Good day, ladies and gentlemen, and thank you for standing by, and welcome to the EHang Holdings Limited Second Quarter 2025 Earnings Conference Call. Please note that the management's prepared remarks and the subsequent Q&A session will primarily be 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 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 the English lines are open for questions. And today's call is being recorded. Now, I will turn the call over to Anne Ji, EHang Holdings Limited'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 2025Q2. 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 Chia-hung Yang, Chief Financial Officer. Before we continue, please note that today's discussion will contain forward-looking statements made 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 applicable law. Also, please note that all numbers presented are in RMB and are for 2025 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 us today. We are pleased to report on our strong performance this quarter. We successfully delivered 68 units of our EH216 series, generating total revenues of RMB147 million, representing 44.2% year-over-year growth and a 4.6 times rebound from last quarter, clearly demonstrating the continuous market demand and our robust operational momentum. Our order book in this quarter also reflected strong momentum with new orders of over 150 units for the EH216 series, again demonstrating robust market interest and confidence in our products. These orders will be fulfilled in batches in the coming quarters. Today, there are more than 40 dedicated operation sites across China for the EH216S, with coverage continuing to grow, highlighting our expanding commercial momentum. In 2025, the EH216S completed over 10,000 safe flights without a single incident, underscoring its proven safety and reliability. This exceptional safety record not only reinforces our reputation but also establishes a solid foundation for scaling up commercial operations in the future. Two certified operators, Guangzhou EHang General Aviation and Hefei Hei Aviation, have already commenced a trial commercial operation of human-carrying flights in Guangzhou and Hefei. They aim to officially open the service to the public within the year, offering more people the opportunity to experience pilotless eVTOL flights. 2025 marks a landmark year at the beginning of commercial eVTOL operations in China. As the industry pioneer and first operator of pilotless human-carrying eVTOL, we understand that building a commercial aviation operation goes beyond technology. It demands a robust safety framework, seasoned operational teams, and comprehensive expertise. That's our focus for this year, setting standards, building operational models, and cultivating talent. We are confident that this foundational approach will drive the company's long-term sustainable growth. Turning to our supply chain, as a leading participant in…

Thank you, Mr. Hu. We were able to quickly turn the backlog of customer demand in Q1 into actual deliveries in Q2. While Q1 presented headwinds, our performance rebounded strongly in Q2, both in terms of our orders fulfilled and revenue, bringing us back on a healthy growth trajectory. We are also seeing our customer base continue to expand. This quarter, we delivered aircraft to 13 enterprise clients across China from Guizhou, Jilin, Jiangxi, Hainan, Gansu, and Yunnan, as well as to an international client in Japan. This growing global confidence in our pilotless eVTOL solutions continues to broaden our market presence and strengthen our operational footprint. In the second quarter, new orders also picked up significantly. We received new orders for more than 150 units of the EH216 series, including from Ansheng City, Guizhou Tourism Group, Jilin Zichengchun, Jingyie High-tech Zone, Ansheng City, Jiangxi Air, Gangpo Low Altitude Economy Company, and the Fuma Group in Lingao, Hainan. These orders will be fulfilled in planned and phased deliveries. This strong demand highlights the rapid expansion of China's low-altitude economy and demonstrates EHang Holdings Limited's growing competitive edge. At the same time, we are supporting our regional clients to prepare eVTOL operations that are tailored to their local environments, whether it's in scenic areas, urban centers, islands, high altitude, or cold weather regions. We are helping design deployment plans that reflect each location's unique climate and terrain. Our goal is to enable diverse use cases such as low-altitude sightseeing, urban air transport, and emergency response across a wide range of real-world scenarios. In 2025, we completed over 10,000 flights across multiple scenarios in different regional settings, further validating our operational readiness. With the deployment of China's economy, eVTOL applications are becoming increasingly diversified. In particular, the demand for emergency management use…

Hello everyone. Before I go into the details, please note that all numbers presented are in RMB unless otherwise stated. A detailed analysis is available in our earnings press release on the IR site. Now I will present some key financial data. Total revenues were RMB147.2 million in Q2 2025, an increase of 44% compared with Q2 last year and a significant sequential increase of 4.6x compared with Q1 2025. These year-over-year and sequential increases are primarily driven by increased sales volume of EH216 series products. As our COO mentioned earlier, OC issuance has significantly boosted customers' interest in our products, which resulted in more active order conversion in the second quarter. Gross profit was RMB91.9 million in Q2, showing both year-over-year and sequential growth driven by increased revenues in the quarter. The gross margin in Q2 was 62.6%, remaining stable compared with the 62.4% in both Q2 2024 and Q1 2025. This indicates that our products maintain sustained market competitiveness and stable pricing power. Turning to expenses, total operating expenses in Q2 were RMB173 million, representing increases on both a year-over-year and quarter-over-quarter basis. This was primarily due to our continued business expansion and increased R&D investment, which translated into higher staff compensation. The adjusted operating expenses for the second quarter, which excluded share-based compensation expenses, were RMB158.2 million, representing a year-over-year increase of 37.2% and a quarter-over-quarter increase of 52.3%. This increase was mainly due to the company's accelerated pace of commercial expansion, with the corresponding workforce growth resulting in an overall increase in staff compensation. Additionally, our continued investment in new aircraft models and technologies also contributed to higher R&D expenses. Adjusted net income was RMB9.4 million, excluding share-based compensation expenses and the one-off non-operating provisions made for the settlement fee of legal proceedings related to the…

Thank you. And our first question comes from the line of Tim Yao from Morgan Stanley. Please go ahead.

Thank you, management, for taking my question. This is Tim from Morgan Stanley. I've got two questions. One is on the material cuts to the revenue guidance for next year. So I would like to know more about the reasons behind this. Why? Because the management has talked a little bit about that. I wonder why we choose at this time point to adjust our growth strategy. Is it because of the external factors or is it because of the market or any challenges that we're facing on the operational level? So why is the company taking this prudent approach when it comes to deliveries? And as you revised down the revenue guidance as well as the delivery pace, I was wondering whether we have a lot more visibility into the deliveries in the second half of the year because we have delivered a lot more in the first half as the current data suggests. So I would like to know more about that. Thank you.

You're right. In the second half of the year, we have made strategic adjustments to our overall company strategy. That's because we have obtained the OC. That's when we started to focus more on the operations. So the focus is to shift on providing more support services to existing clients to help them establish regular operations for the products they have already purchased safely and systematically. And I would like to emphasize that the adjustment is not due to insufficient market demand, but rather because we want to maintain safety as our core principle and adopt a more prudent development strategy. We are not blindly pursuing rapid short-term expansion, but instead focusing on safe and sustainable commercial operations. Therefore, we have cautiously lowered our full-year revenue guidance based on our current order. So that's that. And based on the current order backlog at hand, we are confident in achieving the full-year revenue target of RMB500 million. And the second question is on OC because the two EH216S operators have obtained the operating certificates from the CAAC in Q1. So I was wondering if management could share more color or give us an update on the progress as well as the process in terms of the OC application on the client side. So could management give us an update on that? Thank you.

After the two operators obtained the certificates, they are now adopting a phased operational approach and are currently in the second phase of passenger trial operations. They are continuously optimizing the processes and services. They are exploring the dual helipad operation model. So this is to increase the commercial value. I would like to emphasize that the existing customers saw that our operators have obtained the OCs. And so they have shown significant interest in this. Also, we are now widely recognized by the market. So there's a lot of attention on us. So I would say that the OC has a very strong confidence in the current customers as well as the potential customers. Right now, our clients have two options in front of them. One of them is that they can put together a dedicated team, put together all the information required for the OC application process. And during this process, we would provide full technical support in their OC application. And the other model for the client is to go through the hosting or agent approach where we would apply the OC on their behalf. Both models are progressing fairly well at the moment.

Thank you. Our next question comes from the line of Yong Lin from Bank of America. Your line is open.

This is Fiona from Bank of America Securities. I've got two questions. One is on the order backlog. So what is the breakdown for the orders that are currently at hand? I mean, in terms of how many of them are from domestic customers and how many of them are from overseas customers? And whether that provides any visibility in terms of the conversion rate for the orders from the year after and the year after next? Thank you.

In Q2, we obtained 150 new orders. I want to emphasize that these are not framework agreements. These are purchase agreements that we have signed with these customers. And these orders, so the clients will purchase these, so we'll take the order with us in batches, and that will convert into actual sales and revenue. To give you a rough breakdown, 90% of the sales are with domestic clients, and 10% of them are with overseas customers. Thank you. There is a trend that we have spotted that there is significantly more demand for our pilotless vehicles from the overseas market. There are several orders of significant volume that are in negotiation, and we will disclose them whenever we finalize the purchase agreements. However, we want to emphasize that there's a lot more demand for our pilotless vehicles from the overseas market. So that's the trend that we have spotted. Thank you.

My second question is on the VT20 model because we saw that we debuted some model in the Zhuhai Expedition in July. And we are aware that this model has been under flight testing for roughly a year. We also noticed that particularly the test flights have been conducted in the Greater Bay Area. Do we have any plans for airworthiness certification and commercialization of this model? Thank you.

The VT20 series logistic aircraft currently operating regularly in Zhuhai are small UAVs that do not require airworthiness certification. The large logistic aircraft models that are still being refined do require airworthiness certification. But given the experience that we have in the application of airworthiness certification application, I think the progress will be much faster than the previous formats. Thank you. In the progress of developing any new models, we're rolling out any new model. We always place our top priority on safety. And we aim to achieve sustainable long-term commercial operations for all of these models that we have rolled out. So our approach is to start with these smaller-sized logistic models and gradually transfer or transition or shift to those large logistic models. And we do have commercial plans for these large commercial pilotless vehicles in the future. Thank you.

Our next question comes from the line of Alan Lau from Jefferies.

This is Alan from Jefferies. Notice that we've made a strategic adjustment in terms of the revenue guidance. I'm wondering will we notice a notable or material increase in the revenue growth for next year? So that's the first question.

We have mentioned that we are going to place a lot more of our focus on safety, and we're going to put more efforts into preparing some of these projects and build them into demonstration projects across nationwide. So that's the strategic adjustment to that. Based on that, we have made a strategic adjustment of slowing down the deliveries for the second half of the year. However, we are confident that we are going to have significantly faster growth for next year. I think it would have been about half a year time, that would be sufficient for us to make the adjustments.

Next question is on orders from the overseas market. Recently, your competitors have signed many overseas markets. We also noticed that EHang Holdings Limited had signed an order with a Japanese client. So I was wondering, could the management share the company's overseas business progress, such as any progress sales breakthroughs in Thailand or Japan? On the order volume level, what would that be? Can management give an update on that? Thank you.

We did notice a stronger demand from the overseas market. And our goal is to obtain commercial operations within six months. Our collaboration with the Thailand regulators has been progressing fairly well in terms of moving into commercial operation. So right now, our approach is to deepen the sandbox testing model. So in the first phase, we will conduct many test flights along the Pattaya and the Bangkok area. So our hope is to achieve commercial operation after obtaining the certification from the Thailand regulators. So once that has been proven successful, we can replicate and bring this model, expand our commercial operations into many other islands, tourism islands in Thailand, for example, Koh Samui Island. So I believe this would serve as a role model for many potential markets in Southeast Asia. So one thing to notice is that this sandbox-based test is from point A to point B. So once we obtain the certification for this commercial operation, this would also provide a lot more experience in terms of helping to secure commercial operations in China. Thank you. Another similar project or test flights we are advancing is the sandbox test area in UAE, Abu Dhabi. So we are partnering with a local partner. So we are conducting test flights to obtain the certificate from the local regulators. So again, like I said, this is a point A to point B.

Thank you. Our next question comes from the line of Rongyan Zhou from Citi. Your line is open.

This is Rongyan Zhou from Citi. I was wondering, in the previous strategic model, our production is actually based on our sales. I was wondering if we, after making the adjustment on the revenue reduction, I was wondering if we would still pursue the production base expansion plan with an annual production capacity of 1,000 units. And with that, will that feed into any changes in terms of the 2025 CapEx? Thank you.

We would continue to pursue our production base expansion in Yunfu. So the annual production capacity according to plan is 1,000 units per year. That would guarantee our future deliveries. And in terms of the production expansion, I think that will reflect some changes based on the estimates of deliveries, but it will continue to expand for two reasons. One is to prepare for the long-term demand of different customers. Second, this expansion is to prepare for deliveries of diverse models, including the VT35 model as well as many fire rescue or firefighting models. And in terms of the 2025 CapEx, that would remain consistent with our disclosure, that is at $14 million remains unchanged in terms of the 2025 capital expenditure guidance. Thank you, management.

Thank you. Our next question comes from the line of Laura Lee from Deutsche Bank. Your line is open.

Hey, thank you for taking my question. So I'd like to ask how should we think about your business model as a eVTOL service provider as you mentioned earlier? So basically what's your role and how the revenue generation will be like? And also will this be a long-term strategy or mostly just for the initial stage of operations?

I think that our adjustment is in time adjustment to the development phase of the UAV sector. Previously, in a couple of years, we put most of our efforts into pursuing the EAC, making sure that we can produce an order that can fly and that can be sold. And the strategic target for this year is to make sure that we will pursue commercial operations for these existing clients. I think it's very hard to start any new business or a new initiative. I think our success in obtaining the airworthiness for our very first UAV model has proven the success. And at this moment, our goal is to pursue sustainable long-term commercial operation for this model. We admit there are going to be a lot of challenges and obstacles along the way. However, we are confident in overcoming them. Every time we made a breakthrough in terms of the challenges that we made, it instills a sense of confidence into the market. So going forward, our business model will be positioned as an eVTOL producer plus an operation service provider. We will be providing supporting services for all of our clients, ensuring that they can fly their eVTOLs safely. All of our efforts, for example, in conducting the test or trainings and etcetera, are positioned to address all the challenges encountered by our clients, and we are confident in advancing the industry along the way with our customers together. So with all these hurdles cleared, we are able and going to deliver more UAVs to our clients going forward. Thank you.

Okay. Thank you for the color. So my second question is actually about the VT35. I think you mentioned the support from the state government of that RMB500 million. So any breakdown on this number? I mean, is this mainly the eVTOL orders, like mainly the infrastructure build-out or some shared costs or R&D?

Yes, on the VT35, to give an overview, this is a new model rolled out by EHang Holdings Limited, and we have submitted the model, the type certification. We have actually informed the CAAC about this model in February. Now we are advancing the airworthiness application process. And today, we made the announcement of signing the strategic partnership with the Hefei government, and we are going to bring these new models into Hefei and make it our base for this new model. The RMB500 million support from the Hefei government comes in the formats of orders, investments, as well as the supply chain support. Support from the government will definitely push the development of the VT35 model. Thank you.

Thank you. Our next question comes from the line of Yu Chen from Guangfa Securities. Your line is open.

This is Yu Chen from Guangfa Securities. I got two questions. The first question is whether management could you give us a breakdown in terms of the 68 units sold in Q2? How many of them are from domestic customers and how many of them are from Japanese customers? And as well as the breakdown for the 150 new orders that we've signed, what's the breakdown between overseas and domestic markets? And the second question is on the solid-state battery initiative. Are there any updates on that?

In terms of the 68 units delivered in Q2, they are the EH216 series. And to give you a breakdown, 67 of them are EH216S models, and one of them is an EH216L model, the logistic version. They are delivered to 13 customers, 12 of them are from domestic customers, and one from Japan. And in terms of the 150 units, these are firm orders with a signed purchase agreement. And to give you a breakdown, 90% of them are from domestic customers, and 10% of them are from overseas markets.

I'll take your second question on the solid-state battery initiative. So currently, the company is adopting a multi-battery R&D strategy. That means we are pursuing multi-channel cooperation plus multi-directional deployment. We're exploring the optimization opportunities for power systems. At the moment, we have established partnerships with battery manufacturers, including Q1, Goshen Hitech, and Xinji Energy, to explore the different battery solution development directions. So to elaborate on the question, just to make a quick add. So there are several directions that we're exploring with the battery R&D. Firstly, we are working to resolve the challenges of battery fast charging and discharging and lifespan issues to increase the daily flight operations. And then the second direction is to develop universal low-cyclical batteries to reduce the adaptation costs. And the third one is to do research on the semi-solid-state batteries. And the last direction we are working on the battery R&D is the solid-state battery development, which has achieved significant results. EHang Holdings Limited is the world's first to install solid-state batteries on eVTOL aircraft and conduct actual flights, as we have demonstrated last year. So we have successfully increased the flight duration from 48 minutes. And last year, we have successfully brought it to 66 minutes now. So currently, our firefighting and logistic aircraft can exceed one hour of flight time. And one thing to note is that we are actively applying for the airworthiness for the solid-state battery on the eVTOL model. We are estimating to have the application reviewed and successfully granted by the end of the year.

Thank you. Seeing no more questions in the queue, let me turn the call back to Ms. Anne for closing remarks. Thank you all again. This concludes the call. You may now disconnect.