ECARX Q4 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 24, 2023

There are 11 speakers on the call.

Operator

Good morning, and welcome to our Q4 and Full Year 2022 Earnings Conference Call. With me today are EcorX Chairman, CEO and Co Founder, Ziyu Shan Chief Operating Officer, Peter Serino and Chief Financial Officer, Ramesh Narasimhan. As a quick reminder, this call is being recorded. Before we begin the prepared remarks followed by Q and A, please note that we may refer to both GAAP and non GAAP measures. Today's discussion also contains forward looking statements based on the environment as we currently see it and as such does include risks and uncertainties.

Operator

Please refer to our filings with the SEC for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce EcorRx Chairman and CEO, Xu Shen.

Speaker 1

Thank you, Adam. Hello, everyone, and welcome. Thank you for joining our first earnings call as a public company following our listing on Nasdaq in December. We are very excited to be here today. For those who are new to our story, I would like to start today's call with a brief overview of our company before discussing our financial results.

Speaker 1

I will also discuss some of the exciting announcements made at our recent Tech Day and then turn the call over to Peter and Ramesh for commentary on our strategy, financial performance and outlook for the year. To begin with, EcorX is a global mobility tech provider working with OEMs to shift of the automotive landscape as the industry moves to an all electrical future. As OEMs create of new vehicle platforms. From the ground up, we are developing vertically integrated 4 stack solutions, which include video copies, chipset solutions, a core operating system and an integrated software stack, all designed specifically for automotive use, aiming to combine multiple ECUs into a single computing platform, which enables OEMs to develop new applications, Services and Revenue Streams. As of December 31, our solutions had been integrated into 4,700,000 cars worldwide and we continue to shift the interaction between people and vehicles by advancing the technology behind smart mobility products.

Speaker 1

6 years ago, I co founded EcorX with Eric Li, Founder and Chairman of Zhejiang Qidi Group Holding Group, one of the largest automotive groups in the world. Today, we have around 1500 employees worldwide, of which over 70% are involved in R and D. Our operations span 10 global centers in cities such as London, Goldenberg and Shanghai. We work with a total of 12 OEMs and 21 vehicle brands across Asia Pacific and the Euro, including GDR, Linkingco, Zeker, Lotus, Volvo Cars, Polestar and Smart as well as 8 different Tier 1 automotive suppliers including Visteon, Nusoft, Beidou and DesaiFi. Ian Steinway, the telephone involved into a handheld computer.

Speaker 1

The car of the future will involved into a computer on wheels. EcorX is at the forefront of this journey helping to bring Automotive Intelligence TO All. We focus on developing an automotive tech platform that is uniquely in formed by our deep rooted, automotive and strategic collaborations. We learned in our early days that the best way to deliver great computing power and experience is to collaborate at research and the development stage. For example, we have agreements and strong relationships with cutting edge of companies like AMD, Volvo and Fine Engine, where we collaborate on an immersive digital computing platform Dazhi, defining the next generation of in vehicle entertainment and taking the digital customer experience to the next level.

Speaker 1

Another example is our latest strategic partnership with Unreal Engine with which we are working on create an enhanced user experience through real time three d immersive virtual FX, which supports large of GEO AAA Games and the extensive gaming ecosystem of the Epic Games Store. We view this as one of the key beneficiaries for EcorX. OEMs benefited from our seamless deep play integrated solution and the work with us as early as they want a new car design. Looking ahead, we are excited by the opportunity in the large and growing automotive tech industry and believe our cutting edge Solutions and strategic relationships will enable us to continue to capture new market share. Now I will provide some highlights on our financial performance, which Ramesh will go into in greater detail later.

Speaker 1

Rizal Revenue of $516,000,000 for full year 2022 and year over year increase of 28% at constant currency. This growth was largely driven by an increase of new digit copy sales volume and a favorable sales mix with higher revenues per unit. Demand for our innovative products remains strong as we continue to expand our customer base. In 2022, we introduced and launched new products with vehicle brands such as Lotus, Smart, Citron and Master. Alongside our strong top line performance, we also saw significantly improved adjusted EBITDA loss of $100,000,000 for full year 2022, coming below our projected loss of RMB152 million for the 4 years.

Speaker 1

Importantly, we remain on track to reach adjusted EBITDA of Profitability by the end of 2024. Last year was his track record for EcorX and we are excited to build on this monument in 2023 beyond. We look forward to providing more details on our strategic vision, product roadmap, 5 years financial targets and growth opportunities at our Investor Day on Tuesday, May 9 in Europe, I hope you will all attend in order to see our products in action through live demos and meet more of our leadership team. Before handing off to Peter, I want to highlight a few items from our Tech Day event, which was held last month with the theme of Enable and Accelerate. We showcased how Ecar X is pioneering a new era of intelligent vehicles by bringing the next level of of Efficiency and Computing Power to the Global Automotive market, business and R and D leaders from more than of Kian Automakers and they are major brands participated in the event, including Mercedes Benz, Smart and Posture as well as representatives from Verizon Emerging EV Brands.

Speaker 1

We were also joined by many of our global partners such as AMD, emphasizing Ecorex comparing technology and the excitement among our stakeholders. During the event, we announced the launch of multiple automotive hardware and software panels, including the Antora series, Macaro, the super brief central computing panel and and CloudPick Software. These products will enable our customers to create high quality vehicles and define the next generation of Intelligent Automotive Inspirix. And importantly, bringing their new designs to market at speed, Peter will discuss our strategy, Partnerships and Panform, NEXX, and we're looking forward to sharing additional details about our innovative offerings at our Investor of MXBox. Peter, over to you.

Speaker 2

Thank you, to you, and good morning, everyone. I'm excited to be here today at our first quarterly earnings as a public company. Demand for our products remains robust across all verticals and we are continuing to capture market share for our next gen suite of products. One of the key drivers of growth for EcorRx has been our focus on innovation. We invest heavily in research and development to introduce cutting edge technologies and features in our products, which allow us to stay ahead of the curve.

Speaker 2

During the Q4, we announced the debut of our next generation digital head units in the Lotus Electra and smarthashtagone, helping us expand across the European market and globally. The lowest of lecturer leverages ecorex's first dual chip system, enabling server lever computer power and Rapid Processing, an immersive multi screen user experience and capacity for continued improvement over the lifetime of the car via over the air updates. The smart hashtag 1 is equipped with a co developed platform delivering a smooth, efficient and enjoyable user experience that embodies the smart brand on a system that can run global apps and content. Based on the conversations we are having with OEMs, we believe the demand for these products will continue to remain strong as the industry transitions to solutions that offer more seamless and immersive user experiences. Our focus on innovation and efficiency has also led to a significant increase in our market share.

Speaker 2

Our product modularity allows for seamless integration of the EcorRx offering across brands and has been well received by customers across geographies as we have experienced strong demand in both domestic and international markets. Growth in China, the world's largest automotive market, has been particularly strong and we are seeing increased interest from OEMs across Europe. As the EU noted, We recently shared details of multiple automotive hardware and software computing platforms, including the Antora series, Macaloo, Super Brain Computing Central Platform and Cloud Peak Software. Our flagship product, the Antora series is specifically designed to meet growing demand for system on chip in the EV and intelligent vehicle markets. Our advanced 7 nanometer SE1000 system on a chip provides powerful 100 ks DMIFs computing power and 900 gs FLOPS graphics rendering capability through multi core heterogeneous Automotive Computing Engine and Efficient Hardware Architecture.

Speaker 2

The Antora series includes 2 core products, of Antora 1000 and Antora 1000 Pro, both of which offer low power consumption and are expected to speed up OEM development. Antora 1000 is certified for functional safety and information security and supports rich intelligent cockpit hardware configurations. While Antora 1000 Pro offers even higher performance with dual powerful computing modules that cooperate at ultra high speed transmission rates. Our aim with the Antora series is to increase the overall computing power of the car and help OEMs move away from replacing hardware platforms every few years. This in turn will help meet the rapid growth of user demands and the need for multi device integration.

Speaker 2

The next product I want to highlight is the EcorRx Makalu, our next generation immersive Intelligent Cockpit Computing Platform. We consider Macaloo to be one of the most powerful platforms within the smart cockpit market. It comes equipped with the AMD Ryzen embedded B2000 Processor and Radeon RX 6000 Series GPU. With a powerful performance of 3.94 ks DNIPS and graphic rendering capability of 10.1 tFLOPS. Makalu supports up to 32 gigabit standalone memory and a groundbreaking 8 gigabit of standalone vRAM.

Speaker 2

This platform can deliver desktop level performance and supports the latest graphics processing interfaces of PC platforms, Ideal for Gaming, Real Time 3 d Environment Rendering and Surrounding Spatial Audio FX. We are excited to introduce this offering to our customers and we are currently planning for mass production rollout in 2024. Following EcorRx Makalu is the Superbrain Central Computing platform, which combines our SE1000 with Advanced AD Chipset, bringing AI performance to its full potential. This is our all in one solution that we view as a supercomputing controller that integrates the cockpit, driving and vehicle control with our full stack hardware and software technologies. The super brain will lead to improvements in performance and efficiency of the ED architecture and drive the evolution from intelligent EVs to intelligent mobile devices.

Speaker 2

Superbrand will also allow OEMs to reduce the wiring harnesses in the entire vehicle by 5%, cut vehicle engineering costs by 15% and bring 20% material savings when compared to distributed controllers. Last is EcorX Cloud Peak Software, which is the cross domain system capability foundation built by our global R and D teams in collaboration with Halitek, the joint venture between EcorX and vulva. The system's architecture is built to fully meet the functional safety and information security requirements of vehicles, supporting multiple operating systems and the Global Mobility Ecosystem. It meets both national and international standards and is compliant with the EAL for Security Certification. From a partnership perspective, we are excited about our latest collaborations with Unreal Engine, which you mentioned earlier, and Shin Shimizu Group, which was discussed at our Tech Day to create immersive user experiences through desktop level 3 d visual effects and to jointly develop FlyMe Auto intelligent cockpit solutions respectively.

Speaker 2

We are proud to debut Antora 1000 Pro and FlyMe Auto in the Lincoln Co 8 model, showcasing the power and potential of our innovative products. This exclusive partnership gives Ecar X unique access to Fleming Auto for in car use and builds on EcorRx's existing OS development, enabling a global Android product offer. Looking ahead,

Speaker 3

We

Speaker 2

are building EcorX to become a leader in a large and growing EV market that is undergoing transformational change. We continue to invest in our people and in R and D to create innovative products and services that meet the evolving needs of our customers. I encourage all of you to join us at of our upcoming Investor Day on May 9th to get a better understanding of our vision and to get experience with our products and tech first hand. I will now turn it over to our Chief Financial Officer, Ramesh, who will share more about our financial results and outlook. Ramesh, over to you.

Speaker 3

Thanks, Peter. I'm delighted to be presenting our first results as a public company. Over the past year, EcorX has demonstrated strong financial performance. Our revenues increased significantly, driven by strong demand for our products and services. We have improved our profit margins through a focus on sourcing, Manufacturing Efficiency and Cost Reduction and remain on track to reach adjusted EBITDA profitability by the end of 2024.

Speaker 3

To provide a better view of the underlying performance of the business, I will be referring to our growth rates on a constant currency basis. Our revenue for the Q4 of 2022 was $221,000,000 up 44% year over year, driven by sales of goods revenues, which increased 43% when compared to last year, primarily due to the higher average sales prices and higher volumes from the launch of new products. Our software license revenues grew by a strong 2 63% year over year, driven by increased volume and favorable pricing, while service revenues saw a year over year decline of 10% in the 4th quarter, primarily due to the impact of COVID-nineteen pandemic on our customers' operations, which resulted in delays to certain projects. For full year 2022, Our service revenues grew 35% year over year due to increased demand for technical consulting services from OEM customers and Tier 1 partners. Of note, the Q4 is seasonally our highest quarter of the year, contributing to around 40% of the top line, while Q1 is the lowest at around 15% to 20%.

Speaker 3

Our gross profit for the Q4 of 2022 was $62,000,000 up 30% year over year, primarily driven by the launch of new products and favorable product mix. For full year 2022, our gross profit was $144,000,000 up 21% year over year. Our adjusted EBITDA loss for the Q4 of 2022 was $30,000,000 primarily driven by strong demand from our OEM and Tier 1 customers and pricing recoveries, slightly offset by inflationary headwinds. For full year 2022, our adjusted EBITDA loss was $100,000,000 bettering our planned estimates by $62,000,000 and are 15% better when compared to the prior year. This improvement was mainly driven by proactively optimizing and reducing our operating costs, while also leveraging of the higher absolute gross margin from our top line.

Speaker 3

Net loss for the Q4 increased to $107,000,000 up from $37,000,000 in the same period last year, largely driven by IR R and D and SBC charges as we continue to invest in and execute our robust product roadmap. For full year 2022, Our net loss was $224,000,000 up from $177,000,000 in 2021. As of December 31, 2022, we had $113,000,000 in cash, a decrease of $18,000,000 over the year, primarily due to investments in R and D to support the launch of new products. Our capital position remains strong and will enable continued investment in innovation and strategic partnerships to drive growth in the future. We have optimized our supply chain and production processes, which have resulted in lower costs and higher profitability.

Speaker 3

In addition, we maintain a strong balance sheet with healthy liquidity and a manageable debt load, which have allowed us to continue investing in our business and our pipeline in a very focused and a disciplined way. And of course, an important part of this has been our efforts to continue building our international capabilities that are essential to our continued success. Looking ahead, EcorX will continue to focus on efficiency and cost control, while also investing in our business to drive growth and Innovation. We will continue to prioritize sustainable and responsible business practices, which will contribute to our long term success. We also plan to expand our reach into new markets, both domestic and international, which we believe will drive growth and profitability.

Speaker 3

Moving now to guidance. We look forward to sharing more detail during our upcoming Investor Day on May 9, where we will outline our 5 year financial objectives and strategy. For now, speaking for 2023 and taking into account the current exchange rate between the U. S. Dollar and renminbi.

Speaker 3

We are guiding for revenue to be in the range of $700,000,000 to $720,000,000 a 38% year over year increase at the midpoint. For adjusted EBITDA, We maintain our guidance of achieving breakeven by the end of 2024. With that, we would like to open up for questions.

Speaker 4

Thank you. Thank you. We will now go to our first question. One moment please. And your first question comes from the line of Yuchun Ding from HSBC.

Speaker 4

Please go ahead. Your line is open.

Speaker 5

Thank you, Tim. This is Yu Chen from HSBC. Thanks for management for the presentation, very informative. I've got 3 questions if we may roll in 1 by 1. The first one is Tesla recently talked about a significant profit opportunity by its autonomy progress, while keeping their vehicle margin lower for more volume elasticity.

Speaker 5

The implication could be how would the management team view the industry dynamics, especially between increasing OEMs might want to enhance their vertical integration software capabilities to harvest the more autonomy margin in the future like Tesla or the OEM would procure the intelligence or connectivity content from independent supplier like us. So how do we position ourselves against the OEMs' buffication between vertical integration and the other of Pure Funding from the suppliers like us. I might ask the following questions after your answer, if that's okay.

Speaker 3

Good, great question. Thank you for that. That was the first question is always hard. I'll hand over to Zviu to answer you.

Speaker 6

Yes. So, this is Steve speaking. So, thanks for the questions. So, I think regarding the question, so the vertical integration by OEM and other like the platform from third party. So I want to explain that we needed to define what's meaning of the vertical integration Because like Tesla, of course, that's a possible integration because they in house SoC like FSD and also to buy themselves.

Speaker 6

But in the world, only Tesla, 1 OEM is doing that, that, that. They're doing this kind of model. And most of OEM are using Qualcomm or NVIDIA PEMFEL. So So actually we are doing the similar things. We in house our actually the platform with SoyEngine, SoC and platform and provide a shared platform to all OEMs right now.

Speaker 6

So that's my understanding about vertical integration or our position. So actually our main competitor, actually the similar core part of earlier doing that we are providing the SoC base, the computing platform. Our Antora and Antora 1000 parts including Sai and GSOC, very similar like that. So I'm not sure if you have to answer your question or not. So Maybe Peter, you can add something.

Speaker 5

Yes. Sure. Thank you. That's very clear. Yes.

Speaker 6

Okay.

Speaker 4

Thank you.

Speaker 5

If we may roll on the rolling another question. Yes,

Speaker 2

sure. The

Speaker 5

second question is yes, that would be great. Thank you. The second question is to ask you about your perspective on the margin outlook, especially in China. We don't just the Q1 seems our end customers are going through severe pricing competition. So are we facing the potential margin Squeeze coming from our OEM customers or if any other initiatives that we can do such as providing them higher of Value Addition Content to buffer the potential margins squeeze.

Speaker 5

Could you share a bit of more light on that front?

Speaker 3

Yes. Thank you. Thanks again for the question. So this is Ramesh here. I think for us, What we are seeing is a significant growth in our revenue and we are seeing our ability to maintain strong margins going forward.

Speaker 3

And that's on the basis of the fact that we have, as we referred in our take day, a number of products that we are We announced and I think the key is that we are the products are enabling a very strong customer digital experience, which is helping us to maintain the margins and at the same time be competitive. So I think We are pretty positive and optimistic about the long term growth of company and the profitability of EcorX.

Speaker 5

Got it. Thank you. The last one, could you walk us through about your cash burn rate guidance before breakeven In the coming 2 years, obviously, we've maintained our EBITDA breakeven point by the end of 2024 within this year and next year and also 2024 was The rough the estimated cash burn rate, the fixed cost specifically such as R and D and SG and A. And during the meantime, if any additional equity or debt raising we might need it to before we achieve self sustaining level.

Speaker 3

Yes. I mean, let me start with, firstly, our cash position as of December. So we ended up with $113,000,000 in cash. So, as we said in the recording, we in the messaging that we our Cash decreased by about $18,000,000 over the year and mainly we continue to invest in R and D and support the new products. We are pretty comfortable with our current cash position.

Speaker 3

We are capital light in terms of our of Structure. We outsource our manufacturing. So primarily, our cash balance as part of this year is sufficient to support us for 2023. We are of course with the growth, there will be some demands on cash and we will evaluate opportunities to see if we need to raise funding in future to help us to grow further And also to continue to invest in R and D.

Speaker 5

Got it. Very clear. That's all for me. Thank you, team.

Speaker 2

Thank you.

Speaker 4

Thank you. We will now go to our next question. One moment please. And the next question comes from the line of George Giannariqas from Canaccord. Please go ahead.

Speaker 4

Your line is open.

Speaker 7

Hi, everyone. Thank you for taking my question. Wondering if you can go into more detail about early interest in Makalu platform, any details on the OEMs and the use cases?

Speaker 2

Thank you. Hey, George. Thanks for the question. This is Peter. Just to give an update on that product, we're super excited about of the use cases in the vehicle.

Speaker 2

The McAllo product brings both in vehicle gaming as well as a deep of the on vehicle 3 d experience for the operating system. So we think that will provide great differentiation for of the digital cockpit inside the vehicle. We announced that the Smart brand We'll be using that product on future launches, and we're continuing to have conversations with other OEMs as well, Both inside of China and inside of Europe. So we expect that product will be probably on vehicle by the end of this year and then continue to adopt across additional OEMs in the market.

Speaker 7

Is there any way you can help us understand the P and L impact of that product, as it starts to ramp.

Speaker 3

Let me just understand your question. You would like to know what the impact of McCullough is on our revenue?

Speaker 7

Revenue like ASP differences between Antora and Makalu and margin difference, any sort of P and L impact you can help us quantify? Thank you.

Speaker 3

I think the McAloo impact will be more from end of this year. So I think it's a little bit early to talk about the ASP impact on our P and L for 2023.

Speaker 7

Right. As it begins to ramp next year, can you just help us like early indications of what the difference is in ASP will be? Or have you not I haven't gone into that much detail with your customers yet.

Speaker 3

No, not yes. We I think it's a little bit early to discuss that, yes.

Speaker 7

And then on the super bright, you talked about 20% BOM cost savings. So you mentioned a little bit about wire harnesses. Any other can you help us understand a little bit more about what BOM savings there are and how that's a potential marketing to customers in terms of just the ASP difference between the super brain and the bump cost? Thank you.

Speaker 6

Okay. So this is Du speaking. Let me answer your question. So the SuperBring actually that we are bringing copied domain and ADAS domain put together 1 box. So from hardware perspective, so we are saving a lot you know, mechanical PCB and our conductor.

Speaker 6

So obviously, that's the cheaper of Form Cost comparing 2 different box boxes for the 2 different formats. Also from vehicle e architecture point of view, We are offering SuperBrid, we can also sever a lot of connection and communication, cabaling of complicated software protocol, etcetera, etcetera. So we can latch e architecture of vehicle for value much easier Dan before all architecture. Yes. So that's overall the bond cost saving point of view.

Speaker 6

Of

Speaker 7

the company. Great. Thank you. And maybe a final question that was asked by the earlier analyst about just the weakness in the Chinese EV market and the impact on pricing. I'm just curious as to whether you can share any real time thoughts on the market, what you see happening and Tazeen, maybe illuminate for us a little bit of a real time impact that the market is having on your business.

Speaker 7

Thank you.

Speaker 3

Yes. I think overall, while there might be some softening, we're actually seeing of growth. As you saw year over year, we have grown substantially and this year we are forecasting a further 38% increase in revenue. So We are currently, we are not seeing the impact yet. We certainly, With our new products, we are seeing higher demand and we are optimistic about the growth of opportunities for eCAR X both in China and also outside.

Speaker 7

Great. Thank you.

Speaker 4

Thank you. We will now go to our next question. One moment please. And the next question comes from the line of Jared Mayman from Berenberg. Please go ahead.

Speaker 4

Your line is open.

Speaker 8

Hey, guys. Good morning. Thanks for taking the question and congrats on the first call as a public company, obviously, pretty exciting. First question for me, just on the partnership that you guys recently announced with Meizu on the FlyMe audit platform. It sounds like that platform is going to be pretty powerful compared to what exists on the market right now, at least looking at the current state of those offerings.

Speaker 8

So, I guess I'm curious if you expect that platform to be standardized across of other geo ecosystem brands or models. And can you speak to how that opportunity might impact licenses or services revenues versus Good Zolt.

Speaker 2

Hey, Jared, it's Peter. Thank you for the question. Good to hear from you. We, As you know, debuted that platform right around the Shanghai Auto Show on the link goes 8. We had it in our booth as well at the Shanghai Auto Show and got some really great feedback from existing and future potential customers.

Speaker 2

It has the capability of bringing the smartphone experience very close to the automobile and digital cockpit and making that seamless integration between cell phone and vehicles start to come to life. So we're pretty excited about As we continue to work closely with Meizu on launching future vehicles and bring that platform into the vehicle and into users' hands. I think we'll see a significant continued tailwind from that platform.

Speaker 8

Great to hear. And then just clarifying that partnership. So that you guys thought that was an exclusive strategic partnership. Can you just explain What that means in the context of that relationship?

Speaker 2

Yes, sure. I mean, we work very closely with Meizu on integrating They're a software into our software stack and bringing it into the vehicle experience. So we're an exclusive partner with Maison on the FlyMe Auto system in order to take that from their software development stack into the vehicle experience. So we work closely with the OEMs and build that build the system out accordingly.

Speaker 8

Got it. Okay. And then one on the kind of the model here. So it looks like EBITDA loss came in a little bit lower than expected that's obviously great to see. Just kind of curious what the dynamics were there, I guess how that kind of panned out.

Speaker 8

Was that the result at all of kind of pushing any cost to manage the cash position and any implications on what the 2023 Lars might look like as a result of that.

Speaker 3

Yes. Hi, Jared. Ramesh here. So let me just break down your question into 2. So For FY 'twenty two, basically, our EBITDA performance was stronger by us focusing on our fixed costs on a very proactive basis, right?

Speaker 3

I think we also mentioned that we focused on operational efficiencies and making sure that while we are maintaining or improving the margin of the quality of revenue, we have a very strong eye on the cost discipline. In terms of our EBITDA objective, we are committed and strongly confident about the 2024. I think for us, what is important is that we focus on a sustainable profitable growth Dan, that's what we are focused on, right? So we're not giving you guidance on 2023 EBITDA because For us, what is important is to ensure that we achieve our 2024 commitments that we have made previously. And as I mentioned that we are very confident about achieving those milestones.

Speaker 8

Yes, yes, definitely. Totally got it. Great to hear that you guys are still committed to that. Last question for me and then I'll let somebody else jump in. But just kind of a more broad industry question.

Speaker 8

So Some of the silicon and platform providers, I think especially in ADAS have established pretty fairly recently some really strong partnerships with OEMs that includes of some software sharing revenue. So I'm just looking at the Meizu partnership, for example, and some of the other ones that you guys have. I'm curious if you could talk to kind of what the opportunities look like there as far as your own kind of software recurring revenues goes and what the conversations with customers have been like?

Speaker 2

Yes, Jared, I mean, we I think the customer reaction to the amazing platforms, We think it's really exciting. I think the FlyMe Auto system will enable capabilities inside the vehicles that really bring, as I said, the cell phone experience into the car in a very unique way. And we're certainly able I think through that partnership to help the OEMs build out their capability to generate reoccurring revenues inside the vehicle. So I think we continue to explore unique pricing models, especially as we look for future systems and bring some of these very high horsepower assistance into the vehicle. And I think we'll continue to look for those opportunities as we go forward in the future.

Speaker 8

Sounds great. Thanks guys and I'll see you on the night.

Speaker 2

Great. Looking forward. Thanks, Charles. Thank

Speaker 4

you. We will now go to your next question. One moment please. And your next question comes from the line of Suji Desilva from ROTH Capital. Please go ahead.

Speaker 4

Your line is open.

Speaker 9

Hi, Suji, Peter, Ramesh, congratulations on the strong 2022 and the outlook as well. You guys talked about this in Q and A a little bit, but just as you compete with guys like NVIDIA and Qualcomm, who are traditionally from the smartphone space, can you talk about Ecorrex's advantages coming to that perhaps the strong auto relationships and things of that nature. Thanks.

Speaker 3

Suji, just to clarify your question, well, good to hear from you again. Just to clarify your question, you want to know what's the How do we compete with NVIDIA Qualcomm?

Speaker 9

The competitive advantages you bring versus them.

Speaker 3

Competitive advantages that we

Speaker 9

have from the PCE smartphone side. Yes. Thanks.

Speaker 6

Yes, yes, yes. This is Steve speaking. Okay. So because our core DNA, from Automotive R&D. So we know the vehicle architecture quite well.

Speaker 6

And we our team actually already finished a lot of vehicle programs and we know vehicle feature and assistance are much, much better than the other competitors. So that's why we have vertical integration and including SoC design and very dedicated for our module requirements. So especially I introduced before from our financing SoC, we have physical safe island and the function of 15 vertical integration, etcetera, etcetera, as an example to provide a very valuable feature to system design and OEM R and D to reduce the cost and improve the performance because at day 1, when we design a system that's a way of focus on automotive design. So that's very unique. That's unique for our product actually from the competitors.

Speaker 5

All right.

Speaker 9

Thank you, Steve. That was very helpful. And then perhaps on the revenue guidance, curious your visibility into that guide and customer diversification there as you broaden your customer base. I'm curious how much visibility you have into The forward guides and then how the customer base will be diversifying with new programs and new customers ramping.

Speaker 3

Yes. Suji, hi Ramesh here again. So in terms of visibility, as you know, automotive is normally 18 to 24 months at least in terms of contracts. And therefore, we have we're very confident about the revenue guidance. Of course, it is subject to macroeconomic impacts that might happen, but that is due to economic challenges that might come across, but we're very, very confident given our visibility that we have in terms of the 2023 guidance.

Speaker 3

In terms of revenue diversification, I think the revenue base will start diversifying more as the new products come along. We are seeing the demand from different customers. We announced the FAW strategic partnership a couple of months ago. So those will diversify our revenue base very soon with the new products, but also We are we have established the International Business Office based out of the U. K.

Speaker 3

And we are in a number of conversations overseas. So while that might that will take a little bit of time, we're also confident that in the long run that our revenue will diversify by not just from a customer base perspective, but also from a geographical base perspective as well.

Speaker 9

Okay. If I could sneak one last quick one in. I know your hasn't talked about pricing yet, but can you talk about perhaps the content opportunity Per car is a way to kind of size the addressable market for you guys?

Speaker 3

Yes. I mean, well, I'll talk about content per car today. So today, our content per car is about I'll give a range And this does not include some services that we provide like engineering services or software services. So Our content per car is around $3.60 to $3.80 per car. So that's typically what we have in a vehicle.

Speaker 2

And then Tufu, just to add to Ramesh's comment, I think as we continue to develop some of these advanced platforms like the McAllo program, We talked about the super brain. I think that's got those complicated systems have the potential to raise that number as we go through the life cycles.

Speaker 9

Okay, great. Thanks, Peter. Thanks so much. Thanks again, guys.

Speaker 2

Thanks, Suji. Thanks, Suji.

Speaker 4

Thank you. We will now go to the next question. One moment please. And your next question comes from the line of Fanjuan Ding from CICC. Please go ahead.

Speaker 4

Your line is open.

Speaker 10

Hi, this is Wen Zheng from CICD. Can you hear me?

Speaker 3

Yes. Hello.

Speaker 10

Okay. Hi. Yes. I just got on the phone and might have missed the previous communication. And I have 3 questions.

Speaker 10

The first one is what are the target markets for SD1000 and AMD V2000 platforms? Are there any segmentation among those 2? This is the first question.

Speaker 6

Okay. So This is Steve speaking. So let me answer your first question. So FE1000 SoC that signed your SoC and we build the and Tora Seres Parlogs. Actually this one, actually talking about the, of course, the global market because the SE1000 already had of the Automotive Grade Certification and Portable SIM certificate.

Speaker 6

Also we have the global IP protection of that. So that's why we are aiming to the global yet for global market, of course. And the V2 thousand by AMD, Of course, that's also we collaborate with AMD as very strategic on automotive grade area. So Of course, we are targeting the high the large rebrand and high end product EV market, also the global market as well.

Speaker 5

Yes.

Speaker 10

Okay. That's very clear. Thank you. Yes, yes. And I have the second question.

Speaker 10

Which platform, which computing platform will be the main platform promoted overseas? This is the second question.

Speaker 2

Yes, I'll grab that. Great question. As we look as we're talking to potential customers for expansion in Europe, We are talking with them about both potential platforms. I think the Antor platform will be in the Higher volume center of the market. It provides a great performance value equation for our potential customers.

Speaker 2

And we can see I think some very high volume discussions that we're having on that platform. As Viyu mentioned, the McAloo platform is higher performance and we are discussing primarily with the premium EV suppliers or EV customers for that product line. So I think the discussions that Ziyi was mentioning greatly applied to the global market as well.

Speaker 10

Okay. Thanks. The third one is about financial performance. I have read that Wei gave the guidance for 2023, but can you break up the income compensation for us?

Speaker 3

Yes. So we gave a guidance in terms of the 2023 that we will be between $700,000,000 to $720,000,000 and that represents a 38% year over year growth. And somebody else, I do not know if you heard that question, but somebody was asking earlier what is the level of visibility we have. And given the automotive nature, we have very good visibility in terms of 2023 And we are very confident that we will get to those guidance.

Speaker 10

Okay, okay. That's all for my questions. Thank you very much.

Speaker 3

Okay. Thank you.

Speaker 4

Thank you. Of Jan. There are currently no further questions. I will hand the call back for closing.

Speaker 3

All right. Thank you, Sharon. I would like to thank all of you for taking time in joining this exciting first earnings call. I really appreciate all the very good questions. Sohas, thank you.

Speaker 3

And we look forward to seeing you in a couple of weeks in New York, where we will share our longer term vision and strategy. Thank you.

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Earnings Conference Call
ECARX Q4 2022
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