NASDAQ:ECX ECARX Q3 2024 Earnings Report $1.12 +0.03 (+2.75%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$1.13 +0.01 (+0.98%) As of 04/25/2025 07:38 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast ECARX EPS ResultsActual EPS-$0.14Consensus EPS N/ABeat/MissN/AOne Year Ago EPS-$0.26ECARX Revenue ResultsActual Revenue$203.10 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AECARX Announcement DetailsQuarterQ3 2024Date11/7/2024TimeBefore Market OpensConference Call DateThursday, November 7, 2024Conference Call Time8:00AM ETUpcoming EarningsECARX's Q1 2025 earnings is scheduled for Monday, May 19, 2025Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by ECARX Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 7, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good day, and thank you for joining us. Welcome to e Car X Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After management to give their prepared remarks, there will be a question and answer session. As a reminder, today's conference is being recorded. Operator00:00:34I would now like to hand the conference over to your host, Renee Du, Head of Investor Relations at eCARx. Please proceed. Speaker 100:00:45Thank you, operator. Good morning, and welcome to e CarX's Q3 2024 earnings conference call. With me today from e CarX are Chen and the Chief Executive Officer, Ziyu Shen Chief Operating Officer, Peter Cerino and Chief Financial Officer, Xiao Zhou. Following their prepared remarks, they will all be available to answer your questions during the Q and A session that follows. 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. Speaker 100:01:21Further 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, A reconciliation of the non GAAP financial measures to GAAP financial measures can be also found at the bottom of our earnings release. With that, I'd like to hand the call over to Zu Yu. Please go ahead. Speaker 200:01:51Thank you, Renee. Hello, everyone, and thank you for joining our Q3 earnings call today. The solid growth momentum we picked up in the first half of the year continued into the Q3. The global automotive industry is rapidly evolving towards software defined vehicles, which we are uniquely positioned to benefit from, and I think our results this quarter reflect that. Let me start with a brief market update. Speaker 200:02:23Looking at the broader automotive landscape internationally, the sector continues to face a challenging environment globally. Despite the headwinds, the overall trajectory remains positive, particularly for electrical vehicles and intelligent car technologies, with the automotive industry still projected to reach approximately 88,000,000 vehicle sales in 2024. In contrast, Chinese Automotive market has been gradually picking up. Total sales from January to September increased 2.4% Speaker 300:03:06from Speaker 200:03:07the same period last year, among which China's export layer showed a much more positive outlook with overall export volume rising every month this year. China exported 4,300,000 vehicles from January through September, an impressive increase of 27% year over year. Electrical vehicle sales in China during the same period increased 33% year over year, accounting for 39% of total new car sales. The market continues to yield significant opportunities for us despite headwinds. This underscores our unique positioning to drive growth in China and overseas. Speaker 200:03:57Regardless of market cycle, our evolving product portfolio, diverse customer base and strategic global partnerships and operations are key factors that enable us to capitalize on these opportunities. By the end of the quarter, there were over 7,300,000 VX on the road, equipping eCAR X technology with 442,000 vehicles added this quarter alone. This translates into an increase of approximately 31% year over year or 6% sequentially. Our global reach across the sector remained stable from last quarter with 17 OEMs across 26 brands. Notably, Zu, the number of project wins from existing customers increased substantially as we deepen our relationship and build up the success of existing mass production projects. Speaker 200:05:09Revenue during the quarter increased by 31% year over year to RMB1.4 billion on the back of recent vehicle launches such as the Geely Glax E5. Competition remains fierce with ongoing pricing pressures, causing gross margins to decline to approximately 17% during the quarter. Despite the challenging competition and impact on margin, we remain firmly on track with our top line continuing to outperform the broad market as we scale and build our path towards profitability. We have a very strong track record of growing our top line with new vehicle launches and have a robust and healthy pipeline with over 40 vehicle models currently in development. To offset the impact of pricing pressure on our margins, we are working aggressively to optimize our cost structure by taking greater vertical control of our manufacturing and supply chain, optimizing our product portfolio, improving engineering and operational efficiency. Speaker 200:06:30At the same time, we are expanding our global footprint to provide us with the flexibility to mitigate geopolitical risks. I'm highly confident in our ability to drive significant growth throughout the year and beyond. Our strategy has not changed, and we remain on course for success as we focus on sustaining revenue growth momentum, capturing sales volumes and improving margins. Our flexibility to adapt to a changing market environment ensures that we can see new opportunities as they arise, leaving us very optimistic about the future. I will now pass the call over to Peter, who will go through the operating results of the quarter in more detail. Speaker 400:07:25Thank you, Ziyu, and good day, everyone. Our customer base remained diverse and stable during the quarter as our business continues to scale and gain momentum. We secured 2 new design wins from existing customers during the quarter, further deepening our relationships with them. Both vehicles are for the China market, and we'll deploy a version of our Antorus series computing platform, NCEM integrated with FlyMe Auto OS. These wins showcase our ability to deliver customized cutting edge technology solutions and reflect the growing value proposition we offer automakers with our unified computing platforms for China and overseas. Speaker 400:08:12Our global ecosystem of strategic partnership forms the backbone of our strategy to reshape the global automotive technology value chain. We entered into a formal partnership with MulticoreWare at the end of August. Having initially worked together to optimize our intelligent driving software algorithms used in the Lincoln Code 8 earlier this year, we are strengthening our partnership and expanding the scope of our collaboration to cover all projects to reduce the time to market for mass production of Skylion Pro and provide global OEMs with unique vehicle experiences. In addition to leveraging our global ecosystem of partnerships to improve our performance of our leading hardware and software stack, we continue to strategically invest in R and D, while at the same time improve R and D efficiency. We are investing in our lower cost R and D centers. Speaker 400:09:13We are engaging AI tools to improve efficiency and quality, onboarding new partners with innovative and cutting edge support models and completing a deep dive of our entire cost structure. Our ADU solutions now feature real world rendering capabilities compatible with mainstream 3 d engines such as Unreal and Unity and are expected to be integrated into Hangzhou and smart models currently in development. We deployed eCARx Auto GPT by adopting Microsoft Smart Occupancy Monitoring System to track and monitor in vehicle behavior of children to ensure safety, while we continue to work closely with ecosystem partners to explore more in vehicle scenarios under eCARx Auto GPT. We also developed an automotive hypervisor that allows multiple vehicle systems to run on the Mackaloo platform using AMD chips. Our technology leadership continues to strengthen as a result with our robust intellectual property portfolio now expanding to include 6 13 registered patents and 656 pending patent applications globally as of September 30. Speaker 400:10:29On the product side, we had several new exciting vehicles launched this quarter that showcased our technological strengths and demonstrate our remarkable versatility to replicate and scale our solutions across various brands and models. Demand for the Geely Galaxy E5 since its launch in August has been particularly strong with over 12,000 vehicles sold in that month alone. Notably, the Galaxy E5 is the 1st vehicle to integrate digital cockpit and parking capabilities into a single board using the Antora 1000 computing platform under Geely's new EE architecture, which serves as the foundation for their next generation vehicles. On top of that, the Antora 1000 SPB, which integrates digital cockpit parking and driving capabilities on the Antora 1000 platform, has also been launched and can be replicated and scaled with any AI chip, providing a highly cost effective and streamlined solution that aligns seamlessly with evolving EE architectures. This broadens the Antora 1000 appeal as the central computing platform of choice for automakers globally. Speaker 400:11:46Lincoln Coast flagship Z10 began mass production during the quarter following its debut in June. This vehicle showcases the strength of the Makalu computing platform powered by AMD Ryzen V2000 Processors and our self developed hypervisors, which I mentioned earlier. Our extensive experience in digital cockpit design, combined with AMD's advanced computing capabilities, has resulted in a vehicle that sets a new benchmark for in vehicle technology and user experience. The Smart Hashtag 5 officially launched on October 27 following its global debut in August also comes integrated with the Makalu computing platform. I'm happy to see our Antora and Makalu series widely adopted across various vehicle models ranging from entry level to premium. Speaker 400:12:41This demonstrates our strong competitiveness in the market and ease with which our solutions can be scaled and replicated. The LincolnCo 2, known as the Z20 in China, debuted in Milan on October 11 and has since launched officially in Europe. Integrated with our Galena computing platform, we are committed to support this state of the art model as we explore market opportunities globally for this tailor made solution. Lastly, our Pikes Computing platform officially launched this quarter, utilizing Qualcomm Snapdragon 8295 SoC. This solution will first be integrated into a new Geely model planned for the start of production in 2025. Speaker 400:13:27We are making solid progress in establishing ourselves as a partner for automakers as they transition to software defined vehicles by delivering solutions that are scalable and cost efficient. Our expertise in commercializing and deploying these integrated vehicle solutions on a global scale not only optimizes costs, but also speeds up market entry for manufacturers around the world. We attended the 3rd Global Digital Trade Expo in Hangzhou at the end of September, where we showcased the Maku and Antora platforms and signed an agreement to further expand our Fuyong smart facility. Fuyong represents a critical step in our strategy to integrate manufacturing and supply chain processes. This facility is opening at the highest industry standards, deploying the latest in connectivity, advanced analytics, automation and advanced manufacturing technology. Speaker 400:14:24Production capacity has quickly ramped up since production started in April with about 30,000 Antora 1000 units produced and shipped for the Galaxy E5 in August September. In 2023, we were deeply engaged in the supply chain management, but all our end product manufacturing was completed through partners and joint ventures. Now by the end of 2024, we have taken control of our manufacturing and we should end the year with about 15% to 20% under our own control. By the end of 2025, we expect that metric to be over 50% with a long term target in the range of 70% or more. By improving our control over costs, product quality and operations, we will be able to further enhance our competitive position in the market. Speaker 400:15:15I am pleased with the progress we have made and remain highly optimistic that we will continue to see tremendous growth going forward as our investments, technological innovation, diversification of customer base and global expansion begin to generate significant returns. I will now turn the call over to Phil, who will go through our financial results. Speaker 500:15:38Thank you, Peter, and hello, everyone. Our strong performance in the first half of the year continued into the Q3 as our business continues to grow. Total revenue for the quarter was RMB1.4 billion, an increase of 31% year over year. Revenue from the sales of computing hardware was RMB1.2 billion, up 61% year over year, mainly driven by continued global demand for the Volvo EX30 and the PolarStar 4, as well as an increase in sales volume for the Antola series and the Marcarlo platform digital copies and autonomous driving controlling units, which contributed approximately 23% and 11% respectively to total revenue. Software license revenue came in at RMB84 1,000,000, down 39% year over year, due to a decrease in the sales of navigation and operating software compared to the previous year. Speaker 500:16:40Compared to the last quarter, software license revenue grew by RMB28 1,000,000 or 49% with the ramping up of Framing Auto sales volume and the intellectual property revenue growth. Service revenue decreased 26% year over year to RMB161 1,000,000 mostly as a result of timing differences in completing non recurring engineering revenue contracts. Our year to date service revenue grew approximately 10% year over year. Gross profit was RMB248 1,000,000, a decrease of 25% year over year, which translates into a gross margin of 17%. Margins on hardware products continue to be under pressure as we adopt a penetration pricing strategy to drive revenue and volume growth to gain market share and achieve economies of scale and the cost reductions against the backdrop of an industry wide price war in automotive sector and ongoing transformation of customers EE architecture. Speaker 500:17:47As I discussed in the previous earnings call, we expect this pressure on our hardware margins to remain over the medium term. To offset this impact, we will continue to focus on driving sales of our unique product portfolio, deepening cost reductions and improving operational efficiencies. OpEx during the quarter decreased 2% year over year. This was primarily driven by improved global operational efficiencies and a lower share based compensation expense during the quarter, which were partially offset by continued investment into R and D, core product raw mats and the future technologies. Loss per share was RMB0.97 compared to the previous quarter RMB0.84. Speaker 500:18:33Adjusted EBITDA loss was RMB233 1,000,000, up from a loss of RMB181 1,000,000 during the same period last year, primarily attributable to 1, a decrease in gross margin as a trade off for the growth in motive computing platform business and the increased market share and the number 2, lower foreign currency change gain, partially offset by lower operating expenses and an increase in fair value of financial assets compared to the previous year. Moving on to our balance sheet. As of the end of the Q3, we had RMB688 1,000,000 of cash and restricted cash, which gives us ample resources to fund our core product roadmap, key initiatives and the global business expansion, while we continue to improve our working capital and profitability. Overall, we maintained a robust growth despite intense market competition. We will continue to focus on expanding our customer base, deepening our penetration of both Geely and the non Geely ecosystem to gain market share, driving economies of scale and the cost optimization. Speaker 500:19:47We will also continue to optimize our operating expense and carefully control the new investments to improve our margin performance and the sustainability of our business in the long run. That concludes our prepared remarks today. I would now like to hand the call back to the operator to begin the Q and A session. Thank Operator00:20:10you. Our first question comes from the line of Wei Hung with Deutsche Bank. Your line is open. Speaker 600:20:45Hello, can you hear me? Operator00:20:49Yes, we can hear you. Speaker 600:20:52Hi. Thanks for taking my question. So my first question is regarding the sale of goods margin. We've seen a decline Q over Q and year over year to around 9% in the Q3. Can you maybe talk a bit on the factors contributing to that? Speaker 600:21:09And how should we think about it in the Q4 and into next year? Speaker 500:21:15Okay, sure. Alexis, so I'm happy to address your question regarding the margin performance in the Q3. Yes, there's fierce market competition, which drove the hardware solution margin deterioration in the quarter, which is from last quarter 14% to current quarter 8.9%. We actually we chose to drive the volume increase and maintain a share of wallet stability in our key accounts, our customer base. And we also want to have an opportunity to further work on the supply chain and cost optimization. Speaker 500:21:54As I mentioned, it's all about economy of scale. The other reason is the product mix also impacts the current quarter's margin performance. Normally, 50% of our profit came from services and software. Their margin performance is pretty stable, ranging from 57% to 60%. Due to the software selling ramp ups and the service bookings seasonality issue, the mix from services and software changed from 30% to 17% in this quarter. Speaker 500:22:29And all these are the key factors that impact our overall margin performance. However, in moving into Q4, we foresee that we will rebalance the portfolio of sales on services and software and we are able to restore our margin performance through that. Meanwhile, we are able to further drive our cost optimization and which can help uplift the hardware margin performance as well. So that is the answer for your question on the margin performance in Q3. Speaker 600:23:04Thank you. That is very clear. And the other question I had was, we've seen Geely, the Galaxy brand, launch 2 vehicles, the Galaxy E5 and the Star Wish Sedans. And we know the company has disclosed that the E5 uses the Antora platform and the Flammi Auto OS system. Can you maybe talk about the Star Wish Sedan? Speaker 600:23:30Does e Car X also supply the hardware for that model as well? Speaker 400:23:35Yes, this is Peter. I'll grab that question. I mean, does the Galaxy E5 uses our Antora 1000 platform, along with the Famiado software, as you mentioned. And the Star Wars' platform uses our Venado platform. So that's our E02 platform. Speaker 400:23:52We have a that's a very robust product that we've had in the market. We have more than 1,000,000 units, lifetime on that program. So they both use solutions from Ekar X. Speaker 600:24:06Thank you. That is very clear. And maybe a last one for me. After the Lincoln Co Z10 and the Smart 5, can you maybe give us some outlook on whatever vehicle models will the Makalu platform be used on? Speaker 400:24:21Yes, I'll grab that one as well. I mean, the Makalu platform is really a benchmark lighthouse project for us. It's deep strategic cooperation with AMD. We're the 1st automaker to adopt the V2000 platform, which is AMD's newest automotive platform. And we've built up, even as we discussed in our prepared remarks, a unique hypervisor that extends our software capabilities and really drives a very tight software hardware linkage to have fantastic performance. Speaker 400:24:59We've got great user feedback from the vehicles. The Z10 has been in production. Smart is in a ramp up phase right now. And we will continue to promote that to both the future vehicles for Smart, for Lincoln Co as well as others in the market. Speaker 600:25:23Understood. Thank you very much. That's all for me. Operator00:25:27Thank you. Please standby for our next question. Our next question comes from the line of Daxin with Your line is Speaker 700:25:42open. Dear management, this is Tony from SPDB International. I've got 2 questions here. The first question is also going back to the gross margin. Do we have an outlook for the gross margin for next year for 2025? Speaker 700:26:00Do we have a direction here? Do we expect the gross margin to improve from the gross margin of Q3, especially for the hardware products? And for the gross margin specifically, I've seen that our in house manufacturing is improving, especially for 2025. Is this a plus for the gross margin for next year? This is my first question. Speaker 500:26:26Hey, thank you. Thank you, Sundance. This is a very good question and I'm happy to address this one. We observed that the market competition starting from September 2023 and we keep seeing aggressive pricing pressure from our customers. But again, as I just mentioned, we also would like to drive the volume uplift and maintain our installed base in our customers. Speaker 500:26:53This is very critical because we want to drive the economy of scale. And only with that, we are able to further negotiate the cost optimization from a supply chain perspective. And yes, you mentioned that we will for sure, we will try our best to keep our overall gross margin performance over 20 ish. That is our goal as well, because half of our profitability came from the services and the software and the margin performance is pretty stable. And as long as we can keep the reasonable sales mix from 2 products, then we should be able to keep the overall margin performance at a reasonable level. Speaker 500:27:34However, I agree with you that the pricing pressure on especially on the hardware solution is right now a challenge, but we do have our plan to recover that. 1st, We will keep innovating we keep investing our R and D and we will keep innovating. And we always can bring our best of breed solutions to our customers. And within the time window, we are able to charge a price premium as well. So we are pioneering in this hardware solution in the market sector. Speaker 500:28:05And we will also drive the lean operation as well, right, in terms of the loss of operation, the total profitability with our focus on SG and A optimization. And we should also highlight in the quarter, right, SG and A OpEx actually declined 19% a year over year. This also reflects our ability to control like expense as well. So in general, I would comment that we will try our best to keep our gross margin performance above 20 ish, but that depends on our execution on services and software sales. At the same time, right, how to bring the higher margin hardware solution to the market to delight our customers. Speaker 500:28:49And meanwhile, control our operating expense tightly and the year end with the scale of our business, we are able to achieve a breakeven very soon. So that is our that concludes my answer to your margin questions. Speaker 700:29:05That's very clear. A quick follow-up on the in house manufacturing and is it positive to gross margin? Speaker 500:29:14Yes, for sure. So right now, we adopted OEM manufacturing model. And the good thing is we keep receiving orders from our customers. And for sure, we would like to achieve the scale as well. So as long as we keep optimizing the CapEx investment, the expense happening in supply chain sites and manufacturing sites, we should be able to control our manufacturing costs within a reasonable level, which is also very competitive in the market. Speaker 500:29:53So I can share with that, that's also on our radar. Speaker 700:29:58Okay. It's very clear. And my second question is about the overseas business. Can we have an update on our overseas expansion? And also on the overseas customers? Speaker 700:30:11Do we expect any revenue or profit from overseas customers for 2025? Speaker 400:30:20Yes, I'll grab that. This is Peter. So I mean, the company has been driving down this global expansion road, for a number of years now. I mean, as you remember, in early this year, we established our office in Stuttgart to help expand our customer intimacy with the German OEMs. And presently, we're engaged in a number of RFQ processes with new customers there. Speaker 400:30:52So we're quite excited about the progress. The European OEM business, I would say, moves on a very rigorous structured timeline. So we might see some NRE service revenue towards the end of 'twenty five, likely in 'twenty six and the SOPs we're looking at are probably in the 'twenty seven horizon. And that's just, let's call it, a standard development cycle that the European OEMs follow. But we definitely see a lot of strong customer intimacy, customer engagements, and as I said, a number of very tangible programs that we're working through the RFQ processes with. Speaker 400:31:38So we're very excited about the progress we're making there. Speaker 700:31:43Okay. Thank you very much. Thank you, Phil. Thank you, Peter. It's clear. Speaker 700:31:47That's all my questions. Operator00:31:50Thank you. Please stand by for our next question. Our next question comes from the line of Jacky Jeong with CICC. Your line is open. Speaker 300:32:05Hi management team. My name is Jacky Jeong from CICC Auto. So I have three questions for this quarter. The first one is regarding to the GD Group. We have seen GD Group has performed a very strong quarter. Speaker 300:32:20And also for the October, GD has delivered the single most number of deliveries in a single quarter. And my question is regarding what is the percentage of revenue actually currently contributed by GD? And what is the eCARx expectation for the percentage of revenue contributed by GD in the year 2025 and maybe the years coming? Thank you. Speaker 500:32:51Sure. Thank you, Jacky. I'll let you so. So regarding the business mix from Geely and Geely ecosystem and non Geely business. So in 2024, the expectation is we still 90% of our business still came from Geely and Geely ecosystem, including Geely affiliation like Volvo, Posta, Smart and Lotus. Speaker 500:33:16And yes, we still have lots of opportunities to further improve our non Chile business mix. And in 2005, we foresee that mix will keep improving, including new business upon FAW. And we also facilitate more business from our international OEMs as well, which is also a highlight of our non GAAP business expansion, especially from a global OEM perspective. And by moving into 2025 and 2026, our goal will not change. We will keep focusing on our non Geely business expansion. Speaker 500:33:52So in our goal is like by end of 1026, 1027, nearly a 40% of our business will be from non GAAP. Speaker 300:34:04Right. Thank you so much. Just one quick follow-up. So could you give us more color on the projects in the FAW? Because previously you mentioned that we are going to expand into wider spectrum models. Speaker 300:34:19So how is the progress on this? Thank you. Speaker 500:34:22Yes, sure. I can address the question and maybe Peter chime in additional information. So everything is on Trapichachi. We are delivering 2 flagship vehicle programs from FAW, Huynxi project and the contract has been signed, had been signed and the team is working diligently to make traction. And then we are on track to deliver our program and the SOP expected by end of the quarter early year and Q1 of next year. Speaker 500:34:58And yes, and we foresee more FAW Homechip vehicle programs coming and which also can significantly contribute to your non GAAP business to our portfolio. Speaker 800:35:12Well, so this is Xu speaking. So I would like to add more information here about Hongqi FAW program. So right now, we have 2 models under development right now, and we will make them SOP the end of this year and beginning of next year. So and actually not only the full vehicle model, that will be the time for because that will be very similar what we are deploying in GD already that Antora plus primary auto platform. So that will be very unique competition platform for all FAW HomeTeam future vehicle models. Speaker 800:35:51Yes, so that's I would like to add here. Speaker 300:35:56All right. Thank you so much. That's very clear. My second question is regarding to the progress in ADAS. So we have seen from the news that the AD1000 chip has kicked out. Speaker 300:36:09So big congratulations on that. So from the management perspective, how can we evaluate the breakeven points for the chip like how many deliveries that we can lead to breakeven? And is there any new contractual design wins that can be shared? Or is there any technology breakthrough regarding the bookshelf that can be shared? Thank you. Speaker 800:36:34Okay. Well, so AD1000, that's very successfully we tape out ETSMC. And also I would like to share more information to you because right now all performance required already achieved regarding the design point of view. And for investment point of view, from EcorX, we will start computing system R and D with this SoC. But for SoC investment, 100 percentage in Cyanjin, which is separate company from E Car X. Speaker 800:37:08We are shareholder, but a separate company. So that means E Car X will invest 81,000 computing platform next 2 years and 3 years to accelerate our ADAS portfolio. Yes, so that's our plan. And this one is this SoC is very competitive, the 7 nanometer and with a 5 12 tops AI capacity. And also, as you know, we already had 7,000,000 gallons already shipped SE1000 over 500,000 in the market. Speaker 800:37:43So that's why we're quite confident AD1000 will be faster and quicker to go to the market in production soon. Speaker 300:37:55Thank you so much. That's very promising. Just one quick follow-up. So are we going to develop the algorithm softwares by Jikar ourselves or are we going to collaborate external partners? Speaker 800:38:09Yes, because AD1000 platform will be the open platform. Of course, we'll finish our platform and integration and engineering. But of course, that open platform can support some customer like OEM in house software or also we can support a third party software on top. Very similar position like NVIDIA PEMBA in the market. Speaker 300:38:35Thank you, Zvi. That's very clear. And my last question is regarding to the so what are the costs and expenses actually associated with developing new platforms? Because we see there are quite a number of new platforms that's currently under development and the research R and D expenses actually going up. So I'm quite curious like what are the costs and expenses associated with developing a new platform? Speaker 300:39:02And what's the point of breakeven regarding to each of these platforms? Thank you. Speaker 800:39:12Yes. I think you're asking the very good question here. So I think the most important for the company that every year we are having 30% growth of revenue. That's very important. Also, we are keeping more than 20% gross margin for 3 years. Speaker 800:39:32So that's why we are expanding R and D investment actually year by year. We can keep the same percentage, but we can get more total amounts because of our revenue growth. So that's the logic. So that's why we are doing very carefully like 10% R and D investment, maybe future will drop to like 9% or 8%, but our total amount will be much bigger because our revenue growing faster. And SG and A will going to be like 7% or maybe below 7% because we are trying to put it even as fast as as early as possible. Speaker 800:40:22So that's why we want to balancing these kind of percentage for R and D and SG and A. Does that make sense? Speaker 300:40:31All right. Thank you. Just one very quick follow-up. Currently, we have Qualcomm chip, cyan chip and AMD chip. So which one of these actually contributed the most gross margin and probably why? Speaker 300:40:46Thank you. Speaker 800:40:49I think from revenue perspective, so because this will and gross margin perspective, that will be the very different segment. So, signing chip will be entry canceled and a very strong cost competitive for China market and for worldwide market as well. I can follow your information. We have 1 global OEM opportunity bidding that we are using signing chip right now. That's quite advantage for us because cost competitive comparing the global chip band. Speaker 800:41:25But for Qualcomm, IMD and NVIDIA for future, that's for global roadmap and for at high end segment. Yes, probably like gross margin are bigger like media and AMD, even Qualcomm, but for gross margin percentage should be similar. Speaker 300:41:50Right. Totally understood. Thank you so much for answering my questions. Thank you. That's the end of my question. Speaker 300:41:57Thank you. Operator00:41:59Thank you. Please stand by for our next question. Our next question comes from the line of Derek Soderbergh with Cantor Fitzgerald. Your line is open. Speaker 900:42:12Yes. Hey, guys. Thanks for taking the questions. So Phil, you guys talked about new wins. On the I guess on the hardware gross margins, just specifically referring to new wins here. Speaker 900:42:28These are with existing customers and I'm curious, are hardware gross margins improving with existing customers as guys are sort of becoming more integrated into their vehicle platforms? Again, specifically asking on the hardware gross margins. Speaker 500:42:46Yes, Derek. Thank you, Derek. Again, yes, hardware gross margin, we did see the challenges and this is all about the competition, right, because China market competition is fierce. At the same time, as I mentioned, we are expanding our footprint into the globe. We want to serve the top customers in global OEMs. Speaker 500:43:08So that's why we can balance the margin, especially the hardware margin performance from different customers base, different customer segment. But in China, the competition will be always there. And we also chose to again, we also want to chose the game to play to win as more as the volume as much as possible, which is also the foundation for us on the supply chain management as well. And yes, we also expand our footprint into our OEMs, FAW, Home Qi and which can also help improve our hardware margin performance. So it's all about the portfolio playing from a different customer base, from a different product like hardware service and the software. Speaker 900:44:00Got it. Got it. And then on the software side, pretty good margin there. You guys have made some good partnerships. What are the biggest growth opportunities looking ahead for that business? Speaker 900:44:10Can you talk about ways to maybe expand that over the medium term? Thanks. Speaker 500:44:17Yes. So look, right now, the core software business in China is all about like operating systems, automotive and efax in house development software product. And we basically we along with the customers demand, we also promote those software products aggressively and for the last generation product layer end of life. And that's why there's a transition as you can see that from the software revenue year over year perspective, there's a slight decline earlier. But in the longer term, we foresee that our software from Framia Auto and the Caltech will climb up for sure and will replace the traditional old generation software and the growth will be there. Speaker 500:45:06And as you can see from a quarter quarter perspective, the software revenue from Framing Out of and CloudPick is outstanding, right. So that momentum will continue. Speaker 900:45:19Got it. Really appreciate it. Thanks. Operator00:45:22Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Phil for closing remarks. Speaker 500:45:46Okay. Thank you. Thank you all for attending today's earnings call. So we are on right track to deliver our commitment to the customers. The growth momentum will definitely continue through a solid execution on pipeline conversion and the new business acquisition, both from non Geely and the global expansion perspective. Speaker 500:46:06E cards always takes a long term focus strategy. We will keep investing into R and D, keep innovating and bringing the best solutions to the market and delighting our customers. We will take multi initiatives to optimize the cost structure, drive lean operations and improve our profitability. Our global business expansion will carry on and we will keep diversifying our customer base and we are on the right track to deliver our profitability improvement and achieve our breakeven point sooner in a very short term. And this concludes the remarks for today's earnings call from the management side. Operator00:46:53Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallECARX Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) ECARX Earnings HeadlinesEcarx partners with HERE Technologies to launch next-gen in-vehicle navigationApril 23 at 8:36 PM | markets.businessinsider.comECARX Partners with HERE Technologies to Launch Next-Gen In-Vehicle Navigation SystemApril 22, 2025 | globenewswire.comTrump’s tariffs just split the AI market in twoTrump’s tariff just split the AI market – among others – in two. One group of AI companies—the ones relying on cheap foreign hardware—just saw their costs shoot through the roof. For the other group of AI companies, they were just handed a massive competitive advantage. Make no mistake, AI as a whole is still a game-changer for the global economy. But within the AI sector, Trump’s tariffs have created a huge divergence.April 26, 2025 | Traders Agency (Ad)HERE partners with ECARX to launch Next-Generation, In-Car Navigation at Auto Shanghai 2025April 22, 2025 | globenewswire.comIs Ecarx Holdings Inc. (NASDAQ:ECX) the Best Penny Stock to Invest in Under $1?April 16, 2025 | msn.comEcarx announces launch of ECARXperienceApril 14, 2025 | markets.businessinsider.comSee More ECARX Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like ECARX? Sign up for Earnings360's daily newsletter to receive timely earnings updates on ECARX and other key companies, straight to your email. Email Address About ECARXECARX (NASDAQ:ECX) develops a full stack automotive computing platform to shape the interaction between people and cars by rapidly advancing the technology by smart mobility worldwide. It offers system on chips, central computing platforms, operating systems, and software. Its core products include infotainment head units, digital cockpits, vehicle chip-set solutions, core operating system, and integrated software stack. The company has entered into a strategic partnership agreement with Black Sesame Technologies. 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There are 10 speakers on the call. Operator00:00:00Good day, and thank you for joining us. Welcome to e Car X Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. After management to give their prepared remarks, there will be a question and answer session. As a reminder, today's conference is being recorded. Operator00:00:34I would now like to hand the conference over to your host, Renee Du, Head of Investor Relations at eCARx. Please proceed. Speaker 100:00:45Thank you, operator. Good morning, and welcome to e CarX's Q3 2024 earnings conference call. With me today from e CarX are Chen and the Chief Executive Officer, Ziyu Shen Chief Operating Officer, Peter Cerino and Chief Financial Officer, Xiao Zhou. Following their prepared remarks, they will all be available to answer your questions during the Q and A session that follows. 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. Speaker 100:01:21Further 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, A reconciliation of the non GAAP financial measures to GAAP financial measures can be also found at the bottom of our earnings release. With that, I'd like to hand the call over to Zu Yu. Please go ahead. Speaker 200:01:51Thank you, Renee. Hello, everyone, and thank you for joining our Q3 earnings call today. The solid growth momentum we picked up in the first half of the year continued into the Q3. The global automotive industry is rapidly evolving towards software defined vehicles, which we are uniquely positioned to benefit from, and I think our results this quarter reflect that. Let me start with a brief market update. Speaker 200:02:23Looking at the broader automotive landscape internationally, the sector continues to face a challenging environment globally. Despite the headwinds, the overall trajectory remains positive, particularly for electrical vehicles and intelligent car technologies, with the automotive industry still projected to reach approximately 88,000,000 vehicle sales in 2024. In contrast, Chinese Automotive market has been gradually picking up. Total sales from January to September increased 2.4% Speaker 300:03:06from Speaker 200:03:07the same period last year, among which China's export layer showed a much more positive outlook with overall export volume rising every month this year. China exported 4,300,000 vehicles from January through September, an impressive increase of 27% year over year. Electrical vehicle sales in China during the same period increased 33% year over year, accounting for 39% of total new car sales. The market continues to yield significant opportunities for us despite headwinds. This underscores our unique positioning to drive growth in China and overseas. Speaker 200:03:57Regardless of market cycle, our evolving product portfolio, diverse customer base and strategic global partnerships and operations are key factors that enable us to capitalize on these opportunities. By the end of the quarter, there were over 7,300,000 VX on the road, equipping eCAR X technology with 442,000 vehicles added this quarter alone. This translates into an increase of approximately 31% year over year or 6% sequentially. Our global reach across the sector remained stable from last quarter with 17 OEMs across 26 brands. Notably, Zu, the number of project wins from existing customers increased substantially as we deepen our relationship and build up the success of existing mass production projects. Speaker 200:05:09Revenue during the quarter increased by 31% year over year to RMB1.4 billion on the back of recent vehicle launches such as the Geely Glax E5. Competition remains fierce with ongoing pricing pressures, causing gross margins to decline to approximately 17% during the quarter. Despite the challenging competition and impact on margin, we remain firmly on track with our top line continuing to outperform the broad market as we scale and build our path towards profitability. We have a very strong track record of growing our top line with new vehicle launches and have a robust and healthy pipeline with over 40 vehicle models currently in development. To offset the impact of pricing pressure on our margins, we are working aggressively to optimize our cost structure by taking greater vertical control of our manufacturing and supply chain, optimizing our product portfolio, improving engineering and operational efficiency. Speaker 200:06:30At the same time, we are expanding our global footprint to provide us with the flexibility to mitigate geopolitical risks. I'm highly confident in our ability to drive significant growth throughout the year and beyond. Our strategy has not changed, and we remain on course for success as we focus on sustaining revenue growth momentum, capturing sales volumes and improving margins. Our flexibility to adapt to a changing market environment ensures that we can see new opportunities as they arise, leaving us very optimistic about the future. I will now pass the call over to Peter, who will go through the operating results of the quarter in more detail. Speaker 400:07:25Thank you, Ziyu, and good day, everyone. Our customer base remained diverse and stable during the quarter as our business continues to scale and gain momentum. We secured 2 new design wins from existing customers during the quarter, further deepening our relationships with them. Both vehicles are for the China market, and we'll deploy a version of our Antorus series computing platform, NCEM integrated with FlyMe Auto OS. These wins showcase our ability to deliver customized cutting edge technology solutions and reflect the growing value proposition we offer automakers with our unified computing platforms for China and overseas. Speaker 400:08:12Our global ecosystem of strategic partnership forms the backbone of our strategy to reshape the global automotive technology value chain. We entered into a formal partnership with MulticoreWare at the end of August. Having initially worked together to optimize our intelligent driving software algorithms used in the Lincoln Code 8 earlier this year, we are strengthening our partnership and expanding the scope of our collaboration to cover all projects to reduce the time to market for mass production of Skylion Pro and provide global OEMs with unique vehicle experiences. In addition to leveraging our global ecosystem of partnerships to improve our performance of our leading hardware and software stack, we continue to strategically invest in R and D, while at the same time improve R and D efficiency. We are investing in our lower cost R and D centers. Speaker 400:09:13We are engaging AI tools to improve efficiency and quality, onboarding new partners with innovative and cutting edge support models and completing a deep dive of our entire cost structure. Our ADU solutions now feature real world rendering capabilities compatible with mainstream 3 d engines such as Unreal and Unity and are expected to be integrated into Hangzhou and smart models currently in development. We deployed eCARx Auto GPT by adopting Microsoft Smart Occupancy Monitoring System to track and monitor in vehicle behavior of children to ensure safety, while we continue to work closely with ecosystem partners to explore more in vehicle scenarios under eCARx Auto GPT. We also developed an automotive hypervisor that allows multiple vehicle systems to run on the Mackaloo platform using AMD chips. Our technology leadership continues to strengthen as a result with our robust intellectual property portfolio now expanding to include 6 13 registered patents and 656 pending patent applications globally as of September 30. Speaker 400:10:29On the product side, we had several new exciting vehicles launched this quarter that showcased our technological strengths and demonstrate our remarkable versatility to replicate and scale our solutions across various brands and models. Demand for the Geely Galaxy E5 since its launch in August has been particularly strong with over 12,000 vehicles sold in that month alone. Notably, the Galaxy E5 is the 1st vehicle to integrate digital cockpit and parking capabilities into a single board using the Antora 1000 computing platform under Geely's new EE architecture, which serves as the foundation for their next generation vehicles. On top of that, the Antora 1000 SPB, which integrates digital cockpit parking and driving capabilities on the Antora 1000 platform, has also been launched and can be replicated and scaled with any AI chip, providing a highly cost effective and streamlined solution that aligns seamlessly with evolving EE architectures. This broadens the Antora 1000 appeal as the central computing platform of choice for automakers globally. Speaker 400:11:46Lincoln Coast flagship Z10 began mass production during the quarter following its debut in June. This vehicle showcases the strength of the Makalu computing platform powered by AMD Ryzen V2000 Processors and our self developed hypervisors, which I mentioned earlier. Our extensive experience in digital cockpit design, combined with AMD's advanced computing capabilities, has resulted in a vehicle that sets a new benchmark for in vehicle technology and user experience. The Smart Hashtag 5 officially launched on October 27 following its global debut in August also comes integrated with the Makalu computing platform. I'm happy to see our Antora and Makalu series widely adopted across various vehicle models ranging from entry level to premium. Speaker 400:12:41This demonstrates our strong competitiveness in the market and ease with which our solutions can be scaled and replicated. The LincolnCo 2, known as the Z20 in China, debuted in Milan on October 11 and has since launched officially in Europe. Integrated with our Galena computing platform, we are committed to support this state of the art model as we explore market opportunities globally for this tailor made solution. Lastly, our Pikes Computing platform officially launched this quarter, utilizing Qualcomm Snapdragon 8295 SoC. This solution will first be integrated into a new Geely model planned for the start of production in 2025. Speaker 400:13:27We are making solid progress in establishing ourselves as a partner for automakers as they transition to software defined vehicles by delivering solutions that are scalable and cost efficient. Our expertise in commercializing and deploying these integrated vehicle solutions on a global scale not only optimizes costs, but also speeds up market entry for manufacturers around the world. We attended the 3rd Global Digital Trade Expo in Hangzhou at the end of September, where we showcased the Maku and Antora platforms and signed an agreement to further expand our Fuyong smart facility. Fuyong represents a critical step in our strategy to integrate manufacturing and supply chain processes. This facility is opening at the highest industry standards, deploying the latest in connectivity, advanced analytics, automation and advanced manufacturing technology. Speaker 400:14:24Production capacity has quickly ramped up since production started in April with about 30,000 Antora 1000 units produced and shipped for the Galaxy E5 in August September. In 2023, we were deeply engaged in the supply chain management, but all our end product manufacturing was completed through partners and joint ventures. Now by the end of 2024, we have taken control of our manufacturing and we should end the year with about 15% to 20% under our own control. By the end of 2025, we expect that metric to be over 50% with a long term target in the range of 70% or more. By improving our control over costs, product quality and operations, we will be able to further enhance our competitive position in the market. Speaker 400:15:15I am pleased with the progress we have made and remain highly optimistic that we will continue to see tremendous growth going forward as our investments, technological innovation, diversification of customer base and global expansion begin to generate significant returns. I will now turn the call over to Phil, who will go through our financial results. Speaker 500:15:38Thank you, Peter, and hello, everyone. Our strong performance in the first half of the year continued into the Q3 as our business continues to grow. Total revenue for the quarter was RMB1.4 billion, an increase of 31% year over year. Revenue from the sales of computing hardware was RMB1.2 billion, up 61% year over year, mainly driven by continued global demand for the Volvo EX30 and the PolarStar 4, as well as an increase in sales volume for the Antola series and the Marcarlo platform digital copies and autonomous driving controlling units, which contributed approximately 23% and 11% respectively to total revenue. Software license revenue came in at RMB84 1,000,000, down 39% year over year, due to a decrease in the sales of navigation and operating software compared to the previous year. Speaker 500:16:40Compared to the last quarter, software license revenue grew by RMB28 1,000,000 or 49% with the ramping up of Framing Auto sales volume and the intellectual property revenue growth. Service revenue decreased 26% year over year to RMB161 1,000,000 mostly as a result of timing differences in completing non recurring engineering revenue contracts. Our year to date service revenue grew approximately 10% year over year. Gross profit was RMB248 1,000,000, a decrease of 25% year over year, which translates into a gross margin of 17%. Margins on hardware products continue to be under pressure as we adopt a penetration pricing strategy to drive revenue and volume growth to gain market share and achieve economies of scale and the cost reductions against the backdrop of an industry wide price war in automotive sector and ongoing transformation of customers EE architecture. Speaker 500:17:47As I discussed in the previous earnings call, we expect this pressure on our hardware margins to remain over the medium term. To offset this impact, we will continue to focus on driving sales of our unique product portfolio, deepening cost reductions and improving operational efficiencies. OpEx during the quarter decreased 2% year over year. This was primarily driven by improved global operational efficiencies and a lower share based compensation expense during the quarter, which were partially offset by continued investment into R and D, core product raw mats and the future technologies. Loss per share was RMB0.97 compared to the previous quarter RMB0.84. Speaker 500:18:33Adjusted EBITDA loss was RMB233 1,000,000, up from a loss of RMB181 1,000,000 during the same period last year, primarily attributable to 1, a decrease in gross margin as a trade off for the growth in motive computing platform business and the increased market share and the number 2, lower foreign currency change gain, partially offset by lower operating expenses and an increase in fair value of financial assets compared to the previous year. Moving on to our balance sheet. As of the end of the Q3, we had RMB688 1,000,000 of cash and restricted cash, which gives us ample resources to fund our core product roadmap, key initiatives and the global business expansion, while we continue to improve our working capital and profitability. Overall, we maintained a robust growth despite intense market competition. We will continue to focus on expanding our customer base, deepening our penetration of both Geely and the non Geely ecosystem to gain market share, driving economies of scale and the cost optimization. Speaker 500:19:47We will also continue to optimize our operating expense and carefully control the new investments to improve our margin performance and the sustainability of our business in the long run. That concludes our prepared remarks today. I would now like to hand the call back to the operator to begin the Q and A session. Thank Operator00:20:10you. Our first question comes from the line of Wei Hung with Deutsche Bank. Your line is open. Speaker 600:20:45Hello, can you hear me? Operator00:20:49Yes, we can hear you. Speaker 600:20:52Hi. Thanks for taking my question. So my first question is regarding the sale of goods margin. We've seen a decline Q over Q and year over year to around 9% in the Q3. Can you maybe talk a bit on the factors contributing to that? Speaker 600:21:09And how should we think about it in the Q4 and into next year? Speaker 500:21:15Okay, sure. Alexis, so I'm happy to address your question regarding the margin performance in the Q3. Yes, there's fierce market competition, which drove the hardware solution margin deterioration in the quarter, which is from last quarter 14% to current quarter 8.9%. We actually we chose to drive the volume increase and maintain a share of wallet stability in our key accounts, our customer base. And we also want to have an opportunity to further work on the supply chain and cost optimization. Speaker 500:21:54As I mentioned, it's all about economy of scale. The other reason is the product mix also impacts the current quarter's margin performance. Normally, 50% of our profit came from services and software. Their margin performance is pretty stable, ranging from 57% to 60%. Due to the software selling ramp ups and the service bookings seasonality issue, the mix from services and software changed from 30% to 17% in this quarter. Speaker 500:22:29And all these are the key factors that impact our overall margin performance. However, in moving into Q4, we foresee that we will rebalance the portfolio of sales on services and software and we are able to restore our margin performance through that. Meanwhile, we are able to further drive our cost optimization and which can help uplift the hardware margin performance as well. So that is the answer for your question on the margin performance in Q3. Speaker 600:23:04Thank you. That is very clear. And the other question I had was, we've seen Geely, the Galaxy brand, launch 2 vehicles, the Galaxy E5 and the Star Wish Sedans. And we know the company has disclosed that the E5 uses the Antora platform and the Flammi Auto OS system. Can you maybe talk about the Star Wish Sedan? Speaker 600:23:30Does e Car X also supply the hardware for that model as well? Speaker 400:23:35Yes, this is Peter. I'll grab that question. I mean, does the Galaxy E5 uses our Antora 1000 platform, along with the Famiado software, as you mentioned. And the Star Wars' platform uses our Venado platform. So that's our E02 platform. Speaker 400:23:52We have a that's a very robust product that we've had in the market. We have more than 1,000,000 units, lifetime on that program. So they both use solutions from Ekar X. Speaker 600:24:06Thank you. That is very clear. And maybe a last one for me. After the Lincoln Co Z10 and the Smart 5, can you maybe give us some outlook on whatever vehicle models will the Makalu platform be used on? Speaker 400:24:21Yes, I'll grab that one as well. I mean, the Makalu platform is really a benchmark lighthouse project for us. It's deep strategic cooperation with AMD. We're the 1st automaker to adopt the V2000 platform, which is AMD's newest automotive platform. And we've built up, even as we discussed in our prepared remarks, a unique hypervisor that extends our software capabilities and really drives a very tight software hardware linkage to have fantastic performance. Speaker 400:24:59We've got great user feedback from the vehicles. The Z10 has been in production. Smart is in a ramp up phase right now. And we will continue to promote that to both the future vehicles for Smart, for Lincoln Co as well as others in the market. Speaker 600:25:23Understood. Thank you very much. That's all for me. Operator00:25:27Thank you. Please standby for our next question. Our next question comes from the line of Daxin with Your line is Speaker 700:25:42open. Dear management, this is Tony from SPDB International. I've got 2 questions here. The first question is also going back to the gross margin. Do we have an outlook for the gross margin for next year for 2025? Speaker 700:26:00Do we have a direction here? Do we expect the gross margin to improve from the gross margin of Q3, especially for the hardware products? And for the gross margin specifically, I've seen that our in house manufacturing is improving, especially for 2025. Is this a plus for the gross margin for next year? This is my first question. Speaker 500:26:26Hey, thank you. Thank you, Sundance. This is a very good question and I'm happy to address this one. We observed that the market competition starting from September 2023 and we keep seeing aggressive pricing pressure from our customers. But again, as I just mentioned, we also would like to drive the volume uplift and maintain our installed base in our customers. Speaker 500:26:53This is very critical because we want to drive the economy of scale. And only with that, we are able to further negotiate the cost optimization from a supply chain perspective. And yes, you mentioned that we will for sure, we will try our best to keep our overall gross margin performance over 20 ish. That is our goal as well, because half of our profitability came from the services and the software and the margin performance is pretty stable. And as long as we can keep the reasonable sales mix from 2 products, then we should be able to keep the overall margin performance at a reasonable level. Speaker 500:27:34However, I agree with you that the pricing pressure on especially on the hardware solution is right now a challenge, but we do have our plan to recover that. 1st, We will keep innovating we keep investing our R and D and we will keep innovating. And we always can bring our best of breed solutions to our customers. And within the time window, we are able to charge a price premium as well. So we are pioneering in this hardware solution in the market sector. Speaker 500:28:05And we will also drive the lean operation as well, right, in terms of the loss of operation, the total profitability with our focus on SG and A optimization. And we should also highlight in the quarter, right, SG and A OpEx actually declined 19% a year over year. This also reflects our ability to control like expense as well. So in general, I would comment that we will try our best to keep our gross margin performance above 20 ish, but that depends on our execution on services and software sales. At the same time, right, how to bring the higher margin hardware solution to the market to delight our customers. Speaker 500:28:49And meanwhile, control our operating expense tightly and the year end with the scale of our business, we are able to achieve a breakeven very soon. So that is our that concludes my answer to your margin questions. Speaker 700:29:05That's very clear. A quick follow-up on the in house manufacturing and is it positive to gross margin? Speaker 500:29:14Yes, for sure. So right now, we adopted OEM manufacturing model. And the good thing is we keep receiving orders from our customers. And for sure, we would like to achieve the scale as well. So as long as we keep optimizing the CapEx investment, the expense happening in supply chain sites and manufacturing sites, we should be able to control our manufacturing costs within a reasonable level, which is also very competitive in the market. Speaker 500:29:53So I can share with that, that's also on our radar. Speaker 700:29:58Okay. It's very clear. And my second question is about the overseas business. Can we have an update on our overseas expansion? And also on the overseas customers? Speaker 700:30:11Do we expect any revenue or profit from overseas customers for 2025? Speaker 400:30:20Yes, I'll grab that. This is Peter. So I mean, the company has been driving down this global expansion road, for a number of years now. I mean, as you remember, in early this year, we established our office in Stuttgart to help expand our customer intimacy with the German OEMs. And presently, we're engaged in a number of RFQ processes with new customers there. Speaker 400:30:52So we're quite excited about the progress. The European OEM business, I would say, moves on a very rigorous structured timeline. So we might see some NRE service revenue towards the end of 'twenty five, likely in 'twenty six and the SOPs we're looking at are probably in the 'twenty seven horizon. And that's just, let's call it, a standard development cycle that the European OEMs follow. But we definitely see a lot of strong customer intimacy, customer engagements, and as I said, a number of very tangible programs that we're working through the RFQ processes with. Speaker 400:31:38So we're very excited about the progress we're making there. Speaker 700:31:43Okay. Thank you very much. Thank you, Phil. Thank you, Peter. It's clear. Speaker 700:31:47That's all my questions. Operator00:31:50Thank you. Please stand by for our next question. Our next question comes from the line of Jacky Jeong with CICC. Your line is open. Speaker 300:32:05Hi management team. My name is Jacky Jeong from CICC Auto. So I have three questions for this quarter. The first one is regarding to the GD Group. We have seen GD Group has performed a very strong quarter. Speaker 300:32:20And also for the October, GD has delivered the single most number of deliveries in a single quarter. And my question is regarding what is the percentage of revenue actually currently contributed by GD? And what is the eCARx expectation for the percentage of revenue contributed by GD in the year 2025 and maybe the years coming? Thank you. Speaker 500:32:51Sure. Thank you, Jacky. I'll let you so. So regarding the business mix from Geely and Geely ecosystem and non Geely business. So in 2024, the expectation is we still 90% of our business still came from Geely and Geely ecosystem, including Geely affiliation like Volvo, Posta, Smart and Lotus. Speaker 500:33:16And yes, we still have lots of opportunities to further improve our non Chile business mix. And in 2005, we foresee that mix will keep improving, including new business upon FAW. And we also facilitate more business from our international OEMs as well, which is also a highlight of our non GAAP business expansion, especially from a global OEM perspective. And by moving into 2025 and 2026, our goal will not change. We will keep focusing on our non Geely business expansion. Speaker 500:33:52So in our goal is like by end of 1026, 1027, nearly a 40% of our business will be from non GAAP. Speaker 300:34:04Right. Thank you so much. Just one quick follow-up. So could you give us more color on the projects in the FAW? Because previously you mentioned that we are going to expand into wider spectrum models. Speaker 300:34:19So how is the progress on this? Thank you. Speaker 500:34:22Yes, sure. I can address the question and maybe Peter chime in additional information. So everything is on Trapichachi. We are delivering 2 flagship vehicle programs from FAW, Huynxi project and the contract has been signed, had been signed and the team is working diligently to make traction. And then we are on track to deliver our program and the SOP expected by end of the quarter early year and Q1 of next year. Speaker 500:34:58And yes, and we foresee more FAW Homechip vehicle programs coming and which also can significantly contribute to your non GAAP business to our portfolio. Speaker 800:35:12Well, so this is Xu speaking. So I would like to add more information here about Hongqi FAW program. So right now, we have 2 models under development right now, and we will make them SOP the end of this year and beginning of next year. So and actually not only the full vehicle model, that will be the time for because that will be very similar what we are deploying in GD already that Antora plus primary auto platform. So that will be very unique competition platform for all FAW HomeTeam future vehicle models. Speaker 800:35:51Yes, so that's I would like to add here. Speaker 300:35:56All right. Thank you so much. That's very clear. My second question is regarding to the progress in ADAS. So we have seen from the news that the AD1000 chip has kicked out. Speaker 300:36:09So big congratulations on that. So from the management perspective, how can we evaluate the breakeven points for the chip like how many deliveries that we can lead to breakeven? And is there any new contractual design wins that can be shared? Or is there any technology breakthrough regarding the bookshelf that can be shared? Thank you. Speaker 800:36:34Okay. Well, so AD1000, that's very successfully we tape out ETSMC. And also I would like to share more information to you because right now all performance required already achieved regarding the design point of view. And for investment point of view, from EcorX, we will start computing system R and D with this SoC. But for SoC investment, 100 percentage in Cyanjin, which is separate company from E Car X. Speaker 800:37:08We are shareholder, but a separate company. So that means E Car X will invest 81,000 computing platform next 2 years and 3 years to accelerate our ADAS portfolio. Yes, so that's our plan. And this one is this SoC is very competitive, the 7 nanometer and with a 5 12 tops AI capacity. And also, as you know, we already had 7,000,000 gallons already shipped SE1000 over 500,000 in the market. Speaker 800:37:43So that's why we're quite confident AD1000 will be faster and quicker to go to the market in production soon. Speaker 300:37:55Thank you so much. That's very promising. Just one quick follow-up. So are we going to develop the algorithm softwares by Jikar ourselves or are we going to collaborate external partners? Speaker 800:38:09Yes, because AD1000 platform will be the open platform. Of course, we'll finish our platform and integration and engineering. But of course, that open platform can support some customer like OEM in house software or also we can support a third party software on top. Very similar position like NVIDIA PEMBA in the market. Speaker 300:38:35Thank you, Zvi. That's very clear. And my last question is regarding to the so what are the costs and expenses actually associated with developing new platforms? Because we see there are quite a number of new platforms that's currently under development and the research R and D expenses actually going up. So I'm quite curious like what are the costs and expenses associated with developing a new platform? Speaker 300:39:02And what's the point of breakeven regarding to each of these platforms? Thank you. Speaker 800:39:12Yes. I think you're asking the very good question here. So I think the most important for the company that every year we are having 30% growth of revenue. That's very important. Also, we are keeping more than 20% gross margin for 3 years. Speaker 800:39:32So that's why we are expanding R and D investment actually year by year. We can keep the same percentage, but we can get more total amounts because of our revenue growth. So that's the logic. So that's why we are doing very carefully like 10% R and D investment, maybe future will drop to like 9% or 8%, but our total amount will be much bigger because our revenue growing faster. And SG and A will going to be like 7% or maybe below 7% because we are trying to put it even as fast as as early as possible. Speaker 800:40:22So that's why we want to balancing these kind of percentage for R and D and SG and A. Does that make sense? Speaker 300:40:31All right. Thank you. Just one very quick follow-up. Currently, we have Qualcomm chip, cyan chip and AMD chip. So which one of these actually contributed the most gross margin and probably why? Speaker 300:40:46Thank you. Speaker 800:40:49I think from revenue perspective, so because this will and gross margin perspective, that will be the very different segment. So, signing chip will be entry canceled and a very strong cost competitive for China market and for worldwide market as well. I can follow your information. We have 1 global OEM opportunity bidding that we are using signing chip right now. That's quite advantage for us because cost competitive comparing the global chip band. Speaker 800:41:25But for Qualcomm, IMD and NVIDIA for future, that's for global roadmap and for at high end segment. Yes, probably like gross margin are bigger like media and AMD, even Qualcomm, but for gross margin percentage should be similar. Speaker 300:41:50Right. Totally understood. Thank you so much for answering my questions. Thank you. That's the end of my question. Speaker 300:41:57Thank you. Operator00:41:59Thank you. Please stand by for our next question. Our next question comes from the line of Derek Soderbergh with Cantor Fitzgerald. Your line is open. Speaker 900:42:12Yes. Hey, guys. Thanks for taking the questions. So Phil, you guys talked about new wins. On the I guess on the hardware gross margins, just specifically referring to new wins here. Speaker 900:42:28These are with existing customers and I'm curious, are hardware gross margins improving with existing customers as guys are sort of becoming more integrated into their vehicle platforms? Again, specifically asking on the hardware gross margins. Speaker 500:42:46Yes, Derek. Thank you, Derek. Again, yes, hardware gross margin, we did see the challenges and this is all about the competition, right, because China market competition is fierce. At the same time, as I mentioned, we are expanding our footprint into the globe. We want to serve the top customers in global OEMs. Speaker 500:43:08So that's why we can balance the margin, especially the hardware margin performance from different customers base, different customer segment. But in China, the competition will be always there. And we also chose to again, we also want to chose the game to play to win as more as the volume as much as possible, which is also the foundation for us on the supply chain management as well. And yes, we also expand our footprint into our OEMs, FAW, Home Qi and which can also help improve our hardware margin performance. So it's all about the portfolio playing from a different customer base, from a different product like hardware service and the software. Speaker 900:44:00Got it. Got it. And then on the software side, pretty good margin there. You guys have made some good partnerships. What are the biggest growth opportunities looking ahead for that business? Speaker 900:44:10Can you talk about ways to maybe expand that over the medium term? Thanks. Speaker 500:44:17Yes. So look, right now, the core software business in China is all about like operating systems, automotive and efax in house development software product. And we basically we along with the customers demand, we also promote those software products aggressively and for the last generation product layer end of life. And that's why there's a transition as you can see that from the software revenue year over year perspective, there's a slight decline earlier. But in the longer term, we foresee that our software from Framia Auto and the Caltech will climb up for sure and will replace the traditional old generation software and the growth will be there. Speaker 500:45:06And as you can see from a quarter quarter perspective, the software revenue from Framing Out of and CloudPick is outstanding, right. So that momentum will continue. Speaker 900:45:19Got it. Really appreciate it. Thanks. Operator00:45:22Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Phil for closing remarks. Speaker 500:45:46Okay. Thank you. Thank you all for attending today's earnings call. So we are on right track to deliver our commitment to the customers. The growth momentum will definitely continue through a solid execution on pipeline conversion and the new business acquisition, both from non Geely and the global expansion perspective. Speaker 500:46:06E cards always takes a long term focus strategy. We will keep investing into R and D, keep innovating and bringing the best solutions to the market and delighting our customers. We will take multi initiatives to optimize the cost structure, drive lean operations and improve our profitability. Our global business expansion will carry on and we will keep diversifying our customer base and we are on the right track to deliver our profitability improvement and achieve our breakeven point sooner in a very short term. And this concludes the remarks for today's earnings call from the management side. Operator00:46:53Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.Read morePowered by