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.

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