Good morning and welcome to our Third Quarter 2023 Earnings Conference Call. With me today are ECARX Chairman and Chief Executive Officer; Ziyu Shen, Chief Operating Officer; Peter Cirino and Chief Financial Officer. So Joe, following their prepared remarks, they will be able to answer your questions during the Q&A session that follows. Please note, today's call is being recorded. Before we start, I would like to refer you to our forward-looking statements at the bottom of our earnings press release which also applies to this call. Further information on specific risk factors that could cause actual results to differ materially can be found in our filings with the SEC. In addition, this call will include discussions of certain non-GAAP financial measures. Please refer to our earnings release which contains a conciliation of the non-GAAP measure to GAAP measures. With that, I'd like to hand the call over to Ziyu.

Thank you, Renee. Hello, everyone and thank you for joining our third quarter earnings call. Let me start by saying a few words about China market. This quarter saw again a growing share of vehicles [ph] and the train is clearly accelerating with global NAV adoption rate reached a record high at 90.8% in the third quarter. This year, China is well positioned to become a large automotive explorer in the world. This year is also likely to be the first year where domestic brands will also foreign brands in China. One of the important wins that will we witnessed this quarter was the launch of car-specific mobile phones, whose over seamlessly integrated into the vehicle ecosystems to create a value experience with major, we are pushing a similar integration strategy. At ECARX, we delivered another strong quarter of growth with revenue up 50% year-on-year as we continue to benefit from increased spending by OEMs on enhancing the in-car experience and meeting consumer demand for greater creativity and more ticketed digital copay technologies. There are now over 5.6 million vehicles on the road that incorporate our technology across 24 brands offered by our 15 automotive OEM customers. Vehicles on the roads equipped with our products increased 8% from last quarter and 31% from the same period last year. With our dedicated team of over 2,000 people, 70% of whom are engineers, we are firmly positioned as the leading tech provider in the industry. I'm pleased to report that we further expanded our customer base outside of JD Group in China during the quarter with [indiscernible], the joint venture between [indiscernible] coming above onboard as a significant customer in ECARX Holdings Inc. We also added 6 design wins for flagship car models in the third quarter, paying the way for further growth which I will let Peter go over in more detail later. Internationally, Chinese EV makers and technology deployers have truly arrived on the global stage following their massive presence at the IAA mobility model show in Munich in September. We are investing significant resources into growing our business and prices outside of that and have several key milestones coming up that will significantly raise our feasibility internationally, including the upcoming launch of the Volvo Ex review that will feature our digital copy solution. The recent debut of the Lincoln Co-08 SUV equipped with our fourth stack solution is a great showcase for the full range of technologies we have to offer as our industry profile continues to grow. We are also attracting increased attention as a technology provider within the mobility space through the ecosystem partnerships we announced with Baidu and Mobile this quarter. In summary, we delivered a very strong quarter, both from our commercial technology and ecosystem point of view. I will now pass the call over to Peter, who will go through the operating results for the quarter in more detail.

Thank you, Ziyu and good day, everyone. Our innovative product portfolio enabled us to secure a number of new design wins during the quarter. Operationally, we were focused on strengthening our portfolio internationally, expanding our partner ecosystem and delivering additional product advancements with operations in 11 major locations across 3 continents. Our global footprint facilitates close working relationships with local OEMs and access to a truly global talent pool. As Ziyu mentioned, we have gained significant momentum in the China market by adding 3 additional OEMs to our customer base. We also added 6 new design wins in the third quarter. Three of these will utilize the ECARX and Antora 1000 Pro platform, 2 will utilize the ECARX Makalu platform, with the remaining to adopt ECARX and Toro 1000 platform. These achievements underscore the increasing demand for software-defined vehicles and enriched in-car experiences, reflecting the significant value proposition and market opportunity for our innovative product portfolio. Our ECARX and Tora series offers customers with a high-end digital intelligent cockpit experience at an attractive price point. ECARX is well integrated and Antora SoC also enables them to save on engineering cost and decrease the time needed to bring their vehicles to market. ECARX Makalu, on the other hand, offers clients an ultra-high-end performance digital cockpit computing platform, supported by a powerful AMD SoC and unreal engine graphics solutions. With unparalleled 3D graphics, security and entertainment features, it is one of the most powerful intelligent pockets available on the market. As Ziyu mentioned, our solutions are now being integrated into Dongfeng Peugeot Hisron automobiles, new Citron Tani, Pugeout-4008 compact SUV and Peugeot's flagship 508L Sedan which began mass production in the first half of August. These vehicles are equipped with our E02 intelligent cockpit computing module which has already been installed in…

Thank you, Peter and good day to everyone. We delivered another solid quarter of growth which further strengthened our position as a key player in the automotive and technology sectors. Total revenue for the quarter was RMB1.08 billion, a significant increase of 50% year-over-year. Computing hardware goods revenue was RMB734 million, up by 38% year-over-year, driven by an increase in demand for our new digital carpet solution. We increased penetration into GD ecosystem brand, smart and Lotus. While our share of wallet in GD auto business remains stable. We have shipped our product and solution offering for the new EV market segment and capture the market growth curve. Software license revenue came in at RMB137 million, an increase of 73% year-over-year and 21% sequentially, primarily due to demand from our 2 framework agreements with strategic partners, Patio and Shinji Meitu. The related demand was high for ECARX and Antora platform software and ECOs automotive service IT licenses which reflects the unique value proposition offered by our cutting-edge solutions. Service revenue maintained a strong growth momentum as well, with a search of 92% year-over-year to RMB209 million. This remarkable increase was primarily due to revenue recognition timing for nonrecurring engineering revenue. As we discussed on our last earnings call, we expected the bulk of lease revenue to be booked in the second half of 2023. Gross profit reached RMB331 million, an increase of 140% year-over-year. This was well above the nearly 29% year-over-year increase in cost of revenue due to timing differences in completing nonrecurring and generating contracts which we plan and manage from a full fiscal year perspective. We expect this as part of the recovery of low year-over-year gross profit growth delivered last quarter. Looking at quarter 4 which is the big season for the industry. We see challenges…

We are excited about our position in a significant and encouraging market where industry trends are driving robust set growth. We are pleased to witness that our customer base has further extended beyond the GD Group. Our unique technology and diverse product offerings have enabled new design wins and forces the strategic ecosystem partnerships. We are committed to continued progress in these areas. Meanwhile, we are predicting allocating resources towards opportunities that can enhance future growth prospectives and drive innovation, much like our ongoing efforts to strengthen our international business and prices. Operator, we will now open the floor for questions. Thank you.

[Operator Instructions] First question comes from the line of Yuqian Ding from HSBC.

This is Mike from HSBC. And congratulations on the strong third quarter results. I have 2 questions. The first is regarding the gross margin. We saw a company has maintained a pretty good, stable gross margin quarter-over-quarter despite the very challenging pricing environment. And how do we perceive the gross margin outlook going forward? And will the pricing pressure in our clients escalate to us? And could you give us some color on the pricing mechanics with our customers. And my second question is regarding the sector. How do you perceive the inflection point of indiscernible] in both, China and the world, especially we are saying the EV2 players like Xpand, Loto, Zika are rolling out their non-stringent [ph] and how do we see the inflection point for nomsdriving in China and also in the world in the next coming 2 to 3 years, maybe. Yes, that's my question.

This is Phil. I'm going to take the first question regarding the margin performance. Yes, in quarter 3, we delivered another strong quarter and we are on track to deliver profitability expectation based on the current momentum. And looking forward, quarter 4 is a traditional peak season in the automotive industry and all OEMs will work on the shipment maximization. There could be a trade-off on pricing, volume, velocity and we anticipate that the margin erosion will transfer throughout the entire industry chain. But we are ready to catch up the trend and finish the full year under our renin a strong way. So the profit momentum we built in the first 3 quarters can help us to get a layer. So we have confidence to deliver our original gross margin goal. And the confidence actually was built on our execution on profit performance in the first couple of quarters. And we will continue to max. Number one, the initiative is about the software and service portfolio optimization. The second one, we will continue to drive the cost optimization. The third one, we will drive product cost selling to enhance the vehicle cost efficiency, right? So having said that, the no market is now having a fierce price competition on the market share gain between OEMs and the lease pricing pressures are expected to transfer, right, to Tier 1 vendors and affect the entire market, as I mentioned. And the whole customers are also working on the architecture transformation so as to enhance the digital copic capability as well as the cost optimization. So we do foresee the hardware profit will [indiscernible] but will be offset by the initiatives I just mentioned about and we will also proactively participate in the architectural transformation discussion and we are sure that our technology platform will be fulfilling the customer demand and the transition time into is coming soon by end of 2004. So with that, we are able to mitigate the margin elosion or hardware solutions at the same time, drive our software and service further growth. So we are pretty comfortable with our ability to compete in that environment with our food stack solution that we are already offering and we expect more to come.

And then maybe I'll take the second question, Phil, thanks for that answer. I mean when we look at the autonomous market, it's certainly still in its initial stages but quite a dynamic and, I think, exciting market for ECARX to participate in. So as we talked about earlier in the presentation, the Lincoln 08 is in the market containing our full stack solution which includes the digital cockpit as well as our SkylinPro autonomous system; that's our first significant autonomous launch in the market that ADAS Level 2+ system eventually will, through OTA features include Navigate Autopilot and we see that solution being very competitive, both feature set and cost competitive product out in the autonomous market. When we scan both the China markets and the global markets relative to autonomous, certainly, there's a number of OEMs that are leading in China. I think the deployment of systems there will certainly be much more aggressive. We believe that there'll be mostly focused on the Level 2+ space and that's where the volume in that autonomous market will be. But certainly, there will be some offerings that go beyond that. We're excited about our collaboration with Mobileye that will enable us to launch be one of the first to launch the SOFR system on the Polestar 4. We recently made a detailed announcement about that partnership as well and we're collaborating very closely with Mobileye to offer some unique customizations with this IQ6 and [indiscernibe] that we'll be bringing into the Polestar as well as other vehicles. And when we look across the European markets and North American markets, we're certainly engaged with a number of OEMs to have discussions about the products that I talked about. I think the adoption rate could be a little slower in some of those markets. We certainly also see that Level 2+ will be the largest volume for some years to come but there's certainly many investments going on in the autonomous market and we're excited with the opportunity to participate with the products that we're bringing to the vehicles first in China but I believe strongly that we'll have opportunities to bring those products to the rest of the world as well.

The next question comes from the line of Loja from BOCI [ph].

Congratulations on the results for this quarter. And I have 2 questions. The first one is related to Antoro 1004. And we feedback Lincoln 08 has been delivered for some time. Have we received any feedback about the use of Antoro 1004 Pro? And could you share any other models which will be equipped with an Antoro Pro in 2024? And the second question is considering that we may have more than 13 new products next year, could you share about our budget in R&D for 2024? And do we still maintain the breakeven plan by the end of next year?

Maybe I'll take the first part of that question concerning the Antoro Pro digital cockpit. As we've launched the Lincoln Co 08, it's a first opportunity for ECARX to put our full stack solution onto a vehicle. So important for the organization because it represents the ability to launch the product from what I'll say, from silicon to cloud services. So it's our Antora Prodigital copic computing platform on that vehicle. The software stack is our full software stack Cloud Peak software stack in that car as well as the Plameauto integration with the cell phone with the major cellphone that has also launched on that vehicle. We've seen very strong demand for that vehicle. And we anticipate that the demand in the market will continue to grow for that car. So we're excited about continuing to service that vehicle and launch additional features in future OTAs, both in the digital cockpit and in the Sky land autonomous system that's launched on that vehicle. When we look at future launches, we have additional launches that are planned for next year with both the -- with all 3 of our significant products. So the Antoro series, the two Pro series as well as our macro series, we'll have a large number of launches as we move through 2024 on a number of different platforms. So I think that will contribute to a significant volume growth we see for the organization on a go-forward basis.

Yes. And I will take the second question regarding the R&D investment. So looking at our current trajectory for quarter 2 and quarter 3, R&D expense as a percentage of revenue will be stable at around 30%. So we will keep investing into the other ones, the minority development and product availability for the market. So while there's a potential to adjust R&D investment percentage as the scaling of the revenue growth approach and we will keep it at a reasonable level, 30% at our general deadline. And we also expect a significant growth and the possibility of continuing to in fix the cost. So original guidance on breakeven was based on the company's position at the starting of this year. And the goal is still there. And that breakeven could be further pushed out to 25 different investment that we're making in a brand-new product portfolio, as just mentioned, we have leading merge starting in Q2. And we also invest a bit into automotive solutions. So nonetheless, we are still working on a go and as long as we invest in additional product lines, the whole group's profitability will be different but we will make sure the return of investment and keep pushing over breakeven in our entire store.

Our next question comes from the line of Derek Soderberg from Cantor Fitzgerald.

I want to start with the pricing environment. I'm curious how sort of ASPs are moving. And then as it relates to inflation, do you guys have maybe inflation clauses embedded in your pricing contracts? And how quickly are those contracts negotiated every year?

I'm going to address this question. So yes, the pricing competition is a reserve for the industry, at least during the first 3 quarters. And as I mentioned, the pricing on the car will be transferred to the entire industry. However, ECARXs, we -- right now, we are offering the full stack solutions, right, including the computing platform, software operating system and ADAS solutions. And on top of that, we are also driving cost optimization. So including the package you just mentioned. So during -- for the contracts we signed with our customers and vendors, we also defined the flexibility in terms of the product exchange, okay? And at the same time, right, we also provide our high value-added services to the customers. So with that, we are able to maintain and keep increasing the ASP. At the same time, without pricing away our cost optimization activities.

Got it. And then as my follow-up, I'm curious if you could talk a bit about there's a strike in the United States with the auto workers. I'm curious if there's any sort of knockout effects that you're seeing on your end? And then just on the macro environment, are you seeing any particular areas of strength or weakness that have kind of changed in the past quarter or two?

Derek, maybe I'll capture that question. I mean, we've talked about a number of exciting launches for ECARX and I think that's what's driving our volume, both in the current quarter and as we look at our outlook into next year, the launches certainly with a number of electric vehicles are seeing very strong adoption in the market. So we mentioned the Volvo EX30, we have launches coming with the Polestor brand and with our other -- within Go brand and also a lot of activities beyond our core customers like we've described earlier today with the launch of products with the PoughoSitron and Dongfeng brands that we see launching this quarter. So I think we have a very strong pipeline. When we look at the impact from -- the U.S. strike doesn't really affect our business at this point in time. The -- but we certainly see very strong demand for our products, both as we go through here in Q4 and as we move into 2024.

Our next question comes from the [indiscernible] from Jefferies.

This is Jane [ph] from Jefferies. And congratulations on the strong financial performance. I have 2 questions for management. My first question is about the product pipeline. Can you share more colors about the new product, mass production timeline and the guidance of the delivery target of each product line. And I'm also wondering which customer or car model or platform do you think can be the strongest growth driver next year? And my second question is regarding the competition from Huawei, especially in terms of the smart copy solution, Huawei is expanding a cooperation with smart oncoming cars and we will launch more new models. And AgM7 and M9 has gained much interest and recognition from customers. How do you think of the competition from Huawei, things we are also developing the operating system with CGM. These are my questions.

Yes. Thanks for your question. Let me go and address both elements. We have a large number of new launches as we go into 2024. So we see launches across all of our products, both in the digital cockpit space with as I mentioned earlier with Antora and AntoraPro, those vehicles, vehicles deploying those systems launched throughout 2024 on a number of different brands. We mentioned some today, especially with the Volvo EX30 is a significant launch for us as it enables us to deliver vehicles globally throughout, I believe it's more than 40 countries on that vehicle. Also, we mentioned the Lincoln CO08 with our full stack solution is a key benchmark product for ECARX and it's very well received in the marketplace as well. As we go through 2024, we expect launches with our digital cockpit products as well as additional launches on the Skyland ADAS system. So we'll continue to see the steady progress that we've made in 2023 and extend that into 2024. As Phil mentioned, we're continuing to invest in our pipeline with future product developments, both in the ADAS space as well as the digital cockpit space. Recently, we announced the Mobileye collaboration that will bring new and unique product offering to our portfolio with a future launch on a polyester 4 Coupe as well as we'll likely be making additional announcements as we go through the next 1 to 2 quarters on investments in our digital cockpit platform as well. And then, your second question was relative to Huawei; I would say we're really excited to see Huawei enter the market. I mean, they are a very strong competitor that brings a great technology stack. But we're also quite excited about the offering that ECARX can bring both with our computing platform, our software stack and the Flame Auto collaboration that we have with Meizu [ph]. So ECARX is a very unique -- has a very unique position in the market because we truly offer a fully vertical technology stack. So we go, as I said earlier in the call, we go from silicon right through the cloud services. And I think we bring a very competitive product offering to that space. Huawei is a great company and it's great to see them invest in the automotive marketplace. I think it demonstrates the potential for this -- for the continued expansion of this product in the market and how customers -- how end customers are differentiating their purchases in vehicles. And I think if you look at our product offering, it's very capable as well, provides a very unique user experience, especially with the Flame auto stack and the full cell phone integration that we can do with the Mazu cell phones. And I think we're very comfortable with our ability to compete on a go-forward basis and excited to see additional new technology partners come into the space and really demonstrate how significant the demand will be in the future.

Next question comes from the line of Cheng [ph] from CICC.

Congratulations on the results for this quarter. So in Sachin from CICC. So I see some great progress in the software provided by ECARX in this quarter's presentation. So I would like to ask 2 questions regarding the software products. The first one is regarding the Cloud Peak which is launched in the Volvo EX30. I think it is probably launches on a hardware platform that is not produced by ECARX. So could you give us on how is the projects -- how the products collaborate with the other party? And what is the business model? And what is the gross margin be like in this project? So that's my first question. The second question is regarding the [indiscernible] system. So it has been launched on Lincoln COO08 but we have noticed that it is not launched in Lincoln COO06. So could you give us some guidance what kind of projects will be sliding which ones or not? And could you also refresh us what is the radiator business model like? And what are the -- are there going to be more projects going to launch Renato? So that's my second question. My last question is regarding the autonomous driving functions on the Skyline Pro. So who is actually responsible for developing these functions? And how is the business model to be like?

Yes, thank you for your questions. So let me try to address them one by one. So as we look at the Cloud Peak solution that we've launched on the EX-30. This is a demonstration of ECARX capability to deliver products on a global scale. So we have a significant number of engineers that are actively working on continuing to mature that product. It's a product that we developed jointly with our joint venture with Volvo Cars and one that will feature the Google Automotive services. In that environment, as we mentioned earlier, it is launched on a Qualcomm SoC as well as with through tight collaboration through a great partner that we have with Visteon on the supply chain side. But I would say ECARX is playing a position of a system integrator and software developer. We've also contributed significantly to the hardware design in that environment. As we have already announced in our Antoro series, we bring supply chain capabilities to our portfolio. So we operate in a number of different business models to deliver those solutions to the marketplace but we play a very strong position in terms of development of the software delivering the UI UX that has been detailed by mobile cars and also integrating all the solutions from Google Automotive into the software capabilities of that vehicle. Relative to the Flame auto position, it's the Lincoln 08 is really a great product. And when you couple that with the cell phone integration and the unique user experience that we bring through our full vertical technology stack, I think it really is a differentiating product in the marketplace. There are many new launches coming with the Flybe Auto solution in the software stack. And in that construct, we have unique relationship with Mazor that we…

[Operator Instructions] At this time, there are no further questions from the line. Allow me to hand the call back to management for closing.

All right. Thank you all for participating in today's earnings call. So ECARX, we are excited about our position in this significant and encouraging market where the industry trends are driving robust sector growth. And the ECARX also keep a strong momentum in business growth and the profitability enhancement and that we'll be able to further devote our heart-and-soul intellect and looking forward to talking with you very soon in coming quarter 4 and annual report cycle. Thank you again.

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.