Hello, ladies and gentlemen. Thank you for standing by. Welcome to Hesai Group's first quarter 2026 earnings conference call. At this time, all participants are in listen and limoed. Please note that today's conference call is being recorded. I will now turn the call over to our first speaker today, Wang Ting-shi, the company's head of capital markets.

Please go ahead. thank you operator hello everyone thank you for joining her side groups first quarter 2026 earnings conference call our earnings release is now available on our IR website at investor.herstitech.com as well as via newswire services today you will hear from our CEO dr. David Lee who will provide an overview of our recent updates next our CFO mr. Andrew Sam will address our financial results before we open the call for questions before we continue I refer you to the safe harbor statement in our earnings press release which applies to this call as we will make forward-looking statements please also note that the company will discuss non-GAAP measures today which are more thoroughly explained and reconciled to the most comparable measures reported under a gap in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Lee. David, please go ahead.

David Lee Lee Thank you, Yunting, and thank you, everyone. Today, we are incredibly honored and excited to announce that Hoosai serves as strategic LiDAR partner and confirmed supplier for Mercedes-Benz models, enabling Level 3 autonomy. We see this as a major milestone, not only a strong validation of our technology leadership, but also a clear signal that LiDAR is moving to core infrastructure in a global evolution of intelligent driving. More importantly, I am thrilled to announce that HESAI has officially entered a new era of growth and possibility. 2026 marks a transformative chapter for us as we initiate a strategic paradigm shift evolving from spatial perception to spatial intelligence. Beyond our LiDAR business, we are actively forging the eyes and muscles of physical AI. This evolution underscores what has always been at the core of Horsai's DNA, A deep tech enterprise that leverages hardcore technological innovation and sustained R&D intensity to deliver the world's most cutting-edge products, ultimately unlocking profound long-term industry value. At our recent 2026 Tech Open Day, we unveiled several breakthrough innovations that we believe will redefine the industry landscape. I will come back to these in more details later in my remarks. Before turning to the broader opportunities in physical AI, let me first walk through our LiDAR business highlights for the quarter. Last year, we delivered a record 1.6 million LiDAR units. This year, we expect our total shipments to approximately double, reaching between 3 to 3.5 million units. We are confident that this level of scale firmly reinforces our leadership position in the global LiDAR industry. The trend we highlighted before is only accelerating. LiDAR is fast becoming the invisible airbag deployed across vehicles at scale. This was clearly demonstrated at a recent Beijing Auto Show, where Hesai LiDAR was featured in 56 vehicle models across 24 leading automotive brands, ranking number one in LiDAR presence across exhibited models. At the show, our LIDARs were deployed across the automotive ecosystem, from leading brands such as Audi, Cadillac, Lotus, Li Auto, Xiaomi, BYD, Leap Motor, Geely, Great Wall Motor, Chang'an, Cherry, to autonomous driving leaders like Pony AI and WeRide. This broad adoption reflects our deep ecosystem penetration and the growing strength of the Hezai Insai effect. According to Yoh Group, we ranked number one globally in long-range ADAS LiDAR shipments with a 43% market share in 2025. Our leadership only strengthened in March 2026 when our China market share surged to 55% according to GASGU, roughly triple that of the second-ranked player, marking our 14th consecutive month in the number one position. This momentum was fueled by our industry-leading product portfolio, with our flagship ATX continuing to scale across major platforms. In April 2026, we began SLP for the revamped version of ATX. OEM demand remained exceptionally strong, with backlog now exceeding 6 million units. As Level 2 scales, Level 3 is emerging as the next major growth driver for the LiDAR industry. As responsibility shifts from the driver to the automaker, vehicle safety requirements are rising rapidly. Striving architectures from typically one LiDAR per vehicle last year, representing roughly $200 US of LiDAR content per car, to three to six LiDARs in Level 3 platforms, increasing content to about US$350 in entry-level multi-LIDAR setups, and US$500 to US$1,000 in more advanced configurations. We are well positioned for this transition, with multi-LIDAR design wins secured across leading OEMs such as Li-Auto, Xiaomi, and Chang'an. Notably, Li-Auto officially commands deliveries of its multi-LIDAR model on May the 15th, 2026, marking the first mass production deployment of our FTX Blindspot LIDAR. Level 3 is not just about more sensors. It fundamentally elevates the role of LIDAR from a passive backup to an active decision enabler in safety-critical driving scenarios. To lead this shift, we introduced PICASO, the world's first 6D full-color ultra-sensitive SPAD SOC. It fuses RGB color and precise 3D geometry at the true chip level, generating real-time, colorized point clouds. In plain terms, it enables systems to see and understand the world more like humans do, and directly addresses the long-standing LiDAR versus camera debate. For the first time, we are delivering a unified perception stack in a single chip, bringing both worlds together and taking a real leap in how machines perceive and understand the physical world. For example, through native pixel-level fusion of color and depth, Picasso-equipped LIDARs help address challenging real-world edge cases across intelligent systems, not only in autonomous driving, but also in robotics and industrial applications, such as distinguishing overlapping traffic lights at adjacent intersections, or differentiating a yellow signal from sunlight, scenarios where vision-based systems can struggle. Powered by the Picasso platform, our flagship ETX LiDAR now supports up to 4,320 channels and delivers a maximum 600-meter range, enabling ultra-high-resolution, full-color 3D imaging. With enhanced small-object detection, ETX pushes safety margins to unprecedented heights. Commercial momentum is already building for this industry-first technology. We secured an exclusive design win with Cargobot for its Phase II transport robots, deploying our 4,320-channel ETX together with FTX blind-spot LIDARs. This marks the first commercial vehicle contract for our 6D full-color LiDAR. ETX is expected to enter mass production in the second half of 2026 across multiple flagship programs, with additional engagements actively progressing among both ADAS and robotics clients. Looking ahead, we see LiDAR expanding far beyond today's boundaries, with many camera-dominated applications naturally shifting toward LiDAR over time, positioning us for the next wave of physical AI. On the global side, we are incredibly honored and excited to announce that QSI serves as strategic LiDAR partner and confirmed supplier for Mercedes-Benz models, enabling Level 3 autonomy. The new supply agreement supports Mercedes-Benz programs in Europe and China, with LiDAR production supported by Hesai's new Galileo Manufacturing Center in Thailand. In parallel, we continue to deepen our footprint with Chinese joint ventures as well as fast-growing Chinese automakers expanding overseas. We have been selected for GAC Toyota's 2026 BZ3X model, marking our first entry into the Japanese automotive ecosystem. We have also secured new overseas design wins with Xiaomi, one of our largest customers, with SOP expected to begin in 2027. Looking ahead, we see strong and sustained momentum driven by both global OEM partnerships and the continued international expansion of Chinese automakers. Together, these two forces are becoming the key structural growth drivers for Hesai in the years ahead. Beyond ADAS, robotics is emerging as an addressable market, roughly 10 times larger. We are already a leader across key segments, including humanoid and quadruped robots, robotaxis, robovans, and robotic lawnmowers, ranking number one according to GGII, Yul Group, and Frost & Sullivan. To share a few recent highlights, in Humanoid Robotics, our JT128 LiDAR-powered honors lightning robot to deliver a championship-winning performance and break the human world record at the world's first humanoid robot half marathon. In RoboVans, we secured an exclusive design win with Xelos for 200,000 LiDAR units and deepened our partnership with Neolix as its largest LiDAR supplier. We are also expanding into smart mobility, with an FTX design win from Neol Technologies for next-generation electric two-wheelers, a market with more than 60 million units sold annually in China. Having established ourselves as a global leader in 3D perception solutions, one thing is clear. Bringing AI into the physical world takes more than just LiDAR. That's why we are taking our most exciting step yet, expanding from spatial perception to spatial intelligence. To build an uncompromised digital foundation for the physical AI era, we introduced COSMOL, an AI algorithm-integrated spatial intelligence device. As physical AI accelerates, we believe richer, higher-fidelity spatial data is becoming an increasingly scarce strategic resource, arguably even more critical than computing power itself. COSMOL is purpose-built to break this bottleneck. Unlike traditional 3D reconstruction solutions that rely on bulky hardware and costly workflows, Cosmo combines HLISA's ultra-high-precision LiDAR with proprietary 3DGS and AIGC algorithms to rapidly generate photorealistic, production-grade 3D environments at scale. For a 200-square-meter space, Cosmo requires only one-fifth the time of existing three DGS solutions and roughly one-fiftieth the time of traditional methods, with dramatically lower labor costs. More importantly, Cosmo is far beyond a hardware-AI-integrated product. It is the starting point of a scalable new business model, combining hardware, AI software, spatial data, and future platform services, creating recurring revenue streams, strong ecosystem effects, and a durable long-term moat. We believe Cosmo unlocks trillion RMB downstream opportunities across robotics, simulation and training, immersive media, 4D entertainment, and beyond. Commercial traction is already building rapidly. We are actively engaging with the powerhouse roster of industry leaders, spending global pioneering embody AI companies and top-tier entertainment studios to market-leading tech giants, AI-driven industrial titans, and global luxury brands, with some customers already having place orders. We are incredibly excited about the long-term growth potential ahead. Beyond perception, bringing AI into the physical world also means enabling it to act, giving it the muscles to truly come to life. This leads to our next strategic pillar, robotic actuation modules. This is a natural extension of our systemic expertise in materials, simulation, physical design, and the manufacturing of delicate components. We also bring proven know-how gained from millions of in-house developed automotive-rate motors and encoders deployed in our LiDAR products. Consider this a first glimpse, an Easter egg.

More exciting updates will follow in the near future.

To wrap up, let me bring us back to the core theme today. our evolution from spatial perception to spatial intelligence we are executing this across three clear dimensions first preceding the world powered by our chip-based lidar solutions giving robots the eyes to see the physical world in high fidelity second understanding the world with Cosmo and its ecosystem, transforming rich spatial data into actionable intelligence for real reasoning and decision-making, changing the world through our robotic actuation modules, the muscles that allow machines to truly interact with the physical world and serve humanity. Together, these are unlocking powerful new growth engines and positioning us as a core enabler of physical AI, digitizing the real world and redefining how humans and robots perceive and act with that I will now turn the call over to Andrew to discuss our financial performance and outlook Andrew please go ahead quarter financial and operating performance I would like to provide an important update on our financial

reporting structure as David highlighted 2026 marks a year of strategic evolution for her side as we expand our boundaries to become the key enabler of physical AI to better reflect this shift and further enhance our disclosure transparency starting this quarter we are updating our segmentation into two distinct categories our core LiDAR business and our strategic growth initiatives or SGI which includes our new AI algorithm integrated spatial intelligence device, COSMO. We believe this updated reporting framework will help investors better appreciate the distinct financial profiles, independent growth trajectories, and underlying value drivers of these two segments. By separately reporting our robust, rapidly scaling core LIDAR business from our highly transformative SGI segment, we aim to provide you with clearer visibility to better model model our business, and track how each engine contributes to our long-term shareholder value. Let me walk you through our first quarter operating and financial performance, followed by our outlook for the second quarter and the rest of 2026. To be mindful of the length of our call, I encourage listeners to refer to our earnings release for further details. We kicked off 2026 with strong momentum and delivered another strong quarter of robust growth, improving scale, and disciplined profitability. Starting with the top line, total net revenues reached RMB 681 million or U.S. dollars 99 million, representing an increase of 30% year-over-year. This marks our eighth consecutive quarter of year-over-year revenues growth, reflecting both sustained demand across our core markets and our ability to scale with consistency and operational rigor. This performance was supported by total LiDAR shipments of over 471,000 units for the first quarter, with both broad-based ADAS and robotics shipments more than doubling year-over-year. Our growth margin for the quarter stayed healthy at over 39%. On operating expenses, we maintained a disciplined approach while continuing to invest strategically in long-term growth. During the quarter, total operating expenses increased by 9% year-over-year, primarily reflecting targeted R&D investments in the new initiatives that David outlined earlier, partially offset by savings from skilled adoption of AI tools across the company. Excluding these investments, our LIDAR operating expenses declined year-over-year, driven by ongoing efficiency gains and cost discipline. This brings us to the underlying profitability of our two segments. For the first quarter, our LIDAR business delivered a robust operating profit of RMB 42 million, demonstrating its strong self-sustaining profitability. Meanwhile, our SGI business recorded an operating loss of RMB 51 million, representing our deliberate and forward-looking investment in building the infrastructure of physical AI. As a result, we delivered GAAP net income of RMB 18 million or U.S. dollars 2.7 million and non-GAAP net income of RMB 48 million or U.S. dollars 6.9 million for the quarter. This extends our track record to four consecutive quarters of GAAP profitability and six consecutive quarters on a non-GAAP basis. The sustained profitability reflects the strength of our operating model and the benefits of scale as our business continues to expand, firmly positioning us at the forefront of the industry. Looking ahead, we expect to build on this strong momentum. For the second quarter of 2026, we expect net revenues to be in the range of R&B 850 million to RMB 900 million, or U.S. dollars 123 million to U.S. dollars 130 million, representing year-over-year growth of approximately 20% to 27%. We also expect revenue momentum to strengthen progressively each quarter throughout the year. From a broader perspective, we believe our business is entering a more sustainable growth trajectory our core LIDAR business will continue to drive growth scale and cash generation while SGI is beginning to contribute and significantly expand our long-term growth potential supported by our strong customer base and the momentum from early adoption we expect SGI to generate approximately R&B 100 million in revenues this year with revenue contributions expected to start in the second quarter of 2026 looking further ahead we aim to scale this to around R&B 500 million by 2027 and over time establish it as a meaningful and long term growth driver for her side together these developments are accelerating our evolution into a key enabler of physical AI unlocking the next phase of growth with greater scale and global impact this concludes our prepared remarks today operator we are now ready to take questions thank you if you wish to ask a question please press star 1 on your telephone and wait for your name to be announced if you wish to cancel your request please press star 2

if you're on a speakerphone please pick up the handset to ask a question for the benefit of all participants on today's call if you wish to ask your question to the management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow up with your next question. Your first question comes from Tina Howe with Goldman Sachs.

Hi management, thank you very much for taking my question and congrats on a strong set of results and also very excited about our new opportunities So my question is more related to our announcement with Mercedes-Benz and supplying to their L3 models going forward. So just wondering, how should we think about the opportunity in terms of volume, revenue, and margin contribution over the next, let's say, one to three years and then longer term from this collaboration? Thank you.

Tim Sa with Morgan Stanley.

Hi, this is Tim from West Indy. Thanks for taking my questions. So, switching gears to the spatial intelligence device, but as we noticed, Cosmo has already received early orders, and it's also highlighted in the announcement that there's a scalable business model. So, wondering if you could elaborate a bit more about how we should think about the fundamental the difference or with synergy between the Cosmo and the conventional light-up business. Are there any comparable products currently available in the market? And how does Cosmo stand out against such alternatives, if any? Additionally, it would be great if the management team can share more details regarding the existing client base. I think David also shared a lot of information. In the meantime, the timeline for consumer-facing rollout, as well as your expectation for financial contribution from Cosmo. Yeah, that's a few follow-ups. Thank you.

Thank you very much for sharing all the details, David.

The question comes from Nora Ming with UBS.

Hi, this is Nora Ming from UBS. Thank you for taking my question. So my question is about your progress of the humanoid robot actuator business, And what do you think is the current technical bottleneck and who are your potential customers? Also, are the actuators for the body or hand?

Hi, thank you for taking my question. My question is around the strategic growth initiatives as well. Could you talk about the ASP revenue and also margin on both the Cosmo and also robotic actuator modules?

Thank you for the question. This is Andrew.

Both the robotic actuation modules and COSMO are part of our new strategic growth initiatives, or SGI, segment. Think of this as an early-stage innovation layer sitting alongside our core LiDAR business at this stage. Because these products are still in early commercialization, we are reporting them on a consolidated basis within SGI rather than splitting them out individually. On the revenue side, we expect SGI to start contributing in the second quarter this year. With strong early customer interest and initial adoption, we currently anticipate around R&B $100 million in full year 2026 revenues. Looking further out, reaching around R&B $500 million in 2027. and over a longer horizon. Within five years, we believe this business could grow to a scale that is compared. SGI is expected to be accretive to group gross margin over time as an assessment scale. Cosmo in particular, not just the hard ability, has been a very early deployment phase. So current pricing is highly customized and driven by pilot representatives or provide more normalized units.

Sure.

Thank you very much, Andrew. Your next question comes from Dan Lin-Man with CICC.

Hello, everyone.

This is Dan Lin from CICC Auto Team. Thanks for taking my question, and congratulations on your strong regards and exciting partnership with providers. My question is regarding your castle chief. We think the market is keen to understand how your product interacts with cameras, and to what extent can 6D later replace certain camera functions? And additionally, some of your peers are also promoting camera-related fusion solutions. How does your approach differ from years?

And what has the customer feedback been so far? Sanxin comes from Jeff Chang with Citi.

Hey, hi, David. What's the updated 226 revenue forecast right now? And how much SGI contribution to the three-year revenue? First question. And secondly, if we take out the 100 million RMB revenue from SGI in the second quarter, the core revenue excluding SGI Q1Q growth will become 18%. Would that be a little bit conservative? And finally, any volume guidance for the second quarter?

For the second, the range of RMB, 850 to 900 million, with around 650,000 LIDAR shipments. Importantly, the second quarter will also mark the initial revenue contribution from SGI. Growth margin has remained resilient even as our ADAS business continues to scale rapidly. We've now delivered a gap net income for four consecutive quarters and non-gap net income for six consecutive quarters, and we expect to maintain this momentum. And if you look at the pattern of our business and OEM production cycles, we also expect financial performance to continue improving sequentially through the year, with SGI expected to contribute around R&D $100 million in 2026 during this early year. For the full year 2026, we are reaffirming our LIDAR Sherman guidance of a record 3 million to 3.5 million units. We remember the trajectory, separating drivers, including higher LiDAR penetration across the market, increasing LiDAR content per vehicle as the industry moves toward Level 3. Global ADAS programs, including the overseas expansion of Chinese OEMs, as well as broader robotics adoption across increasingly diverse applications. executing strongly across all of our business continues to serve as a very solid foundation leadership and global scale. Extremely excited about the future of SGI, and we look forward to sharing more updates on these new businesses. My answer to your question.

Thank you.

Question comes from Zhang Yu with Hotai Securities.

Hi, management.

This is Zhang Yu from Hotai Security. I have a question about ASP. How do we interpret the ongoing decline in LIDAR ASP and what's your long-term outlook for pricing as the market matures?

Headline blended ASP are becoming a mainstream standard across both automotive and...

Next question comes from G.L.U. with BFCI. Hello management sirs, thank you for taking my questions.

I have a question regarding the competition dynamics. Over the past few years, the LIDAR industry has been focused on cost reduction. However, in the beginning of this year, we've observed a shift towards performance rates such as escalation in channel counts, why the technology roadmap has begun to convert. So how does management envision the evolution of the competitive landscape of the LIDAR industry? What will be the key differentiator for Hesai to maintain its leadership?

There are no further questions at this time. I'll now hand back to Wang Tingxi for closing remarks.

Thank you once again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you and goodbye.

That does conclude our conference for today. Thank you for participating. You may now disconnect.