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.

Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. We will now pause momentarily to allow questions to register. Once again, if you wish to ask a question, please press star 1 on your telephone. Thank you. Your first question comes from Peggy Wang with MS. Please go ahead.

Hello. This is Peggy from . Can you hear me? Yes. Hi. Thank you for taking my questions. So I have two questions for the first quarter results. I think most investors are curious about what is the expected revenue mix for the main three quarters of 2026 because we have been exploring more revenue stream from product outside of Evoto. So to the management team, give more color on the revenue mix in the foreign quotas. So this is my first question. And the second question is about the overseas business. So how should we look at the contribution from the overseas market in the coming months? Thank you.

Thank you. Thank you. China China China China China China thank you

China has acquired double recognition from 32 countries overseas. Based on this, we will prioritize the recognition of these countries. Hello, Peter, can you hear me? Yes.

Okay. Now, I'll provide a translation for Connor.

So, the key strategy for the company is to execute revenue diversification strategy, and the results have been shown in our Q1 results. And we have a project both at home and overseas for our human-carrying business as well as our GD4 aerial business. The projects are scattered across both China and overseas. Some of them are, some of the typical examples are projects in Changsha, Xiamen, and an overseas example would be Thailand.

and we are going to increase the number of performances for these GD4 drone performances in the upcoming two quarters.

We are also advancing the R&D for our logistics and firefighting models, and they will be rolled out to the market later this year. In terms of the revenue mix breakdown, For our human-carrying business, roughly, specifically speaking, that would be revenue contributed by the sales and deliveries of UH216S and the VT35. Together, they will contribute 60% of our revenue. For non-human-carrying businesses, they are going to contribute roughly 40% of our revenue. And now, moving on to the second question. The proportion of the overseas revenue will increase significantly. We have made obtaining overseas VTCs, i.e., validation of type certificates, our top priority this year, relying on bilateral agreement channels and have established a dedicated team. Pioneer projects in Thailand and Mexico are progressing smoothly. In the medium to long term, overseas markets are expected to continuously contribute to revenue.

Thank you.

The next question comes from Xin Wei with UBS. Please go ahead.

Good evening, everyone. I would like to ask two questions. One is about the interest rate. I see that our interest rate is still at a relatively high level in the first quarter. But I noticed that in a quarter, we actually have 40% of revenue from drone flights and some media income. I want to ask how the trade rate of this business is. How do you look at such a market and competition? And then my second question is actually I want to ask about this export business. Because I remember last year's conference, the company talked about Thank you, management, for taking that question.

My first question is on the gross profit margin. As you can see, it stayed elevated in Q1. I also noticed that 40% of revenue from Q1 was contributed by media business or non-human-carrying related services. I was wondering what's the gross profit margin for this segment, and what is the market and competition outlook is like for this segment? My second question is on your overseas business. As we have heard from management, The orders, potential orders from overseas markets was around 100 units. I was wondering if there's any update to this number, and if you can, please also provide a timeline on that. Thank you.

有关毛绿的话的,整体来讲就是编队表演飞机现在有这个编队表演飞机的销售加上编队表演啊, Overall, in terms of team performance, aircraft and performance, the overall net profit should be above 50%. In addition, the net profit of our aircraft is improved to last year. So the overall combination can still maintain a yield of more than 60%. The whole year, we also work according to such a net profit target.

On the gross profit margin, the gross profit margin is, so that specifically means the gross profit margin of the sales and performance of the flight performance of the GD 4.0. That is around 50%. And for our human caring business, that's contributing higher and higher profit margin this year. Therefore, we are seeing the overall GDP mix staying above 60% for the first quarter. And we also keep that as our full year target. So that's on the growth profit margin.

. . . The Civil Aviation Bureau is also in close communication with us. Our goal is definitely to have an advanced air traffic conference held by ICAO, an international civil aviation organization, at the end of this year. The goal is to be able to officially commercialize before that. China China China China China China China China

And with your question on the overseas orders, we are expecting the revenue contribution to rise up to 10% of the overall revenue. However, this specific contribution is closely tied to our commercial developments in Thailand. We have been spending every effort in Thailand our communication with the ECALC. Our overall target is to launch the official commercial operation by the end of the year before the AAM conference is going to be held in Bangkok by the end of this year. If the commercial operation could be we achieved earlier, we are going to see a higher contribution to the revenue from the overseas market.

Thank you.

Your next question comes from Alan Lau with Jefferies. Please go ahead.

Thanks for taking my question, Alan.

So I'd like to... follow-up on the question regarding to the gross margins. So, what are the major cost items for the non-evito business? Because the margin is 50%. We'd like to know what are the key cost of goods sold in that business line. And the second question is, is there any operation data that management can can share to investors regarding the operations in Hefei.

Thank you. Thank you for accepting my question.

My first question is to continue to ask about the growth profit margin mentioned earlier, which is our net profit. What I want to understand is that the net profit of our Evito aircraft is about 60%. What is the biggest or the least cost ratio? This is the first question.

The second question is, can you share with us about the cost of the OC that Hefei has already obtained? Sorry, we have to clarify.

My first question is regarding to the non-edital part, the aerial media part.

What are the costs of goods sold in that business? Thank you. 我来更正一下我的问题。 我的第一个问题是想问一下我们的非载人业务, 也就是我们的编队无人机编队表演当中, 这个的主要的成本构成最大项是什么?

对,我觉得可能一开始他的问题是非载人业务。 那我先讲一下这个编队的。 编队的话,这个业务分为编队表演, In addition to the sales of the flying aircraft, the sales of the flying aircraft are mainly hardware production, rotation, battery assembly, and so on. In addition to the overall horsepower, as I just explained, Then if you face the performance of this way, then we are based on the scale of the performance of the factory. The most important thing, of course, is that this is because This plane is also our fixed asset, which is equivalent to the cost of this plane. There are also related expenses for personnel services, personnel expenses, and so on, which are calculated in this plane. So in terms of two levels, the total calculation is about 50% of the net profit. In addition, if we talk about non-privileged businesses, the non-privileged businesses, of course, include firefighters. Firefighters, our net profit will be a little higher overall. Its main cost is the same as eVTOL. For example, one-third of it is related to the fuselage, and one-third of it is related to the power system, such as battery and battery. The other one-third is related to some parts other than the two parts.

Okay.

Now, the sales and the performance of the drone slides, it's contributing 50% profit margin. And to break it down, majority of the costs for the sales comes of the drones is, first of all, the own costs, plus the battery, the costs used occurred in the assembly line. And when it comes to performing, The majority cost of that depends on the size as well as the units of the drones to be deployed for the performance. And given that these drones are possessed by the company as fixed assets, so there is a cost of depreciation plus the cost of sending products. personnel and staff to operate and fly these drones at different places. So together, these form the cost of the operation and the sales. And now moving on to the non-human caring business. Specifically, we're talking about the firefighting models. It has a higher, well, growth margin. In terms of the cost, a third of it comes from the carbon fiber material used in building the model. Another one-third of the cost comes from the powertrain as well as the battery, with the remaining one-third coming from the components that used to build the model.

As you can see, everyone is paying attention to Hefei's operating point. So our Hefei's operating point, the current commercialization process has reached the final stage. So the Civil Aviation Bureau and the world's first unmanned carrier have proposed a higher and more detailed operating standard for the commercial operation project. Since March to now, we have held multiple meetings with the Civil Aviation Bureau. Every meeting is aimed at commercialization operation to be able to move forward. This is Wang Zhao.

I'll take your second question.

I know the market is keen, keenly watching the progress of the operation site in Hefei. I would say it is right now in the final stage of development. official commercial operations. At the moment, the Hefei and Gondwa operation sites are currently still in preparation for commercial operations. And given the unique nature of that site being the world's first pilotless human-carrying needle commercial operation project, the CAAC has proposed higher and stricter operational standards. And since obtaining the OC in March 2025, we have been maintaining close communications with the CAAC. We are accumulating precious and valuable trial flight data, making sure that there's no accidents or zero violations of the standards in place.

Thank you.

In March of 2025, since the acquisition of Hefei, other than Hefei, including Guangzhou, our nuclear data has always maintained zero accidents and zero violations. The flight price has exceeded 3,000 prices. Hefei has also announced that we have set a ticket price of 299 yuan. Currently, Hefei has prepared four aircraft, 14 flights a day, and the corresponding low-cost small city area is also on the line. To supply some key data, since obtaining the OC in March 2025, the two partner

or two operation sites have maintained stable operations with a safe flight record of zero accidents and zero violations, completing over 3,000 flights. As we have disclosed, the price, early bird price, we set for the healthy operation site is 299 RMB. Currently, there are four units of the EH216 at this site. and they are scheduled to fly 14 flights per day. Related to MiniApps for ticket booking, it's now up and running. We are fully ready for commercial operations. Once we get to the approval from the CAAC, we'll soon roll out the commercial operation. Thank you.

Your next question comes from Laura Lee with Deutsche Bank. Please go ahead.

Thank you for taking that question. So my first question would be could you provide more color on the order intake so far in 26? And are the new orders mainly from like existing customers or that you're seeing demand from your clients as well? And my second question will be could you update the expected timeline for the operator training? Because once your program is approved, like how long it takes for the first group of the ground crew to complete the training. Thank you.

我这边有两个问题。 第一个问题, 管理层能否详细地说明一下2020年至今的订单的承接情况? 这些新订单主要是来自老客户, 还是有新的客户的潜在合作意向? 我的第二个问题是关于我们的培训。 How long after our first batch of personnel training is completed, can we actually go on-site?

These are the two questions. Yes, our goal for the annual revenue of 600 million this year is to maintain confidence. This confidence is based on the diversified social structure that has been realized so far. There is also the possibility of overseas breakthroughs and domestic commercialization. The business is about to reach the bottom line. So we have to be most of this The most of this income will be reflected in the second half of the year. There are currently a lot of orders that are being carried out at the same time. We actually have a lot of orders in China. It comes from government-related to its overall Thank you.

On the revenue question, we remain confident in our full-year revenue target of 600 million RMB. Actually, this confidence is based on the diversified revenue structure achieved in Q1, the predictability of overseas market breakthroughs, and domestic commercial operations entering the final sprint phase. Majority of the orders will be coming in in the second half of the year. We have many orders moving in parallel. Given that a majority of the orders coming from government-related or institutions or enterprises, the overall approval for the budget, you know, is primarily ready in the second half of the year. We also have seen a lot of new customers expressing strong interest in purchasing our models. We expect that over 50% of the revenue for this upcoming year is going to come from new customers.

我来回答有关操控员培训的问题。 I will explain in detail. The training of the entire operator is divided into three stages. The first stage is that we put all our training materials, subjects, textbooks, and exam standards, and the Civil Aviation Bureau to formally discuss and promote the formation of standards. This year, the Civil Aviation Bureau officially implemented the system operator training requirements for large civilian unmanned aerial aircraft. Sorry. Sorry. Sorry. I will explain in detail the process of the training of the pilot. It is divided into three stages. The first stage is that we and the Civil Aviation Bureau jointly establish a large-scale drone pilot training test mechanism, and put all of our professional training requirements into professional training documents, textbooks, characteristics, standards, and current test standards. This year, the Civil Aviation Bureau has In May, we officially implemented the training requirements for large-scale civilian unmanned aerial aircraft system operators. This industry standardizes the standardization of large-scale unmanned aerial aircraft operators and defines the rules and regulations. In the process of forming the standard, a number of H216 aircraft operators were prepared to find jobs and participate. A large number of first-tier pilot experience was provided for the standardization of the aircraft.

So let me explain.

The crew training usually is break down into three stages. In the very first stage, the CAAC has officially stipulated the large-scale civil vital pilot training or crew training mechanism And we have deeply involved in this process. We actually supplement all the related documents, teaching materials, and everything. We also participate in making the related teaching materials and formulating the tests required to test all the training personnel. Actually, in May this year, the CAAC has already published the requirements for the civil EVITO training-related standards. And that actually provided a key compliant reference for the whole industry. And we actually, EHON, has been deeply involved in that process. and we have actually lend our experience to this process in forming the standards.

第二个阶段是内部的教员培训,也就是培训老师的培训。 我们目前跟民航局这部分培训工作已经开展,并且即将结束。 相关的方案已经通过了民航局的审核。 This can be carried out very smoothly Already at the end of the term Expected to complete the end of this month Then the third stage Is the official development of the operator's ten training This part of the work is expected to continue until the next quarter Then after these parts of work are completed One line can enter The process of training We have a training class It is expected to train five to ten operators at the same time Many training classes can be opened at the same time

And following in formulating the standards is the internal training of the instructors. This process has kicked off, and it's about to wrap up. We have submitted the response. associated plans, which has been reviewed by the CAAC. Right now, this has been progressing quite steadily. We're expecting the training of the instructor program to wrap up by the end of the month. And the third stage is to kick off the official training of the crew, ground crew. And that will expect it to start in the following quarters. Once all these stages have completed, EHON will be in a good position and ready to launch batch trainings. With each training group, we can train five to ten personnel. and with multiple practice training groups moving in parallel. By that time, we will be ready to supply a sufficient number of qualified ground crew to the market.

Thank you.

Thank you all. Given the time is limited, let me turn the call back to Ms. Anne for closing remarks.

Okay, thank you, operator, and thank you all for participating on today's call. We understood that there are many analysts and investors still waiting on the line, but due to the time limit, if you have any further questions, please contact our IR team by email or participating in our following investor events through the calendar information provided on our IELTS site. And we appreciate your interest and look forward to our next earnings call.

That does conclude our conference for today. Thank you for participating. You may now disconnect.