EHang Holdings Limited (NASDAQ:EH) Q3 2023 Earnings Call Transcript

EHang Holdings Limited (NASDAQ:EH) Q3 2023 Earnings Call Transcript November 22, 2023

EHang Holdings Limited beats earnings expectations. Reported EPS is $-0.06, expectations were $-0.16.

Operator: Good day, ladies and gentlemen, and thank you for standing by, and welcome to the EHang Third Quarter 2023 Earnings Conference Call. As a reminder, we are recording today’s call. Now, I will turn the call over to Anne Ji, EHang’s Senior Director of Investor Relations. Ms. Anne, please proceed.

Anne Ji: Hello, everyone. Thank you for joining us on today’s conference call to discuss the company’s financial results for the third quarter of 2023. The earnings release is available on the company’s IR website. Please note that conference call is being recorded and audio replay will be posted on the company’s IR website. On the call today, we have Mr. Huazhi Hu, our Founder, Chairman and Chief Executive Officer; Mr. Xin Fang, Chief Operating Officer; and Mr. Conor Yang, Chief Financial Officer and Director of the Board. The management team will successfully give prepared remarks. Remarks delivered in Chinese will be followed by English translations. All translation is for convenience purpose only. In case of any discrepancy, the management’s statement in the original language will prevail.

A closeup of a self-driving hardware unit inside the dashboard of a passenger vehicle.

A Q&A session will follow afterwards. Before we continue, please note that today’s discussion will contain forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company’s actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company’s public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, please note that all numbers presented are in RMB and are for the third quarter of 2023, unless stated otherwise.

With that, let me now turn the call over to our CEO, Mr. Huazhi Hu. Please go ahead, Mr. Hu.

Huazhi Hu: [Foreign Language] [Interpreted] This is the English translation of Mr. Hu’s remarks. Hello, everyone. Thank you all for joining our conference call today. The third quarter of 2023 marks a significant milestone in our journey as we have successfully reached one of the most highly anticipated and thrilling achievements. Our self-developed EHang 216-S passenger-carrying unmanned aerial vehicle system has obtained the type certificate from the CAAC on October 13 this year, making it the world’s first TC for an unmanned eVTOL aircraft. It is not only a milestone for EHang, but also serves as a guiding light for the entire eVTOL industry, paving the way for its future development. As the saying goes, being the pioneer in the new industry is no easy feat.

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Q&A Session

It requires innovation from the ground up and unwavering determination from the outset. At EHang, we have always been committed to this principle to keep in mind our humble beginnings and never give up. In early days, when there were no established method for eVTOL airworthiness certification worldwide, we embarked on a journey of continuous exploration, experiment and improvement. It was in January 2021 that the CAAC officially accepted our TC application for the EHang 216-S. After that, over more than 1,000 days and nights, we persevered with relentless effort, overcoming challenges and demonstrating innovation. We also faced additional hurdles posed by the epidemic. Today, we have successfully completed the entire process of TC certification, starting from scratch, leading the way for unmanned eVTOL type certification.

The EHang 216-S stands out as a disruptive and innovative product, boasting a range of unique features such as its all-electric nature, autonomous flying, fully back-up systems and cluster management, among others. As a result, it differs significantly from traditional piloted aircraft in terms of technical architecture, configuration, performance, functionality, operation modes, and flight environment. Recognizing this, the CAAC gathers a team of nearly 100 top experts from across the nation to review and certify EHang 216-S. Through close collaboration between the EHang team and the CAAC review team, a rigorous and innovative approach was taken and established the world’s first airworthiness certification standard for passenger-carrying UAVs. Guided by the principles of Life First — Safety First, this standard ensures that EHang 216-S certifies at the level of safety equivalent to that of a piloted aircraft.

These standards lay a solid foundation for the verification of EHang 216-S, contributing Chinese wisdom and solutions to the global development of the electric passenger-carrying UAVs in civil aviation and the establishment of the comprehensive airworthiness certification standards. The process of airworthiness certification is a rigorous one with no shortcuts. Grounded in the principles of science, comprehensiveness and safety, and following the framework of CCAR-21, we, in collaboration with the CAAC, have undertaken an extensive and a complex review and verification process. This comprehensive approach encompasses multiple dimensions and disciplines, ensuring a meticulous and systematic evaluation. Across the 12 professional subjects and 65 major categories, we have completed over 450 compliance test items.

The 12 professional subjects cover a wide range of areas, including flight performance, structure, design and configuration, electrical system, propulsion unit, flight control system, ground control station, communication and data link, airborne human-computer interaction, general aspect, continued airworthiness, and system safety. The compliance tests involving assessing main material performance, structural strength, flame resistance, crashworthiness, gas toxicity, environmental conditions of equipment and systems, software simulation, data links, ground control station, overall system functionality, electromagnetic compatibility, flight performance and flight stability characteristics, et cetera. Throughout the validation process, we meticulously scrutinized every component, equipment, and the entire aircraft for any potential defects, faults or interference.

This scrutiny extended to both laboratory tests and the flight tests. Over 1,500 compliance test flights along with more than 40,000 safe flight records, EHang 216-S has finally met all the requirement to complete a compliance review. The TC process has been conducted with a scientific rigor and authoritative oversight. The TC signifies that EHang 216-S is qualified for passenger-carrying commercial operations. It also marks the beginning of the new chapter as we are poised to take the leading commercial operations in the days to come. I want to thank the entire team at EHang as well as all the leaders and members of the CAAC and the review team for their support and dedicated efforts, and to all the people who support and are passionate about our development as well as the eVTOL industry.

However, we are fully aware that obtaining TC does not mean we have succeeded. Instead, it just makes the beginning of a new chapter for us. The TC has opened the door to rapid advancement in unmanned aviation industry and vast opportunities presented by the low altitude economy. It will propel China’s urban air mobility industry into the faster lane. As a pioneer in this field, we anticipate several firsts that await us to achieve on this journey. This include milestones such as the first EHang 216-S aircraft produced according to the TC officially rolling off the production line and a first batch of EHang 216-S operation sites and routes, the first commercial flight and the first passenger to buy a flight ticket. We invite you to stay tuned and witness these milestones as we progress forward.