Hesai Group

Hello, ladies and gentlemen. Thank you for standing by for HESI Group's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode. Please note that today's conference call is being recorded. I will now turn the call over to our first speaker today, Yuan-Ting Shi, the Company's Investor Relations Director. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining Hesite Group's fourth quarter and four-year 2023 earnings conference call. Our earnings release is now available on our IR website at investor.hesitetech.com, as well as via Newswire services. Today, you will hear from our CEO, Dr. David Lee, who will start the call with an overview of our recent updates. Next, our global CFO, Mr. Louis Teh, will address our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statement in our earnings press release, which applies to this call, as we will make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconcile to the most comparable measures reported under GAAP in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Lee. David, please go ahead.

Thank you, Yuan Ding, and thank you everyone for joining our call today. 2023 was a landmark year for Hezai. We not only continued to substantially outperform our LiDAR peers, but also extended our leading market share with stellar full-year results across revenues, total shipments, and the blended growth margin, all of which surpassed our previous expectations. Furthermore, we create a virtuous cycle of cost control and economies of scale and achieved multiple significant milestones on our path to profitability. For instance, our operating cash flow for the full year of 2023 reached positive territory, a feat unparalleled within the industry. These remarkable accomplishments reflect our unwavering commitment to sustain and responsible growth to our mission of reducing accidents, saving lives, and making global transportation safer for everyone. Let's delve into our fourth quarter business updates. On the domestic side, we achieved a significant milestone in the fourth quarter by expanding our collaboration with one of the world's largest EV manufacturers based in China. Our extended cooperation encompasses another fresh lineup of vehicle models that are set to debut starting 2024. In addition, we were recently selected by Lialto as the exclusive LiDAR provider for their Mega MPV platform. Lialto also made a standard equipment on their popular L7 and L8 Pro versions, immediately adding hundreds of thousands of LiDAR units to Hussite's growing order box. We also recently forged a new strategic partnership with Great Wall Motor, one of China's largest auto brands, and Leap Motor, who has recently formed a joint venture with Talantis to include joint research endeavors and the integration of a variety of LiDARs into their vehicle models, with SOPs scheduled to commence in 2024. We anticipate that our partnership with these prominent domestic OEMs will soon deepen even further. The EV revolution is in full swing, particularly in China. In 2023, the estimated NOA penetration rate in China stood at 10%. It is projected to increase to over 20% by 2025. OEMs are eager to distinguish themselves through intelligent NOA functions. For instance, as I just mentioned, Lialto's L8 and L7 Pro models now feature our LiDAR as a standard configuration with an urban NOA function, which navigates from urban point A to point B with minimal driver intervention. Additionally, LiDAR is increasingly recognized as an essential safety feature, just like air bath. Consequently, LiDAR has become a prerequisite for safety-conscious consumers seeking the highest safety standards. Moreover, as the industry advances towards L2 Plus and L3 autonomous driving systems, a transformative trend is emerging with ADA systems equipped with LiDAR configurations making their way into passenger cars in a growing range of price categories. This evolution began with vehicles priced at 400,000 RMB range in 2022 to 300,000 RMB range in 2023, and now has extended to models priced near 150,000 RMB range in 2024, as illustrated by the recent launch of Leap Motor's latest EV model. The widening accessibility of Linar technology across affordable price categories represents a transformative phenomenon for our industry, unveiling a mass market opportunity 10 to 20 times larger than the previously served premium sector only. The catalyst signal is a key inflection point for ADAS and LiDAR adoption in China and the rest of the world. China has maintained its global leadership in EV production and sales for nine consecutive years, commending a majority market share exceeding 60% worldwide. Meanwhile, Chinese OEMs commenced mass EV production in 2021-2022 in contrast to global OEM timeline, which mass EV production is anticipated to begin around 2025 and 2026. In other words, China's EV industry is approximately five years ahead of the global curve. We are in the right place at just the right time to capture the opportunity. With accumulative shipments surpassing 300,000 LiDAR units by end of 2023, HSAI has not only realized financial advantages through economies of scale, but also amassed significant technological expertise and a profound understanding of mass production and quality management systems. This serves as compelling evidence of our established proficiency for global OEMs, particularly those who may be more conservative in vendor selection due to past unsuccessful attempts with our U.S. and European peers. Armed with this strength, we are well positioned to compete successfully on the global stage. Let me walk you through some of the specifics. First, Hasai's pioneering R&D initiatives are defining the LiDAR industry's product development trajectory. In January 2024, we unveiled AT512, our next-gen ultra-long-range flagship ADAS LiDAR scheduled for mass production 2025. This cutting-edge technology is establishing new industry benchmarks, boasting the highest available detection range and resolution. It not only outperforms industry competitors by a significant degree, but also challenges long-standing misconceptions about technical bottlenecks, including the notion that only LiDAR designed with 1550 nanometer wavelengths can detect beyond 250 meters. Standing out with industry-leading performance across every key metric, AT512 greatly enhances the vehicle's perception capability by detecting objects at least twice as far away as competing LIDARs in its category, giving the intelligent driving system over 40% more reaction time to make the safest decisions. As the CEO of a leading global OEM declared, when it comes to safety, the second best LiDAR isn't good enough. We firmly believe that investing in development of the best LiDAR products, which not only meet but exceed the dynamic demands of the market, provides substantial long-term benefits to society as well as our company and stakeholders. We are seeing various new LiDAR debuts at the 2024 CES event in Las Vegas reflect a technological convergence towards our innovation direction. Several competitors who had traditionally emphasized the use of the 1550 nanometer lasers or MAMS technologies are now unveiling products based on rotating mirror scanning systems or 905 nanometer lasers. This underscores a growing recognition of the benefits of our technology's offers in terms of cost, performance, and reliability. Our leadership and ingenuity were recognized at CES event, where our groundbreaking, ultra-thin, long-range in-cabinet LiDAR ET25 won the prestigious 2024 Innovation Award at CES. Second, We firmly believe that mass production at scale is the only way to ensure sustained operation, effectively manage cost and cultivate enduring trust with our customers. As of now, we operate two major factories, our Maxwell Center in Shanghai, focusing on new product R&D and testing, and our Horse Center in Hangzhou, a facility dedicated to mass production, boasting an unprecedented automation rate of over 90%, unparalleled in the global lighter industry. By the end of 2023, we achieved an annualized production run rate of over 800,000 units, a figure we project to rise to 1.5 to 2 million by end of 2024. Meanwhile, we expect to cumulatively shift over 2 million LiDAR units to the market by end of 2025. Third, beyond manufacturing capability, stable quality and reliability have emerged as crucial indicators for OEMs when considering mass installation of LiDAR systems. LiDAR systems require the sophisticated integration of optics, mechanics, electronics. As such, quality and precision are paramount. Amid intense competition and widespread adoption of ADAS systems, LiDAR product maturity has become EV manufacturers' primary concern. From OEM's perspective, there's no better indicator of a product's superior quality and reliability than their outstanding long-term performance in real-life road conditions. Drawing upon these assets and know-how, we are confident in our ability to expand our domestic leadership to a global scale. We are beyond thrilled to announce that, as of now, we have won over 68 series production EV models from 16 major OEMs and Tier 1 suppliers worldwide. We've been selected by two top global automotive OEMs for their new EV series production programs. And there are more. Our global RFI RFQ lineup has expanded to include a total of 13 OEMs. with nine leading global OEMs from North America and Europe, and we're adding Asia X China to the roster of the quarter. These major accomplishments mark a promising start to our global ADAS journey. Stay tuned for the updates. As we look ahead, the road ahead is filled with opportunity to broaden our impact. Our achievements thus far are just the beginning. With market-leading LiDAR technology and strategic partnerships worldwide, we are poised to capitalize on the evolution of intelligent driving, reducing accidents, saving lives, and creating a safer global transportation system. I'll now turn the call over to Louis to share more details on our financial performance and outlook. Louis, please go ahead.