Hesai Group

gentlemen. Thank you for standing by. Welcome to HerSciGroup's first quarter 2025 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 head of capital markets. Please go ahead.

Thank you, operator. Hello, everyone. Thank you for joining He Sai Group's first quarter 2025 earnings conference call. Our earnings release is now available on our IR website at investor.hesai.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, our CFO, Mr. Andrew Fan, 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 reconciled to the most comparable measures reported on the 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-Ting, and thank you, everyone, for joining our call today. Let's start with an overview of this quarter's progress. We began with a strong start in 2025, fueled by outstanding momentum in our ADAS and robotics segment, and backed by solid financial results. Our shipments more than tripled year over year to nearly 200,000 LiDAR units in the first quarter, despite the impact of typical seasonal patterns. This explosive growth suited an almost 50% year-over-year jump in our net revenue. Thanks to sharp execution, operational discipline, and cost control, we're also able to reduce our net loss by an impressive 84% year-over-year. Meanwhile, Hussite's leadership is being recognized across the industry. For the fourth consecutive year, UO Intelligence, a highly respected independent research firm in Europe, ranked HSI the number one global leader in automotive LiDAR market share. According to Youth 2024 analysis, we ranked number one in three major categories, by revenue with a 33% share of the global automotive lighter market, a 26% share of the global passenger car lighter market, and a dominant 61% share of the global robo-taxi market. These achievements speak volumes at the pace at which we innovate, scale, deliver, and reinforce our position at the forefront of the industry. Next, let's dive into our latest business highlights, starting with an accelerating momentum in the ADAS market. The 2025 Shanghai Auto Show, one of the world's largest and the most influential auto event, featured over 100 vehicle models with cutting-edge LiDAR technology. Hasai stood out with 12 OEMs at the show using our LiDAR technology, and among the 2025 production models making their debut, Hasai had the highest number of model integrations. The event shows that automakers are rapidly implementing intelligent driving across their lineups. and that LIDAR is fast becoming a must-have for elevating safety in everyday passenger cars. Our ATX LIDAR is the embodiment of our core belief. Safety is not optional. Never second best. And without limits. Designed to be affordable, ultra-compact, and offer best-in-class performance in its pricing category, ATX has been a true champion driving the democratization of intelligent driving. The sensor has already secured design wins with 12 major OEMs in May. Lialto announced its entire L-series EV lineup will be integrated with our ATL LiDAR, a specialized variant of ATX, as standard configuration, delivering even sharper 3D perception. In addition, we recently secured a major design win with Zkir to integrate ATX across several of its top-selling models, including a standard integration in the newly launched luxury shooting brake sedan, the Zkir 007 GT. At the same time, ATX is expanding its reach with extended partnerships lending new design wings with Great Wall Motors EV brand Aura, Cherries iCar new energy lineup, and an upcoming model from Geely aiming at mass market. With a rapidly growing roster of leading OEMs and flagship vehicles, ATX entered mass production in Q1 and made an immediate impact with close to 40,000 units shipped in its very first quarter on the market. Powering models such as LEAP Motors B10, the industry's first vehicle offering advanced ADAS at the RMB 120,000 price point with LIDAR hardware. According to public data, LEAP Motors B10 saw over 15,000 orders within just the first hour of its launch in March, with more than 70% opting for the LiDAR-equipped version, reflecting its strong appeal in the mass market. As part of our expanded strategic relationship with LEED Motors, we've secured a landmark order for 200,000 units of Hussite ATX LiDAR, which is set to power a wide range of LEED Motors production models starting in 2025. Internationally, we're also achieving breakthroughs. In addition to our exclusive design win with a top European OEM, a multi-year program across both ICE and EV platforms that extend into the next decade, we're excited to share that our business in Japan is rapidly gaining momentum. We recently secured a new proof-of-concept POC development project with a top five global tier one supplier headquartered in Japan. This achievement marks the first time they've joined our client portfolio and is a significant milestone in our global expansion, serving as a powerful endorsement to our LiDAR technology in Japan. Asai has been actively driving five TOC programs with four top global OEMs and Tier 1 suppliers across Europe and Japan. Three of these programs were successfully completed in the first quarter of 2025. Evaluation results from these programs will be shared with HSI, fostering a deeper collaboration between both parties and further refine and enhance the market appeal of a product. While these POCs do not yet constitute full design wings, they mark significant progress and were encouraged by the positive momentum as we look ahead to the next phase of development. As domestic and international OEM demand continues to evolve across level 2, level 3, and level 4 platforms, we took a major step forward this April with launch of our game-changing Infinity-i or Chenli-i LiDAR solution alongside three next-generation automotive-grade LiDAR sensors. This new platform, in conjunction with these sensors, is available in three configurations. Infinity IA is built for high level, level four autonomous systems. We achieve this by combining four AT1440 ultra high definition main lidars with four solid state FTX lidars acting as a blind spot detector offering true 360 degree coverage without blind spots. Infinity IB is designed for level three conditional autonomy. It features one new ETX main LIDAR, the world's longest range automotive LIDAR, which can detect up to 400 meters at 10% reflectivity. That paired with two FTX LIDARs for enhanced blind spot perception. And for level two ADAS applications, Infinity IC brings the perfect balance of performance and cost efficiency using one compact yet powerful ATX main LIDAR. A core feature of this new platform is a shared architecture across our AT, ET, and the FT series that features more than 85% component commonality. This means faster development, lower cost, and seamless scalability. These industry-leading solutions are a direct testament to our product's technical strengths and our holistic approach to satisfying customer needs. Beyond delivering superior performance, we create comprehensive solutions that integrate our cutting-edge technological capabilities with cost effectiveness. As a result of these strengths, we have won design wins over 120 vehicle models across 23 OEMs worldwide. Meanwhile, the broader robotics market represents tremendous opportunities, and our LiDAR solutions sit at the core of this growth. According to Goldman Sachs estimates, China's autonomous mobility market is set for explosive growth and is expected to expand over the next decade from just US dollars 54 million in 2025 to US dollars 47 billion by 2035. China is clearly on track to become the world's largest autonomous mobility market. In recent months, we've been at the forefront of a new wave of robo-taxi breakthroughs across China and beyond. As the main LiDAR supplier, we're powering mass-produced next-generation fleets for Baidu Apollo Go, Didi, Pony AI, WeRide, some of which have already expanded onto the global stage. Today, we're proud to be the world's largest LiDAR supplier for robot taxis. We're also thrilled to be accelerating L4 autonomy across both long-haul and last-mile logistics. Recently, we signed a new agreement to bring our ultra-high-definition 18-14-40 sensor to Cargobot's Level 4 Robotruck fleet. At the same time, we partnered with Zelos to scale its last-mile delivery operations and Neolix to deploy its LMA Level 4 vehicles. As Level 4 autonomy moves into commercial deployment, we're proud to be the LiDAR partner, helping customers scale smarter, safer, and faster. Beyond transportation, LiDAR is unlocking a world of new possibilities, each bringing fresh opportunities to reimagine the everyday and drive incremental revenue and profit. We believe that every robot needs LiDAR as a core 3D sensor for precise positioning, mapping, navigation, and perception. Take our JT LiDAR, for example. It's been chosen for the next generation robotic lawnmowers, delivering superior accuracy, stability, and efficiency over traditional RTK and camera-based systems, especially in signal-challenged or visually complex environments. We also recently expanded our partnership with a leading smart home robotics company in China. Over the next 12 months, we expect to provide 300,000 JT units to this customer, generating meaningful revenue while helping transform everyday consumer products in intelligent, LiDAR-driven capabilities. In summary, Q1 has laid a powerful foundation for what promises to be another transformative year for HSI. We stand at a pivotal moment where breakthrough technology meets a real market readiness. With our unmatched technology leadership and scalable production, we're leading in the industry to shape the future of mobility. And we're doing it alongside customers who share our mission to make advanced perception and safety accessible for all. Before I hand over to Andrew, I want to share some exciting news. In early May, the U.S. District Court for the District of Delaware has officially dismissed Alster's patent infringement case against us with no conditions, no financial settlement, and no injunctive relief. This brings an end to all existing IP actions against us and reaffirms the integrity of our technology. It's a powerful validation of the strength of our IP portfolio and the years of R&D that power it. We are proud that our innovations have not only withstood legal scrutiny, but have also prevailed. Our deep passion for technology and our wavering commitment to R&D continue to give us a real edge, and no legal tactic can change that. With that, I will now turn the call over to Andrew to share more details on our financial performance and outlook. Andrew, please go ahead.

Thank you, David, and hello, everyone. I will now go through our operating and financial figures for the first quarter of 2025. For further details beyond what I covered on this call today, I encourage listeners to refer to our earnings release. Our Q1 results highlight strong sustained momentum. Total revenues soared 46% year-over-year, reaching RMB $525.3 million, or US dollar 72.4 million. This impressive growth was fueled by exceptional shipment performance. Nearly 200,000 units were delivered during the quarter, more than triple the volume from the same period last year. Notably, this marks our third consecutive quarter of over 150% year-over-year shipment growth, a clear reflection of both surging market demand and the strength of our operational execution. The surge in shipments was driven primarily by the rapid adoption of our ATX LiDAR among OEMs, with large-scale mass production commencing in Q1. At the same time, our JT LiDAR gained strong momentum, with 45,000 units shipped in the first quarter alone, driving our robotics LiDAR shipments to nearly 50,000 units in the first quarter of 2025, with over 600% year-over-year growth. Meanwhile, our gross margins stood healthy at 42% in Q1, and we cut operating expenses by 9% year-over-year, reflecting the strength of our disciplined cost management. As a result, we narrowed our first quarter net loss by 84% year-over-year to remaining $70.5 million or $2.4 million, while remaining non-GAAP profitable for the quarter, a performance that was significantly stronger than our earlier guidance and especially notable given that Q1 is typically a seasonally slower period. Looking ahead, We are encouraged by the strong momentum we built in Q1 and we remain confident in our outlook for the rest of the year. For Q2, we are expecting net revenues of between RMB 680 million or USD 93.7 million and RMB 720 million or USD 99.2 million, which would be a 48% to 57% increase year-over-year. This forecast conservatively takes into account the current tariff environment, as well as some expected short-term shifts in customer demand to Q3, mainly from U.S.-bound robotics LiDAR shipments. Despite these considerations, we are projecting total shipments of over 300,000 units in the second quarter, a substantial increase of almost 250% year-over-year. Even more encouraging, we expect to reach gap break-even in Q2 and remain firmly on track to hit our full-year profitability targets, despite navigating a dynamic tariff environment. As the global environment continues to evolve, we will remain proactive, refining our strategies to ensure minimal disruption to our long-term growth path. We are confident that our products remain highly competitive, even in a tariff-impacted landscape. And if cost adjustments are needed, we will take a measured approach to pricing, always focused on delivering strong value to our customers. At the same time, we are prioritizing long-term resilience with strong momentum behind our overseas manufacturing plans to swiftly mitigate geopolitical risks and better serve our global customers. In May, we signed a lease for our new factory in Southeast Asia, a decisive first step forward. To conclude, Q1 represents an exceptional start to 2025 with outstanding performance across revenue, shipments, margins, and cost management. We have laid a solid foundation and are confident in our abilities to sustain this positive momentum in the coming quarters. This concludes our prepared remarks today. Operator, we are now ready to take questions.

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. For the benefit of all participants on today's call, if you wish to ask your question to the management team in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Your first question comes from Tina Howe from Goldman Sachs. Please go ahead.

Hi, thanks management for taking my question and congrats on the strong result and strong guidance. So my question is mainly regarding our full year guidance. Since we have seen, I think starting from the beginning of the year, we have seen a very strong take rate for LIDAR from both premium OEMs as well as mass market ones. So wondering if we're still maintaining our annual shipment guidance for 1.2 to 1.5 million or do we see more like upside? from there? And also related to that, as the ADAS LIDAR portion becomes larger for our entire portfolio, how do we see the trajectory for our growth margin? And where could 2025 total company growth margin end up? Yeah, that's my main question. Thanks.

Tina, thanks for the question. Let me take this first. Regarding our 2025 full-year guidance, despite the evolving tariff environment, I think we are still maintaining our 2025 revenue guidance at the remaining 3 to 3.5 billion. The total shipment remained at 1.2 to 1.5 million, and 40% in gross margin with 200 to 350 million gap net profits for 2025, so we maintain our 2025 four-year guidance unchanged. I would also like to share some information about our Q2 guidance. In the upcoming quarter, in the current quarter, our revenue is expected to reach about 680 to 720 million RMB. a strong year-over-year growth of about 48% to 57%, driven by the rapid adoption of LiDAR in passenger vehicles in China. This forecast conservatively takes into account the current tariff environment as well as some expected short-term shifts in customer demand to Q3, mainly from the U.S.-bound robotics LiDAR shipments. In Q1, we shipped about nearly 200,000 units in total, up over 200% year-over-year. We expect the shipments to continue accelerating through the year, with 2Q shipments reaching over 300,000 units. The ATX LiDAR, which has a market price at around $200, entered mass production in Q1 and is ramping up shipments in Q2, expected to account for about 50 to 60 percent of total deliveries in Q2. With all these ATX LiDAR shipments in consideration, our GP margin is expected to remain healthy at around 40 percent. As you can tell from our Q1 gross profit margin, with the ATX ramping up, our quarter over quarter margin still enjoyed a moderate improvement. Therefore, we are still very positive about reaching the full year gross profit margin targets. On the bottom line, despite the typical seasonality in Q1, we achieved a non-GAAP profitability and significantly narrowed our GAAP net loss by 84% for Q1. Well above our previous guidance, we anticipate a further quarter over quarter improvement in Q2 reaching break even point on the gap level. That's my responses to the questions of Tina. Hopefully that can address the questions just mentioned.

Yes, that's very clear. Thanks Andrew.

Thank you. Your next question comes from Jesse Lowe from Bank of America. Please go ahead.

Hi, Daisy, Andrew, and management team. Thank you for taking my question. My first question is regarding to the ADAS LiDAR AC train. As we currently supply ATX or ATL and also existing ATP products to our clients, and then after we migrate to AT1440 and also ET1440, and even potentially like next year for the overseas clients, how do you foresee this ADAS LiDAR ASP train?

Thank you, Jessie. Regarding starting from Q1, since our product mix has started to shift meaningfully with the ramp up of ATX mass production, our blended or average ASP will be naturally brought down. But it doesn't tell the full story. It's more helpful to look at the ASP volume trends by products. For 2025, we have three variations of the AT series in production. First, our ATP LiDAR will see a moderate ASP decline in the low teens year over year. reaching around $350 in year 2025. The ATP is expected to account for a low six-figure shipment volume in 2025, with production scheduled to conclude by end of this year. Then we will have the ultra-high-performance AT LiDAR built for L3 applications, which carries a higher ASP of about $500 but is being shipped in relatively smaller volume this year. We expect a large-scale shipment of eight of these high-performance LiDAR to ramp up starting 2026. Lastly, our ATX LiDAR, most cost-efficient compact version with a market price at $200. It started mass production in Q1 and has already adopted has been adopted as a standard feature for many popular car models. For large volume orders, customers typically receive a modest discount of the market price, a common practice across the supply chain industry. While the ATX brings down the blended ASP, it opens up much larger volume potential. We project ATX to shift in the high six-digit range possibly up to a million units in year 2025. At present, we do not anticipate new market products pricing another half of the ATX. For the foreseeable future, the ATX will remain Hesai's flagship long-range front LiDAR, offering high-cost performances. Overall, while the mix is shifting, we believe LiDAR content per vehicle will remain stable in the long run, given its irreplaceable safety and functional value. With the adoption of L3 driving the need for multiple LiDAR units per vehicle to enable full 360 degrees coverage, we expect LiDAR contents per vehicle to stay in the range of $500 to $1,000. Jesse, that's my response to your question.

Thank you, Andrew. And then I have a second question regarding our capacity and CAPAC. So earlier in the last conference call, we mentioned that towards the end of this year, we will be expanding our capacity domestically to 2 million units. So could you share some of the progress on that capacity expansion? And then on top of that, you also mentioned that we just found a lease in Southeast Asia. and then what current CAPEX will look like for the South Asia capacity and also the total production units and potential profitability from these overseas plants. Thank you.

Okay. So as of now, as you just mentioned, we have about 2 million production capacity guided by end of this year. To give you an update of that, we are building up new production lines starting from Q1, which will begin mass production in Q3. Therefore, this 2 million production capacity is being installed on track. Also, on top of that, we have more production lines in the planning stage, which might start building up in this year, and it typically takes us four to five months to set up a new production line in China. Our operations are very lean and efficient. Meanwhile, I would also want to comment on our overseas expansion plans. We are making good progress on our overseas manufacturing plans, which are a key part of strengthening our long-term resilience. under the current geopolitical environment. To better manage the risk and support our global customers more effectively, we have signed the lease contract for our new overseas factories in May, making a key step forward. We plan to break ground later this year and expect the facility to be up and running by late 2026 or early 2027. to support the demand of our overseas customers. Our highly automated production technology enables us to set up an overseas production line with controlled and efficient CAPEX. To summarize, we expected that our 2025 CAPEX should be around 30 to 50 million US dollar in total.

David, go ahead.

Yeah, this is David. I want to give you some insight on the ASP. So there are really two ways to reduce or improve the cost structure of our products. The first one, I think it's by design. It's really the integrated circuit, the ASICs, and it's really the innovation. So for each generation, obviously, we designed that roughly two years ahead of the shipment for domestic market. And the way we look at it is that, okay, we think about the volume, we think about where we should reach at the price, and we sort of reverse that back into the cost structure. And by that time, we already factored in how many were expected to ship for the lifetime of the product, at least for the first two, three years. So that's why, if you look at the results of the ASP, it's very predictable. It starts with above $500 and slowly declines, but it's within the expectation because we already designed the cost structure based around that. The second reason is that it's still the economies of scale. As you can see, the ATX and ATL product, when we're shipping this year, the volume is much higher than ATP. And then it will grow to another level next year. with very high certainty, that's where we see slow decline of the ASP, similarly with products like ETX. But you will not be able to expect a decline that's falling to the range of halving that, simply because if you look at the original design architecture of such a product, It will have slow decline on ASP, but it doesn't have the room to continue to the 50% level. That isn't design. So that's how we see the price will change down the road.

Thank you, David. Thank you, Andrew. This is super helpful. That's all from me. Thank you. Thank you.

Your next question comes from from Morgan Stanley.

Please go ahead.

Hi, David, Andrew, and thanks for taking my question. I've got two questions. The first one is about the competition. Because we noticed that one of HOSAI's local VITA peers is reportedly winning the project the brands like the Xiaomi and Leitmotor, which I think are both HUSA's key clients. So with management team concerned about the potential of the reshuffles, I think your company used to be the sole supplier to the top-notch car EV makers like Xiaomi. And what's the implication to our orders and the potential price competition? That's my first question. Thank you.

Okay, thank you, Tim. We do not want to comment on our market speculations, because ultimately orders and official announcements speak for themselves. The LiDAR industry has been a very competitive arena since its inception, and currently only a few players possess massive production capabilities. HERS-IS products have earned a strong reputation for their performance, quality and reliability over time. Notably, we have observed a consistent trend of our ADAS customers switched from our competitors, which underscores Hesai's robust competitive edge. I would say a winning contract doesn't mean mass production and doesn't mean they can generate a meaningful revenue from this contract. Strategically, we chose to collaborate with high-quality, promising clients to ensure reasonable pricing and maintain healthy financials. Our customer bases comprise top-tier OEMs, reflecting our commitment to quality partners. Unlike the Internet industry, the LiDAR sector requires long-term perspective. Our goal is to build a sustainable industry avoiding short-term gains at the expenses of long-term viability. Achieving a win-win scenario with our clients is our ultimate object.

Hi, this is David. I think it's kind of unfair for Andrew to ask Andrew to comment on competitors, especially Xeon. So maybe I'll offer some of my market information. I'm actually unaware of that, which you mentioned. I think the speculation always may be, and it's difficult for an existing vendor like us to prove the negative. I think it's in every customer's best interest to continue to understand what's available on the market, and they do. Everyone does that. It's just a common practice. But in the end, you have to provide your unique value proposition for your quality, your performance, and pricing as a combo, especially when you already are an incumbent player for OEMs. There's a lot of inertia in it in terms of the data compatibility, and also their vehicles are designed around your sensor. So there is a pretty high bar for a second vendor to be able to step in, especially during the phase where everybody is rushing to upgrade their products to the smaller, better sensor to take it to the next level. So the answer is we're actually aware of it. In the end, you should refer to the announcement of the OEM to know what's really going on, and I would not just make decisions or speculations based on rumors.

Great. Thank you very much for sharing the details. My second question is about the new products, because during the presentation, I think David also mentioned about new solutions, the Infinity Eye. So just want to gather a little bit more colors about when do you think the shipments or next production will start and the potential client rings? And of course, the value content would be much higher, but we have the rough idea about the rough range of the value content and the margin. So this is the new solution. Yeah, that's my second question. Thank you.

Okay, I will first provide a response to the question about our launch of the InfinityEye. We are very proud to be the first provider of a full stack of L2 to L4 LiDAR solutions. We have seen very encouraging feedback from our OEM customers since the launch of our new Infiniti Eye. One of its key strengths is its flexibility. Infiniti Eye A, B, and 3 are built on a shared architecture but are tailored to different customer needs and system setups. Depending on the OEM's vehicle platform and software stack, each configuration can support anything from L2 all the way to L4 autonomous driving. All of our primary LiDAR sensors deliver outstanding performance, but each is optimized for specific technical priorities. The AT1440 boasts the world's highest angular resolution, delivering ultra-high definition, image-level point clouds. The ETX, which is a core part of our Infinity IB solutions, is engineered for superior ranging capabilities offering best-in-class detection distances. Both AT1440 and ETX are high-performance LiDARs, each priced above $500. The ATX, which is a core component for Infinity IC, priced around $200, represents our cost-effective solutions, combining compact design with robust performances. The choice among them depends on the specific autonomous driving capabilities of our customers. All three models, i.e. AT1440, ETX, and ATX, are suitable for L2 to L4 applications, and have all secured a series of production design wins. These design wins are a strong validation of the Infinity-I solutions adaptability and the technical differentiation across our LiDAR portfolio. And as we repetitively conveyed a message to the market, though we have different price ranges for our different products, but when we designed the the pricing, the architecture of the product, and also the cost components of the product, we always aim a healthy and relatively stable gross margin target. Therefore, as you can tell from our historical gross profit margin performances, I would like to assure you that the gross profit margin will not fluctuate significantly in the future due to the change of product mix with these new products launching.

Great. Thank you very much for sharing all the insightful information, and congratulations on the solid results again. Thank you.

Thank you. Your next question that comes from Bingrui Kui from Gotai Hiong. Please go ahead.

Hi, my name is Ting. This is Bingrui from Gotai Hiong Securities. Thank you for taking my question and congratulations on the strong results and guidance. So my question is about the tariff. Could you please share some details about the impact of Trump tariff on pricing, supply chain, et cetera, and how to deal with this problem? Thank you.

Okay, we have closely monitoring the situations of a tariff which is changing on a daily basis and have conducted a thorough analysis of the potential impact. While the tariffs do introduce certain cost considerations, we believe that their impact on our overall business will be limited for three primary reasons. First, our direct exposure is very limited. The U.S. market is projected to account for only 10% of our total revenue in year 2025. Secondly, only 5% of our total revenue or 50% of the revenue from U.S. is under the so-called DDP terms or Delivered Duty Paid Models. where we as the seller bear the cost of tariffs. And certainly, our continued focus on operational efficiency and cost control and also our market position give us the flexibility to effectively manage external challenges like those. And we have a relatively strong market position against our customers. Moreover, we have several levers, including adjusting the pricing strategies and efficiency gains, which will help absorb or offset these tariff-related costs. Also, when we provided our profitability outlook in our last earnings call, which is March this year, we had already assumed a 45%. tariff as our base case scenarios. We have seen some customers front-loaded or rescheduled their orders due to the uncertainty around future policy changes, especially after April. But depending on the current shipment and the delivery schedules, this may shift some of our revenue from Q2 to Q3. That's also part of the reason why our Q2 guidance is presented as a range. For the full year, we are keeping our revenue guidance unchanged at maybe $3 to $3.5 billion. We haven't seen our major customers canceling their orders due to these tariff changes. For the full year target, our gross margin target remains healthy, around 40%. And we expect the current impact from tariffs on our full-year gross margin and profitability to be immaterial.

Okay. Thanks for sharing. That's very clear and helpful.

Yeah. I want to also add to the tariff topic. So first is obviously a small percentage of our revenue today already from the U.S. And there are really two types of customers when they face the tariffs. A small part will treat this as when it was really high and they treat this as unacceptable, really just false. They're not canceling because they couldn't find an alternative, but they were pausing for some time until they came back down to where it is now. The other part is actually front-loading more because they realize that there is risk down the road that it could go back up again or facing other challenges, and they definitely don't see an easier solution just to switch over at all. So they actually try to buy more. And at the price, they're okay. And they feel like it's a reasonable number, especially now. They just wanted to make sure the continuity of their supply chain is guaranteed. So that's why we also see some of the customers placing more Let's call that, for lack of a better word, revenge orders, as we see both types of customers.

Thank you. Your next question comes from Jia Liu from BRCI. Please go ahead.

Thank you, management, for taking my question. My first question is regarding our new ADAS product, ATL and ATX. We noticed that our key client Li Auto's newly launched models all integrated He Sai's ATL LiDAR, which is a customized version based on ATX. But most other OEM customers all choose the standardized ATX version. So for He Sai, is there any difference between ATL and ATX in terms of SP, cost, and gross margin? And in future, if standardized ATX will remain as a mainstream solution for OEM customers or more OEMs will follow the auto to adopt a specialized one. Thank you.

So, I'll give the, yeah, I'll just give some of the background of this product. It's a variant, but it's an enhanced and advanced version with enhanced resolution and a few other things. The main idea behind that is that, well, we wanted to keep the standardized platform for a specific customer like Liotto. They're very particular about the specifics. specific advanced functions of that LiDAR because that's what they see as needed as they develop their ADMAX platform. So in a way, it's a customized version for them to best match the requirements of their software. In the ideal world, maybe every customer have something look differently than others want, but in Lialto's specific case, we have a very particular requirement that's above the standard ATX, and we were able to meet that. And so that's the nature of such a product. And we don't have additional information on the price or the growth margin, but it remains largely in line with the typical platform.

Okay, got it.

And my second question is related to the Robotexy LiDAR. Recently, we see that Baidu, Didi, Pony all adopt our ADAS product AT series to replace the traditional mechanic LiDAR for cost reduction. Just wondering the usage of ADAS LiDAR by these L4 players, the transitional temporary solution, for Robotaxi industry. Looking ahead, will Hesai develop the specialized product series for Robotaxi or will continue to sell ADAS LiDAR to these L4 players? Thank you.

Okay. I'm glad that you asked this question as Hesai is the largest Robotaxi LiDAR supplier globally. with a 60% to 70% market share. Our main LiDAR products are widely used by all the top robo-taxi players in China and outside China. Historically, robo-taxi operators have used mechanical spinning LiDARs for small fleet testing and operations. However, recent trends in China indicate an urgent need for scalability in the robo-taxi fleets. By adopting our flagship ADAS LiDAR on RoboTaxi, our customers achieve a better balance between price and the performance of the sensors, enabling faster fleet growth and helping them become closer to profitability. As a result, we are expecting to receive significantly larger LiDAR orders for use in RoboTaxi for the years to come. Historically, on the RoboTaxi side in China, We expect that moving from smaller-scale, high-priced mechanical LIDARs to larger-scale ADAS LIDARs will boost our revenue and gross profits in the long run as the robot taxi business grows in China. Meanwhile, global robot taxi companies continue to rely on mechanical spinning LIDARs to ensure the highest sophistication of their AD solutions. Take this, for example, from the earnings. We are the exclusive supplier to a top global robo-taxi player, and their fleet has already racked up nearly a million autonomous miles in 2024. Now they are gearing up for a bigger expansion in 2025, scaling their self-driving fleet in a big way, all powered by our Panda series LIDARs. With the robo-taxi market rapidly advancing towards large-scale commercialization, our technology plays a crucial role in enabling safe and reliable autonomous driving, autonomous transportations. Also, when our ATX, AT-128 or ATX type of LiDAR to be deployed in the robo-taxi, these ASIC-based semi-solid state design provides a more cost-efficient solution However, due to its 120 degrees horizontal field of view, RoboTaxi typically requires three to four units of our AT series LiDAR to achieve 360 degrees perception. Also, advanced algorithm approach. So that's my response to your question. Hopefully that can cover that.

Okay. Thank you, very helpful. Thank you, David and Andrew.

Thank you. Your next question comes from Zhang Yu from Huatai Securities.

Please go ahead.

Hi, David, Andrew, Yuanjun. Thanks for taking my questions. My first question is about the global market. When will we deliver LIDARs to the global OEMs? What's the impact of volume for the next one or two years? And how to estimate the NRE income from the global OEMs this year? Thank you.

Okay. Hezai has been actively discussing and cooperating with our global customers. Recently, we have been actively driving five POC programs with four top global OEMs and Tier 1 suppliers across Europe and Japan, including the most recent POC awarded in Q1 by a top five global Tier 1 supplier headquartered in Japan. While these POC contracts are not yet full design wins, they play a critical role in the decision-making process. OEMs typically define final product specifications based on POC outcomes and use this phase to validate and co-develop surrounding components. As a result, suppliers engaged earlier in the POC stage are strategically positioned and may have a higher chance of securing the design win once the OEM issues a formal RFQ. We have secured design win partnerships with five global OEMs, four through their JVs, and most importantly, an exclusive design win with a top European OEM, as we announced in last quarter. This long-term deal extends into the next decade across both their ICE and EV vehicle platforms, representing the largest global program in the automotive industry LIDAR industry. Where we refer to the largest global program, it signifies not only our collaboration with this leading global OEM, but also the extensive worldwide reach of our shipments spanning China and numerous other international markets. Our quality and performance have become our name card and our ability to deliver a comprehensive solution Bundling both long- and short-range LIDARs makes us the go-to partner for global OEMs. The market potential is just massive. Global LIDAR penetration is nearly zero today, but as both ICE and EVs started to adopt ADAS and LIDAR, we are unlocking an additional $30 billion to $60 billion market in the overseas market in the long run. driven by 60 million overseas vehicles at a $500 to $1,000 LiDAR content per car, as we estimated. That's my response to your question, Zhang Yu.

Thank you. It's very helpful for me. Thank you. That's all my questions.

Thank you. Your next question comes from Sia Huang from SPDBI. Please go ahead.

Good morning, management team. Thanks for taking my question. This is Sia from SPDBI. And I've got just one question about our dual listing plan. As market rumor saying that HESA has confidentially filed for a Hong Kong listing, how do we respond to this?

Thank you for asking this question. Regarding the market speculation about our dual listing plan in Hong Kong, I have no comment on that. That said, we periodically evaluate all possible and available options, including listing on other stock exchanges to protect our investors' interest and sustain our growth trajectory. Rest assured, our commitment to the company's long-term success in the capital markets remains steadfast. I guess the reason why you ask this question or the market is so focused on this is related to the market rumors about potential delisting of China ADRs from US market. But based on the advice of our SEC compliance counselors, there is no legal or factual basis on the current NASDAQ listing rules or past precedents that support the delisting of He Sai from any government bodies. To date, we have received no inquiries, no investigations, nor communications from NASDAQ concerning the potential delisting of similar actions. Based on the currently available information, we do not find any concrete legal risk of being delisted from NASDAQ. At this time, we are fully compliant with all the regulatory requirements from NASDAQ market.

Yeah, I don't know if people will respond to a confidential failing. The entire point is it's confidential.

That's very helpful. Thank you, Debbie, and thank you, Andrew.

Thank you. Your next question comes from Joanna Ma from CMBI. Please go ahead.

Hi, Madeline. Thanks for taking my question and congrats on the solid results. So I have a question regarding, could you please share with us your review on impact on LiDAR industry development from latest AEBF draft for soliciting opinions? Thank you.

I'll take it on the AEB question. Yeah, I think it's very important. Hello? Can you hear me?

Oh, yeah. Yeah, thank you.

Yeah, I think it's... It's taking such a technology to the next level. Historically, the idea is if you buy a car with a LiDAR, you have a few more functions, some type of NOA, blah, blah, blah, blah. And people can always say, no, I feel very comfortable driving my own car, or I feel like I'm safer than the car driving itself. So that's where LiDAR was about. And then starting from last year, AEB take us to a new domain in which it will trigger, no matter you turn it on or not, if it sees a risk. Essentially, it becomes a future of invisible air bath. And it's even better than air bath because obviously it can stop a crash before it crashes. So the entire penetration of AEB with LiDAR became much faster than the previous round for that reason. And this is what we see. The entire LiDAR industry or the ADAS industry is now rushing to have most of the vehicles have 100% take rate for LiDARs. Almost everybody is doing that because now you buy a car, you don't want people to worry about not having a LIDAR and now we're also seeing a lot of the discussion at the regulatory level because clearly having an advanced ADAS function with ability to detect in complex environment is a must and most people agree LIDAR is a critical part of such an effort so that's why You see the penetration rate is quickly going up, and now the marketing for different OEMs are focusing on not only the computation but also the LiDAR. Many, many car launches today will explicitly page about LiDAR adoption in their car because no one wants to be not future-proof.

Okay, Bobby, that's really helpful.

And my second question, also, can management share with us your outlook on the room for operating efficiency improvement in the coming years? And also, are there any updates regarding the outlook for your CapEx?

Thank you so much. Thank you.

Okay, let me answer this question. The second question first, the KPACs, I have guided that we expect our full-year KPACs will be around $30 million to $15 million in the current year. For the OPECs, on a non-GAAP basis, our OPECs in year 2024 is about $1 billion, and about 65% of the OPECs is R&D. and 15% goes to sales and marketing, and the rest are the GNA. In 2025, we actually guided that we are going to, we expect that we are going to achieve a 100 million savings in the gap basis OPEX. We are committed to taking expenses management to the next level, ensuring even better efficiency and the financial discipline. As you can tell from our Q1 results, our OPEX declined by about 9% on a quarter-over-quarter basis, which is in line or even slightly better than the full-year cost-saving target. Our headcount for year 2025 currently is about 50% for R&D staff. 15% for production, and the remaining is the sales and marketing and G&A related employees. Also, I would like to highlight the importance of the operating leverage. We have spent over a decade building a strong and a stable organization structure, which is what we call a large mid-platform with a lean front end. This allows us to scale our business without significantly increasing R&D expenses while our revenue and gross profit grows. Therefore, we expect our R&D investments to remain relatively stable on the absolute amount, even as our revenue and gross profit continue to grow at a solid pace. Internationally, our ADAS business is still in the early stage and contributes a relatively modest share of total revenue as of today. At the same time, we are allocating some of the R&D resources to support our global programs. In our robotics segment, most of the costs are tied up to our global sales network. On the product side, we are benefiting from our platform-based development. So we are not starting from scratch in each application of robotics, which help us scale more efficiently. Yeah, that's my answers to the question you just raised.

Okay, got it. That's really helpful. Thank you, Debbie. Thank you, Andrew. And congrats again.

Thank you. As there are no further questions, I'd like to now turn the conference back over to the company for closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes today's call and we look forward to speaking to you again next quarter. Thank you and goodbye.

This concludes today's conference call. You may now disconnect your line. Thank you.