ECARX Holdings Inc. (ECX) Q2 2026 Earnings Call Transcript

Over the past 12 months, a contributor to efficiency is the internal deployment of AI across our organization. This is changing the cost curve of the software development for us. With over 90% of our developers now use cloud code and other solutions in their workflow. This becomes structurally more valuable as our software footprint expands with the addition of FlyMe. On a sequential basis, we realize improvements across almost every key metric. Revenue up, cost downs, profitability increased. The only exception is the adjusted EBITDA, which remained a positive but was down from $4 million last quarter to $0.5 million in Q2, and improved annually by $30.2 million. To explain in more detail, last quarter's adjusted EBITDA of $4 million included that $14 million of partial monetization of our shareholdings in sign engine. which was a one-time item, and there was no similar one-time item this quarter. We are very pleased to have delivered our fourth consecutive quarters of a positive EBITDA, which is a testament both to the recovery in the market that we guided at Q1s and our robust cost discipline. Our confidence going into the second half of the year rests on three things. The first is the launch cadence, Peter described it, which leaned heavily toward the second half of this year. And the second is the order backlog underpinning those programs. The third is the historical seasonality of our business, where the second half was consistently carried the largest shares of annual revenue. With that confidence in mind, we are reaffirming our fall year 2026 revenue guidance of $1 billion to $1.1 billion. In summary, the second quarter delivered the rebounds that we guided to in April. Our cost structure continues to improve, and we have added materially to the strategic assets of this business to drive growth. We remain focused on the disciplined execution and creating long-term value for our shareholders. With that, I will hand back to Zui for his closing remarks.

Zui Zui Thank you, Dylan. As you've heard today, we have made meaningful progress across our strategic priorities for 2026 this positions us for growth in the near and long term in the first half of the year we entered into an agreement to expand our capabilities with the addition of the flying business portfolio we extended our global reach with the volkswagen commercial build out and we delivered a strong financial result on both top line and gross profit against the challenging backdrop. And I'd now like to open the call for questions. Operator, please open the line.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To whistle your question, please press star one and one again. Once again, that's star 1 and 1 to ask a question. Please stand by.

We will compile the Q&A roster.

We will now take our first question from the line of Wei Huang from Deutsche Bank. Please go ahead.

Thank you very much for taking my question. So first I would like to ask a bit about our gross margin. You have got it in 1-2 that's and in this quarter that our memory price are going to be pressuring on gross margin this year, but the 2Q hardware gross margin was quite strong, actually at 15%, even though memory prices also increased quite a bit this quarter as well. What is the outlook for the second half of the year?

Yeah, thanks. We are reiterated our comments about the margins at sets of earnings, and obviously the higher memory cost to support structurally the higher revenue as the balance is memory cost with our customers however this sort of a pass-through you know does come at the understandably lower margin and and we do the right things and you know it doesn't really indicate any negative about this business and you know in terms of the Q2's you you're right about this was a strong performance and that was it really driven by a few things and And first, with any cost increase in components in some of the which that we already have in stock. And there are timing discrepancy between the purchasing and the passing through. And also, the selling higher value products than we did last year. So pipes and torres are up significantly, which support both the revenues and revenue quality. And very importantly, we also did a great job on managing costs in the business, and we reduced our operating costs year over year, despite the growing revenue by 45%. So I think with all the elements and the reasons, that really helped during the second quarter.

Thank you very much. just to follow up a bit. So, can I assume that our memory purchase inventory is going to be depleted, and I guess the memory price hack is going to hit us more, I guess, in the third quarter and fourth quarter?

Wei, I'm sorry. The question wasn't very clear. Would you mind repeating it, please?

Yes, no problem. You stated that one of the factors that led to the strong hardware growth margin this quarter was the memory that you already had in stock. So, I assume as gets depleted, our margin is going to be more under pressure in the third quarter and fourth quarter.

Yeah, it is. And we're very working closely, our supply chain teams and also working very closely with the marketplace. So, we'll continue to manage that going forward. We do anticipate.

Yeah. So, this is Steve speaking. Sorry, I jumped in here. So, I would say our our supply chain team had a great job. So we built a very strong strategic partnership with CNXT and also Samsung. So we are our partner with them. So from memory supply point of view, we are very leading. And we had a very strong inventory and a future pipeline. Also, principally, I want to say and confidently that most of, I think most of increase actually pass over to the customer. So no impact on our gross margin, that's for sure. But we will strongly maintain our good supply chain operation to sustainably support our That's our very strong advantage in market growth.

Understood. Very clear. Yes, very clear. And then the second question is on our high-end and current types. You mentioned it increased quite a bit sequentially as well. Did you have a number for what percentage of our volume was it in the first quarter? because you said 2Q was 42%. I wanted to do a comparison on your basis.

I don't know if we have that number to hand. We can come back to you with that. I think we did talk about it at the Q1s, but let us confirm. I don't think we have that number to hand.

Maybe I just make some comments. We see very good traction on these two product lines and they continue to roll out across multiple customers for us in China and in the global market. I think they're two strong lighthouse project programs for the organization. So as I mentioned in my comments, Santora saw a 52% increase year-on-year. And I think on a year-on-year basis and on a quarter-on-quarter basis, I do suspect we'll continue to see increases in that platform. Pikes just launched last year, so it saw over a 2,000% growth year-on-year. And again, I'm very confident it will continue to grow, we're offering a great user experience to our customers on those two platforms, and I think they're solid performers for us in the market and show exceptional technology leadership.

Well noted, and I assume our product mix is also one of the reasons our ASP has increased to roughly around 360 US dollars in the second quarter. Do you have an idea on what's a reasonable level to assume for the third quarter and fourth quarter, assuming with the new product launches and the old models upgrading to these newer platforms, how much higher can this go?

I'm sorry, the question again was quite muffled. Would you mind repeating it?

Yes, no problem. I wanted to ask about our AST outlook for 3Q and 4Q, since it reached around 360 US dollars in the second quarter due to, I assume, higher shipments of Antor and Pykes. And given the new model launches and the old models upgrading their chips to the newer platform, how much higher can the CSP go?

So, Wei, I don't think we'll announce a specific number on that, but that's a trend that you should see from us, I think, and you see from most of the industry who's investing in new platforms and delivering these high-end user experience. You'll see that as just an industry trend, which we'll feel as a tailwind. So as our older products roll off and the newer, higher-performance products roll on, And the customer experience is actually a net decrease in their vehicle architecture costs because more functions go on to these platforms, more of the vehicle becomes software-defined. It actually enables the automaker to deploy additional features inside their vehicle environment. But with a higher-performance computer in the car and higher-performance software, we should continue to see, I would say, an increase in ASP.

Well noted. My last question is on our software license as well as the service business. So gross margin for these two should be declined sequentially for the second quarter. software license went to almost zero break-even and service course margin declined as well. Do you have anything to highlight that contribute to this or just normal businesses now?

The way perhaps I comment on that, the software line item in our financials is one that gets a lot of attention because it moves up and down by a big percentage every quarter, but it's a very, very small number. And the way that we think about that is that's generally around, say, a million to $2 million a quarter, except when there's a significant event in the quarter. We saw that in Q1 2025, for instance. But we encourage people not to focus too much on the movement within software. I think it's important to understand as well that a lot of what people might think of as software comes into our services line item as well. I think the movements around margin on those are just just general business dynamics as the quarters move over it's principally driven by by new product launches and being specified on platform very much that's all for me thank you thanks we appreciate it thank you to ask a question please press star one one on your telephone once again that's star one and one to ask a question there are no further questions at this time I would now like to turn the conference back to mark Hankinson for closing remarks thanks very much operator and thanks for joining today the second quarter clearly reflected strong execution we saw this demonstrated throughout our financial performance and we saw it in progress against our strategic objectives he corrects is positioned to become a leading global supplier of innovative next-generation solutions for OEMs, and we look forward to providing more updates on our progress in the second half of the year. So thank you very much, and with that, we'll conclude the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.