Earnings Call Transcript - HSAI Q4 2024

Operator, Operator

Hello, ladies and gentlemen. Thank you for standing by. Welcome to the Hesai Group's Fourth Quarter and Full Year 2024 Earnings Conference Call. Please note that today's conference call is being recorded. I will now turn the call over to our first speaker today, Yuanting Shi, the Company's Head of Capital Markets. Please go ahead.

Yuanting Shi, Head of Capital Markets

Thank you, operator. Hello, everyone. Thank you for joining Hesai Group's fourth quarter and full year 2024 earnings conference call. Our earnings release is now available on our IR website at investor.hesaitech.com, as well as via Newswire services. Today you will hear from our CEO, Dr. David Li, who will provide an overview of our recent updates. Next, our CFO, Mr. Andrew Fan, 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'll 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 GAAP measures in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead.

David Li, CEO

Thank you, Yuanting, and thank you, everyone, for joining our call today. Let’s start with a look back at the exciting journey we have throughout 2024. 2024 was a transformational and breakout year for Hesai with LiDAR shipments and net revenues hitting record highs. Driven by accelerating LiDAR adoption in the ADAS and robotic sectors, we solidified our industry leadership and shipped over 500,000 LiDAR units in 2024, achieving an impressive growth rate of more than doubling each year for four consecutive years. Fading the rising tides of LiDAR storing demand and leveraging our unmatched vertical integration capabilities and economies of scale, we delivered the strongest financial performance in the global LiDAR industry with the highest net revenues and blended growth margins. Most notably, we made history as the world's first LiDAR company to achieve full-year non-GAAP net profit, all while further strengthening our unmatched financial leadership with solid positive operating and net cash flows, making us the only company of our kind in the industry. Building on this momentum, we would love to share our three expected goals for 2025. First, we are projecting 1.2 million to 1.5 million LiDAR shipments with nearly 200,000 of those being high-margin robotic LiDAR units. Second, we aim to achieve net revenues of RMB3 billion to RMB3.5 billion. And third, we expect to achieve GAAP profitability of RMB200 million to RMB350 million. This marks a significant leap from non-GAAP breakeven in 2024, solidifying our trajectory towards long-term success. Now let's zoom out and look at the bigger picture. China is leading the charge in electrification, with EV making up nearly 50% of the passenger vehicle market in 2024. As EVs become the new norm, the battlefield is shifting to ADAS and vehicle intelligence, critical areas where OEMs are fiercely racing to set themselves apart. According to projections, ADAS is poised for explosive growth, with market penetration expected to skyrocket from just 8% in 2023 to a staggering 70% by 2030 in China. This trajectory mirrors adoption curves of smartphones from 2008 to 2015 and EVs from 2019 to 2026, signaling a transformative decade ahead. The long-term macro trends are directly reflected in the bold actions of OEMs in China. In 2025, our key customers, such as BYD, Changan, and Leapmotor, are ramping up their strategic upgrades, driving the push to make intelligent driving mainstream. ADAS is more affordable and accessible than ever. Even more revolutionary is their universal intelligent driving strategy, which integrates cutting-edge ADAS across the new vehicle lineups, also shattering price barriers. With LiDAR-equipped models now entering the RMB100,000 range, advanced driving technologies are within reach for a wider audience. We're thrilled to witness the democratization of intelligent driving technology and excited for what's ahead. As ADAS becomes ubiquitous, so does the demand for enhanced perception and safety, driving the rapid rise of LiDAR adoption. Fueled by the growing acceleration of ADAS and autonomous driving, along with mass market adoption, LiDAR integration in EVs in China is set to surge from just 8% in 2023 to 20% in 2025 and then to an impressive 56% by 2030, according to Goldman Sachs estimates. The future of driving is here, and LiDAR is at the forefront of this revolution. The surge in LiDAR adoption is a testament to our long-held belief in LiDAR's three core values, making cars safer, smarter, and more desirable than ever. First and foremost, LiDARs are becoming as essential as seatbelts, propelling LiDARs into the mainstream. Camera-only systems have been linked to crashes with stationary emergency vehicles and unexpected road hazards, as reported by the Wall Street Journal in 2024. In contrast, LiDARs outperform cameras by cutting through glare and darkness while accurately detecting irregular small objects and other corner cases without matched 3D clarity and perception. Research shows that integrating LiDAR into a vehicle can reduce severe accidents by up to 20% and improve overall crash avoidance by up to 9%. As reported by Li Auto last quarter, their active safety features have prevented over 3 billion potential accidents, including 516 severe accidents. In the race towards higher levels of autonomous driving, while safety is paramount, LiDARs aren't just nice to have; they are a game changer, actively protecting you and your loved ones on the road. Second, LiDARs do more than just keep you safe. They supercharge advanced driving features like urban NOA, chassis tuning, and automated parking. In urban NOA, nearly 100% of the models use LiDAR for precise perception enabling smooth lane changes and obstacle avoidance in complex environments. For chassis tuning, LiDAR scans a road in real time, detecting conditions up to 150 meters ahead, including speed bumps and potholes. It then adjusts the suspension for better battery efficiency and ride comfort. In automated parking, LiDAR accurately maps the space and detects obstacles, offering robust performance in low-light conditions and ensuring precise space parking, even in the tightest spots. Our client recently said, 'true high-level intelligent driving starts with LiDAR.' Finally, LiDARs are more than just a technical advancement; they are a statement of style and sophistication. Cars with LiDARs are seen as premium, cutting-edge, and safer. That's why Chinese car makers are positioning LiDARs front and center, showcasing them as a badge of innovation. A perfect example is Great Motors' Wey Lanshan, one of China's largest shippers, which launched in August 2024 with our AT128 LiDAR as a standard. The result? A sales explosion. By December 2024, monthly sales surpassed 8,000 units, three times the sales of the previous model that didn't feature LiDAR. These core benefits are driving LiDAR into the spotlight, earning recognition from both OEMs and consumers alike. We are committed to lowering the barriers to LiDAR adoption and driving technological equality. ATX LiDAR, our category-defining product, delivers unbeatable cost performance priced at just $200. Equipping vehicle models starting as low as 100k RMB, it offers OEMs a budget-friendly LiDAR solution designed to drive widespread adoption. With mass production kicking off in Q1 2025, the ATX LiDAR has already secured design wins with 11 OEMs, fueling the democratization of vehicle intelligence. This is opening doors, bringing new clients, and converting others from rival suppliers. We are particularly proud of our client partnerships with Chery, one of China's top three automakers and a major automotive group that includes the VOYAH premium EV brand. VOYAH's flagship electric MPV is a market powerhouse, shipping over 10,000 units per month. Production for these exciting wins kicks off in the second half of 2025 and is expected to accelerate in 2026. In addition, our order book continues to diversify and expand as we forge new relationships and strengthen existing ones. In February, BYD, the world's largest EV maker, announced that all its models will feature next-generation ADAS, God's Eyes, making it accessible to everyone. LiDAR will power two variants of this system, which is key from urban to highway NOA. We've deepened our collaboration with BYD and will supply LiDAR for more than 10 of its models set for mass production in 2025. But this is just the beginning. Our momentum is unstoppable. We've also secured exclusive ATX LiDAR design wins with Great Wall Motors and Changan, two of the top ten Chinese automakers covering multiple top-performing brands, including bestsellers being slated for mass production in 2025. This marks a major leap for us, accelerating LiDAR adoption in mass market vehicles and vastly expanding our total addressable market. Building on our stellar domestic ADAS performance, we are thrilled to announce yet another major milestone as we expand further onto the global stage. We are beyond excited to be awarded a new groundbreaking exclusive design win with a top European OEM, further deepening our collaboration. This multi-year program will last into the next decade across both ICE and EV platforms, marking it the largest global program for the automotive LiDAR industry. This long-term partnership is a resounding endorsement of our unmatched performance and quality. Meeting the rigorous standards of a global market leader, our quality has become our name card, a powerful symbol of excellence and a vote of confidence in our visionary future. As we continue to push the boundaries of innovation, our unwavering commitment to delivering unparalleled quality and exceptional products propels us towards an even more exciting future. Our momentum is real. As of today, we have already secured design wins for 120 vehicle models across 22 OEMs worldwide, including the remarkable nine out of the top ten largest automakers by Market Cap in China. It's just a win. That's a statement. A statement of industry leadership, trust, and the sheer power of our cutting-edge technology. In 2025, with demand surging, we're launching new production lines in Q1, which will begin production in Q3. By the end of the year, our annualized production capacity is expected to reach 2 million units. We are not just building LiDAR, we're reshaping the future of mobility. We are bringing intelligence and safety to everyone and everywhere. This isn't just innovation; it's a movement and we are leading it. Meanwhile, enormous opportunities await us beyond the ADAS sector. We're taking our mechanical LiDAR solutions to the next level, expanding into the broader robotics market. Our newly launched JT Mini LiDAR is already redefining robotics navigation with this innovative hyper-hemispherical field-of-view ultra-light compact design. It's ideal for a diverse range of robotics applications: humanoid robots, delivery robots, cleaning robots, AGVs, port and yard automation, stationary applications, and many more possibilities worth exploring. We've also capitalized on the booming robotics market with the JT LiDAR and we are thrilled to announce a partnership with a leading smart home robotics company for mobile robotic lawnmowers, forecasting to deliver a six-digit order in 2025. This order book is expected to grow with clients expensing into new models launched in 2026 and beyond. Additionally, JT has also secured orders from an autonomous agricultural vehicle solution partner to the world's largest manufacturer of compact construction equipment. This further signals JT as the go-to choice for the booming robotics market, and we're only beginning to unlock its full potential. Building on the strong momentum of our JT series, we have also made significant strides in broader robotics applications. In Q4 2024 alone, beyond JT, we shipped approximately 7,000 robotics LiDAR units to L4 customers, powering thousands of autonomous vehicles. Our robotic LiDAR is fueling the robotaxi boom, transforming industrial automation and pushing the boundaries of autonomy. We are the exclusive long-range LiDAR supplier for all of China's top 5 robotaxi companies, including Baidu's Apollo Go. We're also the sole supplier for a leading global robotaxi player, which clocked nearly a million autonomous miles in 2024 and is set for significant fleet expansion in 2025, all powered by our Pandar and QT Series. Beyond mobility, our XT Series LiDAR is driving advanced 3D vision for different applications, robots, and automating in-plant driving systems at BMW factories. These partnerships unite industry leaders in autonomous driving and sensing technology, paving the way for the future of robotics. Finally, I would like to extend my gratitude to our incredible team for an outstanding year. While we've made huge strides, we know this is just the beginning of an exhilarating journey. We are on a mission to redefine the future of mobility and revolutionize robotics with our cutting-edge technology. As we continue to push boundaries, I'm confident that our innovations will not only reshape how people and goods move, but also unlock opportunities for growth, efficiency, and sustainability. I will now turn the call over to Andrew to share more details on our financial performance and outlooks. Andrew, please go ahead.

Andrew Fan, CFO

Thank you, David, and hello, everyone. Let's go through our operating and financial figures for the fourth quarter and full year 2024. To be mindful of the length of our earnings call today, I encourage listeners to refer to our fourth quarter earnings release for further details. Beginning with the numbers for the full year 2024, our net revenues increased to record high of RMB2 billion, or USD285 million, the highest in the global industry. Shipments in 2024 exceeded 500,000 units, more than doubling 2023's total, highlighting our robust growth trajectory. December was a particularly strong month as we set an industry first with 100,000 monthly shipments, a stellar achievement, especially when compared to global peers who are still shipping in the lower thousands per quarter or even per year. Of the 100,000 units shipped in December, over 20,000 were delivered to our rapidly expanding robotics business, marking a significant leap forward for this booming market. In the fourth quarter 2024, our blended gross margin remained healthy at 39%, down from the third quarter, primarily due to a decrease in higher margin NRE revenues and a shift in product mix towards ADAS shipments. More importantly, we hit a pivotal milestone with our business turning profitable. We are extremely proud to be the world's first LiDAR company to achieve full-year non-GAAP net profits of RMB14 million or USD1.9 million, marking a significant leap from our non-GAAP net loss of RMB241 million or USD34 million in 2023. At the same time, we further cemented our industry-leading financial strengths with a full-year positive operating cash flow of RMB63 million or USD8.6 million. 4Q 2024 was a standout quarter, driving a strong inflow of operating cash flow at RMB641 million or USD88 million. These accomplishments not only validated our business model but also solidified our leadership in the LiDAR market, demonstrating how innovation and a strong financial performance can go hand in hand as we continue to drive the future of autonomous technology. Looking ahead to 2025, we are preparing for another strong year that will reinforce our market leadership and drive further market share gains. We expect net revenues for the full year to be between RMB3.0 billion or USD411 million to RMB3.5 billion or USD480 million, representing a year-over-year increase of approximately 44% to 69%. This growth will be driven by total shipments projected to reach 1.2 million to 1.5 million units, with over 80% of units coming from the ADAS sector. A key driver of our rapid shipment growth is the increasing adoption of our newly released ATX LiDAR, a category-defining LiDAR priced at approximately $200. It has quickly gained traction with OEMs, increasingly adopting it as a standard feature or integrated into mass market vehicles. We anticipate it will contribute between high six digits and nearly 1 million units to total shipments in 2025. While positioned as a lower-priced offering to accelerate mass market penetration, the ATX cost structure has been carefully optimized with 100% of the key components designed in-house, ensuring that we maintain a healthy margin for this product. Our LiDARs are also gaining tremendous momentum in the robotics market, driven by the newly launched JT Series, our mini 3D mechanical LiDAR, now seeing strong adoption across AGVs, service robots, stationary solutions, and more. We are excited to have secured a major multi-year order for mobile robotic lawnmowers from a leading smart home robotic company with six-digit shipments of JT expected in 2025. Mass production of the JT series began in December 2024, with over 20,000 units shipped in the first month alone. We anticipate its average gross margin to align with our existing mechanical LiDARs, reinforcing its strong financial contributions. Meanwhile, our Pandar and XT series LiDARs continue to power a wide range of robotics applications, such as robotaxi and industrial automation. With pricing for our robotic LiDARs, including the JT, XT, and the Pandar series, ranging from low thousands to over RMB100,000, we provide a versatile portfolio to meet diverse robotics needs. Robotics LiDAR shipments are expected to reach nearly 200,000 units in 2025, marking a major milestone in our robotics expansion. Lastly, for the first quarter of 2025, we expect the net revenues to be between RMB520 million, or USD71 million and RMB540 million, or USD74 million, representing a year-over-year growth of 45% to 50% with a total shipment volume of approximately 200,000 units. We expect the revenue and the shipment momentum to strengthen progressively each quarter throughout the year. In terms of our blended gross margins, we expect a full-year target of around 40%. At the same time, we will continue to strategically invest in R&D to enhance the competitiveness of our technologies and strengthen product roadmaps while maintaining disciplined cost controls. This balanced strategy drives us towards incredible success. We are forecasting GAAP profitability to reach RMB200 million to RMB350 million with non-GAAP profitability soaring to RMB350 million to RMB500 million, an astounding 25x to 35x our 2024 non-GAAP profits. This explosive growth not only sets the stage for unstoppable growth but also cements our path to long-term industry leadership. This concludes our prepared remarks today. Operator?

Tim Hsiao, Analyst

Hi. This is Tim from Morgan Stanley. Congratulations on the great results and thanks for taking the questions. So I just have one question about the guidance. During the presentation just now, I think David and Andrew shared the robust sort of revenue and bottom guidance for the full year 2025. Given several moving factors, could you please share more detailed guidance about how a quarterly volume trajectory will look like, the product mix of the ATX or the AT by 1Q, potentially impacting the ASP erosion as well as the gross margin trend throughout the full year 2025. And I think gross profit margin was stated as a healthy level. So what's the healthy levels Andrew referred to? Is that 40%? And in the meantime, we noticed that 2025 would be another profitable year. I just wanted to double confirm that if we should expect every quarter, including the first quarter in the low season, to be profit-making. Yes, that's my question. Thank you.

Andrew Fan, CFO

Thank you, Tim. Let me take this question. Regarding our guidance for first quarter 2025, revenue-wise, we expect to have revenue between RMB520 million to RMB540 million, a strong year-over-year increase of 45% to 50%, mainly driven by the rapid adoption of LiDAR in passenger cars in China. However, quarter-over-quarter growth was lower due to seasonal factors. Regarding volume and ASPs, we expect the first quarter '25 shipments to reach approximately 200,000 units, with quarterly volumes increasing sequentially throughout the year. And this number is also similar to our Q4 volume. In Q1, the AT128 is expected to have an annual price decline to the teens from $400 in 2024 to around $350 this year, while remaining the majority of the ADAS shipments in Q1. Meanwhile, the ATX priced at approximately $200 has begun shipping in Q1. Additionally, a higher-priced ultra-high-performance AT product series will be priced around $500 and is set to enter SOP in Q2 this year. Gross profit margins-wise, we expect it to be close to 40% considering the large contribution from ADAS shipments in Q1. Profitability-wise, despite the seasonality in Q1, we anticipate a year-over-year improvement in net loss of approximately 50% with a rebound to profitability expected in Q2. The breakeven point will be between Q1 and Q2. For the full-year guidance, revenue-wise, reflecting the strong demand from both ADAS and robotics, we are forecasting RMB3 billion to RMB3.5 billion in revenues for 2025, with ADAS accounting for roughly 60% to 65% in total revenues. Volume, we are expecting 1.2 million to 1.5 million total shipments in 2025 based on our customer forecasts, i.e., 1.0 million to 1.3 million units from ADAS and nearly 200,000 from robotics. For the ADAS segment, we have discussed the multiple industry trends during our earnings call where LiDAR adoption is skyrocketing as more customers recognize the three core values of LiDAR, making cars safer, smarter, and more desirable than ever. In recent quarters, we have secured significant design wins for new car models SOP in 2025 and beyond. Some of our major customers' top-selling models, including those from Li Auto, Xiaomi, BYD, and Leapmotor are driving LiDAR into the mainstream. Additionally, some of our clients are adopting LiDAR as a standard configuration starting 2025. For 2025, we will have three variations from AT in production. The first is the current ATP series, which will experience a moderate annual decline in ASP in teens to reach around $350. The second is the ultra-high performance AT designed to meet L3 standards, which will enjoy a higher price tag around $500. Lastly, the cost-effective compact ATX priced at $200 has begun its production in Q1, with the best-selling car modules adopting it as a standard configuration in 2025. Tapping into mass market vehicles, the ATX is projected to shift between high six-digit to 1 million units in 2025. Expected long-term content per vehicle remains $500 to $1,000 with the introduction of L3 as more LiDAR units will be adopted per car for all-round safety. Regarding our robotics segment, the robotics market is surging. Our JT, XP, QT, and the Pandar Series LiDARs, ranging from low thousands to over RMB100,000, are in high demand across consumer robotics, industrial automation, robotaxi, and various other robotics applications. For example, JT has already secured a multi-year order from MOVA for robotic mowers with projected six-digit delivery in 2025. As such, we anticipate delivering nearly 200,000 units of robotics LiDARs in 2025. Production capacity as of now, we have two production facilities in operation, one in Shanghai and one in Hangzhou. Driven by the strong demand, we are launching new production lines in Q1, which will begin production in Q3. By the end of 2025, our annualized production capacity is expected to reach 2 million units. Full year gross profit margins, we are confident that our blended gross margin will stay healthy, thanks to effective cost management and our flywheel approach of cost and scale optimization. Also, we expect the robotic segment to contribute significantly to our margin profile. The 2025 blended gross profit margin is expected to be around 40%. Net profit, we are setting the pace, projecting GAAP profitability to hit RMB200 million to RMB350 million, while non-GAAP profits are set to skyrocket to RMB350 million to RMB500 million, an incredible 25x to 35x our 2024 non-GAAP earnings. Hopefully that will address Tim's question.

Tina Hou, Analyst

Hi, management. Congratulations on the strong result and strong guidance for 2025. I have two questions. The first one is in terms of the robotics LiDAR market; I understand it's growing very fast, and it's just an emerging market. So longer term, how should we think about the potential size of this market? Also, longer term, do we expect the margin to remain at such high levels, or do we see the margin more normalized to levels similar to our ADAS LiDAR when there is a mass adoption for robotics? That's my first question. And then the second question is regarding our cost reduction. I understand with the ATX, we've successfully reduced cost by quite a lot, around 50% versus the AT128. So just wondering going forward, how much more room for cost reduction there is, and through what kind of technology advancement are we achieving these cost reductions? Thanks.

Andrew Fan, CFO

Okay, thank you. Let me first answer your question regarding the robotics market. Beyond ADAS, the robotics market presents enormous opportunities. The time in these areas is expected to be a major growth driver for us in the future, potentially even several times larger than the time of our passenger vehicle business. Take the robotic market as an example. The adoption of LiDAR in this space is accelerating rapidly. By the end of 2024, we saw a surge in demand for robotic lawnmowers, one of the emerging verticals, and our LiDARs are also driving advanced 3D vision for Unitree robots. In December alone, we shipped over 20,000 LiDAR units for robotics applications. Apple recently unveiled a robot demo featuring 4T-TOF LiDAR sensors, signaling that humanoid robots and similar technologies will see widespread LiDAR adoption in the future. Beyond robotics, LiDAR is also gaining traction in stationary applications like airports, ports, and factories. A great example is our recent work where our XT Series LiDAR powers the in-plant driving systems at BMW's factory. As LiDAR technology continues to mature, we expect more robotic verticals, potentially dozens or even hundreds, each will bring new growth opportunities to us. These non-automotive factors not only offer vast market potential but also come with higher margins. With over a decade of LiDAR R&D and deep expertise built from complex L4 applications, we have established strong advantages in both product performance and cost control. Additionally, we are integrating ASIC technologies into mechanical LiDARs, further enhancing our technology and cost leadership in this robotic segment. Take our newly launched JT product, for example; we are excited to spotlight the JT Mini LiDAR, which debuted at CES 2025 and is quickly becoming a top choice for robotics. It's 70% smaller than similar products, making it incredibly easy to integrate. Plus, it boasts the world's widest hyper-hemispherical 360 field of view, giving robots unmatched spatial awareness to navigate complex environments and making it ideal for everything from humanoid robots to delivery robots, cleaning robots, AGVs, and industrial automation. Adoption is taking off. In just the first month of mass production in December 2024, we shipped over 20,000 units, and our partnership with MOVA for robotic lawnmowers is expected to generate a six-digit order next year. Regarding pricing, the JT is priced at a low to mid RMB1,000, and as you can imagine, the cost structure is much more efficient than the other mechanical LiDAR. Therefore, we expect the gross margins for these robotic spaces to be similar, if not better, than our other mechanical LiDAR products. That's the answer to your first question.

David Li, CEO

Hi, this is David. Andrew, I also want to add to your question on the discussion of the growth margin between LiDAR for robotics versus LiDAR for ADAS. I think it's a very interesting question. I want to answer that by giving you a few angles. The first one is that the nature of ADAS LiDAR, especially when we're talking about ATX for level 2++, this type of application, the nature is that it's a safety part. It's like an airbag or invisible seatbelt, meaning that it's there, but the chance of you needing that is very, very rare. It's only in the one of the millions of chances you need it. So for that, you want things to be more affordable, and you want it to be standard. And that's why it’s priced at a very competitive level. But then the nature of robotics LiDAR is a different nature. It's not there to be the invisible airbag. Instead, it's the functional part, meaning that it's taking on a much bigger responsibility for that application, which means that such a technology is creating a lot of value. For example, if you think about the robotic lawnmowers, it's for navigation purposes. If you don't have the best LiDAR, there's a chance that your lawnmower will get lost, which means that every integrator of such a technology has the incentive to use the best ones, which can be translated directly to good margins. The other reason is for commercial reasons. Truth be told, in the ADAS market, it's still a reasonably concentrated market with the top 3 to 5 players. Well, if you look at the robotics market, the nature is that we have a platform technology, we have a standardized product like JT, but we never said JT was for lawnmowers. It was for really many things, for humanoid, for traffic monitoring, for forklifts, for AGVs, and for ports, which means that each of the customers is really a tiny fraction of the entire customer base of such a product, which again, in commercial logic translates to higher margin because we're also a tiny part of their bulk. So with those two reasons combined, we actually firmly believe not only that robotics LiDARs are going to be in a more diversified, bigger market but we also focus on the core technology of ASIC and advanced manufacturing to drive the platform. We also, of course, you already see, we also strongly believe that in the longer term, this is going to be a high-margin product and it will continue that way, as we see in many other technologies that have a very diversified customer base. I hope this helps to answer the question.

Tina Hou, Analyst

Thanks, Andrew and David. That's very helpful.

David Li, CEO

Sure. I'll quickly answer this question. So, when we're talking about humanoid, we're really talking about different types of LiDARs. The first one is for humanoids to do localization, meaning you need to know where the humanoid robot is, and the JT is actually perfect and we work with quite a few players in this domain already. And there are other sensors that we don't have today, but we don't believe it's the type of LiDAR we do. For example, if you think about the hand, you need to know what it's grasping. And that's a different type of 3D sensor. It's technically still LiDAR, but it's a different type of LiDAR than what we do producing. And we definitely see a lot of opportunities for humanoids to leverage the mechanical LiDAR solutions we've developed. But the truth is that humanoid robots are still in their early phases of development. So our strategy is to continue to leverage our platform semiconductor technology to build what's the best fit for the humanoid technology. And because our biggest strength isn't LiDAR itself; it's the core platform semiconductor we have. And this leadership will always be our biggest strength.

Jessie Lo, Analyst

Hi, David, Andrew. Thank you for taking my question and congrats on the outstanding results. My first question is about the assessment of the ASP decline potentially offsetting volume growth in the next few years, particularly in the ADAS market. You mentioned that Level 3 is different and could lead to charging higher prices for OEMs and consumers. Is this a back-and-forth regarding regulatory changes, since the responsibility still lies with drivers currently? If they open up responsibilities, do we see a bigger potential in this market over the long term? That's my first question. Thank you.

David Li, CEO

Thank you. Let me try to make sure I understand your question. So your question is whether we should multiply the projected ASP times the volume, and your worry is that the ASP will continue to decline, right? So first, I think my previous answer hopefully was clear that it was declining in the past because we didn't reach the volume to justify the economics of scale. Today, we believe both the $200 and the $500 are already at a steady-state price, which means that I don't believe this is further going down to a $100 level or below $500 for the other LiDAR. So, that is what we clearly see. That's the number one point. Number two is the penetration rate. If you look at the history of the penetration rate for the past 2-3 years, it's clearly more than doubling every year for the entire market and it's also for us. If you look at our volume, we've been doubling—more than doubling our volume for the past 4 or 5 years. And then for the entire market, it's also a similar trend, which means that one factor is at its bottom and it will stay there, and the other factor is growing and the penetration rate we expect to continue to a much higher level, especially for Level 2++, which is really a safety belt. So if you think about a seatbelt, in the end, our belief is that every car needs to have such a device, no matter which level you're talking about.

Jessie Lo, Analyst

Yes, sure. Thank you so much. And then my second question would be on the robotics side. We have already quite successful partnerships with MOVA and autonomy. Currently, humanoid robots still yield a lot of excitement. What other outlook can we expect from this robotics segment, particularly with humanoid robots?

David Li, CEO

Sure. I'll quickly answer this question. So, when we're talking about humanoid, we're really talking about different types of LiDARs. The first one is for humanoids to do localization, meaning you need to know where the humanoid robot is, and the JT is actually perfect, and we work with quite a few players in this domain already. And there are other sensors that we don't have today, but we don't believe it's the type of LiDAR we do. For example, if you think about the hand, you need to know what it’s grasping. And that’s a different type of 3D sensor. It’s technically still LiDAR, but it’s a different type of LiDAR than what we are currently producing. We definitely see a lot of opportunities for humanoids to leverage the mechanical LiDAR solutions we've developed. The truth is that humanoid robots are still in their early phase of development. So our strategy is to continue to leverage our platform semiconductor technology to build what's the best fit for the humanoid technology. That core semiconductor technology will always be our biggest strength.

Unidentified Analyst, Analyst

Hello management. Thank you for taking my question. My first question is regarding the ADAS LiDAR adoption pace in overseas markets. I'm glad to see that we got an exclusive design win with the top European OEM recently. But since electrification in the European market seems slower than expected, and we know that LiDAR adoption is closely related to smart EV popularity. How do we expect our ADAS LiDAR growth prospects in overseas markets in the coming years?

David Li, CEO

Great. I will take this question. This is David again. So if you read our announcement carefully, I think the first thing that's interesting to everyone is that it's not only the EV; it's ICE and EV, which means really all vehicles. We want to make it clear because, look, LiDAR is for ADAS, but it's really decoupled from the electrification technology. So that's why the top European carmakers we work with, and it's a major program lasting to the next decade, a global program, meaning it shifts not only to China and also outside China to many countries around the world. And it's across their offerings from EV to ICE. This is really the trend we see. We shouldn't be limited by the concept of EV when we think about LiDAR. LiDAR is really for all the new vehicles wanting to have the future of invisible airbags and seatbelts. So that's why we're led by that. The other great thing is that the other global program we already have, they will start shipping by the end of this year, and it will start to be, again, a global program inside and outside China.

Unidentified Analyst, Analyst

Oh, got it. Any quantitative guidance for our overseas LiDAR shipments?

David Li, CEO

Sorry, we don’t have this number to offer yet, but we will work with OEM on an announcement on the specific numbers, schedules, and car models.

Unidentified Analyst, Analyst

Got it. So this OEM ship will start next year?

David Li, CEO

We'll start it by the end of this year and go into larger volume next year. And of course, it will last all the way to the next decade.

Unidentified Analyst, Analyst

Okay, got it. And my second question is regarding the long-term competitive landscape of the ADAS LiDAR market. Since we are currently the exclusive LiDAR supplier for our key clients, such as Xiaomi, is there any possibility that along with their LiDAR shipment surge, these key OEMs will find another supplier for LiDAR, or will they rely on us as the only LiDAR supplier? In other words, how should we expect our market share in the ADAS LiDAR market to evolve?

David Li, CEO

So first of all, obviously no OEMs will commit forever using only one supplier, right? And no one would ever say something like that. So there's always a chance that even though it's exclusive for now, they will continue to evaluate everyone. And we encourage them to do so. I think the biggest competitive edge is not only that we have ongoing relationships and we are designing and that the switching costs are high, but more importantly is the competitiveness. In different countries, the competitiveness is defined differently. For our global customers, it's the performance leadership. They always want the best quality and best performance, and that's why they pick us exclusively. In China, honestly, it's price. You need to be very price competitive, and we have been very competitive. But make no mistake, price competitive doesn't mean that we lose margin. If you look at the margin we compare to our peers, I think it's fair to say we have a pretty good leadership, which means that as long as we keep our costs down, as long as we keep innovating on the semiconductor, we will always have a sizable gap compared to our peers. It is really difficult for customers to choose someone who is more expensive and inferior and someone they never worked with. You probably wouldn’t do that. So that's how we try to maintain our leadership.

Unidentified Analyst, Analyst

Okay, got it. That's all for me. Thank you.

David Li, CEO

Thank you.

Zhang Yu, Analyst

Hello, management. Thanks for taking my question. My first question is about the guidance. We see a very strong guidance from the company, with shipments increased over 1.2 million and profits reaching RMB200 million to RMB350 million in GAAP. How to achieve the above guidance?

Andrew Fan, CFO

As we provided our guidance in the earnings release, the top line growth, we are quite confident of the guidance between RMB3.0 billion to RMB3.5 billion. That is based on the orders from our various clients that have already been provided. The reason why this volume growth is quite strong is that our top customers, including Li Auto, Xiaomi, BYD, and Leapmotor all increased their sales targets and also the LiDAR adoption rates in 2025. Some car models have been set with LiDAR as a standard configuration. That's how we got our revenue guidance. And with the 40% gross margin assumed, we are going to have about an additional RMB400 million to RMB600 million in gross profit. That's the improvement to net profit at GP level. Regarding the expenses management in 2025, we are committed to elevating expenses management to new heights, ensuring enhanced efficiency and financial discipline. We expect our total OpEx to be slightly lower in 2025. If you look at our financial statements in 2024, our total OpEx is close to RMB1.4 billion in 2024. We expect that this number in 2025 will be lower. So if you take these two factors together, it is not so difficult to reach the bottom-line level number, which is a GAAP net profit of about RMB200 million to RMB350 million and a non-GAAP net profit of about RMB350 million to RMB500 million. That's my answer to your questions regarding net profits guidance.

Zhang Yu, Analyst

Thanks very much. And my second question is about robotics applications. Why will the LiDAR be used in robotics for a long time, and what is the primary function in the robotics system?

David Li, CEO

Yes, I will take this question. I understand your logic, but let me give you a counter example. The easy counterexample to challenge your argument is the robotics vacuum cleaner. You would think that it is still slow and it really doesn't kill people when they bump into things. And yet, every new robotic vacuum cleaner has a LiDAR. Of course, it's not a LiDAR from us; it's a much cheaper one. But you think about why would they do that? The answer is very simple. It has certain functions. You need to perform SLAM, meaning that you need to create a map. You need to know where that is. Yet, if you use cameras to do that, it's not a great product. So, they need a very good LiDAR to achieve that. Of course, that function needs to map and the price needs to match that functionality. Similarly, with humanoids, robots still need to map what's around you. And even if you think it's slow, it's still a very costly error when you chip on something, bump into something, or miss some object. So it's not about 2D versus 3D; it's about how much it costs to use 3D versus whether I need this 3D to create a valuable function for me.

Sia Huang, Analyst

Hi, management team. Thanks for taking my question. This is Sia from SPDBI. I've just got one question on our capacity and CapEx plan, since demand seems strong in both auto and robotic sectors. As you mentioned, we are now launching new product lines. So my question is, do we have an updated CapEx plan for 2025 and 2026?

Andrew Fan, CFO

Sure, I'll take this question. With this strong demand, our CapEx in 2025 will mainly be used to launch our new production lines both domestically and globally. We are launching two new production lines in Q1 in China, which will begin production in Q3 this year. By the end of 2025, our annualized production capacity is expected to reach about 2 million units. We believe that this production capacity can satisfy our demand this year. Meanwhile, as our collaboration with global car makers deepens, for example, our exclusive contract with the top European OEM, as David just mentioned, we may consider the possibility of establishing overseas manufacturing facilities in Southeast Asia in the future. We have already developed preliminary plans and are taking steps towards this target. Furthermore, our highly automated production technology enables us to set up an overseas production line with well-managed CapEx numbers in a relatively short time period. Hence, we expect our 2025 full-year CapEx to be around USD30 million to USD50 million in total. We have sufficient financial resources to support these CapEx.

Yuanting Shi, Head of Capital Markets

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.

Operator, Operator

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