Hesai Group

Hello, ladies and gentlemen. Thank you for standing by. Welcome to HESI Group's third quarter 2024 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, Huangting Qi, the company's investor relations director. Please go ahead.

Thank you, our creator. Hello, everyone, and thank you for joining Closet Group's third quarter Kisan 24 earnings conference call. Our earnings release is now available on our IR website at investor.closettech.com, as well as via newswire services. Today, you will hear from our CEO, Dr. David Lee, who will provide an overview of our recent updates. Next, we would like to welcome our new CFO, Mr. Andrew Fan, who 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'll make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most compatible measures reported on the GAAP in our earnings release and the SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead.

Thank you, Yuanjing, and thank you, everyone, for joining our call today. Let's start with an overview of this quarter's progress. First, we surpassed the high end of our revenue guidance for the third quarter, delivering net revenue of RMB 539.4 million and maintaining a strong growth trajectory. We also continued to accelerate LIDAR adoption among our customers. We delivered a total of over 134,000 units during the third quarter, marking our second consecutive quarter of nearly 50 percent sequential growth this trend underscores a growing recognition of the value that lidar brings to autonomous driving systems and we're confident that this momentum will carry into remainder of 2024 and next year second Our strong commitment to operational efficiency and financial discipline has enabled us to consistently reduce our gap net loss for four consecutive quarters. Fueled by powerful trends and exceptional finance performance, We're moving full speed ahead towards a monumental goal, a projected revenue of US$100 million with an estimated net profit of US$20 million for the fourth quarter alone. We couldn't be more excited as we're now projecting full-year profitability on a non-GAAP basis for 2024. making us the first automotive LiDAR company worldwide to reach this remarkable milestone. This put us on a path to close the physical year with an unprecedented overall financial performance. Looking at the broader industry landscape, LiDAR technology is increasingly recognized as a key driver in the advancement of autonomous driving. According to recent data from Gasco, a leading automotive industry information service platform, approximately two-thirds of the models with highway NOA are now equipped with LiDAR, and the city NOA models have achieved 100% LiDAR adoption. Moreover, a recent research report projected a strong increase in level 2 and level 2 plus ADAS adoption in China, estimating a 40% penetration rate for 2024 and 50% by 2025. A key turning point is anticipated in 2026 with the introduction of Level 3 autonomous driving solutions, which will demand even higher standards for perception and safety capabilities. This evolution marks an exciting phase of market expansion and technological progress in the autonomous driving sector as the analysis indicates that not only will more advanced vehicles adopt LiDAR technology, but they will also likely employ multiple LiDAR units to create a 200 to 300 meter safety buffer, significantly enhancing overall safety standards. A recent U.S. safety investigation highlights the critical role of LiDAR technology in vehicle safety systems. The National Highway Traffic Safety Administration, NISTA, has launched a probe into around 2.4 million vehicles equipped with vision-only ADAS systems after collisions occur in low-visibility conditions like fog and glare. These incidents have exposed the limitations of relying solely on a camera-based system for vehicle safety, raising a critical question. Is a vision-only approach truly sufficient for autonomous driving? While future AI and vision language models will undoubtedly enhance vision-only systems, they will still require extensive training and remain vulnerable in low-visibility scenarios. In contrast, LIDAR generates its own light and offers a real depth measurement without depending on vision algorithms, which may struggle in poor visibility conditions or with irregular objects. With LIDAR becoming more affordable and scalable, it directly addresses the limitations of vision-only systems. that adopting LiDAR, which functions like an active seatbelt or airbag, alongside with cameras, is essential for improving safety in autonomous driving, making it as safe, if not safer, than human drivers. Now let's shift our discussion to our roster of ADUS clients who are strong advocates for integrating LiDAR into their system. LiAuto, our largest ADS client, achieved a remarkable milestone by producing its one millionth vehicle in October, which also marked a proud moment for us, showcasing our success in supporting LiAuto's rapid growth as well as maintaining a leading share of the LiDAR market in China. We're confident that this momentum will continue as our OEM partners pursue new goals further cementing our role as a key supplier in the ADA sector. We also recently secured a new platform win with Leap Motor, a leading EV maker in China, and the facelift of two flagship models with a premium EV brand backed by a leading Chinese automotive group. Production of these models is expected to commence in 2025. Kasai will be serving as the exclusive mainline supplier for these new wings. This exclusivity reflects the trust and confidence that these manufacturers place in our technology while broadening our presence in the rapidly growing EV market. What's more, we're thrilled to announce a new collaboration with a leading EV manufacturer in China. As one of our top customers by shipment volume and a leader in the EV industry, this pioneering OEM has also exclusively selected our next generation Level 3 Ultra High Performance LiDAR alongside with the cost-effective ATX LiDAR to power their upcoming models slated for release in 2025. Building on this momentum, our ATX LiDAR is rapidly approaching its SOP phase. Its innovative integrated design and exceptional cost efficiency have already sparked significant interest with multiple customers planning to adopt it as a standard feature in their 2025 lineups. The future of scalable intelligent driving is here, and we're proud to lead the way. This quarter's success extends beyond the domestic alien market with new progress in expanding our global reach. First, our worldwide shipping programs with a leading global automotive OEM have advanced through several critical phases to the successful delivery of B-sample units, a key step in validating our technology's performance and ensuring that it aligns with our partners' rigorous standards. These samples are essential for assessing how our LiDAR solutions perform under real-world conditions and verifying their integration into the OEM's vehicle platforms. Our progress also enhances our position as a vital contributor to the global automotive ecosystem, helping shape the next generation of vehicles that will define the future of mobility. Furthermore, we recently signed a collaborative framework with SAKE Volkswagen for an automotive LiDAR program, marking a new chapter in our partnership and elevating our position to a strategic supplier for the top-selling automotive joint venture in China by sales volume. Together, We aim to innovatively integrate advanced LiDAR technology into vehicles, enhancing safety and automation features while propelling the OEM's vision for smart vehicle innovation. To date, we have secured the design wins with five prominent global OEMs, including four joint ventures in China with two Americans and two European automotive companies. These joint venture collaborations enable us to leverage our partners' established network resources and expertise. Their guidance has been instrumental in enhancing our collaborative capabilities, helping us streamline operations and meet global standards more effectively. We believe our strategic alignments will position us to capitalize on emerging opportunities and pave the way for our participation in the global supply chain. Our efforts to expand our global footprint across the broader Asia market have also yielded promising results. We're delighted to announce two newly secured development projects, both proof-of-concept POT programs with a top-three OEM in Japan. These programs cover both level 2 plus passenger vehicles and level 4 robotaxi applications, highlighting our growing influence and capabilities in diverse segments of the ADAS and AM markets. Securing these POC projects with a leading OEM in Japan underscores the trust placed in our technology and expertise while providing a valuable opportunity to showcase our LiDAR systems functionality across various scenarios. Currently, we have four POT programs underway with three global OEMs, and we're excited about the potential of these partnerships as they move into the next phase. Over the past two years, both Hazai and the broader LiDAR industry have largely concentrated on the ADA sector which has seen substantial growth driven by rapid advancement in intelligent driving, particularly in China. While the data sector will remain a key focus, we're also committed to exploring the opportunities in the broader autonomous mobility market, where we have traditionally held a significant global share as a market that prioritizes performance over price sensitivity, autonomous mobility offers exciting growth opportunity as a new valuable use cases to continue to emerge. In September, we unveiled our latest flagship 360 degree mechanical automotive grid long range LIDAR OT128 at the 2024 IAA Transportation Fair in Germany. inheriting 95% of the key components from Hazet's best-selling AT120P ADAS LiDAR, OT128 boasts a point rate of 3.45 million per second and a 200-meter detection range at 10% reflectivity. This high-performance, 360-degree perception LiDAR with a market-proven, vertically integrated architecture makes OT128 is an ideal solution for scalable applications, including robotaxis, industrial robotics, smart factories, and logistics. OT128 also integrates HESAI's proprietary all-weather perception system, the intelligent point cloud engine, to enable effective detection of rain, fog, exhaust fumes, and water splashes, distinguishing it as a unique and innovative mechanical LiDAR offering in the market. Since its debut, OT128 has made a strong impression in the market. emphasizing our technology's potential across diverse application scenarios and autonomous systems. We have already secured contracts for OT128 with 90-plus global and domestic clients, such as WeRed, Westwell, Ambotech, and EasyMile, and the production and delivery have already begun. Notably, our OT128 LiDAR played an instrumental role in the success of the champion autonomous race car at Formula Student Germany 2024, the world's largest competition for electric and driverless vehicles. These early successes highlight the growing recognition of our advanced LiDAR solutions across a wide range of industries. We remain committed to exploring new use cases and engaging new customers in both the ADA and AM sectors, leveraging our lineup of versatile libraries. Last but not least, I would like to introduce Mr. Andrew Pham, who has recently joined HSI as our new CFO. With over 18 years of experience in accounting and corporate finance, We're confident that he will further strengthen our financial management, enhance our engagement with the investor community, and help us create sustainable value for Hosei and our shareholders. Welcome, Andrew. At this point, I will now turn the call over to Andrew to share more details on our financial performance and outlook. Andrew, please go ahead.