EHang Holdings Limited

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Ehang Second Quarter 2026 Earnings Conference Call. Please note that management's prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese, and the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder, all translations are for convenience purposes 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 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 Ji, 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 second quarter of 2026. 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. Huazhi, our founder, chairman, CEO, Mr. Feng Shuai, CTO, Mr. Wang Jia, C-O-O, and Connor Yang, CFO. Before we continue, please note that today's discussion may contain overlooking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. forward-looking statements involving handwritten risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings of the SEC. The company does not assume any obligation to update any forward-looking statements except as required by law. Also, please note that all numbers presented in RMB are for the second quarter of 2026, unless stated otherwise. With that, I'll turn the call to our CEO, Mr. Huazhi. Please go ahead. Good day, everyone. Thank you for joining our Q2 earnings call. Since Q2, Yihan has entered a vato-strategic transition, moving beyond the certification toward operational readiness, scenario validation, capability development, and a global expansion. Certification is just the entry ticket to commercial operations. What really determines whether a company can sustain flights and scale commercial operations is not just about having an aircraft or a certificate. It's about having an end-to-end operational capability, replicable solutions, a solid product pipeline, and the ability to deliver standardized solutions to global markets. We have been investing in these areas and have made meaningful progress. Of course all of these rely on a sound regulatory environment. That's the foundation that enables qualified, capable companies to grow. In late June, a serious accident involving a piloted lighted sport aircraft in China has led regulators to adopt a more cautious approach to safety oversight. While unrelated to Yihan's pilot list of vetoes, this has affected our human-carrying commercial operations approval process in Hefei, and the timeline remains uncertain. To be clear, this is a temporary, industry-wide timing issue. reflects no change in demand for EHON's products, nor does it indicate any issue with our technology or safety record. Recent accidents highlight that safety, regulation, and traceability are baselines for low-altitude commercialization. EHON operates with a pilotless aircraft, preset fixed routes, intelligent fleet dispatching, centralized monitoring. Our goal is to make urban air mobility safer, more transparent, and easier to regulate. While the passenger-carrying aviation fundamentally changes in how we travel, we fully understand the regulars' caution and we respect that. It is a responsible commitment to the public safety. However, technology, innovation, and regulation must evolve together. More than a century ago, when automobiles first appeared, people had similar concerns about this new form of transportation. The UK passed the Red Flag Act which required a person to walk in front of a motor vehicle carrying a red flag to warn pedestrians and limiting vehicle speed. The law was essentially old rules overregulating new technology. History shows that safety validation, operational rules, and regulatory frameworks for disruptive transportation technologies all take time to mature. History shows technology and regulation eventually align. New forms of transport don't mature overnight. EHON's role isn't to sit and wait, but to proactively provide regulators with the real safety data, proven operations, and reliable technology. The EH216S and its operating system have obtained all key certificates under China's Civil Aviation Regulatory Framework, TCPC, Airworthiness Certificate, and AERA. are operating our certificate. Our entry in the system in Guangzhou and Hefei are fully operational. Within our internal trial operations, both of us have been operating continuously and safely for around 1.5 years with a 4.94 out of 5 passenger satisfaction score. The EH216 series have accumulated nearly 100,000 safety flights. With the demand of product certification and safety records in place, we only await regulatory approval for public ticket sales. Despite this critical transition point, we are confident that commercialization window will eventually open. Amidst uncertainty, Econ isn't sitting still. We're tackling challenges head-on and finding new opportunities. Since Q2, we've been pushing hard on three things. First, expanding globally on multiple fronts. strengthening domestic readiness while accelerating overseas deployment. In China, we continue to strengthen our end-to-end operations to develop standardized replicable operating models and solutions. We have completed preparations across full operating cycle, including personal training, maintenance, insurance services, airspace coordination, and emergency response in Guangzhou and Hefei, accumulating practical operating experience. We initiated point-to-point trial operations to build experience in advance. Once the regulatory window opens, we will rapidly deploy and help customers operate to standard. Overseas, our footprint expanded to 23 countries, adding Mexico and Switzerland since Q2. Thailand is running validating flights via sandbox, and the Civil Aviation Authority of Thailand has established a clear path forward. We're targeting a commercial approval in 2026. We've also selected for Hong Kong's low-attitude economy regulatory sandbox X trial project, with flight validation underway and a public demo coming soon. Furthermore, we advanced our Global Fast-Track program. Many countries want to bring in pilotless CVDOs, but lack the regulatory framework on how to build a complete path from safety validation to operational standards to commercial deployment. Drawing on a decade experience, as well as our engagement with the civil aviation authorities in multiple countries, EHON is turning this experience into a standardized market entry framework. This is the basis of our Global Fast-Track program. It's not simply about selling an aircraft. EHON is providing a standardized methodology from validation to operational preparation to commercial deployment, helping local regulators and partners move more efficiently. Sri Lanka has become the first country to join our Fast-Track program, and we are also engaging with multiple other countries regarding framework. This shifts our global strategy from merely selling products to exporting experience, standards, and capabilities. Second, revenue diversification. Keeping passenger transportation as our strategic focus while developing non-passenger carrying business and a broader product portfolio. Passenger mobility remains our strategic focus while domestic passenger commercialization is still pending regulatory approval. We're actively developing logistics, firefighting, and aerial building media to build additional revenue streams. We're developing and validating logistics and firefighting aircraft based on our passenger grade safety technology These products address real needs such as forest firefighting, portal logistics, and emergency response. They are moving through testing certification and customer validation with the potential for faster market deployment. Alongside a steady progress on the EH216 platform and the VT35 certification and flight test, Ehon is building a multi-scenario product matrix rather than relying on a single aircraft. Meanwhile, Aerial media revenue surged over 270% year-over-year in Q2, and now expanding to Europe, Japan, Thailand, and other overseas countries. We're expanding one-off event performances to regular on-site shows for sustainable revenue and replicable business models. Third, improving cost efficiency and focusing our resources on long-term competitiveness. Since Q2, we streamlined the organization, refreshing talent structure, Cutting non-essential compacts, improving efficiency. The outcomes will be visible in the second half. We are focusing resources on things that matter most. Core product development, certification capability, operating system, overseas commercialization, and business data can generate revenue, deliveries, and cash flow. Over the past decade, Yi Han's core strength has been getting aircraft flying and operations running. Now we're turning that into a standardized, scalable capabilities. Customers value our ability to guide them from zero to commercial operations, not just the aircraft itself. We are validating our capabilities in China and scaling them overseas, two tracks reinforcing each other. The demand is real and the path is proving out. Now we're focused on execution. converting operational capability into orders, deliveries, and cash. Finally, Ehon is leading a long-term business. We are breaking technology barriers and help shape industry rules. While navigating the evolving regulatory frameworks requires careful management, our long-term vision remains unchanged. The end game for loyalty to mobility remains pilotless flight. But regulation and ecosystems take time to mature. Short-term friction won't alter our direction. When the window opens, Yihang will be the first one through with the credentials, capabilities, and the readiness. And the moat we're building through standardized operations will only get deeper. The strategic direction of the low-altitude economy will not be disrupted by short-term volatility. For 12 years, Yihan has focused on making safe life accessible. We will maintain a pioneer's discipline and execute what needs to be done. Thank you. I would like to invite our CTO, Peng Shuai, to introduce our latest progress in technology and R&D. Thank you, Mr. Hu and everyone. In Q2, our R&D focused on three aspects. First, we continue to upgrade existing products and invalidate operations for current customers and scenarios. Second, accelerated R&D for new products and new applications. Third, deepen core underlying system capabilities. These three aspects together build a more completed technology foundation for skilled commercial operations. First, upgrading existing products and an operational validation. This quarter, we completed a series of validations for EH216S root operations We established our first point-to-point test route at our Guangzhou headquarters, continuously accumulating trial data. This marks a meaningful step, moving EH216S operations from single-point takeoff and landing toward regular route-based operations. On passenger experience, we completed several key updates. We validated the operational capability of our new battery cooling vehicle. Under test conditions, increase daily orders per aircraft from about 6 to 12 to 15, a meaningful boost for daily capacity. With the same fleet infrastructure, each aircraft can handle significantly more flights per day, which matters a lot for operational efficiency and unit economics. Additionally, Our new independent air conditioning system rapidly reduced cabin temperature by 10 to 15 degrees Celsius, enhancing passenger comfort. Second, new product development and scenario expansion. For the VT35, we completed truck wind tunneling testing and lightening direct effects and LIE protection testing for key components, alongside multiple flight tests in China. to support aerodynamic calibration and airworthiness validation. Meanwhile, we're extending our technology into new applications. For forest firefighting, we're testing AirBust delivery system with our existing product to enable early stage crown fire response. Based on the 35EH21 success platform, we're also developing a cargo version Adapting this mature platform is expected to shorten development and certification timelines. Our prior work on the EH216L will also be integrated into this new configuration, ensuring logistic capability continuity. Third, deepening core systems. On the operational system front, we're beating differentiated product capabilities for two key customer types. First, low-altitude operations control system for operators and aircraft consumers. Second, city-level low-altitude integrated supervision platform for government agencies. The letter covers aircraft to use applications, plan filing and review, airspace destination, real-time monitoring, information publication. This quarter, we focus on two key areas. Improving our platform's situational awareness, tiered supervision, and emergency response efficiency. Second, deepening system integration with the Hefei Government Flight and Service Center. We've developed a set of framework documents covering airspace designation, operational standards, and service process, helping the Hefei Flight and Service Center build a city-level altitude and supervision system. Think of it as a software plus hardware foundation for future large-scale, high-density urban operations. We'll continue holding our product and system development to aviation-grade standards, translating technological breakthrough into a tested, validated, and deliverable commercial capability to sustain Eon's long-term leadership in global altitude mobility market. Next, I'll turn the call over to our CEO for sales and operational updates. Thank you. Thank you. Mr. Feng, and hello, everyone. I'll discuss our Q2 operational progress and how we are approaching lean operations, product diversification, operations markets, and safety systems. In Q2, we delivered 35 units of EH216S and one VT35. On AeroMedia's site, we completed 22 AeroMedia shows and delivered 520 units of GT4 drawings. Beyond these numbers, we want to be transparent about our current environment. This year, China's low-altitude economy entered a more cautious phase across safety oversight, airworthiness management, and operational regulation. This has been reinforced by the new airworthiness framework, and Civil Aviation Laws. Recently, industry safety incidents have heightened regulation and public attention on low-altitude flight safety, leading to intensified safety inspections of general aviation and low-altitude economy operators, aircraft and operational projects. As a result, a slow down of progress delivers acceptance and commercial operations for some projects, and a passenger carrying commercial operations for low-altitude aircraft has also been affected. So we are being more cautious about our operational expectations and resource allocations. Our CFO will address our adjusted full-year revenue guidance shortly. However, we firmly believe that in passenger aviation, safety and compliance must always precede commercial speed. To be clear, only the local timeline for commercialization has shifted, not long-term market demand or EHOM's competitiveness. Going forward, we'll keep the market informed with clear operational progress updates. Mr. Hu talked about our three strategic priorities, global expansion, revenue diversification, and cost efficiency. On the operational level, our approach covers the following areas. First, improving internal efficiency through lean management and AI integration. During the period of external adjustment, we haven't been waiting passively. We have been proactively streamlining our organization and focusing our resources. On R&D, we're concentrating our core talent, improving technology reuse across platforms. On the digital side, we're integrating AI tools into R&D, knowledge management, cross-functional workflow to shorten development cycles and boost productivity. Our rule is simple. Cost reduction will never compromise safety, product quality, or quarantine. We won't sacrifice long-term competitiveness for short-term financials, but we're strictly scrutinizing expenses to strengthen cash reserves and ensure sustainable operations. Second, strengthening our operational foundation for passenger commercialization. Our Guangzhou and Hefei sites continue to refine flight operations, ground support, emergency response, and regulatory data integration. Through internal trial operations, we're accumulating real operational data to ensure we're ready to start safe and stable commercial operations as soon as regulatory approved. We're also building pilot to point capabilities in advance, including route planning, vertical coordination, ground support, multi-aircrafted dispatch, contingency handling, and passenger services. These are full operational capabilities for future low-altitude transport. Take the Yerhai Lake project. Ground trip across the lake takes an hour. Our planned route reduces the time to about 10 minutes. The Hainan Linggao Cross-Sea Low Altitude Corridor Project has also broken ground. This is the first project under our strategic partnership with the China State of Construction Engineering Corporation, Six Bureau. The first key flight station, the Wing Hop South Sea, is currently under construction. Together, we are building a closed loop altitude economy that combines infrastructure and operations. For local governments and partners, Yihong delivers more than just an EH216S. We'll provide a comprehensive solution including aircraft, command and control systems, scenario planning, route design, road report infrastructure planning, and personal training, maintenance, regulatory coordination, and safety assurance. Third, we're leveraging the mature safety architecture of the EH216S to accelerate non-passenger products and specialized applications. Passenger carrying operations are a core direction, but they're not our only growth path. We're leveraging the EH216 mature aviation-grade safety architecture, including its flight control, powertrain, redundancy design, and command and control for logistics, firefighting, aerial meeting products, building a diversified portfolio less reliant on passenger commercial approval. Aerial media remains a key revenue driver. In Q2, completed 22 shows and delivered 520 units of GD4 trains. The business is evolving from a one-time event to regular onsite services. Projects like Chongqing Media Group and Xinyi in Shanxi are helping us to build experience in continuous operations, content production, fleet management, and outside support. Regular commercial shows improve equipment utilization, customer stickness, and revenue predictability. Overseas, we also deployed a GD4 drones across Japan, Thailand, and Europe, accelerating international expansion On firefighting and logistics, we're working with the customers on product customization, advancing T-30 firefighting drone prototypes and logistic aircraft, and trial flagship scenarios in forest firefighting and port logistics. Fourth, we're accelerating standardized overseas commercial CINEVAX diploma to build a replicable international pathway. Overseas markets are a key part of the Honset long-term strategy and an important platform for validating adaptability, regulatory coordination, and business models. In Hong Kong, we're selected as an early participant in the regulatory CINEVAX X trial project. We've chosen CINEVAX as our first CINEVAX site. Test flights started at this point with a public demo coming soon. An additional flight validation and its now diploma will follow under regulatory oversight. In Thailand, we have established efficient communication coordination with the CAET. Our target and commercial operations are beginning in 2026, and this work will proceed according to CAET's review process with a final timeline subject to the regulator's schedule. Based on this CENABOX experience, we launched the Global Fast Track Program, a four-stage framework of regulatory alignment, a CENABOX build-out, validation flights, and commercial launch designed to compress the timeline from market entry to commercial operations. Sri Lanka is the first country to formally adopt the program. Over the coming months, we will accept the project deployment in Sri Lanka according to the FAST-TRACK roadmap. FAST-TRACK does not bypass local regulatory processes or lower safety or environmental standards. Instead, it reduces technical documentation, safety data, and our accumulated operational experience to reduce duplication. and improve the efficiency of project collaboration, regulatory engagement, and local operational setup. Beyond Sri Lanka, we are also exploring this program in Central Asia. Through the program, we aim to transform individual overseas projects into a standardized, replicable capability, providing a clear, compliant, and efficient implementation pathway for more countries and regions to introduce pilot, let's say, vetoes. Fifth, we are building operational standards and a safety foundation to convert our first-mover advantage into a sustainable competitive mode. Over the years, we have accumulated nearly 100,000 safe flight records. These flights span a diverse geographies, weather conditions, terrain, application scenarios, and operating environments, providing a critical data foundation for continuous improvement in aircraft performance, operational procedures, and command and control systems. We are working with the airworthiness and operational experts to advance air operator certification standards. The goal is to turn our accumulated flight experience and internal operational capabilities into standardized, verifiable, reputable operational benchmarks and industry can use. At the same time, we're building comprehensive after sales support network covering delivery, personal training, spare parts, maintenance, data support, and emergency response. We need to have the organization systems and service capability in place to support scaled operations before commercial scale-up actually begins. While this may not immediately reflect in short-term revenue, establishing these scalable service capabilities now ensures we can rapidly capture market demand once the commercial window opens. We'll continue translating investments into efficiency, building quality products, and closing the loop on operations by enforcing lien management, diversifying revenue and establishing robust safety standards, we will build a sustainable competitive advantage and earn investor trust with verifiable results. Thank you. Next, I'll pass the floor to our CFO for financial updates. Hello, everyone. I am Connor, CFO of Yihan. 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 press release on the IRR website. Next, let me walk you through the key financial data for Q2. In Q2, revenues were 77.9 million down from 113.3 million in Q2 2025, but up significantly by 203 from 25.7 million in Q1 2026. The sequential increase was mainly driven by higher sales volume of EH216 series and with additional contribution from VT35 aircraft. The year-over-year decline was due to lower sales volume of the EH216 series compared to the same period last year. Gross margin in Q2 was 61.2% compared with 61.5% in Q2 2085 and 62.5% in Q1 2086. Overall, gross margin remains stable. Our stable margin profile reflects the competitiveness of our products as well as our continuous strength in manufacturing efficiency and supply chain management despite changes in quarterly revenue and product mix. Turning to operating expenses, adjusted operating expenses defined as the total operating expenses excluding share-based compensation were 112.7 million in Q2, representing a 16.9% increase year-over-year and a 11.5% increase quarter-over-quarter. Increase in operating expenses primarily reflects the combined effect our business advancements and the transition costs associated with organizational optimization during the period. We continue to make targeted investments in commercialization, global expansion, and R&D to reinforce our long-term competitiveness. It's worth noting that Q2 expenses haven't yet fully reflected the outcomes of our organizational optimization and Quebec's control measures. As these initiatives were mostly rolled out during the quarter, we expect the outcomes to gradually show in the coming quarters. Going forward, while protecting our core R&D airworthiness, operating and global expansion capabilities will continue to improve resource efficiency and reduce non-essential spending and maintain strict cash displaying. As we continue to invest in our future growth, our Q2 profitability was affected by both revenue scale and operating expenses. Adjusted operating loss in Q2 was 62 million, compared to 77.1 million in Q1, 2026. Adjusted net loss was 58.5 million compared to 75.6 million in Q1, 2026. As of June 30th, 2026, our combined cash and cash equivalents, short-term and treasury investments totaled 929.4 million RMB. This healthy cash position provides strong support for our continued commercialization efforts, core product development, global expansion, and day-to-day operations. Turning to our full-year guidance, given that the regulatory policies and supporting mechanisms for low-altitude human-carrying commercial operations are still evolving, there remains uncertainty around the timing of domestic commercial operations. Accordingly, the company has decided to withdraw its previously issued 2026 annual revenue guidance of 600 million RMB. The company will not provide a replacement of full-year revenue guidance at this time. As the regulatory environment and business feasibility become clear, we'll provide an updated outlook to the market when appropriate. In the meantime, the company will continue to provide a transparent and timely updates on key operating milestones. These includes preparation for and approval process of domestic commercial operations process in international markets, product development, orders and deliveries for non-passenger carrying business such as logistics, firefighting and airway meeting, as well as continuing improvements in operating efficiency in our cash position. Going forward, we'll stay focused on driving commercialization and core tech development. We'll continue to improve operating efficiency and resource allocation. We believe these efforts will strengthen our foundation for long-term growth and create sustainable value for our shareholders. 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. Your first question comes from Tim Hisiao with Morgan Stanley. Please go ahead.

Hi, this is Tim from Open Stanley. Thanks for taking my questions. I have two questions about commercialization. The first question, as we just discussed, I think the company target to get a commercial operation permit in Thailand this year. So just want to get more details when do you think that would happen. like in third quarter, in fourth quarters, and if it happens, how many units of 216 do you think we're going to ship this year based on the contract? So that's my first question. My second question is about the commercialization in China. For those, I think, as Benjamin just mentioned, we are not going to provide update guidance and the uncertainty to the incidents that took place in June. But as we remember, the incident was caused by human factors. And if there's any potential barrier, as we discussed with management, I think previously management believed that That's with favor Yihan because Yihan's Jira products are designed to follow the schedule route and will fly autonomously and can be under system control. So just wondering what really changed management's view on the impact and to the OC schedule, just what happened over the past few months. Yeah, those are my two questions. Thank you. Thank you for accepting my question. I have two questions here. They are all about commercialization. First of all, it is the first commercialization process in Thailand that we mentioned. I want to ask, when do we expect to get the corresponding commercial license in Thailand? Is it in the third quarter or the fourth quarter? If we succeed in commercialization in Thailand, how many EH216 sales will it bring based on the current contract, compared to how many shipments this year? My second question is also about China's domestic commercialization progress. Just now, we gave a future guidance. For example, we did mention that The accident in June caused some uncertainty. This accident was obviously caused by people, but for Yihang, What is the reason behind the actual impact on the real landing of OCD?

I would like to answer the first question. In Thailand, we also have a subsidiary and non-subsidiary business. In terms of subsidiary operations, the company has already made it clear to the Thai Civil Aviation Bureau about the approval process for piloting. It is expected that in the next three seasons, we will be able to get experimental piloting licenses. This means that our eVTOL Huai Feng, Xiaona Li, Anne Ji Huai Feng, Xiaona Li, Anne Ji

Let me take your first question. We are deploying both passenger carrying and non-passenger carrying operations in Thailand in parallel. On the passenger carrying side, we have further clarified the approval pathway for flight qualifications with the Thailand Civil Aviation Authority. and we expected to obtain an experimental flight permit in Q3 and we also expected to secure a formal commercial operation certificate by the end of the year. By then, we'll start. So by that milestone, it represents that Our EVTO will be officially registered within the Thailand Civil Aviation Authority, though we may not be able to directly sell tickets to the public, but that is indeed a milestone that we are hoping to achieve within the year.

We have communicated with the Civil Aviation Bureau to plan at least 10 business routes in Thailand. They will cover Bangkok, Pattaya, Phuket, Sumedong, Guidao, and so on. So the real delivery will be next year. Next year, we will have a business route So we are striving to secure the operational certificate in Thailand by the end of the year. And we are working with the local civilization regulator to plan 10 routes

that will cover Bangkok, Phuket, Sumay Island, and Pattaya. Official deliveries of our EH216 models will start sometime next year. According to the plans, Each location will require at least five units of EH216S. So we are going to see a significant increase in our Vero deliveries in next year.

In terms of this year's business, Chia-Hung Yang has deployed more than 1,000 GD4.0編隊無人機 to the Thai market. He also held a long-term performance in Bangkok, Pattaya, and others.

On the non-passenger side, the company has shipped over 1,000 GD4 commercial drones by sea to the Thai market, and we plan to launch regular drone light show operations in Bangkok and Pattaya.

In June, there was an incident in China where someone was driving a new type of aircraft. It was indeed caused by the original cause. So, as a result, the collection of government policies is obvious. Because after each incident, there are corresponding investigations and researches to improve the law and regulations. So, especially for someone driving an aircraft and its pilot, this is a key investigation and review process. We still insist on the original point of view. This incident, regarding the impact of the June flight incident,

The incident you mentioned, a manned light sport aircraft accident in China at the end of June, was indeed primarily caused by human factors. The subsequent regulatory tightening has been noticeable, particularly around manned aircraft and their pilots. We continue to hold our original view. Our unmanned, pre-programmed, fixed route, fleet-oriented, coordinated operating model have inherent safety advantage and stricter safety regulation is not positive for us in the long run.

关于OC这一块呢,这次的事故呢,从监管部门的角度来看,监管的实际反应超出了我们最初的一个预期。 这起事故呢,促使监管部门对整个地工行业采取了更加审慎的看法。 Regarding the

have made a significant change in our outlook on the OC, operator certificate timeline. However, the regulatory response has been more far reaching than we initially anticipated. This incident has prompted regulators to adopt a more cautious stance toward the entire low altitude industry. Although it is not directly related to our unmanned evidos, the overall cautious regulatory environment has indeed slowed the approval timeline for domestic carrying commercial operations. Specifically, the commercial operation approval process for the Hefei project has been delayed, and the timing of regulatory clearance remains uncertain.

However, the tightening of the actual implementation level of supervision is not a restriction of our technical route, but a gradual impact on the entire industry review rhythm. We respect and understand the attitude of the supervision agency to highly responsible public safety. At the same time, we put our energy into things that we can control, such as operational output, and help customers build operating systems. When the window is opened, we don't need to start from scratch. So our assessment is that the actual regulatory tightening at the enforcement level, and this is not a rejection of our technology pathway, but rather a periodic

and others. We respect and understand the regulators' strong commitment to public safety. At the same time, we hope that the regulators would provide reasonable policies on ensuring safety. For us, we're going to focus on executing what can be done from our side. In the meantime, we are proactively pursuing our global overseas initiatives so that we can move the industry forward. Just a quick add. We are working with the local civil aviation authorities to clarify validation pathways and shorten the time from validation to market access through our overseas fast-track program. That's the end. Next question, please.

Your next question comes from Weigu with Jefferies. Please go ahead.

Hi, thanks. I'm from Choppers. Two questions, please. The first one being, given the full year guidance on the revenue has been withdrawn, and I understand it could be difficult to quantify, but do you mind give us a little bit color on the kind of like the second half run rates versus the 2Q kind of numbers? It would be great if you kind of split it out between EPTOL and the non-passenger segments. and my second question will be coming towards the accounting adjustment that we've mentioned in the one queue call. So, do you mind give us some sense on the numbers being delivered in this second queue and any more to be delivered down the line? Thank you.

Can you repeat the second question? I didn't quite Okay, got it. Yep. Yep, got it. Perfect. But can you ask the management to make a comparison in terms of the direction, for example, with the run rate in the second quarter? Will it be stronger or will it be flat? If possible, can you give some explanations from the details of the in-vitro and non-in-vitro business? Then the second question on my side is about the accounting adjustment we mentioned in the first quarter. Then we want to ask this How much did the second quarter actually pay off? And how much is there to pay off? Can you help me with this adjustment? Thank you.

Let me answer the first question. Indeed, due to the situation this year, there are some uncertainties, so the company decided to temporarily update the annual income guidance for 2020. Then the corresponding company is no longer providing a specific quantitative expectation for the proportion of employees and non-employees, but from the already realized business data, then the second quarter of the air traffic income ratio is 92% and the ratio of non-employees to employees is about 8%, and the non-employee business is mainly編隊表演業務

Given the uncertainties, the company has decided not to update its full-year 2026 revenue guidance at this time, nor will we provide any specific quantitative expectations on the revenue mix between passenger-carrying and non-passenger business. However, based on the actual operating data, that has already been achieved. Air mobility revenue accounted for around 92% of our to-do revenue, while non-passenger business, primarily TD4 formation drone performance, accounted for approximately 8%.

飞载人业务的收入和占比将在下半年呈上升趋势。 are expected to be affected by the performance of the K-team, and other non-contractor products, including logistics and fire-fighting. The income of the non-contractor business will still be in the leading position, mainly due to Guangzhou Hefei's non-contractor line of commercial operations and the expansion of overseas markets. The company will continue to promote the expansion of non-contractor scenes in the land of non-contractor business operations. The specific income ratio will change with the progress of the business line. Thank you.

Non-passenger revenue is expected to trend upward both in percentage as a share of the total revenue as well as the absolute amount in the second half of the year, driven mainly by increased deliveries of formation drones as well as a small number of other model deliveries such as firefighting series. The passenger business revenue will continue to dominate, largely depending on the pace of commercial operation launches on passenger routes in Guangzhou and Hefei, as well as overseas market expansion. The company will continue to advance both passenger commercial operations and non-passenger use case expansion in parallel, with the specific revenue mix evolving dynamically as each business line progresses. Let me answer the second question.

In the second quarter of 2026, the company confirmed part of the aircraft sales of the EH216 series that had been delivered. As for the rest, the company will confirm the relevant sales in the following quarter with appropriate accounting standards. The company will not disclose the details in detail.

In the second quarter, the company recognized revenue for a portion of the EH216 series aircraft that had been previously delivered. And going forward, we will recognize revenue as the contract meet the certain criteria according to applicable accounting policies and that the company will disclose them to the market in a timely fashion. Thank you. Next question please.

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

Some people are taking my question. So two follow ups on the topics that you mentioned before. So firstly, on the regulation side, I think you mentioned a certain level of cautiousness, but just trying to see like for this current regulatory sentiment, what kind of safety evidence or milestones will likely be needed for this approval page to normalize? And my second question around the diversification about your revenue stream. So could you update us on the progress across the non-passenger businesses, like the logistics or firefighting trains, like which area looks more promising in the near term, or any contract or program you are pursuing?

Yeah, that's my two questions. Thanks.

I have two questions for you. You just mentioned that the Chinese supervision department I would like to ask how to evaluate China's current management attitude towards ZRT and ZL operation. If we want to review the rhythm and normalize it, what kind of safety measures or key procedures are needed? My second question is about non-ZRT business. Thank you. I will answer these two questions. The first one is about the attitude of supervision. The current attitude of supervision is to ensure safe inspection and approval.

This is not a stop. Let me take your questions. First, the review and approvals are conducted with a strong emphasis on ensuring safety.

So there are still ongoing reviews. It doesn't mean that the review and approvals have completely come to a ground halt because you know the low altitude economy represent a worldwide trend. And with regard to operations, we are still advancing our operation capabilities. and the operational model will still need to be reviewed and approved. And for approval to become normalized, our operational model needs to be passed a regulatory review and enter regulatory operations.

. have entered into a standardized operation and become a standard sample. They can be used as reference for other operations. At the same time, we are also helping the customer with the relevant operation units and preparing the information. Once the security inspection is completed, when the industry continues to advance, the customer's approval will be greatly accelerated.

I think to see a full scale back to normal review and approval condition, we need to see that the trial operations that we have in Hefei moving into routine operations. And then we will establish this routine operation, this site, as a role model for other operators and even Industry Benchmark. So currently, we are helping our customers putting together related documents and et cetera. As regulatory clearance clears its way and the industry goes back to its normal cadence of review and approval, then our customers will be able to expedite their approval process and move into routine operations

Then for the second question about our non-pilot business, first of all, these areas are in actual demand. Yihang has a lot of technical equipment in the drone field, and we can transfer the safety of the carrier to our non-pilot products. This year, we will be in the short-range emergency logistics, long-range logistics, and drone command and control. There is real demand. Well, there is clear and genuine demand across all of these areas, and Yihan has a deep tech reserve.

And we are reusing some of our technologies from the human-carrying products onto the non-human-carrying products. And to give you some examples, there are some short-range emergency logistics and long-range logistics and et cetera. And those are some of the critical use cases where we can use our product. And looking into the second half of the year, we're also going to ship firefighting products and there's quite promising prospects for the orders of these products.

因此呢,我們今年的戰略依然是豐富多場景,尤其是收入過程多元化方面。 And this is a

Exactly where our strategy is. This year, we're going to continue to focus on diversifying use cases, particularly in terms of the revenue mix. As you already seen, non-passenger business has already reached 80% of the total revenue, and we expected this to further expand and the share to continue to grow as our business progresses. Thank you.

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

Thank you once again for joining us today. If you have any further questions, you can reach out to us through the email on our IR website. Additionally, we are going to host some offline sessions where we are going to have more in-depth communications with you. and we look forward to seeing you in our next earnings call. Thank you once again. Bye.