH216S focuses on intercity transportation, while the VT35 addresses intercity and regional transportation. covering major metropolitan clusters such as the Yangtze River Delta, the Pearl River Delta, and the Beijing-Tianjin-Hebei region, extending the radius of the one-hour air travel circle to hundreds of kilometers. Together, the two models form an intra-city plus intra-city product matrix that alleviates and expands Yihong's low-attitude mobility network. Separately, we also began mass production and commercial deployment of our self-developed next-generation technology formation drone, the GD-4.0, in the third quarter. With a single charter flight endurance of up to 45 minutes and a modular box launch design deployment, the lighter-weighted system with high-precision positioning enables long-duration, highly stable flights and significantly enhances visual effects and operational efficiency for aerial light shows. During the 15th National Games held in Guangzhou, we deployed more than 11,000 GT 4.0 drones for a night sky performance, making our largest formation record to date. We're also advancing development on several next-generation models, including the firefighting variant of the EH216 series, the VT series logistics aircraft, and a two-torter configuration to support a broader range of commercial applications. Our joint venture with Chang'an Automobile Yi'an Zhiheng has been formally established, and we will co-design and develop the next-generation product line, further strengthening industrial synergies and accelerating the diversification of our overall portfolio. In terms of industrial development, we continue to strengthen our manufacturing system and long-term capacity planning. Our strategic cooperation with Mint Group deepened further this quarter, leveraging this expertise in lightweight structural components, and intelligent cabin system to enhance the core competitiveness of Yihan's Evito products. Meanwhile, our joint venture with Empower Yunfu Yihan has entered trial production for its Phase 2 project at the Yunfu production base. Construction of our facilities in Hefei, Weihai, and Beijing is also progressing as planned, forming a full value chain layout across R&D manufacturing, airworthiness certification, delivery, and operations. As these major industrial bases come online, we expect to further strengthen our production capacity, supply chain resilience, and deliver efficiency. Internationally, we continue to advance global deployment in a steady and phased manner, establishing scalable market entry models through demonstration flights and local partnerships. During the quarter, we achieved notable progress across Asia, the Middle East, and Africa, including ongoing trial operations under Thailand's regulatory sandbox program and completing the Mideast's first intra-city pilotless human care and uvito flight in Qatar, which showcased the efficiency of point-to-point low-altitude transportation. We also carried out consistent demonstration flights and regulatory engagements in Africa and Japan. These overseas initiatives, the Path of Flight Verification Scenario Application Program, commercial operation, laying a solid foundation for future large-scale business expansion. On the policy front, China's 15th Five-Year Plan proposal released in October explicitly caught for accelerating the development of industrial clusters in strategic low-altitude economy, providing long-term stable and high-certainty policy expectations for the industry. Ongoing regulatory improvements, aerospace reform, infrastructure build-out, and application scenarios to collectively create a comprehensive environment that supports the R&D, production, testing, and operations of EBITDA. As an industry pioneer, Yihan will continue to participate in standards development and demonstration programs, leveraging policy momentum to accelerate the technology deployment and industrial expansion. Guided by national policy support, Local governments are increasingly supporting the low-altitude economy, providing more practical operational guidance for the industry. For example, in October, Guangdong Province introduced several measures to promote the high-quality development of the low-altitude economy, supporting Guangzhou, Shenzhen, and Zhuhai in pioneering intercity and intercity low-altitude passenger routes and promoting cross-border drone logistics in the Greater Bay Area. Similarly, in September, the Hong Kong government also proposed in its latest policy address to formulate a low-altitude action plan and launch an advanced sandbox pilot. The initiatives cover more complex scenarios, including cross-border flight routes and human-carrying veto operations. We are currently working closely with the Hong Kong regulators to advance pilot These policy breakthroughs will not only strengthen the industry's long-term outlook, but also provide a clear institutional guidance for our commercial implementation. We also continue to invest in the broader industrial and research ecosystems. Following the establishment of the Joint Research Institute with Tsinghua University this quarter, we recently signed a Strategic Cooperation Framework Agreement with the China Academy of Civil Aviation Science and Technology. The partnership will focus on six major areas, including flight safety, route management, operational support, regulatory standards, and technology validation, and jointly building a standard system for low-altitude commercial operations. Looking ahead, we will continue to prioritize safety while leveraging our product strength, innovation capabilities, and operational expertise as our core drivers. We will advance commercial operations in a disciplined manner and further deepen our global footprint. Benefited from an increasingly supportive policy environment, a more complete product portfolio, and our continuously strengthened full-chain capabilities across R&D, manufacturing, airworthiness, certification, and operations, we remain confident in our long-term growth outlook. Meanwhile, we're also very pleased to welcome our new board member, Ms. Hai-Yin Lee, to the company's board of directors. With her extensive global experience in capital markets, asset management, and corporate strategy, her addition will provide significant support for enhancing the company's international perspective, capital market engagement, and strategic decision-making in the future. Her appointment will also strengthen the diversity of our structure and the government's capabilities of our board. We look forward to working with her to drive the company into its next phase of growth. I will now hand it over to our COO, Wang Zhao, for operational updates this year. Thank you, Mr. Hu. In Q3, we continued to execute against our core strategy focus on safety, operational excellence, and commercial deployment. We generated revenues of 92.5 million RMB and delivered 42 units of eVTOL, including 41 units of EH216 series and the first of VT35. Deliveries this quarter were mainly in China, totaling 39 units with overseas customers in Thailand and Malaysia. The quarter-over-quarter and year-over-year declines in revenues and deliveries were mainly due to the delayed payment schedules from certain customers. While some sales agreements were signed during the third quarter, payments were not completed in time, resulting in a part of the originally planned Q3 deliveries being deferred and therefore not recognized as Q3 revenue. As of now, 30 units of those orders have been fully paid for and will be recognized in Q4. Based on our current delivery progress and order execution, we are maintaining our full-year revenue guidance of 500 million RMB. On operational readiness, we are steadily preparing for the official commercial operations of the EH216S in China. Our two certified operators, EH216S Han, General Aviation, and Hefei Heyi Aviation continued human-carrying trial operations around the third quarter. As of now, in the second half of 2025, a total of 1,147 flight missions have been safely conducted by the two certified operators, including 359 human-carrying flights, all demonstrating stable and reliable performance. Hefei Heyi Aviation's operations site is now ready for commercial operations and plan to gradually and carefully open to the public through a reservation system starting in December. This will allow more passengers to experience pilotless and vehicle mobility firsthand. Meanwhile, preparation for point A to B route trial flights at both sites are progressing well. Route planning, vertiport assessment, and aerospace surveys have been completed. and multiple rounds of test flights have already been conducted. Leveraging capabilities of both certified operators, we will continue conducting additional human-carrying flights and operational trials to advance the rollout of point A to B route operations. Furthermore, we continue to support delivery to customers with route flights. These flights have been carried out across a variety of terrains and environments, including Meijiu Island in Fujian, Hangzhou in Shanxi, Chongqing in Mongolia, and Qinghongdao in Hebei. Through scenario-specific verification and trial operations, we are gradually establishing an operational guidebook for different applications and accumulating high-quality data and practical experience for future-scale commercial operations. Flight tests in special environments such as the plateaus, cold regions, and straits are also progressing steadily, further demonstrating the strong flight performance of the EH216S. For external operational support, we have begun delivering or offering services of OC certification assistance and outsourced operation services through Yihang General Aviation and Hefei Heyi General Aviation. Several customer projects are already underway. To support future commercial scaling, we are accelerating the deployment. development of our key capabilities in q3 we completed the design of all required materials for the eh216s ground operator training program including training plans flight menus course outlines training materials and assessments systems the center south regional administration of the caac has formally accepted our application and the first training program is expected to begin shortly. The training cycle will run through the end of the year and proceed under CAAC supervision. Our goal is to verify the first batch of ground operators early next year. We plan to build a team of about 100 professional ground operators to support scaled commercial operations and service delivery, while also training additional ground operators for our customers' own operating teams. Once a certain number of certified ground operators are available in the market, regular operations can be realized in various customer operations scenarios, and the progress for other operating companies to obtain OC will be further advanced. At the same time, we're making steady progress on developing the EHON trip ticketing system. The internal testing version is now live, allowing our employees to book and experience flights through the online platform. And initial feedback has been very positive. This will prepare us for upcoming launch of the public online ticket service. Internationally, our global visibility and flight footprint continue to expand. To date, the EH216 series had cumulatively completed over 80,000 flights globally, further strengthening its international presence and credibility. In Japan, the EH216S successfully flew near the Osaka airport Kansai Expo venue and at the foot of Mount Fuji, while the EH216L completed first cargo logistic route flight in Ishikawa Prefecture. In Rwanda, in collaboration with the China Road and Bridge Corporation, we completed the first human-carrying flight of the EH216S in Africa, extending our flight footprints to 21 countries. Regarding overseas regulatory certification, we are working with local partners and civil aviation authorities in multiple countries, including Saudi Arabia, the UAE, Thailand, Brazil, and South Africa, to advance the establishment of bilateral airworthiness validation with the CAAC and to support the validation of type certificate application for the EH216S. Relevant regulatory frameworks in these markets are accelerating and maturing, laying important groundwork for future commercial EV2 operations. Meanwhile, we are also actively exploring trial-first pathways to initiate operational trials overseas. In October, together with the Civil Aviation Authority of Thailand and local partners, we officially launched the Thailand Advanced Aeromobility Sandbox project. Through flight validation under the sandbox framework, we were able to obtain special operational approval through an expedited regulatory process. This initiative represents the world's first regulatory sandbox model for advancing commercially veto operations and is expected to become a benchmark program globally. The EH216S has now undergone over a month of continuous trial operations within the Bangkok sandbox area, showing strong stability and reliability across all trial flights. We also conducted a series of on-site emergency response demonstrations for CAT, covering scenarios such as propeller failure, communication loss, and other contingency situations to validate the autonomous handling capabilities and safety performance of our pilotless intelligence system. These efforts not only validate the commercial operational model for eVITOS, but also establish a solid foundation for a replicable, regulatory, and operational framework. Looking ahead, we plan to expand the sandbox to Pattaya, Kualan, Phuket, and Kosemi, forming a demonstration network covering tourism, commuting, and intra-island transport. This will also provide a scalable and replicable pathway for commercial pilot projects across other Southeast Asian markets. In the Middle East, with operational authorization from the Qatar Civil Aviation Authority and And with support from the Ministry of Transport, we successfully completed a series of human-carrying flights with the EH216 as in downtown Doha and the region's first pilotless intra-city point-to-point vehicle flights. The flights connect to the Doha port and to the Katara cultural village, reducing a 30-minute car ride to just eight minutes, clearly demonstrating the EH216 as its application potential in urban air mobility scenarios. We will continue deepening cooperation with Qatar's Ministry of Transport and advance the pilotless air taxi project in a phased manner. In Central Asia, we signed an MOU in September with the group. a major industrial and commercial enterprise in Kazakhstan, outlining a phased procurement plan for 50 units of EH216 series Evito. Together, we will establish the first UAM operation center in Central Asia and plan to build a localized assembly base, further promoting the localized development of the low-altitude economy industrial chain across the region. The partnership has attracted strong attention from Kazakhstan's first deputy prime minister and the governor of Kazakhstan, Karaganda region, we held two meetings with the first Deputy Prime Minister in Beijing and Astana, during which Ian was invited to share China's leading operational experience and regulatory best practices to support Kazakhstan in building a compliant and sustainable low-altitude economy. Beyond our human-carrying business, And in line with this year's strategic priorities, we are also actively expanding our non-passenger business, including emergency firefighting, logistics, urban inspection, and drone light shows. For emergency response applications, we have developed an integrated system. It links small drones deployed from automated drone ports with our command and control system and a specialized firefighting UAVs. This solution enables cities to build a comprehensive rapid response emergency framework. Several municipalities, including Fengshan District in Beijing, have already expressed a strong interest and project planning and demonstration drills are underway. Ehan was among the first enterprises to conduct drone light shows. This year, our newly developed GD4.0 drone also demonstrated strong performance and high scalability. It successfully completed an 8,000 drone performance for CCTV's China Science and Technology Innovation Gala and over 11,000 drones for the National Games and has already achieved formations of up to 14,000 drones. Currently, test flights for a 20,000 drone show are in progress, which would surpass the current Guinness World Record. In addition, the GD 4.0 is multifunctional with minor modifications. It can be used for urban inspection and as a key component in building 3D digital twin models and smart city management systems. The strong overall performance of the GD 4.0 positions our aerial media business to shift its focus from primarily providing show performances to becoming hard work. solution suppliers through direct sales of formation drones. To date, the GT4.0 has secured firm orders for 3,000 units and customer purchase intentions exceeding 10,000 units. Selling formation drones not only enables us to quickly recover R&D investments and generate product level margins, but also helps us cultivate the drone formation show market and capture greater market share. In addition, it brings recurring revenue opportunities from aircraft maintenance and consumables This drives a more diversified and resilient revenue structure for the business. Looking ahead, we'll continue to strengthen our overall competitiveness through our diversified product portfolio, modified SIS, low-altitude solutions and solid safety record, improving commercial operation capabilities, and our growing global partnership network. These capabilities collectively reinforce the foundation for the company's long-term and sustainable growth. Now, I'll turn it over to our Chief Financial Officer, Connor, to walk us through the financial results. Hello, everyone. 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. Now, I'll present some key financial data. Total revenues were 92.5 million RMB in Q3 2025. These year-over-year and sequential decreases are primarily driven by decreased sales volume of EH216 series products. This was primarily due to the company's strategic focus being adjusted to the various operational preparations before the launch of operations, as well as assisting customers in the establishment of operation certificate systems and capabilities, which thus affected the short-term delivery. Gross profit was 56.2 million RMB in Q3, showing both year-over-year and sequential decline, caused by decreased revenues in the quarter. The gross margin in Q3 was 60.8%, slightly lower than 61.2% in Q3 2024 and 62.6% in Q2 2025. Despite a slight decline, our gross profit margin remains at a relatively high level, which reflects our competitive advantages in the EBITDA sector. Turning to expenses, total operating expenses in Q3 were 151 million RMB, which remained basically flat year-over-year and decreased quarter-on-quarter. The quarter-on-quarter decrease was primarily due to significant decreases in sales and marketing expenses, The adjusted operating expenses for the third quarter, which excluded share-based compensation expenses, were 89.1 million RMB, representing a slight year-on-year increase of 2.6% and a quarter-on-quarter decrease of 8%. This quarter-on-quarter decrease was mainly due to the company's continuous efforts to enhance operational efficiency, which has led to a reduction in various operating expenses. Adjusted net loss was 20.3 million RMB compared with adjusted net income of 15.7 million RMB in the second quarter of 2024 and 9.4 million RMB in the second quarter of 2025. The adjusted net loss was mainly caused by decreased revenue generated in the quarter. In Q3, the company raised 10 million US dollars through its at-the-market offering program. The proceeds will mainly be used for the company's research and development of next-generation technologies and products, team and production expansion, establishment of new headquarters, commercial operations, working capital, and general corporate purposes. The company continues to have strong capital reserves. As of September 30, 2025, our cash and cash equivalents restricted short-term deposits and short-term investment totaled $1.8 13 billion RMB. This solid foundation gives us the flexibility to support future R&D investments, expand our production capacities, and grow our commercial operations. With steady delivery progress for orders in hand in the fourth quarter, we currently remain confident in achieving our full year 2025 revenue guidance of approximately 500 million RMB. Looking ahead, as commercial operations begin to scale and international sandbox projects advance, with the establishment of a scalable operating system and the continued expansion of our global footprint, EHON is rapidly building a robust foundation for sustained long-term growth. We'll continue to pursue healthy, sustainable...