EHang Holdings Limited

Good day ladies and gentlemen. Thank you for standing by and welcome to the Ehang First Quarter 2026 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 purposes only. In case of any discrepancy, the management's statement and the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions, and today's call is being recorded. Now I will turn the call over to Anne Gee, E-Hung Senior Director of Investor Relations. Ms. Anne, please proceed.

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 2026. The earnings release is available on the company's IR website. Please note that 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. Shuai Feng, chief technology officer, Mr. Zhao Wang, chief operating officer, Mrs. Xiao Na Li, China general manager, 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 and uncertainties is included in a company's public findings with SEC. The company does not assume any obligation to update any forward-looking statement, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for the first quarter of 2026, unless stated otherwise. With that, let me now turn the call over to our CEO, Mr. Hua Zhihu. Please go ahead, Mr. Hu. Thank you.

Hello, everyone, and thank you for joining our earnings call. In the first quarter of 2026, Ehon is navigating a critical transition from certification to commercial operation. We are fully committed to launching the world's first pilotless human-carrying eVitil into commercial service. Today, I'd like to share updates from two perspectives, the fundamental shift in regulatory environment and progress on our four core strategies. First, policy and industry developments. The biggest change in Q1 was institutional. The low-altitude economy now has a solid legal foundation and policy anchor. We're moving from the policy concept stage to one truly governed by law. On the legal front, the newly revised civil aviation law was passed in January and will take effect on July 1st, formally recognizing the low-altitude economy for the first time. On the regulatory front, the CAAC has established a new low-altitude safety bureau, while the NDRC and CAAC have formed a two-tier governance model, with the NDRC providing top-level coordination and the CAAC handling industry-specific implementations. Separately, China's State Administration for Market Regulation, together with 10 government departments in China, have jointly issued the Low Altitude Economy Standard System Development Guide, aiming to establish a basic standard system by 2027. Some worry that more regulations may slow the industry down. I believe the opposite. This is a positive development. A clear regulatory and standard framework helps everyone in the industry move faster and more properly. As a pioneer, EHON is turning our certification and talent development know-how into beating blocks for industry standards. These first-mover advantages not only contribute to industry development, but also strengthen our long-term competitive mode. Meanwhile, state-owned enterprises and local governments are accelerating their deployment. The low-altitude economy has been featured in the government work report for three consecutive years and is now designated as one of the six emerging strategic pillar industries under China's 15th five-year plan. More cities are actively planning airspace, building road ports, and rolling out subsidy programs. The low-altitude industry ecosystem is accelerating toward maturity. Now, let me turn to progress on our four core strategies for this year. Routines. commercial operations, global expansion, VT35 certification, and industrial chain integration. First, routine and scaled commercial operations remain our top priority. We have cleared the certification hurdle and are now fully focused on the commercial operation hurdle. We have obtained PC, PC, and AC, and our two operators hold OCs. Over the past year, we have continued to refine the entire operational chain, ticketing insurance, aerospace approval, maintenance, charging, infrastructure, crew training, and command and control systems to launch the world's first commercial pilotless human-carrying veto service. We're now working closely with the regulator to fine-tune our operational capabilities and to make the final push from the internal trial operations to public ticketed service. That day will not be far away. The market demand is real. Take our 299 RMB experience ticket as an example. We continue to receive a large volume of inquiries asking, when can I buy a ticket and take a flight? This reflects a strong public enthusiasm for a veto commercial flight. Importantly, our operational capabilities extend beyond passenger vetoes. Our formation drone fleet has years of proven Experience, in February, our new GD4.0 drone completed 22,580 units of formation of flights, setting a Guinness World Record. In Q1, the proportion of revenue from the aerial media solution increased noticeably. The experience, processes, and teams we have built through these large-scale, highly reliable unmanned aircraft operations will directly benefit EH216S commercializations. As the saying goes, the last leg of the journey marks the halfway point. Obtaining the four certificates was only the first half. The real second half is the commercial operation. In the global EV industry, E.H.A.N. remains the only company with the TC, PC, AC, and the license for commercial operations. The first mover advantage here is not a short sprint nor a manufacturing race. It is an operational race who can run a safe, sustainable commercial model. Second, deepening our global footprint. We are making steady progress overseas. The Thailand AAM Sandbox program continues with the routine validation flights. To address hot weather conditions, we completed a battery cooling vehicle testing in Thailand and Guangzhou this month, adding independent cooling systems that significantly improve charging efficiency and passenger comfort. We're also actively working with Civil Aviation Authority of Thailand to issue EH216S's first overseas operating license. Our experience in Thailand sandbox has become an important reference for our global expansion. Third, accelerating VT35 certification and commercialization. Certification for VT35, our new longer-range pilotless human-carrying vehicle, is progressing steadily. In Q1, we completed multiple system functions and flight performance tests. and held in-depth discussions with the CAAC on a certification basis. Our VT35 will support future inner-city and regional air mobility, enriching our product portfolio. At the same time, we are developing non-human carrying models, including firefighting and logistics for more application scenarios to further expand our addressable market. Fourth, strengthening industrial chain integration. We are turning our first-mover certification and ecosystem experience into industry consensus Yihan is not only China's leader in pilotless human-carrying vehicle certification, but also the earliest practitioner and contributor to national and industry standards for unmanned aircraft in China. As the world's first mover about to enter routine commercial operation, we are taking steady steps to strengthen our operational capabilities and build a compliance mode. At the same time, we're integrating R&D, manufacturing, supply chain, and quality systems to improve end-to-end efficiency, and scaled delivered capabilities. In closing, I want to reiterate the low-altitude economy is a long-term strategic arena with deep potential. E.H.O.N. will never lose sight of safety, compliance, and operational quality. We're committed to being long-term players who shape eVito industry standards with craftsmanship so that China-developed and China-operated pilotless eVitos will continue to lead the global low-altitude mobility market. I will now turn the call over to our CTO, Shai Feng. Thank you. Thank you, Mr. Hu. Hello, everyone. I am Shai Feng. In Q1 2026, our work focused on three priorities, product R&D and upgrades, certification progress, and commercial operation support. On one hand, we accelerated VT35 development and certification. On the other, we continued to optimize the EH216S performance. operational efficiency, and passenger experience to support upcoming operations, strengthening the foundation for skilled deployment. Number one, VT35 progress. VT35 R&D and certification progressed steadily in Q1. The program has now entered the certification basis definition stage, where we're working closely with the CAAC to establish the safety evaluation framework. We're engaged in in-depth discussions on special conditions, safety objectives, and performance requirements. On the engineering side, critical ground and flight tests are advancing as planned to validate system functionality, flight performance, and safety redundancy. Meanwhile, the VT35 AVDOC system has entered a detailed design stage, preparing for certification prototype manufacturing and conformity verification. Building on the EH216S certification experience, and our avutal technical expertise, we are advancing VT35 efficiently, laying the groundwork for future intercity and original air mobility. Number two, EH216S performance upgrades. This quarter, we focus on hot weather operational efficiency and passenger experience through targeted upgrades to battery thermal management and cabin comfort systems. On operational efficiency to address battery thermal management challenges during high-frequency takeoffs and landings, we developed a dedicated battery cooling vehicle. It has completed production testing and is undergoing further optimization. The cooling vehicle significantly shortens battery cool-down time from high temperatures to safe operating levels, increasing daily charging cycles and flight volume. In field tests, the cooling vehicle doubled EH216S utilization, directly supporting higher frequency commercial flights. The unit can be quickly deployed across operation sites, providing flexible and reliable thermal management for large-scale, high-density operations. On passenger experience, we upgraded the cabin air conditioning system. The new independent cooling system is separate from flight control and avionics circuits, so it doesn't interfere with critical functions while improving comfort. In tests, the system quickly reduces cabin temperature after prolonged sun exposure and maintains a comfortable level throughout the flight. This upgrade directly addresses a key pain point in hot climates, improving passenger experience, commercial reputation, and market acceptance. Number three, digital infrastructure for low-altitude operations. Our Guangzhou Command and Control Center is now fully operational, supporting passenger, firefighting, logistic, and formation drones. It provides integrated capabilities, including aerospace management, flight planning, dispatch approval, real-time monitoring, operation records, and risk alerts. In Hefei, the command and control system has been developed sensing network, and Hei Aviation's operational data. Together, these platforms establish a solid foundation for regional, skilled, low-altitude operations management. Number four, new product development. We are also actively advancing the R&D and flight testing of the new products, including logistics and firefighting aircraft, further expanding our product portfolio and low-altitude economy applications. Under our CEO, Mr. Hu's leadership, I will continue to lead our team in advancing product iterations with aviation-grade standards, translating technological progress into commercial value efficiently, and providing a strong foundation for Ehon's long-term growth. I will now turn the call over to our CEO, Zhao Wang, for sales and operations updates. Thank you. Thank you, Mr. Feng. Hello, everyone. I am Zhao Wang. As Ehan enters a new phase of commercial operations, I want to introduce a new member of our management team, Ms. Li Xiaona, formerly our Vice President and General Manager of East China, has been promoted to China General Manager. She will lead our sales, operations, and marketing teams, overseeing business development and operations management in both China and overseas markets. Over the years, Xiaona has led our East China team to build our presence in Hefei from the ground up. She established He Yi Aviation, secured its operator certificate, built a highly effective operations system and team, with a strategic industrial layout covering R&D, manufacturing, and commercial operations, and delivered outstanding results. I look forward to seeing the He Fei model scale further under her leadership. Now, let me walk you through our Q1 business results and strategic plans. In Q1 2026, we achieved revenues of 25.7 million RMB. We delivered 4 units of the EH216S and 1,000 units of the GD4.0 formation drones and completed 22 drone formation performances. The year-over-year and sequential decline in EVito deliveries was mainly due to the seasonal impact of the Chinese New Year holiday and customer delivery timings. Look at our revenue mix. Our aerial media business grew faster and contributed approximately 40% of the total revenue in Q1. The parallel development of our multiple business lines is driving revenue diversification, reflecting continued demand growth across low-altitude application scenarios. Looking ahead to the full year, we remain confident in our 2026 revenue target of 600 million RMB. This will be supported by the progress we have made on three strategic initiatives. First, diversified revenue streams beyond passenger evito sales and operations are non-human carrying businesses, including aerial media, firefighting solution, and command and control systems are expected to become new growth drivers. Second, continued overseas expansion. We expect it to replicate our overseas model that combines regulatory sandbox program, local partners, operational capabilities to drive sales and operations in Thailand and other global markets. Third, advancing domestic commercial operations. Preparation for EH216S commercial operations has entered the final stage. We're working with the CAAC on the last mile of commercial operation. We'll continue to prioritize both sales and operations, ensuring steady and compliant commercialization progress. I will now turn the call over to Xiaona for a detailed review of our Q1 execution. Thank you. Thank you, Mr. Wong. Hello, everyone. I am Li Xiaona. I'm pleased to join the earnings call for the first time. Let me walk you through our Q1 results, operational strategy, and future plans. In February, we featured 16 EH216S aircraft and 22,580 GD4.0 formation drones and the CMG 2026 Spring Festival Gala Hefei segment. We completed a flawless performance and set a new Guinness World Record. This appearance significantly enhanced our brand awareness and industry visibility, helped reduce the concept of low altitude mobility to a broad public audience, and demonstrated our leadership in fleet flight, remote dispatch, and communication integration, strengthening our brand foundation for commercial partnerships and market expansion both at home and abroad. As of May 2026, the EH216 series has accumulated over 90,000 safe flights globally in 21 countries. This long-term stable safe track record is our core competitive advantage in global market expansion. Overseas, we have achieved multiple milestones, completed the first humanitarian flight in Mexico, Latin America, and trial flight permits in Thailand, Japan, South Korea, and Middle East and Spain. On overseas strategy, we made a strategic adjustment this year, making VTC our top priority to fully open the commercial pathway in overseas markets. Given how civil aviation regulations work, we plan to leverage China's existing bilateral airworthiness agreements with 32 countries for our certification applications. Thailand is our first flagship overseas market. Five Vodaport locations have been identified, and the first approved survey has been completed. We have adapted our hardware, including batteries and onboard air conditioning, for a hot and humid tropical environment. and are pushing hard on commercial operation permit progress. We have formed a dedicated overseas team integrating R&D, commercial airworthiness, and communications functions. Going forward, we will systematically map out our bilateral civil aviation policies globally and develop differentiated overseas deployment plans for human carrying and cargo aircraft, targeting key markets one by one. On domestic human-carrying air mobility network continues to expand. To date, our customers have built over 40 in vitro operational sites across China, some of which are already in routine operation. This year, we are shifting our business focus to high-demand tourism scenarios using light asset models such as equipment leasing, joint operations, and direct sales to lower the barrier for partners while putting the existing aircraft to flight. We are prioritizing locations with high foot traffic and natural commercial appeal, such as Dali, Huangshan, and Taishan, running small-scale trials to accumulate safety data, then progressively helping customers apply for operator certification. To improve project execution efficiency, we have set up a dedicated sales support team that works alongside frontline teams to develop customized integrated operation plans landscape. On commercial operation preparation, the CAC has raised the requirements for the world's first pilotless human-carrying vehicle commercial operation with higher and more detailed standards. At this stage, our two OC-certified operators in Hefei and Guangzhou continue to refine their operations systems, ground support, crew training, and emergency procedures while running internal trial operations routinely and accumulating flight data and service experience. Since obtaining their OCs in March 2025, both operators have maintained a perfect, safe record, zero accidents and zero violations. As domestic benchmarks, Ehon General Aviation and Hawaii Aviation have completed over 3,000 of EH216S flights. We have built a complete end-to-end service system covering ticket pricing, online and offline ticketing channels, customer service, and complaint handling. Flight capacity is being expanded in phases. Going forward, we'll continue to refine our standardized SOPs for passenger services, ticketing management, and averted port operations, and then exported these proven models. Crew training progress is on track. We have completed internal instructor training for the EH216S model and submitted all required materials. The plan has been reviewed by the Central and Southern Regional Administration of the CAAC And once formally approved by the CAAC, our future training will begin. After internal instructor training wraps up in late June, we'll begin full-scale crew training. Our non-human-carrying business is an important second growth driver. We focus on two areas, firefighting and inland waterway logistics. On firefighting side, based on real-world operational scenarios, we have identified clear product iteration directions, R&D of the new firefighting aircraft is on schedule and will be formally launched to the market upon product validation, together with supporting maintenance and training systems. In the second half of the year, we'll showcase product performance through firefighting drills at various levels, while actively working to get our products included in fire equipment procurement catalogs, tapping into the emergency response market. On inland waterways logistics side, we have completed sign selection for test routes at Guangzhou port and the Pearl River main channel. The project will be routed out in phases. Near-term, continued test flights and routine safety reviews. Medium-term, routine delivery services on the Pearl River and expansion of our new application scenarios. replication of the proven model, application for government funding, and building a benchmark inland waterway low-altitude logistics project in China. On formation drone performances, the industry is seeing increasingly intense low-price competition. We are avoiding price competition and have set a clear strategy to build benchmark projects, replicate profitable models, and expand both domestically and overseas. In overseas markets, we are simultaneously rolling out formation products, leveraging local tourism resources to create routine performance venues that complement our human-carrying business. Going forward, I'll lead the sales, marketing, and operation team to execute our strategic plans steadily with dedication, efficiency, and compliance, with safety as the first priority. I will now turn the call over to our CFO, Connor Young. Thank you. Hello everyone, before I go into details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our Earnings Price Release on the RIR site. Now let me walk you through the key financial data. In Q1 2026, revenues were $25.7 million, on par with $26.1 million in Q1 2025, but down from $177.6 million in Q4 2025. The decline was mainly due to lower evetal deliveries, partly offset by growth from our non-human carrying business. During the quarter, we delivered 4 units of the EH216 series compared to 11 units in Q1 2025 and 61 units of EH216 series plus 5 units of VP35 in Q4 2025. The lower deliveries were primarily due to seasonal factors at the beginning of the year and customer delivery schedules. On a positive note, our revenue mix continues to diversify, benefiting from increased brand visibility and growing market demand, our aerial media business grew faster and contributed approximately 40% of total revenue in Q1, Highlighting the synergies across our diversified business lines, gross margin in Q1 was 62.5%, stable compared to 62.4% in Q1 2025, and up slightly from 61.6% in Q4 2025. Our consistently strong margin profile reflects continued improvements in manufacturing efficiency and supply chain management. Turning to operating expenses, adjusted operating expenses defined as total operating expenses excluding share-based compensation were 101.1 million RMB in Q1, up 59% from 63.6 million RMB in Q1 2025, and up 7.9% from 93.7 million RMB in Q4 2025. The increase was driven by our continued commercialization efforts, R&D team expansion, and increased technology investment. As our business scales, we have strengthened our operational, R&D, and global expansion teams while continuing to invest in EH216 series upgrades, VT35 development, and future generation products and core technologies to enrich our product pipeline, and reinforce our long-term competitive advantages. As we continue to invest for future growth, our near-term profitability was impacted by lower revenue scale and higher R&D expenditure. Adjusted operating loss in Q1 was 77.1 million RMB compared to 42.6 million RMB in Q1 2025, Adjusted net loss was 75.6 million RMB compared to 31.1 million RMB in Q1 2025. As of March 31st, 2026, our combined cash and cash equivalents restricted short-term deposits and short-term and treasury investment totaled 1.03 billion RMB. This healthy cash position provides a solid support for the continued execution of our commercialization strategy, global expansion plans, and technology development programs. While near-term financial performance was impacted by delivery timing and strategic investments, we remain committed to a long-term growth strategy and maintain our 2026 annual revenue guidance of 600 million RMB. Our confidence is supported by our diversified revenue mix, continued global market progress, including the commercial breakthrough in Thailand, and the advancement of EH216S commercial operations in China. Meanwhile, we remain focused on improving operational efficiency and capital allocation as we scale our business. We believe these efforts will strengthen our foundation for long-term growth and create sustainable value for our shareholders. Based on our confidence in the company's future and healthy cash position, our board of directors has approved a share repurchase program. Over the next 12 months, the company may repurchase up to $30 million worth of its ADSs. Repurchases will be funded from existing cash reserves, and management will execute them flexibly based on market conditions. This initiative reflects our commitment to returning value to shareholders and in demonstrating our long-term confidence. Thank you all.