Good day, ladies and gentlemen. Thank you for standing by and welcome to the EHang's Fourth Quarter and Fiscal Year of 2024 Earnings Conference Call. Please note that the management’s prepared remarks and the subsequent Q&A session will be primarily conducted in Chinese. And the corresponding simultaneous or consecutive interpretation can be accessed on the English line. As a reminder all translations are for convenient purposes only. In any case of any discrepancy the management statement in the original language will prevail. To listen to the original remarks by the management, please join the Chinese line. Additionally, both the Chinese and English lines are open for questions, and today's call is being recorded. Now I will turn the call over to Anne Ji, EHang's Senior Director of Investor Relations. Ms. Anne, please proceed.

Hello everyone. Thank you all for joining us on today's conference call to discuss the company's financial results for the fourth quarter and fiscal year of 2024. The earnings release is available on the company's IR website. Please note the conference call is being recorded and the audio replay will be posted on the company's IR website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman and Chief Executive Officer; Mr. Zhao Wang, Chief Operating Officer; and Mr. Conor Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements may pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding this and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under replicable law. Also, please note that all numbers presented are in RMB and are for the fourth quarter of 2024 unless stated otherwise. With that, let me now turn the call over to our CEO Mr. Huazhi Hu. Please go ahead Mr. Hu.

Hello everyone, and thank you for joining our earnings call. Q4 and full-year 2024 marked another record-breaking period for EHang. We continue to grow significantly, beating our guidance and setting new record high quarterly and annual deliveries and revenues. In Q4, we deliver 78 units of EH216 series product, generating revenues of RMB164 million, representing an increase of 239.1% year-over-year. For the full-year, we delivered 216 units with a total revenue reaching RMB456 million, marking a 288.5% year-over-year increase. More importantly, 2024 was a breakthrough year as we achieved positive adjusted net income and positive operating cash flow for the first year, a significant milestone in EHang’s decade-long journey. With this, EHang also became the first eVTOL company in the global urban air mobility industry to achieve non-GAAP profitability, further solidifying our leadership. At China's 2025 two sessions, the low-altitude economy took center stage as strategic emerging industry and a key driver of new quality productivity. For the second consecutive year, it was included in the Government Work Report, which explicitly calls for large-scale demonstration projects to advance new technologies, new products, and new applications to promote the sector's safe and healthy development. Additionally, China's NDRC, National Development and Reform Commission, established a dedicated low-altitude economy development department in December 2024. Meanwhile, the local governments in over 50 cities across China have introduced their localized development plans for the sector. These government initiatives further highlight China's long-term national strategy and strong commitment to developing the low-altitude economy. If 2024 was the year of planning for low-altitude development, 2025 will be the year of its implementation. Since obtaining the three airworthiness certificates, we have been accelerating the commercial deliveries and operational deployment of the EH216-S. Our customers have already established over 20 eVTOL operational demonstration sites and e-ports across 16 cities…

Hello, everyone. This is Wang Zhao. We closed 2024 with record high deliveries and revenues, exceeding our performance guidance. This success is driven by strong market demand and growing customer orders. In particular, our EH216-S autonomous messenger, eVTOL, has received a 30-unit order from Shandong province, a 30-unit order from Zhejiang province, along with an initial five-unit order and an indicative order from another 45 units from Sunriver, with the result of 78 units deliveries in Q4 and RMB164 million revenues. The total annual deliveries reached 216 units, with a total revenues of RMB456 million. To meet the continuously growing order demands, we are focusing on enhancing production efficiency, scaling production capability, and planning capacity expansion. Guided by our manufacture-to-order principle, we are establishing our regional and networked production-based layout in South China, East China, and North China. In South China, our Phase 1 Yunfu production base currently has an annual capacity of 300 units. This year, we plan to expand Phase 2 with 24,000 square meters of new production lines, while upgrading automation and efficiency. By 2025, Yunfu production base is expected to reach double size and a total annual capacity of 1,000 units. It will also produce a large number of aviation materials and components for our customers. In East China with Hefei as our regional headquarters, we are further deepening strategic cooperation with Hefei government, partnering with the advanced and new energy vehicle manufacturers JAC Group and Hefei Guoxian Holdings to build an advanced, generalized, and automated eVTOL manufacturing base. Additionally, we are collaborating with the Weihai High-Tech Zone in China province to establish a pilotless passenger eVTOL R&D and manufacturing base there, creating an all-around collaboration system, integrated production, sales, and operations. In North China, we have entered a partnership with the Beijing Fangshan district government…

Hello, everyone. This is Conor. Before I go into details, please note that all numbers presented are in RMB, unless otherwise stated. Detailed analysis are contained in our earnings press release, which is available on our IR site. I will now highlight some of the key points here. I am pleased to report that we closed 2024 on a strong note, surpassing expectations for both Q4 and the full-year. In Q4, we achieved record revenues of RMB164.3 million, representing an impressive 190% year-over-year growth. For 2024, our total revenues reached an all-time high of RMB456.2 million, up a substantial 289% year-over-year. This outstanding performance was primarily driven by strong eVTOL market demand, along with our well-coordinated and impactful strategic initiatives in key areas including OC certification, production scaling, and commercial readiness. On deliveries, we set a new quarterly record with 78 units of the EH216 as delivered in Q4, marking a 239% year-over-year increase and a 24% sequential growth. For 2024, total deliveries of the EH216 series reached 216 units, up 315% from 52 units in 2023. Our gross margin for Q4 was 60.7%, slightly down from 64.7% in the same period of 2023 and on par with Q3. For full-year 2024, the annual gross margin was 61.4%, a slight decrease from 64.1% in 2023. The decreases in gross margin were primarily due to changes in the revenue mix and higher unit costs for the EH216-S. Despite these modest declines, our gross margin remained high at 60%, highlighting our competitive edge and pricing power in the eVTOL sector. Turning to the operating expenses, in Q4 adjusted operating expenses, which is defined as operating expenses excluding share-based compensation, were RMB78.2 million, up 22% year-over-year from RMB64.2 million, but down 10% from Q3. The sequential decline reflects cost control and efficiency optimization,…

Thank you. Now let's open the call for questions. [Operator Instructions] Your first question comes from Ting Song from Goldman Sachs. Please go ahead.

[Foreign Language] [Interpreted] Hi, thank you for taking my question. I just have a question which is regarded on the production capacity. I know we are expanding our production capacity for the Yunfu Phase 2. So wondering what kind of added production capacity we're looking at for the Hefei production facility by the end of 2025 and 2026? And also if we're talking about a total production capacity of 1,000 units. So how much volume are we seeing? So how much will be the utilization rate. I'll be looking at between 2025 and 2026? Thank you.

[Foreign Language] [Interpreted] I will take this question. For Yunfu Phase 2 for the capacity expansion, this will complete this year reaching total annual capacity of 1,000 units. And the Yunfu Phase 1 and Phase 2 production lines will have specialized focuses. They will be focusing on aviation materials, flash components, manufacturing, and aircraft assembly respectively. So additionally, with our joint venture with Empower, we are also upgrading the production lines, improving the automation and efficiency in manufacturing and supply chain management. With regard to Hefei, we plan to establish a JV with JAC motors and Hefei Guoxian holdings to build a modern low-aptitude aircraft manufacturing facility. And according to the planning of the government, of the local, of the local government, the expansion construction work is expected to be completed in 1.5 and two years. And Additionally, we also have plans for production in Weihai, Shandong province and Fangshan district of Beijing as previously mentioned. And our expansion for the capacity follows manufacturing to order principle. So we will adopt a systematic growth strategy across different parts of China, say South, East, and North China. And they will have specialized management for different product lines, including passenger transport, logistics, and emergency response and firefighting. Thank you.

Thank you. Your next question comes from Cindy Wang from Morgan Stanley. Please go ahead.

[Foreign Language] [Interpreted] Thank you for answering my question. First, congratulations on the strong Q4 results. Could management provide additional color on the executive timeline for our OC application? What are some of the milestones we are expecting with regard to the application? And my second question is that when are we going to achieve a GAAP profitability with our collaboration initiatives and also the construction of many of the infrastructure and facilities. Can you please offer a ballpark, CapEx and OpEx for the coming quarters of this year? Thank you.

[Foreign Language] [Interpreted] Let me take your first question. We are glad to announce that we have a complete -- sorry the CAAC has completed and the acceptance and on-site inspection of these two AC applicants, that's for our Heyi subsidiary company. And we are now just waiting for -- so we have pretty much completed all the required work and just waiting for the final regulatory approval. So we also expect these OC will be rewarded to us as soon as possible. But so the inspection and everything I mentioned itself is already a milestone and these will provide the basis for us to roll into commercial operations as soon as possible. I want to emphasize that these will be the first unmanned eVTOL OC issued under the new interim regulations for the UAV flight management. So the certification process itself is establishing and also refining the standards. So it is a significant responsibility that will set crucial precedence for the safe commercial operation of EH216-S and all unmanned passenger carrying aircraft in China. Thank you.

[Foreign Language] [Interpreted] Okay. This is Conor, I will take your second question. As we have mentioned, we have achieved a non-GAAP profitability in 2024. And with your question of how and when are we going to achieve a full-year GAAP profitability, so according to our plan and also our estimated revenue growth of 97%, which is RMB900 million revenue in 2025, we expected to achieve GAAP profitability quarterly in the second-half of 2024. However, for full-year GAAP profitability, that will be sometime in 2026. So with regard to CapEx, our full-year CapEx guidance for 2025 will be [$14] (ph) million. And the CapEx will be used in scaling up our production capacity in Yunfu Phase 2, Weihai, [Heyi] (ph), as well as our planned production site in Fangshan district, Beijing. And we will also use some of the money for developing models that will be used in emergency response and logistics. Plus, there's going to be investment in construction of our new headquarters in Beijing -- in Guangzhou. And we expect the OpEx to grow at 40% year-over-year in 2025. Thank you.

Thank you. Your next question comes from Wei Shen from UBS. Please go ahead.

[Foreign Language] [Interpreted] Two questions. Good evening, management. Two questions, one is on the gross margin outlook and the other one is on financing plans in 2025.

[Foreign Language] [Interpreted] Our targeted gross margin is around 60%, give or take. So to achieve that, we are going to adopt two initiatives. For one, we are going to invest more efforts, roll out more product lines to make our product offering more diversified with the diversification that's going to help drive up the gross margin. And the second initiative we're planning to, you know, whatever I just mentioned about is going to help grow the gross margin. However, we are planning to do distribution model, which kind of, you know, sacrifice the gross margin a little bit. But give or take, we are aiming 60% gross margin. So last year we reached nearly $100 million and also our current cash reserves exceeded RMB1.1 billion and as we've mentioned that our cash positive cash flow is around [RMB160] (ph) million for 2024. So as you can see that our business is itself you know we have a business of sustaining capability and healthy development. So with regard to this year, we will accelerate in market and business expansion, seeking additional financing to strengthen our capital position. This will support new eVTOL technology and product development, market expansion, new headquarters construction, production facility development and team growth. So ensuring sufficient funding for our next growth phase. Thank you.

Thank you. Your next question comes from Laura Lee from Deutsche Bank. Please go ahead.

Hey, thank you for taking that question and congrats on a strong year. My first question is about the air taxi part. So we noticed there are increasing announcements of UAM, either you're building an experience center or development of digital infrastructures. So just wondering, is there any rough timeline for the air taxi operation and any notable milestones in between?

[Foreign Language] [Interpreted] Thank you. This is Wang Zhao, I will take this question. While air taxi services remain our long-term vision and mission, aviation prioritizes safety above all, requiring careful step-by-step progress. So over the next couple of years, we will first establish operations in domestic tourism areas to accumulate enough data before we venture into air taxi services. And also air taxi implementation depends on ground infrastructure, particularly vertiports, and many low-altitude digital infrastructures including communication, navigation, surveillance, air traffic management. Right now, cities across China have put forward clear and specific plans and timelines for the infrastructure construction. And with many planning hundreds of thousands of vertiports and routes over the next three years. As an industry pioneer, EHang is actively contributing to policy development and infrastructure planning. Our partnerships with the CCCC and CSCEC and many local governments are actually helping to build the ecosystem and framework for air taxi operations.

Thank you. Your next question comes from [Rongyuan Zhu] (ph) from Citix. Please go ahead.

[Foreign Language] [Interpreted] Thank you for the presentation and thank you for taking my question. My questions are on your overseas market. The first one is the progress of our OC certification, as well as the orders. What kind of situation are we at right now? And my second question is on our plans on diversifying our revenue streams. So with that, I mean particularly, what kind of revenue growth or mix are we looking at outside of manufacturing of these flying vehicles. So any guidance or plan on that?

[Foreign Language] [Interpreted] I'll take the question. Since Q4, we have completed flight demonstrations in Japan, Thailand, Spain, Mexico and many others, expanding our flight footprint to 19 countries. Last year we delivered orders to overseas markets, that includes UAE, Japan and Dominica. As pioneers in pilotless passenger carrying aircraft, we are actively engaging with civil aviation authorities worldwide through local flight demonstrations and discussions to promote the airworthiness certification for this new aircraft. The CAAC is very supportive of our efforts in applying for international certification. And we are working together to promote the certification of unmanned passenger carrying aircraft overseas. We are actively exploring some innovative pilot-first approaches to expedite the international operations of our eVTOLs. Thank you. On your second question of diversifying our rapid extremes, EHang maintains a dual strategy of both operations and sales. So we position ourselves beyond just being an eVTOL manufacturer. We build a complete lifecycle value system for our customers, featuring hardware, service, and operations. So this includes product sales, customer service, personnel training, aviation materials, maintenance, software systems, and route planning and operations. As the eVTOL commercial operations scale up, EHang will develop more diversified revenue streams. And additionally, I want to tell you that beyond the passenger transportation, we are intensifying our efforts on logistics and firefighting business this year to broaden our revenue sources. Thank you.

Thank you. Your next question comes from Yiming Wang from China Renaissance. Please go ahead.

[Foreign Language] [Interpreted] Thank you for taking my question. I got two questions. One is on the update on new orders. And the second question is on the collaboration with the JAC production base. So what kind of roles will JAC and EHang play in this JV? And what kind of profit is split and also cost is split, we are looking at between you two? Thank you.

[Foreign Language] [Interpreted] Our domestic demand is very strong, with the current intention order of exceeding 1,000 units, plus many more orders are under negotiation. Just so you know that we have dozens of clients, who place orders of dozens of units at each time. And additionally, you should know that China has nearly 15,000 Grade A and above tourism attractions for aerial sightseeing. And there are nearly 700 cities that offer or planning air mobility services. So we remain optimistic about the strong demand for our eVTOL products and operational services. Thank you. And with regard to your second question, The JV partnership with the JAC is actually carried out under the support of the Hefei municipal government. We are building a JV with JAC and Hefei- Guoxian Holdings Corporation to build eVTOL production base. So, JAC has accumulated expertise in manufacturing and supply chain management in the automobile sector, whereas for us, we are leading in the development, production and OC in the eVTOL sector. So this cooperation will bring the best of us and leverage both parties' respective advantages. And with regard to the specific details of this JV, it's still under discussion, and I'm sorry, I couldn't disclose more at the moment. Thank you.

Thank you. Your next question comes from Yu Chen from [Guangfu Securities] (ph). Please go ahead.

[Foreign Language] [Interpreted] First of all, thank you for taking my question and congratulate on the breakthroughs and strong results achieved in 2024. I got a question on the financials that I would like to double check with the management. So in Q4, we have seen that management and R&D related expenses grow significantly quarter-over-quarter in Q4. So how does management view the trends for these expenses for 2025?

[Foreign Language] [Interpreted] This is Conor. I'll take your question. You know, that the companies are still expanding and that's why we're seeing substantial revenue and delivery growth over the past year. We're also expanding our team, leading to increased expenses. However, expenses as a percentage of revenue have decreased significantly. And looking into this year, we expected the sales and R&D expenses to grow, definitely for sure, with moderate to growth in management expenses. So as revenue growth will outpace expense growth, we expected the ratio of SG&A to revenue to continue declining. As you know, that we are projecting a 97% growth in our revenues, whereas our operation growth related costs will grow at 40% year-over-year. Thank you.

Thank you. Your next question comes from Ling Liu from Gocheng Securities. Please go ahead.

[Foreign Language] [Interpreted] Thank you, two questions. One, is on the EH216 battery. So what kind of battery is it? What are the progress on the EH216 battery? What is the progress on the next generation lithium batteries? And what are the expected upgrades timeline and the anticipated flight endurance improvements? How are that looking? Second question is on the product of the VT-35 what's the update on that and when are we planning to submit to the TCE application? Thank you.

[Foreign Language] [Interpreted] With regard to battery, right now we are pursuing two directions for the battery involvement. First, on the fast charging batteries. We are partnering with Greater Bay Technology and currently testing samples that could significantly reduce the charging time, so that's for one. And secondly on the solid-state batteries, our strategic investment in INX Energy is progressing well. We are having very excellent cooperation and R&D breakthroughs. So we have doubled the EH216-S flat endurance and we'll continue fine-tuning the performance and conducting more scenario validation. So we're aiming for mass production and installation by the end of this year. Thank you. With regard to the long haul model VT-35, right now the development of prototype is currently in its final assembly and debugging stage. We plan to complete the full function flight testing soon and initiated the airworthiness certification project it will be unveiled to the public shortly.

Thank you. Seeing there are no more questions in the queue, let me turn the call back to Ms. Anne for closing remarks.

[Foreign Language] [Interpreted] Thank you operator and thank you for -- all for participating on today's call. If you have further questions, please contact our IR team by email or participate in the following investor events through the calendar information provided on our IR website. We appreciate your interest and look forward to our next earnings call. Thank you.